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

Join hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Founder and Executive Chairman of Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Sep 20, 2019

EP188 - CarMax CMO Jim Lyski

Jim Lyski is the CMO of CarMax. In this broad-ranging interview, we discuss the keynote Jim delivered at EtailEast, "CarMax Goes All-In On Omni-Channel: Building, Scaling And Deploying With Speed", as well as discussing the digital disruption of the automobile business, and where it might all be going.

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

Episode 188 of the Jason & Scot show was recorded on Wednesday, August 21st, 2019. live from the eTail East trade show in Boston, MA.

http://jasonandscot.com

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

Updated 9/23: Fixed editing mistake in audio file (sorry!)

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show
this episode is being recorded live from the etail East trade show in Boston on Wednesday August 21st 2019 I'm your host Jason retailgeek Goldberg and unfortunately Scott was unable to join us today so I'm solo,
but I'm making up for it by having a great guest on the show welcome to the show today Jim whiskey the CMO at CarMax.

Jim:
[0:50] Thank you for having me Jason.

Jason:
[0:53] I am super excited to have you on the show and I suspected most of our listeners are familiar with CarMax but may not fully perceive the scope so can you kind of give us the soda elevator pitch.

Jim:
[1:07] Sure like where the nation's largest retailer used vehicles and we're basically Coast to Coast with over 200 stores and we sell three-quarters of a million cars a year.

Jason:
[1:21] That is awesome and full disclosure for me I spend some of my formative years at Best Buy until I still like I can't hear CarMax without thinking the enemy at Circuit City.

Jim:
[1:32] Yeah yeah we were a spun out a Circuit City in 1994 so.

Jason:
[1:38] I'm dating myself I know that that is awesome.
You are the cinema what sorta is the scope of us Eno at a company like CarMax like what what sort of things do you get involved in and how do you spend your day.

Jim:
[1:54] Yeah well I think you know the CMO rolls a little different every company but that CarMax I'm ahead of all the traditional brand things so I can advertise in Communications PR
as well as strategy marketing strategy and Analytics,
and then an additional. I also had a product organization so the product team focuses on how we represent ourselves digitally as well as in the stores.

Jason:
[2:21] Got it so that whole in-store experience are in dealership experience and the digital version of that is all in your scope so it sounds kind of like a part-time job then.

Jim:
[2:31] Yeah exactly.

Jason:
[2:34] And how did you come to CarMax what was your background prior to CarMax.

Jim:
[2:38] Well I started off my marketing career at FedEx been about a dozen years there ended up heading up all u.s. marketing for them eventually,
then I went over to Cigna Healthcare Nationwide Insurance and most recently Scotts Miracle-Gro.

Jason:
[2:54] That awesome so you know we talked about e-commerce allowed on the show and there's this book retailer in the in Seattle I Amazon the comes up periodically and so,
FedEx makes a lot of cameos on the show and we're talking about logistics but lately the big news is they sure to boldly,
fired their customer a little bit in an Amazon as a impassioned Observer do you follow that all is that stuff.

Jim:
[3:22] I think everybody in retail I last saw that and being a former associate FedEx it was particularly interesting.
I don't know why they did it but that's pretty smart company so I'm assuming they weren't making any money.

Jason:
[3:37] Yeah I know I tend to think you have a finite amount of delivery capacity and if you sell all that to the,
company with the most leveraged in the world you have to sell it at the the lowest price point and I have a feeling FedEx wisely figured out that,
they can sell their capacity Elsewhere for more money at the same time that an exit probably Amazon's probably investing in their own capacity pretty aggressive.

Jim:
[4:03] Yeah Amazon I don't know if you go through any neighborhood in America now you're going to see those Amazon trucks everywhere.

Jason:
[4:09] Oh my God the trucks to now and soon there's now a San Francisco to Seattle it's the drones on that these on the sidewalk there is crazy.

Jim:
[4:17] Yeah well then FedEx has her own little robot making deliveries to so I think it's going to be a dangerous place here pretty soon.

Jason:
[4:25] I know I know my poor four year olds going to have to learn to skateboard somewhere else I don't know how that's going to happen the FedEx drone is even cooler though cuz he can climb stairs and stuff.

Jim:
[4:34] Yeah it looks pretty cool.

Jason:
[4:36] Yeah yeah I like that video so you know I have to tell you before we jump in any further or Coho Scott is super bummed to not be here with me today is where both e-commerce guys Scott founded,
well known company in Tipton public in e-commerce paste but he.
Started a new business a couple years ago on demand car washes.
And today he's now expanded into like 13 states and raised a bunch of money and so he's become a total car guy so I know I just wanted to spiritually give Scott a shout out that I'm here and you're not.

Jim:
[5:13] Yeah and he's really going to be pissed because we're going to go on a test drive and in a Ferrari F40 the right after this interview.

Jason:
[5:21] That you went you didn't I just bet that I can I drive around in the black one.

Jim:
[5:24] Level of a little race.

Jason:
[5:28] Yeah exactly yeah she's a guy and he's going to point out that like potentially in a straight line the test I can take the Ferrari but I'm going to point out that is long as we put a curve in there we're in great shape.

Jim:
[5:42] Plus you and I are going to look a lot cooler than sky.

Jason:
[5:45] Yeah well that was true even without.
I love it when he's not here to defend himself that's my favorite thing so.
Tomorrow you are speaking in detail in your session title your keynote is Carmax goes all-in on omni-channel building scaling and deployment speed,
and so I'm assuming you've thought about what you're going to say tomorrow or you going to work on that after this.

Jim:
[6:10] No I thinking if you have any words of wisdom I'm going to incorporate that was sent to my speech tomorrow but I have an outline at least.

Jason:
[6:16] Yeah well what has mostly made a success for me is making fun of Scott so I feel like.
Did they send you do that on stage you'll you'll be ahead with the audience no matter what.
I promise not to let any of us Tomatoes audience listen to the show in advance can you get a sort of a high-level about what your POV is about like what it what do you mean by going all-in on omni-channel.

Jim:
[6:39] I think it's pretty clear across all our retailers that the consumer expects to be able to conduct business with the with Brands both online and in-store with retail brand and I think you see brands
that are traditionally brick-and-mortar going into the online space and vice versa right so,
Arctic is going to be just how did we excel at both.
Make it a seamless experience and then scale at out Across the Nation we're right in the midst of rolling this out or we're not in about 45 States right now and
by February we'll have more than 50% of our customers on our omni-channel experience that stuff is really just about
like how do you do that how you take a massive company and and make this pivot really really quickly.

Jason:
[7:28] Yeah and I know it's it's doing pretty easy right you just sent out a memo and everyone changes behavior in.

Jim:
[7:33] Yeah we didn't we only have 25000 Scioscia it's on the front line so I think they should be able to modify Behavior within a week or two.

Jason:
[7:40] Yeah that seems like I mean maybe give it three ways to be safe yeah
so I think of Carmax as being sort of an original disrupter of the car shopping experience but now the Choppers are used to all of these digital amenities and how many channel has has become
prevalent and I assume
that different said all the consumers have shopping unit doing buy online pickup in-store at at apparel store or a consumer electronics store now impact their expectations,
when they shop for a much more expensive higher consideration I don't like an automobile.

Jim:
[8:15] Yeah I think you're pretty spot-on on that the the major major difference is that this is a very considered purchase so far lot of our customers this is the largest purchase they've ever made an and four others maybe it's the second largest so,
the a buying journey is as nonlinear and it kind of starts and stops and it's squirrels a little and so being able to,
give the consumer a lot of you know full credit for everything they've done online.
Or when they eventually walking to the stores extremely difficult but but absolutely critic.

Jason:
[8:51] And so it's digging in that little bit like there's two things I'm always interested in so one is.
The customer-facing Experience so I've done a bunch of research on your website before I ever go to the store probably let you know evaluated your inventory and I you know I probably should have preferences and I might have even there all day
Pacific Beach vehicle before I land at the store.
Does anyone in the store know all those things I did or do I have to start over with that sales associate in the dealership.

Jim:
[9:19] Yeah so last year you'd probably have to start all over but this year are we rolled out across all of our stores are CRM platform which is salesforce.com,
and we take all the information and all that work that you've done online make sure that's readily available to the customer and the associate both,
and so we try to make it like I said very seamless experience where you don't have to repeat the effort that you re put in and you actually get credit for it and you can progress quite quickly so,
if you progress pretty fully online that you can walk into the store and get the keys and drive off in about 15 minutes,
still have to sign some papers each State's a little different but 15 minutes 14 minutes is the fastest we've done one so far but,
that's quite a different experience to walking it a dealer spending all afternoon they're getting put in an office with the finance manager and you know,
eventually walking out feeling like I don't know if I got a good deal.

Jason:
[10:24] Yeah yeah you're almost at parity with the guys that steal the car now.

Jim:
[10:27] Elvis.

Jason:
[10:28] It's almost as frictionless.

Jim:
[10:29] I got it I got to trim five more minutes.

Jason:
[10:31] Yeah hopefully we'll make it so personal us that they'll stop wanting us to you
I would be ideal and then the other thing is interesting to me is the attribution so you mentioned it's a considered purchase so you probably invest in a bunch in marketing vehicles and probably not very helpful to focus on the last click attribution and see how many people.
Immediately transacted so do you guys have a notion of a omni-channel attribution model to try to understand how how your marketing is impacting.

Jim:
[11:01] Yeah absolutely Remy we do multi-touch attribution and we we.
I do again.
I'll just I can answer you have to repeat if it's a question if you don't want to.

Jason:
[11:15] I'm going to just put a little Mark in there go ahead.

Jim:
[11:18] So yeah we do multi-touch attribution analysis and being able to figure out exactly that customer journey and what was influential in the making the decisions has been pretty critical to our marketing Investments.

Jason:
[11:34] Sorry now I'm getting distracted yeah I'm just going to cause for one second they're sorry.

Jim:
[11:39] Yeah that's good it's hard.
Little quips painful for both of us.

Jason:
[11:58] If that's the most painful thing we have to endure will be in good good shape.
And how many dealerships did you say you had or how many.

Jim:
[12:13] Storefronts Wacom stores so we're at what are we up to and we're almost at 2:10 am I supposed to know.

Jason:
[12:24] What you just did you at we on vacation during his last tour opening.
They're probably kind of persnickety about accuracy.

Jim:
[12:32] I think Lubbock Texas was 208 I think.

Jason:
[12:41] Awesome.
So that is that certainly makes sense with you have over 200 stores now are there any particular challenges with a doing omni-channel at that kind of national scale or is it actually easier when you're covering the whole country.

Jim:
[13:00] Yeah I know I don't know which would be easier but but it is been pretty challenging because it's a behavioral change for our Associates and so.
We were in kind of the original disruptor in this industry we rolled out no-haggle pricing,
and you know and that allow the consumer to have a great retail experience in the used car industry nobody did that and it was highly differentiating.
The backbone is delivering that experience are our Frontline Associates that are in the stores and so we have about 25,000 of them and
if we're going to roll out a new experience to the consumer we first have to make sure that are sociopaths are very aware very comfortable and very well trained on it,
because we're not going to take a step back in the end delivering an awesome experience.

Jason:
[13:48] Yeah I know that makes total sense in Dysart have a philosophy that most of these customer experiences are about 10%
technology and Platforms in 90%,
people in organizational change management so I'm guessing when you deploy that CRM 25,000 Associates last year that was a big cultural shift that you had to be a sort of embraced and reinforced was.

Jim:
[14:13] Yeah absolutely,
I think it was one of those who Moved My Cheese kind of moments for them and so you had to show him how they're going to be more successful,
how they're going to be able to provide an even better experience at maybe a little bit more personalized experience to the consumer are Associates that really care about delivering a great experience and.
I don't know if you know this but,
all of our sales consultant for example if they are on a flat commission they don't care what car you're in so they're not in Center to put you in the car you can't afford there and send it to put you in the car if that best fits your needs,
and anything that we can do on the technology side on the data side to allow them to better fit you into a great vehicle,
the happier they are until once we show them how how salesforce.com was able to provide them information that allowed at personalization they bought in holy until,
we've been able to we've been very pleased with the experience that we're delivering right now.

Jason:
[15:15] Yeah that's awesome and I can imagine there's a little bit of the internal communication to sort of evangelize those benefits to those those internal Associates it's it's funny cuz in a lot of retail categories
people now experimenting with self-service technology UI digital you know amenities or or you know experiences on the phone that the Shopper can use themselves,
and it it's always the case that the most cost-effective way to deliver a digital digital experience inside of a store is to digitally enable that,
sales associate turns out it's really hard to get customers to download your app and I'm not going to say it's easy but it's easier to get those 25,000 Associates using your app.

Jim:
[15:57] Yes absolutely.

Jason:
[15:58] So what do think I'm curious about is on the title of your your topic you qualified it at speed,
and I suspect this is somewhat relative like what does feed mean at Carmax is that transformation you're trying to change over a course of years is it something this year like what what is the the speed goal.

Jim:
[16:21] That's an interesting question I never thought of it as a speed goal but the way I've thought about it is that.
We are the industry leader we have a good distance between us and number two,
and I want to extend that distance so when I intubate I want to get it out faster and faster faster I want to do it at a pace that nobody else can keep up with so when we think about speed.
We think about delivering those objectives every quarter.
And then you know we obviously plan out years and one year and multiple years in advance but it's really kind of,
orienting our product teams about delivering that next iteration or that next Improvement in a relatively short amount of time usually in about a two-week Sprint site.

Jason:
[17:07] So what's pivot a little bit to the car buying experience.
Categorize things in a two experiences there there's the used vehicle experience and there's a new experience in WoW,
like York really known for used vehicles I think you do own some new car dealerships as well a few,
so but that gives you enough of a taste to the maybe you can weigh in on this little bit.
The new car buying experience in u.s. like I would argue totally sucks
and a big part of the reason why is there this multi-tiered distribution system right so there's got you not coming to manufactures the car and they have to sell it to a local dealer who sells it to a consumer in so give
the expense is going to improve.
Every local dealer has it independently decided they're going to improve the experience and sort of deploy it out like the manufacturer can't do something at scale and dictate that that all these dealers do it,
in the used car business you don't have that multi-tiered model you guys on the inventory you're on the hook to sell the stuff and you're on the hook to invent the experience across.

[18:16] Your 208 stores to deliver that experience,
so as customer expectations Elevate and I bought a used car and I had a great experience or I bought you know some some something else,
it was a tie bought a wedding ring or some other high considered item I did Julian had this great experience and now I'm going to buy a new car for the first time and I have this sort of could you experience the website that I'm doing research on can't even give me a price because.
Mercedes website doesn't sell car hairs and a night you know the,
refer me to a dealer is kind of a I don't know what to email marketing for him or something you know they're all these these frictions that consumers are increasingly not used to is
is there any hope that that's going to change in the u.s. is economic like art are we going to figure out how to deliver a good experience through that multi-tier distribution model is.
Are consumers ultimately going to put pressure on the model and you know I know there's at least one car manufacturer that's trying to.
Disrupt that like what what are your thoughts about the evolution of the new car buying experience.

Jim:
[19:21] Yeah yeah I think it's got a modify for a few reasons so one I'm a big believer in macro trance and is certainly a macro Trend around customers expectations,
customers expectations have never grabbed it toward gravitated south has gone up and up and up and so the consumers becoming every year,
less willing to put up with stuff that suboptimal buying a car is going to be no different secondly.
All the oems desperately would love to control the experience all the way through but these dealer groups have a ton of power I mean I can
only imagine the meetings where the dealers come in and they are unveiling new makes and models and new commercials and,
you're not telling telling the marketing department that he hate the commercials and I me I can only imagine how those go because it's crazy how much power that they have,
and they don't do what they don't want to do know some of them are very Progressive and they get right in line and they see the big picture and but most most,
dealers in my experience are really about extracting as much money out of your wallet as they can,
and that just doesn't align with the consumers expectations so I think they're going to have to modify in and when things like,
autonomous vehicles and things come out in the future I think it's just going to put the increasing pressure on that bed modify.

Jason:
[20:44] Yeah no for sure another macro Trend when were taking American census been interesting to me.
The people in the buying used cars I assume for almost as long as there have been cars
it's a high high capital expenditure for your point and it it like it's not a new paradigm that you would buy used car it's not a new paradigm that you buy a used home but I'm noticing is,
previously owned products are becoming more popular in many more categories so I in a parallel we now have,
you know monthly rentals of business attire from Rent the Runway and we have
the real real just going public with sell all these previously owned luxury goods and thredup has been on the show and all that you know as consumers get more and more used to,
getting a better value from these previously owned things does that make it like,
even more likely that they're going to make a decision to a used car versus a new car or I had the had those sort of go-karts already played themselves out.

Jim:
[21:48] You know I I I hope it does but I don't know if I will but I hope it does cuz the difference in value you get from a lightly-used vehicle in a brand new vehicle is monstrous if you look at the depreciation curve Cindy years 1 and 2.
Nuts and for some cars that's it's significantly nuts.

Jason:
[22:08] Oh my God yeah I know I mention Scott's a big test with man so I just let him by all these new vehicles every time they come out with the new color he has to buy one and then I I just tried to buy his old ones off of them witches has worked out.

Jim:
[22:19] Yeah you're saving about 30% probably.
So I think so I think you know that's helped the train keeps going that way as consumers get more and more comfortable with it I think that one counter to that is,
that a car is still a status symbol and haven't you know be like Scott and you want the latest and greatest the shiniest in the most gadgets and,
yeah you're willing to pay for it and there's always going to be a subset of the consumer that does that which is great for us I mean you and I who don't mind buying one and two year old car that has all the latest gadgets and is awesome.

Jason:
[22:55] Yeah I know for sure once more so because you just highlighted something like there are all these,
like a pretty different missions that different car owners might have right in for some people it's utility to get to work for four other people it's a you know part of their identity and a status symbol,
when you're thinking about marketing and driving traffic to your stores,
I do have a sort of persona base model and you do different kinds of campaigns for those those different personas or if you figured out how to.

Jim:
[23:31] Yeah I know we definitely have a Target I think I'll great marketers know where the bullseye of the dartboard is and that's where you aim that doesn't mean you aren't going to get customers outside of that as a bull's-eye but you always have a bullseye in so we have one,
I always tend to be very considered purchasers like they're they think about,
the value that we just talked about of a used vehicle they think about the functionality they also think about you know it's just something they like and want to,
I want to have you know kind of represent them a bit so they're very very consider they do a lot of research,
and appreciate our cars have been really well conditioned well kept in on 90 day warranty is all that stuff really matters to them and so that's our Target we go after them and I and we did a lot of others outside the target.
That's that would be the Persona we go after.

Jason:
[24:26] Don't you in are there any like particular marketing tactics that you feel like are the bread-and-butter that have been most successful for you that you.

Jim:
[24:35] 04 us.
I don't think any particular tactic other than talking about value I think value is a strong tactic like, I don't know if you know this we don't have sales.
We'd obviously don't have a call that's you know that what we are founded on we don't give discounts to different,
user groups or anything like that it the prices the prices the price and so we've never in a broken out Labor Day sale and you know Mother's Day sale and God knows what the next one's going to be but,
but we've relied on we feel that this is a great value that we're offering and so we try to educate around that and it's done pretty well for us.

Jason:
[25:18] I sort of think of you as having what I would calling everyday low price So Pro,
and it's funny in if you survey all retail through edlp retailers tend to do better than promotional retailers the the one caveat is once you become promotional,
it's virtually impossible to recover your edlp position until we've seen some bad examples in recent memory of our friends that like Macy's or JCPenney trying to.
Make that shift and have it not go well.

Jim:
[25:49] Yeah definitely be careful how you condition your consumer.

Jason:
[25:52] Yeah it turns out they will learn and that's one of the most fascinating things to me about all these in this reason I think it's absolutely true in yours.
The traditional model used to really rely on what I'll call in information imbalance like the the traditional not highly regarded used car dealership,
had a lot more information than the person buying a car so only the dealership new the history of the car and what the true value of that car was and likely all the information the buyer was going to get.
Was the information that the deal are deemed appropriate to share them which was,
likely to be self-serving information today we have this massive transparency we have all these information sources and it feels like,
there's nothing that could be known about that vehicle that the consumer isn't going to know if they choose to before they,
they buy the car and so I know that site in your case,
you make a lot of that information available so I let you know you can get that information from your own digital tools you've enabled your salespeople digital tools so they have a bunch of information and then they're there is a bunch of third-party tools,
that the consumers can use as part of their consideration process as well do you view those third-party tools as a good thing because they help,
consumers figure out what the right vehicle is and you know you have the right vehicle at the best value or.
Would you prefer that you could keep that customer in your own Echo System more.

Jim:
[27:17] Oh no I think we prefer having transparency in this industry we think if it was fully transparent and accurately transparent we would do a even better than we're doing now.
I think some of those tools are partially true and partially not I mean when you look at things like.
I get onto the site and says all this vehicle is a good deal and I would ever great deal good deal what you don't know what you know what they don't know and hence the consumer doesn't have frame damage.
And that's not a good deal with a car with frame damage or this car may have an electrical issue going on,
it's still get salt we have some markets where where the average price of a liked like vehicle with our inventory is actually below hours.
But when we look at the cars and we We examined over 2 million cars a year we look at the cars we.
Passed on buying those cars to retail because we knew there's something wrong and now we're watching them being sold at these other dealerships and think there's no way the consumers really going to know that even when they use.
All these third-party tools they just look at something and say oh great deal okay.

Jason:
[28:35] Got you so I think so some of those tools are bring to our surprising deals with like you know I can't imagine like that does arm the customer with some some new tools that they didn't have previously,
think of there being tools that give people a pretty detailed history of the car,
are you saying that those like his reserve or imperfect in terms of like identifying the potential flaws or evaluators of the vehicle.

Jim:
[29:03] There definitely are two also you can go and look at vehicle history and those tools are better than not having any,
and they are not 100% accurate by any stretch and sew what they know so some of those tools use you no police reports and DMV data will not every DMV Department reports and whatever,
police reports and other shoes other kind of data and it's just imperfect and so.
They do catch some things for sure like if I was on one of those sites and I sawed this car has electrical issue or it has a toners or something like that would be like all right that's definitely a no,
so I know that's that's it you know not a good car but there's some false positive there's some listed is clean it just are not clean.

Jason:
[29:55] Sure and I can imagine a lot of them seem like they're based on public record so the car has been in an accident rate I know that if the frame is Rusted or it was mistreated in some way that didn't create a police reports,
that's where like you you need to like have significant car knowledge or a smart friend.

Jim:
[30:13] Exactly like I could you know I could get in an accident in my car you know a single-vehicle accident and I'm not going to report this to the police write a report that happens all the time.

Jason:
[30:24] Shirt go go trade it in the CarMax and get a new one.

Jim:
[30:28] Yeah we buy any car any car.

Jason:
[30:30] Yeah but you probably are pretty good at evaluating the True Value.

Jim:
[30:34] Yeah I have all the cards that we buy which is in a four hundred thousand a year even more like six hundred thousand year only about a third of them make the cut to get retailed again the Russian we auction off to other dealers who are going to sell them to you.

Jason:
[30:48] Got you all right show me a pivot to one more macro Trend I keep hearing that
teenagers are slower to get driver's licenses in a lot of Metro's in the like obviously they're all these ride-sharing services that make it,
more possible to not own a vehicle at all.
I'm inferring from that that potentially like car ownership may have Pete and I'm just curious why am I dead wrong and we're buying more cars than ever or or is growth slowing down like what is the overall status of car ownership.

Jim:
[31:22] Yeah I know we look at this pretty closely in the overall status continues to grow so we look at a stat that is a number of vehicles per household and that's actually increased over the last decade,
with the Advent of ride-sharing and all of that still moving up and then obviously the United States continues to grow in that household so,
are we see vehicle gross till we haven't really seen at Plateau it may be plateauing in new or something or subcategory but overall,
it's been a very minimal effect in some very dense markets it's probably more exact exacerbated but,
across most of America's it's a minor thing.

Jason:
[32:03] Great all my in-laws from Detroit are now going to Ward over me that I've been wrong when I told him that that.

Jim:
[32:08] I'm glad I could help you.

Jason:
[32:10] Yeah probably more important than you help my in-laws than me anyway so,
Swiss turn to the Future for just a second if you could put your sort of future has had on we get in that time machine and go visit a CarMax store in 2025.
Is it going to feel a lot like the the experience you're rolling out right now or do you feel like it's going to continue to evolve another any particular areas you're hoping it involves in.

Jim:
[32:38] Yeah I know,
I as I mention we're going to be rolling out this Omni experience to most of the country by February but that still leaves another third of the country to go or so and so,
with about 5 years from now it'll feel mostly similar I think we're going to continue to innovate aggressively and iterate
they offering I think the consumers going to get more and more comfortable doing more and more online so I would Envision that the visits to the physical stores is going to continue to go down in time,
I mentioned we're already down to about 15 minutes that doesn't mean everyone's 15 minutes,
but we think more and more will move towards that sub our level 30 30 minutes or less basically so I think that's I'll be the primary feeling that you would see if you walk if we walked in the store five years from now.

Jason:
[33:32] There's a lot of other categories that retail that have been disrupted by digital and the the store is role as a,
Discovery in browsing his is greatly diminished but it's its role as a service and fulfillment center for that shopping experience has expanded and it sounds like like you're anticipating to see more of that same progression in your space.

Jim:
[33:55] Yeah I think they're still be a strong merchandising aspect to this because you're going to buy a car you're going to be sitting there for hours and hours,
ever used car we are Iowa State ever used cars like a snowflake everyone's different they had a different owner different miles different conditions you just did somebody smoker not smoking all this you just like want to sit in it,
and and will bring the car to you will let you test drive it at your house but a lot of consumers just want to come see you in a couple different cars make sure that you know the Honda Odyssey is the car that they really want and
all the different car seats and everything fit in it and,
I don't think that's going to change too much I think more Marvel by sight unseen but largely.
We want you to test drive it before you buy this it means a lot of money.

Jason:
[34:45] Yeah and there is right I'm perfectly fine with people buying something digitally but there is this some fun psychology element there's a thing called the endowment effect in like once you you try something,
you now imagine yourself owning it and so now I frankly the psychological promise is am I going to get this car back to the gym or am I going to keep it right so literally
like it's a loss aversion like one once I imagine owning that this and now in effect kicks in and it's it's you know frankly much,
much more likely that they're going to buy so I like I certainly feel like there's there's always a role for that that that physical Tryon and for that endowment effect to kick in.
You highlighted one thing I want to just follow up on a little bit like every car is a snowflake and that it could be so again if I may use a new car dealership I have this merchandise.
1 car,
and hopefully the dealership makes a bundt or the manufacturer makes a bunch of them that are exactly like that one car maybe with some different color paints in your inventory,
you you could have a large quantity of the exact same make model but each one is.
For your point unique and might have different value based on its attributes and all these different things.

[36:02] How do you try to meant like I meant I could imagine as an e-commerce guy I'm like oh my God that's a pain in the neck like every SKU.
Is is quantity wine and when however much I'm going to invest in the digital shelf for that skinny one stack ourselves that investment goes with it so I.
Why are there some particular digital amenities you think about her how do you think about like.
Telling the story of each individual car is it just kind of value that you can afford to invest a lot in each one or.

Jim:
[36:33] How is like I don't I don't know how many Nissan Altimas I sold last year but it was a lot.
Literally in the tens of thousands and I took.
Pics 30 pictures of each one of those 360 degree pictures on Interiors Stills exterior shots.
And you know I'd highlight if they had new tires or or what-have-you we describe all the features and we did that last year over 750,000 times,
so I wish I could take one picture of one Nissan and then say it represents all but that's how it's not as transparent as we like to be,
so we invest in it because we think it's the right thing to do and you know we're hunting for way to do it more and more efficiently but we spent about.
Then I'm probably every 14 minutes we produce a new car in a store right self-storage taking cars reconditioning,
trading L replacing parts that are worn touching up paint,
waxing and polishing pictures all that every 14 minutes they're rolling out and we do that across you know dozens and dozens of our stars and so it's just the right thing to do and we invested time in the money to get it done right.

Jason:
[37:54] That is interesting and I mean I certainly agree with that approach in the apparel industry there are these off-price retailers in
they get very thin inventory
of items but they're high value items right and so I think I'd like a TJ Maxx for example in until they you know often they talk about their store experience as a treasure hunt there's,
there's one really good Jewel in there and you're only going to find it if you come visit that store,
and there's a lot of talk they just had an earnings report in their way behind on digital and they would say yeah because digital is not important to us you can't have the Treasure Hunt online we can't create a great digital experience for all these,
unique items that we have no depth one of inside they've kind of said oh digital is for selling other stuff in addition to the the treasure hunt you find in our store,
I feel like you're you're sort of an extent but the fact that that's not necessarily true or sustainable and I you know I feel like there's a bunch of advantages to the,
transparency of having all that inventory online and and you sort of do Evan online digital treasure hunt.

Jim:
[39:02] Absolutely and I think you know I like I can't imagine saying you know being able to do that you know when a digital Treasure Hunt is impossible when you got companies like eBay out there that's,
all it is is a digital treasure head right so,
yeah we believe we believe that it's worth it and we believe that's what the consumer wants I can't imagine not aggressively digitally merchandise in my view.

Jason:
[39:30] That makes a lot of sense and that's going to be a perfect place to leave it because it happened again we've used up all our listeners a lot of time so if folks want to continue the conversation you're welcome to jump on our Facebook page or hit us up on Twitter,
Jim is the listeners want to get in touch with you to hang out somewhere on the Digital internet like LinkedIn.

Jim:
[39:52] Other than spying on my kids yeah I think LinkedIn is probably the safest place to hit to sniff me out.

Jason:
[39:58] All right well hopefully with your kids won't listen to this episode and we'll put your LinkedIn profile in the show notes I bet you I really enjoyed our chat and I really appreciate the time you took today.

Jim:
[40:08] Thanks for having me it's been great.

Jason:
[40:09] And until next time happy commercing.

Sep 13, 2019

EP187 - Euromonitor Michelle Evans - Commerce 2040

 

Michelle Evans (@mevans14) is the Senior Head of Global Digital Consumer Research at Euromonitor Intl. She recently published a new report, "Commerce 2040: Revolutionary Tech Will Boost Consumer Engagement."

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

Episode 187 of the Jason & Scot show was recorded on Wednesday, September 4. 2019.

http://jasonandscot.com

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

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 187 being recorded on Wednesday September 4th 2019,
I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot:
[0:39] Hey Jason's going to be back with you welcome back Jason and Scott show listeners
Jason the folks over at euromonitor recently released a really awesome report that's right up our alley here at the Jason Scott show it's called Commerce 2040.
So if you're doing the math on that is 2019 when recording that so it's about 21 years in the future
it's a broad and Really Brave look at where retails going by 2040 as well as some of the intersections of Commerce in the home and entertainment.
And help us walk through it here on the show we have the report's author Michelle Evans Michelle is the senior head of digital Global consumer research at euromonitor and joins us live from Chicago.

Michelle:
[1:28] Thanks for having me.

Scot:
[1:29] It's great to have you Michelle on the show I just want to report Jason has four words in his title and you have six so I believe you should get paid 50% more so we'll we'll discuss that after the show how the correlation of,
titles word titles and compensation should match.

Michelle:
[1:48] I appreciate the appeal for more.

Jason:
[1:53] Michelle you're Taylor just one of many reasons you should probably get paid more than you.
That kind of time on the show but would you always like to kick out the show by getting a little bit of syrup for your background for a guest so can you tell us a little bit how you found yourself in the.
The consumer research world.

Michelle:
[2:14] Yeah actually I started as a journalist initially in my career and during the recession
I had a come-to-jesus moment beside it probably wasn't the best for me a long-term so I started looking for other jobs so I was last at crain's Chicago business which is a business publication in Chicago
operates other places as well they have City pubs but,
I started looking at research jobs PR jobs that kind of thing euromonitor was actually looking for a former business journalist and so I joined I started focusing first on payments
I dream about 9 years ago did that for a good four years and then I brought to leadership
Nigeria to launch a product called today and we covered did Chelan are more Berkeley German offers from
retail too Foodservice to travel to a beauty and personal-care but I thought we could do something more for our clients provide
Marvel 360 look at the digital consumer so it launched in February of 2016.

Jason:
[3:28] That's awesome and for our most loyal listeners they're going to be somewhat familiar with euromonitor because you are actually the second Michelle from euromonitor that's been on the show.

Michelle:
[3:38] Correct.

Jason:
[3:39] But Michelle Grant was on the show number of years ago back in episode 34 when we're still figuring out how to do it so now that we've got all the Kinks worked out.
We're at we're excited to have the Aging.

Michelle:
[3:55] Work work side Reebok.

Jason:
[3:58] So for folks that they don't have that episode fresh in their mind can you refresh everyone's memory about sort of who your monitor isn't what you guys do.

Michelle:
[4:08] For sure so you're a reminder we're based out of London we have 15 offices globally and we are market research firm we have
we do both strategic and and now have to go research
our history has been in more strategic planning so we have data and Analysis to clients subscribed to,
as part of a syndicated offer then they also made you custom work with us as well to answer a specific business question for them.

Jason:
[4:43] That is terrific in the end Michelle Grant had to focus on a particular industry segment which is retail and you have a focus on this particular.
I don't know we call it a demographic but the the digital consumer so you're looking through the lens of the consumer's life where as she's walking through the lens of.
This this one particular shopping Mission and a consumer has do I sort of had that right.

Michelle:
[5:11] Yeah you're pretty close so we have within our syndicated database different systems Pages a client subscribe to so there's a
30 + that are more industry-driven so retailing being one of them travel food service and then we have some
but are we block them either on their economies or consumers are in my case so what digital consumer we are thinking about it
more from the
customer vantage point in more like our motto is to think about how Tech is changing Commerce so really it's
Commerce that happens you know maybe it's in a store maybe it's online our retail system looks at the sale of goods so
in general consumer were thinking about those type of purchases but also travel Food Service entertainment I'm kind of that.
Consumer-facing Commerce experience.

Scot:
[6:13] Colorful next to the background sounds like you got a lot of ground to cover and we were really excited to see the report so you want to jump into that the report probably looks it when I think of his kind of three use cases so you talk about entertainment venue kind of the home and then retail store and I thought just for fun because you told it in that sequence we would actually go the reverse so so
because we really Reach Out focused here I thought we'd anchor on that and start without me so the first question I have is you
here we are 2019 and there's a record number of stores closing in Mall's closing at least the US and think it's kind of a global Trend and feels like there's still a lot more stores that are going to close side if you read some books a like 30% of malls will close
so so I guess my starting question is do we even have stores in 2014.

Michelle:
[7:03] I think for sure any of the key part is that stores are going to evolve so obviously through the history of retail there's always been changes where you know people in the USA might have
lived in shop downtown
you know several decades ago and then eventually went to Suburbia specialty retailer is Rose and popularity and you know now we're seeing them to Klein so I think there's a natural kind of
evolution of things have happened in terms of what you know clearly it's more of a kind of a.
Probably a generational shift it feels more severe what's going on.
Certainly some economic factors and Technology playing a role and I'd say you know though we see.
Online sales obviously from gross Sandpoint outpacing what is Boston Store you also when you when we serve a consumers you ask, why do you shop and store and it's a c
Lexi lore touch things before they purchase some so 47% of global consumers say that
they'll want to go in store I just think stores are probably going to change around those.

Scot:
[8:21] Do you think we'll have them all, format or is it going to be more of just kind of individual little Standalone stores.

Michelle:
[8:30] I think the mall format cuz it could certainly be feasible and I think what we're seeing as malls today is If you,
consider some of the department stores are closing and some
you're more of like entertainment Concepts that are coming in more of the restaurants there is a.
Little shopping center in Chicago in the north and Clybourn area
it's it's small it's not a huge mall by any means but it opened the last couple years
and I am always struck whenever I go there because there is a grocery store so I might have more frequent football there there's a jewelry store
remember like a candy shop that kind of thing there's also
pleather of entertainment options so there's a cinema I think there's some other entertainment and then
also a lot of food service options so giving you a variety of reasons to go and enjoy yourself and as your lingering perhaps shopping then.

Jason:
[9:34] Awesome and I I want to dig into that but before I do I just wanted to compliment you over on the report I think it's super smart.
To forecast the future 21 years out Scott and I do these forecast every year and then annoyingly a year later Scott likes to do a show where he reminds everyone of all the things I forecasted a year ago.
And that never goes well for me and I'm thinking that like.
Bye-bye doing at 21 years out your way less likely to have people pulling out your old report in 21 years.

Michelle:
[10:07] I hope so that's my that was my makeup there.

