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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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May 16, 2019

EP174 - Web Smith of 2PM 

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

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

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

http://jasonandscot.com

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

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Web:
[5:29] I will never forget you guys.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Web:
[21:24] Yes please.

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

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

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

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

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

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

Jason:
[27:14] Interesting for example.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[50:04] Let's go dark.

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

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

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

Scot:
[51:10] I think we do.

Web:
[51:14] I I care about it.

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

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

Scot:
[51:27] Those guys yep you're right.

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

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

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

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

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

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

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

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

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

Jason:
[53:26] Until next time happy commercing.

May 10, 2019

EP173 - Live show from ChannelAdvisor Connect http://jasonandscot.com

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

https://www.slideshare.net/retailgeek/jason-scot-show-channeladvisor-connect-2019

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

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

http://jasonandscot.com

Apr 30, 2019

EP172 - Amazon Shareholder Letter and Q1 Results

Amazon Annual Shareholder Letter

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

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

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

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

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

Q1 Results

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

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

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

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

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

http://jasonandscot.com

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

Transcript

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

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

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

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

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

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

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

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

Scot:
[1:53] Mutually exclusive.

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

Scot:
[2:16] Yes it absolutely is.

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

Scot:
[2:21] Sorry you didn't ask him.

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

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

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

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

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

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

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

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

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

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

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

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

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

[12:47] EBay.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[39:07] Amazon web services is another big big chunk in revenue for that for the quarter was like 7.7 billion.
Which is still 42% year-over-year growth which is exciting cuz you you worry that eventually you're going to email when you
that gets a big that it's harder to keep growing at that pace I'm so I do think the pace of growth is slightly decelerating for Amazon web services but it's still very fast growth and,
just a quick reminder like an unlike the retail side of the business that 7.7 billion is considerably more profitable so that's a nice revenue or profit driver for long for Amazon as well.
Those are kind of some of the the financial highlights what what else would you take away from the the quarterly earnings.

Scot:
[39:53] Yeah there was a third-party side 53% of the units for third party that was a new high Wall Street was expecting the kind of you that has a missed their revenue that Amazon does report from third-party
services that was a little light another positive was subscription Services which grew 49%
and the CFO in his is kind of color commentary and answering some questions
I know at the 4th quarter report listeners remember we talked about Amazon said they had more Prime users added in the 4th quarter than ever before
so one street Wall Street analyst kind of said hey how are those new ads kind of converting is there is. There and they
it said that you know they saw a really good activations across all the different rhyme
capabilities suits what they mean there is no way they do it is in a Bezos says that you'd be
I want to make prime so good you'd be responsible not not sign up for it so so you've got. Obviously the fast free now going to one day normally two days you've got.

[41:05] You got all the Kindle stuff you got music you've got the video star.
I called the Alexa and puts in their busy even more in their exclusive products and all these things so one of the things that they kind of said body language was on the call was there fishing really good kind of.
Is increasing I kind of read it is increasing and this line item called subscription Services where that would show up that grew 49%
what kind of cars do you everything in the first quarter that was kind of the fastest-growing peace which I think it's well if if Prime is prime sign up for when your fastest growing things that that.

[41:43] What's the acceleration on the road as those people start ordering and taking advantage of their subscription
advertising one this was this is interesting so we talked a lot about this on the show it really slow down prematurely it's been growing kind of north of 50% I believe in this load to 34% year-over-year the
there was some talk
the system of all she has reported that there was an accounting change their that some of the third-party types of ads have now moved over into more this merchant services kind of line item and aren't showing up in advertising so I think they're kind of you know.
Are some apples and oranges there and then the CFO did say you know if you
adds grew faster than other so the other line with 34% so he was kind of trying to signal I think if accounting changes out there is still growing pretty rapidly
John Blackledge I referenced earlier you got to put sad visit 13 billion this year and she's at about 35 by.
What kind of the new multibillion-dollar line that Amazon is growing up a lot on the call about how.

[42:55] And I'll take this over to you cuz this is your bailiwick they're adding a lot more capabilities here for agency types of folks to have apis and ability to.
Run multiple accounts and I think they they realize that something that has large agencies need to include Amazon and a lot of ads and it sat out there.
The biggest concern from Wall Street is they have this metric called paid units.
That has slowed those 14% growth in Q4 at slowed to 10%.
Speed unit growth only go 10% yet will Revenue gross means the.

[43:39] The average order value is kind of doubled the only way to make that work in the retail world so there are some bears out there saying this feels like maybe Amazon starting to bump up against.
Challenges of scale in saturation there's a lot of reports that show that there at like 85% less of the.
High-end cameras out there are on Prime and those kinds of things so that's give me a metric I want to watch this really close when they did their forward-looking projections it does feel like a little bit of acceleration but it's not clear
is that coming from a TBI sads or the retail business are our what soaks I was kind of like the only little
kind of cloud on the horizon I would say is the speed unit growth really decelerate it pretty hard it's the lowest it's ever been
Child Say the bottom line on the first quarter is a really solid showing by Amazon the big surprise was the one day Prime that definitely kind of got everyone's attention and like I said before most of the Wall Street folks were pretty pleased and we saw a lot of
yeah raising of price targets to your kind of that north of a trillion-dollar territory up into the the $2,250 kind of ranch.

Jason:
[44:58] That it's going to be interesting to watch that the advertising thing a lot of the new device are right after the announcement like people people miss that
certified accounting change and there was a little bit of a panic in the advertising world because there's been all this talk about oh my gosh Amazon's the fastest growing advertising platform and and you know number of the newest episode of forecasted at 2
do certain eventually be able to compete with a Google's and Facebook's of the world and so.

[45:30] At this point to already have decelerate in growth would have been a concern but obviously if that's.
I'm sure they explained Away by just went buckets Amazon puts the the revenue in then that's that's not as big a concern so it'll be interesting to see.
Like is that does that explain 100% of it or have they had a deceleration.
Well I am sort of bullish on on Amazon's prospects as an advertising platform,
I think you you hit one of the pain points that that's going to keep them from scaling is there there.
They're advertising tools and capabilities are are much more nascent than
say Google or Facebook in and you mentioned agencies don't like that and that's certainly true but like increasingly the the Google and Facebook tools are good enough that clients like to run their own campaigns on and that's
that's way less true on Amazon today so Amazon has a lot of.
Catch up to do on tools and you know you could see that like I'm sure they're they're investing a lot in the tools right now like we see a lot of new apis and capabilities coming out all the time
but but that could be a constraining factor on their advertising and another thing that I still speculate.
Is Eliza constraining factor in the short run is the budget that these advertising dollars are coming out of so.

[46:54] You know I still think the majority of advertising it happens on Amazon is advertising for a particular product that a brand is trying to sell on Amazon and Those ads usually come out of what's called a trade budget
and a lot of the dollars that gets spent on Google and Facebook come out of
a marketing awareness budget and I'm not sure Amazon his establish themselves as as a viable platform for those
those kind of top of the funnel advertising dollars in the same way that that Facebook has yet I think they're ever going to really scale they're going to have to demonstrate that they're good at that too and so I think.
Time is going to tell there but that's probably a good place to leave it's got unless you have any any closing remarks cuz we we've used up the are budgeted time for for the show.

Scot:
[47:49] I think that's all the exciting news on the Amazon side will it's just kind of keep it there and we'll be back with more guests and more news and future episodes next for joints.

Jason:
[47:59] Yep and if you didn't try this episode we sure would appreciate that five star review on iTunes as always if you have any comments or questions or we got anything wrong feel free to
the reach out to us on Twitter or leave us a note on her Facebook page we loved to have a dialogue with our listeners and until next time happy commercing.

Apr 24, 2019

EP171 - DTC brands physical experiences 

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

Episode 171 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from Austin Texas on Monday April 8th
2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

Scot:
[0:41] Hey Jason and welcome back Jason and Scott show listeners,
this is the first worst Jason not only are we in the same place together but we’re outside and I know listeners love your trip reports because you are the roving retail trip report.
Ninja but we are actually out at a shopping mall in Austin doing a live Jason and Scott show.

Jason:
[1:03] Yeah this is awesome I feel like we are completely breaking all the usual conventions of podcasting because I am actually,
actively shopping with you here at the Domain at Northside in Austin while we’re doing a podcast I’m really excited to find out if this is going to work at all.

Scot:
[1:21] Yeah yeah so I’m sure their listeners are already hearing some interesting sounds were,
kind of sandwich between a bar some construction and a lot of these noisy birds that live in Austin I’m not exactly sure what they are but hopefully that adds to your Ambiance as you’re listening out there.
So the how we get here so bad a year ago my wife and I went to Austin on a little trip and we discovered the small area,
I have been looking for one of those hot handbags are suitcases I should say called in a way and we were drawn here by the had an Auburn Pop Up and Away so we came out here,
and had the digital native brand experience it just really loved the small I think it’s one of my favorite,
malls in America if you will so we decided since you and I are here for channel advisor connect that we would do a live remote.

Jason:
[2:10] Is an awesome idea.
So this isn’t one of these outdoor lifestyle mall so we’ve we’ve talked about those before like they tended that tends to be the format.
That is thriving more than some of the other formats it has a couple of traditional big anchor tenants like a Neiman Marcus I think the new Big anchor tenant is Nordstrom that might have opened here a couple years ago,
as you mentioned most of the digital native brands that that are in a brick-and-mortar business have a,
a location here so that’s interesting you can see the the Caspar Warby Parker been of us,
Etc all here and Scott what were your sort of initial Impressions the mall you mentioned it’s your favorite Mall why so.

Scot:
[2:58] Gets a little another background thing this mall is owned and operated by Simon Property Group one of the larger Mall operators,
YouTube haven’t come here three or four times now what I was surprised with the day is there’s a lot of clothes stores I wouldn’t say.
I would kind of guessed 10% maybe a size 15 my little surprised by that because it does seem to be a pretty hot Mall area,
now most of them already have a coming soon so we’ve seen the ones that are close are already kind of being back filled so so that was a little bit of a surprise so I don’t think anyone is immune from all getting would be my first impression.

Jason:
[3:34] Yeah and I are going to have to burst one of your bubbles not all signage is truthful.
So if you’re an operator and a tenant leaves the wallpaper you put over the front of that store says coming soon whether you have a tenant soon as a very flexible definition.

Scot:
[3:52] Brands so I assumed that they were like.

Jason:
[3:55] I think that’s actually the way you can tell into this mall feels like it has about a hundred 75 stores and that’s probably a fair estimate that like 15 of them are so seem like they’re vacant and at least half of those deer Point felt like.
They had a named tenant moving in and I would argue.
In the modern era that’s just the.
That’s the sign of a healthy mama like there’s some Concepts people open here that just didn’t work and stuff goes out of business and and stuff opens up we are here on a Monday afternoon in the middle of the workday,
and I would say traffic feels adequate like it definitely is not bustling but there’s a significant number.
A folks here shopping on a three on a Sunday afternoon or Monday afternoon and as with most of these lifestyle malls it is sort of a mixed-use.
Model so there’s a lot of retail here there’s a lot of dining here some of what you know it’s sort of higher in than a food court might be there’s a couple hotels on this property,
because we’re here for channel advisor we’re staying at much fancier hotels downtown but there are cool hotels here and there’s some entertainment venues as well so like some of that traffics probably retail but some of it maybe,
locals coming for lunch or something.

Scot:
[5:21] Yara Uber driver live is live in Austin for about 40 years he kind of called it this domain area we’re in the little subsection called Northside he called it the new Main Street of Austin so it is definitely kind of,
not only a shopping destination but people are kind of moving here and living that go that the the busiest part of the mall today is definitely the food and and kind of services.

Jason:
[5:43] Shout out to Velvet tacos that took care of us.

Scot:
[5:45] Yes delicious.
So let’s do some sort reports to the first store we went into his beta and Jason if you have a superpower I haven’t witnessed it before but your superpower is getting store associates,
to spill their guts about what’s going on in the store so tell us what you learned about me.

Jason:
[6:03] Yeah we talked about bananas on the show before one of the founders of FUBU his has been on an episode so just as a reminder for listeners that maybe didn’t hear that this is sort of a.
A retailer Services mall or another way to say it would be a physical Marketplace so this is a a store,
the brands can buy a shelf slot on and tell their story and so it tends to be,
young up-and-coming Brands and novel product that maybe don’t have huge awareness or distribution yet.
And or product they require like better demonstration or explanation to be,
to be sold and so they they would pay a beta to have a slot in the store data gets a commission on everything they sell and so it is very much is like beta is a Marketplace operator and their individual brand selling their products.

[6:55] In the store fun fact this is my second one I’ve been in this week cuz I was in the Santa Monica store in LA or earlier within the last week.
So the thesaurus get a lot of traffic one of the pros and cons of beta is it’s a great store for,
what I called Discovery like if you don’t know you’re looking for something you walk in your aunt you’re very likely to find something you didn’t know exist that you think is cool and you want to buy.
And so for example I think Scott and I both desperately want although I guess I’m guessing neither of us have it used for,
one of these Neo digital pins which is a physical pain that you write on paper,
and everything you you doodle or right or no to take are stored in the pen you can download them in real time or after the fact as PDF stand iPad.
And it just kind of cool thing that you maybe didn’t know existed before you walked in the store.

Scot:
[7:51] Yeah they have a ton of that D on my first impression this paid I’ve been in the one in in Palo Alto,
first of all this felt like a Google take over so almost entire perimeter of the store was taken over by Google home kind of what I would call Little vignettes vignettes they had a device may be some Associated kind of,
Google device maybe maybe a phone or something but then also they were trying to walk you through some use cases for how to use the Google home devices so there was a recipe than yet,
there was a weather temperature vignette have an ending like a travel kind of a 1000 Rushing look like Google is spending pretty big bucks are there two.
The new used for superpower and got the store so she has to say some the top selling things and this particular beta are the key smart system.
And Shout out we know some of those hooks are listener so.

Jason:
[8:42] Sometimes known as the smart key.

Scot:
[8:45] Bone-conducting headphones are popular,
the Neo smartpen and then there’s a lot of really cool musical instrument stuff so jamstik so you could teach yourself how to play guitar,
is it my favorite thing was because we’re always have to do this company meetings and you always are shouting out in these Open Spaces had this really cool I’ll do it was $900 call the sound box Co KS,
I was just a ginormous Bluetooth speaker that you could either take take to the beaches like a mega Boombox or I would use it for like a PA system at a company meeting.

Jason:
[9:20] And when you say ginormous you mean 30 lb.

Scot:
[9:22] Yeah this guy has like a whole system for carrying it and what not but it looked quite robust like you could stand on it or whatever have some sand get on it and it wouldn’t wouldn’t get destroyed.

Jason:
[9:32] So that again. I think this works great for that kind of thing that you discovered something you didn’t know existed. Point about Google
Google’s a perfect example they don’t have a network of their own stores and they have products that you may not know you need unless you see them used or demonstrated you may not understand,
some of the Google products and so they need physical brick-and-mortar demonstration Apple solve a problem for their products by opening hundreds of their own stores Google hasn’t done that yet and so it makes sense that they would invest in these,
opportunities to create a physical presence the downside of a store like this is you can’t rely on them having any particular product.
Before you walk in the door so it’s not a store you walk into with a mission like it’s unlikely you’d go I need new headphones I’m going to go to bed at like.
That headphones in particular it’s likely there’s going to be several different kinds of headphones in a beta store.
But they may not have the complete breath of Assortment or the brand you’re particularly in.

Scot:
[10:32] They’re not going to have like a Bose QuietComfort they’re not have some any kind of pedestrian thing that that you would go to like a Best Buy for absolutely.

Jason:
[10:38] Exactly so it’s interesting that we were talking to the guy,
and we’re talkin about some of the other good retailers in the in the mall and he mentioned Peloton and Casper and in his POV was that those guys would do great in a beta store.
And that you know that they all have like sort of physical elements that would resonate with a betta customer a we also talked about a way he felt like the away bags would do particularly well in the.
In a beta store and I was kind of.
Going down on that a little bit I actually don’t think a beta store can offer the immersive experience that a Casper store can offer so I would actually argue when you have the opportunity to have a Casper store in the mall.
That’s what you should do is have a Casper store not being beta but if betta is in a mall that Casper isn’t in you can imagine that that.
Peter could be a supplemental experience for sort of expanding the footprint for some of these other brands.

Scot:
[11:40] Yeah yeah I think they could be in or kind of a Thing versus just a you know you have to choose between 1.
So I can pay the we went we walked by Peloton they had kind of a class going on in there and,
yeah it looks like it looked to be quite busy they had many of their their signature devices that’s on the treadmills that’s their newest widget there’s a lot of Buzz out on Wall Street that this company is going to
dummy onesies that goes public as we speaking today lift has filed as done their IPO if someone,
this is been a little bit of a rocky start for tpd on what that was is good for the company not so good for the investors that that bought the IPO,
I’m and then Pinterest is actually starting the road show today so we’re starting to see this IPO Log Jam clear and a lot of chatter out there about Peloton being one,
and a big surprise about Peloton is it’s not really a hardware company it’s a subscription song.

Jason:
[12:35] Yep exactly so it Center.
The hardware is a little bit of the razor in this model and then the the monthly subscription for content is the Razer Blade so you the original product was stationary bike,
with a big screen on it and they have a great group gamification model so you take live classes.
With other remote participants so you can get a very famous instructor if they were teaching at a spinning studio in New York they’d only be able to accommodate 30 bikes but now this instructor can have to get two thousand people in their class,
and you get the instructor on the video screen in front of you you’re competing against all other two thousand people you can see how many watts your making it hard you’re working,
against these other two thousand people and that access to.

[13:24] The the finite commodity of really good instructors and the in the sort of competitive gamification in the fact that.
There’s so many classes that you kind of have you can have a completely flexible schedule.
That those set of factors have caused Peloton to do really well and get a really zealous user base a lot of people think that they’ve taken a big chunk out of the the dedicated,
spinning businesses like SoulCycle in those guys,
so the newest thing for them they were a direct-to-consumer business they only sold the bikes online they did infomercials and so retail is a very new model for them that they’re rapidly opening stores,
probably because they captured all those early easy customers online and now to expand the footprint they’re having to have a brick-and-mortar present.

Scot:
[14:14] Yara are class a mall in Durham has a Peloton pop up so it’s like the slow glass enclosure with two or three in there.
The last I heard I think there they’ve crossed over a million subscribers so you know starts to feel when I talk to a lot of people there, like it’s just like going to be almost like the next Netflix there’s nothing.
You know the that software you could have imagined it on tons of different devices and this whole in-home exercise area is hot with feces so some companies to kind of keep an eye on if this is interesting to you
others mirror and tonal who have all raised substantial Capital to go after this Market they all have different approaches.

Jason:
[14:51] Yeah yeah and there’s you might expect a lot of sort of me choose even on the original equipment like that the cycling bike and Peloton is expanded now to treadmills,
so yeah it’s an interesting hot space and I think I may have mentioned in our seat yet show,
there’s a whole Exhibit Hall at CES dedicated to this sort of connected Fitness face and these guys all had a prominent presence there.

Scot:
[15:14] Cool so then we we wanted around we walked by bonobo Sonora be no need to go in those those are well well treaded for us then we went to the bakery and sampled some some Bakery items and some.

Jason:
[15:28] The seasonal oatmeal cookie really hit the spot.

Scot:
[15:30] Yeah 10 minutes of Gone by since a latte so Jason was was he was she.

Jason:
[15:34] Unless my wife is listening in which case I had the fruit parfait.

Scot:
[15:38] Yes good job having just that one strawberry then we went into the Casper store and it was my first Casper so I’ve seen their little kind of in Target pop-up before but I never been in a Casper store how about you.

Jason:
[15:50] I have been in a number of Casper stores in so this is on the smaller value side of Casper stores.
So they they do a good job and Merchandising their products so they have their primary product is a mattress that can be a direct home delivery that they they sort of.
I want say they invented the product-based they were the first runaway success in the.
Foam mattresses that you can press down small enough to UPS them home,
and so they have a lot of these these sweeping vignettes these little mini houses with their various mattresses in them,
that you can lay down and try and what will get back to the Deep Dives to God did in trying a mattress in a minute that they ought they expand until I bedding and they have a very cool like bedroom lighting system.

Scot:
[16:39] Oh yeah that’s my favorite.

Jason:
[16:41] Serta hypnotized asked for about 15 minutes and we were playing with that.
What’s different about this Casper store that’s kind of weird this Casper start-stop bigger Casper stores have sort of more of a social media component so they might have had like like.
Photography set where you can take a cool Instagram picture of you in a in a Casper vignette and in the Marquis thing that some of the big Casper’s have is this thing called the dreamery.
And the dreamer is kind of the wework of nap.
So you you make a reservation and you pay to go into this isolated soundproof pod with a Casper mattress and premium bedding and you literally can pay to just have an app for,
for half an hour and my understanding is that like you think sell out till like.
Team offsites and team building and things and it’s it’s kind of a cutaway they’re monetizing people trying their product which is pretty clever.

Scot:
[17:38] Michael you should see the associates look on his face when Jason asked if he could take a nap.

Jason:
[17:43] Side note if you’re going to do at a store visit it’s important to have a super cheesy annoying joke as an icebreaker for everyone so thanks man.

Scot:
[17:52] Yes you’re really good at that your dad jokes are off the chart.

Jason:
[17:57] I work hard on I’m so we didn’t mention this in data but I highly encourage our listeners whenever you walk in a beta store and someone comes up and asks you if you need help the first thing you should ask them is when they’re expecting to get out of beta.

Scot:
[18:08] Yes the guy gave.

Jason:
[18:10] He almost fell on the ground laughing.

Scot:
[18:12] Epic Gyros and side eye.

Jason:
[18:15] The @apple what you like to do is go stand by the laptops and when someone comes up and offers to help you which will no longer have an Apple store by the way but I pathetically if it did what you want to do is go yeah,
when did iPod start making computers they love that joke.

Scot:
[18:32] Uncle Joe in Casper the little vignettes for funny Casper always has his good better best mattress system nice get the names they have like the wave and the This Not That,
I’m so you could try those in six or seven will vignettes and then they had to find one that has the,
the self lifting feet and head and like it’s got magic fingers so that what that was I I spent quite a bit on time on that one,
that was fun and all lights were cool so it’s kind of a lightly but next your bed you can just rotate the light it’s it’s a cordless so it sits on what looks like a what are those kind of chargers the conductive charger,
an induction induction charger I’m sitting kind of like turnitin dim series of lights or you just turn it upside down and it turns lights off so that was pretty cool device.

Jason:
[19:17] Yeah I like the fact that the light seem like they’re Wi-Fi network so literally like it when you say turn you don’t mean to Nob you mean literally spin the lamp itself.
An atom’s but if you have you could have 10 lights in your room and they would all of them and you can flip the one lamp upside down and all the lights in your room go off and flipping it won’t come back on.

Scot:
[19:36] Yet sad much it is a lot of effort compared to talk into Alexa them so I don’t know I don’t know how successful I was exhausted flipping the light two or three times.
Not sure not sure I needed that much of work out here today. I think we should talk about briefly is
one of our listeners is here in the area super listener I guess we should call him Ted and he was able to secure a demo for us and a tour of Brigham and Borrego has a robot coffee,
kind of a experience so imagine if you will a 8 by 5 by 6 7 ft,
a little a little Hut with a lot of touchscreens and stuff that has a little robot Barista inside of it,
sounds really cool to see I’ve seen it here in the Austin Airport and apparently it’s in other airports like DFW and I guess coming soon to maybe SFO so what did you think about that mr. espresso.

Jason:
[20:35] For me it’s all the fundamental problem which is called 24/7 availability of expresso,
so do you know anything about staff coffee shops that they don’t tend to be staffed at 3 a.m. but with one of these automated systems you you can get a delicious iced latte anytime of the day or night.

[20:55] In that sense obviously I love it it’s interesting to me what the ideal use cases for that so this feels like.
Something that you’d want to put into a high-traffic public space I do a space that’s open a lot of the time or all the time like a bus terminal or some kind of public transit are the airport,
and you would put it in in lieu of a man Espresso Bar so it does it takes up less space than I am and expresso bar and it can make all the different drinks and stuff it does not seem like something you’d add to an existing.
Coffee place or something you know I think it’s meant to be sort of a stand-alone mini coffee shop in the moment it’s meant to be indoors which.
You can imagine a lot of the 24/7 use cases that would be interesting are,
I could potentially be outdoor installations I think we saw their business from model problem for him while we’re there I really think they should be partnering with the Tesla superchargers,
and you can actually order your coffee from your car and have your car waiting for you when you arrive to plug in and charge it.

Scot:
[22:05] Yeah and I think they should be branded a human supercharger I met him at that my song.

Jason:
[22:12] Nice that could be your eyes breaking joke whenever you you know anyone.

Scot:
[22:16] All right I’ll tell you something delicious case I thought of and that it is popular is convention centers and I flash back to you and I have been to the NRF Big Show,
some ungodly number of years and even though there’s two Starbucks some unbranded espresso place and another place the line is always 2 hours long.
I’m sort of the cool features of this is if you download their app you can you can pre-order and the Machine will,
you can you can actually schedule when you want your coffee made and then you go it doesn’t just have to make the coffee and spit it out so you go to the it holds it for you for for up to two hours,
and then which finally makes sense with iced drinks anyway.
And then you go up when you enter either you swipe your card or enter code and it didn’t dispense is the drink so I was thinking you know and those times in RF where we’ve got,
1520 minutes between now be a perfect use case for it because there is so much of the Cyber Monday for coffee demand really far outstrips the supply and the lost opportunities.

Jason:
[23:17] Yeah and I feel like it’s one of these categories almost every category that gets did we disrupted there’s like the the sort of,
traditional players that are like oh my gosh a big part of the espresso experiences talking to the Barista and everyone wants to interact with a human and that’s you know it’s the third place and in this sort of impersonal robot is never going to work,
but I would remind people that 20% of all Starbucks orders are now online order and pay and you essentially don’t,
ever interact with a human you you order the drink on the phone you walk in you hope that you get easy access to grab your drink and never see a person and walk out and so this kind of automation,
you can imagine really being a primary fulfillment vehicle for those kinds of experiences.

Scot:
[24:01] Yeah one lens you can look through this is the the human in the equation actually adds a lot of cost and then also a lot of variability right so you know the one thing I think you would find from a robot coffee maker is going to be,
obviously a more consistent experience and they’ve done a lot around that that’s pretty wild,
another cool thing is we’re able to see their Network Operating Center so they could see all the machines was going on and you know she number six is a little low on its cinnamon and this machine is low on this size cup,
it’s a really cool demo and wanted to thank the guys for doing that especially shout out to Ted for inviting us on that.

Jason:
[24:35] Yeah and get any top animated caffeinated today hopefully that will pay off when we give our presentation at Channel advisor later.

Scot:
[24:42] Yeah I’m just hoping you don’t Peak too early so we got it we got a time this right.

Jason:
[24:46] I’ll always a challenge so what was the last store we visited before we sat down at the podcast how was your I think your original impetus for coming to the mall the away store.

Scot:
[24:57] Yeah we we popped into the waste or I tried to convince Jason and I had a robust argument in the middle of store around 2 vs 4 Wheels we will not bore you guys with that that argument,
but the staff I have a little problem with my suitcase and those that was actually quite helpful with that and,
yeah I love this store it’s a great suitcase it’s pretty cool how they can’t take in a suitcase and put a Lifestyle brand on it,
so why the packaging and all is really geared towards people that travel a lot and talks about Adventure and since the last time I was in the store they’ve added a lot of accessories and other little kind of travel do dads and gadgets the,
you know when you do travel those things I do to improve your life so I thought it was a great story if you have a chance to visit one of those used to definitely try it out.

Jason:
[25:44] And I think I’ve mentioned this in a previous tour visit.
I have mixed feelings cuz I feel like it’s a way as a great brand new had a lot of success they obviously evangelized you and I think if you hear the founders speak,
Del Taco watt about it being a travel Lifestyle brand not a luggage brand right and so.
I had a chance to visit their first pop up before they open retail stores and I would have said their pop-up was brilliant I thought I was really well-executed and it perfectly matched,
that story about them being a lifestyle travel brand so the store was set up in vignettes and the vignettes pretended to be different aspirational travel destinations so you might have had like,
Lake Como in Bellagio Italy and you might have had I don’t I don’t know it just an Bull in turkey or something.

Scot:
[26:33] Myrtle Beach South Carolina.

Jason:
[26:34] And then obviously Myrtle Beach South Carolina for the golfers.
And yes I did have a vignette of each of those things and it was like yeah you needed a suitcase but what they’re really selling was this aspirational lifestyle of traveling and taking great vacations.
I know that Austin has very interesting bird life by the way for those that was not Scott,
so I feel like the store did a good job of creating that aspiration and kind of telling that travel story and they were almost selling the destination more than the products,
and then when they close this New York pop up and they open their permanent stores,
I feel like they’re way more water down it’s a lot more shelves with suitcases on them and it’s a lot more talkin about the,
the act of using the features in the benefits of the luggage and less about the lifestyle selling is a lot more subtle and I guess is what I’m saying that to me is mildly disappointing from.
Experiential retail price back.

Scot:
[27:36] FairPoint yeah I did I get it I think they’re struggling with one of the knock knocks on these kind of show Rumi kind of places like,
when I talked to your average consumer about bonobos
they think it’s really weird you can’t go in there and buy stuff so I think away is trying to kind of say for that that person that does want to walk in and buy something it is a weird experience to say thanks for stopping by to this kiosk and will ship it to you in 3 days,
irr what not to so I do think that kind of you know that’s probably why it has that feel to to compare to what you had in the pop-up.

Jason:
[28:10] Yeah I know and I I certainly am not going to argue against than having inventory in immediate gratification light,
yeah in general those are all good things I N D Dunn Mesa a reasonable argument why he doesn’t want it but there’s pros and cons but I will say that sort of highlights my key takeaway from this whole Mall,
is is.
An increasing percentage of this mall and other good malls are filled by these digitally native vertical brands that are expanding to brick-and-mortar so you know we talked about malagueta and then lots of stores closing,
you know it’s a big number right now it’s it’s over 5,000 stores that closed this year which is more than close the last year and there are.
Thousands of openings like two or three thousand but not as many as closings and the openings are all these digital native brand so I do feel like that’s the future of the mall are more of these brands that were born online and,
are now moving to Brick and Mortar but here’s my one knock on all those experiences.

[29:07] They do still feel like isolated brick-and-mortar experiences so none of those cool stores we talked about could you have started shopping online,
and resumed that that experience in-store none of them had,
digital tools that the salesperson was holding to know which size away bag you looked at online before you came in the store none of the Casper when you know employees knew whether you were a Casper,
customer or not already and what kind of relationship you had with Caspar I feel like it’s a lost opportunity,
that you know these are a lot of brands that people have discovered online and then they’re exploring further in store and I really feel like the the omni-channel experiences.
Continue to be lacking across the board.

Scot:
[29:52] Yeah yes all the reason I like this mall is you know where I am it’s very vanilla in the Southeast your your malls have,
your standard Sears JCPenney Macy’s kind of an and that that’s maybe get a belts as an anchor in there so we don’t get almost any original stores at all so even Apple Stores we got like four of those,
I’m too I think Center see about it is it is one of the few places you can go and find these kinds of stores that you just can’t find anywhere else,
I’m going on vacation to New York in a couple weeks and I’m going to stop stop by Hudson yards they don’t know whatever you do don’t call them all but they’re,
the collection of stores at Hudson yard I’ve heard native New Yorkers don’t like it but I’ve heard that it’s a fun destination because a lot of really unique things there so I look forward to seeing how that compares to this mall.

Jason:
[30:42] Yeah I’m going to eagerly await your trip report cuz I’m somewhat humiliated that I feel like you’re going to beat me to Hudson yard I I got to visit it before it opened but I haven’t been there since the grand opening.

Scot:
[30:52] Yeah I feel as Chief strategy retail digital e-commerce officer at Publicis pretty bad that you’ve let a landlubber like me get to get to the store before you so I hope none of your bosses are listening.

Jason:
[31:05] Well you know it would not be a Jason and Scott show without mocking Jason’s title and that’s probably going to be a great place to leave it because we’ve used up our a lot of time for this very first,
Jason and Scott mobile podcast I hope the wisner’s enjoyed it and would love to get some feedback if if,
ask schlepping on the podcast gear on our backs and walking through a mall in the blistering heat Scott wearing like a giant flannel jacket.

Scot:
[31:34] I’m being attacked by bear loud birds.

Jason:
[31:36] Baibars exactly if that’s the thing to put you over the edge really well to show we sure would appreciate that five star review.

Scot:
[31:44] Thanks everyone and if you are interested in learning more you could either Google or come visit at next time you’re in Austin this location is called domain Northside that stewards domain Northside and that is by Simon Property Group.

Jason:
[31:57] And so until next time happy comercing.

 
Apr 9, 2019

EP170 - ThredUp President Anthony Marino 

Anthony Marino (@amarino) is the President of thredUp (@thredup), the nation's leading online marketplace for women's and kids'​ like-new apparel. Over 25,000 brands, ranging from Gap to Gucci, are listed on thredUP.com at prices up to 90 percent off retail. 

In this interview, we cover the basic thredUp value proposition, challenges and opportunities for the re-commerce business model, the dynamics of operating a two-sided marketplace, customer acquisition, reverse logistics, and the dynamics for brands in the re-commerce space.

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

Episode 170 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Friday February 22nd 2019 live from the etail West Trade Show here in,
somewhat Sunny Palm Desert.
I'm your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott couldn't be here today so you're getting twice the Jason for half the usual cost,
Kira detail one of the big topics of conversation has been new retail Concepts that are blowing up and so we thought.
What better guess to have on the show then one of those Concepts so today we have the president of thredup,
Anthony Marino on the show welcome to the show Anthony.

Anthony:
[1:08] Thank you Jason great to be here.

Jason:
[1:09] We are thrilled to have you long time listener that the show will know we always like to start by getting a little bit of background about the gas so I can you tell us how you you came into your role.

Anthony:
[1:18] Sure so I've been at thredup about 6 years.
And I came to thredup it's it is actually an interesting story I came home from work one day six seven years ago and my wife had a big green polka dot box on our kitchen table.
And that was a threat of box,
and she reached into the box Sycamore have to show you something and she reached into the box and Sheepshead of unfurled this very good-looking cashmere sweater.
And she said I bought this for a box and I was like okay and she said this is a $500 cashmere sweater and I was like.
Okay and she said and it's used and I was like what and so she then told me the thread up story where she had sent in a bunch of our kids and her clothes to thredup. Credit.
The shop on the site from sending in her stuff.
She could have cashed that money out but she kept it on thredup the shop and she bought this amazing sweater that was used a great deal and she said to me you need to go work for this company.
And then about six months later we moved to California I was renting a house in the East Bay my kids were crying cuz they missed all the friends in New York and a big adventure in an e-commerce marketplaces in retail and second hand started for me.

Jason:
[2:37] Wow so decide note I'd be really focused on your wife's new interest in shopping habits if they're going to that directly affect your career.

Anthony:
[2:45] Yeah she's she's she's a smart smart person so I listen to her advice at least that's what I say publicly.

Jason:
[2:49] I feel like we exactly we all benefit from marrying up so used to it but let's jump into the threat of story little bit like down and give us the the rundown on the value prop.

Anthony:
[3:03] Yeah well that the the founding story precedes me by a couple years are founder and CEO James Rinehart look into his closet and just saw a closet full of clothing that eat that he didn't want to wear,
but all the clothing was in was in fantastic shape and I think if you.
A few fast forward to today where Marie kondo is encouraging people to the spark Joy by removing things from their homes that they don't use or don't love anymore,
his inside in his closet and on that one day many years ago and in Cambridge Massachusetts turned out to be something that millions and millions of people were experiencing as if they bought a lot of things that they weren't wearing or enjoying the fact those things,
making them feel guilty or unhappy because they were taking up space and they were reminders of mistakes from purchases past and he said I want to figure out a way to,
I make it easy for people to easily get rid of these things know that they're not going to be wasting their for destroying the Earth and getting into the hands.
And and that was really the birth of thredup it was how to help people,
clean out and make amazing you so the things are no longer wearing a particular women's and kid's clothes and then provide amazing deals for the people on the other side of that equation for whom those fought those were amazing finds there are Treasures.

Jason:
[4:17] That's awesome so if I like to read repeat to see if I get it right basically you're a sort of a two-sided Marketplace for Consignment so,
people that have stuff in their closet that they come to regret or in end of usefulness for them they send those to you,
you go through a process on board those keep the ones that are resellable and wisto's on a e-commerce site that consumers can then shop for
like a high-value products at meaningful prices.

Anthony:
[4:48] That that's right about there's about twenty-five to thirty five thousand Brands listing on thredup at any given moment there's 2 million plus items on the site.
And they're up to 70 80 90% off retail and there in like new condition so it's the things that America has in its closets are.
Beautiful but for the most part of what the vast majority are and we take those things that come to us and we we price them and attribute them and photograph and put them online so it's super easy with a person who wants to clean out,
and then for the person on the other side who wants to buy great brands at great prices is just as easy as shopping do you want any other e-commerce site.

Jason:
[5:25] Awesome and I have no trouble imagine that there's a super valuable merchandise and all of our closets that we don't use I imagine not everything in our closet is super valuable and I feel like there's some
remorse about what happens to that like I'm guessing you're going to tell me you have a good story for how you disposition the stuff that maybe isn't as hell.

Anthony:
[5:46] Yeah where are our goal and our commitment is that you know we have a 100% reuse goal and commitment for the items we receive so there's a couple things we can do.
With items that people send to us that aren't high enough quality to be listed on our site or in one of our stores or with one of our Retail Partners so what will we can send those things back to them we can say hey,
after the animatronics app you can you can pay a little bit and shipping and will send them back to you by the way most people.
Do you know they do that only wants they that they don't want to see it come back again or like wait how'd that happen why did I do that and then there are some things that we can.
I'll distribute through our partners who can sell those at consignment stores that don't have the quality standards that we have,
some of those things can be recycled into carpets and and if you've ever gone to the car wash those those Rags that they use to dry your car off those fibers can be recycled into into other future fight future Fabrics,
and I'm so yeah that's that's how we do it.

