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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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Nov 11, 2017

EP107- Listener Questions

 

Listener Questions

Q1: Brands selling direct on their own site

Shawn Cheng What do u think about a brand to run their own brand store, not through market place such as eBay, Amazon or Alibaba?

Jamie Dooley Hi Scot & Jason: Have you heard of any brands seeing true success building a D2C E-Comm business through their own websites? (On a path to do 10-20% of sales and/or 8-9 figures in annual sales?). D2C seems like D2C was a big trend a year ago but I am not hearing about success stories where sales justified significant spend.

Scott Silverman Do you think a new brand without an e-commerce site or digital presence could be built by selling on Amazon? Secondarily, should manufacturers selling on their own e-comm sites, shut them down and just sell via retailers?

Q2 Mobile Conversion Gap

Ari Nahmani Mobile conversion rate... retailers are getting more and more of their web traffic from mobile, but those users are half or a third as likely to convert. They don’t seem to be coming back on desktop. So what’s happening? We see across the board where YoY traffic is flat, revenue is down due to the device mix over-indexing on mobile YoY. How do we explain this behavior? Where are those users purchasing if ecommerce growth is up?  I’m seeing his trend on several client sites and I recall one of your shows that this trend was discussed.

Q3: Omni-Channel Fulfillment

Alexandro Volakis order sourcing in an omnichannel network. how do you decide where its best to ship from?

Q4: Singles Day in the US

Julia Ptock How do you think about Singles Day (11.11.)? Are there some retailers who take part at this event in the USA? Amazon is focusing on Cyber Week (Cyber Monday & Black Friday) but doesn't show interest in Single Day. Do you have an idea why?

Q5: Toys R Us impact on Holiday Promotions

Melissa Burdick How will the bankruptcy of Toys R Us impact Amazon this Holiday? Is it going to be a bloodbath in pricing this Holiday with TRU stores cutting prices and Amazon price matching (and then closing stores shortly after holiday)? https://www.usatoday.com/.../toys-r-us-store.../683762001/

Amazon News

Amazon Private Label articles:

http://jasonandscot.com

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

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

Episode 107 of the Jason & Scot show was recorded on Thursday November 9, 2017.

New beta feature - Google Automated Transcription of the show

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 107 being recorded on Thursday November 9th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

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

Jason: 
[0:46] I'm doing terrific Scott if you like there's a number of exciting things I've been eager to talk to you about.

Scot: 
[0:53] Let's talk about the Chicago weather first.

Jason: 
[0:55] It's sad I feel like we've had a super mild winter so far but this week it turned cold so we've been in the forties and tomorrow it's,
can a potentially drop it on the twenties in snow so I've had to visit a portion of my closet I haven't seen in awhile.

[1:15] What about Raleigh is it beautiful and sunny still.

Scot: 
[1:18] It wasn't beautiful but it is still like in the 50s so I enjoy hearing about your snow stories.

Jason: 
[1:24] I am always happy to help you feel better about your life by hearing about mine.

Scot: 
[1:29] Thanks man.

Jason: 
[1:30] I would imagine that you're feeling some extra warmth because I feel like there's been some exciting Star Wars announcements later that keep you up warm and comfy.

Scot: 
[1:39] Yes it is a great time to be a Star Wars fan we went through kind of.
Salmon there for a long time and I know we have the prequel trilogy which is exciting and then we didn't know what the future would hold and then with the Disney acquisition the announcements coming Fast and Furious so we have first of all we have.
2 Star Wars movies just right in the pipeline right behind each other which is exciting as we record this 35 days until the last Jedi 34 if you go on the.
Actual opening on the 14th 196 days for the Solo movie so excited about that little Star Wars story and then the big news is at the.
Industrial,
conference call at Bob Iger announce to Star Wars things so Ryan Johnson the guy thats directing Last Jedi they loved working with him so much they've given him his own Trilogy so it's going to be some,
three part story in the Star Wars universe but not part of the normal Saga and then they're also.
I'm sure you seen this but they're doing a streaming, thing at Disney that this is all the rage everyone's unbundling and now will pay,
8 times as much for all the content but anyway they're doing a Disney streaming Channel and they announced a Star Wars live show will be on that so.
Lot of great new Star Wars content con.