Jason:
[10:11] Going back to our original theme of ways in which Michelle is smarter than Jason.
Reading between the lines when you were describing the report in the the specific missions that people would still have in brick and mortar stores,
I made an inference and I'm not sure you explicitly call that which is maybe retail isn't as.
Maybe physical retail isn't as important or replenishment as it is today and that you know it more has this roll around these these special missions like like something you want to try before you buy,
when you just want to serendipitously discover some.

Michelle:
[10:49] Yeah so when you think about different
sort of purchases I think you've hit the nail on the head we talked about this a little bit in the home environment which. Rob is going to talk about in a few more minutes and I think dads were the replenish
Amazon you obviously iot is starting to take off Smart appliances and whatnot so the idea of your washing machine belt.
Shade or inform you when you need to charge it those kind of purchases could be outside of mice more so in terms of
physical Outlet which is what we talked about in the in the retail store section we think that there's going to be kind of suppose by categories that there would be a convenience store for those those purchases that are
Shirley just impulse buys I'm where you're walking down the street and and you just want to water or you.
You know we're going home to make dinner and you you know you need milk or whatever that item is there that you don't want to have delivered and then the other type of
storefront there would be would be more of an experiential Center I'm so this gets to that point of consumers Battle of touch feel,
experience products that require oftentimes more consideration so maybe it's something like Furniture maybe it's apparel,
beauty products I'm also come to mine.

Jason:
[12:18] Yeah and in a report when you talk about these sort of experiential centers.
It sounds like the bar is significantly raised over like what we think of is experiential retail today so I today you throw a coffee shop into a retail store and now it's it's experiential retail but like what what are some of the examples of.
Of the kind of experiential Center that you guys are envisioning and 24.

Michelle:
[12:44] Yes or no example that we included in the report is around the idea of a sports apparel store so you might have and I think there's there's flavors of this that an Under Armour my do in a flagship store
were you you know you can go in and let's say
there's treadmills where you might try on shoes you know trying to see how they fit what we're talkin about also in that scenario is why does it have to be a treadmill if you're trying to buy cleats because you play soccer why couldn't it have more of a substance that's more like turf or grass something I've seen in some stores today is this notion of taking a shower of concept in game if I in it so obviously you could go in there it could be for trying on the product or it could just be
are you competing against yourself for 6 months ago or competing against a friend
and I think a big saying is also like the kind of testing areas so you see some of that with with beauty products today and you'll leveraging AR to kind of see how that.

[13:53] Shade looks on you and that type of thing what we are talking about in this world is a room that's sort of changes
and you see some of it with changing lighting but we're even talking about change in temperature or changing to rain so a story that we talked about in the report is,
this lady is preparing for a trip to Patagonia because I went Patagonia this year so that was top of mind
and I you know needed to buy a winter coat so she's prompted to go into the store because
they have this type of information on her interest her she's able to go into this room with this winter Co and see how it would truly feel because we know there's,
I was like think about when you you know by clothes that they need to keep you warm and it's.
70° in a store it's hard to to kind of get that sense of how it might work and then the other big element that we talked about.
With this particular example is this idea of.

[15:00] Very much a game that you can play and we think for those retailers that really kind of nail and experience and make it unique that they could certainly even charge entry
2 to allow consumer Steven to play this game so what we've
outlined in the report is the idea that
you know maybe LeBron James is your favorite player and so you always dream about playing him in NBA Finals so we have some imagery in the report and so there is in the image graphic
ran or holographic representation of LeBron.
You as a consumer you have the ball and in your getting ready to take the game-winning shot so if there's those kind of experiences that really.
Bring to life something that you might not be able to experience I'll swear you know perhaps that's something that a consumer might be willing to pay to build experience.

Jason:
[16:02] I like it and just a clarification for listeners that LeBron James she's talking about is LeBron James jr. who will be the.

Michelle:
[16:09] In 2040.

Jason:
[16:13] And I came back you might be coming up on the end of his career by that but I'm I'm pleased to hear because you know for people that believe in global warming I'm I was somewhat worried you might not need a coat in Patagonia in 20.

Michelle:
[16:27] Yeah that's that's touch-and-go right now you have a good point there.

Scot:
[16:33] So you're on the show we're big fans of AR VR 3D printing and some of those things that when Jason I talked a lot about them retailers kind of glaze over because they feel really gimmicky and and
not like they're not going in Back to Future I was excited to see those mentioned in the report how do you how do you see those fitting into the store of the future.

Michelle:
[16:53] Yes I think you're right we actually do
an annual survey of Industry professionals globally where we ask them about Technologies and where they're investing right now
like looking out 5 years a eyes number one I'll choose number 2 but seems like 3D printing.
Still fairly low arvr is kind of middle of the pack so it it certainly mirrors what what I hear as well and I think you know in that survey we asked them all so well why are you not investing in the topic,
the top reason back of tends to be a lack of a clear business use case so I think we're still going with how this,
you know how smooth the business forward arvr is certainly something that comes in quite a bit in this report for sure.

[17:49] I think you know where this,
a r I think about the use cases even today and terms of you know you know the being able to try on makeup.
Being able to you know see.
Clothes on yourself made it when you're not in the store the sizing getting more accurate sizing that type of thing and hopefully you know when we think about VR and we think about
those kind of headsets I'm across the worlds we we keep calling them world's or environments in the report
when we talk about VR and we think about the headsets we think about them being that more
Spiffy's and something like the Google Glasses that we've seen in the past something that.
You know you might actually wear that it would be a fashionable piece of I wear it wouldn't be maybe as intrusive as well
time to bring things to life 3D printing is something we talked about in the retail store area and I don't know that we're,
that it would come to a place where you know everything is printing on-site what we've talked about is
if if you're trying on a shirt in the fitting room and in maybe it's a V cop that you want to run to cut maybe you can make small adjustments like that and have it printed.

Scot:
[19:16] Call how about I think you talked a little bit about kind of to use your Patagonia example where if you were trying on something you could you could see yourself and kind of us an AR mirror so we can see how,
maybe they don't actually have the Garment there in the store and you can see how a different color would look or something like that you see that kind of
technology being in the store or more kind of in the home.

Michelle:
[19:41] Why thinking both places are certainly and we can talk about it probably more in the home but,
we had a pretty detailed imagery and in the report where we talked about a woman trying on
product in the mirror and in what the experience around now with the you know I do think smart mirrors.
In the retail environment have been around for a few years for sure and where we're seeing them more and more I think there's definitely a strong use case for those in terms of how they can.
Kind of extended use cases and and helps it move.
Bring different colors or Cuts or whatever it is to life for a consumer.

Jason:
[20:33] Yeah said to me it's like there's an it's hard to talk about each of these three things separately because in some ways I feel like they do overlap a lot and since you are.
You know I'm kind of taking the the perception of the consumer that makes perfect sense.
You talk a lot in the report about like increased demand for personalization and I feel like that's one of the areas where.
You know some flavors of this 3D printing make an awful lot of sense is it like it's probably not true in 2040.
That very many people are all walking around wearing a carbon copy of the same thing.
Like we're using the same thing right like it you don't you don't have the same glasses prescription and it just feels like by 2040.
There's going to be much more opportunity for for everything we use a known in life to be much more tailored to us and our unique.
Differences in taste and flavor.

Michelle:
[21:29] I think that's entirely accurate and
personalizations a common theme across the report certainly what you're talking about is is more so that product we bring home and the ability to kind of slice and dice it
so what we want which I think is going to be certainly more feasible and it is probably,
you know what I was describing with that 3D scenario is that if you're trying it on in a fitting room a certain shirt and you can see different cuts of it you can see different colors of it you know maybe this is a shirt
today that's only sold in two colors in one cut but in 2040 could be in 03 * 8
Bridal 24 different versions of it that could be slightly different not to mention just the cut of the shirt you know like the way it fits you write the nobility we would have some more Taylor it,
to a consumer as well.

Scot:
[22:28] 2 with the store of the future it wouldn't be a Jason Scott Shofu didn't talk about Amazon is is Amazon play a role in 2040.

Michelle:
[22:38] Will it be around in 2040.

Scot:
[22:43] For they are they what's Amazon look like in 2040.

Michelle:
[22:48] Are they serious.
Yeah that's that's quite a ways out I would say if they continue on the same trajectory and
and I'll continue to put the customer first and
adhere to that sort of business principal than in theory they would still continue to be relevant obviously the world is fast changing so any number of things could happen you know I think with Amazon.
And in the in the society that we live in as opposed to somewhere like a China just the sheer amount of of size that they have.
Their tentacles so many different areas know they are the antitrust thing also comes up in what they might look at look like come in but you know I think Amazon also knows that,
I can't fall asleep at wheel because.
You know there's a lot of players like a like a Sears or a blockbuster Kodak they're all classic examples of people that were top of their industry and then.
Lost Focus.

Scot:
[24:00] Yap's alethea you have to kind of self self innovator or else you'll get an intubated.

Jason:
[24:10] Yeah I do.
I mean obviously I could go either either way but I do that you know Jeff Bezos has this quote that I admire,
no Empire has successfully predicted it done to my eyes,
he seems much more aware of How likely it is that bite by keys I just got a question of if Amazon well.
Go pass relevance win and then he has the funny one liner I just want to make sure it out as me.

Michelle:
[24:41] Yeah and I think they kind of their other strategy is Bill in that defensive mindset right like they're they're always coming out fighting from their regard.

Jason:
[24:52] I do think it's going to be interesting I do you know I think it's easy to kind of bifurcate retail into the like all that you just sort of Need for filament replenishment and.
That's obviously the the way the area that Amazon's dominating and leaning and then there's all of this sort of.
Experiential you know personalization all these sorts of things that Amazon doesn't plan as much like I think it's rather Complicated by these non-retail businesses than Amazon's really selling at so like you know.
Maybe they're they're the backbone of the internet in 2040 and in retail has become a boring industry that they don't Focus.

Michelle:
[25:33] If you if you think about Amazon.
If we assume what I'm talking about Commerce 24 it comes to fruition and we think about Holly Amazon layers over it obviously they could dominate when it comes to kind of that General the filament of a
replenish our products that I talked about in the home area you know maybe in a retail store maybe it's questionable I was so they pushed into stores more so and they certainly could do more
I think a big area when we talked about their future as with Alexa
and if they're able to win that battle to you to be one of the default choices for consumers because certainly across this report I talked a lot about that kind of voice first
mentality.

Jason:
[26:19] Oh for sure like part of me is like I'll be thrilled it by 2040 they finally know which lights I mean when I say.

Michelle:
[26:26] Stars of things to be worked out for sure.

Jason:
[26:32] That's a video of machine learning is it like you're going to incrementally get better every year for the rest of life like I'm like you know the human brain which like does not end.
Over over the Long Haul so yeah I know I do think that's interesting and I'll just be at the moment like in some ways they're they're much smarter about trying to make their technology open in ubiquitous.
There's like some interesting news about just how much renewed effort they have in winning the the car dashboard and how far they're going to go to give away the voice technology to the car manufacturer or something like that because I.

Michelle:
[27:10] Well it's it it's the operating system of the future right now is it going to be it feels like the next generation of like the Apple iOS kind of battle.

Jason:
[27:23] Yeah for sure and I do I'm going to go back up I'm not I'm definitely not going to get in the business of predicting and Amazon's demise but I will say like one thing that is interesting about.
You know so today personalization is a lot about personalized they experience and I do believe that increasingly is going to be economically viable to personalize products as we already talked about.
And so-so For Better or Worse one of Amazon shoe disadvantages in retail is.
They've just invested orders of magnitude more in their fulfillment Network than anyone else since they're able to,
hold more good closer to the customer and get it to the much faster and cheaper than anyone in their orders of magnitude ahead of everyone so they made this huge investment.
It now gives them this huge advantage and service-level I'm which is all really smart but one thing that's interesting is it the world does go to.
Products that are made to order and made on demand a lot of that existing an investment gets depreciated.
So it it just either that is one of the things that you could imagine sort of.
Being a little bit of a equalizer and reducing some of Amazon's competitive Advantage if it is a place.

Michelle:
[28:41] Well I'm thinking about you know even if it doesn't go that way to like how fast can it get you know it is it you know they're down to 1 hour for some products can they really get it to me faster it feels like.

Jason:
[28:57] Oh yeah the patent is they're going to have it waiting in your basement before you know you need it.

Michelle:
[29:00] Going to be creepy Leo living in my second bedroom or something.

Jason:
[29:05] I mean the picture of your basement.

Michelle:
[29:08] Oh that makes sense then that's those people work down there.

Jason:
[29:16] Bebe cool iron is in 24.

Michelle:
[29:18] Yeah I just feels like even on that front that other retailers could catch up I guess it's my point.

Jason:
[29:27] Know for sure it's going to I hope I'm I do want to pick up a little bit though we constantly talk about today and you know his butthole.
Digital disruption and like in particular like everything's omni-channel like all these debates about how you measure sit like.
Is that all gone away by 2040 like is there like a people still talking about these channels is different things and you know are we still.
Segmenting sales by like people that deliver online and people that deliver and store what it what is omni-channel mean in 20.

Michelle:
[30:05] Well if we're going to get to this Vision I would hope on your channels and non-existent I think that's what it's really about is.
Is not looking at it by these various channels and drawing these lines as much as it's about just being you know having a product.
When the consumer wants to shop for it and where they want to buy at excetera excetera so if it's picking it up on their way home from a convenience store location or if it's having it shipped from that,
that store to their home you know I think that's probably what really holds back retail and additional era today it's those kind of / it started because.
Digital camera on 2nd right is so I think you almost have to get past that in and look at solving it from where the consumer vantage point from their point of view.

Scot:
[31:05] William I'm excited to shop in the store 2040 hopefully we can all do a repeat of this episode and we'll just on January first week of January
E-40 we'll get together and I guess Chicago would be convenient for you guys and we'll go see the store of 2042
anniversary this episode so let's go home because you do paint this picture where you know today I don't really think much about shopping at home you've got them really kind of all integrated Ruston Way
and when you described that house the future actually reminds me of Jason's house cuz I think he's got like 50 Alexa's
you can see through his refrigerator and it orders things is espresso machine knows he needs an espresso every 10 minutes.
Self self espressos for those of us who don't already live in the house at 2040 give us a walkthrough of what what you think that looks like.

Michelle:
[32:00] Yeah for sure so I think we are starting to see some of those Technologies come in as you describe it
20/20 starts we come up the volume higher because that's when several different Appliance manufacturers say that,
all lines of their products.
Will be connected so you'll see more of that come in at home so you know as we think about it you know voice is Paramount across all these worlds where we talked about it
and then you know when the home certainly plays a role certainly the the the speakers are
hearing a voice like we should Google home and Alexa as well
you know there is an imagery and Aaron Imaging report where we have a connected fridge and it's still the same set up sort of idea that you might have stay we can make a list or order something I didn't see about.
You know the 2040 version is the level personalization that comes in is what we're talking about is that it ties in to that individuals Health System let's say you know what maybe you're.

[33:11] Wearing something like a Fitbit is tracking your exercise you know tracking your food and and when you go into the fridge at 8 to grab whatever it slaps you on the rest and says you know this is going to know your calorie count or what-have-you we also show
a lot more screens couple different places in the kitchen in the bedroom so.
You know anything about the interaction screw in the kitchen how you could monitor different levels or whether is energy temperature security excetera.

[33:45] In the home or I mean in the the bedroom specifically we have is interactive mirror and this is
one of my favorite parts of the world to kind of imagined and wrap my head around is that we have the same mother she's just trying on outfit for the morning
two interactive mirror so she can quickly see what's in her closet kind of
you using the technology just throw it on or there's ability using social media of tomorrow or private communication channels
picture send it either sure girlfriend that she trusts will actually give her an opinion or to a group of random strangers and then there's an element where you could invite a holograph brand rep.
Into your home now I don't think this is something that's going to be.

[34:35] I'm not going to be invited to every brand into my home but I'm thinking about someone
like an apparel retailer in the US whitehouseblackmarket that's a place that I shop at quite a bit it's a place and I'm comfortable buying online because I
I've shopped enough in person that I know they're Cuts so I would know what sizes fit me best
so if they're also very like a commission driven so there is no stylist there right on top of you when you go into the the outlet and in terms of helping you so I could see someone like that. Kind of
Grand where they they already provide value in your life when you shop with them so you can invite them into the home to help you
finish out a certain look so you have the skirt but what about a top that would go grade or a certain belter or what have you.

Jason:
[35:33] Yeah one of the things that excites me about that vision is today as a retailer.
You get a lot of data about what consumers own but very little data about how they actually.
Use what they write so,
yo like it's it's a very but it's very binary like they have skinny jeans are they don't have skinny jeans they have it at you. But there's no contact and so you know when I read that sort of,
homes in REO in ueno now like you don't give the customer Ops in and you know all that everything aligns you cannot share with that brand.
Analytics on what you know what's actually in your closet and how often you wash it and how and how often you wear it and what you wear it with.
And you know you could imagine the the AI recommendation engines of the future.
Things bad with that much with your data source could be you know much more accurate at.
Sort of you know truly finding things that made my life better than than the kind of basic recommendations that we have today and things like that so.

Michelle:
[36:43] Yeah and I don't want to creep out your entire audience face by any means I I don't think this is going to be every brand it's going to take a certain,
there's a certain trust you would have other brand like that alright to give them that kind of information but once they've established that trust,
I could see that type of thing.

Jason:
[37:02] I think one of the interesting trust ones to play out is the whole and you you paint a little bit of this in the report to is the whole integration of bike shopping and health care right though.
You can imagine again that that facilitates a lot of better experiences if.
Your grocery store knows that you have diabetes like like forget just like telling you if you're buying your calorie counter not like are you buying doctor approved items and are you know all of those kinds of things to come in a play but they're right there are potentially some.
Some huge trust barriers enabling some of those experiences.
But I do want to keep the audience out and so.
The the potentially cool or creepy part to me is you got you seem to be pretty in on the robotic assistance so it like is are we straight up Jetsons are we going to get a sparrow.

Michelle:
[37:58] If they can fold my laundry I'm all about them coming so we talked about robotic-assisted from the idea that I might share one
there could be different business models like maybe the outright own maybe they're leasing renting that type of thing there's a screen on its belly and stomach where we can see.

[38:25] Show me the interactive screen where they able to talk to him or you know maybe they see entertainment program Maine
or maybe Brands actually are able to push out messages through there but throughout our images as robot.
Plays a role in one of them he.
You know gets the products that were delivered that day and bring some to the kitchen in the one.
In the bedroom on Mom's getting ready he's playing with the small child so he's not outright the babysitter mom still in the room but it's
he's playing educational games with the kid and the scenario where describing here is you know it's a small kid they're playing blocks and the kid says
you know where we are.
You know what we're bubble he says Mom I'm bored in Oakland by the next Edition so what we're talkin about here's the idea that you know if you have
you would.
Police are out right on this robot and then you would buy in a certain packages so in that case maybe you bought the package for a two year old to three year old and now I need to upgrade to the four-year-old package something like that.

Jason:
[39:37] It's going to be interesting are you familiar there's a uk-based television series called humans.

Michelle:
[39:49] No I'm not but I need to watch it at.

Jason:
[39:51] Stay awake I think it's on AMC in the US and it a door a couple of Seasons or one season has was dislike.
Somewhat distant future when like households were just started by affluent household could now afford the the Schumann eyes robots,
and of course they're getting better every year and said they're all these financing plans and if you're middle class family like.
You know do you make the financial sacrifices to invest in one of these things or do you have something symport you know and I.
Because it's DJ's are psychos off the rails and ultimately you can't figure out like who the Androids are in the humans in.
Driver bolt and try to of the pilot is very much in line with with a painted so you should know.

Scot:
[40:50] Clear you are in the report you suggest a lot of bran ways Brands inject themselves into the house you've given us a couple of those examples you Yeltsin reduce this kind of concept of passive consumption
explain what that is and why connected home ring set alarm.

Michelle:
[41:06] Yeah for sure so I think we're starting to move into the air like I said 20/20 is a key or where there's a lot more appliances
in the marketplace Mass consumers naturally upgrade things these appliances will be connected so the kind of Pastor consumption you know it's going to tie to those were punished for products I don't think.
Any of us get up in the morning and work
like super excited to go buy Tide laundry detergent so those kind of product choices are product decisions purchase decisions that we could just
essentially automate so we we see
technology today now that it's going to be even better into these machines you know it's able to measure consumption rather than purchase history that the retailer would have so some of this could be
I'll try to my settings are still a question if the consumer want to be removed entirely or if they want to be paying down their phone to okay a decision
but I think long-term is we think about this idea of passive consumption is certainly starts to.

[42:14] You know shake up the retail industry as we know it consumer Appliance manufacturers with with.
Attack in these appliances are able to get closer to Consumers offer things like remote monitoring maintenance kind of things to keep that relationship going you know what,
just because.
You know it's going to notify you need me more laundry detergent doesn't mean a retailer has to fulfill that there's a potential potential probably for a brand to do that as well so I think it starts to change the whole paradigm
and it has a big impact anything about loyal to two because,
you know you're a lock into a decision so there's less opportunities upon which a cpg brand like a a P&G could influence you to buy Tide
I'm just switching by that versus what you might have been buying before.

Jason:
[43:11] Yeah I I D I think that's.
Interesting totally viable in my in my mind that is another scenario that potentially causes Amazon to have to order the Amazons of the world.
To have to Pivot right because,
again there they build their business to try to be the world's most customer-centric business customer kind of.
That their customer Persona today is a human and you know they built they invested in all these warehouses in this huge assortment because they feel like customers like huge assortment and they like to get the goods real fast.
If the customer of the future is the LG dishwasher and it is ordering its own soap.
You can imagine some of the things Amazon's investing and being less important right like the LG dishwasher might run a reverse auction and buy the soap from whoever can you know provide soap that has meat specs.
They can provide it the cheapest and unlike the human that doesn't notice they're out of soap and told her out of soap and they needed in one hour the LG dishwasher that knows exactly how how frequently you've been washing dishes for the last 10 years.
Can can order the soap well in advance and wants the cheapest Zillow soap that can be delivered on a very slow cost-efficient method.

[44:31] I do think that that's going to be another that that's a potential another interesting.
Curve that that some of the players of today might have to think about but I was more excited in your home thing you saw their super practical problem there's no porch piracy in 2014.

Michelle:
[44:49] I'm glad I did that.

Jason:
[44:55] Write like in CNS because the the delivery Guy waits until they know you're home and then they deliver the.
Stages of close to you and then using this all the spectator they do it when you're home which I think is bad I do want to Pivot the to the entertainment venues in 2040.
There are a bunch of a cool ideas and it seems like a VR plays a super prominent role you want to talk about that a little bit.

Michelle:
[45:22] For sure so you know I live in Chicago I'm actually a Cubs season ticket holder so we go to a ton of games and so when you think about.
Dad experience that you have at the stadium today and then what am I be in 20 years you kind of have to just start to.

[45:43] Weber jetting more technology to add to that in-stadium experience
because it's already commented home I I was in a conversation with friends this weekend and someone was talking about the upcoming Bears game and how much a ticket cost and I don't want to deal with parking and all of that nonsense
and I can just watch it when I can watch it at home on my 80 inch whatever TV so you know obviously.
The stadium operators are competing in a new way you know against
against the streaming services and in the technology you have at home to bring it
Sabrina game The Lies We talked about is a are so think about those cool glasses that I described earlier that we would naturally have so how can we take AR and Leo over the action.

[46:38] Deep in it
so an example might be like from the baseball realm a key stat they often throw around you know what a picture is how many pitches is it you're on the game and you know that's going to start arrest come out as he hits a hundred or hundred five why have you
what if you had all their stats because the players.
When you could see their endurance level as something else is happening in the sixth inning he's just getting worn out because he pitched on three days rest.
What other factors come into a horse's Commerce Elementary as well where you can order food
to your seed order it too kind of a click-and-collect kind of location and then also Tynan to you watching the game the ability to order
pre-order merchandise as well you know based on what players you might be taking an interest in.

Scot:
[47:34] Cool one of the things we haven't talked about his drones and there's a little bit of drone delivery in there but but here in the entertainment world you talk about this kind of cool you could be sitting there watching things and then switch to a different camera from from the Drone is
how do you see those playing into the whole event situation.

Michelle:
[47:55] Yes I think it's just about you know.
Angles on the game that you know so you know I think about it in terms of
what you might see at home that you don't actually see when you're in person at the game from your seat currently you know if you guys I'm sure
you guys have been probably Wrigley Field it's going through a lot of upgrades right now but if you think it back a few years ago without the jumbotrons without
Cheap Eats around the stadium the idea of being able to see a closed play you know you want to re-watch it you want to build understand how it.
What is the Players really say for whatever the scenario was so I think that's another way another kind of layer to it.

Jason:
[48:43] That like it's going to be awesome to live in that world Michelle in that's actually going to be a great place to me baby cuz
once again we have used up our a lot of time for the show but if folks have a burning question and want to continue the dialogue we certainly encourage westerners to jump on our Facebook page or hit us up on Twitter
Michelle is Whispers you want to contact you what's the best way to to find you online.

Michelle:
[49:11] For sure I am on Twitter and also linked Denso on Twitter it would be at Nevins in Evans 1/4 and then online Michelle Evans.

Scot:
[49:26] Cool we really appreciate taking time out of planning our feet are 21 + years future so to come on the show.

Michelle:
[49:35] Thank you was a pleasure to be with you guys.

Jason:
[49:38] Until next time happy commercing.

Sep 5, 2019

 

EP186 - BottleKeeper CEO Adam Callinan

 

Adam Callinan is the co-founder and CEO of Bottlekeeper (@thebottlekeeper).  In this broad-ranging interview we discuss Bottlekeepers origin, their experience on Shark Tank, Amazon strategy, protecting intellectual property, and challenges and opportunities of scaling a direct to consumer business.

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

Episode 186 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

http://jasonandscot.com

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

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from the etail East trade show in Boston on Tuesday August 20th
2019 I'm your host Jason retailgeek Goldberg and unfortunately Scott was unable to join us so I am so low today but I've made up for it by to juuling a great guests to join us on the show Welcome today Adam Calhoun and he's the co-founder and CEO of bottlekeeper
welcome to the show Adam.

Adam:
[0:53] Now you're having me.

Jason:
[0:53] We are super excited to have you as you have a great story as Messengers are going to get in just a minute but for those that haven't already had the life-changing experience of owning a bottlekeeper,
what it what is the elevator pitch on bottlekeeper.

Adam:
[1:09] So it is a bit admittedly it's a bit challenging to just fully explained it is a very visual product but I'll do my best.
Bottlekeeper is effectively it's a stainless steel bottle like a water bottle that we've all seen for 20 years,
and the base of that bottle screws off and so the inside of the the body of that bottle is is insulated with neoprene so that you can put a beer bottle inside the body of the bottle screw the base back on there's a built-in bottle opener into the cap,
I've been a seals being closed bottle and does all these great things will also helps to keep your beer bottle which is now enclosed much colder much longer and it's protected from what we say is gravity induced explosions,
I lie when you drop your beer bottle on a pool deck Kubota Beach Etc broken glasses bad.

Jason:
[1:53] So so I have heard so if I called it a beer cozy on steroids would that be offensive or is that.

Adam:
[2:00] It's important, defensive and me to tell in 1981 was the first patent for the super old-school thumb is he so it was time for redo.

Jason:
[2:13] Time for an upgrade right so we get massively better cold we get the bottle protection I'm not sure you Market it this way but there's potentially a stealth elements to the product.

Adam:
[2:24] I need a wee wee Focus pretty heavily on that keep it cold and protected live there.

Jason:
[2:30] Fair enough and I feel like most of our listeners have imagined that their dream job would be to be a CEO of a company in the adult beverage base.
I was going to ask his it's like are you going to ruin it and say it sucks and you were like 80-hour weeks and it's super stressful.
Or you can nice.

Adam:
[2:49] Now it's amazing I mean we we were very very intentional early on in starting this company my co-founder partner Matt Campbell and I about doing,
ignore my previous world was a lifestyle that was built around a business and so and going into bottlekeeper and launching and I wanted to do the polar opposite that was build a business around a lifestyle in my lifestyle,
living in Southern California I spent a lot of time in the water and on the beach and traveling with my wife and so we built that mentality into the framework of the business which even now and we launched in 2013 even now six plus years later.
It's fun I mean it's really casual it's really relaxed we have you know our team has unlimited vacation we have mandatory work-from-home Fridays because I literally I was trying to get people to work from home on Fridays and they keep coming in so now it's like.
You got to work from home on Fridays so it's just it's a very fun casual flexible products.

Jason:
[3:45] That that is totally awesome and I know you guys have a pretty funny origin story like how did you come up with this idea.

Adam:
[3:55] Yeah so my cousin again co-founder partner Matt was sitting on the beach drinking a beer out of a red party cup.
85° outside we know how the story goes right it's warm in 4 minutes and drinking warm beer is about as fun as having a tooth pulled,
so he at the same time he's also,
that particular about drinking beer out of bottles that's just something you would always prefer to have a beer out of the bottle so he's looking around he sees people drinking out of we're just normal off-the-shelf water bottles with her everywhere today.
And thinks himself why can't I just take one of those and put a beer bottle inside of it and really the only way to do that is by cutting it in half,
so he went and purchased a bunch of off-the-shelf water bottles a handful and Vise grip them to a table hack saw them in half,
cut up some old neoprene College Koozies and super glue them inside and his favorite beer bottle fit perfectly,
and what this did was it created an opportunity to keep a beer a lot colder a lot longer while simultaneously protecting the bottle because again he's on a beach he lives in Phoenix Arizona has a pool is all these places where,
it's hot and glass you know, doesn't make sense in this was the quick and easy solution to that problem.

Jason:
[5:06] That is awesome so we made a product for that and I heard a rumor that you you did a quick and dirty test to find out if there be a customer demand for the product.

Adam:
[5:20] Yeah when when you know we started doing this together we we burn it up in early 2013 we,
I was not admittedly super I thought was a really really cool product to fit my lifestyle gray but I wasn't overly convinced him particularly have never been in the consumer product business before that we could sell it that we could get people interested enough in the product
to sell it at a real price point NADA this is Hobby price why put a real price on with real margins so I built a website
just a landing page with a video that I shot on a GoPro and plugged an email capture system into a MailChimp and,
you know basically I spent $500 on Google AdWords in and sent people to the website they just basically said if you think this is cool and you want to know when it comes out leave your email and it converted reasonably well and it wasn't a 5% but even at 1% like we'd at least prove the people that were,
you know we're interested enough in it not knowing what the price was to go on to the next phase which R Us was crowdfunding.

Jason:
[6:18] Play up first. That is totally cool it wouldn't have been that much earlier that it would have been super expensive than unfeasible to even do a basic test like that.

Adam:
[6:29] No question and that's when you look at these sorts of things you know you can it's really in hindsight it's really easy to point out that the things that were really lucky and one of those the timing I mean had we try to do this in 2008 it would have been a totally different story.

Jason:
[6:42] Yeah and you're not the first entrepreneur on the show to say hey we
we put up sort of a faux buying experience even before we knew how to make products in fact I think we had tuft and needle on the show and he literally had a bye but and took an order in the first day.

Adam:
[6:58] That's awesome yeah we didn't take it quite that far but I can send there's a lot of Value Inn in doing that particularly when he basically combined what was Frost Phase 1 and Phase 2 he combined that into one phase which was can you get people out of the credit card information and click by.

Jason:
[7:13] So they also not available 5 years earlier would have been that that crowd crowdfunding component can you talk a little bit about that. I said you had any experience doing a crowdfunding project.

Adam:
[7:23] I mean I was pretty guy come from the medical world at that point and Matt is a also not turn over but has been in the alternative fuel conversion space since college so neither of us have any experience.

Jason:
[7:34] Kickstarter or Indiegogo or one of those.

Adam:
[7:36] We used fundable we actually got declined from Kickstarter at the time they were I guess we're focusing on our projects and things like that so I I met somebody who was a Founder CEO of honorable and they were super helpful and got us off on the right foot.

Jason:
[7:50] Awesome so then that's Circa 2013/2014.

Adam:
[7:57] That was the about September 2013 was the beginning of the crowdfunding it went on for 2 months.
Was really successful for us not in the amount of funds raised it wasn't super expensive to start this company so that wasn't the point but we we set up a low goal,
we
more than tripled that goal and it was it the real proof of concept that we can get people to enter their credit card information and click by and having these people not be like our parents in front of him.

Jason:
[8:23] Yep but it and it's only gave you some sort of Market validation that you had a.

Adam:
[8:27] 100% of men. That is the validation right we had something people were interested in and we're willing to pay real money for.

Jason:
[8:33] Yeah yeah so now you so now I assume you start chewing up and Manufacturing you fulfill those orders was it easy to grow organically from there or how did you say.

Adam:
[8:46] No.

Jason:
[8:48] I was being slightly start a.

Adam:
[8:49] Yeah it was not easy at all I mean it with this was like a funny side project for almost a year and not because we didn't love it and think it was amazing we just haven't figured out how to do it yet.
Sew-in yeah we we did that I built a real website on I think I'm bored press if plug-in woocommerce to it and you some funny Dragon drop that it hurts I don't have code.
And we started taking pre-orders at the end of the crowdfunding cycle so we had started doing some testing on actually being an e-commerce business in the fall we ship those orders in the first week of January 2014 barely missing Christmas which is awesome.
And I'm just literally just fumbled along for 8 months.

[9:30] We are doing two or $3,000 a month in Revenue I had two other kind of side project things I was doing maths in a running as fuel conversion company,
I'm so we're still doing this we're trying to do it we just haven't figured out how to make it work yet.
And something really important happened for us and that was in in about August of 2014 Facebook launched their video advertising platform,
so I thought of you again I'm not a videographer I'm not never done this before so I just took you off the shelf Camera DSLR that I had from some previous trip.
And propped it up on a backpack in the sand and had this sort of demonstration video that was abusively long in today's standards of digital marketing at least with respect to Facebook and things like that and put it on Facebook and it exploded.
Just went from you know 5 or so thousand dollars in August to like.
10 in September to 25 in October to 50 in November to 60 in the first seven days of December and we saw a lot of product cuz we had no expectation that this was going to have.
That was that was the point of which you know we were.
Clearly earlier on may be in September after like holy hell is actually working and then it just continued to work because with Facebook if you just keep putting money into a particular when you're at the smaller scale and you can achieve the same results.

Jason:
[10:46] Yeah that's awesome so during that that run up as you started getting that heavy Traction in this volume started really getting up did I did like WordPress break and all that sort of stuff and did you have to migrate I'm assuming.

Adam:
[10:59] Oh yeah we were we were in.
Way over our heads and by we I mean me my was responsible for the front end of the business the tech The Branding the marketing OSF mats with multiple for the back end with the inventory is the manufacturing or financials on this important stuff so yeah I was weighing over my head I mean we.
Do we couldn't ever get enough bandwidth to support the girl that we were doing and we Band-Aid patched it for.
A year easily are removed to Shopify which was one of the smartest things we ever did in the summer 2015.

Jason:
[11:30] And then fast forward a couple of years and you guys were on Shark Tank.

Adam:
[11:39] We were in the November of last year.

Jason:
[11:42] I'll put in the show notes but it's like season 6 episode.

Adam:
[11:48] It season 10.

Jason:
[11:51] Episode 6.

Adam:
[11:51] Season 10 I think it's episode 6.

Jason:
[11:54] Sex so so we'll put it in there before you get you can get on the show as a regular follower I sort of thing marked even as an unbroken record of investing in every Beer Company.

Adam:
[12:06] There might be a theme there.

Jason:
[12:08] So I don't know I don't know if you targeted that at all but just a side note.

Adam:
[12:12] Yeah he had this great quote and up one of the Publications that came out of that nose actually became the title of this article it was something to the effect of every time I drink a beer I invest a billion dollars.

Jason:
[12:22] Well I hope he's got a good Roi on that that could be an awesome investment strategy if it's working,
so you're so happen to have a guest shark A-Rod and in the beginning of your pitch to demonstrate the protection element of bottlekeeper you,
I handed him a baseball and let him throw a baseball at your product and I'm actually thinking I would be in your shoes terrified at this moment because if I make a rod look bad.
He doesn't like it at flush.
Like this could go totally sideways so luckily there's no listeners on the show so I guess we'll never get out did he nail it in the First Take.

Adam:
[13:05] He did I'm in the guy's a Hall of Famer.

Jason:
[13:07] Yeah.

Adam:
[13:08] It was surprising how I mean he nailed it dead center in the middle 60 plus miles an hour in a full business suit and dress shoes on a hardwood floor from 30 yards.