Jason:
[6:47] Got you and what are things that seems cool about your model to me.
2 fundamental problems you have with a lot of marketplace models are that you have trouble guaranteeing a service-level so I went eBay matches a buyer to a seller,
they can't necessarily guarantee how fast that sellers going to ship the goods to the buyer,
and they're also can be a trust problem the eBay can't necessarily guarantee the web the sellers selling is authentic in in the condition that the,
the seller promised it's in so you can send it to me you feel like a two-sided Marketplace except
you handle all the logistics and fulfillment so you basically can guarantee a service level and you also act as a sort of independent trust verifier that gets to see all that merchandise before the consumer buys.

Anthony:
[7:31] That's exactly right we are the we are the seller of record you know so we take possession of the goods we have for distribution centers throughout the us and we're increasing our volume of those,
are those items are upcycled did an incredible incredible volume I mean we will,
up until today have a vial cycled over the past couple years over 60 million items this year alone will do another 30 million so.
Yes we take possession of the goods we make sure there in like new condition we photograph them and put them on a hanger and then we can ship them in a beautiful box wrapped in tissue paper and and send them out to our buyers and they are.
Generally Blown Away by the quality of the product.

Jason:
[8:10] And so does all that merchandise that you've received an unloaded within a single fulfillment center somewhere in the US or out of the Majestics work.

Anthony:
[8:17] It lives in in for facilities in a distributed across the u.s.
And we do all kinds of interesting things TARTA route inventory and product to different centers depending on supply and demand and how the overall market place is performing but yeah those those four facilities process all those items,
for sale online and offline.

Jason:
[8:38] Got it and is everything in the Fulfillment center available for sale right now or do you try to I can almost imagine you get a lot of new merchandise from Spring cleanings and there could be a lot of fall merchandise in or winter merchandise in that
and in that stops or try to sit on any of that or how does that work.

Anthony:
[8:55] You mean how do I optimize for seasonality.

Jason:
[8:57] That's a way more elegant way.

Anthony:
[8:58] So so so it's a great question because it's a really tricky math problem because think about it from from the consumer's perspective,
they don't necessarily want to go into the closet to be like is this fall is this spring is this winter all they see is too much stuff.
And they want open up a bag or open up a box and put it all in it and and move it out so.

[9:23] All of that said you know we've been at this a while and we have millions of Sellers and when a seller sends you a box of stuff there's an incredible amount of data that you know about that seller their sizes their brands.
What they're what the what the what the what brand items are moving into versus clearing out of as you get multiple bags over time so we found that there are ways.
To influence what the what the seller will put in their clean-out bag to thredup and it has a can have a significant impact so,
we are we are we work with wood sellers in a way that's this pretty light touch but the people generally want to do the right thing if they feel like,
they can put a few extra more seasonal things in a bag and maybe learn a little bit more because we'll see faster cell to run an item that's it's perfectly in season we want to share those economics and incentives with sellers we're not heavy-handed about it,
we try to use our data and what we can do on the types of people who you request bags from that helps us,
can we just want to make it as easy as possible for sellers but yes we are everyday getting more and more seasonally relevant I think it'll actually be.

[10:35] Don't forget I think if I think ahead and 6-12 months I think you'll see the the seasonal element of our site really really kick out cuz we're.
We have so many billions of data points on this now that we're actually starting to figure it out.

Jason:
[10:48] That's awesome and I can come and there's this healthy tension on the one hand
you really like to sanitize that person to only send stuff to you that you know you're going to be able to sail and is highly monetizable and like frankly that's going to let you come back to that cellar with the best news hey we got you a bunch of money
I can imagine there's a subset of your sellers that like.
Appreciate the money but there's some catharsis bike again for your earlier Point their Marie kondo followers or whatever in there that you aren't a,
new better way to get everything out of my closet than the Salvation Army was last season or something like that and.
In a way you don't necessarily want to discourage those people because 10% of what they send you is going to be exactly what you want you're just going to,
after project lights out in general do you try to get people to just any of the 10% that you're going to resell or are you happy to take everything because it makes you more seller friendly.

Anthony:
[11:47] This is something that how we treat.
Salaries in how we think about their experience and why they they decide to order a front of clean-out bag has been.
Something that we've always wanted to be very very clear about from the beginning cuz you're exactly right do you want them to only put.
Perfect things in the bag or do you want to shove everything in there and there's real trade-offs you know them or prescriptive to get with people the more they'll be like to know what this is a little bit too hard but if you just let him do put anything in there then it then it becomes hard for us and I think what we.
Decided in general is that we want to make it really easy for consumers and let us as a as a business that is built on,
reverse Logistics and data let us figure out and become the most amazing company at figuring out how to make the best use of those goods and monetize them in a way that's great for suppliers great for our consumers and great for the environment,
so I think that has been our our our challenge you know but I think we've come a very long way and look there's always.
There's incredible benefits over the long term for making things easy for consumers and if we're the company they can figure out how to crack those problems.
Then I put you in a very powerful position to build quite a moat around that that volume the quality of the supply that customers are going to send you.

Jason:
[13:07] That's awesome let's talk about that reverse logistics for just a sec because it is funny in apparel.
I've been in this industry long enough to remember when it was like oh no one will ever buy clothes online like they need to fit everything and feel everything and obviously that.
That.
Could have been disproven but it is the case that the economics of e-commerce prepare alarm or challenged in some other categories largely because
there is such a high return rate right and you could talk to most retailers and it's like me and the return rates are tripling and those returns are so expensive though it just takes of getting that stuff back and then how that retailer.
Dispositions that can they resell it is new what do they do all of those problems most retailers would say we're not very good at it and it's a core fundamental challenge with our economic model and I'm looking you and it's like,
that's your business is convincing people
to send stuff to you so I'm curious like a view if you found a Magic Bullet like what what is the experience and how do you how do you tackle that that sticky reverse Logistics challenge.

Anthony:
[14:12] We found the Magic Bullet is to be extremely transparent with your customers so we love to say to our customers when they call customer service or when they write in.
That there's no such thing as free returns you're paying for it somewhere you're paying for it in the product or paying for it in your membership fee you're paying for it somewhere it will be like to see the customers is our goal was a business,
is to be able to list online.
The greatest volume of high-quality second-hand apparel at the lowest possible prices and we will be explicit with you this is what it cost for us,
to take that item if you send it back to us and put it back online whatever cost $0.50 or $0.99 whatever it is and so if you send those items back to us.

[14:58] It's going to cost you this but we also say to our customers hey if you are shopping with us and you don't seem to return a lot.
When it will never charge you a return fee if we then we bought but by equal measure will say to customers who buy 10 things and return 9,
hey we we see you but you been doing this,
we love you but you're killing us and so what we're going to do is we're going to give you a one more free V but if you keep returning 90% things you buy we're going to have to start the charge you a dollar 99 per item to restock it so,
we just want to be really upfront with people about the reality of the business and.
Is yours a good news about returns they affect everybody equally they're equally miserable for every e-commerce company so what this forces us to do is just have the best possible product you keep the core proposition
it's got to be in a bang on as far as the brands we are for the quality of the product the selection daily freshness and pricing so forgetting all that right.
Then we should be able to sustain returns if you can't then you got to figure out a different business model.

Jason:
[16:03] Got it better in general it sounds like you almost have a dynamic pricing model based on customer Behavior but you're super transparent about it.

Anthony:
[16:11] Very transferred there's no mystery maybe call him we call you use your level return policy and.
Looking to maybe some customers who we say you know what you eat we see you're returning a lot if you want to pay 999 a month.
And you can return as much as you want then then we'll offer that to you so I think you I think we just got to think about and see where you're going to meet them where they're at and left with them about what it takes for us to stay in business if they love the product to be like you know what I get it,
it's like I don't know actually returning nine things back to you until we actually created a product called a buying bundle,
we're and we found a lot of customers were buying lots of things and they were paying shipping from you know from us to get the stuff sent to them and then returning stuff in the way back,
we gave them its ability to,
can I purchase things we didn't ship it to we have critical mass of their items on the site and then they would they would avoid the the shipping fee until there's things you can do when you understand a job your customers trying to do,
then you can start to say okay I see what you're trying to do here is what it what it looks like on our end and hear some here's some options on ways we can,
we can make it work for you and Mike brought work for us we're big fans of that we we love experimenting with things like that we think it's the way he Commerce has to work.
And yeah there's no such thing as free returns.

Jason:
[17:31] So one of the fundamental challenges usually have with a two-sided marketplaces is you have to win at two things you have to convince a bunch of people to be sellers on your platform and you have to come in too much of people that want to buy goods from your platform on most resided marketplaces
the strategy is usually to be great at one of those which,
facilitates the other if you get a ton of buyers it's easier to get sellers if you get a ton of great merchandise it's easier to get buyers like in your case have you found that there's one side that you absolutely have to win at or what what is the strategy around customer acquisition.

Anthony:
[18:02] There are really two so that the needs and the in the complexities of the marketplace of significant they're very different on both sides and so so what start with with suppliers generally speaking.
Are our core supplier the value proposition is the clean out the closet in a really simple way and to feel good about it and so we've invested a lot of time and effort,
and delivering on that value and so suppliers come to us in droves we we do not have a difficult time attracting suppliers to thredup in one thing I think,
people are often surprised to hear about our businesses are like well okay so they come once you know when do they come back like in 2 years I'm like no they come back in like 3 months,
because they go out and they keep on things so it's not it's not as if they clean out their closet and their I'm good you know they're good like until the next season rolls around so.
So that side of the business is very viral and it drives itself.

[19:03] And for us we spent a lot of time and effort understanding at the really at the at the at the user level you know how to get the best Supply I had to get it at the right rate how to manage that with the with the overall growth and scale of our Marketplace,
on the demand side little bit different there's lots of places in the universe for people to buy inexpensive clothing.
If you are looking to buy a $8 dress you can go to Walmart if if you're looking to buy an $8 J.Crew dress little bit harder so we we've learned a couple different things on the demand side which is the,
are Brands matter customers love.

[19:40] Defined the brands they love and trust and who's quality they believe in at great prices and the fact that it's second hand is almost incidental to them,
if we can maintain the quality part of the equation that they don't even I think they actually probably forget that they're shopping second-hand I think another thing we found,
that app that that our customers love on the demand side which is a key part of the value problem I'll come back to you that your acquisition point in a second,
is they love to see new things.
Every day we have customers would love to see new things on thredup every hour and they come back that that much they're hitting refresh if they're going to their app that much because not unlike their Instagram feed,
we're all day long we're listening 60 70 80 thousand fresh items every day so if they didn't see that dvf wrap dress,
or that Banana Republic jean jacket,
that they were looking for right away if they come back in an hour at the rate which were processing Goods to our system but there's probably something there that's if not V things are looking for it's pretty darn close so that's a very
powerful part of the demand side proposition that makes it look a little bit different from being just you know hey I'm looking for a great value on clothing and I think the final thing is.
One thing about Millennials and and younger Shoppers these days is that they never want to be seen on Instagram wearing the same thing twice.

[21:01] But at the same time they they don't want to be conspicuous consumers they don't want to feel wait so about what they're doing and thredup is is an interesting solution to that problem because they can.
They can scratch their x444 wardrobe that can move at the speed of their feed,
but at the same time they can take those things put them in a bag send them back to us and feel like they're part of the solution and not part of the problem.

Jason:
[21:26] That's why I make sense you you hit something in the in the course of that explanation that it just occurred to me,
another word justice problem you have that maybe more cute than a traditional retailer is your onboarding a heck of a lot of new SKU so like I'm pick and and you're not in most cases getting content from the manufacturer,
The Whispers queues so I'm picturing you up to have like,
high-volume photo studio and people riding a lot of like attributes for product listings is that.

Anthony:
[21:58] Yes and went when when a bag or a box of nice a box because.
You can do the way that to send items that start out as you can go to our website a request to clean out back and he's someone to you for free it's a recyclable bag about the size of a camper and a big green polka dots on it and it's,
I'm very cool or you can just print a label because we know that people have boxes from all their other e-commerce shipment sitting in the doorway of their house and we like to get up the opportunity to have a slightly smaller compact soap.

[22:27] Yes people send these stuff to us our customers suppliers send these items of clothing toss and he's bags and boxes and when they come out of a bad they don't announce themselves they don't have a barcode they don't have asked you it's literally a pile of clothing and so what we have built,
over the past several years through through tens of millions of transactions is the ability to take you know his ability to take those items and begin to attribute them their brand or size their measurements and do some of this with software and we do some of this with people,
because it's it can be hard to teach,
a computer what an acceptable level of fading is on a black shirt you know so there's only certain things that humans at least right now and can.

[23:10] Certain things are computers going to leave Divine so well so people still have to do it but yeah we've built a system where we can take all these items to come out of the bag on an ounce of with no information.
And attribute them as we attribute them those items magically transform from being stuff in a bag that was essentially
value less are worthless to the person who wanted it shipped out of their house to becoming an item that,
with every attribute that we had brand size increases in price from 51020 to $30 is now its 8 now it's a fully formed living fresh item of clothing again to someone in the universe,
and so.
That's how we do it we don't get data from anyone we we we built all those systems in house and we are able to do characterized and categorize and photograph you're right we have we we probably take more,
photographs on a on a daily or weekly basis than any retailer on the planet and that's how we do it.

Jason:
[24:06] It's a going back to the customer acquisition for buyers I think of you as a digital native company you you've been around for awhile now you have six years of history and I see this,
kind of consistent progression that every new digital company launches and based on their value proposition that there's some amount of organic traffic
that they can acquire super easily and in fact there's this Pitfall in the first year you see this nice hockey stick of growth and you think it's going to keep happening for the next six years and unfortunately for most digital companies
it doesn't like they grow fast to a certain point and then they start to plateau and depending on their value prop that Plateau could be
60 million dollars in sales that could be a billion dollars in sales it almost doesn't matter but what happens after that.
It certainly requires a lot more effective marketing to acquire new customers and so I'm curious six years and I'm kind of assuming you're either at that point or you've already surpassed that point and what are you doing now to acquire customers and how's that working.

Anthony:
[25:07] So your ear right I mean that we've been through those Cycles I mean I remember the days of 00 those days of yore when you know spending money on Facebook or Google,
was was easy and satisfying but,
you're right you get to a certain scale and those auctions get more more competitive,
and you need to start to do two things you need to diversify,
the way in which you reach customers because on up if you're trying to build a predictable business.
Were you can where you can grow smartly quarter-over-quarter you can't just keep turning up the Facebook and Google dial and assume that the Matrix are all just going to continue to work so you've got to figure out a way to to grow efficiently by doing different things,
in addition to doing the old things better and better and then the second thing you need to do is,
and you just have to run a better business I mean if you would have that you're putting more product online or renovating,
the types of products are the types of solutions you deliver to customers based on what they're looking for or it's whether it's their margins Mansion to you you in the early days it's easy to be you know when twin growth,
is is easy it's very satisfying to investors in to employees it feels really good but as you as you get to the further down that funnel.
Need to think more holistically about the business to figure out how to grow I mean I think I think for us we feel that.

[26:36] A real change has happened you know since we started the business six years ago and how we how we think about.
Second hand clothing and resale and how frankly how the hole.
Retail of retailers are thinking about it I brand you think about the beginning our vision was hate me know we're always going to take.
The items that we that we the supplier sent to us in front of them were going to sell them on turn up., exclusively and what we started to see.

[27:03] Is that customers are saying to us look at you you know 1020 30% of my closet.
Is second hand clothing so it's 8 you note ever going to be a hundred percent but this is how I shop now I buy some things new,
I buy something second hand and I want to be able to find this product in more places it you know it's and it's sort of,
it was it was it was a very exciting part of learning for us to your customers start to say that.
Because it was clear that we had moved from oh yeah there's only this certain type of customer that buy second-hand to being actually.
Over 10% of our customers are millionaires so there's a broad range of people demographically psychographic Lee that just wants a great deal and I want Brandon it doesn't matter if they.
I need to based on their budgets or not they want to because it feels like a smart thing to do and they're saving money and they're getting the product they want so on the customer acquisition point.

[27:56] We're finding that you're so we open for of our own stores,
and we're working and running some tests with some department store is where we have stores in stores where customers are actually,
thrilled to find second-hand product that's that says that has the quality in the freshness and the brands that we have in places where they shop every day and it's it's it has the potential to drive younger Shoppers into these,
offline physical stores that want these younger Shoppers you want these Brands and want this type of experience I want this type of content and it gives you the ability for us,
2801 Des dollars in in in point of distribution that I thought that isn't just Facebook or Google or TV or instagrammer all the other well-known Performance Marketing,
channels that we love but that as we try to try to expand in a T Bar vision.
Inspiring a new generation of Shoppers to think second and first you have to be where they are and they're not exclusively on on Facebook.

Jason:
[28:56] Sure and I want to drill into that brick and mortar tactic for just a second do you tend to think of those stores as a.
The separate Channel or separate p&l in that like hey I'm going to invest a certain amount of it fixed inventory that's going to sit in that one location and I'm going to measure how how much money is made off of it or,
do you think of it as a true marketing customer acquisition expense that causes you know a lot more eyeballs to become aware of thredup and then,
you know maybe buy from you across any channel down the road.

Anthony:
[29:27] I think over the over the long term.
You need to make the case that these are powerful marketing vehicles and that they're really accretive to your overall.
Acquisition in Gross that you need a lot of them so you know if you have for like we do it's it's still early days for us there but I think in the end you know until you have a critical mass,
you can make the case in Excel you know any of us could do that but you know any early days I think our view is that the stores have to perform.
And they have to perform on their own without having to factor in the unreasonable.
Gino synergies you know that everyone who walks by is a vis a Steno it's worth $100 CPM he does so so I think for us it's a it's a blend and it's a matter of you know the time frame.

[30:19] But I think it's pretty phenomenal if you can have your own stores,
and the stories can stand on their own financially and you can put the right product in them at the right price and draw you customers into the store and some returning customers and if customers can bring a thredup clean-out bag into the store and drop it off or pick one up.
So there's that there's a number of service functions that we can perform in that store that.
Are really accretive to the business but the early days look make make those things make those things work,
and then I think yes overtime I didn't mind he would be then you could start to lean into out what and what an amazing Symphony you have between your online marketing spending your and your retail visibility.

Jason:
[31:00] Yeah that makes total sense that just triggered a follow-up question are you.
Like you have any Partnerships around drop off locations like I could imagine,
you know like we were coming or places like that where you you could imagine hey there's a bunch of Millennials that are working here let's make it super convenient for them and drop off his back.

Anthony:
[31:20] Yes State stay tuned so those are things that are that work we're getting a lot of inbound interest from Brands and retailers where they want to work with us to essentially.
Sanda a threat of turku branded thredup and we're doing this with Reformation now where where you can wear their customers can get their hands on a Reformation clean out bag and then Reformation customers can put,
a bunch of the clothing they're not wearing from their closets in that bag that bad comes to us but then the customer gets shopping dollars to shop on Reformation.
So what's up so it's a really really nice way,
to make a Reformation front of mind for customers when they're cleaning out the closets and then they're not only front of my man customers are cleaning out their closet thredup has been putting Reformation dollars into the customer's pocket to go and spend the Reformation so it's a,
it's a really powerful way for a retailer brand to get rate right up front and center when a customer is empty no shelves in their closet and you know the next thing they're going to do is,
stack them up again with new things.

Jason:
[32:20] Yeah I said that's interesting cuz you can imagine the first time a retailer sees the thredup,
e-commerce site it could be competitive in it feel like that's a clever pet pivot to make them you feel like any incremental partner instead of a direct competitor,
how did the brand feel about you I do they hate the fact that you're you're you have ads on the internet for their stuff at a lower price point than they like or do they like that it makes their customers feel better.

Anthony:
[32:46] It's it's it's evolved dramatically so when when we got going on this when I started at thredup.
18 on the early day 6 years ago.

[32:57] Retailers Workwear little bit puzzled and and you know they didn't they didn't pass their brand didn't pay it much mind because where we know where we were teeny and I think with the change that's happened.
Is that these brands have seen that this is going on anyway so if you go to Facebook and you go to a a Facebook buy sell trade group and you can find.
1500 moms in Wisconsin who all they do is trade Children's Place dresses
you can find thousands and thousands of those you could go to eBay you could type in pick your favorite brand you'll see tens of thousands of items they can come to thredup and you'll see tens of thousands of items so the,
their resale economy is happening and it's growing it's growing faster than retail in a couple weeks we're going to.
Release our annual resale report what we put in all the stats around how the industry changing and I'm so we can I can send that to you.
So the point is it's happening in the difference between the early days when retailers and Brands were like huh and now is that the retailers are brands are starting to come to us and say okay.
It's happening is there a way we can work with thredup to participate and.
It's a win-win and I'll go back to the Reformation partnership we have where.
They they they put a clean-out bag in their customers hands or they getting their customer can print out a label.

[34:24] They clean out the closet and they get credit the shop so it's great for us because we get terrific Supply from those Reformation customers it's great for for RAF because they get Revenue what we're finding is that.
If a customer gets $100 from their their bag that they sent to thredup they spend far more on reformation and that hundred dollars right they they they think of that hundred they got for the clothing they didn't they were no longer wearing is almost free money.
So and then it's great it's great for the customer because they the cleaned-out closet they feel like they're interacting with Brands who are doing the right thing so it's it's a it's a win-win-win and.
We expect over the next two five ten years to see hundreds and Brands doing this many retailers doing this because consumers are saying second hands are part of my life.
It went and Marie kondo has been a great push to remind people that hey you don't have to buy something and hold onto it forever you're not buying it for ownership you're really buying it.
For use and I'm in so we we think we're one part of that story and we think we think smart retailers and brands are going to want to be part of it too.

Jason:
[35:27] Interesting so it's funny I have the saying that a lot of readers don't love hearing but my premise is,
but it's getting harder and harder to make a living selling other people's stuff and I would argue in a way that you're more insulated than most from that because.
Well you're selling other brands products the version of that you're selling I would argue is partly is yours at that point because it's no longer,
you know once you that a manufacturer made 30,000 of it's a unique skill of one task you have one with a unique value proposition and a bunch of unique attributes.
But that aside the way this plays out in general is most of the big retailers that used to be 90% wholesale,
are increasingly making their own product and leveraging their customer intimacy to make products that the manufacturer didn't see until like 8,
apparel space I think of like a cat and Jack from Target is being a phenomenal success
probably super early days but I read that you guys are starting to use some of the data you have from your customer base to venture into product manufacturing as well is that do I have that right.

Anthony:
[36:36] You do we we we tested something and we continue to test it called remade and it's essentially a its new product.

[36:46] I think you can buy on thredup app but it comes with essentially a buyback guarantee so you you purchase it on thredup.
And we say look if you were trying to toss in good shape will give you 40% of your money back.
And so you may wonder why did we why don't we make new stuff if if second-hand is.
Is our bread and butter and I think what we wanted to understand and we're still understanding it is is there a group of customers out there their segment of consumers who were like hey I like I like this whole second hand thing.
And and I and I and I need to to buy something you but.
I get it is this an easy way for me to try it out you know can I buy something new that comes with this buyback guarantee.
And it said if I can Ava way to onboard a new type of customer who may not otherwise want to just come to the site and buy something,
they may want to buy it new and then so and I think it's it's been pretty remarkable to see how we can use the data we have on what selling what's trending,
and then come up with you know I A A handful of items and it's not really a line there's a wrap dress in there and there's a floral top and there's some there's some pretty specific.
Items can we can we take that data create the right things and then attract a customer who otherwise may not have purchased on thredup.

[38:10] And I think we're still evolving it and we're still learning but you're right the whole move towards private label is massive amongst retail and for us we're just trying to get as many people thinking.
Second hand first and we're always experimenting with new ways to do that.

Jason:
[38:28] That's interesting I haven't thought about that as a sort of trial customer acquisition tactic that's clever and I also,
there's a few brands that are like using customer data to invent products and I think I have a stitch fix is an example of a company that lets weaning into that.
So when I read that you're doing it on like oh yeah that's cover they're selling some stuff they know the address to the stuff they're selling they see what the browsing behavior is they can leverage that data to make some products,
during our conversation that occurred to me you actually have a ton more data about those Sellers and like.
Everything that's in their closet and what they kept and so it is interesting it's a pretty,
potentially valuable data set in the long-run so I'll be looking forward to seeing how that all plays out I want to wrap up with one question cuz we're running time on time,
we are here to Big e-commerce show and you you were talking on a panel about the next big things and Retail Concepts that are taking off
do you have a sort of view for the future if we come back to the show and five years like what is that you Commerce industrie going to look like then.

Anthony:
[39:31] I think what we'll see at least it as far as the the thredup growth plan and the trajectory we're on is I just think you'll see amazing second hand Prada.
Everywhere you'll see it in more places you'll see it across more brand you'll see a more integrated into the ecosystem I also I also think you'll see more rental product I think you'll see.

[39:54] Packages are our poor offerings like Stitch fix you don't continue to like where your way into America's closet so I think.
If you think of the closet of the future which we do a lot and if in the past that was up there was a massive chunk for department stores and then a bunch of little specialty stores I think those chunks the Departments are junk is shrinking a lot.
And off price has grown a lot TJ Maxx and Ross another to give brands at great prices and daily prices and then I think you'll see folks like us,
who do resale you'll see folks who do rental you'll see I think you'll see all these different modalities or shopping start to expand their share of that closet,
and like our hope and our mission is that it should be great for consumers it should be great for the environment,
we're a very mission-driven company and where we never forget the fact that the clothing industry is second only to the petroleum industry and being a polluter,
and sell it we we we we love at least the idea that we can try to be on the right side of history on this and the more of those brands in those concept expand their way into closets to make.
To make us all live a little bit better as it could be a very satisfying world to be in.

Jason:
[41:07] That is awesome and that's going to be a great place to leave it because it's happen again we've used up all our a lot of time as always a folks have questions for Anthony or want to keep the conversation going and could you to jump on her,
page and we'll be happy to respond to you there if you enjoy the show this is a great time to jump on the iTunes and give us that five star review,
but Anthony of Whispers want to reach out to you or get involved in thredup in some way like what's the best way to reach you guys social media or LinkedIn.

Anthony:
[41:35] But yeah we're in all those places on on Facebook or on Twitter or on on social on LinkedIn yet reach out with we'd love to hear from you.

Jason:
[41:44] Awesome we'll put some of the songs in the show notes and thanks very much for your time Anthony was real pleasure to chat with you.

Anthony:
[41:49] Great Juicy J.

Jason:
[41:50] Until next time happy commercing.

Apr 4, 2019

EP169 - GGV Capital Principal Robin Li 

Robin Li is a principal at GVV Capital, a global venture capital firm that focuses on seed-to-growth stage investments across Consumer/New Retail, Social/Digital & Internet, Enterprise/Cloud and Frontier Tech sectors. The firm was founded in 2000 and manages $6.2 billion in capital across 13 funds. Past and present portfolio companies include Affirm, Airbnb, Alibaba,  Peloton, Poshmark, Slack, Square, Wish, and many others.

In this interview, we cover a wide range of topics around the hot trends in retail and consumer in North America, and we deep dive in what’s going on with retail, social and e-commerce in China well.

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

Episode 169 of the Jason & Scot show was recorded on Wednesday, February 20, 2019 from the eTail West tradeshow in Palm Desert, CA.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Wednesday February 20th 2019 live from the etail West Trade Show here in relatively Sunny Palm Desert,
I'm your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott couldn't be here for this show so we'll have to try to Soldier on without him.

[0:46] His longtime listeners will know two of the most common questions we get on the Jason and Scott show are what are the hottest Trends in
consumer retail companies and what's going on with retail social and e-commerce in China so we're really excited to have on the show one of only a handful of people that can answer both of those questions
please welcome to this week's show Robin Lee Robbins a principal at ggv Capital welcome to the show Robin.

Robin:
[1:12] Thank you so much for happy having me.

Jason:
[1:14] We are thrilled to have you running really like to start the show by running a little bit about the background of our guests can you tell us a little bit about how you came to the PC World.

Robin:
[1:25] Yeah sure so before I was Adventure I was actually an educator so I spent three years and Teach for America teaching special education at Middle School pretty much all subjects,
then I went on to go into business school I really didn't have a hundred percent Clear Vision of what I wanted to do,
but I did a lot of volunteer work in the local Chicago Community especially at startup accelerators and Teach for America is entrepreneur program which is why I really learned a lot more around,
answer when I was in business business school I took a chance and apply to this job opportunity to intern at shemane which turned out to be a top PC found in China,
and I actually never lived in China I was born in Hong Kong but I was like hey this is awesome and I'm very curious to learn so I ended up.
Applying and that's up to me and that's where I'm at hahnstown managing partner now at UCB Capital little that I know.
He was actually on the Forbes Midas list as one of the top PCS in the entire world and so after meeting Hans might not work really crew he's an amazing mentor,
I was briefly have Flex has a venture capitalist but then after I finished business school I returned ggv capital and I've been here since ever since it's been almost five years.

Jason:
[2:37] That's awesome so you are basically followed like Jack Ma's career trajectory sort of starting as a teacher and then going on a diamond 80.

Robin:
[2:44] He is definitely my role model.

Jason:
[2:45] I think he's a lot of my real mom so that is awesome and I love the Chicago connection I'm also a chicagoan and until recently I I work right next to 1871 everyday so.

Robin:
[2:57] Well and that is what I want to do.

Jason:
[2:59] Yeah perfect so you probably walked by my office at razorfish all the time.
Back in the day so let's dig into ggv just a little bit can you tell us a little bit about the firm.

Robin:
[3:11] Of course I'm ggv capital is 6.2 billion dollar of global Venture Capital firm I mean Bastin entrepreneurs globally in the US and Asia and other emerging economies,
it's always actually been doing this for the past 18 years we have offices across Silicon Valley which is Menlo Park in San Francisco,
we have Beijing Shanghai most recently Singapore and I am based in New York as a team we live by a few Simple Rules great impact the local and then global.
So in terms of stages we're actually stage agnostic and so we can do anything from investing in a c Stage Company to very late Stage pre-ipo Company so that means we can buy checks as small as a hundred K to 11:50 million dollars,
I would say that we are very sector-specific we focus on four main particles consumer internet and Arbonne Tech which is what I cover,
Enterprise SAS and detect and so we.
Adventure capitalist we are believers behind the Billy verse we look for a very globally-minded entrepreneurs and Founders that are changing the world that we live in.

Jason:
[4:16] That's awesome and you were smart enough to pick the best of the sectors that GB covers to sew.

Robin:
[4:21] That is very exciting and very relatable.

Jason:
[4:23] I like it and I know it's a famous whistle I already know the answer to the question I'm going to ask but can you share a couple of the companies that you guys either LED or been involved with.

Robin:
[4:36] Yeah of course in so I mean given that we already tell whether I'm going to focus on some of our e-commerce before you we love and nothing in the sector and e-commerce ecosystem and so we're actually early investors in Alibaba back in 2003,
which really helped to shape our Global Commerce strategy,
and if you ask me back a lot of companies in Market places such as wish house Poshmark offer up,
do even direct to Consumer Brands like Peloton Lively when key locks function of beauty and even each other's like boxed wholesale and yammy buy and sell.
We invest a lot in e-commerce enablers and so you could think of these as,
Payment Solutions such a square and a firm to Bigcommerce to power a lot of the merchant shop.

Jason:
[5:22] That is totally awesome and congratulations on all that success I'm going to assume there were some that weren't as successful that we didn't answer.

Robin:
[5:34] Thank you we try.

Jason:
[5:36] Yeah and I hope we will get a chance to dive into a few of those but you were here in detail West to talk about a pant to participate in a panel about what's hot in,
internet in retail so I want to steal all the Thunder from that panel what what are some of the things that you're you're singing excited about.

Robin:
[5:57] So in terms of what we're excited about we we look a lot into these e-commerce enabler is an ecosystem partners,
and so for us we could we could be in a box brands and at Marketplace is and what not but we we do see that there's been an emerging Global trend,
and so whether it's next-gen retail
across the world or enabling Global Commerce Solutions weather on the payment side or actually on the cross-border shipping Logistics I that's something that we're diving deep into.

Jason:
[6:28] And it is interesting cuz you guys have a big International footprint and obviously a lot of successful North American brands as well.
And you're one of the three conversations we have here is.
Like us there things that seem like they're wildly successful for like particular in China like social commerce Arch at Commerce or different things that we.
Maybe haven't quite gotten his quick adoption in the US when you take a global investment strategy I could imagine that's even harder because you're investing in a company that may excel in one market and and.
I have a more difficult time getting Traction in the in some other mark.

Robin:
[7:09] Yeah that's right I'm but we actually looked at both markets for a lot of inspiration I mean,
you know before China Look to You a signed copy. A lot of the models they're right but now the US looks to China and so we actually take a lot of lessons learned and help each size scale,
we also see this happen a lot in Emerging Markets which actually look very similar to China on so we recently made some investments in Latin America as well as Southeast Asia.

Jason:
[7:37] Nice.
I sometimes have an iPod hypothesis that there are experiences and consumer value products that get launched in China sooner.
Eventually get Traction in the Uso it's white and sometimes sometimes I feel like you can use China as a little bit of a time machine sometime to predict things that may may come to pass year if you like are you able to do that at all or.

Robin:
[8:04] Yeah for sure and so we we see a lot of Trends in China particularly because China have leapfrogged and many different Industries and so you could say you know what,
China has LeapFrog in the mobile side of leapfrogging a payment side and so that's really exciting for us to take a while to look into and next-generation Retail from offline to all mine is a,
very fake friend in China that we take a lot of inspiration from.

Jason:
[8:32] Yeah for sure and it's like.
The thing that comes up by for me obviously there's great Mobile payment Solutions in China and I feel like that's a foundational thing that enables a bunch of great customer experience as they are,
in people go ho maybe American consumers don't want to do social commerce or something like that and my premises that they probably do we just don't have the great Universal.
Digital wallets to enable those transactions like we like they do in China and so in my mind,
we may see more of those does Asian experiences come here once some of the enabling foundational things like like mobile payments are in place.

Robin:
[9:13] Yeah actually you know Instagram has doing a lot of these interesting selling features and it hides a lot into social commerce in the lessons that we see,
I in China and so this has been like a huge area and opportunity for us and we started investing in this in this a couple years back,
we made an investment call Little Red Book or red for sure,
it was founded in late 2013 now it's growing to about a hundred sixty million users in China and is the number one lifestyle sharing community in China,
and if you want to think about read it a try to like an Instagram memes Pinterest me to Amazon,
nothing is that users there are on the platform are young predominantly female Urban I'm very trendy and so they not work with each other through a lot of this content on the platform.

[10:01] And so we see this as,
a chance that are in China right and they shape a lot of the Next Generation consumption behaviors and what we call like social commerce and so what they do is they buy something whether it's in China or overseas come back post about it,
how do you know if your show off to your friends but also collect items right and see what's trending in a which category and so,
I'm making a career trip next week I want to know what's the best selling beauty products,
what are the top snacks in Japan that I should bring home and so they actually have about a hundred thousand years are generated content post per day amassing billions,
Impressions I so given that they know a shiny at any given time,
they actually can Source by while I'm building Marketplace and this is exactly what they've done so they now have this incredible e-commerce business and a Marketplace on that platform,
how to cut a tire back to the us a few months ago they even started helping Brands like kkw Kim Kardashian's Beauty brand launch in China.
And so we definitely see that you don't answer damn is definitely Berry global,
and are starting to take a lot of lessons and enables social commerce to work and I'm very excited to see what what what.

Jason:
[11:15] That for sure in so going back earlier Point could you see that becoming popular in the US as well like,
obviously you know you mentioned the Instagram's new shopping features I feel like a lot of their predecessors have tried shopping features and didn't get good adoption until you could go.
You know poo poo that but you against your for your point you got to China and like man the level of Engagement with,
the social Platforms in WeChat and pick a dude in red and all these platforms you go man if if so many consumers are doing that there it's hard to imagine that they don't want to do that here as well.

Robin:
[11:51] Yeah I definitely think that you know if anyone can make it work it's probably going to be Instagram I think it's a little too late for for Pinterest to make that type of pivot but,
yeah I definitely think that especially with Logistics getting easier or payments becoming faster and I'm working at 4.
Consumers estate it's definitely possible.

Jason:
[12:12] A bunch of the companies in your portfolio are direct to Consumer Brands and we've been spending a ton of time talking about sort of the evolution of the market and it's interesting.
I frequently point out to my like water just have us retail clients that there.
They're really only has been one new wholesaler launched in the last 10 years and nobody can name them by the way they're your company it's boxed but in general like all the new companies aren't.
Traditional wholesale retailers there direct to Consumer brands that make their own stuff.
The challenge has been it seems like they all get to some threshold level of sales and then like seemingly plateau and so you know once you hit that plateau.
We see them sell themselves to bigger establish brands or making huge investments in customer acquisition that maybe,
seem crazy and unsustainable and I'm thinking about Jad or blue apron or some of those those bad examples examples.
Or they start to look at other channels to grow like partnering with traditional wholesale retailers are opening their own stores are those kinds of things is is that just growing pains of the Sea Market and are you confident that these Adidas e companies.
Are are going to be able to like hit the kind of scales that give you a good return on investment or is that a challenge in that space.

Robin:
[13:40] Yeah I mean that as you can imagine this is a Hot Topic Mojave sees the decency and Landscape is changing faster than ever and I think that.
What we seen is that there's just been honest and amazing increasing amount of new players launching pretty much every day
I want these Innovative strategies that can reach customers that have never been,
been able to be done before writing and in the US and this has really been powered by Facebook and Instagram has made it possible it and in China like you said it's really WeChat WeChat mini programs right,
just to give some perspective we've now seen 820,000 merchants on Shopify alone that sell pretty much decency.
Most of which aren't even venture-backed but have built huge businesses,
Amazon has 136 private label Brands and Amazon's pretty much start to Consumer and these are what to taking over what traditional.
Department stores and grocery stores have done 383 exclusive Ranch House on the Amazon platform alone and I think that
you know if he's he's going to play in the space I think we have to take a look at hey
it's been so easy to start these Brands what is it that I can really distinguish up from the other is it a very unique supply chain we look for a Founder that has an incredible story ambition and and something that can give them a very tough and competitive.
Definitely somebody who wants to go global.

