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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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Sep 17, 2017

EP100 - Get to Know Our Listeners

To celebrate our 100th episode, we decided to put the focus on the most important element, the listeners.  So we invited three of our most active listeners to be on the show.

Radz Mpofu @RadzMpofu

Kevin Harmon @imadness Facebook 

Ted Fifelski  @ted_gives

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

Episode 100 of the Jason & Scot show was recorded on Thursday, September 7th 2017.

http://jasonandscot.com

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

 

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 100 being recorded on Thursday September 7th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot & Guests: 
[0:40] Hey Jason and welcome back Jason and Scott show listeners Jason how are you doing.

Jason: 
[0:47] I am doing awesome it's super exciting to be at episode 100.

Scot & Guests: 
[0:52] It really isn't before we jump into it too deep I wanted to announce that we will be podcasting again at the shop. Org digital Summit,
this year the Summit is being held in Sunny Los Angeles on September 25th to 27th.
Jason Scott show listeners receive a 10% discount when they register using the code js-10 that's js-10 and we will put a link to the registration in the show notes where you can enter that code,
we hope to see everyone there Jason as we mentioned that we've had a pretty big milestone here with 100 episodes.

Jason: 
[1:31] I know I know I have to be honest when we started this 100 episodes we're not on my radar screen I had to read a podcast primer and it mentioned that like.
If you get past episode 7 you've sort of survived the mortality rate so I think my big goal was,
was 7 and I've since then read that the average podcast on iTunes only ever gets 24 episodes.

Scot & Guests: 
[1:56] Yeah yeah and we officially have more episodes in listeners now just kidding we actually we actually.

Jason: 
[2:01] Yeah that's that's because I have a small family if I had a bigger family we'd have more listeners.

Scot & Guests: 
[2:05] That's actually it's kind of fun to break down some numbers so we started this I don't know about you but I really didn't have any expectations I just thought we would do it for,
the fun aspect of it and looking back it's kind of,
ballon my expectations I would share admittedly low so we've had over 200,000 downloads since we started the show,
the record months had over 18,000 that was over the summer in June cuz we had so much Amazon news going on,
the most popular episode is the June 17th hot take we did which is episode 89 where we talked about the Amazon and Whole Foods acquisition and then as reminder for every one we actually started this whole Adventure on November 13th 2015 with episode 1,
do you have a quiz for you Jason how many how many episodes have we recorded.

Jason: 
[2:57] This will be our 101 including the one I screwed up and we didn't get to publish.

Scot & Guests: 
[3:04] Boomkin answer inside info but yeah 100 episode soon so pretty exciting.

Jason: 
[3:09] I share your Your Enthusiasm seems like we should be doing something special for the hundred show.

Scot & Guests: 
[3:17] Yeah yeah and couple months ago we were pretty good at math so we kind of saw this coming on the calendar and we started thinking about what we should do to celebrate a hundred episodes.

Jason: 
[3:28] Yep and obviously one of the first things that come up is is with many listeners know,
chupitos is constantly hounding us to be on the show and so for while we're thinking hey that's a perfect opportunity to finally Jeff on the show but then you know we thought about it and the reality is this show is for the listeners it's not really about the fancy guest so we turned him down.

Scot & Guests: 
[3:51] Yeah you know we,
Basils cuz of stuff to talk about both at listeners who who would care so what we did is we decided to really kind of turn the microphone around,
so we we went to Twitter and and looked at the social engagement that we get and we really active Community here for the show that we really enjoy and,
what causes a lot of back and forth and it went challenges us and recommends things and ask questions so we we thought what we would do is have a listener appreciation event in celebration of episode 100,
so we somewhat randomly picked three listeners from different geographies all over the world if you will these folks work at all kinds of different size companies and have different kinds of rolls and we invite them tonight to be on the show,
to hear about their e-commerce experience and where they think e-commerce is going and just kind of turn it over to the listeners for,
for a bit and give everyone a little bit of break from hearing from us for the last hundred episodes.

Jason: 
[4:50] Yeah yeah I'm super excited about this idea and you know frankly pleasantly shocked that it when we invited accepted our invitation so Scott who's the first guest.

Scot & Guests: 
[5:02] Well Jason let's kick it off excited to have our first guest here for the listener appreciation show we know him best by his Twitter handle which is RADS radz and that's at radz mpofu on Twitter,
what's up rats not much just wrapping up the day here how about you.
We're super excited we hit 100 episodes Jason didn't think we'd make it past 5 and I had the long money on going the long haul in the sinks the red 100 we're pretty excited.
Yeah I have to say that I would have to agree with you because when I first remember seeing the Jason and Scott Show come out I was just like oh my gosh I have needed this for so long that was like I'm starting my retail career.
Yeah I told you guys 100 I don't know why Jason would say that,
check two boxes for us here for the first time you're you're the first kind of super listener we've had on the show and then also you're the first International correspondent so you're you're not in the United States of America.
Nope I'm in the Toronto or the six as Drake would say okay and is it snowing there.
No not yet but it is raining a lot okay interesting summer where it's just been.
I bet Seattle and BC weather where this raining a lot.

Jason: 
[6:26] And in the long run does that mean it's good or bad for the ice wine this year.

Scot & Guests: 
[6:31] No idea.

Jason: 
[6:34] Those are mine I mainly focus on the food of every venue so for me Toronto is ice wine and poutine even though I know pooting is really Montreal but you can get it in in Toronto.

Scot & Guests: 
[6:47] Yeah that's true but you forgot you got to check out Uncle tetsu's cheesecake as well as smoke smoke signals barbecue those are two really good spots those in the true true true Toronto Staples.

Jason: 
[7:01] Nice I am adding those to the list that the show has already paid off for me.
So Reds you mentioned that you you were start listen to show you were starting a retail career you want to tell us a little bit more about what that was and what you're doing now.

Scot & Guests: 
[7:20] Yeah for sure so even though like rewind a little bit vacuum before that I actually started my.
E-commerce sales career in at a company called Ashley Bridget, so I was there when we were still like in a basement making maybe if you know a few hundred thousand dollars and a scale to over a million so that.
Being part of that company like they double grabbing use like every year since after that but that experience I think really.
Help me get to become a part of tulip which is where I started started my retail.
Retail career that don't know a tulip was founded by the founder of well. CA.
Oh yeah yeah yeah he was involved in doing that as well so yeah I started my career at tulip that was in.
March 2015 and I think a few months after that you guys started the Jason and Scott show and then where is your career taking you now.
So now shifted to a company called pagerduty and a lot of people especially in the it the it and devops were all day they definitely know about picture to be it's almost like a household name.
We were actually mentioned on Silicon Valley recently some I think it was Guilfoyle he told the Nash that he was on pager to the until we got back at the house he was leaving to go somewhere.
But yeah basically Patriot Duty Autumn eats the incident resolution process from end-to-end so a lot of that stuff is being done manually right now so you know I have like an Excel spreadsheet.

[9:01] I'm the psychos down you call somebody on it for there's too many modern tools to.
Really get the key incidents that you need to resolve resolved so page Diddy animates all of that.
Google every e-commerce site wants to be up 24/7 so I think you know you say you're out of the retail business but I think you just kind of dawn to a broader addressable market and I'm sure our vehicle it's probably interesting to your folks.
Oh yeah I know definitely we actually just it's funny that you mention that we just started.
Retail all of my coworkers are all pinion me for people's contacts so yeah definitely I am still very much plugged into the retail game only doing it through all my coworker.
Get in touch with me get in touch with retail Executives Through Me podcast you can recommend they want to learn more.
It's how I've already been said I've been telling them don't worry I would cover.

Jason: 
[9:56] We we have a vested interest in pagerduty tracking the retail Market because you know it's it's going to be sad to go to the industry shows like shop.org and not see you.

Scot & Guests: 
[10:07] Exactly I think you needed to tell our CEO and her had some marketing that Jennifer Tejada if you ever end up listen to this please we should go to shop talk next year.

Jason: 
[10:16] Exactly.

Scot & Guests: 
[10:17] Shop.org.

Jason: 
[10:20] That both good shows both good shows.

Scot & Guests: 
[10:22] Oh yeah both really good shows.

Jason: 
[10:24] The actually have a photo of you and it I think act technically it's from neither I think it was probably from NRF and you you had your then employers Logo shaved into the side of your head.

Scot & Guests: 
[10:36] Oh yeah okay okay I thought you were going to go in a different direction with that there's another photo of someone who's on stage didn't Maeve look like me I don't know maybe but that was.
That was that was in January and I think Dominique actually mentioned that from bonobos on on the previous show I think I got to shut up because of that.
Although we never saw you put Jason and Scott show logo in your in your head.

Jason: 
[11:09] That's going to take a more talented Barber than the to it.

Scot & Guests: 
[11:13] I fixed I was always thinking maybe just a j plus s but I don't do it at all.

Jason: 
[11:21] Yeah I know you need portraits of two portly dudes.

Scot & Guests: 
[11:24] Two rats two quick ones Have you listened to every episode.
I wish I could say that I have but.
The last one that I listen to since I've been ramping up at pagerduty was are the one with the Accel partners and then one that was either just before that or just after that was with.
The CEO of the CEO of Kohl's and ModCloth I remember listening to those when so I think I'm about 20 episodes behind at this point.
Cool you'll have to just drive to Florida and you could pick them all up.
Yeah exactly exactly or I'll do it on my next plane trip to San Francisco.

[12:10] What were what were a couple of your favorite shows so I think my favorite show obviously I can't,
I can't not do it but Danza episode on bonobos that was my favorite one but also the ones with Rob Schmaltz from Talbots as well as Faisal masud,
I'm from Staples,
those were like really those are I think those are probably with my top three favorite ones all the a lot of the retail executive.
Interviews were like I'm on my favorite ones those ones you know I got to learn so much about you know what's going on in retail and all the changes that if you know what happened this year and I'm sure that will continue so I think those are all my favorite ones.

Jason: 
[12:56] Very cool that being said any as one of our super listeners were we're always looking to make the show better anything you feel like we could be doing better or any tips for things we should think about trying.

Scot & Guests: 
[13:10] So I thought about this and.
I think what you guys have done is really cool you know you have the Deep Dives as well as.
The the retail executive interviews so I'd love to see maybe a little bit of a panel you know between and I'll maybe not people that are like opposing and Views but would love to find out.
Maybe get like the behind-the-scenes story from what happened at Sears maybe not like.
Anything like bad that happened but like to know where did. They live like missile I'm so like maybe a previous executive from there and then you know maybe get somebody from.
Walmart or one of the opening or tomorrow off and coming retail brands.
Could have done better or there now fallen by the wayside in the ones that are doing really well and see if they can.
Meet in the middle and what can be done.

[14:13] Where do you where do you see the future of retail and e-commerce.
I think right now it's still very much in a state of upheaval.
Get out like I'm actually keeping tabs of all the retailers that either went belly-up or like we're struggling really.
Really tough out there was like it's the year started off with like BCBG and then the Limited,
then actually remember seeing HMV Yonge and Dundas Square here in Toronto that's kind of like the Union Square Toronto onto the San Francisco people out there so I remember seeing that one shut down as well and then all American Apparel.
I think all of these a lot of these retail Brands I'm hoping it doesn't continue but it looks like it well I think there's still going to be a lot more.
A lot more unfortunate seems like that I put on top of that too kind of.
You know balance that I would say that there might even be more consolidation that's going to happen at a lot of people are saying that it might not happen but from.
What we've seen from Walmart this year with the acquisition of Moosejaw and the novo's band also more recently with some of the shoe retailers I think.
Michael Kors just acquired Jimmy Choo and then on top of that Vince Camuto was acquired by although or vice versa so yeah I think there's definite going to be a lot more retailers that are.
Going under if they don't figure out how to go digital and no kind of modernize their with their in-store experience and then on top of that.

Jason: 
[15:50] That's very cool I don't want to get one question in that we've actually ask every guest but Scott keeps making me edit the answer out so so hopefully for the 100th episode I'll finally get to get it in there.
Would you say that you like Jason a little better than Scott or way better than Scott.

Scot & Guests: 
[16:10] I would say that the two of you I hold you both very near and dear my heart and there's no way I could pick them from the two of you.

Jason: 
[16:17] So you lied you're willing to be honest about everything else and then you I on that one alright.

Scot & Guests: 
[16:22] Good answer he's he's texting me right now saying that I'm his favorite.
You weren't supposed to say that I have a kind of sales question which is you're there in Canada in Toronto and your imagine.
You have territories that are boom across the continent is it hard to be in the sales rep in candidates Ellington us or doesn't feel different at all than if you were in New York or something.
No I don't think it's that big it's that different at all I think it actually might even play to your advantage we're kind of seen as the we had this running joke on my previous company and to love that,
everybody always sauce in the in the states as the friendly Canadians we are always just really do a comedy versus you know kind of like that.
I don't want to generalize but you know the ones that play hard ball in New York or something like that so I definitely plays to word Vantage I would say that it's probably tougher to sell,
in Canada versus outside of Canada Canadians sometimes don't like buying from Canadians I will say that much.

Jason: 
[17:29] Interesting I feel like we do have the perception that that Canadians are super friendly I mean it it's like I'm sorry a sort of a catch phrase for Canadians.

Scot & Guests: 
[17:39] Yeah I know right I actually had was made fun of in an Uber I took Uber pool for one of the first times,
on a recent business trip and the gentleman the back just what he found out that it was from Canada he was just like,
or you going to say I'm sorry a lot and even put on the Canadian accents it's definitely known across America.

Jason: 
[18:03] I totally get it this may offend you but I am frequently mistaken as a Canadian that people feel like I have a Canadian accent.

[18:13] Which I have never lived in Canada but.

Scot & Guests: 
[18:17] Can you say a boat.

Jason: 
[18:18] I definitely can go a boat but that's because you know did a lot of work in Minneapolis which is little known fact but it's actually north of Canada is a lot of Minneapolis.

Scot & Guests: 
[18:28] Yeah yeah I've heard that.

Jason: 
[18:30] Culturally I used to make that joke and then I married a woman from Detroit and I warned that Detroit actually is.

Scot & Guests: 
[18:37] Canada.

Jason: 
[18:39] You you drive south to go to Windsor to drink when you're 18 that's the whole that's all gig when you grow up in Detroit apparently.

Scot & Guests: 
[18:46] Yeah yeah I've heard a lot of people say that and even on the opposite end,
back in I'd say what the seventies and eighties a lot of people would drive down from Toronto and Windsor to the states to go check out Hip Hop shows because there was nothing in Canada.

Jason: 
[19:03] Wow certainly not true anymore Toronto is like that got a lot of great Hip Hop.

Scot & Guests: 
[19:08] Yeah yeah Drake in the weekend and all those guys.

Jason: 
[19:14] Very cool what was red we greatly appreciate your.
Royal falling and the suggestions you sent all along and we look forward to getting you back in the industry and getting you all caught up on the show so thanks very much for being part of the episode 100.

Scot & Guests: 
[19:33] Yeah thanks a lot for having me guys and hopefully I'll sing me up a lot more retail shows I'm going to use this as leverage internally at pagerduty.
Awesome thanks for as we really appreciate it.
Okay Jason are next listener on listener and 100 is Kevin Harmon I've known Kevin 415 of the longest term.
Ebayers I've met I think if we met at one of the early eBay live shows and he has been a huge fan of the show welcome to the show Kevin.
Text Jason how are you guys.

Jason: 
[20:14] We are terrific 100 episode what could be better.

Scot & Guests: 
[20:19] Boom that's right yeah so yeah we really appreciate you taking time out of your busy schedule to join us so I'll let Jason Kick It Off.

Jason: 
[20:29] Yeah so Kevin Scott mention you been a long time eBay so do you want to give us the the background about how you got into the account Biz and what you're doing today.

Scot & Guests: 
[20:40] Sure I've been an e-commerce for a long time I think 2001 is when we started and for about 10 years I stayed in the media side we sold DVDs and CDs and video games and books.
On eBay and Amazon other places did that for a long time and for some weird reason books and CDs and DVDs of again stop selling so well so.
We moved on to another couple things are doing then and then now what we do is I have another company that sells clothing and books now.

Jason: 
[21:16] Very cool and predominately as a Marketplace seller.

Scot & Guests: 
[21:20] Yes 100% so we're sort of you know eBay phds Amazon phds we know a lot about both and we do the best we can.

Jason: 
[21:31] Nice and are you mostly focus on North America so those are the two two big platforms for you.

[21:38] Gotcha and we do often talk about the Walmart marketplace as well if you looked at that at all or.

Scot & Guests: 
[21:46] Yeah we are looking into that Walmart in and Jed as well so we think that that might be a pretty viable saying coming down the road here.
Cool so I know you listen to a lot of episodes you can listen to every episode I listen to.
Show me episodes of the Jason I'm going to call you out on this I think you said that welcome to the Jason's not show about 6 times now.
I didn't even catch that.

Jason: 
[22:24] That's a special service to the fans that I give to that the loyalist.

Scot & Guests: 
[22:28] Yep.

Jason: 
[22:31] That's all I mean to Beyonce it's a it's a Freudian slip my other podcast is called the Jason and snot show.

Scot & Guests: 
[22:38] Oh that's so strange it's for its for ents.

Jason: 
[22:40] Deaf deaf.

Scot & Guests: 
[22:42] What are several times I know it's hard to pick but what are a couple of your favorite shows.
I think my favorite one was the one with Melissa Burdick from the Mars agency just because you know my Amazon experience and that she seemed,
super knowledgeable about Amazon and it was a really good conversation you guys had with her I really enjoyed the the whole thing about you know crap which is hilarious.
It was good crap joke the most I have to have like 6 I can't listen that fast normally get pumped up.
Yes you super knowledgeable.

Jason: 
[23:25] And since we're talking about her I should give her a plug she's actually no longer with the Mars agency Melissa and another of our guests.
Have started their own business which is now called the laying verdict which is of an Amazon consultancy so that's Andrea way right Scott am I remembering correctly.

Scot & Guests: 
[23:47] Yeah I think they should call it like Mel B and Andrea or something help her but I didn't ask me I was debating with Scott.
Just trying to find an end and acronym for a crap for that.
Amazon Canada and I can't for the great ones got didn't like it but I might tell you guys anyway which is it's it's not crap its poop which is probably only offline profit.

Jason: 
[24:13] Okay I'll.

Scot & Guests: 
[24:15] PG-13 know you're gone now.

Jason: 
[24:22] Well you know.
One of the things we're always trying to do is improve the show and so as a one of our best listeners that is heard the majority of our shows any feedback you have anything we should be doing different or the drugs you nuts.

Scot & Guests: 
[24:40] Know the address to the Scott unbridled enthusiasm for Amazon domination.
Minutes I wish I was more Counterpoint to that every once in awhile it's.
It's cool to watch a hurricane make landfall not sure unless you want to people on the land as falling on butt.
I think it'd be great to have like a I don't know what chat room or I'll take take live Twitter questions except her a little more often just just just involve your audience.

Jason: 
[25:13] Yeah I know that's great feedback we definitely are looking for ways it's actually one of the the deficiencies of the podcast format is you know.
We don't have a way for example to email all of our listeners and get questions or those sorts of things do you have to use a parallel to like Facebook or Twitter and you know it.
A very loyal but small subset of our podcast listeners are following us on those other platform so.
Love to find more ways to engage more customers and get more feedback but that is only a great suggestion I do feel the need to slightly defend us though.
Totally hear you on the Amazon world domination and I would love to be the the Counterpoint more loudly.
But I continue to be shocked I work with all these.
Our big Fortune 100 retailers and it's still more often than not that I walk into a retailer that dramatically underestimates Amazon as the competition and so like.
They absolutely have flaws in their absolutely ways to thrive in in the market against them in all those sorts of things but it still turns out that like more of the people in our industry then I would expect.
Underestimate them rather than overestimate them so so you know maybe we err on the side of hitting that a little hard but I,
I often feel like I have to be in evangelist for a half serious at threat they are so much so that one of my biggest clients that they think they have a funny nickname for me they call me Paul Revere.

Scot & Guests: 
[26:48] Know he was right I mean the that is actually very amazing.
When you see me look at what I've done I mean they're an amazing amazing company that has effort on their own set of rules they know that.
I start unique in the world and yeah they're gone disrupt everything sooner or later probably sooner.
That's a good transition you you've been common the marketplace Biz 4.
Pussy 2001 you 15 20 years what are some of the big trends that you've seen in and where do you where do you think the marketplace part of the world goes.
I think the marketplace continues but it seems to me like it's a lot easier to start a business than it used to be for sure you know 15 years ago when we started that was quite an effort.
And now with all the tools available now it's a lot easier to get into a business but I also think that there's a lot of consolidation going on so I think it's harder to grow a business and you know grow into a large business in particular.
I think because these large sights Amazon Facebook.
Google the beginning on more and more of the entire end and process and so the more pieces they don't have that the lesson Advantage you have.
I even if you saw on those platforms it can still sometimes be a disadvantage so.
I think e-commerce continues and grows like crazy I don't I have concern for the really small business owners though going forward.
Yeah and it's Russian cuz I have that same concern and you know you and I have known.

[28:20] Know more people that have gotten out of the business owner still in it and then put then what kind of countercyclical e happens there,
is baffalo like some of these small business platforms like Magento Bigcommerce and Shopify there exploding so there's these it seems like there's these Merchants out there that have,
yeah that are doing well like Shopify just hit I think the 500,000 small store owner,
what's a kind of Wonder like who are those people and you know that that seems to be where things have shifted the marketplaces if that so competitive that the a lot of folks have gone to just creating there a little, but then I don't quite understand how there,
going to differentiate themselves and get their name out there wifey that's exactly right so 15 years ago the easiest way to start with on eBay.
So every small company in the world start on eBay and then they sorta grew or didn't grow a coordinate the eBay's growth are Amazon's girls and now the Shopify and the other.
Consolidated sites we can do a lot of different things on one place now everything is Shifting to calm and that's a that's a big change I don't know.
I can't I can't judges level success over anything else yet I being too soon but it's definitely a big change in the marketplace in the last 2 or 3 years.

Jason: 
[29:42] Yeah it's it is fascinating I mean,
play I would argue the eat of your really successful Amazon Seller that like or or any plat Marketplace seller like that that shouldn't be your only platform that you should you should have a presence on a platform you own into the.
The extent that you do earn your own traffic and aren't you know and earn your own customers.
Like you don't want to be actively driving them to the marketplace you you do want to be driving them to that that platform you own so I totally get why.
The the shopify's of the world would be successful alongside the the big marketplaces but is you guys are both aware like.
You know painfully difficult and expensive to grow a meaningful audience on that on that digital property that you own versus.
Nina taking advantage of the the incredible traffic that that Amazon in particular has belt.

Scot & Guests: 
[30:40] Is there a true and you know I've always go to Amazon and eBay Caesars.
As a market expenses an advertising expense and you're paying those fees they bring you the customers.
And so you know on your own. It's you're on your own until you bring customers to you it's a much different situation and much more difficult situation but if you can if you can achieve it I think you have a lot better chance of surviving long-term.

Jason: 
[31:05] Yeah for sure we will use the I used to have this kind of derogatory term for people that.
Brands that tried to use Facebook as their only digital platform in Fitchburg Facebook's a wonderful tool.
But I used to call them digital sharecroppers because they're you know you're you're planting your crop shirt you're putting all your equity in this land that you don't own and you know in the early days.
Facebook change the terms and conditions of how you could use that land.
Very frequently in that you know was a huge disruption to to all those Brands and you know it does feel like.
The marketplaces today are are very similar to that like there's huge opportunities there but you are a digital sharecropper like you know if the day that Marketplace decides that they've hit some critical mass and don't need you anymore.
You know that your your your business is definitely in Jeopardy so it's.
Scary to have all those eggs in that in that one basket is good to own some land of your own.

Scot & Guests: 
[32:04] Yep and that's been a major change the last couple years as well so so back in the day.
EBay wooden Scott can attest to this I think even said one time that it seems like people just kind of flavors over there sometimes wear any 6 months. They can make it a complete change the marketplace that really disrupted louder seller base.
Can I get used to that and then or later something else will come along and just kept going like that what you could never really establish eBay presents Amazon.
Another hand they watch the products the truck didn't change at all the solid for a long long time.
Until the last time say couple years and now Amazon surround to the point with her information.
A new Rose new changes that you know can hurt some sellers I can help other sellers but but it's almost like Amazon let you grow your business bigger before they decided I didn't need you and I don't know witches.
What the worst scenario is there you know you can get shaken off by eBay or you can get kind of gets trampled on by Amazon at some point.
Either either have those risks which again why I'm sure every consultant tells people to sell in multiple marketplaces and make sure the doc is a priority.

Jason: 
[33:13] Yep.
So keeping the fan show light let's turn to a much more important topic I heard a rumor that you rival Scott as a Star Wars fan.

Scot & Guests: 
[33:29] Boy that depends on what metric you're talking about but I'm a huge Star Wars fan absolutely.
I have a big question what's your favorite movie.
Thesaurus really starting to warm to that one.
Tricky question is what's the best one of the three new ones that's the tough one.
Yes another one another tricky 1ru if you could only watch one more movie this year,
would you do Blade Runner or pussy we've got is there another Marvel and coming up and then then you have Last Jedi.
Is it Last Jedi Bar None or would you consider some the others.
Man that's a tough one I mean it's definitely Last Jedi but I am really looking forward to Blade Runner.
I think Ridley Scott if you got the right guy I've got the right directors you got the right characters again.
I'm really really hopeful that they could do something spectacular with that.

Jason: 
[34:48] So the question I always like to ask and this may be the the wrong audience for this but so I have A2 year old son what order should I be showing him the movies.

Scot & Guests: 
[35:00] Machete Star Wars movies I would say 4 5 6 7 8.

Jason: 
[35:08] Okay I get 456 first a lot but that that's.
The skip the prequels is a good one there is like there's some fan edits of the prequels that are much better like I wonder could we replace the could we make one of those the official Canon instead of the the George Lucas versions.

Scot & Guests: 
[35:28] What you can probably edit those three movies together to make one pretty good movie I mean that's definitely cool things happened but how to pick one that's hard to even recommend them.

Jason: 
[35:40] I think none of the fan edits that I've seen that are you know some of these have had millions of hits on on YouTube none of them have Jar Jar Binks in the middle.

Scot & Guests: 
[35:48] But that's alright uh I think the woman Darth Maul I'm sure you guys have seen that at your fan is amazing really good really good fanfiction there.

Jason: 
[36:00] And I apologize for digressing but like perhaps my the funniest Star Wars thing I ever saw on television as you guys remember when Stephen Colbert did the.
The contest for the the lightsaber green screen fight.

Scot & Guests: 
[36:17] Yeah that's good I did I was good.

Jason: 
[36:22] So super super quickly for listeners they may not be as big a Geeks as as Scott and Kevin the.
Tons of people on the internet where do I.
Making your own videos of lightsaber fights and so Stephen Colbert decided hey he would do this funny contest he would pretend to be fighting with a lightsaber in front of a green screen and make the video available this fans.
And he would have a contest with prizes for the free the three fans that made the best scene using his.
His greensaver is green screen lightsaber fight and so they they show the the two finalists on on this Colbert show and the first one is this you know woman Lisa from.
From the you know I like Minneapolis or whatever and she's she's got this great video that she made featuring Stephen Colbert fighting the video and then.
The the other finalist is George from.
Marin County California and as as they're talking like it becomes obvious that it's George Lucas.

Scot & Guests: 
[37:31] Yes it was hysterical.

Jason: 
[37:32] And he's he's like in his own thing and they've like you know they've like.
Cut new scenes for the movie this thing but the best question was you know Stephen is asking them both like do you own all the movies and George George's like I own all of them except the first one there's some dispute about the first.

[37:53] Which I thought was a funny line.

Scot & Guests: 
[37:55] Yeah that that in like that the SNL auditions for Star Wars 7 was great too that's so cool. Star Wars is the entire ecosystem around it is also awesome.

Jason: 
[38:08] Would you say that something that Star Wars has in common with a Jason and Scott show that it's a sort of that kind of cultural phenomenon.

Scot & Guests: 
[38:15] Yeah I think you guys just need to add a conference right you need to have a Jason Scott convention and.
Bring a bunch of your gas there and everything else in a certain place and I don't know is there I know Scott's wearing a red jumpsuit right now probably I don't know what you're wearing Jason but you know some sort of attire for the show we could all wear it would be cool.
Yeah we get wicked mix in a Star Wars convention at the same time how awesome would that be.

Jason: 
[38:39] I'm thinking it's going to be at your that that at Scott's new residents which is that that the new hotel.

Scot & Guests: 
[38:46] Absolutely I can't wait for that.

Jason: 
[38:51] So I do before we get out I just want to wrap up like we had a good conversation about where the future of marketplaces are going I'd be curious if you had a maybe.
SAE more General POV about you know how what what retail looks like in the future like does this digital.
Disruption like you don't continue to play out how it's playing out now to see any big changes coming that the other listeners be thinking about.

Scot & Guests: 
[39:20] Personally I think that we're honestly really only beginning to see the beginnings of the acceleration.
Honestly I don't know that's not good news for people but I think these large companies that are getting much larger much faster are described in.
On a scale that that we've never seen before and will probably accelerate so I worry about things for example like even Brands themselves you know I worry.
I worry that when you get when when is going to come in like Amazon starts doing a ton of private-label stuff I just a time and way more than we even even know about.
And then answer to something with that like a voice product like Alexa.
The combinations to it is really deadly and when you fit when he think about how deadly it is it's a little scary you know if you ask Alexa to buy something Alexis probably not suggest you it's on Amazon brand suggestions.
And when you can when you take those you know brand spend billions of dollars on.
On marketing and their packaging and they're looking their feel and when you remove all of that I'm invoice removes all of that so.
I get this weird thing that Amazon is attempting to.
Accelerates the death of Brands but but taking a lot of that margin that Brands used to enjoy and sort of shipping over to itself.
So I definitely that Trend coming and maybe accelerating Scott yeah it's it's their stuff only you know when you ask.
Her can't say it cuz she's right here.

[40:52] For Alexa when you ask her for her batteries you know that's going to be an Amazon basic battery I think there's definitely rust there I think,
brands are not really putting all that together I don't think you know Jason's earlier point they take Amazon seriously it off and then I don't think they get the voice thing and how it really,
is a different way to shop where all the packaging and all that looking field doesn't really matter.

[41:24] The decisions you have to make tonight bet exciting if you want to space not have toothpaste.
I think Amazon is realize that and I think they're going to do their best to sell you Amazon toothpaste instead of your own and by the way they'll give it to an in an hour right so.
Amazon has been spending all this time building this gigantic ecosystem in the background and I think you're just now beginning to see if that's it.
Yeah yeah and then you know the Counterpoint,
to that which I feel is ironic but I'll I'll do this is that you know when we first started Channel advisor it when was kind of like you had to be able to answer the Google question you know,
how is Google now you have to answer the Amazon question so these things tend to go and 10:15 year cycle so,
we'll see you know I think they'll be there's some company we probably don't know the name of yet you have some some dudes in the garage somewhere and there will be another competitor to Amazon that,
the tides so it probably won't be as game over it feels like when you're in the in the heart of it but it is a little scary.

[42:30] Yeah I mean if you think about brand searches right so they used to be all Google now it's it's got to be pretty split between Google Amazon and eBay.
And in Facebook I should say Facebook in particular so even that even the even way to find products is draft dramatically changing.

[42:49] Absolutely well we really appreciate you sharing your thoughts Kevin and and of course being such a long-term listener we really appreciate it and you give us a lot of great feedback,
we will try to integrate your feedback here tonight and do more kind of live questions and those kinds of things and we hope you listen to the next hundred episodes.
I love the show I love it and thanks for let me find next we be on.

Jason: 
[43:14] Thanks so much for being on.

Scot & Guests: 
[43:16] Discontinuing with episode 100 listener preciation we are excited to welcome on to the show Ted for felski Ted is on Twitter as Ted,
TD underscored gives gives and he's always one of the first people to start a conversation after we put a show out there so not only is he an avid listener but he's also very,
timely on on his downloads mustn'ts,
Ted lives in Austin Texas and is part of the e-commerce startup Community there he is the father of 3 boys and co-founder of simplytapp welcome to the show 10.
Hey guys will thanks for having me I always enjoy your show so I'm glad to be here on your podcast as well.

Jason: 
[43:58] We are thrilled to have you Ted Scott mentioned that you're currently the co-founder simply tap and we're going to get to that in just a minute,
do you know when we have guests on the show we always like to get a little bit of the color about their career matriculation and how they got where they are so can you.
Can you give us the Reader's Digest of a of how you got here.

Scot & Guests: 
[44:20] Yeah definitely so my career kind of started.
You're out of college with a degree in finance going straight into International Business Development for the World Trade Center so I did that for about a year-and-a-half and then found my way.
Down to Texas on a Consulting gig which.
Ultimately led me to my actual degree in finance over the boutique firm here in Austin Texas called Arthur Financial Services.
Doing technology evaluation for the energy and oil and gas Industries.
And so I always knew I wanted to start my own company and you know.
God willing and gave me a opportunity when my co-founder of simplytapp move down here from Knoxville in about 6 years ago and so we.
Yeah we kind of met.
Online it away before tender was big or before meet up with big I just threw some some blogs and we hit it off and he had a great idea I had a great idea we mashed them together and started a company in off at once.
Cool what would really appreciate you listening to the show when when did you hear about the show and when did when did we kind of pick you up as a listener.
Well I've been I think I've listened to every episode for the last say.
Maybe April 2016 so coming up on a year and a half or so and.

[45:50] What I was looking for when I found your your show was some smart guys with some opinions around the.
E-commerce and commerce space so when I found yours not only did I find it interesting but I also enjoyed listening to.
Take the given take you both hat and so obviously you guys spend a lot of time covering the world of Amazon because it's such a big part of the current ecosystem right now.
At least how it affects everyone both from an employment standpoint to an idea standpoint to it infrastructure standpoint and so.
I thought that was something that I had necessarily heard the level of detail and so that's really gravitated me towards Georgia podcasting.
You would come out with with good episodes one after another and so I can listen to them.
At normal speed where is most of them they you know you stood him up a little bit you get to about 1.7 maybe 2 x.
And you get some faster but I've set through a regular speed with you guys since the beginning so and then obviously I started following guys on Twitter.
And your website reached out to try to.
Find out as much about you guys as possible to make sure the stuff I'm hearing your podcast is legitimate and I think it is,
devious plan is working with pulled you into the the evil web that we have one.

[47:32] And it your your diction to.
Starbucks though Jason is a little bit over-the-top I hear that mentioned every so often and I just wonder how much Starbucks this guy drink if he takes it with him on trips and mouth isn't it everywhere already sell.

Jason: 
[47:46] Yeah it's it's a little bit of a problem I actually had a moment this morning I huge line at the Starbucks so I thought I'd be really Advanced user and do Mobile Pay to skip the line.
So I do Mobile Pay and I'm sitting there waiting and I never comes and never comes and then I go to the phone and realize I sent the mobile pain to a different store.

Scot & Guests: 
[48:05] Oh yeah I actually saw your Tweet there but they were nice enough I thought that was a real.

Jason: 
[48:09] Oh my God they were rock stars they when they realize what I did they made my drink for me anyway didn't charge me in save my day.

Scot & Guests: 
[48:17] Bullets I think the price they probably was in your show so they're like.
India favorite guess that we've had on the show that that's kind of come to mine favorite guests.
You know you guys have had so many good ones over the years while since I posted over the year and a half.
Not really you know everyone seems to be pretty good and I'm not a big names guy so.
I really don't remember anyone that jumps jumps out that's like why I'm glad you guys had that on there because I was to a couple of them and I always match him up so.
So no sorry.

Jason: 
[49:00] Know where they're all so good that you can't pick up it's like picking when your favorite.

Scot & Guests: 
[49:04] It's a Neverfull a while honey I can pick that but I'm kidding.
You know what one of the episodes I really enjoyed was when you guys decided to put a token name on the new checkout process or shopping experience from Amazon.
Seems like every time that they come out with a new way to deliver a product or service.
You know you guys come up with another acronym for it that is really hard to explain or or remember or say it but you guys use it as if it's a thing so.

Jason: 
[49:36] #j

Scot & Guests: 
[49:37] Appreciate that yes that's the one.
Yeah... Was I think here in Texas I think of JJ Watt which is the football.
Little bit bigger deal than Jay water itself or maybe someday lumpy you know he'll retire Hill go into the announcer booth and JWoww still be around.

Jason: 
[50:00] I feel like it's always going to be safer to say to Jeff Bezos the Jay Watts not a big deal than it's ever going to be to say to JJ Watt that he's not a big deal.

Scot & Guests: 
[50:08] Well you know I mean there for people who follow just Beason Amazon me he has been bulking up there has been a lot of memes lately with him you know looking like Arnold Schwarzenegger so I mean.

Jason: 
[50:20] Know know know he looks totally fit but he still looks like maybe JJ's right arm.

Scot & Guests: 
[50:24] Yeah fair enough fair enough so it's working obviously as you guys cover Amazon.
An undercut of all the to do and how they affect the rest of the industry is obviously here in Austin Texas Whole Foods has been a staple of one of the corporation's at kind of the Hallmark for what it means to be Austin right it's this.
Upstart started neon 25 30 years ago from hey I just want to produce and Supply Wholesome foods that are well.
You can't find in general Grocers and so obviously with the news of them acquiring them I was really excited because my office is about a block-and-a-half from their headquarters and I go there quite frequently for lunch so I know the prices of everything another people.
Know when the announcement was made that Amazon was essentially going to a choir Whole Foods.
I walked in there and the place was some pins and needles but to be fair you know the day that the acquisition actually went through.
And I'm sailing back I was expecting maybe a sign or you know everything to be saying free on it because it's.
Our delivery for something you know I didn't see any of that but the people.
We're in good spirits and so I thought that was at least initially a good sign.
The communication between Amazon and Whole Foods is going to be.

[51:58] Good enough or you know smooth enough to wear.
What makes Whole Foods Whole Foods and experience hopefully won't get washed away by technology day one it's going to maybe gradually going to go in that direction so nice.
Turn off people are scared at least here in Austin for the for that acquisition Bill actually go through.

Jason: 
[52:24] No I think that is true and I only have to say.
The day one experience was remarkable I think we've all been super impressed with how much they got done in terms of integration on that on you. That that first day of the.
Under Amazon control this Monday.

Scot & Guests: 
[52:44] I don't know what you guys experience but headquarters never moves you know they put a new payment systems they put in terminal they put in new ideas that app never works like,
this'll last post ever touch so it's weird because it is headquarters it should be you know of a flagship you think they would get that one right,
straight away but there was nothing integrated in nothing to headquarters was just nothing at all,
so except for some commentary about why why the employees couldn't use Alexa for something so.

Jason: 
[53:19] That's funny it that's a common thing so that the headquarters Store the store that's closest to the headquarters for almost all retailers like.
Always has this unique character and like one of the things is it's almost always run by a totally cynical manager who's not impressed by anything right because.
Can you think about it every vendor that ever called on Whole Foods has gone to that store and they explore that store and they probably like stopped and talked to the manager about how important they were to Whole Foods and all that sort of stuff.
And you know of course all the Senior Management from the company shop there and all those things in like if you were going to be Star Struck by by the executives coming into your store.
You wouldn't do very well in that that.
Headquarter store so that the surviving manager there 10 tends to usually be a guy that walks to the beat of his own drummer.

Scot & Guests: 
[54:12] Yeah I think that's definitely true you know I've met quite a few of their their Executives being so close and you calling on them from time to time whether it be something that I would working on that I want to show them we're just in general curiosity they,
they've all been pretty open even though they do get solicited constantly but even pretty open I've been able to.
Have some pretty good conversations and coffee and what not have lunch with them so I haven't in a while obviously they've had other things on their mind.
But they've been really great Bunch for as large as I've become so I'm excited to see what happens to them not to make this an episode about.
About Amazon and Whole Foods but.
I think it's going to be exciting and I think there's going to be some Growing Pains But ultimately it's going to really Drive.
The industry as a whole towards better things from a consumer perspective.

Jason: 
[55:11] No I totally agree I do want to change topics to we mention you're the co-founder of Simply tap and tell us a little bit more about that.

Scot & Guests: 
[55:21] Absolutely so simply tap is a cloud-based payments company the idea was born from.
My desire to want to do something in a meaningful industry.
I'm being in finance specifically in the energy world I thought it was just phenomenal how you can take this material and it just runs everything right and I still looking at the world around me I said you know what there's there's something very similar to,
two oil and gas and that is currency that's a meal money basically its Financial systems and so.
With a degree in finance I said well that's pretty perfect than I do about three years of research and finally went Doug came down.
On to Austin he had been working on us a specific.
Not to get too confident but a specific architecture software architecture for doing cryptographic based payments.
And today that that system is the one we've created and it's used on over 500 million devices worldwide mainly Android it's called host card emulation or agency in so when we came together.
I saw that and I said this is this is what you've made hear your idea here is in phenomenal so I you know put my business development had onto my marketing hat.
You know we started the company and since then you know we've had a large Bank clients and small Bank clients around the world.

[56:53] But ultimately you know over the last year we've said well there's a whole lot of Green Space here in the United States and so we are going to create a new.
A new mobile payment in a new shopping experience called game g a n e and so that's really what we as a company have been working on this past year and so we're looking forward to to launching yet.
Star over the next month or so and see where it goes.
Know it's it's been fun ride we were venture-backed we have great gravy C's and fries and Ventures and Lightspeed Ventures and blue sky from Canada.
It's been fun and it's exciting and I know Scott you have gone down this path in your previous life and honestly now with spiffy and you've been around the block.
But it's this is my first time accepting someone else's money and then requiring to return that back to them.
100 fold if you will so it's something that I'm very.
Thankful of had the chance to experience and grow team build a product in Market that Prada.
It's all been is open very exciting and it's all been very kind of.
Nice to do it here in a place like Austin or there so many resources to to learn and to grow and to kind of pull from.
That's awesome congrats on the funding the we just had I don't know if you heard it or not but we had Shane from Zola on and I believe Lightspeed was an investor in those guys they're they're very active in the e-commerce space as I'm sure you know.

[58:32] We were a core Payments Technology and and the patents we have around it RR.
Are very very strong however has a small company it becomes.
Delicate to put the least and how you how you handle yourself.
So unlike many of the things a light speed run Commerce invests in which is more on on platforms that are to enable Commerce or speed up Commerce or grow Commerce from.
Cat facilitating position this one was was more of a linchpin to make Mobile payment actually happen.
I'm so it's a very technical technology that we use now Visa NASCAR DMX and everyone around the world leverages.
But yeah Lightspeed is a is a wonderful Venture Capital firm how to see the not Basin Austin we are fortunate for them to seek us out at the time.
That doesn't usually happen but we were in a space that they really liked I want individual there and.
Notice women introduce themselves if we want to give you a bunch of money we said I don't know if we can trust you you know and the dance began you know over 6 months and then finally they convince us that they work or not,
we're going to steal everything from us and you Story Goes On so.

Jason: 
[1:00:09] That that's a great story and just just to make sure I have it right so simply tap.
Which is almost a B2B play that would have license technology to other folks that would use it for for mobile cloud-based payments and then game which is Gano is a.
Consumer-facing app that you guys have lunch that fits art of the echo system that leverages that technology do I do I have that right.

Scot & Guests: 
[1:00:35] Yeah you got that right so it's it's Gane . But that's that's fine I mean you got softener so it's just me going to be listening as my own.

Jason: 
[1:00:49] Now Jeff Bezos isn't going to find your app.

Scot & Guests: 
[1:00:51] All good I don't need him find anything that you can worry.

Jason: 
[1:00:55] And when you guys say host card emulation.
I'm taking a wild guess but so you're using NFC chip in the Android to sort of spoof the NFC antenna that would be in a nfc-enabled piece of plastic is that.

[1:01:12] Kind of true or no am I totally wrong.

Scot & Guests: 
[1:01:15] Know your you're quite right with a couple technical differences so an NFC radio is simply just a radio it can it can pass just been any protocol NFC.
Is a particular protocol that everyone leverages.
Or I should say what people know as of NFC and so what we essentially do is we take that cryptographic element which is typically considered a secure element.
And we host that in a remote server so at the time you want to make a payment what we've done is we've we've incremented the cryptographic element a number of times.
And then sent those essentially loaded transactions ready to be used down to the device for storage,
a time of payment over NFC or really any means we deliver that,
that cryptographic element that send merged with the transaction itself so it can then be validated on the back and buy a large processor.
Stop a process that would process that particular issued product so it works with just about any.
Every it's a universal standard now.
But yeah it's it's on Android devices it was on Windows devices and blackberry but obviously those aren't around anymore so it's now Android.

Jason: 
[1:02:44] So one burning question so obviously the newer Apple devices have an NFC radio in them but likes.
Heretofore they haven't opened up that radio 2.
What are useful things we'd like to do it almost sounds like they're starting to an I thought I had read that they were going to start opening that up in some some Limited Format are you up to speed on that at all is there any any hope in the future of.
I'm getting NFC functionality out of the the Apple.

Scot & Guests: 
[1:03:13] Well I'd like to preface this common by no one knows what Apple do until Apple does it but we do know Apple quite well.
And what I would I'd like to say is it was great to see them it help the entire ecosystem when they chose to adopt.
NFC technology as for payment.
There's great advantages to opening it up and leveraging a architecture that we've you know.
What created the industry called height post-credit Malaysian it would offer all the things that you might like to do with that particular type of radio or frequency.
Making the experience that you have with the device in the world around you much more interactive and much more powerful potentially now they have recently opened up what they would say the readability for their NFC chip.
Which allows you to Simply hit a tag and RFID tag.
And then if there's a URL based there it will then pull the oral up just like you were to go to a website or provide you with information.
Based off the products so one of the examples of this is RFID lock tags on very expensive bottles of wine typically this is seen in China or areas where.
You can simply refill a bottle with bad wine charge the good one prices and so what this.
Opening up in the way of Apple allows them to do is now you can just a simply walk up to the the bottle of wine in the store.

[1:04:52] Wherever they'll go is to stop hearing about a product and it will then either provide you information about that particular part.
Or it can potentially allow your mobile device to download a coupon or a code.
Or take you to a website where you can learn more about that particular product where it came from maybe it could be pulled directly into a health app where,
hey if scans it says no this is no good for you because it has XYZ and we know you're allergic to XYZ so it's a great step forward.
It's going to be used pacifically for marketing and it's not necessarily.
Fully opening their NFC stack as as people in the industry.
Cool all this fancy payments talk is over my head but,
makes me ask how you feel about Bitcoin and cryptocurrency cuz I'm assume you have a lot of time thinking about that when we were giving to last session say.
Bitcoin was all the rage on in Silicon Valley and you couldn't get through one meeting without them asking what your Bitcoin play.
And I'd scratch my head and say look you know if the government doesn't take it as this is my general stance if the government doesn't take.
You can't pay your taxes with it and the government can't regulate it then it will never exist here in the United States as a main form currency not to mention that.

[1:06:22] There are very large incumbents like visa and MasterCard on the banking system as a whole that will not allow a cryptocurrency as a de-facto currency to exist because they already have the compute power they already have the infrastructure.
So for Bitcoin as a currency to become mainstream and many of my friends with hate me for this because their Bitcoin.
I'll put that way it just won't be supporting the ecosystem and the incumbents can simply squash it through regulation what screw do just.
Bearing it throughout marketing dollars so.
You have the currency know what chain is more interesting there's other Alternatives but you look at and you have to compare the Computing cost of walk chain with the existing cost of computing a cryptographic keys.
It's kind of you know it's not Cheaper by any means the decentralized.
Essential system is not cheaper here just spreading off the cost across the notes.
And if those nodes one day decide that it's too expensive for them will guess what your your network of nodes gets you no crappier.
Because now you're losing computer power so I know it's going to be a big fight it's better suited for countries with currencies that are have wild.
Deflation or inflation.

[1:07:53] So I won't most likely won't hear work here in the United States for ever until these except sit as their defacto.

Jason: 
[1:08:02] It's interesting in general with wood agreed with you and share your skepticism but the one thing I didn't see coming that seems like it's helping to make it slightly more mainstream is ransomware.

Scot & Guests: 
[1:08:13] Very fair very fair you know the problem is you can as an organ well I see the problem is and you're right ransomware offers this.
This way but you know.
Anna silly want to go and find and hold Bitcoin and no one does right so if it if it's not an everyday occurrence and the payment systems as they stand today no this very very well.
If you can get someone to change their habits and Amazon in anyone else will notice to then you really have no chance write a one-off purchase from a retailer I'll let Kohl's.
Even if they give you a deep discount and you never go back,
you didn't win anything you just discounted your products and services and you're not you're not making any moment towards them adopting your brand or knowing your brand any better you just trick them or force them to.
Of the economics of it to experience what you want to experience.
It's going to be a long fight ransomware will always exist being in people with cryptocurrencies at hopefully.
You know I obviously it's not a good use case come mainstream use case your fraud and theft and blackmail but it is a use case and you know it maybe if it keeps growing and.
Everyone's like hell yeah I need to have a little jingle of Bitcoin in my pocket.
Cuz I know I'm vulnerable and someone's going to hack me and all my pictures are going to be frozen or stolen or my business whatever.

[1:09:49] That does a use case.

Jason: 
[1:09:51] If you had some of the pictures on your phone that Scott has on his you'd want to carry a little bit coin.

Scot & Guests: 
[1:09:56] I think it wouldn't I think you just leaving locked forever that what you couldn't get back to him because yeah.
When one quick,
final question you're at you're there and Austin. Quite a hotbed of metal e-commerce but but high-tech can,
investing in things like that do you is there a kind of a community of e-commerce people do you get the shipping guys down there like shipstation you've got that coremetrics bazaarvoice,
Bret Hart and his kind of crew or down there how does that work in and did you pick Austin or you just kind of ended up there.
Well so I didn't pick Austin I was actually living in Chicago before I moved down to Austin and it was College buddy before you got married at 4 months I had some time so I took that Consulting gig here in Texas and I can live anywhere.
So he was an awesome I said sure sounds like a good place.
But as far as the I mean I'm here there's a ton of opportunity and it's a great great Community but as far as the Commerce Committee goes you know what.
It's definitely here.
Because the size of Austin is so much smaller more accessible than say so can Valley or New York.
It's easy to get in touch with and have conversations with but I can't really say that there is a.

[1:11:28] Yeah I don't go out and play poker with with five other you know individuals who are all in the payments or e-commerce space even though it's there's so much of it here it doesn't happen as much as you would think.
I've often thought about starting a you know I'm morning Club of some form around e-commerce but what I found is.

[1:11:52] There's there's anecdotal stuff that everyone runs into when you're selling things online when your building logistics for whatever product you're selling and everyone has a little bit of different take which is nice but the end of the day Commerce is Commerce,
and you know the tools that emerge as as best.
Best use case tools or advantageous tools they all seem to be in your hands all the same time.
Time for whatever reason the sales guys are getting those tools you know how to the businesses.
Have have a good Rolodex to call on in so you know I think that the individuals here in Austin are are quite.
You're in tune with the heartbeat of e-commerce and since they don't have necessarily the.
Changed up the social constraints of some of the bigger cities that have a little bit more complexity to them.
I think they're able to try things very rapidly here and I think that's one of the attractive.
Reasons why large corporations not only cost but there's a spirit of entrepreneurial exploration really is alive and well here and.

[1:13:02] E-commerce Community here is strong I wouldn't say we don't all good coffee every morning.
But you can definitely get coffee with just about anybody you want there's some places better than Starbucks I have to tell you that though you know.

Jason: 
[1:13:20] I totally accept that just to be clear.

Scot & Guests: 
[1:13:23] You only drink Starbucks.

Jason: 
[1:13:25] To Starbucks for me is that they're consistent and ubiquitous everywhere I definitely make no claims that they're they're the.

Scot & Guests: 
[1:13:32] Los Osos McDonald's.

Jason: 
[1:13:34] Yes this FairPoint but let just say they they're they're consistent ubiquitous and they they meet my particular requirements I lived in.
Portland Oregon for 10 years and you could actually be like stoned for walking into a Starbucks there that was sit in sidered such a low brow Coffee House in in Portland but I survived it.
So definitely sound in addition to the robust VC communaute entrepreneurial community and Austin and it's also I hear a pretty good place to get some barbecue and some good eats so.

Scot & Guests: 
[1:14:08] It's a it's a it's a foodie town for sure so if you guys come down I'll take you around will get some Starbucks will get that India get some barbecue after that we'll see you soon.

Jason: 
[1:14:22] I'm in I'm in I might wait till the rain stops.

Scot & Guests: 
[1:14:26] Yeah yeah thanks guys loitering.

Jason: 
[1:14:28] But we do definitely want to thank you for being part of episode 100 we're super excited about it and will certainly look forward to having you back at episode 200.

Scot & Guests: 
[1:14:40] Wonderful well thanks guys so much and I look forward to listen to every episode twice from here on out.
Text Ted we really appreciate you listen to the show so diligently and following us on the social channels best of luck with simply tap and game thanks guys.

Jason: 
[1:14:59] Will it happen again even with our dramatically extended length for this special hundred episode we have still used up all at a lot of time,
so certainly want to thank Reds and Kevin and Ted we really appreciate you taking the time to join us in celebrating episode 100 and we hope to have you all back for episode 200 as a reminder listeners are always welcome to continue the dialogue on our Facebook page,
and for sure if you like today show please go to iTunes and give us five stars 100th episodes of perfect opportunity for you to go,
finally write that review and give us the five stars it really helps us out on we appreciate it and of course as a reminder,
we're going to be podcasting shop.org this year and a couple weeks at the digital Summit in Los Angeles,
near my home town of San Diego so excited about that so that's going to be September 25th through the 27th,
course we've negotiated a 10% discount for a listener so if you go to the shop. Org website and use the promo code js10,
the number 210 you'll be able to get that discount and it's a URL that only a digital analyst tagger could love but will will put it in the show note so you can click on it.

Scot & Guests: 
[1:16:14] Jason congrats on 100 episodes been a pleasure working with you so far and thanks again for listening we really appreciate you not only just listening but really engaging and and challenging us to think about new things and talk about new topics it's always this is what really keeps us going is the listener so we really appreciate you sticking through the Jason Scott show for 100 episodes.

Sep 8, 2017

EP099 - Tulip Retail CEO Ali Asaria and News

Amazon News

Other news

Digital Retail Newsmaker

Our Digital Retail Newsmaker segment, features an interview with Ali Asaria (@aliasaria), CEO and Founder of Tulip Retail. Tulip Retail is a mobile application provider focused on empowering workers in retail stores.  They recently raised $40M in venture capitol, lead by Kleiner Perkins.

 

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

Episode 99 of the Jason & Scot show was recorded on Thursday, August 31th 2017.

http://jasonandscot.com

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

A weekly podcast with the latest e-commerce news and events.

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show,
this is episode 99 being recorded on Thursday August 31st 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingull.

Scot: 
[0:41] Hey Jason and welcome back Jason Scott show listeners Jason you know what I got 99 problems and are podcasting ain't one.

Jason: 
[0:49] I'm sorry to hear about your other problems but I'm super excited we're about to have the Y2K of our podcast.

Scot: 
[0:56] I know you'll have to see what happens when we go triple digits this whole thing could fall apart on us.

Jason: 
[1:00] My naming conventions for our audio files way up with iTunes like everything's going to break.

Scot: 
[1:07] Don't tell me that I'm actually legit right now.

Jason: 
[1:10] I didn't mean to make you nervous I've actually I programmed everything at three three digit so until we get to 1000 we're good.

Scot: 
[1:16] I'd Optical you have been on the road as per usual and I think you were most recently up in Boston tell us what's going on in that part of the world.

Jason: 
[1:27] Yeah yeah I've been traveling light I'll be on the road I think almost every day this month,
and I was in Boston this morning and yesterday which is a great retail City I was meeting with a couple of clients and some of my colleagues but one store in particular I had been meaning to get to that I finally got to,
is the ministry of Supply Flagship in Boston and is in a retailer and what's pretty cool is.
They have a make on demand.
Wool Blazer machine in the store so you you can figure an order your Blazer.
And they literally knit it in the store on demand.

[2:12] So it's kind of you know which is definitely a potential potential future Evolution for a lot of retail is kind of you know.
The Maid to Order personalized products at Masco and and pushing manufacturing out to the edge and all these things and you know.

[2:30] In the distant future we might have a lot of this manufacturing capability in our homes but for many years before we have that.
It'll make sense to be putting it into retail store so it's just think it's kind of interesting concept to watch.
I saw them sell a couple sweaters while I was there and definitely not a perfect experience at the moment I think it takes about 3 hours to knock out one of these sweater so you're you're ordering it you're leaving the store to do some more shopping and then coming back later that day to picking up.

Scot: 
[2:58] Because you don't just stand there and robots kind of so it on to you Westworld style or that's not how it works.

Jason: 
[3:04] That would be awesome that will be a future version no it's a pretty big machine that looks like a fancy 3D printer it's pretty funny fun to watch.
And what's interesting you'd almost expected the like that it would be a little gimmicky in that the product want to be that good but it's actually it's a stylish wool Blazer and it's like a.

[3:25] The the Yarns are like high-tech wool it's like an athletic performance wool so it's like it's intended to breathe and Wiccan and you know it's it's meant to be convenient travel garment that.
That look stylish but but doesn't make you too hot and sweaty.

Scot: 
[3:45] Call how do they get your body measurements with a Kinect kind of a thing.

Jason: 
[3:49] So they are not doing like a 3D scanner for the body measurements they the measure you the old-fashioned way with a.
A tape system but one of the disappointments is they are not custom making the sizes yet so they do they measure you but they measure you to figure out which of the standard sizes they'll make you.
So you can custom pick the colors.
And some options and things like that but you can't for damn pole say I want 2 more inches in the in the Chester's or shorter sleeves or something like that which.
Seems like a obvious thing you'd want and expect in a made-to-order garment.

Scot: 
[4:26] Is there some complexity around like making it kind of fit right and back on stuff.

Jason: 
[4:32] I think it's it's early like I think this is intended to be a permanent machine there some other versions Adidas is done one of these with sweaters and it was sort of a pop-up shop in Berlin for a couple months this is intended to be a permanent fixture in the store.
But I think you know we're seeing generation one of the experience and I think they've said that there.
They're you know going to see what customer adoption is like and and eventually expand to make door sizes.

Scot: 
[4:56] Thankful well thanks for the trip report and,
one thing I want to talk about is it's tomorrow is force Friday and for this is like a Star Wars Insider thing but before they do the movies the first wave of merchandise comes out that's called Force Friday,
so I'm actually making a huge sacrifice I am forgoing Midnight Madness for Force Friday to be on the podcast here tonight far listener so that's how much I care about her listeners Jason I'm willing to give up a little bit Star Wars action.

Jason: 
[5:30] I am super grateful I hope you don't miss anything super valuable by not being a right at midnight but I've actually I feel like there's been a lot of things pulling on your,
testing your dedication to the podcast is that I don't know of our listeners are aware of this but we we actually had to delay the recording of last week's podcast because you are a celebrity appearing on The Today Show.

Scot: 
[5:53] I wouldn't say I was a celebrity it was just kind of one of those things aligned much like an eclipse and I was I was able to be on the Today Show it was kind of fun so got to talk about,
it's funny I'm sure you've done these things where you talk for 30 minutes about something and they use like a 10-second snippet but I talked a lot about it we'll talk about it later in the show,
the tie between Walmart and Google so they were looking for experts couldn't find anyone I guess you were traveling and they ended up finding me so and I was the one guy that answered his phone I like 9:30 at night.

Jason: 
[6:27] Is funny they actually called me first and they had me send a picture and then they got the picture and said you know what you have a face for podcast we're going with Wingo.

Scot: 
[6:36] Applebaum was funny the only wall we had at Channel visor that had the logo where the camera can fit in Halogen orange wall and it made me look like a Oompa Loompa so that was exciting.

Jason: 
[6:48] I'm glad you noticed that because I did but I felt that it want to bring it up unless you.

Scot: 
[6:52] Everything's I have like spray on tan but that that's not the case.

Jason: 
[6:57] Yeah I have to be honest I feel like that was shoddy work on the cameraman like I feel like they could have fixed that.

Scot: 
[7:02] Well you know they don't have the professional crew like we do here at the Jason Scott show.

Jason: 
[7:07] Exactly the audio engineer on the Jason Scott show would never let you sound Orange.

Scot: 
[7:12] A couple other quick things for get into it the,
as a recording this we found out today that September 12th is the big day when Apple's going to announce something which we all know is going to be the iPhone 8 so that's going to be exciting and I'm sure they'll be some e-commerce implications we have a couple of things tonight we'll talk about,
and then I'm going to cook Commerce on September 13th to 14 really just as a spectator to come look and see what they're doing I'm super excited they're doing a tour of a prime now facility so I look forward to reporting back to letters on what I see there,
if any lister's are at that event and want to connect shoot me a note on Twitter or LinkedIn or where.

Jason: 
[7:53] And it's adorable that you think you're going to go there without me because I of course will be the one sitting next to you.

Scot: 
[7:59] Bloom I wasn't sure if you're going make it that's exciting.

Jason: 
[8:01] I am I am having to take a red-eye from a client obligation on the west coast so I might be a little sleepy but hopefully they're there will be a Starbucks in Manhattan that I'll be able to find.

Scot: 
[8:11] I'll be waiting there with a Trenta for you so that you're ready to get refueled and and hit the ground running.

Jason: 
[8:18] I totally appreciate it a side note on the world's best planned obsolescence like I thought you no one's expecting they're going to announce and iPhone 7S which might be available.
Very soon after the announcement and the iPhone 8 that's going to be probably a pretty constrain product and might not be available for a month or two.
After the announcement maybe that's the sort of common speculation and there's also a lot of speculation that they're going to launch a new Apple watch at the event and so they,
Apalachee solve the problem for me you know what I was going to be sad cuz I'm going to want the aid and that means I'm going to have to delay gratification and wait to get it,
but on the day they announced the announcement announce the announcement yeah I got off the plane and my Apple watch exploded.

[9:03] The screen not an actual exothermic explosion but the screen flew off.
So now I have a legitimate reason to buy the Apple watch so that'll that'll acute fulfill my my short-term gratification and then then the iPhone 8 will be my longer-term when I guess.

Scot: 
[9:21] Dump yard so Elon Musk doesn't call them explosions their violent release of atoms so that's what you're watching.

Jason: 
[9:29] Yes not as violent as some of his Rockets thankfully.

Scot: 
[9:34] Well Jason this time of year between summer and kind of the Fall is the crazy time in the world of digital retail cuz everyone's pushing out all the things they've been working at out for the since last holiday,
and getting ready for this holiday season and true to Fashion it's been a crazy busy news week so let's jump into it and then,
one thing for listeners to stay for years we have a new segment today it's called digital retail newsmakers and,
that will follow a short update on the news and first thing we want to cover tonight is Amazon news.

[10:25] Yes so the first thing that we have to cover here is we are kind of deep into this Whole Foods Amazon,
integration so the sequence was Thursday last week was I believe the 23rd or 24th,
Amazon sent out a press release saying we have received,
that the transaction is going to close on Monday and here's some of the things were going to do,
and that release itself really set the not only the internet on fire but also the stocks of the grocery companies so I saw that several of the main grocery companies were down 8%.
And I thought it was funny because when they,
that in the precious there was three or four bullets and it was almost a bullet for bullets list of the things you and I predicted on our Whole Foods Deep dive that we did right after the announcement.
The quick take so pat on the back to us because I think we got most of the stuff right.

Jason: 
[11:29] Yeah yeah I feel pretty good and then one thing we,
we did talk a little bit about on the show but the other thing a ton of people were predicting that there would be a lot of them Regulatory impediments and that that would slow down and that the government was going to look at it.
Really closely and I think both of you and I discussed on the show and then did a bunch of Prince interviews where we we said that that was silly on that that this was going to.
Not have any antitrust issues whatsoever and sure enough it it it got very fast approval.

Scot: 
[11:57] Yeah yeah and then so the day one activities were pretty impressive were you able to pop into Whole Foods on day one.

Jason: 
[12:04] I was and yet impressive is definitely the word the the speed at which they got so much done is truly impressive and scary to a lot of the folks that have to make a living competing against them.

Scot: 
[12:19] Yeah the so.
The biggest one is price cut so they picked some of the most popular items and did some pretty substantial price cuts and and then kind of said more to come,
this is nursing you know you're starting to see this kind of,
you know you hear of this whole fake news and how the news media covers things in the political side of things but seeing e-commerce where.
Yeah I saw some people report as much as 40% off and you know what day it done is just really kind of found two things that had been discounted and then didn't average that was one way of looking at it,
and then the most conservative article I read said that it was only like 1% and what this person did as they took like.
Every SKU in the store and.
Including like that you know the 50 to 100 top sellers and then they just kind of looked at the math that way and that one's kind of the dinner some cuz it was clearly designed to get the worst results and it basically said well you know the prices have achieved more than 1% we checked.
10000 items and so I thought that was funny that it's clearly they they either had absolutely no idea how Commerce works or they were just trying to.
Prove a point that it wasn't that big of a discount.

Jason: 
[13:33] Yeah I mean it it does go like there's an age-old problem with.
Like tracking prices and you know everyone has a different basket of goods and and you know every basket is going to have a.
A different outcome in so you know the most interesting studies are the ones that like pick a consistent basket of goods over a long period of time and then you can see.
Ctrends.

[13:57] But you know I just have to say like the fact that they got prices changed at all in my mind was super impressive and their brilliant about milking those price changes for for a huge amount of PR but just in general.
They got a bunch of Amazon signage up in the stores they got a display in every store that was merchandised with a bunch of Echoes that were for sale.
And you know they they they change prices on you know a hundred items that are you know likely price sensitive items that that people are paying attention to in generated a bunch of media that prices are lower in Whole Foods which is.
Going to drive a bunch of extra traffic to Whole Foods weather.

[14:40] Does customers particular baskets are lower or not so you look at all that that they got done on the first day that they took control of the store and you go you know man in a traditional grocery store that list of activities would take nine months to deploy.

Scot: 
[14:54] Yep and it goes even deeper so when the arrow kind of points from Whole Foods to Amazon so the things I saw they had you know a really good selection of Whole Food private label and that's called,
whole 6330 another word for 365 and so that was on Prime now it was promoted categorized and you know the pricing seem to be pretty aggressive I didn't check exactly to the store but it seemed to match the,
a couple things I saw on Main Amazon you had some things so that that was also an impressive that they got that done so quickly.

Jason: 
[15:33] Yep absolutely there they are just operating at a different speed than everyone else in and that you know should should really be a wake-up call if if you're you're planning to compete with them.

Scot: 
[15:46] Yeah nothing in the announcement that I thought we had talked about that a lot of people poo-pooed but is definitely happening like it's two things so number one they're kind of it's not a day one thing cuz there's an integration.
Amazon Prime will become the whole food customer reward program and then,
I know folks that have gone in and chatted and heard from cashiers that there will be an overall Prime discount to your entire basket.
One cashier said 10% I have no idea how they're going to verify your Prime imagine maybe a mobile app or something but that's going to be interesting to watch roll out.
And another one that you know is interesting in and unite talk about this kind of being able to,
I think a lot of people are really obsessed with this are they going to just ship is going to become a shipping station and this kind of thing and actually the reverse was announced where Amazon's going to put Lockers in there so if you're going to Whole Foods you have some Amazon returns you bring them with you,
I just told her to lock her and now you saved yourself a trip to the UPS store or whatever it is you need to drop those off.

Jason: 
[16:49] Yeah yeah bunch of the crazy things on day one and I'm sure we've only seen the first wave of the interesting integration so it's it's going to definitely be a fun one to watch.