Jason:
[13:18] Which.
Yeah I mean he's there I got to do it but you still is I feel like it's impressive nonetheless so you took a risk until I paid off and on the show you Altima got a deal with Mark and Lori,
like pretty meaningful valuation when the fun things to me is a lot of people come on that show,
very early revenue or pre-revenue in like asking for sort of a wack evaluation and they get beat up,
I almost got the impression they felt like you were a little silly until they found out about your your existing Revenue run rates and then it became a different kind of gum.

Adam:
[13:57] Yeah which any of that was is,
very very planned out right I mean our goal it wasn't our goal wasn't to go on in and look silly but it was to go on and then get to the point where 3 numbers and have them all,
set up in their chairs and even even with you got to structure all these things right even with a rod drawing we designed that around having a run on the show we didn't say we want to do this experiment that all the time we have a run it was what do we need to include in our patch so that we can,
so that we can guarantee they will air our episode and it's like you have a rod throwing a ball on National Television there's no way they're not going to.

Jason:
[14:33] Yeah it's too. It's brilliant and I've been told by other shark tank entrepreneurs on the show that one of the things that can be frustrating is you don't actually know when your shows going to air.
Until I can be,
dislike again you're likely to have a big bump in in demand from the show in the band planning and hardening your systems can all be a challenge in your case I think you got a really lucky air date did you not.

Adam:
[15:01] We Dad we are the night before Cyber Monday.

Jason:
[15:03] Oh my gosh so tons of demand a peak time in you already on Shopify at that point so did things hold up in.

Adam:
[15:13] Yeah I mean from a from a texting Point yeah every everything that I'm in the fortunate thing for us in that experience was that we had already been in business for,
five or six years we've already done millions of dollar in route dollars and revenue we had,
you know we had put all the pieces in place through other learning mistakes and we were around that we've been on other TV shows prior to that's the we had these huge bumps in Things Fall Apart and so we got to patch all those holes
in advance and the other part was we had we work this great deal there manufacturing group where they were basically they would create,
I think it was it was up to 10 containers of product on their dime and basically hold them in a facility in the US and we could draw from them as we wanted so that really D risks,
our inventories going into Shark Tank cuz you're right we find out three weeks before it was going to air that was going to air.

Jason:
[15:57] Wow that's awesome in my distant past we used to do some work with Oprah Winfrey in like early on in her list she would literally put these entrepreneurs out of business cuz she like you create so much demand and like so,
you would have had to invent all these new disciplines about how you handle this this one ridiculous spike in your business that's a first world problem though my friend.
So so you're on the show the product looks gray By Carolyn season on the show you get this nice bump and I think you said like,
like a 300% increase in rent do I have that.

Adam:
[16:33] Yeah as of that night and then grilling to Cyber Monday we had we were already up W Revere so then we basically increase 300%,
the night of and it lasted through the subsequent week minute tell off a little bit the beauty of TV now versus TV 10 years ago did you get this huge Spike spike lives on a movie still
something like temperate not sock. It's slower it's like 5% of our traffic today we can still point of Shark Tank,
start in November of last year it reared in Des in January of this year but even then this up lives on.

Jason:
[17:10] The rears its the DVR now and on demand you get this nice a long tail.

Adam:
[17:12] Horse HD streaming systems.
Over the course of the week following the Airing weekend directly attribute an additional million dollars in Revenue just to Shark Tank nuts customer acquisition free which is a beautiful thing.

Jason:
[17:27] That that is awesome so that could be is valuable for being on the show you raise some Capital which I assume you were able to invest wisely and that's valuable I'm.
An argument that sharks off and make on the show is
did they have special skills and they'll help the entrepreneurs and so I'm always curious like I've done some math it's kind of funny
Mark has done a bunch of deals and he's like oh I will help you with your website and take care of all that and I hurt your back is done a bunch of those basically they're putting people on Shopify in Magento.
If you don't know about that.
Yeah that's why I'm just like to the extent you can say like you like do you get intangible incremental benefit from a shark investor versus you know like sort of anonymous money from a Visa.

Adam:
[18:19] Yeah I mean.
Anytime from our standpoint we're end up into this point we've had no investors are. So we've always looked at taking on Capital as a means of taking on,
assets that go far beyond Capital what do we you know what is the person bringing to the table outside of just money cuz we don't necessarily need the money that bad now it's part of the pushback we got with going on Shark Tank,
I was worried it was relatively apparent that we weren't there only for the money which a lot of companies go there for cuz they're about to die.
So each of them has a different skills that each of them has a different.
Thing they can they can contribute teams of people that can contribute I'm I can't really speak to them specifically prank their deals on going so,
we don't have a ton of experience in working with him directly but you.

Jason:
[19:08] Yeah it's going to be interesting to follow and it certainly is a fun story I want to turn the O2
what is often done fun part of the School entrepreneurship which is the whole hassle around knockoffs in protecting your IP
and this came up on your episode even a little bit like it is and I I get that they film this long for our thing and they added it down to 30 minutes,
that would like 8 minutes or whatever and it's
but like it almost seemed like you came on you totally shocked them with your Revenue run rates and you have good margins of good unit economics and then they're like we'll how much of you netting and it wasn't a huge number in it
it took awhile to figure out they like oh we've been spending a fortune protecting r i p,
so tell me a little bit about that.

Adam:
[20:07] Yeah it's.
United consumer product world where you have to deal with patents and knockoffs it's just a very unfortunate and mind-numbing part of the business but it but a reality so,
we we started to see knockoff products show up in on Amazon in 2015 late 2015 it exploded in 2016 and although we had patents filed they were still pending or inactive so you can't do anything about you just watch this happen which is brutal,
through that explosion in 2016 we we had over a hundred companies on Amazon selling fake they're not saying they're bottlekeeper so it's not counterfeit product released Amazon takes up are really seriously swear able to deal with that because of the trademark something that we had but,
when are patent did go live in November of 2016 we had to get really really really aggressive with defending the brand we had to make a decision,
are we going to grow more in Top Line and effectively bottom line.

[21:04] In 2017 or are we going to take some money out of marketing and aggressively Defender Brandon we did the ladder we know we're in this for the long run we spent a lot of time your building what we,
you know very much believe in and then and so we spent about a half a million dollars in 2017 and lawsuit suing a different companies.
I'm getting consent judgments and doing all these important things as part of a strategy that will and update thought at least at the time that would put us in a position to better Defender patents moving forward which worked in Heights at work really well but it was really expensive,
when you can take in the you know what I'm talking about that on the show that half million dollars we have to take out of her marketing Budget on retained earnings were Castle business,
so how to come from somewhere in the only place I could come from was was marketing so.

Jason:
[21:54] So I should have asked before but were you already selling on Amazon prior to the counterfeiters or did the counterfeiters show up on Amazon before you.

Adam:
[22:04] They should open Amazon before us that's why we went on Amazon.

Jason:
[22:07] Yeah I was going to say okay so you're selling direct if I have this right you filed a provisional patent before you really started selling the product or early on.

Adam:
[22:19] The provisional is something and it said this early I'll preface is that I'm not an attorney so talk to you later but the provisional something that you file that's kind of like a placeholder it's an inexpensive patent it last for a year,
and it basically like puts your place in line if it ends up working out and you want to come in I want to file a utility or a designer whatever patent on top of that so we had a provisional in place I mean frankly before Matt and I even came together and decided to do that.
We filed the Utility Patent didn't think December of 2013 and it didn't go live until November 2016 is it really long.

Jason:
[22:52] Yeah not fun either so also not an attorney on the side but like in general the,
super important thing about those patent filings is your filing date,
right and so you don't cost a certain amount of money and and both filing fees but also just to prepare a patent and so instead of spending all that money to file a full patent you can in fact,
take this cheaper path which is a provisional patent but the provisional patent gives you that all-important filing day,
I'm so if you have a bunch of money provisional patent actually not a good idea you should just go right for the patent and save the thousand bucks from the provision.

Adam:
[23:32] I mean I haven't even believe in that if you're testing a new concept as we come out with new stuff the first thing we do is file a provisional patent we're not sure it's going to work I mean our first and that's not like a small.

Jason:
[23:46] No no that's it shoot.
So so you get the date from this provisional.

Adam:
[23:53] That's the important part.

Jason:
[23:54] Yeah and then when it converts to a full patent application that still retains the provisionals date so that's the whole point of the provisional patent,
it's totally unpredictable how long the pageant can issue in it,
it comes down to a bunch of luck about the examiner you catch and if there's a lot of questions and you have to do a lot of defense and you know do additional primary and all that stuff so you could issue in a year,
and you could issue per your point in 5 years or longer so in your case,
people say you selling direct knock it off and start selling the knockoffs on Amazon under a different brand before your patented issue.

Adam:
[24:38] Yeah an end of the challenge there is that weird.
Heavily marketing bottlekeeper spending millions of dollars your marketing bottlekeeper on Facebook and all these other channels so why we had to be there is because people were then going to Amazon searching for bottlekeeper and please knock offs are coming up so we had to be at the top of the list for Bobby's reason.

Jason:
[24:55] Yet so you had to show up in their search
I won't make you say it but many people would also say that a lot of the amenities that Amazon does offer for brand protection,
are easier easier to Avail yourself of if you're a seller on Amazon
so like frankly a lot of people become sellers on Amazon specifically so they can do brand registry and and eventually get a wrap and have some recourse is for some of this.

Adam:
[25:23] Yeah I know the kicker there is he that doesn't happen till you get to a significant amount of scale.

Jason:
[25:28] Yeah which feels kind of oily, it's also like,
repeatedly how it plays out on most of the international market place is so you know you're trying to be on Team all at Ali Baba you know again has a lot more,
IP protection tools when your seller then when you're just a disinterested third party,
so so that prompts you to move to the Amazon platform so now you're playing at a crate
on the same sales that you in the past would have captured direct but presumably also exposes you to a bunch more customers so you may not have gone on Amazon for,
necessary the best of reasons but in hindsight.
Are you sort of neutral about being on Amazon like you feel like there is an at economic Advantage if you like is a disadvantage or not prepared.

Adam:
[26:22] Oh man how much time do we have.

Jason:
[26:23] I'll do a long show forever talk.

Adam:
[26:27] We if we look at the from a consumer brand if we look at the overall picture of what Amazon does for us is consumer brand I would call a negative.
You're right that we get exposure to new customers but the problem with our product is it's really hard to sell in a still image it's really hard for someone to look at it that doesn't know what it is and go I know what you do with that you put a beer inside of it
so it's not like we're selling socks,
yeah I mean when someone goes to Amazon looking for socks and we're one of the results that comes up and they love our socks and I wish it was it was that it was that simple I mean,
that be a beautiful thing but unfortunately it's not so the other challenging part is that in the customer that purchase
purchases from Amazon is Amazon's customer is not your customer that our customer we don't really know who that customer is they don't get to experience any any part of our Brandon
and buying Direct in the processing funny copy and follow-up emails that are super fun and engaging in personal thank-you note every single customer that buys from her site gets from me personally that comes from my address
they respond to it it comes to me and I respond every one of them. That's a really really important part of our brand that's how we get tremendous feedback that's how we design our new products,
so we've.

[27:41] We're hoping with some of the things Amazon is has put in place and we need to give them credit they have put in place a number of things that have been tremendously helpful like the patent infringement portal and brand registry which they just launched in the fall of last year that has been tremendously helpful.
But from a consumer brand stamp when it's really really really hard to invest heavily in acquiring customers on Amazon when they're really not our customers.

Jason:
[28:07] Shirt and you can act like if you think about it there's two kinds of traffic that's hitting your PDP like there's people that got exposed to your top of the funnel marketing activities off Amazon,
and so I want to hear funny YouTube videos or the television ads you're not doing which will get you in a minute,
are all these other things and like you already created an intent to buy
they go to Amazon and buy it instead of to your website and buy it and so it's lower-margin I didn't ask but you're probably also fulfilling via FBA and paying all those fees.

Adam:
[28:41] Yeah maybe actually Mark the product up on it was on the weekly or so to cover those please number one and also to give the customer incentive to come back.

Jason:
[28:50] I like it in that still gives you that visibility in search but protect you from some of that Marginal Road and that's a great tactic if,
the product still Converse at that high price I promise if you price at to hide and no one buys it then it actually doesn't show up in search.

Adam:
[29:06] So it's it's funny when,
when we first launched the product we launched it and one color one size and it didn't have the built-in opener wasn't powder-coated didn't have all that sort of bells muscles that it now has.
And as we launched colors and then when an Amazon we did it with our what we color 1.0 product.
That one for the product we were selling our website for 24 1999 $20 and you're selling it on Amazon for 25 but it was selling perfectly well on Amazon a 25 which was kind of that light bulb of did we underpriced are Prada,
and that is we launched new bells and whistles and things that came directly from feedback from our customers,
we looked at that pricing auto very differently and priced it well above what we thought would be reasonable and realize that we have not yet got to that pricing ceiling yet,
Amazon for helping us figure that out.

Jason:
[29:54] That that is a terrific unintended benefit I guess.
But so you have that version of the traffic in that converts and it's great but,
that again we'd rather you don't get to meet that cuss around that thing and then you have people that maybe didn't know they needed your product Discover it on Amazon and prove your point,
when those people at your PDP they probably don't convert near as well because your your storytelling and you're you're sort of want to buy contact content on Amazon is less compelling than it is on you.

Adam:
[30:27] Yeah it's it's significantly more limited.

Jason:
[30:29] So now I want to Pivot to another thing that I was actually expecting the Sharks to beat you up about and the Beast in the final edit it it you got a total pass on it,
you mention what a boom Facebook video ads for you were,
it sounds like it one point in your Evolution like you were you were very dependent on Facebook that that was your primary marketing via.

Adam:
[30:55] Yeah I mean even through today we're still dependent on Facebook we're just being very aggressive and diversifying that Revenue.

Jason:
[31:01] Yeah and for your point,
early on it's like as much Capital as you have you can buy more more profitable eyeballs from Facebook with that that capital in your Capital constrained.
There comes a point though when the cost per eyeball starts going up as you have to buy,
broader and broader audiences and as Facebook just as the monitor talk about their their cpn's are CPAs,
while they going up over time and as they scale and if that's your primary marketing vehicle you you have to worry that you're eventually going to hit some inflection point when.
We can't keep growing the same way you were and so like what are you doing or what hat what are you trying to sort of diversify that the customer acquisition from Facebook info sorry,
super long question when we're saying Facebook are we primarily talking about classic but Facebook or do you mean Facebook as sort of Facebook and Instagram.

Adam:
[32:03] Separate the two so classically Facebook we treat those two channels differently so looking,
I mean everything you said it sounds like crack the bigger you got the harder it is to generate Returns on Facebook now.
Combined with that is the fact that today you know Facebook isn't growing like it used to grow up really domestically at least which is where our main consuming audiences and.
The number of marketers advertises on Facebook is up significant let me know anybody with a harpy can go in and create an ad account on Facebook and sell their Wares.

Jason:
[32:37] Even I could do it.

Adam:
[32:38] I could do a lot I mean I figure it out,
the kicker bass simple supply and demand economics at least flatlined Supply and increase demand just gets more expensive,
couple on top of that we have Facebook removing a pretty significant amount of targeting as a result of all the scandals and things have come out which just means it's more expensive for us to go and find,
customer that we know exactly who that customer is and if we can Target them based on these Civics then then we do have to go to your point go broader which just makes more expensive naturally so we're focusing heavily on,
we do advertised on Instagram that doesn't convert that's a great brand building getting eyeballs to a but hasn't has to work we can but it real well for us.
We advertise in some capacity on all the socials Pinterest has worked really well for a tickly seasonally in and around Father's Day and key for the one that really surprised me and our marketing team is TV.
I'm TV is at a place where there is a lot of additional technology that wasn't there 10 years ago.

[33:45] TV ad-buying so the technology is not only in being able to attribute a sale to somebody saying.
Adam TV commercial on a specific Channel but it's also being able to buy the space on that channel now they're these live auctions that are all you know automated that
a really good TV buying company can go and get really inexpensive ads based on really good channels during great times a day that are in and I'll say the third position in a channel lineup rap commercial instead of the first,
but it's like $200
for an ad on Hallmark Channel during the holidays he was the sort of thing it could be really really really inexpensive when it's done correctly and combining that with the fact we're doing all around creative in house,
we can crank out high-quality creative and test the hell out of things before we hit need to go and put real budgets behind them.

Jason:
[34:34] And so it would be great if I said like that there this nice combination of there's way more inventory of Television than there's ever been before and there's slightly less competition for that inventory and so.

Adam:
[34:46] Yeah I mean if people are moving the advertisement for the attribution when you can just get it's just so much more clear.
TV gets less expensive I mean there's not necessarily less viewers there's less linear TV viewers
but even in the in the Digital streaming advertising and Digital streaming TV is great because you that's much easier to track that attribution issues IP matching and that's crystal clear in the linear side where it's somebody you know I'm sitting down watching TV.
Yeah you you kind of got to follow him a little bit one of the ways that we've been successful doing that as is with a simple hear about us how'd you hear about us and our checkout funnel and being really specific.
To the name of the channel in that dungeon feel like TV cuz if you're advertising 10 channels you're not going to know which ones doing well cuz I'm going to do really well in summer like any normal advertising Channel.

Jason:
[35:34] Yeah I think it's the old I want to make a quote half my ads are working I just don't know which half the,
so TV has been good the I also heard a story that you were doing at least an outdoor,
pilot it's a week like normally we've got digital outdoor and that means you're buying like a digital billboard or something that you are buying a digital boat.

Adam:
[36:02] This is Mike's American are a head of marketing is really really really smart guys I was coming up with these funny.
Interesting things to test a nut wheel of testing stuff so we
starting earlier this Summer started testing a bottlekeeper add video that's on a digital screen on the side of a boat that just drives up and down the coasts I named Ali in Florida and a couple other states as a
5 or 10% off discount code on and try to help us track conversions and it works really really well
the challenges scale most of these marketing things that work really well as getting the scale and it but I was another pleasant surprise.

Jason:
[36:36] Yeah yeah and did the guy that pitch that happen to own a boat in like.

Adam:
[36:40] Yeah it was like this is this guy's belt that's that's the downside of this is It's not like there's one company that does this it's like Joe's boat in Miami Jimmy's boat in Baton Rouge like it it's quite desperate see if we work them individually but it is an interesting.

Jason:
[36:54] And eventually one of those boats is going to hit a manatee and there's going to be all kind.

Adam:
[36:57] That'll be the end of it.

Jason:
[36:58] Yeah yeah I hope I hope that doesn't happen to you so lots of stuff in flight for customer acquisition the other big change I heard is you are now if he's piloting some retail.
So hot like talk to us about how like how you come to the why weren't you in retail in the beginning what changed that made sense for retail now and how's that.

Adam:
[37:21] Yeah you know what the beginning from my,
prior 10 years in the medical world experience was really labor-intensive and really hard to manage at least from a logistic stamp why there was lots of just stuff people in multiple States and delivery vehicles and warehouses and all the stuff,
she couldn't get away from it so when we started bottlekeeper the idea was to do the opposite of that let's think I said earlier let's build a business around a lifestyle,
the sort of like Drop Dead question when we looked at opportunities was do we need to hire people to to accomplish it if the answer was yes and we just didn't do it,
one of those things as retail as we started you know murdering people hammering stuff on Facebook with millions of dollars on Advertising retailers,
none of that and they are start sending an enquiries and interested in whether it's a big retailer with small Roots retailer we didn't know what to do with them cuz we couldn't read that just set that we're not doing this.
You know I was looking kind of at the GoPro model where they went completely direct-to-consumer for a long time and by the time they went to retail they got to make some,
in a pretty decent demands because they had the consumer yeah they had way more leverage and I always made sense to me and it sort of fit my my operating model of let's do this without people so.
Fast forward a couple years we as people retailers were coming to the site we were just saying hey we're not ready at between this waitlist and we'll let you know when we are so we had.

[38:40] 3000 us retailers on a waitlist,
we had a significant in the the how did you hear about us on the waitlist was customers coming in and saying why don't you have this which is really important piece owning the customer which was back twice challenging to design Amazon is a huge part of the puzzle,
so come 2017 or patent infringement staff gets largely cleaned up,
I'm 2018 we see the writing on the wall with Facebook we're starting to hit that point at which,
you know our Yang and yang with expense and return it starting to get out of alignment we're looking for other Revenue models,
so that one we were we have historically been a pretty seasonal business we do about a third of our Revenue during Father's Day and half of Revenue in the last 6 weeks of the year,
so that gives us 9 months of the year that we know have low sales were losing money and some of those,
I mean as we continue to grow our losing money in a lot of those,
I mean that's made up for in these other two seasons so it just got to the point where retail we had enough demand we needed to try to level out a revenue throughout the year and not be so dependent on Facebook and our other social channels doing marketing,
and some retail started to make sense so we actually this all started when a sales and he's now our director of sales this guy that had been in the the consumer space retail space for a long time.
Reach Out blindly ends at Ace Hardware wants you.

[40:06] And one company that I will totally plug happily that we've always looked at as sort of a model of brand building Done Right is yeti.
It's an amazing job building a brand on relatively limited amounts mean I know they have a huge patent portfolio now that early on they had a couple of Pattinson,
and protective of their drinkware lines in the sort of stuff that's that's hard to patent cuz it's that's been around forever yet,
they build this following where people will go and spend 50 or $70 on a cop that you can buy for $5 literally anywhere else and I mean they just IPO they were filling the dollars,
clearly that works for them so.
Is a store that Yeti is heavily in so that was the first big retailer that came to us and they were you not saying we want to work together you want to sell your products that and then it started to make sense so we,
brought on this order for Versailles who's awesome and what he does
and started that conversation we started opening up Ace locations they have four thousand or so domestic stores,
started opening that up in the fall of 2018 so by the end of the year we had two hundred or so stores,
started explaining to a bunch of a very select retailers,
and as of the first six months of this year we're going over 4,000 domestic store so we're growing rapidly into retail and now with launching new products and stuff just on our our big pipeline we get to add to those shelf the Shelf space that we now have.

Jason:
[41:28] That that is awesome I'm curious you you mentioned earlier on that like the product really needs the video demonstration to sell so one of the challenges of that retail shelf is your problem actually looks a heck of a lot like a Yeti water bottle,
on that on that shelf like a bee are you thinking about or if you experimented with any like video pop or anything to try to tell that story in retail.

Adam:
[41:53] So this is this is a huge consideration in launching into retail my nightmare is that
bottlekeeper ends up in the hydration Isle of a store sitting with all the other water bottles it will get lost so the benefit of having a bit of Leverage and going into the retailers that are saying please please no I'm not I don't know me to oversell it
they wanted the product and we had enough leverage to be able to say I'll kill you can you can have it if you do these couple of things and one of those is used our merchandising that we created,
I mean our counter display has a physical bottlekeeper unit broken open on it like glued to the front of this would display so you can't miss what this product is.
It's like they have to use the kicker.

Jason:
[42:34] Yep and is it like do you try to get merchandise in the beer section is that.

Adam:
[42:40] It just depends on the store I mean our again our sort of no-go zone is is hydration yet this is cousin doesn't but in
entrance doors yeah I mean we have like,
Meijer a great you know high and grocer that's perfect to be in the beer in the rear section I mean on a couple of sets a Whole Foods all these places that have grape your collections it works really well.

Jason:
[43:02] Awesome the I forgot to ask International so are you guys selling much International now is that in the expansion.

Adam:
[43:13] It is a big part of the expansion we have we actually physically launched into Australia in 2015 were some really good learning experience.

Jason:
[43:21] Then think about that but that's like one of your fate area would be where is it hard to keep beer cold.

Adam:
[43:25] Yeah and Australia versus a lot of the other places you can lie.

Jason:
[43:27] Like Greenland probably not as high on.

Adam:
[43:29] Yeah UK is not quite up there either but I mean Australia it's hot most of the population lives on the coast they like beer speak English,
it made sense to do that really good learning experience you know we sold physically they're out of a warehouse that was contracted and had a physical presence there learn quickly that there,
Amazon doesn't have quite the hold their that they have here so consumers aren't quite trained up on e-commerce,
so having a physical presence there is really really important over in the midst of working with Distributors to go the more traditional retail route as well as in a bunch of different countries yes is the really long answer to your question.

Jason:
[44:05] And obviously I'm sure you're ahead of me on this one by one of the sake things is of course all that IP work you did in the US you now have to start thinking about duplicating time what time is potentially a lot.

Adam:
[44:19] Yeah I mean there's you know that,
the downside of the very beginning of the company of not going in raising a bunch of money is that when it came time to file patents lien filing patents in all jurisdictions is phenomenally expensive and so there's some places that we just don't have coverage we just have to rely on the fact.
Certain countries really enjoy using American brands and.

Jason:
[44:44] For sure until we're getting we're running up on time I want to give it to the last topic
but I would be remiss if I didn't point out one of the funniest things of the day so you were funny only to me but you were on a panel at detail on Startup founder stories,
until they were like three three great Founders that had you each had heard of a wildly different story that you all share it and I feel like there's actually a bunch of,
useful practical learning that the audience probably got from all three of you but the one thing that all three of you had in common that it seemed like there was violent agreement on was that you should do all this marketing and concentration in house and that agencies
don't work very well and I don't know if you know this but I work for a giant agency,
so I'm laughing I'm thinking of my French overlords listening to this podcast and they're like nice TV is coming back we have a hundred and twenty thousand people that know how to produce great TV and then the next thing is but,
it's now easy enough and there's a bunch of significant benefits to do it in-house which I would totally agree with.
Yeah so I just wanted to get that out there for all my co-workers listening to the show I think the takeaway was agency sock was kind of.

Adam:
[46:01] No I buy my ticket would be that there is there's a time and we do use agencies were multiple points throughout our growth there's a time and a place,
and even today we are TV buying we're not doing RT to buy internally like it would be impossible for us to do that so we still do use agencies in a couple.

Jason:
[46:17] No I die till I get I just thought it was funny so I'm having fun.

Adam:
[46:20] Glad the other guy Adam really got into that one so you can lay down.

Jason:
[46:23] T it sounds like a couple of the other guys had some like particularly bad rebranding experience,
what does not hard to imagine so pivoting forward you put your future hat on in your imagining 2025a.
What does the world at bottlekeeper look like a view.
Dramatically expanded product lines have you like so this business to somebody in your living on the beach with like a concierge to bring you cold beer so you don't care anymore like what's the.

Adam:
[46:55] I mean we're not we're not even remotely close to where I would think of the acquisition time there's a lot of stuff you want to accomplish and we're certainly in it for the long haul I mean
you know we we spent a lot of time internally part of the downside of naming the company after your first product is launching your second product becomes kind of interesting so we spent a lot of time internally,
being able to better articulate why we as a business are doing this why is we we as a group of people are coming in and doing all the stuff everyday and as we get to better articulate that
I'm at we are getting a lot better at articulating. That will allow us to expand into other.
Verticals that I can't even imagine today I mean again looking at yet either a good example they started as a cooler and I was all a dog bowl expensive dog bowl,
so it took 10 years to get to that or what not but but there's a there's a lot of a lot of room for growth.

Jason:
[47:47] Yeah it's a crazy story like that you.
8 years ago they were primarily super expensive cooler manufacturer that was like known as are the niches today that they had this like super powerful brand and a Scraper on a product some people are like wow overnight success you did all this stuff in
5-day years there 23 year olds.

Adam:
[48:08] Yeah I was definitely not 5-day ears that's for sure.

Jason:
[48:10] Yeah I mean it's like it's it's the age-old story everybody's an overnight success 20 years it,
will listen am I super enjoyed talking to you about this is going to be a great place for us to leave it because it's happen again we've used up all our a lot of time but if listeners have any burning questions or comments and they want to continue the dialogue they're totally welcome to join our Facebook page
where you will see a lot of bottlekeeper ads I did some research for the show and your retargeting is now stalking me.

Adam:
[48:43] Perfect it's working.

Jason:
[48:46] Yeah yeah yeah and I'm a good guy so I clicked on every one of those ads for you.

Adam:
[48:50] Okay yeah thanks thanks for that.

Jason:
[48:52] Yeah I'm here for you maybe I should buy a product after I click on that. I don't know if that would be better I'm kidding,
but that we would love that as always if you enjoy the show please give us that five star review on iTunes Adam if people are inspired by the show and want to get in touch with you like what's the best way to,
to reach you.

Adam:
[49:12] I mean you can find me on Twitter Adam underscore callanan out. I will tell you in advance I don't use it a whole lot much to my had a PR sugar in,
I mean our bottlekeeper accounts of the best way we're still a small team super connected so if something comes to that I'll definitely about it.

Jason:
[49:28] Awesome I will wish those social accounts in the show notes and Adam really enjoyed their conversation thanks very much for making the time until next time happy commercing.

Aug 28, 2019

Amanda Tolleson, the Chief Customer Officer at Birchbox.  In this broad-ranging interview, we discuss Birchbox's core business, their price increase, their personalization strategy, and their new partnership with Walgreens.

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

Episode 185 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from the etail East trade show in Boston on Tuesday August 20th 2019 I'm your host Jason retailgeek Goldberg
and unfortunately Scott was unable to join us today so I'm solo but we made up for it with a great guest,
on the show today please welcome Amanda Tolleson she's the chief customer officer at Birch,
Amanda just finished a keynote here I know you mainly came to talk to us on the podcast yeah but super generous of you. Also.

Amanda:
[0:56] Squeeze me and you know to talk him.

Jason:
[0:59] Exactly which I think was wise of them because it seems like the audience really loved it and the topic was a tracking a customer who's inherently not looking for you.
So I want to talk a little bit more about that but before we do I measure most of our listeners are somewhat familiar with Birchbox but in my experience people,
don't always have the exact right perception about your business model so can you kind of give us the the updated elevator pitch.

Amanda:
[1:27] Absolutely and you're very right people usually know one thing about us but not the full story so far Xbox is a beauty and grooming retailer,
I'm really focusing on a new way of discovering Beauty and grooming Surly Discovery at the focus of our business model but still we have the full purchase model,
so you can actually buy full-size products from us as well as Beauty and grooming instead of beauty but we have grooming as well,
I'm so what we're best known for is the subscription box right kind of picking up the subscription box economy which is taking over the world in some ways.

Jason:
[1:59] You guys are sort of the Birchbox up Birchbox.

Amanda:
[2:01] Yes exactly yes yes exactly where so I got to stay until we get a lot of fun free press where it's like in the Birchbox of blank just launched it sucks or it's just sex toys I get some fun ones in there for sure so there's some like
pros and cons that we definitely have kick-started that industry.
Things are best known for that but we're definitely not in the business of just building a subscription box company or the business of it being away a better way to discover Beauty in particular because,
beauty is so overwhelming the internet options on the internet and an easy way to
explore discover products has to have a personalized set of products you thought a profile personalized that a product gets into every month.
You can just cover them in the ease of your home beauty regrouping and then we have an easy path to purchase where we have anything that you get from us in your sample box you can then,
purchase for full size on our website complete that pass,
and then we also have a focus on someone physical details we've had a physical retail store of Our Own in New York in this will get into we have a partnership that slave focused on that,
how did the end of the day what we're really trying to do is create an experience for the Casual Beauty consumer so this is a consumer that.
That really is not there by the industry beauty is not their top interest they don't spend a lot of time it was going to be easy efficient delightful exciting. There's you have more questions but that's kind of Genesis of Birchbox.
Is it serving a consumer or a better way.

Jason:
[3:27] Awesome and like today all of these these subscription Discovery boxes and different things like sound like kind of common but you guys are 9 years old,
and it was a completely foreign concept when you first launch so I'm just curious I know you haven't been there for all nine years you're far too young but the.
If you know like what was the origin story was that like a super scientific evaluation of a gap or.

Amanda:
[3:54] Yeah so actually do know it even though I know as I am so young in my teenage years,
it's hard to imagine that I wasn't business school at the same time as the cofounders answer to my best friend from business school and I was their marketing friend as they were like launching the idea explore ESO actually do have inside so really it was a mix of things are kind of the same or the business,
the business Insight story in the personal Insight Stories the business is a story is when we were in business school there's a lot of,
a lot of industries were having your seen massive growth in the penetration of online shopping I'm happening so clothing Etc right and what they noticed was,
beauty is not having that it was not having that grow within online it was but others were in the question was going to fly,
I was at not happening so the insides are being well because of key part of discovering Beauty the sampling is trying to products right so,
if I'm just picking from images online how do I know if that foundations going to work with me I don't even know what a Serum is right there's a huge part,
a critical part of the shopping experience for beauty that was missing in the way it was set up for copying the way other online retailers for other industries were doing it had to be something new and different enemy.
Unless it was just for replenishment which is basically what a way to the time is only replenish my shopping for beauty so instead of Discovery shopping in the personal Insight was just like who you know.

[5:12] That they are the two co-founders alien kathi are not that this beauty obsessed customer they're not they weren't like obsessive beauty industry wanted to get in it was more than,
they had a friend Molly who's the co-founder Force employee Birchbox worked at a magazine and she basically had access to a sample closet,
and she would send samples to Haley on the co-founders at business school with a note that was like oh I saw this I thought you'd like it this is why I thought you'd like it,
and that so those that like personal experience of like well this is a great way to discover Beauty basically someone slightly more knowledgeable than me who knows me well enough just any product
I trust and I'm willing to try even if it's something I've literally never heard of in my life so that's kind of like that that was an amazing experience okay can we come by in that inside of a,
a true Human Experience that was beneficial with this industry inside of why the hell is you know what can I say hello massari.

Jason:
[6:06] I guess just go market as an explicit show on iTunes.

Amanda:
[6:09] That's exciting.

Jason:
[6:11] Exactly your kind of risque.

Amanda:
[6:13] So the kids the kids won't get my insights I guess it's too bad so buying out with the industry inside that's that's how I was born with those two four two two things happening at the same time.

Jason:
[6:25] Very cool said she was getting Birchbox before there was virtually.

Amanda:
[6:28] Exactly they couldn't part of the experience before it and then like it was kind of how do you how do you grow it how do you make this so you know it's 7121 right so we have like an algorithm for example that takes your profile and how do you Skillet to be,
millions of people you can have that same Personal Touch experience.

Jason:
[6:45] My next question was going to be why isn't Katrina a South Korean influencer but now now I totally understand it makes perfect sense.
Now you are the chief customer officer of Birchbox which is a I'll call it in emerging tight.
So what what does a chief customer officer is it a better paid Chief marketing officer or.

Amanda:
[7:11] I'll take that back as a to-do on my to-do list for Converse.

Jason:
[7:14] Yeah that's your kpi.

Amanda:
[7:15] So really it's something I've seen happening a lot adidas D deciso direct-to-consumer businesses where.
At the heart of the Insight is about a consumers that a consumer need and ultimately the whole business needs to be focused on that consumer in building an experience with marketing is thinking about oh here's a customer when a Target,
and the rest of the company is not involved in that write the best marketing the best way to engage a consumer is pretty product for them that's really resonant is it mean
feels good feels their needs and then we talked about it so it's really to make it was really to elevate that concept of like we we as a company or focus on his casual Beauty consumer has repeating grooming consumer the entire company every single function in some way,
need to know about that understanding and using Corvette in their day-to-day decisions of what they're doing and there's a core part of our strategy rather than in marketing.

Jason:
[8:10] Awesome that makes total sense and it should clearly be paid better.
Then see him out. There's anything wrong with this email we have plenty that our friends the last question and you you maybe give us a little ready but how did you come to this role what was your free Birchbox experience.

Amanda:
[8:29] That's a pretty Birchbox I was on the Consulting side so this is my first quote on quote in new client side job I still some.

Jason:
[8:36] Congratulations on escaping as a as a current consultant people like you give me hope.

Amanda:
[8:41] So I I could have had but mix of jobs in Branson salting and customer research so did a lot of work around what is your brand stand for who's your Target customer
how do you take your bread equitation it into new lines of business from all different types of Industry
ended up I loved I still let you know I could totally end up going back to that side like that the intellectual.
Diversity essay of kind of those different problems that you got to get you to talk into all different types of people and companies is really interesting but had this,
you know urge to see like how do you follow it through all the way through the execution and what does that feel like and so,
ended up jumping into Birchbox really not and I am very much a cash app you can sing or not cuz I was looking for a beauty company job by any means but I think when you're moving to something new in a start-up the biggest to me the biggest turtle as we trust leadership,
even if it's a great idea if you don't have great leaders and you don't have good decision-makers then if they say doesn't matter so I knew obviously copy and Haley from business school so it gave me great confidence,
but I didn't have kind of I started the director brand marketing,
and then I'm going to see about overtime and then as I took on this job now Chief customer officer where I'm over the marketing team still but I'm also over are experiencing which is digital product creative content Community social as well as engineering.