[15:08] Because I think today if you only create a brand just for certain group of audience you actually missing out on billions of other smartphone users around the world and we're very bullish on cross-border e-commerce.

Jason:
[15:19] Yeah and that that feels like another interesting evolution of me is like you go back in time traditionally brick-and-mortar retail has not.
Expanded geographically very well like there's a few examples but like you look at some of the most successful retailers in the world and they kill it in their home market and they really struggle to get.
Global adoption in other markets in this this new DLC model.
You know seems like it thrives globally and jumps borders much much easier in with lower risk frankly.
Without all those costs I'mma start a big believer in the DTC Market to talk a lot about how like I feel like the future is.
You know one or more big aggregator marketplaces in every market and then every other retailer will essentially be d2c and the.
All those retailers in the middle that are mainly trying to sell other people's stuff are the ones that are most at risk and what's interesting is people. We've met so you think Walmart and Target are going away because they're wholesalers.
And what's interesting is there.
They're becoming DTC companies too and you look at Target in Hugo man they've launched five new brands like things I can and Jack.
Are selling two billion dollars a year in some ways those are the most successful new consumer brands that have been launched in the mark.

Robin:
[16:40] I mean Walmart and Target have always had private label right and it's only been kind of resurfaced lately and I would packaged in a different way.

Jason:
[16:48] Yeah and I think I think the difference is now they're treating it like a brand instead of a.
A cheaper value proposition to a national thing they're putting marketing behind it and said to me that.
A hugely interesting trend is like Kroger has this wildly successful private label brand called Simple Truth.
They're selling simple truth on tmall in China by Kroger is in a retailer in China.
And I feel like that that's an interesting Trend that you guys are sort of on the,
the right side of it the moment Scott would be very angry at me and I didn't ask about on demand Services as you may know he he's started up another one of those as we speak.
So he's obviously bullish that is that like you see a good future for the on-demand type Services as well.

Robin:
[17:37] Oh yeah this is a segment that we love to invest in especially because it is a crossover between both e-commerce and orbitec and so you know we we actually started to see this take off and then you ask me for China,
but what China is done is another Emerging Markets is is that it's taken off because it's driven off by them by micro Mobility I saw when you look at on demand services in the US you can always remember.
All the different silos that is touch like GrubHub doordash ubereats really just go after food.

[18:10] And then you have instacart going at the grocery and your Postmates going on these various goods and,
and then you have some very select on demand for massages or what not.
But I think that you know that the issue or kind of the challenges that this can provide is that.
You have to acquire users again and again and it say it gets really expensive and maintaining even operational fleets on your own is something that requires a lot of capital and it's very very intense of an illusion all four,
Founders as of what we've seen in China emerge I need mega platforms are so-called super apps so very sample maid swan.

[18:50] It's a rising super app in China it's kind of like an Amazon for services,
that's all you have fresh. Reviews Yelp delivery local Services booking,
movie tickets groceries even you can't even book travel and vacations on there and let alone ride-hailing and I'm bike sharing is so it's pretty much everything,
and they leverage the micro Mobility solutions that they have to power all the deliveries and every category that you can find an you know that actually last year they are. And it's now 40 billion dollar market cap company,
we actually,
take this lesson from China we don't think that is exactly representative what can happen in the us but we see it in happening in Emerging Markets like southeast Asia and in Latin America particularly Brazil Mexico and what not and so.

[19:40] Even the new Emerging Markets are improving upon that model which is so exciting and they're adding like Payment Solutions on top of it,
and so we are very bullish on On Demand.

Jason:
[19:51] Very cool and then the other one,
has a lot of Buzz lately is that last Mile and like new innovative solutions for retailers and Brands to do the delivery is that a space that you think also has legs or is that played like.

Robin:
[20:06] Yeah I I think it's still very much TV.
Does does a retail Outsource a ride or do you do it in-house I think Walmart has try to do it in-house where they they make their own employees going to take something home along the way but obviously house callable but you know
you know I should you be wavy we've invested in a lot of these last-mile Solutions and so you you don't like
Didi in China hello bike which is number one bike sharing in China in from just having,
you know on your own the Lorraine on your own kind of using the service as a as a bike sharing but actually
leveraging get to become the delivery and that becoming a vehicle right we have five in Southeast Asia with lime and that you asked for scooter sharing bike sharing and even yellow who now recently merged with rain to become grow in Latin America.

Jason:
[20:59] Yeah it I mean obviously the direct the home delivery gets like a lot of the buzz and that's what people think about in last-mile you early on you a little to the Soto experience are you out of working grocery space and I I really feel like.
Pick up is going to be the high volume last Last Mile there and you you will get you know things like I think they just change their name at what used to be all about him and now I think it's.
Blue hippo maybe is that.

Robin:
[21:27] That's just the English translation.

Jason:
[21:29] Titian but yeah I know but it feels like they've officially shifted to the English like I think they're putting hippo on the side.

Robin:
[21:37] Actually seen them I recently had enough and the Big Show.

Jason:
[21:41] Yeah which is interesting that they're exhibiting at us trade shows I think the US retailers are having a lot of success with that to like Walmart with online grocery pick-up and,
and that is interesting that feels like there's even a bunch of new startups in The Last Mile space that are focusing on helping retailers with that.
Pick up experience as well so that's going to be interesting when we get asked about a lot is voice comers what is that like a fat or do you think Boy Scout.
A big opportunity.

Robin:
[22:13] I think it's still a little bit too early to tell me and you have these huge numbers around 86 million units shipped worldwide last year and and 60 million households around the world have these devices but you're acting like,
literally consumer consumption Behavior to change and like how do you actually educate a customer to do that and having,
having even enough accountant and Payment Solutions and stuff like that enabled and I think it's still a few years away.

Jason:
[22:42] Yeah.
I think their categories where it could really work but I'm not sure people are going to order things with a lot of complicated attributes in Brands specific language for the first time the invoice Commerce.

Robin:
[22:57] People are so sensitive right everybody wants a good deal.

Jason:
[23:00] Yeah for sure that's always at the top of the decision tree no matter what else happens is.
I always always is a big factor so we talked a little bit about some of the successes and unique companies in China but like are there any Big Mac Road friends that you're saying in China that that wasn't should know about.

Robin:
[23:19] Yeah I think,
you know we talked a lot about the continuity of social commerce right the influential live streaming as is huge industry and producing a lot of e-commerce growth in China and so that will actually you know Legion,
maybe 4 billion in Revenue this year and just sit with influencers live streaming to almost like 450 million viewers,
which of the lot at 9 so I think that that's really exciting to watch you still haven't seen that take off here yet,
new search engines are in China and so instead of like the Google in the by do,
a model by you people are actually now searching directly on the super apps and WeChat mini programs and so instead of starting off I'm just,
figuring out what you want you're actually inside a platform that your messaging or your transaction or transacting already and spending a lot of your time.
Alaska think you know Chinese platforms are starting to go Global we just talked about Alibaba all right,
but that's how much does one part of what they have in you have fight dance in Tik Tok and,
some of these digital platforms are just just massive and then lastly alipay and WeChat pay will continue to expand across borders.

Jason:
[24:30] Yeah it's funny when I get a tourist destination now it feels like the one that's had the most Traction in the u.s. is Ali pay for Chinese tourist so like you can use all your pay that to pay for your taxi in Las Vegas now all right like beginning makes perfect sense.

Robin:
[24:44] Oh yeah I think that you know you definitely see Ali Baba and other players,
really focusing on the China outbound market right it is a very valuable demographic you have only pay has 600 million active users in China they have you know,
but they have a lot of focus on these outbound outbound Travelers last year there was about 130 million outbound trips just out of town all alone and so 25% of that was actually to North America,
and so in order to service them who kind of,
use alipay at home every day and they're spending like $4,005 in dollars per trip abroad how could you not.
You know Market to that consumer base and so I think that you know that's definitely something that you'll see more and more of in terms of Partnerships around the world.

Jason:
[25:36] Yeah I know that makes perfect sense we talked a little bit about Alibaba one thing I'm curious about is.
Is China a winner-take-all model like it feels like Alibaba is so huge and is,
doing so well and everything in all their categories and obviously we chat seems like they're huge and yet there are still new Mega platforms it's seemed like they emerge and it seems like they're getting traction like that.

Robin:
[26:00] Yeah and I think our accounts you just the percentage of
e-commerce as a percentage of retail Ryan and sell in the US has 10% and in China that's what money per side so it's still a lot of room to grow
that said Ali Baba still accounts for 60 to 70% of that market and in terms of volume and so I think that they are incredibly smart and very strategic,
so instead of just looking at you know influence our side and partnering with red.for example on fasting and in these cases they actually have time now which is it is amazing with just a,
not working very efficient wealth domestically and operationally international as well,
I am so impressed by that platform at this this Consortium just to get some background.

[26:48] Play Alibaba committed to the smart China Logistics Network to provide had a 24-hour delivery of any product anywhere in China.
And I actually spent about 43 billion dollars she just even kick start this project and so they,
they want to do this in terms of like shipping domestically in China and even 72 hours globally,
I am so as taobao in China has transformed in entire generation shopping Behavior I think that time now from Alibaba can actually transform the traditional Logistics ecosystem,
and so they have this incredible brain behind data intelligence domestic fulfillment cross-border Network,
Urban Last Mile and even tapping into the rural Villages of China which tons of opportunity may think we we care a lot about you know Beijing and Shanghai all the time but you know the real opportunity in I'm just dumb,
the bulk of the people are actually living in your 2 tier 3 tier 4 City and so.
I think that like it's it's very smart that you know Alibaba is investing heavily in the logistic space,
I'm just as Amazon is doing so here in the US and globally as well.

Jason:
[27:58] That's funny I I've been any Commerce long enough to remember when people used to think e-commerce was going to be a capital light like the numbers that they're throwing out in terms of infrastructure Investments are like hard to get your brain around.

Robin:
[28:12] Oh yeah and I mean I think that you know when you think about shipping that's a necessary necessity for any reason we are a merchant not just shipping to the consumer but even like,
how do you handle returns I had an end kind of how do you make a faster but also more cost-effective and I think that sucker is still.
Still early,
Amazon is as pushing the envelope right into the bar is that a higher and higher for the customer everyday and so you actually see we see this a lot of startups popping up
in very specific Niche Solutions right or just one product Solutions hey shipping labels
or where how they ignore talk stores are handling returns and I think that it's definitely a very promising and as Avicii where it were looking a lot into the space cuz I think the last few years,
we talked about TTC it's a lot of investment and how do you how do you prove to find an experience and now you know,
baby toddlers And and companies are really investing into retail automation back and how do you improve the inefficient sees that you have and that's something that they're learning a lot from overseas as well because China really leads and logistic.

Jason:
[29:23] For sure and it you know you mentioned the reverse Logistics that feels like.
There's so much room still to improve that and it's so important for the economic the unit economics by.
In us the apparel industry you know he's usually moving e-commerce but returns are like an enormous piece and cost of that thing that seems like it's not sustainable.

Robin:
[29:45] Oh yeah and a lot of times you could be even 40 to 70% are recharged much higher than what you would see offline.

Jason:
[29:52] So you can imagine there's some small vendor here that you and I haven't met yet that is figured out at help mitigate that returns problem for retailers and that could be a great,
Great Neck story for for growth and then e-commerce face.
So I know we're running out of time I'd love to get your perspective about where you think all this is going like you know if we jump in that time machine and go forward 5 or 10 years how do you see the the markets of.

Robin:
[30:18] What I definitely look alive for to Global platforms I'm being with a shop a very easily all across the world,
what no matter where you are in the US and China what not then second and is I look a lot into a eye and intelligence,
so how do you make a more efficient last waste Mendes trickles into other categories not just an apparel or Commerce right but you have,
you know from anybody from univ restaurants to coffee shops and and whatnot and lastly.
Sustainability and kind of CSR right and I think that,
you know what I shop a lot on mind mapping Chopper have a box that coming almost every day but it appeases me to think about how many trees that like I'm actually cutting down and and even though we recycle,
how much of that really gets reused a memory package and it's a really looking forward to somebody solving the sustainability problem for sure.

Jason:
[31:18] Got no I got those are going to be interesting I'm looking for to find them as well and that's going to be a great place to leave it because it's happen again we've used up all our allotted time,
as always if folks have a comment or question feel free to jump on Facebook and will,
continue the dialogue there if you enjoyed this episode we love that five star review on iTunes but Robin if listeners want to learn more about ggv or they've got the next grade,
Innovation and I need your help finding it like what's the best way to get in touch with you.

Robin:
[31:48] Find me a LinkedIn I leave my email there and you can message me at anytime.

Jason:
[31:53] That's awesome we will put that in the show note so no need to try to write it down while you're driving or anything with that Robin is it's been a real pleasure to chat with you and thanks very much for being on the show.

Robin:
[32:04] Thank you it was a lot of fun.

Jason:
[32:05] Until next time happy commercing.

Mar 28, 2019

EP168 - Bombas founder David Heath

 

 

Bombas CEO David Heath

David Heath is the CEO and Co-Founder of Bombas (@bombas), a fast growing, energetic e-commerce apparel company, focused on making the most comfortable socks in the history of feet, while helping those in need. Founded because socks are the number one most requested clothing item at homeless shelters, for every pair they sell, they donate a pair to someone in need.

In this interview, we cover a wide range of topics including the Bombas founding story, their SharkTank experience, the DTC business model and growth challenges, social marketing, innovation, the brick and mortar.

If you’re inspired by the Bombas story, they are hiring!  FREE SOCKS included. https://boards.greenhouse.io/bombas

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

Episode 168 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Friday February 22nd 2019 live from the etail West trade show,
here in semi Sunny Palm Desert
I’m your host Jason retailgeek Goldberg and unfortunately Scott is trapped on a plane so we’re going to talk about him and assign him a bunch of action items.
One of the top trends we always cover on the show is direct to Consumer Brands and so we’re excited to have on the show one of the top DTC companies in the apparel industry,
so joining us from bombas we have the CEO and co-founder Dave he.

David:
[1:01] Thank you.

Jason:
[1:02] Hey Dave thanks very much for being on the show a long time listeners will know we always like to get things started by getting a little bit of the background about how you came to your current role can you tell us a little bit about your bio.

David:
[1:13] Yasso born and raised in New York and I don’t think we need to go back that far,
but I so actually my dad’s not to renew are so very early on it I knew that entrepreneurship was something that I wanted to do was very inspired by him and watching him build a business from,
the basement of our house to you know something that I think we’re all very proud of I need to go to school for entrepreneurship at Babson College and then upon graduation.
I always found that every job I had I can end up working for a smaller and smaller and smaller and smaller company ultimately landed at a media company where I was the seventh employee Rana clean up where I ended up meeting one of my co-founders Randy Goldberg,
it’s been 6 years there we developed our relationship and kind of always shared his mutual passion for wanting to start a business together one day.
We developed business plans for numerous ideas ranging from services to pack the product,
ultimately it was kind of one of these moments of Fate that I think let us to where we are today I have Andre scrolling on Facebook back in 2011 I came across a quote that said that socks with the number one most requested clothing item at homeless shelters in.
I immediately wasn’t like oh my God there’s some business to be had here I just kind of stopped me in my tracks and I was like what you said something that.

[2:38] I’ve never spent more than a second of my life or day thinking about is perceived as a luxury item for somebody else,
so I remember walking over to Randy’s desk and I remember sharing the quote with him and then over the next couple weeks we both found that we just couldn’t shake this idea,
obviously followed entrepreneurship and the other Trends were happening in the startup World in,
Tom’s was in there 50 or business and growing incredibly fast where we park her just announced that they had launched about six months prior and kind of bug and reinvigorated the conversation around the one for one business model cuz when more be first launched.
They were one for one I wear that was kind of their remains take they’ve more position to be a fashion brand these days babe.
That’s some kind of the light bulb went off and we were like, what if we created a company where we donated a pair of socks for every pair of socks that we sold to help him solve this problem in homelessness.
Remember like okay well what type of socket we integrate how are we going to create,
no carve out our place in the in the market and so we spend the next two years looking at your doing research and development trying every pair of sock on in the market and ultimately landed on was.

[3:55] I’m much more comfortable and Innovative kind of everyday casual
athletic sock so at the time Brands like happy socks and Paul Smith we’re coming out with these brightly colored dress socks and your funky dress socks for men wear a trend
Randy and Iraq start of guys we were jeans and sneakers to work everyday.

Jason:
[4:14] And you are tube socks up till then right.

David:
[4:16] Oh yeah totally totally you know Walmart all packed everything,
and so what we ended up realizing was that there was this large gap in the athletic Market where you guys are.
12 pack from Walmart or you buy these individual premium price products that were really aimed towards the runners and cyclists and basketball players and hikers that were costing 15 1820 $38 a pair
and so I was like what did Linnaeus a $38 pair of socks from a $2 pair of socks.
So all of this technology and Innovation seamless toe arch support comfort footbed you know high-quality fabric new articulation in the heel.
Amounted actually a lot more Comfort just an everyday wear but I was realizing that all of these sock companies are marketing all of these Innovations just towards the enthusiast.

[5:04] I’m kind of waiting our light bulb moment our our our our our moment way so what if we took all those Innovations and marketed towards the mass Market consumer and,
pitched in a while seamless toe is better for standing on your feet every day as a nurse or a firefighter or a baker or you know,
mom chasing after her kids or a school teacher.
And that’s bombas was born and we launched the company back in August of 2013 and here we are five and a half years later we’ve just donated I believe our 15 million pair of socks.
Team has grown significantly we continue to double your over here and sales yeah it’s been a wild ride.

Jason:
[5:47] That’s awesome I put your key like there’s some pesky details that might have stopped some people from pursuing that like expertise in like design or Manufacturing,
Jane or a bunch of stuff I didn’t hear you mention having a having a rich background in.

David:
[6:04] Did not did not at all.

Jason:
[6:06] Yes I’m sort of curious was bombas able to happen because,
those things are now easier to Outsource in your able to leverage that or did you guys just jump in and learn how to do stuff and make some mistakes and kind of grow the expertise organically.

David:
[6:20] Yeah I think it was I think it was a mix of luck and the fact that we didn’t have any expertise that allowed us to create a product that was I think far superior than anything that we had,
ever experienced it say the lock portion of it was so when I sat down.

[6:36] Early early days of the idea I sat down with my dad and I was like I got this idea for a sock company,
yeah expecting him to be like that’s one of the worst ideas you’ve ever had but do you think I’m leaving your godfather was in the sock business for 40 years and I know that you did really well by himself can’t go talk to him,
so I called him up and it turns out that in the late eighties and early nineties use presidency of Gold Toe,
I’ve been left Gold Toe to start a private label stock manufacturing company which ended up being one of the largest private label stock manufacturing companies in the world so.
Falling into kind of expertise and somebody who literally knows every single supplier of socks in the world and knows how to manufacture any type of sock in the world,
was a massive advantage and something that I totally totally a tribute to lock,
the component that wasn’t luck that I think once we started the R&D and design phase,
with the fact that we had no bias and no snow we weren’t skewed by any preconceived notions in manufacturing and I remember.
Very vividly talking with one of our manufacturing Partners I said to them I said I want to put a seamless toe on this athletic sock.
They’re like why would you want to do that like that’s wildly expensive you only find seamless toes,
ano Italian made dress socks because they’re so thin you can actually feel the same they’re like on athletic socks you can’t feel the same cuz they’re cushiony was like I can feel the same like I want to go to see what’s the weather like.

[8:06] Do you know how expensive that is on a per pair of socks be so it’s like I don’t know you know how much and they’re like $0.10 a pair and I was like.

[8:13] 10 senses like I can makeup 10 said that my godmother was like no I used to make socks for less than a penny a pair whose like this is why they’re pushing back on this but I think the fact that we were.
Truly designing this coming at it from a consumer’s perspective,
and not coming out of her manufacturing or you know resellers perspective of oh well we need to create a product that has this much margins that weekend we didn’t think about it we were just like let’s create the best product possible,
and see if people like it and so that’s how we came to me.

Jason:
[8:42] That’s awesome and I feel like in some ways that’s not an uncommon story that the disruptors one of their their core advantages as they don’t have the bias of all these preconceived notion of the the people that did them before in some ways II,
I feel like I’ve heard similar iterations of that story from like the Tommy John guys or you know a bunch of other even Dollar Shave Club like where,
if you would come from Joe at it probably would have been harder to imagine Reinventing the.
Product like that exactly so early on the model was that we’re going to put the socks on a website and sell them direct-to-consumer and was that,
the the idea why did you guys ever kick around being a wholesale supplier of socks or.

David:
[9:30] I mean so rainy and I came out of the online media business so the online space was I think what we knew and I think we were the most comfortable I believe we also thought that you know early days we,
United States early days when 2013 doesn’t exactly feel like early days of the internet when you think about it it’s only e-commerce is only been around for you
20 + years or so yo it’s still relatively early days I think we thought that you know.
For building a brand around another wise commoditized product like a pair of socks we we need the,
the unlimited landscape and palette by which the internet affords to tell deep and enriching stories and produce really great content which is ultimately what builds great brands are at least we believe build brick builds great brands,
and similar let you know it’s like the Dollar Shave comes over all that you know I think having.
The ability to use things like video and deeply Rich photographic content and copy in a way to talk about a really small product that on a store shelf,
would only got you know what to in of packaging space to tell a really how do you tell a deep story like that and so I think.

[10:48] Are whole thesis early on was,
let’s see let’s put our content in a brand that’s why we launched an Indiegogo we created a 3-minute video about the socks
I only like I don’t know if you’re going to sit through a 3-minute video about Sox ultimately they did and I think the product in and our brand resonated,
with the customer base and I think that’s kind of sad our path and I think we always talked about.

[11:14] Wholesale at some point we just launched a small wholesale Partnerships last year with Nordstrom’s Dick’s and QVC.
But I think it wasn’t I think we felt like there was so much room and still believe they’re still so much room to grow,
online where you kind of really got to have that one-on-one relationship with the customer around and otherwise.
Forgotten or not thought about product like a pair of socks.

Jason:
[11:41] Yeah and Sumter is one of the things a lot of DTC companies talk about as one of them obviously,
is your name higher margins when you’re selling direct to Consumer but a big thing is customer intimacy and you get like the immediate feedback what what’s tough customers like what they didn’t like you hear directly from the voice of customer inside there’s always this hypothesis
we can iterate our product faster we can make our product better because we’re directly connected to the customer as opposed to just turn feedback from the Walmart by or something
curious if that’s marketing speaker that’s true why are your sock the same as they were the day they want or have you have they evolved in integrated based on customer feedback.

David:
[12:21] I mean I think for us I mean it’s it’s not marketing-speak I think a lot of the.
The ways that the company is involved and you know I wouldn’t say that we we changed our core product in a whole lot of ways.
I mean without without any sort of you guys think we’ve nailed it I think we got it pretty right but things like.

Jason:
[12:44] He’s doing a little dance while he’s saying that just so you know.

David:
[12:46] I remember one one very distinct moment through customer service we kept getting a lot of Outreach from people saying why don’t you make socks that are size 13 to 15.
Or like extra large that’s got to be a small market for us you know who’s really going to buy them.
And we were like now is put it on hold us but I’ll hold it like customer service to be like we keep getting request for extra large socks when I okay fine will produce a small number of extra large socks,
in kind of summer are course I also,
and it ended up representing 10% of our overall business I mean in the in the industry on a whole I think it represents someone like three to 4%.
But I didn’t because we were there listening to the market and then serving that market where owning a much larger share of that because we’re producing a product.
Foreign otherwise probably over over seen part of the demographic it’s that was one instance and then another one in the incense is wise we,
earlier cuz I’m sure you hear from a lot of other d2c brands or Scrappy so like all of our photo shoots for basically like.
Me and my other co-founders we happen to be for white males and we got a lot of feedback from from customers of color being like.
Yeah why don’t you give him.

Jason:
[14:07] Why can we get a good looking feet in that yeah yeah.

David:
[14:09] Baphomet why don’t you representing African-American feed or or or more people of color and we were like you’re absolutely right we should you know it wasn’t something that.
We had really thought about but we took that feedback and then immediately our next photo shoot we have wide range of diversity and and now it still continues to be one of the pillars
of all of our photo shoots and content going for is it we we always learned from an eye of inclusive inclusive and diversity
which I don’t leave our socks around ass or shelf I don’t know if we would ever,
if we ever would have gotten that feedback all the way back to us but listen to our customers and having that relationship with them we can react and say like yeah.
We talked up on that one we oversaw it like shame on us will fix it but we can’t we have the ability to fix it pretty rapidly going forward,
and the response we get back from those customers is like,
the extra large like I can’t believe you listen to me you were going to buy a ton and then you know the people who are proactive on the photo shoot stuff,
they wrote back at me and be like wow thanks for listening to me and and implementing change.

Jason:
[15:13] Yeah you know it that’s interesting cuz again I feel like I’ve heard that similar story for my Andy Dunn bonobos and it’s like the exciting take away from that for me is.
The because we never had the relationship with that brand that was sitting on the shelf to even care.
And said they tasted like that a better connection with you give you feedback might have started off as a negative that it turned into this this positive opportunity to get closer to the customer.
So first place I can buy this oxygen to go go I’m guessing you’re going to tell me you were oversubscribed and that was a wildly successful launch.
And so the back in 2013 you got all right now I got to stand up a website to sell these things and in 2013 it might not have been totally obvious what the best way to do that was so I’m just I know you’re not the CTO but I’m just curious.
Did you guys decide to build your own site from scratch did you find Shopify back then and you remember what you did.

David:
[16:09] Yeah so I actually had the fortunate nature of two of my co-founders were former creative agency guys so.

Jason:
[16:17] Hold that against him as a creative agency guy.

David:
[16:20] It’s been a it’s been a massive massive advantage that have them on our team so they both built design number of websites for clients in the past so it wasn’t.
It wasn’t that foreign to us and I think that having worked at this Media company we put a lot of microsites and kind of manage that aspect for four different clients as well,
so at the time we were like well we want to be an Enterprise company one day so you know obviously going to go with Magento because Magento runs out of the enterprise software and they had Magento community in Shopify was,
not I mean they didn’t have + when we started and it’s amazing to see how how much they’ve grown over the years but.
Probably one of the worst mistakes we made was not launching on Shopify to begin with you have a Gen 2 ended up being a bear super resource-intensive you know,
from all of this press bike so we got on Today Show Good Morning America Shark Tank every time our website would crash and it wasn’t until we got on Shopify eventually,
that we’ve never experienced any of that pain going forwards I’m a big big big Choppa by fan.

[17:33] But yeah I mean it wasn’t signed up we would put up with magenta community site within about 30 days post our Indiegogo campaign we really wanted to capitalize on queue for sales that year and yeah I was Bruce.
Relatively easy against again again borrowing against some of the.

[17:54] Bumps along the way I think managing managing the site was not something that was super foreign to us.

Jason:
[18:00] Sure sure and don’t beat yourself up I feel like the path forward was very much not clear in 2013 if you like them I feel like the options of four for the incubation stage of clear.

David:
[18:12] I couldn’t afford demandware and so.

Jason:
[18:14] Fast forward your next problem what you should be on when you’re selling a billion dollars a year and socks like the answer is unclear at the moment to buy,
but that’ll be a first world problem I think to solve so then remind me how far along you were when you went on Shark Tank.

David:
[18:30] I so we were fourteen months at 11:13 months old so we launched in August of 13 and R episode.
Aired September of 2014,
they did reach out to us in April that it’s our Indiegogo campaign I think one of the things most people don’t know is that there is an actually there is actually an active casting department at Shark Tank which is.
After being on it an hour and I watch the show pretty regularly I now see you there like yeah we had a successful Kickstarter I’m like they found them.

Jason:
[19:09] Fishing they weren’t that what they didn’t stumble upon.

David:
[19:10] So so what are the tips of your they want to get on Shark Tank have a really successful Indiegogo and Kickstarter campaign cuz that’s where they look to reach out to us an April kind of thought of it as like a laugh to begin with her like really like we want to do that like,
like I guess what’s the harm and went to the went to the interviewing process and you created the videos and flew out there and film
and then you fill him in there like.

[19:36] Cool with you may or may never hear from you may or may not ever hear from us again if you do will let you know like a week or two before your episode airs,
don’t plan on anything basically in the meantime run your business is normal and so we were in the middle of fundraising at that time and so,
no I was like man if we are going to be on Shark Tank like,
I want to be able to like use this as leverage to like raise a better valuation but ultimately we closed the round about four weeks before the episode aired
we got the call and then I cure episodes good are in 2 weeks
not a whole lot you can do at that point we staffed up significantly on customer service cuz we just did it now luckily I talked to my friend over Nick over at plated who been on
and he was like Overstock customer service he’s like that’s the one thing like that you can actually do before you,
go on air everything else is he can’t buy more inventory can’t fix the website you know just going to kind of cross your fingers and hope it all goes well,
so yeah we hired I think 30 customer service people and ended up I think’s going up to like 50 that weekend cuz it was just so overwhelming.

Jason:
[20:51] It’s in his crazy that you get so little notice there’s an earlier iteration of that phenomenon like Oprah’s West Wendover used to be on
and literally by the the end of Oprah’s run she had a full-time team that just helped those aren’t for entrepreneurs like Harden their business to get ready for the show airing because.
She put them out of business.

David:
[21:13] Yeah yeah you can actually crush a business.

Jason:
[21:15] Intermountain my senses shark tank is a lot more there now then it sounds like like I do like that you get more notice than 2 weeks now is that not true or okay.

David:
[21:23] I think so I mean at least not from what I what I hear look at the end of the day ABC is trying to reduce the television show.
I think they obviously have interest set you know they want to see their their entrepreneurs succeed but at the end of the day they have to protect.
They’re their IP and make sure that nothing leaks in advance and yeah they really want to control you know.
What businesses are going to be on in and in the messaging around then I think,
there’s probably too much liability on there and 4 if they tell you too far in advance is probably going to lie that you’re going to tell somebody and then it’s going to end up in the Press somehow like I think the Press would really give a shit about,
like cool your man with long with nine other brands but.
You know I hope you know I hope no like ill will against them and neither our interests are two different things but we’re trying to run a business and they’re going to reduce television show.
Is partner’s past Shark Tank ABCs been incredible I mean you really do become part of the ABC Family when you when you close a deal with a shark in,
you know you got on Good Morning America you get on The View and they put products in you know the Bachelor and dancing with the stars and they do a lot of cross-promotion across their platforms.

[22:43] So they’ve been they’ve been really fantastic since them but in the early days they’re just like you got to run your business.
Cuz I also think they don’t want it cuz I’ve also advised the number of other.

Jason:
[22:54] Oh yeah don’t ramp up like you’re going to die.

David:
[22:57] And I have to say that like I’ll say you have to prepare for the best-case but expect the worst.
Because I’ve seen people who bought hundreds of thousands of dollars worth of inventory and then they do like $10,000 and say us.
It’s no telling what it’s not like Oprah where I think it’s a little bit more Oprah endorses it it’s probably going to go through the roof if you go on Shark Tank with.
Alarm clock that fries bacon how many of those are really going to sell.

Jason:
[23:26] One right here but I take your point.

David:
[23:27] I volunteer.

Jason:
[23:31] Yeah I tell you I tell you get it I know you’re in the ABC family so feel free not to, but like I feel like early on there were some entrepreneurs they were smart enough to say hey this is a great customer acquisition opportunity and I don’t really care if I get a deal and I feel like one of the the secret things that that ABC is done to combat that is
they now like they charge a piece of equity just to be on the.

David:
[23:53] They don’t actually anymore now so they did that for the first five seasons but actually,
Mark I think threatened to walk off the show because he felt like it was to turn good businesses from coming on the show right cuz if you got a,
10 or 20 million dollar business you’re not going to walk on this phone and give up Equity car blondes without knowing really what the outcome is going to be in so.
Look I think the way that they try to combat that.

[24:22] I think anybody will realize and admit I mean I could M you even being on it yeah it’s a great obviously exposure opportunity but what I will tell you in the research that I did going on to the show.
From the like six or seven brands that I talk to.
The people who ended up getting deals ended up having higher success rates from immediately you know airing the episode than those that don’t I think there is a little bit of that Oprah effect where the customer validates.
The product or the business if a shark actually invest in it versus if they down is a truss a month,
I’m sure there’s probably a number of cases where people have seen Monumental success Following the show just from the exposure from our standpoint we were really like we want to create it we want to do a deal because we know that all kind of guarantee
higher degree of success once we are and then also say following that being a part of the ABC family and then kind of the value that we’ve gotten since then and obviously having a shark in our corner,
yeah I certainly certainly paid for itself.

Jason:
[25:29] That’s awesome and I just wanted something which I truly appreciate so remind us you were funded and who who was your.
Daymond John who sort of in the space so that was,
probably an aspirational shark to get I always chuckle in this particularly I feel like comes to play with like Robert and Mark is.
I have a sentence that like in general the sharks are looking for good deals right like inside other very often is an argument that that you should give away more Equity than you might to.
Traditional funding source and part of their argument is always we’re going to bring all this support and expertise and technical help and and Mars always oh and I’ll take care of all your website and all that stuff
and as we now know from falling a bunch of these usually what that means is on the throw you on shopping and I’m like.
That could be good advice I’m not sure how much Equity I would want to give away for that advice alone so I’m always curious to hear from sharks that they feel like they’re the they got more value than just the cash from there,
there shark.

David:
[26:35] I mean in our case it’s really been a level of mentorship
you know I think Damon will be the first to admit and he always says he gives us a ton of accolades he’s like let these guys understand e-commerce way better than I do you know he understands the wholesale and brand-building side of the world but,
there were moments where you’re we were talking about going in the new product categories are going into wholesale and having him as a sounding board.
And I think that that’s why each of the relationships are super unique thing in our relationship it’s been.
Mutually beneficial because it we were two business guys that come from startup world would come from the online background can we knew how to build a brand.
We need to kind of build and scale online we had to do digital marketing so we weren’t there calling him every step of the way being like how do we do this how do we do this how do we do this how to do and in some instances you know I think there are.
More inventors are than entrepreneurs or like I came up with this really cool idea and think of my garage.
Are the first thing about starting a business and for them the advice of go on top of eyes like they wouldn’t even know which I was I was so it’s hard to.
Argue you know somebody doesn’t know something and they got to a path of there with the path of least resistance.
Yeah what is the value.

Jason:
[28:01] It’s a view from an expensive mistake like absolutely,
and I think it’s so a I sit there with a box of popcorn and risking no personal Capital heckling that show all the time and one of the things I feel like is really involved is all of their perspectives about,
the value of various channels right now if you like early on it was like oh you might do direct-to-consumer until you could get a wholesale but whole sales only way to get scale and I feel like more recently and I’m like damn John in particular he’s reference
did he learn from you guys and I feel like like I said there was at least one show where he mentioned like as a result of my experience with people like you,
I’m now a lot more weary about that wholesale model and a lot less excited about it and I think it even says he’s liked it at his own business,
based on some of this morning so that’s it like you should be getting some Equity back I think that’s when he calls I’ll tell him.

[28:55] Yeah so so that is totally awesome.
One of the things that we see with a lot of direct-to-consumer companies is based on your value proposition there’s a certain Market out there that’s really easy to acquire right in.
That’s says the market could while they vary between different kinds of businesses.
Whatever it is you launch you grow really fast you get to that point like we’re in the old world if you’re opening Gap stores it might have taken you 5 or 10 years to acquire all the customers that were predisposed to love you
today you get all those customers in the first 6 months and so you get this nice first Spike but then most companies,
hit this Plateau where the new customers stop being quite so easy to acquire and so I’m always curious for for folks like yourself of kind of,
in my perspective gone by that first raunch like like did you go through that and then what what if you had to do and how do you think about things differently about acquiring customers today than you did back in your Indiegogo Shark Tank like.

David:
[29:59] Yeah so how how much time do I have okay.

Jason:
[30:03] The recorder will be out for 12 hours.

David:
[30:05] It’s a great question I think I think it’s obviously something that any d2c brand is constantly thinking about right when is this is when is this going to run out I think for us you know.
There are there are number of levers that we continue to Paul that allow us to continue to acquire customers profitably on first purchase and that’s always been our kind of marketing.
Principal and guidelines from day one is a we were never going to chase LTV you saw what it did other companies you know you saw that over paying on customers early on that you thought we’re going to repeat
didn’t repeat yo ended up
tanking the company sue you are always thinking okay as long as we can focus on some of the core metrics that will define success in the business which are.

[30:52] Produce a high margin products as long as you got high margin then you can you’ve got a lot of dollars to work with then contribution margin on on aov so if we
start to reach a plateau in terms of being able to acquire that customer how can we raise a OVI you know one of the
key things that we did for the beginning we used to be a singles only company that we moved the packs the day that we moved to pack sorry you if you went from $36 to $60
since then we’ve introduced higher-priced product so we’ve got Merino wool and you know ski socks and
bar product mixes as is grown from a merchandising perspective than our aov is like $86 so we’re constantly finding ways to combat,
yo the inevitable growth of cost-per-acquisition on a customer base is so this year when we introduce a new product categories that all have a much higher price point hopefully will raise its over the $100 mark,
simultaneously we’re always looking to optimize channels and I think one of the things that people are people under value,
or they don’t think about and it’s one of the things I constantly advised some of the early-stage startups that I either investing or mentor.

[32:03] Is the power of creative.
Really really really good creative can actually lower CPAs sum when we introduced to our our million pair video campaign
original you’re like okay this is just me a thank you to our customer base will produce this video not really expected to go anywhere and then our CMO is like,
I want to test this in marketing or like okay fine potestas in marketing but it’s always like a 2 minute long video or like no way this thing is going to work online,
it’s scaled so rapidly we were getting like CPAs in like the $9 for a few months were getting like low team CPS,
are the time when we are averaging a thing you are average CP is probably 40 or 50 bucks the time significantly drop that campaign ran.
Over a year until it started to see fatigue I think that videos to date is over a hundred and fifty million views probably attributable to close to,
10 to 15 million dollars of Revenue off of that one single piece of creative and so.