Scot: 
[17:00] And then continue on the Amazon news11 tidbit I saw we've talked about this on the show or fair amount where you know I think the Amazon ad.
Kind of opportunity is way bigger than people realize and there's a lot going on there so there's an article in digiday where they talked about.
Not Amazon has really kind of opened up in within the Amazon Marketing Group AMG and AMS a lot of AP eyes that allow for more programmatic bidding so as you know being in the ad to yourself you know the.
Biggest advertisers have these pretty complex things they want to do they want Total Control they want to be able to programmatically do things the first generation of the Amazon API would basically say or or Amazon's.
Add technology basically said Mr Advertiser that's great but here's our little system this toy built you're going to have to use it yourself that really kind of delayed adoption so now when it comes to things like the bility to you spin up.
Retargeting campaigns display ad campaigns and then search programmatic search kind of things they have a piece out there now that they are pretty actively.
Getting into the hands of advertisers which eyemagine is part of a Q4 push to to really kind of dramatically grow that business so so that's pretty interesting and I still think that's probably the most underappreciated kind of.
What could be another multibillion-dollar pillar for Amazon is is the the Amazon ad technology.

Jason: 
[18:32] For sure.
Another interesting Amazon announcement partly because of the irony is that they announce their,
a new fulfillment center that they are opening and the location is quite interesting because,
they are taking over a 900,000 square foot mall and Randall Ohio so this is one of the very first.
Indoor Regional malls close back in 2005 and you know there's a lots of Taco in the mall again and World about you know what.

Scot: 
[19:19] You think they really turn it into a cell phone I kind of envisioned I'm having a bold as it don't you think.

Jason: 
[19:25] Yeah the location yeah I think the I think Amazon's fulfillment centers are highly optimized I don't I don't imagine they would reuse the space.

Scot: 
[19:34] Yeah it's called it like a huge fulfillment center I think it's going to 800,000 square feet which Amazon's building of it like 1.5 21.9 now it's actually a small fulfillment center for Amazon.

Jason: 
[19:46] Yeah but I mean to put that inside that's a very typical sized you know Regional mall and so your point like a regional mall is a small Amazon fulfillment center.

Scot: 
[19:59] Yeah and then I think it's a nursing cuz I'll probably a lot of jobs inside of there too so I don't know what do you say so.

Jason: 
[20:05] I think they Dance 2000 people on day one.

Scot: 
[20:09] What is to do the math of the conversion rate for every dollar you lose in retail and how many employees does that and then what's it look like over at Amazon I think that would be a fun exercise will do a deep dive on it.

Jason: 
[20:21] Awesome are there is a lot of good dialogue around that Trends in in retail hiring and what happens with unit e-commerce Jobs go up as as brick mortar Jobs go down on all this or something so that be a great thing to deep diver.

Scot: 
[20:35] Another quick hit on amazon.com Square put out a pretty interesting chart I will put it in the show notes and what they did is they did one of their comps Corey studies with Millennials and they found that shocker Amazon is the number one app with millennials,
and they asked interesting series of questions like you know what app would it be most hard to live without an Amazon came out on top of that,
I and another interesting fact wait on that as you had Amazon it number one and then you had some Social Media stuff,
Google was in there but it's kind of me okay third the size of of.
Of Amazon it's just another maze data points that kind of shows that as people.
A Amazon has become the de-facto kind of product search that the people look for and then be,
as people look for products they are not really going to Google anymore they're going to Amazon.

Jason: 
[21:29] Yep and you know it that isn't surprising I've just done a bunch of consumer research on behalf of of some clients and you know one of the huge takeaways is is Amazon is just simply becoming a loved brand and.
You know they're there an important part of the consumer's life they're not just a place to get stuff so it makes perfect sense that their app would be the.
The sticky one of the top of the Heat.

[21:57] I think there's also a lot of interesting not Amazon news this week.
One of my favorites is there was an article in the Wall Street Journal this week talking about citing Warren Buffett and talking about.
Retail and Brands being on a collision course.

[22:18] And this was that super exciting for me because I have been that that is slide one in my my retail Trends presentation for the last 6 months so when.
Warren Buffett agrees with me that's one of the rare occasions when I feel like I'm probably on to something.

Scot: 
[22:34] Call did Warren call you for advice on this.

Jason: 
[22:37] She did not but essentially like the the the spin here is.
Retailers and brands have always been Frenemies that retailers have been trying to create their own private label brands.
Forever but you don't allow the more recent Trends are the the stigma around private labels is going away and customers are much more happily adopting them and.
As a result.
National brands are losing their equities are losing their Equity you know stores are all getting Consolidated so the retailers have more power and from Warren's position who owns a lot of cpgs.
You know you know what I think he's saying that the retail and brands are on a collision course and the retailers are winning.

[23:26] Which which I certainly think is is possible in one sense I think the industry interesting thing we talk a lot like.
These products retailers are making are no longer private labels like they're their National Brands the.
Kirkland is the best sounding you know sells more on Amazon than they do on on Costco right like that's that's a brand it's not a a private label for Costco and you know that the Amazon Echo.
Is it certainly not a private label product like it's it's the market-leading you know best ecosystem product in a space.
So I certainly think that the trend is true I think it's beyond.
Just private labels but one of the interesting subtext under this is the this article kind of echoed a lot of Articles have been in the news this this week.

[24:21] The one one of my competitors in the space wpp announced servisoft Revenue quarter and you know people are making a lot of.
Conversation around hey is advertising or digital advertising.
Dying or weighing it looks like he's big big Ad Agency holding companies are starting to see soft soft sales so you know a lot of.
People that care about me or asking you know if my curse in Jeopardy and I do think.
That that we're seeing those kind those digital ads really start to wane like that.
What I call interrupted rim and advertising like interrupting when someone wants to see in order to you know force-feed them this advertisement just.
Is a decreasingly.
Effective tactic and it's the the analog versions are less effective in the digital versions are less effective and I think you know our friend Scott Galloway like he calls advertising is increasingly becoming.
Attacks that poor people pay any talks about all the.
The the rapidly adopted ways that more affluent people are paying to avoid ads and you you get your your media from Netflix without ads and.
You pay for ad blockers and he pay for subscriptions to you newspaper to get it without ads and said I feel like this traditional.
Interrupter of an advertising is sort of dying and you know so agencies like mine or having to reinvent themselves to serve customers in ways other than advertising and and of course the.

[25:53] The particular company I work for it doesn't really do that kind of advertising so so it doesn't particular dust.
But the big article that came out that really triggered all this was about a week ago and it was marked picture who's the chief customer officer at P&G.
And he announced that they had really concluded the digital advertising wasn't working and they were they were going to cut at least a hundred million dollars of their digital ad spend because it wasn't effect.

[26:19] And that's interesting because I do think there's a strong Trend towards.

[26:26] Eliminating some of this this interrupt driven advertising but I don't think that's the whole story of Procter & Gamble.
Patrick gamble has some some some serious activist investors that are kind of in their shorts right now and you know there's a lot of pressure on them to cut costs and it really looks to me like.
They just did a brain-dead analysis and some of their marketing activities and are trying to justify the fact that they're having to significantly curtailed their spending so you know their there they're doing like.

[26:56] Kind of brain-dead last-click attribution on a on a whole bunch of marketing spend and just saying hey hey you know we don't anticipate sales are going to significantly go down when we.
We stopped spending this this hundred million dollars but it you know it it really kind of.
Doesn't feel like they they've done a very detailed analysis on how you know how,
you have and how that media is or could be influencing sales in their wholesale partners and and you know they're there,
they just seem really rudimentary on the metrics Mark Mark is like one of the most powerful guys in advertising and he spends all his time talking about,
a metric called visibility like whether or not you can just see an ad,
and wow it's super important that that that metric be right it seems like someone about 32 levels below Mark should be focused on that and someone at marks level should be a lot more focused on,
how can I marketing tactics drive more profit for human and you know it just seems like,
like tractor is kind of lost lost sight of that kind of view on on their digital marketing spend.

Scot: 
[28:01] Sold articles are nursing say think so Buffett and then also one of Sam Walton's descendants of sold quite a bit of Walmart stock,
and it's just confusing cuz the Articles kind of time together but like you can tell the,
the two events that happened separately in Warren Buffett's not really saying the reason I'm selling Walmart stock is because of this battle of between Brands and retailers but but it's interesting to because he's he's kind of.
With his wallet he's buying Brad's and Son retailers but then he's kind of saying that he thinks retailers are winning that battle what's your.

[28:38] Which kind of your view on that.

Jason: 
[28:39] Yeah I don't I agree he he I'm a less sophisticated investor than you but part of me feels like he has a very disciplined investment strategy,
that you know is based on value investing and so you know in a market where the cpgs are losing power to the retailers are the retailers stocks becoming,
yeah less likely to meet his value criteria and does he feel like if he can pick the the subset of winners among the cpgs that those are potentially better.
Better value investment censored you know better fit his in his particular investment profile.

[29:20] I don't know if that's true or not I was that's internally speculation on my part.

Scot: 
[29:24] Yeah it's it's a little confusing the way they time together but they're not really meant to be together.

Jason: 
[29:31] Yeah for sure it's going to be an interesting space to keep watching,
I think we talked on the show it's going to be increasingly hard to make a living selling other people's stuff and so what you just are going to see is you know,
retailers are going to start looking a lot more like Brands and Brands you don't going to have that retail distribution so they're going to have to start selling direct to Consumers and so they're going to start looking more like retailer so I definitely wouldn't we say collision course I think the two businesses are going to know start looking a lot more the same than different is as we progressed.

Scot: 
[30:02] I'm just glad that we have a little break from the mall again merkel's it's getting kind of a little old.

Jason: 
[30:08] Yeah and I don't think we have much of the data points but like,
a bunch of surprisingly good earnings quarter this year so they're a bunch of companies kind of surprised us with some beats even if they're there future outlooks weren't particular promising.

Scot: 
[30:25] Yeah I think that's why actually had quite a strong quarter and surprise whilst reading.

Jason: 
[30:29] Yeah and and again though like had caution that that wasn't the new normal and then there's talk one way down to spite the fact they had a big beat.

Scot: 
[30:37] I mentioned it to the top of the show with the Today Show kind of live there but the other big news in e-commerce was Walmart in Google really kind of.
Deeply partnering to effectively take on Amazon and yeah I think I think it's early to call this one but what's really interesting in this story to me is the whole,
you know enemy of my enemy is my friend so you know here's two companies that have never really had,
an alliance I'm aware of other than I'm sure Walmart's large Google Advertiser in that kind of thing really kind of aligning and saying,
hey you know we need to create a counter to this this Amazon kind of meth it's growing and and figure out what we can do there it's interesting too cuz Google has always play this kind of you know,
we're neutral we just in traffic to all the different retailers we don't have a favorite retailer but it's starting to sound like Walmart is one of their favorite retailers.

Jason: 
[31:35] Yeah and I mean you know you think of that like it's it's increasing in the case that Amazon's big competitors are are these platform Echo Systems more so than.
Then other retailers and so you know that that puts them much more odds with Google and Facebook than it does Walmart so it's interesting you note.
Google and Facebook have some monetization problems versus Amazon's model in so you don't Google Plus Walmart feels like a more valuable.
Competitor to the to the Amazon Echo System and I think you called it but like one of the most interesting parts of that announcement is not that hey you can order Walmart excuse.
Through Google home,
it certainly is interesting and by the way Walmart's up till like 67 million skus now so there you know it's a pretty pretty deep assortment,
but the most interesting thing is Walmart is sharing first-party data with Google and so what would that lets Google do is.
You know have much better inside and what you purchased in the past and be much more predictive so that your your voice experience can be much more impressive in its going to accurately guess.
What size Campbell Soup you buy or what size Ruffles potato chips you buy and so they they get that SKU right cuz you know voice.
Ordering becomes a disaster when they don't have good data about you and have to guess which of the hundred variance you might you might be interested in buying.

Scot: 
[33:03] Yep another quick one that I saw is so so.

[33:10] Google shoppings at ad unit is called Product listing ads and saw that they are running a new pill a ad unit usually the way this works is you go to Google you search for,
you know I don't know.
Screwdriver or power drill or whatever and that's you see a bunch of those products from multiple retailers we saw unit that effectively was kind of a retailer take over so you would search for,
I think the one we found with some office supplies at the Go staplers and they had,
The Container Store where you could just kind of say as a user you would only see Container Store Staples in the ad unit and then there would be the same number of kind of,
products with in there so that was kind of nursing not in a Google test tons of things all the time that we're always looking for new ones so I thought that was kind of interesting single retailer ad unit,
that we hadn't seen before I will put a link to that in the show notes as folks are interested in learning more.

Jason: 
[34:03] Yeah that's toy interesting another one we saw was that the target.
It seems to have moved off of AWS and that that's interesting for a couple reasons listeners World member about a month ago,
Walmart launched too aggressive initiative we're not only did they say will not use AWS but we're encouraging any vendors that that's support us to not use AWS and now you see,
Target moving off of AWS like the the obvious impetus for all of this is.
These retailers don't need to be paying money to a competitor that that competitor can then use to develop new products and offerings,
they make them you know more competitive with Amazon and so so you know this is always been,
kind of the case but I think it's it's becoming much more apparent that retailers are recognizing it's foolish for them to use any Amazon Services even if their services than aren't competitive because they're all of course.
Supporting and funding.
Efforts that are competitive so if your Microsoft Azure or Google Cloud platform like,
you know this is probably great news for you you got you know a lot of retailers are,
are modernizing their it infrastructure and moving to the cloud and increasingly it's clear that the one category in the world that's not going to adopt AWS as the dominant Cloud platform is going to be the retail one.

Scot: 
[35:34] Cool and I know we're up against time we want to make sure we have room for a newsmaker but you know long time Lester's will know we are very enthralled with augmented reality and virtual reality and there's a bunch of news there.
So I put it on my Star Wars hat one of the ones that was exciting is as part of the retail launch day of of this Force Friday they have added an AR functionality to the Star Wars app.
I know the way this works is you go to your retailer and there will be a display there and you hold up the AR app to a QR code like thing and then there's a Star Wars character that appears in virtual reality or augmented reality that you can see.
Did you can take pictures of them and collect them so one of the clever things they've done is there's something like.
20 characters 15 to 20 characters so as Star Wars people you kind of try to collect these things and let's say you're going to Walmart on tomorrow on Force Friday,
well they're going to rotate characters to characters you see over the next four or five days will be different so they're kind of using this this virtual kind of technology to draw people,
back to the stores versus just having him come in one time so I thought that was kind of interesting marriage of of the Two Worlds that we like there.

Jason: 
[36:48] Yeah I am not surprised at all that you are the earliest adopter and I'm excited to give it a try myself another interesting AR.

[37:00] Milestone is this week both Google and apple release their variance of AR kits,
which are essentially their api's for developing AR & VR but mainly AR experiences in their mobile phones and this is a huge deal,
Google this had some AR technology called Tango,
but it was really restrictive it only worked on very specific Hardware configurations and now Google is released this AR kit which works,
on the majority of Google Hardware out there so it already works out over 100 million devices apple is released a kid that's works on basically all the.
The Apple devices that can run the current operating systems in this is really likely to usher in.
A huge crop of new you know highly functional AR apps in the.
In the app stores like you look at a successful Arab like Pokemon go in the developers had to develop it on themselves and now you're getting.
Napi from from the hardware manufacturer that that is much more robust and higher performance and.
And takes the burden off the programmer to do all that so we've talked a lot on the show about.
How AR apps are going to be important part of retail and you know that the availability of these api's is is definitely going to be a catalyst for seeing one of those so I'm excited to see what comes.

Scot: 
[38:24] Yeah I'm kind of seen some indications that there's e-commerce is a category that they're really interested in and,
I think Ikea is a lunch partner and you know it'll be interesting to see,
I'm imagining so apples really excited about this we couldn't event coming up in a couple weeks you know what if we had a retailer on stage I don't think that's ever happened where we had a retailer on stage kind of talking about new technology,
let me nursing to watch and see what the retail implications are.

Jason: 
[38:55] For sure and I akea is the perfect lunch partner cuz they're one of the retards that went to the work to program their own custom AR app.
I'm the day already had so it will eyemagine it was super easy for them to sort of adopt and expand it to use the new new kits.

Scot: 
[39:11] Yep in the last little tidbit so company when we did our deep dive on a rvr that we talked a lot about is magically.
And I belong away depend for their headset was released today or are at work it's off to the patent pipeline so that's definitely an interesting read if you're into this whole world,
there's there's,
the air BR world is please pretty split on this a lot of people think this company is really kind of you know never going to ship something and that it's really vaporware and other people feel like maybe they're getting pretty close now this patents up.

Jason: 
[39:44] Yeah yeah for sure I'm eager to find out more let you know they've had some patents on the kind of underlying technology before this Pacific patent is actually about.
The wearable glasses version and at least you know the Pak patent makes it feel seem like.
They expect to be able to build a pretty lightweight convenient device.
That that might be consumer-friendly and and that's interesting cuz a lot of people have feared that the technology you know like the prototypes of the moment the smallest one is a pretty heavy backpack.

[40:17] So the fact that they think they can build it into assetto eyeglasses is is very encouraging and so with that we should.
Turn to our next topic is Scott mentioned earlier tonight we are trying a new segment that we're calling digital retail newsmakers so what we're going to do is pick interesting companies in the e-commerce ecosystem,
it has an interesting recent news and talk to the folks involved to get the inside scope,
so Scott who is this week's digital retail news maker.

Scot: 
[40:57] Will Jason on August 22nd which was last Tuesday Kleiner Perkins which is one of the bluest of Blue Chip Venture Capital firms out there announced a 40 million dollar investment in Toronto based.
Tulip.
And here's the kicker all these headlines about Molly getting all the buzz around e-commerce Amazon Etc while read about store closures,
tulip is not an e-commerce company but it really focuses on providing a mobile application platform to store associates that are in.
Source so we are really excited to have alyas area live from Toronto he is the CEO of tulip retail with us here tonight.

[41:36] Thank you so much for having.

[41:38] Sure sure before we jump into it I wanted to bring up kind of a beef I have with you I was a very early Blackberry user,
and from because I was on the BlackBerry from definitely like 2000 2007-2008 super pretty heavy user I think I've got all the way from the little kind of.
Pager kind of form to the bigger ones and my favorite app was brick breaker breaker which I learned that you had some kind of a involvement in tell us the backstory on that.
Yes it is quite a backstory but it's funny cuz like for a lot of my career I always always get introduced as the guy who created Brick Breaker and now it's funny cuz it's times past,
what does time passes lesson bus people remember that game and sometimes.
Recapture to be like the excitement that was created from that that one out that I created that was on that one more time so I'm like a hundred and fifty million mobile.

[42:34] Yeah they were calculated the hours consumed done on your brick breaker.
Oh man there's actually so many articles written about how much wasted time has been like that has been lost like from even likes to senior people like that I think the former president Obama used to be a big player I feel sort of guilty about it but not too.

Jason: 
[42:50] You are single-handedly responsible for lowering our GDP.

Scot: 
[42:54] Even ready to be at least I could you imagine the numbers on that.

Jason: 
[43:09] So obviously we have hinted at part of your background but Allie for listeners that don't know you why don't you give us the the recap of what your background is and how you came to tulip.

Scot: 
[43:22] Yeah so I mean my background is I mean I studied Computer Engineering at University called Waterloo here in Canada and I was really focus on Hardware that time and I got this new job at this.
It's relatively new company called blackberry and started working there and wherever and eventually work there full time.
But quickly I mean after I graduated University I I felt like I had to start something so I started this company I mean about 10 10 11 years ago.
Caldwell. Yay and it was literally just me in a closet.
I'm trying to build an e-commerce site from scratch I rode by wrote the code myself and I was packing the boxes myself and then we'll does he agree to what is now like one of the largest e-commerce companies in Canada,
in that process it for the beanie Mike rewrite I literally like when I started well that's yeah I didn't know anything.
About retail about merchandising about Warehouse Logistics and vendor management Ida learn all that from scratch as an engineer.
And then that kind of led me to do what I'm doing now is building software for retailers having dinner retailer for a big part of my career.

[44:20] What tell us more about well. CA what did what did you sell there.
Better inside your Pharmacy and eventually groups of being what's I would describe it maybe it's like diapers.com for Canada so it sells everything from baby to Health and Beauty it's kind of largest largest company in Canada in that category online.
Get it sounds like it's still operational so is that something you sold or or what how did you know what was the end result that.
It was kind of interesting so I was the CEO up to about 4 years ago and at that time.
Rebuilt how much software there that I actually went to the board and I said hey look there's a ton of value here I want to step down as a CEO of this retailer so that I can build a software company out of all this,
great engineering that we have here and the potential for it and so to actually started with me you know promoting,
who is Dennis to out who is now the CEO of so that I can step down and pull out a lot of the IP and that's that's how we begin,
tulip with me kind of saying there's actually made me more value in this softer than there isn't any in the rest of the pictures.

Jason: 
[45:28] Very cool,
and I guess I don't know if irony is the right words got always correct me with when I use bad diction but the wheel that CA is if as I understand it is is premature play,
e-commerce site and then it seems like the biggest play for tulip is is is clearly an omni-channel pitch.

Scot: 
[45:52] Yes it's got me this is kind of the irony of my career but I think maybe a lot of lessons make sense right is that it's so much of my life was focused on trying to.
Compete with physical retailers by building an online,
retailer in love and in that process I was competing with all these retailers that I eventually build relationships with and so I would I would know all the folks at companies like Toys R Us that we now work with and some of the other folks and.
What I started to realize was that what the thing that I think a lot of us know but it have any figured out how to really capitalize on which is.
90% of retail still happens inside these places called physical stores and there's so much opportunity there but it feels like 90% of the Innovation is all happening on that on the comp side only on the outside.
My career is now about kind of trying to take all of that Innovation that I learned that I originally deployed Annie, try to replace that inside storage.

[46:46] Cool so so 4 years ago you started tulip in when did you know you wanted to kind of go the store router was it kind of you edited there in somewhere.
Yeah we started right away saying that stores matter and there's a massive opportunity there but I don't think we knew exactly what we were going to do there.
The journey from me really sad was with me sitting with a bunch of big retailers that I built relationships with over the years and saying like help me understand what are your biggest challenges.
And what I started to learn like just by sitting on the floor inside the stores and talking to heads of stores was that.
It's really hard to innovate inside physical retail because they're stuck with these old green screen like you don't point-of-sale terminals that were built in the 1980s and the culture of stores and so difference and there's like one of our retailers has 40,000 employees there,
all we know part-time and high turnover and so you're in this world where they're so much.
The man from customers to innovate on their retail experience but when you're a retailer front operate these like very complex businesses it's really hard to adapt with the software in the technology that we have right now and so I was just like hey this is all opportunity this is a,
big tough scary but big opportunity and so that's kind of what we went on.

[47:57] Got it so so soon I'm an e-commerce guy and I don't know much about stores which would be a good assumptions give me kind of the elevator pitch for for tulip.
Diane and why stores need to use this.
90% of retail is happening inside physical stores but I think the part that we forget is when we say.
What's happening in physical stores it's happening with real human beings going up to other real human beings called store associates and buying through them and so you have this large job it's actually the largest job in North America I didn't know that,
retail store associates of job which is never had tools before so we've all experienced customers.
Frustration of going into a big retail chain and try to talk to a store associate that looks like they just were hired the day before and they can't answer basic questions that.
You was a consumer can answer on your own phone right I can I can sometimes look up inventory an answer more complex you know product questions on my own phone and I would expect a store so she filled answer answer the opportunity to realize.
Give this massive massive job category that's never had gray tools before.
What happens if we actually gave them the tools to be able to answer customers questions and pull up inventory from other channels and help people transact across you, and in-store regardless of where that product is.
Well if we could do those things.
Maybe there's a potential lift and in the sales that we can do inside stores and that was the theory when we started we had no idea like at the massive opportunity and in the lift that we could create once we once we did and that's kind of where all the success companies come from.

Jason: 
[49:32] Perfect that you know we we used to make the joke like for a longtime store associates weren't even you know a common rule in a retail store was it store associates couldn't even use their own phone in the store.

Scot: 
[49:44] I work with these folks right so now I sit on the floor sorry but I mean I'm sitting on the floor with these door so I started to see the other side of it.
Open very young people who know how to use technology cuz now everybody knows how to use a phone but they're so frustrated because they can't get access to basic information sometimes the only computer they have is the point-of-sale terminal so if there's people checking out.
There is nowhere for them to,
research information sometimes they're using their own retailers like mobile app because that's all they have and so I feel for these folks now and I didn't even though maybe in my previous career I used to kind of make fun of them because I see now what it's like being on the floor inside a story you want to help customers we don't have tools rent.

Jason: 
[50:24] Oh yeah it's it's believe me it's it's a difficult job and we you know and like originally doing all these rules,
we are nobody wanted the sales associates to have more technology cuz frankly everyone was afraid they'd be playing brick breaker on it all day long and not talking to customers so I guess there's some irony there,
but the the you don't when customers started walking in with their own phones and having all this information in the sales people are completely unequipped we used to talk.
About you know the sales associates were essentially bringing a knife to a bazooka fight like it was.
Totally asymmetrical so makes perfect sense to start equipping those the sales folks.
You you can help me as an advocate a little bit because it is you may know from listening to show Scott doesn't really get the value of retail store so you know Scott.
Scot as a drum in his office called retail Mulligan and and he just constantly beats it.

[51:22] And you don't Infernus him like there are in fact a lot of stores closing and there are in fact,
actor water stores facing some headwinds but I just beat you know curious what what's your general like so you know your future is tied to the future of the store's what what what do you think's going to happen to physical retail.

Scot: 
[51:41] I think you can see I'm a little biased because I bet my career in my entire company on that idea that stores matter right but I think like from our perspective right like you're seeing is right we see a lot of the retailers we work with right now,
as tulip enters into the retailer to start our work with them.
The head of stores has been mandated to close 10% of the stores but increase sales by 15% in those in the remaining store and so what's I think what's happening I think we're all seeing as that,
even if the shift towards like you know you, goes from 10% to 15%.
There's still a massive number of transactions that were going to continue to happen inside the stores in a space where there's like three trillion dollars retail transactions in North America and so you have a massive massive category on the other hand.
You know 5% shift online means lots of jobs lost and so.
The world in which tulip lives is we're working with me Taylor's that are saying yes stores will have to close and we have to correct for them the right number stores for the remaining ones.
Bad experience that we drive for those customers we need we really need to up our game and it can't just be by.
Lowering prices or in a fighting on trying to not have Amazon have access to the channel it's got to be about creating a differentiable experience inside stores at customers.
Actually want to come to and that's kind of the world in which tulip plants ring.

Jason: 
[53:02] It makes perfect sense I'll just eat like the customer behavior is fundamentally changed as a result of.
These digital tools that they've now become accustomed to and you know one of the big examples we always use his ratings and reviews to become super important for customers and making decisions,
but none of those digital tools are available in the overwhelming majority of stores writing so you know a super common problem for a retailer is what is the in-store digital experience that,
brings all those digital amenities to the The Shopper that they become accustomed to from their online shopping,
and most of the answers to that question are inconvenient like they're they're super expensive and very hard to maintain and you know,
digital signage and digital fact tags and you know there's there's a lot of baggage attached to doing everything on the customer's mobile phone and having him be kind of heads down in your store and by the way it's super hard to get the customer to download your mobile app anyway so they're all these these headaches and,
it it it seems like providing the the sales associate which is the one variable in the store you can control.
With access to these digital tools to use on behalf of the customer or with the customer seems like one of the the best solutions to that problem.

Scot: 
[54:17] Right I think you see that right when people talk about the,
the end of stores you look at something like the Apple store right be like apples in this position where they don't have to open physical stores but they continue to open them and they're doing phenomenally well right and so I think we see this world in which like another we work with examples right bonobo started online.
Did really well and then started opening physical stress you see all these like these folks were doing well online still opening stores but the stores feel very different,
in terms of experiences it's different,
how you drive a perfect experience for a customer,
device they can share that with a customer cuz they know that to the customer that matters but in addition to that they'll also pull up pricing from other retailers write a big part,
the selling process for some of our some of the rituals we work with his saying.
Are you afraid that this product is cheaper on Amazon let's go to Amazon together and look at that price because they know that the customers thinking in the back of their heads.

Jason: 
[55:15] Well so of all the sort of features that can exist on that tulip tablet you know I'm imagining things like inventory information product information you know customer,
Behavior information although sorts of things I get is there one one experience that you feel like.
Is the overwhelming leader I would just be curious I once they sings Get deployed like what's the the most go to feature for for the majority of sales associates.

Scot: 
[55:42] Yeah there's there's basically two big experiences that we drive that usually Drive the most left right.
The first one is on the channel selling so that's the ability for the store associate to say,
whether or not the product you're looking for is in the store in front of us right now I can sell you any product from online and in the store in one basket and so that's that's key for that for a lot of the details who can't carry all of their inventory at one location.
Does the second big thing that we do which is really interesting cross we learned a lot about her last years was is what's called clienteling and basically.
Try and retailer on a lot of their business but like a significant percentage of the business for a lot of the best high-end luxury retailers happens through these one-on-one interactions that they have with customers and so a lot of a tulip does in that case.
Is we help retailers write personal email text or says it's my personal emails during SMS messages to their best customers saying.
Hey this just came in I thought it would look right with that thing that you bought before I put these these three items together and putting them on hold for you at a building that really one on one relationship that you can only get with that with a great tool plus a great store.

[56:46] Awesome and so you mentioned but no bus which I guess now you get to count Walmart as a customer it's always nice to upgrade took like 5 minutes to switch that logo.
What are some of other retailers that are utilizing your technology.
Able to talk about in class which is a big pig to play fetch 800 locations across America,
one of our best customers Saks Fifth Avenue and that whole network of retailers that are associated with them in miles from specialty retailers like,
Toys R Us to the bonobos to Chanel it's been it's been very interesting to see how different ringtones work.

[57:31] Cool and then says I fell off and we're always love to hear the story to the extent you can tell it of fundraising you know it's pretty clear that you convince the the nice Folks at Kleiner,
10 fasting what you're doing so that they're they're Believers is this the first round of funding you've done and,
you know what what's the point of you of some of the feces out there that are raised that are looking that you're talking to are they do you run into some of that are like.
Stores what are those or are they all pretty open-minded to that that kind of pitch these days.
Yeah I think that's like one of the tough kind of side effects to the rise of Amazon are all the challenges we talk about one more time trying to compete with Amazon that I think not everyone knows about it is that it is next to impossible to raise money right now.
For a business that is in the econ category right well. See experience that a lot just because VC's are very well aware of how difficult it is to compete at scale when once you have to go head-to-head against Amazon.
I'm in that same kind of,
light when we started to if I started to talk to me season but when I wanted to do next and I just was told basically by everyone that I was crazy why are you going after this category that's.
It's going to be massively shrinking and no by the way retailers are the worst customers and so hard to work with but we just felt like it was just too big of an opportunity and I think.
A lot of the things that scare people but the category for me kind of indicated that there was actually something there that people have figured out cool.

Jason: 
[58:59] So you're one of the things that I'm curious about all the you mention for example the the customer follow-up use case and just maybe I would generic be caught like the clienteling use case.

[59:13] Imagine there's a yes or two pads for all those sorts of things build that native functionality into to it and so then you know it's it's in your ekosistem in and all that sort of thing versus interfacing with all the other,
tool that does big retailers you just mentioned.
Likely already have in their ecosystem is like does to try to be a complete solution with everything integrated in one big killed base or are you having the interface with a lot of other retail systems and how's that working out.

Scot: 
[59:46] So I think that's probably the biggest challenge for building tulip is that we're working in a space where you cannot you can't go to a retailer.
The size of the returns that we typically work with and say,
hey please throw it all of the tens of millions of dollars you can vested in all of your big ecosystem and all of that you know that the side effects of what what those things are connected to because we want to swap it out for this other cool app which we just built and so if you look at two of it where anywhere,
rather large company now,
about half of the company literally just does Enterprise Integration since the typical project bras with a big retailer will take some time six months maybe more.
Just integrate with 15/16 back-end systems everything from sap to IBM and all of the mixture stuff that they have so a lot of tulips kind of,
way of working greenhouses to say hey we're going to work alongside all of the systems that you bought already and we're going to have meant them and replace parts of parts of them when you don't have the right system but we can't come in and say please swap everything out at least to start with.

Jason: 
[1:00:46] Sure sure what one other question I'm curious about the,
kind of retailers that are sort of best suited like I'm of the opinion that no retailer is purely self-service or purely sales assistant that like almost every retailer.
Spectrum of those too but there some some classes of retailer that are much heavier sales assisted.
And obviously some of your early customers like I would put in that category but then you know there's huge swaths of retail that are mostly cell service and you mentioned your biggest appointment was Toys R Us I would think of them as a,
mostly self-service environment so I'm I'm tears in my wrong that that you're a better fit in a sales assisted environment or what's what's the strategy there.

Scot: 
[1:01:33] So when we first started we said let's focus on retailers where sales associates really matter where,
retail just saying the store experience and we want to act like it Ramon in Destiny's people that's the category we thought we do the best in we started getting contacted by grocery retailers,
7-Eleven type retailers in quick-service and all the sudden we started to realize that I think what we're going to see is that.
I think personally that every single job in the cattle work like sales associates in Cashiers all of those jobs will have a mobile device in their hands as part of their job for some of the.
Less service-oriented one those mobile devices will be focused on you inventory counting and more of the kind of back in tasks and more of the service books ones will be more about.
The summit tools kind of very famous for out front and center you know sending emails to customers and helping with the I like product information but in the end I'm of the belief that.
Every category retail is going to have to arm its associates with a mobile devices as part of their job that's just so the reality of the Next Generation Enterprise.

[1:02:33] On until we started with a lot of these high-end folks but now we're we're going to be deploying with a lot of the three times that you would traditionally think of his being sales associate Focus.

[1:02:42] Regal one so do you help stores with kannada omni-channel implementation so do you get involved with buy online pickup in-store and ship from store in that kind of stuff.
Absolutely I think like.
You know one of my my big beliefs in this in this industry is that we all kind of maybe did it to service to the industry by over focusing on the word omni-channel because.
Two lot of the consumers and and practically from an experience this perspective I'm just held it really mean anything until you do something with it right and so it's more of a philosophy than it is an an an experience and so tulip ends up being kind of good thing you do after you realize how many shells important,
super a lot of okay we want to build a cell across channels that's an omni-channel selling experience but to do that I need to actually give it tool to.
Perform the sound and so tulip is basically everything we do is if I don't Channel but it's kind of its kind of maybe the post on me channel thing that you do.
What day in matching would be hard and we struggle with us at chill advisory even on the digital side and,
the store side just kind of blows my mind this maybe while you have half your company is on the integration,
peace but you know that the buy online pickup in-store in the ship from store has really high failure rate and no one really publishes one but my guess is somewhere between 5 and 10% based on personal experience.
And I can imagine you're only as good as the systems you're integrating with so if I is a user in going to retailer and having that that.
Pretty high stock out experience it must be frustrating for the clienteling app to be you know a boy we're going to sell this customer widget X and it's going to be awesome and then the store associate.

[1:04:16] Can't find widget X because the underlying data is Bad Hat is that a challenge for you guys and how do you saw that.

[1:04:24] Yeah definitely write like a lot of the returns we work with they don't have a perfect view of inventory a lot of them they don't have photos of most of their products that aren't available online and so a lot of tulips projects end up reviewing to the retailer.
Places where they need to know reinvest in terms of improving data quality and process right.
Is that you can do a lot of things quicker now so you can ask a store associate to go fetch a shoe and then you can find out within.
2 minutes whether they executed on the task and if not you can be assigned that task to another store and the other piece I think none of us really realized until we fully started like working in this space at tulip was the incentive structure behind meant so one of the important things for tulip is not just.
Telling a store associate to go grab a product or instructing them to sell something from online but to make sure that also they get commission for that cuz I work right.
And then one last question I noticed you guys seem to be pretty heavily aligned with Apple so so tell us more about that and is that a formal alliance and in or is it just kind of you prefer their Hardware how does that work.
So this is been kind of one of the biggest surprises.

[1:05:33] FR company right was that when we started tulips we started winning all these big retail accounts and then follow us and we got a call from Apple which we never never predicted.
I was actually that basically what happened was that.
We had I guess went as retailers have bought two of they had triggered the sale for so many iPads and iPod Touches that we got on the radar,
answer that quickly grew to now what is a formal partnership Direction where we're at we're in a partnership with,
appleworks we actually work with them alongside so you look at a lot of the screens on our app they would actually code is IND at in Cupertino with apple and they come along with us to sales sales opportunities actually help supervise project with us into one of the big opportunities of my.
My life now in my career has been filled to work kind of hand-in-hand with some of the best Folks at Apple to help kind of tell this shared Vision around what is the future.
Mobility inside retail in in the Enterprise cuz I will kind of shares the same vision right in their stores near like Hey we're doing so well because we figured out how to.
Innovate on the store experience partly through giving our sales associates better tools if we could just show retail like General retail that same vision.
Mean green salad or devices and so too it's kind of part of that very cool Super Geek question have you been in the spaceship.

[1:06:53] No I've been looking at it I want to go actually where we have appointments coming up that I think will finally go there but I've been meeting just outside of that.
Will have to do a special edition of the spaceship edition of the show so you can give us a report on on what it's like inside of their.

Jason: 
[1:07:08] We're not all meeting at the the iPhone announcement on the 12th.

Scot: 
[1:07:13] Oh yeah it's going to be being from there right.

Jason: 
[1:07:18] In the Steve Jobs theater is if I'm not mistaken.

Scot: 
[1:07:21] Yes I heard I heard.

Jason: 
[1:07:22] What what are the things that's interesting to me about the Apple partnership is just been a lot of time doing technology inside of retail stores and for a long time I would have said.
Oh you know it's like consumer technology like apple stuff is great for proof of Concepts and quick prototyping but when you really want to scale it it's totally inappropriate for.
The store environment that it's it's not hardened and people are going to want to steal and it's really hard to lock them down and you know it's it's hard to keep them charged and you know there a million like frankly very valid reasons why it's not.
That that Hardware isn't perfectly suited for the retail environment.
But I've completely lost that argument and long ago gave it up because it just it just seems like the the argument that,
hey the store associates already know how to use the consumer technology in the consumer Technologies so much cheaper and more ubiquitous and frankly like when any of those bad things happen to it it just cheaper to replace it then it is to buy,
uglier more clunky industrial tablet that cost 5 times as much up front is that is that what you're finding or do any of your clients use industrial.
Hardware for the for the stuff.

Scot: 
[1:08:35] Yeah if you if you ask me that same question I would have been in the same camp as you write I would have said that you have to focus on an Enterprise hard and Hardware Apple wasn't designed for the consumer that's what I thought 5 years ago and so if you want to come a hint at.

[1:08:47] What I think is the secret long-term plan for tulip is that we believe that that mistake that we all made in terms of.
Make the consumerization of the Enterprise write the influence that end workers have in terms of,
what type of hardware and we hope what type of software is deployed inside the Enterprise will that prediction that we all had was so wrong that there's a massive massive opportunity now we think all of software in the Enterprise including UPS in retail.
Is it going to change in the same way that the hardware is where.
We we all miss predicted how how strong I think a lot of the Legacy thoughts we had around what soccer looks like in big companies and in the same degree Hardware so what we're seeing to answer your question specifically is.
Apple's kind of just one in retail even though people didn't predict.
Partly based on real people fight with maybe was too expensive at the timer it wasn't the right thing for Enterprise but all of those predictions ended up being wrong it's definitely the right solution and then what happens is you have any question of.

Jason: 
[1:09:48] Yep yep so I have a feeling that when I sing a lot of new investments in symbol and NCR and all those guys as a result of that I'd be Church though is the natural progression of that trend.
Not that there won't always be some dedicated hardware for Solutions like you but could you imagine.
A blended solution where where there's dedicated tulip tablets in the store and they're searching the sales associates that have that but did the Tulip app is also available for employees to install on there.
I want Hardware to sort of expand the footprint bring-your-own-device.

Scot: 
[1:10:24] Yes.
Yes a lot of our botones talk about bring your own devices and there's a decent like legal and compliance issues around that for in North America that we have we talked to her but definitely all of our retailers have on their road map.
A vision of what Canon campus tours OC do on their own device it's different right because there's privacy issues you're not obvious even allow them to pull up any customers record and that's where thing but there's definitely tools we want to feel to give store so she can access any money off.

Jason: 
[1:10:49] Yep in that that does trigger an interesting thing so you've you potentially on the on the store provided Hardware have proprietary information about the customer and I imagine there's a fine line like you don't necessarily.
Just want to make everything that a retailer knows about that customer transparently available to the sales associate in the store when a customer might see it.

Scot: 
[1:11:15] Yeah it she when we started with one of our best retailers it's like a high-end fashion retailer they started telling us about user stories that we needed to capture and part of,
part of those stories is the idea that hey we have.
The addresses and phone numbers of all of these famous celebrities in North America we can't just even have any of our store so see you know type in,
famous person's name in pull up their phone number and so I'd like to actually has built-in privacy tools to make sure that that's our stuff is locked out it's it's crazy when you start thinking about the information that you could have access to it.

Jason: 
[1:11:45] Yeah I did a project with a a large chain of of wine and alcohol stores and they they were too playing a clienteling solution and they wanted what,
I don't know if it's pop anymore but what used to be popular is this rfm scoring recency frequency monetization score for each customer how much stuff they buy how often they buy a valuable they are but they very specifically didn't want,
they wanted that to be a relative number they didn't want an absolute number because they they they didn't want customer seeing like how much gosh they were consuming for example.

[1:12:18] Which makes perfect sense.

[1:12:22] So where do you think all this is going is it like you see a further Evolution or do you see like is the main played just expand the footprint for the kinds of solutions are offering today or or are they experience is going to get even better.

Scot: 
[1:12:36] Like for me the hardest part of my career now is.
Sitting now inside retail and seeing all of this opportunity and wanting to go after all of it but also trying to stay focused right and so I look up I look at the stores as these massive opportunities to Pivot.
Cross at the thing I see across all of the returns I talk to Everyday is this shared Vision around the future of the store be coming.
Presenting experience center right and so what I push a lot of the retailers that I work with.
To think about is not just about improving their stories and allowing on the shower transactions but to try to build a location that customers would actually pay to go to,
that should be the bar you should be so awesome that it's feels like you're going to Disneyland or you know this place is like the Disney Store they like the Crayola Experience Store we actually have to reserve a spot to get in there,
cancel.
What I think is going to be the future the store is that they're going to be brand experience centers that will be so great that you actually people will stop criticizing stores and see them for what they really truly can be which is,
this really awesome fun way to experience brand whether or not you buy in those stores.
Doesn't really matter it's as long as there's a way to facilitate the transaction and connect it to that towards Branson somewhere.

Jason: 
[1:13:48] I think that makes perfect sense and all of that is going to be a great place to end it because it is happened again we've perfectly wasted an hour of our listeners time.

[1:13:59] So we certainly want to thank you for joining us and wish you all the best with to Apple you look forward to following a future success and just a reminder listeners are always welcome to continue the conversation on our Facebook page and for sure if you like Today's Show jump on iTunes and give us that that 5 star review,
we we greatly appreciate them and it's super important.

Scot: 
[1:14:23] Thank you so much I appreciate it thanks Allie.

Jason: 
[1:14:27] Until next time happy conversing.

Aug 30, 2017

EP098 - Zola CEO/Co-Founder Shan-Lyn Ma

An interview with Shan Lyn Ma (@shanlynm), CEO and Co-Founder of Zola. Zola is re-inventing the Wedding Registry for the modern couple.

In this episode we discuss Shan Lyn's previous experience including Yahoo and Gilt Group.  As well as Zola's business model and potential growth opportunities.

Shan mentioned a recent article written by Zola investor, Alex Taussig (@ataussig) of Lightspeed: Finding product/channel fit at Zola.

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

Episode 98 of the Jason & Scot show was recorded on Tuesday, August 22nd 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 98 being recorded on Tuesday August 22nd 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot: 
[0:40] Hey Jason welcome back Jason Scott show listeners Jason the day after the eclipse did you get to see the clips at all.

Jason: 
[0:47] No tragically I was on the airplane and I was sitting next to a pilot that was Dead Heading and I asked him if there was any chance we were going to see the eclipse and he told me that they would have to bank upwards about 45 degrees which seemed unlikely.

Scot: 
[1:02] Yeah but opted out of that the clips here in review of it and it was a lot of fun pretty exciting to have midday Darkness.

Jason: 
[1:14] Where you at I'm imagining you're one of the special people that had ordered a glasses well in advance and so you had them.

Scot: 
[1:21] That is correct yes and I were them and I didn't wear them more than 3 minutes I followed all the rules and as a result I have good Vision still so I'm excited to report that everybody.

Jason: 
[1:31] I am I'm very happy to hear that I was a failure in my family I ordered them a month in advance and they arrive so early that I lost them before the eclipse came.

Scot: 
[1:39] Epic fail.
Well you know summer is winding down here at the Jason is got show and we're heading into the fall so we are going to ram back up the interviews of e-commerce movers and shakers and tonight we have a special treat for listeners,
please join me in welcoming shan-lyn ma she is the CEO and co-founder of Zola welcome sham.
Thank you very happy to be talking to you both.

Jason: 
[2:08] We are happy to be talked to.
Sham what is a regular listener the show your pray for me or this but we always like to get things started off by.
Having our guests tell us a little bit about their background and how they came into their current roles and in in your case you have a very story e-commerce Paso can you share your background with her listeners.

Scot and Shan: 
[2:33] Shaw so I was mentioning to you earlier that I am a fan of this podcast particular because I am also an e-commerce nerd and,
that has come from what can you Nokomis at particular over the last 9 years in New York,
and.
I moved to New York from Silicon Valley to take a job at what was at that time a very small startup that had just launched cold Gill group,
that was 2008 join Guild as the first product person and it had just launched and so.
Joint when it was about 30 people about 7 million in Revenue a time and.
Was tasked with redoing what does gilt.com look like both,
from the front-facing user experience as well as what we want it to be out over the the longer term of the next they wanted to use as the business. To add new categories like,
Harmon's kids and what would eventually be added on would be things like,
Gilt City and experiences and travel and Bowl.
Ended up staying at guiltful for years which was a fantastic full use of very intense learning during that time I got to be the product lead on a lot of the new business lunches go to launch the mobile.

[4:07] And and then go to pitch in launch my own business unit within guilt which was a gourmet food and wine,
business that we called guilt taste and so then at that point really in,
my 32nd transitioned out of a product management role into more of a GM Mini CEO within a bigger startup kind of role.
Salina great deal there about all the functions outside of just product development.
At the end of four years guilt had grown from.

[4:43] Initial 30 people to be over thousand employees and at that time was probably around six hundred million in revenue and so really got a great sense of.
What's.
What would really write to see that Revenue growth so quickly and then what was some of the challenges that that business faced as it tried to.
Move towards profitability and an obviously following the company closely after that got to see a bit of perhaps you know what.
Mites that company what might we have done differently that.
Might have could have avoided some of the decline that it had in more recent years and so often I.
Wanted to do this. Up Jenny all over again and move to become Chief product officer of another New York consumer.
Text Atif cold Chloe & Isabel which is social selling and Jewellery.
Company start up and after being in that role for a relatively short amount of time realize that you while I had been putting off what I always wanted to do which was stopped something.

[6:02] Based on your kind of idea or number of ideas that I had I thought I could not delay any longer and.

[6:12] Decided to stop Zola with micro fountas and that you was 2013.
Which also happened to be the end of all my friends got married at around the same time and I was,
buying a lot of wedding presents for them from the different wedding registry sites online and was thinking you know.
I am surprised that these.
E-commerce experiences which is why the wedding registry really is I'm surprised that they're no better than than what I was saying online and was starting to talk to Nobu microfindr about.
Frustrations that I had as a gift give up shopping from their Registries and we started to think about how would we do it differently if we would have create a wedding registry from scratch and that was.
When we came up with Zola and and toes all was born and that was four years ago.

Jason: 
[7:08] Very cool I feel like that is a common story is that you no germ of a great startup idea being born out of need the only sad thing is if you would have recognized the need of your early are you could have sold it to all your friends.

Scot and Shan: 
[7:20] Exactly yes I am I'm often,
sad that now the precise time that I love to go to weddings is actually the time that I am no longer invited to living since most of my friends get married have already been married,
but every time I meet someone that is not married I secretly hoping they will at some point get engaged and invite me to their wedding which is user research essentially.

Jason: 
[7:48] Night yeah that's in fact I assume the gift you give are write-offs.

Scot and Shan: 
[7:54] I wish that is not the case however you're in combination with that when I should say is that I,
my my the quality of gifts that I give to people now is so much better now that I know the data around what makes a good wedding gift what is the average price point of a wedding gift this is all,
information I wish I had before 2013.

Jason: 
[8:21] And I should throw in usual disclaimer I have no Financial background and I'm not qualified to give tax advice to anyone listening.

[8:30] The.
You know you mentioned your experience guilt from kind of 30 employees through through a thousand and I think most listeners are probably familiar with the story of guilt but one thing that I feel like gets lost is,
that that gill really built a.
A fabulous e-commerce team and that Talent has spread throughout the industry are in an are in a lot of interesting position so you remember the pretty cool Alumni network in the e-commerce space.

Scot and Shan: 
[9:00] But I think that is one of the most exciting things that I've seen change in at least the New York,
technology ecosystem since I moved to New York in 2008,
when I moved here in 2008 I was new to the city and so I was looking for other product people like myself to come talk about ideas and best practices in the city and.
It was hard for me to find other people in that same role I found a few but,
you can compare that to today if you are trying to do that same activity there is,
hundreds and thousands of people that could probably find that so many meetups that are all stalking new startups and from the people that you meet that so it's it is.
It's changed since I've got started but.
Also when we look at the companies that have come out of Gil group alumni at last count there were around 20.
Startups that was founded by people that had previously worked a guilt and and said that alone even in the short few years that,
that's been possible to do is a pretty big impact,
Graco the PayPal guys call themselves The PayPal Mafia I don't know if they call themselves that but have you guys call yourselves like in.
Gilts Gilder you have a clever name for that is prettier.

Jason: 
[10:37] My money is on the guilty.

Scot and Shan: 
[10:39] Guilty.
We could we could just turn the show into Gill tons guilty as charged hello alright so Zola is,
in the wedding space 04 listeners that aren't familiar that tell us a little bit about the wedding space and and what's exciting.
To you about that space Zola is.
The fastest growing wedding registry around and we started as a wedding registry because we really wanted to solve this one particular.
Pain point that I described of couples getting married wanting to create a wedding registry that,
met the needs that they have today and so couples getting married today all the millennial generation and the the way that then needs a different,
particular relates to wedding registry is threefold so one is they want to register for products and experiences and cash all in the one registry they want.
Registry that is truly personal that they can personalize that reflects who they are at the couple and what they love and similar to the way that they post lies their Facebook page old Instagram and the third,
they want complete control over their registry as it relates to how it shows up at.

[12:10] When that gets a ship to them and they want to control on their mobile devices as well as on their laptops and desktops and so those three things and would not really,
available at all outside.
Zola so that was the starting point for Zola and we lunch with that idea and in the few years that we've been around we've seen it grow extremely quickly.
This past quarter we actually launched of a first new product that.
Speaks outside of the wedding registry which is the product code Zola weddings and what that is is a suite of wedding planning tools that helps couples plan their wedding.

[12:58] On top of their wedding registry so specifically it's a free wedding website guest list manager and checklist and.
Overall what my trying to do here is really helped a couple plan their wedding for the day they get engaged through the fs your marriage through all the different.
Tivities and toss that you have to do as you're planning your dream day.
Coin and I'll take a shot I don't know much about how it works but I'm guessing your business model is effectively,
I'm kind of like an affiliate commission model on the back end where are you you're as as couples kind of say I want to register for this and purchases are made you have a revenue-share kind of model is that how it works or is it more of an ad model.
X
Actually neither of those so the the best way to think about Zola is that we are a hybrid of a Marketplace and an e-commerce business so where am a place in the sense that we have.

[14:01] We work directly with over 500 Brands today and of the 50,000 products so if you look at the Zola store you can register for any of those products and we we partner directly with brands.
Zola in the same way that we pottanat directly with friends when we were in guilt.
The difference and why we have a Marketplace hybrid is that we are not taking inventory so we are in Dropship.
Business model and.
The big shift that has happened in the home industry which is the industry that registry operates within is.
Home Brands really started to transition to enable Dropship capabilities in the last 5 years or so so.
If we try to do Zola much earlier it would have been hard for us to do as a business and hard for us to have.
Best Dropship capability with the number brands that we would need to have within the registry,
and we probably wouldn't have done it if we had to buy all the inventory because with a registry you need a lot of skews and very shallow depth answer that that's the the komaki pre-flight component,
an e-commerce site in the sense that Zola is the merchant we are the retailer we have,
and developed a relationship with our customers which are a couple's we provide all the customer support and everything is captured through the Zola experience insight and so in that sense we.

[15:40] We look and feel like an e-commerce experience.

Jason: 
[15:45] Very cool and one of the things that maybe I just want understand a little bit better like so when I think of a traditional.

[15:51] E-commerce wedding registry it's a single retailer experience so.

[15:57] Like in general I have to decide upfront oh I'm going to register at Crate & Barrel in so I go to Crate and Barrel and I I go through there there specific.

[16:06] Registry experience in there I'm only going to be able to register for products that they sell and certainly not experiences or cash.
Products that they know self.
So you are what I would call a sort of a multi retailer registration through you I can register for a potentially much wider range of products I have that right correct.

Scot and Shan: 
[16:31] Yes and,
and we have all the brands that you might expect to find it any other department store so top registry Brands include things like lecreuset all clad KitchenAid and those are all.
Brands that we have and partner with on Zola and wee wee retail them like any other department store retailer does.

Jason: 
[16:56] Yep and so do your partner's 10 Dobby the product manufacturers as opposed to other retailers is that.

Scot and Shan: 
[17:03] Yes that's right.

Jason: 
[17:05] Got it.

[17:09] So do any of those those brand like so obviously some of those brand cell direct so you mention like la Creuset or All-Clad like they would have their own e-commerce site.
Do any of the manufacturers try to do their own wedding registry or is that just not not common at all.

Scot and Shan: 
[17:28] We don't really see that and I think the reason is because it from the use of perspective,
the use of the couple does not want to create,
ideally more than one register you don't want to set up a registry on Lake say and then registry on Old Clyde and then it registry on KitchenAid because all of a sudden you're sending your gas to light potentially hundreds are different sites so,
you want to do it once and he want everything in the one place it's convenient it's more straightforward for the couple and for the gas which is what the couple also has equally about.

Jason: 
[18:09] That makes total sense but then I saw recently that you had announced a partnership with Bat Country.
That's fascinating cuz you know that you wouldn't think of his the backcountry assortment as the.
The traditional merchandise for wedding registry but I suspect you're going to tell me,
that it's an in high demand in in the new Target demographic but they I think of as a as more of retail out of other people's products so it does that work differently than your than the manufacturers or or.

Scot and Shan: 
[18:44] Yeah so wait.
The way that we decide how we want to add products apartments or retailers to Zola is based on what we think the couple's pull into the registries.
Does m.
Couples can set up their Registries and add products that we already have within the Zola stole but they can also on top of that.
Add any products from any site online anywhere on the internet into the Zola registry as well and.
Similar to the way Pinterest has the pin it button we have the add to Zola button which just pools in that particular product into.
A couple's registry and so that for us as being the best insight into one of the products and Brands and retailers that customers,
once that we don't currently have on solar because they're pulling it in as a from day one we really had that day too driven approach to merchandising where we,
use this.

[19:52] Pull data essentially to inform a merchandising roadmap and the reason we added back country.
Is because we saw a lot of couple.
Registering for outdoor equipment and a wide range of outdoor camping gear.
That we didn't have on Zoll at all until we thought sociable.
If we would Apollo with that country it would allow us to add a lot of different.
Products to the Zola cement very quickly but also that's a brand that we know couples already love it's a retailer that I couples already love and so.

[20:35] Makes sense for them to if we will add it to Zola so that's one another example of a similar partnership we did with a retailer is Michael C Fina which is a New York.
Tabletop retailer that has.
It has a very storied history in New York's upper east side and they had a lot of high-end luxury brand,
tabletop,
that we didn't have on Zola and we did see that was some months for that and so we added that to the side and certainly that has gone very well and full couples that are looking for that really fine China from top brands.

Jason: 
[21:19] Very cool and prisoners every time I dine at Scott's house he always has a fabulous table set with Michael C Fina so that that would probably where he would register.

Scot and Shan: 
[21:30] It's not a great dinner without a great table top iOS actually have Star Wars plates and glasses.
Does that is that fancy.

[21:42] Well getting some Michael thinking that is the place where many children of presidents have registered for their wedding so it's not surprising that you would also have some of that fine china.
Cozy get started in 2013 give us a little idea of traction like gum,
have you raised BCE and and how much and any idea about maybe how many weddings have gone to the platform Registries or anything like that you can share would love to get us fuel for the scale that you're dealing with now,
Shaw soap since we launched we raised over 40 million in VC funding from.

[22:25] Great Venture Capital firms such as Lightspeed Venture partners and Thrive capital and canvas pensions and full Runner to name a few.
At most recently I lost round was the series C round where we raised 25 million,
into fall last you until be announced at that time we have had over 300,000 couples register with Zola and.
Quia multiplying each year.
Yeah it's great having race venture capital I have a lot of respect for folk stuff done that it's it's not easy so congratulations on.
Thank you and I agree this is not easy.
And then so,
you know I know Target Macy's and lot as other guys really promote their registry pretty heavily do they view you guys is a threat or are they happy to partner as long as kind of some of the sales go through their retail platform sword or do you go direct Brands pretty much most the time.
Right now the vast majority of our business is directly through the Brand's and.
What we hear from our brand Partners is that.
Zola is one of the few channels that is growing for them which is reflective of our overall.

[24:00] Very fast growth is a company and we are also deleting M text audible leading startup.
In the Online Registry space so.

[24:14] I think for the audience that is Young professional tech-savvy and working busy does not have a lot of time to.
Think about all the different places they can register but they want a wide range of things on their registry in Zelda has become the go-to place and I think there are the time we will.
Want to see a good reason to partner with more and more.
Retail is like the ones you mentioned and it will be determined by the day that away collecting based on what couples and pulling into their registry.

Jason: 
[24:55] Got it in one thing I do think of most of the traditional like single retail Registries is.

[25:02] A big and ponent I assume the overwhelming majority for most of the Retailer's is is actually in store and you know.

[25:10] I'm assuming you're exclusively digital like is there an omni-channel Ellen into the offering at this point or is it all via e-commerce.

Scot and Shan: 
[25:19] One of the really interesting things about,
the wedding registry is that unlike the rest of the e-commerce world so I think if we look at e-commerce,
total industry online shopping in general it's about between anywhere from 10 to 20% of total purchases online in registry,
80% of registry purchases are online and.
When you think about it logically makes sense because if you are a guest you'll going to a wedding.
What would you prefer to do if you're buying a gift for your friend do you prefer to go into the store.
Awesome to pull up the registry buy it in the store and then leave the store and that's it or would you prefer to do it in a few clicks online so the purchase thing is already online the thing that is.
Sometimes off line is when couples want to set up their registry and they want to see some products in person so.

[26:22] Full. Use case and Zola has,
what we call the Zola townhouse which is essentially a showroom or a concept or an experiment that we have set up in New York where couples can come in person see and touch and feel product that they may want to register fall.
However we do find that the vast majority of our couples.
At the end of the day end up just registering fully online and don't feel the need to come in to see something person it is something we're experimenting with.

Jason: 
[26:54] Got it and is there any um.
I'm almost wondering if there's an omni-channel component component in terms of the gift delivery right like so you mentioned dropships all these manufacturers are probably shipping the goods and in separate boxes of the couple of or some.
Long period of time is going to get boxes.

[27:13] Presumably in most cases they're not going to be wrapped or you know what you like so majun one of the areas or opportunities.

[27:22] For some future experiences to is to figure out the you know how do you recreate that experience of there being a Pyle of beautiful gifts at the wedding or maybe people just don't want that.

Scot and Shan: 
[27:33] No couples do not want that that is that is a.
I miss that that a couple's want that at their wedding so the actually win a Wii with first thinking about is even a good idea for us to start we interviewed many many couples about.
What the wedding planning experience was like what the registry experience was like and what really surprised us was the number one complaint that we heard was,
couples who have been through the registry process and had gotten married with saying when it comes to registry the worst part of it was.
As people were buying gifts from their various departments or Registries gifts would just start turning up at the house and they had no idea what was coming who sent it what's in the box,
if boxes were arriving for them on honeymoon or when they were at work and it was suddenly all the taking,
that lives the stress of having to track all these gifts that they didn't even realize what coming when they were coming and.
After hearing story after Story of this complaint we thought this is something that is easily solved using technology.
The couple should have control over when gifts arrived at home so the thing that we built into Zola from the start and that's.
Is is really the idea that couples can control shipping of their own gifts so we don't send anything to the couple.

[29:10] Until they say they're actually ready to receive it and.

[29:15] That the big difference is that actually couples most couples don't want to receive any gifts until after they've come back from there,
honeymoon they've often waiting until they moving into the new home that they move into,
between 3 to 6 months after the wedding and then they're ready to look at what will be given and what do we actually want to now receive.
So because of this feature which is controlled shipping feature and we have,
very low return rate we have virtually no returns because couples are able to determine if they really want something before it shipped to them and for that reason I'm couples tell difference you Zola because.
Eliminates this stress of getting gifts when you're not ready to receive them.

Jason: 
[30:01] That that makes perfect sense and frankly I don't want them to receive my gift until they've proven that they can at least survive the honeymoon.

Scot and Shan: 
[30:09] Well I've heard all kinds of horror stories of people who and your vote,
I have registered elsewhere and they said they can secretly took back the gifts because they wanted something else but then that.
And whatever registry that when using.
Refunded the person that gave them the gift and then the person was I why did I get a refund for this gift I gave you did it you like it wants to do and then the couple istick embarrassingly like tell the.
Fox we could you give that back to me so it's there's a lot of old Christmas around that that we are really try and we have we have avoided.

Jason: 
[30:49] Yeah and I am sure there that retailer appreciated being used as a gift card.

[30:54] The you mentioned earlier that the the the first expansion product could bend the wedding planning product which them that makes.

[31:04] Great sense I'm curious like so your first expansion is kind of a vertical expansion into the wedding event.

[31:13] And I imagine that the wedding space is a huge opportunity in and of itself is.

[31:20] Is that likely the continued to ejector e of Zola would you keep adding like looking for more wallet share of the wedding or like are there other significant gifting occasions that you could see expanding into like what's the.

[31:33] What what.

Scot and Shan: 
[31:35] Yeah yeah so this to a big expansions that,
that makes sense for us one is right now in the wedding registry space,
even within the us alone that's a 19 billion dollar a year industry so that is a big Market in itself with the lunch and soul the wedding what where,
dipping a toe into is the lodge weddings Market which is an additional 70 billion within the US and so that's an area of expansion for us that's very interesting and very deeply.
Tied to each other so because we now off of tools in.
Wedding planning checklist guest last wedding website and registry overtime it does make sense for us to add more and more based on what the couples are asking us to build for them.
Which we already had many requests.

[32:35] The next big step is then once you come back from your wedding couples are often moving into the new home they often need more things to set up the Newlywed life together and we already have.
Today on the 50,000 products for the home.
So you can imagine because we have a great sense for what will a couple's love in terms of the Brand's the price points that stop references similar to what Stitch fix is done and done in fashion we have.
Awesome Arkham level of intelligence we can utilize for home and because we already have all the skews we can think about how do we.
Move into being the place a couples turn to as they setting up then you home.

[33:24] Awesome if you had do you guys have some machine learning folks there that are starting to kind of look at those this correlations.
I think that's another if I told you I'd have to kill you kind of question however I will say that engineering is on biggest team and soda.
Yes good as an engineer we we appreciate that job job security.
So just to switch gears a little bit when you when you talked about how you guys are different you talked about you know your your couples and how they want that mobile experience what are some of the things you guys have done that the differentiate your mobile experience is it,
is it an app or is it mobile web and in what are some of the things that you do leverage any of the phone's capabilities and interesting ones.
Yeah so this two things that I think you might find interesting so one is we have at this shop the room.
Feature within Al iPad app which I personally love the most out of all the different features because it gives you an immersive beautiful editorial type of room.
Homescape and you can then click on the hot spots and Shop different products that you see now or add to your wedding registry from there so it's not.
Augmented reality in the way that the people think about it today because it's just it's a room that we have shot so it's not your own home yeah.

[35:00] But it is giving it is serving the the user need of inspiration and discovery of new products that is.
That is also shoppable so that is one thing that we've done that's really interesting that's experiment through our iPad up.
The.
The other cool features that is one of talk about that we have in Isola iPhone app it's the registry iPhone app and the feature we have there is cold.
Glenda which is essentially a Tinder for Home Products so it lets you can swipe through one by one.
Selection of products that we have in the Zola stall and if you swipe right you add it to your Zola registry and if you swipe left it dismisses it and you go to the next one,
so what's interesting about this is that it is the most popular feature on any of the Zola apps it is.
It is very highly used a couples love it and it's it's a very frequent activity that we see people using blender to.
Discover new products and add them to the registry which is interesting to me because it's certainly not as.
Immersive and emotional and beautiful as the previously tried just described but it is one that people while they described as fun and entertainment and so.

[36:30] We've learned a lot through that.
I wonder if they're sitting there doing it together or if she she goes and swipe rights on 8 things and he kind of like going to swipe left on these 30 off swipe right on these two other ones,
if it's like a dinner you can almost like that there be in there at you know me there's like a button or hit there and talks to,
potential newlywed therapy.
We do here a lot of brides saying that they are essentially the the manager of the registry so they approve oldest final decisions.

Jason: 
[37:11] So when you said they wanted complete control you meant complete control for the bra.

Scot and Shan: 
[37:15] No no that's not what I meant.

Jason: 
[37:23] I say no more so one of the things is going to be fun as you get to you get this like fascinating insight into how these young couples think like any.
Particular products that surprise you the people register for or any sort of funny funny trends that we we might not expect about how people are registering.

Scot and Shan: 
[37:45] Yeah so the biggest surprise for me was I am.
I did a lot of using interviews before launch and I was always asking what.
What do you do with a bride-to-be want to register full and I hope lot of fried say I don't need them.
Traditional registry items I want.
Cool new experiences to do together and I want cool unknown Brands and products so we did have a lot of those and we didn't have as many of the classic,
make registry items when we first launched Sola and what we very quickly soul.
Which was through this at Isola button that people will pulling into the Registries a lot of the classic registry items that people said they didn't necessarily want so very quickly we can see everyone actually does want.
The blender and the toaster and the iron and the vacuum.

[38:46] They also want all the things I said they want which one's the experiences and the cool Boutique items and so the takeaway.
The point which is kind of obvious in retrospect but not obvious at the time was that they want it all and I wanted to really reflect what that passionate about as a couple soap.
Some couple the very passionate about.

[39:13] Food and an eating and cooking and drinking wine together and said that you can really see come through on the registry of the couples,
very passionate about,
Outdoors hiking skiing biking together and said they have all those items on their registry but what is consistent is that,
everyone sees the registry is an opportunity to upgrade a lot of the items in the home that they might not necessarily been able to afford themselves so it's what everyone.
Does have some sort of blend a toaster or iron this is the chance that they can get the one that.
We'll lock them for another 10 years where they might have had that toasted that they bought when they were straight out of college 10 years ago.
Apps about his big surprise.

Jason: 
[40:05] I'm sad to report that next year's toasters are all going to have WiFi so the ones they thought we're going to ask them forever I'm going to be good enough anymore.

Scot and Shan: 
[40:13] Well I don't know if there was a going to still be the the top sellers because that the top sellers in registry have been the same top salads and many many years so I don't know his buying did the newest gadgets vote,
we see some of those on so well but it's not the vast majority of items.

Jason: 
[40:33] Sure in the actual answer to your question is who's buying the newest gadgets is Scott and I.

Scot and Shan: 
[40:38] Your Jason ready has the Alexa toaster.

Jason: 
[40:42] Yeah and Scott has an R2 D2 toaster so that does charity or philanthropy coming to play at Ridge in registry and all.

Scot and Shan: 
[40:52] Yeah so a couples can certainly set up a charity fund all up Prado at a fun that day then designate.
To a charity of their choice and so we really leave it up to the couple to.
Share and determine what charity is most meaningful to them and then they can add that to the Zola registry so that is a component.
And 1. And we see coming up it's very it's as you might accept a very personal charity or cause.