Jason:
[9:58] So that is awesome and then as I mentioned of your topic today was attracting a customer who's inherently not looking for you,
so I'm dying to find out I'm teasing I already heard it so I know I know what you were talking about but I'd love for you to share Their audience time and what the the key points were but I I will start by pointing out,
like you upfront you have to admit there someone in the world that's not inherently looking for you what shockingly like some companies struggle with that that realization.

Amanda:
[10:28] Yeah yes it's really hit me as this focus on his casual Beauty consumers only we have to admit to ourselves is that,
they're not the it's not the thing they're most interested in their lies about that's it that's it in definitionally who they are they're not the video says they are there's a beauty obsessed with most of the beauty industry focus is on which makes sense because they're hyper engage hyper users that are
is there hobby is their passion and they're going to spend way more per person but they're really only maybe 15 to 20% of the total people engaging with UD,
and there's this huge white space of people which we call the council meeting is about 70%.

[11:05] And there. It's not like so what some people get confused when I say that's we're not going after Beauty and engage people that's another 10% or something on the bottom that they're not they're literally like give me my soap and that's it don't talk to me about it we're not trying to push a
boulder up the hill but we are trying to change perceptions of the industry beat for me they were trying to overcome this customer,
mostly it when they've engaged with a beauty experience they got into a beauty retailer are they've seen a beauty influencer let's say on Instagram they felt like this is clearly not for me.
This is clearly not designed for me as a consumer which is okay maybe I'll run in that store and try to find something but I don't I didn't enjoy it you know it's not for me and so the concept of beauty experience can be designed for them.
Is foreign is an Uber, this is very upfront that we have to get over and we have to think a lot about how do we look and sound different from other Beauty retailers in our advertising so that they will pause and look at our Instagram bad,
Atwood most of the time they're not going to look at it are in the influencers right now but we don't work with beauty influencers even though that's,
how to learn to do as a beauty company because our customers are not following Beauty influencers are following lifestyle influencers are food influencers and so those people can talk,
you know they already had the loading they can say hey.

[12:19] You and your beauty is not my top priority either but I found some interesting stuff via Birchbox it really improved my life and then it's just about being.
Where they are witches we can get into like the kind of partner with Lorraine butts just like,
we found once they find out that we exist in who it's for people love it our best customers are the customers who were not with this casual you can actually write us letters and say oh my God I can't.
I never thought of company could be for me if UTI discover these pot never heard of a serum I've never heard of dry shampoo but they,
completely change my routine in this amazing way but we have to get process that hurdle of getting over just like getting them to stop long enough to pause long enough to believe that this experience can be design.

Jason:
[13:04] Awesome to you perfectly framed a kind of daunting marketing challenge so how do you sell that marketing channels what were you talking about today that was a clever tactic in that way.

Amanda:
[13:13] So when is this is the view still a sheet for some Beauties offline so we are we've been online for most of our.

Jason:
[13:19] Wait there's an offline.

Amanda:
[13:20] There's something called offline it's new.

Jason:
[13:22] I'm totally.

Amanda:
[13:23] Is there a new and so you don't online a lot of it is like you have to drive the traffic to website right so that's Dino
I have to like an odd or it for shirt like a huge weight is just like customers like you they talk to their consumer but there's something is very active that needs to happen to come to your experience
I VS1 power off line is just as a passivity about it either they see you in a store window walking by and they stop in or
example just being in a place people already or shopping for our consumers are you shopping for beauty so and thinking about that we have partnered with Walgreens,
where are for sure the Casual Beauty consumer we listen lots of our studies like it's shopping drugstore Brands right there shopping at the drugstore for their
Beauty and if we can have a space right there the feels comfortable and welcoming and inviting and replicates all the amazing person experience we've all mine physically.
It's an immediate overcoming of that barrier that we have of getting attention because they're there right and they it's interesting and they're going to go check it out.

Jason:
[14:22] Very cool answer this is a sort of exciting new thing that you that's alive now that you haven't experienced inside a handful of Walgreens to start.

Amanda:
[14:32] 11 we started with 6 Plus December we just opened five more.

Jason:
[14:36] Got you in I know there's one in my hometown of Chicago other big cities that was nurse could find one.

Amanda:
[14:43] Yes we're in New York and Chicago and LA in San Francisco.

Jason:
[14:47] Perfect so you've got a bunch of the big Metropolitan is covered and what is the experience going to be when I walk in the store when am I going to see you different than a traditional Walgreen.

Amanda:
[14:57] Yeah so a couple things we focused on we're making sure that it felt something new right both knew but also,
self aware of the space it was in so if I knew I mean how can we bring the Birchbox brand to life in the space so we thought about what are the things that are.

[15:15] Most important in the experience of our consumer that they love about her subscription box are all 9 website I'm so things like I feeling warm and welcoming and,
not intimidating to this consumer so even in the design of the space I'm thinking about the colors we using Brighton friendly
lots of woods we use a lot of Home elements like wallpaper and like the tiles that you know the backsplash on your kitchen will use that element in part of our design is to make it and we've heard that we've had we've done some intercepts in the store people feel like,
warm is your friendly ass feels welcoming but also making sure that it felt,
it wasn't cut off from the rest of the Walgreens store so we're not trying to create this a store and sore feeling in the sense that,
oh I'm walking out of a Walgreens into a Birchbox as much as Walgreens and Birchbox are together presenting this experience that is you can very easily your shop across both.
Frosty of prestige brands on the table to bring it to the store for Walgreens and then also we definitely expect the Casual consumer to still be feeling her basket with him or drugstore Brands so making sure it felt like there's an ice floe,
and a key part of that too if there's a beauty consultant,
that we're only in stores that are the woods called their beauty differentiator storms the Walgreens has invested a lot in this beauty strategy to keep for them and they trained,
3000 stores they treat Beauty Consultants really help you with your knee is it in the beauty Consultants work across both are our area as well as the rest of the beauty.

Jason:
[16:44] Hey Santa by understand this at Walgreens that experience is much more of a sales assistant experience so they have a
A salesperson with a specific training and subject matter expertise and you're much more likely to get help and advice than you would in a main line Walgreens store for exam.

Amanda:
[17:00] Yeah yeah so this is it yeah that they have specifically trained Beauty Consultants that only work in The Beauty Department so we trained them are brands are trying on other so very different than the day it introduced.
I think a couple years before a partnership with us and he's already been on that journey and we will have that experience by coming together.

Jason:
[17:18] Show me to put some pictures of this experience from my Chicago store on your weiner show notes but so
Shopper walks in the Walgreen they're going to see this this
premium space that has a different feel but still organically feels like part of the the same shopping experience and is it going to be strongly branded Birchbox is it co-branded.

Amanda:
[17:42] Is evolution only rented Birchbox so you know that you're it's a Birchbox environment but again feels very fluid between the two and then we have some I really tried to bring to life,
so there's kind of design of what I talked about that also the actual a sitting Twitter engaging within the space,
the replicator Birchbox experience so how do you bring for example the surprise and Delight of the subscription experience to a physical store,
so we have something called the build your own Birchbox BYOB.

Jason:
[18:08] Which is often disappointing when someone finds out that it.

Amanda:
[18:11] Customers you don't have might have a different interpretation it's Dino so but the idea there is that you're able to.

[18:19] You know we have a stamp lately we have samples and get a pack and make your own Birchbox you know where was five or six samples you can tape home experience that it's a way for us to start a conversation about what the subscription boxes are for,
we focus a lot on having Indie Brands be a part of the experience they are discovering and depressy is brand versus a really well-known Brands because,
begin that discovery that Delight the thing that I would never have found on my own as a key part of it so that's a key part and then in the full-size shopping experience,
really focus on how and we learned this actually in our in our own store that we have launched and brought it to this was.

[18:53] How does a consumer actually want to shop physically how do you make it as easy into it as it is in the Box on our website to discover products list take what's a good cleanser for example the most Beauty retailers the way they categorize things,
so if I want to cleanser or an eyeliner I'm going to go to like 20 different locations will get all of the different I don't the only thing I know about the differences that there's this x vs R and Y,
how do I know what's right for me so the way we set up our merchandising was by hadiyah categories
more I say intuitively to the consumer rights cleanser I go to the cleanser section and then we have to think of it like a jeans wall and try to visualize if you don't have pictures or you have been a column
going down with my B cleansers and then you have horizontal going across which will say like detox or moisturize right or acne prone you know what what are the ways that we can help a consumer make a more informed decision about what could work for them rather than putting on the onus
on them to have to do a lot of things about the beauty industry to make episode.

Jason:
[19:51] Perfect so you've sort of a sort of things by use case our problem rather than by brand which I know the early days of cosmetics,
like in the department store the only way to shop was by Brandon so it's almost like you had to get some kind of education before you could even know what you were looking for.

Amanda:
[20:08] And it prevented Discovery rightly we actually find a lot or casual be the consumer if she before she finds out she is like my mom use Clinique and therefore I use Clinique nothing wrong with that but it's a great brand but.
You don't even don't know how to store something else or do you know where to start yours like I'm just going to stick with Clinic because that's what I know.

Jason:
[20:24] So in this section I can make my own box and then,
am I paying for that one box and walking out with it and I sent you a bought some samples or if I actually subscribe to Birchbox and the one I take with me is just my first box.

Amanda:
[20:40] We hope it's the latter we have both options but it's definitely an intro selling tools I want to just feel like how it's a fun experience we found with uses in events in general.
People love it it's like candy people line up to do this so it's it's kind of an it's an enticing experience to get people even into the space and we definitely try if someone's interested to up-sell them and say hey if you like this will you can get this box for free if you sign up for 3-month subscription,
for us obviously the goal is definitely to try to convert into subscriptions but you can also for it up price we could we charge you more per box if you do just one,
but you can just walk away with the box of him.

Jason:
[21:15] Perfect so I can buy a box of samples I can subscribe which as far as I know is sort of a new thing from Walgreens Walgreens hasn't had a lot of,
like subscriptions and replenishment service outside of actual prescriptions,
so that's super interesting and then I assume I can also shopping by the full-size product in this is an interesting part of the partnership to me you're bringing a bunch of.
Aspirational independent Prestige brands that,
historically might not be willing like wouldn't be willing to sell on the Shelf in Walgreens so you're giving Walgreens access to some aspirational product that they might not otherwise have.

Amanda:
[21:57] Yeah definitely a big part of you know I think in any great strategic partnership you want to make sure that you're bringing equal value to the table,
I'm in your sock equally solving a big business challenge for the other So Raven Birchbox brings to the table for Walgreens is innovation Wright County innovation,
9 years of focus on this casual committee consumer which as a.
David. They've been going after them too but they're up there more than Beauty right there so many so many things are selling Wares were so laser focus on knowing that consumer and then for sure our relationship or our existing relationships and Trust we have with our trusty partners,
is it a part of it and for them obviously bring us scale they bring us amazing physical retail experience we don't have and that just like being in the place they have it has a consumer of the casualties were there.

[22:42] We have a lot of locations so having that so yeah for sure a big bend a big Focus for Walgreens and for us is like bringing in great Brands so that it feels like.
Fullbeauty destination in the point is not that it's going to shift all to be this type of the Cindy Prestige brand that's not the 80s that we believe that consumer and likely experience they're going to want is to shop for.
There are more Indie Prestige whatever reason if there's a need or brand or product they like as well as their drugstore Brands and have it be a seamless experience across that they can shop.
Draper Temple and we do have a check out in our space but it's not a Birchbox only check out.
I just there to facilitate the experience if you want that but you could buy other Beauty Brands are in the drug store 2nd and Walgreens section if you want you can buy your toilet paper there if not it's made to feel integrated to bring them together and stay there.
More options and Beauty to explore and having all of that available to Walgreens customer is definitely a big part of their strategy.

Jason:
[23:40] Awesome in so I can totally
fill my prescription make a custom box and get some diapers and go pay for all of it at the the front cash register at the Walgreens which is cool so is like obviously you're getting access to all the
the organic
but traffic to Walgreens normally gets because you're you're bringing something elevated to the Walgreens experience are they marketing you guys at all or you doing any joint marketing are you doing any any any campaigns outside the store to drive people to these stores.

Amanda:
[24:11] Yes definitely they're very excited know both of us are very sad about the partnership and think of something interesting and new so we're both talking there,
4 in the locations in the area so we are working our customers are they are there. We did Big launch event.
For the storage to make sure like in the cities you are aware of it happening we've also have done download with some digital app,
before it's too late friends are people in the store being advertised being so there's a lot of a lot of focus on how are we getting not just converting who's there but also how we getting new consumers end in two different ways is there a,
one thing we definitely look at his are we getting people who shopped at that Walgreens before but I've never even engaged in the beauty category which were done anything like move it on right,
example of that Walgreens right getting them into the store.

Jason:
[25:02] Got it and so beyond that digital marketing is like if I go to any of your own digital experiences or Walgreens own digital like is there like can I find out which stores have the Birchbox experience.

Amanda:
[25:14] So are we definitely have you know what location was retail locations you can find out where we are as well as we actually do have a small digital.
There is no give you look if you just a Google Walk Birchbox Walgreens the most likely to Walgreens I'll come up where they talk about where we are but we do have a small digital shopping experience to,
exactly omni-channel with Walgreens I'm so you can buy there's like a Birchbox there's a Birchbox section all in the Walgreens website.
Well that is similar to everything I just talked about physically you can see in the digital with a different look slightly different look and feel a little more elevated a little more information and you can just check out,
name is offline the online you can check out with a full basket with other things from.
From their mother be sections are the paper and have it shipped to you so it's it's not as big yet where the focus has been on the physical but we definitely have that too.

Jason:
[26:05] And the super Advanced question so don't feel bad if we're not at like 10:30 blacked out yet,
Services riding so you and we'll talk about this morning at the sac that why you can do things like trade a box and do things like that,
can you do those like on E channel experiences inside of the Birchbox location so I can I do a return for example if I got a full size item or.

Amanda:
[26:33] I know you could not yet he bought one from our website you couldn't return it to the Walgreen.

Jason:
[26:37] The probably be bothered at the Walgreens you.

Amanda:
[26:39] Yes definitely yes those kind of their separate experience in that but if you buy a subscription you really slow into the Birchbox inscription experience and we have talked a lot about how do we.
Think about what is valuable in the intersection of the subscription and Walgreens so.
Example of something that we could have your box deliver to the Walgreens instead of your house if you wanted right that could be an option so I'm or you could.
We have customization as we said we'll talk in a little bit is a big part of our experience for people who live close to one of these Walgreens you can say the way to customize your box at 1:50 to go in and do build your inbox in the wall,
so we definitely are having a lot of conversations on how how do we create value by the fact that,
play there's no place like the full-size shopping in the lake getting a new consumer in our world but in trying to marry the subscription experience with the the Walgreens and how,
thinking about you there there's there we just we don't wanna just launched something just to have that we want to make sure it's a trade-in value.

Jason:
[27:38] And then one other question about the Walgreens experience beyond the stores that have this
physical presence I read that you also did an integration with Walgreens where there's beauty advisors in all the stores can sell digital Birchbox inscription
American tablets.

Amanda:
[27:56] Yeah so in all of the beauty differentiation sources but they call it the ones that are more depressed or more upgraded in Beauty the 3000,
yes we're at 11 physically but yes been 3000 Source we just launched this month actually any beauty Consultants can sell a subscription,
I'm to a consumer and one thing that were really interested in learning and testing there is that.
Can different than how we do online and digital is at one of the best places to best ways to explain that I have a Birchbox human-to-human in Dracula
talk like this here physically I have for a talk about the Casual Beauty consumer and what we're about
I always have people come up after it's like oh my gosh I had no idea I'm the Castle View to Consumer I would love this I thought it was for my friend who's the beauty obsessed so there's something about us,
human to human conversation that can really quickly break through that kind of going after consumers not looking for you that we're hoping to leverage in this
model the beauty consultant selling it so that's very exciting that's when we're launching and then in general were so kind of
playing around with formats so as we grow and we don't want to go to more storage we don't just want to roll out the same thing we want to test it were exploring smaller format subscription or,
only affordable kits like we do a lot of kids some which is going to bundling a simpleton to a theme so.
Really trying to still test and learn before we roll out so we know what works where.

Jason:
[29:21] Got you into one of the things that's really interesting me about testing Warren and especially like to.
It's complicated because you're you're not making beauty products yet so your.

Amanda:
[29:32] Wish we have we have our own own brands.

Jason:
[29:35] Dutch okay so we have some oven Brands yeah and Anna,
a plurality of of wholesale Brands but then you you amalgamate them into this new product that's called Birchbox right I think of you is a direct-to-consumer brand even though you.
Are you could one could argue your a wholesaler.

Amanda:
[29:56] Yeah we're both our retailer and have our own product which is this.

Jason:
[29:59] Exactly but so normally when you know the reason companies do directions to Consumer is.
Number one better margins and number to direct relationship with a customer so you get all the states that you can use to rapidly evolve and do test and learn and and do all these things and if you,
if you were to just sell your boxes to Walgreens and let them sell them to Consumers however they choose,
you you'd be lacking that day that you wouldn't know those customers there be a bunch of detriment and so you don't you see direct to Consumer Brands like struggle when they try to,
partner or expand with a a big retailer to get better reach but the relationship you guys are doing scenes,
much more novel in integrated because you really aren't getting disintermediated from that customer even though they're meeting you through the Walgreens and I wonder if that's going to be.
A model we see you anymore.

Amanda:
[30:58] Yeah I don't mean it's definitely,
harder to get there today but it's the only one we were interested in in the sense that yes it was right before I sent a strategic partnership that's kind of what I mean,
hearing about your product and sell it and see how it does not. It's not just a pure reach I guess that's a part of it but it's how we,
how are we influencing to get how we're trying to build something together that is new and different and how are we both bringing different skill-sets to the table that also sharing learning ISO as your reference data data the ability to share both of us.
Combine what we learn and share data is a new critical part of the setup of the partnership so that we have that dataflow happening between our companies and it's not.
It's not a ice not just set it and forget it by any means it's is how is that comes from believing this is a massive massive opportunity,
this is not an opportunity that's like let's do it in a couple stores not see what yeah you know is that I think.

Jason:
[31:55] It's a lot of work if you're just doing it.

Amanda:
[31:57] Yeah I like rays that like that because of belief on both as if this is a massive opportunity to build this together that we did a lot of work,
because I found the conversation started,
a year before we even launch of of what this partnership was it was a lot of alignment at the top levels of leadership of those companies that we believe it's a huge opportunity there for this is the type of investment really make this is the type of information we need to do this is
how much testing and learning the news that happened that were bad alignment was critical to make sure that we were doing this in the right way.

Jason:
[32:31] Got it inside of her listeners Walgreens is based in Chicago so we know Amanda said she's working closely with Walgreens with a basically means that she was visiting my home town and never drop me a line one.
But I'm not hurt I mean I am but but I'll get over it so I want to pit a little bit though the Walgreens extreme sounds totally cool definitely encourage our listeners to go.

Amanda:
[32:52] Yes please go visit.

Jason:
[32:53] Check it out and let you know I do think there's something here in terms of.
Future models for collaboration between digital native Brands and traditional wholesaler so it will be eager to follow it and I'm going to charge you to be super transparent about all those analytics and sharing with us.

Amanda:
[33:08] No no problems there with some.

Jason:
[33:12] Yeah yeah I'm sure I hear that stuff so I just.

Amanda:
[33:15] Minor.

Jason:
[33:16] Their suggestions so what's going on at Birchbox.

Amanda:
[33:30] Yes on the corps experience were really focus on evolving Barber products and be Innovative Innerspace in designing spiritually Catalina consumer and
one day tactic we had this year which is an enabling tactic was to raise our price for the first time so we never raised Our Praise,
and I nearly raise our price for the first time and then the point being so we can invest back in our experience and really improve it and continue to innovate,
I'm to talk about a couple of things they're so there's going to taking the course. We have right now and making it better every thing from the merchandising that's in it to the algorithm and how we match of people with products to contents over Ark,
Advil consumer you can probably imagine education is critical cuz it in there just not that familiar with the industry so how are we giving them.

[34:13] Having them know what a Serum is why you would use it right is like a baseline of information having more content in the box and then how can we evolve the experience of the box to an able not just the discovery piece but also if I let you know,
we're not trying to just make you discover forever if you find something you love and we want to help you purchase that so I'm a couple elements there that were introducing or just about to introduce one is the ability to swap your box for a full size item.
I'm so you know this sucks and you can pick from but if I'm like I don't want to discover do samples this month I like the full-size you can do that,
we have also related to that is we have this ability to have add-ons so you can have items shipped for free with your box so if you want to have items you,
love and discovered you can have a ship and then we introduced swap your box for.
Which is really out next month everyone we did a test around it was before like so you we have loyalty points as many retailers to what you can use to buy full-size items on the site so you can swap instead of give me a box that once you get credit and we can spend later,
and we also have our customization options we've always had which is just you can pick a sample that's coming you can pick up. Mint so trying to make.
Give the customer choice right to say there's a lot of reasons why your you may be very different points in the Journey of Discovery versus having found something you love it,
how can we give customers options and how they engage in that subscription experience every month instead of being in a.

Jason:
[35:36] Donna and tell and just to make sure I understand these are all sort of proactive experience is so I get some kind of
messaging that hey here's the box that scheduled to come to you this month and I have some option to opt out of getting more samples and instead get points or a full-size product.

Amanda:
[35:52] Exactly you're the man experience if you don't do anything you'll just get the personalized box for everyone just gets that with some people have some for some people to subscription the benefit of subscription is.
Not activity basically right.

Jason:
[36:03] Set it and forget it.

Amanda:
[36:04] So we definitely have a huge portion of our consumers do that but then we also have people who want more control more decision-making and their experience especially if they may have said oh you know I've discovered a lot of things I like right now I'd like to take a break from Discovery but I really want to know.
It's almost like the layaway concept has been around forever right layaway some of this money so I can buy that shampoo or mascara that I really like.

Jason:
[36:26] Well one of the.
Sort of unpleasant parts of a subscription business is even subscriptions that customers really value there's this phenomenon of subscription fatigue.
And so you know you can imagine I get a bunch of value out of the samples but one particular month I haven't tried any of your samples and they're all sitting around my sink and I'm having a guilty moment and then I get an email that the next one's coming and I'm like,
and I would argue this like subscription fatigue has been super challenging in like the meal kit.
Example so it seems like some of these amenities are clever ways to kind of combat some of that subscription fatigue and I can get some other utility without.
Turning off my subscription and then then and then you don't come back to the the samples when it's more fresh and exciting again.
So that's why make sense I'll be interested to see how that goes,
the reason prices had to be an entrepreneur all of the siege The General,
cheaper and there's a couple examples in retail that didn't go that well raising place I'm thinking about the JCPenney for example that you did that with some consideration.
Did you feel like.
You knew you would lose some customers as a result of raising price but they they weren't the right customers and the extra money would give you more resources to do a better experience for your customers that kind of.

Amanda:
[37:54] Yeah I mean the decision-making was more.
Less around Lake and now is the date we have to raise our brightest and more around we fundamentally believe we need to continue to evolve and improve our experience,
and we cannot deliver the value we think is demanded by our customers at the price point that we've been at we can't because other things for us to write like.
Should we delay shipping is having a big part of the price right we don't charge extra shipping included that's one of every year right like so it was just more of a reality check I like we can't like,
living in the reality of the world ran in the prices that they are we don't.
Really we can stand behind our product if we can't innovate and explore anymore and in order to do that,
we need to raise our prices to create the belief that we can create more value by doing that versus the cost of the of the rising and the prices but it was definitely I was just right but it's both exciting and terrifying.
For sure right changing your face after 9,
especially as the marketing head is going to be in charge of the comms and figured that was like definitely really scary and I think it came from at the end of the day our biggest value in the thing that's going to make us successful is the community policing us.
And then.

[39:04] We believe we had that and because we had that if we were super super transparent in our, so if you were about why we were doing it was very upfront about it we give them multiple months ahead of time that we were doing it.
What we are trying to achieve and knowing it would be perfect and that,
they would be on the journey with us and that's what we found me actually found amazing response from our community list they're waiting another still like we're going to see
but they were like we believe in you verse possibly believe you can create more value and better for your so you did it one time before we believe that you you can put this money to good use and we really found that are,
we got they had much lower we had about a Superfecta. What we thought might happen from a term perspective so customers leaving subscription is a much lower.

[39:49] We don't need no impact would just really amazing and we also we did some smart things I say in the price change a couple of things one was having some Legacy pricing so we have for our Aces which our customers are most loyal,
Empire that was a communicate if you be more transparent as a business is like if you spend like to be in Asia to spend $400 with us in the,
if you can if you spend that with us we can afford to give you a $10 box,
even though we're going to Beth Moore in it right and then for our current customers we basically provided a slightly lower we got like as pretty as long as they say a subscriber there continue to have a lower price for the new customer coming in yes we've already,
you know you already given us money we appreciate that you were going to give this to you so trying to do some smart things like that and then the price will be introduced with tiered.

[40:38] I'm so again to communicate their relationship or trying to hang out with our consumers if you subscribe on just the month to month subscription your price is higher if you want if you commit to 12 months your price is lower per month I'm just a just trying to be.
Upfront and make it is obvious to customers as we can what we.
What makes a viable customer to us and in what the will allow us to invest more industry.

Jason:
[41:02] Yeah I know it's only make sense in some ways it's funny I think of your subscription,
as analogous to some of the the membership fees at a retailer charges so I almost think of it like,
the membership fee I paid a Costco and then that enables me to then buy products or the membership I paid a Amazon Prime and coincidentally like Costco famously,
successfully raised that membership price in the last 18 months and Amazon is now.

Amanda:
[41:32] Oh yeah it was on Prime say I mean how many times.

Jason:
[41:33] Yeah it raised raised it a couple times and so it does seem like if you think of it not as the product but as access to the product.
Like there is some some president of that being successful so it sounds like,
it's it's it was initially going that way for you and that's a perfect segue to the Future so maybe leverage some of your previous Consulting XP
nice to put your future has had on 5 years from now when we're sitting here at the,
the 2025 Utah least how do you feel like the the beauty shopping experience is going we'll have a ball.

Amanda:
[42:13] Yeah probably just end up in a lot of Industries but just like.
Technology loves you like really into interact with a product like online with it feels physical today we know Birchbox.
We wants to know how these technologies that are merging where the weight alike.
Hack the all my friends having some way to sample and testing those to send you some papers in the mail but for sure there's a lot of technology which is you know.
Look at my face and what is the colors look like on my face or like I just think it's definitely to go in that direction of how can sampling online of beauty products be fully digital
I think it's got a long way to go over when I see you in a bit actually being
truly useful I would say but I think in five years I bet they're going to be a whole Suite of new technologies and products that are out there that help you.
Really discover and use products that can work for your hair your skin excetra via these digital interactive AI.

Jason:
[43:08] Oh I got I think you're right I think like whatever the virtual trying experience is today and there's already some evidence that today is virtual trying experience I'm now seeing some day that we're customers prefer,
virtual lipstick try on inside of a beauty store as a.
Physical Tryon because you know.

Amanda:
[43:26] Just how accurate is the accuracy is where it's like.

Jason:
[43:29] Sure sure they even in today's date it there might be a preference incident your point five years from now like one can only imagine how.

Amanda:
[43:38] Especially other I think I would see colors kind of different colors.

Jason:
[43:42] I feel like they could finally nail my Foundation color you think I'm looking forward to that cuz it's right it's a real challenge at the moment nobody sells this blotchy color I don't know.
I appreciate that and that I'd say that's going to be a good place to end but that's slightly too
too long because we didn't really need to talk about my my beauty routine that we have used up all our allotted time so if listeners have any questions or comments we'd encourage you jump on our Facebook page or send us a tweet.
As always is a great time to jump in iTunes and finally give us that five star review that you've been meaning to do
Amanda is folks want to find you online or you on the interweb somewhere do you have a do you use LinkedIn or Twitter.

Amanda:
[44:25] I only said yes.

Jason:
[44:26] Okay cool cool so LinkedIn is the way to go and we sure appreciate your time thanks for being on the show.

Amanda:
[44:32] Yeah it was really fun.

Jason:
[44:33] Until next time happy commercing.

Aug 22, 2019

EP184 - Tapestry CDO Noam Paransky

Noam Paransky is the Chief Digital Officer at Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman.  In this broad ranging interview we discuss Tapestry's vision for a Global Digital Experience, some of the challenges with global localization, organization structures for a house of brands, and the future of commerce.

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

Episode 184 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

http://jasonandscot.com

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

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from the etail East trade show in Boston on Tuesday August 20th,
2019 I'm your host Jason retailgeek Goldberg and unfortunately Scott wasn't able to join us today so I'm solo
we're going to make up for it with a great guest joining us this morning is known bransky he's the chief digital officer at tapestry regular listeners will likely remember the tapestries the parent company for Coach Kate Spade and Stuart Weitzman
welcome to the show no.
We are thrilled to have you I mentioned in the in the intro that tapestry is sort of the House of Brands and I know you're relatively new to the real can you come and talk a little bit about how that
sort of evolution from coach to the tapestry evolved and what the thought process behind that.

Noam:
[1:18] Absolutely so,
tapestry is obviously the holding company for family of Brands the idea of building a luxury brand holding company has the vision of our CEO of Victor Luis,
who I report in to as.
Coach first bought Stuart Weitzman and then is the Kate Spade brand was integrated into the portfolio,
wanted to have a name the conveyed the the aspirations of our company.
And ultimately you know we we describe tapestry is a new york-based house of modern luxury lifestyle brands in our ethos is really focused,
on luxury being inclusive in its nature.

Jason:
[2:07] That's awesome and I'm always fascinated by the chief digital officer role I found there's a fair amount of diversity and sort of the scope and approach should I just be curious what what is a CDO do at tapestry.

Noam:
[2:22] Certainly there are many different ways to tackle the role of the digital leader in Enterprise.
Designed a few organizations as a relates to to digital and in how to approach it and,
fundamentally if you are a single brand entity versus a portfolio entity there are some different considerations in terms of thinking about the role of the organizational structure,
Etc,
specifically with tapestry we're trying to build a global scale digital capability because ultimately tapestry is a platform so our visual activities at the Enterprise level should be building a digital platform people processing technology,
ultimately the end of them responsible for all things digital in the Enterprise,
but there is a web of ran digital leaders and then centers of excellence that we're building the crate that scale platform so.
Fundamentally about being a team captain and making all of these things sing together creating scale and leverage brand Independence integrating those things to create the Desire X team approach and outcome.

Jason:
[3:30] Got you and I'm always curious in a house of Brands there's kind of the State versus Federal right side sometimes a CDO is like a center of expertise that the the brands can use,
sort of at their discretion and other times did you lose more federalized in this video is like putting guide rails in place that all the brands of my respected Apollo is there like.
Eyewear in the spectrum is tapestry.

Noam:
[3:56] Will potentially somewhere in between or altimate lie in the midst of our journey of really articulating at a detail level exactly how everything is going to work as a as in four months in and we're building this Outlet.
My view is at the Tactical level there's more sameness than different so how we think about our Tech stack,
wireframes General experiences within the guardrails of what the capability is gets built at the Enterprise level,
the brands are ultimately masters of their own destiny in terms of the stories they're going to tell the assets that they build to create those emotional connections and we try to make sure that basically at the Enterprise Al will do plumbing that we,
develop the tactics excetera.
Allow that amplification to occur and we're learning across the family of Brands so is something is working for someone else we can I take that and we can make it back to another bread hey you guys should try this of course it's going to be their voice their content,
their DNA but ultimately the journeys that we can build in the successes that we can have can be pretty Universal as we as we approach them.

Jason:
[5:01] That's why it makes sense and you mentioned you're new to tapestry but you're not new to this kind of role can you talk to us a little bit about your background and how you came to the role.

Noam:
[5:10] So my last role was very similar role with The Gap Bank portfolio Brands Gap a very mature and her prize platform,
I had had a universal shared shopping carts and something like 2004-2006 up the the platform the tech stock was already,
integrated as I enter that role so that role is more about you know organizational I meant and you know evolution,
I'm versus building scale Center of Excellence so here it's,
or a new is a portfolio only two years old and name as is tapestry so taking learnings from that rule adjusting and then applying them to the role here and then before I was it,
Gap and cannot rule out as a consultant for almost two decades doing digital transformation type work.

Jason:
[6:00] Got your listeners can't see the disdain on your face when you said consultant.

Noam:
[6:05] Cuz I cuz I was looking at you.

Jason:
[6:07] I know I didn't take that personally I told her appreciate that like well hopefully it gives me hope that my career will eventually take a better turn so.

Noam:
[6:14] You can always home.

Jason:
[6:15] Exactly it's important to have dreams of nothing else and I feel like that that Circa 2005 Gap Inc website is permanently ingrained in my brain because like in that year,
every client was you know having this debate Universal card,
separate sides and you guys were sort of the gold standard for having integrated that Universal part so I your your side.

Noam:
[6:39] I can't I can't take credit for that for that decision but it was it was very wise for that portfolio at that time.

Jason:
[6:45] Yeah but it is funny it's it's I feel like everybody is in a different situation you have at the moment 3 luxury brands in the portfolio but,
they they do have pretty different value props and I presume sort of core customer targets.

Noam:
[7:04] Did you occupy distinctly different space,
so in terms of thinking about the evolution of the platform and potential points of integration you certainly have to take that into account versus the very clear shared space that was occupied in my house roll.

Jason:
[7:21] So obviously you came here today mainly to be on the podcast but as a.

Noam:
[7:27] Without question.

Jason:
[7:28] Yeah but you are super nice guy so you did agree to also do a keynote at that you tell.

Noam:
[7:33] Absolutely I'm just I'm just here to give.

Jason:
[7:35] Yeah you are a giver and I I just got to catch that Keno but the title was reimagining the global digital experience which it sounds super simple.

Noam:
[7:45] Very simple yeah it's a small world.

Jason:
[7:47] One sentence clean out your drop the mic and walk out and for people that were unlucky enough not to make it like Kenny I like what was your high-level POV what were you guys talking about.

Noam:
[7:57] A lot of it was,
if I'm really what I wanted to convey the audience is just to share how they knew in this role how I think about a portfolio of Brands and how to,
tackle building capabilities and so for me it goes back to this how do you create,
a scalable Global platform people process technology I think,
in our industry but especially to the piers that we work within the other functional areas you say digital and they think two things right off the bat website and Technology.
And of course digital has become so much more than the website and it's getting more and more disaggregated across,
and touch points all over the globe but he then no social climber social activity and,
and how that's kind of the first point of ideation and inspiration yes ultimately all the way down to the website and also into the store but it's much more the website and it's much more than technology it's the people
in the process and then yes the technology all those things need to work together so there's a lot about just articulating to the audience,
how I was thinking through those elements and hopefully they could get a sense for how they could Advocate and their organizations to balance those things out to advocate for what digital can be and should be and how to integrate,
the rest of the organization at large into those activities.

Jason:
[9:22] Yeah and it is funny because I'm a hundred percent agree it's super common mistake that when people think about it they.
You go right to the lowest common denominator and the technical bits and bytes in the platforms and.
Sure those are important but so often the success and failure is much more predicated on the experiences you create with those platforms and I would argue
the hardest part of all of this is the organizational platform and getting the sort of the alignment and governance and getting like all the talented people in an organization running in the same direction instead of different directions.

Noam:
[9:59] I think that's the challenge of leadership across any discipline ultimately bringing digital experiences the life are very,
cross-functional cross-discipline is kind of where the rubber meets the road for all of these things it's it's the kind of first place that they converge and therefore was a very complex dance needs to occur to execute that,
successfully night and I think that's a lot of what's missing in today's retail environment is bringing all the disparate pieces and ideation and,
objectives of the organization distilling that down in the kind of clear experiential and functional swimlanes that then be executed against.

Jason:
[10:38] And doing all that for a single brand is difficult. You know I give you your blue belt save that if you can,
even just get that alignment in a single go for a single brand when you had multiple Brands and different stakeholders with you know they're starting from different povs.
I getting their skills like that brown belt and then we have to do a global issue and so many different markets have different sensibilities and.
Structure and experiences in us may be very different than what the right structure and experiences in China for example.
I'm so pretty good luxury one of the things I find fascinating I want to put words in your mouth but.
The majority of luxury brands in the US are not super excited about.
Trying to sell through a platform like Amazon for example in your silent me nodding.

Noam:
[11:30] No comment.

