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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[58:31] Apparently.

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

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

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

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

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

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

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

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

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

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

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

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

Jun 20, 2019

EP178 - Chewy IPO and Listener Questions Part 2 

Recap of Chewy IPO (Chewy S1)

Listener Questions Part 2:

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

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

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

Q8: Parker Block 

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

Q9: Baxter Overman

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

Q10 Aakash Gupta

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

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

Q12 Ted: Mixed use retail entertainment?

Q 13 Michelle Grant

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

Q15 Melissa Burdick

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

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

How should brands prepare?

Q16 Melissa Burdick

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

Q17 Melissa Burdick

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

Q18 Melissa Burdick

When is Spiffy coming to Seattle?

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

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

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 178 being recorded on Tuesday June 18th 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here to host Scott Wingo.

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

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

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

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

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

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

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

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

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

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

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

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

Jason:
[11:31] Yeah it’ll be fun to see.

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

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

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

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

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

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

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

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

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

[15:19] Questionnaire questionnaire questionnaire questions.

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

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

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

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

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

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

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

Scot:
[21:23] Oh man I didn’t know that.

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

Scot:
[21:32] Mulligan artist closes stores.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason:
[53:36] Yeah yeah so when it’s the.

Scot:
[53:38] Not enough of them.

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

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

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

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

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

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

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

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

Scot:
[58:20] Did the Starbucks usage.

Jason:
[58:22] Exactly.

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

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

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

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

Scot:
[1:00:53] That’s not sorry.

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

Scot:
[1:00:57] The Vessel.

Jason:
[1:00:58] That’s all thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jun 17, 2019

EP177 - Internet Trends 2019 and Listener Questions Part 1

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

Recap of the Code Conference in AZ.

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

Listener Questions Part 1:

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

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

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

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

Tune in next time for listener questions part 2!

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

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

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 177 being recorded on Friday June 14th 2019 I'm your host Jason retailgeek Goldberg and I'm here with your co-host Scott Wingo.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[19:04] Oh yeah absolutely.

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

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

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

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

Jason:
[20:56] That's interesting.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason:
[28:15] Finally thank goodness.

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

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

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

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

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

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

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

Jason:
[30:09] Or on the treadmill.

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

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

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

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

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

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

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

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

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

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

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

[41:46] Banisters.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason:
[1:06:12] Happy commercing.

Jun 5, 2019

EP176 - Tuft & Needle Co-Founder JT Marino

 

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

Topics covered:

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

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

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

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 176 being recorded on Monday June 3rd 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jt:
[29:58] Exactly.

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

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

[31:33] And so we did and it took a couple months to get to get to buy button activated so that we can have reviews place there
and then we started sending our call our customers everyday to write reviews
and within about read a beautiful mess with the highest rated they were selling matches with the highest rated mattress in their store we are also the highest rated product in the entire Furniture category and we held that spot for almost two years so we were at an early mover.
Enzyme and we still have majority to Market of mattress sales above the $500 mark.
I’m on Amazon Nummies also developed a product with Amazon I’m called the knot.