Jason and Shan: 
[41:29] Yeah yeah I have to say my own wedding experience was an epic fail.
Not hopefully not that the wedding I got married fairly late in life and so my my fiance and I were both lucky enough to like.

[41:47] Frankly you like own the aspirational version of most items in so I really didn't want to register I really didn't want to get gifts and felt like it was going to unnecessary until I.
Try to get that message out and all the guests were just angry at me.

Scot and Shan: 
[42:04] Yes you know we hear this actually pretty often in that it is.

[42:13] It is often ends up being dead guess who buy you a gift if they want to buy you a gift and so the best thing you can do for yourself is to give guidance and it makes everyone's lives easier.

Jason: 
[42:26] Yeah if I had it to do over again I would have taken that or if I had met you earlier I would have definitely.

[42:32] It taken that advice another topic that's interesting so you know one of the challenges and opportunities you have to acquire your own couples.

[42:43] So you know what what like what are the marketing tools that you're using to get customers are couples into the ecosystem.

Scot and Shan: 
[42:51] So this was one of the things that we learn from guilt and one of the reasons why we really would run to the idea of a wedding registry was this idea that guilt.
Cute benefited from a lot of what a mouth and,
and referrals because everyone was really excited to share Gill because it was beautiful because they felt like they were letting difference in on a secret date.
Dynamic that we liked with Zola was that it has that in built virality or referral,
within the concept of a wedding registry because when a couple gets married on average they invite about 150 guests to their wedding so that's the average in the US which means that you have.
150 people who are attending of which most of them will feel,
in some way they want to check out your wedding registry and probably buy you a gift and so those,
essentially eyeballs that I've been looking at Zola and if Zola is a betta will beautiful more compelling wedding registry they will then when I tell their friends.
O use it themselves when they get married so having that in built.

[44:19] Referral mechanism into the idea of a wedding registry has been the biggest driver,
evolve growth and so when it comes to acquisition we know that if we have a better wedding registry experience than anyone else we will.
Be able to grow with a company that's a bad has proven out now but so that's that's what's really driven.
Su tomorrow volcanic growth on top of that we are like many e-commerce companies always experimenting with all the online marketing channels so we experiment.
In Facebook Pinterest Instagram and those channels Russell interesting because they do have,
ways for engaged couples to flag themselves as engage the moment that you get engaged so we are able to Target and,
and and it really experiment with different campaigns to understand what what is most compelling for people to want to register with us.
What was Sabbath experiment with more recently is some out of a brand marketing so things that unless.
Easily trackable at we recently launched the subway advertising campaign in New York.
That we sent me advertising Bridal magazines and to oldies things.

[45:52] Interesting for us in in that Derek the the challenge for us is how do we get the most insight into the impact.
Friendly's marketing dollars.
Which is a different kind of challenge to to building the best wedding registry product but we are up to the top.

Jason: 
[46:12] Yeah it is interesting cuz you look at sort of the the history of the pure-play startups and certainly guilting a prime example but almost everyone bonobos Warby Parker jet whoever you pick it whatever scale,
there seems to be in every industry a finite amount of.

[46:35] Customers that you can very cost-effectively earn through all these digital tools so I can be a bit social or influencer marketing or digital advertising or search are all these things in in in every industry,
there come this inflection point where incremental customers.

[46:52] Start to get dramatically more expensive in and sew in in Moe's Industries that's where you see them start to.
Get more omni-channel to open Warby Parker stores or bonobos guideshops or you know or if it's not opening stores it's it's Outdoor advertising and things like that is.
I think of your industry is a little bit different like you don't just want to reach out of eyeballs like there's only.
A small finite period in the life of each each eyeball where it's useful for you to reach them so it almost seems like you you got to find some more.

[47:27] Targeted vehicles.

Scot and Shan: 
[47:29] Yes that's exactly right and that's that's why we found the online channels.
As it relates to allocating on mocking budget have always being strong performance for us because we can talk that group of people at that point in time very well online and.
And so it continues to,
be the most compelling place to invest where we do have budget but the bigger investment and by fall we are spending more time and energy investment on building out,
the product experience because we see that drive growth so much more effectively for us.

[48:18] Cool. You talked about how in the early days you did a lot of interviews what what kind of user-testing do you guys do now do you do formal,
watching people use the system or are you instrument it so you kind of know what they're doing they always get that question from are there on turnovers that kind of get a little lost once they get to a bit of scale it's kind of hard to get that.
Feedback.
Yeah so we we do we try to do as much as possible when it comes to use a testing so we do.
We do what you said which is watching people as they use the website talking out loud talking about what they seeing thinking,
these are people that are unfamiliar with Sola we also do face-to-face interviews which are more exploratory which tend to be,
tell me about what you think what you're thinking as you stopped to plan your wedding open-ended exploration all that's a lot.
Around new product development what we do that and then we do very regular,
online surveys to both people that have recently started a Zola registry as well as people that have gone through the entire Journey gone on honeymoon come back and then,
close to the end of their life cycle and so we want to survey them on that pole experience answer for each of these different.
Types of groups we're asking and looking for different things and.

[49:53] Constantly trying to understand what are the things that are causing them to.
Restless and promoters of the people and let's not never lose sight of that lets only lived double down on those things.
And on the flip side one of they saying that is making them hesitate about Zola.
Or making them I'm confused and how can we take those things out for future uses.

[50:22] Cool any any day do you can share on desktop vs mobile.
What's interesting for us is that it's not as much of a drastic shift to mobile as you seen on the e-commerce businesses and this is because.
Setting up a wedding registry is a more considered process than buying a.

[50:49] 10 old you're buying a shirt online so for a sexually the we still see.
A good amount they probably the majority of people creating their Registries on Zola through desktop however we do see a lot of,
management updating of Registries browsing new products adding new products to mobile apps so the initial,
experiences desktop and then the follow-on experience through the rest of the life cycle is mobile so for us it's important to be continually and innovating on both,
because I user is using both the true omni-channel experience going on there people going in and out of each each one,
two two quick wrap-up questions first of all other than obviously everyone should check out Zola and both the the app and,
the iPhone app that iPad app and then also the website but do you publish anything online that people could look at it or you popular on the Twitter or LinkedIn or in those kind of things.
You can follow.
Zola which is this at Zola on any of the social channels and one interesting,
article that is Canmore on this topic actually that one of our investors just published on Monday which people name,
your audience he might be interested in checking out is so invested Alex taussig at Lightspeed Venture Partners wrote a medium blog post on the concept of.

[52:26] Product Channel fit which is the next thing any.
Company Pinnacle e-commerce companies need to tackle once they've tackled product-market fit so that post.
Is critically interesting and it kampala's how.
Zola thinking about product Channel fit and talks a bit to just one prong of.
Yo what up marketing more acquisition team might look at to drive growth.
Sprinkle we will put that in the show notes and then last question got stepping outside of the wedding industry in and putting on your e-commerce biru hat you've been in the industry for a long time,
where do you see things going in the next 3 to 5 years what what get you super excited,
Innovations in e-commerce that I'm excited about and so one is,
I think very clearly everyone seeing the direct-to-consumer,
Trent answer the continues to be new brands in new categories that are emerging that I find very exciting both in the way they're thinking about product about selling and marketing,
the second big category is.

[53:45] Innovations in what I described as curated marketplaces or Target Market places that are serving a particular audience or need some examples of this might be.

[54:01] Caviar in food space oil and,
net-a-porter which is not quite a market place but it is a house of Brands Zola falls into this category of companies include your Rent the Runway which is a different take on on this,
Stitch fix danco or Unbound and then the third big category of innovation which I find very exciting and e-commerce is.
All the Innovation that's happening in the supply chain so technology that is.

[54:38] Supporting e-commerce companies all supporting retail Brands to.
To buy create a better user experience on the front end but also create.
Address of business operation end-to-end from the moment you think about sourcing your product right through to provide customer support through to reporting analytics Adams shipping.
So those three things I think I completely changing your even though.
Amazon is the thing that everyone wants to talk about there is this really true Innovation happening across the board outside of just how much on.

Jason: 
[55:23] Very cool in one bonus question that that we ask every guest if you were going to have to dress in a costume to appear on your company photo what what would you dress up as.

Scot and Shan: 
[55:38] Well I'm a huge Game of Thrones fan and we do take Halloween very seriously so my favorite Halloween costume retire.
Secretly don't tell Mom one twice is Daenerys from Game of Thrones because I have a dog which I like to dress up as a dragon so that would probably be the one that I would have to pick.
Very cool and then you yelled Rick Harrison the dog it's not spoiler.

Jason: 
[56:11] I know I was just reminding everyone.

Scot: 
[56:12] I haven't yet but I might try that this year.

Jason: 
[56:17] I think that'd be cool I have a little dog MacGyver and he doesn't much better Chewbacca than he does a dragon.

[56:26] Well Shan it has happened again we have used all of our lot of time but we definitely want to thank you for joining us sweet we certainly wish Zilla all the best and look forward to following your success I want to remind listeners that you're welcome to continue the dialogue on Facebook,
if you have any questions or comments about Today Show,
feel free to come over Facebook page and leave us a note we try to be very responsive and of course as always if you really enjoyed this episode jump on the iTunes and give us that 5-star review,
that's that's how we pay the bills at the Jason is gosh I was 5 Star reviews.

Scot: 
[57:04] Thanks Shan have a great evening.

Jason: 
[57:11] Until next time happy you commercing.

Aug 21, 2017

EP097 - Industry News

Congratulations to friend of the show Billy May, on his new appointment as CEO of Sur La Table.  Billy was a guest on episode 23.

Amazon News

Other News

  • US Dept of Commerce reported that e-commerce grew 16.3% in Q2  - half of that was from amazon.  Fastest growth since early 2012 - 12.1% of total sales.
  • TJX sales up 6%
  • Gap earnings slightly up; they announce new BOPIS test.
  • Dicks Sporting Goods, CEO, Ed Stack:
  • "There's a lot of people right now ... in retail and in this industry in panic mode," Stack added. "They seem to be in panic mode with how they're pricing, and we think it's going to continue to be promotional, and at times irrational, going forward."
  • Stack said he noticed heavier promotions and price cuts particularly on athletic apparel, electronics, and hunting, fishing and camping gear beginning around Father's Day this year. "And it continued to be very promotional — not only from retailers but also from some of the brands on a direct-to-consumer basis."
  • Walmart Online grew 60% y/y
  • Target acquired that same day delivery company Grand Junction
  • Alibaba 56% y/y growth vs 49% projected- Adj EBITDA margins of 50%.  Jack Ma talks about New Retail concept (such as Hema Grocery store)

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

Episode 97 of the Jason & Scot show was recorded on Saturday August 19, 2017.

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

http://jasonandscot.com

New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 97 being recorded on Saturday August 19th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot:
[0:40] Hey Jason and welcome back Jason and Scott show listeners we took a little break Jason was on vacation so I took podcast vacation.
And what we found is over the summer it's harder to put gas so we we took some breaks from guest So today we're going to talking about news but before we jump into the news Jason what's new with you.

Jason:
[1:00] I am super excited cuz one of my good friends launched his business in a new sitting this this month I wait that you.

Scot:
[1:09] Yeah yeah we.
Yep so the still involved the channel visor exec chairman but spending the bulk of my time at new company called spiffy which is on demand Car Wash and we launched in Dallas.
Early August so we're excited about that and we've already added something like Fifty office parks in Dallas so the Dallas folks the people of Dallas really love having their car cleaned apparently.

Jason:
[1:35] I'm happy to hear that hopefully some of our dallas-based fans will get a chance to try it out and they can leave us some feedback on Facebook about whether you're going to go to for two on your entrepreneurship or not.

Scot:
[1:46] Yeah yeah I would love to hear how they enjoy the service.

Jason:
[1:51] Awesome other than that I'm a Jeanette's taking up a bunch of times have been a good summer.

Scot:
[1:56] It has been yeah yeah kind of deep into back-to-school catch all the kids back to school so that was have two in college and one in middle school so lot of lot of variety going on at the back to school this year.

Jason:
[2:11] I have heard a rumor that there's this increasing trend of parents fulfilling all their backed of consumer purchase needs with this newfangled e-commerce thing did you try any of that.

Scot:
[2:23] We did a lot of e-commerce around the back to school time yes absolutely.

Jason:
[2:27] I'm happy to hear it that's important dress rehearsal for all of us for for the big holiday season but did you try any of the like back-to-school specific Services by chance.

Scot:
[2:39] Did not in one of the things that kind of feels at colleges their mailrooms aren't open until like a week dip in there a week so you can't just kind like ship all this stuff there and pick it up I'm fortunately ship it to your house and then take it with you.

Jason:
[2:53] That is fascinating I would have thought that problem is addressed and I think we're going to have some news tonight that's Loosely related to that.

Scot:
[3:01] Absolutely.

Jason:
[3:02] Cool I'll leave that as a spoiler to keep people waiting until after the banter is over and we get into the news.

Scot:
[3:09] It's a tease if you tell it's a spoiler if you if you don't then it's a tease teaser.

Jason:
[3:14] That's a fair point thank you very much for correcting me.

Scot:
[3:17] How's your vacay.

Jason:
[3:18] It was great we my family is all from the Midwest from the Detroit area my in-laws so,
the lady rent a beach house somewhere on the on the shores of Lake Michigan every summer so so we took the family up there,
got to hang out with all my nieces and nephews which was a lot of fun and is a fun week in Chicago because it's the air show so the Blue Angels are in town and they they fly directly over my condo so I got the,
here here and see some frightening Lee close together jets flying around.

Scot:
[3:55] And isn't that Michigan Beach week that week you don't have Starbucks and have you recovered from them.

Jason:
[4:01] You're going to have to give me more detail I I'm not aware there is a week when I don't have Starbucks.

Scot:
[4:06] I thought that's weak where you don't have access to start.

Jason:
[4:09] So there have been occasions where we were so remote that I was not able to have Starbucks and so I actually travel with my own Starbucks syrup,
accoutrements and then an espresso machine tool my own shots but this summer we've tended to move around venues and so this summer wasn't remote enough so I was able to go to.
A Starbucks in bedded in a Meyer that was only a few miles from our rental place so I got to spend some time and Meyer which is great Midwest Hypermarket the compete successfully with Walmart and then,
I got my full fix of Starbucks.

Scot:
[4:50] Good I was worried about.

Jason:
[4:52] I appreciate the concern and thanks for yeah that's funny that you remember that.

Scot:
[4:57] What do you want to do is send a shout-out to one of the friends of the show Billy may he was at Abercrombie he was on Jason can you have one of the interns look up the episode that Billy was on one of our most popular episodes,
and he has just recently been announced that he is the CEO of Sur La Table so congrats to Billy.
I don't know the specifics of it but Jason I'm pretty sure being on the show can give him credit for that clear move so.
Yeah I think once you're on the Jason Scott show your your career is on a meteoric.

[5:33] Rocketship kind of a think Peter Cobb is now on the board of.
Discount shoe warehouse so lot of Greg pulsifer is over at General Mills now so one of our Our Guest of moving up in the world Kevin or tell went to Nike.

[5:50] Just do it.

Jason:
[5:51] I do I feel like there's a basically unbroken string of your career catching fire once once you get on the Jason and Scott show and of course the loyal listeners remember that Billy was on episode 23 he was one of our earliest,
yes and wow this is statistically not true I've always promised Billy that I would say it was our most listened to episode.

Scot:
[6:13] Cool well let's jump into the e-commerce and Retail news with some Amazon news.

Jason:
[6:35] Yes a couple new interesting things on the Amazon blotter this this week or the last couple weeks that I think is per ticket interesting is that Amazon has announced a new.
A delivery method that they're calling instant pick up and so the notion here is that you can pick up items 2 minutes after you place an e-commerce order for them.

[7:02] And so when you first hear that you go wait a minute that's that's the Majestics of that are mind-boggling how would they ever do that.
And what it really is it the moment is there's a handful of pickup locations that Amazon has and I think they might exclusively be on college campuses at the moment so you reference some of the mailroom problems on college campuses.
E-commerce has been a huge disruption to college campus mailrooms and one of the remedies has been the Amazon his open their own pick up Depot in the number of college campuses which is this pretty fancy operation.
And so reading between the lines of the instant pick up announcement.
They're using those college campus pick up Depots and they're going to pre inventory in assortment of the most popular ordered items.
Presumably over time those will be the items that are most needed with with no weed time and you know they'll have sort of a walker type thing and once you place an order to go have someone that pulls that out of inventory and puts it in the locker for you.
Instantly so when you need a new.
Lightning headphone for your iPhone or a new battery or something like that you'll be able to get it right away and I almost think of it as sort of a big version of the.
The sort of Commerce vending machines that you see at some big businesses in airports that have like the you know the the most popular Best Buy items.

Scot:
[8:31] Yeah there's some food places that are kind of working this way now where you know there's a kitchen and they put the food into, the Walker system didn't you go to a noodle shop that if I remember that right.

Jason:
[8:41] And I'm not going to remember the name off the top my head but it's like a healthy Asian themed,
Bowl restaurant that's a lot of like stir-fried stuff in the Bay Area and it's a completely,
no human interaction you order on basically iPads and then your your food is delivered the food in a locker and you open that locker and you get the food shockingly quick and it's delicious and healthy and.
They don't have to pay a person to talk to you other than when I was there it was early and they had a few concierge's out there that were trying to teach you how to use the iPads of you put them figure it out.

Scot:
[9:22] Yeah Regal when when quick when I saw Amazon stock was down like 5% one day and you $1,000 that's that's.
Fifty bucks says a holy cow it's going on so couldn't find any couldn't find anything in that I looked and,
president Trump tweeted that you know I'm pretty negative Amazon tweeten I think what happens is he gets pretty cheesed off by the depressed,
and Jeff Bezos owns the Washington Post in creates this kind of feedback cycle so his tweet was Amazon is doing great damage to tax-paying retailers,
town cities and states throughout the US are being hurt many jobs being lost so you know wall Street's reaction to that is wow that increases the.

[10:06] Chances of some kind of a. Monopoly kind of thing so not clear what's going to happen there's obviously a lot of weird things that happen to Twitter world and politics and what not but that was interesting that meal for no reason,
that the stock was down pretty material amount and then it was ended up being kind of a tweet from from the White House.

Jason:
[10:25] Yeah I mean like regardless of how you feel that any of that there's at least one slight irony there a lot of people that deserve that that Amazon can basically drop,
a press release and Wipeout you know a huge piece of the,
the market cap of of any competitor and so it's at least somewhat humorous to think that there's at least a person that can drop the tweet and put a little dent in.
In Amazon's networth listeners probably know this but the.
Jeff Bezos does on the Washington Post Amazon doesn't write like that,
fake only gets mentioned in the in the Trump versus Bezos disputes,
but it's also pretty factually untrue that Amazon doesn't pay taxes like we we assume when Trump is talking about that he's talking about collecting sales tax which.
Again technically Merchants don't pay sales tax they collect sales tax that consumers pay.
But as hopefully most listeners know by now Amazon collect sales tax,
in the majority of markets that they're in so they cut deals with a bunch of states,
you know their various timelines for Windows will kick in those will kick in but but many of them have already kicked in in the big States and so Amazon's collecting an awful lot of sales tax and I haven't seen a lot of this yet,
but I would expect this year like based on some of this negative press,
I would expect to start seeing some PR from Amazon I'll bet you they're one of the largest sales tax collectors.

[12:00] In the country right so you know.
If even the us we were just talking about this you know there's lots of estimates on the gmv if if they're selling 120 hundred fifty billion dollars worth of stuff and if they're collecting sales tax on 75% of that.
That's going to put them in the top 20 sales tax collectors in the US.

Scot:
[12:25] Yeah what you could be talking about is corporate tax so you don't have his own doesn't have profits and then they have these very huge no else not operating losses from.
From the past so you compare on them to a Macy's or something they also have a much lower tax rate from a corporate tax respective.
Hard to know exactly which taxes being talked about.

[12:51] Yes true.

Jason:
[12:57] And this is what I missed from a little while ago but the end of them,
July Amazon announced the expansion of a program we talked about on the show few times the treasure truck so this is a truck that tends to stock one item it's based in Seattle and every day of your if you subscribe to this SMS list,
they they send you an SMS saying hey the treasure at truck has,
adeel 60 bucks for a Nintendo Classic this this today only and you can accept the deal on your phone and the truck will come to a location near you and you pick up the.
The item so it's kind of them buy online pickup at truck.
Experience so I don't know exactly how you pronounce that acronym bow pit Maybe.

[13:46] And that was in Seattle only I had seen them specific to a couple special events like the,
Consumer Electronics Show in Las Vegas and now it looks like they're expanding into six other cities in one of the cities of Chicago,
so I I have a signed up on the list and hopefully sometime this month I'll start getting getting a deal texts.

Scot:
[14:09] Hope there is some there's two kind of.
Dust up surround Amazon private label a editor at Quartz magazine was digging through some of the trademark filings out there and found in about 20 kind of unannounced private labels.
And.
As you know I do that Amazon escapes so I went through all these and some of them I would say about half of them we're right in other half you know what happens is Amazon May file these trademarks but then never do anything with him a big corporations have.

[14:39] If someone has an idea I'm sure that is far off an email the trade markets created and they may or may not use it.
So some of the ones that were mentioned in there weren't really valid in that they're not actually being used for for that or and then if you go to Amazon it's a big you see the things being sold when you dig into it they're actually different brands not the ones.
Believe me that was interesting and then more recently this week the.
The data company 1010data came out with some pretty interesting data around the private labels and some the ones that I know our listeners have been really interested in or some of the apparel items so.
The first time I've seen data on Lark and Ro button-down some of the newer ones Amazon Elements which is more cpg and.
For example.
The first half of 2017 this estimates and this is I think one of these companies that looks at the cash register receipts than in emails that people give them access to through some and.
What they're saying is some of these.
Like I lost pic on button down to about a million dollars in the first half of the Year seems low to me I just kind of surprised that low.
But then saw the growth rates of these are pretty tremendous in.
If some of the categories like batteries Amazon is really starting to get to be over half of of the sales of batteries online and things like that so,
continuing to watch private label something that that you know we can courage Brands and retailers to really think about how that fits in with her strategy.

Jason:
[16:12] Yeah and it it it does seem to keep,
expanding two things that kind of jumped in my mind when I saw that news number one there is this,
kind of gray area about what is an Amazon private label so I think one example there was a article that went around talking about,
how Amazon and launched a private label wine and then,
Amazon dog doesn't own their own own Vineyards and they don't have their own wine label maker that's making this wine so they're obviously.
Paying someone to produce this wine and wines getting sold on in some of their label and Amazon kind of denied it was one of their brands and that it's it's actually like a.
You know a seller that created a new brand that they were selling on the 3p Marketplace on Amazon.

[17:05] And so are the ones I as a one-piece seller to Amazon and so there it kind of is this interesting thing you know if Amazon encourages the manufacturer to make a product to fill a gap versus Amazon commissioning a manufacturer.
There you know there's kind of this this gray area that's it's hard for a Observer that just sees that.
That's some new new brand popped up on Amazon that that they're not familiar with is it a true.
Amazon owns brand or is it a Amazon and courage brand I guess is the the distinction there.
One of the things I was like to.
Joke with client about is I'm trying to get people to stop saying private label particularly in context Amazon right like a private label had this original connotation that was.
There's a national brand.
And then there was a private label in the private label was intended to be on the Shelf in the store next to the National brand and have a large e the same value propositional brand.
Without all the marketing at a lower cost and so you know the consumer had to decide am I getting.
Bear branded aspirin or am I going to get a generic aspirin for a little less money.
Many of the Amazon products are designed to have unique value propositions and so they're trying to not build private labels although some probably are fit the classic definition of private labels like amazonbasics.

[18:36] Let me know these brands are intended to be a stand-alone brands that have their own value propositions,
and you know have they have their own to me and then be,
the national Brands not exclusively on price but based on features and and other aspects of the product and the the most glaring example is of course their most successful,
in house brand which is Echo right or,
and so I'm sure of your product manager at Sony that's responsible for Bluetooth speakers you don't think of echo is a private label you think of it is a national brand that's frankly kicking their butt.

Scot:
[19:16] Yeah yeah it is tricky maybe we'll do a deep dive on this and come up with a new framework for people to think about it.

Jason:
[19:23] Oh no I have to think of some new thoughts and Edition ones I just shared.

Scot:
[19:27] Yeah yeah you can do it just had vacation your brain is fresh.

Jason:
[19:32] Thanks for the vote of confidence.

Scot:
[19:34] One quick one Amazon should have closed the Whole Foods deal by now but the regulatory kind of review of it is still underway so they've extended that and,
to my knowledge was pretty open-ended didn't kind of say a week or two weeks so that deal still has not closed.
And then there was another rumor while you're on vacation that Amazon's getting into event tickets that they see that as a,
an opportunity where the customer experience isn't very great and that they want to kind of get in there and compete with the ticket masters live Nations the world which I,
as a guy that buys a fair number of tickets I would love to see more competition in that space.

Jason:
[20:14] Yeah and I thought I read a rumor that they maybe even tried to acquire or partner with Ticketmaster and when that didn't work out that they now seem to be moving in the direction of building their own service.

Scot:
[20:27] I didn't stuff.

Jason:
[20:28] Not what I that time time will tell it certainly would not surprise me it certainly seems like it it fits the Amazon Mo and you know they want to be the everything store.

Scot:
[20:41] Yes and we just got to the end of earning season and there's some some new kind of July comps that that came out as well and I thought it was interesting I sorry for that,
there's a company that goes through all the different transcripts and looks for different indexes them all and they reported for the S&P 500.
Over 15% of the conference calls with Wallstreet mentioned Amazon in some way that's high-water Mark in it it's interesting when you kind of go through the day actually will put in the show notes we don't have time to do it but they go through,
if some of the highlights and you have the real estate companies all talking about it grocery cpg.
All the brands that are out there and of course retailers and then specialty stores like Auto Parts and things that nature in,
it's kind of interesting here that your point earlier that.
I would have to have an Amazon story all the sudden in it used to be just kind of a retail thing but now they're very just like the last 3 years there,
they're pretty spread so wide that a very large swath of that the public companies have to have kind of an answer to the Amazon question.

Jason:
[21:48] Yeah I wonder if UPS and FedEx were on that list of companies dimensioned of.

Scot:
[21:52] They have in the past I absolutely have heard that yet so I don't know if they were on the list or not.

Jason:
[21:59] Side note everytime our intern ask for a raise I remind him that his job could be to read all the S&P 500 earnings transcripts and count how many times Amazon was mentioned.

[22:14] So believe it or not there is some.
Digital Shopper marketing news outside of the world of Amazon in one of those is at the US Department of Commerce published their Q2 data.
Which is a very useful data set that we we always like to follow and I think they came out and said 16.3% growth for e-commerce.

[22:42] In Q2 this year.

Scot:
[22:44] Yeah yeah yeah tribute half of that to Amazon which is good so so when I kind of,
back to the math as we talked on the show here for long time a lot of lot of folks didn't take into account the 3p part of Amazon but now it looks like the Department of Commerce is actually Factory that in so,
yeah that's that's pretty good to see them kind of catch up to that.
They come to a lot of the shows the guys the team that does this I think that she doesn't the podcast so shut up to them if they're listening I don't know if you've ever talked to them but they.
Really nice group of folks and they are the come to all the shows and try to kind of tune the data based on what they're hearing and I have give them that feedback a lot so I don't know if it had any impact on them including that there but it's good to see.

Jason:
[23:30] Yeah yeah I'd be fascinated to hear how they sort of estimate 3p or what they're using is there 3p estimate to factor in there,
we should definitely have them on the show I have met a few of them as well I will throw one Counterpoint out there there there are a fair number of detractors that don't,
feel that the the methodology that they use for e-commerce is entirely accurate right and I think it would be impossible for it to be,
perfect I find it to be a super valuable data set and one of the things that,
in general is really valuable about it is they've been using this consistent methodology for a long time so you can kind of look at how things are trending in and shifting overtime,
but that their definition of e-commerce and what's in and out of that let you know has a few things that you know you.
You probably wouldn't agree make make perfect sense of you were inventing the categories from scratch.

Scot:
[24:27] Yeah and I've got a lot of arguments about this lately if not arguments with interesting discussions with people and you know so what what I also here and I don't know,
I haven't had time to take into this but you know the other kind of doubles argument about this data set is it's a business survey it's a small number of businesses,
the bulk of the businesses are kind of B2B kind of company so they're selling you no widgets and fasteners and cogs and gears and stuff.
So
So then my argument is while the come squirting is very highly correlated so it seems like it checks out their argument is no it goes other way comes grow actually use it as an input the Department of Commerce data so that their date is lined with it so,
I don't know what to believe Mabel get someone on the show and do a little panel where we can kind of get someone to talk about the veracity of this data.

Jason:
[25:19] That that would be great so we can get some of the the panel guys like comscore 1010data and the US Department of Commerce so we could have a shootout.

Scot:
[25:26] Yeah Jason and Scott show data wrestling match.

Jason:
[25:31] I love it.

Scot:
[25:33] The sum of the cops are out and one of the big Winners is TJMaxx they,
the cops are up 6% that's for July and so that's pretty interesting we will talk about this on the show where there's this kind of,
password if you are a value oriented retailer you doing really well right now so,
the dollar store bears are doing well all the TJ Max's Ross stores companies like that if your convenience oriented which tends to fall over towards the e-commerce side Amazon it's up to you doing well,
and the folks that are kind of stuck in the middle of your not value or convenience right now you're going to pretty bad spot so the Macy's.
The sports folks all those guys are really having tough comps right now.

Jason:
[26:19] Yeah and said that makes it all the more interesting like one of the categories you talk about is having a pretty tough time is apparel.
And GAP announce their earnings and they actually eat doubt some slightly improve numbers this quarter so I want to say that their profits were up 1% this quarter,
versus being down to the previous quarter so like that's certainly not letting the the world on fire but.
The you know you certainly always like to be more profitable than you you were the previous quarter and in a category that's that's you know super distressed.
That's an interesting data point I was I was joking around with one of the Forrester analyst on Twitter today.
I would not take that news you know they're up against a really soft comp.
And I would argue you know that a lot of the Peril in history and in gap is a perfectly good example of it.
Have a lot of institutional headwinds I'm not sure I would take that that.

[27:24] The nice up to get this quarter in and use that as a reason to invest in the in the category but never the less good news for the gap.
And an interesting subtext in there they announced they were piloting a new customer experience for them which is buy online pickup in-store.

[27:41] And for many listeners this show they might say wait a minute Gap wasn't offering buy online pickup in-store that seems like table sakes for an omni-channel retailer.
Gap has been one of the largest proponents and one of the earliest adopters of Reserve online pickup in-store so they're normal experience was.
We won't charge you till you get to the store I'm so you you'll reserve it will pull the product.
I have it ready for you and you know when the mean reasons you'd want to do Reserve online instead of buy online is because you like that customer to come to the Gap Store discover a few other things that they didn't know they needed an add them to the transaction.
And that's easier to do when you have a reserve online.
It also is kind of a lower threshold to get the customer to reserve cuz they don't have to put any money down up front and so they've been one of the big proponents of reserved online and what's not said and.
The earnings call that I'd be really interested in is.
Are they throwing the towel in on Resort online are they if they decided that the pros and cons of of bopis versus reserver.
I can tell you enough that they're now shifting to what is the much more common industry practice.
I don't know but I'll I'll certainly be digging to see if we if we can learn any more about what that shifts about.

Scot:
[28:57] Yeah I don't have any data but my bed is when you survey customers like reserve reserve and pickup is like a.
Like to wait in line which is not convenient so people want convenience and if you're if you're going to put your priority of go pick up more stuff we're not going to get convenient so you'll buy more stuff that that Jesus customers often today's world.

Jason:
[29:17] Yeah know I tend to agree and you know there's there's.
Execution problems with both but you know I think one of the challenges in a store like Gap is executing on these thing so you know when you reserve online do you walk in the store and,
and this product really have been pulled for you and it's the right products and they had in stock what they said they had in stock there there's a lot of things to go wrong and in some ways when it's reserved online there's a little less economic pressure on the,
on the store to execute and so that can then a road customer confidence in the service.

Scot:
[29:54] Yeah Absol.
When did I fall it really closely those pretty resting is so so we had the failure of Sports Authority and Dick's Sporting Goods,
down pre substantially after their Crow the results and the CEO is needs Ed stack he had pretty interesting quote here I'll read a couple exits.
This was in when he got into the Q&A with Wall Street there are they missed on the I think they kind of came in line on the top line but then their bottom line the profits weren't really there and gross margin seem to be under pressure and,
the CEO kind of win a little bit or rant kind of a no therapy session he said there's there's a lot of people right now in retail and the sports industry that are in panic mode.
In panic mode he said they they're freaked out about how their pricing how we're pricing.
It's going to be it's going to continue to be Promotional and at times irrational going forward.
Well you can imagine Wallstreet didn't like that word irrational so that that was not well-received and you know what I think I saw some notes that said it's going to be a structural change.
These guys where they're going to have to you know there.
The energy price matching with Amazon they're going to have to just kind of take much lower gross margins they had going forward so really big pressure there and then another little piece that listens would be interested in.
Is he kind of finished up and said it's going to.
It's continues to be very promotional not only from retailers but also from some of the brands on a direct consumer basis so.

[31:26] She had this kind of like this crunch scenario where retailers are stuck in the middle you've got online guys like Amazon and.
They are much more efficient and they can have a different model that that has lower gross margins lower prices passes amount of consumers and then you have Brands go Direct on the other side.
You specifically asked about Amazon having Nike selling on there.
He said you know I don't think you've seen anything we're watching it very closely we've talked tonight Nike a lot about it so pretty interesting going to.
Another in a crunch there with with retailers.

Jason:
[32:00] Yeah and I wouldn't expect to see a lot of a,
concerning behavior on Nikes part yet but what can definitely happen is you know all the all these other players win this when the retailer closes,
if you were Under Armour Adidas or Puma,
you are the forecast for the year and you built you you manufacture product based on that forecast and part of that forecast was that there be a bunch of Sports Authorities that would each have to buy a certain amount of inventory to put on their shelves,
and so when they stop buying at inventory because they're out of business or there's been retail consolidation or whatever,
and the market gets flooded with cheap product because some Liquidator buys the existing inventory that those things happen,
you as the manufacturer are suddenly not going to make your numbers and so that likely is going to trigger a bunch of other you know bad behaviors that ultimately result in mr. Stax observation right like you could either,
try to sell that stuff to direct a consumer and you could get more promotional to do it,
you could get more promotional in incentives you offer your you're surviving wholesale Partners to get them to sell through more stuff there's you know like there is,
second and third tier effects on all of this stuff that that create a negative spiral of momentum in the category.

Scot:
[33:21] Yeah two other quick ones in this kind of same bucket Foot Locker was asked about Amazon on their conference call and the CEO kind of pounded his chest that we don't worry about them we have you know the latest and greatest and sneakers come Dawson Amazon doesn't get them,
as long history of people that have said that they're not worried about him son and or Amazon can't compete that they're either out of business are going out of business so.
We should start a Jason Scott pool where you know people that foolishly.
Poke the bear the Amazon bear end up paying for it down the line and another one I did read article wear under armour,
to your point earlier they had some lines that were at a retailer they liquidated some of them to Kohl's and ended up really kind of craving this.
Bad cycle between I forget who the other retailer was Maven Dick's Sporting Goods the created some bad blood and and ended up that you know that.
The other retailer didn't want that product line anymore in the not all just going to have to go to Kohl's and more of a discount kind of a format so it's a lot a lot of.
Gnashing of teeth out there and in the Sporting Goods got over.

Jason:
[34:26] Yep and then I haven't fought a closely but I I think we're waiting to hear for regulatory approval on Cabela's Bass Pro Shop so that's another.
Like potential significant disruption in that space of those two guys merch.

[34:48] So another retailer earnings that came out this month it's to me super interesting is the largest retailer in the world Walmart,
they had another,
slightly profitable quarter in the stores so I want to say they were up one or 2% or someplace between one and 2% so that if memory serves that's like the 12th consecutive quarter of.
Brick-and-mortar growth for them and just to put that in perspective,
not very many retailers have had a dunwell 12 quarters in a row so there's an obvious inference to make that Walmart is.

[35:31] Benefiting from a lot of the hardships that other retailers are are experiencing and that there.
Well well position weather the storm with a little bit more Elbow Room than then.
A lot of other retailers but the super interesting thing is that they're online growth was up.
60% for the quarter from from this quarter last year and to put that in perspective.
Last quarter they were up 62% so that's now two consecutive quarters with astronomical growth.
Obviously it's much easier to grow a small number then a big number so you know it's almost not worth comparing that to Amazon even though it is much faster growth than Amazon but I'll remind everyone.
These guys are the second largest e-commerce site in the u.s. they're going to sell unipres north of 15 billion dollars this year,
and so you know if you think about the e-commerce Industries growing in about 15 to 18% depending on which numbers you use,
that Amazon is growing at like 25% and Walmart is growing it like 60% most of e-commerce isn't growing that fast,
if the two biggest players out there our way outperforming the rest of the market like usually in a mature Market you see exactly the opposite you see everyone else growing faster than the the guys at the top of the echo system so,
all super interesting and then I guess one other spin on that like.

[37:06] Walmart has acquired a bunch of companies that have meaningful e-commerce Revenue so obviously I mean jets in these year-over-year numbers but Moose Jaw ModCloth bonobos,
would all be new and so what the Senate could look at this and say oh will there.
Their e-commerce growth is way up because they through acquisition but they're claiming they claimed last quarter and I think they claimed again this quarter that more than 50% of their growth is organic.

Scot:
[37:40] Yeah yeah saw a Goldman Sachs report where they actually kind of backed into it and their estimate was 30% organic growth 30% from Acquisitions so they they kind of put it right at that 50% so I don't.

Jason:
[37:53] Yeah so even if so that still has them growing faster than Amazon.
One interesting contacts for this this is the the growth in the mark Glory when he took over for Neil and,
there is sort of the big shift in philosophy at Walmart like they Walmart really used to focus,
walmart.com used to focus on stuff you couldn't get in the store so I'll they,
they had a you know a couple million skews there they're mostly trying to sell the stuff that people wouldn't traditionally buy from the store so barbecue swingset things things that were inconvenient to buy from a store.
And the mark Lori era at Walmart is really about selling daily Essentials online and so that's a pretty big shift in philosophy you seen the skew can't go way up at Walmart and these these first two quarters tell me,
did that strategies really working and the reason I point that out is that's a really interesting shift and philosophies you know tis.
E-commerce best suited to to,
fill in the gaps that are hard to do and brick-and-mortar stores and sort of rounded out or should your e-commerce offering really mirror your in-store offering and cater to the the same customer base and it seems like at least an Walmart's case,
they're they're doing Best Buy by shifting to try to meet the same kind of needs online that they've traditionally men in store.

Scot:
[39:20] Yes a Star Wars toy collector I get to go to lots of Walmarts and one thing I've definitely notice in the last 6 months is a lot.
One more integration with online in the store so you know just little things like they have these poles out front that keep,
cars from driving into the Walmart I think now they have these kind of sleeves on them that talk about online,
online pickup buy online pickup would be in the very back of the store and it was never staffed now it's moved back to the front of the store couple of my Walmarts are really pushing the,
dedicate a lot of lanes for for grocery pick-up and,
you know I saw I haven't used that but I saw this one person get it in like for Walmart employees came out and we're like,
just yeah team loading the car with groceries it was pretty guitars like a priority that they had a lot of lot of Associates really working on it so it's definitely at the store level there doing a lot too.

Jason:
[40:13] Yep yep and that particular Zaza that pick up curbside experience and they they continue to greatly expand that so I know in California they added a ton of stores with curbside pickup.

[40:29] Which only works well for groceries in this or two things.

[40:34] And then when you talk about Walmart it's hard to not talk about Target and a couple interesting things have happened at Target lately they they've done a few interesting Partnerships we I think in the past I've talked about their Harry's partnership.
I can't remember did we talk about the Casper partnership on the show yet we did.

[40:54] Yeah and so you know they've been doing these these Partnerships with some of these digitally native brands.
In this month they acquired Grand Junction which is a same-day delivery service.
Which is interesting so they're there now offering same-day delivery for for a number a subset of their products.
Yeah they used to have this partnership with curbside and they they abruptly canceled that partnership and then they've turned out and acquired a same-day delivery so that's.
That's it interesting thing to think about it Target is it certainly seems like Target doesn't feel like.
Curbside pickup is the the best solution for them and and same-day home delivery is going to be a good solution.
And I forget what they caught but they also launched a new service with just kind of their version of Prime Pantry that sort of a a bulk replenishment service this month as well.

Scot:
[41:51] Yes starts with an R I can't remember the name either.

Jason:
[41:53] I'll go get our intern on it while we while we go on.

Scot:
[41:57] What are the last companies to report Q2 every year is Alibaba and it's because,
they are a Chinese company that has is held by us entity in Hong Kong it's it's kind of a complicated way that you have to do things if you're Chinese company so they came out this week and,
blew away expectations across the board so the stocks hitting new highs and there's a lot of really interesting things on that conference call.
One of the things that was interesting is their growth is really reacceleration Alibaba so while she was expecting 49% growth night that was kind of stretching it came in at 56%.
And they their adjusted ebitda margins are north of 50% so.

[42:43] Yo if you if you look at kind of the pure Marketplace model there's there's almost no.
Cost in there so so there's causes whatever it cost to push bits around on a computer and an over the wire and and then there's some sales and marketing and some R&D and that's about it so 50%.
Emergency pretty pretty crazy there cloud computing platform that competes they to be us is doing really well and it was a big contributor to that.
They also cited taobao which is their P2P Cana Marketplace they've changed the u.s. and Jason I thought you would find this interesting they did.
Big personalization project at Alibaba that rolled out and they said that that's driving a lot of growth where there they're learning more and more about their customers that are dropped by buying from the marketplace and.
What to recommend to them and get them to buy across the whole family of services and products.

[43:34] Nothing that that's really nursing with Ali Baba is just like Amazon they are doing a lot more in physical retail they've been buying some physical retail opening stores.
In a couple interesting things the CEO said he said imagine the store we can pick up items from the shelf and in the same time.
Be there stuff that's not in the store of the you can scan with your phone and then you just tell the store you know look just have everything delivered to my house and it just goes there because you have stuff to do after you go shop.

[44:02] Another example that used is a see you go to the grocery store and get something for dinner but then.
You didn't know you wanted for the rest of the week so you just want to order a meal online so what they're seeing from the Chinese consumer in and sounds a lot like the US consumer is.

[44:20] They're looking for a spot Navy convenience in speed and total flexibility that the favors the customer versus the retailer that's what they're really building towards they call that new retail.
And here's the quote on that with new retail satisfying ever-increasing consumer expectations is no longer an incremental game it's disrupt.
And in the same sense that we were going to have to.
We have to disrupt e-commerce first and embrace the physical world in and kind of just tear down all the barriers between them so is very flexible is kind of like Beyond even kind of the normal things we think about in omni-channel.
You seem us experiences between the on and offline world is what I Bob is trying to build in.

[45:00] What's interesting is as they go into the more physical store if they're kind of merging the marketplace in there so just like we talked about on the show it's that concession type model is really kind of happening in the physical retail World Air in China.
You haven't seen that the US but it is going to be interesting to watch that and see if that time makes its way over here.

Jason:
[45:19] Yeah for sure the the the new retail Mall of the Alibaba talks about it's not entirely hypothetical either they've actually opened a handful of these,
Next Generation grocery stores they call Hema and said there is actually some video tours of them available online I'll try to put a.
A link in the show notes but what's interesting is when you design a store from scratch for some of those experiences versus you know most of the stores were familiar with in u.s. was a traditional store.
That they retrofitted a buy online pickup in-store or a Home Delivery Service or something to,
it's pretty interesting to see how the store looks different when it's designed from scratch to do that so,
one of the the utilities that I found interesting is they they literally have this conveyor belt in the.
The store with these hooks that like pick up bags of groceries and lift on out of the store like into a Depot area for home delivery,
and so the ends are Shoppers run around they they use you know mobile phone,
get the list of items that they're going to ship home for a customer and then they like.
You know super efficiently just just hang these bags on a hook scan a barcode and that bag gets shuttled off somewhere to.
For a home delivery so couple interesting things like that they they heavily rely on barcodes in the store for product information so you can.
Need to scan a QR code to get you know the product information about all the products in the store China doesn't have the same.

[46:55] Labeling laws that we do in the US so there's even more need to learn about products for for Discerning Shoppers and in China so just some kind of interesting evolution of the store and for your first point.
They're making so much money that they have significant resources to invest in figuring out the future of retail.
And like almost everyone else they've kind of figured out that the long-term future of retail isn't exclusively online so they're they're putting some.
Some real resources and figuring out what the.

[47:27] Physical store of the future looks like in a digitally disrupted World them so you know I for one on and thrilled to see them trying to do that.

[47:39] And I think that that is all the news we had for listeners this this.
Week so as a special treat we have not wasted a perfectly good hours of our spare time,
but we certainly would encourage listeners to give us feedback so as always we have a Facebook page if you have any questions or topics you'd like to talk about her,
hope she like to hear from or just suggestions of what we're doing well or what we can improve we greatly appreciate it and of course of you love the show,
shoot over to iTunes and give us that 5-star review that's super important and we greatly appreciate it.

Scot:
[48:17] Thanks everyone and.

Jason:
[48:19] Until next week happy commercing.

Aug 5, 2017

EP0096 - Listener Questions Part 2, and News

Amazon News

  • Amazon now showing pics of delivered packages in app
  • AU fulfilment center
  • Amazon hiring day (50k new jobs)
  • Lots of new FCs coming
  • Sears to sell Kenmore on Amazon and build Alexa into products
  • New Amazon Hub Lockers
  • Forcing Free Returns on 3p Sellers
  • New Amazon  handbag private label launched - The Fix (Prime exclusive)
  • Stripe processing some Amazon orders

Listener Questions

Michelle Grant via Twitter:
Do you think Nike is one of the few brands that have the leverage to get Amazon to remove 3P inventory?

Steve White:
Hey guys, when I talk to brands they have this sense that they are going to be 'pushed out' or off the platform as Amazon develops products in their respective categories- my sense is that Amazon has never acted like a bully in that regard, just adds additional competition- thoughts?

Parker Block:
Who is right, @retailgeek ? Are disruptive forces going to drive retail consolidation (per @debweinswig) or fragmentation (per @klobaugh)?

 

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

Episode 96 of the Jason & Scot show was recorded on Thursday August 3, 2017.

http://jasonandscot.com

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

 New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scot show this is episode 96 being recorded on Thursday August 3rd 2017 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 you're you're at home the rear of the sign this is the first week this year you've been home so that's pretty exciting.

Jason:
[0:50] I am for those of you that are listening this would be a good time to up your investment in Chicago area Starbucks if it's possible the individual investor in the Starbucks branch.

Scot:
[1:01] Cool flowey,
you wanted to start off at the top of the show and congratulate one of our friends of the show Peter Cobb he was our first guest and he's founder of ebags and he has just announced today that he is joining the board of DSW so congrats to Peter.

Jason:
[1:19] Yeah that's super exciting I had a nun confirm report that his primary qualification for that job was that he was the inaugural guest on the Jason and snot ship Jason and Scott show.

Scot:
[1:31] Oh yeah yeah I think it's definitely Resume Builder will have to see who the second guess was and see if they rise to Fame and Fortune as well as well.

Jason:
[1:39] Exactly.

[1:41] Scot I feel like we didn't get to talk about it and I may have happened 2 weeks ago but they revealed all the information about the new Tesla and if I'm remembering right you have an option to buy one.

Scot:
[1:55] Yeah yeah I'm excited the actually the day they announced it I put into pre-orders so I was going to,
use one and give away or if I couldn't find some of that wanted I was going to sell the second one and,
it's exciting because they did just kind of update the website and show when they're going to be delivered.
And I find it hard to believe so I'm taking this with a grain of salt but it shows that both of mine would be one is to give you a 3-month window and one is October,
November December in the other one is November December January of,
1718 so I doubt that I will actually be that early but it's kind of fun to think like it could be possible.

Jason:
[2:38] Wow are you going to have time to expand your garage in time.

Scot:
[2:42] I don't know we will see.

Jason:
[2:47] That you talk about first world problems that is definitely a first world.

[2:52] I don't know if I ever told you this but that turned out to be my inadvertent brush with greatness do did you follow that there was this light controversy someone asked you on musk if he was going to get the very first one,
and he tweeted something about how know we have a strict policy that whoever fate pays.
The full fare gets the first one and so that belongs to one of our investors who subsequently gave me the rights for my birthday did you.
Did you see that story at all.

Scot:
[3:21] I did not know I missed it.

Jason:
[3:23] Yes it was like a internet thing for a day and a lot of people were questioning the veracity of that policy,
and so it became a little controversy on stuff but what was funny about that is,
the investors name is Ira iron price and that that sound really familiar to me,
it turned out he was an intern for a VC firm that was when the investors and when the reefers companies I was a principal for and so I get to work with,
I rather like the week he graduated from Stanford Business School and now he's giving Tesla's to Elon Musk.

Scot:
[3:58] Nice you should call him up and get on the list.

Jason:
[4:01] Yeah I don't feel like I would want to want to impose.

Scot:
[4:04] Yeah.

Jason:
[4:06] But I will share the story on the podcast for partial credit.

Scot:
[4:10] Cool actually I think it counts yet that is definitely a Forrest Gump kind of moment there.

[4:15] Two on let's jump into it on this week show we're going to cover some news from the week and last week we had so many listener questions we were swimming and listener questions we're going to.
Kind of swing back around at the.
Back half of the show and pick up some of that we were not able to get to so we apologize to those listeners that were waited on listening it with bated breath last episode,
we will do everything we can to get to the mall of this week so let's kick it off it would be a Jason Scott show without some Amazon news so here we go.

[4:50] Amazon news your margin is their opportunity.

Jason:
[5:06] Yeah so the first thing is I had several colleagues send me pictures this week from there Amazon app where in the the order tracking,
Amazon was uploading photos of the Amazon box being left at the customer's doorstep.

Scot:
[5:25] Yes the.
You tag me in one of those tweets and I logged into my account one morning and had like 60 notifications that's like what the heck the only time that ever happens to me as if Marc Andreessen his stop tweeting but when he was he retweeted a couple things and I would wake up and have like.
500 followers so it felt like that is very exciting for me.

[5:46] It's coming in a few I was kind of thinking through the logic there and so.
Obviously one of the standard carriers is not going to do that so.
So USPS so it's Amazon the bulk of crime goes through ups and then they leverage USPS in the needle little bit of FedEx so none of those three cares would do it.
But they do have this Care Network called Flex that not many people know about this started when they launched Prime now it's an Uber Rush type service so uses 1099 drivers and a very similar Uber like system but for packages instead of people.
And they developed this for Prime now so all the prime now products are delivered that way.
And then what we're starting to see is more and more packages out of the Fulfillment centers they're running some algorithm that essentially kind of.
Uses that same driver not work and I believe if people are close enough for the you can ommix work out that it's.
Cost-effective compared to the other options,
then they will get Flex drivers actually go to fulfillment center and deliver a package so it looked a lot like my guess was that that's what those package pictures were is the flex drivers like an Uber driver they have a very.

[7:05] I'm very specific Amazon after the download to be a flex driver in there they can scan packages and take pictures so seems like that's the logical place where that would be happening.

Jason:
[7:15] Yeah and I think partial confirmation that you're right at the first person to send me that picture was a co-worker of mine Jeremy lockhorn,
and he has a one of the Ring doorbells so after you you positive that theory that it probably wasn't a UPS driver Jeremy pulled the video from his ring doorbell and,
sure enough it was a woman in a tank top that look like.
Dropping off that that the box of the door.
Sheer in Chicago because we're lucky enough to be really close to some fulfillment centers we get a lot of,
same day delivery using those Flex drivers from the actual fulfillment center in Indiana and so it's my my building I have 12 Neighbors,
it's in our condo building is pretty funny we get two waves of Amazon packages a day like our UPS guy comes at about 1 in the lobby fills up with Amazon packages,
and then the Fulfillment center delivers All the Same Day deliveries at about 9 p.m. and are in our lobby refills up with Amazon boxes every night.

Scot:
[8:23] Wow you're just like Amazon sooner there.

Jason:
[8:26] Yeah there's a lot of good trend-spotting by just walking it with my neighbors order I will say I'm someone impressed by my neighbor's they they have some pretty eclectic e-commerce shopping witch.
Which always makes me happy but I think people Basque.

Scot:
[8:42] You're a child the look in the box feature to see what they throwing.

Jason:
[8:45] I have it as you probably know it only works with your own order.

Scot:
[8:48] Yeah I know I try to.

Jason:
[8:49] Which means I can never say anything because it's my boxes are always from my wife so they should have a family family plan for that somehow.

[9:00] Everyone on the plane Prime account you should be able to see or something but I think presumably the reason they're taking those pictures is to reduce fraud and you know false claims the packages when delivered that seems like that.

[9:16] The primary reason.

Scot:
[9:18] Yes there are some of the on demand economy companies make it part of their user experience to kind of show the delivery one of the one of the New Generation Flower companies called Urban style mistake they actually film a little video of the product being delivered and they send it to the sender as kind of a nice little wait to see.

[9:38] It's not as kind of boring as a package sitting on a porch.

Jason:
[9:41] Yeah it makes it makes the most sense in the world and you think about it it's it's kind of sad that the big flower companies can't do that cuz you would really like you never know what the product look like looks like that you purchased.

Scot:
[9:53] Yeah absolutely,
a couple other kind of quick hit lightning round items on Amazon news these are all kind of in the area of filament so.

[10:04] Amazon has long been rumored to be opening in Australia there was kind of definitive news that they have located a warehouse so that's interesting so their first fulfillment center in Australia has been located they've done a lot of PR around hiring for the holidays and they they did a job fair this week where they had,
50000 folks they were hiring and,
moose articles I saw actually wear negative because there's so many people at these events the lines literally went on for,
most people reporting waiting in the lines for eight nine hours it was interesting the financial press was kind of surprised because,
if you look at the data that comes out from the government it looks like we're at effectively you know neutral employment where,
almost everyone has it we have very low unemployment right now but then when you go to these events that they're hiring you know kind of.
10 $15 an hour kind of folks there are also a lot of people out there looking for working and they really would like to work on Amazon fulfillment center so that was really interesting in Amazon got a lot of,
there's ton of press around it.
A lot of it was negative not not really against Amazon just a line seem to be very long I'm the last one is we recovered Amazons.
Q2 earnings last podcast but.

[11:19] After we recorded some news came out that the CFO essentially said one of the reasons there was a lot of expenses kind of in the four projections was that 80% of the format centers are going to open this year will be in the,
back half essentially and Amazon doesn't really open fulfillment centers in November December so back-half essentially means,
July August September October so when I do the math on that it's kind of crazy it makes it seem like they're going to open.
Teen 220 performance centers and it kind of comes out on the high side of that so that's give me something I'll be keeping a really close eye on it is kind of the reading the tea leaves there made me feel like there are a lot of a felmet centers coming in the next 3 or 4 months.

Jason:
[12:06] Yeah and that's feels like that's now going to just be an annual cycle for Amazon so it's it's funny of your investor you should almost like you know grow to expect Q3 to be a low profit quarter as they they have these huge expenses for opening these things.

[12:22] Another interesting news bit do we didn't get to cover earlier is Sears announcement that they would now be selling Kenmore appliances on Amazon and that.
It was interesting for a couple of reasons but in recent months we've talked about.

[12:39] Honest to add previously said they would never sell on Amazon sewing on Amazon we talked about Nike that said Amazon wasn't right for the brand you know he's at least dabbling with some excuse on Amazon you know now we see Kenmore which is one of the you know.
Few remaining valuable properties that Sears owns.

[12:56] Moving to Amazon in every time one of those things happened like it had a derogatory fact on the rest of the industry and sure enough the other Appliance retailer stock went down.
When Amazon announced that they were selling Kenmore so you know I think we're seeing this new trend that.
Then Amazon can you know at least temporarily like materially affect the valuation of all their competitors just by issuing a press release which is.
Pretty interesting in one other thing it was interesting about this Kim ordeal that I didn't see as much coverage on but Kenmore also announced that they would be integrating the Alexa in a bunch of their appliances.
And so that's a you know another controversial one you know a lot of retailers aren't aren't big on Alexa being the default,
artificial agent in all these kitchen appliances because it obviously is giving Amazon this huge leg up and you know now for Kenmore to do it as is,
pretty big blow.

Scot:
[13:58] Yes I think it's you know that a lot of discussions about looks with colleagues and I kind of take it to this pretty extreme wear.
I think Sears could actually do better if they would shut down a lot enough all but maybe I don't know 50 stores or something and sell the real estate and then become a house of brands that sell other places online not only Amazon but.
Definitely Amazon good examples I think a really big mistake they made is they sold Craftsman for something like,
900 million dollars to I think a private Equity Firm note to Black & Decker and you know I think if they'd sold Craftsman on Amazon that would have been.
That line is got to be I don't know what its revenue is but it's kind of be a.
Billion dollar ear line is still quite popular out there with with tool folks so so it's interesting I don't know if this signals a change of that kind of thinking or if it's a last-ditch effort before they sell it or I don't know but it just to me it feels like.
If you could have kept Craftsman.

[14:59] Cheap Kenmore of the good couple other brands sell the stores and use the proceeds to go buy more brands in and I'm kind of a family of Brands there that may be a better future for Sears and kind of like what looks like this slow death that they've been barked on.

Jason:
[15:14] Yeah I know I certainly think you're right I suspect that some of the valuable Brands they've had to sell it been painful and I think they probably had to sell them because the stores are such a money sink that they just needed the cash and you know I think,
you know financial hardship makes you make some some short-sighted decisions and and Craftsman might be a perfect example of that.

Scot:
[15:36] Another quick Logistics one Amazon announced a whole new product called the Hub.
And this is a physical Locker it's a lot like Amazon lockers and even looks kind of like it but what's different is it's meant to go into residential location so at least case they talk a lot about is an apartment building,
or like your building where you are Jason sounds like maybe have a doorman so the packages are secure but pretend you didn't have a dormant then,
you would put this Hub there and you'll receive packages and,
the returns in there that kind of thing just like an Amazon Locker the difference is it now has a new brand called the Hub and if you go to the hub. Amazon.com you'll see a picture one of these and other really interesting difference is it can be used by Third parties so a FedEx delivery person could come in and they enter a code,
there's a sequence that they they can enter on the screen and say.
I have a delivery for Jason Goldberg and it would open the door and then it would know okay Jason lives in apartment.
Etsy and it would somebody would message you and I think you can set up,
as a resident you can log into there some software you can log into and and set some preferences of how you want to be communicated with so you would get a text message that would say.
Jason you got a package from FedEx tracking number X in the hub and then you would go get it and,
and you can even put packages in there and summon UPS let's say for a pickup kind of thing so it's pretty resting and.

[17:08] You know a lot of companies are working on these things and it just Amazon already is is kind of dislike their 5th generation attempted this it was interesting to see them taken more open approach which is kind of the closed public area Amazon Locker.

Jason:
[17:21] Yeah and I mean it feels really smart you you go to like the grocery stores that you know do the home delivery through a bunch of these services and what you now see is,
a bunch of Amazon lockers for grocery delivery next to a bunch of instacart lockers for grocery delivery next to potentially some third service,
and it's taking up a ton of real estate in it it just doesn't seem feasible and so you know you use scale that to these home buildings and it's not likely that FedEx ups and Amazon are all going to get,
get the locker space,
in the lobby City's building so it's it's pretty smart of Amazon to say hey wolf will do the landgrave pool get the space because we'll let you use it for everything.

[18:03] And I do also you know obviously one of the things this is a dressing as just as as.
You know we're being disrupted by e-commerce and so many of us are getting so many packages at home one of the real problems that's coming up is package theft and we're saying all kinds of.
Interesting and Goofy Contraptions being invented to sort of mitigate that but these Walkers are obviously.

[18:26] One of the best tool so so I suspect they'll get some success with that the next news item I saw.

[18:36] Got some seller Amazon sellers and a little bit of a kerfuffle Amazon sent out a letter changing their their returns policy for three-piece sellers.
All just read a little bit of the announcement dear seller Amazon is simplifying the returns process on items fulfilled by sellers.
Starting October 2nd 2017.
Returns of items that you fulfill and that fall within Amazon return policy will automatically be authorized customers will be able to print a prepaid return shipping label via the online return center instantly.

[19:12] There's another paragraph where they announce another future which is we're also introducing returnless refunds a feature of the tire you requested by sellers.
If you choose to do so you will now be able to set rules and automatically issue a refund without requiring an item to be shipped back to you.
So as a request this because in many cases it allows you to save on both return shipping and processing costs so the gist of this.
Is your three-piece seller on Amazon you're not using FBA.
Customer wants to return a product used to go through a process and the seller would have to authorize that return and now they're just saying hey we're forcing all sellers to take returns no questions asked.

[19:57] And there's a lot of small sellers then on the forums and on the the Amazon forums.
I really outraged about this because you know you know they feel like they're getting getting cheated by by these nefarious buyers that buy stuff and then.
Indiscriminately return it and I think it was even some confusion some sellers thought they'd be forced to use this this returnless refund.
And that clearly isn't the case that's really designed for products where you know it's more expensive to ship the product back than it is to just throw it away or something like that and so you know they're giving that as an option to sellers but.
I don't think this is news for anyone in FBA I don't think it's news for any of the big sellers but you know I do think it's.
An interesting play I understand the sellers being upset by it but as a customer I think it makes a lot of sense when Amazon is doing.
It's really confusing and complicated when the terms of service are different for every product you buy.
Based on who sold it to you right so I buy 3 things they may have come from three Cellars.
On Amazon I typically don't even notice that and so then if I want to return all three it's very odd that two of them are returned with no question to ask and one of them the return is denied so this seems like a.
A step to force more consistency in a more customer-centric.
Approach on Amazon and you know certainly at at some cost to Amazon sellers which I understand they they probably don't appreciate.

Scot:
[21:29] Yeah yeah a lot of small sellers view returns is kind like this.
Battle Ground and they the Dig and dig their heels and have these stocking fees and all this kind of stuff they try to turn into a profit Center and I think the larger sellers of kind of said look please.
Those days of Internet are over that's comic 1995 thinking let's returns are here to stay just got to make it in your modeling and that's not going to be the profit Center in whatever the cost is.
Put it in your business model and go forward you can't just,
can have that kind of thing and I agree with you it it's level sets to user experience that makes it a lot cleaner than than kind of the password to Congo reach every sellers return thing and go to the different rma's and all that stuff.
Another Amazon news item is I think one day in the future will look back on 2017 and it'll be the year of Amazon private label because seems like a new private label is launching every week right now so this is your for long time you had a couple out there anchored with amazonbasics and,
couple others pins on and and Stratford and things of that nature and then this year there's been like literally a new one is discovered,
every month so this month so you know.
Private label is called the fix and it's Prime exclusive so all these private labels are either Prime exclusive or not this one is a prime exclusive private label and its Footwear and Handbags so.

[23:02] It's got kind of a very floral bright kind of a look to it so it'll be interesting to see how that does.

Jason:
[23:11] Yeah you know I think there's some possibility that Amazon you know has been the Nemesis of Peter Cub forever and so what a coincidence the day Peter goes to work for shoe company Amazon start selling shoes.

[23:29] But yeah I do think it's going to be interesting obviously you know every industry looks at Amazon and then go oh man they're doing great and all these other Industries but,
but our category is much more more complicated and you know I suspect a bunch of people at,
a Vera Bradley in Michael Kors and you know all the other brands or you know waking up this morning and either.
Being being concerned or or not but but they certainly probably should be based on the success of some of the other Amazon brands that they've been able to build.

[23:58] And I just always like to remind everyone like we get in the habit of calling these private labels because they're their brands that are offered by the retailer but.
You know my joke is Alexa probably doesn't feel like a private label to the the product managers for Bluetooth speakers at Sony.

[24:17] Seems like they're full fledge brand.

Scot:
[24:20] Yeah and unlike kind of what I talk to other brands they kind of say well we've competed with private label for very long time which is true but it's.
Different because you know these are frequently tagged.
With Amazon Choice they're designed in such a way to be very diffi like mature Brands so it's not like Old Roy dog food where it's like clearly the the Walmart brand or something like that so there's a couple that are there's like wickedly Prime and amazonbasics obviously,
but you know when they when they do these apparel ones they slip them in there and,
you know it is as a consumer that's not familiar with every brand it is hard to tell so if you do a search for dress shirt or black dress and you will see I'm guarantee they'll be a strip of Brands up there and two of those are private label so it's kind of a I like to do this I go into a,
like you I present a lot I'll go into a presentation and and pull that page up and say what's the private label and I would say almost understand the time people cannot a hundred percent gas at the,
there's one that dough gas in it other one don't they will mess up so I think it's people should take these very seriously.

Jason:
[25:35] For sure and think about it like what the next likely plays are with all these brains right like Amazon guns going to use.
All their data on selling Handbags and Footwear across all products,
to identify the attributes that customers most want they're going to use the search results in the the non converting products and figure out where the gaps are in the market and so there,
they're going to be able to use this huge amount of data that they have,
dictate what you know how their product lines evolve which is a potentially big competitive Advantage now they're going to install cameras in a bunch of people's dressing rooms and take pictures of their outfits so now they're going to be able to help.
Help no much more so than any other manufacturer,
the exact fashion sense of all their customers and what products they tend to wear and how frequently they tend to use them so that's going to give him another big advantage over over the traditional Brands and then you know course they're going to roll all these products into,
the Amazon wardrobe offering and you know send free trials to customers to let them keep them if they want them like they're just building so many pieces of.
Ecosystem here and if your you know your attritional handbag manufacturer or footwear manufacturer that just makes products and tries to sell on you know.
You know I think you really need to think about it like you're not just competing against another skew your complete competing against a whole new echo system that that.
You know in the medium-term is likely to change how people shop for these products so that's going to be interesting to watch.

[27:06] The next news item I had I'll be honest I'm not sure what to make of and you you had a particular interesting Theory,
stripe made a press release in stripe as a,
very popular payment Gateway particularly with smaller Sellers and marketplaces in they made an announcement that they were now.
Providing an undisclosed conducting transactions for an undisclosed percent of Amazon sales.
So Amazon is now using stripe for some of their payment processing.

Scot:
[27:46] Yeah this was a tricky one cuz it was reported everywhere and it was hard to chase down the.
The source and its in a Bloomberg article will put it in the show notes and seems like the author saw Amazon's logo on their site and that was almost kind of the.
The Germ of the whole article who's winning pieces you know how they became a unicorn not stuff which is great but then you know it is weird because so stripe is.
Primarily used for mobile payments and I just got to imagine that core Amazon which one you think about amp.
Mobile is the the Amazon app I find it hard to believe they would use stripe but the.
Interesting thing about Amazon culturally,
is every team is independent and so the cost of that is you don't get a lot of reuse of sometimes nowaday forestry used to the the cloud platform called AWS which is kind of how they saw some of that but I have seen teams at Amazon just kind of like me,
their own kind of choices for things and dude.
Copies of things like for example in Prime now launched it had a whole different set of product images and taxonomy and things than Corey Amazon and,
traditional companies would say well why would you do that that's silly but Amazon favor speed over over efficiency so.
So my guess my first guess was while there's a team in the Amazon that wanted to move quickly if for some reason they didn't really want to use Amazon payments per se so they probably just use stripe then I was kind of thinking what.

[29:24] That be two ideas I had were,
so the treasure truck is really starting to scale up an. You can imagine that that's going to be one of those scenarios where you're going to need to be out there,
you're in the field with a point-of-sale system Amazon doesn't have anything quite like that and you're going to want to be.