Jason: 
[2:56] Yeah yeah yeah the TV show super exciting I'm with you I've been annoyed by all this unbundling like I,
I suspect you and I both had to buy the CBS subscription to get Star Trek I probably would have already had to give the Disney one due to my son so maybe like in that case I'm not as upset but.

[3:16] And you and I both been walking around with her iPhone 10s for almost 2 weeks now so what's what's the verdict for you.

Scot: 
[3:23] It's awesome it is a great phone the.

[3:28] Notches not a big deal the face ID is really cool I really like it it's very handy to buy stuff it is a little unusual to Skylake pick up your phone and look at it,
but you get used to it,
I have an Android phone that is the same feel as iPhone and everyone will take it out of my pocket and look at it and then I feel really ridiculous cuz it doesn't look back at me.

[3:50] Just kind of like what you think I'm an iPhone and then I would put my phone and it unlocks to the face ID thing is pretty cool how do you like yours.

Jason: 
[4:00] I can agree on how you're looking your Android phone is how my son looks at everything that isn't like an echo like he expects All Electronics to be able to talk to him.

[4:11] But I have been super happy with the 10 I'm with you everything has worked pretty smooth.
Uniden it I have is without the button there's not an obvious way to feel with the right orientation of the phone at so I now fine I put out of my pocket upside down or backwards more than I.
I used to.

Scot: 
[4:33] Get a feel for the camera bump.

Jason: 
[4:35] Yeah I have.

Scot: 
[4:37] About should be on your right index finger.

Jason: 
[4:39] That that I would do you answers part of me that doesn't want to like get a bunch of smudgy fingerprints on the camera now that I'm not OCD.

Scot: 
[4:48] That's why I put the camera there.

Jason: 
[4:50] Gotcha I'm think I did put the leather case on it the kid cancer got the phone a lot so I felt like I needed some protection and so now I what I feel for is the.

[5:02] There's no weather in the bottom of the phone so that's how you can tell.

[5:06] Yeah so that's worked out well and what's killing me is I do use an iPad a fair amount and the muscle memory now to go back and forth between I feel like I've gotten used to the all the gestures.

[5:20] Answer that the button still being on my iPad is killing me so I feel like I'm going to have to get a new iPad when they come out just to have them all work the same.

Scot: 
[5:28] Yeah I like the new gestures I don't like swipe down from upper right to get to the control panel because I frequently hold it.
One handed and like that's pretty weird gesture to do single-handed.

[5:41] So I kind of don't like that and I did hear there's a rumor of their members on the.
Apple Hardware sides today or I read a rumor they're working on a high-end iPad that will have face ID in a bunch of other cool stuff and then there's a lot of rumors going around about a r Hardware that they're working on which is kind of interesting.

Jason: 
[6:00] Yeah man you know in some ways.

[6:04] There's not new AR Hardware in this device but this is the first device with the horsepower to Sephora support the the new AR software kit and so there are some cool.

[6:16] New AR apps that you can run on this phone that you couldn't run on other phones which is pretty cool we make that make him up in one of the listener question.

Scot: 
[6:24] Yep and that this is nursing one of these kind of these designers kind of tries to pontificate what the future looks like these things that this interesting observation that the sensors that are in the notch on the 10.
Are really everything you need for a r glasses today they took essentially kind of the the look and feel of the 10 and they put that not kind of on bridge of glasses and then they,
they made glasses come around them which is kind of an interesting I have never thought of it but it is kind of interesting.
Because it's doing the face ID in all the pieces you need to do that is exactly what you need to turn that around and be able look out at the world with with ar glasses so.

[7:03] That could be kind of part of what they're thinking about.

Jason: 
[7:05] So an interesting thing in this comes into play in some in-store retail environments the Microsoft Kinect has been the the cheapest ubiquitous sort of.

[7:17] 3D camera with.