Jason:
[11:31] Like obviously every whether you want to or not every brand,
has Amazon there's lots of interesting conversations about that but the majority of luxury brand so far have made the decision that it's it's not brand additive to be on a you know everything type store.
And like obviously we've seen your brands.
I continue to invest in their own digital properties in in my sense is that why you sell through wholesale the majority of of tapestry sale.

Noam:
[12:00] House Majority is correct.

Jason:
[12:02] Direct-to-consumer through both your own retail stores and your digital properties so now you get on the plane fly to China.

Noam:
[12:10] Awesome awesome.

Jason:
[12:12] Sorry you have to I actually think it's super cool it like yeah but one of the things that super fascinating to me about China is.
Owned properties are important in you have to invest in them it's extraordinary difficult to conduct transactions in high-volume on your own properties in the the consumers are just been habitual.
Does the team all marketplaces in the JD's the world.

Noam:
[12:36] Yes that is the prevailing consumer Behavior.

Jason:
[12:39] Exactly so even a luxury brand generally has to have a T-Mobile store and you but you know what I I'm assuming you guys do as well.

Noam:
[12:48] We do is Stuart Weitzman our other two Brands currently are not Auntie mail but that is that is where the consumer is transacting digitally at scale in China without question.

Jason:
[13:00] And one of the like obviously that's Ali Baba's benefit one of the things that's really interesting to me you'll get a big Market Place in the US and all of that product,
is still indexed on Google so even if the the consumer starts of Journey on Google if that product exists on Amazon they're going to find it on Google and Amazon is likely to win the sco when it's going to snow.

Noam:
[13:21] There's a lot of forks in that road and I question.

Jason:
[13:23] The Amazon specifically doesn't allow their their pages to be indexed by bat out so it actually.
Almost makes it it's a huge disincentive to start a product search on the search engine in China like even more so than the US.
Consumers just go to Team all the start that search because that's the product catalog of done if you will.

Noam:
[13:46] Yeah I mean the journeys are familiar different in China on.
Many many layers the percent of Journey starting in search where they ultimately end up is certainly one of them there's also a big difference for between team on Amazon in terms of customer data sharing,
very very different approaches between T-Mobile and Amazon so built the whole digital landscape there is very different both in terms of where she transaction China what her journey looks like,
and ultimately the the Platforms in general are quite different whether it's the $0.10,
platforms whether it's team all-weather is Little Red Book there's a whole different ecosystem
in China so as we think about China we at we announced and teased are trying to next round of June our last earnings call and that's really going to be an effort.
To invest in local China ecosystems and teams to.
Adapt in leverage the ecosystem that's in China and then plug into our Global ecosystem where that's appropriate self there to be certain activities that need to be done on a on a local basis and things like,
content that we want to leverage globally and frankly bi-directionally so that we're creating content China and we're lovers and other markets and vice-versa but creating those points of integration but also the regional differentiation that China requires,
and not focus.

Jason:
[15:08] If that wasn't complicated enough one of the interesting Dynamics there so many cities at such ridiculous scale that people don't even understand here.

Noam:
[15:19] Is there a funk of forty or cities that are bigger than Boston that.
Most of the people are in the room today have never heard I would I would bet any amount of money that that's the case so that the size of the cities in China the rate of growth the speed at which the revolving as is quite breathtaking.

Jason:
[15:34] Yeah it is amazing and it is but it does create this interesting challenge does Tier 1 and tier 2 cities have pretty robust retail infrastructures and so you you can tackle luxury by opening,
gray brick and mortar and having this amazing high-touch experience that the the tier-1 City Chinese consumer like has mostly come to it,
for luxury go to that chair for City when your point is still bigger than Boston and there may not be that brick and mortar retail infrastructure and so my sense is a lot of brands are thinking.
It's simply not going to be possible to scale brick and mortar to all of those cities and so in some cases we're going to have to LeapFrog.
The in-store experience and served as customers with a new digital Ledger experience that like frankly I'm not sure anyone's perfectly invented yet.

Noam:
[16:25] Now I mean there are a number of challenges and opportunities so as we think about our business China represents,
first the coach brand China has tremendous awareness and brand equity and said it's an amazing business to be a part of them to work with.
And we're looking to provide that same kind of scale to other two brands in China but,
I think what you just described represents the opportunity that is China so while there are the issues of what is the retail footprint look like over time how does that start to mature at the same time,
you can kind of say there's a certain destiny,
to that because ultimately the infrastructure will propagate these are millions and millions and millions of people in these cities who aren't serve bye-bye luxury malls.

[17:05] Then there's the transactional piso is our objective in 3rd or 4th tier cities to,
transact was it to build the brand awareness and desire ultimately a lot of those people are coming into first and second-tier cities,
is Taurus and so they can purchase in those cities but just even though ensure that
are brand awareness and desires propagating into those markets bills that future Equity as the infrastructure of olives and then of course transacting digitally as possible.
Ultimately when people are spending that kind of amount of money,
in any country let alone China for that kind of product that there's that desire to
look see feel touch and experience that kind of immersive 360-degree experience inclusive of the stores and sell those things have to get into a sink,
overtime but will continue to extend our own properties into China will value 8
Partnerships with others but ultimately I think the number one objective is to to penetrate without awareness into those in a 3rd and 4th tier cities and make sure that were,
one of the top brands in consideration for that consumer as the infrastructure develops out and as they come into first and second-tier cities to visit in the shop.

Jason:
[18:18] You said it perfectly articulated one of the tensions that I think is really interesting and luxury customer experiences.
Utility inconvenience versus sort of experience and engagement,
it's over 4 years and you asked like the gold standard for customer experience in retail was our friends at Nordstrom you know that the staff is famously and able to do anything necessary to serve the customer in 4 years
they scored the highest in any way you would measure customer experience or satisfaction.
But in the modern era it's kind of funny or modern I should currently some was going to give us into this in five years and laughing at us going that's the mall.

Noam:
[19:05] For sure.

Jason:
[19:07] Today Amazon actually scores higher in a lot of the customer satisfaction in the X's then Nordstrom and they're obviously not doing it by,
doing that concierge high-touch bespoke experience better than Nordstrom but what has happened is they,
change the dimension and they've made a low-friction inconvenience and speed the things that.
Customers value right in luxury like I don't think the customer has shifted that they don't care about that sort of Engagement and bespoke experience but I think there are occasions in touch points when that low friction.
Convenience is super important even for luxury brand and their other occasions when that high engagement is super important and I wonder like how you think about.
Sort of balancing those two things in Franklin even understanding what the consumer wants at any given moment so you can sort of deliver on that.

Noam:
[20:07] That's the age-old retail challenges give the customer what they want and sell a lot of what we think about what we focus on is,
how do we how do we get to some ground truth about that,
in terms of the the MPS of say one retailer against another at least in in my travels would have seen is the demands are different,
so if your replenishing toothpaste,
what will get a high mtscores fundamentally different than you know that's $1,000 drafts or handbag the expectations are fundamentally different the dimensions are fundamentally different even if it's the same consumer,
and then across different customer cohorts you have,
just different frames of reference it's the same reason that I'm like I TripAdvisor a 3-star hotel might be the top-ranked but surely on a like-for-like basis if the room was $1 they wouldn't get the same score there's the context of the.
The price and value so is released to Amazon compared to someone else there's a lot of Dimensions to to consider but I think for us.

[21:08] Where we where the customer wants to be frictionless of course we want to be more fresh unless where the customer wants to be educated or have some more ceremony around the transaction we need to provide that as well,
and ultimately this is we aspire to have this kind of Lifetime engagement with the consumer of course everyone talks about lifetime value but.
When you're a luxury brand you're playing as a very long game around being,
consistent with high-quality and backing it up with service for perpetuity and that's in that's what really separates,
a luxury brand from a brand that's native from or transactional because ultimately that it's it's the power of time the crates that permanence in that true brand value and that's the stewardship that were responsible for,
for me within a set of capabilities that then prop up the brands and their day-to-day activities to allow that,
two occurring continue to evolve against the changing consumer landscape but that's that's the reality the difference between like the ultra Ultra frictionless environment you would see.
Does someone like a value retailer on Amazon is really trying to play in and then in the luxury space we are trying to provide but consumers perceptions of luxury will evolve,
it will need to evolve to a certain extent to meet the customer were there at while providing that longitudinal stewardship of Our Brands.

Jason:
[22:31] And I'm sure it's a small cohort but I have to imagine your favorite cohort are the people that buy thousand-dollar handbags with the amount of consideration that they bite toothpaste.

Noam:
[22:40] Without question yeah we're at work we're fine with that but it but at the end of day even if we get the transaction like-for-like.
Yeah we want to ensure that that transaction comes with that emotional attachment that.
That that aligns with that lifetime value cuz sure it's great to have the thousand-dollar hand-eye but we do want,
their next and I was he want to sell him some ready we're at we want to sell him some shoes and so ultimately we just want to make sure that they feel,
really good about the purchase and they have this Affinity to the brand that they connect to this great experience great product excetera so even if yeah we could get many one second one and done purchases ultimately,
our responsibility is to create that deeper level of Engagement.

Jason:
[23:29] Luxury was a little late to the digital game for a long time and that you know some of the luxury houses were sort of famous for
our brand is built in the dressing room not on the web page and while I understand that sentiment I feel like,
consumer behavior is necessitating that luxury does figure out digital and I think we are starting to see.
More segments of luxury Shoppers that use digital at least as a part of their shopping Journey or their primary shopping Journey.
Is there any examples out there that you think I should have best-in-class of recreating that brand engagement that that you would traditionally have in a great store on a digital property like what is the analogous experience.

Noam:
[24:17] I don't think I've truly seen that yet I mean I think for starters the statement that luxury is kind of late to the game II think that's technically and tactically,
accurate I think the interesting piece that is hard I think for us digital professionals to absorb.
Is that the traditional luxury houses have had a tremendous run over the past five or 10 years despite the fact that they didn't,
have these big investments in digital and that just highlights that first and foremost it's a Brandon product game,
and so if you have what people desire and I think if you look at say a Nike as an example if you have something that people desire enough they will go to the most friction Laden experience possible like lining up around the street corner overnight,
to get their hands on that products so first and foremost and I'm part of why I came to tapestries I wanted to come to a company that was really focused on product.
Because it starts with great product is a digital practitioner I can't I can't sell,
digital right is IT consulting I guess I can sell digital in-house is a leader I cancel digital digital has to be a supporting element,
and if you don't have product that people desire it doesn't matter how frictionless or how inspiring your digital experiences that the dots are connecting goes back to the,
team sport stuff that we were talking about before so luxurious Gwen quit late to the game but are the masters of maintaining and building brands for you know sometimes decades and creating that product designer and inspiration.

[25:46] So being in the space I want to take the connective tissue of that piece
and build a great visual platform the connect that into and I think that that was damaged us as we hopefully continue to build our portfolio over the years so that's that's what I think is super intriguing about this proposition in the in the luxury game but
I think it also highlights that,
digital isn't always as important as this digital practitioners would like to thank it's got to be connecting into a greater healthier.

Jason:
[26:16] No I I told a green item I didn't mean to imply that what genus are who have two Bunch on the table by not moving earlier.

Noam:
[26:24] Well maybe maybe it did but man I mean you know some of the players that done tremendously.

Jason:
[26:28] Yeah and for your point.
Having a product and having that mindshare with the customers ultimately and a much more valuable resource than being good at Digital Light in back. Even argue we're going to an interesting phase right now we're a bunch of,
people that I would characterize as good digital,
practitioners including some places you've words are struggling at the moment there are some some of the the best most successful retailers in the space,
are not necessarily particular good a digital so I absolutely don't think there is a pure,
correlation between being great at digital and being an economic success it's,
it's one element of that overall customer experience and while I can my day job I like to talk it out of the lot it absolutely is not the the most important element in that.

Noam:
[27:23] That and I think over the longer. These things will play out because ultimately customers have an expectation expectation that there are the places a shop or going to become more.
Customer-centric more personalized if you don't have those foundational capabilities it will become a greater challenge but so many elements at play two to bring together.

Jason:
[27:43] Yep yep and where is early days but we're starting to see.
Some third-party digital retail emerge that's focused on luxury and trying to cater to luxury and it's it's it's.
Timmy I think the jury is out on whether they have the exact right experiences or not but it's it's going to be interesting to see if they start to change customer expectations.
Bare luxury shopping we should be watching them closely whether we are in bed.

Noam:
[28:09] Yeah I think.
I think it's the experience of experience has evolved across all sectors right it is changing consumer expectations and perceptions and so in my position I got to be close to that and see,
where a customer wants to go and try to ideally be a step or two ahead so that we can build into that.

Jason:
[28:27] So what's pivot for a second we talked early on about like one of the difficult most important parts of these kinds of digital transformation being the organization how does tapestry structure itself I do you have all the.
The digital expertise like federalized and you support all the brands are there.
Digital folk sitting on each of the brands and does the digital Merchants next to the brick-and-mortar merchant is it the same person.

Noam:
[28:55] It's it's a I would call an ex and we're going from point A to point B with a creation of my role but ultimately.
We were independent brands that rolled up in the one into one portfolio so each brand had their own digital capabilities,
digital it was first federalized and now we're trying to create centers of excellence to then plug in and create scale,
for those Brands so it's going to be a next ultimately it's a team sport the.
The site merchandising the assortment architecture the day today commercial plan in those decisions were going to reside in the brand and then,
the the foundational capabilities the plumbing the enablement,
will be in centers of excellence so we're looking to bolster or digital teams I'll put in a Shameless plug like I did this morning but we're hiring for tapestry across all,
digital disciplines roster Jensen pull string within WinCo brand functions but ultimately for it to work properly,
everyone needs to act seamlessly it becomes a more specialized model than when you have distinct brand teams without the federalization but it's a again,
Amex so that ultimately folks going to be more specialized more focused and then were,
we're learning across the portfolio you talked about him goes like the the blue belt brown belt black belt.

[30:20] It can be difficult to operate in a portfolio because you're trying to trying to build a lineman and consensus to a degree right and you've got disparate opinions you ultimately need to build and Define a demand management process today,
you're clearly hearing articulating and partnering with business stakeholders to say,
you want this capability what's the value there's the dollars and cents piece the input and output related to cost and then benefit was also a strategic element you have to incorporate and then each item is not just its own business case but,
things connect together to become greater than the sum of the parts.
So you got to you got to manage through that which is a challenge but also an opportunity cuz you get a broader View and then similarly in terms of implementing things,
There's an opportunity to get one partner one brand to try something another brand to try something else and ultimately you can move at greater velocity cuz if something works for 1,
my past experience is about 99.9% of the things that can quit win 4-1 win for everyone,
I think one occurrence where it was did no harm and then the rest one so you can you can kind of with a portfolio more quickly propagate you do get to some scenarios where
Regional differences really do manifest especially on the experience and then the the third party partner enable mint front,
they can be somewhat the stink but a lot of these things will propagate successfully across a lot of the globe.

Jason:
[31:48] I think that maybe another one of the advantages of Euro versus mine is.
Well you have a portfolio there's some commonality to that portfolio is a consultant I have a probably a much broader portfolio and it's definitely true in my world that there's things that can win for one client and actually do arm for another client.
And like you know those warnings are real tough it makes it it makes these.

Noam:
[32:12] So that's why your test that's that's the beauty of of structured test.

Jason:
[32:15] Exactly I was just going to say like it is to me it really underscores this danger of best practices right in his notion that there is.

Noam:
[32:22] And benchmarking and yeah there's that you have to apply contacts that is a former consultant to a current one right there's always there's always that contact store marketing efficiency will if you invest,
what's the Benchmark on market efficiency if we invest $1 will get an Infinity return,
if we invest a billion dollars will get a much lower return because ultimately a lot of the media's biddable and there's an audience sizes and all of the supply-demand,
economics come in the play as is overall aggregate brand Health sobran that's healthier and sometimes scale channels much further than a brand that's in a different stage you need to think about the funnel composition differently.
Yeah these things all have to be taken in context and you got to be able to read the the distinct numbers.

Jason:
[33:05] I think you just crystallized the failure of Facebook marketing in one sentence right there no data driven decisions like show me the data if we're going to go to the pinions let's just use mine.
Almost no one takes that advice but I'm I'm trying.

Noam:
[33:21] It's very clear though since I since the concise mask.

Jason:
[33:24] When confronted with the risk of taking my opinion people are suddenly much more open to collecting data.
Yeah and I want to give it today. But just one car to find question you mention you're hiring for digital talent in New York you just moved in the cool office space in Hudson yard.
So you get if you working digital at tapestry you can literally have Mama Food fried chicken for lunch everyday.

Noam:
[33:51] You can you can watch people crawl along the vessel like an ant farm every day lots of lots of fun things to to CVI we got great new offices at Hudson yards this beautiful place and I,
we were one of the first tenants maybe the first tenant in Hudson yards and so the team is having a live through construction for a couple years when I join that construction was kind of finishing up so I get the benefit of this whole new kind of,
City from scratch finally fully functional at the coast which is awesome.

Jason:
[34:20] I'm personally hoping that that's also style customer experiences don't catch on too much as I out of shape retail consultant it's a disaster for me every.

Noam:
[34:29] It does prove if you build it they might come.

Jason:
[34:31] It does indeed feel like Mama focus should have been at the top of the vessel maybe would have made sense but I tease data,
one of the things that we talked about earlier in the show is this whole notion that like your digital properties have to wear two hats.
Have to be transactional when a customer wants to buy something but they're also the brand ambassador and they are they.
Best digital dressing room and I feel like that's a,
a potential challenge for attribution right so if I'm equipped and I'm selling a $20 toothbrush I want every visitor that comes to my site to buy a toothbrush in that visit right and so my answer jimano's pretty simple like what,
percentage of the people that came to my side.

Noam:
[35:16] Conversion rate is black and white good or bad.

Jason:
[35:18] Exactly but in your world there there's a ton of traffic across all your your digital properties that may not consummate the transaction but may have been wildly successful for you is a bran.
So do you have a super robust attribution model to sort of account for that is that like something a.

Noam:
[35:39] We're working on that I mean I think there's I think there's a few layers to the cake there so attribution My head goes first the marketing and how do I think about marketing efficiency so we're going to tackling the typical econometrics models to,
understand Diablo left more rigorously were talking about some Alpha Pilots with some Partners to help us kind of balance,
econometric models and multi-touch attribution models there's,
there's a whole journey that that were going to be undertaking I think some of your question all he's also gets into,
the context of Journeys in Journey productivity and objectives at the session level and then objectives at the,
visitor level and we're really looking to unpack that as we tackle rebuilding our experiences as we unify,
are platforms over the next year or so and it's a really meaty exercise to get into I think the important thing.

[36:31] Is to not get trapped in the in the historical norms and quit best practices but letting the data unlock what's really happening.
How do we think about if a customer might come back 6 times,
before they didn't go in the store by handbag how do we track that progress how do we understand that and how do we evolve and adapt the experience at each stage is really where are,
thinking is that but the idea of conversion being black or white or a car abandoned being bad carb and may very well be highly predictive of the future store visit and we can do that as being a very productive activity cell,
we're really trying to get into the depths of the data and understand it and not get into the typical funnel analysis cuz we're not playing a session game,
and really trying to think about,
what does she want to accomplish and how do we evolve a morph that experience to make sure that each touch point is a creative and to me that's super meat is a very complex,
but it's really something that we can sink our teeth into in our space and if we get that right that creates an advantage in the marketplace.

Jason:
[37:39] Yeah that makes total sense it's funny.
A lot of digital amateur companies will come to me as a consultant and they're like hey we built our funnel and we want to hire you to double our conversion in the funnel and my smart aleck response is always,
that's super simple we're going to stop letting all this unqualified traffic coming.

Noam:
[37:57] We're only going to let repeat visitors back to the site where done.

Jason:
[38:00] Exactly and yet no one's taking me up on that approach I proposed it many times we got to figure that one out.
So I want to give it to the future but before I do I had,
one more specific questions about about customer experience that came up in your session you mentioned in China that the brick-and-mortar experience that luxury customers expect a super high touch experience in so you talked about some of these,
wildly successful sales associates that are.

Noam:
[38:32] Tens of thousands of social followers.

Jason:
[38:34] And to me that's actually the most interesting thing like I feel like that's a common model in China is the sort of influencer as sales associate.

Noam:
[38:45] The importance of influencers more liberal even more important than I didn't hear you.

Jason:
[38:50] I'm actually very bullish on influenster other than the difficulty in scaling and sometimes and to me that influencers I care most about are those those micro influencers it's not the.
The paid million follower sorting out to me that's that's broadcast advertising that does Micro influencers are super powerful scaling on ends up being the challenge,
in China One of the cover ways they scale of me is they have all these employees who did they turn into influencers you own it.

Noam:
[39:20] A volunteer but yes.

Jason:
[39:21] Well sure you own a bunch of stores with Associates that likely decided to work in your store instead of another store,
out of some strong brand Affinity in brand loyalty like is that an opportunity for luxury in the US to do a better job of enabling the employee base as home phone service.

Noam:
[39:44] I think it is I think the China right now allows for the greatest scale.
To really scale amplify that one to one engagement and really dig in and in refined that.

[39:57] Then take those learnings and then adapt them for the us but I think generally especially in our space,
the the sales associate is a central figure in engagement is a huge opportunity I think.
Today the the lens is a little too limiting where we we can I get boxed in dequeen Co clienteling systems and so okay you so she can send an email or a text look very,
rigid views of the engagement based on,
the platforms that people buy versus thinking more broadly about the clienteling experience and then how do we identify where that associate has,
a potential Central role in that engagement and continuing the nurture that cuz again we're playing is long game in our space and.
You know what what would appear play like what an Amazon with a low-friction can't replicate to this point is that human connection that that sales associate,
is creating and so I think we've got a plate of that strength and figure out how to permeate that more broadly in our experiences and engagements that's it that's a lot of what we're thinking about him thinking about you blocked out of how we parse out the globe,
and where we have this permission to engage at this huge scale at a very personal level.
Build and refine our view and tactics and then take that and then look to employ that in the rest of the globe I think u.s. space companies tend to take a u.s. Centric approach.

[41:20] Take the Playbook here in just kind of push it out and there's a lot of,
Beyonce old stories about that so I think it's more about learning globally and having this by directional sharing and testing and evolution.

Jason:
[41:31] It's an interesting funny I do talk about one of the the best ways to compete with Amazon his obviously to sell stuff than Amazon
doesn't sell and you talked about the personalized experience in the opportunities there I like in the lawn when I actually think that's going to extend.
Do personalized products as well and I think that's an area where I know at least coach is already experimenting with some made to order product.
There's so many trans we're seeing right now about customers wanting distinctiveness the.
These different potential ownership models into me the.
The opportunity for personalization is an exciting foil against the Amazon Amazons whole model is we've got a hundred seventy warehouses that are super close to the customer give us a million pieces of your property and we'll split them up amongst all those warehouses.
Does warehouses are huge for a teacher can manage that suddenly go away when the customer wants something.

Noam:
[42:32] For them unique.

Jason:
[42:33] Unique to them and I think some of these like we're still Sterling the nail personalized experiences so it may be a little while before personalized products are its scale but to me that is one of the interesting risk factors that Amazon has in the.
In a long-term beyond that is your thinking about the future if you were to sort of put your futures hat on and think about I don't know five years out.
Is it like in your mind has the luxury shopping experience for medically changed is there. A wager any guesses as to how the consumer or the experience might be different than 5 years.

Noam:
[43:07] I think there's still a high level of store centricity I don't think we'll see.
More than 50% of the transactions occur in online I think will be some number materially lower than that I think that ultimately if if some of us are successful the brand engagement will be more immersive than continuous.
Versus just these big moments of coming into a store or a campaign launch but I think they'll be more of this always-on connectivity with,
the resources that we have the bear weathers the sales associate at whether it's a ai-driven kind of product finding experiences whether it's more game of Acacia around product engagement and or product customization and just,
customers playing with those permutations and ultimately slowly over time,
you know finally getting the product the way that they want it and then transacting it and maybe a mix of some Automation in the customization to.

[44:00] Help them in that process because ultimately people want to create they want you need product getting started can be kind of the key impediment so part of it is trying to think about.
You know how do we create,
that inspiration around what could be in letting that go I think also the the kissing cousin the product customization allow these drops right so people you know if it's a limited edition of 300 500,
people can see it they like it and I know that everyone's not going to have the same thing that they can express themselves in a more unique and individual level,
and I think that's been a lot of the the attraction to the drops that and just the exclusivity of it so I think I think the drop thing will continue but I'm hoping that.
There's a little bit more from the drops to more engagement of product customization cuz I think we can play really well in that space and I think it's super exciting to allow the customer to.
Fully Express themselves from product perspective with within the context of the brand value proposition super interesting to me.

Jason:
[44:57] I totally agree I think it's fascinating and I feel like that vision is a great place to leave it because it's happen again we've used up all our a lot of time if folks have questions or comments are welcome,
continue the conversation on our Facebook page or hit us up on Twitter as always this episodes of great time to jump over to iTunes and finally give us that five star review You've been meaning to do,
appreciate being on the show if folks want to find you online what's the best way to.

Noam:
[45:26] LinkedIn Stephanie the best way to hit me up and I'm highly responsive so particularly if you're interested in discussing careers or Partnerships with tapestry please hit me up on LinkedIn look for the conversation.

Jason:
[45:39] Awesome and we will put your LinkedIn profile in the show notes thanks again for taking the time today until next time happy commercing.

Aug 12, 2019

EP183 - Jason Del Rey Land of The Giants Podcast 

We catch up with Jason Del Rey (@DelRey) Senior Correspondent, Commerce at Recode. Jason was last on episode 67.  We discuss some recent industry events and get update on this two big projects:

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

Episode 183 of the Jason & Scot show was recorded on Thursday, August 8th, 2019

Transcript

Jason G:
[0:24] Welcome to the Jason and Scott show this is episode 183 being recorded on Thursday August 8th 2019 I'm your host Jason retailgeek Goldberg and as usual you with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners we are really excited this week to have back on the show Jason Delray Jason is senior correspondent
Commerce at recode he's also produces the industry event code Commerce and now joins Jason
retail geek and I in the pantheon of famous podcasters
he was last on the Jason Scott show on episode way back on episode 67 which was January 17th back then he was senior editor so I guess congrats on the big promotion to senior correspondent.

Jason D:
[1:14] I don't know if that's a joke or not but I am I am happy to be back I was going to make a sport Sports Talk radio joke which is second time long time you know.
Okay well we'll keep going thanks Rodriguez.

Jason G:
[1:34] It's good to have you back we don't get to make fun of the next enough so.

Jason D:
[1:38] Oh man it's going to be a long night.

Scot:
[1:41] So

Jason G:
[1:42] So is it true that your appearance on the Jason and Scott show sort of ignited your whole passion for podcasts.

Jason D:
[1:50] I mean I honestly did not know what podcasting was and then I came in you guys taught me the ropes and how many years later is this I don't know took me a couple years to like.
Build up the courage and skill set but here I am so thank you.

Scot:
[2:09] Cool fucking to the club it's exciting to have you up in the in the in the podcaster realm.

Jason D:
[2:17] Only for a few more weeks but hopefully they'll be a long tail of listeners that all at all extend the Land of the Giants fan club into the rest of this year.

Jason G:
[2:31] Absolutely and we are going to need that into that but before we get in a Land of giants I want to talk about one of your other projects it's near and dear to Scott and eyes heart.
I think it might have been three years ago now but you started a series of events code Commerce.

Jason D:
[2:52] Yeah that's right so we started we started with these one night one night,
what we would consider a live journalism events and we started inside of shop talk I think year one of shop talk
we did a sort of separate one-eyed event within shoptalk that required a separate ticket and it basically 3 hours you know an hour
some ways food and drinks and networking and then usually three or four
what would you like to drink or no BS interviews with.
You know people like in past years you know we've had people like Jack Dorsey talking about Square
Katrina wake pre-ipo talking about Stitch fix Mark Lori several years ago and overtime we built that. Into a standalone
today event that's why we're going on Year 3000 New York City Standalone event,
that happens every September and so we're only about a month out.

Jason G:
[4:03] Yeah and so and you have announced some of the the guess you're going to have for the Cher show.

Jason D:
[4:09] We have so we've announced maybe maybe about three-quarters of the lineup which I'm super excited about we have.
Entrepreneur founder CEOs like Jennifer Hyman Rent the Runway Julie Wainwright we just took the real real Public Market Lori from Walmart
Jeff Rader that Co CEO and co-founder Ari's which has agreed to sell for,
make 1.3 billion dollars.
I cookies in the CEO of Birkenstocks in the US and the founders of away
digital native luggage or they would call themselves as they call themselves travel company,
so that that's that sort of off the top of my head that those are some of the great guess we'll have and we are and there's a few more as well.

Jason G:
[5:09] Yeah that's going to be exciting away is kind of controversy on the show because Scott is a big fan and Advocate and I'm not so much.

Jason D:
[5:18] Should we got into that now or should we save that.

Scot:
[5:21] Shirtless Jason took me like 6 years again to buy a four-wheel bag and didn't even get in a way I don't I don't know what he was thinking.

Jason D:
[5:31] I will say that,
we are a I I have a I have a new wish four-wheel bag that was purchased by my wife at
TJ Maxx and so if that doesn't give it away I'll just say it it's not in a way back and it was probably about a third of the price,
but I am very fond of the look of the waybacks and I'm very very interested in whether they are able to do what they say they want to do which is,
build themselves into really a.
Multi products brand that sort of incompetence has all the different types of products you could need or want.
Intrexon sort of in your travel life.

Jason G:
[6:25] It's honestly like I have a critique of the product and but more seriously of the company like the
the Super Bee product line coming me miss your bag is perfectly fine I travel a lot more than either of you I've already been on planes on her 50000 miles of this year
it's alright it's like it tends to be worth it to invest in the most durable bag possible and for me that like I really like a bag that can.
Expand into a soft-sided expandable bag works better for me.

Jason D:
[6:56] Yep so what it was so what is your brand of choice.

Jason G:
[7:00] So I might I have a Briggs & Riley.

[7:04] More expensive more durable like I've already been with Scott when he was repairing his away bag and you know I would argue I've many more miles on that I've never had a proper.
But that's I mean both bags get you get what you pay for with just fine.
And I don't have a huge could take my bigger thing and you know maybe I'll get a chance to bring up on in your conversation with Jen.
I visited their pop-up shop in Tribeca and I thought it was a fabulous piece of retail and and you already alluded to it they get mad when you called him a luggage company they like to call themselves the travel company,
and you you go to this pop-up shop and they very much,
Lycra merchandising and glorifying the travel lifestyle so I know there was a lot of like.

[7:58] Memorabilia and stuff that made you you know sort of aspire to go to destinations and you know it felt like the the luggage was helpful enabler of this lifestyle that away was positioning right and whenever you.
You know either founder talk about the company that's exactly how they talk about it so then they started opening permanent doors.
And the permanent stores are super sterile shelves with luggage on on that like I could replace the away with Samsonite or to me and it would.

[8:34] Exactly the same.

Jason D:
[8:37] Yeah so we will definitely 100%.
Talk about this I think my guess or edit my educated guess is that,
they are going to sedate David they talked about that they're going to open I forgot what the number is but I believe dozens of stores is the ID across the country or maybe not just across the country,
select International markets over the next few years and I think frankly they are still I think they will read thank.
Their approach but I will let them speak for themselves on,
try to remember if they're speaking on September 9th or September 10th at Commerce whichever day I know be sure that this will be a topic we dive into.

Jason G:
[9:26] Yeah I'm looking forward to it I will be there and it'll it'll be fun to hear they're there POV I'll probably check my Briggs & Riley bag so they don't have to see it.

Jason D:
[9:37] Hahaha well I'll bring it up on stage.

Jason G:
[9:41] Awesome alone at the exactly.

Jason D:
[9:43] Okay.

Scot:
[9:46] Cool awesome to see what news comes out will be doing a show we always do a recap show from there and let's talk about your podcasts to land of giants you've got the time recording the Masters three episodes out,
it's kind of a different kind of flavor than kind of what we're doing here with news obviously suits to tell us about Anna what got you started on this and how you're laying it up.

Jason D:
[10:09] Sure and then just so just so I don't know how touchy the search the search functions are on podcast apps I'll just slightly correct that it's a land of giants so
people want to search it's Landon,
Giants and I'll try to make the backstory quick centrally recode inbox me decide a lot of success with podcast over the last few years my colleagues petercopter Kara Swisher they have phenomenal,
interview style shows but there has been a couple of things going on at the same time but what do this first dish heater Costco
friending how he came to me and said you know
you should the companies looking for more podcast you should do something on Amazon and I was like
okay that sounds interesting and then simultaneously their conversations and other part of the company about an idea.

[11:06] Doing a narrative getting into more of narrative storytelling and podcast there's not a lot of great narrative storytelling in the business world as a relates to audio and so there was this idea to do a franchise around the fangs
companies and do a season on each company so short of the idea to do something on Amazon
with that interest in the Fang franchise,
call West End for me the timing was for me at all about a couple of other things one is
obviously there's a ton of discussion around power effect of these right now.

[11:44] NBC in Saucon Valley in the media should I felt like good timing the other pieces
I know you guys know this to from being in the industry,
it's very easy day today till like worried about the next in my case right about the next product announcement the next business Amazon's getting into NYU know I'll have some contacts in my article is but sometimes
you need to force yourself to like step out to the big picture and say like you know,
you know what is the status quo in e-commerce right now like is that healthy what are the what are all the impacts on society
everything this company is trying to do and so I've had all those questions in my head for a long time and there's this seems like a way to I have the time to serve both dive deep and like take a broader look
at the same time so that's.
So why I can I can I can give a little more detail on what we're actually try and what we're actually set out to do with the content if you'd like or I can let you guys ask me whatever you want.

Jason G:
[12:51] So what's up I want to get to a little more of the contact but just to make sure that our audience is tracking so that the notion is there's a season about each of the Fang companies so there's a.
Amazon season I think most people Nothing But Apple Facebook Netflix and Google so it's actually faang,
that's the idea you'll have a season about each of those companies and then you're you're currently three episodes into the Amazon season is there a.
Dick by Jordi know how many episodes that are going to be of the Amazon season.

Jason D:
[13:28] Yes oh yes so there will be 7 episodes and there's a chance that episode 7 will.
Will be taped alive at so Commerce and so if,
is that ends up being the case episode 7 was sort of break from the format we have in each episode so far which is sort of a Storyteller telling a story basically throughout a given,
atopic area involving Amazon and episode 7 would sort of be like a conversation recap of unlike of of what listeners that the Earth were the first six episodes,
and so you can imagine the challenge of trying to break up Amazon's impact,
and interest into six or seven episodes is not easy and so on in episode 1 we should we try to
the iiibeca by I'm curious what you guys think you know the foundation of Amazon's retail
rise and dominance to me is Ben Prime and so episode 1 we both have Amazon Executives and employees telling the origin story of how Prime came to be and then we also
get into the consumer psychology of how Prime has been able to walk us walk you know.

[14:56] Over a hundred million people into Amazon's ecosystem and makes it very hard,
to break out,
episode 2 of I had this big question of like what does Amazon want that you from being inside our homes with Alexa with all the connected devices with ring with Eero with you know.
Basically best smart home and so we exported that question with with an Amazon executive and also.

[15:27] You know some smart people as food asking some skeptical questions about you know what this future of a fully automated home,
I will will,
will feel like in and how that might impact our lives in the future and then third episode which aired so far was that a look at Amazon's impact on local communities among the big tech companies yeah I would argue that Amazon.
Has the bigger the biggest physical impact on small communities around the around the country because of their warehouse Network,
North 710 now large fulfillment centers just in the US and so we went to a small town in Kansas that which was home to one of Amazon
first fulfillment centers and it was number three or four and where they left a few years ago and then told the story what happens when they came and left
and I'm and then I went to my hometown of Staten Island New York which is home to one of Amazon's very new,
Jerry automated fulfillment centers to get the taste of.
What the promise is in a in a small community when when Amazon comes to town today I'll take a breath.

Jason G:
[16:41] Yeah it's it's
yes I'll be curious it's interesting like I told you to greet you that Amazon has the biggest physical footprint and you know they're for like sort of physically has the most impact on those small towns some of the other ones are you know much more responsible for,
deciding who are government leaders are and how we really think so it's hard to know which one has more impact on your day-to-day life but yeah.

Jason D:
[17:05] Totally and then and I should I should say you know yes that's 100% true you know,
part part of Odysseus or the the emission of of the whole franchise Land of the Giants has been,
you know it is easy in our day-to-day getting caught up in our day-to-day lives work Family Family Life,
you know pleasure.
What sort of what the broad impact on what the broad reach of these companies now,
now he's in our lives and and that's not to say it's all bad I mean it's a lot a lot of good and I hope that you know will come across in the in the series as well but it feels like a moment in time where,
you know healthy scrutiny something that the world could use a little more us.