[29:44] Having an individual process payments kind of a sales rep kind of thing so that kind of struck me as potential area and then another one is maybe like some of the Amazon book stores or something like that maybe.
Oster using has striping bedded and then you know the AWS team is kind of its own Rogue thing that I was thinking maybe they certainly are processing a lot of credit cards there maybe Stripes used on the B2B side there and some context,
yeah or maybe there's some other Amazon app haven't really thought of this launch in the last year that that used to stripe to as as as payment processed I just went to really hard to believe that core Amazon is using stripe unless you know this is some precursor to an acquisition or.
Did Solving some.

[30:28] You know it could be maybe an international kind of think so sometimes you know you're going to Sonny's markets and the it would be too expensive to add support for payment Type X and maybe stripe party has it,
those are kind of the things or maybe they wanted Amazon pay or Apple pay added to something and you know,
Apple present keen on letting Amazon into that so they stripe give him coming arms-length way to have that those are kind of my thoughts on this I don't think it's kind of what,
you know the kind of implied in that article.

Jason:
[31:05] Yeah I think any of those are possible like I greet with you unless it's a precursor to an acquisition it makes no sense then Amazon would just start using stripe as kind of a.
1/32 primer for people about payments like.
If your small pair a small seller and you want to start taking credit cards you're likely going to pay a 2.9% fee for credit cards and that's the,
the base price that striped charges to accept a credit card the more volume you get the better price you can negotiate.
And so if you're a huge retailer.
Only 10% of your sales are online so you're selling if you're Walmart you're selling 300 400 million dollars billion dollars.
In stores you're selling 14 billion dollars online.
You want to aggravate all of that sales together to get the absolute lowest credit card fee possible and that size you're actually going to install your own network and have a direct relationship with a bank.
Either a little smaller than them you're going to use one of these Enterprise providers like cybersource or Chase payment.
Amer maybe Braintree you know that these are all really common with the big Enterprise sellers.
And where stripe is really fit is for smaller Sellers and newer sellers because what with stripe uniquely did is stripe said hey we're not going to try to offer features that appeal to the CFO making the decision.
What service they're going to use we're going to offer features that appeal to the developer deciding what service to integrate.
And said they they have much better api's and documentation and implementation guides and you know if you're a small startup and you want to add Payment Processing.

[32:43] Million times easier to implement stripe then something one of the other payment providers I mentioned so they kind of grew viral RI some of those small companies have become quite large.
But that's really historically been there Niche the big Enterprise company retailers haven't been using them in the biggest retailers for sure wouldn't use them because they would just agregate up all there.
There their transactions so it makes very little sense for Amazon to take a small percentage of their revenue,
pull it out of their deal with a bank send it to stripe where they would almost certainly have to pay higher interchange fees it just it just doesn't.
Doesn't make sense unless there's something else going on like you you theorized.

Scot:
[33:23] Yeah and you just jog something for me one of stripes,
biggest benefits therapy eyes is not only are they good at charging cards but they're good at disbursements that ends up being something you need if you're going to be a Marketplace so Airbnb is large customer of theirs and so imagine you rented your apartment out to you would want to collect from the renter and then you would want to receive payment and that disbursement part is is kind of tricky because,
you as the person receiving the dispersement you may want it to an ACH on a credit card or who knows PayPal or something so then that makes me think,
the newest Marketplace in Amazon is Amazon Home Services where,
they are doing a lot of these you know installations of those kinds of things were there collecting frown when in and dispersing on the back end so that that's like another option I can think of is,
strike could be the disbursement platform for that.

Jason:
[34:18] Yeah yeah that totally possible so that that is going to be interesting to watch.

Scot:
[34:22] Cool and non Amazon news just a couple of quick ones,
Stitch fix has been widely reported to be close to following an IPO and then they actually have apparently file to confidential IPO.
In the way this works is there is a jobs Acton before the jobs act you would minimally familiar with this process you would,
you have to file your S one and then you would essentially put everything you're doing out there in the public so as you go back and forth with the SEC your documents are out there for everyone to see,
and you maybe the market goes to a rough. And you want to pull the IPO you've already kind of revealed all of your deepest darkest secrets so what the jobs I did is it allowed for companies with a under billion dollars of Revenue to file confidentially so you get a period of time where you can file you know you have to tell anyone you have seems like they have chosen to tell people they filed but it gives you this kind of air cover where you can work with a cc,
you can,
you can even cut an update the documents over a quarter to and essentially get ready for my PO and then do the timing.
Whatever works best for you can see how the market rolls out in it leaves alleviates kind of a lot of the risk and stress of the IPO process so a lot of.
Series out there of why they're doing it now and I do think if it kind of the math they were reported to be at like a 800 million dollar run rate,
I bet they were getting pretty close to the billion-dollar run-rate and you lose the ability to do this so you also see this kind of decision Point kind of at that billion-dollar run rate of your gosh we need if we're going to do this confidentially we can have to do it now.

[36:05] So I think,
I think that's to be really interesting to watch when they do take the covers off that US1 will report on it because a lot of people are very curious about what's going on under the hood there.

Jason:
[36:16] Yeah I hadn't even thought about that but then she'll risk that they go over the threshold that's that's super interesting the other.
A news tidbit I had was an announcement from Walmart and JD in China and for those that don't know JD is the largest.
Direct seller e-commerce site in China so you know we always talk about Alibaba which is Team all and tell about those are both marketplaces so jd.com is the largest kind of traditional.
Reseller of other people's stuff online and they have announced a pretty interesting partnership with Walmart to,
host a shopping Festival which here in the US would call a sale holiday on August 8th next year so that's that's going to be an interesting.
New play from Walmart in JD and China to try to create their own shopping holiday to compete with alibaba's single day on November 11th.

Scot:
[37:16] Yeah freak will be interesting to see if they're going to call it like all each day or double 8 answer seems kind of can't call it singles day.

Jason:
[37:25] No but I suspect we're going to have a podcast to cover it next year.

Scot:
[37:30] Absolutely.

Jason:
[37:32] So was you mentioned upfront we did we did listen or questions last week which were great and very popular but we didn't get time to answer all the listeners question so it is once again time for.

Scot:
[37:53] Questionnaire questionnaire question love the echo did you you must have done that one at the Grand Canyon.

Jason:
[38:04] Exactly I give that sound effect was a little shorter we would have had time to get all the questions in last week.

Scot:
[38:09] I never know if it's ever going to totally stop,
our first question this week comes from a longtime friend of the show Michelle Grant she's at euromonitor in this one was from Twitter and her question do you think Nike is one of the few brands that have the leverage to get Amazon to remove 3p inventory,
and that's what they're calling Marketplace skating so what you think Jason.

Jason:
[38:37] Yes I do think they're one of the few but I think it's a combination of things right like I think I think you have to be a big desirable brand and I think in in Nikes case the levers they had is that they,
we're not selling on the brand and they're one of the the most requested products on Amazon and Amazon you know didn't carry except through.
Through a three-piece hours and so I.
Like I do think that was interesting that they had the leverage to to clean up the the the marketplace by by draining Sales & Products Direct,
I wouldn't surprise me if we see a couple more of those deals but I certainly don't think they're going to be commonplace I certainly think in general.
Amazon's not going to be willing to do that and you know frankly as they knock down a couple of these top.
Top brands they want they're just going to bless less future brands are going to have less leverage to cut the same deal that Nike cut.

Scot:
[39:33] Yeah I agree I think there's literally 5 to 10 brands that could get this kind of treatment things going really interesting is how will this relationship work so yeah you can paint a scenario where.
Nike went into this genuinely wanting to sell more product and clean up the marketplace or you could say we'll maybe this was kind of a little bit of had faith in there like okay Amazon will sell some of our in Nike has a good better best will sell some of our good in a little bit of better but none of our best,
and you're going to clean up the marketplace and then you know the other part were not privy to as what is the pricing relationship so.

[40:13] Amazon hates it when they can't change the price of a product they will they will live up to map pricing.
But if you see it cheaper somewhere else they really like the flexibility to lower price so you can see this relationship being a little twisted if.
Couple scenarios so so let's say Nike has somehow negotiated Amazon can't do that that's going to drive Amazon crazy not being able to the price so that's one scenario where this relationship sours another scenario is where.
You know.

[40:44] Amazon goes and changes the prices like maybe Nike came in thinking we've got our pricing under control that's not a big deal fine change prices if you find it lower and it was on so good at that that that's a good may surprise it in my experience and I deal with their very surprised that,
Amazon so aggressive with pricing and then be when they call him on it Amazon can provide like a detailed report that says here's why we lowered the price it was you had it at,
in Iowa there was the store that had it in with a it was even cheaper per se but it came with a gift card and that's why we not to ten bucks off across the country so I think that could cause some friction and then,
Amazon is forgoing some a lot of Revenue and a lot of margin and maybe a year into this it turns out that,
3p was more practical than Nike I I don't know what the outcome of that would be but I got imagine Amazon has some data there so it's kind of interesting to see how this relationships going to play out over time at I think I see more scenarios where it kind of sours and then they cut split up then.
Baby come back together later or so we'll we'll see how it goes.

Jason:
[41:54] No I think you're exactly right and the 3p Marketplace is such an important part of Amazon success it just it seems like.
Yeah that's to be a really compelling reason for them to do something that that negatively affects that.
So the next question we got is from Steve White and,
Steve is a co-worker of mine on the the Commerce team it sapientrazorfish so no Steve very well and he he sent the question hey guys when I talked to Brands they have a sense that they are going to be pushed out of the,
platform is Amazon develops products in their respective categories and then he goes on to say my senses then Amazon has never acted like a bully in that regard just adds additional competition,
thoughts so Scott is are they going to kick off all the shoe companies now that they have private label shoes.

Scot:
[42:45] No no I think you know they Amazon love a couple things today love fast free shipping they love Amazon Prime and the kind of loyalty it builds and Trust the things they love on top of that or selection and volume so there's this classic Amazon flywheel,
Scot funny up and talk about this for 10 years now I run chose to flywheel,
in and at the heart of the flywheel is selection and value and that's that's where,
you know they don't really push Brands off so so I think,
what I'm saying is this really interesting kind of hat trick where you'll have a name brand out there so let's say.
I don't have Bob I was buying something that has buying some shorts so Columbia shorts are out there and they were like $80 maybe $60 for last year's kind of thing that was the name brand,
men's shorts and then there was an Amazon Brandon there and then there was a Chinese brand so so I think they they like giving consumers that option to say hey here's here's a wide price range of things you decide,
and they're all prime eligible and you decide what you like do you want,
us to have a cop put our brand on something and call it the Amazon choice and the private label do you want to take a little bit more risk on quality and whatnot with a Chinese kind unbranded Cellar or do you want to buy from the name brand name brand that has you know it's more expensive and you're going to get you.
Better fabrics and better this a together with that one so so I think I think.

[44:21] That brand shouldn't worry about that now would they should worry about those the slice of the pie because even though they're still on there we weave there's stairs.
Lots of case studies that we see everyday of these traditional Brands they don't really pay attention to their Amazon business,
and I'm not real brand comes in and soaks up like 80% of the Amazon Market overnight and that's hard to fight against even if your name brand because just the way they Amazon machine works with SEO and sales rank in the ad system in FBA and all that it can be very hard for a traditional brand,
did they have to make some really fast.
Big decisions that big brands are not good at making to catch up to that sir so I think the risk is actually that they lose a slice the pie,
and that's the entire Amazon Pie which is the very big pie.

Jason:
[45:10] Yeah once again I totally agree I think the.
There's very few things are going to do to get kicked off the Amazon platform I mean you know violating terms and conditions.
You know fake products stuff like that or,
selling stuff that Amazon can't make a profit on you know if you know you can fall into that category and get kicked off the project the platform but,
it certainly is unlikely they're going to kick you off the platform to preference their own Brands to your point.
Like it can be harder to win the buy box when Amazon has products but I don't even think that they.
Manually putting their finger on the scales in most cases.
For those private Brands I think they just know how to score better in rank better in there and answer the result they're going to win the buy box more.
And you know when those search results more.
And therefore it is you say get get a bigger piece of the pie I would say the one place work like this still isn't getting kicked off but we're probably feels like it's getting kicked off it is.
You know something like the echo is getting like so heavily promoted around holidays like Prime day and and Christmas and you know it could be.
Pretty hard to elevate visibility for your competitive product you know if you're competing against one of those.
Does core Amazon products but I don't think we're going to see that for all the private labels on Amazon.

Scot:
[46:44] Yeah and here is our last question this is from Parker block this one requires a little bit of setup so there were two articles recently out there another friend of the show who has been a guest Casey Low by he had an article out talking about kind of the fragmentation of retail so lots of Little Stores sign things and Brands going to react so,
Lots in this big kind of.

[47:08] Tons of choices for consumers at the same time a popular writer Deb weinzweig she used to be an analyst at Citi now she writes for Fung retail.
Sheeran article that said know there's all these disruptive forces going on in retail and we're going to see massive.

[47:28] Consolidation so essentially you're going to go from you know I don't know how many retailers but if you look at kind of Mulligan and you start tracking the number and they've been very good at.
That tracking the number of store closures and then projected store closures and all that it's pretty easy to convince yourself there's going to be.
Walmart Target and apparel company and,
or two or three in a couple luxury ones some dollar stores some clubs and then that's kind of it so a lot of the retail is going to go away and we've seen enough more bankruptcies this year than we've had ever so,
so that's a long set up so the question is and I'll let you tackle this one Jason,
are disruptive forces going to drive retail consolidation which is Deb's argument.
Or are we going to have fragmentation which is Casey does seem to be mutually exclusive outcomes so I'll I'll turn it over to you Jason to hear your thoughts.

Jason:
[48:22] That's very very clever I was actually hoping to hear your answer and then I was going to tell you whether you were right or not,
but well they seem to be mutually exclusive I actually think they're not and so I think the answer is both but I'll I'll.
Be a little more definitive than what I mean by that the.

[48:42] I feel like we're going to definitely see a consolidation of people that are segregating other people's stuff and selling it.
So traditional retailers that buy stuff from third parties mark it up and sell it I just think that's going to.
Increasingly be a hard business to be in in differentiate yourself in and we're likely to only see a handful of those product aggregators,
and you know obviously at this point though the one that that certainly seems to be winning as in North America is our friends in Amazon but at the same time.

[49:15] That we're seeing a lot of product manufacturers have lower barriers to entry to sell direct to Consumer than ever before I mean 50 years ago if you invented a product the only way you could get it to Consumers was to get it on the Shelf at retail,
and today it's it's much easier to sell that stuff to wrecked a consumer and increasingly.
You you would want to go from a margin standpoint and from a customer intimacy standpoint and from a data standpoint,
and you have to because that's,
tell me what you can control your price and differentiate yourself and you know not not just be you know and see if 100 million products on Amazon and so I think what we're going to actually see is.

[50:01] A fragmentation and sellers in the form of product manufacturers that are selling their products direct and we're going to see a consolidation of sellers in the form of aggregators that sell other people stuff.

[50:16] So so Casey Deborah you're both right.

Scot:
[50:20] You unpacked the mutually exclusive arguing very well the aldila controversial and disagree with you to some extent so I'm going to go consolidation and.
I put a star by that so let me come back to that in a second but let let me dress fragmentation night do you think it is interesting we talk a lot on the show about the digitally native vertical Brands but what's interesting if you kind of look at it.
They haven't scaled as big as you would think they would right so so the splits pick on bonobos they've been on the show great brand love them love Andy's riding and all that stuff,
but they sold the Walmart you know they didn't create kind of a 5 billion dollar brand and.
I don't never disclose sales but I think they sold for 300 so if we give them kind of a 1x sales or maybe that was to set put some between 150 and 300 million.
You would think with the vast audience online that they would have been able to just keep selling in Skilling online that I haven't opened stores but they ultimately had to open stores to get consumer awareness so.
So I think there will be Brands willing to sell direct but it's going to be hard because it's very it's a weird customer experience to not have them aggregated in some way,
and that's what traditional retailers have provided now back to my consolidation I think we're going to have consolidation but I pull astrix by it because I think the consolidator is going to be different than what we think they are,
tell me the traditional folks like an Amazon a Walmart kind of department store kind of thing but I think what will happen is.

[51:52] As these Brands want to get consumers to consolidation points will be where your attention is and.
China is a really good example of this where you know you have WeChat has become itself it started out as an app.
App for chatting it is become this portal or Channel now that people shot through so the app has become kind of the.
What's the web essentially so it has the tire web inside of an app and that's.
A form of consolidation so if it kind of project that Ford in the US I think what you'll have is you'll have some traditional retail points of consolidation but I think actually what will be bigger is going to be,
it was some the platform consolidation so I think you actually will have a fair amount of sales going through Facebook it's hard you know and I.
Put Facebook I put in stew and all that stuff inside of there and then also when you look at people where people are spending their time things like Snapchat Google and then maybe even at the device later maybe an apple or.

[52:53] Yeah it's kind of nother kind of consolidation point so.
That's how these brands are going to have to be able to get in front of consumers because they just can't do it through traditional channels and.

[53:07] Part of my thinking on all this is that we go to a much higher percent of sales that are online and that's kind of what's happened in China as well to drive that behavior so so I think consolidation but not just retail consolidation but.
No attention consolidation which may be a retail thing like Amazon but it could also be Facebook Twitter and yes those guys have tried all this but I think it comes back around in some form and that's the,
platform for discovery that I am you're if you're not playing on those your you won't be found on the internet.

Jason:
[53:41] That's very interesting.
I will totally buy that it can spend the fact that most of the platforms have had very little success today I I certainly agree that is going to be easier and easier to push the,
the transaction out to the point of Discovery so if if they're in a new points of Discovery they could ask absolutely be consolidation points,
so that that's a great call at Scott I'm going to Sweet Lee clarify my answer when I said,
brand selling director going to you know therefore be a bunch of pregnant at Sellers I suspect the overwhelming majority of those Brands still will sail with the aggregator so I don't mean no exclusively sell Direct,
but I think they'll they'll certainly you know do their best to earn as much of the direct businesses they can and you know particularly if you look at it through Scots timeline.
The other thing that's going to happen is a lot of the buyers for this stuff are going to be computer chips are all agreed them's that are doing Auto replenishment in your home and.
You know that the Samsung dishwasher is not going to care whether it buys your tide from Amazon or direct from Procter & Gamble and so you know I think that's going to.
Create greater opportunity for for those direct Cellars in a bunch of those categories.
To have a meaningful Direct business so would that said I have a follow-up question for you is a Marketplace.

[55:02] Consolidation or fragmentation right so on Amazon where I've got you know a huge number of sellers but a single cart is that actually.
Fragmentation of sellers or consolidation of carts.

Scot:
[55:16] I think it's consolidation because and I think their traditional way of thinking about.
Consolidation is front doors so that's kind of the approach I'm taking his like you're going to how many please it offline metaphor how many physical front doors do you end up going through.
That number will drop off line in offline I think now it's your counting the fragmentation is the number of buying entities or if sellers of record behind the front door.

[55:48] I think that's kind of a nuanced kind of view of it but I see where you're going with it but yeah I think it's the front door is kind of how I am I'm answering the question.

Jason:
[55:58] Cool Scott we we meet at we got all the way through or listen or questions,
and that is perfect because it is happen again we've wasted a perfectly good hour of our listeners time so we certainly would encourage listeners to continue the dialogue on our Facebook page if you love this episode we greatly appreciate a 5-star review on iTunes and feel free to use Twitter or Facebook to,
send this new questions and we'll agregate a bunch of them and do another listener question show in the future.

Scot:
[56:31] Yeah thanks everyone for all the questions we really appreciate it.

Jason:
[56:34] So until next time happy commercing.

 

Jul 30, 2017

EP095- Listener Questions and Amazon Earnings

http://jasonandscot.com

Amazon Q2 2017 Earnings Summary (PDF from Amazon)

  • Amazon reported a beat on revenue but a miss on earnings
  • Revenue came in at $37.96 billion, beating street estimates of $37.18 billion.
  • EPS was only 40 cents per share, missing street estimates of $1.42 per share.

Listener Questions

  • Kiri Masters:

    I'd love to hear Jason and Scot talk about their global e-commerce outlook. Amazon in particular seems keen to expand aggressively in international markets. Does the growth opportunities match the regulatory / operational complexity for brands? Interested to get your take.

  • Josh Tarasoff:

    Hi Jason and Scot--What is your take on Amazon's strategy behind buying products at full retail price from marketplace sellers? Here is an article: http://www.cnbc.com/.../amazon-new-fba-program-buys....

    Thank you. I love the show.

  • Anup Gosavi

    Hey guys... love your show. Would love to see your take on when/ if brands will be active on messaging platforms like Messenger, Kik. etc.

    Is it actually a better channel than email? Is there a signal in all that noise? Opportunities/ risks etc. Thanks!

  • Lauren Quaile Tonkin:

    I'd love your thoughts on autoreplenishment. Why have other retailers not adopted this tactic broadly (beyond Amazon and Target)? Do autoreplenishment models differ globally? What non-intuitive products/categories do you think can benefit from an autoreplenishment strategy? Thank you! Keep up the great work.
  • Ben Kates:
    off-price retail offline and online

  • Gareth Hanes (in uk):
    Hi Jason & Scott, enjoying your podcasts from "the other side of the pond" in the UK.

    I would be interested in your take on the recent (in the UK anyway) growth of products sold on Amazon by Chinese 3P merchants (presumably manufacturers) using FBA.
    I have noticed transformational changes in some product groups where new SKUs and brands have gained strong traction very quickly (propelled forward by a combination of agressive pricing, AMS & FBA).

    There's been a lot of talk on your podcasts about Amazon "own label", but this "manufacturer to consumer" model would appear to be a much more of a imminent threat to incumbent domestic brand owners.

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

Episode 95 of the Jason & Scot show was recorded on Thursday July 27, 2017.

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

New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 95 being recorded on Thursday July 27th.
2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.
Scot:
[0:40] Hey Jason and welcome back Jason and Scott show listeners Jason imma.
I haven't been traveling a lot lately but I think you have been zipping around for you you've kind of been hanging around the coast update listeners on your many travels.
Jason:
[0:56] Yeah I have been bicoastal this week's. I spent most of the week in my ancestral hometown of San Diego California,
I was there for interact Tech which is a great smaller event that the internet puts on every year so that's some.
Originally designed for CTO that sort of expanded to include the CMO Council and the digital Council so we had a.
A fun couple days of a networking and content there and I got to lead to Workshop which was fun.
It was for me probably not for any of the attendees and then flew to New York today to do a workshop with a card tomorrow.
Scot:
[1:37] Awesome yet so just racking up the miles going to join the eight million Mile Club Pearson.
Jason:
[1:43] I'm happy to report I hope to never achieve 8 million miles but I do have quite a few and I did get to visit I got to check off another Amazon bookstore on my West cuz there's one in University Town Center in San Diego.
Scot:
[1:58] Cool so give us a quick update on that and then what was the buzz it in RF take anything that listener should know about.
Jason:
[2:05] Usher so the the Amazon bookstore like.
[2:09] Is not very interesting it was the second one they opened and it's a smaller footprint so it's basically.
[2:18] Today in equivalents at our offerings to the.
[2:21] The Seattle won that bet in West base so you not if you've been to another Amazon bookstore you don't need to go out of your way to see this one is that mentioned before the.
The one in my hometown in Chicago appears to be,
the most advanced with the with the coffee shop and a broader assortment of products than any of the other which is sort of interesting.
Scot:
[2:42] Did you try to return a random Amazon product like you're like you're freaking leader.
Jason:
[2:47] Because I was traveling for 8 days in a two-day overnight bag I did not have room to bring any test returns with me.
[2:56] Yeah that's my shoes and I'm sticking to it but the check was good there was a lot of interesting speakers.
[3:06] I definitely would say the theme of the show was preparing for the future and particularly overcoming risk aversion and not being afraid to fail and failing faster with sort of the.
A recurring theme throughout the day.
Scot:
[3:23] So, gelatin and how do some of these 5200 or organizations crank up the the speed.
Jason:
[3:30] Exactly and I you don't I I think sometimes explicitly stated and sometimes kind of just implied,
but you know I'll just leave the boogeyman for most of these these folks as Amazon and and they're particularly good at moving fast and innovating despite the fact that there.
A large twenty-year-old company in so you know I feel like the the realization is hit a lot of folks that they have to find ways to be more.
More agile and more forward-leaning than than the the innovator's dilemma with typically dictate.
Scot:
[4:03] And then what was your talk on.
Jason:
[4:05] So I actually did a workshop on that theme so I am.
Presented sort of seven trends that I felt were sort of exponential growth Trends in the industry that would likely affect all of the.
The attendees businesses and then I gave them some brainstorming tools that we use to be more forward-looking and sort of divorce ourselves from some of the,
the Legacy thinking so I introduced them to a structure that was designed by a guy named Eddie to Bono called six hat thinking and so we went through a six hat thinking brainstorming exercise where we fired everyone from their current companies and had them all work for a new grocery retailer trying to invent a new customer experience in the US,
to compete with Amazon Whole Foods.
Scot:
[4:52] Cool we should do a deep dive on the so don't say too much let's leave listeners just kind of guessing my my big question is did you really wear 6 haven't set a time.
Jason:
[5:01] Note that when we talk on the thing what you want is you only get to wear one handed a time that's that's the beauty of the the system.
Scot:
[5:11] So we won't tell listeners why it's called six hats so leave that is as I'm sure they're on the edge of their seat right now.
Jason:
[5:18] Cliffhanger.
Scot:
[5:19] What we have a jam-packed show tonight so let's jump into it so the two big topics number one is earlier today Amazon release their earnings for the second quarter and hot take on that and then we have listened or questions it's been quite a while since we did listen to questions we put the call out,
and I'm excited report we we have a lot of listen to questions I'm not sure we're going to be able to get to them so let's kick it off with Amazon news which is our hot take on earnings.
[6:04] Yeah so today.
[6:07] Amazon came out with their Q2 earnings they're usually one of the later companies to report in our world so we already heard from eBay already heard from Google and Facebook and Twitter just kind of summarize those guys eBay was Steady As She Goes.
Google did did relatively well the stock was off a little bit.
They paid clicks were up but they face somatization challenges that that people kind of scratching her head about a lot of people worried maybe they're just getting a lot of klicks from YouTube that aren't monetizing very well-off out loud concerns over mobile and then,
let's see Facebook crushed earnings on every measurable kind of thing they hit some new all-time highs Twitter's results for kind of man you know they're really struggling to add new users so that's kind of the setup is kind of you know.
Mixed bad coming into Amazon so let's go through that so.
The Top Line got to looking at Revenue that I came in at 38 billion and that topped Wall Street expectations pretty handily and represents 26% year-over-year growth and just remind listeners e-commerce is growing at 15%,
and here you have Amazon just kind of pretty easily doubling that.
[7:19] Nothing that I was have to remind myself with this quarter is it does not include Prime Dave so Prime day will actually fall into the Q3 results so.
So this is this is pretty nice that represents a bit of an acceleration kind of from last quarter so you know Amazon would what amazes me is.
[7:38] They seem to defy the rule of large numbers and what kind of talk what about Wyatt a minute that you have to be 38 billion and still posting these kinds of growth numbers is is.
Pretty impressive.
As you peel the onion on the revenue side North America Revenue was the cause of the reacceleration in that grew 27%.
[7:59] There were some concerns about the cloud computing which is AWS because Microsoft had reported a strong quarter there a dubious has been lowering their prices as they kind of compete out in the world with with kind of the commodity storage and things,
and AWS topped expectations so people are excited about that International had some currency headwinds but when you take those out it also had a nice showing.
Things I watch closely are some of the non-gaap measures so third-party seller Services which is its own Revenue line item now.
Groove 40%.
[8:33] I should say little footnote for those of you that have followed my Amazon analysis for a while that used to break out media egm and other and they stop doing that unfortunately so.
I can no longer kind of see how that egm pieces doing that's always going to want things I really enjoyed I do think this third-party seller service metric now is probably a proxy for that because most third-party sellers are in a GM.
So that grew 40% so again you know almost three times the pace of e-commerce which is pretty amazing,
third-party as a percentage of units hit a new high water mark of 51% that's the highest that's ever been so the third party Marketplace I know we have a lot of listeners that are either brands that do hybrid or are there are third-party sellers, retailers very healthy growth there.
[9:22] The another new segment that Amazon introduced this year in the first quarter that we're now starting to see some Trends on is called retail subscription services,
and that's essentially revenue from Prime and Dad grew 53% which the Wall Street notes will come out tomorrow I think we're going to see.
People against before Prime day which I think had you know they said record signups I think we're going to see people touch up their number of prime subscribers based on this I think I think.
[9:49] Egg while she may have underestimated how many prime subscribers kind of added in the quarter so so that'll be interesting to watch and will report on that,
another area I look at is paid unit growth so this is just took kind of a,
measure of volume that was up 27% year-over-year and that's its highest level since Q3 of 16 so it's really interesting reacceleration at Amazon going on and that's you know I think if you kind of.
[10:16] You think about how Wall Street thinks about that was all super positive the one thing that kind of freak Wall Street out a little bit and this happens.
Every cycle with Amazon is they start to show some profit and they reinvest and then a certain set of investors freak out about that.
So that's on the bottom line on the expense side so while she was looking for just over billion dollar in in gap profit,
and it actually came out to be 600 million so kind of half of what folks are looking for earnings per share that translates into earnings per share of $0.40 while she was expecting like a buck 40 so you'll see this headline to know that.
Amazon misses bottom line by you know 77% that kind of thing that's certainly true.
But you know when you when you beat revenue and Miss on earnings usually kind of implies some level investment inside of their and.
[11:10] We'll see that we'll talk about that in a second and then the thing we.
You know yo big public is very much of what have you done for me lately kind of thing it's really,
maybe 20% about the quarterly reporting 80% about the next quarter what they're talking about so at Amazon updated their guidance for Q3 and the projected revenues between 39 and about 42 billion which implies,
a bracket of 20 to 28% year-over-year growth 24% at the midpoint Amazon has a pretty good history at kind of beating that just like they did this quarter or coming in right at the top of that guy that's so that.
That was as kind of that exceeded wall Street's kind of previous thinking about Q3 but where they did not exceed are they contact.
Missed where while she was thinking is when they projected the bottom line into next quarter Wall Street was thinking about 950 million and Amazon said no it's me arrange of - 400 million - 300.
[12:09] So this is going to raise those questions you and I hear a lot about in Amazon's not profitable it's not fair we just have to kind of wait for them to wash it to wake up.
[12:19] And you again.
Stock after hours was down 30 or $40 which feels like a lot but you have to remember Amazon is an $1,000 stock Club so that's only a couple points.
And I think what we'll see tomorrow it'll be interesting you know it's hard to guess how lost react but I think we'll actually see.
[12:40] The set of investors that care about growth and market-share what kind of overcome the industrious that are focused on profitability.
[12:48] Last point on profitability Amazon really does not optimized for any of those things I just talked about they optimized for Revenue growth in market share and then.
Cash flow and what happens is always accounting rules kind of.
Bend that as you report this thing's so just kind of give you some numbers for the quarter Amazon had 17.8 billion dollars of operating cash flow and then 8.2 billion of that goes property equipment in R&D,
so that's kind of what's Happening Here is the way I think about it is.
[13:22] Amazon where to stop investing for the future and so let's just come.
Play that off they wouldn't be making these kinds of Investments and you would have seen no a big chunk of the 17 billion flow to the bottom line.
What they're doing is they're investing in R&D they're building fulfillment centers in her building data centers does does your kind of the three biggest legs of investment so for example another four billion went to pay for Lisa's so that's fulfillment centers and then invested another four billion in,
new releases in equipment so so you know.
[13:58] The losses that you see the way I would argue it and I think a retailer should think about this Wall Street it's kind of Ena.
Don't think Howard I think these losses actually are not from the current business is kind of his F you know they're they're making.
[14:14] Good investment for an Indies levels you think about the levels I just talked about that's the level of their investing in so so pretty crazy levels investment.
Jason:
[14:23] Yeah absolutely and you know I tend to think of it pretty simply if they if their profits were going down because their cost of goods were going up or some,
some operating expense that was directly related to their sales this quarter were dramatically going up like shipping went way up as a percentage of sales or something like that like then.
That would be indicative of a problem in their business model but when they're their profit isn't High because they're investing in,
things that are likely to have a much higher future value like capacity or subscribers.
[14:59] Like that that's that that's a whole different equation in my mind.
Scot:
[15:04] Yeah absolutely into that point I didn't talk about it but gross margins were real.
About that been relatively the same for the last year or so you know the cost of goods are pretty are very stable and then,
this is kind of like in the weed so I'll just kind of leave it as something if listeners are interested Amazon does report kind of segments in then that gives you a little bit better view of how profitable is each business unit if you strip some of this investment out they call it,
CSI which I think stands for I know it's segment operating income I forget what the C is for,
but they kind of report on retail AWS and that customer segment operating income I think it is that's a really interesting metric if you if you're if you want to get super geeky on this stuff and you have to really dig into their SEC documents their q and in her case can I get that,
but it is a Consolidated segment operating income at the kiddos said look for CSI and I think.
[16:05] I always find that is a really interesting few that strips out a lot of the things like you know RS use and non-cash pieces and a lot of the accounting stuff that kind of gives you a hard makes it hard to see what's going on inside of their.
Jason:
[16:19] Yeah I'm I still run into it all the time that you know I hear from some particular from retailers but you know others that oh man Amazon has good at growing Revenue but they but they're not profitable and of course.
That just factually untrue and.
It was even on Truth escort or even though it was a somewhat down quarter versus Wall Street expectations and then the one of here even more commonly is.
[16:44] Only AWS is profitable so were you to take out AWS they they wouldn't be a viable business.
Scot:
[16:50] Yeah and the CSO actually proves that wrong so it does show AWS is profitable but it also talks about,
not combines retail and 3p and it I believe it does a,
domestic non-domestic in both of those domestics profitable Internationals losing a little bit on but you can see it's on a path to get there and it's kind of been chewing away at it over time so yeah you know that that's those are just kind of factually wrong Sue.
Yeah I guess and NF.
Amazon secretly loves it when people think that because they did you know that is not true and they they love misinformation kind of things like that that people are not watching the right.
Part of them the ball here to to keep up with it when one thing is happened and we called it here on the Jason Scott show,
as the stock has kind of held over $1,000 is kind of in the,
thousand $10,020 range so things have happened out there and with Berkshire Hathaway and Microsoft stock and whatnot and the end result is by at least I've read into sources now CNBC in Fortune Bezos is the most rich person in the world at 90 billion dollars so so congrats Jeff whenever you're a big listener so,
big pat on the back for that and yeah we know congratulations.
Jason:
[18:10] Pour yourself a drink with that top shelf a beverage of your choice.
Scot:
[18:14] Boom get a Diet Coke go crazy.
Jason:
[18:16] Exactly other I do things gotta actually read that that he hit that Peak based on the stock having a nice little uptick before the earnings were now it's because the,
that anticipation was that it was going to be a good quarter,
and then I think after the announcement that the stock actually corrected a little bit and I think you might have slipped back under Bill Gates for the time being.
Scot:
[18:38] Yes it gets it like 10:20 to 10:25 somewhere in there so I'm sure he probably doesn't care what's another.
Jason:
[18:46] I think if you really cared you would have skipped a year of space exploration and you'd be there.
Scot:
[18:53] Cool so that's our hot take on Amazon's earnings for Q2 and and if the way I would summarize it is.
I think it was really strong and they are just pouring more money into Investments and they're very profitable lots of free cash flow that they are just spending as rapidly as they can into.
Things that I think are pretty.
Conservative that are going to pay off for them another fulfillment center Prime now launching in Australia launching in Singapore all these things are our kind of no-brainers.
[19:28] Soup that is Amazon news and now it is time for.
[19:43] Question question question.
[19:50] Who's the first wanted to thank all our listeners to most of these come from our Facebook page so as reminder if you just go to Facebook and the search for Jason and Scott show you will be taking there,
or if you go to Jason and Scott.
we have links to Facebook page there and it's Scott with 1T so our first question Jason comes from Curie Masters so it's also say a blanket statement of I apologize if I say Jason right I say your name wrong,
security says I'd love to hear Jason Scott talk about their Global e-commerce out,
Amazon in particular seems Keen to expand aggressively in international markets does the growth opportunities matched regulatory operational complexity for Brands interested on your take.
Jason:
[20:34] Yeah so that that's a great question carry like at a high-level like you know I think certainly we're all bullish about.
International e-commerce growth so just kind of.
The level set this is a milestone year in 2017 globally e-commerce will surpass 10% of all retail sales across the globe so,
we can I hit that inflection point worldwide and Global e-commerce growth is about 23% so even Scott mentioned earlier,
we're in one of the more developed markets here in North America and its about 15% so so the worldwide growth prospects are certainly higher.
[21:12] But your your question sort of implies the real trick to all of this is you know in those markets where there is considerable growth.
[21:23] Is it cost-effective to see that growth either because of the.
The individual complexities of those markets it because of language and Logistics in in those sorts of things and in particularly is the growth opportunity constrained.
[21:37] That because of rigor Tori issues right and so you know that's the.
The sort of equation you have to apply but certainly I think the the conventional wisdom is you know that the super exciting market for most.
[21:51] Folks at the moment is India and you know to kind of put that in perspective.
In North America about 75% of all the consumers that have access to the internet or online Shoppers in fact I think it's like 76% in Asia.
[22:09] It's closer to 2:50 or 60% of of all users.
That have internet access are shopping online but where it gets interesting is in North America the overwhelming majority of all users have internet access in Asia only about half of all users have internet access so when you look at.
[22:31] The percentage of the total population that are shopping online you don't in in North America where about 65% in Asia were at 25%,
so India in particular is even a little lower than that and has a huge population so you have a huge population you have an emerging middle class.
And you have very low penetration at the moment so those are certainly.
You know all the the favorable characteristics that have caused a lot of big International companies to come in and make big bets in it in India which is why it's.
Kind of the the global e-commerce Battleground right now and as you've directly pointed out there some,
challenging Logistics and Regulatory environment that make it difficult for for businesses Amazon in particular to sort of.
Completely replicate their their North American model in India so so that's that's the barrier.
Scot:
[23:27] Yeah and um.
So I'll specifically can't talk to Amazon a little bit I'm not an expert on regulatory issues but you know so Amazon is growth strategy has been,
is it interesting so they start in the US and then they did Europe and then they,
the only time Amazon has not kind of.
[23:50] Really focused and become number one is China and if anything in China I think they're like number four or five which is pretty interesting and I think they've learned a lot from that experience I think they they realize that.
[24:05] They have to really adaptive local market and build a team and maybe acquire a company and,
just kind of be more Nimble than they had been since the China was a real big learning and and ever since then you know they have when they going on Market they go guns blazing and,
to Jason's Point India seems to be that's really interesting Battle Ground right now between all the big.
Global e-commerce companies so so Amazon got a bit of a late start because there is some some regulatory things they had to cross over and India and they.
They can only open the third party Marketplace are they Amazon still does not retail so there's some kind of protectionist law that you can't afford company can't be a retailer and India so so you had.
[24:50] Flipkart and Snapdeal as kind of the incumbents local companies and then Amazon dinner and they started taking sure then what's happened is Alibaba and eBay of each continent.
Southside Bank in so he's really big players have kind of bolstered those anti Amazon companies so Amazon is is,
pretty publicly said they can spend billions of dollars in India there's something like I tracked us pretty close 15 to 20 fulfillment centers they're building Justin India so there.
Derp derp pretty much betting that the Playbook of getting product close to Consumers can be really important India because it is a very large country.
No what is a six billion people in the Diaz Harrison.
Jason:
[25:34] Yeah I think that sounds about right no maybe like 3 billion.
Scot:
[25:39] Maybe China sex so.
So you have a very populous country spread out lots of cities lots of different ways not a really great career system or delivery system, like a FedEx UPS USPS so I think Amazon is really investing in that so it's been interesting to kind of watch in and they know they've been way more aggressive there than they,
did when we went to China I think day and when I read the tea leaves I think they kind of regret not being more aggressive in China and Android building that out better and they got kind of beat by JD with a 1p model and Alibaba other 3p model.
[26:12] What kind of stick to Asia pack there they that's been where they've been investing for last 3 years they haven't been,
expanding much but now we're starting to hear they're definitely opening Singapore and then Australia and so it's interesting to see them kind of pick up those countries,
then just a reminder they did a choir a the top Marketplace in the Middle East called souq souq.
Jason:
[26:42] Yep exactly.
Scot:
[26:44] And that's a pretty big market place I think it was like 2 to 5 billion and GMP which is pretty sizable and,
that's going to pick up you know Saudi Arabia Qatar Kuwait some of the Middle East countries there and it's a lot like mercadolibre we've had on the show or it's kind of a family of little local marketplaces it's not kind of.
Homogeneous Marketplace it's kind of every country has its own rules and regulations and language and currency and careers so they kind of like have built that in each country in the Middle East and then they.
Did you have some glue that kind of combines it together so some cross-border trade kind of things payment platform that I think is is kind of somewhere across there and that kind of a thing so so for that gives you a flavor for Amazon is and then the last one I'll talk about is,
kind of something America so,
so Amazon so South America for long time was one of the fastest growing e-commerce markets yes you would have China so Jason was talking about,
Jason did you say Global at 23 or 25.
Jason:
[27:53] 25
Scot:
[27:54] Cuz I didn't you used to see Brazil kind of this 35-40 and China kind of like maybe it 2830 Brazil has come down pretty considerably because just politically rest in the country also have right next door is Venezuela is kind of Hit the skids,
do the some currency devaluation things going on there so loud political and currency things in the South American countries have caused the Slowdown I believe in we had mercadolibre,
on the show they were talking about kind of 25 28% growth that they were seeing so that used to be like the fastest grower and I think China has kind of supplanted that that kind of what your data shows Jason.
Jason:
[28:36] Yeah and I I would say like so.
Latam is kind of right in between Asia and North America in terms of digital Shopper penetration so there is a lot of Headroom there but is you you rightly pointed out it,
it's actually a lot more fragmented so while you can kind of you know list ones q and and reach all in India.
You know you you are what you really need to do is West as you know a separate skew and in each country in Latin America are the Middle East which make the the logistics a lot more challenging.
Scot:
[29:08] Yeah and I've never had the pleasure of meeting Carrie but I see from her LinkedIn that she she always Brands sell on Amazon and other places and you know when when I talked to brands in the US about this.
[29:22] It's interesting so.
[29:24] Two years ago plus they were they were obsessed with China and like what's our China strategy and I've seen the last 18 months that has cooled down and it's very much.
What's my direct consumer strategy what's my Amazon us strategy,
so I think I think that people have pulled back a lot on this kind of global international thing because they are feeling the heat in their home market and there's this is us Brands I'm talking about,
so
You know for those brands that aren't concerned about that you know where where we see a typical road map is let's see it to us brand they starting to us the natural place to go is the UK because you don't typically have a language in Madera,
it's a very kind of us feeling kind of a country obviously and then you'll see some expansion into Europe usually Germany and France being kind of the next biggest e-commerce markets.
[30:15] We have a lot of customers a challenge to do really well in Australia Australia is kind of an easy box to take off its English-speaking and is very friendly to Imports and,
there is a lot of infrastructure out there for supporting these countries so there's a lot of lot of the marketplace provider so eBay has a really excellent program around this so does Amazon,
around global Shipping say allow you to they'll take care of lot of this operational kind of complexity you talk about where you can have a crawl walk run metaphor so,
eBay brand program for example you start out like let's say you're a US company and you want to start selling into eBay Germany,
you can just kind of set a flag that says I want my part to show up on eBay Germany they'll actually translate it for you using a Google translate consumers there can see it the order it and then you'll get an order that just shipped to the US and does it reshipping,
that's that's nice because you can kind of test the waters without having to make huge Investments Santa Crawl part then is what we say to folks is as you see that volume take up it's not the best customer experience so really kind of go to that next level of customer experience you need to start kind of shipping pallets over to,
the destination country and selling in more of a localized way that's the walk and then run is when you,
you know you actually kind of maybe create a store footprint or a fulfillment footprint actually put bodies over there answering questions of that kind of thing and that's the run so we sit up that model work really well for both small and medium-sized retailers as well as Brands and.
[31:46] I think we'll see more and more of those kind of solutions that come out to really help everyone kind of,
peel this cross-border trade peace and understand how you selling these International markets.
Jason:
[31:57] And I'll just head one one points and Scott and I both won't geography China has about like 1.35 billion people in India has about 1.3 billion so there,
they're the two most populous countries in together they're almost three billion which is.
Scot:
[32:13] Yeah there's like eight billion people on the planet.
Jason:
[32:15] Exactly.
[32:18] But so yes I think that that that's a great answer to carries question the next question came from Josh tarasoff and Josh wanted to know what our take is on Amazon strategy,
behind buying products at full retail price for Marketplace Sellers and he gave us a link to CNBC article talking about this this new deal.
Scot:
[32:43] Yeah and this is kind of a little bit of a head-scratcher and as I've talked to a lot of sellers are concerned about this because,
the way it was announced was just kind of like Amazon didn't exactly say why this kind of said hey you know you have some product and FBA and you may see.
Amazon.com is the buyer which kind of people like what what's that mean so what I think's Happening Here is.
Yo again these global Shipping program let me kind of explain how eBay does this so a seller on eBay.
[33:18] If you don't opt out of it they will actually.
Up to your default opted into that global Shipping program I was talking about I think that's what Amazon is doing because what they want to do is when they pick a new country but this is true for any country but when they ruined Australia.
They want to show as broad assortment as possible and people and I'll show you love Western Goods so this this program will allow Amazon to say to people in Australia.
Look we have you know 30 million products that that are available to come into your country,
versus if they did do that then maybe it's a million or two million that they would kind of host,
so they would still have a million to 2 million local and then like another 28 million that are kind of cross-border trade that could be shipped from the US,
that gives that gives them this kind of I would call the backfill strategy so it gives them this perception of lots of selection.
Using cross-border trade as a back film then let's do it lead you do is so imagine people start buying from.
The cotton country in the outer country product they can very quickly learn from that and say oh.
[34:23] These widgets are very popular in Australia let's kind of source them local or let's get pallets instead of each is from the u.s. FBA let's work with Our Brands and sellers to kind of say hey.
Hey mister customer your widgets are really popular in Australia that was kind of wrap this up so that's what I believe is going on it's easy to kind of make it seem more nefarious and Jason turn over to you for that Park.
Jason:
[34:52] Yeah though I have to say I have a slightly dishonor different understanding of what's happening so be interesting maybe there's a little both happening but I've talked to a few 3-piece Sellers and it was less than automatic.
To the program that you had to opt out of and more it was an offer to opt into a one-time transaction.
[35:14] And so like what these sellers were told as hey you have an inventory that you're selling 3p in North America.
We want to buy that inventory from you one time so that those listings will go away in North America cuz you'll no longer have the product to sell and we're going to take ownership of that inventory and sell it in another country and so it was basically an offer.
[35:38] From Amazon to the seller to buy their inventory so that Amazon could resell it and they were offering to buy at at at.
[35:46] Full ask price from the seller and how I interpreted that is.
That they were looking to buy inventory to fill in brands or products that they were missing in some of the new markets that they're entering like Australia for example.
[36:04] Interview if you think back to the early days of toys and Amazon you remember they originally had a deal with Toys R Us Toys R Us to the famous we pulled out of the deal.
Right before holiday would you have to Amazon in a bad spot and Amazon actually sent a bunch of employees to go in the retail stores.
Buy toys at full pop and put them on the market place so that the customers would be able to buy toys from Amazon and that really kicked off Amazon's.
[36:32] Foray into the toy space in so I look at this this 3p thing and I said hey Amazons.
Doing the same thing in new markets today only they now have a convenience they didn't have back then they don't have to walk in the stores and buy products,
have a bunch of sellers in their own Echo systems that are they have products in their warehouses so they just go to those guys and say hey do you want to sell me your inventory if you do great I'll buy it.
[36:56] I'll sell them in another Market you know in the long run I'm certainly going to look to get them more efficient supply chain but but as a way to get started I will do that.
There's nothing wrong or nefarious about doing that but what what does happen is there a few brands that three-piece Cellars.
Are selling on the marketplace the do not want Amazon to be able to sell them in and most famously,
these days that would be Birkenstock and so Birkenstock had a number of,
of authorized resellers that were selling their products on Amazon is 3p and they got letters from Amazon saying he will buy your inventory and resell it.
And the Birkenstock CEO reacted very badly to that he sent out a very dire letter saying you know any retailer that sells even one pair of shoes to Amazon to allow them to resell will never sell Birkenstock again and he,
he called it Amazon's attempted modern-day piracy and and you know there's a pretty pretty lengthy article about it in Washington Post,
which is I guess somewhat ironic since it's paper owned by Jeff Bezos and will put a link to that in the show notes.
Scot:
[38:10] So our next question comes from a nuke goes off in a noob says hey guys I love your show so Anup obviously has,
impeccable taste and yeah where was he says we would love to see your take on when if Brands will be active on messaging platforms like Facebook messenger Kik Etc is it a better Channel than email is there any kind of signal in the noise where do the opportunities risk thanks.
Jason:
[38:39] Great question on oops so it it depends a little bit on the parameters of what you're asking so when you know you mentioned,
Brands being active which is different than brand selling stuff on these platforms and you predominately named platforms that are.
They're pretty prevalent in North America although kick kick has a more Global footprint.
[39:06] The answer varies widely depending on your geography so obviously we talk a lot about we chat,
in China being you don't Super Active platform for brands,
there are millions of sponsored accounts on on WeChat kakow chat and other parts of Asia like Korea is very popular and a ton of brands or have are active on that here in North America although messenger has a billion users you know we only see about 30,000 Brands active on it right now which like compared to Lee isn't a lot,
and that's really because the the platforms that are most prevalent in North America like,
messenger Snapchat Instagram historically haven't had the best tools for Brands so the advertising tools have been kind of poor and those are rapidly improving which.
Makes me think we'll see Brands using those platforms more as an advertising vehicle and then the Commerce tools are still very poor and what we what we just painfully lack in North America is a.
Universally adopted digital wallet that enables you no friction full free transaction on all these platforms so when you look at what the big difference between WeChat is and Facebook Messenger,
it's really,
that we chat has 10 since digital wallet built into it and it makes it really easy to do a transaction right in the platform and we don't we don't have that on Facebook Messenger today.
[40:35] And so I do I guess you know roll all that up we are starting to see brands use those platforms more,
more degree brands that are very Visual and that are using like Snapchat and Instagram as a discovery platform,
all the platforms are rolling out better advertising tools they're rolling up better self-service tools and their ruling out visual search tools like the Pinterest new lands feature for example and those all lend themselves to do.
The platform's Becoming better product Discovery platforms so I do think we're going to see progress but I don't think we're going to see anything like,
the adoption of WeChat in China unless and until we get a universally-accepted digital wallet.
[41:21] So I would just add one more thing,
these could all be good tools for your mix but at the moment none of them are going to give you an Roi anything close to email which is you know still a great bang for the buck.
Scot:
[41:32] Yeah I totally agree and we talked about it a lot and our annual predictions and you know I think.
Everyone every us company wants that China mild work here in an in it just hasn't kind of.
Taking it I don't know if it's even if we had a lot I'm just not sure consumer behaviour the same so it's going to be really interesting to watch that play out I wouldn't count it out yet because you know you have some really serious multi-billion-dollar companies kind of playing this it is interesting,
kind of a dark horse in this is Amazon so they we mentioned this in summer Amazon news last episode so they've got theirs a lot of rumors that they have a messaging platform in the works.
I have to believe that would enough.
If I think of what would Amazon do to make their messaging platform different I think buying stuff would be the one thing that other thing I would think would be kind of unified Echo,
and text chat kind of you know,
kind of hook up maybe pretty resting so let's kind of see what they come out with and then also as a reminder they came out with I want to call it.
Sprint's but Sparks I guess is there a kind of.
Pinterest e instagrami product oriented kind of think so so Amazon is the first e-commerce company to take a shot of this so that could be a different take but I do think there's a lot of headwinds there.
Nothing I would draw your attention to that's an interesting case study is,
the the retailer everlane came out and they were kind of the poster child for this and they've been lockstep with Facebook the integrated everything they did the transaction notifications they did the wallet they've done all that stuff and then in March of this year they actually announced they were just going to end a life that so I think you know.
[43:15] I think that we went to a hype cycle there and we're definitely in the trough of disillusionment kind of phase I don't know if we going to make it out of that truck or not.
Jason:
[43:24] Yeah it's going to be interesting to watch I tend to be bullish but I think you it could be really risky to overestimate the timing so,
you know what remains to be seen like how quickly it's adopted,
and I guess I would add just one of the point I have seen some interesting new pilots including one by I think Adidas with a really trying to.
[43:48] Use SMS as that that sort of transactional platform,
and add the ability to do auto reorders and things like that using SMS witches sort of interesting cuz that can be well or friction than some of these other platforms.
[44:05] So let's go to the next question which is from Lauren Tonkin and Lauren right side love your thoughts on auto replenishment,
why have other retailers not adopted this tactic probably Beyond Amazon at Target.
Do auto replenishment models differ globally what non-intuitive product categories do you think him venefit from the NADA replenishment strategy thank you keep up the great work Jason the sky.
Scot:
[44:33] Fix another person with a great taste I have to say Jason let me let me kind of.
Paying this off of you so we make sure to talk about the same thing so when I think about Auto replenishment it is.
There's kind of nuance here so Amazon free sample has subscribe and Save which is a hard I want to subscribe to this Auto replenishment to me means the platform saying to you,
hey Jason you ordered toothpaste 30 days ago is this a good time do you want to go ahead and order more is that kind of how you think about it or do you want them all together.
Jason:
[45:06] No I think about exactly how you do I think there's two tears and implied in Laurens question is when she says Auto replenishment I think she's actually,
initially talking about subscriptions because she references Amazon and Target and you know Target does support subscriptions but not through Auto replenishment,
and and your point like you know I think the Step Beyond subscriptions is this entirely implicit process where the stuff just shows up.
Scot:
[45:34] Yeah and it's too kind of background things to answer this question in number 1 full disclosure I'm on the board of a company here in Research Triangle Park called Windows Circle and their whole thing is applying data science machine learning to transactional data retailers to cut a fine replenishable products so it's actually know a fair amount of this and then I would also Point folks to,
the excellent Deep dive Jason let us onto machine learning this is a great way the other,
to leverage machine learning so this is obvious right so.
Dog food any replenishable kind of a consumable product is going to have a certain period of time and it's done.
Other ones are harder to tell so it's harder to tell the duration like even dog food you know I you know I may have a dog that only eats one cup versus Jason's dog eats two cups we all know MacGyver loves to stuff it and.
And then also another good example is maybe batteries because maybe person a has six kids and they just.
Turn two batteries like crazy person be being doesn't burn two batteries that much of This Is War Machine learning is, nursing because it can look at that transactional data at a very personalized level and say you know this.
This customer is seems to be replenishing on this product on this level let's automate that for them.
Or maybe even surfacing it up to that that top to your of subscribe and save I do think it is very interesting.
[47:04] I think Why are retailers not really kind of attacking it I think when retailers list the things they're going to move the needle for them,
they are stuck at night number one into which typically and Jason you're more of an expert on this but whenever I talk to retailers they're obsessed with 3 platforming,
so they spent a lot of time I just like choosing the platforms Andrey platforming and kind of doing that kind of stuff.
And then there are spending a ton of time around omni-channel Integrations and these kinds of things and then you know like.
Replenishment subscribe and save is like number four and five personalization maybe this number three so so my view is it just kind of like it's hard for your average top.
200 retailer to get to this to spend time on it so I'm curious to hear your thoughts Jason.
Jason:
[47:51] Yeah I do think one of the challenges is just the band with challenge that you know and he's big roadmaps if if it doesn't pencil out as that you know.
First or second most valuable initiative it just hard to get bandwidth to get to it,
but I do think there are some nuances I think the majority of subscription programs at the moment are pretty brain dead and tendon not work very well,
so you know you think about a lot of these subscription services.
Like a blue apron or Dollar Shave Club and after awhile you get behind you didn't cook all the food the Blue Apron sent you or you have an excess supply of razors and you get subscription fatigue and you turn it off and so we're left in North America with this irony there all these subscription-based businesses,
Stitch fix Trunk Club.
It started out as a recurring subscription in and they all have had to shift their model to not be automatic subscription because customers.
In general just don't like receiving the product when they don't need them and so just sending stuff on a fixed schedule hasn't worked very well you know I do think.
[49:00] An exception to that rule is the Prime Pantry and I think boxed is probably an exception to that rule in that regard but what we really.
Like close to and just haven't seen enough good examples yet is the artificial intelligence based,
replenishment witches I think more what's Scott's talking about an interested in and you know they're there certainly are some good examples of that we're doing a lot of work with Sephora which has a huge data set and,
you can imagine you know everyone's use case for a Cosmetics as wildly different,
and so it's not a matter of just figuring out that people need mascara on a monthly basis it's a matter of figuring out you know the individual usage patterns for for a particular consumer.
And and predictively shipping for that consumers use case and so I do think that's going to be successful we're going to see more of that and then I would also say.
Did to me the big the big picture here is instrumented Auto replenishment in you know and said this.
Amazon has a little bit of this and what they called their Dash replenishment program but your you know your Canon.
Inkjet printer that automatically orders ink when it knows it's running low or The Brita water filter that orders a new filter cartridge when it knows you should change the cartridge.
Those are the today examples but you don't have to go too far in the future before I can virtually assure you that the,
your toilet paper holder is going to count how many squares of toilet paper to use and know when you need more toilet paper in your house and you know you can imagine that Amazon Go technology that they're using in the store to see what products you put in the cart you can imagine that same technology being in your kitchen to know when you're running low on milk and you know so I think.
[50:39] In the not-too-distant future the internet of things will be the trigger for a lot of these Auto replenishment orders in and when that happens we're projecting that about 40% of the skew used in the center of a grocery store,
you know the people go shopping for the day and drive trips and causes serendipitous Discovery and all these other things are going to go away because about 40% of those goods you're just going to have magically show up at your house when you need them.
Scot:
[51:06] Yeah and there's kind of a news item here just recently Walmart filed a patent that would it was kind of like dash button but the products would order things themselves so there's there's a lot Innovation going around that area to be interesting to see that.
Play out and see you know.
Is consumers adopt that or not it's kind of like creepy when the milk kind of self their nose is empty and orders it for you I'm not really sure if if how folks are reactive.
Next question is from Ben Cates and been really wanted to just kind of talk about our point of view of off-price retail both online and offline.
Jason:
[51:45] Yeah and that it's a tricky topic right now cuz it's,
in North America off-price retailers in one of the few bright spots in brick-and-mortar retail so you look at the dollar stores you look at TJ Maxx and and there you know really one of the.
The few growth areas in brick-and-mortar retail.
You know obviously consumers are getting more price-sensitive and and that's become a super popular format in the challenge has been how to manifest that off price format,
online Frank and you have sort of two problems when you get to these really you know inexpensive low-cost items like the things in a dollar store.
The shipping becomes really challenging for e-commerce so that that's a you know the Majestics cost become a big impediment in Amazon parlance you know most of those items are crap items items you can't realize a profit and e-commerce on in the even bigger problem is,
a big part of the shopping experience in these off-price stores is the treasure hunt it's that you don't know what you're going to find when you walk into the TJ Maxx and your you know hopefully going to find something that there's only one that's a great deal and it's really.
Cost inefficient to,
create a product detail page for that SKU you only have one of them and it sells super quickly and in many cases it just makes more sense to put that coat in a store then it does to.
Put it online and so I would say the moment that the best off-price retailers are really struggling to figure out what the Digital model is I mean you know that.
[53:17] TJ Max is in the Nordstrom Rack I'll have e-commerce sites but the.
Assortment of product they sell in their e-commerce site is very different than the assortment they sell in the stores and the percentage of their sales that are online are much lower than a traditional apparel retailer for example.
Scot:
[53:36] Yeah I think I don't have a ton dad there there's a there's a chart maybe we can put it in the show notes that this kind of shows this disparity that that you have been kind of talks about here where,
if you look at it just kind of physical retail the only things that are growing from a same-store sales are the dollar stores and the the warehouse clubs and,
it's ironic because those actually don't translate to unlined very well no one is figure it out we've had boxed on the show I kind of put brandless in this bucket.
Amazon Pantry figured out how do you bring that that Wholesale Club kind of an experience,
bolt products and end up getting the unit volume unit cost down and butt by having you buy,
large assortment some things no one's figured out how to bring that online and at the same time the guys that are really struggling offline are the the non off-price retail so if you're not a value-oriented or kind of a convenience oriented play right now that seems to be there studies that show this will have time to go into it but there's this kind of,
bifurcation in the US by our Market where a pretty big segment loves value and they'll go to the TJ Maxx and they'll sort through every.
Apparel item in there looking for a great deal so they have at Skyway I think about it as they're willing to spend a fair amount of time to save save money and they like that hunt and other side is convenience wanted so so I think's happening is the guys that are really struggling offline you know the ones we've reported on the Sports Authorities to Macy's the Sears guys closing stores.
[55:06] Then really have value and they also don't have convenience so they kind of in this no man land where consumer behaviour changed and and I think the off-price guys have been very fortunate that they they are squarely in that value bucket.
Jason:
[55:21] Yeah I think that's absolutely right and I think there's there's one outlier there which we won't get into on the show but the affordable luxury is is one other bright spot and that's,
mostly cosmetics in the form of Sephora and Ulta in North America but those guys are killing it,
so if you need to make an investment right now that might be a place to walk.
The moving on Gareth Haynes from the UK from across the pond sent us a great question enjoying your podcast from the other side of the pond I would be interested in your take on the recent in the UK anyway growth the product sold on Amazon,
buy Chinese 3p Merchants which are presumably the manufacturers,
using FBA and Garrett says I've noticed transformational changes and some product groups where new skus and brands of being strong traction very quickly,
is propelled forward by a combination of aggressive pricing and supported by AMS NFPA.
Scot:
[56:19] Yeah this is this is very much in my wheelhouse and,
this is huge said this is a massive Trend Amazon it's in Orson cuz you think Alibaba would solve this cuz all these guys are all about as customers but all he bothers so focused on,
new Chinese manufacturer selling to Chinese consumer they've kind of dropped the ball on this they do have a platform caught AliExpress but it really hasn't gotten Traction in our Market or Europe it's very popular in in a couple other areas where e-commerce is underrepresented like Russia and what not,
so when Amazon is done is.
Yeah I would say two to three years ago they realize there's demand people like this product direct from China manufacturers what they don't like is the stuff takes you know when it gets shipped from the Chinese manufacturer.
Honeycomb Core slow boat from China it literally is a slow boat from China it takes kind of four weeks to get here if you've ever bought anything from the marketplace wish you've experienced this.
That's a fun Marketplace and have been all kinds it's the closest thing to a dollar store if you will kind of that his kind of nail dad and you know it's a great company they're growing but the.
The downside is you order these things for three to five six bucks and they take 6 weeks to get here cuz they're coming from mainland China so so.
In a world war addicted to Prime that feels like it takes a thousand years so it would Amazon cleverly did as they saw demand for the stuff on the platform.
But it was being shipped directly so they have built a whole entire infrastructure call Dragon Boat that essentially uses Predictive Analytics and looks at these folk song on the platform that are shipping Direct.
[57:53] And says to them look at instead of doing this direct we think your volume would increase this much if you did pallets and they'll actually then work with them too.
Pallets on containers onto an Amazon boat they're cut off all the middle men they see six of middlemen in this exchange so all draft right from Amazon Amazon has part of Amazon China is all.
Set up for this to get them into the u.s. in FBI and then now they're Prime eligible.
[58:18] And the same is true for the UK this is been extremely disruptive especially for non-branded kind of things so.
Yo electronic accessories was the first category now we're seeing it in apparel so you're the same Factory that's making the Vera Wang.
Wedding dress is now selling a wedding dress for $200 versus the.
The 20K kind of thing so yeah it's been hugely disruptive and what's interesting is you start to see this trend now where.
Let's see what can I pick on I was buying some shorts other day and I bought a Columbia pair of shorts for like $80 so that was the name brand,
and then amazonbasics had a pair of shorts so then Amazon has worked probably with a China Factory too kind of say here's what we want it to look like in the quality and is not half price so is $40 and then I could actually buy a comprable products direct from a,
and you find these guys using AMS to your point using a Chinese manufacturing never heard of and,
yeah that one was $20 so what you start to see is this differentiated price we're branded is attacks Amazon Prime as half of X and,
Chinese seller is 80 to 90% of X and I think what Amazon is saying is let's give consumers the trade-off and if they whatever they choose they choose and they they understand the trade-offs there and we'll make it very transparent.
And so is very interesting and it's extremely disruptive.
Jason:
[59:49] And I would totally agree and I do think that three-tier,
model is going to become more common I mean you even think about like you know Gillette razor blades cost $7 each Dollar Shave gun,
Club disrupted the market by you know selling blades at a dollar each and now the Chinese manufacturer the dollar was using as is selling directed $0.20 each and disrupting Dollar Shave Club.
And I think that is common.
I will give Scott Galloway credit which I hate doing that he has a funny quote about how you know people that have way over estimated 3D printers we already have the world's greatest 3D printer it's called China Anne and I think these marketplaces are really just a sort of facilitating,
us using China as sort of a 3D printer that can you know really quickly manufacture these products and get them in the market.
Can I guess I would say the one cautionary tale is there have been two huge hits,
in in North America that were direct from Chinese Factory products with no brains right and said I was to holidays ago we had all the hoverboards the the stabilized skateboard stuff and you know those were all like designed by Chinese factories and sent over here and they were you know,
all also direct from Factory and right now we're in the middle of this silly affair with all the fidget Spinners and most of those are our direct from Chinese factories and in both cases their electronic products were the battery and we're having some scary.
[1:01:20] Consumer malfunctions and so I do think there is there's a potential risk,
that that these these products are going to get a bad rap for safety concerns and therefore it's going to scare consumers away and so you know,
I think we have to make sure we steer clear of that you know for this trend to continue.
Scot:
[1:01:42] Yeah and the time and puts it in Gareth question.
quickly is what's a brand to do so so you're a brand or a retailer you're in category X and suddenly there's a Chinese seller and I think this is really this is the world going forward and to your at the top of the show you talked about how are you more agile I think the answer is.
Brands and retailers have to partner to be much more agile there's some things you can do around you know what's interesting is a lot of these things are coming out of the same Factory so they'll do a run for the brand and then we'll do it run stuff,
and so if I'm a brand I think I would go back to my Factory in negotiate that they're not allowed to do that in some way you know there's certain constraints that that you can put on there especially with your Electro property,
there's some stuff you can do there but it is a day there's so many use factories that you know just shutting down the one there's one next door, so I think its Innovation so you know.
And if that's what your brand has to kind of stand for just just kind of these lifestyle Brands and things,
those days are are are going to be hard to stay on top of if you're not doing something Innovative around the fabric the technology,
all these kinds of things to differentiate your product as a brand and that that treadmill a lot of Brands I talk to you kind of say we've had private label in grocery whatever for years and it doesn't matter I think this is way different than Ethan they face before and it's a new world and.
The only solution is in a bit.
Jason:
[1:03:10] That absolutely and I think it comes down to being close to your consumer if your brand that they can really stay close to your consumer know them you can innovate products that.
Particular meet their needs or fit their life and it best that the Chinese factories are going to be fast followers and so I think in the New World,
those.
Does he know great Innovations you come up with their going to have a shorter lifespan because you know you are you are going to have the Chinese competitors coming in and and challenging your price point so you need to be ready to move on to the next product little faster than we used to do.
[1:03:46] And with that I'm sorry to report that it is happen again we've wasted a perfectly good hour of our listeners time,
and I'm even sad and report we didn't get to all the listener questions so we're definitely going to have to do another one,
so if you have any thoughts about the questions we covered on this show we'd certainly encourage you to hop on Facebook,
let your thoughts be known and if you have some other questions we'd love you to leave those on Facebook as well and will get them in the next episode and they've you did enjoy the day show we would certainly appreciate a 5-star review on iTunes.
Scot:
[1:04:20] Yeah thanks for when we really appreciate the questions and hopefully even enjoyed the hot take on Amazon's quarterly earnings and listener questions.
Jason:
[1:04:31] Until next time happy commercing.