[7:19] Infrared distance measuring that was out there until there were tons of little Nitch applications that hacked some solution using that.

[7:27] Does Microsoft Kinect camera so there's lots of these like 3D body scanners that you could potentially use for.

[7:35] Uploading your avatar to your favorite e-commerce site or or made to order clothing or measuring rooms for furniture and all all these different things in there a bunch of in-store applications where are these.
Is Microsoft Kinect camera got hacked in Microsoft just announced that they're discontinuing the Kinect and so that's going to go away and of course the.
Everything that was in that big camera module is now you know there's a better version in this little notch on the on the iPhone and so I think we're going to start to see a bunch of.
Interesting apps and use cases where they're essentially using an iPhone just for that that sensor array and in a bunch of.
I fixed installations in which I think would be cool you know the bummer at the moment is there going to be hard to Source in there going to be expensive for a while.

[8:27] And I sure wish they had them on the back as well cuz I feel like.

[8:30] Retail uses it would be very handy to have that sense of Ray pointing out so that we could use it for some other uses.

Scot: 
[8:38] Vehicle in the other exciting gadgets tree portal.

Jason: 
[8:42] Well I know you got a new one that I'm eager to hear about when we'll get to that in a minute the other thing I'm just over over all excited for this week,
is
so we recording this Thursday night which is Friday morning in China so it's the day before singles day we'll talk about that like that would be an exciting event on the show just anyway but it's extra exciting because,
our very first show was a recap of singles day which tells me that the next should we do will be our our anniversary show.

Scot: 
[9:14] Yeah if you're coming in on two years who knew.

Jason: 
[9:17] Exactly I do think you put up with me for that one.

Scot: 
[9:20] It's been a struggle but I managed to figure it out.

Jason: 
[9:25] I appreciate it I'm I can't speak for the listeners that II.

Scot: 
[9:28] Speed of a source of it's been awhile since we did a question episode,
way back to episode 96 actually so put put a call out this morning and we actually got a very strong response our listeners have a lot of questions,
so let's jump into someone's no questions.

[9:59] Questions first one is not really questions more of a statement it's from Natalie Bowman and she says hello.

Jason: 
[10:07] Hey Natalie thanks for responding to the questions.

Scot: 
[10:11] Hi Natalie okay and then next question is kind of interesting three people.
Who's similar nuances of the same kind of a topic so the first flavor of this was from Shawn ching and.
I said what do you think about a brand to run their own Brand store not to a Marketplace such as eBay Amazon or Alibaba.
So you should have ran have their own e-commerce site is kind of the flavor there and then are a good friend of the show Jamie Dooley asked hey Scott Jason have you heard of any brand seeing true success Building address.
Consumer e-commerce business through their own website so should you do it and then have we seen anyone that's had success.
I in any kind of adds a Nuance you know it seem like it was a big trend of year ago but I'm not hearing about success stories and then another friend of the show Scott's ornament he said what do you think about it there's a new brand.

[11:10] That doesn't have any Commerce site should they just start on Amazon or Marketplace like that.
And then should manufacturers be selling all their own e-commerce sites are just shutting down and Salvia retailers so.

[11:23] Interesting flavor kind of in this topic of Brands going direct that we've hit on.
Probably at least every other week if not every week but what's your advice when a brand comes to you with with those flavored questions.

Jason: 
[11:35] Yeah so I agree they're all related to Sean and Scott's to me are almost identical right like the two spins on the exact same thing which is.
Do you need to have your own branded site in addition to selling on the marketplaces are you can you get by with just having a presence on the market places in my strong advice to anyone,
it's trying to build a long-term sustainable company is I would I would definitely encourage you to have your own.
Site in addition to you know whatever efforts make sense for you on Market places in.
The reason I say that is a couple in most cases you're not going to do the kind of volume on your own site that you're going to do on the marketplaces I get it in so it you know it maybe.
Your first effort might be your presence on the marketplaces and it may not be that appealing to invest a ton in your own site.
But the thing is.
We are all essentially digital sharecroppers on the the marketplaces platforms right like.