Scot:
[18:02] Close Amazon been kind of supportive of this or they they didn't really engage on.

Jason D:
[18:08] You know that's.
You know I have not gotten a lot of feedback from the company since since episode 1,
are the few weeks ago so they participated in episode 1.
I interviewed one of the people I interviewed was Jeff Wilke who spent it on his own two decades and is now to CEO.
Best way to get the global retail business and Global consumer and he reports to Jeff Bezos
in episode 2 I did it interview the vice president of the smart home at Amazon.
And you know for a episode 4 which will come out the week of August 12th so.
I want to watch than a week from now you know I got a tour of one of them is on a more automated warehouses for an episode about through Amazon as an employer and Automation and so Dave,
but they also just you know turn down and on-the-record interview for.
In episode that'll be about competition on the Amazon platform and Sherman Antitrust scrutiny so I would say.
They probably participate a little more than I expected but I think they're I think they're kind of still in a way to wait and see mode.

Scot:
[19:37] Did you did the Fulfillment center the toward was it like Eva based or was it one of the ones like the pallet lifting robot or something that we haven't seen you.

Jason D:
[19:46] It was,
yeah so I don't know what I didn't see in the warehouse so it's possible and had more than I saw but it what I saw it were I don't know that they call them TV anymore but yes the orange,
I think they call them mobile drive units are carrying carrying the 8-foot tall shelves to their stores and their Pickers.

Scot:
[20:12] Got to go so you don't you like us spend a lot of time to think about Amazon what's what's something that you done the podcast that kind of was a new discovery for you.

Jason D:
[20:22] That's a great question I think I think so far.
It reinforced a lot one of the things I thought I knew about the company over the last six years you know I will say one thing that stuck out to me that's in one of the episodes that is already aired so,
episode 2 is about sort of the smart home and Alexa and.
Yeah I won't give too much away for people living with him but essentially I'm talking to someone who's in the author and futurist about you know.
All the types of things that Amazon might do in the future with the data they can collect and you know I ask the VP of the Smart Home.
Daniel Rausch I said so you know do you guys have a team's inside of Alexa and I know you have thousands of employees working on Alexa that sort of kind of listened to like this the questions coming from the Skeptics of this you know,
as I said that the echo the echo behind me Alexa.

[21:30] I'm going to ignore that I'm sorry guys so they're always always listening.

Scot:
[21:38] At least you're still has work so they're not too angry with you when your when your Prime shipments stop in your Alexa stops then you know that you fingered the Amazon.

Jason D:
[21:50] I was a little surprised I asked you I asked his VP of a smart home,
you're do you sort of listen to it a lot of the smart smarter Skeptics are saying and what they worry about in the future and Anna try to like maybe we'll work back from you know some of those potential.
You know use cases that people are worried about or you know data collection people worried about and his answer was essentially we were young very Amazon we work back from your problems and you know.
And I we start from a place of optimism always phrase like started,
the amazing company it is today but also miss climbing in 2019 like saying like.
Tapping the site Facebook and social networks and you know it just felt,
I guess I was just surprised they've built a certain lack of knowledge mean the word seems me self-awareness.
About sort of the downsides of you know the advancement that sure the fast pases,
Innovation sort of Eden of even specifically like inside our hugs and that's one thing that sort of stuck out to me,
that was a little surprising I'd say.

Jason G:
[23:15] Yeah that
totally make sense I mean to me that's part of the fun of your podcast is for your point you know most listeners are they show or sort of living and stuff day today and it's like you're there some new piece of news about something Amazon's doing.
Every week if not every day and it's kind of fun on the show that you you kind of,
take that 50000 put View and kind of put it in a broader context then leaves.

Jason D:
[23:47] Yeah I'm like the chat near the challenges we're trying to do a couple things like my goal is to have Jason and Scott and the listeners of this podcast and the you know,
sure the sources I have you had developed over six years day today reporting like find enough compelling story wines and and hopefully new information as well that even though they stay the day they are coming away saying,
that was a pleasant storytelling experience or I learn something new or I never I didn't think of it that way while also being welcoming to
people who don't live this day today but but have Amazon in their lives you know in a big way and wonder about Amazon or 1/4 about Jeff Bezos or you know
shortest sit on the periphery
of these industries and so I think from the feedback I've gotten the reviews I've seen I think we've done a pretty good job at that so far,
but you know we'll have you know episode 6 which will be antitrust and competition on the Amazon Marketplace I can that one like we'll dive into the weeds that in a way that I think even people in the industry.
It'll really really resonate West and I think will be both surprising and hopefully
somewhat news-making so I'll leave that to you.

Jason G:
[25:07] Nice. That's a good teas are a couple of short fun facts on stuff we've already covered I can't let it go without teasing Scott Scott had an opportunity to be an early investor in Cuba and thought it was a stupid idea.

Jason D:
[25:19] Scot.

Scot:
[25:21] Yeah what was NC State Professor he was talking about how he was going to take the algorithm ants use an appliance warehouses and it just didn't didn't make sense to me that Aunt part lost me.
You was right I was wrong.

Jason D:
[25:35] Yeah I know I'm just I'm shaking my head in this empty house right now so.

Jason G:
[25:44] You mention so in episode 3 you visited a,
a warehouse that's now a fulfillment center is now closed you you teased us that you went to a modern performance center and episode for a fun fact for listeners,
Amazon actually gives a remarkably good tour of a bunch of those,
modern fulfillment center so even if you're not a fancy journalist I Jason,
you you can go to a web URL and Reserve at or I take clients on these tours all the time and it's if you're in the industry or you're just interested it's super worth going,
so as you're listening to episode 4 and hearing Jason's description know that you can you can follow it up with aching person experience and I'll put the donation the show notes.

Jason D:
[26:33] Have you been to the Staten Island New York Film Center.

Jason G:
[26:36] I haven't and so an interesting question which I'll see if our intern can figure out while I'm talking to you only certain of the facilities are available.
For the tours.
And I don't think that's an island is so like in your neck of the woods Robbinsville New Jersey and West Deptford are available.
I don't see Staten Island on the list I'm in Chicago and they they have a.
You have to go to Jefferson Indiana and now there's a which is a suburb of Chicago.
It's pretty interesting and I presume you had a slightly different experience at the very least they let you bring a mic and they do like Frisk you for all your digital device.

Jason D:
[27:39] Yes yeah they were there were big they were big no no phone or no camera signs and then
yeah I was going to say another
I'm hesitant to say what I think my memory is surfacing right now and another know something signed but I'm wondering if maybe it was when I visited a different
Amazon facility 5 years ago or 6 years ago and cnx I have a vague memory of a no guns sign but.
Anyway I am a millionaire I don't remember for sure so I probably should have said it but.

Jason G:
[28:26] That's not going to want to listen it'll be safe I'll put Jason's phone number in the show notes.

Jason D:
[28:34] Speaking of Jeff speaking of Jeff Bezos I got a secret I got a little package in the mail today from from.
Kara swisher and the box says Bezos primes and the hundred and hundred billion dollar man and I opened it up and it is a Jeff Bezos figurine maybe like.
A foot high and it comes with a robot that he was spotted with that one of his events a few years ago,
so I can maybe that can be your show mascot.

Jason G:
[29:09] That would be awesome is it I'm assuming because the robot is buff Jeff Bezos and not a bookstore Jeff Bezos.

Jason D:
[29:17] Yeah if you if you Google as I just did Jeff Bezos yellow robot the first image that comes up is Jeff Bezos walking with a.
Yellow shirt of is this a robot dog Boston Dynamics robot dog and he is wearing and just in the figurine is wearing what Jeff is wearing in the soda which is.
Yes.

Jason G:
[29:40] Patagonia obligatory BCBS.

Scot:
[29:43] Does it have a drawstring into the Jeff left when you.

Jason D:
[29:46] I couldn't I couldn't see that past the bulging bicep switch on.
A little envious I honestly.

Jason G:
[30:00] That was really your way of just working in that Carrie Fisher knows your address which is impressive but.

Jason D:
[30:05] She actually she actually I've only worked with her for 6 years and she had to text me for my address the other day not that cool.

Jason G:
[30:15] Yeah I kind of assumed that was the case I have to compete cuz I have a current mask mascot staring at me that I was going to bring the code Commerce this year I have one of the pets.com sock puppets.

Jason D:
[30:30] Yes yes and I'm assuming you're saying that the guess we're going to have Julie Wainwright too and I'm back in the day at one point rent ups.com.

Jason G:
[30:41] If I were younger listeners pets.com was one of the the fast runners in the first free internet crash
that was a precursor to Chuy and had television campaigns and it has mascot was this sock puppet dog
the that that's essentially did in fact morph into Triumph the the comedian.
I don't know if you know the backstory here but there are lawsuits in the whole thing that,
that sort of after pest.com left that the comedian that that treated the Triumph character like bought the rights to the Past. Calm dogs,
and there are some real property fights and stuff so it's fun and then the founder of pets. Com is the the also the founder of real real who's going to be at your shop.

Jason D:
[31:35] One correction yes she was not,
not the founder of cats but feels like almost every time.
Yeah journalists are very go see this on almost every time Julie is you know appears that something like.
Pets.com comes up twenty years later and I'm just curious about like,
maybe it's something it's a it's a role she held but I'm curious of what she'll have to do like what she has to do to like not have that be part of the,
part of the story in an only reason I ask is will a,
I had someone reach out to me recently after we announced her and was like really you guys still mention pens.com and it made me think about that and then being like
who is the CEO and maybe it's just a bad person and I should,
I should I should know whether a person is alive or what they're doing today I think it I think it might have been a George something.

Jason G:
[32:46] George Shaheen good job.

Jason D:
[32:48] Okay cool you know maybe it's just a juul he's had some level of success and I don't know that's that's enough that I don't know if that was actually a question but it's something I I was just thinking about recently and so was interested.

Jason G:
[33:02] If I remember correctly after webvan George became the CEO of what was then Anderson Consulting now Accenture.

Jason D:
[33:10] Wow I was going to say something really mean which is probably not right I was going to say failing up but but maybe I actually was not covering.

Jason G:
[33:19] Thank you I think I could be a correct characteristic.

Jason D:
[33:22] Okay sorry George.

Jason G:
[33:26] That way so I have a very minor version of that I started my career and was like one of the original directors of marketing a blockbuster entertainment and in my world,
like every time I go visit a client the the consultant from my saying company right before I get there pops up a slide talking about how you don't want to get Blockbuster.

Jason D:
[33:46] Oh well.
So you view a failed really up.

Jason G:
[33:51] I have but I would actually point out I'm feeling,
down because we sold Blockbuster for 9 billion dollars people always talk about the end when a failure the company was you no railroads are not a very good,
investment today but Anderson Cooper's family did pretty good on the railroad.

Jason D:
[34:15] I am now staring at your LinkedIn which I did not know about this.

Jason G:
[34:21] That I never listen.

Jason D:
[34:23] 1616 month. Of your work career.

Jason G:
[34:26] It's a slide that I have to face every single day as though.

Jason D:
[34:34] Listen listen as someone who grew up so when you were there I'm not going to do the age thing but okay I'll do it when you were that when you were there I was,
I was in Middle School and
Blockbuster was probably one of my favorite places on Earth and I have very fond memories especially now that my parents both my parents are deceased very fond memories of going into Blockbuster on Friday nights and you know,
hoping you what am I remembering correctly that like the case might be out but like if you opened it.
You had it like you found out whether a movie or game was in or not with whether it was actually that the case was empty or not or am I am I totally making that.

Jason G:
[35:21] I know you're probably thinking of an independent video store so I guess what we would have is the box art would always be there with the movie was in stock or not behind and next to that box are would be.

Jason D:
[35:32] Oh yes.

Jason G:
[35:33] 30 or 40 Blockbuster desert called Amaray cases that plastic taste it held the the video.

Jason D:
[35:41] Got it well well thank you for giving me this even this cloudy memory of my Friday nights as a 12 year old.

Jason G:
[35:50] I appreciate you making it a blockbuster night we are so getting back to more tree Topix,
I want we want to transition of the podcast but one question that you you may have inadvertently.
I revealed an answer already but so season 1 Amazon you are the host.
There's you know it least four more seasons are you going to be the host for these other companies or are we going to meet some new character.

Jason D:
[36:26] Most likely not I think,
this is I think there were likely be people with more expertise.
Then I have on those other companies since I have spelled spent the last six years really diving deep into Amazon in e-commerce show.
I don't I don't know what the 100% answer is but that is the 99%.
Correct answer likely answer so no I did I did there is an appointed frankly you know that I had to make you know
by choice I had to make some trade-offs as I've spent the last six months and still end on this podcast series and also working on the conference which was I've not been
able to report and write as frequently as I was I would like so you know where in the beginning of August and the last story I published was a big deep dive into
internal tension at Walmart and that was a month ago so I'm anxious to get back to Amor,
consistent writing a Cadence starting in the fall.

Scot:
[37:42] Cool I like how you started filling in the middle so you're kind of like doing episode 4 Star Wars style and then you'll have to kind of go do some some will have to come in and have filling before you.

Jason G:
[37:56] Netflix is going to be the prequel.

Jason D:
[37:59] I've always wondered is Amazon the first a in the Fang that has two A's or II a.

Scot:
[38:06] You know Kramer coins this I'm 99% sure so we can ask him.

Jason D:
[38:14] Know what you tweet we we we all know no one famous actually coins that thing right there like borrow it from someone was less famous.

Scot:
[38:21] Not the creamer did he had it on his knuckles one night I remember I remember watching the episode.

Jason D:
[38:27] Okay.

Scot:
[38:28] What it is like really fired up here like almost like a knuckle tattoo so is like f a i n g on the.

Jason G:
[38:34] But am I if I'm remembering right just to jump in when Kramer did start using it Apple wasn't even one of the things so I am assuming it was literally faang and I think so therefore it has to be m.

Jason D:
[38:49] Someone has tried to make for the newer companies A+ happen if you heard that one.

Scot:
[38:58] The effort several chondromatosis they're just not as catchy of Spain.

Jason D:
[39:03] No and now and I can't even I can't even tell you what the A and A+ is is it I'll maybe it's Airbnb anyway.

Jason G:
[39:11] The G is now and they also to make things more complex.

Scot:
[39:15] That sounds like an Andreessen Horowitz thing cuz it sounds like they're portfolio does their PRT.

Jason D:
[39:23] What's an A+ that I'm forgetting which food at after is who thinks he's an investor he actually is an investor.
Yes he is in a duster sorry Aspen yeah a plus.

Jason G:
[39:37] What in your world A+ is Ashton Kutcher in my world it's the supplemental high-value content on the Amazon product detail.

Jason D:
[39:46] Man we are we are just nerding.

Scot:
[39:52] Cool sweet recommends that listeners check out Land of the Giants make sure you get the D in there except to get the search right it's great podcast we strongly endorse it here at the Jason Scott shoe
so weak since we have you Jason we thought we just kind of
Heather written about the news without we pick your brain about some topics the one I'm most interested in is we've had a lot of IPOs and recently so we've had
Uber Lyft are out now we got chewy real real they all
Uber Lyft haven't done so great but I think the Commerce ones have done pretty well specially real rely things done quite well what he thinks next I know you follow the shoe guys close to are they tearing up or is it your way just raise a lot of capital.
Country has few you have any insights into what's next in the pipeline.

Jason D:
[40:43] Yeah sure so I'll you know what some of the ones I've been curious about.
And so so wish wishes accompany that.
Assertive gone through phases of being like like very much in the business news and then you know skirt,
out of the news in the business world and you know frankly I haven't checked in on their performance in a while and you know last I saw that,
there are some reporting that there is there gmv or I don't know what they use for their gross number is I want to say was somewhere maybe approaching or around 10 billion and.

[41:29] And I'm assuming most westerners no wish but should I tell them what it is if they down or.

[41:37] Yeah so wish wish I like to think of it is essentially AliExpress but for.

[41:46] The popular in different markets or sort of taobao,
what the Western Schism on it essentially not it's,
it's a mobile shopping app with a fee that specializes in the low price non-branded products that are very very cheap that often,
will take weeks to get to you although they've they've opened up some of their own warehouses to stop for the best selling stuff,
and I'm just very curious about them in it for a long time mainly for you know a lot of stuff they sell,
does not last very long
yeah I've wondered a lot about what you know what the expectation is with different consumers in different countries when they pay a dollar or $2 for something like is it
okay that it,
brakes after 4 tries or no is that going to be a significant turn issue to wish is one you know I don't I don't know what their IPO plans are I could see them going public in the next year but that's one of the companies I'm anxious to dig into when I get back to writing a little more
Casper there's been a lot of talk about I still looking at you know I still work at that company and.

[43:14] Msmm frankly just skeptical of a long-term independent future you know my big question with all these sort of single product for the most part I know they have some other products but single product,
digital native Brands is are they really expanding the markets,
they're in or they just growing much faster than previous iterations in their industry and so they're going to hit a ceiling
much faster and maybe that's obvious the people but it's something I think about a lot and.
I just you know I had to report a couple years ago about talks they had with Target about a potential sale for around a billion dollars
should I trust one like I don't know what the outcome is but I am very curious because like I said I'm I'm skeptical the public company that Casper has a password and public company,
and then some other ones instacart,
I think I wish around the current valuation they seem too big to be acquired,
I'd love to see you in an s-1 filing with those unit economics look like.
And then one that sort of Commerce City but sort of marketplace I don't know what you got if you guys have heard much or,
what that much recently is house Houzz.

[44:38] You know there was a lot of talk around then maybe a year or two ago and the businesses are smart like at a certain point you just want to get want to get your economics write a certain scale and like.
You don't need to be held talking to the business press as much and so that's another one that sort of all my radar to check back into.
I did a good job of talking for a few minutes and not actually answering your question.
Makes me feel like a PR person.

Scot:
[45:06] Those are good let's see how about that you guys were they big enough for you think they need some time to consolidate.

Jason D:
[45:18] Yeah I I mean iced I still think those are so there's there's good and there's stockx.
Which just,
data breach which took them a long time to reveal actually I think I just got an e-mail today but I feel like I saw it reported last week maybe.
My opinion is I think I think those are acquisition place.
I just I have trouble I have trouble seeing those guys as public companies then again like you know maybe they you know the real real just went public and I know it's not Sneakers but it is.
It is sort of high price high price point items Consignment second hand and sell.
You know maybe maybe that is a future but my bet would be on both companies acquisitions.

Jason G:
[46:25] We've I recorded your your bets and we'll do a recap show later I'll throw like one slight editorial and let you know
can I think it's an interesting thing about some of these companies that has changed as a result of digital disruption if you were to launch a
a really popular single item company 15 years ago,
the marketing vehicles that would be available to you and it would be affordable to you would like,
put significant parameters on how quickly you could grow so even there was a demand for 5 million people that wanted to buy your product,
it might hate for five years for all five million of those people to find out about your product.
And today that that same five million people will find out about your product one day after you want,
and so what are the things that I feel like digital has done is.
Artificially compressed the sale the initial sales.
For your product info you know the mistake I think some people have made is you know you look at these rapid growth of all these companies and you go oh man we just project that out another five years,
this is a huge business and what you don't realize is.

Jason D:
[47:49] You hate you hate you hate your car.

Jason G:
[47:51] Plateauing much fat.

Jason D:
[47:53] Yeah. Yeah you said that and much more articulate way than I was then I hit that I did earlier but yeah that was
play I was attempting to make was already are these companies and weeks I think we've seen it with some are these companies going to hit a ceiling much sooner than
they expected maybe investors inspect extract and.
And so yeah I mean that's why I don't hear it as much but I you know I grew double overtime you know few years ago I would have laughed after a. Of time when.
A Founder that was like 4 months in or 6 months in would talk to me about like it was confident about.
LTV lifetime value and like modeling out there tax you know because.
Because of that very point you just made like you're going to stir your hitting your target audience much quicker than in the past.

Scot:
[48:57] Coop's one area I wanted to see if you have any thoughts on this you've done a lot of good coverage around the food delivery companies you mentioned instacart
so there's there's like a zillion of them and
we saw a little bit of consolidation with someone acquired the one that square has always so that was caviar and they got acquired by.

Jason D:
[49:18] Doordash.

Scot:
[49:18] Yes yes and there was also controversy around tipping so to give us an update on what you're seeing there.

Jason D:
[49:26] I mean it's like the wild west right it's pretty crazy yeah we had also reported that Postmates had.
In a filed they had a press release very early this year saying they had confidentially filed,
paperwork with sec to go public and we are now in August,
they have still not filed their official S1 paperwork a publicly that is very unusual for a company that will,
that for companies that will eventually actually make it public until we we we have reported that every code that they had talks with some potential acquirers there just has to be Asian I mean no one you know
of the private companies no one's making money doordash is viewed as sort of dick because they have all this money SoftBank bank backed company they have tons and tons of money that they are burning through,
just to gain market share I mean there you know the rumors about them doing some deals with some of the The Big Dig
sort of quick casual and or fast-casual and food chains were there essentially you know,
they're take raid or they're cut is like.

[50:47] Pasta zero or maybe it's zero in some cases and so this is me it's just not sustainable what I've been told and Uber went public,
and had a good public outing
and was a valued you know they were they were thinking they were going to be value to round 120 billion I haven't looked recently but I'm going to try to pull it up right now what are they 70 70 billion
that they were going to wipe they would be wife we to do a deal,
for one of the companies and so that you know that the problem in a couple problems you know,
so I sold my back was they were going to eat there were neither acquired doordash or even GrubHub another public company,
and but at 72 billion instead of 120 billion those deals at those companies market caps evaluations,
become really really big percentage percentage of meaningful percentage of Uber's market cap.

[51:52] And yeah I could I could keep going to ugly one other point just on like the the debate for Hoover on who do who do you acquire you know you choir doordash you kind of a quite you acquire the crazy
show the crazy player in the market that's forcing anyone to just everyone in the mark this sort of lose their heads and burn cash for market share but but that
that's her set you back on the economic side like that does not help your profitability of your business right maybe there's some synergies but like on the face of it no
if you if you acquire instead GrubHub which is profitable business,
you know you've you've gained some NASA volume GrubHub shuja New York with seamless Fusion some Big Moe died in Chicago GrubHub popular Hometown but then you still have the crazy,
cash burner doordash out there and so.
I'm really interested to see what all happened I think there will be consolidation I'm hoping we haven't announced any of food delivery CEOs for code Commerce yet but I'm very confident we'll have one of the heads of want to be Services there,
and what I didn't talk about what is the Tipping scandal,
which is essentially I drove one of you guys for a wants to summarize it but it but I'm happy to get my dots on it.

Scot:
[53:16] Yeah I think the the summary is the so they they all charge there's just got two buckets there's a there's a delivery fee and there's a tip and,
what's happening is if you if you put a tip-in then none of the delivery fee they're essentially kind of well couple things to do is,
it's legal to skim the tip so you can charge the worker you can you can take out
yo sitting on there's all kinds of rules around us but something like two to 4% essentially covering your credit card fee and whatnot so that's one aspect to this
I think all that stuff kind of unethical but whatever so it's legal and then and then the bigger thing was that effectively you know the
as you tipped then the company was keeping more and more of the delivery fee so they were kind of saying it was like an order so the driver got you know kind of an order from the delivery fee in the tip not an ant.

Jason D:
[54:15] Right and I think this was surprising to an indoor dashes case and I don't think they were the only one surprising to both,
the delivery people when they were in that you know I was tipped,
$8 but I didn't get all that tip and then I think it was surprising to,
customers and doordash initially
sad like we believe in this model we believe our it's more steady income for our delivery people with this model and when they don't when they get you know this is better for them when they don't get a good tip and,
and then the story kind of exploded again a few months later when I think of New York Times writer,
a reporter asked her did delivery I get her first person then of what it was like and this came up again and then
doordash recently gave in or has said they will change their model the problem with the whole space I mean I'm going to paint with a broad brush and I know there's some nuances with each service but
generally like there is just I think most consumers just don't know.
How much they're paying and where it's going and you know maybe for a lot of people they don't care that they're,
you know the price is basically marked up twenty 30% from what they would pay in the store but the convenience is worth it but.

[55:45] I really think there's room for an ethical player to Stand Out by just doing business really the right way the problem is I think the economics of the business at least with the current auditor site and how many services there are.
Don't allow for that.

Scot:
[56:02] Yep yeah that's at some point prices will go up in the convenience store and consumer will know that they're they're paying extra for the stuff so what we have to just come to get to that normalization.

Jason G:
[56:13] Yeah the the tricky part is sometimes when at normal ization happens then the service isn't as appealing a consumer's rights.
At a similar version is played out with instacart where they were Articuno originally they they had a low delivery fee but they were artificially raising the price of all the goods you paid so it was.

Jason D:
[56:32] Right right.

Jason G:
[56:33] And when customers found out about that that's out really oily and dishonest so you know they started passing through the items at the same price and tried to charge more for the delivery fee
and found the customers weren't willing to pay that delivery piece of eight like 10 only do good in Market Square,
they kept the delivery for you which meant the unit economics for the business don't working in a b c is paying for your delivery.

Jason D:
[56:59] What are you doing I'm just curious and it like do you think any of these bit whether it since the card or you know the the meal delivery companies.
Do you think do you think any of them like go away like they did do you think we're in for a rude awakening where like.
Some of the most sensual like one or two of them like literally collapse even.

Jason G:
[57:22] Why did consolidate in one of them does well for a while but in the long run I'll predict the day all the way in or we change and the reason I say that is.
That they're essentially offering a service to grocery stores in the kids of instacart or restaurants in a case of the others,
providing a customer experience at that Grocery Store retail you know restaurant wasn't interested in providing or didn't feel they could have adequately provide and,
early on when it's not a big business it made total sense to do that as,
that service becomes the dominant method of getting those those companies products.
It becomes increasingly stupid for these companies to Outsource this right and I mean not the analogy to me.

Jason D:
[58:16] Oh I am now remind I've heard I've heard your tape before but I want.

Jason G:
[58:20] In the early days.
Nobody built their own e-commerce I try like we're retailers and so what will pay this technology company in Silicon Valley to operate an e-commerce site for us.

Jason D:
[58:31] Or in Seattle.

Jason G:
[58:32] Yeah so that was either Amazon or company back in the day g s i n g s I became a very successful very fast runner made the owner of billionaire now owns the 76ers the.
In the long run.
All of the the surviving retailers had to find a way to unwind their deals with Amazon and GSI because it just became too important a part of the customer experience and when I.

Jason D:
[59:00] And those DSi deals man I've heard some stories.

Jason G:
[59:03] He was a great salesperson that the contracts were absurd.

Jason D:
[59:08] Team 10 15 year deals yet.

Jason G:
[59:10] Yeah it was amazing but in the case of restaurants there's a huge shift in consumer Behavior.
20% of all restaurant sales are now consumed off pram,
the the deals they have with these marketplaces are unprofitable for the restaurants and so it's it literally at the,
inhibit scales under the current economic model outputs all these restaurants out of business and side note all of these delivery companies are secretly opening,
kitchens and commissaries to start delivering the universe similar to Amazon private label Marketplace so there's more pressure coming in the big successful restaurants that actually have products that consumers want.
They're going to have to own their own delivery experience right in it and you talk to these got these huge companies are announcing oh we're going to partner with Uber Eats,
and I I go like that that's crazy that's your the front door of your your restaurant.
That you're now Outsourcing to someone that's going to disintermediate you from the customer it for a variety of reasons I don't think it's a sustainable model what's the.

Jason D:
[1:00:20] Yeah one one other thing I forgot to mention Little Couple interesting things one is you know
the former CEO ousted CEO of uber Travis kalanick he's in the space I think
here's a company one of his one or a division of one of his new company is called Cloud kitchens which is essentially these like dark,
call dark kitchens or Bay City restaurants that only do delivery.
The other thing is you know how Mazon hasn't come up in this conversation yet but in the end they you know I think they announced shutting down Amazon restaurants there,
attempted delivery I don't think they're out of this I think like I would like,
I think the two wires to me in this space at least in the US are,
Uber and.
Uber and Amazon and so I didn't you know will Amazon do any big Acquisitions right now with the current regulatory climate maybe not but.
Maybe that's obvious to people that they're not out of it but I think some people when they saw them Amazon shutting down out of the restaurants. They were exiting but I think.
I I would not be surprised whatsoever if they if they make a point in the space.

Jason G:
[1:01:46] No I I I think that's very possible with some decent that's going to be a great place to leave it because we've done it again we've completely wasted an hour of our listeners time.

Jason D:
[1:01:57] You got you guys did I didn't want a day like that.

Jason G:
[1:02:00] You know you are a total a willing participant,
the but if listeners disagree and they want to continue the conversation as always you could jump on her Facebook page and leave some comments or hit us up on Twitter,
as always in bed this was the show that that you know finally added value in your life
what you should do is jump on iTunes give us that five star review and at the same time you can subscribe to Land of the Giants in here even more Jason Del Rey.

Jason D:
[1:02:31] Check can I just plug like you should really give it a shot we've been top 50 and top 30 for most of the last week on all of apple and I am open to all feedback,
good and bad I'm on Twitter at Delray Delray Jason at recode.net we have an email address for Land of the Giants,
and I just hijacked your ending there you go.

Scot:
[1:03:01] Jason thanks for joining us and congrats on the success of the podcast we look forward to hearing the rest of it.

Jason D:
[1:03:09] Thanks guys I'll see you at Code Commerce.

Jason G:
[1:03:11] Absolutely in until next time happy commercing.

Aug 5, 2019

EP182 - Amazon Q2 Earnings and News 

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

Episode 182 of the Jason & Scot show was recorded on Wednesday, July 31st, 2019

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 182 being recorded on Wednesday July 31st 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your code Scot Wingo.

Scot:
[0:39] Jason and welcome back Jason Scott show listeners,
Jason has been a while since we were able to get together with given the holiday season 2 vacations going on
and then we had some guests in there that that's important topics you on the cover so we thought it would be a good time to go and catch up on some news
there's been a fair amount going on in the world Lee Commerce as
you haven't been at this for feels like forever kind of Summer's kind of quiet and then here in this kind of Q3. Is where it gets really newsie as we head into the house so we thought we'd go over some of that before we do Jason you have been
a busy traveler I'll tell us about some of the tricks you been on.

Jason:
[1:26] Yeah yeah I have been on a couple trips full disclosure a number of them have been vacation and so I'm I'm a little proud I feel like you probably beat me on quality of summer vacation but I feel like I at least meet you on quantity of summer vacation.

Scot:
[1:41] Yeah yeah you were able to get a couple weeks in there and I'm
I can go further because I don't have to carry a 8 lb 80 lb espresso machine with me I think that that kind of limits our options but so fly over to Europe and stuff so we're going to free you from the shackles of the espresso machine.

Jason:
[2:00] Exactly I don't know if you think you're joking or not but I did I took two vacations I visited my family in in San Diego for the 4th of July and I
went to Upper Lake Michigan with my wife's family and the Upper Lake Michigan lake house is remote enough that I did have to bring my own espresso machine.

Scot:
[2:20] Oh I know I know I'm familiar.

Jason:
[2:22] But I'm calling it a big win I actually consumer protip.
Years passed I bought the new Nespresso which is called the virtuoso which is this fancy or system and I was never actually that happy with the shots.
Into this year I retired it and bought the older Nespresso original system.
And much happier with the shots there's a much greater diversity of coffee available for its was actually able to buy.
My Starbucks pods to go in that coffee shop by my lattes were both much better and this little town we we stay in North Point Court last year head Giro expresso machines in the town and they sure they had to poop so I feel like.
Like it was all green light.

Scot:
[3:07] Nice nice you're you're making America better.

Jason:
[3:11] But so in between all of that Leisure activity I took the opportunity during the Heatwave to go to Las Vegas.
For a new show that interact has launched this year called in RF next and they cleverly spell it like the Hipster kids NXT.

Scot:
[3:31] It's very cool to drop any kind of owls so kudos.

Jason:
[3:35] Exactly it sweet speak.
And they the.
Important to me because it's somewhat of the spiritual successor to the shop. Org annual Summits when shop.org used to be a separate entity from NRF.
Into this was the first year of this new format it's in Las Vegas in the summer it's at the Four Seasons hotel which is like a kind of cool luxury hotel inside of Mandalay Bay.
And it's less of a trade show there's no exhibit hall and more of a a conference with.
Certain interesting approach to content curation what they do is they they have.
Key notes that everyone attends on a topic and then they have breakout sessions which are deeper Dives on the topics from the keynote and you sort of picked the.
The specific tactic that you're most interested in for the deeper dive so you might have liked.
Akina ain't no bunch of good retailers that did Keynotes Zulily DSW Shoes untie.

[4:42] Dick's Sporting Goods Peapod.
Lilly Pulitzer to Value H&M JustFab I think with all the main presenters and you know you might see that the CMO giving a presentation on the keno to set up high-level case study about what they're doing and then you might have the.
The director of email marketing doing a breakout session specifically on on Dick strategy around a b testing emails for example if that was what was interesting to you until you both you got a mix of kind of high-level.
Strategic content and like you do more Hands-On tactical button-pushing contents as well which I like.

Scot:
[5:22] Brickell what were what were your your your most and least favorite topics.

Jason:
[5:30] Yep so there you know.
Everyone is tackling different aspects of what I call the next best dollar problem that like.

[5:43] A lot of the traditional tactics that repairs of used to drive traffic and drive conversion like.
Either aren't working as well as they used to or are becoming more expensive and more competitive and so you know our readers are challenge with like what is the right mix of tactics and
you know how do we evaluate what tactics to do and then you know how do we optimize and get the best bang-for-the-buck for all of those.
Like primarily traffic generation tactic so a lot of.
Surf interesting examples of how to tackle influencer marketing an email marketing and.
Bike shopping cart abandonment campaigns and in topics that we talked about for a while but like kind of what the the latest state-of-the-art is in optimizing those tactics out.
You know there's a bunch of General stuff there and then the 1st came out of the day was sort of a.
A much more overview of the market Keno which is from an acquaintance and former colleague of yours Pascal finette who's.
At Singularity University but I think you hired him a channel advisor at one point.

Scot:
[7:00] Yeah that's goes way back Pascal is a super smart person in here and Germany for us for a while he's a great guy and we stayed in touch so hopefully he gave give a good presentation there.

Jason:
[7:14] So I thought he did a really good job and his his whole presentation,
is there an interesting angle on something we've talked a lot about about bifurcation in retail and he had an interesting Paradigm for it like he he talked about traditional retail being a pyramid and at the bottom of the pyramid you had,
very high-volume low-margin transactions.
And at the top of the pyramid you had much of lower volume higher margin transactions and so you know for the most part it's like.

[7:51] Discounters and super high efficiency stuff at the bottom of that pyramid so that's that's Walmart T.J.Maxx dollar stores things like that and at the very top of the pyramid.
It's typically luxury brands,
and you know then there are a bunch of retards that are historically a compromise of those two things right and so that's,
that's all I like the mall based apparel companies that's that's gap that's Bed Bath & Beyond its Staples it's all these these different retailers and his premise was that for most of the history of retail.
The best place to be was that compromise in between the two extremes and that as a result of our our current disruption in the marketplace like what's fundamentally happened is.
The customers have all bifurcated to either
the the super high efficiency retailers at the bottom and the super high-value read you know High luxury retailers at the top and the
the segment of retail that's getting decimated are all those retailers that are trying to live in the middle and so he takes his pyramid and he he takes the bottom and the top and puts him around and it's it's sort of.
Like an hourglass so that the pyramid has become an hourglass don't kick in in the the the.
The dramatic conclusion being don't get stuck in the middle.

Scot:
[9:18] The sands of time are running out.

Jason:
[9:20] Yeah it was a little awkward that I'm sitting next to a little Gap team is he pops up beside that says and the Gap is in the middle.

Scot:
[9:26] They without the computers to start working on the resumes.

Jason:
[9:30] I don't think it was news to any of them that that was a challenge they had to overcome.
Yeah but so that was a good conference and of course like,
cuz it was a little smaller to maybe about four hundred attendees the networking you know is one of the highlights you know I got to see a lot of old friends of yours and mine and meet meet some new friends
share a couple adult beverages and and make fun of people.

Scot:
[9:55] How about where are digitally native vertical Brands their represent.

Jason:
[10:01] There were so like JustFab was one of the presenters they were number of,
the DMV be sort of in attendance so they they definitely had some some representation that it it's it was a pretty interesting mix of.
Frankly you know all all portions of that of that parent of Pascal's pyramid.

Scot:
[10:28] Cooper another one of the takeaways can you share with us.