[33:10] That was that was a real eye-opener for us we’re like how we need to constantly be reinvesting in in creative and sweet built out this.
Full basically internal agency model which is nice cuz two co-founders from Regency people you have a lot of that skill-set internally but we develop.
So much creative more constantly pumping it into the marketing field you know and 90% of it.

[33:35] This garbage you know it doesn’t work but the 10% that does well you kind of start to distill down and distilled down into still down to the power I think of e-commerce is that,
are being able to see when you put money behind an ad be able to see what performing and why it’s performing in on what audience base is it performing well then you can try to replicate that across similar audiences and then tweaked it,
and as long as that engine and you start to build you know that engine up and start a leopard the data you can start to become really really smart about the way.
We also have to be willing to take risks is one piece of creative that we came up with last year our laundry back guarantee we’re basically said.
Never lose it one of a pair of bombas in the laundry will replace it for free did horribly on Facebook.
And our CMO is like well I think this is such a great campaign I got such great press coverage like let’s put it on TV.
And I was like why are we spending any more money on this piece of creative it did terribly on Facebook why do you think it’s going to do well on TV,
and miraculous agents really really well on TV so you know I think the ability to kind of create content tested iterated but also be able to take risks on where you’re publishing that content,
with an eye again towards those metrics.

[34:52] Is for us would what is allowed us to continue and also diversifying channels I think that was the other thing I think realizing.
Early on it take 90% of all of our spend was on Facebook,
our budget continues to double every year on Facebook by Facebook I think represents 40% of our overall spend today.

[35:13] TV represents a large power podcast audio direct mail I mean every single of these channels add up.
Yeah direct Mills great CPAs hard to scale it you know it doesn’t scale like TV in Facebook,
but it gives us a really really competitive CPA is so having the overall mix bring the overall cost for a cost for a position.
Facebook is higher these days but as a blended mix that’s all we really care about while we also in one of the other advantages of our businesses,
kasaks a replenishment item,
naturally and we have a very very high repeat Ray and repeat is what ultimately drives the profitability of the of the company,
Zack gives us the ability to reinvest into new channels and.
Yeah I got not every businesses as fortunate or set up the way that you know our margin structure is or some of the repeat rates but.
What’s a lot of Cisco.

Jason:
[36:09] That’s why you would spend some time picking the right product categories suicide note that that seems like one
path to success has to be really smart about your Performance Marketing and and do great executions and really agonized unlock trade even try lots of different things and learned that’s one way to go is to just spend like a drunken sailor
and then I hope to get a choir to go public before anyone notices so I’m just saying for listeners to pads you choose.

David:
[36:39] I would recommend against the ladder pass.

Jason:
[36:41] I would too but like more.

David:
[36:42] Super super stressful yeah I think those are fewer and farther between I think if you look at the Acquisitions that Walmart made by mod fast forward 70 million dollars and they raised 75,
I don’t know I don’t think anybody really did well on that deal.

Jason:
[37:00] I think the only one that wasn’t a value acquisition was yet for sure.

David:
[37:04] Yeah I mean I owe dark bonobos was was in there somewhere.

Jason:
[37:07] I think it was close to like One X Revenue.
Which it like I would argue I’d like to get a lot more but that’s where you may not be closed yet what we shall see.
Once I take you didn’t mention but I feel like I have not been in a in a car in the last year and not have you remind me about the seam in my socks is it is radio or really affected part of the.

David:
[37:33] Killer yeah yeah podcast Radio audio serious all the way across the board that continues to be one of our largest growing,
are fastest growing channels by spend I think we tripled,
tripled spending audio over the last two years represent probably 15% of our overall spend now.
Yeah we can meet at 8 it’s a little bit more hit or miss I think it’s like TV and then you’ve got to find the channels that resonate for you and there’s not,
unless we will find a podcast that does really well for us and then I think we saturated over time and then it stops performing so it’s kind of move on audio two kind of mining for gold tonight might find you know
one that does really well you dig really deep and then the other one the other mine
dries up and you got to find something else but across-the-board audio does pretty well but it’s time-consuming for sure cuz you got him that it you know it’s you got to create the spots.

Jason:
[38:35] Podcast in particular one thing that podcast from notorious for his like the attribution model is kind of tough.
You Tennessee products that are like really fast direct sell direct all the action and it’s usually you’re cracking attribution based on like a URL or promo code is that how you guys look at podcast or do you feel like you have some sense for.
Building in that kind of thing.

David:
[39:00] Like if anybody I think I think if there was anybody who figures out how to do multi Channel or multi-touch attribution in e-commerce well I think they would.
Yeah I think they would be the next multibillion-dollar company honestly we were lying on a pretty easy.

[39:18] Way we do we do how’d you hear about us surveys and yeah we cross metric that against the data coming through the coupon codes for the sights but,
what you’re fine and yeah I think the big maybe it’s not a big secret but I think,
what most companies do is the same offer that you’ll get by Just landing on their website is the same offer that the promote within a podcaster on a radio show.
So what we end up getting is a lot of people just type in bombas. Com and see the promo offer 20% off your first order and then they just go through that.
What we find is we got probably,
a four times after bution on the how did you hear about a survey when we overlay that data so if it was $100 CPA office specific podcast will come down about 25 bucks.
Once we kind of overlay that how did here but you know we’re in so many channels now it starts to become really challenging like did they first learn about us some podcast was that the last one touch point of entry into how many times today
you know see us on Facebook or television or you know Direct Mail which was the channel that ultimately got them over the hump
this is why were I think.

[40:32] Monitor Channel by Channel acne or cost-per-acquisition to look at efficiency I think the thing at the end of the day that we really really care about it’s just overall cost per acquisition across all channels
that’s that’s truly the one metric that allows us to know whether we’re on the right path or not.

Jason:
[40:48] Got it so that ends up being your sort of next best dollar calculus is
is customer acquisition cost with that makes perfect sense that’s a perfect to my next question you mentioned earlier in the show that you’re just starting to pile at some some wholesale partners and I’m curious.
Are you thinking of that is a separate channel in separate piano and just evaluating the ROI from that channel on its own or are you thinking about,
that exposure in those those high-traffic retailers as a customer acquisition marketing tactic as well.

David:
[41:20] Yeah I think it’s I think it’s a mix of both I think that when I.
You know when I eat when I look at the future of the company and we have plans to be a billion dollar company in the next 10 years.
I don’t think that the rate at which e-commerce is growing,
will we be able to necessarily do be able to do a billion dollars of Revenue just online and look if you like fashion over or proving that you know you can do seven hundred million dollars of Revenue online cuz I got things up first for a,
branded only retailer Nan Marketplace retailer to be doing those kind of numbers I think I think more and more brands of get there but.
When I look at our strategy and kind of diversifying where we’re going to get growth probably need to be a little bit more strategic about it and not going to put all my eggs in one basket and so I still see you,
a large opportunity and also assume there’s a lot of other brands that are in our space I look at Stan’s you know.

[42:21] Over a hundred million dollar your company predominantly at wholesale so when I look at that I’m like okay well apart of the market share you know can I take you know how big can bombas be not necessarily competing against ants and when we
interview our customers the majority of our customers are coming from Brands like Hanes for the loom
your jockey there they’re buying up rather than buying over.
And so when I look at how big of a market share those brands have at retail,
Mike well if we’re doing this online we surely should be able to carve out a nice little business for us at wholesale that will just add to the revenue stack over all but.

[43:00] Interesting lie enough when we launched at Nordstrom’s dicks at Nordstrom’s and Dick’s specifically,
we were over indexing pretty significantly against every other sock in the category,
and remember I was like I can’t believe you know I knew that we were confident that we were going to be successful at at retail or wholesale but,
I didn’t think that we would be two to three times the sell through rate of of the next best-selling sock in the category and I remember sitting out with our private Equity partner and they’re like.
Will you realize there’s not another sock brand on the Shelf spending $40 a year on marketing and I was like,
all right so I think that we’re benefiting at wholesale from a lot of the radio ads and TV and stuff that we’re thinking is all direct response
what is actually having a lift at wholesale as well because there’s brand recognition if you’ll rocking through the store is there
yeah maybe they’re listening to us in the car and then they get into a Nordstrom’s like alright that’s the brand I just heard about I’m going to buy a pair of those
I don’t think we ever kind of really thought about the the overlap effect.
Are online or online marketing I just did Eric Woods would have in the offline world.

Jason:
[44:14] I’ll put their clothes in the show notes so people can see him,
you know you talked about hitting that like billion dollar threshold and you say like how many direct-to-consumer like native brands have gotten a billion dollars and it’s it’s pretty small right,
and then you go all right well what about the traditional House of brands that dominate the retail shelf the VF Corp sayings like how many billion dollar brands of a built in the last 10 years smaller
so you know where all the new 10 billion billion dollar run rate brands are coming from the retox.
It’s cat and Jack its lights to Target to lunch 5 billion dollar brands in the last 2 years Kroger has billion dollar brain is crazy.

David:
[45:03] Gary Wright coming out of Aeropostale.

Jason:
[45:06] Yeah so there is this to me there’s something to like.
And I don’t like using private label cuz I actually think these new brands are our evolution of private label it’s not just a cheaper version of the national brand on the show.

David:
[45:20] They put like brand thinking and jolly.

Jason:
[45:23] Microcytes they do all these things but you think about it what the common denominator of those Brands is.
That retailer has the same customer intimacy that our direct-to-consumer brand has they know the customer to have a direct relationship and then they have us the scale visibility and low customer acquisition cost.
Retail some you know if or do I give all that infrastructure has already been amortize somewhere else and so it is like I do and I say you like man,
part of the equation for digitally native Brands to get to billions of dollars probably means some you know some blend of that that brick-and-mortar presence is.
So this is all been great I do just in case I was stupid enough not to ask any of the right question is there anything that you feel like you’ve learned in this run that would surprise new entrepreneurs are new direct to Consumer brands that,
that you’d care to share with us.

David:
[46:21] Yeah I think I think one of the biggest piece of advice that I got really really early on for one of my friends who worked at Tom’s was the.
The ability to focus our main focus on a relatively small product set.
When I remember when we had done like $500,000 in sales those like we’re killing it Riley sales in her first six months we need to be producing shirts and underwear and sweatpants and sweatshirts and he sat down and he was like.

[46:52] We at times is that we sold the first we sold one silhouette in five colors for the first I think like four years I am built like a multi hundred billion dollar company off of that he’s like don’t underestimate.

[47:05] How small you are or don’t overestimate how small you are.
Compared to like the larger population and we’re over a hundred million dollar brand today and I
still and now I’m not surprised by you no bite as much when I meet people in there like oh I don’t know I’ve never heard of bombas before I cuz I was it just like more humbling at this point where I’m I have to assume
that nobody else has heard of us despite our size and even though I think that puts it in respect that you can be a brand over a hundred million dollars,
go to the middle of the country and ask people at Warby Parker is our guarantee most of them are like I never heard of Warby Parker I think I remember of somewhere and I was like oh Casper mattresses,
what’s a Casper mattress and I like right you live outside your like New York in LA and you know some of the bubbles that we live in
and yeah these Brands don’t penetrate quite as deeply
as you as you may think there are that’s what brands are thing like Target or able to you know it’s been up brands in a much easier it cuz they owned those customer bases across every single Geographic and demographic,
Physicians I would say don’t like don’t overestimate.

[48:18] Your size and stay focused on the one thing that you do really really really really well and frost I was producing socks and selling them online that’s why we didn’t get distracted by going to wholesale we didn’t get distracted by producing other products
here we are five and a half years later we still just sell socks,
and I still think that we’ve got hundreds of millions of dollars more Justin our core product category just online.

Jason:
[48:42] That that is awesome and don’t forget to get out of the New York l a bubble sometimes figure out what the customer in Muskogee wants Muskogee is in Oklahoma,
people Walmart frequently talked about like that’s the prototypical Walmart customer at Muscogee random facts on the Jason and Scott show
so we’re running out of time I want to get one last question in when you and I are back at the show five years from now you have any sense for how the the market in the world might be different if you have a view for the future of,
of Brands and like do we have the same assortment of direct-to-consumer and wholesalers and things that we have today.

David:
[49:25] I think there will be a might have been anything there’s going to be some consolidation I think I think it would be great if,
I think there’s so much efficiency to be had by rolling up some of these e-commerce Brands together by centralizing marketing centralizing back office operations,
I think Andy at Walmart that was kind of their you know what he was charged with I’d love to see him pull it off.
If not him I think there’s I think somebody should should come into the space and and kind of wrap up a bunch of these big Brands to make them even bigger.

[50:02] So that’s what I’m kind of hoping for over the next five years and,
I bet you will also start to see I’d like to hopefully see some more Acquisitions in the space that aren’t that better,
not billion-dollar Acquisitions right I think you know a hundred million two hundred million dollar Acquisitions for the small the native deodorant company right I think those are,
in the end the next round of entrepreneurs that I’m meeting interesting Lee enough are all in the product categories that they’re all developing.
Are not sitting down being like I’ve got the next billion-dollar idea I think they’re saying that I mean like,
I see an opportunity to carve out a 40 million dollar you know Market in this direct-to-consumer space and hopefully somebody will hire us for a hundred hundred twenty million dollars and I think that’s the right mindset of this next round of entrepreneurs you don’t need to go out and raised
50 to 300 million dollars of capital to build this Behemoth or and that’s going to take oatmeal a world domination and be the next P&G,
yeah I think I think we’ll start to see a little bit more of a fragmented space and smaller smaller fundraises and smaller a relatively smaller acquisitions.

Jason:
[51:13] Interesting in that lights up.
I think we talked about the fact that I got our business can be a great business for a bunch of employees I can solve a consumer problem and the challenges,
which businesses in that size is they don’t offer the return on investment for the traditional VC model and so if you build your company based on that VC model like that BC does not want you to see.

David:
[51:38] We could have a whole nother podcast about vcu’s and where I think their place is in building direct-to-consumer Firenze versatile.

Jason:
[51:45] So that’s that’s kind of what I was like in the short version of that like you talked about raising less when you say raising less do you think that’s raising last from the traditional funding sources or do you think that’s a newer funding sources.

David:
[51:59] I mean,
you know I use us as an example we were we raised $2000000 to seed funding in 3 million in our and haven’t raised a single dollar ever since we raised four million dollars and total and built a hundred billion dollar company in 5 and 1/2 years at Super profitable.
It can be done right you don’t need to go out and raise $50 hundred million dollars to build a hundred billion dollar company is like that that’s like to me is like asinine thing k,
answer this next wave entrepreneurs I think they’re looking at margin or looking at cost-per-acquisition they’re looking at contribution,
they’re looking at the financial is in a much more surgeries way and they’re also not just looking at online they’re looking at omni-channel they’re being a lot more strategic about how they’re bringing products to Market and you know how they’re acquiring customers and realizing that,
there’s a subset of Angel Investors and there’s a new wave I think of you to see entrepreneurs like myself and Andy and you know Jeff reiter and all these other due to see CEOs that are now investing in this next wave of companies and saying
you don’t need to go raise 20 million dollars from you no first-round or any of these other big you know no knock on them I just think that.

[53:06] They serve a great purpose in writing in funding Technology based companies that require massive amounts of capital that don’t
have 90% margin profiles that shouldn’t you know that that don’t generate cash in the first year but like if you’ve gotten retail brands have been being built for the last hundred years without.
Massive amounts of VC funding because if your business is set up correctly.

[53:31] As a consumer business you should generate profit on your product like it it sounds crazy to be like stating that as a fact today but like your.
Fundamentally if you have the right model setup your business should generate cash and that cash at scale should be able to fund growth I don’t know.

Jason:
[53:50] That’s a wildly controversial position I’m sarcasm fully intended totally agree and I
that’s a great place to leave it because we’ve done it again we blown through are a lot of time making some people stay at the gym a little extra long for this episode which I like.

David:
[54:05] Look at this excerpt Rhapsody.

Jason:
[54:06] Exactly I got nose I need them if folks have some comments or questions about the show feel free to jump on our Facebook page will continue the conversation there as always.
If you really enjoy this episode we sure appreciate if you jump on iTunes and get us that five star review Dave if folks want to connect with bombas or follow some more of your thought leadership is there a place on the internet that it’s best to hang out are you a Twitter guy.

David:
[54:31] I’m not at it I’m actually not a social media user much to my communications Apartments Chagrin but.

Jason:
[54:38] I can put your mobile phone number in the show note so that would be better.

David:
[54:40] Founder it’s out there somewhere I get a lot of random phone calls from.
Bender’s but no I mean by myself, we’ve got to buy me something on Instagram that’s what the kids are using these days but I’ll plug that we’ve got 55 open positions the company right now,
incredible company culture so if you’re interested in a job in New York go on our career pages and definitely.

Jason:
[55:07] That is awesome and that that best Pat there is the Gear Page on bombas.com will put that in the show notes as well Dave really appreciate your time and really enjoyed our conversation until next time happy commercing.

Mar 21, 2019

EP167 - Instagram Checkout Hot Take 

This episode is a hot take on Checkout on Instagram feature.  We cover the main features, details about the closed beta, potential pros and cons, and a recommendation for brands thinking about selling on Instagram.

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

Episode 167 of the Jason & Scot show was recorded on Wednesday, March 20th, 2019.

Join your hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer and Scot Wingo, CEO of GetSpiffy 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:
[0:24] Welcome to the Jason and Scott show this episode 167 is being recorded on
Wednesday March 20th 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

Scot:
[0:40] Jason and welcome back Jason Scott show listeners
yesterday Facebook announced an exciting new feature for Instagram called checkout on Instagram those marketing Geniuses over there so today we wanted to give you our hot take on that.

Jason:
[0:58] I am excited to talk about that Scott but before we jump into it you are officially podcast cheating on me now.

Scot:
[1:07] I am I am you know we need full disclosure I told Jason I was going to do a podcast use very supportive
so we have an open podcast relationship if Jason wants to do a podcast that’s fine but I really know he doesn’t have time to
so when your Chief Commerce retail e-commerce strategy officer don’t have time for one podcast baby
new podcast is really kind of a spiffy thing so it’s the future Vehicles so I was framework called vehicle 2.0 where we talked about
what’s eclectic are changing car ownership electrification an autonomous vehicles so if any of those things are interesting to you at over the vehicle to. Get spooky., and you can find a new podcast would love to bring some Jason Scott show folks over there
another funny thing is we got a call a couple weeks ago from Lyft they’re having a big event in Houston it’s a rodeo to Sunday your.

[2:10] Find out your first review and 30 Day Rodeo can you imagine a lot of people that go to the
just a lot of radio and
so we didn’t experiment which is pretty interesting we did a kind of driver rewards thing where we set up right near this rodeo and lift would send messages out
two drivers that were doing a lot of work on their Network and giving free car washes so that was fun we wash over 400 vehicles in a pretty short 3-day.
It was three days around but it’s really time or in the evenings so
does a lot of car washing soap not it’s exciting to partner with companies like Lyft there are also in their IPO process if people are interested in IPOs the lift.

[2:57] Roadshow is available it’s really cool by 30 minute video I think it’s well worth your time
you go to Retail Road show.com the SEC makes companies now publish their Roadshow
and it’s a little known fact that they do that so I can go out there and do that it is only up there for about a week so we’re recording this on the 20th and I think I’ll probably be down by the
3rd or 24th so rachaelrayshow.com to watch Lyft IPO it’s a really cool another aspect of what looks spelling
so that’s what’s going on in my room.

Jason:
[3:30] That is very cool you in one of your first podcast episodes for vehicle 2.0 you broke down the Lyft s-1 filing which was also very informative and interesting.

Scot:
[3:43] Yeah yeah and unkind of swing that back over here diepio pipeline is is just bursting with with all kinds of
convenience really goodness so we could lift in there Ubers rumored to be in the pipeline instacart Postmates are also candidates and then
as he sings come out we’ll be covering all the distance cop show if they’re little more relevant than this was.

Jason:
[4:09] Yeah in sign up for a long time listener G of course to know that I used to be a rodeo clown and I can tell you those 30-day rodeos are exhausting you are super sore by the 30th date.

Scot:
[4:21] Your Barrel by the end of your Barrel your rubber Barrel this is all dented.

Jason:
[4:25] Exactly fun but yeah there’s actually a lottery for which Clown goes in the barrel every day so you’re not generally in the barrel all 30 days.

Scot:
[4:33] Wow what to do a whole episode Deep dive on Jason’s rodeo clown.

Jason:
[4:38] Exactly
that one that would be super interesting and I did get a chance to listen to several your podcast they were super informative I’m right up to the point where you have gas so I’m I’ve done a full dose of Scott wingo and I’m excited to
to hear from I think the CEO of smart car.

Scot:
[4:56] It’s exhausting God doing it on you cuz I’m not used to talking so much.
I usually get like 5 minutes out of 50 and now I have to like there’s a lot of a lot of space to fill I miss you.

Jason:
[5:09] I bet you I got to we having a cute version of that problem
and then the last thing before we we jump into it I am too busy to do another podcast but to be clear it’s what makes me too busy to do another podcast is my job as the audio engineer for this podcast.

Scot:
[5:26] Yeah I learn from that we have we have a ghetto person for that.

Jason:
[5:34] Thank you for not saying like confident person.

Scot:
[5:38] Not nearly as good as you are but they have a lot more time to work on.

Jason:
[5:42] I was I was a little jealous about that aspect that I’m excited and I’m a subscriber.

Scot:
[5:48] Cool let’s talk about Instagram so if you’ve been living under a rock Instagram is a very popular social media Network driven by pictures of the kids in my family have a rule
when we get we’re at a restaurant
this doesn’t apply to Applebee’s or anyone basic but if we’re at a fanciest restaurant no one touches her food until we instead because
instant or it didn’t happen so that’s what I’m talkin about tonight so Instagram is very popular as a refresher it was acquired by Facebook
for a huge at the time record-breaking billion dollars in 2012 looking back from 2019 most people feel like that was quite a seal and other stuff so
show history there was a reminder that that Facebook owns Instagram.
Ceaseless jump into the announcement I know as the chief Commerce strategy officer you probably about this for a while what were the highlights.

Jason:
[6:55] Yep before I jump in that we always like to have useful tidbits on the show and so I feel like the the valuable one for this show is going to be that there are actual,
psychological studies that have proven that when you take pictures of your food before you eat it you actually enjoy the food West.
I’m super sorry.
To share that with you but I feel like the Wingo family could actually be enjoying your meals a little bit more if you weren’t interested in them. I’ll put a note to those studies in the show notes and you can decide.

Scot:
[7:25] I’ll try that with my kids but I think it’s actually more correlated to the number of likes your free picture gets sick.

Jason:
[7:31] Yeah Isis I suspect that that is true and who cares if you enjoy your food if you get new new follower,
yeah so this is obviously a feature for Instagram that for a while Instagram has had the ability to pin products to organic content.

[7:52] So you you can have some hot spots on photos and click that hotspot and there’s been a vehicle where you could sort of Click through
2 e Commerce site that had that product so it would take you out of Instagram to the mobile version of the,
the Brand’s website to look at a product detail page in in most cases and so what the what they’ve done here is they’ve eliminated the need to leave the Instagram app and go to the e-commerce site so you now get a
a native product detail page in Instagram
can let you do attribute so you could like selected their shoes you could select a color and a size and then you can add it to carts
and then there’s not really not add to cart they’re sort of just a checkout button because you’re only allowed to buy one thing at a time and when you check out you enter,
your your name and address and your payment information and they will ship you the product,
so essentially Instagram is becoming your favorite thing on Marketplace wedding letting,
primary Brands and in most cases at the moment did you need a Brands sell stuff natively on the platform they’re paying undisclosed.

[9:10] Take radar feature to Instagram and the Hope from Facebook Sandpoint is,
we have people like in this visual platform that are doing a lot of product Discovery and had a lot of high buying intent and now we’re dramatically reducing the friction to convert that buying intent into
purchases.

Scot:
[9:32] I have I’ve been busy washing cars and haven’t had a chance to look at experience I know I looked at the launch Partners a lot of them were in the fashion category that in fashion we have the age-old problem of of styles and colors
I have they saw that or do they just kind of plan on that neat have a different PDP for each.

Jason:
[9:52] No no they do they have a dream you drop down so you so you can select a size and color
they a little bit about it’s a closed beta at this point so there’s 22 Grande selling
if you’re a brand interest in selling the you can’t apply or sell right now
yeah but you can have up to five products in one piece of Instagram content this is only organic content so this is not an ad format so you can.
Certify visibility for this content you have to be publishing content that that a lot of viewers are already consuming and they say that the way they selected these 22 initial.
Partners are folks that were already heavy users of the Instagram platform and we’re getting a lot of Engagement and we’re already tagging their content with product and so
you know that apparel and Beauty category did it heavily skewed towards apparel and Beauty it’s mostly digital-native Brands you know some of the.
You know so it’s it’s the Warby Parker’s and the Unicorn clothes.
There’s some laundry stuff like Prada Nike and Adidas to me are the big mainstream manufacturers,
there on the platform but there’s also like Burberry and in the oscardelarenta and revolve clothing some folks like that.

[11:21] Yeah so they do let you do those attributes. General question what they there are some from my perspectives,
limitations to what they do let you do on the product detail page and I’m actually going to hold off on.
Hitting those now cuz it we are going to come in and walk through some of the.
The the pros and the cons at least as you and I see them but you know we’ll put a link to their actual announcement and I’ll try to find,
a product what are the limitations is this only works in the Instagram mobile app so it’s only on a mobile it’s only a nap but I’ll try to list a product so that you can click through it yourself
they do have a video demonstration on their on their blog announcing it so you can kind of watch a video of someone checking out.

Scot:
[12:10] Call is it IOS and Android or did they just pun.

Jason:
[12:13] Yeah it’s all the platforms that other mobile platforms that are Instagram supports it is also only in North America right now.

Scot:
[12:19] Okay yeah and then
I should actually know this but do you know so let’s go back so there’s been a long history of social networks trying to kind of Mary e-commerce and frankly a lot of success what are some of the historical highlights of
biscuits have been tried that you recall.

Jason:
[12:41] Yes it is it it’s an interesting conundrum there’s been a lot of efforts at what I’ll call the social commerce in the US,
like a particular bunch of iterations and sort of social by buttons and none of them have really been very successful and yet there are Platforms in particularly China by throughout Asia
where this this Paradigm is super popular in heavily adopted and so for a long time we’ve always wondered are.

[13:12] Eastern consumers just fundamentally different than Western consumers are they even more digitally native and Savvy in China and therefore ahead of the US consumers and so this will eventually catch on or you know it is the,
are the experiences that the Pinterest and Facebook have tried.
Fundamentally inferior to the experiences that that we chat and and others have done in China like.
Don’t know the answer but I can tell you that Facebook launched e-commerce on the platform in 2010 and there was actually a pamper store where you can buy your diapers on Facebook back in 2010.
That really didn’t go anywhere and in the subsequent 9 years.
They’ve they’ve dropped a lot of Commerce capability some that wasn’t adopted and it’s been sort of abandoned and others that are that are still utilize but aren’t you don’t fall short of actually letting you do the transaction.

[14:14] And so you know I think like 2014 that they wants to Facebook buy button.
Which is you know not not in service today but they also wants things like collection ad formats which were like a,
Commerce oriented ad format that let you have multiple products in a single ad,
in 2014 and that that so is used today if you know it doesn’t let you go all the way to the by,
in some non us markets Facebook actually lets small sellers host or friends on Facebook and they’re they’re powered by Shopify.
So that’s interesting in some markets.
Course in 2016 they made a big push to doing Commerce in the Facebook Messenger platform and there’s some.
Some examples of that being useful but that certainly doesn’t you know have.
Have brought engagement and you know their competitors have had similar challenges to Pinterest as as.

[15:17] You know incrementally added shopping features like Rich pins and shoppable pins and Shop the look but hasn’t really you know been able to do transactions on the platform.
Twitter had the the buy button for a little while and killed it Google has some shopping for mass that had buy buttons in it then aren’t aren’t.
You know hugely successful and Broadway deployed so there’s a checkered past here and it’s,
going to be interesting to see if now is the time that works if Instagram is resolved some of the fundamental
challenges or you know the timing is just right I have my own Theory which I I promise to reveal by the the end of the podcast.
The you know,
one of the things that most of these efforts have in common and I I think I did notice this about the the Instagram one is if they do get successful one of the Whitney in ways they envision
brand being able to publish their content to the platform is through this company I I think I’m familiar with Kyle Channel advisor.

Scot:
[16:26] Yeah yeah yeah so I was
as surprised as you are to see jamas are there so I’m not involved in the day-to-day but you know the usually when someone needs a Marketplace integration Channel that’s what it’s called
and then Spirit of of kind of.

[16:46] Open the other partners that were announced where Shopify and Bigcommerce which are more kind of SMB e-commerce platforms so there it’s not like an option where you say hey if you want this widget to show up on your website you can also make it shoppable on,
Instagram and then more of a competitor to channel advisor is called Commerce Hub there more
XML you Dropship e but a lot of similar kind of connections that we have them so they announced kind of the for lunch partner Sarah
Channel visor was excited to to the apartment I actually don’t know so I was going to ask you earlier I’ll swing back that,
when Twitter first came out the buy button we got in this really big argument with them because
they just wanted a retailer to put the Spy button up there and tell them inventory one time and then they would keep track of it going forward I said well
that’s okay but you see these retailers have all these pools of inventory so,
it’s very easy for you to get in an oversold situation because you know on on Tuesday March 1st when the retailer said they had a hundred of these widgets.

[17:52] Then here on the 20th and they have zero days do it listen to us and turn off it end up being kind of a
Calamity and they had to go back and figure it out you know how the inventory kind of checks are done on the sir they kind of,
get the better systems will do you can either sink inventory I’ve been kind of constantly update it,
I or you can do kind of call back when something’s about to be out of the car is she going to say hold on one second let me go back and verify I still have this widget in stock do you have any idea on how that’s working.

Jason:
[18:21] Yeah it’s a great question I don’t have super detailed.

[18:31] Sort of architecture understanding of the solution I can tell you that all of these 22 vendors have bespoke Integrations and they specifically mentioned that they did Integrations with,
customer service and with OMS in so what that means is.
Like they say they do have some sort of robust automated way to talk to the order management system of those individual sellers.
And it in the one thing that’s interesting to me very often went a platform like this watch as a service.
By the way they they they do an integration with like one or a few popular platforms and then they pick beta partners that are only using those platforms.
That does not appear to be with what Instagram did they pick 22 brands that were popular on Instagram and figured out how to integrate with all of them and so my suspicion is.
Some of that these Integrations are likely more robust than others and so.
You know it wouldn’t surprise me if the higher volume sites is like the Nike and Adidas there’s probably a real-time Perpetual inventory system in there with her it’s pull or push I don’t know.
But it’s not going to surprise me if.
A few of these Brands you know are doing that integration via you know file sharing and in nightly uploads or something like that and and could have some some real disparity on availability of they ever,
ever had a product go viral or something.

Scot:
[20:00] I know I’m speaking for listeners when I told us out here what would be really helpful Jason is if you could do some experiments for a so you can go order between one and three hundred items from let’s say I’ll pick a random on here
Prada and then let us know what your your your rate of receiving goes in and out of stocks I think they’ll be super useful.

Jason:
[20:24] I would totally do that but I’m afraid that that that this purchases would come out of my Star Wars budget which would be tragic.

Scot:
[20:30] You have a very large Starbucks Star Wars budget.

Jason:
[20:34] I think the parts going to be expensive.

Scot:
[20:38] So do you think this is going to kind of finally bring that Chinese level of of Engagement and activity to the marriage of Social and e-commerce.

Jason:
[20:51] I don’t so so to be clear like I actually think this is,
probably a good step forward I think Facebook and Instagram were smart to do this and I think in certain circumstances that makes
sense for the brands to take advantage of it so I I think I could have some adoption I think it could be more successful than any of those.
Serta previous efforts that we that we highlighted earlier in the show but at the same time I don’t think this solution as is hits the sort of.
WeChat level of of a shopping engagement.
I don’t think this is going to end up being a primary selling platform for any Brands and I would certainly argue.
It should not be a primary selling platform for any of these Brands it ought to be.
A smart sort of secondary platform the brands leverage but not the primary way that there.
That they’re looking at getting their product in the hands of consumers and so in that way I don’t think it’s going to have the same kind of adoption that some of the.
The really big brands have had success with in China.

[22:08] But I will like so if you know in the way I got to that is kind of just thinking through the pros and cons of this experience in there are some clear benefits to this right so I mention early on.
That Instagram is very much a discovery experience right in there the.
There you know there was a great quote earlier this year and now I’m I’m spacing on and who was from that I want to get.
Attributed to Katrina at 6 fix that like Google saw Amazon solved.
Buying but ruined shopping.

[22:49] In the gist of it was essentially that e-commerce has gotten really good at the transactions of trading goods for for currency but that we haven’t really figured out how to do this sort of.
A surprise and Delight of browsing for stuff in discovering stuff you didn’t know you wanted and in the modern digital era in North America the two platforms that scene.
To do that sort of serendipitous Discovery the most are Instagram and Pinterest.
Enso adding Commerce to a platform where people are already doing a lot of browsing and Discovery experiences.

[23:29] Makes a lot of sense and it it frankly fills in a gap like there just aren’t that many consumers that are.
Shopping for designer clothes by you know thumbing through Pro detail pages on Amazon.
You know I know Amazon would like to change that but at the moment that’s just not the case so I think it’s it’s super smart and important that this is a discovery experience-based.
Platform,
you know we’ve talked a lot in the past on this show about the mobile Gap that you know the whole shopping audience is moving from laptop to mobile phones but they actually convert much poor on mobile phone,
are mobile websites they convert really poorly on apps they do better but almost no retailer or brand can get a meaningful audience with her app that almost all cases the app has very poor reach and so you have this problem.

[24:22] Bad experience on web small audience on mobile apps and Instagram is a potential perfect solution to that it’s a nap.
With a huge a highly engaged audience so it you know it it potentially can be that that solution to the mobile Gap,
like all marketplaces one of the big things it’s bringing to the party is a bunch of eyeballs right and so there’s a lot of traffic on Instagram that you get to monetize if you’re participating in this.
And you know there’s a lot of brands that even though you can’t do Commerce on Instagram before this feature.
The Instagram and other social networks are already a super important part of the marketing mix and so a lot of.

[25:07] Particularities digital-native Brands you know really.
Launched by creating organic content on the social networks and having that content go viral and that’s,
really one of the primary ways that they do customer acquisition and so you know there’s a ton of brands that invest a lot of money in content for these social networks,
and you know one of the challenges has always been you no attribution for that content like what’s the ROI for that great viral story that you did on on Instagram,
they didn’t have a Commerce call the action will now it can have a Commerce call the action and you can you can monetize that and you can attribute that so suddenly you have a better way to,
attribute value to all that that effort and content York rating on the platform so to me those are all favorable things that would make it appealing.
To try this new platform of course there’s also some cons.

Scot:
[26:06] What is the current Jason.

Jason:
[26:07] Yeah well so a big one right off the bat hat is this a platform that’s owned by Facebook and you have to enter your credit card information into it right and there has not been a lot of favorable news,
about Facebook lately and they’re certainly has not been a lot of
favorable news about trust and security with regard to Facebook and so I do think it’s reasonable that Facebook is going to have a trust Gap,
that they’re going to have to overcome to become a Commerce provider and I think everyone that sells has this trust problem and I would argue that Facebook potentially at the moment has a more acute version and so,
that’s going to be super interesting in all these beta announcements Facebook has been super clear that they’re not disclosing what the fees are for the service.
And so you know it is going to be interesting to know what the take rate is here like is it.
You know a few percent that covers credit card processing then that could be a great deal you know is it.
Higher take rate than a sort of Commerce base Marketplace I got Amazon or Ebay than you know.

[27:20] That could be problematic because these are all brands that have a a direct-to-consumer economic model and they you know there.
They’re not expecting to have to give away a huge chunk of those margins to an intermediary I mention it’s a great solution for mobile,
oh, it’s only a solution for mobile and so if you’re someone that doesn’t use the Instagram app or you want to do Discovery experience on a on a browser or a desktop.
This is not going to reach you so the audience’s is inherently limited one of the big problems to me is,
mousse brands that decided to be a direct to Consumer brand did it because they wanted to have a direct relationship with the consumer and they wanted to collect first-party data about how that consumer was shopping for him buying their products,
and wanted to build a relationship with that consumer and have a higher lifetime value and most d2c brands would talk about how.
That the value of each customer is much higher than a single transaction and certainly much higher than selling a single SKU.

[28:28] This this solution breaks all that right like the brand selling through Instagram don’t get any customer data.
Instagram gets that customer data you don’t get the payment information Instagram gets that payment information and in fact at the moment they’re piloting a.
An opt-in choice to let Instagram share the buyers email address with the seller.
So so when you buy a product on this From Prada there’s going to be a checkbox you’re going to have the option of checking that says Prada can have your email address but if you don’t check that does not even going to know who you are or have any way to contact you,
and you know in those cases people don’t check boxes to opt-in for marketing stuff so,
I feel like first-party data is a big down or of this kind of solution.

[29:23] You also have a problem that that the first time you buy a pair of Nike shoes on this platform you’re going to have to enter your payment information in the Facebook which is kind of klujian in a pain as it is with most mobile phones.
But then Facebook’s going to store your payment information and so in the future if you’re on Nike Site and you want to buy some Nikes Nike isn’t going to have your payment information even though they sold you that pair of shoes you’re going to enter your credit card again.
But conversely if you later discover a pair of Adidas on Instagram that’s going to be a very low friction purchased because.
Adidas friends at Nike earlier you know got through that that friction hurtling got the customer to enter their payment information on Instagram so in a way.
You’re you’re giving customer data that benefits competitors as much or potentially more than it benefits you so that’s a little risky.
And then there’s just a bunch of.