[12:41] They can change their terms and conditions at any time they could be horribly under favorable the.
We could intentionally or unintentionally run a fall of any of their their policies or.

[12:56] He perceived to run afoul of them and get cut out of those Marketplace it there all kinds of bad things that can happen on the marketplaces.
And it didn't given time you look at it and say hey yeah I know there were some Old Market places that change the rules all the time but Amazon has been much more consistent or.
Alibaba is much more consistent or whatever the case is.

[13:16] Overtime that can just shift so it's just really risky to have a hundred percent of your.
Brand presence be on this site that you don't own and you don't control and that your landlord can essentially.
Raise your lease and change that your terms or kick you out in anytime and so I do think it it absolutely makes sense to have your own destination on the web that you own and you absolutely can.
And to the extent that your brand can drive any organic traffic that you can build any of your own falling.
It just makes more sense and it's more profitable to send those customers to your own site instead of.
To the marketplace you can avoid the take rate you can still in most cases for Phil through you know whatever fulfillment vehicle you're using on the marketplace.
And you know as you get to know some of those customers into the relationship with his customers like this gets a little dicey but you know there certainly is a,
percentage of your customers you can shift to be direct on your own site and you just you know on those marketplaces you're totally disintermediated from the customer,
and so you did you know even if it's only a small percentage of your customer base,
you want a direct relationship with some customers if only to get feedback to be able to understand what kind of content is selling and not selling and to build to run a B test and do all sorts of other things so for those reasons,
I would say you absolutely have to invest in your own site,
and I'll you know I'll give you a caveat that it maybe isn't the first investment you make are the biggest investment you make that that fair to you Scott.

Scot: 
[14:54] Yeah and a lot of it depends where you're coming from too so you know there's there's many buckets of Brands these days and it's.
It's becoming increasingly easy to create a new brand when we were growing up,
new brands had this like huge hurdle to launch them yet to do a TV campaign and all this kind of stuff and now we're just seeing an explosion of brand so so I would use a framework where there's kind of Legacy Brands and then,
new kind of born recently kind of Brands and.
Do I cycle I see with newly-born Brands is if we take and there's kind of two segments there but let's just take.
More Scrappy auction real ones they to Sean's Point Sean ass this year they.
They start on marketplaces soap to marketplaces a great place to start a colony e-commerce training wheels because they have these incumbent.

[15:51] Consumers already there so just like riding a bike with training wheels it's hard to steer pedal and balance so training wheels takes balance out of the equation starting a direct-to-consumer business you know it's hard to acquire customers.
Gold products can get the products to the consumers and and all that so I Marketplace simply gives you the training wheels by giving you a customer sand,
I wanting them to you to your pointer sharecropping of whatever whatever analogy is there and but you know to your point.
Next product life cycle needs to be maybe start on Amazon you go multi Marketplace but the sooner you can kind of create your own presents on the internet where you can control the brand at the better,
and then there's a lot of tools to Jamie's Point kind of weave that in the companies that have had a substantial kind of was caught materials over 10% of their sales on their website,
there's a lot of tricks that utilize to do that and what are the simplest ones is offering something special to your website customers.
You could think about special pricing but that actually kind of creates this.

[17:04] The problem so that's usually not what brands do but usually special products so for example Under Armour I don't know if their website is out there.
To talk about this publicly I don't know if their websites 10% of their sales I doubt it is cuz they have that huge wholesale component yeah.
But you're one of the clever things they do on their site and it did I know is successful is if you're an atheist of their brand that's where they launched a lot of new stuff so that's kind of like the exclusive Channel 4 new stuff and then there's this waterfall maybe the new stuff there for.

[17:38] A month in an account waterfalls into retail and then it waterfalls down into a Marketplace or something like that that's interesting kind of thing a lot people do exclusives on different channels the mattresses and why electronic guys are King.
the digitally native vertical Brands what's interesting about kind of those is they start really with a website and then we seen many of them.
Going to realize you can only get so far with that approach so it's almost kind of speaks to the store location is the right strategy so they are diversifying into offline a lot of them are exploring Marketplace is a lot of exploring Retail Partners those kinds of think so.
So I think the best strategy is a balanced kind of from a risk and a channel perspective is to have a portfolio of channels and that includes having website.