Jul 23, 2017

EP094 - News http://jasonandscot.com

Amazon News

Alibaba

Other

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

Episode 94 of the Jason & Scot show was recorded on Wednesday July 19, 2017.

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

A weekly podcast with the latest e-commerce news and events. Episode 94 is a recap of the weeks news.

New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 94 being recorded on Wednesday July 19th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason and Scott show listeners Jason I'm sitting here in 99 degree sunny North Carolina whereabouts in the world are you.

Jason:
[0:50] I am in a relatively cool 94° New York City.

Scot:
[0:55] Nice nothing like the odors of New York in Late July with 94 degree weather it's a nice city for them.

Jason:
[1:05] Jack me I find that it really brings out the New York bouquet in the in the air.

Scot:
[1:10] The city's usually pretty dead cuz her once in the Hamptons only have this cursed.

Jason:
[1:14] Exactly Scott I feel like this has been a super exciting week for you I have been living vicariously through you through some exciting news going on this week.

Scot:
[1:25] Yeah for the fellow nerd / Geeks or whatever you like to call yourselves out there this is it's a big kind of two week 10 day. So you had last weekend e23 which is Star Wars going to insiders conference and they had a lot of good start that's a Disney conference,
in Star Wars is owned by Disney so they had a lot of interesting news there also around Marvel if you're into the superhero side of things and then coming up soon if not.
Eminent is a Comic Con I've never been to it as a San Diego and and kind of quite a trip from you never try to go like.
Four times it never works out so I kind of gave up but they'll be a lot of things now it's there and,
so there was the sizzle reel for Last Jedi which is exciting that's the movie coming out this December,
and then I think I'm most excited about is their doing Star Wars land which is going to be called the edge of the Galaxy and they're going to do a Resort in Orlando resort so.
Destiny exciting you'll you'll kind of go check in and be assigned kind of a you know.
Personna if you will and I'm sure people will cause play I'm not a big cosplayer but I think.
You and I haven't discussed it but I think we should talk about having the Jason and Scott show there at lunch in.

[2:38] 2019 lizards that excited we can do a Big Lick meet up there or and we'll have kind of a rebel versus if kind of thing on the podcast and it'll be great at least five of us will really enjoy that podcast.

Jason:
[2:50] I'm totally in I'm putting it in my calendar right now.

Scot:
[2:54] Yeah well we have been doing a lot of deep Dives interviews lately and we thought it would be a good time to get back to just news there's a lot going on in the world of e-commerce even though it's summer and you would expect,
e-commerce to be slow there's a ton of news and of course it wouldn't be a Jason Scott show without Amazon so let's start with some Amazon news.
Amazon news your margin is their opportunity.

Jason:
[3:28] Yes Scott we've obviously did a whole show on the announcement that Amazon was acquiring Whole Foods,
but there's been some foul on conversation their number people that are speculating including Scott Galloway did a video this week or last week speculating that,
did the potentially the the acquisition won't be allowed to go through and that the government will try to break it up.

Scot:
[3:59] Yeah you know I think that's an interesting perspective but you know I think.
Amazon really smart and the the two Tech Titans of kind of tripped over this or IBM and Microsoft and,
what ends up getting you with these Monopoly things first of all what ends up getting with the government is being Monopoly and.
You know the definition of monopoly from the government's perspective is you just have this obscenely large market share and they argue that this is bad for consumers or businesses because they don't have toys prices go up in those kinds of things,
and I think I think Amazon has kind of just because they're scale and what they do they've been oculate themselves from the Sprewell so freeze ample.
You know a grocery let's say there there is no argument that says this will give Amazon a monopoly and grocery because you have yo.
Walmart so far ahead and then Kroger and there's literally and I think we talked about this make some number six or seven in the Market at.
Kind of like 8 or 9% when you add up Whole Foods plus Amazon so it's so it's hard to make a case there and then,
it's also hard to make a case of this is going to hurt consumers because we all know prices are going to go down so I think Amazon by picking these huge addressable Market areas that they're in and getting a small piece of them then also relentlessly driving prices down.
I think they're pretty inoculated from kind of a government.
Kind of rule even even when you look at e-commerce you know you could say Well they're like 30% and 25% of e-commerce 30 to 33% if you count DMV.

[5:40] That's Monopoly but then the pricing thing doesn't really come in there and I think what Amazon would argue is,
well you know you can't really look at e-commerce because it's all Commerce and you know when you look at all Commerce then Amazon has 4% of all Commerce so certainly doesn't feel like a monopoly,
from a market share perspective and also it doesn't have a pricing thing so I would actually disagree on based on what we know today that Amazon will get split up because I think they're they're pretty safe from those two,
kind of pretty simple test that the government uses to look for monopolies.

Jason:
[6:15] Yeah I totally agree I think based on sort of the conventional wisdom it would be highly unlikely because the first thing that happens is they have to define the market and then the market.
The relevant Market here is likely going to be grocery so it's not going to be,
online or offline and it's not going to be all of retail is it's going to be Grocery and Whole Foods has less than 1% market share and Grocery and Amazon has no market share and groceries so you know from that standpoint.
It's going to be real hard to make a monopoly argument and your point in the US,
antitrust like there has to be tangible damage to Consumers would usually as lack of choice surprise and nobody's going to be able to make the argument that.
Amazon buy Whole Foods is going to drive prices up if we were talking about your up or something it might be a different case cuz they're they can make all these arguments that that.
The merger could impede Innovation which is bad for the consumers in the long run but but the US definition is much more narrow so I just I don't think it applies at all I think the only chance that,
did you know we might see some saber-rattling cuz I do think there's some politicians that are going to you don't want to want to make some hay by talking about it but if the end of the day,
it would require like a new antitrust theory in and dramatically new PAW enforcement policies to really see them take action against this this acquisition.

Scot:
[7:45] You're the one thing Scott did bring up that I I do think Center esting is.
Yeah will Amazon be a trillion dollar company not to give you a more interesting is what is the first trillion-dollar company going to be and I think the three candidates are,
Amazon Apple and Google and so just kind of like size that up for listeners to so the way you think about this is every stock has a market cap which essentially the number of outstanding shares times its current price.
And right now apple is ahead with 787 billion dollar market cap,
their stocks it about 151 so did get to a trillion they need to go up with CT.
50% so that would put their stock at like 2:25.
And then number two right now you have Google also known as alphabet now and they are at 670 billion and their their stock is kind of somewhere to Amazon's right now it's at about $1,000 so they effectively have to get up towards $2,000 in their stock.
Assuming there's no splits between now and that that mythical point when they hit a trillion.
Amazon's actually the laggard so you know in amongst these three so fruit number one is Apple at 787 number to is Google at 678 and then number 3 and quite a distant number three is Amazon at about 5.
500 billion dollars so half of the way to a trillion dollar market cap so they're stuck what have to go to mm so you know.
A lot of people would lead Apple we'll get there because we got this kind of iPhone supercycle happening with the often leaked not not verified iPhone 8.

[9:22] I'm starting to see some negativity around that because a lot of the components as these Wall Street guys dig into the supply chain,
looks like it's going to be hard to get the components so a lot of people are saying a is going to be very expensive phone and it be it's going to push to next year,
the supply so you know maybe this iPhone 8 Super Cycle doesn't happen or it's delayed but anyway it it's going to be you know I think a lot of things have to go.
Amazon's way to beat Apple there who knows Google you know what let's see how they do they got a lot of.
Great things are doing you know some of these things in Google lab probably need to hit for them to kind of get to that trillion dollars cuz it feels like search is kind of running out of gas a little bit.

Jason:
[10:03] Yeah I mean that's.
The one thing at Amazon has going for them versus the other two is they have much smaller market share in a lot of their businesses so there's a lot more Headroom than it feels like.
There there is for apple and Google's mature businesses to your point is.
If Google hits a homerun with a ton of his vehicles or something like that that that could certainly be the thing to do at 2.

Scot:
[10:27] Yeah that's like so we'll be watching it really close here at the Jason's gotcha.

Jason:
[10:33] Other Amazon news this actually happened a couple weeks ago when we were doing other shows,
but I've heard some more recent conversation about it is well and that was Nikes decision to start selling on the Amazon platform.
And,
that was kind of a deal because Nike had been sort of a vocal opponent of selling through Amazon and so it was it was really seen in the marketplace as he some of the last brand holdouts Nike and honest company which had both kind of over it we said they wouldn't.
They didn't think Amazon was right for the brand are now both.
Selling in in in case of Nike that announcement had a head of favorable impact on Nike stock at had a negative impact on all the other Sporting Good stocks like Dick's Sporting Goods.
And so you know people were kind of saying like hey this is another another Amazon Milestone is they're getting all these hold out Brands to sell in the plant form.
But the more recent conversation has been like it doesn't appear that Nikes necessarily.
Embracing the platform and putting their whole product line on it and sort of like using it as a primary point of distribution.
You know when you work at like what Nike had on the platform for Prime day versus a lot of their competitors you know it was only a smattering of product and a lot of people have taken a theory that.
That Nike is in her the business relationship with Amazon so that Nike will have more leverage and get more support from Amazon and protecting their brand and you know in for saying.

[12:15] You know fake products on the platform and the,
really it's it's more of that level of a relationship then then it is you know Nike selling all their goods direct through Amazon.

Scot:
[12:27] Yeah and um I wouldn't have certainly there's some counterfeit stuff in Amazon sexy pretty good it even before the way shapath pulled Leasing.
Anything that seems counterfeit,
but a lot of it is really more around third party and controlling the third party and so-so as sweet we had an inkling this was coming because a lot of third parties that sell Nike items,
I were alerted that you have come July they would no longer be able to sell on the platform so so now I keep definitely leverage their power to control the third-party Marketplace as a question for Amazon is is the you know are they driving enough sales and selection to Nike to replace and even be.
Automatically ahead of that was was that deal a good deal for Amazon so it'll be interesting to watch that because Amazon has no qualms of kind of,
terminating deals if they're not making sense for consumers so this could be interesting to see how that plays out in there is nothing argument that Nike actually flexed its muscles and,
will Amazon one of them badly enough on the site that they they did this kind of very rare brand gating where they now Gates this brand from third parties and I can probably count on one hand the number of brands of succeeded in doing that.

Jason:
[13:39] Yeah yeah it's going to be fascinating to see how that that all plays out and regardless it does get Nike on the platform and once they get a taste you know it remains to be seen what they'll do like you know they can easily expand the assortment overtime.

[13:55] Another interesting piece of news that made me think of you is Amazon the launched a new platform this week which is called Amazon Spark.

[14:06] And this is the latest in a series of new new tools and Amazon has offered that are really about helping consumers with Discover it.
So you know you think of Amazon is being great destination when you know what you want and you use the search engine you go right to your PDP and you buy the products.
But what spark is really about is browsing visual content and having shoppable photos so the photos can have hot spots in the hot spots are linked to.
Amazon Asians and you you can sort of a reveal and add to cart button and put stuff in your car.

[14:43] Straight from these these photos so this gives a tool to influencers and Affiliates to start.
Publishing their own pinterest-style visual content on the Amazon platform and Shoppers can curate that content based on their personal interests and when they you know.
See a picture of a toddler playing with some blocks that you think would be fun for your child you can.
You can click on the blocks and Adam to your cart so in interesting new shopping model for.
For Amazon and it made me think of you because a couple weeks ago you publish this very cool Amazon scape sort of listening all of the.
The different tools in the Amazon Echo System and is willing to put together the outline for Tonight Show I couldn't help but thinking that you're your three-week-old Amazon scape is is wildly out of date already.

Scot:
[15:35] Yeah yeah that thing is a blessing and a curse like some of these kind of projects I seem to bite off at theirs.

[15:44] Is it good like 6 things I need to add on to their already which is just pretty amazing considering it is 3 weeks and then we don't we don't really talk about a lot of the cloud-based stuff on the show but there's already been several Cloud things I need to add on there.
And it's this kind of is a good kind of.

[16:02] Switch off Segway into Jeff Wilkie I think that's how you say his name Wilke I've always heard people d'amazon climb lucky I guess you could argue that the es Island and its will,
he's pre senior guy at Amazon and I have never seen him speak and he was actually Fortune had one of these kind of frou-frou Aspen the things called the brainstorm Tech Conference,
you and I are too busy to accept our invitations to Keynote so maybe next year will be there but Jeff Wilkie was he was over the only had a lot of free time and popped on over there he runs the he's effectively he's got like a CEO title which is really unusual a lot of people behind the scenes say that he is the likely success successor,
to Jeff Bezos holder that's all all this person,
NADA it has not been designated that anyway I've never seen this guy talk and he was really excellent in so we'll put a show note up there's like a 30 minute video from a talk he gave,
allies Amazon guys at comedy shows they don't like talk about Amazon in a meeting way and,
but what I like to do is pick up Tim bits of culture in and you're the one question having build some businesses is.
How do you do so much and obviously they have like 300,000 people and you can do a lot but you know I've been in.
Visit large companies like that and it just get so wrapped up and caught up and PowerPoint gnosis and meetings and in that kind of thing.
And this interview is really good cuz he spends a fair amount of time talking about that and it's funny he says you know his is the short answer is they create separable single-threaded teams so.

[17:39] It's almost like a developed it approach they've taken with cloud computing is like their cultural approach so it's almost like every team and.
Amazon is its own little service and gets to focus on that service and if it needs to work externally that's fine it'll it'll kind of create a little mechanism for doing that but then.
That team spends 99% of time.
Focusing on it an interview and had no idea what he meant by that and so so he went out and bought a couple examples and he kind of said you know what will do is will we in the early days of Alexa we hard one person and all they did was think about Alexis and we didn't.
We didn't tie them up with anything it didn't have to.
Time with the rest of the system or anything like that we talk to people that like Microsoft and Sony's other companies that's what starts to really hamstring them is the funny story like the early Xbox almost died because they wanted to have Internet Explorer,
the main window on it like the IAT wanted it to have that so they actually.
Creepy little teams in Amazon create leaders they go build teams and nothing gets in their way and,
this is pretty amazing at the scale Amazon is that you know there's not a legal team at Brand team when you get in these larger companies I'm sure you interact with them daily.
The it becomes a culture of know and somehow Amazon has created this kind of,
primordial soup that still continues that allows many ideas to flourish and die and and and,
yeah it seems like they're going to with that culture they'll be innovating and out innovating a lot of companies for a long time so if you're interested in that topic will put it in the show notes there's a 30 minute video that's very much worth your time.

Jason:
[19:16] Yeah I mean to me the interesting thing you know talking about,
software development is sort of a metaphor for organizational design he even talked about the way the teams interacting with each other being sort of like an API where you.
Add Define inputs and outputs and that's all you worried about and you you know other than that you know weeders in one business weren't getting involved or getting in the in the shorts of,
leaders of the other businesses which which you know as you were saying it made a lot of sense.

Scot:
[19:47] Yeah I've been an Amazon meetings where an Amazon is a very buttoned-up company.

[19:53] But because they're so singularly focused you'll go and so like the one Pea in the 3p teams don't really know each other how their systems work.
And it's kind of funny like we'll have to explain to that will be like well.

[20:07] Did you guys know you have the Seller Central thing over here and it's got this that in like really who runs that in your like.

[20:15] Your trip is just kind of really interesting,
yeah it does create a little misalignment in some ways but I think what they've done is they done the calculus and said it you know focus and moving quick is better than alignment in some.
Some ways maybe lime it's not the right word but like a little bit of duplication of effort happens so I think it went having built again I'll route to a large organization,
you start to really worry Nashua duplicating effort here and you make sure these teams are talking and sharing stuff and it doesn't it seems like Amazon to just turn all that out it's just like go as fast as you need to you know.

[20:50] Go fast and break stuff and it's easier said than done in a company the size so that does really interesting that talk so highly recommended.

Jason:
[20:58] For sure and in that that model probably explains.
How they're able to maintain this incredible pace of innovation and you know.

[21:09] Part of that Innovation is all these new product offerings that are launching that we're having to talk about on the show and it's it has the unintended consequence of the podcast sometimes feeling like an Amazon podcast because I missed this week and.
Yeah sure know if they want antenna products we already talked about Spark,
you know another big one this week is meal kits right and so they they've launched their own meal kits which you know.
Cuz very negative reaction on the part of a blue apron and some of the traditional competitors there but they they just seem like they're able to.
Innovate and get these these products in new categories and new services.
Out incredibly quickly in and obviously part of the reason they do that is because they're.
You know they're out there all independent and running in parallel as opposed to having dependencies on each other.

Scot:
[22:02] Yeah meal kits was interesting because it was almost kind of like.
Accidental news because so a company in the UK saw that one of the Amazon entities created a trademark for from yokuts and I think the trademark is some it's like a more of a slogan and it says something like.
We prepare it you cook it and that's kind of what then they pulled that thread and they found that they're working on meal kits what's funny because I had a friend.
What I heard is it was going to be for fresh only so I had a friend look into this and Bill kids have actually been sold on fresh for like 90 days and it started with a couple and their Amazon meal kits and now they actually have about 20 meal kits and,
you know what's cool about these is there's a good better best so the Amazon brand is a lot like amazonbasics it's a basic meal,
it's usually a beef or chicken and pork in a vegetarian option and it's $19.

[23:01] Didn't have third parties selling on there so there's another one and it's called Tyson and something,
and it's more like $25 and it's all chicken because it's Tyson and you tell Dave come up with the recipes and everything and the food quality goes up a little bit and then there's a fancier one that's called Martha and something,
and that one is like 35 and it's got you know skirt steak and,
fancy sauces and all this kind of stuff so it's really interesting that you know of very.
I would argue there are Dion Generation 4 where is a lot of these delivery subscription kits you know they're not a.
Great customer experience in many ways you and I have talked about how we will try to unmanned lot of people terminate and you know the problem is you don't control when the food comes used on this Relentless treadmill of food,
and if there's a meal you don't like you kind of feel obligated to you don't get to pick the meal and so Amazon by just kind of having these meal kits that.
Seeing you know there's good better best soda number one there's three price points and number two,
I get to pick it and when I want it and it just seems like a more natural way of doing this this kind of prepared meal Thing versus having it kind of like come on this kind of Relentless schedule where you fall behind and start to feel guilty you're not cooking all your meals.

Jason:
[24:15] Yeah I know I agree I think the order on demand component is that is a big win like you know I've been doing a lot of consumer research for some clients and.

[24:25] Meal planning and healthy eating and Fresh Foods are all very high on the decision tree for consumers but at the same time they're super,
times of compressed in they have very limited bandwidth and so meal gets really fit that Niche that they,
they let families feel like they're making fresh healthy food and they say the family time into your point you know when you can order them onto me and you can.
Pick the taste that you want you know on the date you want and not have the sort of Relentless pressure of a mandatory subscription coming to your house.

[25:01] Another interesting thing about the mule kicks is that it seems like they're showing some real food Innovation so one of the things I read was,
that they would be offering ground beef hamburger patties made from single cows and so you know.
One of the health challenges with ground beef is you need to get,
meat from a bunch of different animals in them any one of those animals have any diseases that in your potentially at risk and so that that forces everyone to make sure that the ground beef is is,
cook sufficiently to,
to all those viruses and so you don't get the super juicy flavorful meat so by offering single cow ground beef they they offer product that's safer to cook at a lower temperature and I liked it just never considered that before and you think about the the challenging Logistics of.

[25:54] You know.
Making that product in a meat processing plant and you know it seems like Amazon signing up for some pretty significant Innovation their versus just sort of Outsourcing these foods from the traditional suppliers.

Scot:
[26:09] Yeah and done just servants clear this is available to Amazon Prime fresh subscribers which is that full-on grocery deliver delivery subscription.
But I think we've seen this program where they test things there but random up they get them too.
You know 30 40 50 skews then would be very easy for them to move this across platforms the next platform I would expect to see it in would be.
Prime now and then obviously like the the pickup in the go in Seattle but that's that's kind of a small footprint and then it.

[26:41] My Prime now I would put it in a 40-45 markets that would be interesting and then,
that point they could figure out how to make it part of just kind of the normal Amazon kind of infrastructure so this can be really interesting to watch them with these meal kits and we'll keep reporting what we see there another kind of tidbit for you,
my friend is in the beta for the Amazon Prime pick up and he's tried it two or three times and.
Every time he tries it he picks a he like literally lives 20 miles away from the pickup Center he's seats at 15 minute window and it's ready in 5 minutes he said it's like the best thing that they have ever tried for grocery it's just like.
Dothan availability window seems high now that could be a part of the pilot program maybe they're not just putting a lot of people to their but the it is so far really under-promise and over-deliver it as far as the timing and.

[27:34] He said the quality of the food is very good date they actually kind of prefer it to Fresh in some ways cuz it's kind of gives a little bit more control over when they get things and.
So I thought that was interesting.

Jason:
[27:47] Yeah absolutely everywhere we've seen at testing of of buy online pickup in-store for grocery like you you see huge adoption so,
that doesn't surprise me a funny antidote I saw a professional chef in Seattle rotor review of Amazon go where she she orders and ingredients and,
similar experience she had she had great service there but she gave the the.
Actual food products that she got sort of a mediocre results like somewhere apparently like very high-quality ingredients and some of them were pretty disappointing including like this this Marquis piece of fish that she bought,
my guess was pretty disappointing and what was funny about it is she wrote this is a review that got published in the New Yorker and so it's this like,
you know well written 2000 word.
Weird review and she published a link to the New Yorker article on Twitter and cc'd Amazon help their customer service spot in the automated response from the the bot to this link with this long article was,
you know where we're sorry you experienced a problem can you please give us a little more detail about what went wrong.

Scot:
[28:55] Bots going to ride and that's actually a good segue into there's a new this one's kind of in the rumor category so this is on,
I'm not known if it's going to happen or not unverified I guess I should say but a lot of people got in surveys asking about an Amazon messaging app that appears to be called according to the survey anytime,
this is kind of like one of those things we scratch on your like why would Amazon do messaging you know clearly all these messaging apps are out there and way ahead.
But I do think Amazon has couple things going for them so,
the popularity of Alexis so it'd be interesting to have a voice component to messaging you know so so right now none of these messaging systems really connect well into voice so that's kind of interesting with the new Amazon.
Ecko show I believe I had a chance to play with yours yet.

Jason:
[29:47] I have them.

Scot:
[29:49] Yeah it's a little bit of a social network kind of a thing going with it so so I think they're kind of getting you know they may be seeing some early data there that says hey this is common air sting,
maybe there's a chance we can build a little bit of a social network here so so if you on your phone if you give it access it slips in your contacts and now,
you can call other people that have those devices so so it's almost that and then I think the third thing and probably most important they could bring to bear as if some of this cognitive an AI so we talked to Andrea frigg's ample and you know she talked about how you can chat with an Amazon vendor bought and,
it will negotiate on Amazon's behalf you seen it with the help but so I think there's they've got this really kind of interesting a platform that's probably second to none that.
Could be interesting to leverage in.

Jason:
[30:44] Anschutz got we just had a little audio glitch can you hear me.

Scot:
[30:51] Area.

Jason:
[30:52] Okay so it was my fault I open another tab I just can't do that like cuz.

[31:00] I was trying to look up another product but let me just quit.

[31:07] 550 parts to so you were it was the sentence when you're talking about you just started the the Andrea AI.

Scot:
[31:20] Tell me to say the third like start there.

Jason:
[31:24] Yeah that would be best.

Scot:
[31:30] The third piece Amazon brings to Bear is this kind of AI engine now we don't know all of their building in there you can see some hints of it through AWS,
and if you remember we had to Andrea on the show and she was talking about this hands off the wheel initiative where.
You know dude you're as a vendor you're singing or negotiating with to chat system and its actual robot on the other side and most owners only realize it's a robot so apparently have some really amazing internal AI technology maybe you've seen it on that help. You mentioned so it'll be you know interesting that's kind of one of the ways they could commercialize this,
yeah and then you think how can Amazon use the messaging well imagine you could ask Amazon about any product.
You know you could send messages between Alexis and all the devices so I don't I don't know it interesting to see if this one becomes real and what they're using it for.

Jason:
[32:18] Yeah I am a mixed feelings at you know always interesting to see,
Innovative new products and it's way better than the current state of messaging apps like that that could be a peeling I sort of have a little bit of messenger for two you get the moment I feel like I have you know a.

[32:36] Community of people that communicate via SMS or via.
Apple iMessage or video Google voice chat and you know so part of me is worried about.
Fragmenting this messaging even further with another app not feeling super appealing,
I have to say that I have found the the drop-in feature on the Alexa more useful than I expected to so in my house it's it's actually getting used as a pretty useful intercom right like so you know my wife will be putting our son to bed and it'll be 10 to read a story and she you know she can just with her voice while she's holding our son you know drop in and the room I man and tell me that we're we're ready for story time and that kind of stuff super interest has been,
will useful in our house unless fired up to be able to drop into family members house and use that versus all the other.
Other messaging tools we have so so we'll have to see how that all plays out.

Scot:
[33:36] Yeah another angle and I forgot to mention this is there's a lot of rumors that slack is out there for sale and and it's a business productivity chat out really for lack of a better word so maybe what we're hearing is really going to be less concerned more kind of business productivity,
and that would actually slide in well with kind of these private e apps that they've been putting out like chime and whatnot so we'll be there some see if what direction they go here.

Jason:
[34:00] Absolutely and let me just say.
Slack message fragmentation is the bane of my existence cuz I'm a member of about 50 slack teams and it's it's pretty hard to monitor them all at once so hopefully Amazon does acquire them and fixes that,
another service that came out was there home installation service in so a lot of people have kind of taken the colonist Amazon's version of Geek Squad,
and I'm not sure this is completely confirmed but there were number of job listings that were sort of the precursor to the service,
the made it seem like these were going to be W-2 employees than Amazon was actually hiring that would do home installation of things like,
consumer electronics in so you know we haven't had the test yet but on Prime day I had my mother buy a new printer for her house that she needed and as she purchased that with home installation from Amazon sawall,
I hope we in a future podcast Bill to talk about how well that goes.

Scot:
[35:01] Yeah maybe we can have your mom in it on as a guest how awesome would that be.

Jason:
[35:04] It would be totally awesome the downside would be that you know that would we lose our number one listener that week.

Scot:
[35:11] Yeah you're right she would price to listen to I think we should do it.

Jason:
[35:15] Gotcha well I will mention it to her when I when I get the the printer install recap,
but it is interesting to me that they're adding services and you know in the old days if that like.

[35:28] They were really trying to build a business that didn't require human interaction and you know there's all this talk about like if we have if you ever need to talk to a human that we did our job wrong and you know more recently.

[35:40] A ton of the services are depending on humans and you know you're seeing Amazon hire a lot more people and in Creed jobs and you know I felt like you know despite the fact that this home insulation was a brand new service,
was heavily promoted on Prime day and,
you know it was it was it both had prominent space on the on the pdp's and and it was being offered it's an aggressive promotional prices as well.

Scot:
[36:03] Yeah and they have this is on my Amazon skate but they also have a home Marketplace called Amazon home services and.
It doesn't have such there's kind of to entry points to where it's popular is in checkout upsell so if you're buying a big screen TV or.
Printer and you want to buy insulation to get a pretty good attached right there where we're not seeing a lot of volume is when people kind of go through the top of the funnel and kind of say,
oh I need to go to Amazon to get my house cleaned and it's just think I think people don't think that way and they try to boil the ocean there's like literally everything you could do in one place and it's,
it's a little bit of water down by experience but you know I'm obviously you kind of deep into this on-demand Services world and I think Amazon you know.
I'm interested in it for all the reasons Amazon is I suspect it's it's a very big huge dress will Market if you look at GDP.
It's 80% Pro Services 20% products so,
you know it's four times as big and Theory as products and the terrible customer experience you know think about when was the last time you had a great service at your home,
yeah you have no power in the thing you get these delivery Windows the guy never shows up if he does he knocks and runs is just like a really terrible experience so so I think there's there's a really big adjustable Market there that it's probably pretty interesting to Amazon and what kind of see how serious they get about it.

Jason:
[37:35] Yeah that's going to be another Super interesting one now watch in in the last,
new service I noticed is from the back of a service for brands for for number of yours Amazon has offered branded landing pages but they were pretty rudimentary answer the last month they they did a major refresh to the brand pages.
And these new pages are pretty cool they're they're based on a much more modern framework they're based on a react framework but what school is.
You can now have multiple pages of URLs for your for your brand page so you know if you're a brand that has multiple categories of products you can have your own navigation with links to a,
to a category page within your brand page which is a pretty common need and something that they didn't support before some multi page.
Brand landing pages is really powerful they've added the ability to support rich media which is huge.
For a long time we've actually advised clients to put a lot of brand content.
Yeah in What's called the A-Plus section of their pdp's and that's because you know maybe someone's just shopping for your brand but typically an Amazon.
Eat when they search for you the brand that the results going to take him to a PDP and so the PDP had this sort of be the.
The main page for each individual skew or a sin but it also had the kind of act as an ambassador for that category of product and so so you saw a lot of folks commonly put.

[39:08] Rich media in their pdp's that was really meant to be at the category of brand level and so now they've they've enabled you to put all that content where it really belongs on its own.
On brand Pages Nat super powerful and then you know equally helpful,
they've added a real CMS in Vendor Central that let you can manage these Pages pretty easily you know even for a business use or not necessarily,
a technical are creative user so this is pretty new future,
that is if you are brand selling on Amazon you know you should have on your roadmap to be implementing these Pages as quickly as possible because if the moment it's definitely a competitive Advantage for the folks of adopted at and,
I always like to appoint people to like the the happy belly brand page you know which is Amazon's own product to see what you know some of the best practices are.

Scot:
[39:59] Yeah and you know what's interesting is a lot of these e-commerce platforms especially that's in bees have pivoted because there's not a lot of small retailers that are doing this that well out there in the world so most of them riveted towards France and I saw this is a little bit of a shot across the bow of some of those guys essentially saying.
You know.
We have a lot of Leverage with Brands and this could actually be a pretty nice e-commerce site for Brands overtime Amazon had been in the web.
Web store business that got out of that and I'm not saying they're going back into it but when I looked at this I kind of thought you know a brand what else do I need you know it's almost.

[40:40] It feels very modern and kind of next-generation so the nurse and see what else they do with us.

Jason:
[40:46] Yeah and it definitely like just the the trend of adding better tools for Sailors is very welcome so hopefully they they do a lot more.

Scot:
[40:56] Yeah and while I was just just now poking around I noticed they've moved up to the homepage the treasure truck so,
so the treasure truck I don't know the Genesis of this to you but it's kind of legendary in Seattle so every day there's this truck to drive around and it has like it all seems like something we would do but I don't think it's associated with his guys,
but everyday there's like a great deal so people in Seattle that you get a text and it will say the treasure truck is by the museum and it has you know a backpack for half off or something like that and you rush down there and get it it's like.
Supposed to be really fun and I was meaning to mention earlier because they.
They put the meal kits on the treasure truck which is they put a lot of beta stuff on there so that was interesting but now I've noticed today they pushed a video out with kind of funny pirate and now they have on home page where the truck is going to be traveling around the country,
let's go interesting new thing and good news it's already on the Amazon scape so I was I was that was when I knew about.

Jason:
[41:54] Nice I've actually run into the treasure truck at some events so they they send it for example to Las Vegas for CES and I actually asked the driver if if he considered it sort of on Wheels and he was actually a little offended.

Scot:
[42:10] Another couple of tidbits of news so.
After the the frothy,
Prime day there's some interesting analyst out on the Wall Street with some reports so first of all credit Swiss came out and they have a new analyst there and he picked up his coverage of Amazon what I thought was a refreshing is most guys if you and I've talked about this on the show a lot but,
a lot of folks still don't understand that Amazon has effectively to businesses there's the retail business which we call one p.
In that line of business everything they sell counts as Revenue so if they sell $100 widget a hundred dollars of Revenue.
Pretty simple same as retail the one that trips are one up is the third party part which is the marketplace so if they sell $100 widget Amazon can only recognize the revenue from that widget which is their commission or their take rate.
Across Amazon at on average is about 10%.
C'est Cela widget $400 in Amazon gets recognized $10 of Revenue because of gaap accounting rules I always have argued for a long time and I was kind of like.
The only guy out there saying this now most people have kind of come over the can't really think of Amazon that way because one Walmart will say that that.
That hundred-dollar which it was a pair of Nike shoes and.
And dicks lost out on $100 not $10 so when you actually unpack all that and we used to have to do this through a pretty arcane mechanism now Amazon gives you a lot of Clues to get there.

[43:42] Ineffectively the punchline is you think of Amazon is about 130 billion dollar retailer with actually about 250 billion so credit Swiss was out and they had you know it was pretty nursing date that she kind of has a 2017 estimate of.
230,
38 billion it kind of see him getting pretty close to five hundred billion over the next couple years which is which is pretty amazing that would be kind of Walmart territory so I thought that was a good report,
and then some of these things are surveys so you know you and I are not huge fans of surveys,
but RBC had when I only put some of the more Salient things here it was kind of interesting so some of the RBC is Mark mahaney he's kind of a very kind of legendary.
Analyst on Walmart I mean sorry on Amazon.
And some history questions are interesting so you know you hear from a lot of people will no one wants.
Same day or next hour delivery in a new survey yes I would like 60% of people said well of course I would love this and I would use it on a on a regular basis.
You're some more they talked about some category questions so.
Only 7% of those surveyed in this is a survey of quantity about 2,000 people and only 7% said they had tried grocery but 13% said they wanted to buy more grocery so yeah I'm kind of.
Signals of a large intent of an interest there on the top categories that were purchased on Amazon according to the survey were apparel Electronics.

[45:16] Home furnishings and of those are surprises but the fourth one I thought you'd be interested in a cpg so 31% of the folks had bought a cpg item on Amazon I don't think Dave.
Dundas multiple years but I bet if we if they had cpg would be down there with grocery last year so something and if something's going on and people are buying more CPT at Amazon which I think,
Dutch well for the grocery business.

[45:43] 12% said they use same-day delivery so that's up from 2015 with 6% so doubling.
And then yep Prime is best.
And then this is pretty fascinating so they asked Which online retail site has the Lost prices Amazon 64% the next closest was Walmart in eBay at 11%,
which has the best selection Amazon at 82%.
EBay at 6% Walmart at 4% which is the most convenient Amazon 76% Walmart 8,
eBay five so these charts are funny their bar charts and they're so tall dad is kind of change the perspective to even pull some of the retailers,
into the chart so so if you think about if those this kind of classic Bezos thing that he said and is is 97 letter,
we think people won't get tired of low prices great selection and convenience / free shipping and turns out I think he was right.
And that's kind of the recipe for for how well they've been doing so will put a link to that up in the show notes for those that are kind of like going to get super geeky on this stuff but might take away was cpg is on the rise and Amazon,
Prime is huge,
in Amazon hisses pulled away so far from comping competitors they don't even really show up on the radar anymore which which you know they could be disheartening if I was out there competing with Amazon.

Jason:
[47:13] For sure but speaking of competitors they're not necessarily pulling away from.
I did see a couple interesting pieces of non Amazon news and one of them is from our friends at Alibaba which which is certainly is holding their own obviously in different markets against Amazon.
But I find it kind of funny you know you'd only Bob I invented this this holiday singles day and you no one could argue that the.
That Prime day was coming knock off on on Singles day well I stumbled across a cool video which I'll post a link to,
of a physical grocery store that was designed and open by Alibaba called Hema supermarket and so this is a fairly digital High service,
grocery store in China I'm going to both had some kind of e-commerce Innovations there's a quick and collect and they're you know a ton of Shoppers are picking orders and they have like a good infrastructure for helping those,
does that Shoppers pick their orders from the Shelf have a barcode on every skew and you can scan them with Alibaba app you can you know.
Quickly check out using Ally pay and things like that and then they had some of the the usual cultural differences of of Asian supermarkets versus Western supermarkets,
for example most of the seafood is alive and you actually.
Pick your own crawfish or your own Lobster like you know out of a bin with tongs and you can actually hand it to a chef who will then prepare your your freshly selected Seafood for you too.

[48:54] To consume right in the store so some interesting things there and it you know just occurred to me you know what what a coincidence that they would.
You know be getting in grocery and you know with some Amazon Girish feeling.
Teachers you don't feel like these these two Giants are heavily sort of borrowing or competing with each other at the moment.

Scot:
[49:16] Yeah I think we should do a Jason Scott show roadkill have to work with our sponsors to see if we can get a week at that shirt at store.

Jason:
[49:23] How much are either of us are in adventure enough eater to be like we might have to bring someone with us.

Scot:
[49:32] Another kind of interesting startup that launched that got a fair amount of fanfare I think it's cuz they raised capital is called brand lesson I was so curious about this so now I had to go in and order some stuff so it actually came today and first of all it's kind of.

[49:48] It's super ironic because you get this very vanilla brown box and all it has is on like 80 lb a 80 Point font is brandless trademark,
alright your brand is brandless and they care about their brand but then everything to talk about his being unbranded yet they're branded with the.
Brandless it's kind of hard to everyone at work was like really confused by the whole thing and it at.
I gave up trying to explain explain it but he's got to do is it's kind of like taking that private label unbranded new.
Peanut butter or something and privatizing it and so their whole brand promises you don't play quote unquote the brand tax.
And then everything is $3 so we'll see I ordered some K-Cups and have not tried those yet but you know the dollar.
The the cost per K-Cup is about half of a branded one or a little bit less so that's pretty good deal if it ends up being good,
some of the things that that people in the office were like this ad good snacks so they had.
Quinoa crisp which were essentially healthy Cheetos so those were popular and then they had a wide selection of candies that we're brand was so they had you know the equivalent had gummy worms and gummy bears and this kind of thing,
everyone felt like the quality of those was really good so Buena.
It's interesting I'll keep you posted some of the other stuff we try but it was kind of a fun kind of again making it was.
Yeah good enough that I gave it a shot and it works really well came quickly products seem to be pretty good.

Jason:
[51:23] The interesting they're getting a little buzz cuz they they're sort of the mash-up of all the popular Trends right now right so that you know they have,
hundreds of products that are essentially a cpg company with like food and cleaning products and and you know all the other things you would think of a of a,
a craft in a PNG you know kind of Assortment but they're also heavy on the on the organic.
Quality transparent sourcing and so you know you know there's a lot of ingredients that aren't allowed in the products and they have have this like high quality Organics story.
And then they're your point a good value so you know $3 for a premium product that the based on the name you would assume doesn't.
Invest a bunch of money in advertising right like they're brainless and so it seems super interesting.
I have to say I think there's a huge flaw in their current business model and so not to say you know that they won't pivot and discover a successful model but the problem I have is.
You see them and you instantly think private label and so your go private labels been successful these guys should be successful but the.
The shoes difference between brandless and private label is you don't have to do marketing for private label products right because you,
you put the bleach on the Shelf in the supermarket right next to the Clorox bleach and and people walk to that shelf with buying intent and they see the private label is is cheaper than.
The national brand and so some people will you know make that trade off.

[52:54] Brandless isn't in on a shelf next to a another product right like there's there's no one walking by the only place to buy brandless is on Brandon and Brandon has no organic traffic,
so guess what brandless is going to have to do in order to get people to discover them and come to their site and buy their stuff.

[53:16] They're going have to spend a fortune on Advertising right and and said that the closest model we have are the guys that jet that we're spending you know originally $100 a consumer for acquisition costs and,
you know maybe got it down to 50 bucks of consumer and so the irony here is you know they're calling themselves Brandis and trying to position themselves as a product that doesn't have to sync a bunch of money in advertising,
but they're probably going to have to spend a fortune on Advertising to get people to go to their site and I would argue that even have a worse problem.
You know they can't advertise $3 peanut butter and get someone to come to the site that just wants peanut butter because the other thing you know whether three Dar products,
you have to buy 26 of them to get free shipping and is Jeff Bezos already proved nobody wants to buy anything without free shipping and so you have to find a consumer that's all in and willing to order.
26 products to get the free shipping and so that the ads you have to run the Google pieles you know probably can't even be at the product level they have to be at this like.

[54:14] You know cpg level and I I just think that's that's going to be a really challenging story for them to.
Digitally acquire consumers that want to buy that many products from them so I'm I'm sure we'll see them pivot on their shipping model they have a club at the moment with you,
pay money to just reduce the shipping cost which I'm not confident in and you know.

[54:35] Eventually like they'll either have to decide to distribute through places that are Eddie had buying intent like Amazon or traditional retailers or they're going have to spend an awful lot of money to get people to their site.

Scot:
[54:47] Yeah it's cuz the the two boxes came within days of each other but it reminded me of boxed so very much kind of similar box size model and and do you know fill the box to get it shipped to you, then.

Jason:
[55:02] Yep other little pieces of news this one's kind of interesting to me but in separate announcements over the last two weeks.
Both Apple pay and Samsung pay have announced that they will allow you to use PayPal as a method of payment on there.
Their digital wallets and,
to me that's a pretty big piece of news for two reasons number one there are kinds of tender you can have them PayPal that you couldn't have an Apple pay for example so you can have your checking account you know when do electronic fund transfers linked to PayPal you can't do that in Apple pay but now you can link your checking account to PayPal put PayPal in your Apple pay digital wallet and now you can use those super you know seamless,
Apple pay experience to pull money straight out of your checking account no credit card required and so that.
That seems pretty interesting it seems like a big win for PayPal that both of these these digital wallets you know which are.
In some ways competitive with PayPal have both decided to support PayPal and you know my my very superficial read is.
If Apple pay and Samsung pay we're getting a ton of traction onboarding their own customers,
they probably wouldn't want to accept Paypal in the fact that they are accepting PayPal is probably a nod to the fact that that,
an awful lot more consumers of stored their payment information with PayPal then then either Apple or Samsung are getting organically and so they're they're having to go to where the payment cards are.

Scot:
[56:33] Yeah very interesting so I guess it's signals weakness right.

Jason:
[56:37] Potentially yeah that's really the way I read it.

Scot:
[56:40] Yeah it's kind of frustrating time of this thing so I was early adopter on Apple pay and then between like.

[56:47] Updating my phones in my watches I have to read it like delete all my credit cards every time and every atom I have given up and you think I would be like the perfect person for this but literally that cycle of going in and out with my credit card so many times this may be just be like easier to use the stupid.

[57:03] Monkey tip line.

Jason:
[57:04] I I would totally argue with you except that like none of my cards are in my Apple watch right now for that very reason.

Scot:
[57:10] Retailgeek call Jeff.

Jason:
[57:13] I'll fix it right after the show.

Scot:
[57:17] Cool one thing I saw that was interesting is we talked a lot about digital native vertical Brands we've had ModCloth on the show but no Bose also known as Walmart and,
everland is one of the popular DMV bees and the big Trend with these guys is opening up pop-up stores or physical stores so everlane announce their opening a store,
and I believe it's going to be there going to open up a store in the San Francisco Mission and then I can have some pop ups at their headquarters and then also in New York City.

Jason:
[57:50] Very cool I'll be looking forward to seeing what they do in the permanent store you know they had a lot of innovation on their website and you know do a lot of interesting things so hopefully they'll they'll have a fresh take on retail as well.

Scot:
[58:04] I think you should get up at like 6 a.m. tomorrow and go check it out.

Jason:
[58:08] Unfortunately I think the first that that for stores only going to be in the Mission District and I don't think they've even announce the date yet so that maybe a later show.

Scot:
[58:17] I think there's a pop-up in New York you can.

Jason:
[58:19] There is a pop-up but I have been to that.

[58:23] And for the record I will be up at 6 a.m. tomorrow anyway so for my client that's expecting to see me I'll be there.
Another one that I saw.

[58:35] Is a new e-commerce platform so this is very cleverly named platform is called new store.
And it's it's from a well-known character in the e-commerce platform space a guy and I'm not sure I'm pronouncing his last name right but I I call him Steve Shambhala.

[58:54] And Steve is well known for having found at a company called intershop which is a.

[59:01] A well-established e-commerce platform originated from Germany the kind of Frank Leah grew up with hybris hybris got sold for a large amount of money to to sap.
An inner shop really didn't get as much traction but what what internship was most well known for is.
It was the platform that GSI commerce was based on and so you could you can buy the platform yourself from inner shop or you could rent in adoration of GSI from.
Of inner shop from from GSI so so Steven is back with a new e-commerce platform and it has in it a bunch of the things you would expect to see in.
A brand new made from scratch,
Commerce platform from somebody that knows the market well and so it's it's heavily mobile-centric it leverages a lot of the latest technology in Mobile so it leverages mobile accelerated pages from Google most exciting for me it natively supports Progressive web apps which is really exciting capability for for enhancing the mobile experience and having fast loading Rich pages,
and you know it does have,
sort of the full stack which is you know one of the common Trends we're seeing a new e-commerce platforms it's not just a storefront it has the the order management system it has some omni-channel feature so I can support you know an inventory model in your store and.

[1:00:32] On your website and buy online pickup in-store and all those sorts of things so I know he raised the money I think it was like 50 million dollars was a series B and it'll be interesting to see if they get some Traction in the e-commerce platform space.

Scot:
[1:00:48] Yeah yeah I know Steven well and he has plenty of capital to go retire so it's interesting to see him going to stay in the space and continue to innovate after after kind of.
Starting in the early days and then.
Founder of demandware and now it kind of working on I think he calls it like Commerce 3.0 so so kudos to him from the unreal stamp point for for having the gustow to stay in there for so long.

Jason:
[1:01:10] It's it's an addictive cat.

Scot:
[1:01:11] Last it really is it's a lot of fun last one I saw was,
and this one is kind of funny because we stop talking about Amazon opening fulfillment centers on the show cuz they open like to a month right now but Walmart actually had has announced the opening of a pretty massive e-commerce for phone at Center it harder to keep track of them cuz Walmart doesn't announce them like.
Amazon does now but I'm pretty sure this is the 7th one so they're they're kind of in the high single digits in,
I'm ninety-nine percent sure I'm right on that if it not number 7 but this one is truly pretty large so it's Amazon's largest fulfillment centers gift 1.2 million square feet,
does puppy is 2.2 million square feet that spans two buildings it's in Florida it's got 1,500 jobs one of the low blurbs always read these things I'm kind of a.
Logistics nerd is they said this next generation.
Pickup module system so not exactly sure what that is I mean I know it pickup is but I don't know what the module system is sounds like some proprietary way of doing things it if effectively has 33 miles of shelves so I was thinking wow that's that's a lot of if you had to,
if you unfortunately ended up on one end of that and you had to walk to the other end to get the widget that would be bad so hopefully their systems more optimized than that.

Jason:
[1:02:30] Yeah I think it's actually automated I think part of that pickup module system is that the that you know what's the automated shelving systems where you know the sort of shells are stored in 3D in it,
it pulled the Shelf to the Picker instead of the Picker having a go to the Shelf.

Scot:
[1:02:47] So the Shelf could have to travel 33 months.

Jason:
[1:02:49] Yeah well probably only in a in a really bad sort would it have to go that far but yeah.

Scot:
[1:02:55] I want to see these 33 miles that's maybe it's like if you stack them they would go to the moon or something I don't know it didn't it didn't make sense to me so I thought I would.

[1:03:07] Maybe I'm sure of the listener out there we have Folks at Walmart they can explain it to us.

Jason:
[1:03:11] That's the one thing I know for sure is if I ever need to hide the Ark of the Covenant I know where I'm going.

Scot:
[1:03:17] Yep we're going to put it in Florida in the Walmart fulfillment center.

Jason:
[1:03:21] Awesome,
and Scott that's probably going to be a great place to wrap it up because it's happened again we've wasted a perfectly good hour of our listeners time as always we would encourage you to continue the dialogue on Facebook interview particularly like today show we would greatly appreciate a review on iTunes.

Scot:
[1:03:40] Thanks everyone and also we are looking to do another listener question show so I use that Facebook page to shoot us your questions or you can send them to retailgeek or Scot Scot just want Wingo Wingo on Twitter and we hope to get your questions so we can have a show just of listener questions.

Jason:
[1:03:58] That's going to be awesome and if any of our listeners are listening to this on the day it's published and you happen to be going to Comic Con in San Diego or in RF Tech in San Diego I will be there so,
feel free to drop me a line on Twitter and it'd be great to meet up so until next time happy commercing.

Jul 13, 2017

EP093 - Amazon Prime Day Hot Take

Amazon Prime Day was July 11, 2017.  In this episode we give our hot take on this Amazon created sales holiday.

  • Goals for Prime Day
  • History of the Holiday
  • Results for 2017 Prime Day
  • Jason & Scot's conclusions from this years event
  • Interview with Jamie Dooley Head of e-commerce at Dorel Juvenile Group to discuss their Prime Day experience

Amazon Prime Day Recap press release

Amazon Deep Dive EP24 Podcast

Full interview wth Dorel Juvenille Group, Jamie Dooley - EP86

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

A weekly podcast with the latest e-commerce news and events. 

http://jasonandscot.com 

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

Episode 93 of the Jason & Scot show was recorded on Wednesday, July 12, 2017.

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 93 being recorded on Wednesday July 12th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot & Jamie: 
[0:39] Hey Jason and welcome back Jason and Scott show listeners,
well yesterday was the third annual Amazon Prime day and it's Day show we want to go over the highlights with a Jason and Scott exclusive Prime Day hot take.

[1:09] Well Jason did you take advantage of Amazon Prime.

Jason: 
[1:12] I did not as voluminously as I might have thought I would but I found a few things to buy.

Scot & Jamie: 
[1:18] I think the problem with you and I as we're probably at at Peak Echo so it was,
it's actually frustrating day when you're at pekic Echo and you paid no I think I paid north of like 18190 for my couple of my Echoes and to see it there at at a.
Much lower prices it's almost got a negative effect in a weird way.

Jason: 
[1:41] I have that happen in a couple of ways like certainly with Amazon first party for like but they're also some some other products I purchase from Amazon recently that then went on on Prime Day deals that they gave me a little bit of buyer's remorse in,
night my family frequently likes to remind me that I have a very short gap between desire and fulfillment so it's.
You know I'm not good I'm not going to waiting for those deals.

Scot & Jamie: 
[2:08] Yeah next you need to create a prime day blackout for pretty much all of the spring so no shopping past me.

Jason: 
[2:16] Yeah yeah that that would be the smart thing to do I'm not committing to it.

Scot & Jamie: 
[2:21] So it's funny I probably like you I spending a lot of time for the day looking at the deals and,
really funny one I don't know why it made me think of you but I did and it was this lunch box and it kind of started working its way up as a hot deal pretty quickly and I don't know how many they sold these things but it must have been,
thousands of them but it's a it's a lunch box and the gag is it's this kind of white medical looking box and it's got an EMT tag on it and it says human organ for Trans,
so you know imagine you see your colleague in the lunchroom and they're brought walk in today open this up and start eating stuff out of its kind of like.
Zombie apocalypse lunch box that was a really strange when you know some of the strange ones that you see over the years are like The Yodeling pickle and those kinds of things with this was a new I had not seen this before I am and it was kind,
at the same company makes fake take out boxes that for you to put your lunch in so that he's kind of like you know,
strange-sounding stores in you they they look like Chinese take out and you put your lunch in there any doubt of it just kind of like throw people off that what you're doing.

Jason: 
[3:28] I got it that seems like a lot of thinking type stuff.

Scot & Jamie: 
[3:31] Yeah yeah it was kind of funny it's from a third-party seller where these guys I will have to have one of our interns look it up and get back to you.

[3:43] But I thought it was pretty funny one to bring out for folks.

Jason: 
[3:47] Good luck with that with the interns I can't get those guys to do anything.

[3:53] Scot before we jump into this year's Prime day maybe it's worth a setting the table a little bit and talking about the the history and context answer the first thing I was like to remind folks of,
is the Amazon is not the originator and does not own the market on inventing their own sales holidays there's a,
a great great tradition there but specifically in an e-commerce you know Cyber Monday which is been the biggest shopping online shopping day of the year in the u.s. for many years was really an invented Holiday by one of our former podcast guests and the original shop.org team.

Scot & Jamie: 
[4:37] Yeah yeah you know the what to pull up the episode but Scott sober in the,
does that story goes they saw the trend in the kind named it so you know the back before we all had Broadband Sans fight 3G 4G 5G kind of connections you would go to work and you would use that nice juicy Broadband connections that's why that Monday took off and they decided to name it,
that was the first created holiday and then another one we talked about a lot is singles day.

Jason: 
[5:07] Yeah absolutely in that and you know that the global people and or the Alibaba people that created singles day.

[5:17] Would quickly point out that that the.
It's it's become much bigger than Prime day or Cyber Monday are at the moment and so there's a lot of momentum there by the way the the Scott Silverman episode was episode 66 of any listeners want to go back in,
and catch that up,
so we have that Cyber Monday then we had Ollie Bob launching singles day where they took sort of a niche holiday and turned it into a huge shopping day and it's now you know by far the largest single online shopping day of the year globally in the end of course 2 years ago.
Amazon 2015 Amazon launched the first Amazon Prime day.

Scot & Jamie: 
[5:59] Yeah and pretty quickly it has become their single largest day and that's a good segue thanks for a little history on that and before we dive into,
a little bit more details on Prime day I think it's important to take a little bit of a step back and say why does Amazon do this I think the common.
The surface level is to sell more stuff you know if you can take a month like July and make it into a put a peek day in there that that actually helps right and maybe pull forward some holiday things,
and it also helps with Q3 you know Q3 is kind of slow or time. And summer is kind of,
little bit boring any Commerce there's a lot of extra capacity in the system but but I think you know as we go to the episode,
I think that you have to peel the onion on this to really understand,
the first child refer listeners to the Amazon deep dive which was very early in our podcast and career which was episode 24 shame on you if you have not made it through that episode,
but for those of you that the didn't which I know is very small part of our audience what are the keys to Amazon success is the prime program.
Jeff Bezos has a fun crew out there that you're a lot he kind of says we want to put so much value into Prime that you would be effectively irresponsible not to join.
And right before Prime day there's this,
This research company called consumer intelligence research and they they they tend to have the highest approximation of prime users and it came out at 85 million Prime users.

[7:34] I think that's their Us number most other people are in kind of the 65 to 70 million range and,
the other thing that is common about prime is it when someone's on Prime,
they spend at least twice some surveys show twice as much and some show three times as much I believe is more towards the three times,
as much so I believe the prime numbers a little bit lower than that you 5 million but I think the actual usage and the multipliers higher if that makes sense so,
so I believe there's five reasons that Amazon created Prime day number one is to create a generate more sales or what we would call and Industry gmv gross merchandise value I like that term because it encapsulate Stu 1p in 3p,
transactional volume a little bit clearer and that's too deep for this episode but again hours for you to that deep dive,
the number to is prime adoption so again people spend more money on their own Prime and if they can get people to,
try Prime data shows that,
dead again this is from survey data so take it with a grain of salt this is not Amazon releasing this but as people there's nothing surveys out there I think you get a pretty clear picture that once someone enters a Prime trial 73% become paid numbers,
flip side of that is 27% of people probably just join Prime for the 30 day,
trial. And then turn out but 73% stick which is when you look at online trial rates is actually pretty high usually they're kind of been to tend to 15% stick on Amazon 73%.

[9:09] Then if people stay a year then the retention rate goes up to to greater than 90% so if they is kinda like the roach motel once you check in to prime your chances of checking out are pretty slim and Amazon's got a lot of devious things.
Genius depending on which side you look at it for forgetting you deeper into Prime and accessing one of the many kind of spokes on the Hub,
the third reason for this is an Amazon has an increasing we talked about this a lot on the show portfolio devices so getting more devices out to you and in your house,
creates more stickiness in all those devices are tied to Prime Lenny's flywheels overlap each other the 4th when is prime day,
drives engagement of the Prime offering and adds value so so it's kind of foreign five together so by driving engagement of saying okay I'm using and maybe you're enjoying today shutting will try video,
Prime music try Prime Pantry Prime here's some exclusive deals Prime now try,
Echo deals that are for Prime members only try some of our private labels that are prime exclusives,
the more they can get you to activate inside of the Prime family and offerings and ecosystem the more kind of stuck you are in the web and,
you're the fifth one is that that making sure that you're reminded every year that there is a big benefit in this annual sale is one of those many benefits that exist,
Nordstrom's is kind of famous for their loyalty program they have their annual sale and giving people today's exclusives or something like that to go shop.

[10:43] Sets on the surface it feels like it's a reason to sell stuff but in reality I think the real reason and benefit of prime day is to drive Prime sign ups and add to the value prop in the seals are really just the icing on the cake.

Jason: 
[10:58] Yeah I would totally agree like of those five benefits the the sales while like certainly valuable and important as probably the least important of those five reasons so they.
They recognize all those opportunities they launched the first Prime Day in 2015,
and serve remind people how that went you know it was generally viewed as pretty smart and favorable that they had created their own holiday so I think they got like a good vibe and there was some Buzz coming out of,
that first year but it was not what I would call a home run right like so there was a lot of the narratives from 2015 where.
The man the deal sold out super quick and so a lot of people weren't able to take advantage of the deals and and we're somewhat upset,
there were some actual you know customer-facing technical problems and so this hashtag emerged on Twitter Prime day fail and folks were complaining because.
The card didn't work and they weren't able to take advantage of the lightning deal and then the deal expired and they missed out and they were upset there were some.

[12:06] Vin deals in in the prime day so they were there some kind of.
Products with they were underwhelming that you know not very many people are interested in and or the deals weren't very good it was a little confusing to even find the deals.
And you're going back to one of your subjects.
You don't half of Amazon essentially is is that that 3p Marketplace and those guys really weren't included in the first Prime day it was almost exclusively for Amazon products and for 1p products in so that you know both was bad for customers cuz so many of the things that customers buy from Amazon or 3p,
no certainly bad for all the 3p Sellers and then you know wow Amazon paid lip service to it being sort of a global holiday and being in all of the Amazon markets,
from the volume standpoint you know it really only was meaningful in the u.s. in the UK.

[13:01] So in spite of all those challenges like you know I think the big win for that first year is you know that they were able to say that they added hundreds of thousands of prime users in that one day so regardless of those challenges,
that alone would have made 2015 a success.

Scot & Jamie: 
[13:18] Yeah yeah it was it was definitely rough riding and on the 3-piece side I think they were so secretive about it,
that didn't tell anyone about it literally until about 24 hours before they just had told us you know maybe like 3 days before that there was going to be something happening in to get the servers ready,
so that was kind of funny and you know.

[13:38] It's only two years ago which is which is crazy but Amazon had some candles that line was getting kind of old and tired,
they're the tablet's they had where did really didn't find kind of the niche that they have found now that's kind of like you know this value kind of tablet they were there still kind of,
premium tablets and they just come off the failure of the fire phone you and I are the only two people that think in the globe the have them,
and so there was a lot of that that device stuff that they could sell in 15 so then 16 came along and you know what how I would characterize that is typical Amazon fashion they learned a lot from 15 and in 16 they are they.
They righted the ship in and fix a lot of the wrongs the deals were more aggressive they they now had Echo to kind of go out there and push.
Call you and I bought a couple that multipacks tobacco so I think we bought some three packs of. Some of those kinds of things so if you are kind of,
early adopter it helps you kind of get echo in your whole house which was nice.
The spread the deals to the day so instead of having them all at launch and then it won't come through them they they were much more well distributed they open the valve a little bit for 3p and,
then when the dust settled they announced that it was as big as Cyber Monday so they had actually created a day that was kind of into that top 5 kind of a day,
two or three day for them dad and more countries so they expanded it they were in,
nine countries and 15 Inderal and 10 in 16 but I would say they they got more serious about it and we're countries and in 2015 it was probably United say 80% attention was US 20 UK and then like.

[15:18] Almost nothing in other countries and then 16 they realize they could create more of a global push so there's a lot of push special an Indian and then.
Again with the dust settled at Amazon announced that the sales were up over 300% from the previous year so 16 it feels like this really got a lot of traction.
One thing to highlight is the top 10 deals from last year so I think that's kind of interesting as we can look at what,
sold this year something to this quickly so the number one was this air vent cell phone holder,
number two was an Amazon gift card so it's like a $50 card with $5 off which is effectively 10% off anything you want to buy from Amazon some in the ear headphones noise-canceling from pose a USB thumb drive that worked on both USB C and normal us,
Echo was number 5 fire TV stick was number 6 fire 7 tablet was number 7 pressure cooker was number 8 and,
one of those 5-port Chargers was an Amazon Basics 1,
number nine and then one of those power Banks or or a movie like charger but it wasn't the movie was the 10th largest so.
So that was really the the kinda the Highlight there from 2016 feels like they had addressed a lot of the technical issues and in really kind of,
started to get their sea legs on the Steal.

Jason: 
[16:38] Yep and then when it came time to talk about prime this year Amazon made some,
some pretty significant changes to the program so one of the biggest ones is it's no longer Prime day it's Prime dazed.
Because they've extant extended the deals to 30 hours so it actually started the evening of the 10th and ran all the way through the 11th.

[17:04] So you got six more hours they really sort of.
Try to prime the pump and get more people using their Alexa to do shopping and so they actually started offering deals.
Alexa users that were willing to use voice two hours earlier so that started at 4 p.m. eastern time and that was a clever way to to get people to start doing a voice Commerce the.

[17:30] They greatly expanded the the number of deals that greatly expanded the the opportunities for three peas to have deals globally they added China India Mexico.
They.
For the first time they now had so many deals that they had to offer some some filtering so that you could filter deals by category and a little bit by price point so they started giving you some some basic tools to.
Turn call through all the deals and find the ones that you're interested in they had a lot of exclusive deals to the Alexa platform.
And they even had some International deals where you could do some cross-border shipping for some things in some markets.

Scot & Jamie: 
[18:18] Yeah and then so that was kind of lead up and then when the deals went live again we're talking about this year,
I always think it's interesting to kind of see what they highlight on the homepage is kind of like those that is really kind of priority deals that they're launching and I think it helps you read the tea leaves on what's their priority for that Prime day,
so there was the you're obviously echos a really big push so the. Was 34.99 versus 4999 so that's like a,
that's a really low entry point to get into the family at like now at 3499 did is some interesting bundles with the. I saw him bundling it with the whole Sony speaker,
that little Sony speaker only added like $15 so that was interesting,
the main line Echo was 89.99 or his 179 sets half off which is very aggressive and I think I think.
I think it 179 they're probably making a little bit of margin on the hardware I think it 90 they're losing money so they must see you know some some,
data from putting these devices out there there must the razor razor blade thing must be working for them or I don't think they would be selling a,
prices you and I both know did it was funny that they had a really good deal on Oculus where is effectively $100 off of via an Amazon gift card,
another really big seen this year was home automation so they were really pushing folks like yourself and I that have already kind of,
flushed out the The Echoes in the house should really try to do more home automation I took advantage of some of those but so some of the things like the higher-end Philips hue light bulbs kits were rather.

[19:49] Attractive price some of the plug automations I don't do the locks but I saw those were pretty aggressively priced so you can tell that that was a really big scene was was getting people to activate home automation in connection with the echo,
another one that's really interesting I saw was some of these ancillary parts of the Prime mucosa.

[20:09] So they have Prime now which is same-day free 2-hour delivery and paid 1 hour delivery that's in about 45 markets now most of the stuff on Prime now was 25 to 35% off,
plus they had this $10 off coupon that if you hadn't used the service before you could use on your first two orders,
there's a program called Amazon restaurants which competes with Uber Eats.
Push mates in all those kind of food delivery companies and in cities I don't have that where I am but where you are in Chicago they were pushing,
people pretty hard on that Music Unlimited,
Prime Pantry so those programs we've talked about on the show had pretty substantial discounts Prime Pantry with 35% off your first use,
and then a lot of the private labels that was talked about on the show everything from apparel to amazonbasics and whatnot those were very aggressively priced up to 50% off.
So heading into the day internet retailer magazine projected that for 2017 that they would have their first billion-dollar Prime day.
And they were kind of saying it would be about a 20% increase.

[21:20] Zach that's kind of lead up to the day and when it first launched and here we are the day after and now have some early kind of hot take results that we can walk you through,
Jason you want to take a stab at some of those.

Jason: 
[21:31] Yeah so you know.
Amazon has issued some press releases of their own most of the stuff that they give us is sort of a relative number so how things did this year versus last year and then you know there's some third parties that do their own estimates based on surveys and things like that,
so one of the the Amazon.

[21:53] Claims was that they sold 7 times as many Echo devices this year as they did last year so and I would have argued they sold the awful lot of echo devices last year so selling 7X.
Is pretty impressive I think they mentioned that 50 of the top 100 sellers on the platform ran.
Ran promotions and I think you know some of the Animas have said that this probably ended up being about a billion dollar day for them instead of put that in perspective.
A normal Q3 day for Amazon's about 444 million dollars in Revenue so it's a little more than than twice a normal day as a result of of this pig sale.

Scot & Jamie: 
[22:39] Yeah I know that equates to when you start doing the math it's like you know between one and 2% so this you know I think people,
you hear about these things that are like wow this is going to increase Amazon's overall sales 30% or something and certainly for the day it does but in the the overall vast sea of GMB that is Amazon actually.
Doesn't move the needle that much but if they can add 10 20 30 million Prime users into a subscription into a trial period and and like I said at the top of the show 75% stick.
That's huge when because those guys were are now in the ecosystem now they have to come like moving to the next up witches get them you get them loving 2-day Prime shipping and then get them using something else and then Delp Delp stay around forever,
what are the interesting themes you and I have talked about a lot of the last year is Bran's really waking up to the Amazon opportunity and one of the guys we had on this show on episode 73 or the Wall Street analyst Omar Asad,
he had a note out today and in his take away was.
Did there was just this crazy level of participation from softline Brands this is topical because we had a lot of news here lately where we've had Nike coming onto the platform and and whatnot.
So so you kind of rated the different brands and and how they did and.
Let me kind of pursue this in the Brand's he saw take,
Shakira advantage of prime day would I would imagine this is kind of a.

[24:12] We're going have a guest on later that will kind of walk us through how they think about it but you have kind of the foundation is you know you have to have product Prime eligible that's important which means they need to be fbar you can use self Rafael Prime and then.
That's that's the platform then you need to offer deals into the different deal platforms Amazon has been kind of another dial you can turn as a brand of selling 1p,
and even 3p most of these that is we'll talk about her one piece Amazon gives you quite a bit big of the big ad platform so they have AMG which is display ads and Ms which is search ads.
So the highest levels participation in the softlines category coined Omar were awarded to Calvin Klein Hanes Carter's Lee and Wrangler VF Corp Levi's Puma.
I feel like this is a who's who's list of who's gone the show fossil guess and Skechers the ones that kind of underperformed or really didn't,
dissipate are let me see if I can get this right Gap American Eagle Lululemon Vans and and Nike I need to make sense I think.
You a lot of those guys kind of proceed themselves beat up,
so some of them are on the platform very aggressively it all a lot of them view themselves to be kind of a premier or luxury brand a lot of her new the platform like a Nike so Nike just started selling no literally.
Days ago right it's been kind of formalized I don't know if they're late actively selling very much so I think next year will be a year for that so it's interesting his takeaway was this is kind of the year for four Prime day that Brands really woke up and participated in the end of material weigh.

Jason: 
[25:53] Yeah and I then I kind of think you know there's Brands they were very clearly playing defense.

[25:58] And you know they're on their and they're they're they're doing some participation but they're being really careful not to sort of poison.
There other channels and in markets with promotions and then they were brands are playing offense and we're saying like Hey we're going to take advantage of this day when we have huge incremental traffic with my intent and try to sell as much stuff as possible.

[26:21] So the like looking at the official Amazon announcements they said Revenue was up 60% year-over-year.
Which is obviously very good it's not as good as last year which was sort of in the area of 300% up but obviously.
You know now they have a bigger base they said 3p was up more like he wasn't very helpful statistic,
they said that they were a record number of new Prime members tens of millions in a 50% more customers this year than last year,
more folks joined Prime yesterday than any other day in history and the number one product sold was the Amazon Echo.