[30:20] Tactical execution thing that like I don’t think as it stands right now the Instagram check out full of is a best-in-class checkout flow so you can’t use Apple pay for example it’s you know it’s.
Limited and payment types are all these edge cases that consumers sometimes want to do like gift cards or splitting a purchase on the two credit cards or things like that you’re not going to able to do any of these things for the Instagram platform.
The best practice for entering a shipping address right now is to use the lookup database so you start typing a street database and we find your old address and save you a bunch of keystrokes.
You can’t do that on Instagram if you got to enter all that the address Fields Me and You Lie,
a huge killer for a bunch of Brands is that you can’t sell multiple skus or accessories or upsell the customer doll you each item is a separate transaction,
and then you know one of the things that makes e-commerce most successful,
is having social proof on that product detail page having ratings and reviews having Rich content that tells a story about that product.
And you know there are no ratings and reviews on your product detail page on Instagram and there’s actually not a lot of rich media like the rich media is up front in the discovery experience but once you get to this conversation.
Yet you know you not getting like detailed information and description and selling points about the products.

[31:44] You know those are just a bunch of things that like if you were comparing it to experience you could deliver from your own e-commerce site are sort of in my mind inferior.

[31:54] And so none of those are deal-breakers they just are less than perfect right so you roll all that up and I was thinking about.
You know what I be advising my my clients to use this feature and the kind of conclusion I came to is.

[32:13] Most of those down sides are not negatives to the brand they are negatives to this one channel and so they limit how much success you could have on the channel.
But they don’t actually like fundamentally hurt the brand and so you know.

[32:31] In a mind if you’re a brand that’s already spending a bunch of money on Instagram content and you’re getting organic reach with some of that content then.

[32:40] Probably makes a lot of sense to try to monetize that and you know some of the negatives I mentioned will like slightly limit the success you can have but you can still have.
Pretty meaningful success but if you’re not someone that’s creating a bunch of of Instagram content then I think you need to think really carefully because there’s a major expense and commitment to this this is very different than a.
A transactional market place where you know you got a thousand skews and channel advisor and you just had publishing it sends a thousand of them to this platform,
that’s not going to help you here like you’re gonna have to create bespoke content that has tags to these individual skews and that content is going to have to show up organically to a meaningful a size audience on Instagram.
So if I was not on the Instagram platform and I was looking to grow I’m not sure I would look at this as a primary tool and I for sure
would never recommend to anyone that they say hey what’s not have our own e-commerce site that’s not have a direct-to-consumer effort let’s just selling Instagram like I think that would be a.
A horrific mistake to be sort of a digital sharecropper and try to build an audience exclusively here that you don’t own so
to me it’s a great secondary channel that can really accelerate things for some
people that are already good marketers but it’s probably not you know the holy grail for for replacing e-commerce sites and and those sorts of things for for everybody to see bran.

Scot:
[34:08] Yeah the the One Direction Twitter was going I thought was interesting in that it’ll be interesting to see if Instagram goes this way is it a lot of times,
people,
aren’t really looking at the brand pages and falling them their find influencers right so I’ll pick on a Kardashian or less a Kanye that’s about let’s see let’s say
LeBron James right so he sells Nike shoes and so he may want to put something on his content that’s actually a shop old Nike ad
but it’s like him wearing the shoes and chocolate that starts to get kind of complicated right so you know she doesn’t want just anyone kind of,
making an ad Nike shoppable so then how do you collaborate the influencers in the shop ability to see if Instagram tries to go that route or or if it stayed with the branch being the one stopping.

Jason:
[35:06] Yeah like that was an early question about this was is there an amenity for influencers or even a way to track a Filippi’s I can influence are referred to say the brand did do this content and did have a sellable product on Instagram
if if influencer directed an audience to that brand could they somehow be tracked and compensated for that because,
there’s a lot of of.
Influencers who is monetization like you know do use Instagram as the primary way to reach customers and it is pretty arduous at the moment to do at the Venetian on that and so
yeah none of that is in this platform right now you know I will say a couple months ago Mark Zuckerberg talk about the direction Facebook was going in and he mentioned that commerce was going to be a major
part
of the the future of Facebook and so I don’t think this is the only major Commerce feature that we’re going to see this year so you know I I won’t be surprised to see other,
Commerce amenities make their way into the various Facebook platforms and you know I do think there’s a
a huge influence our community that’s not perfectly well served right now so I wouldn’t be surprised to see some new products there but there’s no no hanser indication that that is.
Eminem or you know the next step of this.

Scot:
[36:27] Any last Lots.

Jason:
[36:31] No idea this this to me is one of those things like you know the bummer is as a brand,
you didn’t have this on your road map yesterday you had a big road map of initiatives that you drink we didn’t have enough resources to get and now you’ve got this new problem.
You know where it is hey Jason said this is maybe a good hit. So where does this go in the priorities do I bump something do I need to jump on this right away and let you know I do think a bunch of brands are going to struggle with.
Sort of figuring out how this fits in the privatization the good news is I don’t think they’re going to be opening this up to other brands in the very near future so I think we’re going to several months to.
To watch and see if we can get any any.
Tidbits about how customers are adopting this with these top brands before anyone really has to make the the decision to invest in it so it’s a little bit it’s a kind of thing you definitely want to know about him be falling carefully and it’s a you know.
However it plays out I think it’s an encouraging sign that the Facebook is trying more Commerce things I think that’s super important.
But you know I don’t think anyone is I don’t think it’s going to change anyone’s economic fortunes dramatically in the in the near.

[37:47] And that’s probably a good place to leave it because we’ve slightly exceeded our allotted time for this abbreviated hot take.
If we missed any questions that you have if you want to continue the conversation we do every to jump on our Facebook page or hit us on Twitter and won’t be happy to discuss it more,
as always in this hot take was helpful that great way to repair says jump on iTunes and give us that five star review.

Scot:
[38:15] Yeah thanks for doing the same one we always try to give you more podcast for your money so be enjoyed this episode.

Jason:
[38:22] And until next time happy commercing.

Mar 18, 2019

EP166 - Shipsi CEO Chelsie Lee

Shipsi CEO Chelsie Lee

Chelsie Lee (@ChelsieAnnLee) is the CEO and Co-Founder of Shipsi, a software solution for aggregating and managing last mile delivery services.

In this interview, we cover a wide range of topics including last mile solutions, curbside pickup versus delivery, changing customer behaviors, and the Amazon effect.

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

Episode 166 of the Jason & Scot show was recorded on Wednesday, February 20, 2019 from the eTail West tradeshow in Palm Desert, CA.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Wednesday February 20th 2019 live from the etail West Trade Show here in sunny Palm Desert,
I’m your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott didn’t make it to the show so you get twice the Jason for half the usual cost,
but to make up for that we have a great guest listening to the show will know that one of the topics we spent a lot of time talking about his last mile delivery so we’re particularly excited to have on the show Chelsea Lee and co-founder and CEO of shipsi,
a company that helps retailers saw that exact challenge Chelsea who welcome to the show.

Chelsie:
[1:04] Thank you so much happy to be here.

Jason:
[1:08] Chelsie as a long time listener of the show you’ll know we always like to think that getting started by having to listen to get a little bit of background about how you came to your world so can you tell us a little bit about your background.

Chelsie:
[1:19] Absolutely I am a proud Minnesota native.
I grew up hunting and fishing with five uncle’s which is probably not as common as most founders.
Spend some time in Europe New York now reside in LA,
and spend a lot of time in corporate retail and then working in technology and Technology Consulting anyting EDI Erp and VI point-of-sale analytics was.
Was my passion for a long time and then,
I think it all started though actually my grandfather’s gun shop supply and demand and the fact that you can negotiate anything he wanted during gun season was was also really entertaining for me.

Jason:
[2:01] That’s awesome I’m a big family of a big fan of a family retail business as I can from a retail family as well I’m sorry I forgot that he missed you because he died r p e p o s are some of his favorite acronyms,
and his listeners will know I sort of think of Minnesota as their retail capital of the us having.
And a lot of time at Target in Best Buy a lot of lot of great retail in a lot of great retail people come from that region,
so what’s taking the ship see a little bit can you tell us how you came up with the idea.

Chelsie:
[2:37] So it originated because I was getting really frustrated that any brand that I was working with from Bob’s Bait shop and Nike everything in between they always have his big big Dark Cloud of Amazon.
So maybe not New York recently but yeah yeah.
It really stem from this frustration so I wanted to figure out how I could solve for it so I considered working for a private Equity Firm.
So I called my friend and a mentor of mine been who is now my co-founder and said what do you think you think I would like it.
And he’s a Serial entrepreneur angel investor and said,
I think you would like it fine but I think you should look at the side project I’m working on and it’s it’s called the shipsi and I said it sounds like Logistics I’m not into that you don’t want me and,
a solution that was originally made for traditional Logistics I looked at it and,
the Ben what are you doing this is the front of a nanny cam so we flipped it inside out and upside down and that’s Gypsy today.

Jason:
[3:46] Very cool give us a like what is the bullet like how does shipsi work.

Chelsie:
[3:52] Yeah so when I was speaking with Ben originally and we started toying around with this idea Banda Manatee cam,
I called every friends and old client in my retail networking and said,
if you could deliver within a couple of hours without changing any of your existing business systems and not pay for shipping,
is that something that you would find Value in would you invest in something like that would not fall in line with your priorities this year,
and it was really hard to find someone who said no.

Jason:
[4:27] It’s always a good problem for incubating a good thing to happen when you’re getting a new idea and so in my mind.
Unlocking all this inventory that a retailer had an individual store that can only serve visitors of that store and essentially turning that inventory into e-commerce in the far is it can be.

Chelsie:
[4:49] So we’re in a great an additional shipping option or add an additional option at checkout in any existing e-comm website,
and then we aggregate multiple last mile delivery networks on the back end so that the consumer is completely dazzled and gets the best price for it,
and then we also utilize existing infrastructure as you mentioned of stores warehouses distribution centers to basically open up an instant shipping option in whatever City those things are in.

Jason:
[5:19] Great and so I’m going to dive into the details in just a second but before I do I mention we’re etail West you were just on a panel that you tell West calls a tech tank and it was kind of like
you each got the picture businesses in the audience voted on the the business they would most likely want to adopt,
and how did you do.

Chelsie:
[5:42] Well it was an amazing thank you for all of my voters I swept it I would say so that the question or the what they were judging and I believe it was something like.
Which of these companies would you invest in within the next 12 to 24 months or seriously Implement within your business and I had over half of the votes in the entire room out of the the panels.
It’s definitely top-of-mind as you know we come in last my alarms are only a Hot Topic.

Jason:
[6:10] For sure for sure tank so congratulations on that wear with the inaugural Tech tank.

Chelsie:
[6:15] Yes thank you thank you.

Jason:
[6:17] Very exciting.

Chelsie:
[6:18] I plan to that so that I we could finish that before coming on here.

Jason:
[6:21] Yeah I didn’t want to spoil it but like I would have only invited you on the show because I knew for a fact that you are going to win.

Chelsie:
[6:27] I knew it yeah so where’s my tiara do I get a tiara crown or some kind of trucker hat Maybe.

Jason:
[6:34] So you know it said I was going to bring it to Yara and some of your people said that you just ordinarily wear a tiara and so it seemed like it would be redundant.

Chelsie:
[6:43] Depends on the day multiple hats yes.

Jason:
[6:46] That is that the job of a Founder rarely is one of those hats that Tiara but yeah.
So let’s dive into it a little bit so you’re solving Last Mile I think.
You know what I just heard that I would imagine you either hiring a bunch of people to deliver packages or maybe you’re on demand system where you’re using like gig workers to deliver packages is that what you’re doing.

Chelsie:
[7:10] No so we have the beauty of learning from a lot of other mistakes that last mile networks who are very successful now have already made,
so because they figured out a lot of heavy lifting I think for us in the beginning we partner with last mile delivery Network so a big piece of it is,
we don’t own the car is the warehouse is the merchandise nor employee kind of anyone within that,
we just you know basically are the master aggregator Wrangler coordinator.
And a really critical piece in that is that we set up different business rules are parameters to make the option up here or not appear so we don’t touch the traditional Logistics,
but let’s say a driver isn’t available or the merchandise isn’t available we build all of these profile and business rules or what we call a PBR,
behind the scenes so that the consumer sees the option and we can ensure that they get what they need.

Jason:
[8:04] God you you have to be careful cuz there’s a lot of hunting stores a PBR mean something totally different.

Chelsie:
[8:07] Yes.

Jason:
[8:10] So so let me make sure I have this right so I’m I’m a hunting dog, I have a website and I ship stuff out of my warehouse via UPS or the mail and maybe I have a store then my loyal customers come in and Shop.
You add the option to my website to say deliver same-day and then the customer pics that and then.

Chelsie:
[8:32] I’m going to make a slight correction on that it’s generally within an hour or two hours at most.

Jason:
[8:38] Even better okay so deliver in an hour as I’m about to go on a hunting trip and you’ve got that new training collar I need for my hunting dog,
so I clicked on that one hour delivery and then your software is deciding who the best,
Last Mile fulfillment partner is in you’re going to send that order to that fulfillment partner,
they’re going to fill that order you’re going to collect all the data about about delivery and all that stuff and feed that back into the Retailer’s.

Chelsie:
[9:06] Exactly and that’s a big piece of it that often.
You know it’s cool that we can ship something within an hour from point A to point B but the real value that I see especially in a couple years is having that,
Predictive Analytics on the on-demand market and to be able to feed that back to our Retail Partners so that they can in turn feed that into the rest of their supply chain.

Jason:
[9:29] So you’re sort of the middle layer between the last mile companies in the retailer and are there any particular last-mile companies that you tend to partner with other that westerners would be familiar with.

Chelsie:
[9:40] Oh yeah you know it ranges some of them are small Courier Services some of them are the Postmates of the world and it’s it’s just been amazing to see
us fueling every party involved with with more Revenue we will be making a big announcement in the upcoming months about another,
why is my old partner on major one as well today we’ve accessed over 500 cities across the US and by the end of the year we anticipate having,
over a million drivers through those driver networks to be available for shipsi deliveries.

Jason:
[10:12] That’s awesome so so pretty much a national reach at this point the are there any particular categories that you’re finding our are lending themselves to one hour delivery like what kind of retailer is best suited for the service.

Chelsie:
[10:25] Haha that’s a good question I wish the data skewed one way or the other would help our sales team know what to go after a little bit more but.
It’s really diverse I would say the younger women demographic.
Works a little bit is very slightly skewed some of the luxuries skewed but then there’s also things like a phone charger and birthday candles which has been really interesting to see there’s not a clearly defined,
category or vertical,
I should I’m not surprised anymore by our new customers because our first time customers were a men’s clothing women’s clothing footwear apparel accessories a sex toy company I mean.
Everything so to answer your question no we haven’t seen as a friend or vertical yet.

Jason:
[11:21] Awesome. You can’t go wrong with a vices I feel like everyone you know once devices delivered more quickly in.

Chelsie:
[11:27] Absolutely.

Jason:
[11:28] So chocolate in in alcohol might be good although there’s some complexities in the alcohol one.
So one of the topic categories we talked a lot and last mile delivery lately is around grocery are you doing anything in grocery or is that something you’re you’re thinking about.

Chelsie:
[11:46] So we have a little bit and grocery some more specialty gift food items such as edible which is a delicious edible cookie dough if you haven’t tried it,
and we.

Jason:
[11:56] Speaking of vices.

Chelsie:
[11:57] Yes he has absolutely so we are really focused on retail we’re actually really.
Making it a point to stick away from grocery but if you look at some of the trends that’s happening in grocery right now it is,
is amazing I think something like a Business Insider just recently published a report on 35% growth in grocery and that,
consumers wanted you know 69% of them wanted home delivery versus 31 or curbside and pick up.
So I see those Trends and Retail is is trying to catch up but we need to go fast.

Jason:
[12:38] Yeah I know for sure I should have asked you a question earlier but this will open up to my next set of questions,
so you’re you’re helping collect that order in your you’re getting that last mile person to show up in the store in in your model is the the retailer most responsible for picking the order in the store and having it ready for the,
the delivery person or the delivery person like going into the store and picking stuff off the shelf.

Chelsie:
[13:04] I have a delivery person is not picking things off of the Shelf,
the retailer either picks it up or there’s a dedicated place for shipsi delivery is just like there would be for a 7 to 10 day or two to four day whatever might be in the warehouse,
and then with some of our larger Brands we have a shipsi person that we have hired to say,
we will get you guys set up if it’s if the demand is so high or maybe in the first couple months will send someone from the ships that you to go work with your team in the store Warehouse to get them familiar and then we also have a,
customer service layer that is absolutely critical so that we can be one point of contact for the consumer for the retailer for the warehouse for the driver so that.
The retailer doesn’t have to deal with some of those things in the consumer gets what they need and feel confident about it.
Someone last week actually referred to us as The Wizard of Oz because they didn’t even know is a retail customer of ours and.
So many things that we do the retailer doesn’t know about it so every 10 seconds word checking in order to make sure that everything is okay and when it’s not we catch it.
99.5% of the time before the retailer or the consumer even know.

Jason:
[14:18] Got an internet metaphor they didn’t want to even know what’s behind the curtain they just wanted to see the magic so.
The whole curbside versus delivery thing like I feel like there is in the abstract there’s a consumer preference.
But I do like price also comes into play in that so like presumably the more you have to charge for home delivery,
the more likely a customer is to opt for the convenience of curbside pickup versus delivery so I would assume if you can get the price low enough or at least the price as perceived by the consumer,
then do every it heavily skewed towards delivery but in places where the unit economics don’t work for that like it might for a real grocery store,
side becomes more popular.

Chelsie:
[15:05] Absolutely there’s actually two points for our business and why that matters one is because we’re aggregating multiple Last Mile networks and Courier Services,
we’ve seen really drastic scenarios where maybe one specific last-mile Network says that it’s going to be $51 and then another one picks it up for maybe $6 is a really really bad,
differences in that so one piece of it is the aggregation and the our ability to do that II is that,
the retailer is no longer responsible to pay 12 bucks to drop it off to FedEx or USPS because the consumer sees exactly how much it is,
so we have a couple of retailers right now that we’re playing with the pricing and they say well I already have $12 allocated in my p&l for FedEx,
what if I throw 10 to the consumer well in many cases it ends up to be a dollar for the consumer to get it now and obviously there he comes sales skyrocketed,
they’re doing silly Facebook videos and so that’s been really really exciting and we’re finding out a lot about,
really what the consumer is willing to pay for but especially when the brand allocates a couple bucks towards it a lot of times it’s a dollar or dollar is $5 you know ten bucks and we’re just been really exciting to see him.

Jason:
[16:21] Yeah it is you know pricing consumer pricing is one of the interesting things here because,
because we’ve sort of overwhelming data that in general consumer don’t like paying for shipping right inside you know the the Dirty Little Secret is something like 68% of all e-commerce.
Is sold with free shipping like that in that free shipping is of course never free to the retailer.
Readers are being forced to pass to absorb those costs rather than pass them on so I’ll call it a premium delivery service it’s doing 1 hour.
Like it’s interesting like our consumers more willing to pay for shipping for that one hour premium and they perceived that that’s that’s okay or do they have sort of the same attitude that they do with regular shipping they feel like they shouldn’t have to pay for it.

Chelsie:
[17:10] I cannot wait until a more data behind it I will say we have a brand right now that 68% of their consumers last month pick the ships the option when it was available to them which is,
phenomenal right I was thinking well if we have 10% 20% growth that’s amazing you know who knows what we’ll find,
what does to have one that 68% of their consumers are picking the ships the option and,
as a Founder it is so exciting to have this I want to color a team camaraderie with a lot of our retail clients because I’ll get a call that says child’s we just broke a record this week,
and I said quiet so did we because we just seen a consistent growth every single retailer has had,
higher shopping cart more dollars in the every in their shopping cart collectively and also Maury come orders so it’s just so exciting to see that that growth with those brands.

Jason:
[18:08] That that’s awesome I do feel like you’re benefiting from the sort of rapidly changing consumer expectations as well.

Chelsie:
[18:14] Yes yes.

Jason:
[18:15] I had a number of clients that sort of piloted not even one hour delivery but piloted same day delivery.
A number of years ago before I would argue before like in particular Amazon have,
had like set that expectation and back then there was this really interesting learning the same day delivery was considerably more expensive than the other delivery options,
and it wasn’t selected by very many consumers back then again they didn’t have the perception that that that was the the expected time frame and so it looks like this premium option,
even back then what it did when you added this really expensive same-day option it dramatically increase the number of consumers that would select the two day shipping option versus the slow shipping option so we started that price anchor.

[19:02] The the middle shipping options seem more appealing and you know fast forward,
we’re getting benefit from it even though there wasn’t really high consumer adoption and now you fast forward 5 years and it seems like that’s completely changed and per your experience when you throw that,
getting an hour button on it sounds like at least in some cases,
the majority of customers are now picking that option so that’s that’s a key lesson I think in this whole industry is.
You can’t just learn something once and assume that’s how it’s it’s going to work like the customer expectations are changing really quickly and what wasn’t a requirement for your business last year may well become a requirement.

Chelsie:
[19:49] And it’s interesting to see the price Dynamics I’m part of a woman’s group and we were working with some younger women who were in a,
I can’t quite work all the the name of their group but they were you know Middle School elementary school women who we were going to have to work with Friday,
someone had raised their hand after I was explaining shipsi and I I had an example where the ships the option was less expensive than the overnight option and so I think the girl must have been seven or eight and she stood up and said well.
Why would anyone pick the more expensive overnight option if I can get it in an hour for less less money and it was just,
that’s stuck out to me it because and I think my response was something like,
what is a really good question I don’t know why would someone pick them or extensive longer option but examples like that and and when children maybe point that out it’s fun to see that.

Jason:
[20:44] Yeah it’s always a good time when your business model can survive are you smarter than a 4th.

Chelsie:
[20:48] Yeah.

Jason:
[20:49] For sure so it wouldn’t be a Jason and Scott show if we didn’t mention Amazon and sewing in Scott’s absence I’m going to try to channel my my inner inner.

Chelsie:
[21:00] Okay let’s hear it.

Jason:
[21:02] It does feel like this is a major area of emphasis for an Amazon and they’re building out this Flex network of their own drivers the buying tens of thousands of their own delivery trucks,
and,
in the most recent earnings statement they did an interesting thing you know that they wished the the competitors that they that you should be worried about any added a new phrase to their competitor list shipping and logistics companies,
which I find very interesting so the fact that they’re winning so much into this is that,
competitive threat is that an opportunity how do you feel about about Amazon vs shipsi.

Chelsie:
[21:43] I actually think that it works to our benefit because I don’t know Jeff Bezos personally but I would say that he.

Jason:
[21:52] I’ll probably call you after a year.

Chelsie:
[21:53] Absolutely I would say that it would be shocking if Amazon didn’t take a big brother approach,
the things and I love the fact that we humbly sit in the background and support our retailers and that they are the hero they get the credit at the end of the day,
so I actually have seen the the expectation that Amazon has set on consumer expectations work to our benefit,
because any other retailer needs to figure out how to keep up and that’s when hopefully I got a call from them and they work with shipsi.

Jason:
[22:29] Yeah I would totally agree it seems like,
Amazon has like super access to Super inexpensive capital and lots of it so they build out this big infrastructure and that raises the expectations,
for all those consumers and tell every other retailer that needs you to figure out a more cost-effective way to deliver that same capability that I am.

Chelsie:
[22:49] Yes yes.

Jason:
[22:50] Best it in so you can only see that Dynamic playing out in your space are there any sort of case studies or initial clients that you can tell us about.

Chelsie:
[22:59] Yeah absolutely I said we’re working on a release that’s going out within the next couple of weeks so a few of them will be mention there but Atlanta vinyl is a really hot one for us right now edible who I mentioned,
there’s it’s really every shape and size and small and large and we cater to kind of their volume that they’re doing,
we also have a partnership with Oracle as part of a woman’s Founders program so that will essentially give us access and,
I’ll be able to cater to any any retailer that is currently running on that but yeah it has been so fine like I said,
one of the best parts about being a CEO is when we get calls or I got to call and I think it might be a customer service issue or or maybe something bad when someone on my team does they really want to talk to you right now right now right now,
we broke another record thank you I guess it’s just so so much fun.

Jason:
[23:53] Yeah for sure in general it’s it’s usually not a good thing when the retailer calls and demands to speak with you so it’s fun when it it’s it’s been when it’s happy news.

Chelsie:
[23:59] Yeah right right straight the other does another interesting one and they’re kind of in this younger women demographic so yeah it’s it’s been really exciting to see to see the progress.

Jason:
[24:13] Very cool you imagine the partnership with Oracle are there any particular software platforms that retailers run that you like a prickly well like that you have pre-existing Integrations with or you’re particularly well suited for.

Chelsie:
[24:26] So the way that we work as we would partner with our we do partner with the demand where is the netsuite or the I’ll call him that sweet forever because of my background but,
Shopify so we do a prebuilt integration,
if we have that pre-built integration it can be a couple of minutes until someone’s up and running and live with shipsi or I can be a couple hours,
of course we do some tests orders that we initiate or if we initiate with them,
and if it’s one that we’re not currently connected to our average time is anywhere from 6 to 12 months to finish that pre pre built in a gracian,
so we’re not not necessarily limited it’s just some of them are in a matter of minutes and some might be you know a month or two months yeah absolutely.

Jason:
[25:11] Got you but that’s a mean it’s big chunks of marketing Shopify alone you mentioned that sweet which is a quartz nail in my Oracle with that stuff to get used to it ain’t even tougher our friends at Salesforce want us to start calling demandware.
Salesforce Commerce cloud.

Chelsie:
[25:25] Commerce Cloud I will never and sweet Cloud it’s a yes.

Jason:
[25:29] Yeah the consolidation and name changes are up I do want to dive into what like are often perceived as some of the challenges with this model so you know one of the the challenges with using as on demand delivery services are the,
the drivers don’t work for the retailer right and so the retailer can’t make the driver deliver something like the reader can merely,
offer a deliver delivery in the driver can decide to accept it or not.
The majority of the time that works great and it’s a great career for you know this gig economy,
but there is this challenge with Pete demands right so everybody wants to deliver on Valentine’s Day and everyone wants to deliver the day before Christmas and a lot of those gig economy guys are working for multiple services and they.
You know might be making more money doing Uber deliveries then postmate deliveries on those peak days and so I think one of the perceived challenges with on-demand delivery drivers is,
shoot on the day I most need to promise the consumer I’ll absolutely get the package to them.
It’s the day that’s most risky that the gig economy drivers actually going to deliver that pack.

Chelsie:
[26:38] Yes yes.

Jason:
[26:39] Do I have that right and how do we solve that problem.

Chelsie:
[26:41] Yes absolutely so there are so many things that go into working with multiple last-mile networks one is the size weight and dimensions of whatever we’re sending soap just because someone has a specific type of car,
maybe that’s why we’re aligning them,
and we also have very strict criteria on The Last Mile networks that we work with because we want to always dad’s all the consumer expectations so maybe,
it’s a certain peak time that we don’t even pull from that last mile Network maybe it is,
specific merchandise or not during food hour is if it’s a food-related one so we have a last-mile Network that has just over 90% accuracy,
when they’re on their own but we build all of these blocks if you will blockers so that they have to deliver within that,
and we’ve gotten ones that are on 90% on their own up to a 98.5% delivery,
accuracy because we building a lot of those blocks and parameters.

Jason:
[27:42] That toy makes sense and I also Imagine because you work with multiple delivery networks you have the ability to sort of spread that risk around more than someone that’s working with a single delivery Network.

Chelsie:
[27:55] And automatically fill someone else in and yes absolutely.

Jason:
[27:59] So then the other thing that’s scary is there’s a lot of points of integration where data is flowing through the system,
Ecommerce is flowing through this way super Antiquated point-of-sale system that’s keeping the inventory and you have to get data from those systems and they have to send data to this wide variety of different,
delivery networks and get it sounds like a lot of real-time data back from them about the status of those deliveries in those are two things,
I feel like we’ve all been at a a restaurant that’s like struggling to do all their their various food deliveries and you see the printer jammed up in like,
everything goes off the rails like there’s there’s some fear that there’s a lot of fragile point of integration in this.

Chelsie:
[28:44] Is a lot there is a lot and something that was really critical and important to us when building the business,
is it’s not our reputation that is at stake it is the retailer with their consumer which is why it makes all these complicated systems even more important that we don’t screw it up,
because it’s not our reputation at risk it’s really the retailers which is why we have that customer service and the real-time tracking but something else that.
Is that an investor pointed out to me actually was probably almost 2 years ago.
And we had been working with a couple hundred Alpha and beta customers at the time and he said this is just too messy and complicated you can’t do this and if anyone who first and only remember you professionally knows me.

Jason:
[29:28] The wrong thing to say or the right thing to say.

Chelsie:
[29:30] Are you yes yes it let another fire under my ass off I know you don’t think so great watch me and I delivered something to him within 21 minutes and had him initiate the order,
and yes it is complicated but you know we have an amazing Tech Team and I think my CTO all day long that they finish things before I even really know they were a problem so thank you been,
and it’s just been amazing to see it come alive.

Jason:
[30:00] One thing we failed to bring up earlier the economic model for your Retail Partners do they pay you a fee per delivery is there something like is it a red sheer like what’s the,
I am not looking for the actual price but like what’s the basic model that a retailer buys into.

Chelsie:
[30:15] Yeah the basic model is the based on four different tears so it’s based on the size of the volume of orders that the retailer is doing so that we can cater to the Bob bait shops of the world and also the Nikes so it’s a monthly subscription,
and then a small portion of the delivery fee but keep in mind the retailer isn’t paying for shipping,
so we have seen that actually we should we charge about 10 times more than we are but we really like retailers and we’re on boarding as many as way we can right now so we’re just going to keep rolling with it it’s fun to see them breaking records and US breaking records as well.

Jason:
[30:51] Yeah I feel like there’s some hidden costs that are saved in last mile delivery that people sometimes forget about.
Packing cost to make something UPS a bowl can often be a lot higher than the poly bag that you might.
Deliver in until there are some places to take costs out of the system when you do this kind of delay.

Chelsie:
[31:12] Yes and we’re working on some cool case studies right now with some of that because people that have to pay a lot for the packaging like if it’s dry ice or if it’s fragile or things like this we one of our tears of retailers we actually offer a,
like a matte black bag so that the driver picks it up instead of a sexy matte black bag or a box because the retailer doesn’t have to,
packaging and some kind of fragile packaging and yeah there’s also saving money on the packaging and the materials as well.

Jason:
[31:41] Yeah but in the end we talked a little bit about the the price that is offered to the consumer at it sounds like,
researchers are testing different price points are there any best practices that have emerged so far like like what where do you recommend retailer start in terms of pricing 1 hour delivery.

Chelsie:
[31:57] So we either we have a couple different options option one is just a display what the exactly what that price is we are completely transparent about that cost and filter it through directly from The Last Mile Network we don’t want to mark that,
up or down because we wanted to be as low what we want to do is low for the consumer as possible so that they pick up more.
The second option is if the retailer subsidizes a portion of that,
we’ve seen Jurassic success even if they only put 3/4 or box towards whatever that might be,
and it’s easy if you already have something like that built in European L and I already have a line item for that just throw that into the shipping cost so,
I should know we haven’t seen any crazy you know they always pick it up at the dollar that’s easy to say or try not to use always and never but.
Very very very very often when it’s a dollar or I would say under 5 is kind of a no-brainer for consumers,
it’ll be interesting when you asked me that question in a year looking forward to to finding out more about that.

Jason:
[33:04] Well we will take you up on that offer to come back in a year and share some of that data
and that’s going to be a good place to leave it because it’s happen again we’ve used up all our a lot of time as always it was nice have a burning question for Chelsea feel free to jump on Facebook and we’ll continue the conversation there
if you enjoyed the show we sure would appreciate that five star review on iTunes Chelsea of listeners want to learn more about shipsi,
where should they find you guys.

Chelsie:
[33:30] Yeah I would say probably the first guess is a hello at shipsi. Com otherwise feel free to reach out on LinkedIn.

Jason:
[33:38] So we’ll put those links in the show notes for folks that are driving please don’t stop and write that down but it is a ship SI.

Chelsie:
[33:48] Phi PSI.

Jason:
[33:49] Yeah on a podcast you might be imagining that your ship.

Chelsie:
[33:52] Yes.

Jason:
[33:53] In the letter c so wanted to highlight that Chelsea really enjoyed chatting with you thanks for being on the show.

Chelsie:
[33:59] It was a pleasure thank you so much.

Jason:
[34:01] Until next time happy commercing.

Mar 13, 2019

EP165 - Amazon Alexa's David Isbitski

David Isbitski (@thedavedev)is the Chief Evangelist for Alexa at Amazon.

In this interview, we cover a wide range of topics including the growth of the Alexa platform, the evolution of the developer community, the future of voice, and voice commerce specifically.

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

Episode 165 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

http://jasonandscot.com

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

Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Friday February 22nd 2019 live from the etail West Trade Show here in not completely Sunny Palm Desert
I’m your host Jason retailgeek Goldberg
and unfortunately Scott is trapped on an airplane so we are going to make a lot of fun of him and hopefully assign him some action items for after the show,
long-time listen to the show will know that if we were to make a word cloud of everything that we’ve said in the hundred and seventy something episodes.
Amazon would be the biggest word on that word cloud and Alexa would probably be third I think Star Wars might so I can let you be.

David:
[1:02] Well that’s good to hear.

Jason:
[1:03] Be ahead of Alexa,
but obviously we talked about a lot on the show so I guess we’re super happy to have on this week’s show is Dave a bitsky who’s the chief of Vangelis for Alexa at Amazon welcome to the show.

David:
[1:17] Thanks for having me super happy to be here.

Jason:
[1:19] Yeah so I record a lot of these for my home studio and the first thing I have to do is mute all of my Alexa devices.

David:
[1:28] Oh yeah I’m the same way yeah in fact even when I’m on stage if I’m Kino to hear something when I say her name there’s still that thread that goes through my head waiting for a response.

Jason:
[1:42] Oh no it’s something going wrong.

David:
[1:43] Yeah yeah.

Jason:
[1:45] So David for a long time with some of the show we always like to start by getting just a little background about the the guests can you tell us a little bit about your backup.

David:
[1:52] Yeah sure I guess it depends on how far you want to go back.

Jason:
[1:57] I have your high school records of.

David:
[1:59] Yeah yeah exactly so I grew up in the 80s in Commodore and this this vision of how,
science fiction and Technology was a future rights what do you mention Star Wars growing up on Star Wars and things like,
the black hole right and Star Trek and all of that and I just,
man I want to be a part of it and I remember speech technology TTS text-to-speech back then be able to do stuff like that I had to do that and.

[2:29] I just I was like man when is this going to happen right and I started out any e-commerce 96-97 building.
Commerce pipelines actually competing against Amazon was just getting started the time at this company called microwarehouse macwarehouse and then I did web whole rise of the web did want you to. Com Consulting did I,
Enterprise gig in a large pharmaceutical company,
and that was my me trying management and realized it wasn’t my cup of tea I just I love that I love being,
I love traveling talking to people and using new technology which is right and around 2007,
October to a Microsoft December roll to I have now there a lot of stuff around games and mobile and worked on Windows phone and Xbox Kinect,
and then I joined Amazon,
oh gosh 2013 help out with the we are kicking off the Android App Store that we have with the new Kindle Fire tablets did that watch Fire TV is Saint with fire phone and then.
I am super fortunate I was Employee one for Alexa skill marketing team around 2014,
and now it’s crazy where everything is now in 2019.

Jason:
[3:45] That’s awesome so I don’t listen to the show will know that Scott and I are two of the four Alexa fire owners so you.

David:
[3:51] But thank you I still have mine.

Jason:
[3:52] We sometimes we have our suit we sometimes predict it shall rise again I’m not asking you to.

David:
[3:59] The dynamic perspective stuff still awesome.

Jason:
[4:01] Yeah there’s that there’s some cool features so that’s going to be interesting to see if you have a rear job and Amazon you mentioned liking to talk to people I would argue the majority of Amazon employees are not encouraged to talk to her.

David:
[4:13] Yeah I’m just I’m one of those rare birds where I approved,
Alexa’s spokesperson Amazon spokesperson,
I’ve been doing it for a long time though I’ve been in very much these Community Building public-facing you know kind of marketing PR working with marketing and PR roles,
and there’s always a need for that because you know.
I have this belief like large companies we all have processes and there’s so many things that if it falls out of that process gets lost,
and I’ve always looked at my job to be the person that’s finding all those anecdotes cuz they’re so important cuz a lot of times there’s signs for things that need to change or that we missed and that we need to do better,
and I’ve always I left startup mentality and unfortunate Amazon is just as Perpetual startup mentality it’s not for everyone but it’s it’s Scrappy man it is like and that’s,
I love that I love where things aren’t to find you got to figure him out there tough problems you’re constantly inventing things you have to think about the customer problem and dive deep in the stuffing,
I’ve just been able to make a job out of that you know it’s it’s funny because funny you ask that I’ve gone on a couple podcast,
the past few months cuz that seems to be the big thing is like.

Jason:
[5:30] I guess to warm up with a couple of those farm system podcast before they come here so that’s all.

David:
[5:34] Yeah it’s like you got to start thinking about cuz you cuz it’s so all over the place there’s no defined like I went through this. Where I was like,
I’m old enough that all of my friends now are turning into CIO CTO xorbee peas and I’m like I’m doing this thing,
what is this thing exact but I love it and I would talk to him if you like crazy but we do sucks I would love to do what you do. So it’s like just Embrace what you’re passionate about and get down there and if I like to look at it like if I saw 12 year old me,
and he was asking me when all this Tech was going to happen I make it happen for him and keep him happy.

Jason:
[6:13] I like it I like it I also like your Amiga Roots I actually work for, nor in the.

David:
[6:17] Oh man we got to talk.

Jason:
[6:18] Yeah that that text-to-speech engine was called Sam so Sam was the person.