Jason:
[10:33] You're grilling me I mean like those are the the big ones that we have time to talk about right now because I heard a rumor I know you have this whole separate gig in the automotive industry that you're cheating on me with
and I heard you were at an auto event while I was here so did you did you get a new cars.

Scot:
[10:57] I did not but it was fun because this was an event that was actually in my backyard the one of the Publishers and autospace I didn't even know this until
Teresa Lee is based out of Cary North Carolina which is in the Research Triangle Park area and they put on an annual kind of it's not funny how
things once you've done this in several Industries It's relatively similar to kind of
are e-commerce road so they have kind of like the big show their one goes to this kind of like you know the current stage and then they have the more forward-looking show that they kind of do the smaller and we're in a hot soak.
Kind of like interests next for Autos this was in Raleigh so it's actually nice to get to drive to the conference house by 2 so I was invited to speak about.

[11:43] Changing car ownership landscape which is not the topic of our podcast but it is kind of fun you know there's an in the
my world my e-commerce World in my Auto World are all colliding so we we talked a lot about these new models the most popular ones are there's two companies ones true and ones get around the CEO of truism eBay dude and then the get around
my folks are both marketplaces into
takes time for at least learn to talk about all the time and see it seeping into the Auto World another interesting company in that space is called ACV auctions where there's all these physical car auctions
require acres and acres of land in kind of silly because you ship all the cars there and then if people fly there and then walked around and and
bid on items and then they blow to back up and shut them somewhere else there's two shipping's in there there's this ACV auction company has gone and it just on a digital marketplace around that so very kind of eBay 1.0 asks to be in a different industry but then see the
the similarities the other fun thing is a lot of the presentations were you how do we make it like
easy for people to buy cars the carvana has really disrupted that World by effectively taking e-commerce.

[13:03] Stuff that we know well and applying it to used cars so now all the dealers are trying to figure out your pay if Jason walks in on a on a
Sunday afternoon in Chicago how can I sell him a car in less than 8 hours so that it's kind of funny they're trying to figure out you know.

[13:21] The basic blocking and tackling of that that we had knee Converse for a long time but but it's funny to watch them,
figure that out and there's a different set of vendors different set of players so it's a lot of fun.

Jason:
[13:32] Yeah I know it is it's funny when I get teased a lot from
my tenure at Blockbuster entertainment which is now kind of a joke but we sold the company for a bunch of money and a lot of the management team and that the founder of Blockbuster took that cash and started AutoNation in the hole
the whole premise even back then was,
like the inventory in any given used car dealership is the local inventory in that one dealership so you know a very small assortment free Chopper
but what you really need to do is aggregate the assortment across the whole the whole country right and that's that sounds like that's essentially what's happening with these options as well.

Scot:
[14:14] Yeah yeah and then yeah so they'll traditional models are all changing to the CarMax has the realtor now adding digital and it just kind of funny to watching.
The same waves we were kind of in the end of the sixth inning or whatever you want to say I guess Amazon would say they won but you know if we've been that day one for 20 years
daughter Ministry of feels like it's way earlier in that and it's going to go faster because we don't,
we don't have all the new waiting for people to trust payments and smartphones broadband and all that it's all all here today so it's just feels even more chaotic to the folks that are in the middle of it.

Jason:
[14:49] Sure I will say and I've been falling carvanha a little bit as a
start a digital shopping experience and there's a bunch to admire their butt from the commercials like you get the impression that if you bought a car on your mobile phone from carvana it would get delivered in this cool carvana delivery vehicle.
Or you go to a vending machine and the car would come out of the vending machine and I was kind of disappointed to find out that like.
Yeah in most cases some dude just going to drive the car you bought to your house.

Scot:
[15:17] Sure we'd moessmer delivered on the little flatbeds they don't have the commercial tissue this really big one but they bring them on these little flatbeds.
You by Ada price on so many cars in Chicago that there haven't.

Jason:
[15:32] Got you okay good I'm glad I'm glad to hear that cuz that felt a little bait-and-switch e and I'm hoping they've all been detailed by gets 50 before they get to.

Scot:
[15:40] That's what we're going on there's a lot of lot of cars to clean up their thanks for bringing that up.

Jason:
[15:45] Hey I'm here for you man.

Scot:
[15:47] What's one of the big news items we wanted to talk about is last week Amazon revealed their second quarter earnings since they came out the stocks been a down about 10% feel a little bit of pressure and what would happen there is it's kind of mixed quarter so it's Amazon you look over the long Arc since it went public
I was at a whiteboard I would draw these kind of stairsteps there and and see what happens is the,
they'll invest will bits the stair goes sideways and her words, like what's happening this is going to work out
and then do that that's what cycle Revenue growth will accelerate in the woods happy on Wall Street and then the Amazon will say well we need to go through another investment cycle so they've been pretty used to this
the telegraph this if you want if you remember that's when they took the auctioneer to announce
next day Prime so that's the real theme of the quarter is the mixed aspect of it so positive
camaco season of the quarter was one day Prime really increased demand that was that was good and exceeded while she text
Haitians pretty handily on the top line but at the same time I'm delivering on one day Prime really
shoot away at probability so you know I can have this mental image of they press the button on the website and then the.

[17:08] Total chaos happen to the Fulfillment centers in there just kind of getting their arms around that also you throw Prime day in there that wasn't a cute too but it's kind of body language was that it was a lot of little bit harder and more expensive to implement one day Prime
I'm too we're going to dig in the next level down is and we thought we kind of cover on positives and negatives we drew straws and I got the positive side Jason sits on the positive side
Revenue accelerated so Revenue at Amazon grew 21% year-over-year excluding in any kind of
benefit or hadwin from a foreign currency that exceeded expectations by about 3%
pretty material at Amazon's you know billions and billions of dollars to exceed by 3% hundreds of millions of dollars kind of come out of that one area that
everyone looks that pretty closely is within the Commerce business or what they called the online unit the there's a unit growth so that's effectively
no to the number of things sold so paid units that it's kind of slow down over the years to about 10% that.

[18:16] That metric which is kind of a forward-looking metrics that popped up to 18% so that's probably the best signal that the one-day Prime is working really well and then I think imma call Amazon did call out that you know
that that was driven that salvation was driving by the introduction of 1-day Prime one-day Prime's benefit was largely centered around North America because in most of it to go to 2
UK for example it's such a small little island are that pretty much prime has been one day for awhile since you out a lot of Europe they're already kind of at one day Prime.

[18:52] So it has a business impact on their National side so a lot of this growth came from the North America side
so North America Revenue accelerated to 23% year-over-year compared to 19% q1 that's a 4% bump due to one day Prime and then
the other thing that made Wall Street excited was you know whenever Amazon releases a quarter they talk about the next quarter so.

[19:17] Ouachita been projecting Q3 to be no X and then Amazon guided that pretty significantly ahead kind of keeping it this mid-20s growth rate at the mid,
another kind of interesting kind of in this we get kind of inside baseball here on the call Amazon talked about
Amazon is very methodical in these autometrix Sue on the call they revealed that they have about 10 million items right now that are in this kind of one day Prime
so think about these concentric Rings where you have at the center at the same day you have Prime now and then some cities have
car that same day delivery that's Prime now is like was like 5,000 skews and then I think maybe you get up to 10,000 20,000 skews for same-day so then the next thing out which is next day is now 10 million
and then the next train out which is I think there's about 30 to 40 million Prime
eligible products total supposed to be like the next thing out which is 2 days going to probably have caught 30 to 40 million so
they're really kind of focused on this this kind of ring that is that one day Prime so you know theoretically I think they could get you know.

[20:37] 4 * 40 million
items that are effectively available to put into that one a prime will it get it all there I don't know I have to kind of wait and see how they go but ten millions not a not a bad start
so it's it's going to be interesting and now they've revealed that number will get a slide about it we'll try to track it on the show here for you guys so you got to see if I was if I was them I would kind of try to get that up to
20 million die holiday I think that would be no cuz pretty material holiday bumps and then what you begin.

[21:07] Last couple things within third-party that segment of Revenue grew 23% year-over-year which was a nice little
acceleration retail subscriptions which is kind of our Prime lives that grew 37% and then one thing we watch on the show really closely is the Amazon ads now they put in this other category in blush and Rose have a way of kind of
looking in there and pulling out the ads business so so the ads business was up 37% year-over-year really nice growth and then the estimates are that this is that about a 13 billion dollar run rate,
I'm going 42% year-over-year so the projections have kind of been edging up we talked about this for a couple years that they were there
you're pretty high now I think they're raising them so I'm seeing a north of 30 billion from Amazon ads by 2024 that would
you're the ad
guy that would definitely put them up into the the Facebook kind of snow level certainly that would exceed I think Twitter and Snapchat
it might stay singers and they're not growing as fast as is Amazon's business so don't put them up in that kind of elite air with Facebook and Google if I'm remembering by my ad.

Jason:
[22:21] Yeah they're they're clear third they're like you. They still have a significant amount of ground to make up on on Amazon and Facebook and Google but they also have like a pretty good Gap ahead of everyone else.

Scot:
[22:34] Yes those are the positive sit in the question is why was the stock kind of down and I'll turn it over to our curmudgeonly Jason to give you the negatives.

Jason:
[22:44] Yeah I think it's because I'm such a positive guy that it it just feels better getting the bad news from me,
11 seidman on the advertising I saw a new and interesting datapoint today that I thought was kind of fascinating there's this company out there jumpshot we've talked about them before
they have tricked a bunch of consumers in the stall installing there plug-in in their browser.
Variety of utilities but then whether means is they get to collect data about how all those consumers are our shopping and their web browser and they,
they sell that industry data so they get they claim they can watch millions of Shoppers in North America on Amazon and they said that in January of last year.
6.6% of all product detail page is the people looked at on Amazon where clicks from a sponsored at.

[23:42] So by December it was 10.5% of all quicksand so there's this like they have monthly data and you just see this daddy step up that like,
Amazon has essentially double the amount of page views as a result of these.
These paid placements in that this very much follows a trend you see on the other big advertising platforms that you know originally.
You know Facebook had a lot of organic Google had a lot of organic content in overtime as they.
They've you know optimizing monetization on their platforms or less and less of the the content with C on their platforms is is organic and Marvis paid so where.
We're seeing a very similar progression happening For Better or Worse on Amazon.

[24:30] That Flippin to the the negatives from the earning report the first one was that their AWS growth rate was slightly below expectations so.

[24:43] To put this in perspective.
The growth rate was still 37% so it's a very fast growing business it's a wildly profitable business in Amazon has by far.
The the largest share of that business and I would say you like one other positive about that business is that there's still a ton of growth left in that business so you know by most people estimate something like 5 to 10% of all the.
Computing jobs in the world are done in the cloud and the rest are all still done in local data centers and things like that so there's still a huge amount of growth as.
Compute my grades from
from the local to the cloud and Amazon you know has this this clear commanding lead but the rate of their growth is starting to slow down and particular Microsoft and Google.
Wow much more than Amazon are now growing faster than Amazon so that's like not unexpected but it's interesting to see that play out and obviously there's,
a lot of mistaken Impressions out there that the.
That the revenue from AWS like pays for the unprofitable retail business for Amazon and hopefully our listeners.
I have learned to debunk that but be that as it may the AWS revenue is is very beneficial to Amazon.

Scot:
[26:09] Giannis this is not a cloud computing podcast but Microsoft actually their Cloud Revenue just passed their non-cloud revenue and that was really well-received by Wall Street
they are now in that that
Elite Trend dollar market cap where Amazon has kind of Fallen well below that due to the headwinds from this investment cycle.

Jason:
[26:31] Yep yep so it's it's super interesting to see this this Microsoft Resurgence they also announced that they're going to
invest more than a billion dollars in this openai platform that they're going to accelerate via.
Azure which is their Cloud platform so I say interesting stuff happening in the cloud space I like to think we're all the beneficiaries because the the tools and services that these guys are all offering.
Like they're they're so competitive with each other that they keep wildly improving and expanding every quarter so.
So it's a fun space going back to the retail side of Amazon's business a little bit more overall gross profit decelerated Amazon so is,
22% versus the last quarter was 27%.

[27:22] As you mention like they took a little hit because they had a good quarter last year and then their guidance was that they were going to.
Make more Capital investments in the subsequent quarter and expected things to go down and that's that's kind of how it it played out but they.
You know still still it's no fun to tell people that you you made less profit than you you did in the previous quarter.
Their operating income was also down a little bit and you know you meant I think you already mentioned their there.
There's a third quarter guidance was also a little lower as a result of this slightly lower profitability and I look at all three of those things and that to me those are all symptoms of.
They made the shift to one day Prime and it was a little more expensive and difficult and messy.
Then maybe they they anticipated and sew-in you know I think as we talked about in the past.

[28:28] Any inefficiency you have when you accelerate everything they they get Amplified in exacerbated and so you know the the.
Putting the accelerator on a lot of these processes if you don't have the exact right inventory in every fulfillment center instead of having expedite a shipment from one for filming Center to a customer now you're having to expedite shipments from to fulfillment centers to a customer things like that so.
Like this doesn't seem like a horrible shock to me and I I feel like I have a pretty high degree of confidence that.
That Amazon is going to operationally get this stuff all squared away and
you and me talk about this in in other news later in the Shell but like however much pain it's causing Amazon to do one day Prime delivery a bunch of other retailers have already announced that they're going to match the one day service and others probably will and I can virtually guarantee you.
It will cause more pain to all those other retailers to try to hit that service level than it's causing Amazon.

Scot:
[29:30] Yeah absolutely yeah some of the Wall Street folks are kind of saying it's a knockout punch in there there's a lot of interesting kind of language around that that the the demand they're seeing from it.
Is there a tributing just to really kind of is going to,
if it stays in Amazon and get the cost down it is going to be late to away at the the sheriff not only online but the offline folks will moved on Lancaster.

Jason:
[29:56] Yeah I know you have talent follows Amazon pretty closely and they they.
They have a pretty sophisticated model for how much opportunity think there is for hims on how quickly they'll grow and then they do this big consumer survey every quarter until right after Amazon announced this last quarter
they surveyed all the customers about how their shopping behaviors might be different if they could get stuff in one day and they had enough Confidence from that survey
that they had to dramatically increase the
addressable Market in their in their model and therefore like the the amount of Headroom for growth Amazon had because I felt like,
offering one day delivery was going to change a lot of shopping habits and and help Amazon capture a lot more wallet chair.

Scot:
[30:43] Yeah one final announcement they made that's near and dear to your heart as they talked about adding two more go stores which will bring the total to 13.

Jason:
[30:52] Yeah and it depends on how you read the announcement but there's two to four that are currently scheduled to open so maybe two of those they had already announced,
and they added two more but two of them are in Chicago,
and we have a number of ghosts tours I want to say we have three or four here now but one of the new ones that's opening here in Chicago is actually opening in one of the buildings I have an office and so it's at the merchandise mart.

[31:21] So that that'll be fun this was not Amazon news but there was a sort of interesting article.
That that came out that someone had done an analysis of the,
the shopping carts one of the credit card companies of the like spend in the Amazon go stores and they reported that the average ring in the Amazon go store is.
Much lower than the average ring in a traditional convenience store so so they were saying that like.
A typical consumer visits a ghost or like two to five times a quarter and a typical consumer visits a 7-Eleven like.
427 x 1/4 so they get 7-Eleven get slightly more visits then I go store but then the average ring in the convenience store was like $25 and then the go store it was like $14 and so the.
The takeaway from this is that you know people are tending to buy one item or just a couple items in the go store in a slightly bigger card in it.
Typical convenience store in it adds to the the the high-level speculations that the C's go stores at the moment are wildly unprofitable so it's,
it's very interesting and typical Amazon that like in spite of the fact that the the unit economics don't don't seem to work at the moment.
You know that's not curtailing Amazon's ambition to keep keep scaling and growing and learning.

Scot:
[32:51] Have you tried the the coffee that I have seen some of the newer ones have the coffee thing have you tried the.

Jason:
[32:57] Yeah they do have a coffee bar I confess I have not because I have very goofy specific tasting coffee but I will I will have to try the coffee when they open one in the merchandise mart.

Scot:
[33:08] Well we need you to take one for the the podcast team and even if it's sub below your standards we want to kind of hear you're all the Gory details.

Jason:
[33:16] Yep. I'm embarrassed I'm embarrassed to say that that I haven't I mean I think two things you think of when you think of the retailgeek are Amazon go stores on coffee so somewhat embarrassing to me.

Scot:
[33:27] You can just walk out without paying this can be even more fun.

Jason:
[33:30] Yeah yeah as I was like to say they they invented just walk out but they broke just walk in.

Scot:
[33:35] What if you go in and get your coffee drink it and then fill the cup again will they charge you for lunch test that Force.

Jason:
[33:43] Yeah well yeah that it is funny that there is a little bit of a history of background like you think you're joking
but this this ties into this so I kind of broader theme that there was some news about these last couple weeks which is about Amazon's overall grocery Ambitions and that the reason I say this that ties into coffee ago stores is because
there's an interesting recode article about the history of the ghost or in the evolution of it and,
it started out as a full-service grocery concept and in fact the idea was that you chop all of the.
The perishables.
In a live store that use Go technology to just let you grab whatever you want and leave and that you'd buy all your consumables,
I just ordered them on your mobile phone and they'll all be packed enough for Film It Center that was attached to the store and they be waiting for you as you walked out of the store.
And somewhere along the line it was deemed too complicated and one of the biggest reasons it was too complicated was.

[34:54] All of these items in a grocery store that have variable quantities that you have to weigh or count,
or you don't have different sizes of the same thing we're tricky for the camera to recognize and so,
the camera knowing whether you have 12 or 16 oz of coffee in your.
In your cup and your point whether you drink half of it and refilled it is a tricky Edge case that apparently Amazon aspire to do originally and then kind of avoided when they rolled out.
The ghost or so.
But it's interesting how Amazon handles that in these go stores but they they there is now construction going on in the original.
10000 square foot lease that Amazon took in Seattle when they thought they were going to open a grocery store and so there's lots of speculation that in the not-too-distant future we're going to see a new grocery concept.
That that may include some of the Amazon go visual search capability computer vision capability but but the Amazon may be stepping back to that more ambitious original.
Original Vision so we're all eager to see what happens when they they peel the paper off the windows of the storm Seattle.

[36:19] So that is kind of interesting in the grocery space another interesting tidbit of news I saw recently from Yuna from the the Seattle corner of our country.
That kind of feels very Amazon asked to me is Starbucks made an interesting announcement.
They did a partnership with a POS company to sell a product ties version of their mobile order and pay two other restaurants.

Scot:
[36:52] So are they now it's any who's going to be taking the outer or how's it going.

Jason:
[36:57] Yeah so I did not see in the in this original article.
Who like it may have already been pre-sold to.
But essentially this was like the chief digital officer Starbucks that help build mobile order and pay left Starbucks to start this new company called Brighton,
and now fast forward a year later Starbucks has done a deal with him at bright room,
to sell the the technology stack in the software stack to other retailers and to me that feels very.
Amazon AWS cuz it like you you build something to solve an internal problem and then you say like.
You know rather than keep it as a proprietary manage for us we're going to scale it and monetize it by by selling it to the rest of the industry.

Scot:
[37:53] You'll be interesting to see who takes out or not.

Jason:
[37:57] So I'm up interested to see if other people up take it there a lot of categories that maybe aren't directly competitive with Starbucks but want this capability and so,
you know I it is easy to imagine it being successful motor mobile order and pay the huge deal in the in the restaurant space right now and and something with a credibility of the Starbucks offering would be interesting when I'm super interested to see is.
Included in this deal would they ever consider using Starbucks as a payment method.
So can I buy my Five Guys burger on my Starbucks card for example.

Scot:
[38:36] Yeah yeah so be interesting to see how if it's a universal payment system ER or just kind of you know a complete private label into another brand.

Jason:
[38:44] Yeah I kind of suspect the first version will not include payments but it's interesting to think about and you know it could also open the door we seen a little bit of this like Kroger's it has invented some in-store technology that they're trying to sell the other retailers I get just going to be interesting to see if this is
a play that becomes a more you know Common part of the The Playbook going forward where I would argue historically
whenever a retailer meant anything proprietary they they want to keep it as far away from the rest of the market as possible and keep it as a sort of,
unique competitive advantage.
But there was also a lot of logistics news in the last couple weeks have you been following all this cotton.

Scot:
[39:26] I have a few yeah. I kind of use it that Amazon is caused so much destruction or one's kind of working to keep up have what what do you think about it.

Jason:
[39:36] Yeah no for sure and some of it very directly so this is slightly old news at this point but like in the beginning of July.
FedEx add their earnings and either during their earnings call or within a day of that earnings called they announced that they were not renewing their contract to provide Express services to Amazon.
And when you first hear that you go oh my God that's a huge deal.
Be reminded FedEx have the smallest chunk of Amazon's delivery and FedEx has a couple.
Products that they sell the Amazon only one of which is this this are delivery and so this is really FedEx walking away from one piece of Amazon business,
and you know if your regular listener the show hopefully it wasn't a total shock to you because I've said for a long time.

[40:27] The carriers are having trouble rapidly scaling their capacity and in so if you have a finite capacity.
Do you want to sell that capacity to the highest volume user that you don't have the most negotiating power and pays the least or do you want to sell that capacity to eat or smaller retailers with more with less Leverage,
they will have to pay more for that and then you know apparently FedEx answer was.
Yeah we we can make we can better product profitize are our capacity by selling it to other retailers and walking away from from Amazon who presumably.
You know as a Biltmore more of their own capability or you know where we're turning the screws for a better and better deal from FedEx.
So that was big news at the same time in that earnings call they did acknowledge than Amazon is a potential competitor in the space which like that also should not be.
Shocking but like you know up to this this point like FedEx had consistently said that that Amazon is a great partner and not a competitor so it's kind of funny that they finally acknowledge that.

Scot:
[41:37] I think they've all slipped it into their or their 10 case there's this guy competitor kind of category in everyone's going to start it but Amazon in there.

Jason:
[41:46] Yeah and I think I got triggered first by Amazon listing them which is never never good news,
the FedEx and UPS are doing some interesting moves the going back to the capacity problem they are both going to seven-day-a-week delivery so they've added Sunday as a delivery day,
that is going to be interesting to watch out you know Amazon was just a lot of their own deliveries here in Chicago already like has been delivering on Sunday for some time and Amazon has a u.s. postal deal with.
For Sunday delivery so like and I feel like the consumer expectation is it is is expanding the seven days and now we're seeing the other carriers.
Trying to figure out an offering in that space and they're also doing some interesting things about reverse Logistics and so.
UPS and FedEx have both like greatly expanded the their locker program and their pickup locations and I think.
Last week UPS announced that they had done a deal with CVS Michaels and Advance Auto Parts to use those 12,000 stores as.
Pick up locations for UPS packages in my mind that the CVS one is particularly interesting because.
CVS I believe is also a pickup and return location for Amazon so you know.

[43:12] It seems like as the healthcare industry is getting more challenging and and the prescription drug business getting more challenging like CVS is doing some interesting things to repurpose some of the the square footage in their stores.

Scot:
[43:24] Have you is there any anecdotal evidence how these return programs are doing it for everybody like is Kohl's benefiting from the Amazon thing or are people just kind of like.

Jason:
[43:33] So the 3rd party traffic monitors feel like holes traffic was up and Kohl's claim that their traffic was up,
demonstrably in the pilot stores when they first
when I first started taking returns and so Kohl's is totally Double Down they've expanded the returns to all their stores and Colts is really improve the logistics around the return so you cannot walk in a Kohl's with just a unpackaged item that you bought from Amazon and your
order on your smartphone and Kohl's will take it back box it and do the whole thing for you a CVS will take that package back but they don't do all of that boxing Logistics portal you have to bring the package,
can a ready to go in a CVS store and I know people always say like Josh kaul
poses in bed with their competitor I actually think this is the smartest partnership I've ever seen a retard do with Amazon because,
this this partnership is not giving Amazon access to Kohl's customers in any way this this partnership is really exclusively giving Kohl's access to Amazon's customers.

Scot:
[44:43] Yeah yeah I guess I'll never announce it let you know there's some percentage shopping in the store which.

Jason:
[44:52] Yeah exactly if you have to walk through that store you're going to serendipitously discover something and closes protected well suited for that because they're a little bit of a
treasure hunt store anyway and that you know they tend to have a thin inventory you know of that turns regularly with lots of deals and so
if you are Kohl's shopper
and that triggers a couple extra visits when you're returning something you know you're very likely to discover something and if you're not a Kohl's Shopper it's even a bigger win for Kohl's if they get you to come in that store for the first time.

Scot:
[45:23] And then I'll give you the privilege and then you every time I go to Kohl's I get in line behind someone that's optimizing their their triangulation between like some kind of cash back thing
Kohl's cash and something else and it's crazy like.

Jason:
[45:41] Yeah we call it doing a leveraged buyout on a t-shirt.

Scot:
[45:45] And then invariably they'll like walk away from a cart full of stuff to run and get like this was
it's not BOGO but you know if I bought this and this I got double Kohl's cash and I can apply them in this and then they want to split the transaction with their significant other and it's like
no they did a line for people that don't like just want to buy stuff and get out of store.

Jason:
[46:08] So for sure that's a common complaint in a number of retailers and Kohl's in particular like the more sophisticated those those reward programs are in the greater percentage of customers that are in those reward programs and take full advantage
the more acute that problem is
in the case of the Amazon returns it doesn't hurt you though because the Amazon returns as a separate counter within Kohl's so you're not waiting in line behind
any of those people to return your Amazon package at Kohl's and a bunch of other retailers like Macy's a big part of their answer for you,
is
if you're not that super high Rewards customer that's doing that really complicated transaction there they're trying to get you to do mobile,
Scan & go and check out without standing in line because they know that check out is a big a big pain point for them.

[47:05] Yeah I'm not sure that the average Kohl's Shopper Macy Shopper has,
then as early in the Doppler that technology as you probably are but like I I do think they're going to continue get more more traction we're seeing more and more stores.
Go that way and that's that such a perfect segue to.
Something we'll talk about in in just a minute but I had one more news topic I wanted to touch on before we get there.

[47:31] So there's this awesome quote I use all the time that I think Andy done originally used maybe four or five years ago e-commerce is awesome.
As long as you don't care about anybody off and
the sort of ominous you know message there is customers are loving it it's a it's a better customer experience in many ways for a lot of use cases boat but when things you shouldn't lose sight of is
the the unit economics of e-commerce are almost always unfavorable versus traditional retail unit economics and,
two big reasons for that are shipping and returns and it's it's just been interesting I've seen some some.
Not optimal news for eCommerce sites on both of those those costs this this month
so you know one thing there's a report every year that comscore does called the state of the online retail industry and they share a bunch of data and Trends the Desi from there you know millions of customers that shop in their panel
and one of the staff they always share every year is what percentage of sales every quarter were sold with free shipping.
And so for holiday this year 85% of all e-commerce orders had free shipping.

[48:56] And like three years ago it was 65% of all Commerce orders had that had free shipping so increasingly this is probably isn't surprising customers expect free shipping and they only by when they get free shipping,
and that that's currently you know ramps up the the profitability challenge for retailers and then you know when you,
you talk about like you know Amazon stepping on the gas and Walmart and Target quickly following them with one day shipping you know when you not have to give away free 1-day shipping,
that's a real challenge to to e-commerce profitability and then.
For many retailers the double whammy is returns tend to be much higher online and I saw a horrific stat this month,
there's a logistics company called optoro that did a study
and I'm not sure if I told you this I haven't been able to look in their methodology but they are claiming that the average rate of returns
for e-commerce orders over the last five years has essentially doubled so the percent the percentage of returns at every e-commerce retailer twice as high today as they were in 2014.

[50:12] And I don't know if that exact number is accurate this came from a Vogue article I'll put a.
Lincoln the show notes but but even if it's just directionally accurate your returns are going up.
That that's a huge stress to profitability in the example I was like to use
when revolve had to disclose their Finance his revolve is a Edition Ada vertical Brandon the apparel space in 2018 they had almost a half billion dollars in online sale they sold 499 million online and
on their books they they wrote down 531 million dollars in costs associated with returns.

Scot:
[50:59] Wow that's not skilled.

Jason:
[51:02] No nosso the unit economics on that suck.

Scot:
[51:06] It's a minus 20% or something.

Jason:
[51:09] Exactly and so obviously there's a ton of people working on,
the problem of returns and there's a lot of you know interesting things that the people are doing above make it less expensive to do returns and diminish people's,
interest in return but like early on an e-commerce industry you know everyone encouraged you to buy multiple sizes and send back what you didn't need I think I've sort of Zappos has.
You'll be one of the first big retailers to really do that and now they're desperately trying to untrain all those customers to stop doing that.
So not so you know that's going to be interesting stuff to watch as more and more of a sales volume shift to e-commerce were going to have to figure out these.

Scot:
[51:53] I'm not sure how you entertain people out of free shipping and returns so sweet.

Jason:
[51:59] Yeah I haven't seen it done in general it's very hard to unring a bell.
So wrapping up as we're coming up on time here I have a couple upcoming trips that I'm excited about and we'll get to talk more about some of them but I'm actually headed to.
Indianapolis and Dallas next week and the one of the reasons I'm excited about dialysis there's a couple stores,
that haven't been to yet in the Dallas Market so one of the sources Neighborhood Market that this is one of the physical Marketplace stores.

[52:34] Like merchandise a bunch of degenerative Brands and others in a physical space in the,
the the store essentially collects rent from all the other brands in the Brand's keep all the the prophet of there or their sales so it's sort of a digital Marketplace.

[52:48] In a physical manifestation they're going to be opening a store New York soon but I'm going to get to visit their original Plano store next week.

[52:55] And then also in Dallas Sam's Club has a store called Sam's Club now which pair are skin and go conversation Sam's Club now,
doesn't have a traditional check out so the only way to get out of the store is to scan and go and ask him super interesting virtual reality feature or augmented reality feature is to
let you get better product information and wayfinding and stuff in the store so it's up a store that's totally designed around using your mobile phone while you're in the store so I'm I am,
excited to see that and then,
a little later in the month on August 20th I'm going to be at Eataly East which is a long-running e-commerce show
in Boston and I know you can't join me but,
I will be sure to take good notes and do a trip report there and we may be able to put down a couple of interesting interviews from some of the
set from some interesting retailers that are attending that show so hopefully more on that and then if any of our our listeners are in Brazil or
are familiar with Brazil I'm going to be doing my first trip to Brazil ever at the end of this month and I'm excited that Mercado Libre has invited me to come speak at their customer conference so,
looking forward to checking out some of the the Brazilian retail and I'm eating a bunch of the sellers on that platform.

Scot:
[54:23] Hope you can screw them on marketplaces.

Jason:
[54:26] I have a feeling they already know a fair amount about marketplaces but I'll certainly try to add my spin but it won't be in Portuguese.

Scot:
[54:34] Yeah talk slow to the translators and keep up the I learned that the hard way.

Jason:
[54:40] Well that's that'll be easier because I'm such a slow talker just naturally oh wait nevermind I'm allowed talker that's what I am.
Yeah so that is all the news we have for this week I apologize probably little longer than we hoped but that's part of the ramification of us not laying down a new chauffeur for a little longer than usual.

Scot:
[55:02] And thanks for joining somebody.

Jason:
[55:05] Yep and as usual of you enjoy the show we sure would appreciate that five star review on iTunes if you do have any questions or comments about any of the news from the show feel free to hit us up on our Facebook page or on Twitter and until next time,
happy commercing.

Jul 29, 2019

EP181 -'Think Like Amazon' Author John Rossman 

John Rossman is a former Amazon executive who helped launched and scale the Amazon Marketplace, and he’s the author of “Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader“.

In this wide ranging interview we cover some of the 50 ideas from the book about how Amazon operates, as well as how the ideas can apply to other businesses, and what businesses that are competing with Amazon should know.

You can read more from John on his blog “The Amazon Blog“.

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

Episode 181 of the Jason & Scot show was recorded on Thursday, July 25th, 2019.

Automated Transcription of the show

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 181 being recorded on Thursday July 25th 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners Jason I am super excited I’m tingly all over tonight we have on the show
author of think like Amazon John Rossman that was published this year,
and as you and the other listeners know I have started my first consumer-oriented company,
and I’ve made it a court in and of what we’re doing to try to follow as many Amazon principles as as possible stuff like day one customer first there’s a million of them,
to beat the teams Etc and what I have found is this information is exceedingly hard to come at you have to kind of meet all these X Amazon Indians and pick it out of them and I’ve actually
unable to on the DL get a copy of some of the management principle guidelines I can’t say where I got them from,
so this book is really a welcome addition to my library I’ve actually made everyone in our management team read it and it’s actually the Bible her operations at 9
so we’re real excited.

John:
[1:46] Hey thanks for having me.

Scot:
[1:48] Yesterday I feel like we could probably go I know I could go like 3 hours on this so we’re going to try to stuff it all in one hour so I’ll turn it over to Jason and he’ll kick us off.

Jason:
[1:58] Scot and that’s a quick you know warning for listeners that if if you’re exercising while listening to show you probably want to turn down the intensity just like this could be a long one.
John first of all that’s a lot of pressure is spiffy fails it sounds like it’s going to be your fault.

John:
[2:15] It’s all in the implementation so it’s okay.

Jason:
[2:18] Smart well said so regular listeners that the show will know we always like to start by getting a little bit of background about our guest and sort of how you you came to your your current current role can you talk to us a little bit about your background.

John:
[2:33] Yeah so I was fortunate enough to play a senior role at Amazon I got to launch the marketplace business in 2002 and then I ran the D Enterprise Services business,
and when I left Amazon late 2005 started working with my clients on digital strategy and Leadership and culture,
I started to see the impact of all the principles and mechanisms and things we did Amazon get results and it was actually.

[3:04] Several years after that that I had a client of mine at the gates foundation’s at John you really out of caption this up and write a book and.
I did that and this book think like Amazon 50 and a half ideas to become a Gentle Leader you know one of the things I I like to point out the people as it really isn’t about Amazon
it’s about you and what you can take from a company like Amazon and put into your
approaches your habits your culture and I love hearing Scott talk about that you know you’re using it as an executive team and.
Worst-case even if you don’t take the ideas just talking about them as a team will help you be more thoughtful and deliberate about your what you do believe in and so these are,
authentic Amazon moves and strategies of use them with my clients since I’ve left Amazon Alexa 2005 and they really do you know you got to use the right ones at the right time but they were they really can help making it.

Jason:
[4:04] Nice and you really had to pay your dues because I’m imagining that when you left in 2005 you told people that you were doing something based on that’s how you did it at Amazon that wasn’t necessarily the instant credibility that it probably is today.

John:
[4:18] You’re absolutely right like that credibility to some degree came a number of years later but I think you know from me the craft is always been.
Really understanding the situation what the challenges and then prescribing little things to do and if you can lead people to it or says
heading him over the head you’re always more successful as an adviser and so it’s really been like
making them into little chunks and sliding them in and leading people there with good questions like that’s that’s kind of the art of being a good.

Jason:
[4:55] Interesting and one of the questions I have for you so so you left in 2005 the book If I have this right just got published this year right 20.

John:
[5:04] Maybe that’s right.

Jason:
[5:06] But reading through the book there’s a bunch of principles in it that my senses are,
relatively current at Amazon and so that I’m curious is that because,
these principles of an evergreen Inn and Jeff and Tina implemented them in the very beginning and they still carry through today or have you done some work to sort of State current on that on the Amazon Prime.

John:
[5:28] Some of both so
I was at Amazon from early 2000 to the late 2005 is a really interesting from Amazon because we were getting clear that we were really two types of companies we’re both platform company that built tools others with used and,
we were a retailer and we’re building Marketplace business but I am always testing my understanding kind of current,
techniques and approaches with my friends and in former colleagues at our am at Amazon or just left.
And although the company has changed a thousand times since I was there
how they approach their work is unbelievably consistent since I was there and I think that’s really one of the secrets of how Amazon has scaled is
is how they approach their work how they work together how they hold people accountable what they believe in what they prioritize how they make decisions how they use metrics,
that is consistent across the entire organization and that lets them scale scale as they are.