Scot & Jamie: 
[27:08] Yeah and another one they highlighted a lot is they've gotten they worked with the manufacturer and I can't remember who it is but they made this TV maybe it's the element I believe it is and it's 55 inches and it's Alexa enabled,
and I haven't seen one but I talked to a lady there and it is pretty wild you you can say the whole experience is through,
everything you can do on a remote you can do to the Lexus so they've built this skill and you just going to say Alexa you know go to Channel 5 or Alexa find,
you know the two men then whatever your favorite show is fine Star Trek next Generation or whatever and it will it will do all that stuff,
so that's a relatively new product that was announced earlier this year and they promoted it very heavy another big element of.
Prime Day this year is Nate they ran a lot of TV deals which I took his kind of putting a bit of a bull's-eye on on Best Buy and this TV day,
they hiked it a lot going into they had a lot of them in his to be aggressive and actually sold out in 2 or 3 hours which means at to get this deal really over performed what they are expecting.
They did put out a list of best sellers by country I want kind of take it went to that for once I wanted to just chat about quickly,
pretty much an every country there was a private label offering so if Riggs ample in Mexico the number one seller was an Amazon basic,
Cable in Japan happy but happy belly pure bottled water was a top seller that's a private label brand that they have for cpg there's.

[28:40] What other Canada the double a batteries the Amazon basic double a batteries were a top seller so what what's interesting is,
private label seem to do very well this year I saw him pushing it very hard and in the u.s. deals also is a bunch of accessories so whenever someone buys that TV I'm sure then you get on Amazon basic HDMI cable,
I'm so that was interesting to see a lot of private label push they didn't put any other stats out on that the other stat that was interesting is they said,
stop base which means you're using the Amazon app on on your smartphone those orders doubled so if the whole day,
orders grew 60% and does effectively doubled between hundred percent they really over indexed which means desktop Ryland group.

[29:23] Percentage when you're 30% Amazon does a lot of things where you can always see the deals and track them you know that the app experience is truly better than the desktop experience they said they sold 3.5 million toys again,
it's a nursing number but I have does a lot of reference.

[29:41] Another one that's kind of interesting is this this voice Commerce so they're so aggressive with the Alexa deals and pushing those early,
I looked at them they're pretty good too had a 3D printer on there that was normally $600 for like 250 or something like that and,
that's some really interesting deals on there they had Greenies that were more than half off there's a PR firm kind of pushing stats that say,
before Prime day 19% people had purchased using voice in a 33% additional intend to if we kind of when the dust settles on Prime day I think we're going to see.
You know 30 to 50% of folks,
either having use that for Prime day or will it with their new Echoes they will be ordering something online so so that's pretty interesting Callen came out the survey also right before Prime day that said,
they believe 13% of us households have echoes,
and you know if if it's since we have this Echo. As the top seller and eyemagine the normal Echo was up there these TVs it's going to nursing you know I think,
by the end of this year with holiday and Prime day maybe we start to see 20% of households,
that's pretty interesting because you know Amazon is on their lap of this thing and and the rest of competition is really kind of stuck on the starting blocks.

Jason: 
[31:01] Yeah absolutely that that's one where it felt like they came in the prime day with a commanding lead and then for that to be the the biggest seller and 7 times more than last year,
they're absolutely lapping the field in terms of a penetration there so if they can turn your point they probably did make a bunch of money on any of those devices so the magic question is going to be vacant.
They can turn that into customer value over time.

Scot & Jamie: 
[31:26] Yes sir so let's wrap up this segment with kind of what what were your your big takeaways from Prime Day this year.

Jason: 
[31:34] Yeah what's it looking at the day in aggregate I definitely feel it was a big win for the 3p sellers there we saw a lot more 3p sellers participating,
there as a result doing a lot more deals in a lot of the Amazon advertising Vehicles which can be very effective.
In addition to making some nice revenue for Amazon where vailable the three-piece hours for the first time so so definitely.
A win on the 3-piece side of the fence.
On the one piece out of the fence why we don't have real data I strongly suspect that by far the biggest win we're first-party Amazon products and so that's.
You know certainly that the echo family that we've talked about but also the Kindles and all the new private label stuff.

[32:24] That they're starting to push and that really leaves me too.
To my biggest takeaway from this whole thing which is to me the big winner and Prime day is the Amazon Echo System way more so than sales like almost everything we've discussed up till now.
Was Amazon using prime day as a tool.
To get people more addicted to the rest of Amazon so using more of their services discovering more of their services.
And you know getting more value for that Prime membership and just making Amazon more sticky and increasing the customer lifetime value of all those Prime members and you know wow.
I think that's in stark contrast to singles day.
Which is really just a day to buy stuff like we really haven't seen Ali Baba turn singles day into this powerful flywheel for Ollie Baba.
For the rest of the year like you know maybe they that use singles day a little bit to get new international brands on the platform but it really is.

[33:28] Kind of a one-day Wonder for Alibaba and to me the Amazon approach is almost the exact opposite it's way less about you know Dublin sales that one day and way more about.

[33:40] Making Amazon much stickier and making it in a much more difficult for consumers to choose to buy stuff.

[33:47] Elsewhere after they get addicted to all the stuff that they were encouraged to try for the first time on on Friday so in that way I think.

[33:55] Prime days a home run for Amazon in this year only sort of the extended that when I will say you know they're still things that aren't perfect as a result of having way more deals.

[34:07] You need to give users way better way to filter those deals and find the deals that are relevant to them and you know while they added some super rudimentary tools in the mobile app.

[34:17] I would I would say they were very deficient and so I like to say that they had a signal-to-noise problem this year that it was probably harder than ever before for consumers to find the deals.

[34:28] That would have gotten them excited and so I suspect that something will see Amazon work on and in years to come I mean you and I used to joke about.

[34:37] You know there being no search in the in the Echo skills go to store and in that same way like you know there's actually is no search.

[34:44] For for Prime Day deals for example you know I'm curious I think it depended a lot on category but in a lot of these categories.

[34:54] I'm not sure that the prime Day deals are necessarily the best deals of the year.

[34:59] So it's a promotional day but but not necessarily A deeply promotional day for everything you know I do chuckle.

[35:08] The reason Amazon doesn't give you any hard numbers for for any of these things are obviously they don't want to but they don't have to because this whole day is not financially material to them right in so you know what ones are reminder.
Yeah they do no more than double sales from 450 billion to 2 a billion but that's still not a meaningful.

[35:31] Bump in the in the overall Amazon Echo System so while they brag about the day a lot it's really not about that that.

[35:40] Financial stuff and then I guess my last.

[35:43] Big takeaway is that by far the biggest winner of all is the the echo echo system or the echo platform.

[35:53] Is a quickly lead to hit mute on on my device in the room.

Scot & Jamie: 
[36:00] 8 devices in your house just woke up.

Jason: 
[36:02] Exact side note for people that haven't listened to all the previous episode shame on you but my sister-in-law is actually named Alexis so all the devices in my house have to answer to Echo not to Alexa.
But I do think.
There there is a a holy war going on to win that that end home intelligent agent every other retailer in in the world has huge reasons to root for anyone but Amazon winning it.
And you know we we in our CES recap this year we talked about all the products at CES that had Amazon built into him you know they certainly have the Lions.
Market share and then they're the only one that have a huge promotional event like this so it just it feels like.
Despite the fact that you know a lot of people have a lot of reasons for to not see Amazon win in this category it's getting hard to imagine anyone anyone really catching them at this point.

Scot & Jamie: 
[37:01] Yeah I think voice Converses the big wind and.
Not only is it just the device lead that they have but Google is stuck in this weird place where,
yeah because they don't control a consumer experience for ordering anything with with exception of Google Express,
you know it's this really it's hard to build that so if you say to Google Voice you know order me an air filter for my house they've got some Partnerships with eBay and that kind of thing and but you know,
what are they going to do like shop that order out to Home Depot and Lowe's are you going to have to go and set a preference for everything you want to do it.

[37:39] Is that becomes an important part of this this home assistant,
it's kind of game over for Amazon and then you know let's say Google does go solved that how are they going to monetize it their whole business is Mata,
monetized off ads and you know a lot of the Google things the music and all has all these ads in it and it's like a really terrible user experience compared to that,
now more more people are coming out with these assistance to Apple's it hasn't hit the market yet but they're already announced one Samsung has one coming out in Alibaba analyst 1,
forgiveness cost at T Mall in the name so you everyone's working hard to catch up but I think Amazon has this inherent kind of.

[38:18] Advantage not only with the device penetration but with the use case of ordering stuff now you know you could argue home automation is a lot more level playing around,
but again if they can get to 20% kind of out there and US households and it's clear from the deals that are running they want you to do more home automation they're already kind of got a commanding lead and and again if that kind of starts to become your standard and you start to use that,
ecosystem are locked into it it's going to be heavy sliding for these other guys trying to compete,
voice Commerce is kind of really interesting one to watch this year I mentioned the brand thing earlier,
and I'll refute one of your points a little bit you kind of talked about it not being in material sales day and I agree but it is financially material because of the Prime Subs so if they get 20 million Prime subscribers the average Prime users.
Spends about $1,200 to make math easy let's say they spend $1,000 a year,
well on the day it's not a significant impact that's a 20 billion dollar add to the Top Line and that's like it oh that's like Walmart's entire online business.
Doing the math right so so there is a long-term Financial impact by those Prime subscribers and then,
the more they can keep them and you let say the number is 85 million if they don't want to turn in those folks so if they can get you to use another spoke on that benefit and lock you in even longer again it's kind,
but huge win and it keeps you from going to other retailers.

Jason: 
[39:46] For sure and and I guess I meant to sort of lump the Prime Membership into that.
Thing one of the powerful drivers in that ecosystem versus talking about the revenue.

[39:57] I would make just one other point that you so reminded me of on the how commanding this this voice, sweet is and how problematic it is.

[40:08] You know.
More more products are going to be built with voice in them and if all the manufacturers have to build Alexa and because that's the strong consumer preference think would that means to every other retailer like you can go buy a bunch of Samsung refrigerators in Best Buy right now,
and those refrigerators I'll have Alexa in them and so guess who's shopping list,
when you are you're using with that product you bought from Best Buy is enabling you to shop at Amazon right and you know it's not exactly Apples to Apples but Walmart selling a bunch of Samsung phones that have the Amazon app in bedded in it and so you know you can tell how commanding this Echo System advantages when your competitors are forced to sell products that are,
that are sort of gateways to your echo system.

Scot & Jamie: 
[40:54] Yeah yeah one other aspect of it we talked about it a little bit on the show but I want to kind of bring it up again,
as I mentioned the report on Brands and one of the levers brands have to pull is,
the advertising so so I'm pretty convinced I'm hearing more and more when I talk to brands that they are spending more and more ad dollars on Amazon and there's two platforms and so folks are interested in. We had,
we had Melissa Burdick and Andrea on and they talk a lot about these platforms we don't have time to go into it today,
but I'm convinced this is going to be not the next billion-dollar business for Amazon but it could be 30 or 40 could be the next.

[41:38] Cloud computing for Amazon because bran just can't get enough of these ad dollars into efficacy is super high we see a lot of people moving money out of,
Facebooking Google into Amazon's add platforms and this day another win for this day was getting all these Brands to activate and get into those things you know,
I ate when the if we could speak inside the Amazon curtain I think maybe the biggest Chunk on margin probably came from Those ads would be interesting and then,
the huge long-term win is now they got a Brands kind of activated on those platforms AMG and Anna's I think that is is a huge huge.
10 20 30 billion dollar opportunity forum.

Jason: 
[42:21] Yeah I totally agree.

Scot & Jamie: 
[42:23] Well that's our view of what we saw for Amazon Prime day but we wanted to bring in a live first-party and third-party seller to understand what they saw from the frontlines of this exciting e-commerce holiday.
Jason join me in welcoming back to the Jason Scott show Jamie Dooley.
As a refresher for everyone Jamie is the head of e-commerce a dorel juvenile group we did a full episode with Jamie and one of his colleagues and that is episode 86 so,
hi if you want to learn more about what they're up to as regards Amazon listen to that episode and tonight we're really here to get a fresh hot take about,
Amazon Prime Day Jamie welcome back to the show xcaret.

Jason: 
[43:09] Hey Jamie thanks very much for doing this we totally appreciate it so obviously the the biggest and most important question how were your Prime Day sales.

Scot & Jamie: 
[43:20] They were very strong so it to remind everyone wear a hybrid so we we sell both.

[43:27] Directly to Amazon as 1T and we're a Marketplace seller or three-piece all as well.

[43:33] The data for Marketplace sales comes their way real time so we know that we had.
Fantastic day on over the third over the course of 30 hours.
As a Marketplace our sales were up 600% year-over-year and it was the second biggest day we've ever had on the market place II only Cyber Monday last.

[43:56] So it was it was certainly a very very good day for us on the market side on the one piece side that the data takes usually at least two days to get to work.
And we're recording it's now only day after Prime day so we're still waiting for the final sales data to come but as far as we've we've seen we had a record-setting day.
On Prime day again for even the one piece eyewear.
Almost 100% of our lighting deals fold-out many of them in the first 30 minutes and then where is subscriber to one quick retail and they were able to give us.
Intraday reads as well as a final estimation of what our sales were no looks like we beat all of our forecast.

Jason: 
[44:41] Well congratulations.

Scot & Jamie: 
[44:45] Yes 600% is amazing because Amazon announced they were up 60% so you over indexed by a factor of 10 which is which is pretty awesome set that leads me to ask you mention Lightning Deals,
and you know this is.
Did you guys participate in 15 where are was second last year so then been doing it for 3 years was last year when you really get serious about it or we actually was 15 kind of when you started.

[45:11] I'd say we we really got serious about it last year.
But this year we we we took it to another level as well.

[45:26] So what what were some of the things that work well for you I know a lot of of both 1p and 3p people that are using what I would call different platform so different deal that they,
they got a different deal for mats that I hadn't been in before also more people are in other parts that you go system like maybe Alexa deals Prime now,
Pantry that there's kind of a wide range of things what were some of the platforms you guys utilize this year to get such a great result.

[45:56] Sure sure to remind everybody we're baby Products company so we sell strollers and car seats and Hardline items that really aren't.
They don't play very well into a pantry or even to Echo there they require a lot of a lot of kind of stuff a lot of.
Merchandising online and there is there's a lot of there's a lot of consideration that's required but what we we use the combination of of a mass and.
We had a number of Lightning Deals as well as what it called Chianti's or or Prime member promotions that were on the.
On the Friday deal page when when the customer.
Navigated there and then we had aggressive pricing on on our everyday items as well I'd say on the one piece side we had a very good combination of.
Traditional TNT's and Lightning Deals as well in in combination with.
Advertising that we we we bought through Amazon as well as using social media and other external traffic drivers to drive even more traffic back to those promotions on Amazon.

Jason: 
[47:08] This great Jimmy a couple of follow-ups was that would you say it was a pretty similar promotional strategy to your 2016 so like when you look at that 600% comp is that mostly because.
Prime day was more successful for three peas or.

[47:26] Or because you know you also got got more sophisticated in your in your marketing.

Scot & Jamie: 
[47:33] I think we on the marketplace side if I had to say what what drove the 600% year-over-year growth.
Definitely one part was we have more items overpriced and obviously that that's that's really the name of the game on Prime day so that that certainly helped.
We did you ever tizing much more aggressively this year and.
On the marketplace side there were a lot more opportunities for 3-piece hours to to take part and Prime day so for one example to work really well for us with headline,
search ads were available to Mark play for this year they weren't last year it's actually I think it's still in beta right now we were fortunate to be part of the beta program.
We we watch that drive to some good sales growth.
And I think we that come in combination with just many more items aggressively priced and and Prime dad's I think that that was the key to success of the marketplace.

Jason: 
[48:34] Got it and that that seems consistent with the general Trend that we've heard and talked about for this year that.
Prime prime day was just much more accessible the two three piece sales so the fact that you're you were able to get many more products badge than you had a bigger palette of marketing tactics available to you that that all makes perfect sense that you'd blow it up with with 3p,
that might imply that while I'm sure your 1p will be way up this year it may not be proportionately up as high as three peas that is that a affair guess.

Scot & Jamie: 
[49:08] I think so yeah we are we have obviously had a much bigger base of sales to the cop from last year's Prime day.

[49:17] So yeah we're not going to say I would expect us not to see 600% your growth if we do then I expect to be a CEO somewhere next year.
Even if we even if we see no 104 just under 100% urea go that's going to be a huge win for us.

Jason: 
[49:35] The promise if you do 600% 1p growth this year your current CEO is going to take credit.

Scot & Jamie: 
[49:43] That's good.

Jason: 
[49:46] Totally fair a related question in your category or or specifically do you like how aggressive do you have to get on promotions are we I mean are we talking like.
20% 10% 30% like is it is there a is it similar to other promotions you do through the year do you have to get more aggressive what's the general.
Promotional philosophy.

Scot & Jamie: 
[50:09] It's it's.
It's not great it's it depends depends on the category and then it depends on the level of competition so in general what I saw in a lot of categories was,
it only took 20 20 to 30% discounts to do some significant damage one of our biggest competitors.
Most of their deals were running at about 20 to 25% off and I know they did I'm pretty sure they did extremely well most of our promotions hovered around the the 20 to 30% range and we sold out of our inventory for,
lighting deals in in sickness and in a very quick amount of time.
My takes away from this Prime day and it builds on last year as well as that you don't need to.
To be at 70% off I need a robot aggressive deals out there that call them loss leaders or attention getters.
We found we had some of those too but in general we focus on profitability too and we didn't feel like we needed to.

[51:16] Start a race to the bottom in our categories and I feel like.
In general what we saw across our categories and other categories was the same you didn't see every deal required to be 60% or more.

Jason: 
[51:30] That definitely mirrors with what I sort of informally saw it felt like people were a little conservative with deals in their core products and maybe a little more aggressive with with some of the the West core products if you will.

Scot & Jamie: 
[51:46] I think we saw that and some of the day that one quick retail gave us too so we know that Amazon sales were up 60% but there was a 114%.
Lifting promo count according to down so you thought many more deals but I did was there they weren't quite as aggressive and then I've seen reports.
I'm all over the media where they're saying conversion rate was actually down for Prime day so I'm curious to see if that's at validated but that would all imply that.
Progressive deals potentially across the board but not deeper so.
What will then you and I are were chatting about is one of the interesting things is on on some of the non lightning deal deals you know they utilize that feature we had to add it to cart to see the price,
why do you think that is what's going on there so I know that I've talked about this.
I felt like that was sort of like burying the we we had and we had an item that was priced $50 off and the customer really had a,
went and searched to see that they were getting a 30% discount on one of our top items and that was really consistent with with,
with a lot more deals at work and keys throughout the deal.

[53:11] My opinion is that it allowed them to prevent Walmart and other competitors from price matching them as easily.
I know that said you know what this Amazon ever going to come out and say that they're only really too big categories of a promotions that you can have to get onto the prime.
Hyundai page deals of the day does he the Lightning Deals are pmt's and Amazon official word to us.
Can keys are designed to allow you to be on that page with slightly less aggressive discounts so that would be widened Art discount,
pricing is a set-up but I do think it helps avoid price-matching and we saw that in our category there was just a lot less price matching from Amazon's top competitors,
on our deal because they were they were pmt's and they were harder to describe.

Jason: 
[54:07] But I guess one of the ironies there and tell me if it's different in your category but you know they sort of hurt the customer experience a little bit by bearing a lot of the deals in the,
the carts to avoid letting our competitors price match but it kind of felt like most of their competitors unlike last year sort of sat out this year so it almost seemed like,
like they had no intention of sort of aggressively.
Trying to ride on the prime Day coattails this year at least I didn't see big indications of that did you.

Scot & Jamie: 
[54:41] No I didn't either so I I was actually that was one of my surprising observations would this last year.
Competitors like Walmart even,
they took a shot anyway I didn't see that I saw most of most of Amazon's direct competitors almost in feet,
day in the week to Diamond maybe they'll plan something for later in July but any Amazon on that day and they only.

Jason: 
[55:09] Yeah I think eBay obviously did some like pretty serious National advertising that was sort of counter Prime programming and let you know they did a special deal with the Google home but the,
you're right that the sort of traditional omni-channel retailers Walmart Target like really didn't see any indication that they were trying to make any head of the day.

Scot & Jamie: 
[55:31] Amazon credited manufactured this Holiday Inn is they've done a great job with us.

Jason: 
[55:38] Absolutely any promotions you saw from others that really surprised you.

Scot & Jamie: 
[55:44] Well I think one of the ones that I was surprised didn't happen as it was it was also not just Prime day with national blueberry.
Muffin day and there were no blueberry muffin promotion so that was that was my biggest surprise I couldn't find any promotions to get me a cheaper blueberry muffin delivered.
But I think the some of the ones that I thought we were actually our kind of our we talked about the last.
Discounted just kind of product but it seems like in our category somewhere I competitors took some really big shots with with some deep discounts.
One of our biggest competitor to deal with a day which they have some fairly aggressive discontent what was interesting was that they had some new merchandising that we've never seen before.
With the car completely custom land and gauges on mobile and desktop that they were very interesting so it looks like they spent on a significant amount of money to make that happen and it'll be interesting to see whether.
What are the sales actually paid off for those.

Jason: 
[56:47] Interesting I definitely agree with you I think there's a huge mess on the blueberry muffins I myself actually missed Prime day because I was spending all day at the Muffin Shop.

Scot & Jamie: 
[56:59] The morning was completely shot.
How many muffins in the morning your teeth were blue all day.

[57:10] Cool Jamie really appreciate you coming on and you know we record this show late at night cuz we both have,
allegedly have day job so I appreciate you taking time one last question so based on what you know and I know it's early what,
what did Vice would you give to both Brands 1 p.m. 3 payout there for next year.

[57:34] The things I say were one plan it out as early as you possibly can.
Some of the some of the issues we saw this year had to do with just operations and Terriers not being able to pick our ship and saw.

[57:48] To deliver them to Amazon DC's or two-and-a-half 3 weeks out from Prime day so.
In retrospect next year I'd advise our is get your product into Amazon DC's as early as you can.

[58:04] And I think just in general planning in advance probably needs to start in Q4 or earlier for the next prime day is depending on the items that you want to promote.
I'm already in existence today I already have sales history today already have product reviews if they don't you need to build all that up before Amazon even going to consider them for a major deal and then even want you to get those approved.

[58:31] They're going to need it before casted in depending on whether you're Lee X or.
Your 90 days or 120 days or six months to have them into fakturert and shipped here you're talking about potentially you're 9 months in advance that you need to start thinking about your promotional strategy for.
Prime day so far in advance based on your company's Lee X is number 1 number 2 is is expected the things are going to go wrong.

[58:59] We did a lot of contingency planning with what we.

[59:03] Is it going to go on call of a dead and we had a whole team of of of of e-commerce professionals from is to Ops 2 merchandising and sales all.

[59:14] Call pretty much working off and on The Whole30 hours and you'll eat we did have a lot of things go wrong on our end and it on Amazon so I think having a good contingency plan is is it real.

[59:28] Yeah I think.

[59:30] Third is just making sure that you know your competition and and having a good understanding of what's going to go on with pricing I think a lot of the deals we've heard.
Other sellers just they lose they lose out on the light and gillikins cancelled a few days prior to.
Prime day that's a very common thing and we were fortunate not to have that happen so the more that you can understand your your channel strategy and they make sure that the pricing that you have set up for for Prime day is going to hold out for the day that's.

Jason: 
[1:00:06] Wow what Jamie that is terrific advice,
and that is going to be a great place for us to land because it has happened again Wii U,
used up all our allotted time so certainly like to remind listeners that if you enjoyed this episode we love to continue the dialogue on our Facebook page and if you really enjoy the episode we'd sure appreciate a review on iTunes.

[1:00:31] So until next time happy commercing!

Jul 12, 2017

EP092 - Artificial Intelligence Deep Dive

 

"We're in the middle of an obvious disruption right now: machine learning and artificial intelligence. It is a renaissance, it is a golden age. We are solving problems that were in the realm of science fiction for the last several decades." - Jeff Bezos

This episode is a deep dive into all the use-cases for Artificial Intelligence and machine learning in retail.

Insight Generation

  • Analytics - Google Automated Insights
  • Multi-Variable Regression Testing (Correlation) 
  • Targeting - Best Audience / Next Best $
  • Social Listening / Sentiment
  • Campaign Attribution / ROI

Business Acceleration

  • Inventory Management/Forecasting
  • Merchandise Compliance
  • Checkout - such as Amazon Go
  • Product Design - such as Stichfix
  • Tagging/Unstructured Data
  • Fraud
  • Price/Promotion Optimization
  • Logistic Optimization
  • Drone Delivery

Customer Engagement

  • Natural Language Assistants
  • Virtual Agents
  • Guided Selling
  • Visual Search
  • Search
  • Recommendations 
  • Fitment/Return Avoidance
  • Personalization
  • Loyalty/Retention

AI Vendors Discussed

General:

    1. IBM Bluemix Watson 
    2. Google Cloud Platform 
    3. Microsoft Azure
    4. Amazon AWS  -  including DSSTNE (pronounced “destiny”), the Amazon recommendation engine

Retail Specific Vendors:

  1. Twiggle - Search
  2. Sentient.ai - Visual Search/ Personalization/ Recommendations
  3. Clarifai.com - Visual Search / Video
  4. Simbe Robotics - “tally” Robot / Shelf Audit / Inventory
  5. Focal Systems - Computer Vision / Inventory
  6. Luminoso -  Analytics

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

Episode 92 of the Jason & Scot show was recorded on Monday July 10, 2017.

New beta feature - Google Automated Transcription of the show:

http://jasonandscot.com

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

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 92 being recorded on Monday July 10th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:40] Hey Jason happy Prime day Eve.

Jason:
[0:44] Happy Prime day Eve to you Scott.

Scot:
[0:47] You were recording here on July 10th Prime deals have launched the Alexa deals exclusives came out days ago I think I don't like 5 days ago and then now here at 9 to watch somebody else it's pretty exciting.

Jason:
[1:00] Yeah if you made a bunch of purchases yet.

Scot:
[1:03] Hi man I'm kind of just kind of keeping you in Iowa.
One of the things I suffer from that I think I have is already have a fair number of Amazon devices so does seem to be the most discounted items and unfortunately already have a pretty full dance card there.

Jason:
[1:19] Yep I'm in the same boat it feels like there's a lot of deals but it's slightly tricky to identify the deals that would be personally interesting to you like as as is a problem with Amazon in many other areas Discovery is not their strength.

Scot:
[1:34] Yeah did see some pretty nursing with Deco and sipping pretty dramatically off younis I've seen some 30 40 50 per cent off so it's pretty pretty good.

Jason:
[1:43] Yeah if you haven't invested in the hardware this is definitely the right time to buy the hardware and other way to extend till I Kindles and stuff too so the lot of interesting things you can do with Kindle tablets,
you can Jailbreak come and put other operating systems and stuff on them so I know a lot of people that use prime day as an opportunity to stock up on Hardware.

Scot:
[2:02] This is our first show in July we took a little bit of a vacation there how was your fourth of July.

Jason:
[2:09] It was great my mom was in town got to spend some time with her grandson and so we had a good time everyone in my family enjoys the 4th of July except MacGyver who definitely does not enjoy the 4th of July or a dog.

Scot:
[2:22] I got to get my ThunderShirt.

Jason:
[2:23] We've escalated from the Thundershirt to Pharmaceuticals.

Scot:
[2:28] Quaaludes.

Jason:
[2:33] Yeah I don't think he's getting quite as strong enough jokes to appreciate it but at least it's helping him take the edge off.

Scot:
[2:38] And then I guess you're stuck around Chicago then.

Jason:
[2:43] We did.

[2:46] Dumb like mine anything else one of the nice things about Chicago being so flat is all the windows in my home face West and so from any room in our house you can actually see like for commercial firework shows in parallel.

[3:01] Yeah I see you have to go nowhere to enjoy the fireworks.

Scot:
[3:06] Courtney retail trips to 247 in the gun down to see the Amazon bookstore there in Chicago.

Jason:
[3:13] Been to the Amazon bookstore a few times and I think we've talked about my visit there I have not been to any.
Super exciting new retail I was in the Bay Area since our last show and I've talked about the beta store before in Seattle that the original beta store was in Palo Alto so I got a chance to visit that and it was.

[3:37] In a frankly pretty similar to the the Seattle one and I did finally get to visit a.
Up in San Francisco I'm a little shame that's been been so so long but I finally got to visit a next generation Apple Store.

Scot:
[3:51] What was that all about.

Jason:
[3:53] Well it's been pretty widely covered in the Press like these are the stores that have like the expert Grove and they have a lot of the organic elements and have a big video wall these are like the the Angela Earnhardt.
Next generation Apple stores in you know I think they are improvements.
I don't know that they make a big deal of difference in Amazon's business model like seems like they have the same voluminous number of people and employees as.
The traditional Apple Store so I'll be curious if they ever came out and said like but the it's a much more expensive store to build I'd be curious if they feel like they like their.
Never better return.

Scot:
[4:39] Got it cool sounds like you had a good time where you able to see any good movies.

Jason:
[4:45] I am no I did not were woefully behind on movie so Wonder Woman's at the top of the list of ones I haven't seen I feel like being a parent of a toddler is very detrimental to my movie-watching.

Scot:
[4:58] Absolute you're way behind on your movie-going.

Jason:
[5:01] I am I am I'm jealous of you and your ear like premieres like you can take your kids to the premier's.

Scot:
[5:09] Yep you have already seen Spider-Man Despicable Me 3 caught up.

Jason:
[5:14] Is a lot of talk about how the Spider-Mans are are much worse than the last generation is that your take.

Scot:
[5:22] I like I like this one in the Tobey Maguire I didn't like the one in the middle so I guess I'm counter Spidey.

Jason:
[5:30] Got you yeah so there's some there's some like critical videos that have gained traction on the internet that compare the Tobey Maguire ones to these current ones and they there they come down pretty hard on the current ones.

[5:47] Yep.

Scot:
[5:49] Cool solicitors we've been doing a lot of interviews lately and it's time to mix it up and we're going bring back one of our most popular segments.

[6:13] Deep dive this week we're going to do a deep dive into all things artificial intelligence and how it may impact Commerce.

[6:23] This year's annual letter to shareholders Jeff Bezos talked a lot about Ai and machine learning so here's a little segment from that.
These pictures are not that hard to spot they get talked and written about a lot but they can be a strangely hard for large organisations to embrace we're in the middle of an obvious one right now machine learning in artificial intelligence.
It's a Renaissance a golden age Bezos said we're solving problems with machine learning in AI that were in the realm of Science Fiction for the last several decades.
So I also remember when Bezos kind of dropped in one of those interviews earlier in the year that they had a thousand people working on machine learning so.
Jason this one is squarely in your real house so I'm going to kind of take back burner here in simply interview you for for the audience so once you kick it off and give us your definition.
Of a i and she running a lot of people using these all over the place so it's want to hear your your kind of foundational of you of of how we should think about these things.

Jason:
[7:18] I do think the definitions are all over the place in that that creates a lot of confusion there sort of the,
a technical Definition of artificial intelligence which is not what anyone in our industry means when they talk about artificial intelligence cuz they like.
Real artificial intelligences was called artificial general intelligence or a GI that's the whole notion of a,
computer being able to do all the tasks that a human can and being like you know technology being indistinguishable from a human being and so,
nothing that we're talking about is anything approaching that and there's certainly like that technology is not in the near Horizon for us that's.
You know at least 10 plus years out and their lot of people that.
Smarter people to me that argue about if and when it'll ever happen and if it did you know you could have any get to that.
That Singularity that Ray Kurzweil likes to talk about.

[8:14] So most of the time in our industry one they're talking about with the Ruby talking about is applied AI or what the scientist sometimes call Nero AI or weak Ai and what they mean by that is.
The Machine's ability to do one specific thing as well as a human being can.
And so you know a classic example of of Nero AI is Siri.
Being able to do a very specific set of tasks like a human can in this.
Highlights the real problem with the definition of a eye is unless you also Define the set of tasks you're talking about.

[8:55] You can't really understand what someone means when they're when they're talking about applied AR right so if.

[9:03] I said like in the 1970s that hey we just invented a computer program that can play chess right like the.
Back then the the the Nero task was the ability to follow the rules of chest it wasn't necessarily good at chess and couldn't beat a good chess player but just being able to play chess was a very classic definition of AI in the 1970s.
Today for for any of us to really think of Chess as AI you have to be talking about a chess program that can beat a Grandmaster.
Right and so the the task that you're talking about change dramatically from just playing chess to playing Chessa to Grandmaster level.
And so it it's kind of interesting the AI is always shifting when when you know recommendation engines for e-commerce first came out,
that was state-of-the-art AI you know when folks like Netflix and Amazon first launched those features,
that that was the The Pinnacle of AI you know today you know you've got a dozen vendors you can pick to plug into your website to do basic product recommendations and most of us don't think of those as.
A a current example of a I-44 example so,
the definitions are constantly shifting and then we have this problem of their these three terms that get used kind of interchangeably in our industry there's,
artificial intelligence which is what we've been saying so far there's a related discipline called machine learning that gets used interchangeably with artificial intelligence a lot and then there is this third term.

[10:35] Cognitive Computing and the there are specific definitions of each of those but when you know in the in the world of,
e-commerce and vendors they're all using this using them and using them interchangeably I'm in so it makes it really hard to,
know what folks are are even talking about.

Scot:
[10:55] So that's helpful I think the thing that the listeners price struggle with is how much is reality and how much is hype so for example when we were at shoptalk if just a couple months ago really,
every vendor there for so there's this explosion of new vendors so if we had a fair number of vendors are in history and now there's no.
Really a doubling or tripling and it seems like every one of the vendors is a redo of an existing vendor but with a machine like machine learning a I kind of an angle so now there's on site search.
Adword bidding machines product recommendations upsell engines email optimizations that.

[11:36] Brazilians of these kinds of things if I'm a retailer.
Should part of my 2017 strategy be to just go and figure out all the vendors I have today and find a machine learning version of them and if that's not the answer then where.
Where can someone have the biggest impact for for listeners that are out there with us technology.

Jason:
[11:55] That's a great question Scot we should do a podcast about that.

Scot:
[11:59] We're right in the middle of the chest.

Jason:
[12:00] Oh geez alright well I'm going to start while I come up with an answer but,
in in all seriousness your hypothetical is I would send it as exactly what you shouldn't do you know there's no reason to just go look for versions of all your turn to experiences,
never provided by a vendor that's bolted one of the AI words onto their service because that,
that word doesn't make that service any better or worse than it was before and totally agree with you you know vendors are both in these things on right or left like we.
You know there's some folks that I be in that take it really seriously but it's fun to poke fun at them,
they have this technology or they would call cognitive Computing technology that they branded Watson and some days it feels like they've just added Watson to the front of every product that IBM sells.

[12:51] And so you know the is that a better version than the last version because it has the word Watson in front of it but well.
Not necessarily should you pay more money for it because it has the word Watson in front of it like I certainly not.
I was looking at the vendor list from irce there's 22 vendors that have bolted a Ion 2.
You know their existing product and I'm getting these like calls everyday from vendors saying hey I know you weren't interested on probably before but we pivoted and we're now in a I you know so and so and we would love some of your time to talk about how we should take.
Take our product to all your clients and.
You know you sort of implied in the question that's a bad strategy nothing's going to be better by just buying an AI version of it.
Going back to our friend and number one listened or Jeff Bezos.
She talked about machine learning as a sort of a horizontal layer right like so it's not a in point it's a it's a technology that enables,
new kinds of experiences and he has this pretty simple definite definition that I like to use he says,
like over the past decades computers have broadly automated tasks the programmers could describe with clear rules and Ayala grissom's in what modern machine learning does,
is allow us to do the same for tasks where describing the rules is much harder right so,
playing chess is a relatively defined set of rules and you could write a computer program that follow those rules but what machine learning let you do is.

[14:30] Make a program that can play chess really well even though the programmer themselves might not be able to write a set of best practices for actually playing chess,
and so what what we're really looking for our specific use cases in Commerce,
that are made possible or made dramatically better by adding this horizontal layer by adding this ability to,
to do fuzzy stuff that was hard to write rules for in the past,
and so what I would say rather than looking for labels like you ought to be thinking about specific use cases,
that are made much better or an able for the first time by underlying Technologies and decide whether any of those use cases are particular helpful for you.

Scot:
[15:20] So that's helpful what what are some.
Where some examples of where retailers can use this technology in and maybe give folks a little bit of framework for helping him think about this so that they can kind of formulate a plan and figure out how to start sampling some of these things.

Jason:
[15:36] So so what's do exactly that was jump into some specifics and I I like to,
kind of divide the experiences into three buckets the first bucket I called the insides generation bucket and that's all of the sort of,
analytics data processing type things you can do and I'll go into some examples in just a second the second buzz bucket is what I've called business acceleration it's,
saving time or money or reducing complexity from from various business processes.
In the third bucket is customer engagement it's it's new customer experiences that you couldn't do before the customers appreciate and make you a better Merchant ER or a better solution for those customers.
So let's they're talking about some of the the specific Commerce use cases that might fit in each one of those buck.

[16:32] So the first one I like to talk about in the insights bucket is.
Basic web analytics so we've had web analytics for a long time and you know they don't come with key and reports and dashboards and you can make your own custom reports but all of the traditional Analytics.
Require you knowing the smart question to ask and then the the analytics engine being able to show you go find the answer to that question you asked.

[17:03] And so you again you could you could put into find rules for what was in that dashboard and what wasn't.
What machine learning let you do two analytics is find insights that you weren't smart enough to ask the question for.
And so this is already being built into a lot of the traditional analytics product so there is now a beta feature in Google Analytics.
Call Google automated insights and essentially instead of you having to define a segment and ask a smart question like.
How do mobile users convert versus desktop users or how do first-time visitors convert versus repeat visitors or things like that.

[17:43] Google will use machine learning to evaluate all your data,
and suggest segments that that are particularly interesting or highlight some unique opportunities for you so it's.
The the analytics engine becoming smart enough to ask the smart questions that we aren't smart enough to ask.

[18:06] For the first time and that's an example to me if something is pretty exciting in the machine learning space that makes Commerce operators much better.

[18:17] So another one that you and I were talking about earlier is this notion of discovering correlations outside of web analytics right so there's there's a lot of.
Behavior is in Commerce that that have have.

[18:35] Correlations or there's urban legends that that supposably things correlate that might affect how you run your business so I sort of the the,
the famous example in e-commerce is weather and you know that type of product you should offer when it's raining versus Sonny and of course all retailers complain about whatever the weather is in playing that that was the reason that their sales were off.
And so it's interesting to know what the correlation the real correlation between weather and sales are the famous not obvious correlation that turns out to be Urban myth is,
the beer sales correlate very closely to diaper sales.
And you go will guys would have those two have in common and it's it's in theory it was that the the dad got sent to the store to get get a new box of diapers and he also of course grabbed a six pack of beer.

[19:27] And you mentioned you were using some interesting correlation tools at spiffy.

Scot:
[19:34] Yes yes sir.
My latest company does On Demand Car Wash and detailing and you note small companies still getting off the ground essentially and.
So one of our folks was playing around with the Amazon machine learning and the,
play the story really is that some of the stuff feels like you have to be a multibillion-dollar company to play with it but we found the Amazon stuff is really approachable we'll put on Lincoln the show notes to took on this model that we used in essentially what you do is you can upload a.
Transactional database withing about a really long spreadsheet.
Spreadsheet with bunch of transactional data on every row you can put in there what you know about that transaction so obvious things like they OV the skew that kind of stuff in our world of car washing we know the vehicle.
We know the location the zip code and some those kinds of things so you know what it's spit out with those really interesting and we also know the weather so.
We were just doing this to really kind of.

[20:32] Play around with the weather part of it but it was interesting as it said your inversely correlated to the weather which is the first inside it offered which was too obvious when we were looking for so when it's raining no one wants their car washed,
but then the next thing it did and it said your model customer drives an American SUV probably Yukon and.

[20:51] These are the top three zip codes that are correlated to your sales in Sunny warm weather wow those are things we had never even really.
Kind of thought that you could figure out but it it is what it does you can come look at that data.
And sniff out these correlations that that human just can't process so in all that is done to a pretty simple you I or you can upload a spreadsheet so,
why the stuff feels like it's pretty science-fiction E when you hear about it but that was an example that I wanted to share with listeners where we were able to get some pretty interesting insights just by by using a web-based interface Steven API this with Amazon web.
Web stuff.

Jason:
[21:31] Very cold and so that's that's an actual business user versus a data scientist in that case.

Scot:
[21:38] Absolutely.

Jason:
[21:38] Awesome yeah so those are those are great examples other common ones that we run into an in Commerce or around like targeting and best audiences so you know again,
we have a lot of data about all the people that have bought from you in the past who you know what are the look-alikes that you should be,
see you know buying from Facebook or other ad sources that are potentially most valuable to you you know in other all the marketing activities,
that you could be doing for your business which one is going to give you the the best return for the next dollar of marketing spend you have so you know we're seeing these,
these machine learning based analytics tools,
get really good at defining Target audiences and helping figure out next best dollar sort of related to that are,
the ability to do attribution and Roy models so you know,
traditionally in in e-commerce we all use this model called the last click attribution which is whatever the last thing that guy did before they bought something,
that's the activity that got 100% of the credit for the sale.
That's kind of the default model in most of the analytics tools still and too many people use it and it's completely wrong headed.
You know that sort of like saying like what's the most valuable thing in my store will it's the cash register cuz everyone uses the cash register read before they buy something.

[23:09] The so there are all these other attribution models that give partial credit fractional credit to all the different marketing activities that led up to a purchase in the problem has always been.
Will which model you know is most accurate for my business and you had to pick them out all,
and you really didn't know if you would pick the right model or not so now with machine learning,
the program kind of analyze your data and picks the best attribution model for you and so you know for the first time to your point business users.
Using kind of web-based analytics tools can start getting these really sophisticated Roi calculations and customer lifetime value calculations.
Without having to be a data scientist that could smartly pick the right attribution model.
And then I guess the other area of inside generation that's getting a lot of traction right now.
Is this whole notion of sentiment analysis or or more specifically for Commerce will call it social listening right and so that's this.
This notion that man you have this fire hose of data of people talking about you on Twitter and Facebook and we chat and.

[24:19] You know should I what should I be doing to enhance my reputation are people talking favorably about me or they speaking negatively about me which tweet should I flag for for customer service follow up.
In the old world where you just had to have an army of people read all these things to make decisions on all of it it from most companies.
The volume with such that it just didn't scale and didn't make sense but now with machine learning you can actually,
process the entire fire hose or social media and do a pretty good job of categorizing all of the the dialogue about your brand or product or business into actionable buckets that tell you,
you know.
Weather weather audiences are looking at you favorably or negatively with it they like your new products are don't like your new products and more specifically what what specific,
comments and social media you should be taking action on a responding to to try to improve your your reputation and customer service.

[25:22] Assume you're doing all that at spiffy Scot.

Scot:
[25:25] We're just playing around with some correlations at this point.

Jason:
[25:28] Nice I wasn't.

Scot:
[25:30] I think some of the cinnamon stuff some of the Wall Street guys are like reading the Twitter firehose to try to get cinnamints on stocks and things it's I'm not sure that use case but it is pretty nursing.

Jason:
[25:39] Yeah well I didn't you know once or the interesting one is the.

[25:44] Retailers are starting to report less and less data to the analyst which I know irritates the analyst to no end and so they're looking for all sorts of new tools too sore to get a read,
like what weather Retailer's quarterly financial performance will be in any of those are these machine learning tools in some cases it's.
Taking pictures of parking lots in malls with drones and using those two to evaluate like whether traffic is up or down in the mall and all sorts of interesting things like that.

Scot:
[26:17] Grateful so that's Insight generation than the second bucket you talked about was business acceleration what are some examples that you seen there.

Jason:
[26:24] Yeah what's up the classic one that's that's probably the highest Roi today that you see use the most by slightly more sophisticated operators is,
the whole machine learning for inventory management in forecasting so you know kind of taking the the,
buying a responsibility like out of the hands of the merchant Prince and and you know having them just guess how many of a garment you should make.
Or how many you send to each store and instead using the data to sort of accurately tell you,
what your inventory level should be in an even more accurately forecast your sales.

[27:08] So there's a whole host of retail and e-commerce tools that are focused on using machine learning for inventory management and forecasting.
One that I like that is not quite here yet there's some great demos and a number of retailers are testing at Target I know his testing it.
Is what we call merchandising compliance.
So if you think about a brick-and-mortar store a lot of the displays in that store are paid for by a brand so,
Procter & Gamble might buy an end cap for tide and so the tide is supposed to not just be on the Shelf but beyond the end of the shelf and it supposed to get some special signage and Procter & Gamble probably paid a lot of money.
For that in Cap Toe to Walmart or Target or whomever and so in the old days when you when you pay that money,
you would then hire a bunch of college students or soccer moms,
to go visit every store and take a picture of it and send these report cards back to Procter & Gamble to say whether every individual Target store,
complied with that merchandising program or not because you're paying a lot of money for it and what you find is in a significant number of stores,
they didn't put they didn't execute the in cap are they didn't put the signage out there used to be a stab that like half of the custom,
printed signage that gets sent to the stores the merchandising the temporary point-of-purchase displays never got put out on the shelf and so all the brands had to spend a fortune sending these armies of people out up to the stores.

[28:46] To measure compliance and what we're seeing now is,
you can have a Roomba like some kind of robot that roams the the floors of the store with cameras and takes pictures and uses computer vision to match those those pictures against us,
the planet that the planograms that the intended store layouts and you can report on,
you know which stores did or didn't comply with those displays and you can take corrective action more quickly and you can save all that money of the Brand's having to spend people out to the stores to measure it.
And then you can even use those pictures to tell you when,
for example all of the particular SQ of tide is out of stock and not on the Shelf cuz it might be in the in the back room and not on the shelf and obviously in that out of stock situation,
you're not selling any tide so so using computer vision for merchandise and compliance,
you know is it's still early days but there's a ton of money and friction to be saved by doing that.
And one of the expenses will talk about next Amazon go,
is it a that's sort of one of the underlined capabilities of Amazon go then Amazon go extends that that.
Capability by also letting you check out right so the Amazon go store that we've talked about,
uses cameras to take pictures of the shells and know what products are on the Shelf but it's also using cameras to follow the Shoppers and know what Shoppers are holding which products so that it can charge them for those products when they walk out of the store.

[30:22] So I would characterize Amazon go as a you know a potential future use case of artificial intelligence for retail.

Scot:
[30:32] Regal and then what am I favorite examples is the Stitch fix goddess they talk a lot about private label and one of the reasons they came up with private label was they would they would send all these products people.
Would buy them but they would say I liked.
The strap on this the design of that in the near able to synthesize all that feedback and essentially the machine morning would say you need to produce this garment.
Bob for this audience of people tussle bit more about that.

Jason:
[31:03] Yeah I think that's that's a great use case is serve using machine learning for product selection and product design right soap,
going back to the kind of old Merchant Prince model you know the Mickey drexler's of the world would decide what what you note,
the design of the shirt is that was in gap or J.Crew and you know,
it was as much art as it was science and you don't very often you know they would make good good selections and then sell a lot and then make a lot of money but occasionally they would design something the market didn't want and they.
Have a ton of it in stock and lose a fortune so what folks like Stitch Fates are doing a saying hey let's not have Merchants what use the data to tell us what products to,
to offer to our customers and eventually not just what products to buy and offered our customers but she's the data to decide what,
products to design for our customers and offered them and sew and Stitch fits particular case they have like 60 attributes for every garment so,
things you wouldn't think of but like how many inches is the top button from the collar of what's the ratio of the waist to the chest in the in the size 6 what you know what what kind of cuffs does it have what kind of treats does it have their defining each garment at a much more granular level of attributes,
and then they're using machine learnings to say what are the combination of those attributes in a woman's blouse that sell the best to which of our customers.

[32:35] And so you know originally that use that to the side,
Which Wich prod third-party products to carry but more and more of their scent they're using those attributes to Define what products they should manufacture themselves and offer to their customers so it's really replacing the merchant,
with with the data and then so instead of having a buyer or Merchant you you have a analyst.

Scot:
[32:59] Yeah and then the is a good time to kind of Jack the.
The thing that gets pretty nursing your out this is when you think about business models you know one of the favorite business models the last 10 years is Network effects so the classic example is on Marketplace like an eBay where.
I order more modern would be maybe an Uber where you have supply and demand and more Supply brings more to me into this flywheel effect happens.

[33:22] So more drivers brings more writers writers brings more drivers or more sellers bring more buyers Etc.

[33:30] I think I think when you start to think alot about this machine learning and II and you use that Stitch fix example that the reason to be able to do that is because they have all this great product data.

[33:39] So

[33:40] Data becomes almost the Next Generation Network effect so it's almost like this date and network effect where the more data a company can get about consumer behaviour preferences and those kinds of things they're going to have this Edge that no one else has and.

[33:55] Yeah I know they're kind of called action I.
Usually talk about with retailers are especially Brands is this what you need that connection with the customer because imagine your brand is not signed Direct.
All that data is out of your hands right now and you're there will be a day when you will be at a severe strategic disadvantage for developing products I think.
Trace how you feel about this if you don't have that direct connection to Consumers and you know also not only as the data.
Important baby start flexing your muscles around these things are really understanding how to apply so he's techniques to that data.

Jason:
[34:28] Absolutely and in so I think you're exactly right with most of the current state-of-the-art machine learning models the big competitive Advantage is,
having the data set to train the model and so the more customer interactions you have the more data you have the better model you'll be and the better you're able you be able to serve more customers into your point,
you the better your flywheel will be right.
An end so that's that's true for a lot of these these different cases and specifically with the manufacturer versus retailer it's.
Once this data becomes key you start thinking about whoever owns that relationship with a customer has,
access to a way more valuable asset so like one of the examples I always like to use as the tire industry and you think about the the tire manufacturers of the world,
for the most part they have no idea what kind of vehicle in what ZIP codes,
there their tires getting installed on and they don't know how the tire the the customers use those tires and have no idea for example how long those tires,
last on specific vehicles in specific geographies,
I'm in so they know they know very few Out reviews about their Tire once it leaves the factory but a good retail that installs those tires on the car can start collecting all these extra attributes,
how many miles are on the car what kind of car is it that how frequently do they change their brake pads what ZIP code do they does the car live in and all the sorts of things and that retailer can start using those attributes of that data.

[36:03] To start doing things like much more accurately predicting which Tire will work best for which customer on which vehicle in which geography,
and said they're all sorts of interesting things that come into play there and so if you are that that,
product manufacturer tire manufacturer whatever like one of your big strategic challenges right now is to figure out how,
to start developing that relationship direct with a customer so you can be capturing that data.

[36:36] In the business acceleration and I want to talk about that a little bit more and some of the customer engagement things but there are a couple other business acceleration ones that we should probably just touch on one that's getting used a lot right now is.
The idea of tagging or evaluating text,
so tons of brands have a lot of texts about their products that they someone typed into a super old database that they used to print the packaging that goes in the store,
but the Torah conversation about attributes earlier that wasn't structured data like someone wasn't smart enough to say,
we should have a field for whether all these snacks are Kosher or not and we should have the field to say whether all these next are gluten-free or not right like kosher and gluten-free might have just appeared in a,
text description somewhere in so there tons of product manufacturers that have,
piles of this unstructured data that isn't very useful for machine learning it isn't very useful for search and filtering and all these use cases that are super common in e-commerce and so what you know you either have to,
pay a bunch of copywriters to read all your unstructured text and cut and paste it into fields,
or you can start using these machine learning models to automatically tag your data and turn unstructured data into valuable attributes.
And one of those common when is pictures right so you imagine that you're in a product category that's heavily uploaded to Pinterest or Instagram.

[38:10] You don't know very much about those pictures which which you of yours is in that picture is it being portrayed with a man or woman,
is it being for traded a beach or a ski chalet and all these different things that would be interesting to help you decide when to use that image the.
Machine learning can tag all of those images and make them much more valuable in in all of your Commerce experiences.

[38:37] So we're trying to see that a lot a common one that's being used right now is almost all of the latest fraud engines.
Are using machine learning so this is a classic example where.
You know fraud used to be a set of static rules so you would write rules if people try to shop our side in the US from Nigeria we won't let them shop and if they.
Try to ship the product to a hotel we won't let them by that.
And with machine learning we can be much smarter about what attributes.
Trigger a secondary screen for fraud and what that does is it gives you weigh less false positives.
So you're able to sell a lot more Goods to a lot more people and not offend them by by treating them like their prospective criminal when they've done nothing wrong,
and said that the fraud models are both getting much better at catching fraud but equally important they're getting far fewer false positives as a result of using,
this machine learning instead of a set of hard-and-fast rules one of the business accelerations that that Amazon has particularly made famous.
Is the whole field of price optimization.
And so you know I obviously you don't we talk a lot on the show about Amazon changing 2.5 million prices a day and they're there.
Their approach is much more sophisticated than just being the lowest price on everything right like they're there a strategic low price provider and you know more and more of that,
it's not possible to to just write a set of rules about what your pricing for every product out of be in so you're starting to see retailers.

[40:14] Turn over the keys to their pricing models to these sophisticated machine learning systems that optimize price and optimize promotions and offers for individual customers and unity earlier Network effect point,
those models are most powerful when you're you know at the high end of the volume and you have a ton of transactions and a ton of skews to apply those models against.

Scot:
[40:41] Yan is a reminder we had a guest Andrea who was on and relay and she was talking about how.
A lot of times even a vendor's negotiating with a robot on the other side and Y episode there's not only are they optimizing the price the consumer sees but there no that's feeding into some engine that then kind of coming back to the vendor and saying you need to price the product at this.

Jason:
[41:00] Absolutely and so you know I think Amazon is kind of the gold standard in in Commerce for that and see you're seeing a lot of other like when you,
to your point when you had to have a thousand data scientist to write your own pricing on rhythm,
you know that that was a huge advantage to the people the top of the echo system like Amazon but.
Today you know it is easier to buy an off-the-shelf model,
that you just have to have enough data to feed so there's there's vendors out there like Boomerang which are every bit as sophisticated as Amazon's pricing engine but you know it's available too much smaller operators.
You know as long as there they have enough data to put into the model and so that super interesting.
At the moment the big challenge you have is how do brick-and-mortar retailers do that sort of real-time price optimization like it's pretty easy to change the price.

[41:57] You know from second to second on Amazon it's much harder when there's a paper price tag next to that product.
And it's on the Shelf in the store so that's that's an interesting organic when we're going to continue to see play out.
Another one that I am azaan is particularly great at is this whole notion of logistics optimization.
So once you're bigger than a single Warehouse you start getting you know all these issues about what's the optimum Mount of inventory have in each warehouse and where should you put all that product where is going to be most efficient to get to the most of your customers.
And if you're wrong about that that whole supply chain planning you can cuss yourself a fortune moving products around or shipping products inefficiently to customers.
And so using machine learning to optimize how many excused and which fuse go into each Warehouse.
Is super important in you know when your Amazon and you have what do they have now Scot 112 fulfillment center something like that.

Scot:
[42:59] Yep thereabouts.

Jason:
[43:01] Yeah that that becomes a.
A critical challenge an Amazon spray the only one that has the problem at that scale and they're also probably the only ones that have the solution at that scale.
And then I guess the last business acceleration one that you know I don't think we're going to see immediately but gets talked about a lot is.
Like obviously all the technology to get that drone to your house to deliver the goods.
Is a great example of of something you can only do with artificial intelligence so if we ever see drone delivery be economical for certain customers like that you know that that will be exclusively enabled by.
Buy artificial intelligence and machine learning and I would remind listeners whenever I say drone people always imagine these super expensive flying things,
we are also starting to see a lot of wheelbase drones and so there's an interesting Pilots going on in in San Francisco and then,
Maryland right now with with the drones that are sort of autonomous vehicles that drive on sidewalks and deliver things like pizza and stuff.

[44:10] So I'm excited about renting a house in one of those markets and get a drone pizza delivery.

Scot:
[44:16] Call Sears a lot in the business acceleration in the country cap that sounds more like.

[44:23] Cost savings um I guess there's some that impacts the customer experience but the next bucket is where you probably would customers are going to feel it the most which is what you're calling customer engagement.

Jason:
[44:34] Exactly and this is the stuff that that tends to be the most sexy it's the most visible to customers and,
you know there a lot of things in this category that have their own buzz and then their own own spot in the hype cycle at the moment so one that we talked about a lot or natural language assistance and so that's,
you know Siri Cortana Echo,
Google home all of those sorts of things and you know if you if you think about them they're actually an amalgamation of multiple a Technologies right like so there's this this notion of being able to convert speech,
into data and so their natural language processing and then there's the notion of being able to to.
Act on those the sentences,
and give proper responses and so that's the notion of virtual assistants right and so you you have a lot of these things that are like you speak to like Siri,
you have a lot of virtual agents that you type to a chat box on Facebook and things like that.
And you know there's an explosion between those two categories of The Voice assistance and the virtual assistants in in e-commerce at the moment.

[45:53] If you tried any of the the virtual agents Jets Scot you think any of them are ready for primetime.

Scot:
[45:59] Now the ones I've tried pretty cheesy and there if you stay with them they're pretty unsatisfying they can't answer most your questions until they kick over to a human 20 minutes better.

[46:14] I'm not believing this are quite there yet.

Jason:
[46:16] No and so it is funny because what what we're seeing is,
customers definitely want customer service via chat and Via messenger and so it's,
a mistake to say oh my gosh the chatbots are kind of not ready for Primetime and so it just hire more phone reps and do everything via phone cuz we're seeing strong indications that customers are less.
Tolerant to sit on a hold line and do something asynchronous like like a talk to someone on the phone,
but it's same time you're right like the virtual agents really aren't cutting it yet at the moment and so where The Sweet Spot is are our live humans at the other end of those,
does chat and SMS strings and I guess the best virtual agents I've seen our kind of maybe just one layer deep and they they.

[47:06] The answer some of the the highest velocity questions and they sort of act as a filter to make those those live agents more efficient by not having them have to answer the same question over and over again.

Scot:
[47:18] Yeah and they're smart enough to know when to get out of the way that kind of say hey did you are you looking to track a package oh I'm sorry let me write you to a human.

Jason:
[47:27] Exactly right and well that.

Scot:
[47:28] Once again a doing there like you know big kind of walk you through of of Sky knowledge-based relentlessly.

Jason:
[47:35] The best ones are seamless right and and unfortunately like too many of them you know keep fighting to try to keep you in the virtual realm and you know it some point you you stop asking an honest questions and you're just trying to figure out how to.
How to bypass it.
So another sort of adjacent thing that we're starting to see more of in customer engagement is this whole notion of Discovery and guided selling and so one of the,
the ones that got the most bus here is,
North Face uses the Watson implementation to have sort of a guided selling tool for jackets 800-Flowers has a guided selling experience for for gift giving,
and,
you know I'm a little bit you know I have similar feelings to the guy that selling tools at the moment that you you had to the virtual agents I think the idea of them is very interesting and I I certainly agree.
We need to get way better at Discovery and helping people find new products but a lot of the guided selling tools I've seen at the moment just feel to linear and scripted and I'm not sure.
The there there yet recommending products a heck of a lot better than then you don't sort of us structured set of rules used to last year.

[48:58] So that the next one in customer engagement is one and I may have even have to go back this may have been one of my predictions so I'm going to type it again in the hopes that it helps my my annual prediction come true.
One of the cool Technologies in artificial intelligence is computer vision and being able to.
To process images and more more often process video to get insights out of out of that image data.
And so one of the the most common use cases for that is tagging images that we talked about him business acceleration but the other way more sexy one is visual search.
So that's Amazon Firefly being able to take a picture of a product.
And then order it or you know even cooler use case is.
Via an app like camfind being able to take a picture of the woman at the table next to you with the cool handbag and find that handbag for sale or those shoes and that's kind of the whole notion of this see it by it kind of experience.

Scot:
[50:02] Yeah isn't a lot of people say Pinterest is one of the better ones out there do you know what they're using under the hood for that is it is it some machine learning kind of.

Jason:
[50:12] Exactly and they rolled it out that,
Pinterest to Lynn's they ruled that out relatively recent like so it's probably only about three months old at this point if memory serves,
and that's a great example it's not products Pacific yet so it's,
it helps you find similar images to the image or looking at there are some more sort of Commerce e ones I mentioned camfind is one company will talk about a couple other visual search companies at the end of the podcast that the,
that the whole field of visual search I would just tell people is getting phenomenally better and so for years we talked about natural language getting.
Twice as good every year and last year the natural language interfaces essentially surpassed human comprehension so the,
the computers can now more accurately understand spoken words than an average human being and that's you not forgetting the fact that the computers can also understand.
People in a bunch of other languages in the same sort of evolution is happening in visual search there's a an academic contest for visual search engines that the several of the universities including Stanford put on every year and the winning visual search engine,
is twice as good every year as the year before and so the quality of visual search is doubling every year,
so if you look at some of the best use cases right now they're already pretty impressive and you go oh man this is already useful today and if you think about the fact that they're getting twice as good every year.

[51:42] You know we're very close to visual search being a super powerful tool and that's going to eliminate a lot of the friction we see in stores where people try to get you to,
use NFC tags or scan QR codes or do things like that like imagine a future when you just hold your phone up to the Isle in a store,
in the phone sees every product on that aisle and it visually recognizes all of them and maybe it even reads the price tag off the shelf for each one of them and it can you know instantly highlight for you,
what's a good deals are in that store and what you'd be better off buying from an e-commerce site at home.

Scot:
[52:18] In an one thing that's interesting about this is part of the Renaissance on the visual side is it's tied to video games so you know as as people's demands for video games of higher the.
The game processors that they're these high-end floating-point machines I've got more sophisticated than ends up that's a great platform for vision in.

[52:42] Incognitive I think but I hear it more used for the vision stuff.
So it's interesting is now is part of like AWS Amazon's leasing out you can actually lease out gpus Witcher game processing units,
I end up as the cost of those is come down it's it's made this video stuff get even smarter so there's a hardware part of this that's pretty neat so this stuff is.
You're not only is the machine getting smarter because the amount of data is going up but there's also Moore's law on the back end helping it as well.

Jason:
[53:10] Absolutely and the kind of math that all of these machine learning models use is the kind of math that that I think technically their Graphics processing units not game processing but,
yeah but their primary you were right they were invented for games for sure in our friends at Nvidia like being a prime example the,
that that the kind of math that those chips are good at is the kind of math the machine learning uses and so that is one of the gating factors for machine learning getting better is having access to big,
server Farms of these gpus and and to your point all the big vendors of of cloud computing you know that's the new Battleground is,
you know not not CPUs and cores but the gpus.
And what's that that's really enable to Renaissance in machine learning that these academics can now rent.
Like these these amazing supercomputers for short periods of time to run their experiments and refine their models.
Another one that that's super common in this is like a classic example of.
Making an existing technology better as opposed to enabling a new capability like visual searches enabling a new capability but obviously a core function of every e-commerce engine is it search function and,
the,
that search has gone incrementally better every year but it's a largely gotten better because we put better data into the search so we put more attributes into the surge the.

[54:41] The underlying technology for deciding which product is most relevant to which user hasn't changed a heck of a lot in the last five or 10 years and machine learning is now like the first big incremental Improvement to,
to search in a long time and the way to think about this is the results,
of search that are most relevant to you based on all your past purchases and behavior are probably different than the search results that are most relevant to me,
and so using machine learning they can say hey what's every search result I've given to every customer,
and which ones are the search results had successful purchase experiences in the ends and which ones didn't,
and what did the customers look like that had those successful purchase results and now you know we can personalize search much more to each use or,
based on everything we know about them and make search much more effective and relevant that it's ever been before.

[55:42] But that's a classic one we've always had search engines now every search vendor saying their search engine is machine learning based,
and that really you know you can't just look at that label and say oh that's the new search engine to get like what you really need to do is test the search engine and make sure it's going to work,
better for your audience and with your your product catalog in that that goes double for this next category,
recommendation engines so you know we can take recommendation engines for granted at this point like there's so many out there and and you know for a while there's been kind of parody of these,
these recommendation engines but but you know it don't lose sight of how powerful these things are,
you know a few years ago we saw some data that 75% of all the views on Netflix were driven by product recommendations and this is pretty old now but back in 2013 there was a leak,
that 35% of all the revenue from Amazon came from the those product recommendation tiles and I believe the,
the plug recommendation tiles and Amazon emails were even higher converting than the ones on the product detail pages and so recommendations are super important and of course using machine learning,
you it should be no surprise for listeners at this point you can make recommendations much more personalized and effective for each customer,
then sort of static rule-based recommendation engines that are that are kind of the norm that are out there now.

[57:16] So that I'm going to go a little faster cuz I know we're going to come up on time here pretty quick,
Annette's category that super interesting in the apparel business returns or are crushing cost,
and most of the returns are result of fitment issues so something wasn't the size you expected or didn't fit the way you wanted and Source turn to see machine learning get used,
4
to solve fitment problem so in the old world Zappos tighter going to buy two sizes of shoes that guaranteed one was coming back in that was super expensive so now what you want to do is use data about all the attributes,
to accurately recommend the size and maybe even remind a customer that they bought another size before and it fit better in the order they bought this size before and had to return it,
tell people get the right size the first time,
and avoid buying stuff you're also seeing this get tied in with visual search where you're actually using the camera to help measure the size of the customer and then match that to fitment data tell them by the right stuff so watts of stuff,
in machine learning happening around fitment and return avoidance,
the whole General filled the personalization this is really hard to shop for right now cuz every vendor is hyping all kinds of new new artificial intelligence and machine learning,
capabilities and it's really hard to separate the hype from the reality with all those products but it certainly is true that machine learning,
generates more personalized experiences and so there's tons and tons of new vendors out there in that space you know folks they're still in loyalty programs and retention programs are those can be dramatically improved by Machine learning so we're starting to see the first generation of machine learning based loyalty programs.

[59:01] And that's kind of the the main use cases that we talked about right now and in customer engagement.

Scot:
[59:08] Got it okay so does summarize what got three buckets Insight generation and that's kind of.

[59:16] I think of that is like next Generation analytics so so analytics that not just Splats data but comes up with insights,
business acceleration and that was things that that help you save money improve your forecasting pricing in even practice on,
in the customer engagement which are the more forward front-office things are going to improve the user experience learn more about your customers and give him a better experience,
people are interested in this soap so first of all.
Maybe lay out a lil road map so so a listener is a omni-channel retailer Dave.
Get out there like a lot going on in their world right now where does this fall into part ization and where are some places they can nibble and then where do you recommend they go for more information.

Jason:
[1:00:04] Yeah so in terms of what your focus should be like you know my high-level advised is ignore the labels don't go look for an AI product but instead look at the list that we just gave you and will put it in the show notes and say,
which of those things do we feel like we're most efficient at and we're leaving the most money on the table like art,
are you know we not making good decisions about who our audiences are and how we should Target our advertising or we not making good decisions about our pricing or we're paying too much for fraud,
or are we in or not doing a good enough job of helping customers discover the right products and add more cards to the more more skews to their cards,
and you know our returns to high-dose or two things and so focus on your biggest pain points,
and then say alright you know what Solutions out there are using machine learning Technologies to best address that pain point so that would be my sort of,
high-level advice and then in terms of specific vendors if you're going to build your own solution,
they're they're sort of a 4 horse race for the underlying Technologies for all of these machine learning capabilities and as you sort of alluded to in your experience at spiffy they,
none of these vendors require you to be data scientist anymore so they all are like pretty easy tools you probably still have to be a programmer cuz these are mostly api's that you rent,
but it's really a 4 horse race it's four of the big vendors,
all have these big stacks of AI capabilities that you can rent by the drink in there the really inexpensive in you.

[1:01:41] Add them to your own product so if you're going to hire your own programmer to develop any of these experiences that the first one is IBM with their Watson technology and will put links to all four of these,
these Platforms in the show notes one that people don't necessarily think of but is hugely competitive in the spaces Google and they they have the division called Google Cloud,
platform services and they they have a bunch of api's for machine learning,
they actually invented one of the underlying machine learning models called tensorflow and they've open-sourced it so they they have a lot of great tensorflow Solutions on a gcp but you'll also find other vendors now offering tensorflow because it's become so popular,
Microsoft has a complete set of cognitive api's under the there as your services and then as you mentioned,
Amazon has a complete set of AI capabilities that are part of AWS and.
You know they're all kind of analogous like you'll find basically the same set of api's from all of them you'll find a,
a computer vision Library you'll find a sentiment Library you'll find a natural language processing Library a text to speech Library you'll find all these these Legos of machine learning capabilities that you snap together yourself one that's kind of fun that I will highlight specifically for Amazon,
is one of their Legos is called the destiny and it's spelled,
goofy it's dsstne and that's the actual product recommendation engine from the Amazon.