David:
[6:22] Yeah yeah well I still have it I have I have been working Amiga fully 1000 or 2000 I’ve 600 1200 I still Google Talk.

Jason:
[6:30] That’s why I sent my nigga 1000 predates, door and it’s actually in the The Tech Museum in San Francisco.

David:
[6:34] I have never been but I’ve always wanted to go.

Jason:
[6:39] They’re a couple of those key Engineers one of them is a Google Now RJ Michael.
And one of them Jim Mayer Who did all the hardware chips is actually the the Chief Architect behind the Roku.

David:
[6:53] Yeah yeah.

Jason:
[6:54] Fancy Nails guys continued.

David:
[6:56] And Dave Haney is I’ve seen him out in so where I am cuz I’m near Philly there still it’s like in,
in like Wall jersey there’s this Tech thing and he comes out there and people talk about forgetting his name but he helped build Amiga 3000 and 4000 and a couple of things like that he’s out there,
but a lot of people stayed in the area after Valley Forge after a little.

Jason:
[7:22] The the USA quarters for, nor was in West Chester Pennsylvania I was based in San Diego and so my boss never trusted that I was working cuz if you’re in Westchester in winter.
That you don’t think the young kids in San Diego doing anything years later I visited a client in Westchester and I’m getting at the address to their thing it’s the old commodore.

Marker 01

David:
[7:42] Yeah well that’s on its QVC or Home Shopping Network is one of those owns that whole campus map.

Marker 02

Jason:
[7:50] Jumping back to today stopping at appreciate the reminiscing.

David:
[7:55] We can look forward without looking back.

Jason:
[7:57] Absolutely you talk a little bit about your role love to hear just a little bit more about your turn trolling as it is it mainly like developer poking focusing is it mainly like consumer adoption.

David:
[8:06] No we hire teams that are on that now I would say you can think of me as helping incubate new Alexa businesses,
so I worked a lot with Alexa for business helping them get started a lot of what I do is helping Brands nowadays to what does it mean in this boy’s first world how do you connect with your customers.
How do you build better quality conversations things like that so it’s it’s new areas yeah it’s,
the nice thing about having such large teams is once I’ve done something and I can operationalize it it’s not something that I never need to do again and I burnout least called isbitski burn out when I was growing up where,
I’m always it’s funny if you look at personality test like if you know anything about the five core traits I have super high in enthusiasm and.
Open to new experiences and assertiveness which basically means that even when I was a kid,
I would get super excited about something I make all my friends go and follow me and do that thing and then six months later I’d be excited about something else and I feel like we all need to try this now right now Amazon with all the different things that we’re doing now,
to be able to do that.

Jason:
[9:20] That’s awesome couple quick things we want to get out of the way like what’s your personal wake word at home for your Alexa devices.

David:
[9:26] So it’s always been Alexa I mess around with computer when it was out but by then we already had a relationship with Alexa and it’s interesting here’s a little anecdote Cell 2014 when I would talk about it,
and I would talk to press and think everybody would say the Amazon Echo,
and then I noticed about six months in people would say Alexa and that wasn’t like anything from that people just started saying Alexa cuz you hadn’t you could say Amazon you can do it was a smart speaker.
Now when I talk to people they say our Alexa I don’t know if you picked up on that which is super interesting because it’s become part of the family it’s our Alexa right it’s not Alexa that’s hard Alexa she has her own way of knowing what we like.

Jason:
[10:05] Indeed she does and I know we we love all our children but do you have a personal favorite Alexa device.

David:
[10:13] Oh boy well I love the new show at home I would say there’s three I had love the new show Thomas cuz super big screen,
and that’s the main one on my desk if anyone is curious I really loved the spots and that’s my kids have enough and I also have one in the den cuz it looks like a clock,
you know it’s just a perfect little little size and my third favorite is I have a head for years are Garmin speak which looks like a little tiny Echo dot in my car,
and that’s why I listen to podcasts because I have a Honda and so I have Android auto and I have carplay Nike all that but what I find is just saying with voice to go ahead and without having to hold down a button or doing anything and just pause,
play the latest episode of and then I mentioned this in the keynote today but you know if you do a lot of trouble and you listen to podcast news in the audio books are sometimes where you’re like,
especially stuff I was sometimes it gets deep and you’re like my brain shutting off I just want to play a game,
so I play games I played like Westworld and it played Skyrim and I put Jeopardy and a car I think this,
I’m a I’m a huge gamer so right by my own gaming rig at home and I have consoles I have Xbox One X and PS4 Pro.

[11:31] When I’m in a car and there’s an Alexa skill available I’m surprised how much I’m engaging with that stuff so I think there’s you know it’s it’s,
it’s about the situation you’re in right and in continued conversation as fun my kids doing and yeah.

Jason:
[11:46] I like it I like all those devices I have to say my new favorite though is the Billy Bass.

David:
[11:51] Yes but I if you look if you go to my Twitter there’s a link to a dead reinvent so that team they weren’t they were going to watch that,
and so a Tremont I did a talk and I did the actual unveiling,
of the twerking Santa and Bear,
I think about like a even a little man with a flag if you need to take your medication use and that’s just a visual for somebody in the home like my parents are old to be able to see that they walk in and they see it you can’t have light but there’s all sorts of things you could do it right,
somebody can make that maybe you’re delivering a package again little guy carrying a package or something like that right it’s just it’s integration with his of objects I think it’s pretty neat for notifications that way.

Jason:
[12:36] The old digital physical things going to continue to be an amazing at Lowe’s,
you alerted your talk today so your topic was how to talk to your customers in a voice person world can you give us a little bit of a recap about like what the what the topic was there and what you got.

David:
[12:52] Yeah you know it’s a sew-in audience like this and with the 25-minute keynote it’s like what do you talk about right and so for me a lot of it ctas and so I always break this down into three things,
is there going to be people never heard this they’re going to be people that have a relationship with Alexa already and so.
And then maybe people getting gas how do they do this until I always start it off with what does the future look like cuz I’m constantly thinking about that what does it look like 5 years,
you know head and why we we look back right so we start off with that kind of paint with a futures.

[13:27] Make sure people know that this is Amazon is just part of that,
but this whole voice first is huge you need to think of it like the internet even even bigger right it’s it it’s the interface for everything it’s the human technology relationship moving forward,
and it makes everything accessible and simple and so
I make sure people understand that and then explain some of the Core Concepts because I think even for me when I start my shift same for me cuz I’m stupid
everybody should just assume for me the first time I use this is I use voice control before the stuff doesn’t really work right and that’s not what this is this is understanding intention,
something called natural language understanding is not TTS it’s not looking at phonemes and actually translating them into the letters right it’s different so getting people to understand that and ways that doesn’t get to computer science he and,
try to make myself look smart or anything like that right side motor stand in terms like that and then,
third party that is okay well what can I do today and what have you learned.

[14:30] Because I get to you lot I have this unique view of the field when I talk to somebody customers I have access to so many teams at Amazon I’m always thinking in this space A lot of times when I meet with people they just,
used to freak me out was like what what can I have to offer and they’re like
Dave your view the field this you meant just share with us something so you know and so that’s what I try and do as I learn new things and I talked to customers and we’ve released new features based on that feedback I includes those in the Kia Soul a lot of it is
this is what customers are saying this is how people are using it today they could be using it differently a year from now and this is what you need to be thinking about and,
starting to focus on.

Jason:
[15:08] Fair enough and so most of the listeners of this show are our brands are retailers like.
4 Brands like how should they be thinking about like is it a no-brainer that they should be building a branded skill is there a different more nuanced way they should be thinking about it.

David:
[15:23] That’s funny.
I always feel like I’m in a Morpheus in The Matrix and they might my Syfy should write my what if I told you what if I told you and you could talk to your customer,
everyday in the moment where they are on their own terms.
That’s an Alexa skill or Flash briefing or in any pain but that’s what this is doesn’t exist is always been a barrier and so if that interests you it’s about what I like to call meeting your customer in the moment,
and it’s your tongue got really like I was growing up in Jersey I had it you know I work two jobs since I was,
gosh like 10 with a paper out but I remember one of my favorite jobs work in a movie theater.
I can still tell you I would have to say to people would you like to upgrade that to a large popcorn and a large soda for only $0.25 more the big combo special right but it was that up sale in brick and mortar
right there and it’s in the moment and that is,
completely different than it did not purchase react hit the side button or use your fingerprint or any of that kind of stuff right you’ve already enabled it knows your voice you can set up a pin but it’s seamless and nothing beats time,
right and that’s what that’s for Brands is something they just think about is customer in the moment having a conversation with them every day and.

[16:48] What would they say if they could talk to you today what brands don’t know other than the help desk tickets right and I’ve seen companies now.
Where they are now looking at the Amazon skill reviews as part of their entire ux cycle to know what new features they need to be releasing because it’s the easiest thing that people can just talk you know and so you need to be thinking about those things and then,
lastly what I tell them is what is your brand sound like Miami for us you know podcasters and listen to felt like for me I just,
I loved one for me audio I love conversation I’m always thinking in those terms but I find most brands it’s still very visual social is visual so it was a bunch of images and video and so what does it mean.

[17:34] Do I use Alexis voice do I use my own voice do I have create a new voice of the company,
write like Jeopardy skills Alex Trebek that you here right and then we you know based on feedback we provide more and more voices so you can generate through what we have a service and Amazon web services closed poly so I can
generate all sorts of voices if I need to do that but that’s another thing that they need to start thinking about in the moment,
what do I sound like one of my customers asking for where they want to have an early day so it’s,
Newcastle new customer acquisition is not going to be like what you think in Mobile and wet right it’s early like early mobile web days but man if you have an existing customer and they have a device,
and I’ve ordered something from you and I can just say reorder,
or when is that coming right or check on a status or even games like Destiny made us feel other games and made a scale where you can just say hey what’s my friend score right like you’re just like that it’s interacting again without what I was talking about is it is human,
technology that relationship together and that’s really what’s enabling and that’s to me is a couple spaces where it’s just a huge and exciting business brands,
Auto Vitaly.

Jason:
[18:56] It is interesting the likes of the there certain brands that.
Needed we have this permission to have a daily conversation with a client because of the nature of the brand in the product or whatever and it seems like it’s a no-brainer for them that they need to have a scale and be there a way to have a.

David:
[19:14] There’s certainly some of that like the early web days where it was like I have a skill and then you talk to the scales just about the company I mean I was building those websites for Brands back in the early 90s.

Jason:
[19:23] But if you’re the Weather Channel or something like it would be foolish not to.

David:
[19:28] Yeah yeah.

Jason:
[19:29] Have a skill there because again there’s people are going to get up every day and want to know what the weather is and how to get dressed.
The children have a little bit with some Scott like it’s just needed to voice we talked a lot about app fatigue on the phone right and if you’re not one of the apps on the front page of the phone you get forgotten pretty quickly.

David:
[19:46] Yeah.

Jason:
[19:47] On voice we don’t even get the visual cue so the problem is there to be 300 great skills that I’ve enabled on my Alexa echo system,
if I don’t have a daily reason to use them I’m likely to forget a bunch of them exist and so that like so some of these by I probably don’t want a daily relationship with Charmin toilet paper.
Sherman still thinking about how are Branch it evolved in a world in which voices are super important in her face like any advice for those cut like I feel like you’re mostly going to interact with Charmander,
through the native utterances on the on the Alexa platform is going to be at.

David:
[20:25] But what’s interesting is like.
Why have a mobile app to write like you these are all of it doesn’t change any of those questions what it does changes what’s the relationship of my customer right the demographic of the customer ships,
voice,
you mean somebody has to understand they have to have a smartphone they have to know how to patch it after I have downloader app get the latest version of your dad if they’re using a web browser they still have to be able to patch the OS on a computer do all those things,
in some of these devices you’re talkin like 5 $10 right and it’s always the latest version.
There’s never been a technology as a brand where your customer has the latest version of your experience at all times right,
cuz even the web I mean man,
I spent so many years with all the different web browser differences there is not I’m sorry there is not one version of your and anybody that’s how to program client-side knows that and you know jQuery and other things made things easier but gosh,
that is in a nightmare so it’s that except my dad and he said my mom still print out emails.
But he’s never did with his money right really gave you really turn on computer my dad,
you know he’s a butcher he’s retired now never touch computers life and when we’re hanging out he tells me about songs he pulled out and thinks he’s talked to you with Alexa.

[21:44] And that’s when the light bulb went off for me is I’m like this is empowering man like this is like anybody can do this stuff and so maybe toilet paper isn’t important for me and my age but maybe,
it is for somebody else that needs to think about stuff that right so it’s that’s what you really need to think about what’s the demographic,
your customers if any demographic had access to it cuz there’s kids that are talking to everything now,
because they’re used to Alexa right I hear from customers are expected to so when that happens right that opens to meet new possibilities,
and so you need to focus on those things and look at existing customers when I like to tell people is.
To get to the utility of speed right nothing being speed go look at your mobile app and look at the top 10 things people are doing what are they doing everyday they’re probably doing that one thing everyday cuz it’s fastest on mobile.
So if you can make that faster,
even if it’s just checking on the status even if it’s just a reorder or maybe it’s getting information we try to do things to make it easier to have conversations and so we have the ability for you to say something like that.

[22:57] Alexa how do I remove a grass stain now I may not know what brand but a brand can respond,
right cuz that’s a human being to think we may not remember the full invocation or anything like that until we try to do more and more of those things or Alexa play a game and I get some suggestions but it’s about,
what you think about this is Alexis going to learn about you what do you what do you like your right and what are what’s,
getting reviewed well and things like that so if that’s kind of I think.
To me and this is going to sound crazy from a guy that’s spent so many years building app stores across so many platforms,
but to me I don’t see that 10-15 years down the road,
right cuz I put all the onus on the human being would I see 10-15 years down the road is an AI that knows me intimately that’s already out there,
and remembers things so can be like hey Dave and we had a conversation a month ago about XYZ topic I just found some information about that if that’s what we want we never had that and that’s what voice is going to enable imagine trying to do that in a mobile app.

Jason:
[24:02] Yeah I totally agree I feel like a lot of these things that we have to explicitly enable is apps or skills or whatever like become implicit like apis or capabilities that we just.

David:
[24:12] I could always do it because for some reason computers,
I just nerd it out on them I love them just even in like we talked about it maybe I just spent two hours like making my icons perfect. It was fun,
and I used to get upset that I couldn’t share that with people cuz it’s such a joy to me and people like right like they just didn’t like it and so I knew
did that was just inherently broken if there’s such that technical divide that something else has to be there right and this is it man this is the.
The big enabler.

Jason:
[24:44] Why don’t you mention the kids screaming at the Alexa ideas funny like two things that come up in my newsfeed a lot lately you are,
advice for parents that we need to teach our kids to use politeness with our our Alexa stop Alexa devices because there’s some risk of.
That’s raising a less polite culture because kids are used to sharing commands at the other devices and they respond.

David:
[25:07] My anus is there and this isn’t a belief isn’t that starts with the family what starts with the individual first in the family and then the family.

[25:18] These up to the Community Practice Community is a bunch of families and so regardless of what technology was introduced we’ve always had a set family Rules so when.
Screen when we first started getting iPads and and the Kindle Fire and things like that we had to set rules around screen time.
And some of those rules where you do homework first you do not know when we wake up on the weekend first thing I’m doing is not logging you into these things when we eat dinner as a family for us everybody put phones away. Included,
right and so that is in something that comes with the manual for that technology has something you decide as a family and then as a culture so voice for me absolutely was that because when we first got it early days I be playing music and my,
so this is 2014 so gosh she was six,
and she would run into the room and say Alexa tell me a joke and I be like that’s listening to music so then we had to do a family joke that said you know like this is what’s rude this is not with rude,
and you can do stuff like we did hear from families,
so we enabled stuff like a follow-up mode so if Alexa does something and you say thank you she’ll say you’re welcome back she recognizes all of those things or whisper so if you a little one at home and you can be like Alexa,
quiet and she’ll Whisper back which is a very interesting the first time you hear it cuz it’s so human to do that you know and so you can enable whisper mode.

Jason:
[26:46] Yeah I know it’s totally totally cool like the other parental thing that’s happened is Amazon has completely wiped out the the female child’s name Alexa.
Parents don’t want to name their kid for you no fear of triggering all those devices Olive.

David:
[27:02] Yeah well I do I talk to families that have names that are similar in that they are all Amazon or Echo.

Jason:
[27:11] So it might be my family I have a sister-in-law named Alexis which is close enough inside where we’re at Echo family cuz we also for work say Amazon to off.

David:
[27:21] What’s going to be the new left handed right.

Jason:
[27:23] Exactly is that at that is exactly what it is so I mentioned the other listeners are retailers,
the default position for a retailer is Alexa is the evil,
front door of my competitor and I’m desperately rooting for any other artificial intelligence technology to win because when Alexa wins that comes attached to my competitors store,
are they.
If that’s true that’s fair enough like I mean there’s a lot of competitors in the world is that true or is there a way in which we like Israel and which Walmart should be thinking about how to leverage Alexa or are they right.

David:
[27:58] They could completely make an Alexa skill it’s open to everybody it’s interesting because even and this is going to be in iOS use Amazon services,
was because they weren’t locking into an ecosystem I could use my Amazon video,
my Windows device on my Android device on my iPad and I could get my Kindle book on the Kindle I had 10 years ago where I can download it onto my phone
audible working across everything so it was always I always viewed Amazon.
It always depends on the space that you’re in right so I always do that was on as this Innovative tech company and that that was not locking it is all about giving in the customer choice right and so for me.

[28:50] I never looked at it as what you’re you’re saying that’s just a personal on an Amazon note,
from day one this is been open everybody don’t charge the idea has been that voice,
review is the next big disruption it’s the human.
Technology interface so it has to be everywhere so we’re not going to be the one to do that we’ve got to open it up to everybody,
and so that’s why you see it in the IQ and I we can make our own Echo,
there’s hardware specs to lake house and then you and I can go sell it on Amazon for five bucks and we can make it the retail geek Echo,
write and let me know that that Tech and so it’s,
that but that benefits everybody because it’s helping customers its helping push it for its I view that the people that aren’t that would say something like that are the people that would say cuz I dealt with this years ago to that would say,
that I’m not going to use HTML in the internet because Google Microsoft phones.

[29:50] And no they don’t own it it’s the way that human beings are going to talk that’s what this is there’s no single company infected.
Jeff has said I completely agree with him is that there’s going to be hundreds of a eyes in real life not just okay I mean Alexa maybe the one,
I want you spray but there’s going to be all sorts of him and eventually we’re going to want them although to talk to each other,
and that’s what this is this isn’t some smartprix speaker that you can order stuff on although you can this is a new way of human beings interacting with technology and it’s going to be in everything everywhere.

Jason:
[30:25] It involves the normal Trend like usually these Technologies come about and they start out as like wall Gardens where everyone wants like everything in their own echo system so I got I go to CES every year for 30 years.

David:
[30:37] My apologies.

Jason:
[30:38] It’s like I did not say it is a matter of pride,
the first year there’s a voice interface for televisions everyone has invented their own voice interface and it only works in their echosystem than they imagined you can buy all the devices in your home from just from LG or Samsung and you know you walk that show three years later and.
Frankly like this year there’s an Alexa and a Google logo on every one of those devices and it just.

David:
[31:00] Customer choice.

Jason:
[31:03] How to make is a better experience with a customer.

David:
[31:05] Nothing’s nothing’s in a vacuum all of our lives have multiple endpoints and we just want to simplify that.

Jason:
[31:11] You talked a little earlier you’re like hey if we looked at that uses on the phone there’s like certain things that would have weight higher usage because they’re just the the low-friction best best things to do in the phone and like there certainly is an analogous twist,
her voice and relax all right until we’ve seen some of the surveys and it’s,
people overwhelming we are going to use it to play music to get information you know there’s and you probably know the exact list on making it up.

David:
[31:36] Because we’re at bombers show.

Jason:
[31:37] Commerce show like we always notice like at the moment Converse is pretty low on those lists like it does not appear.
The primary thing very many people are using their device for is to place orders for for stuff and I’m just curious if you have a POV is.

David:
[31:55] Is

Jason:
[31:58] You are truly an adoption or is it never likely to be the dominant thing we do the invoice or what your.

David:
[32:04] It will be the dominant for everything is my opinion but I mean I’m old enough to have heard people say that about the web and mobile as well,
and that’s what you want man you want you want it to just you want in those early days where you’re going to see it up Tick and get in cuz that’s when you can build a really strong brand and really strong relationships.
It’s early days but there’s nothing like in the moment so I’ll give you an example.
If you follow like the thinking of like app store,
where you can buy like Jeopardy you can buy extended and you can do more questions and things like the offer that you can do premium subscription answer today.

Jason:
[32:52] Forgot to take stuff the bus.

David:
[32:54] Nice nice and you can do the innocent and I think people are familiar with that but people were familiar with that in the beginning I mean I grew up I’d buy go to Electronics Boutique and buy a game and that was it man
I wasn’t like I was spending five bucks a week on a skin I just paid one price right and so it’s funny we can get used to it and so there’s that model,
but there’s also did integrates with Amazon pay so physical Goods in things like I’ve started seat like you guys have a podcast maybe you have somebody on the podcast that has a product if you had an Alexa skill where people can listen to your podcast
right in the middle of it you could say you know for 50% off would you like to purchase this and then you’re getting,
physical Goods in you’re getting part of that Amazon affiliate program and things like that right then you have other types of skills that look at it as an endpoint.

[33:43] So I do this is It’s At Its if I don’t do it all the time but it’s my it’s my guilty pleasure I love the Domino’s thin-crust Pizza I’ve always have the grown up in Jersey and,
so if I’m when I’m not traveling and we calling my house Friday night party table I’ll be like all right Friday night and so as I do is say Alexa,
ask Domino’s for my easy order boom it’s already got credit cards not going through Amazon that’s an existing customer relationship,
we have something that we call account linking so you don’t even have to go through Amazon use Amazon pay you don’t have to use login with Amazon you can have your own existing customer relationship they see screen it’s like a mobile,
analog in a waffle those kind of things so you could use any of those providers or your own so it’s an existing customer through a different endpoint,
and I’m surprised even in my own life the use in that and so I think this is my thought.

[34:46] Is that nothing as human beings when it comes to technology and this is especially with purchasing beats speed.
That’s why I think I shipped it and most people shipped it to mobile.
Because I don’t want to go log on to my what the title is a desktop and a laptop and patch and get to the browser and figure it out is in the website and then using them over I mean it’s Common Sense instead of even using the mobile,
I just say Alexa ask your brand to order my stuff.

[35:17] So what does that look like when people started using that year after year after year was that look like 5 years what does that look like.
People who may be caught the people that would call up a number to order stuff right I have I won’t name my in-laws that she is huge QVC Home Shopping Network all of those things.
Call the number doesn’t use the app you know and so and she picked up in a wax on her own and I and was telling me about all these skills it was funny,
I just want to run away maybe 1,000 scales and I were over 80,000 and.
She’s like I brought it to play the Eagles she’s huge Eagles fan and I was like,
you know I already I already pulled up every album I know how to search might like I I’ve never had,
a relative a family member ever just run with a new piece of technology have you it’s like you literally you go there over the holidays in your patch and stuff and your training and maybe you’re trying to reorder some what are something new cuz what they have is so outdated,
the song it’s like it’s an appliance the hardware is the appliance,
this day is getting smart and smarter over time said that I think if you just naturally think about human behavior.
Write an end how we act and if you make something easier and you give me incentives that’s just naturally the way things are going to go.

Jason:
[36:45] That’s right I mean I feel like there’s two points and then I would totally agree with theirs.
The experience and product are going to get an exponentially better because I just wanted some everything at the magically improves and it’s just better than next day versus like these,
product we have to make one go back to the drawing board design version 2 and you know it’s a much longer duration and for sure I have also in my life via in-laws seen the leapfrogging Where do I,
there’s a bunch of the user interfaces that are so complicated my relatives are never going to learn them.

David:
[37:16] But then just let prognose in her faces yeah.

Jason:
[37:16] I just left brought those interfaces the laptop in the phone and now you know the voice they are they’re totally capable of embracing,
the I do and I I’ll be honest I’m nervous about this opinion because I’ve shared it a bunch of times and I have the whole deck of Ono was ever going to buy clothes on the internet no one’s ever going to buy a TV on the internet and like almost any time you hear that.
Precondition to no guarantee that’s going to be wrong.

David:
[37:43] Info.

Jason:
[37:46] So voice Commerce I have a slightly nuanced guess,
I feel like there’s a category of stuff that people probably aren’t going to buy any internet that are high consideration,
they require a bunch of complicated brand specific attributes right like so I’m not likely to go hey Alexa order I will leave Urbana leopard skin size medium.
Address for 2-day delivery here’s my promo code right like out I probably will never wear in the vernacular to order a dress for the first time with all those custom words in it.
But that’s how you know just one chunk of Commerce incident okay I see that Jason but I think all of this like consumables and replenishment and order the peanut butter everyone’s going to do via voice I get that response a lot and I would even say.
The easiest stuff I actually think Amazon’s going to figure that out without voice like I feel like you’re just going to send me the Charmin toilet paper,
and no I need it before I need it right and so.

David:
[38:44] Yeah but that’s just making customers lives easier.

Jason:
[38:47] Which is a good thing so it to me voice is going to fit in this middle Zone which could be a huge chunk but I called the Goldilocks zone.
Too complicated to learn how to say and stuff that’s not perfectly predictable what my consumption pattern is right and so are your point like the pizza is.

David:
[39:06] Make a perfect example in this.

Jason:
[39:07] Check example in the Starbucks and hey I have family coming over double my peanut butter order all those kinds of things like manicuring aren’t my reoccurring.

David:
[39:14] Super Bowl commercial with Harrison Ford and so it’s it’s super interesting because it’s,
individual based like maybe this was two or three holiday seasons ago we released like what people ordered through Alexa and people were ordering like huge stuff.
Like like stuff that was like thousands of dollars I think maybe something was an engine or canoe just like.

[39:43] Everybody’s different In-N-Out.
And it’s also I talked a little about this on my weasenforth With Friends Podcast is as somebody who’s been gaming for 30 years it’s I buy favorite genre and I still play is massive multiplayer online game.

[40:01] But I see with my kids the battery out the fortnite’s right and now they want Apex and there is a genuine General shift.
In those patterns with gaming just like there is and how information is shared through social media just like information the and any parents who have teens know this they FaceTime all the time,
there’s there’s did the visual seeing each other I’m more comfortable with text the chatting all right so,
where’s that how easy is it for me to be in the middle of an Xbox game and or PS4 or whatever and say something like,
buy me another skin pi to half up right now,
just walking down the street you see you know the pizza boxes people holding it up horizontally they’re talking into it now they’re talking to text you know all of those things occurring is,
there’s a study of science with epigenetics we’re with our Behavior actually turns off and on genes,
and so over time is people get more and more used to that the Comfort level increases that to me is the most important thing that has happened in voice.
In five years is there are people now.

[41:21] And I include myself as part of this when I want to use a piece of technology to try to talk to it that’s the first thing that goes through my mind I try to ask Alexa or whatever.
I didn’t exist five years ago so that to me is what.

[41:37] Stuff gets ordered online because I can see you talk about I remember cuz I where I started out,
in e-commerce like I was talking about and this Mac Warehouse might get some of those you know there were $5,000 $6,000 and then it was servers and stuff and so are people going to order that,
cuz or they want to talk to somebody and have them walk if it’s a comfort level you know and so I never I think it’s going to be different I think it’s going to fall down into,
and I think you’re going to be surprised I think people be surprised where the engagement is like this is one of things I talked about in the keynote is.
I had a picture up of both a younger gentleman and an older gentleman and I said I pointed the older gentleman I said that maybe your biggest future customer.
That somebody or targeting today.
Gagement stare right and so I think you know those people have never had a chance because I think about if I had an opportunity to just order stuff.
Cuz they’re come from.

Jason:
[42:40] The thing that lowered that friction enough that they can finally do it or not.

David:
[42:43] Wait cuz we’re basing all the data we’re basing all the data on a certain generation of people who were familiar with technology or who ramped up right and you can and so I think all that’s going to change over time.

Jason:
[42:56] No I told you buy that there’s tons of funny videos on YouTube of the toddler’s to get handed a magazine and they’re like trying to swipe the magazine.

David:
[43:03] Oh yeah my kids are like that when they are young yet.

Jason:
[43:05] Magazines just an iPad that’s broken to a toddler right and there’s this clip by using a lot of Dex but you may you may need to steal this but one of the original Star Trek movies they like go back in time.

David:
[43:15] Scotty computer.

Jason:
[43:17] And it’s Scotty talking to.

David:
[43:18] I talked about that yet that was my favorite year.

Jason:
[43:20] Yeah yeah he just assumed it like a horse weigh.

David:
[43:23] Computer.

Jason:
[43:25] And then when he finds out he has to use them at the.
I do I’m serious though Fallout like you you mentioned the.
Speech interface to the phones and you know that you are and you start to see that here and I definitely see more of that here than I used to in the in the pizza configuration.

David:
[43:41] What’s our primary Computing device as of right now.

Jason:
[43:45] Go to Asia and it’s noticeable to me how more frequent it is and so that’s like one of the my curiosity’s is like,
man I see people in Shanghai like constantly talking in their phones in here it’s a little bit like I would argue it’s more natural to talk to,
an Alexa. Then it is to talk to a Google Android.

David:
[44:06] It depends man like if I got to go pick my teen up and I see them all waiting they’re all.

Jason:
[44:15] Talking on there okay.

David:
[44:16] They’re all on the devices right purses like if I’m hanging out at work or something like that so it’s,
I think a lot of that. Related it could be cultural by here you were talking about there too but it all goes down to learn to behavior and so you can’t get to any of that voice, stuff without foil learned behavior,
Comfort levels things like that.

Jason:
[44:39] Part of me in it does just hypothesis I’m wondering if China is just a little earlier adopter a voice because,
keyboard input of the simple Chinese is a little more painful than than English and so they’ve gone to voice sooner but in the long run.

David:
[44:58] It’s painful for everybody it’s so low bandwidth I have this problem where my brain,
I think it’s way faster than I can type and I used to like be down on myself I was like I’m just a really horrible writer but I’m good at having conversation right,
and I don’t mean that in an egocentric way to I do I mean that,
as I don’t need to make fun of myself I have a comfort level it’s natural and so then I started doing I have Office 365 and they one of the new releases they have,
dictation and I’ve been using that in my work. And I just.
Tons of it’s it looks like I’m writing 15 pages but all’s I did was talk for an hour because it’s finally there and that I met an author he used to,
he was one of those the co-creators of the onion it was at the digital Summit I gave in gosh now it sounds like I’m done driving I’ll just go but I was impressed by who he was,
and that he had the same problem and he wrote this whole book and he said to me he was like Dave just he should he basically did it on Siri on his phone he had this app on his phone and he wrote the whole book by talking to it and so,
voice,
your keyboard and typing and mouse and all that it’s so low down with voice is higher bandwidth when we get to spot we’re going to be a little better.

Jason:
[46:24] So that that’s actually good pivot to our last question cuz we’re coming out on time.
The folks jump in the time machine and go to the show 5 years from now and catch you know what we’re all talking about like we do things in a surprise than the most like what’s going to be,
the most surprising thing is is it is there going to be an Alexa that plugs in or brain or what you know.

David:
[46:46] I know gosh I have to I always go way out for me.

Jason:
[46:51] Okay even go further yeah I’m good with that.

David:
[46:53] Well I think the way that you can predict the future is to go way out and then you’ve got to pull it back because everything’s done in Milestone so if I was going to say 5 years.
I think what we’ll start to see is that.
The human isn’t the major driver like technology today is very what I would call a veteran,
I have to initiate something as a human being I’m looking for something as a human being I’ve turned something I push a button I’ve done all of those things.
I think within five years there going to be a eyes that know us well enough.
That it becomes a way to amplify ourselves and what I mean by that is.

[47:37] When is has been proven right is that you have to have a conversation about a topic in order to learn how you feel about that topic know to defend your position into
this is why you know in groups that you can come up with better ideas because of that process but if I have an AI that I can have a conversation with rise me up like the Star Trek Holodeck,
right you can go back and talk with Einstein and Newton and things like that that’s real when we get to that point,
that wooden locks in human potential is huge because my biggest problem is like,
my OneNote man is like 10,000 different entries right and I’m searching and it’s all these thoughts I’ve had and I Journal a lot and I think about things a lot but I’m like,
I just wish my brain could access that better and I think that’s where we’re going to head is there’s going to be a digital self of me it’s going to understand that.
And is going to be able to interject on things like I’m working on an idea and it’s like actually Dave five years ago you had a similar idea and by the way you were feeling this way around the time cuz I’ve also found in journaling that I go through,
very cyclical emotions based on other things which I wasn’t attending self-awareness is very very key right and.

[48:51] Not to get existential or anything like that but I think that’s what AI is going to allow everybody to get more self-aware who they are and the type of questions they answer and everything else is just
barfing opinions of everybody else and not listening right and it also allows I think it’s.
If we go out more than 5 years it allows Legacy imagine if a hundred years from now you know my,
great great great in a kids could talk to me and that’s the reason why I podcast so much as I know there’s going to be the ability for an AI to go through,
how I respond in conversation in my thoughts and my experiences there already is some of those kind of experimental Services you can say and just be able to have a conversation with me you know and that’s going to tie us together,
you’re feeling the same way that my great-great-great done the same stuff I do you know and so I think that is with all of this is going to be able to,
invoice I think voices the beginning of it it’s I like that’s why I like this a conversation in folks on human beings cuz I think voice is,
start I think we can we can understand a little bit and we can speak a little bit but we still can’t see we still don’t know feelings,
and if there’s so many other things touch there’s so many other things we as human beings just inherently are great at ability to detect emotion in face,
I think when we go out 20-30 years that that stuff will also come into play more does that mean right.

Jason:
[50:21] Visual Commerce you.

David:
[50:22] You got it dude and yeah and then you got to be careful The Uncanny Valley and things like that with people game freak which to human.

Jason:
[50:33] I told you I hope that none should I come to pass and that’s going to be a great place to leave it cuz I have burn through are a lot of time as always,
questions we can get you on the show feel free to drop us a note on Facebook and we’ll continue the conversation there if you enjoy the show we sure would love it if you jump on iTunes and give us that five star review,
David and listeners want to connect with you or or learn more about what you’re up to what’s the like are you.

David:
[50:54] About what you’re up to what my vanity and my vanity URL is just the Dave Dev so the Dave dtv.com and that’s my Twitter LinkedIn email podcast everything.

Jason:
[51:07] Awesome if you’re driving don’t write that down I will put it in the show notes and you can you can click on it when you get to your destination David really appreciated talking you thanks very much for taking the time.

David:
[51:17] Thank you for having me on.

Jason:
[51:18] Until next time happy commercing.

Mar 1, 2019

EP164 - News live from ICSC OAC 

http://jasonandscot.com

Jason & Scot gave a presentation at the International Council of Shopping Centers Open Air Centers show in Austin Texas and got together afterward to record a news update.

  • Amazon Project Zero - New brand protection program
  • Walmart Earnings.  Same store sales up 4.2%, E-Com for the quarter up 43% (up 40% for the fiscal year), guidance for next year is that e-com will grow 35%.  Profitability of e-commerce continues to be a challenge for Walmart, and they expect that to continue.   Walmart stores offering "Online Grocery Pickup" (OGP)_ grew from 800 to 2100 stores this year, and is expected to grow to 3100 next year.
  • JCPenneys Earnings. Revenue down 8.4%, same store sales down -4% (vs. 4.3% expected).  They announced the closure of 18 stores, and said to expect more in subsequent years).
  • L Brands Earnings - Victoria's Secret same store sales down 7%, will close 53 stores.
  • FedEx launched a new delivery robot, SameDay Bot
  • Stamps.com dropped it's exclusive deal with USPS, a possible precursor to an Amazon partnership (or acquisition).
  • Target launched Target Plus, a new invite only marketplace to expand Targets online assortment.
  • Marketplace software vendor Mirikl announced a new $70M fund raise, reflecting investor confidence in the marketplace model.

Jason will be at ShopTalk in Las Vegas next week and will moderate two panels:

MONDAY, MARCH 4, 2019 TRACK 4, SESSION 4: 2:50PM - 3:30PM

TOPIC: Selling on Marketplaces

  • John Evons, VP, Global Direct-to-Consumer, KEEN
  • Bridget Davies, VP, Revenue & Seller Growth EBay
  • Jordan Bass, Head of eCommerce, The Wonderful Company

TUESDAY, MARCH 5, 2019 TRACK 2, SESSION 5: 3:35PM - 4:15PM

TOPIC: Creating a Single View of the Customer

  • Charlie Cole, Chief Ecommerce Officer, Samsonite
  • Steve Miller, SVP, Marketing & eCommerce, JOANN Stores
  • Greg Fancher, SVP & Chief Information Officer, Express

Jason and Scot will be giving a joint presentation (and recording a live show) from ChannelAdvisor Connect in Austin on April 8th and 9th.

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

Episode 164 of the Jason & Scot show was recorded on Thursday, February 28th, 2019.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer and Scot Wingo, CEO of GetSpiffy 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:
[0:24] Welcome to the Jason and Scott show this is episode 164 being recorded on Thursday February 28th 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host,
Scot Wingo.

Scot:
[0:40] Alright alright alright hey Jason welcome back Jason Scott show listeners
we are joining you live live live in the same room which rarely happens and we are here in Austin Texas at the icsc OAC conference.

Jason:
[0:57] That is a mouthful very impressive specially with Matthew McConaughey standing right behind you.

Scot:
[1:02] Yeah yes sir this is a conference that will you put her on and I have all it I'll let you introduce the conference.

Jason:
[1:09] So I think icsc is a Trade Organization for shopping centers and this particular event is about the,
open-air centers which is like,
a strip malls and power centers and lifestyle outdoor malls so it's a bunch of real estate people from retail companies and a bunch of.
Individual property owners that own these these properties that host them all Z's my senses this category Mall,
tends to be less aggregated in the big Regional malls where you name the three big mall operator.