Scot:
[6:37] Brickell to their limited time we can’t go all over all 15 1/2 principles so we thought we would pick a couple out that we’re are quick oats favorites and then
so that this can be kind of one segment that we go through, and then
there’s there’s a bunch of questions that we get a lot as we talked to various retailers and other folks that are kind of trying to live this Amazon lifestyle,
it’ll come up and then talk about the implications for the industry and then finally you know how do people take the knowledge that you’ve captured Sawan the book and apply it to their business and I know it can be hard to fit all those and try to cut it into,
into some some chunks there,
one of my favorite ones is kind of spend a lot of time working with Amazon eBay Google Etc and I’ll pick on eBay a little bit and then have a,
interacted with him in five years this way but back in the day in the John Donahoe Meg
what world you good eBay and everyone was working on Powerpoints and like all day and do it simply you know the lowest level people would work on a PowerPoint no passing their boss they would pass it up,
1 appleside what in the
the Meg Whitman presentation and they just seem to be spending all their time on PowerPoint and then I learned very quickly that Amazon is actually outline outline PowerPoint in the way they run meetings is very unique give us a rundown of that,
what was your reaction when your first confronted with it.

John:
[8:02] Yeah so you know the general principle or approach is that you know all important ideas all root cause analysis all
big projects and proposals are written out there’s there’s a kind of six-page version of a 6-page narrative and there’s a couple of other tools to go along with it.
Writing out ideas in in full paragraphs full sentences for specific audience to,
for specific objective has a few different benefits first of all it forces the the author or the people that are offering the document,
to get to Clarity and clarity as relief both Simplicity as well as completeness of thought in.
Get there with PowerPoint that writing things out horses that team to make sure that they are actually,
not talking past each other and we ran our green on whatever the important aspects are that you need to convey to your audience management meetings instead of.
Having somebody presented actually start with 15 to 20 minutes of silence or leaders are half.
Put the phone away but the computer way and actually read and digest we use the word grok a lot of the Amazon which music deeply in.

[9:19] Then conversation ensues from there in it and it forces everybody to 2.
Have a better deeper understanding of what’s being discussed in the in the implications of it,
and then the last benefit is it’s much easier to forward onto others that need to,
be connected with a conversation but weren’t part of the meeting right and one of the great limitations of power point is that most of the time you still need to have somebody,
along it to actually explain it and where is a narrative should be a standalone documents so it is what I consider a championship discipline even if you’re only writing things out for yourself,
forcing bully written ideas.
Through all of the non-obvious situations issues risks things that can go wrong how to explain it better to still think that through so much better and as a team.
I really consider it one of the go slow to go fast moves which is if you spend more time up front.
Defining what the mission of the project of the program is you’ll be able to make it smaller because you can have better,
refinement of what your hypotheses are what you want to test and get down to just the bare metal Essentials of what the project is and you know that’s the whole minimally viable product in agile mindset.
And then you can proceed with it on scale because everybody better understand what it is that were proposing.

Scot:
[10:49] Call Sue a couple of kind of
questions I get when I talk about this with other folks and I’ve never been in one exams on meeting so I don’t know the answer so I’m excited to hear your answer is it awkward sitting in the meeting reading and in the first shift.

John:
[11:05] What would certainly different right and so it’s not that the norm of what you expect.
You know when everybody understands like you know this is what we’re doing then then and you practice that you need to practice it both as individuals and as a team.
You’ll start to see the impact that it has so yeah it does seem awkward because it is not,
warm but it’s it’s a powerful approaching,
I work with clients on this like I don’t I don’t go for a we have to adopt this across the board but for important programs important changes important strategies.
Completely changes the level of comprehension and thoughtful discussion.

Scot:
[11:52] Closer than I’ve also heard from a lot of my my Amazon and friends that Jeff Jeff Hostess regular quarterly business reviews and they’re in their help in this format and then every noise has a just already have a good story from blazing.

John:
[12:07] Oh sure you know in the qbrs tend to be more about you know the business results so they tend to be more metrics-driven
the narratives are more about it young What’s called the op-1 process the operating plan one process where you’re talking about like what we might do in the future and rationalizing your plan in your resources.
Yeah one of the the great stories I have is memories I have is that in,
early 2003 we had launched the apparel category on the marketplace platform for Holiday 2002.
And we were just working on getting Sporting Goods out out but we were having an s team meeting just ask Migos John.
How many Merchants have relaunched sense the holiday and I started to explain that we essentially had none that we could launch any any any stopping goes the answer to that question and so I say six,
but and then he just he just stands up and he just talks about that that’s the most pathetic answer ever and that I had allowed,
kind of a hard that you see things in the business account hard things in the business and got it. But it really was just a message to me and everyone.
Although my job was director of merchant integration she wanted me to.

[13:35] Like I ran the entire Marketplace this is so if there were bottlenecks or slow down or or other functions in Amazon routes out of Amazon,
we’re slowing us down in launching.
Don’t pay attention to my job title like work the entire system take accountability for the entire end and process from.

Jason:
[14:05] I’m not sure great moment is exactly how I check her I walk.

John:
[14:09] Do you know those are those are Priceless so right and you’re one of the things I took away from that is like.
Answering direct questions directly is a really.
Subtle but important skill in working with senior people and ever since then you know and I thought I was a partner in a big consulting firm and work with life consultants in Psych the,
answering a question directly and then if somebody wants more explanation they will ask you to double click into it and everything right with.

Jason:
[14:46] Yep when when Jeff does single you out do co-workers tend to have some empathy.

John:
[14:53] I think everybody just understands the the kind of game and that it’s technically not about you it’s about just,
making sure that the entire organization isn’t becoming complacent or paying attention detailers young really living up to the values of the Enterprise and stuff so I don’t,
I never took it you know to personally and I I don’t.

Jason:
[15:18] So
side note you know I work for a big big agency so anyway we’ll use a half a lot of and these days our clients want Amazon expertise so I have a lot of X amazonians on my team and.
Inferno you’re with this principle I was super excited that I’d hire all these excellent amazonians and that be really thoughtful Drake,
writers of narratives and it hasn’t really work out that way what I mostly get are people that do really bad PowerPoint because they’ve had this repressed desire to make slot.

John:
[15:53] In in and so is as you say that and think about that what are you what are you going to take from that is it is it because it it doesn’t work or you know what I think.
Does take an immense amount of effort and I think people can wear out on it.
You’re in the right place for the right and I have found a powerful but yeah I’d be interested in what like what you what do you think away from that fact they stop servation.

Jason:
[16:25] Yeah it was mostly joking but I do I mean in seriousness I I do think the answer is somewhere in-between I utterly convinced that The Narrative Approach and along with that the press release which is kind of the,
imagine.
Visualize that outcome is beginning the process I feel like that is a an excellent thoughtful way to approach particular types of meetings like that that op1,
meeting that you’re describing.

John:
[16:55] And you know what I did sometimes do with our clients is.
Team will write the narrative but then we end up turning it into PowerPoint cuz that’s just what management is used to and everything.
Our ability to succinctly communicate is so much better because we’ve hashed through writing out the narrative so I’ve done all sorts of had a hybrid versions of this.

Jason:
[17:20] For sure and I guess I would say like I think it actually is a value in a very well-crafted well delivered,
presentation it’s it’s to solve an entirely different problem like it’s not that facilitate a meeting.

John:
[17:38] Orchard Orchard deeply explain sometimes you know what can be a fairly complex idea in a consistent scale of a way right.

Jason:
[17:47] Yep and that’s so yeah so it sometimes to evangelize something like after those decisions have been made or to communicate to a very broad audience or things like that you know Visual Communications.
Can can be quite affected by feel like they’re both good,
good tools for the right problems and I think there’s an awful lot of misuse of both of those tools and when their misuse their does that.

John:
[18:13] Switch to some degree I would caveat all of these ideas which is the need to be used with wisdom right to the right the right idea the right approach for the right circumstance,
it is contextualizing to what’s going to work in your organization and so they can’t use LINE leaks,
and so I would I would kind of take this discussion about narratives and how to use them appropriately in caveat all of these.

Jason:
[18:42] Yeah so I’m moving on to the next idea we wanted to talk about this is one that that comes up a lot is the two Pizza team approach so I can actually what you described it and and a little about.

John:
[18:57] So so a two Pizza team is a specific type of team at Amazon that owns a service or core capability right so this could be.
The type of service that that you see on the website to be like the promotion service or the image service but it can also be a core,
back-office function like the inventory received process or the item forecasting process right,
it is a capability that you truly need to be great.
Two Pizza team is a small team ideally a team no larger than 10 the ideal to actually team of 1.
Owns the service in entirety and and that team owns the the.
Product definition product management engineering operations of that service in their goal is to drive adoption of that capability book inside of Amazon and,
xtro Amazon Amazon.
Lego blocks the service oriented organization concept,
and it’s a two Pizza team that owns a core capability and is expected to operate it at a world-class level.
When we forward over long.

Jason:
[20:23] Got to end that metaphor is no more people than could be fed by two pizzas.

John:
[20:27] That’s it yet so it’s a team no bigger than 10 which is.
Ashley went to pieces can see it is a cross-functional team often times it’s got a heavy kind of software engineering bent butt.
Sometimes a lot of you know business participation could have legal participation in it but it but it says it is a 8.
Ideally a fairly independent operating.

Jason:
[20:53] And I am that is a key component of it right is that it’s they’ve relatively constrained their dependencies outside of that team so that I almost make it a sin to sort of like object-oriented programming where.

John:
[21:07] That’s right into its instead of a service-oriented architecture you have a service-oriented organization to compliment a Target this is all about.

Jason:
[21:21] Lacon Scott Scott and I actually tried to implement to Pizza teams for the podcast and we found that the pizzas would only feeds Scott and I so we had to stick with it to me.

John:
[21:29] Well that’s the ideal two Pizza team small small independent team.

Scot:
[21:32] Let’s call the Dream Team one question I have on that is this team of 10 people there cross-functional
do you use kind of like the old school language of a matrix organization so is is the I’ll pick on the.
Made it seem as like a lawyer or a finance person,
is that person like reporting to the team lead there or are they essentially over in the corporate legal admin structure and they’re just kind of like sitting on the team and then how do they.
The problem with the Matrix organization is you have two bosses and very quickly get your trays to get misaligned on this how how does how does the two Pizza thing working in those situations.

John:
[22:16] Yes so you can have a mix of both so the pure two Pizza team is only dedicated to that service in that mission in in that capability sometimes,
that could have a fully dedicated illegal or maybe business development person.
Finance is always Matrix in because the the goal of mine answered Amazon is actually very strategic it really is meant to be an independent party both supporting and validating,
the opinions and decisions and financial analysis that goes long until you so you want to have a degree of Independence there.
I think when is the the ideas that goes along with,
the support teams is support teams and it actually idea number 12 in the book which is called gets yes Finance Tax legal in HR teams that matter and you know so many expert at most organizations,
what’s a really good at is pointing out all the reasons why you can’t.

[23:28] Finance teams at Amazon are more oriented and their mandate is really help you get to yes.
And in that might sound like a subtle.
I might should move but it makes all the difference when when they feel and act like an owner in an owner to helping this New Concept.
Business partner gets yes so most of the time.
Key functions like tax legal Finance are Matrix in the organization but the mindset is they they are a business partner.

Scot:
[24:07] So then you know when you when you have all these things like the finance teams helping me get to yes disagree and commit and all that when do you ever say no to something and then Sue says.

John:
[24:20] Will when when when the when the data and when the customer experience you know what kind of justifies saying to Noah,
apart strategy it’s is saying no and I think Amazon is a very disciplined job,
thoroughly thinking through something but then say no right sometimes that simply constraint that’s right we only have the resources the capability to do,
these two things we have five things in front of us we have to rationalize which ones we do or what order.

[24:54] Compromises saying No in fact I think in some ways it helps you.
Be much more deliberate about what you’re saying no to and what you’re saying yes to and then when you say yes to something.
Everybody’s on board with that and we aren’t having a bunch of leakage or kind of Shadow projects going on where you know we didn’t really say no to it so kind of try to sneak it in like that is not in general that the Approach at Amazon like,
very clear that’s a big part of you know that I reference it that the op-1 process is bringing forward all these near as all these ideas all the things we could do.
Then ruthlessly selecting the select you that we can afford to do,
Amazon.
Extremely well both in their operation but in releasing new capabilities they do it much faster much better than most large organizations.

Jason:
[25:57] Yeah yeah one of the ways I’ve heard Jeff describe it that that I thought was pretty interesting was any talk about traditional Enterprises and like any one single senior stakeholder can kill an idea and.
Idea just you know dies on the vine right there and he talked about wanting Amazon. Almost be more like.
The Venture Capital Community where you know you can pitch the idea to a lot of senior stakeholders and you just need to get one sponsor to say yes.
Now that allows you to try to get that initial funding and and be able to take a project far enough to know to learn whether it’s going to work or not.

John:
[26:33] And I think one of the powers of this approach is the ability to think big but you got a bet small right until how to how then with a big big concept like yep we don’t fully understand we don’t know if it’s going to work we call that thing of that.
Maybe not everybody is bought into it but together we go hey whoever the decision-maker is they’re saying yes we wholeheartedly by Intuit,
but then how do we proceed on it with as little.
Risk and as much learning as possible Right End and we’ll talk about this unit have a sale fast mentality in really what we mean by that type of failure is the scientific.
Disciplined testing process right that’s the type of failure were talking about his learning not true failure like failure of execution,
and so having that disappoint us having a big Vision but then making the project a small as possible test learn to adjust,
do we proceed we not proceed how do we just next step we do that like that is the complete agile Manifesto.

Scot:
[27:36] Cool suits moving on idea for and in this kind of permeate solid Amazon and it’s in in multiple ideas but kind of customer Obsession starting with a customer working backwards do your time frame there,
what’s an example you saw that it really kind of a Illustrated.

John:
[27:57] Yeah so I mean in Scott this is a business you probably know if a lot better than I do actually at this point which is the marketplace so when we were launching the marketplace business.
We’re launching it in the fall of 2002 we’re launching in the apparel category,
we we were you know we were nobody in this category right and so we were pursuing several big meaningful Brands and what most brands wanted was for us to pass the customer.
Cards to them and they would process the credit card instead of Amazon processing the order of the charges in this just passing forward the the order confirmation commitments on to the client.
And we felt like it was essential to the customer.
Experience with customer trust that Amazon be the only party that actually had,
the confidential in a payment information that we didn’t pass up forward we had to make some really tough decisions we passed on several really important brands in our in our parallon.

[29:10] Me like when you’re willing to walk away from from dollars in order to stick your.
Your example to me where where our understanding of our brand and customer Trust,
really letters into what I think was a really pivotal moment and I think I think over a long. Of time one of the essential strategies for why the marketplaces were.

Scot:
[29:37] Yeah one of the other nursing case study is Amazon had not if they had to acquire them but they acquired Zappos because Zappos was even more obsessed around the customer than Amazon with the ugliest shoes the the
unlimited returns 365 than all that but is there a point where you can take it too far since this is one thing the.

John:
[29:58] Sure absolutely,
it’s the first of 14 leadership principles is just one of 14 right and so again it comes back to the scene of these concepts with wisdom.
You can over index on any one of them at any point it’s it’s kind of like metrics right you always have to have a balanced scorecard with the same thing with how we approach things and so.
Customer obsession is really what good is.
Amazon and gives others the permission to do really weird things and to understand by customer extremely well that doesn’t mean.
You don’t have to be extremely mindful of the financial implications or the operating consideration or other aspect approaches are,
when you’re using them a couple of them.
One time and where they’re pulling on each other and that Force forces you into a completely new inside her observation not over-indexing on anyone.
I need you to bad places if that’s the only tool you use.

Scot:
[31:17] Is Amazon giving any guidelines for bounce in the principles.

John:
[31:21] You know that’s a great question I haven’t seen any,
I think actually one of the principles kind of lens itself to this macro perspective which is principle number for which is leaders are right a lot right in that that kind of says like basically you have to have extremely good
judgement which of these things use of right time in the right notes.

Scot:
[31:47] Cool it another question I have this is one that’s been frustrating to get information on is I’ve heard several people say that every cuss word Amazon has this this kind of metric I’ve heard it called sugar and
you know there’s when the customer service rep on the other line is talking to Jason he has like sugar level 2 million cuz he gets like 10 packages a day so so they that gives them a fair amount of flexibility in,
replacing a device or something like that but you know there is a customer that can have a very low or even like a negative sugar rating and then the customers this customer service reps know to kind of
this is kind of a perennial return abuser or you know someone or whatever the algorithm is is looking at is is not a not a
premium customer and then the customer service rep has a different set of of kind of the cat box at customer in more tightly.

John:
[32:42] I haven’t heard of the of it being called the the sugar metric or the sugar index that’s a great concept. I’m going to check in with some Amazon people but no doubt Amazon has.
Customer segmentation and they do different things for different customer segments I think I’m.
You know what I talked to your Prime customer you know and everything right Amazon when I go to return a package,
you know the commitment they make is when it’s received at the Fulfillment center are they expected the issue the credit in my packages at UPS the credit is restored to me right and so they obviously like you know this actually helps,
promotes John,
pinemoor instead of my lesson so we are going to accelerate the returns processing in and refunding his funds to him and everything right.

Jason:
[33:43] Yeah that makes sense I want a pivot just lately there’s.
Often when we talk about these these principles with with folks date they have some Percy reason why that principal won’t work outside of Amazon or in their particular case.
Common objections over and over again so it’s one of the principles you have in the book I think it’s been swell 43 is the,
the bar raiser program and we’ve been lucky enough to have a couple buy razors on the show.
When we talk about you know that your net net Amazon has a super rigorous hiring.
Other clients are other readers are are fearful that having that rigorous of a program like don’t you eventually like make it impossible for,
are you to be able to recruit and be able to hire new people and don’t you with this dichotomy where you have people with tenure and seniority,
yeah and then you have like the most rigorous we hired down at people came later.

John:
[34:45] Yeah you intend you know that kind of consideration is is is very real and.
This mystery I tell in that particular idea is really if I reflect back on my career.
The biggest mistakes I’ve made have been when I’m hiring in a hurry right I’ve got a job at project,
I’ve got a candidate that fits the bill but maybe,
that person like they they don’t have either the right you know kind of organizational alignment maybe there’s a limitations like I think they could do this type of project,
rest with your organization but still you move on it because you’re hiring in a hurry and so the bar raiser program one of the benefits of our radio program
party from Over the hiring team in the hiring manager is they don’t have that sense of urgency that often times the hiring.
They don’t become as compromisers.

[35:51] Typically as the hiring team does it say whether you and then in this is kind of how I wrap up the idea you know however you go about it Amazon however you do it,
think about how do you avoid,
hiring in a hurry and end your worst types of iron to stage with her hiring for short-term results versus a long-term career
because those are often times The Hardest Mistakes the most expensive mistakes that you live with in the business for a long. Time and that’s really the spirit
of the bar raiser program at Amazon which is which is hiring not just for the job of today but for the jobs of tomorrow and T.

Jason:
[36:37] Yeah yeah there’s a professor at Warden that Adam grant that does a lot of research and inserted organizational management and he has a thing,
as important as it is to have the right team members on your bus it’s even more important to avoid getting the wrong team members on your bus.

John:
[36:55] Yeah I agree you know one of the things you know that I always think about culture and everything is everybody thinks that culture is.
Is this attribute or this Essence that attracts and keeps.
T-Pain keeps Talent one of the aspects of culture is should also repel the wrong type of talent right and we don’t think about that.
It’s fine if.
The person is qualified that isn’t the right environment for it’s not our job to make a place the right situation for everybody right and I think that that’s something that Amazon is is is very.
I would take him out of his is like it’s not for everybody Amazon is not the right place for for every great capable person it’s that it’s a type of environment for people who align with how they see the world and how they see leadership.
And and that’s I think Jean for teams as they sometimes get mistaken then you know we should be a great place for anybody and that’s not true.

Jason:
[37:59] Yeah no for sure that’s a difficult self-realization to make sometimes though I wanted to talk about another one I hear a lot of the rule 18,
in your book is about the advantages of a platform and like you know there’s there’s a lot of,
reasons that the department can be a huge Advantage but when you talk about that with a lot of other retailers like the the challenges they they lack vision and Imagination around.
What their permission to be a platform it’s because it’s probably not prime for example or am I not be a Marketplace so like you know. Do you believe that every retail entity has a an opportunity in a.

John:
[38:46] I don’t and so you know what I outlined in the chapter and in this is the type of topic I’ve I’ve worked with lots of teams on is,
it’s not everybody strategy to be a platform company but.
The exercise every team can do and help make themselves better is ask yourself.
What are my core capabilities how would I make those independent self-service feature-rich cost competitive highly available capabilities that people outside my organization could use,
what would it take to do that,
and whether it’s the right strategy to proceed on them or not you will still come up with great ideas to improve and operate an architect better today even if not.
Platform companies in right thing so in no way I’ll go back again like it no way am I prescribed.
Any or all of these ideas are the right things it for anybody but but you do have to ask yourself.
You know if I’m not a platform what am I and how would I make myself good enough.
And that’s actually the lesson that I’m trying to give in.

Scot:
[40:05] Awesome so hopefully that gives listeners a flavor of the ideas and I think we hit on may be 5 to 10 in there so so really less than 10% of the ground cover and soap hope that it was straight valuable,
the concepts are in the book we want to move over to the what does it mean kind of area so so I’ve actually I do kind of an Amazon stump speech and then
one of the first questions always get is
what’s Hebrew realize that you should count gmv in the marketplace and not revenue and therefore Amazon’s twice as big as people think that it is all that good stuff,
use it when the first questions I get is,
oh crap I see all roadkill is Amazon essentially Unstoppable what’s your answer that there must be a big part of your Consulting.

John:
[40:54] It’s a it’s a big question I think especially with in retail I think that that that it is chunky question but the answer is is what a lack of imagination if that’s the,
if that’s the the the conclusion anybody comes from I think the,
anytime you you are passionate about your customer and you’re thinking about how you can serve some unique knees there’s there’s opportunities to the innovate and I don’t think Amazon has the lock on any of that.
You know Amazon is now the kind of the from a retail standpoint it’s just the Ubiquiti.
A provider.
With so many people want if they want uniqueness and they want service and I want experience and they want personalization all of those things don’t necessarily align with who Amazon is as as a
as a retailer in so I think that there’s a kind of examples of brands that are winning out there sometimes on the Amazon,
off the Amazon artworks that I mean.
How to compete with Amazon Alexa.

Jason:
[42:07] Yes and I I mean I think there was a irrita when everyone was asking themselves if Woolworths was Unstoppable or Sears was Unstoppable at Walmart was on.

John:
[42:16] Exactly yeah.

Jason:
[42:19] I just had a pretty funny quote once like no no Empire successfully predicts its own demise.
But I sure would like my Empire to out with me.
What is a good girl you know when I’m curious about and I know this happened sort of after your 10 year there but you’ve obviously been fine and pussy.
Whole Foods acquisition and I spent a lot of time in the the grocery space and obviously that.
That that acquisition really caused a lot of people that sort of you know rethink their digital strategies and sit up and take notice but you know now that it’s it’s several years past their you know there’s a lot of.
Diverging opinions about how Amazon’s doing in grocery and and or what the future holds what do you have a POV on Amazon and grocery.

John:
[43:14] Will a I think I have some opinions both on on Amazon and Retail Store presents as well as like what.
Any leader from any industry kind of takes on that so you know that’s the first thing I’d say is I think Whole Foods just an experiment for Amazon refriend.
Just by itself but then you start thinking about you know the roughly what is it 480 Whole Food stores that there are in the u.s.
What that point of presence starts meaning for Amazon and its customers in being to either you know shop pick up in store,
drop off,
other types of of categories that can leverage that physical sort presents like Pharmacy or something like that and so I think it it just needs into the flywheel and gives Amazon,
nice,
starting base for experimentation in in truly how to better serve their customer not just in grocery but in other capabilities also kind of the capabilities of presence of Whole Foods
with an active acquisition like tilt and you can start kind of connecting the dots forward. Underwear Amazon to go but the underlying.

[44:39] Any reader any industry can take from this is,
often times the strategies that have been successful for the past of the strategies that limit us going forward when I was it in fun we were so proud and committed that we were just,
Ecommerce retailer that that was such an inherent and natural Advantage business model we could never SeaWorld,
want physical store presents Amazon was obviously willing even well before the Whole Foods acquisition,
rethinking challenge their own strategy the one of the the ideas in the book is I get 21 which is called Never Say Never,
don’t let past positions create a trapped in the end of the lesson learned that is be very careful
about letting your past strategies especially those that made you successful.

Scot:
[45:32] What do you think of I’ll ask you to pontificate obit either you mentioned pillpack that’s kind of a little little signal that Amazon’s interested in the pharmacy to get their health care partnership.
Honestly kind of poking around travel Services fintech some people even think they’re going to go after the Facebook
crypto kind of things do you do you have a prediction on Castle the next big verticals Amazon speed going to.

John:
[46:01] Will a n i don’t think any of this is going to be a groundbreaking news but I think.
The area of logistics continues to me and will always be a big.
Category of innovation and scale for Amazon it’s a whether it’s back all Logistics last-mile Logistics.
All sorts of different nations in the past month the things I’ve heard that are interesting relative to,
essentially last-mile Logistics capability so I’ve heard a lot about delivery to garage I’ve heard a lot about delivery to trunk,
Kohl’s in Amazon announced a partnership that allow a customer return any Amazon order without packaging to a Kohl’s store to have it returned they continue to do.
My chain and Logistics in those are often times services that other people can leverage I think that would just 6 is going to continue to be at that has been for the past 25 years.
That for Amazon Healthcare is going to be there.

[47:15] Lots of different strategies right come from you know that you talked about the partnership with JP Morgan Chase Berkshire Hathaway it’s called haven.
That’s going to serve that I think it’s about 1.3 million employees at those three companies.
No employer no no patient no doctor is happy with the status quo and I think it really is going to take some external heavyweights like.

[47:44] Chat Tech create examples of how change can happen in Amazon’s going to,
employ their they’re pretty predictable play book of,
free better transparency give customers more Choice make it more real time and and and truly serve the inherent needs of the customer so maybe just a little bit more on preventive,
I’m a Specs than just reactive of.
What a great Playbook to apply in the healthcare so I think that’s going to be a big a big one end and when I’m really interested in and again no big great shock is just internationally how will the Amazon.
Retail visits descale while given all the success that Amazon has had in North America.
Figuring things out on on an international basis and I think that there’s so much more growth
and and healthy competition in all the international markets I think it’s going to be really interesting to see how Amazon creates.
Market specific.
Appropriate you know experiences and businesses that really fit markets in and start to mirror the type of success the Amazon.

[49:08] That doesn’t even touch you know what AWS will do and what the devices businesses will do and what the content businesses will do in call crazy in.

Jason:
[49:24] Yeah I know it’s it’s good it’s going to be super interesting to watch I feel like one of the the challenges they have a new categories is as they get so much bigger.
Like they they really only can make bets that are going to have a meaningful payoff until like in some ways that feels like the biggest constraint on and what vehicles they go after his they’re just they’re just some particles that are just eventually intrinsically.
Too small to be a new bed for Amazon.

John:
[49:50] Yeah I agree with you but I can point out things like you know just was always interested in having the world.
Biggest catalog items whether they were really selling or not so I don’t know if you remember but you know Amazon has this category called small scientific.
And instruments are you at we call this quits when I was at Amazon and it was like about beakers and we’ll scientific tools and and things like that,
like she just always side as a competitive asset remote to have an authoritative catalog on is he could every item in the world and so I don’t think.
I think they they need they need both things that are big and can move.
Place really long really small bats and see how those things are those things materialize overtime.

Jason:
[50:50] Yeah I know know for sure that it is funny I get a little bit of a sense that.
Yeah they’re all these principles in Amazon that are practice all the time but like the one third of wrinkled and some of these principles are like if Jeff has conviction about something.
Like you know he only push it through regardless of the the normal Amazon process is that.

John:
[51:14] Which which is really the prerogative of of management and the types of insights that you wish you saw from Senior Management in other companies which is instead of,
Venus consensus-driven leader and filtering what everybody’s saying like well I guess where we all think this is a good idea so let’s do it,
instead of your own point of view and have an insight about where the market is going where your customers are going and whether anybody agrees with you or not,
going for it and I’ve got to work with with a leaders who have that type of internal conviction in sight and they’re always willing.
To the challenge have encouraged ultimate points of view they don’t want they want to try to avoid confirmation bias.

[52:01] The end of the day when they believe in something they believe in something and and and they are going to commit the organization for doing something about it.
Typically not always typically at Amazon those things tend to be in a fairly bite-size in terms of.
Commitment levels and so they can really allow it to.
Time-in to figure it out like I think the Amazon go store is a good example of that where you know my guess is nobody on the finance team was saying this was a good idea but,
Justin some other leaders probably like you know this is a really interesting customer experience let’s do it and they kept it pretty small sense and they are obviously still figuring some things out about that business but you know they’re going to stick with it you’re not going to see them,
shut that down I don’t think any time quickly you mean.

Jason:
[52:53] That not in fact I think there’s some rumors that we might see a new permeation permutation in the near future.

John:
[52:59] What’s what’s the rumor.

Jason:
[53:01] Well so there’s a wind the go team was first launched they actually took a 10,000 square-foot lease in Seattle in the neighborhood,
and and what we’ve now have heard is that the original go concept was intended to be old grocery store with a butcher.

John:
[53:18] Has been there’s been some reporting that Amazon’s going to watch it a new grocery brand and I and I also believe that.
They’re going to take.
Right aspects of the Amazon go and adopt it overtime into Whole Foods right and so yeah I do think they are going to be experimenting with some different.
Store formats and some different categories in grocery is a really important category for them over over the long. Of time so they are.

Jason:
[53:50] Grocery is one of those ones that that has scale and it has so much wallet share that have your you know you really trying to be customer Centric and you’re not.

John:
[53:59] Amazon gloves everyday transactions right and so they they they they and they are willing,
Lou’s on that type of category business because they understand the customer lifetime value of a customer right and I think that’s
back till like one of the things we can take from the Amazon and it’s really about customer lifetime value versus versus trying to optimize on it on an item or order economics,
Amazon is the most item in order economic aware organization I’ve ever been around but they are clear that they are trying to,
demise for the customer lifetime value in so that lets them invest,
on one item I’m category on one order because they’re trying to win the customer.

Jason:
[54:48] For sure a fun antidote on that that store I guess they took a lease eight years ago when they thought they were going to open a grocery store
and at some point during the go development they pivoted to the convenience store model which are much smaller so that store that that that real estate has sat empty and apparently of the Neighbors in that neighborhood her
I’ve been somewhat peeved because that was,
I’ll be there in a grocery store in Southern and excited that it appears to be an active construction site again and so that you know that’s what everyone’s waiting there,
see them peel the paper off as Windows and see what’s behind that store yeah.
But yeah I do start a video on on some of the other categories longtime westerns the show will know Scott you know has been beating the drum for a long time then,
that would just accept something that Amazon probably product sizes and weaponizes and I would just know in that regard that this week,
or maybe last week FedEx.
In their in their attempt a date they wisted Amazon as a competitor for the first time which is,
and a funny because every every year prior to this day been denying an Amazon compete with them in any way.

John:
[55:58] And I think I think of you the other thing to be you know mine’s love in this isn’t over a short. Of time that I think.
Personalization on-demand manufacturing 3D printing.
All of those capabilities across retail categories is something the Amazons very interested in it so if you read some of their patents you can see some of the the areas of Interest they have in on.

Jason:
[56:26] So that’s a perfect Segway for people that have listened to the whole whole show will get to the the big money question now so,
Amazon issues a press release tomorrow in announces that they’re coming into your space so maybe you are retailer in Australia and you know what Amazon expanded there or maybe maybe your FedEx or maybe you’re a chain of pharmacies or something
like what what is your advice John to someone that let you know it’s suddenly being confronted by the juggernaut.

John:
[56:55] Well if you’re if you’re waiting until that moment then.
You’ve limited your options right and so the best advice is as if right act as if that is actually happened what would you do if Amazon.
I didn’t have that announcement or or the threat came those things before they actually happen to act as if,
you really limited you’ve really limited your options but yes that is the case and you know it.
Like you know double down on who’s your customer.
Obsessing about their experience how to you know Drive Out Cycles on and Brew cost lower quality and then,
how do you serve your password to existing customers in broader and deeper moments right like you know the best the best defense is a good offense he got to go on the offense in this moment.

Scot:
[57:53] Cool one of the attorneys we talked a lot about on the show is the retail contradiction retail is is really struggling brands are going to Rex either either kind of,
larger brands have been around for a while or there’s this new kind of brand that’s being born this the digital native vertical brand
there’s bonobos war of your kind of examples and now I have a slight I show that there’s like eight thousand of these in every category would you think that,
that strategy puts risk to Amazon that you have all these brands are going direct to Consumer the do you need an aggregator like Amazon.

John:
[58:29] I think like most things at it’s it’s some of all of that I think that it’s an opportunity for Amazon because Amazon is the.
Great aggregator of,
customers customer trust not everybody wants everybody wants a hundred Brands but you don’t want your credit card at a hundred different places and everything is I think your presence.
Opportunity for Amazon it also is a beacon for Amazon his you know what sort of new capabilities are customers hungry for it so they can predict that I also think it,
it is you know back to the lake what a great opportunity what a great time this is because you can’t innovate you can
you know do all these things and you can trial and you can scale so much as a cheaper than you used to be able to do and so I think it it you know a traditional retail is struggling,
retail I think is going through an amazing,
I’m first but anytime like young us with destructions about right there’s there’s new winners and there’s no loser and I think that’s definitely what you’re saying.

Scot:
[59:38] Awesome suit final question so obviously I strongly recommend people ever go out and get the book it is also on Audible so if you prefer that you’re obviously listening to this podcast if you prefer to listen to the book it’s on Audible,
did you do the reading or was that a.

John:
[59:54] I read I read the introduction and then actually is somebody who’s who read my other books read the rest of the day.

Scot:
[1:00:00] Yeah I thought this the one time I actually did the Dachshund Rican kind of like to read on Kindle and typed out of a sudden it was
it’s cool to be able to kind of digested more rapidly that way so strongly recommend that but if if folks want to find you online do you are you
regular pontificator on with the tweets are you around lead in what’s the best way.

John:
[1:00:21] Play I am on LinkedIn John Rossman or my my blog my website is Rossman partners.com and I.
I get so many great questions every week whether it’s people at Amazon interviewing Amazon even with Amazon whatever it is and and I love,
I asked you having people ask me like they wouldn’t you mean by this or you don’t give me an example and so there’s always stuff.

Scot:
[1:00:46] Greatly really appreciate you taking time out of your busy schedule to answer our burning questions from the book.

John:
[1:00:52] Well thank you very much for the.

Jason:
[1:00:54] Yeah thanks very much for being on the show John and Provost honors if we didn’t get to a question that was burning in your mind or you have a question
encourage you to continue the dialogue on Twitter or a Facebook page as always if this was the episode that that you know is really going to add value in your day job we’d love it if you jump on iTunes and give us that five star review
we’ve been watching and waiting we see your mass hovering over it and this will give her a time to do it and you know we’ll look forward to reading all those reviews so until next time.
Happy commercing.

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.

http://jasonandscot.com

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

Automated Transcription of the show

Transcript

Jason:
[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.

Scot:
[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.

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

Jason:
[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.

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

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

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

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

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

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

Scot:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Scot:
[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.

Kasey:
[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.

Jason:
[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.

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

Jason:
[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.

Kasey:
[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.

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

Kasey:
[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.

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

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

Scot:
[24:54] Iceland.

Jason:
[24:57] Too hot to cold.

Scot:
[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.

Kasey:
[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.

Scot:
[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.

Kasey:
[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.

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

Scot:
[29:43] Goat yoga is the thracian.

Kasey:
[29:45] Goat yoga hot. Yoga.

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

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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%
gross,
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.

Jason:
[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.

Kasey:
[35:22] Right right right.

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[39:26] Right right right.

Jason:
[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.

Kasey:
[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.

Scot:
[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.

Kasey:
[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.

Jason:
[47:48] Get out of the middle.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Scot:
[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.

Kasey:
[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.

Jason:
[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.

Kasey:
[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.

Jason:
[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.

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

Jason:
[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.

Kasey:
[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.

Jason:
[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.

Scot:
[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.

Kasey:
[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.

Jason:
[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

http://jasonandscot.com

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

Transcript

Jason:
[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.

Scot:
[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.

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

Jason:
[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.

Chris:
[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.

Jason:
[2:36] The more delicious one.

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

Jason:
[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.

Chris:
[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.

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

Chris:
[3:25] Exactly.

Jason:
[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.

Chris:
[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.

Jason:
[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.

Chris:
[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.

Jason:
[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.

Chris:
[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.

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

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

Scot:
[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.

Chris:
[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 half.com 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.

Jason:
[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.

Chris:
[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.

Scot:
[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.

Chris:
[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.

Jason:
[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.

Chris:
[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.

Scot:
[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.

Chris:
[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