[1:03:14] Website that they added to AWS last year so you you can actually use,
the very system that Amazon juzang and we mention this network effect,
it's a huge advantage to be able to get a recommendation engine that's trained by Amazon already cuz you're benefiting from their network of fat.
So that that's pretty interesting and then I would highlight that there's some more Niche vendors,
there are vendors that as opposed to giving you a low-level API have sort of crafted complete machine language capabilities.
Specific for Commerce vendors and so again I'll put them in the show notes but six that come up a lot there's a company called Wiggle,
it has one of these machine language based search engines that we talked about in the customer experience portion,
there's a company called sentient AI,
that has really powerful visual search capability they also have some pretty interesting personalization recommendation engines,
there's a company called clarify that that has visual search including video which is super interesting if you're someone that,
produces a lot of content on YouTube,
the we mentioned the robots that take pictures of the shelves so that's a company called simbi Robotics and they have the,
tally robot that dumb Target is testing there's another company at a Stanford called focal systems that have the.

[1:04:45] Computer vision library for doing inventory and then luminoso is one of the companies that has a specific machine language based analytics platform for Commerce and so,
there's there's many many more vendors out there but those are sort of six interesting ones to look at to get you started.

Scot:
[1:05:03] Yes it's it seems like.
And I don't mean to hang up on this but when when I was in e-commerce person just got thinking about our listeners here and I used to buy a solution know you would look at kind of feature benefit.
Kind of analysis and cost and all that kind of stuff it seems like machine learning in some of these things add this like other dimension that's only important which is data so says you look at these Solutions.
Yeah it's really important to understand.
Is this going to operate just on my data is is my data going to be enough to really get a big get big enough bang for the buck cuz I think we're going to see his new models where you're sharing data with other people on a platform.
But then you also need to be pretty cognizant about that because this is really important and watch will property you have and once it gets into these Platforms in his learned.
Even when you leave and take your data the learning stay so it's really interesting kind of a way to think about things you kind of.
As a user of vendor you want a lot of access to data but then you almost don't want your date at a time be.

[1:06:07] In there in the system to use example let's say your.
I don't know sorry blaktroniks train the system on on whatever recommendation Electronics now you switch vendors will that.
Now competitor switch is there did you start using that now they've they've got a solution to spend trained on your data.
Also you know it's pretty interesting that you mentioned Amazon example where it comes kind of pre learned if you will I don't know if that's the right.
Verbage pre-trained maybe better in any advice on how people should think about that element of these Solutions.

Jason:
[1:06:43] Will know I think you have hit the nail on the head it's the wild west time Electro property and so your,
you're exactly right like you have you know because these are almost all cloud-based Solutions you load your data in it you train it you get to take your data back there's it's very clear that the date is owned by you but when you leave you're leaving that model smarter than you found it and your competitors can potentially benefit from that right and so that,
that is certainly one issue.
But for sure like when you are thinking about areas that you want to invest in and maybe you know the the first area that you want to tackle from a.
Sort of testing out a machine warning capability like like one of the big drivers of of the feature that's going to add the most value to you is the one where you have the most data or the most differentiated data so anywhere.
You have a data Advantage versus your competitors or versus the market that's a great place to look at 4.

[1:07:44] Accelerating with machine learning and that's the big.
Pro in the con of the bill that yourself with these underlying platforms like IBM in Google versus buying a product Eyes solution.
Like at wiggler senscient is you know you need a lot less programmers there's a lot less investment to get a customer experience working out of these complete Solutions,
but they are going to learn from your data and you know your competitors are going to be able to benefit from that if you really feel like you have some,
differentiated competitive Advantage data then that's a good reason to potentially roll-your-own solution using the the the more low-level machine language libraries from from ad the big providers because,
they're they're leaving less of that running behind for the next guy.

Scot:
[1:08:32] Yeah it seems like it'd be smart to go make a coalition with people that aren't competitors and say hey let's pool our data kind of create our own data pool and.

[1:08:43] I almost wonder if there's like some way to do something little Pine Sky almost like a Dana Co-op.

Jason:
[1:08:49] No it's.

Scot:
[1:08:50] Having your own pool of your data isn't as hopefully you still need that other data but you still want control over the day this it's kind of a really interesting turkey challenge.

Jason:
[1:08:58] There's models out there right now so an interesting one is,
Adobe for device detection right so you don't Scot you and I on a bunch of different devices they all have different cookies on them so it's hard to tell when you visit a site on your tablet and then later on your smartphone that you're the same user,
Facebook and Google know because you've authenticated yourself,
in in the on all those devices on Google and so Google recognizes you across all those different devices so Google has a big advantage over most e-commerce sites and Facebook has a big advantage over most e-commerce sites,
in terms of recognizing each user and so you know folks like Adobe have literally set up a device data Co-op.
So that multiple websites can share,
what they know about which devices you own and your Anonymous so your Pi isn't in there but when someone you know gets any device that,
did Scott Wingo owns they can go to this Co-op and find out what the ideas of all the other devices that Scot own so that they can,
do the Multi-Device attribution and so we've we've seen it there we are starting to see these kind of data,
Co-op submerged in a couple places I think in some cases even competitors collaborating so for example a lot of the insurance companies,
they have to pay claims when a natural disaster takes out a roof,
they're all sharing their data their photo libraries of all the roofs that they've had to repair and what the level of damage was and so now they have this big data repository that they all benefit from.

[1:10:37] When the hurricane strikes they fly a drone over the neighborhood of takes a picture of all the roofs,
add a machine learning algorithm you know tells you in half an hour how much is it going to cost to fix everyone's roof in that neighborhood so so pretty cool stuff.

[1:10:51] And Scot afraid that is going to be a good place to leave it because it is happen again we've wasted a perfectly good hour and tax of our listeners time,
listeners as always we certainly want to continue the dialogue so please visit our Facebook page if you have any questions or comments interview like today show we would greatly appreciate a review on iTunes.

Scot:
[1:11:14] Thanks for listening you're ruining maybe someday this entire podcast will be automated intelligence artificial intelligence.

Jason:
[1:11:22] Or maybe it already is? And with that, happy commercing!

Jun 29, 2017

EP091 - Boxed Wholesale Head of Reengagement Nitasha Mehta

An interview with Nitasha Mehta, Head of Reengagement and Boxed Wholesale. Boxed is bringing the wholesale club experience to e-commerce, is based out of Edison, NJ and has raised $132m in capital.

In this episode we discuss Amazon's Whole Foods acquisition, disruption of CPG, private label, mobile, customer acquisition tactics, and customer retention tactics. 

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

Episode 91 of the Jason & Scot show was recorded on Wednesday June 29, 2017.

http://jasonandscot.com

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

 

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 91 being recorded on Wednesday June 28th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Coho Scot Wingo.

Scot And Nitasha: 
[0:40] See Jason and welcome back Jason Scott show listeners in this week show we have a very timely guest,
nitasha Mehta is head of reengagement at boxed she previously held positions at Samsung in Amazon box is bringing the Wholesale Club experienced e-commerce based out of Edison New Jersey and is raised over $139 in Venture Capital welcome nitasha.
Thank you.

Jason: 
[1:06] Soonest Natasha we always like to kick out these interviews by having our guest share a little bit about their background and and how they came into their current roles can you talk to us a little bit about how you got here.

Scot And Nitasha: 
[1:20] Sure,
so I leave here and marketing at Fox I've been off for 2 years now which is been an amazing ride it's been really great to see Nvidia,
be part of that tremendous growth that we've seen over the past two years.

[1:45] Where in New Jersey part of,
companies on Amazon on in Seattle on the content marketing team for Mobile Electronics,
both been in the e-commerce and retail space for quite some time it seemed like a natural extension to.
I joined by a couple years ago and really excited to be part of the team.

Jason: 
[2:14] Pretty cool and you have sort of the unique title how did you arrive at that title.

Scot And Nitasha: 
[2:21] Sure thought of Engagement really has a few different facets,
my main focus is really customer retention and so hyper focus on customer really trying to understand how to find the light messages and promotion,
for a customer at the right time until about one hundred percent of my focus,
an email and push notifications are some of the channels that I meant along with programmatic direct mail and polka Matic display.
I'm so if a pre-owned Compass Bohemian title for the customer experience.

Jason: 
[3:04] Very cool and I always is it I was like it when you invent your own titles so then you can be the the the absolute industry Guru of that title.

Scot And Nitasha: 
[3:16] Absolutely tell us a little bit more about what you did Amazon,
sure so I managed a couple of our Mobile Electronics,
Sanders and campaigns and so worked really closely with apple and Nike on MP3 players and GPS watches as well as Garmin and TomTom not going,
population in 2010 Pacific or GPS devices,
and though many of our on-site popcorn campaigns on the pop form as well as email probably manage over 100,
weekly campaigns across multiple different brands and inventors Regal how.
What do you think about Nike selling on Amazon since you can work for them on the device side maybe you have a point of view on on shoes.
Yes but we home yet actually I'm actually not sure if if not user icon shoes yet but we were the first category with an Amazon to bring them on Direct,
we had a relationship with with,
GPS devices and so when they launched their campaign with TomTom we were able to bring them on which was really exciting at that point but to bring on the he has a venue one of the first category to do so.

[4:46] And then how about a Samsung what did you do over there.
I was on the Punic marketing team for tablet and so it's kind of on the opposite end of the spectrum working with Amazon as one of our customers and so Amazon was one of our largest suppliers,
of iron tablets on other work today cuz they would Best Buy and Walmart on the channel marketing side.
Managed promotions for tablets and this was also in 2012 when tablets,
they still are but when tablets are really On The Rise and was a really exciting place to be at that time.
Then see if it boxed for two years imagine you seen some pretty crazy growth were you like me were you in the first handful of employees.
Boxed is only a couple years old right.
That were about three years old I'm almost four actually and I started when we were almost.
I would say and since then we've.
More than quadrupled so tremendous girls were already running out of space at our third office and so it's been a really exciting ride to you there from you know the very early days.
Free Colts and then does your role change or you've held the same role and just kind of taking over more and more pieces.
Yeah I started in this little a lot of what I've done in the past really like me to.

[6:23] Focus on being gagement in particular and so if I go so slow I've been taking on more over the past couple years and I also have a,
rebagg ball and thunder marketing for work very closely with many of our Brands and suppliers that box as well.
So so imagine boxed has like a typical retail that category teams and all that kind of stuff and even relations you guys have a fun center or is that,
you don't do any of your phone that it's kind of 3 p.m. or something.
No we do have our own system in it and you have 4 at Sears across the country and so we recently just launched our fourth in Dallas,
a few months ago International in the contiguous 48 states.
Are these kind of Amazon 1.2 million square feet kind of Caesar these are iMagic pile of it smaller a little bit smaller that we're pretty close.

Jason: 
[7:29] Nice and for listeners that maybe aren't totally familiar with box but I what's the how do you describe the the value prop with the elevator.

Scot And Nitasha: 
[7:38] Sure,
and once on the last where the online mobile version of your wholesale Shopping Club but we don't have any membership fees and we have free shipping so anything that you normally go to the Wholesale Club on,
and spend your entire Saturday shopping we will deliver on average in two days you and all your books eyes.
As favorite.

Jason: 
[8:07] Don't you imagine the answers both but do you feel like are you primarily trying to take visits away from,
Costco and Sam's Club so you're getting people to recreate that brick-and-mortar experience online or are you you trying to take visits away from Amazon or maybe Prime Pantry.

Scot And Nitasha: 
[8:26] I think it's Holloway coexist with all four,
Costco fans and DJ's they don't have a strong online presence if they're putting a lot of focus on and so we also are targeting Millennials that may not necessarily,
not on the ferry started shopping at his Wholesale Club yet and so.
City dwellers and Millennial moms for example are really a huge Target of ours and and.
A new that we can coexist with all four of these other retailers.

Jason: 
[9:06] Got you in what are the things that somewhat unique about the club stores that some listeners may be very familiar with and others might not is they tend to have different product configurations then art.
Typically sold.

[9:21] At what grocery stores or or even that are sold in Amazon Pantry so you know you might have A4 pack or an 8-pack,
on a grocery store shelf and you might have 104 count in the club club store so we tend to call those Club packs is boxed primarily offering Club packs is that,
are you getting the same configurations or something in between what's the.

Scot And Nitasha: 
[9:44] Yeah so we primarily focus on Club packs or the Bahamas you and so we work very closely with our suppliers on,
customized packaging Pacific to eat, but still you know what's in the Fun Pack.

Jason: 
[10:01] Got you and is it has it been difficult like I I know traditionally in the old days Costco has a lot of Leverage I mean you know with a very small store account there the second largest retailer in the US.

[10:14] I feel like they used to have these.
These kind of draconian vendor agreements where they were the only ones that were allowed to carry a particular configuration so they had exclusivity on this card packs art are you finding it that's less true today or are you you getting.

[10:29] That's like like a slightly different version of Quebec or how is that working are you.

Scot And Nitasha: 
[10:33] Yes yes,
spell largely true what we do is negotiate a slightly different variation or size count for the econ version and so we wouldn't necessarily get a soda.
cut exact size but we would have this form or variation different packaging specific for us.

Jason: 
[10:57] Got it in in in general is are you finding like is a big part of your value proposition.
The value of the products that because they're buying,
Club PacSun you're encouraging them to get a bigger cart that you're able to offer really aggressive pricing or is it the convenience and not having a slap all that big stuff from the store and to the car and all those sorts of things like what what what are the primary things that you think are really driving consumers to use you.

Scot And Nitasha: 
[11:26] I said was definitely convenient but I would say that's probably one of our,
biggest differentiator is and trampolines that are not having for Lego these bolt size 3 six packs of paper towels home especially for myself living in your,
I need to go around the corner to CVS every other day for items but I can just buy one time and had to deliver and open Venus was definitely one of our biggest value Problem by overall,
we don't strive to be the cheapest prices online but the value of having the Club Vive,
RX delivered to your door and not having to pay the annual membership fee is huge Michael.
Imagine you being an ex Amazon person and you guys are in the kind of cpg category with a lot of your offerings what did you think about the whole Whole Foods Amazon acquisition any thoughts on.
Hey I thought it was brilliant and it was 1030 now.
Solution they haven't really nailed down the flash category I'm gone fast food.
Growing but doesn't have the brand yet and so I think this really helps them and help them gain credibility within the fresh-faced and I'm usually beneficial cuz.

[13:00] Because Whole Foods generally have a ton of presence of any and digital and for listening they're really going to help each other and.
Smart across-the-board.

[13:14] And then um the Amazon does have an offering it's it's left I found a lot of people don't know about it and it's kind of under serve but it's the Prime Pantry,
and it seems like that kind of is there trying to solve,
yeah kind of some more problem you guys are with a very different kind of a mechanism I've tried it before and it's like this weird gamification of fun the box and it's like hard to connect.
So it's a lot of work it felt like to kind of like Phil the boxing and going to optimize it.
You feel like you guys have a bit of a white space from Amazon that they haven't really solved the what you're doing or is there some overlap.
Yeah it's a tough I think so I think Prime Pantry and doesn't it's like you mentioned has a brand awareness,
have a very unique brand effect and the fact that we only focus on full and so that's her name differentiator from you,
time pantries yet Enough full disclosure I'm a customer we will use it at my office so we have a startup and.
Yeah it's the food is great for for that.
My family is not quite big enough to eat it that much but booked through the guys have that it works great in an office of 20 people you know we get our and then ordering is is really nice to see you guys have done a good job of.
Be able to reorder things.

Jason: 
[14:38] And for lizards that don't know Scot goes through a lot of snacks so that that's that's a meaningful.

Scot And Nitasha: 
[14:43] They were perfect for you,
and B videos is the flying a huge focus of ours as well and so he's a pretty significant portion of our business that's dedicated to start up like yours.

Jason: 
[15:01] Nice I want to dive just a little bit more into how how you're interacting with Brands and how they view you the one thing on that last question I actually think you're.

[15:13] Prime Pantry is almost the opposite of you write like the pantry is really.

[15:19] A way for Amazon to sell the small packs and entice the customer to bundle enough small packs together that it's cost effective to ship them.
And you're you're selling the big packs which are the things that Amazon normally is willing to sell as eaches even even on there.

[15:36] They're the normal website if you will but.
Honesty Bee Gees I think one of the interesting things that happen is when when Amazon announced the Whole Foods deal all the immediate talk is how that affects retailers right and you know who which retailers are most likely to be disrupted by by this new Force but I feel like there's been this,
the secondary realization,
did it's really a big wake-up call for the cpgs that may not have had very much focus on digital right so your.
Your Procter & Gamble are Unilever or you know Kindle car for those folks,
you know less than 1% of grocery is digital you know you're overwhelming largest customers are predominantly brick-and-mortar and so you know while you're starting to deal with digital it's for a tiny part of your business and now suddenly.
You have the threat that that I can a very significant player could be disrupting your category with digital and so I wonder,
like do you see that that will you know potentially make some of your your brand Partners more digitally Savvy and maybe more open to,
trying things digitally with with folks like yourselves like I could almost imagine that that's a favorable trend for you.

Scot And Nitasha: 
[16:54] Yeah absolutely and I think we've started to see that Trend over the past few years to the fact that many Brands now have a shopper marketing team but are largely focused on digital,
I live in joy tea of my contacts that I have you,
contact conversations with our phone that Shopper marketing team and their.
Much savvy are there in they were you know.
Four or five years ago and I'm so I already started to see that Trend shifts and I completely agree I think especially with this whole foods deal it will continue to grow in that direction and more.

Jason: 
[17:38] The absolutely,
you don't want of the interesting things insert a traditional Shopper marketing there there's a lot of tactics in addition to getting the product on the shelf that are commonly used right like so there's lots of merchandising in Coop and Brands paying for.
And positioning in sampling in and we see some of that,
on on the Amazons in Walmart's of the world is that something that boxed is doing today in terms of like offering digital promotional opportunities for for brands or is that something you're you'll consider as you you advance.

Scot And Nitasha: 
[18:13] No it's actually something that we are already offering which we probably started about a year-and-a-half ago and so we probably,
oh and enjoy these are real estate on both of our site as well as our ass.
And we called many of the placement of virtual and caps and so no at a play on the freaking water and cat food but,
definitely in English.
And excitement and engagement over these placement over the past year as well which which continues with that trend of Brands moving becoming more more digitally body.
Recool the one of the the trends at Costco I don't know about the other clubs but they have the Kirkland brand which is which is their private label and.
And I don't know where it started but it's become quite popular and they sell Auntie mall and that's primarily what they sell is that private label.
I think Amazon is actually sells Kirkland it's odd it's kind of taking a life of its own and it's one of the they sell more Kirkland online than Costco does.
Los customer you guys I really like you guys have a similar offering called Prince and spring maybe tell us a little bit about the rationale of that and how is that going.

[19:33] So if the really started off with just paper towels and toilet paper so two in the fact that he's package good that everyone needs an Zen,
there's huge opportunity there and really being into stop there and our category that's really dominated by another down even the Sherman and so we started that.
A couple years ago and has expanded the printing spring assortment free significance and it's a huge Focus for the company the team has been.
Growing pretty rapidly and now we offer everything from toilet paper to flushable wipes to hangers and most recently it was only just launched,
coffee and so both ground and whole bean coffee all Source locally.
And it's if it's not stopping there we're watching chemo and moving into the food and beverage States as well and so is definitely a huge Focus for us.
And I know she have one of things we love in our office is K-Cup coffee and but it's quite expensive in and noticed your private label is almost like half price of,
what other offerings are which is which is nice.
And it and it tastes good,
okay on the so Jason and mentioned you know the brands and in the things do they eat.

[21:09] How do you navigate having that private label when you're also trying to get the sharman's in the bounties on the side I met you the good news is you're not the first kind of.
Company to do this so I guess it's pretty well-read and ground for him.
Yeah I really just increases over all share with in that category we haven't seen any kind of libation going either way and so again you know I think there is.
There are products that are recognizable that you would always want,
I'm to partner with and and a sore on our site but if we can offer a different selection a different place with wood,
in terms most likely Target a different type of customer your that's really are our strategy that.

Jason: 
[21:58] Got it so I love the fact that you're you're competing with traditional clubs.
In the digital space because I fear going to talk about Costco in particular like they're very admirably retail or they do a lot right so I'm really not trying to pick on them but I freakin called them the biggest digital Luddite in the retail industry.
I think it's very overt like I think they've just made a strategic decision.
We don't want to be digital we don't want to give the customer any reason not to visit our stores and why lie.

[22:33] Can kind of understand that sentiment like ice you know I and I suspect most of our listeners on the digital podcast probably feel like that somewhat short-sighted but In fairness to them it hasn't really shown up on their balance statement yet so.
But what's interesting there model is sell stuff at the lowest margin possible they're super aggressive on price and their primary profit driver is those Club memberships.
You guys obviously aren't doing the membership and that's one of your value props is get those Club packs and get that convenience without the membership.
Bed so I presume you have to make more money selling the goods and then you have this this really inconvenient cost that we all struggle within e-commerce which is shipping.
So

[23:23] Like do you guys have any strategies for keeping the the shipping costs under control I mean I know it feels like that's a ever-increasing.
Cause we talk a lot on the podcast about the fact that e-commerce is growing at like 20 to 30% and the shipping guys capacities growing it like 8% and so there a.
They're constrained commodity and what they're doing is there charging more for their service as a result.

Scot And Nitasha: 
[23:48] What does,
we offer free shipping on all orders over 49 so that definitely helps with the shipping fees and then on top of that the majority of our orders,
the average order size is 9 - 10 items so we are stuck up service our customers are.

[24:19] Play higher than an Amazon sample or the typical or sides or just one or two products are order which does largely affect shipping but because that were able to eat shipping costs low.

Jason: 
[24:33] Gotcha and I guess one of the things that somewhat surprised me.

[24:40] Based on your category in the types of items that customers get from you I almost would have expected to see some sort of subscription service and I know Scott mentioned you have really convenient reorder service but if you guys ever you know.

[24:53] Like is that an over decision you made not to do some scription and says that something that could be in the roadmap what's the scoop on subscriptions.

Scot And Nitasha: 
[25:01] Potentially be on the road that is something that we have considered especially for certain items but.
Customers into typically reorder like baby next absolute spend baby products for subscription type of service and so that only something like thinking about.

[25:21] I may be remembering this wrong but when boxed first launched my recollection is was kind of a mobile app only kind of a thing and then later the desktop was added and again maybe I misremember yet,
but kind of curious about that mix of of mobile and desktop,
again I kind of like the desktop version cuz usually I'm doing it when I'm at work and I can kind of like,
see the product better in that kind of thing but any interesting insights you can share what you guys have learned there.
Definitely the launch of the mobile app for mobile first and also.
Attack company first and so the majority of our employees are actually on the tax team.
The innovator and improving Dorothy experiences while I was excited. And so we launched shortly thereafter.
The first years mobile is the majority of purchase it.
And the letters how many of our customers prefer to shop through the source of the app the app is really is a convenient option I personally love using the app for me order items,
simple to put process reorder and so I think,
you're having both options really great for a different use cases.

[26:57] And then you know I mentioned earlier and you said this is kind of growing part but the kind of a b2c and B2B element.
Did you guys start leaning into the B2B when you kind of saw how people were using things or or tussle bit more about that kind of how that came to be in in anything you can share on mix or anything would be interesting.
Stressful that continue growing our business.
Meet by the natural extension of epoxy started as a beauty popcorn but because you are stuck up service and deliverable and our own office manager or just the front,
LIRR employees I really am from cartoons and truly,
is our employees love the snacks in the Beverages and we need the paper towels in the toilet paper it just seemed like a natural extension and now that team has been curling pretty,
pretty quickly as well for the past year the huge Focus for us this year and in 2018.
Yeah I imagine that it's kind of where we also use you guys for a funeral off the office supplies again the kind of packaging is good as is that kind of where,
those got out at imagine before you saw the business side there wasn't a lot of the office stuff.
Right yet you continue to add a lot more selection within the office based off as we start to it as we continue to build out that part of our business.

[28:33] Wrinkle.

Jason: 
[28:34] I love that strategy like the more Tech Guys you higher than more snacks yourself.

Scot And Nitasha: 
[28:39] Very true it's hard to keep snacks in stock at our office.

Jason: 
[28:51] Hopefully that permit person has a good promo code.

Scot And Nitasha: 
[28:54] Exactly.

Jason: 
[29:02] So going back to the very beginning of our conversation reengagement like one of the.

[29:09] The huge challenges for all online retailers in particular 84 PurePlay online retailers is,
customer acquisition right and I think of sort of the big big player and in the space for the last couple years has been Jet and you know they famously spent,
a fortune on each customer in terms of active acquisition cost what's your strategy around acquiring customers and driving that customer value are there any particular tactic sure,
you're relying on and any that have been predicted successful.

Scot And Nitasha: 
[29:44] Sorry we pretty much,
across the board in terms of acquisition and retention but specifically acquisition-related focus on TV we launched our first,
ad campaign,
the beginning of last year and then we launched another one towards the end of the year I'm working on the 3rd right now as well at Subway has been really.
I'm really surprised MC Market and so really you know building on the Branded dolphin and having that constant exposure in key markets and then print has been used for us in terms of acquisition so,
somewhere to check that is invested a time and direct mail and print we're also focusing quite a bit on that in terms of opposition.

Jason: 
[30:35] Done at night I can majun Subways particularly clever because you know one one large segment of Shoppers that have kind of excluded from the the brick-and-mortar club folks are our folks that don't use that car.

Scot And Nitasha: 
[30:49] Exactly.

Jason: 
[30:54] Yeah so it's interesting you just mentioned a lot of a sort of old-school old-world advertising techniques and I almost wonder in some ways.
For Pure digital play like you know your tendon running a lot of companies that are predominantly doing digital marketing if you know some of the.
The print stuff could potentially be less crowded these days and so the I don't know the signal-to-noise ratio for that kind of campaign could almost be better than it used to be.

Scot And Nitasha: 
[31:20] I agree and that's what we're seeing as well we still have a huge focus on digital Facebook it's probably one of our largest and channels in terms of opposition but.
Agreed and turn the prince and then even some of some other channels that are starting to come back that aren't necessarily a saturated such as SMS.
Is also accused opportunity more suffering gagement but.
I do see a trend of some of these older.
More mature Channel coming back and playing in a very saturated space which is digital right now.

Jason: 
[32:01] Yeah have you experimented with any direct mail I that that detention I guess is another one is those mailboxes are a little less full than they used to be.

Scot And Nitasha: 
[32:10] Yeah we have actually up until I say about a year-and-a-half ago really focus on really use direct mail for acquisition purposely targeting a specific,
Tor zip code and planning our campaigns around that and then we started,
staying programmatic direct now on and this was a brand-new way to rain gauge with friends were really excited to touch with and so we started talking with with a company called pebble.

Jason: 
[32:45] Until what what is pebblepost doing for you.

Scot And Nitasha: 
[32:49] So we didn't micholi at 35 thing with them at to be engaged with,
you think I unsubscribe from our email and go up until that and if the only way.
Really engaged or engage with current customers with email or push campaigns or display programmatic campaign and so this was really exciting opportunity to,
customer that had unsubscribe from our emails I wear either unengaged from them or didn't like the content,
and Shannon promos and Deals if they were still active on our site,
and so how probable works is if a user within our specific segment.
I'm sorry sight but downstairs and doesn't convert within that session I will postal actually trigger ascend,
I'm at our postcard or catalog to that user within 2 to 3 days and it's extremely relevant and targeted.
He started targeting users 8th on what products are what category is actually viewed when they did visit the site and it's completely different,
customer they essentially then either too we send email to which is also a very saturated space.

Jason: 
[34:08] For sure and I guess what I love about that is it it it's almost like analog retargeting like that you're at you know what,
it's their heads Fades retargeting but but via that that analog channel that the you know is potentially a little less saturated that's brilliant,
like you mentioned course email is is very saturated but generally when I talked to folks that still is one of the better Roi tactics for them I'm assuming email is still in your mix as well.

Scot And Nitasha: 
[34:36] Yeah yeah you know this is one of our additional in terms of retention and so I'm still still.
Going to be a huge Focus for us I don't see that changing anytime soon but then again you know a good email campaign may get 20 to 30% open rates right over so even 70% users on the table that were unable to engage with info,
when you think about the number of impression that you get from a physical piece of mail.
Not only two eyeballs but depending on how larger household is because I get a multiple Impressions on a daily basis if you're like me I leave mail sitting on the counter for 2 weeks,
are we by the time.
Convergex that amount of exposure is incredible and.
Target's a completely different user than those who are very email so good.
Yeah I think blue apron's a Believer I'd get something from those guys like every every five minutes from from email.

Jason: 
[35:54] Yeah I think they're actually just looking to step up the the advertising spend is there they're trying to preserve that IPO.

Scot And Nitasha: 
[36:02] Call.

Jason: 
[36:06] One of the things when we talked to folks about the efficacy of their their digital campaigns and particularly email like the big Trend you go to any of the shows these days and you know you throw a rock in your hit 30 sort of personalization vendors,
and it seems like you know the the big the big pitch is always personalization on those marketing channels is that.
Something you're experimenting with is that working or overhyped or what's your what's your POV on that.

Scot And Nitasha: 
[36:33] No I think that's a huge Focus for us and something that we have in focus on for quite some time is really.
Affiliate emphasizing,
a one-to-one customize messages creating triggered messages they found customers havior or purchase Behavior I think that is,
Chris Lyons messages and 101 customize messages that we can send that,
that is our Focus night and definitely something that have a person and direct now is also helping out with.
Just imagine visiting our site and going to our baby category and for some reason or another you don't have,
and upconverting with another question but then three days later you received a postcard in the mail and the content is all babies focus with navy at 20% off discount any baby item on site.
And I think that opportunity there is tremendous in terms of customization.

[37:41] Quinn and you guys are actually doing that or that something you're doing up for it we are doing currently.
So you have that level of of targeting and whatnot in the mail program.
One thing I know you guys do as you have boxed bold which I think is your cash back program and then you have a loyalty program total bit about those and what they're geared towards.

[38:07] Bacco program is our partnership with Emma and so if you aren't a customer and you make a purchase on Fox with your AMEX card,
you automatically given golden box full which is free shipping.
And 3% cash back on all orders so for any regular customer or Montana?
I'm a class program is 1% cash back on every single order and so the more you order from box and more.
Cash back you get and then a mess up my little get 3% cash back.
In the free shipping it just lemonade to the the $50 threshold or how does.
And then said so as a shopper it's kind of interesting it kinda reminds me to Chatta although it doesn't have like the sum of the jet elements because you know when you're first starting your kind of like,
I can't tell if I'm going to save much and it is you kind of go though you just saving it feels like you're saving more and more than like and I was just paid on my NX I didn't really realize I was into some of their special thing,
yeah time to get through you realize you actually saved quite a bit is that that tensioner.
Explain that rational so it's a little bit different than that where the more you ask the car somewhere you're saving,
our cash back program is based on the total part value so if you're sending $100 in the order then you're going to get $1.

[39:46] So you can see it anytime in your account and so the more times you purchase was box you build on your cash back value.

Jason: 
[39:58] Interesting like one of the challenges with those kinds of value props.
And when it's there's almost a little bit of gamification and you're certainly like driving customer lifetime value with the dollars back but I guess the downside is.
You know a customer super price sensitive about one item and they log on your website and they look at the price of diapers and they go somewhere else and look at the price in the.
The total savings may not be reflected in that item priced it does that work against you or.

Scot And Nitasha: 
[40:31] I'm sorry I think they're a lot better value popsci we offer letter.
Different art differentiators but you have so we may not if you,
don't have it the cheapest price on say it's more about the experience I would say we should we offer to free samples on every order so it's somewhere to go wholesale,
shop in Carthage Area 3.
A lot of people go just for the samples so we've kind of levitated that online so you can choose to free samples on every order you'll get the 1% cash back on every order on,
free shipping or no membership see if I think all and all the customer experience really speak for itself,
and then not to mention I don't know if you receive battery if you notice it in your box. But we also have handwritten notes,
to every customer that I was just too so there's a nation with personalized S5 to our entire order earrings as well.
Yeah I seen that kind of borrows from the chewy folks today I don't know who started it first but they were always well known for them yeah.

Jason: 
[41:41] Scot Scot has a giant collection of postcards that same and you guys order a lot of Oreos.

Scot And Nitasha: 
[41:46] Call podcast research those for them the Mondelez episode.

Jason: 
[41:52] Exactly.

Scot And Nitasha: 
[41:53] Oh yes we've done a Facebook live with it with model eating Oreos so and said I love you.

Jason: 
[42:02] Very cool I'm sad to see their stock went down based on the Amazon announcement talking about the impact on cpgs.

[42:12] Yeah but I'm glad you mentioned the sampling cuz that feels like untapped area for a lot of e-commerce players I'm imagining.
The sampling is one of those areas that you're able to use as a shopper marketing program for your Brands is that true.

Scot And Nitasha: 
[42:27] Yeah,
a huge part of our current marketing strategy with our suppliers and and they love it because it's a great way for us to testing products and so for considering a sorting a new item,
stumbling program is a great way to see how our customers will respond to it and then we could also be engaged and put those customers after the fact and send them offers on the full size items,
we do I said or some I am based on what they've actually chosen to add the car,
and a kind of potential there and you're offering,
products that are new to the platform or just even leave I wasn't as limited-time offers or so you're a big focus and comes over sampling strategy.

Jason: 
[43:17] Yeah and so this could potentially be controversial but do you work the your private labels into the sampling program as well.

Scot And Nitasha: 
[43:26] Especially when we launch a new product and that's one of the first places that I will want to watch it as is the other sampling program.

Jason: 
[43:36] Yeah I love that tactic again it just,
there you know so many boxes are going out right now not taking that opportunity to introduce that customer to other high-margin products that they could potentially get addicted to seems like a real mess for a lot of players so I love that congratulations.

Scot And Nitasha: 
[43:53] Yeah.
Thank you I absolutely agree especially for a brand that many new customers haven't heard of other don't know much about a great way to introduce it to them.

[44:07] Cool one thing I thought was kind of a little bit of a non sequitur I was navigating through the site looking at different categories and of the,
one that really stuck out as being an unusual was hotel and travel with,
what's that all about.
Last week and end of the following,
today this is something that our partnership Cena's been working really hard on it and we're really excited about it at all so seem like a,
a natural extension for box,
I still have our vacation packages and now our customers and can go on and and really find some of the best hotel deals I played around with that and I haven't found better deals for for many of the hotel but that I was searching and so.
A great. Please our customers I think of a natural extension of the business.
So your Skype now getting a new variety of non-physical kind of stuff.

[45:19] Yeah if I see if you're on Boston you're looking as backup for your home or your business and why not be able to book a vacation and at the same time and so.
Skyler really excited about this and they don't I don't think this I think this is the beginning of a much larger partnership.

Jason: 
[45:42] Very interesting you don't I'm curious so we talked a lot about your business today we talked you know you're in a category that's,
I would characterize a sort of digitally immature and so you know you're an advanced digital player in a in a space that that seems like it's just on the verge of getting disrupted if you jump in your time machine and look forward to your two,
you know how do you see the the industry in your category changing do you think it's going to look a lot like it looks now do you think it's going to change dramatically.

Scot And Nitasha: 
[46:17] What I think with the time by we mentioned before especially with the Whole Foods acquisition I think,
more and more brands are going to invest more dollars into digital and we're already starting to see that now are at the econ,
your arms of specific brands are growing larger and larger and they have a lot more,
and as well and so I see that really being a huge opportunity over the next year or so so really,
incident and create a new and exciting opportunities with some of these friends,
one thing that I think that I went really love about working with fox,
is the fact that we're so small and then bowl and we're willing to Casting things and new features and so we've actually created features for a brand based on some of their preferences,
and though I see that continuing to be a trend machine shine over the next year or so.

Jason: 
[47:21] Very cool III suspect that as as you know the brand start getting really serious about digital alike as we see some consolidation of you know there's a very long time grocery at the moment and brick-and-mortar grocery.
Anna.

[47:37] You know it feels like there's almost this bifurcation that you're going to potentially benefit from that like the traditional grocery store is getting really disrupted because it's it's starting to be really driven by fresh and organic.
And you know so so folks are looking for.
One experience to get that really fresh stuff and then once you have that really fresh stuff you say are you know what's the most convenient way to get all the rest of my.
My goods in so it almost feels like.

[48:04] You know where I used to do everything as a One-Stop shopping at Kroger now I'm starting to see people you know that are.
Going to all the or Trader Joe's or Whole Foods for their they're fresh and then they're relying more on club or.
You know are are big online friends for for all of those replenishment items.

Scot And Nitasha: 
[48:25] Construe.

Jason: 
[48:29] Well nitasha congrats on your success so far.
I think that's going to be a good place to wrap up because it is happen again we've perfectly wasted all of our a lot of time.
So when a remind the listeners that they're always welcome to continue the dialogue on our Facebook page and of course have you liked this episode we'd sure appreciate a review on iTunes if you didn't like this episode just send an email to Scott.

[48:55] Nitasha thanks very much for being on the show and joining us.

Scot And Nitasha: 
[49:00] Thank you so much for having me as a pleasure to hop on the podcast you guys are building in wish you guys nothing but the best.
I thought I think you sound like.

Jason: 
[49:16] Until next time happy commercing.

Jun 22, 2017

EP090 - Nordstrom.com Ken Worzel and Danny Ryder

http://retailgeek.com/podcast

An interview with Ken Worzel, President of Nordstrom.com and Danny Ryder, EVP, Online Merchandising & Experience.  Nordstrom is the #17 retailer on the IR500 list.   They are one of the most storied retailers in North America, founded in 1901.  Today they have 354 stores in 40 states and Canada (including full-line stores, Nordstrom Rack, Jeffrey Boutiques, Truck Club, and HauteLook).

In this episode we discuss Mobile, Fashion Retail, Amazon, and Retail Disruption.

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

Episode 90 of the Jason & Scot show was recorded on Tuesday May 23, 2017.

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this episode is being recorded live from Sunny Seattle Washington on Tuesday May 23rd.
2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:41] Hey Jason and welcome Jason and Scott show listeners.

[0:44] Today we have a pretty exciting treat for everybody we have the number 17 retailer on the IR 500 list Nordstrom.

[0:52] Which was one of the most storied retailers in North America founded in 1901 and today they have over 350 stores in 40 States and Canada including full-line stores Nordstrom Rack.

[1:05] Jeffrey boutiques Trunk Club.

[1:07] Do I need to sign the show today we have kin worzel who is the president of nordstrom.com and Danny Rider who is the EVP online merchandising and extreme.

[1:16] Welcome to the Jason Scott show Kenna Danny.

Danny:
[1:20] Very much right now.

Jason:
[1:23] Thank you so much and we can start right off the bat by educating me because I'm always self-conscious when I say how look whether I'm saying it right so can we get unofficial pronunciation.
HauteLook so I am correct that I'm not saying it right.

[1:48] My overlords in Paris are going to be like horrified that I that I butcher that one my apologies monsieur.
So
This is another first for the Jason and Scott show we are both live so Danny and Ken are here with me in the remote Jason Scott Trio Studio.
And Scott is at our executive studio in Raleigh North Carolina.

Scot:
[2:18] Bicoastal in a mixture of live and not live it's pretty.

Jason:
[2:23] Exactly I feel like the five-second delay that Scott has will be super helpful because is is some some loyal listeners will know he he can get a little profane.

Danny:
[2:34] Do you have a bleeping machine.

Jason:
[2:36] We've only had to use it when former razorfish are on the show actually but yeah.

Scot:
[2:45] We really appreciate you guys taking time out of your busy days and it would love to start off with just hearing a summary of your background.
You're rolling compasses at Nordstrom can we start.

Jason:
[2:54] Sure yeah my roll.

Ken:
[2:59] I'll let you not been ignored so I can.

Jason:
[3:01] Exactly cement Nordstrom 7 years now.

Ken:
[3:03] Now I guess I am I joined actually after a long time probably 20 years as a strategy consultant.
So that was really where I spent most of my time pre Nordstrom.
But I guess the relevant part about that is Northwest a core client of mine for about a dozen years before I join the executive team so.

[3:26] Interesting perspective as a result of having had an internal perspective now but for a long time an external perspective having worked with a lot of other retailers in consumer companies in in the US and in Europe.
And I joined initially to support our strategy team and build out a strategy function for the company is as we were sort of transitioning out of the recession and looking for for new ways to grow the company.
And then subsequently picked up some other responsibilities including our corporate and Business Development activities.
Are data science and analytics teams and then about eight or nine months ago took on the the p&l responsibility for nordstrom.com.
Which I was.
Is important I think because all those things connected mean if you look at our agenda really for the last 3 or 4 years increasingly everything comes together around how we going to deliver what's been a storied.
Brandon and customer experience how we going to deliver that in a digitally connected world so you know our focus is clearly on continue to be customer obsessed.
Digitally enabled and I'm lucky enough to.
Get to sit in a position where a lot of those pieces come together across the company and I'm also lucky enough to have been able to have pulled Danny long on his journey cuz Danny and I work together for a.
What time in Consulting and when I ended up in in in this gig I decided I should bring the smart guy with the English accent to help me sell our ideas.

Scot:
[4:53] Danny how about you.

Danny:
[4:56] Yes.
That's kind of quite pointed out with the accident so I was born and raised in the UK I ask you went straight from college into Consulting a little bit of a not wanting to know.
No knowing what I wanted to be when I grow up and so I went to the Consulting really thinking about to be something to gain experience and then go off into into.
Career somewhere else but I should stay for number of years and really what's my way all the way through the different ranks within Consulting until she managed to work with a lot of really interesting gun.
Dynamic different consumer goods and Retail companies around the world so that series of projects in your.
North America in the Asia and then about five years ago I received a phone call from Ken.
What was really interesting to me is.
It's really the combination of the fundamental changes happening in the retail world right now and just the opportunity to really be at the house or something that's interesting and dynamic and changing.

[5:54] But also from the outside I always thought notion was I really good company very well-run I didn't realize I didn't realize the level of ambition.
Until she being in the retail that is very well-run but also having this constructive paranoid about the world and where things are going but also not patient keep changing is is pretty pretty interesting so.
I joined the company about four and a half years ago originally is policy of the Cobra strategy team what's in a lot of different things across the whole old different parts of the company and then moved into more of an operational Rolla by 18 months ago with an ocean.
So my title is online merchandising and experience and is really three different teams that I support the first assault online merchandising team,
so a large part of what they do is really help inform up buying team on what these election stress you should be for a website and for app.
Using a lot of the customer Behavior data to my she points out where we have opportunities for a Bratz Odette for white space opportunities.
As well as they also then take the merchandise strategies and then strategies and play that out through the content the navigation on the actual product information on the website.
The other two teams I support a focus much more on the features and functionality of the web in the app I'm so this the user experience design a research team so if they do a lot of work in terms of understanding the customer need and then I should going through too much you designing the features and functionality themselves,
the news team is in the product management team to interface directly with our engineering team when she done go build those different features and functionality.

[7:25] So it's a pretty wide-ranging said of interesting different topics,
one of the best things I love about my job is I can go in one day from having a meeting with someone like a Gucci or Balenciaga to that walk down the wall to a different meeting room have a conversation with our Tech Team about the architecture of all different.
What's the difference aleutians and it finally and the day by going to look at some new features and functionality designs and think about how we can create some Co experiences so it's I definitely love those if not almost my job.

Scot:
[7:55] Cool and I'm not an expert but aren't there sold Nordstrom's at North.

Ken:
[8:01] There are a team of.

[8:04] 11 of us on the executive team from have the last name on the door so late Pete and Eric are co-presidents of the company.
I have different responsibilities Pete manages our merchandising areas Eric is responsible for a full price.
Brand are Nordstrom brand across stores and nordstrom.com and and Blake Spencer lot of his time on or off price business including Nordstrom Rack stores and Nordstrom rack.com and.
And HauteLook and then Jamie Nordstrom is president of Full Line stores so my counterpart in the full price business managing our store business.

Scot:
[8:43] Course need to see there's not many retailers where you still have the family involved to that level set that must be fun.

Ken:
[8:50] Yeah I think it's fun it's also it's it's inspiring and I think they really they deserve a ton of credit for maintaining I think both the ambition that the Danny highlighted in terms of the admission to be as relevant.
20 and 50 years from now is as the company's been for the last 50 hundred years so.

Jason:
[9:10] Yeah and that actually brings me to one of my favorite things about.
All of our jobs is it is it Danny's you mention earlier retail is really going through a significant change or disruption right now and I mean you can look at that and say it's a negative thing and scary and all that but do I to me.
It's fun that that Playbook that Danny is Grandfather wrote that was so successful.
Isn't the Playbook that we can all follow today that like the circumstances have changed so much that we all need to.
Sort of invent what retail feels like for these digitally disrupted consumers that we're all facing today in my premises.
The fundamental thing that's disrupted them more than anything else is ubiquitous access to.
The super computer that we all carry with us now though the smartphone in so I wanted to dive into how you guys are addressing that that transition and so I guess I'll start with a softball question is.
Mobile in Portland to Nordstrom do I have that right is.

Ken:
[10:14] I'm still hung up on the fact that you just promoted Danny to be a Nordstrom that his grandfather.

Jason:
[10:19] No no not Danny grandfather.

Ken:
[10:23] There is nothing more important I mean you know I think Danny can can win in this as well but we're sitting here today and I think we're excited to be sitting here.
In large part because we're in the middle of a huge revolution in in customers experiences and what their expectations are in a lot of that.
Is directly related to super computers that started on people's desks and are now sitting in people's pockets and it has fundamentally changed.
Virtually every part of our customer journey and what customers expect from us which again I think you're right you can need to look at that as scary and risky or you can look at it as this massive opportunity and I.

[11:02] We want to embrace the latter.

Danny:
[11:06] Yeah man just by the Numbers alone it's I think if you don't say mobile is really important to you as a company or as a retail of then I think you're missing a big big big point.
Play quantify we have roughly 700 million unique daily visitors to our website or app.

[11:21] I'm roughly now 2/3 of that comes through a mobile device and that is only growing the actual usage of mobile desktop web experience is declining and saw them at your own TV engagement that was seeing with Nordstrom in additional space is coming through my body Vice.
The big thing is eating things like three causes of emails that we send to customers and now opened on the phone so it's a big deal to buy she think about and I don't need two hands right with customers when they come to a premises but also when we send Communications to them.

[11:50] And I need to make thing for me with mobile is it is the device with which we can she lingcod digital and physical space.

[11:57] And if we truly believe that when one of our adventures is company is the legacy of the great stores we have in the people in the stores and then she.
Giving people great experiences in those doors the phone is the one device that cuts across both the home experience the on-the-go experience in the store.

Scot:
[12:14] Cool it looks peeled onion on that a little bit how would you guys grade the progress you've made so far on.

Ken:
[12:22] I guess from my perspective of back to this constructive paranoid I mean it's it's mixed I mean I think there's plenty of things that I think we can.

[12:33] Play Comfort Inn and take pride in in terms of what the organization's delivered and what we've delivered to customers.

[12:40] At the same time we look at how fast everything is changing around us and you know I don't mean just customers expectations but competitors are making us better.

[12:50] And challenging us so I think we we recognized in a wee one of the earliest retailers to be in the digital space a lot of our categories starting.

[13:00] A catalog Heritage that we had and then Translating that into it a desktop e-commerce experience and we were also early to get into the mobile.
As it is a platform in SA.
Vehicle to connect with customers but we see a huge amount of opportunity and and need for us to continue to make progress so mean from my perspective it's a cc plus I mean we still got a long way to go.
To give ourselves the kind of great we'd like to give in to give the experience I think that our customers expect us to give them.

Danny:
[13:33] Yeah I would haul hot leak in car with AC grade I think we've made some really good progress.

[13:38] Just looking at I think you have to separate out more about web from app and I think on the mobile website we've gone from having a translated version of our desktop experience to watch you having a specifically designed version of arteries.
Specific for the mobile phone itself.
Is part of that doing simple things like designing the interfaces so they all touch friendly on a small screen and as well as making sure that performance is a big deal because of a sea.
Usage on a mobile phone on mobile web is Israelites and very Broad.
And then in the app we actually have a very good Fashion retail app so gets roughly phone off store star reviews in the in the App Store,
but obviously the challenge of that is that reads Fashion retail apps in particular I'm not really taken off in terms of Engagement and that is something that we're going to have to continue to push on his how to make you get people to engage with all app more.
Because apps are expensive.

Scot:
[14:30] Yeah one thing I Jason I debate a lot is the gulf between conversion rates on desktop and and the mobile web and or apps,
is that one of those you guys grade yourself and do you think that will is closing or will close or at 10 to think it probably won't close it just kind of different things and Jason thinks if you put enough.

[14:50] A payment systems on there it'll eventually.

Danny:
[14:53] Yeah that's that's a really tough one when you look at the dates.
What will the use queso Festival all the conversion in the conversion rankings of all different channels is highest in the app.

[15:07] That it's not next in desktop and then it's lobotomize web and there is a very significant difference across that Spectrum.
Ken and I to be this a lot about how much do we think we cannot she closed them about Gabba I think we can close a fair amount solve it but I don't think all and I don't think the reason you got,
the reason you can't close all of it is the use case quite often is you're on the bus so you're walking around and you want to just browse and get information,
what's really interesting to me is when you look at the dates of the drop off so I see the product for you rates on the mobile web is very similar to desktop.
Where it really work start to fall off is the antibiotic and then completion rates and that's if I got you as a big drop-off and so I think that just shows that people are coming to look look at products internationally added to the cart.
And then when sums of the actual how that and flows through the rest of the funnel what you get to check out there's a pretty significant drop off and nothing a large part that is the friction in the checkout and that is it's it's hard to check out on this little screen I take it you don't have your payment.
All your payment details saved.

Ken:
[16:07] Also think that you guys are debated this as well but I think single-session conversion is a bit of an apples to oranges comparison across these devices I mean you look across almost any.
Activity there's more frequent but less lengthy interactions with mobile sessions than there are with desktop sessions and that's certainly true in our categories so I think.
No increase in the we look at even this conversion and engagement kind of measurement we look at it over a. Of time relative to a customer assuming that we're going.
I have experience as we can and should build that in Mobile that's going to encourage more frequent engagement even if it's lower duration.
Can you really I think while look at conversion as a function of that which is can we drive more frequency you might have a lower single-session conversion but against that customer over a period of time.
We think we can close a lot of that Gap now again I think to Danny's point I don't think you're going to close all of the Gap because part of what makes the phone so powerful as a supercomputer sitting in your pocket.
Is it in your pocket so you can use it to look up reviews when you're in a store to validate the purchase you're going to make it a physical environment you look at it on on the bus to see where the closest store is that has that Tory Burch.
A purse that you're interested in so I think there are a set of use cases that are just enabled by the fact that it's portable and that it's with you all the time.
That are different so I also think more generally you know certainly for us and the kind of retailer in the end the brand we have.

[17:42] I think we want to be careful that weird don't get so focused on conversion.
That we're not serving the customers who are coming to us for all those occasions where they're not yet ready to buy or were there looking to be inspired or they're looking to learn about fashion.
And that's a lot of folks I mean that happens in the physical environment but it certainly happens a lot digitally as well.
And so whether that's on a phone or on a desktop I think we're always looking to get the balance of creating a richness of experience and engagement as well as being there trans actually when that's when would people looking to do.

Jason:
[18:15] Dad said record show I wholeheartedly agree the.
Single session conversion is you know one of the convenient things we have to measure and so I feel like it it has gotten in it in appropriate amount of focus and I certainly agree they're a bunch of.
New use cases that are Nable by that smartphone.
That we never had on the desktop in some of those don't have by intent and that's okay you like there they're great brand Impressions and your point like.
That might be buying 10 tickets fulfilled in the store or some fashion advice to share with a friend or whatever the case is so I think we're all sort of the land on that but I do want to double click on.
Danny made earlier hey there is a big gap between.
Are mobile web in our desktop web but we also have this mobile app which actually has the best conversion in this brings up this.
This frequent dialogue that I have to have with retailers in the whole debate about the role of apps and webs in your customer ecosystem.
Like I'll just say it a front I walk into a lot of retail environments where there's a huge amount of the corporate Treasurer being invested in an app.
And oh by the way there aren't very many active users on that app how do you guys think about that.

Danny:
[19:35] Yeah so so we definitely think that should be a differential stretchy between the mobile web and app I think that's that's aligning that we've had internally over the past couple of years.
I think you have to take a look at the similarities and differences I think the similarities between the two is that first of all the phone,
it's a small screen with a touch screen in pots you don't have a keyboard you don't have the ability to achieve navigate in the same where you can on a desk of experience so you have to design the user experience in a way that's easy to use an intuitive but also.
Really optimizes for that phone Factor.

[20:10] The second is you can almost guarantee that when somebody is using whether some mobile web or not it's in the context of the world around them.
Which is the desktop you about your.
You're looking at a biggest green you're more engrossed Wars on the phone you basically up Harley parallel-processing either being on the bus or quite frankly I sit home and watch TV and I see I'm on my phone all the time anyway.
Answer the phone itself is actually it's a connection device that lives in the context of other things happening around you and so therefore how you design the experience has to be compelling enough or easy enough that you're not going to make it.
Optimized for that use case.
I guess you think about the differences between the two I think you have to look at the use cases and just the just add a troll owned on how people use the two different form taxes.
I'm so I think you guys are said this in the past but mobile web is a very Broad and very shallow engagement when you want to look at the time that people are spending a mobile web it's a very small proportion of time on the phone.

[21:09] People spending more time in a very narrow and deep playing in apps and so the actual the frequency vs. engagement piece.
Between the Tucson people go to mobile web very frequently but don't spend a lot of time though people go to apps and they go very deep in those apps and spend a lot of time.

[21:25] Unpretty the most compelling piece of data for me is that roughly only fat people on average only use 5 to 7 apps on a regular basis but they go right.

[21:34] And so from that perspective unless you're one of those Fighters have an app so you may have the best shiny app that does a bunch of really cool stuff.
But if people on engaging with and then you spend a lot of money to build something that actually probably isn't doing anything.

[21:47] Look at when you look up the types of Ops people to spending time in and most of them are Awesome form of Google.

Ken:
[21:55] Yeah I think I think you've guys have talked about this before but we certainly agree that.
They're very different rules for these and I think it would be a mistake for us or any retailer to over-invest.

[22:07] In the app is an example at the expense of having a really convenient engagement experience in Mobile optimized web which is where the vast majority.

[22:16] Archer.

[22:18] The same time there's a subset of customers and in our case it's it's going to be probably our top 20% of customers who have a deep relationship with us as a brand and they're willing to make the investment.

[22:29] To let us live on their phone and you know that's so that's a privilege for us that we need to intern provide them with a lot of value off of that and so I think it's.

[22:38] The learning to Danny spoke so I think it's really clear to us that we need to have an app that serves those customers in a really deep way that gives them the value that they deserve for letting us live on the.
On this precious real estate that's their home screen but we all have to be realistic that that's always going to be a pretty small portion of the total number of customers that engaged.

Jason:
[22:58] Number customer.

Ken:
[23:00] Check early if you look at the kind of categories when I mean people we're not a financial institution where people are engaging with us every day.
And you know we're not a financial institution this sense of you know people generally have a checking account with One Bank.
So most people have a banking app on their phone because it's makes our life better with their One banking partner we are usually part of a dozen retailers that customers are choosing between and they're not going to give us all the privilege of living on their phone so we better.
We'd better have compelling experiences both ends of that Spectrum a really great will block them eyes web experience for the vast majority of lightly engage customers and I really high value-added.
Engaging app for those customers that give us the privilege to live in their phone.

Danny:
[23:46] Yeah it does the last dates race so I think showed that only 3% of time spent in apps on a mobile device is in retail apps and that's because a lot of people.
Facebook always has by Far and Away the most used app in and you really go through social you go through entertainment then you go through Services which could be Banking and Kobe taxis all these different use cases that have been enhanced by put to make you happen to turn up.

Scot:
[24:08] Yeah yeah I agree I've seen the comscore data there what what's an example of a feature that the app.

[24:17] Offers that's not available maybe on the mobile Weber or the desktop in full disclosure of my wife is a card-carrying Nordstrom member so I kind of know the answer.

Danny:
[24:25] Thank you I appreciate that.

[24:28] Great things out it's really anything for you accessing the unique capabilities of the phone that could be the camera it could be.

[24:37] That's probably the main we have right now so we threw up right now you can visual search in multiple different ways so you can scan about the barcode of an item in the store,
I know what I should bring up the part of details and you can make a purchase or you can see additional inventory the other thing we have is visual search so you can take a photo and then we'll give you like iTunes to that.
Titan.

Ken:
[24:58] Yeah it hasn't rolled out yet to your Marketplace got but another example that takes advantage of of the unique capabilities of the phone is something we're rolling out.
This year and Ashley we've tested here in the Seattle Market over the past six months which is something cold Store Reserve.
And that specifically takes advantage of G location awareness so nature that experiences.
Imagine as it as an engage customer you do with a lot of customers do which start that product discovery on your phone.
And you start the journey there but a lot of you know a lot of challenge in our categories as you still want to physically evaluate the product you want to make sure it looks like what you thought I was going to look like that it fits the way you want it to fit.
And so the stories of experiences start that Journey on your phone put it in a put these items in a digital closet.
Will then before your local stores that you can try a little store will then find the product our team will find a product in the store send you a text message to let you know that indeed we found it for you and we're holding it for you to try it on.
Animal use a geo location awareness of the phone so that we can see when you're approaching the store will let you know that it looks like you're on your way in those products are waiting for you in dressing room 2 on the Metro level of the downtown Seattle store with your name on it.
You come through the door at the products already waiting hanging in the dressing room free to try it on.
You go straight to the dress and you try on the product you can be in and out in 10 minutes having done everything you wanted to do in terms of.
Discovering the product on your terms on your time but also being able to physically evaluate it without having to go through the hassle of sending it to your house and potentially having to return stuff.

[26:32] And you know that's something we've made a mobile only experience because it's really only a great experience if we can connect the dots with the messaging both ways and and the g locational awareness and.
Known the same way that Uber doesn't make sense if it wasn't an mobile only experienced something like that only makes sense as a mobile only experience it doesn't really make sense unless we can connect the dots and really personal way with you.
So I think we're looking when we talked about the sea grade I think it's because we have a whole set of those kind of experiences that.

[27:03] Customers tell us every day it would be great if you could do this for me and we need to do that we need to.
Need to use the phone really to to leverage all the assets we have in particular that the local market assets we have of of people product in place and how do you connect.

[27:19] Those assets to our customers via their their mobile device in a way that makes their life really seamless and really easy and on their terms.

Scot:
[27:27] Yeah the wheel of the curbside stuff so this sounds like a nice kind of even and now kind of taking it to the next level there,
so one one other question you guys at the top of the show talked about using the phone in the store is there anything else I get you can take a picture and and scan a code and see the online reviews about using with deacons wear,
I approached a shoe display and maybe there's something that lights up on my phone that tells me more if you guys experiment with that.

Danny:
[27:55] Yeah we've definitely done some testing around that the big lining on anything like that is it has to be really tied to a compelling merchandising strategy because if it's if it's just notifications for the sake of notifications and it's just annoying,
but if you can link it to a great product strategy that I she enhances the experience and somewhat we've really been thinking about is,
whether it's pecans or scanning or other Technologies like some of the light fixtures that I she help you with geolocation to Pieces as well,
it really has to be linked to what are we trying to achieve from the actual product induction diving strategy or the wise it's technology for technology sake.

Jason:
[28:31] We we like to call those Mass pushes where you just push the same message I've been when they walk by the beacon go spam.

Scot:
[28:41] One last kind of on this topic of the store I've noticed your Associates are all very well connected their there either they seem to be able to access internet on their point-of-sale system and then many of them have like a mobile tablet of some kind,
I never been to tell if it's an iPad exactly or what's going on at least he's in a case and hard to tell is there any connectivity there where,
you know maybe I have something in my digital closet on my phone and I can push it out to the store associate anything like that.

Danny:
[29:10] Yeah so we don't quite have exactly that functionality right now but one of the things that were most excited about that is in the process of rolling out right now is really and Hunt selling tools for all sales people,
and that's going to hopefully live on the on that mobile devices so right now we've historically had a text to buy functionality that is really not a very rich experience and pretty clunky and Sons of the signup,
what we just launched about three weeks ago and is in the hands of 400 stylus to be testing right now is a an enhanced,
stop for a sales people that she allows them to search nordstrom.com and then send what we call style bullets to customers and then customers can buy from that.
So that will always you continue to enhance and rollout feather but then the flip side of that is can then customers use that as a protest wins right way so it would sales people as well.

Ken:
[30:00] Yeah we've got a whole road map of of these kind of experiences I think precisely to that that question.
Of of additional ways that we should be making it easy for salespeople and customers connect went when that's when customers want and so to your question I think you will see in the not-too-distant future are starting to turn on.
A functionality for example that would allow customers to both see a visual representation of their closet of what they bought from us in their closet but also to share that inappropriate way with salespeople and stylus when that's what they want to do.
I think is you guys can appreciate me one one of things we're really sensitive to in that context is is making sure that that truly is on the customer's terms I mean what do they want to share with whom and we want to be very.
Transparent and put all that control very transparently in the customer's hands.
So that they get to decide when that's valuable for their experience and so we're just we're working through that.
From a technology perspective but as much as anything also thinking about it from a user experience perspective how do we how do we make that really both easy but also very transparent.

[31:10] Is it they're able to control their information to make their Journey.

Jason:
[31:16] What are the things that super interesting to me is a lot of the successful mobile experiences we talked about they all 10 to be in.
Certain categories right like so you think of Starbucks and it's you know such a high-volume fast turn and you think of these General merchants and it's it's a lot about like volume of transaction and convenience and ease and all those other things.
In your mind is there anything like different or unique about how you have to think about mobile experiences in the fashion business then some of those sorts of.

Danny:
[31:48] Yes yes.

[31:56] I'm sure pretty much every kasperi would tell you this but selling fashion online.

[32:00] And part of that is because fashion is an emotional purchase so much of it won't fashion retailers have been good at overtime is helping you find the right product then evaluate the product by trying it on.

[32:12] Helping you all to the products are fits correctly in so it's not positive fashion Discovery is that she very hot so I think what a lot of.

[32:19] How's the next consultant I think in sounds with two by twos a lot.
For me this is 2x2 of experience versus convenience on the mobile space and particular Oshie lends itself to think about that.
Can you take on one axis you have convenience that's what things like the Starbucks of the world have really done an incredible job of making it very convenient so I.

[32:40] Make your life easier and that's where the banking apps Fallen is well because I.

Jason:
[32:44] I don't pay checks in the Run Channel.

Danny:
[32:44] Paychex in a brunch anymore I let you do for my phone in my life.

[32:49] On the flip side you have the experiential things which I'm all things like.

[32:53] XO the Facebooks of the wall which is more right entertainment The Sweet Spot is always easy people to do both convenience on experience and that's why things like ways really coming for me or even by which is they've taken what is a truly commodity tide experience historical and made it more interesting.

[33:07] Retail that's hard because retail isn't exactly something you do every day so you don't.
I'm sorry Taylor everyday and you don't mess I asked for product to Vice everyday and so making it whether it's experiential convenient we need to be thinking about what is it that we could be doing for the phone to my she hits on one or both of those.
And that's where I think the challenge comes in and just to make one final plug for fashion in general is.
If you look at the dates or overtime Fashions as a percent you spend a disposable income is going from roughly four and a half cents a two and a half percent.
Can I sync the well this is me hypothesizing but I think the biggest reason for that is more of the move to one line.
Because yes people to buy more experiences ammo Technologies but buying Fashion online is hard.
I'm not basing means that when people use to go to the mall to get product information and guidance and I used to be entertainment people don't do that as much and the facial online shopping experience doesn't lend itself as much to Fashion.
And it doesn't do anyone near as much of a small screen the end of that you have to see the product to buy and you have to evaluate it and take the gets harder and harder to small screen.

Ken:
[34:17] Agree with all that but I also think it's very easy to sit here and make excuses for why you know retailers and retailers Like Us in fashion haven't been able to Leverage.
Mobilize it as a channel engagement better with customers and it's certainly true that.
Uber revolutionized Transportation but before Rober nobody had done it and certainly true that Starbucks created an amazing and engaging experience particularly in the integration of.
A payments in their loyalty program but before then nobody else had done it in that sector either and so.
You know I think it's easy to point to kind of the convenience aspect and I think it's true that that lends itself.

[34:58] Back to the beginning of the show we were an industry in transformation I think what we're really seeing is that nobody's cracked the code yet exactly but that's not because there wasn't a huge opportunity there I mean if you generalize.
You know even a bit broader I think there's a bit of a.
A narrative going on about how retail is kind of one to the Future Tech and traditional retailers in.
You know I'd like to take the the positive aspect to that we're in a huge business that's a fun business it's an energizing business but you know if they head of zalando recently said you know you can't lose track of the fact.
Fashions a huge business and it's undergoing a huge amount of change but pretty confident that in 10 years you might not have a car but I'm pretty sure you're not going to be walking around naked.
You people are still going to want to buy clothes right and so we're in a business that has had its core.
You know on the one hand the challenge particular as a fashion retailer that you nope the Pete the stuff we sell it if people want to want it they don't actually need it.

[36:00] But at the same time it lends itself to fun and engaging and energizing inspirational experiences so The Challenge on us to how do we take.
This amazing opportunity we have with technology to supplement what we've always done.
Witches to win with fashion Authority and service an experience with our customers how do we translate that.
Into a world where they have a lot more information at their fingertips to their phone but do it still in a fun energizing way so I think it is a hard problem but just because nobody's cracked it completely.
Doesn't mean that it's it's not an opportunity that we should take advantage of her feel really optimistic about.

Scot:
[36:40] Cat that opens the door little bit I kind of have to ask the question I asked every show wouldn't be a Jason Scott show if we didn't talk about Amazon your neighbors there in Seattle.

[36:52] Yeah yeah Bookseller there in your area.

Jason:
[36:56] I thought they were just the guys they gave away free bananas.

Ken:
[37:01] I've taken some of those free bananas as I walk by.

Danny:
[37:04] I should we we we joke about that so what I asked you tell people is one of the other things I love about my job is.
So we have most of all offices don't located in downtown Seattle and so we have a number of buildings and we're lucky enough Ken and I to be in one of our buildings that she has an amazing view,
and so we have an amazing view Westover the Puget Sound while the Olympic mountains amazing sunsets all that's great however we used to be able to see the Space Needle.
And we can see the Space Needle now because unfortunately there are two new tile blocks between us and the Space Needle that went up in the past two years and that is all friend literally a block away from us right now.
So on the one hand you can say that's a real challenge the other hand as she gives us a very real reminder every day that if we don't continue to move quickly then.
The world is going to end up in the Amazon sphere and so that's something that we really need to be focused on and so.
Takashi to build on what Ken was saying she is really about.
How do we continue to make fashion an emotional patches that people engage where than that she has an elevated experience and truly differentiate from what is more of the convenience and camozzi business of Amazon,
I want we need to do is really focus on working with all best fashion Partners to read navigate the world of digital so the,
they feel there is a very compelling growth path with us so they don't need to go down that commodity path and so that's something that we spend a lot of time on which is how is it that we can work,
with the bronze to create compelling experiences and really showcase their brands in the right way because.
In the same way that we're facing the squeeze on traffic death that feeling it even more and I think for the best friends they want to be in an environment.

[38:40] They feel like that with other great Brands and there is really brand integrity and that's something that we really focused on and I'm making sure that the additional experience really allows us to elevate that.