Scot:
[1:46] Yeah I guess so it's a sold-out show about 500 folks here and fair
yeah it's pretty interesting we were here doing a talk I don't want to say too much I think we're going to try to turn it into kind of a visual
but video presentation so we're going to try a new form out with that but we were asked to come give kind of a live version of the show and we talked about you were always the folks to get to get in front of a bunch of retailers and Tom they're going out of business if so that was exciting.

Jason:
[2:14] Yeah I put a bunch of them on a slide that said you don't want to be here.

Scot:
[2:18] And then I saw some people storm out so I think Mission achieved we think we just killed.

Jason:
[2:24] One way or another.

Scot:
[2:26] I wish we have a lot of one and dones here with a Jason and Scott show Roadshow.

Jason:
[2:35] Exactly we are the ultimate one-hit-wonder but I had fun chatting with you and in a rare occurrence we budgeted an hour for the presentation and took exactly an hour.

Scot:
[2:45] Yeah yeah if we could just be as good on the podcast that would be amazing but we we nailed it.

Jason:
[2:51] I like to think when we go long we're just making our audience more.

Scot:
[2:55] Yeah we're giving them more content for their their dollar.

Jason:
[2:57] No I mean they have to stay on the exercise bike longer.

Scot:
[2:59] Truth absolute yes do not get off the the cycle will work time constraint here cuz I've got to hop on a plane next week you or in Las Vegas that shoptalk I'm super envious this is I'm going to miss this year shoptalk unfortunately.

Jason:
[3:11] It will not be a true shop talk without you to be my my co-pilot but I am looking for to go of course it's been a,
Erasure the last couple years it's sold out this year it's at the Venetian I want to say that more than 10,000 people last year so expect it'll be.
A big shindig and I'm moderating to panel so I'm doing a panel on Monday in the afternoon at like 2:50 on selling on Marketplace has.

Scot:
[3:40] What that's my topic.

Jason:
[3:41] I feel like this would have been your panel has you gone but they're trying to channel,
You by inviting me and so I can have the halo effect but we have a couple sellers that are.
The telling marketplaces so we have keen is on on the ship which is a great Footwear brand from,
from my old Hometown Portland Oregon and then Jordan bass I don't know what this guy did wrong in life but this is will be,
the second time he's been on a panel that I moderated and Jordan Reed's e-commerce at the wonderful company so I always like to.
Wonderful company owns a Fiji Water so I like to spend.
30 40 minutes talking about the Fiji Water girl with him and then I like to get into the details about how they're able to Shell the pistachios and just sell the the unshelled pistachios are the shelled pistachio.

Scot:
[4:31] Can you have you been on your panel to.

Jason:
[4:33] I do incident in addition that you sellers are we have Bridget Davies who is the VP of Revenue and so our growth at eBay so we'll get to hear from from eBay's perspective about how Brands and should be thinking of amusing.
Using Marketplace.

Scot:
[4:48] Cool and then decide for marketplaces what are you talking about.

Jason:
[4:51] Yep sit in on Tuesday I have a panel called creating a single view of the customer so talking about.
Kind of aggravating Gator dated to get that 360 degree view of the customer and how you do personalization and data capture and in all those kinds of things and so we have.
Three retailers on on the show we have a.
Charlie, who has been on the podcast so I vaguely remember that show because I think we did it in the middle of a party and there may have been some drinking.

Scot:
[5:22] There was some inviting I remember Charlie is pretty outspoken so I think he'll ask me a fun panel I'm going to call I'm going to call it now.

Jason:
[5:29] Yeah I think so too and Charlie runs e-commerce at Samsonite which is of course Samsonite but also to me and and i e bags,
incident we've got Steve Miller's that's VP of marketing and e-commerce at Jo-Ann stores in so that you know they have an interesting perspective on,
on a digital in End customer capture so that that'll be interesting to talk about and then,
we have a Greg fanshare who's the the CIO at Express and express as one of the most interesting,
long-running customer Affinity programs in the apparel space so he'll be an interesting perspective as well.

Scot:
[6:07] Free call and then we are back together here in Austin actually April 8th tonight we're going to do another live version of the show for a channel advisor connect so we should start thinking about doing the sides when you get back from Vegas.

Jason:
[6:19] Do you think I will Channel advisor just pay for us to keep this room at the Fairmont so I can just leave my stuff here.

Scot:
[6:24] Probably not this is a this is a pretty fancy I don't there is a Residence Inn I'm so maybe maybe they'll store your bags over there.

Jason:
[6:31] Oscar.

Scot:
[6:33] Cool well it wouldn't be a Jason Scott show without some
Amazon news new your margin is there opportunity,
quotes of the day Amazon announced a new program for Brands I wanted to kick this one over to you Jason cuz I wanted to get your perspective on it
tell us about Amazon Project zero.

Jason:
[7:03] Finally I get to be the one to do some Amazon news I feel like that's always your thing.

Scot:
[7:07] Since you're taking my panels I'll give you the whole Amazon news thing too but I'm going to talk about digital fact tags going for it.

Jason:
[7:17] Project it was kind of interesting so this is a new program that Amazon just announced this week and it's a,
program by invite only for select Brands and it apparently gives them these brands of the ability to flag and take down a counterfeit listings.
And so.
Without any intervention from Amazon or any appeal process a brand that's in the program would have a self-service tool where they could.
Identify a counterfeit copy of their product and take it down so for example of Vera Bradley was mentioned as one of the.
The pilot customer so they they saw counterfeit handbags on the on the site they could take him down and that's the part.
In the short run that I'm most interested in and there's probably the most buzzed-about and there's some pros and cons to this this program,
this is part of the bigger counterfeit program anti-counterfeit program they don't actually have a program.

[8:22] The weather trying to get Brands to serialize their product and literally like Prince a unique.
Serialize barcode on every product and so Amazon's offering that if you,
go to this expense when you manufacture your product to put this authentic Asian serial number on each product the Dell validate those serial numbers when they bring them into,
the Amazon fulfillment center echo system and so they'll the only allow products with valid serial numbers to come in so this is.
Kind of a systemic way the Amazons offering to help Brands keep only authentic products on the site but the reason that's not super interesting in the short run is for a brilliant benefit from that they have to be willing to print this.
Spinning a serial number on a package that you need freeze packages.
In incremental expense normally they just awesome print the package in huge bulk and then they have to put it on every single package in the channel so it wouldn't be just on the,
set of goods they're sending Amazon they have to print it on,
everything they sell at Walmart and Kroger and everywhere else and so I have not heard of any adoption for that other than small.

Scot:
[9:40] So I've been at this for over 20 years now and eBay has gone kind of around the horn on this a couple times where that does program called verified rights owners,
the song is a bureau and they they went through a phase where you can kind of like go and solve your room and then the brands way over reach to know they would just kind of go knock out any third-party seller that was selling stuff without any kind of
way of validating that it was not even talked to be counterfeit and then they had to kind of like to swing back and
I'm in the telecommunication to see if Brands Conover reach on the sand and it just because a third party is selling a Louis Vuitton bag doesn't mean it's kind of it
and you know you have to think it's a little kind of murky so it'll be interesting to see I do think,
my my easy prediction is going to be a lot of overreaching going on early on with this third-party sellers will go through an outrage phase
gmv will go down in these categories in Amazon will then kind of have to swing the pendulum back to some Middle Ground so we'll see how that happens for third-party sellers,
I do think I'll be a short-term negative for third-party sellers.

Jason:
[10:44] Yeah I mean I think there's a couple of ways to look at this somewhat cynical so.
Light at the moment most brands would say there's not enough tools to protect the brand on the site right and so there's a.

[10:58] A complaint process but it feels very slow and,
sort of automated and things take a long time to percolate and you don't necessarily ever see any action in a bit and an even to event Avail yourself of those limited tools you had to have a formal relationship with Amazon which in most cases meant you had to be selling products.

[11:16] Through Amazon and so you know some of the brands that most don't like the counterfeit stuff on Amazon have also made the decision not to sell on Amazon themselves and since they have no relationship with Amazon
Amazon doesn't make those tools available to them so some some people would say that some of these brand protection tools one of their their secondary purposes is to entice Brands to,
to participate on the platform and so I've heard a lot of people speculate that that's one of.
The main reasons that Nike for example participates on Amazon is to Avail themselves of the Amazon brand registry so this is more powerful tool presumably as far as we know you have to be in Amazon,
brands are selling on Amazon platform to use it so that's another enticement to some of those those holdouts and you know per your point,
brands are almost certainly going to over-reach lots of Brands don't like gray Market product even though that's perfectly legal to sell on the,
on the side or they don't like product that doesn't comply with Matt,
pause price policy even though they don't really have the right to take that down so pretty likely as they invite more people in the program people were over reach you and I were speculating a little bit.
Maybe Amazon even already knows that and doesn't care like there's a.

[12:34] A hypothesis would be then Amazon wants to improve some machine learning to improve the automated detection of these counterfeit things and said the first thing you need is a big data set,
listings that have been identified as counterfeit and so one would thing you do if your Amazon you hire a bunch of people.
Look at the listings do the research figure out which were fake and which ones weren't flag all the ones that are fake and then you eat all that data to a machine learning algorithm and eventually you have a really smart system to identify counterfeit and if you were Amazon and didn't want to pay all those,
to do that work you could sort of outsourced to the brain by temporarily giving them the tools to Flagstaff themselves,
knowing that they would eventually Miss use the tools and you have a great excuse to take the tools away from them but in the interim you have built a good dataset you could use to train a machine Learning System.

Scot:
[13:24] Another another signal is the product reviews so I've seen many product reviews especially in the health and beauty category it seems to be where I I see it most we're pretty significant number of reviews will say this is not really from,
Brand X it's is fake and then so you know that's another interesting signal so maybe if a brand comes in and then does Mark that and they'll get,
yep the machine learning could get smarter and no okay up books like these reviewers are right that this is a counterfeit or or if it's not taken down though they'll learn the opposite.

Jason:
[13:54] Yeah and if you're not a regular selling Amazon like you you'd be shocked how deep are this goes like the the fraudsters are super sophisticated now in the black hat tactics are really evil so for example,
they're not likely to write a bunch of negative reviews about your their competitive product they're actually more likely to write.
Positive reviews that they know Amazon will flag is fraudulent about their competitors products.
And figure takedowns and things that way knowing that Amazon's is very slow and not very good at responding to those complaints about accidental.

Scot:
[14:29] Cool so also in the news Walmart had some earnings so walk us through the highlights there.

Jason:
[14:35] Yet so I think it was overall a good quarter for Amazon their same-store sales for Walmart their same-store sales were up 4.2%.
Oh that's that's not a huge number but by retail standard that's a very good number again you know there's a lot of retailers the same start negative same-store sales,
so 4.2 is reasonably healthy across such a big number that they have and I'm more relevant to our listeners there econ was up 43% for the quarter.

[15:06] Cousin hit their 40%.
Increase for the year which was their guidance last year so they basically hit it exactly now that issued new guidance for next year and they're,
predicting 35% eCommerce growth so still a big number still bigger than Amazon certainly bigger than than that industry overall,
but but like many e-commerce sites their rate of growth is is probably decelerating and as we've talked about on the show,
a lot of Walmart's e-commerce growth is really tied to this grocery program they have right and so you know unlike traditional general merchandise e-commerce where you know you you put the listing up once available to everyone at Shops at walmart.com,
when you put eggs up for sale in a particular store,
does eggs are only available to Consumers that our shopping within a close Geographic proximity of that one store then so it's e-commerce sales it's it's it's listed as e-commerce but you almost have to think of it as same-store sales.

[16:09] You know that when they they add more stores there their growth seems really high but the reality is is because they went from a store that wasn't selling groceries online to a store that now is and so if you look at it through that lens,
Walmart is a little more than halfway through making grocery even available on all their store so they announced that they're at 2,100 stores have online grocery pickup right now,
they have 4,000 stores they said by next year.

[16:37] 3100 store so that's about the same amount of growth next year they had this year so if you were a investor or Speculator its it seems pretty safe.
They added a thousand swords of grocery this year and that drove this is big 40% growth number,
they're planning on adding another thousand stores next year that if they hit that stores.
Probably going to you know not be that impressive did they cheat 35% growth and they have one more year and them but what you be really worried about is how they calm.
Ecommerce sales after that final year when they don't have more more stores to open,
and then the other thing is interesting to me is they also announced that only 800 of the stores do they have home delivery and you guys are all heard me talk about I think curbside pickup a bigger deal than home obviously a lot of people do want home,
so the only 800 of the 4,000 stores do home and Walmart has used a variety of.
Internal and external vendors to do home delivery so they have this thing called spark delivery which is kind of using their own employees to deliver,
and they've done some mixed press on that it doesn't seem like it's a huge piece of their delivery Network they partnered with a lot of the third-party delivery firms.

[17:51] To do that delivery and that they're only at 800 stores they said they want to double that next year given that they're leveraging Partners you expect that means they're going to lean into their Partners even more.
About a week before their earnings deliv announced that they were actually stopping their Walmart partnership.
And it first you would assume oh my gosh Walmart my stove fire them for some reason but the the word on the street is that deliver actually turn to Walmart off,
because the.
Delivers using a gig workers and the workers were so dissatisfied with the deliveries they were getting from Walmart that they started refusing.
To get them and that the fundamental complaint is.
Hey you're doing worker you take in order to deliver groceries you go to the store the order is not ready you have to wait a long time you have a bunch of downtime.
As the deliv driver talk about it.
It's a bad experience for the delivery drivers and a lot of inefficiencies on Walmart's part and then on average the customers that are most ordering home delivery are the ones that are farthest away from the Walmart stores which are.

[19:01] If you're very far from Walmart store your super roll and it said expensive long delivery thing so it sounds like.
There's still some some optimization than improvements.
To get home delivery nails at Walmart but it seems like the curbside pickup is going quite smooth and then I guess the last big talking point is,
despite the fact that he Converses growing huge it's a significant contributor to that top-line growth it's not a contributor to profitability and in fact Walmart talks about having a loss on their entire e-commerce business and given that there,
Thomas make 10 billion dollars in an incremental capex expenditures between now and 2020 they've actually said you can expect.
Those losses to increase in potential accelerate in so.
They're talk about like a strategically one of the few things Walmart needs to make progress on that they haven't is.
Getting profitability on that e-commerce sales.

Scot:
[19:58] Girl has any Wall Street analyst, picked apart the the growth to see how much is incremental and how much just kind of moving from the offline to the online, part of The Ledger.

Jason:
[20:09] Not that I have seen and I like to be honest I haven't even seen that you would think at the very least people would start a back into a same-store sales,
number and I haven't seen that yet now you you get a lot more of the investor Communications than I do for some reason there's some.
People perceive that you're like smarter and more economically successful.

Scot:
[20:30] We'll get we'll get some of our interns on this for maybe a few drops of
also this morning JCPenney announce there are things I thought there's a couple interesting things there that the stock surged and I was like oh they must be out of trouble but really it turns out to be one of these less worse than books. So Revenue was only down 8.4% year-over-year I think there was concern out there
as we heard this kind of continuing drumbeat of the back end of Q4 was slow
we've had more bankruptcies we got Payless Shoes is kind of have they filed or their tottering on the brink of filing so a lot of people are really concerned about JCPenney so this ended up being kind of a new idea positive in that it wasn't as bad as people that kind of imagined,
same-store sales in 219 were only down 4% versus,
proceed 4.3 that's like at a point swing compared to Walmart which is pretty interesting Avenue CEO I won't even try to say her last name do you know how to say it Joel Soul Tallahassee while I will try Soul Town
and so she made two announcements that were interesting and there's there's this other weird thing that happens in retail now when you announced store closures or stock pops because there was like Yay work closing stores,
obviously you can't like enough the endgame there as is.

Jason:
[21:48] Add trendline doesn't doesn't go forever.

Scot:
[21:49] Yeah so she knows they're going to close 18 of the main stores and nine of their home and Furniture footprint
I and then she declined to give 2019 guidance and then said no pretty much telegraphed expect a lot more store closures so
you kind of said something to the effect of we're evaluating all the stores there's no sacred cows all that kind of new CEO stuff,
kind of an interesting whipsaw there is so so I see we had Ron Johnson and he left at 13th and there was a guy to co since then so she's like the third since Ron Johnson.

Jason:
[22:22] Yeah they had the original CEO come back after Ron Johnson and then they had and I'm I'm going to say the name wrong Marvin.

Scot:
[22:31] Marvin and I he was big on appliances were one of the first things that you'll did was yank all the appliance stuff out so you know it's interesting to watch these gyrations as he's trying to figure out what what they want to be when they grow up.

Jason:
[22:46] I didn't even know you were allowed to just take a pass on offering a guidance.

Scot:
[22:51] You can't have soy Amazon only gives 1/4 of guidance they don't give annual guidance and it's more of the trend these days not to offer.

Jason:
[23:00] Incident in rounding out this foreclosure news L Brands which is the parent company of Victoria's Secret and.
A bath one by.
Thank you very much I was desperate to say their competitors name.

Scot:
[23:20] You're the marketplace guy and now I'm the retail.

Jason:
[23:22] Exactly I love,
so they also had a tough quarter or same-store sales in Victoria Secret was down 7% then after closing 53 stores and of course they've been in the news lately for,
seemingly not being in touch with the their customers in the marketplace always being accused of that so obviously,
they they have a particular image that they try to sell their customers they don't necessarily have super inclusive sizing the a
like absolutely do not have super inclusive sizing of models selling their stuff,
and as there's been more backlash to that the the management team's response has been pretty like from my perspective.
They have a legitimate point for their brand they need to find a much more elegant way to measure message.

Scot:
[24:16] Yeah at some point you face an existential crisis in you change your mind on those things will be interesting to see if feel feels like they're up against that with 53.

Jason:
[24:23] Or your successors change change.

Scot:
[24:27] Absolutely.
Some interesting news in the Des kind of delivery category So Yesterday FedEx released a new robot delivery system this one is pretty cool,
a little background so Amazon. I think it was three weeks ago they announced that they're also testing a little robot delivery there's looks like a little Moon kind of a Rover because it's got six wheels I don't think that there
they can like scissor up or anything like that it just think it is a really good traction on a flat surface.

Jason:
[24:59] Pick one perfect neighborhood in in like a Seattle suburb that has a perfectly smooth sidewalks that I can go on.

Scot:
[25:04] Or on Mars so is there does your two options so craters and and a sidewalk in Seattle so out of Memphis FedEx is announced a new robot and its really cool it's called the same day and they partnered with the Segway folks to there's a
kind of famous scientist in Cayman and most people know him for Segway but he also before Segway
he took the same technology that is in Segway that allows you to use as gyroscopes things to create a balancing system
create a wheelchair this is been really huge for four people are disabled this wheelchair can go upstairs so you using the same technology for this robot and in the video you know they show it kind of numb going through some pretty
rough terrain and then it can kind of effectively climb up stairs so really cool video there a lot of press for them rarely do you have,
delivery on on things like the night shows but one of the one of the Jimmy is the Kimmel or one of the other guys they said they had it on there I'm so
really good PR for FedEx they're going to roll it out in Memphis and then quote-unquote other cities so they haven't announced those yet
did you have a pretty nice list of brands that are launching it with so Pizza Hut Target Lowe's and AutoZone and if so this is kind of this interesting the last mile delivery problem
using robots to do that other interesting thing about the robots that I saw was there using a lot of autonomous vehicle technology so these things are connected they have a little bit of a lidar camera kind of thing on it.

[26:31] I'm there. I dug into this pretty good and I couldn't get a lot of details on that so I can be interesting this to learn more about
what that looks like cuz I think there's some pretty meeting problems for these things you is there a human just driving this remote from a central location or is it actually autonomous there hasn't been that I saw a lot of detail on that aspect of it.

Jason:
[26:52] Yeah that'll be interesting when I know we had a lot of attitude yes this year's just even a side effect of a lot of these lidars is they,
they're really bad for camera so you can imagine ironically the the FedEx robot taking out all the the ring doorbell.

Scot:
[27:13] Yeah and another something about lidar as you can shine laser pointers I didn't confuse it.
I'm taking meds and someone trying to steal a package by confusing the FedEx robot with a light iron so interesting to see what what happens from these things
I bet you know seems infinitely safer than drones in the lot easier to test these out then you haven't had that pee involved in Lacosta,
also in Shipping News a couple of quick ones
stamps.com is interesting so everyone knows kind of the front end stamps.com but the biggest chunk of stamps.com is they went acquired all the shipping companies that are out there shipstation ship works.

Jason:
[27:52] And by shipping companies you mean software vendors that help people ship stuff.

Scot:
[27:56] Yeah for colic smbs and like eBay sellers in Amazon sellers stamps went on this kind of acquisition spree in is accumulated a lot of the large package shippers using the stamps.com software
then they have this connection into the USPS just called in Deca they had an exclusive relationship the USPS and they would effectively get
sales commissions or I don't know the right terminology there
did eventually get a revenue Sheriff's whenever you would buy you $3 for an overnight kind of a delivery from from the USPS if you miss one of the many stamps platforms they would make like a nickel or something like that
the shipping so many products that ended up being a really big.

[28:39] Part of the revenue will they announce the week ago they were ending this exclusivity Arrangement will USPS and you know the market freaked out but was really interesting is reading the tea leaves on that the CEO of essentially sad you know there's.

[28:54] So much going on Amazon and set the bar at 11 so we need to have much higher service levels that we offer and then there's a fair amount of speculation that
this is an interesting if you were going to go do a deal with so so a couple of things you have together if Amazon we're going to
you know open up their shipping Network for anyone to use it like a FedEx UPS,
that's one if in the second half if you wanted to do a deal with them
then this is the first step of what you would do if there's a lot of speculation that stamps.com is going to be a front-end into more of a Amazon Logistics kind of solution
and you know that that's going to be pretty fascinating.

[29:39] Sidebar I've been I'm going to road trip so I don't usually do a lot of road driving I file a lot like you do
and I have been blown away by the number of Amazon Prime trucks so I went on a three-hour drive from Raleigh to Washington DC and I literally saw 20 Amazon
trucks Emmys on the road it's just like startling how much Amazon Logistics is going on out there then in our area I'm sure in Chicago we see the prime trucks I don't get anything from FedEx or UPS to my house anymore from Amazon that's all direct Amazon so they've definitely kind of started trimming out certain zip codes that must have high Prime density
and are doing deliveries through
that that smile van program where they have this 1099 networks they built up so big moves happening under the under the surface in the world of of delivery.

Jason:
[30:25] Yeah I believe so you won't see the bands as much in Chicago because Chicago was an early Market where they build out a.
A network of actual Amazon W2 delivery people and so they're there full-time Amazon employees but they don't use the mark Vance so the majority of my packages get delivered by an Amazon employee,
one of the easy ways to tell by the way is if you go in till like the mobile app and you look at your orders when Amazon delivers a package they take a photo.
That UPS or FedEx won't you if you have a photo as proof of delivery than you know it Amazon for some pride delivered it.
The Vans are mostly reserved for those there's third-party companies.
That that are franchisees of Amazon Fulfillment of you will end in Chicago we have a blend of flex drivers and.
Amazon W-2 employee so we don't have as many of the franchisee.

Scot:
[31:24] And then the last hit bit and this is back into the world of marketplaces there's a company out of France called Miracle m i r a k l and just want to send them a shout out they just announced 70 million dollar round and what they do is they go primarily to retailers but they also work with some malls in a lot of other
other places where you can have a Marketplace so think of it as kind of a Marketplace in a box of so you can kind of say hey
let's say I don't know hey JC Penney you want to add a Marketplace here's the software and all the components you need to integrate that in with your existing shopping cart functionality
full disclosure their partner of Channel visor so we're already pre-integrated with him so we can go to bring a bunch of celery along with the software
and then the last thing I actually forgot to put in the show notes is,
Target at least that they have a Marketplace so I saw a thing on cnbc's it looks like targets doing some Marketplace stuff which is interesting so these marketplaces are a kind of
I feel gratified talked about him for a very long time and we could only talk about even Amazon but now we have.
Copious marketplaces and talk about with obviously Walmart it's a big part of what they're doing and it's interesting to see not only Miracle raise a pretty substantial round of funding to keep spreading the marketplace fire and now we have.

Jason:
[32:46] So it is interesting to me and almost feels like a a new wave of marketplaces so you obviously you have the businesses that are fundamentally marketplaces I gave an Amazon there their they're.
In the past have been some retailers that leaned in the marketplaces so you know Staples talked a lot about it and I still think run one although you don't hear them talk about as much.

Scot:
[33:09] Actually close to them.

Jason:
[33:11] And of course the best by briefly ran one and closed it down and so for a while there was a whole Market places are great but not.
Every retailer can earn the traffic to make the marketplace work.
Now for your point we're seeing I mean Walmart's is leaning heavily in the marketplace is this new Target initiative Albertsons is an interesting,
tackling marketplaces from a fresh and frozen perspective which will be unique.

Scot:
[33:40] Yeah Urban Outfitter has one.

Jason:
[33:42] And then for your point like Miracle being able to raise money means that there's investors that that think that that's a,
a trend that we're going to continue to see as well so it'll be interesting to see how it plays out I almost wish I had founded some company that made money helping people sell on Marketplace.

Scot:
[34:00] You're a chief strategy retail Commerce digital officer you don't have to worry about mundane things like.

Jason:
[34:07] No no no but keep doing a good job you may eventually earn another initial in your title of your.

Scot:
[34:11] I keep working on it sorry.

Jason:
[34:12] It's important to have goals and that we are going to have to leave it there because,
it has happened again we've used up all the allotted time for this
a special Scott has to get to the airport short edition of the Jason and Scott show so if you have any questions or comments about the show jump on Facebook and leave them there let us know how much you prefer this much shorter version of the guests,
and as always if you enjoyed it would love to get that five star review on iTunes.

Scot:
[34:43] Thanks for joining us everyone and remember...

Jason:
[34:46] Until next time happy commercing.

Feb 12, 2019

Digital Alcohol with Diageo and Drizly 

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

This episode is a deep dive into the digital alcohol market with Diageo and Drizly.

Taylor Burton (@TBurton86) is the VP of Strategic Partnerships at Drizly, the world's largest alcohol marketplace to shop beer, wine and spirits, currently available in 95 cities.

Wayne Blum (@waynegblum) is is the Director, U.S eCommerce strategy and partnerships at Diageo,  A global leader in beverage alcohol, with over 200+ brands.

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

Episode 163 of the Jason & Scot show was recorded on Monday, February 11th, 2019.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer and Scot Wingo, CEO of GetSpiffy 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:
[0:24] Welcome to the Jason and Scott show this is episode 163 being recorded on Monday, February 11th
2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners as a reminder we are going to be at etail West and as a special gift to listeners you can use the code Jason Scott that's Jason Scott on Scott for 20% off
but that's next week and let's talk about today long time listener to the show will know that we have been talking about Brands going direct or direct consumer as a strategy for a very long time since I think 2016 started.
And you also know we are huge fans of the digital native vertical brand Trend as well,
so today on the show we are going to take a deep dive into a huge segment of the beverage industry the spirits your space one of Jason's favorite second only maybe the coffee will find out that will be a question.

Jason:
[1:27] Yep that you don't have to keep those two separate.

Scot:
[1:29] I'll turn it up down up down
understand the space and what's going on we are excited to have the rare to guest on the show
so Crown Royal Johnnie Walker Smirnoff
my personal favorites Guinness for strength what do all these brands have in common that have a single parent company
they're one of the largest global spear companies and that's just some of the highlights that I picked out there Brands there were so many that the show would have gone long if we covered all the brands we're excited to have on the show
Wayne Blum who is the director of e-commerce strategy and Partnerships with Diageo.

Wayne:
[2:13] Thank you guys I appreciate it and I am excited to be here because the e-commerce space is one in which I'm super passionate about and figuring it out for.
Beverage alcohol is is an incredible opportunity for Diageo so excited to be here thank you.

Scot:
[2:31] Great happy and as listeners also know I am a big believer in the on-demand economy and one of the top companies in that space that intersects with the alcohol Spirits world is drizly.
And they provide on-demand Spirits so join us some drizly we have Taylor Burton and he is the VP of strategic Partnerships welcome to the show Taylor.

Taylor:
[2:51] Hey guys long time listener first-time got Russia have me on today.

Jason:
[2:55] The awesome to have you here Taylor
appreciate you both taking time out to educate our listeners about this exciting and I would say somewhat emerging space
for those of you that haven't listened to the show before we always like to get things started with a brief background about how you
came to the space so maybe Wayne you want to give us your sort of a path to Diageo.

Wayne:
[3:19] So I just ruined the audio 2017 to.
Take on this econ strategy Partnerships real but prior to Diageo I had worked for Nestle focused on.
Direct-to-consumer and was running e-commerce digital operations and and platform.
Abilities for either largest GDP in the beverage segments and you know I really kind of chart to figure out.
You know what is the future of consumer goods through econ and particularly how the last mile,
play and so that's kind of been formed by thinking is I started to focus out that out,
and then before Nestle I was with American Express for quite some time and that was either really where I learned a lot about,
digital working with consumer data for Target in optimization loyalty like I value CRM,
what is a fundamental tools of understanding e-commerce promotional Marketing in the digit in the landscape today.

Scot:
[4:27] Brickell so when I went from chocolate to Spirits Taylor did you have an interesting of a background as as winded.

Taylor:
[4:35] Did not come from chocolate and spirits
company timer spaceship part of my last three years leading the charge in the partnership. Drizly on eBay,
I'm working on the gator products specifically helping Merchants great offers within the platform to Target see how users based off their purchase history
the great opportunity for me to come over I'm a check to apply that to what is the relatively new space.

Scot:
[5:09] Causes of vintage Meg Whitman Dara eBay PayPal.

Taylor:
[5:13] A little bit after her I started there about six and a half years ago about 3 and then jump.

Scot:
[5:23] What's at the Bay Area kind of side of things or did you get it from.

Taylor:
[5:26] I work out of New York.
A lot of them and partner drive if they stopped here on the east coast and actually started off
I do. She purchased by PayPal surround advertising.

Jason:
[5:45] That's cool so and I don't want to say anything about it it feels like you are falling all of the traditional vices so I have some theories about what what your next step in your career going to be.

Wayne:
[5:54] I'll be interested to hear that but maybe that's one for after the podcast.

Jason:
[5:59] Exactly maybe we'll do that offline.

Scot:
[6:02] Vaping vaping and cannabis are hot.

Jason:
[6:06] Yeah yes we careful in this category bringing up the whole cannabis things to work we're not going to go there
but when I do feel like regular e-commerce is maybe a little bit too easy and so I I suspect there are some unique challenges around regulation in the distribution model in the alcohol and Spirits category am I right and can you tell us a little bit about,
about that how that changes the business.

Wayne:
[6:31] Yeah so just lay the regulatory environment means that we have to think about things differently right so the US has this three-tiered system that,
essentially says Diageo is going to fill Brands and create these these great products and then,
working at we're going to sell those products through to a distributor who then sells them through to retailers and so across the street to your system we essentially by law go the traditional router.
Selling a product directly to a retailer putting it into their warehouse and then having him the fill out for retail distribution or.
Corporate direct Chef when were looking at beverage alcohol 3 Commerce in the regulatory environment do we play with it at most effectively.
And if you like it what's happening with last-mile this is this is essentially our opportunity particularly for beer and spirits and in my opinion so.
The products being close to Consumers and then the Retailer's learning how to fill them compliantly as you need to do for beverage alcohol she doesn't understand,
that presents the opportunity for for this type of Orissa expanded econ shop.

Jason:
[7:48] Fair enough so in like a general merchandise you used to have two prevalent models you have you know,
a direct-to-consumer model where you know you have tons of Brands launching their own website selling their own Goods direct to the consumer so that's.
Caspar Warby Parker bonobos never give retailers that own the goods and sell those goods direct to the consumer like at Target and then of course she have these really prevalent Marketplace models like Amazon and Alibaba,
where where did you lie you're just kind of introducing the buyer to the seller and that the.
The seller actually you know who owns the transaction because of that that regulation and.
Turn of the locality and fragment of nature that relationship it seems.
Way more likely that we won't or or won't see as quickly any of those sort of direct-to-consumer models.
In in alcohol and that that you know maybe more of the momentum is on the marketplace I am I reading that right or is that an oversimplification.

Wayne:
[8:54] No that's that's exactly that's so the momentum is going to come from the likes of a walmart.com who scales are grocery business,
and has the beverage alcohol category available to add to the basket or it's going to come from.
Some played some small instances like wine who asked of a trustee Wisin who does ability to go direct to Consumer and Wineries and stand up their own web site in and build a brand that goes to.
When were thinking beer and Spirits were really thinking about the last mile either through direct retailer or the Emmys.
That operate like a three-piece up like a dress.

Jason:
[9:41] Yep like the two of the things that they feel like they are super important in this faced so if you're an alcoholic if you're a licensed seller of alcohol you take on a bunch of obligations when you sell that alcohol to a consumer or Aids verification,
you know potentially some liability around over-serving and some of these things and so have you if you have a liquor license and you sell online,
you still have those same obligations and so it it maybe makes things.
More risky or more messy to Outsource some of that last mile to a third party because you still have those,
does liabilities attached in you could potentially you know be at risk for significant regulatory fines or even the loss of your liquor license.

Wayne:
[10:22] You guys are assholes they correct their neither is there is definitely a there's definitely additional levels of compliance and complexity that retailers,
do I dress when they are essentially sending this product off to the consumer enough you know that's what I.
The challenge to the product teams to solve that the challenge for their compliance group to figure out how they navigate the right way of implementing checks and balances but
we've actually seen some some really great innovation in this space you know
think I think of companies like an instacart who do hand off the product and they do have the ability to AJ
at the front end so they present the terms and conditions and ask the conservative,
that they hate that they're within the compliant age to purchase but then they also can scan you know a handoff to the consumer on something like a phone invalidate.
This is their driver's license to actually seem really good progress in the DH dating in the the product management,
side of this business so retailers can start testing and expand into this category.

Jason:
[11:32] Awesome I'm excited you're more about that and then one other follow-up it also seems to me like,
as with any new product category like consumer demand and in sort of the you know smart marketers are maybe ahead of the the regulatory bodies a little bit and so it's
it's not always 100% black and white what is or isn't permissible in any locality and so it's it's it's not even as simple as,
here's the rules that you have to follow up on when you'll be fine
every provider has to sort of make their own determination as to their level of risk in whether they're being completely compliance or not right and so you can imagine,
big companies are at more to lose and therefore are more risk-averse than maybe some you know super small startups that aren't well-funded or those. Is that is that also true or my imagining that.

Wayne:
[12:25] No I think it I think solutely correct.
I seen a lot of of what I would stay out of ambiguity and some of the language around what what are and aren't the rules.

[12:38] Looking in this business everything is kind of driven down to the local the state level or even in some cases the local level you have.
Tri Counties for example that you know someone like a shipt or instacart may need to solve a 4 in terms of family make this product available in this ZIP code.
And if someone order bring it outside the zip code you know what are the rules of,
using various types of digital media that were never thought about when you know these laws and regulations put into place many years ago so.
We're definitely in a bit of Uncharted water orgone sort of unmapped territory to some extent but.
At the same time I think consumers are are voting with their wallets shoveling that.
Baby love the aspect of convenience.
And they want to be able to take what they traditionally purchased an r and an in-store traditional retail environment and replicate that for.

[13:44] Full basket delivery and so we think that if you follow the rules if you understand the local laws and then you get creative around how you,
you find new ways to serve the consumer that you know some of the stuff will become more clear and and you know what the category will find its way there,
just like every other complicated category has found its way to to the digital or eCommerce Channel over time.

Scot:
[14:13] Taylor now that Wayne's given us this good overview of of kind of the three-tier system.
Tell us news how does drizly inject into their so it got the bread man's distributors in retail where do you guys fit in I saw the site you're in 101 cities so I'd love to know more about how you skill so quickly all those kinds of questions I look.

Taylor:
[14:33] Yeah well you first start off by saying it and it wasn't as quick as we would have liked to be there we've been at this for over 6 years at this point and I think cautious.
I'm in control broke is really what you see not to buy,
I think it's important that you know players in our position specifically a category leader in the early early to the space,
are really asking for permission before going to head and diving in and doing things that might be in a regulatory gray area large parts.
Drizly business days but also the Retail Partners on our platform as well as the state and local level of been taking phone orders need an online orders for a long time,
you're making and executing and purchase an app like drizly,
it's really no different from a compliance perspective then it is a you know a person walk into a store and showing an ID so all of this being rules will still apply you're looking at a market that software lawyer,
did it simply allowing a customer to shop for that commodity good in this case alcohol level.

[15:41] And what we basically do with integrate with the Retailer's TLX you leverage Braintree at the back end to take the credit card payment from archers Lee consumer
actual retard South and then the retailer is actually the one making the Fulfillment though,
it appeared at the W-2 employee of a retailer in some states worth compliant we have third-party integration set up at the retailer Postmates or doordash or whoever might be,
I'm in the future and eventually their consumer is owned by drizly and then the actual ending of the alcohol and in-store housing and ultimately shipping of y'all called.
That answer your question.

Scot:
[16:24] It does so imagine you've got in a great to the point of sale system is that is that so you can pull inventory and then.
Is this point of sale systems as instacart is kind of painfully found out grocery stores they are pretty archaic and they don't even have like graphics and army images.
Consumer-friendly descriptions how heavy of a lift is it for a seller to implement drizly.

Taylor:
[16:48] It's not happy with that used to be for the actual Stellar I'm wearing a gray didn't know what you wanted different POS system anything from an analog all the way up to your yard when its tail system,
I'm to the roadmap there and we can onboard a new retail partner and that's 24 hours a day system,
you should be a big challenge but yeah we done the groundwork again over the last six years to make that process as painless as possible for our partners,
but the reason why we do not really require that integration is because when a customer shopping in the product and cart that product and then go to the.
Not a great weekend breaks chains to get to the end of the journey and say hey you know what bye sorry there's no Captain Morgan available for you because your story doesn't currently have,
I'm having that really clean crisp integration on the POS side absolutely Akita.