Ken:
[38:50] Yeah I agree with that I think you know Amazon is a great company Amazon's a great competitor and I think Amazon.
We owe you know that a gratitude for Amazon for you know helping.
Create a paranoid about how to improve customer experience every day and in a digital world so I you know I think that's with all great competitors and we have a lot of them they make us better.
But I don't think that we look at the world and think that.
Amazon's going to put every other retailer out of business I think there's a little bit of a narrative out there right now that resembles you know The Narrative of that was out there 30 40 years ago about Walmart and the reality is that you know what Walmart was in that massive growth phase.
It's true one more put a lot of retailers out of business.
Yeah it's also true that a lot of great retail stories and a lot of great retail bands came to prominence at exactly the same time that Walmart was growing.
Weather that was Costco or Whole Foods or a lot of other great retailers so I think there's always opportunity whenever whenever there is a competitor that's doing new things and I think we it's up to us to make sure that.
You know wheat we compete in a way and serve customers in a way that continues to build on the things were uniquely good at and the things that customers look to us for.
So I think it's important to be aware of every great competitor out there but also to make sure we're we're right in our own Playbook and we're delivering on that and I think in the context of that.
You know we.

[40:20] The challenge we have is we're a brick-and-mortar retailer that has been an early as always been an early mover into serving customers across every Dimension and we were only move her into.
A digital Commerce in and that served as well but we need to make sure we continue to move forward.

[40:38] Again on the on the dimensions that customers look to us to be great at and I think they look to us.
As a fashion retailer who's going to help them look and feel good and also as a retailer that's going to win on by doing that in a way that makes them feel like we're personalizing that interaction with them.
I think that's the great opportunity we have I mean if you look at digital and mobile and the personalization opportunity that that creates in terms of connection with customers.

[41:07] There's a huge opportunity for us to take what's always been a calling card of ours which is personalized service.
Historically that was defined a lot through just a one-to-one.

Jason:
[41:16] Relationship.

Ken:
[41:18] In a store we now but opportunity deliver personalization ATS.

Jason:
[41:21] Still needs to be done.

Ken:
[41:22] But it still needs to be done in a way that you know is relevant to our brand and so.

Jason:
[41:27] I need where we.

Ken:
[41:28] I think where we are always trying to strike the right balance is a we we need to take friction out of our shopping experience whether that's a digital experience or in-store experience there's no question.

Jason:
[41:38] Customers want more control they want to be able to.

Ken:
[41:39] That customers want more control they want to be able to have the journey that they're looking for any given day on their terms and that means.
Take a lot of friction out of the experience but we also you know where where.
Business which is fun and exciting because it's fashion it's you know it's supposed to be fun it's supposed to be energizing it is social and we can't lose.
The context around that we're not in a commodity replenishment business we're in the business of making people feel good not just about what they bought but the whole process of engaging with us and shopping and discovering.
And so I think there's real opportunity win there whether it's in a world where Amazon is or any other great competitor we just have to.

Scot:
[42:26] It sounds like your strategy is to partner with Brands what we see a lot of other retailers doing is saying.

[42:34] Oh my gosh these Brands can be anywhere so the way to differentiate is to get exclusive brands or by the brands like what Walmart and Mark Lloyd jet are doing you guys invested in bonobos I believe.

[42:47] Is that also part of your strategy or you're really just kind of partnering with the brands and saying hey.

[42:53] I guess part of that would be don't sell on Amazon or you know we can drive a better experience Tulsa Lil bit more about that Strat.

Ken:
[43:03] Yeah I can I can take a shot at that immediate into context.
Our business development corporate development strategy is very tightly linked to your customer strategy so.
Take the specific example that that you highlighted their Scot which is bonobos.

[43:21] We partnered with Andy and Andy done the founder of pronobis and his team now must be five or six years ago.
And that was really because we we saw that brand born on the web.
A brand that was highly relevant to our younger mail customer we thought it was a real opportunity there that was a win-win for customers for bonobo sent for us for.
For us it was an opportunity to have a Prada.

[43:51] That was limited distribution wasn't being sold everywhere but that would be appealing to two customers that were already in our store.
Alfabeto Bose and I think for a lot of other aboard on the web brand since then it realize that it's really expensive to scale a brand if the only touch points you have with that brand are digital.
And especially when you're in categories were physical evaluation of the product is important and so for them there was a real opportunity to scale their business and scale their brand.
Through our relationship with us and for customers customers want to have the opportunity to to get exposed to brands in multiple places so for us the investment at the time was linked to a customer strategy was never our intent.
Set to own Brands and it was never our intent for example in that context to buy bonobos as a brand our investment there was to align kind of our agendas but also to provide damn at the time with some capital and commitment from us that we were.
Important to them and and they were important to us and that.
Intern really set the stage for a whole number of other relationships we've had since then with a number of great or on the web brands that are important for our customers some of which have involved investment most of which habit.
We've also continued to invest in things that can build our business and our customer experience so that they're not.
They're going to be things that we're investing in because we think the investment.
Is aligned with helping to scale the business or to create alignment in terms of how we serve our customers so we recently invested.

[45:26] In a company called Dropship.com disco as an example because it's a Dropship.
Capability a platform that really makes it a lot easier for us to engage with Brands who are and Dropship relationships with us and really make that a lot easier for them lot better for them a lot better for us.

[45:43] But I think back to the limited distribution question you know are our message to Brands is not you have to be exclusive to us our messages though that we we think that.
We are a great partner for helping to build Brands and expose brands in a full price context where.
We we can provide an opportunity for Brands to scale their business.

[46:07] Providing the full expression the brand of the customer and that's knows you guys know that's harder and harder to do if you're distributed everywhere if your distributor everywhere.
I think for Brands that's a recipe were often times you lose control of your brand you lose control the pricing of your product.

[46:25] And we are frontal turn it for that and alternative that still we think has a lot of growth and I think we've had a lot of success.
I would light a branch and Danny can speak to this about showing them just the power of being in our ecosystem both full price and off-price both in stores and an e-commerce we can bring all of that.

[46:44] To our brand Partners in a way that I think they really value the commitment we have to presenting their brands in the right way and exposing their brands to younger customer and a customer they might not otherwise have.
But we're excited to be in business with brands that have their own direct-to-consumer business have their own stores week we think that.
Recipe works well works well for brand white bonobos but also,
for the more recent things you've seen us do with the likes of J.Crew and Madewell and Topshop and Ivy Park we have a long list of examples where I think it works for customers it works for a brand partners and it works for us as a business to do that.

Danny:
[47:23] Yeah I would answer that that I think history is told us that exclusivity free exclusives you say can I should be more hurtful I think,
part of that is the stew way you can do a swim until you can have to take exclusive parts of a lion,
all you can have the whole brand exclusively in and historically what we've seen is if you take exclusive parts of the line then you may not get the best products because of see the Browns going to want to sell the best items in more places,
and then with regards to Brand awareness we definitely see that there was a huge benefit for.
Apollon is that she having more exposure both online and in stores in this definitely places where we actually feel that.
Weather is the wrong retail premises or select part is that I shall We Tell Pond is for them that she do allowed the Brand's be elevated and maintaining the brand Integrity Russian pretty helpful.

[48:11] The only thing I would add is that we have a pretty proactive stance now that if we see people becoming Chumash distributed and actually not maintaining the brand Integrity then.
That's a good sign for us that we think the brand is going to be on a sudden points of relevancy and so what we do need to be doing is looking for those next new bronze coming through and taking a really healthy portfolio approach to giving those new emerging Brands a great place to be.

Jason:
[48:34] Cool you know one of the things that's interesting to me is.
As as consumers get used to all these mobile devices their expectations that are set and so then you got you going to figure out what what the right mobile experiences for that.
Customer expectation but then as we talked about a little earlier.
There's unique and an elevated expectations for how I would use Mobile in a fashion context and it heard means you're just talking there's actually even another tear that you guys have to worry about which is.
Like Nordstrom isn't simply a.
Apparel retailer like you you enjoy a unique place in the sort of fashion ecosystem and have a very unique and differentiated.
Brand value proposition so.
If you thought at all about like what's the the truly unique mobile experience the truly unique Nordstrom experience manifested on mobile.
You know can there be such a thing is that possible.

Danny:
[49:35] Well I think the Ken's coins earlier there is there was a huge opportunity if we can get that right and so definitely working pretty hard right now to trying to find what that is and I think it starts with having a break definition of what's the role of each of the channel I think with the mobile web.

[49:50] It's really about creating a fast friendly Discovery experience and customers would like to check out they can do that.
What's interesting to me is we actually get more engagement with some of the content on our website on a mobile phone then we had she done him about website that we actually doing all day.

[50:06] How to search people coming to the homepage and then she clicking through to a story so I think.

[50:10] Does a set amount of fast easy convenience that needs to be through mobile web but also is that the sort of fast hit convenient content.
Ons not something that will definitely be playing through and then from the up experience.
It's really in kentish town this how do we create a great experience that our best customers are going to engage with on a regular basis cuz if we want to be one of those Fighters have an apps that customers engaged little regular basis.
How do we do something that allows for freaking engagements and allows a great eCommerce outside of one of our premises but also then also enhances the in-store experience in the linkage the stores.
So all rap is good really going to be all Powerhouse in times of how do I should create richer engagement or not she Elevate the experience and Sons of the shopping and Simpson experience and feed the mobile web is about.
How do we have customers come to on a regular basis cuz they think it's interesting but it's convenient if they want to check.

Ken:
[51:04] Yeah I think it's fascinating that I.

[51:07] In retail at least a lot of people when they first think about mobile they think of it purely through,
the convenience lens and think that that's that's why how people are using the device and again to Danny's point I think what's interesting in the day that we see.

Jason:
[51:17] What's interesting in DC.

Ken:
[51:20] There's a lot of Engagement with content that's how.

Jason:
[51:22] Makes sense to me people are.

Ken:
[51:23] Make sense mean people are doing bite-sized engagement all the time with their phone as as a source of information and entertainment and inspiration and we're in.

Jason:
[51:31] Retainment inspiration.

Ken:
[51:36] You know we're not unique position I think to Leverage.
Is we have with customers around Fashion Authority do that in a fun way in an engaging way so I think the balance of how do you get that content out there.
In a way that really engaged just customers while still letting them have a frictionless shopping experience when that's the thing they're looking for that's that's the balance were looking to strike.

Danny:
[51:55] The idiotic right thing about mobile phone is it is a unique device to an individual and so therefore you can truly person lies on the phone and actually.
Does a lot of great things we have in terms of what lives in the brain of all sales people with regards to styling guidance in the ability to show people the right product and so we've been working really hard in the background or really on the days room services that would allow us to do that scale through a mobile device.

Scot:
[52:19] Quick here's a quick one and then kind of a long one so Apple Android a lot of the data out there suggest that even though people's traffic.

[52:28] Tends to be half and half this is both a pin mobile web the iOS users represent on the web like 80% of of actual sales even though they're they're smaller in traffic do you guys can you guys see something like that on your side.

Danny:
[52:43] Yeah so actually I think I'll dates are excused for the even more heavily towards iOS nothing apart that is the demographics of our customer so roughly 75% of all traffic comes through an iOS device.
But Android is definitely growing quickly and so I think from from all perspective we don't see needs you thinking about how is that we're all going to play out and between what are system what what are investment in iOS placements through a native app vs. website,
on some light on on an Android device how that looks in the futurism is a pretty interesting question and it's a little bit of all of the above,
not thinking through what that what are the Dynamics between those two platforms cuz I has a big impact on where we want to invest.

Scot:
[53:27] And then the longer one is just listening to you guys Jason I talk to a lot of retailers and a lot of them have kind of that that Merchant King kind of mentality that you know we're going to go and figure out what's the right.

[53:39] Dress for next season and that kind of thing and what I'm hearing for you guys as data personalization data scientist feels like a real commitment on your side to that to the extent your control sharing it knows this one dude locked in the basement.

[53:56] Did the Guilfoyle picture from Silicon Valley or like tell us about you know sounds like you got some pretty serious horsepower behind this thinking.

Danny:
[54:02] Yes I'll let Ken's Pizza that cuz he actually supports all data science and analytics team but one thing I would say before he goes into that is,
tell me what's really interesting is if you just sent it over to Daytona algorithms and it's going to give you a lot of good predictions on what's happened in the past.
And Ashley fashion is something choir there is trillion art elements and that's where I buying too much you have a real talent is being able to pick Trends and pick ones can be important to the customers and that curation elements of what customers should be thinking about is that she a big deal.
And so I think,
Paws Of The Magic of where all welcomes together is how do we take that knowledge that exists in the head of all Bonnie team and all sales people it's really see the machines because machines are only going to tell you the review married,
respective,
and so from my perspective we looking at some really interesting ways of how do I take the knowledge of the people who I should know product really well so I she get it into the right attributes that then we'll feed the algorithms that it will be more forward-looking is fashion changes all the time.
And that's the one challenge of using data science analytics and something whether there is no constant in terms of customer demand.

Ken:
[55:08] Yeah I think that's absolutely right I would say data science analytics a big topic it's a big topic for us and I suspect for anybody like us in our industry and what I mean by that is it's cuts across.
All different parts of our business so we've made a big investment it's probably one of the.
The biggest growth areas in the entire company right now is the way we've been scaling that team over the last 18 months and will continue to scale that capability.
Because it cuts across every part of the business including.
Supply chain and where we where we deploy our inventory how much we should be buying of the stuff we're buying but also.
The point about as your Highline Scot I think like what sorts of product we should put in front of customers in a given point in time to be relevant.

[55:56] But there's also basic things that we're working on that customers expect and we should do a better job on which is.
No personalization I think through a customer's eyes is a lot about.
The more they engage with us and the more they let us know them the better we should serve them which means do you remember what size I am do you help me,
by remembering you know which brands I really like and help you keep informed about what's new in those Brands but also,
help me understand what other brands I might be interested in in and to do that in a in a seamless way that you know keeps track of.
How will those activities happen in stores on a phone on a desktop think that's the expectation that we need to live up to and I think to Danny's point that used to live all in.
In a salesperson's had the fact that it now cuts across doesn't diminish.

[56:47] What part of this and it doesn't diminish the value that comes from this long Heritage and in deep experience we have and all of our people with those those folks are emergent teams or whether it's our sales people in stylist.
We have a deep well of expertise I just use a small example.
You know we found that it when we do things like product recommendations even though there is algorithms to support that those algorithms for us perform a lot better.
If we don't just take the buying information from customers have purchased these baskets but we also feeding information about what are best stylist put together.
And so if we can bring the RT in with the science we know that that actually has a better outcome for customers and so we need to put that all together but at the end of the day that's a big data science problem you can even just getting the data.
Connected in a way that you can connect to single view of product across the whole Enterprise with a single view of customer across all their touch points with us.
It's not trivial particularly when you have a lot of legacy.
A technology that that you're in the process of replacing as we are so it's a big focus it is a big growth area there's lots of different places that we see data science and analytics adding value.
But none of that sat the expansive of the art in the business it's it's a supplement to it in our view.

Scot:
[58:09] Goat sounds I'm getting a mental image of a stylus and a merchant floating in a pool with computer brain connections like Minority Report people are said she needs to see the side of right now.

Danny:
[58:22] I like it we should think by quest list.

Jason:
[58:24] Fashion fashion precogs.
You know it's funny cuz this is very Timely.
So we've been talking a lot about mobile there's a huge buzzword I can't believe it hasn't come up yet in Mobile is the the whole mobile-first philosophy and so I kind of wanted to hear you know where you guys.
Come down on that but what what's been interesting in the last week like Google had their IO this this week and their big thing was.
Hey we've been mobile-first now we're shifting its AI first which is the the topic we were just talking about so.
I guess super question like you know are you embracing a mobile first philosophy and is that important and you know is it.
If you're not is it already too late like should we be moving on to the next thing.

Danny:
[59:16] Yeah I would say so we are embracing my boss first I think to me the definition of mob office versus a fuss.
Is a little bit Falls because if you brought in the definition of marble to go beyond just a mobile device and I see how you are connected to the world which isn't in realities was happening more and more.

[59:32] Then I think my ball first hold and it's really about how do you.
How do you think about the mobile device relative to other connected devices relative to the physical environment except for and so we are definitely still thinking about my ball first.

[59:46] In terms of what about physically mean so I think the greatest example for me is when you look at the way we design not she then execute on features and functionality.

[59:55] Really we definitely are user experience team now stop with the mobile phone screen first and so they will design for the small screen and so the optimized for the small screen make it make it user-friendly make it compelling and then scale it to a biggest green lights on.

[1:00:09] And I see the way we didn't go code again sign execute against eyes very much part so I suppose the mobile device Fest.

[1:00:15] So I think that there's a very real practicality of mobile phones which is you do the work from about fuss.
But in reality what she means is it forces you to be a lot more thoughtful about design because the use of interactivity of a phone with a smaller screen with a touchscreen actually is hotter than a big screen.
I'm sorry I think it makes you fat so and so whether you believe.

[1:00:36] 10 clear what it means in terms of whether it's the mobile phone prices of the connected device starting with the smallest Creole starting with a different use case in the big screen I think makes the design hot or.

Ken:
[1:00:47] I also think more powerful I mean it's a touch screen and has a camera it has a voice in her face it's geolocation Aaliyah where it's personalized to an individual those are all huge advantages in the kind of experience we're trying to create in terms of connection with customer.
I don't know how to distinguish that from AI first mean AI isn't bringing data in science and AI into the equation in terms of creating a better customer experience that still got to be delivered some.
And the delivery mechanism.
From a personalization perspective is almost entirely now moving to be that device that sits in your pocket so there may be there will be adjuncts to that whether that's Google home or other.
Active devices but at its core you know I think everything we've seen I'm sure everything you've seen is that at the core of.

[1:01:34] Good folks digital engagement the phone still sits right at the center of that and that's not going to change in the very near future.
And so I think mobile first for us is making sure we're keenly aware.
And you into the customer's eyes not just that that's the reality but also how do you make a benefit out of these features that the phone has which should have a lot of richness to our connection to the customer.

Danny:
[1:01:56] The really fascinating thing for me is something it was embedded in the question which is some of the announcement that came out from Google in the past couple of weeks is.

[1:02:05] What for example enabling Google assistant on an iOS device that's a big deal.
And what that means in terms of Customs engagement with the different apps on a on a device and if they can oh she's swing more usage of Chrome on an iOS device that not changes the game a lot and Sons of the app ecosystem.
I'm in if we can I see you within Chrome if there's a way the People starts when able Progressive web app type experiences that can then,
access the different devices on the third better than the phone that starts to break up the Apple ecosystem,
I was I think how that Dynamic plays out as something that we can need to continue to watch because that's the point we said Elliott developing apps is expensive and living in the app ecosystem is LBC something that is a.
Paradigm that we all know very well but if that starts to break and you start to see different engagement bottles that is a very different way they would I should precise Investments.

Scot:
[1:02:52] Cool yeah so one of the last questions were tied on time so,
as we look at kind of the first quarter results the there's some charts out there they're pretty interesting and they show,
Mainline retail is really having a hard time of it and no clubs are doing really well so like the Sams in the BJ types and then you see kind of more of the outlet E-Type places doing well I like a T.J.Maxx so.
One thing I've heard said is that you guys you have your main line in then you have your discount and you know I think some Skeptics a well,
the only reason that Nordstrom exists the the main line is to really they make all their money off the discount side the rack side how do you guys react to that.

[1:03:35] I don't know enough to even kind of like having a pinion but I've heard that said several times by people so I kind of want to throw that one out.

Ken:
[1:03:42] Appreciate that Scot.
Look we're at you can you can read our financial statements to see exactly what we disclose about how we make money but what I'll tell you is that we have a full price business in an off-price business,
predominately we serve a full price customers through RR Nordstrom brand as well as our Trunk Club a business and we we serve Ross off price.
Customers through our Nordstrom Rack brand and Nordstrom rack.com and HauteLook and there's an overlap between those sets of customers and.
So from a customer perspective I think the advantage that that we bring to customers.
Is that on different chopping occasions and and it different parts of there their life folks engage with different parts of of the brands that we we offer them.
From a brand partner perspective there's also a real value-add to Brand partners because when we enter a relationship with brand Partners in a waiver the opportunity.
2% there Brandon a full price environment and to sell their brand position that brand very effectively there but we're in the fashion business none of us get it right every season so there's going to be some stuff we buy that doesn't sell,
as well as we all thought it might whether it's the brand or us as a retailer and we have the opportunity to seamlessly take that product and and move it.
Tore off price Channel and that's good for the brand it's good for our customers and it's good for us.
Weird you know we make money in all parts of our business so I don't think that's you know we don't have a substance ation going on between those but we do have.

[1:05:17] A lot of positive connections between that another example would be if you just look at.
Are the demographics of our customers there's a lot of similarities across our customer set but on balance.

[1:05:31] Brand does tend to attract new customers to our brand to to Nordstrom overall they tend to be a little bit younger.
Are there full price customers and about a third of those customers overtime become full price customers so they end up migrating and not only buying in the off-price Brandon Channel but also the full price so we look at this all the time.
From a customer perspective in a business perspective and we have a lot of data to support the notion that.
The Brand's the two brands are additive the full price and off-price business are at added to each other.
An additive to our customers and additive to our brand Partners so we're quite comfortable with that.

[1:06:14] I think that back to the start of your question you know we are in a retail transformation. Right in doing that. You're going to.
You going to see a lot of volatility I think in quarterly results says as a lot of retailers go through the process of moving from their traditional model of.
Competing to a new world and a new model of competing and that's going to have some bumps in the road I think for everybody.
And it's going to show up in people's Financial results and you know not everybody's going to come out of that in the same way I'm pretty excited about.

[1:06:45] What we're investing in and what we're saying in terms of how customers are responding to that but that doesn't mean that it's a.
Completely smooth are linear Journey it's not and that's the nature of being in industry and disruption but that's the also you know it's what makes it fun I mean I said tell our teams a lot.
You know if you can recall the first time you ever walked up to a rollercoaster I think everybody had the same reaction you first time you walk up to a rollercoaster it looks really really scary.
Can you ride that roller coaster for the first time and you get done within about 70% of people go I'm getting back in line and about 30% of people go I'm never doing that again.

[1:07:21] And I think that if you're working in retail these days you got to accept that were a really exciting.
It can be a bit of a roller coaster ride so if you don't like waking up every day and be in an industry that's going through a lot of change it's going to continue to go through a lot of change that I think is really exciting.
But it's going to be a lot of change and so I think you've got to be energized by that you have to feel optimistic about that and I think we have reasons to feel energized that optimistic but it doesn't mean.
The quarter-to-quarter it's all going to be smooth sailing.

Jason:
[1:07:51] Know that that makes perfect sense and that's a great place to end because it has happened again we've perfectly wasted an hour of our listeners times.
Said that Danny can I really want to thank you for taking time out and sharing your thoughts with our listeners.

Ken:
[1:08:06] Appreciate Scot preciate Jason thank you for having us.

Jason:
[1:08:10] Until next time happy commercing.

Jun 17, 2017

EP089 - Amazon acquires Whole Foods Hot Take

Amazon agreed to spend $13.7 billion to buy the grocery store chain Whole Foods Market Inc., which has more than 450 stores.  The grocery category is a $795B opportunity in the US that has largely been untouched by digital.  

  • Terms of the deal
  • Wall Street reaction
  • Impact on the grocery category
  • Winners and Losers

Amazon-Scape that Scot mentions on the show

Amazon Deep Dive EP24 Podcast

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

Episode 89 of the Jason & Scot show was recorded on Friday, June 16, 2017.

http://jasonandscot.com

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

 

New beta feature - Amazon Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 89 being recorded on Friday June 16th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot: 
[0:39] Hey Jason welcome back Jason Scott show listeners tonight we are disrupting our usual weekly schedule for a new.

[0:47] A schedule format that we call a hot take this is going to be an episode where we really go deep on one big news item.

[1:11] Unless you're sleeping on a rock that big news item today is Amazon's 13.7 billion dollar acquisition of Whole Foods Jason what do you think pretty crazy day in the world of the e-commerce and Grocery on.

Jason: 
[1:25] It it was it was totally inconsiderate I woke up this morning with a full agenda of things I had to do and this completely disrupted it.

Scot: 
[1:33] Cool so let's kick it off at I'm really curious to hear your thoughts you and I haven't had a chance to talk about it so this is definitely a hot take let me kick it off with a little bit of.
Data so the deal was at $42 a share it was announced this morning before the Market opens so that's a 27% premium to the the share price from yesterday.
As I mentioned at the top of the show 13.7 billion dollar valuation.

[1:59] So Whole Foods has 460 stores they are mostly in the US they do have some stores in other countries,
87000 team members I think the last number I saw I had Amazon at 3:40 340,000 so this puts Amazon well over 400,000 employees,
another little nuances there's a 400 million dollar breakup fee and what's interesting about that is the way these deals work is you know they.
You you got there you submit a bid you work with a board the board except said but as a public company they have to accept bids from other folks.
And a deal of this size has to go through quite a bit of shareholder and Regulatory governmental kind of approvals so.
The breakup fee kind of indicates that Amazon felt like there was some risk that there could be a competitor competitive bid and then the market reacted also.
Closing at 4286 today so some hedge fund manager out there is willing to pay a little bit more than the $42 a share as kind of a bit of a hedge to see if another bitter comes in so.
Now that the kids this could be the start of the drama so I have to kind of see using things happen pretty quickly and within the first 15 to 30 days so.
I know relatively quickly if there's going to be another bit or not so that'll be interesting so Jason.

Jason: 
[3:18] What does that is that for a million breakup feet is that in some sort of like a poison pill that makes it less appealing for someone else cuz they would lose the former million value of what they just acquired.

Scot: 
[3:28] Yes so that just means that it has to be 13.7 + .4 so 14.1 so they would have to.
Go to have to cover that and it just means that you know it can't be 13.7 one.
Really so it's Amazon Amazon's argument on that would be this is how much money were investing in this and the Damage that would cause if you chose another bid so yeah.
I don't think it was 5 billion it would be insurmountable but I think it's small enough that it is not really a poison pill.

[4:03] Yeah so I'm really curious what your your high-level thoughts are on this since you're kind of real close to the grocery world.

Jason: 
[4:11] Yeah what should I think.
Thematically this makes a lot of sense we've talked a lot on the show lately about the grocery business and in my opinion at least that,
did the the mass market for grocery is buying line pick up in store or order online pickup in-store in the.
That requires you to have shorts and so you know a lot of the traditional retailers with would say hey this is one area where we potentially have a competitive advantage over Amazon,
you know they've been in the space for 10 years they haven't captured a lot of market share they don't have a really strong brand for fresh and they don't have any of these stores for pickup in-store so then you know couple months ago we talked about Amazon opening in the,
the Amazon fresh pickup location which was their first pilot of a online pickup in-store experience,
you know back then we said and if this works if this proves out to be the right model for grocery pretty pretty likely that Amazon will scale and scale at will either,
mean by someone that has a lot of stores or open a lot of stores and so you know.
Fast forward not very long I think less less time than any of us suspected and Amazon bought 460 stores.
To give them great buying like pickup in store locations that overlap there their existing Prime Membership very well and,
really bolster their their creds in the fresh-faced and it turns out in in grocery what really drives your selection of the vendor very often is the quality of the perceived quality of the the fresh stuff in the produce and so so like on all the scores at this seems like a.

[5:47] A very logical move for Amazon.

Scot: 
[5:52] Cool see you think so the prime pick up hasn't been open long enough to really have much data I don't think so so it's not entirely clear that.
That's winner and now they're putting their pedal to metal there may have been something more even opportunistic because Whole Foods had an activist kind of in their rattling some swords their valuation of been down a lot of folks shareholders had one of them to seek a strategic,
buyers and they've been struggling because they kind of invented organic category and now every other grocery store has organic,
it may not be true organic I don't know the whole Nuance of that but the other perception is out there that now Whole Foods is kind of out there alone with just organic and they're super expensive,
so it goes more opportunistic or do you think Amazon sees something with one of these tests they have going on that says scale now.

Jason: 
[6:47] Yeah it will no I think you're certainly right that they haven't had time to collect enough data to have those tests like influence this but like clearly they could have already made the decision that that buy online pickup in-store,
is going to be a mainstream delivery model for for grocery and into your point like there's a lot of opportunistic elements here in one,
we haven't discussed yet is you know Whole Foods was a little distressed which which presumably affects the price but there's,
a lot of new headwinds coming into the grocery space that we're not going to be favorable to Whole Foods so one of the most feared grocers on the planet is this German company called the Lidl,
and then they literally just Grand open their first crop of stores on the East Coast this week they plan to have 600 stores in the US,
what their model is is super low prices very No Frills on the service but very high quality organic produce so it's,
give you that that great quality fresh mostly through private label and and locally-sourced stuff,
add an extremely low price and then a lot of markets they've been able to get way below the traditional price leader in so,
that's a scary entrance to the US market internationally those guys compete with another German company Aldi quite a bit all the RT has a footprint in the US and they announced last month that they're going to invest.
Another I think four billion dollars in the US to dramatically expand their footprint so if you had Whole Foods that was already in a rough spot.

[8:19] You got all of these two scary new entrance Aldi and Lidl coming in into the market you have Amazon saying shoot we need a footprint of stores we need more credibility in fresh,
to release kale Grocery and you know groceries the biggest.
Consumer retail segment that that you know hasn't really been dramatically impacted by digital yet so I feel like it was just sort of a perfect storm of,
there was a good acquisition Target that had a lot of reasons to sell an Amazon had some strategic reasons to buy.

Scot: 
[8:52] Cool and then one of those guys owns Trader Joe's right so is it Aldi don't they already own Trader Joe's.

Jason: 
[8:59] I think that's a hold is who you're thinking of.

Scot: 
[9:01] Yeah this whole grocery space everyone owns every other one I most like will what about Food Lion and then it's part of a conglomerate that the kind of rolls up.

Jason: 
[9:10] That absolutely there's a lot of like there's these all were independent little Regional Grocers then and there been already been a lot of consolidation so that you know Kroger is the largest.
The stand-alone grocery retail in us that you know they're the result of the ton of of consolidation and then Albertsons Safeway is the second biggest and there they own a bunch of the Regionals including some of the ones you just mentioned and.
You know it just goes down from there although there aren't there still is a long tail there still are a lot of small Regional grocery stores that may be only five or six stores in the market.

Scot: 
[9:44] Tell me one of the things I always look to is it's on the Wall Street reports that are out there a lot of them have covered some of the math weave walkthrough,
one of the ones that was interesting was that you point it out it's the largest acquisition Amazon history so that's kind of interesting and the question was just this this is me we have a new.
Your new world order here is are we going to see some more really big swings kind of a thing that's interesting to think through another one.
So Cowan was pretty aggressive and by their math this makes them the number 5 retailer,
set for grocery and they did all the math of taking grocery out of Costco and that kind of thing and then they projected Amazon could be in the top three by 2021,
and I looked at that that would have to be pretty crazy gross I'm see if I will spreadsheet here I think that got them up till like 80 billion to get the number 3 based on the my back in the boat math.
Does this drive with your your kind of understanding of the grocery market.

Jason: 
[10:50] Yeah although like I do think that there's a there's like retail there's a bunch of different definitions of grocery and so like I think there's a couple different size of Market figures out there but but the direction I think that toy makes sense.

Scot: 
[11:06] Cops in woods,
what do you think about integration so so let's say you are you know you're Jeff Bezos congratulations you're you're extremely rich and you now own you're going to own Whole Foods what what's your integration plan like at where you take this thing.

Jason: 
[11:24] I think you're going to give away a fire phone with every purchase.

Scot: 
[11:28] Something damn you just left I can have to spend them back up.

Jason: 
[11:31] Got you and maybe a Washington Post subscription.

Scot: 
[11:35] Oh yeah you definitely.

Jason: 
[11:36] No I mean like the real answer is who knows like you know superficially.

[11:44] You'd eat a Whole Foods was not very digital you you couldn't order online you know that in fact they Outsource most of their digital Miss to.
Our friends at instacart that I'm sure we'll talk about on on this episode and so suddenly you know if your jet pays us the main thing you're going to do is.
To help help Whole Foods catch up digitally you may integrate ordering into the the Amazon Fresh order portal or you might create your own portal for Amazon for.

[12:14] Foods you're going to.
Definitely you know figure out a way to Market that ordering online to your 250,000,000 Amazon members and your you're sixty or seventy million Prime members and all this or two things that maybe even try to offer some prime incentive for shopping at Whole Foods.
And you know just really use Amazon scale to sort of fixed some of Whole Foods eels.
I feel like it step 1 and then longer-term you know.
That's 460 distribution centers that like are in that last mile delivery Zone to a lot of Amazon's most valuable customers so do you start figuring out how to.
How to turn Whole Foods into a mini Amazon Prime now Depot of some kind and and use it for distribution for more products do ya.
You know start except for the first time accepting,
returns from online purchases in a physical presence and you know some of those things right like so they're about to places that can play out there's a lots of potential synergies in the Echo System that you can imagine,
that that Amazon could have leverage to make you know all these parts more sticky but like you know I suspect like part of the value prop to to Amazon has to be,
that the Whole Foods was sort of a flat ass at and that Amazon has the the unique skills to help resolve that fly and so they they can buy it for the discounted price and then you know turn it into a more valuable asset.

Scot: 
[13:40] How about just kind of blocking and tackling in grocery do you think Amazon can go in there and I certainly not their mindset to be the high price kind of,
differentiator for sure and category so you would they go in there and and lower prices so for like Zappos I could argue while they didn't redo that was Apple's Apple still doesn't like the cheapest place to buy shoes so you know.
But at the same time I think Amazon probably lies this you can't win grocery bye bye being relatively expensive so curious what you think about that.

Jason: 
[14:13] Yeah I do think that both from Amazon's value proposition and and you know the the typical flywheel that they usually like to,
to execute is going to require lower prices that pull more people in that store and then the external pressure that we talked about earlier with you don't Walmart significantly investing and pricing Grocery and all the doubling down and and wheedle entering the market like I don't think,
Amazon strategies going to be to sit tight as the premium offering and you know frankly.
We've all seen that sitting sitting at the premium price point just just hasn't worked for Whole Foods.

Scot: 
[14:51] Yep what do legal in Aldi do around buy online pickup and delivery today is that an area of innovation for them or it's more just like the the super low prices.

Jason: 
[15:00] So we don't know about Weedle in the US yet like they they 10 offer that in markets where it's heavily adopted so I cuive talk a lot about the UK that being on much more common tomorrow Nolan just turn mine listeners,
about 1% of grocery sales in the u.s. is online that 6% in the UK is online and it's mostly click and collect.
So they do offer a click & collect in the UK for example all the has not offered really any digital experience in the u.s. today so.
You know.
It will be interesting to see art like are they looking to be a fast second mover and is the consumers adopt that model they'll jump on it like they did in some of the foreign markets.
Will the threat of Amazon cause you know all of these retailers to come to accelerate their digital plans like you know I think that's.
Going to be one of the fun things to watch and I should mention the while we've been talking the the Jason Scott show in terms of frantically been trying to get my attention and point out that as usual Scott was right Jason was wrong in.
Trader Joe's is owned by all these parent company.

Scot: 
[16:05] Stop stop happen again.

[16:12] So one one thing that's interesting is in for listeners that haven't listened every episode first of all shame on you and II of also Prime now is in 46 markets I think last time maybe a couple more they've opened up some International and still it was caught 46 248,
and the way they do those deliveries is Amazon has their own Uber like.
Driver system called Flex so you know one of the things that it's interesting I know you're a big fan of the Click and Clack model but it seems to me they could scale that up pretty quickly I I've heard that there is.
A lot of the demand from drivers cuz it pays orders of magnitude more than an Uber kind of a thing just got better than City and you're you're bringing groceries around and not people and and evidently.
People tip better for whatever reason I guess they appreciate groceries more than people so you know it seems to me one thing that could do pretty quickly is have Whole Foods have a better delivery kind of experience where there's no.
Charge or it's part of a prime offering would you don't you do you think that's likely or you just start convinced that's kind of.
The best way to solve the grocery problem.

Jason: 
[17:21] No I think it's very likely and there's a segment of Shoppers that want that right like both from a geographic Stan,
point and from an economic standpoint I just don't think that that segment of Shoppers is the mass market so for sure,
Whole Foods in a Musa a reasonable amount of volume in home delivery through their instacart partnership it's it just wouldn't be profitable if the VC's weren't paying instacart to deliver those groceries right inside of certainly.
Amazon will be in a much better position to take that over and scale it and add some operational efficiencies there and so I suspect we will see,
both better click and collect experiences and better home delivery for you know the customers that want that and and you don't can be home at the right times to accept the deliveries.

Scot: 
[18:09] Cool what when area I kind of read some things about was.
In an area that's near and dear to your heart is payments and you know one of the Welsh you guys pointed out that one of the areas that gets the highest complaints about the the Whole Foods experience is waiting in line at the checkout,
see the Gammas on could apply some of their payment kind of methodology and then another the first thing I thought about was the ghost or at I know that's not really ready for prime time but,
you know there's got to be a lot of automation at the checkout there do you know if you were going to do that Amazon's assets what would you do to speed up that checkout experience.

Jason: 
[18:44] That one of the first things you could do is they could do a Starbucks style digital wallet they've got you know payment information stored for 240 million Americans,
it's so they could make it super low friction to use that storage in for me that's that stored information.
By showing a barcode on the Amazon mobile app as you go through the cashier and that as they do in the Amazon bookstore for example.
So adding that digital wallet that that links to the payment information you already have them fight with Amazon would be a super easy step.
The the Go stuff like obviously this is a place where they could ultimately leverage it or deploy it but your point you know I think it's a ways away and I think.
That the traditional Whole Foods layout is not going to wind it is not going to be the easiest environment to deploy Amazon go in so I don't think that's something we'll see you in the.

[19:40] In the early days but I could certainly imagine that grocery shopping is a whole new reason to have the Amazon app on your your phone and to Leverage.
Mobile payments maybe as part of getting you know.
Some some from them benefit for checking out right like it essentially Amazon is the world's greatest customer Affinity program and they could bring that to Whole Foods now.

Scot: 
[20:03] Yeah and I haven't had a chance to talk about on the show but they are released this new payment system called Prime reload.
That that's pretty nursing so the way that works is minor standing is there they're trying to get people to use Bank transfers instead of credit cards credit cards have a 2% fee Bank transfers are,
are very very inexpensive for merchants so the the way it would work is almost like a Starbucks card where do you load a tax dollars on to it at a time draw it down and then you get 2% cash back because Amazon's no longer you know having to fund that credit card transaction,
that seems pretty you know applying that to grocery is pretty exciting I've never seen our true percent back kind of program like that and grocery do you think that would be a natural one to kind of play out here.

Jason: 
[20:48] It absolutely could it's interesting like you know we've all been surprised.
That is taken Amazon that long in this particular case cuz that's a huge savings for them again all these customers have that stuff store they have a high level of trust with a customer like all the normal impediments that you would think we keep you from.
From aggressively shifting customers to to those electronic fund transfers instead of the credit card interchange transfers.
It's surprising it's that it's taken Amazon that long so so certainly now that they've done it you can expect them to leverage it in these doors one when nuance.
Our friends at the credit card company that are pretty clever and they usually build into their terms of service that have you want to accept their cards you have to promise to give their cards equal weight and equal billing with all other payment methods and so.
Like very often it's against,
it is is potentially against the terms of service agreement you have with Visa or Amex to offer electronic funds transfers for 2% less,
and that's why most retailers don't do that but you can imagine that Amazon at this point has enough volume that they have the leverage in their negotiation and you know it may be that we had to wait this long for the future and Amazon because,
it took this long for them to negotiate new new terms and conditions with a credit card companies that allow them to do this.

Scot: 
[22:11] I always heard you couldn't explicitly charge more for credit cards and but I thought maybe they were being sneaky by charging last bit sounds like you think that.

Jason: 
[22:19] So there's consumer protections about charging more right into that can literally be a criminal offence but the,
the charging less is is certainly not illegal but again the you know Visa you know knows that you need to accept Visa in so they can say,
hey as part of your agreement for accepting Visa you have to promise not to make these other vehicles cheaper.

Scot: 
[22:42] Cool another area that kind of popped my mind when this was announced this because I did that Amazon scaper I took all their brands and put them onto one.
One chart.
Your folks are listening in her haven't seen that yet it said Billy Billy Amazon skateball one word and it's funny I set down to do that and then I just like started working on.
I thought okay I'll have to have an area for all their retail offering so I'll Prime now and all that on there and then.
You know this that the other and that's like I'll do the private label stuff now and I thought okay obviously have Amazon Basics and then as I started to kind of go through all the times that I.
Founding Father folks talking about different.
Private labels there's like 50 private labels at Amazon and a lot of the newest ones are in this kind of grocery category you have wickedly Prime some of them are prime exclusive some aren't.
You could talk about Mama Bear and then another interesting thing I didn't know about Whole Foods I'm not a huge Whole Foods Shopper they have a very large private label called everyday 6365,
so so another really interesting thing here is Amazon has to pass here they can put their private label stuff into Whole Foods and then they could also.
But the everyday.
365 for sale on Amazon and Prime now and fresh and where were all these different mechanisms using private label factored into this at all.

Jason: 
[24:09] I do I think you nailed it like there's a bunch of synergies what will be interesting there is,
will the brands get equal-weight like like so the the whole food brands have,
probably better consumer recognition today and you mentioned Eglin 365 everyday but there's also this like whole trade and engine to a number of these brands that whole food Shoppers are familiar with will be super,
easy to imagine seeing those on Amazon the bigger question is brands that are brand new to Amazon that Amazon's just investing in like happy belly right for nuts and almonds do they keep investing in that or do they you know.
Or is there an overlapping 365 degree at the n65 everyday nut pack and they they just adopt the,
the whole food one or you know do they take 365 brand and use it for all the Amazon food like they're there lots of permissions I can play out it's going to be interesting to watch but,
I would definitely imagine that that private label was another valued aspect of the Steal.

Scot: 
[25:11] Yeah then come expanding from private label out of ring know Amazon has had a lot of,
water brands just in general but I'm sure in the cpg category that don't want to sell their one of the most popular or the most.
Popular ones we heard about his Honest Company and I would just just out Jessica Alba's company wouldn't sell on Amazon so then Amazon created their own diaper line and some his other things some of that worked Amazon elements in some of the Denton but Amazon seems really want that kind of product,
imagine that this gives Amazon just another kind of hammer to say to brands well you know we're going to kick you out a Whole Foods unless you sell your whole assortment at all the Amazon offerings so so there's also kind of an interesting selection angle there do you think that's going to happen.

Jason: 
[25:58] Very well could and don't forget Whole Foods is an incubator for a lot of those socially-conscious products oh.
You know that they have a model where like individual entrepreneurs can pitch Whole Foods and Whole Foods might put you in one store or one market and you know if it does well there you could eventually expand to,
to their National footprint in so they have this great system for onboarding those Brands like really early in their life and now you know it just.
The.
The final win isn't getting in the 460 Whole Food stores it potentially is you know getting on the Amazon platform and and reaching turning 40 million customers so.
So I absolutely think that that that Amazon will use the Whole Foods leverage with some of these brands.
You know to get more of the more the brands they want info in front of more of the customers they want there's also an interesting one one of the most successful private labels out there is the Costco brand Kirkland Anna a fun fact,
Amazon sells more Kirkland online then Costco does.

[27:06] So they're the biggest distributor the third largest retailer was Jet and after the Walmart jet acquisition jet is actually phasing-out Kirkland off the site and so.
Now really interesting thing and you know this is highly speculative but.
Could Amazon double down on the Kirkland relationship like could they ever have smaller packs of the Kirkland products in Arnhem propria for club and start selling through Whole Foods.

Scot: 
[27:37] Who who initiated that stoppage at Walmart was at Costco or Walmart who said no mas.

Jason: 
[27:45] Minor standing is that it was that it's a Walmart decision to buy Walmart I assume that's Mark Laurie but but to phase out cuz obviously Sam's.
Gladden and Costco are direct competitors.

[27:59] Now course is you know Jets also a Marketplace so I'm sure there's still going to be 3p sellers of that stuff.

Scot: 
[28:06] Yeah II.
Two kind of specular things about that position I wanted it seems kind of silly to me but I just want to bounce Matthew one was will surely they'll close the stores and just convert him into fulfillment centers that doesn't make sense to me because,
you know these stores are chosen to be in high traffic retail areas that's not where you would both of them the sooner that you can ommix don't work.
So this was like some of the folks saying this for like clearly you know it.
It wouldn't even have like pick up there just be a fulfillment that seems kind of silly to me into the second one was some way to leverage the third party system in Amazon and liquid doesn't make sense in that world is.
Yeah the pricing the stuff of filming is really really hard with a physical footprint of the 3p model doesn't really work and physical.
So that down didn't really resonate with me either maybe there's some things like with some certain.
Yeah maybe like some Farm kind of stuff could be almost like 3p also what I'm more of a commission kind of a thing to help with margins or something but I don't know that down didn't make a ton of sense for me either how do you feel.

Jason: 
[29:12] So there and I don't know Whole Foods does much of this but there is a sort of the analogous thing in Martin to 3p would be sort of consignment sales in,
In-N-Out breaking water into their you know there are some grocery that would,
try a product on consignment but I don't see that as a big play if they were going to be a big three pleat 3p play it would be some kind of in whistle experience in Whole Foods right like so if you're,
shopping the vitamin assortment at Whole Foods and they don't have what you want like.
That you know there's a kiosk in there and you know could that now have the entire.
Assortment of Amazon and including all the 3p Sellers and you know could be there be some incentive to ship that that product to the store that's better than shipping it to home who knows right.

[29:58] But you can see it you can imagine a play like that potentially coming in for sure agree with you there's no way they just bought these two for the real estate to convert to fulfillment centers I think the smarter people are talking about,
could it be a store and NFC not could it be exclusively NFC.

Scot: 
[30:14] Yeah even then I mean the Whole Foods I've been in there too pretty jam-packed of people and product it's hard to kind of see him cut enough cutting out much so that for fulfillment center but we'll have to see.

Jason: 
[30:25] No the only way that that works is if there are categories and whole foods that are losers in the Amazon decides to get out of.

Scot: 
[30:31] Yeah definition so.
If you projectus forward do you think that Colin is right and we're going to see Amazon kind as a top three grocery player in like in and let's start to kind of move the chess board around what.
What happens to SAS mean does Walmart take a run at this does Walmart do anything differently it seems like they've kind of place their Bets with the jet acquisition and and Lori and and some things are doing their densities traditional Grocers react United know you've talked on the show about cougars actually,
pretty Innovative and thinking about some different formats and things would tell us going to what you think the three-year chessboard looks like on this.

Jason: 
[31:15] Yeah so I think this is a giant new piece of pressure on that market that's going to fragment,
the traditional grocery market right in there will be a few survivors like hard to imagine grocery is a winner-take-all thing where there's one one National provider,
but you know they're going to be a few survivors and it's again that long tail of grocery rain that we have right now is likely to go away as all those small players aren't able to compete and so,
the young we do projections in the show all the time so I'll throw out some silly ones.
I think Walmart is making big bets in the space and is likely to be one of the winners I certainly think Amazon is one of the big three and then the big question about who the turtle in is is,
if it's the big and comment that's able to survive and hang on and that would be Kroger or if it's one of these new market entrance that's like all the yearly told it that that takes that third spot,
but I would definitely say net net this this was a really bad day at Kroger this was a really bad day at Target you know those guys were already buckling down the hatches cuz they you know they had all this grocery competition coming in the market and you know the last thing you needed is,
the world's most disruptive retailer you know dropping dropping 13 billion dollars in your category.

Scot: 
[32:44] Yeah that's a good Segway into kind of the next segment that I call who wins and who loses so if we think about the winners I think kind of obvious ones or Amazon one today I think their market cap went up much more than what they're paying here so effectively.

[32:59] Market cap accretive Whole Foods obviously this is a great win for them they get to keep the brand that get to keep the CEO of therein,
this like this by the best outcome for them I think they're another one and all kind of say this now and we'll talk about it a little bit later I think consumers when I think you know they're there hasn't been Innovation grocery.
For forever you know we we go to the speech place there's a an IGA there which used to be if I know more and I do like a.
Was it starts of the day you have this old timey grocery store you go in there and it's no different than our Kroger or a Food Lion or Harris Teeter or or anything like that so there really hasn't been.
Tremendous innovation in this category and I think consumers going to win cuz you're going to have more choice and.
Amazon is going to come in and really create amazing customer experiences which is what they're really known for and their lower prices sets I think you know as a prime user I'm excited you know.

[33:56] I may actually start going to Whole Foods more if I can check out faster or there's some really compelling reason to get me in there to do more stuff any winners that I didn't say anything.
Think about.

Jason: 
[34:08] Yeah I know I do think those are the big Winners I got you know I think there's potentially some secondary winners are some of those brands that suddenly get exposure to a lot more more.

[34:22] Potential consumer so some of those those like Whole Food suppliers that could send them now you know.
Yeah have a much more prominent president positioning on the Amazon the.

[34:37] You know again it'll be interesting to see what they do for delivery there you know could be some some winners there in terms of better delivery options and you know I think that's going to be a pretty.
Easy Segway to who the losers are right.

Scot: 
[34:51] Yeah and I almost said suppliers but then kind of some of the things I've read kind of say that those suppliers have had a really easy whole time with all foods that they don't really put pressure on them at all and I think those days are over so so they,
it may be let's put them on the fence so and I think they win with more distribution but I think they're going to lose with getting kind of the the cram down here that they've avoided for probably 10 years.

Jason: 
[35:17] Yeah although I would argue sometimes those forced to sturdy measures aren't fun and don't feel good but they're not necessarily bad for you.

Scot: 
[35:25] I'm sure we asked the brand that would disagree with you.

[35:29] I sold create a third category winners losers and kind of on the fence and put the suppliers in there,
let's go to the losers so yeah you hinted about it earlier Whole Foods had a relationship with instacart and,
I know that they were an investor in instacart and I don't know if this is rolled out at every store but I think it was it was pretty close and you know,
all the dish been in the data out there about the scale of this but instacart was the delivery partner and I can't really see him as on keeping that at all because they already have this Flex thing Amazon likes to vertically in a great whenever they can so it feels like instacart is you know,
Banda on the short block for getting kicked out of that it is that you agree and in do you have any more information on that program.

Jason: 
[36:17] Yeah I don't have any more information instacart wasn't in every Whole Foods in and their relationship with slightly different in different markets the level of integration that they had with Whole Foods for example I think there's some pilot markets where the.
For the integration was very deep the and I think they are certainly a loser,
I would almost say that there the amount they lost today is slightly overblown cuz everyone talks about oh man there this 3 billion dollar valuation company that you know suddenly,
is going to go away and I guess I would argue that I don't think they had a sustainable business model yesterday right like an.
Not creative data path to profitability you know they mainly exist existed to augment capabilities that retailers should have had natively and and you know.
Would probably going to have needed we at some point and so I'm not sure if they had a super viable business model other than 2.
Keep taking more VC money to subsidize the cost of delivery and so I think you know their problem was true yesterday they just probably have a lot less Runway to discover that that's their problem today.

Scot: 
[37:28] So they're winners in the Jason world short where austerity is good.
Can tell you haven't been an option or Jason.

Jason: 
[37:37] I resemble that remark but.

Scot: 
[37:40] You been on the short into one of those new Cycles.

Jason: 
[37:43] Oh I've been on the the business end of Walmart Bender negotiations many times.

[37:50] But yeah I think is this definitely going to affect instacart but you know again I don't think instacart was on some path to a Rosy future before this.

Scot: 
[38:03] Glad I noticed you and I were both mentioned talk to about getting a quote to a reporter and were in that and you mentioned Target what is being pretty heavily impacted talk us to your logic there.

Jason: 
[38:16] Yeah what's up there not a traditional grocery store but that was one of their growth strategies right and so big part of their growth strategies these five signature categories and one of those signature categories is called Wellness.
And a big part of Wellness was organic organic food and health food and so won't Target who made a major investment in.
Upping their presence in that that market like they do have Grocery and they they've tried to use grocery to drive incremental trips and they haven't been super successful and so again they were one of these guys that were like.
Shoot we're trying to win on organic fresh when weedles coming into the market that doesn't feel very good and then you know to have.
Amazon partner up with with Whole Foods you know really makes it less likely that that.
The target is going to win by by having these these Wellness food products in their stores and then you know we're not talking about alone on this show,
Walmart also had an acquisition today of bonobos and that you know.
That is probably not not favorable to to Target either and so Target just looks like there.
They're standing still in a world where there their traditional competitors are all making you know pretty seismic leaps forward and so that that just can't feel very good at Target today.

Scot: 
[39:38] Yeah I didn't know it but one of the Wall Street notes eyes I saw today said Target Outsource some of the Pharma stuff to CVS and their idea was Target should just Outsource this whole grocery kind of experiment to a Kroger or or someone just so you like actively get out of it ASAP you think that's a viable strategy for Target.

Jason: 
[39:59] It is possible like so again if you know grocery is super thin margins anyway and so if you're not built for those margins like you're using it for traffic and you're losing money so if there's someone else that's willing to take that over for you and you still get the benefit of that traffic and you don't have any of the risk of of the losses.
You can imagine that that being the case in.
In the health case you know Target tried to run their own pharmacies and in weren't super successful so Outsourcing them you know,
what was probably not on the world's most favorable terms to Target and you know I suspect that would also be the case if they had to have Source grocery at this point.

Scot: 
[40:38] How many Target stores have groceries do you do tobacco.

Jason: 
[40:42] I do not know.

Scot: 
[40:43] And then you know how big it is for them isn't like 5% temperature 20%.

Jason: 
[40:49] I also don't know that so I will refrain from taking a guess.

Scot: 
[40:54] Ducks about Kroger are they they definitely were a market cap loser today I think you know one interesting thing is if you add up the market cap from the grocery kind of category 40 billion dollars was lost today so so so not only did Amazon ad,
you know plus.
Stop about 20 billion to their market cap that they took away 40 out of the market so kind of a positive swing for Amazon of 60 billion there and quiver was one of the,
biggest losers in this just from one day Wall Street think so but what kind of more should TJ do you think Kroger is in this puts them in a tough spot.
With the same kind of logical Aldi Lidl coming in and now you have this other kind of unknown player.

Jason: 
[41:36] Yeah cuz I got that you know they were one of the largest traditional players in the space and that you know there they were.
Under Siege from Walmart and ALDI and Lidl and you know you could really look at what all the illegal do and say man there,
they're incrementally better than how we've traditionally done it in the US and so they're going to be a formidable competitor but.
Amazon is likely going to be an exponential disrupt or not an incremental one,
and so that's that's a lot more pressure on Kroger like Kroger certainly has made some strides in the last year 2 in digital and they've rolled out.
Quick List which is their version of Quicken correct in like 3 or 4 hundred stores and you know by all accounts it's been wildly successful but those initiatives what really good in a space when no one was making any digital progress and so you you kind of got to look like the most Progressive of the,
the traditional players and now suddenly you Dome,
you don't want that Progressive and so that that you know that's going to be tough at Kroger that's a formidable new competitor in in the space and they're the incumbent.

Scot: 
[42:47] When I was surprised at for Milwaukee respectables Costco I think last I looked they were down about 10% or so yeah the.
I just don't think of them as grocery because you know your.
If you think about the layout of that store maybe a quarter of it is grocery but but clearly I must be missing something what what is this cause for them.

Jason: 
[43:11] Yeah so you know that this gets into the definition of grocery right like so what,
what percentage of their products are at risk there the least digital company on the planet right like there,
executives are still talking about how we don't really want to encourage people to go online because we'd way rather than come to the store and you know there,
there you'll be easy to make fun of them were it not for the fact that they're wildly successful.
So you know to put things in perspective Walmart's the largest retailer in the US largest retailer in the world woman has 4,000 stores Costco's the second largest retailer in the US they have 727 stores.

[43:53] So they're there that you know they're doing well and they have a formula that works well for their their customers.
You know they sell products that are now going to be in competition with Whole Foods Amazon Amazon going to make Whole Foods better and that you know that like just has to have some effect on Costco what is interesting.
Yo Costco probably does not look at Whole Foods is a direct competitor right like both from from the the products that.
Are high velocity in both both stores are very different and the size of the packs are dramatically different as well and so the the Costco assortment looks a lot closer like Costco grocery products with a lot more like.
Amazon grocery products in terms of being cost-efficient to ship right like you want to ship the 36 pack of toilet paper not the 4 pack of toilet paper.

[44:48] So you know it'll be a little interesting if the combination of Amazon in Whole Foods means that more of those packs are available to more more Whole Foods customers but.
But I think.
At this point like I don't think this is a game changer for Costco it's just you know another aggressive competitor trying to seek wallet share.

Scot: 
[45:10] Yeah and then the big ones Walmart so in the Amazon deep dive we did pretty early on to remember that was owed on that one.

Jason: 
[45:18] I don't you should have prep me for the show we should have like rehearsal or something.

Scot: 
[45:23] This what happens when I do a hot take so anyway we did this episode called Amazon Deep dive will have put it in the show note so you can find it a little bit easier he was one of our first 10 episodes or so in there we talked about.

Jason: 
[45:38] Episode 24 Amazon Deep dive.

Scot: 
[45:40] Oh yes I remember it so well and one of the things you and I talked a lot about is the fact that when you just look at Amazon.
Revenue numbers it's like 160 million for this year as was projected,
but inside of there is that third-party DMV which I think you have to kind of unpack,
so one of the things I like to do is say if you take Amazon one p and 3p for this year you actually get up to 300 billion dollars and then now we're going to layer in 16,
from Whole Foods so you really have a 2017 Amazon that could.

[46:16] If this deal goes through it again this kind of enough they won't get the benefit of a whole year but think of run rates Dow BS 316 billion dollar kind of Revenue run rate company.
Walmart estimated revenue for this year is 485 so Walmart is still considerably bigger than the.
Find energy of Amazon in Whole Foods but number one if you take grocery out.
Amazon's already bigger than Walmart in the number to the disparity of the growth rates is about 20%.
And the kind of project that out not too far I think it's like two and a half years then with this acquisition Amazon.
Could be bigger than Walmart all in including grocery by you know call it 2020.com so that that's.
Pretty amazing and that that assumes there's no other big acquisition no what if what if I don't know what else is buyable out there from from that standpoint,
it seems like some of these things are almost unbuyable like a Kroger I don't think either Walmart or Amazon could buy that or and it sounds like Trader Joe's and so he's other International ones are so big internationally that they can't be acquired so but even without an acquisition I think the.

[47:28] We are going to see Amazon has a shot at being bigger than Walmart by 2020 if my math holds up so is Walmart Loser on this or you know I think it's kind of overblown with what's your take on this.

Jason: 
[47:40] Yeah I think in the short-term like again nobody likes seeing their competitors get better I'm sure Wal-Mart looked at Amazon as as.
Like their most significant competitor and so then to see them enter a space that Walmart's enjoyed a lot of success and then Amazon hasn't had a lot of success in.
Like that you know that I'm sure nobody's thrilled that that's happening at Walmart I do think they're well-positioned to be one of the survivors so if you if you look at this move in the long run and say oh this is going to force a lot more.
Industry consolidation and only the people that are able to adapt an offer good digital experiences to their customers are going to survive and you know only people that able to offer like really good products at really good prices.
And with all these good digital touch points are going to survive you know Walmart has the resources to do all those things but remains to be seen whether they will or not.
A lot of these other retailers don't and so like well I'm sure in the short run this isn't favorable and you know I think.
They made an acquisition today and they probably would have liked a happy new cycle about.
I have Progressive they're being in digital and making great progress and buying you know increasingly bigger bigger and more profitable digital companies and I think that that news I got totally obliterated by.
By this much bigger acquisition that that Amazon did so you know I'm sure in the short run that that didn't feel good.

[49:01] But yeah I think what we are setting up is going to be the Epic retail Battle of our careers which is.
You know going to be this this Amazon vs Walmart.

Scot: 
[49:13] Anyone else we've left off the loser list so just a couple of throw out there I saw in the stock Recaps SVU gets mentioned a lot and I guess that's super value but they seem to be,
I'm kind of micro cap on this I'm not sure what's going on with those guys.
But they were down like 16% and almost feel like something else caused it and then a couple I thought about are some of these pure digital folks that are kind of tangential to this space Blue Apron box,
any any thoughts around those guys or any other folks you think her potential losers from this do.

Jason: 
[49:48] Yeah I don't know that those are like I think of anything their acquisition prospects may have just got in a little kiss right like because.
Again Amazon is going to do more Progressive things more quickly than the grocery retailers are used to doing and so even in an Amazon doesn't do any Acquisitions and they build all these features out organic.
The the other significant retailers are going to need to make Acquisitions to keep Pace with Amazon right and so you could imagine.
Amazon launching you know their own meal service and that making Blue Apron look like more of an acquisition Target now you know they're going through a IPO right now so.
So you know I don't I don't know how that complicates all that but you could certainly imagine.
You know box being a box acquisition being a defensive play to stay in the digital realm in competition with with Amazon with the you know Prime Pantry type type experience.

Scot: 
[50:44] Crinkle one area that I saw that was interesting and I kind of.
Talked about of the top the show is there's a couple articles out there saying that this is going to trigger this huge antitrust kind of thing and,
it is weird angle they all took was there worried about job is being cut at Whole Foods that's not really any choices about any trust as more about will consumers be harmed and I just don't think yeah sure Amazon's really big but Amazon is like.
Not even a player in grocery or.
Physical retail if if Aldi Commerce is 10% and Amazon is a third of that 10% and that's being generous if you unpack the DMV most people don't need to do that so maybe they would say 25% of that 10 billion.
Microscopic thing and it doesn't feel like there's some Monopoly being built here and even.
Even then they'll be like number 5 and groceries so do you think there's antitrust risk your.

Jason: 
[51:40] Yeah well so I should caviar this by saying that every single lawsuit I've been in for antitrust with a doj I've lost.
So so so take my opinion with a grain of salt but that that being said I don't think this is an antitrust issue I don't even think they're going to look at it that hard because it is the space is just too wildly fragmented you know.
You like from that you know most of the,
the buzz and the the disruption in the fear about this is not liked by looking at the numbers and adding them up it's.
By Young speculating about the the strength and skill sets of of Amazon being applied to this new category in the more serious way and you know the doj is not going to have an opinion on that they're just going to look at it and say.
That just doesn't fundamentally you know a road choice for consumers and you know therefore be bad for consumers.

Scot: 
[52:34] Awesome those were the the big kind of points I wanted to hit on this hot take anything else you wanted an.

Jason: 
[52:40] Well it's you talked about some of the market cap losers I was I took a quick look at it Walmart's market cap and it seems like they're down exactly 13 billion dollars which would have been enough for this acquisition.

[52:53] So like here's a crazy question like since people could still bid on this like.
Couldn't couldn't form Walmart step into this the the bidding like I don't feel Whole Foods would be near as valuable to Walmart as it as it is to tie Amazon but could they do it as a defensive market cap play or is that all likely to.
To settle out and not be.

Scot: 
[53:14] Yeah market cap it doesn't actually give you dollars to spend on something sensible apples and oranges so you know their challenge probably would be.
I think they have enough cash I think their challenge would be the creativeness of it you know Walmart is held to a very pristine EPS number and if that changes our goes down that has a much more dramatic impact on their stock than anything,
so sorry I almost think that that would be a problem and you know so so I don't know.

[53:50] I don't think that would drive it if they want to do it it's going to be up crap we got to kind of get in here and keep this a set from Amazon kind of thinking yeah I think the I think they.
I think if they actually won it would actually hurt their stock worse than what you seen because my guess would be they would have to lower their numbers pretty effectively and you know the thing is I don't think Walmart knows how to go.
Whole Foods office their playbook doesn't really work in his whole different customer but but you know so I think they're going to have to your list let's pretend they want it they ended up spending.

[54:24] 17 billion dollars I think that's going to be diluted and.
In the way Walmart get Side by Wall Street. Gets Amplified almost by like a thousand so I think they would actually lose like 60 billion of market cap or something pretty substantial if they had to come out with a pretty deleted Acquisitions or weird way,
we were played those board games where you can come like getting a 3-way trap I feel like Walmart may be a little bit of a three-way trap here if they really think through them plication of of.
Of this site if you're Amazon you may actually be okay for them to go but by this and spend more and it's kind of like a win-win for Amazon.

Jason: 
[55:01] Very interesting okay well Scott I have enjoyed ripping with you on the exciting news for today.

Scot: 
[55:10] Yeah yeah we appreciate you guys,
coming in for the hot take and hope you don't mind a little bit of extra Jason Scott show this week so we will be keeping track of this as it develops at you know where your go-to source for e-commerce news,
and this is something we'll be watching very closely.

Jason: 
[55:28] Yep and if you have any thoughts about the news or feedback about the show we'd love to hear from you on Facebook and if you enjoyed the episode feel free to write us a review on iTunes until next time happy commercing.

Jun 16, 2017

EP088 - PwC Partners Steven Barr and Byron Carlock

Steve Barr (@Steven_J_Barr) is a partner in the Consumer Markets practice at PwC, and sits on the NRF Board of Trustees.  Byron Carlock is a partner who leads the Real Estate practice at PwC.  We sat down with Steve and Byron to talk about the current state of the US retail market and what the future may look like.

In this interview, we discuss, Mallageddon, Omnichannel, Grocery, Mobile, and of course Amazon.

PwC Consumer Markets Homepage

PwC Real Estate Homepage

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

Episode 88 of the Jason & Scot show was recorded on Thursday, June 15, 2017.

http://jasonandscot.com

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

 

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this episode is being recorded on Thursday June 15th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Cohoes Scot Wingo.

Scot, Steve, And Byron: 
[0:39] Hey Jason and welcome back Jason is got show listeners,
Jason tonight we have two guests on the show that are going to help us better understand some of the retail and real estate dynamics that we've been talking about here in 2017 first we have Steve bar Steve is an over 20 year veteran of pricewaterhousecoopers which I'll call PWC from here on out,
where he is focused on the consumer Market Steve is a frequent for contributor on topics around retail Brands and cpg he's also on the Board of Trustees for an RF,
we also have Byron Carlock and he is the national partner and real estate practice leader with PWC and Works close to the Steve to understand physical retail Trends and how they impact commercial real estate industry he's been at PWC since 2012 welcome Steve and Byron.

[1:28] Thank you John long long time listener first-time caller.

Jason: 
[1:34] We are excited to have you guys on the show and we always like to get things started by giving a listeners a little bit of a perspective about your backgrounds and how you came into your rolls so maybe Steve we can start with you you want to tell us how you got here.

Scot, Steve, And Byron: 
[1:49] Yeah it's good it's really great to be with you so I leave the consumer markets practice at pricewaterhousecoopers which includes our retail practice are consumer packaged Goods practice.
And our travel and tours and practice.
The practice includes our advisory Consulting business and our traditional audit and tax practice I've spent my entire career focused primarily in the retail and consumer space and like I said I'm glad to be with you tonight.

Jason: 
[2:18] Traffic in Byron.

Scot, Steve, And Byron: 
[2:20] Sure and I'm on Byron Carlock I leave the national real estate practice I came to the firm from industry five years ago.
And spent the first half of my career with the Trammell Crow family a prominent real estate family based in Texas with many companies in the various.
Real estate categories of office retail multifamily.
Hospitality industrial and then I ran three routes for a sponsor before coming to the farm.
I also lead the practice across our lines of Services of.
Assurance tax and advisory my jobs almost as fun as Steve's but I'm more the dirt guy and so I'm watching our industry go through an interesting metamorphosis especially in the retail category.

[3:10] Awesome well as the the dirt guy Byron let me kick it off to you and you know so 2017 is you've been an issue for a while and I've got a majun this is kind of,
what is the most brutal years you seen us as relates to Store retail you seen over 5000 stores announced that are closing this year we've had folks on the podcast that say we can get to 10000,
and you're in that Plies Mall closures in the 20 to 30% range over the next two years,
watch County help us frame it giving your long exposure to the market and in the physical retail side how,
what are you seeing out there is it the worst year you ever seen in and any other pontifications would love to hear.

[3:51] Sure I'm going to put it in more of an evolutionary disruption time frame because I think it's very interesting to sit back and realize.
The 90% of retail sales still happen in brick-and-mortar.
And so although e-commerce is the fastest-growing phenomena in retail it's still only 10%.
Of the total spend and so what happens in brick and mortar is very important.
And certainly worth watching and you're rig