Scot:
[17:42] Cool and then so give us some characteristics of these sellers are they restaurants their convenience stores there
here in North Carolina become ABC Stores so there's like this legal I have retail for certain Spirits what's the profile of the stores on the.

Taylor:
[18:00] I'm putting a lot of local retailers great so that the poster typically competing with with the larger chain with that said we do have quite a few men size regionals on the platform,
I'm in a strictly scaled over the last two years especially we start to see larger partners jump on the platform,
I'm primarily because of the amount of volume that you're through the platform is driven and really that we kind of angered ourselves as if we go to Spotify and Shop alcohol online.
Can we start the profile to ship a little bit as we continue to grow and scale,
and that's really what keeps our Marketplace model moving right the more,
the more selection we can offer our consumers the wife's grave price and ultimately delivery method is going to make that shopping experience just that much better for an end consumer.
And at the end of the day that the best shopping experience typically will win and that's what I think would be great if you're at replay.

Scot:
[19:03] What are the things that I'm a big instacart user one of things they've kind of had a nursing challenge with his price shopping so let's say I'm looking for the cheapest Coke Zero and I
make it very hard kind of like switch between stores to do that because they don't.
I'll have you know if you have any stores with the same SKU how do you handle that that experience.

Taylor:
[19:27] We're going to show them all right you want to leave that choice ultimately Yang consumer but it's not just price that we found our consumers or shopping they stop.
What type of rating does the retail store that's providing that price provide.
They have a higher score a lower score I'm in that also other factors like store hours Etc are going to fix a plan for that ultimate collection.
And we've also found a lot of our you know local consumers will you know how to store that they like to shop to maybe they go there in person,
they want to continue doing business with that's or whether that's in person or online the number of factors
you're the point that you're heading on the difference between the way instacart running their modeling and what we are doing dinner at Wrigley is really offering a wide array of choices selection and I'm really not trying to funnel use.

Scot:
[20:19] One thing I've noticed on the platform is most of sellers advertise 1 hour delivery which is which is pretty impressive is that is that the market at work or set a guideline you guys to give them that kind of the standard in infant.

Taylor:
[20:31] I think it's a great question you said really shy away from saying when I was delivering we didn't want to be bumped into this just yearly on demand.
It's something that you come in Table Steaks right product is for media consumption and we understood that that we actually took,
yeah I really data analytics approach to understanding what's causing our consumers to hit check out,
I'm a huge factor in that was the immediacy write the how fast can I get that when you look in the market like New York know what would you guys guess the average delivery time here is.
Stop the top of your head.

Scot:
[21:06] York this fast so I'm going to go 30 minutes.

Taylor:
[21:10] Yes it's 30 minutes or less right you know I don't know what the exact exact but it's probably closer to 20 minutes.
But it it's super fast almost right,
but that posted something with the New York Market is very used to write deliveries always been a thing here put laundry or Chinese food on that consumer expects that quick and then meet you
if you're in New York is your delivery fees don't lie there just like Amazon's going to great job of training computer the new Prime delivery should be free,
I knew your contemporary it seems it's free delivery to me actually don't even talk on a delivery fee here in New York like we wouldn't them other states so you'll have to understand what is that local market condition and how can you make sure you're checking all the boxes in decision tree,
a person might think through as their healing check out.

Jason:
[21:58] Interesting a lot of my agency colleagues are based in New York and I can't speak for everyone in New York but for them I can say not only the delivery fast but the consumption is probably really fast.

Taylor:
[22:08] Absolutely let me know when you're looking at,
you know you're really seeing people put time and effort and energy into sending just the folks I think that's something you know that we really brings to the table is Bilal
I'm trying to offer unique experiences not some of the stuff that we don't know,
you know companies like Diageo on the building how to get the experience in trying to offer something special.

Jason:
[22:38] Awesome and that that's a great point.
Can a throwback to Wayne Wayne mother thinks it's interesting to me is again going back to kind of General e-commerce you have this tension between like traditional cpgs that you know where houses are brands
and these new did we need a vertical brands
that sort of reinvented the product and the customer experience for this newer digital enabled consumer and is week we talked about in the top of the show it seems because of the regulatory climate is probably unlikely Diageo is going to launch a bunch of new,
direct-to-consumer spirits but I am curious if
these digital enable consumers in the fact that people are you no more likely to place an order from drizly than they they were six years ago and that is changing how you think about.
Product Innovation and building Brands like you know are there brands that are more digitally friendly in the Diageo portfolio than others or could we expect to see,
more in the future like had you guys think about that.

Wayne:
[23:41] No yes I mean you are 100% correct about that so so it's true we will never have what sort of digitally native heritage.
Foreign brands that have a direct-to-consumer proposition but we absolutely do have is a category that I like to say consumerist.
Find Conquest,
it's not it's not like we're going to create a breast and that I'll put in the warehouse and ship it out and say this is a direct consumer brand but we arguing,
is understanding like what is most culturally culturally relevant and then using front of the reaching power digital to to get that message out for consumers,
and I won't be seeing in on the back of that if people trying to Conquest the stuff online to find it so,
what are the best examples I could come up with was Diageo released a limited edition,
Game of Thrones 8 houses to align 3 8 houses in the show set of single-malt scotches so you got you know it Oban Night's Watch it.
What we realized by looking at things like Google search.
It was that this is this is where people go first and foremost to find something that they want to understand where it's at and how much it's going to cost when you don't have you know what station.

[25:01] Commerce Ave Warehouse stop in the mix right now that can say OK Google you don't want to buy Google Search terms.
Guys that have the product understand out of Market at online in essentially starts a go to match up with those consumers.
To essentially find what they're looking for a joke telling that brand story digitally the comes the opportunity and then.

[25:30] Retailers partnering with companies like.
Drizly to help bring that stuff to life on life online and it's actually close the loop on placing that final order.
Becomes what I would say the closest thing we have to digitally native Brad and.
Because because the category is just so engaging for consumers and somebody where is it so much for thought-out purchase,
they want to understand how to use it where they want understand the story behind the brand,
I definitely think building brands in digital is is a great strategy to think about or this guy too gory and then starting to get creative and how we essentially
close the loop on the purchase side becomes the next step in that cuss words.

Taylor:
[26:17] One of the things that I think that's a good point there when you get in the Game of Thrones example that was a new product release.
When that product is released it's important that you know when they're on the Fireside they're launching these products are making sure that drizly in the other.
Have the correct.
Collateral right do we have the right product images do we have the right bottle facts you all these things in an e-commerce consumer expects to see before or right at watch let's that's another thing to think about as you're going down that brand building.

Jason:
[26:52] Yeah I know that makes total sense when I would imagine a new skills for a company with this been around as long as Diageo I have to have,
read digital merchandising the support drizzly & Company but I'm even assuming your traditional wholesale Partners you know there's a there's a lot more buy online pickup in-store than they used to be so I think,
the Total Wines in bed most of the world are probably doing more of that and then you have all this grocery pickup in Walmart and Kroger like you know I'll bet you.
Digital marketing and digital Shopper marketing shops are becoming a much higher priority across the board at the auto show.

Wayne:
[27:29] Yeah and I think that's that's part of the Mandate of our team so when we where we are.
I'm just over a year ago a lot of it was just going after some of the low-hanging fruit stuff so.
Do we have an internal audit the images we have if we don't have 400 and some odd you know brand of Fruit Products job descriptions ready to go,
do we use an in-house supplier or do we Outsource the production work to get that stuff set up,
you know who is R&R syndicating partner can we try and build something internally you two weeks ago.

[28:02] The likes of us ossify which ultimately we end up doing to distribute the content.
We were elastic just showing up in the most fundamental ways was incredibly important for us in the in the sort of phase 1 of this journey.
Once we got that in place then you're absolutely right and starts to become the,
more ideated space of how do we think about marketing on the back of this content now that we know we can trust,
not the content is of a certain caliber and quality to Syndicate to the retailer.
You know it's not an easy conversation to have with with any national retailer any Regional guy if you will if if they come back into you and say something like we don't even have product images and descriptions for your brand so I don't really,
really know what we can start to do for e-commerce year and,
you know that that's been the journey for rusted Dave and that's you know and I think that's a similar journey to most of what she could she'd companies in Centreville.

[29:06] You want it you want to do something aspirational and you want to go big but there's just a ton of work to do when it comes to establishing the brand presents online
correctly effectively and then a scale so you know you look as good with the walmart.com or an Amazon as you do with you Noah Kroger a liar and Albertsons and anywhere else your products are available.
In some type of online chatting format.

Scot:
[29:33] Taylor on the drizly side I saw you guys recently raised around of 35 million that was good hopefully you got up your fair share of that and then that's according to crunchbase that that says you guys are up to 79 total,
clearly must be grown very quickly to to get that much venture capital and there's demand for your service we had to wait on the show several times talking about what they called the bifurcation wear,
u.s. split into Canada.
Surprised by some of the things we've seen there I'm sure it would have you guys seen you think about your I guess it's your sellers customer but I'm sure you guys see you.
Updated.

Taylor:
[30:20] Identity of the consumer is a drizly consumer to be clear the war doing all the work on addition excetera to drive the volumes for a local Retail Partners that value layers be provided outside of the software,
I think what we're seeing is a more receptive consumer to buying alcohol online if he did that was one of the big hurdle that we really overcome in the last year and a half or so is.
The majority of the folks that were shopping kind of more by accident but still felt like they were doing something that might be considered illegal or On The Fringe but we've done a really good job and making sure that are messaging we are in,
they were putting the retailer out front.
When you shop with the New Jersey experience you're seeing which local retailer you're actually shopping from and that's crystal clear to Consumer on our platform I think that's been a big piece of it.
Bill you lagging the general you don't match grocery e-commerce percentage still we're still looking at below 2%.
I told you nobody by building groups and Biagio like Wayne and his team is done
I think of that kind of shows the importance from a category perspective of where alcohol e-commerce is headed
that makes sense when I start to look across the ecosystem of know who's going to be a quarters the consumer consumer probably go shopping or do most of their shopping online,
that's really who's coming to the shop you're just like.

Scot:
[31:50] And then any resting time Trends is this kind of is there a peak time from liking it.

Taylor:
[31:59] Yeah and it's exactly what you think you're seeing a lot of stock application,
no happening later in the week you know Monday Tuesday Wednesday that's more for searching and sorting and complaining if you will
and then as you start to Rolling the Wednesday night Thursday night Friday night that's Morgan start the peak gallop and then obviously just Saturdays
Dagon in anytime if there's a holiday that has any celebratory finish to it you're going to see an uptick in orders,
we have to think New Year's Eve Super Bowl Saint Patrick's Day.

Scot:
[32:34] What was interesting and often struggled with this is a lot of the on-demand guys they go app only because it.
It's easy to measure the metrics but I know what you guys also have web you have a great out but you also have kind of a web transaction model.

Taylor:
[32:55] The majority of our orders do you happen within the app experience and then iOS specifically but with that said it's important to shop and then that experiences,
you know a good experience right we don't want to create an MVP if you will we want to create an MLP if we want to meet him all lovable product,
and I think that's something that we take him very seriously beginning. I personally shop on the website when I'm shopping around Ridley,
typically playing together a little bit larger basket sizes in order,
no. My favorites into the favorite thing,
you know across the app and she just looks like a full bottle of wine she's looking for for for bachelor night with with the girls and she's off on her way so I'm really trying to meet all of our consumers where they are.
I'll take about you that our corporate anybody got a couple.

Scot:
[34:00] Speaking of corporate consumers as cooking around your site and saw some pretty nursing seems like you guys have done some interesting things there are audience maybe how that came to be in some of the programs you have for corporate.

Taylor:
[34:12] Yeah yeah if we we've got a green head of corporate over at drizly
Amazon a phenomenal job of building that practice out for us it's an area that it actually took a little bit longer to really take a deep dive and we've always had corporate customers
yo
would show that we really cared and corporate until released on this latest round of funding so I think it will be tried to do today that's really white blood that service for a corporate customer.
You're a larger order on there's more Logistics involved whether it's coming through a Docking Bay or whatever it might be in typically when you're also ordering for that or you're not,
scheduling it for an hour later you find a little bit of it and you want to make sure that you really get that delivery window because when I,
my happy hour and office is taking place at 6:30 they mean 6:30 they don't mean 7:30,
those are all important factors I think they mentioned that you're chatting
fire but no we also have taken the opportunity to make some Partnerships with some other folks out there yet mentioned the Buddy fridge power that on the back end,
you know what you did great Bay for offices that have the cooler unit within their office to automatically reorder their favorite beers online.
Doing a lot more in that space and I think that for me and Gracie perspective you can expect to see more and more of that stuff happen as Jersey becomes against Anonymous and alcoholics.

Scot:
[35:35] I think it's obvious but anyone that had the title Chief strategy digital marketing Revenue officer would definitely have to have a smart alcohol fridge.
A b a b shot if Jason doesn't.

Taylor:
[35:49] No greater no greater.

Jason:
[35:52] You think you're mocking me but I feel like we have a full-time team at boob assistants dedicated to our in office alcohol consumption technology.
So there I literally think we have tags in our office that are on Twitter and tell you when there's a when they've been tapped and and all that sort of stuff.

Wayne:
[36:13] The route to the reorder part of that cycle in and drizly can deliver.

Taylor:
[36:20] She's she's phenomenal.

Jason:
[36:24] I do want to go back to tell your little bit about some of the differences between how you and your wife shop the leveraging of the using of list and and that's one of the mixed blessings with
digital shopping for a lot of these categories I can in grocery
on the one hand it it makes reorder and it is much easier in an improved convenience and and all these things that consumers are demanding more than ever.
The flip side is there's less opportunities for serendipitous discovery of new brands and things like that and so I've noticed like in the grocery space,
you're saying some new interesting Partnerships and opportunities that the marketplaces are inventing so you know interesting promotional units from instacart or interesting data partnership with Marketplace
shares data back with the flowers that they can use to create new experiences like are you guys.
Seeing that in the alcohol space as well and is there are there any interesting Serta brand Marketplace Partnerships that.

Taylor:
[37:23] Yeah yeah we're doing a lot up there and we talked with a lot of what we consider not endemic partner so you know a recent one Netflix just wants to show called Final Table partnership with them where you know it is essentially,
yeah they're answer to a food show type contest,
where we basically paired wines that correspond with each of the different episode when we actually went through some of our Retail Partners and created in Thor display so taking online and offline,
a creating a little bit of Piper on the show and then about some of the wines that are brought up in,
it really looks at all aspects of the ordering process but also like what people are ordering at a local level write a report with Neil Finn in the past I think the biggest.
Unlearning to be at our people really care about what's being made at a local level on a product.
And we write a logo on it to 10% increase of sales for that product,
English forget that the various craft breweries I'm really like to highlight that fact that he's around the corner from you.

Jason:
[38:48] And I feel like a glove just came off now.

Wayne:
[38:52] Well I mean we don't have as many local badges because I think some of our best stuff happens to be made in Scotland but I would argue that we also have some awesome brands that are local to the US.
I wish you'd have local badges on them too and I know we actually do tell her.

Taylor:
[39:12] Yeah Ugg you got the badges think about you,
you know when you're serving up something a consumer you mentioned earlier,
I think that's an area where you going to see drizly and backed up in the next 6 to 12 months have only in and making sure they were putting right in front of the right consumer at the right time specially given you the the way it is
you know that e-commerce World works today you're very limited Chopper and
right thing in their basket you're so does the better we can do it helping push products at the browse grid.
Are consumers to purchase the more likely they are to check out and continue in the shop with our platform.

Jason:
[39:56] Wayne not necessary enticing you to throw me under the bus unless you want to but in general
like you guys feel like you're you have access to enough data and enough promotional opportunities via all these new touch points to do the kind of marketing,
that you like to do or is there an opportunity for your partner's to do more.

Wayne:
[40:18] I would say we're getting there there's always room for more but but we've realized through some of these what I'm.
Call Canada for spear of of the category the drizly.
Instacart the Postmates you don't whole or the license are really always managed to put some of the product is that.
They do tend to know more about the consumers they serve than some of the traditional retailers and so the data we can get from them is is really interesting for us we get to understand
the notion of usage occasions but now we get to get into purchase occasion so,
you know we spent a lot of time for additionally learning about when people consumer Brands but,
knowing about when they buy them is also super interesting knowing about where they buy them is really interesting knowing about,
in a high price point low price point all the different stuff that you can see comments release these particular channel to partnership.
It's all new data for for the category but it certainly data that I think in the form of our strategy in a whole new way going for it.

Scot:
[41:26] Well it wouldn't be a Jason Scott show if we didn't talk about Amazon so.
Can you sense Wayne with last do you know every startups worst nightmare has to go to build all this out and then Amazon says oh that's an interesting space let's go replicate what how do you guys answer.

Taylor:
[41:45] Yeah the Amazon car says everyone favorite.

[41:51] We be crazy not to think about Amazon right they only had faith in every e-commerce or Marketplace or otherwise I'm just because of how successful they've been,
I think it it honestly is it helpful to have them in the face and I don't use the word oil but I will
because it helps build consumer confidence that your back to my earlier pointed you know you buying online went down the right way and with the right partner is a very legal transaction is something that you know makes the shopping.
I think they were we've got an advantage is really in our Marketplace rights or our ability to show.
And to your point of the 8 to 15 different retailers in a single location with that same commodity product,
and then allowing the consumer to shop based off of what characteristics of that retailer are the most important to them whether it's Private Selection excetra
Jana and I think it will be both are really proven and it's been one of our biggest most to is this is a highly regulated good
right and drizly was built in its core,
the handle does the supporting sale right from the software perspective other regulated
so I think that you're just slapping on and alcohol category that's why we haven't
not the number. Of instacart and Postmates some of the other companies out there because it's not just that right the very different shopping experience.

[43:17] I'm not talking about the bottle of wine they can run into a shopping cart that you know,
yeah I might drink half of and cook with half I'm talking about the alcohol specifically sale,
and I think that's going to be our advantage now and in the dead moving or specially if you start to grow it our national retail.

Wayne:
[43:35] I mean Amazon is is testing this category and we we talked to them and then
you know they do have availability through Prime now in Seattle through fresh in Illinois through Prime now I believe in in Sacramento and Southern child coming from what we understand
we're Amazon has an opportunity to get better to tellers point on this you can't just add one more category and expect you to be successful,
the proposition that consumers looking for when they go to a liquor store in it's obviously price is important but really selection and so.

[44:13] You're the prime now facility were there for filling out of doesn't always have all the space that I think they would need to represent a wide enough assortment,
including various sizes right some people want 175 some people want 375.
You know big bottle small bottle for Matt about to challenge logistically that that I think anyone needs to overcome including Amazon to really build out an interesting proposition for,
are spirits online particular at the marketplace model essentially lets me is the end user on the app.
Columbus ZIP code say I'm interested in Bourbon and essentially yet.
You know almost any bourbon you could think of from from the lowest price point all the way up to you know bottles that are approaching thousand $2,000 for.
You know brand like maybe a copy that anyone should be looking for when you have that proposition and you have it almost.

[45:15] Spell nationally this point it's how you start to see a lot of opportunity for e-commerce to,
firstly when you're operating a very local level like Amazon or most of the retailers all right now you've got to you've got to think through that how do you how do you essentially provide.
. assortment that people are looking for but also you know let people come into the top of the funnel at any sort of scale and sufficiency to to make this thing work like you could do or say or diapers or.
You know any of them more traditional Goods that are available ubiquitously everywhere.

Scot:
[45:53] Yen into the drizly point.
Example Amazon's done like you have 200 friendly Integrations with point-of-sale systems and then like Amazon pay hasn't had a lot of adoption with with retailers because it's kind of like you know.
Hey at this feels really weird having Amazon kind some ways their scale.
I think you heard them because they're not going to be very hard for me to build a network.

Wayne:
[46:21] Yeah I think I know you look on Prime now I think the experience for some of these third-party seller.
Optimize the way presented and then you know I know car category either there's a lot of price for the disparity so I think consumers would expect someone to to see the price options but then also understand why,
you know there are these different prices presented to them so early a challenge that at Amazon,
I think we need to address her or think for a little bit more closely was they knows they look to scale and something like at 3 p.m. I'll only agree with you.

Scot:
[47:05] The big thing this happened in were,
more mature meaning higher adoption categories is now Amazon competing themselves with private label right and you guys worry over at the au jus about amazonbasics beer or an Amazon basic vodka.

Wayne:
[47:23] I don't and I and the reason that I think we are we are not so concerned with something like that I digitally first private label brand with with someone like Amazon is that
one is technically speaking there is this this rest of Market wall with that off so you can't necessarily create a,
Brandon not make it available now Costco does have some really good trip propositions with Kirkland brand of backyard Kirkland brand tequila but
you know I think when consumers are looking for Spirits in particular and beer,
I think I'm looking for that brand story they looking for that experience you know this is.
This is generally a more thought through purchasing you know that the price point is not that of your standard consumer guide and so.

[48:14] You know we we have trust in Our Brands and we we really see the strength of our friends has.
No fighting throw this in a potential disruption from private labeling and one in which I saw very very closely it play out where I was at.
It's just it's just not as easy to enter to win in a private label proposition.
Categories within the other category where you could directly Source manufacturer.
Any other thing with private labeling is essentially you do have to buy it back from the distributor you can.
Direct store so the various tax reform.

Taylor:
[48:54] Yeah and it's a double down on Wayne's plane really strongly believe the brand should one timeline you know they've done the brand building with the consumer
they brought him down the car I think that's the kind of one big point to sit who is an e-commerce world as they need to continue to prove that value prop and buy that brand and that should be shot War.
Ecommerce consumer as well go get some of the traditional channels that have always work,
should be also augmented with coming to think that Wayne and his team are doing to really go about that Chopper and make sure that they end up being.

Jason:
[49:29] That's going to be interesting to see how it plays out you know one of the things that's always interesting to me in in
the market is still really early and it's did you adoption curve like alcohol and Spirits is right now is that you can have a pretty fragmented market right so.
Obviously been a bunch of time talking about drizly here is one of my readers that there's there's a ton of players trying to,
when I a piece of the spacing and you know each with a slightly different go-to-market approach from your standpoint Lane do you have to,
participate with all of them do you make some big bets on the ones you think are going to win like you know what is your strategy like early on when there isn't necessarily A.

Wayne:
[50:12] Yeah I mean we're still in that building phase of e-commerce for sure and in a lot of our time or the last year is just understanding.
What's happening across the market alcohol is in a lot of ways of Barry it's early fragments as you said but it's also.
Locally Tribbett so,
you know we we understand who is going to be the best strategic group to align with the New York but that might not also be this the best guys to figure out who the partner when is Texas in the West Coast,
the the play right now is continue to test and learn and I think that's,
that's really consistent with anything you here in anybody need Commerce is constantly test. Billy learning and you get ready to Pivot really quickly as things change.
But because there's no sort of clear National front-runner right now in in the space we need to figure out how to win it at every light at every level a lot of those levels are are hyperlocal.

Taylor:
[51:18] Come on Rainbow National front runner.

Wayne:
[51:22] The closest thing to a national franchise and about right now is is Total Wine.
But even they don't truly you know have a presence in all 50 states 00.
Yeah so we are we are definitely navigating the the ultra complex for sure.

Scot:
[51:44] Taylor have a start-up question for you if you guys have the school red bear as your logo I'm guessing why that's there but I don't want to make assumptions founding story about the drizly bear.

Taylor:
[51:55] I was why I was wondering when that question would come up you know that.
I can tell you the name drizly actually came from.
That is an option off the board as far as name goes and then very early on in life.
Get a branding agent has become in and give us some marketing tips and tricks and feedback excetera and one of the things that they came up with
shooting currently with this Presley
not a lot of thought went into it after the first logo iteration with the Jersey Devil is done and I think it's something that deep down no one's ever fully understood but at this point in our life is what were known for,
we've all become pretty pretty affectionate to the bear so the bear the bear will live on.

Jason:
[52:49] That that is awesome and is it works at that's going to be a great place to end it because it's happening again we've blown through all our allotted time but if folks have burning questions about the category let's keep the conversation going on Facebook and Twitter
as always if you really enjoyed this episode we sure appreciate that that five star review on iTunes and as a reminder of you want me Jason and Scott in person in Palm Springs next week you can do it at you tell West and then it'll be a promo code,
in the show notes for you but Wayne Taylor a real pleasure chatting with you and really grateful for your time today.

Wayne:
[53:27] Thank you guys just a lot of fun.

Scot:
[53:31] The end up before before we let you go if folks want to find you online are you guys realistic tweeters or snapchatters or instagrammers in any any business writing there that where people can find you.

Wayne:
[53:44] Can you find me an admin people on Twitter although I mostly just tweet about sports and things like that but what happened.

Taylor:
[53:54] When the big wings and I find him on LinkedIn meet me the same people in 86 on Twitter but we're we're LinkedIn.

Scot:
[54:02] Awesome we really appreciate guys taking time out of your busy day so join us on the show and.

Jason:
[54:07] Until next time happy conversing.

Feb 1, 2019

EP162 - Amazon Q4 2018 Earnings Hot Take 

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

This episode is a hot take on Amazon Q4 2018 earnings

  • Amazon Q4 Earnings Highlights
    • $72.4BB, which is a 20% y/y increase
    • $19.4B in Free cash flow
    • Amazon grew North America 18% y/y and International 15% y/y, for a blended growth rate of 17%
    • Unit growth decelerated to 14% from 15% in Q3
    • Revenue from brick and mortar down 3%
  • Amazon Web Services - Grew 45% to $7.4B for the quarter and generated $2.2b in operating income which was up 61% y/y
  • Marketplace
    • 52% of units, down from 53% levels in Q2 and Q3
    • Wingo GMV estimate -> 150B GMV for the quarter.  $450B GMV for the year ($300B GMV in North America).
  • Amazon Ad Business - grew 95% y/y  to $3.49B (Estimated $10B for the year)
    • Pivotal estimates $38B by 2023

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

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

Episode 162 of the Jason & Scot show was recorded on Thursday, January 31st, 2019.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer and Scot Wingo, CEO of GetSpiffy 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:
[0:24] Welcome to the Jason and Scott show this episode is being recorded on Thursday January 31st 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with Scot Wingo.

Scot:
[0:37] Hey Jason welcome back Jason Scott show listeners Jason big question it's -50 there in Chicago how are you hanging.

Jason:
[0:46] I am enjoying the modern technology of central heating so I'm doing I'm doing terrific my dog who hasn't had a walk outside in like 3 days is doing less well for MacGyver.

Scot:
[0:59] Your dog doesn't have four dogs can't take minus 50.

Jason:
[1:03] I really like this is a rescue dog from Detroit that thinks he's like a Southern California dog like he goes on strike below about 40 degrees.

Scot:
[1:13] Got it Caldwell.
Earlier this evening Amazon announced their 4th quarter results that we've been on pins and needles waiting to see how they did so this episode is going to be exclusively Amazon news and we're going to give you a hot take on the result.
But first Jason are going to be live podcasting from etail West which is held February 19th to 22nd at Palm Springs California
and it's a special guest gift exclusive gift to our listeners you can use the code Jason Scott there's no and in there so j a s o n s c o t Scott with one t
looks like Jason Scott is another way to think about it,
for 20% off and we are going to put a link quick Link in the show notes for you to be able to apply for that and come to the show and see Jason I'd life podcasting would love to chat with you if you're going to be there.

[2:11] So with that housekeeping all the way let's jump into Amazon results first I kind of wanted to frame the discussion so the companies have already announced we had Facebook and eBay come out and,
Facebook really kind of exceeded expectations because they've been in this kind of
poop storm of negativity and controversy that was interested or expecting it to be bad because advertisers was bailed on them.

[2:39] Turns out if you have a way to get in front of customers people want then they don't really care about the controversy I guess,
eBay's results were below expectations so so kind of another e-commerce company there and was eBay's results or a lot of talk about this kind of.
End of 4th quarter slowed down
so if you recall we had camera from Adobe on the show and Adobe has come out and said look it really kind of fell off a cliff kind of December 15th
through to Christmas I needed to the back of the year they talked a lot about that where the holiday was semen along and then kind of died there towards the end which was interesting
so the net net of that for them is there Marketplace crew 1% if you exclude the impact of foreign exchanges so
a heading in and outs two days ago I believe I'm so heading into Amazon there's Otay people are a little kind of wobbly can I see some mixed results coming in to Amazon and where were they
so that set up Jason wants you walk us through the high-level pieces.

Jason:
[3:42] Yeah well spoiler alert they landed very solidly like they basically had a complete beat they beat all the the
analyst expectations so top line revenue came in at 72.4 billion,
that was against a expectation of 71.9 billion and was a growth rate of 20% year-over-year,
earnings per share came in at.
A little over six bucks and the expectations were like 5:55 so that was a solid beat.

Marker 02

[4:17] Last year they had a quarterly Revenue this quarter of like 60 billion so that means this year they added about 12 billion dollars in sales just in this one quarter so they continue to be clicking along.
So if you look at an annualized basis for 2018 total revenue from Amazon comes in at 233 billion.
Corso remind listeners.
Ecommerce the revenue isn't really the most important number we like to talk about their gross merchandise value which I'm going to let Scott break down and in just a bit.
But if you listen to Jeff talk.
She's not as big a fan of the sort of Revenue and earnings metrics is he is that free cash flow metric so.

[5:10] Yeah that's really the the metric the Amazon Rise Against is that hundred percent free cash flow and you know once again this was a good quarter for that,
free cash flow more than doubled from 8.3 billion last year to 19.4 billion this year.
So that's a first world problem you got to find a lot of place to spend all that loot.

Scot:
[5:30] Yeah but how's that possible Jason I thought Amazon wasn't problem.

Jason:
[5:34] Yeah it's almost like that some some misnomer from 10 years ago or something.

Scot:
[5:43] Fun fact I would call 19 billion dollars of free cash flow pretty not too shabby.

Jason:
[5:53] Yeah and the one I get now though to be honest I guess you're like a Amazon is not profitable what it What I Hear now which is also a misnomer is 100% of their profits from AWS.

Scot:
[6:04] Yeah yeah let's talk about that so is repealed the onion on on the
the 800-pound gorilla that is Amazon overall North America grew 18% year-over-year and as a reminder to listeners we talked a lot about the e-commerce Baseline of 15%
retail Baseline is 3 to 4%
Amazon has historically clocked around kind of 20 to 30% so this is where the first quarter is when they've actually slowed a little bit and part of it is the concert is getting monstrous in the fourth quarter you mentioned a $12 increase your rear which is you know.

[6:38] Adding a chunk of any other,
retailer but they are specifically in Q4 starting to see things slow down because they've created these massive comps your ear and things like
launch an echo now can create headwinds on that and then you also have to hide window when products move from one p to 3 p.
Prepuce growing faster than one PS4 creates a headwind on Revenue growth cuz they collect a lot less from from third-party
set also a like item going from 1 Peter 3 p as brands do things like hybrid that creates a little bit of slow down and rub you also.

[7:13] So that being said North America grew 18% year-over-year International grew 15% year-over-year for Blended rate of about 17% on the retail side
taking out a WIC etcetera overall they grew 20% but the retail pieces group of three bases 3% slower,
that international number was a little bit of an acceleration which was good to see that they've been kind of facing some headwinds there on the international side so it's good to see that and then profit-wise in North America that took
the 2.3 billion so the North America business inside of Amazon is profitable even so it is not true that that if you
all the profits come from a Tab S but certainly the Lion's Share do and then International is still losing business money
but it it kind of shrink the Lost 30% to 642 million so
even an aggregate if you add up the North America and international the retail part of Amazon is still profitable
including the marketplace so and that International Peace is on its path probability it's just so honking big is going to take a little while to get.

[8:23] North American margins ticked up 60 basis points and that was attributed on the call to getting some really good leverage out of fulfillment center expenses so Amazon 2018 was a. Of time where Amazon
you know they only Built a 15 to 20 centers
I'm a percentage standpoint that was a pretty low capital expenditure year for them so instead of adding all the capacity they needed to
to ship all the packages they utilize more of the film Center squeeze more out of them,
so that being said another thing that I always watch is 2% of units that come from third parties this is the
the the metric.
Give around third-party versus turtle useful that was 52% which is a tick down slightly from 53%
I wear it wasn't Q2 and Q3
reading the tea leaves that was probably driven by as a swing in the fourth quarter you know the the 1p kind of bumped up a little bit I believe because of all the private label that we
Racine going on I think there's over a hundred fifty private label Brands and then what you call owned Brands so things like echoes in the whole X family,
I think that pushes up that first party unit side during the holiday. I'm talking about 1% you're so not a lateral move.

[9:51] One area of a little bit of concerned that for Wall Street is they look at this total unit gross and that decelerate a tad
even at 14% that's down from last quarters 15% so
yo a lot people asking how can unit growth be 14% but then they totally grew 17% so what you have is unit growth in ASP mix coming out a little bit higher to multiply together to give you like the total,
so when Amazon on a quarterly basis doesn't give you the pieces you need to unpack the DMV
astrix and I'll come back to that so what they do is in their annual report which will come out and I think they have another 30 to 45 days to put in your Port out then they will provide the
mechanism for 410A backing into the DMV so.
But astrix is I go to a model I've used over the years that that is relatively close so so what that model tells me is now.
I'll say this is not an official number this is just kind of Scott napkin calculation to,
I just give you an idea of the scale but we don't have to wait for the annual report and if you take Amazon's overall Revenue this quarter of 72 billion.
AWS with 7.4 and you take that out and then if you also take out the other AD business you're left with 61 billion dollars of kind of retail Revenue.

[11:18] So I use that to back into a 1 p.m. to 3 p mix and what I get is 52 billion and 1 p
and then you're left with eight or nine billion dollars in revenue from creepy Amazon's take rate is about 10% so you have to multiply that by 10
so you end up with first party DMV of 52 billion third party DMV of 95 billion for a total of about 150 billion in the fourth quarter, global stamp
again this is an approximation and we'll have a lot more clarity when they're in the report comes out more working into one of our new shows
6 interesting is if you take sat and soaked it with those of you that have her to say this before you know Amazon's easily
twice as large as you think it is to take my calculations from q1 to Q4
I get an annual number of Total Gym v-force partying third-party F450 Glen Jason is you know Walmart is kind of it a 500 billion
your Revenue rates
we we talk a lot about how I think you agree with me but that's that's the better comp is Amazon's total gmbh versus Walmart sales and
so so Walmart is still bigger than Amazon but I do think the lines are going to cross in 2019
I'm so that's going to be the first time somewhere in 2019 probably you wanted you to.

[12:44] Yeah we'll be able to say that GMB to GMB Apples to Apples Amazon is bigger than Walmart that's going to be interesting to keep an eye on.

[12:54] Last little bit on the marketplace side is Amazon it's kind of funny that press releases now are like 16 Pages cuz they usually put like a little. Of some highlights through the year and they have so many highlights now it's like
12 pages of highlights are they really highlights.
I'm the only one that picked out of there that I hadn't seen release somewhere else I thought was hers would find interesting is the announced that 200,000 sellers on the third-party platform are now generating over $100,000 a year in GMT
so I pre nursing small business platform there where you know if that's an international number but I would imagine it's split price 60% us 40% International and then correlated with that I've been seeing a lot of.
Amazon's running a TV ad campaign and it shows a train out of an a bunch of Amazon Fulfillment boxes with third-party seller stuff on it so they're really kind of,
camping up the third party aspected left.

Jason:
[13:55] Yeah it's always chuckle to read those highlights because you'll get like one highlight will be like.
We added a PGA event to Amazon Prime video and then the next highlight will be and we sold a hundred million Alexa devices or so you don't seem seam
super ration.

Scot:
[14:17] Can we handle the trillion workloads on the AWS cloud.

Jason:
[14:21] Exactly.

[14:23] Yeah and the the Walmart Amazon is definitely becoming a horse race is pretty interesting and not just a reminder.
A ton of Walmart's revenue is grocery even with the Whole Foods acquisition very little of Amazon's revenue is grocery inside.
Amazon 30 crushing Walmart on General Merchandise Walmart's crushing Amazon grocery.
It certainly is the case that Amazon's probably growing grocery a lot faster than Walmart's growing general merchandise so if that doesn't doesn't bode well for for Walmart in the.
In the short term is those lines start to converge and then of course Amazon has all these other fabulous business so you know we mentioned,
the AWS gets a lot of the the buzz that's that's not entirely unfair cuz that you know that they continue to be going gangbusters that you're getting there the.
The clear market leader they have a huge weed over there their primary competitors Google and Microsoft.
Until you do when you're that big and have that much market share it's really hard to grow fast but AWS still grew 45% for the quarter so that was.
7.4 billion in revenue and you know much more profitable business so that that's been off 2.2 billion in operating income which is up 61% year-over-year so.
That is not a bad side hustle to have if your if your Amazon.

[15:52] And then of course they they have this other increasingly big category that they still call other the big chunk of other is this advertising Revenue.
Hopefully at some point in the not-too-distant future.
This gets spun out as a separate number but other came in at 3.4 billion which is up almost 100% 95% from last year and so you know.
If you think of that as.
The primarily that ad business is actually the growth rate is starting to decelerate so lightly as they do start to get a critical mass but it's still a huge.
Chunk of gross if you add up that the.
Portion of other for the last four quarters that are likely add sales it's it seems pretty clear that it's over 10 billion and add sales and.

[16:47] You know it is interesting it's like obviously becoming a much more important business for Amazon I think it was an analyst that counted how many times they mention the ad business on this call versus last year's call
and last year it was like 12 mentions this year was 25 mentioned so it's getting more mindshare.
And you know we're seeing all these wild projections of how fast I could grow so I think it was a new one out from pivotal research that said that by 2023.
Their ad business could be a 38 billion dollar business and even more so than eight of us.
Add business is hugely profitable and so you know if if they do grow that kind of trajectory is very likely that the ad business is is both bigger and more profitable than the AWS business in the next 5 years.

Scot:
[17:35] Yats commit arson to see if they can get it to be that size it at that pace it would be bigger than Facebook I believe without a SIM Facebook Stan.

Jason:
[17:44]