Jason: 
[18:24] Yeah tonight I would totally agree in like just to tell you more explicitly answer Jamie's question,
I bet you hit it like all those digital need a vertical brands,
all you know hit the eight or nine figures in in direct e-commerce sales so that's in a bona Bose ModCloth Warby Parker Casper,
you know all of those guys certainly do it there's some some pretty big brands that we don't hear about as much for e-commerce but you know I think the surprise people when you see how big they are but like revolve clothing I think is a big one and then of course stitchfix which arguably started out as a multi,
vendor retailer but but is Shifting to a branded,
to be more of a man with her own products I mean obviously you know got got pretty darn near a billion dollars.
Predominantly through their own website so I think I think Jamie's right that the hype,
was there before and I absolutely don't think it's one of these things were you build it in your guaranteed success so you know I think,
to to Jamie's point there was probably a light-year a couple years ago when I went. I love I just want to website you I called you know I'll be.

[19:41] Entitled to these sort of eight or nine figure,
run rates and you know we certainly seen a lot of people fail but they're absolutely have been and continue to be some successful sites sites in that space.

Scot: 
[19:56] It was talking about just failure for some kind of like what brands do wrong the number one thing I see is,
the brands of everyone loves this map pricing concept and many Brands Don't Force It so it will do is still set for website and all,
yeah they're their there.
I have my pricing so they adhere to that obviously because they believed in the policy and they're selling stuff directly there and then they will have absolutely no kind of understanding of consumer.
Expectations around shipping cost and time so they'll have you know a $50 widget for $10 shipping and,
you know you can upgrade to 3 days for $40 and you know the $10 shipping is the equivalent of USPS.
Yo week.
Week plus you 7 to 10 day type of delivery without tracking and then they're shocked when they don't sell a lot because you know why we put up this website and you know we have all this traffic and no one's buying things why is that.
Did he have to have that kind of discussion about well you're the single.
Most expensive place to buy your products on the Internet is your website your shipping and you know the cost or just way off base with what consumers want and then another funny one is a lot of Brands and you know.
To go to the legal department and all the stuff and they end up like not doing the basics like user-generated reviews and things like that because.

[21:27] How to get really wrapped around the axle like what if someone leaves a bad review should we go delete that or what should we do and you know should we should we go after them with a cease-and-desist letter and it's kind of funny to have this discussion because.
There are people reviewing their products right there on Amazon but it just shows you're somebody's Legacy companies have such a hard time wrapping your head around this digital world there's some the things I see that happen all the time or these Brands really get off base with her web store.

Jason: 
[21:56] Yeah I know told you I've had all those conversations.
That you another there is just a lot of back of house stuff that people tend to overlook when they're you know I used to wholesale model and they're going direct to Consumer for the first time so it's your point like,
they generally wolfley underestimate fulfillment know where they are selling charging too much for 4,
crappy level of service but it's probably also a side job for the wholesale fulfillment guys instead of stuff probably sits in the warehouse for 5 days after you place the order,
before it even gets into the the the shipper system,
answer their those issues and then like you know there's a customer service guy and they that that guy quickly gets overwhelmed with calls so they're all those kinds of things and,
if you survive the infant mortality like if you survived all those mistakes the next big steak mistake we see everyone making is that there's,
every Branford,
whatever the brand attributes are whatever Niche it's in how well it's known there's some certain amount of sort of organic traffic that's relatively easy for each branch require in for some Brands that's.
Three significant amount of traffic for some Brands that's not very significant but there always is some threshold where if you do the fundamentals right you get to a certain level and it then you hit a wall and it suddenly becomes much harder to grow inside the.

[23:26] The real test for the sustainable direct-to-consumer business is are,
you know what once you get over that that first tranche of easy to get customers can you,
still be profitable and successful in growing beyond that original based,
or you just met being a cop out and you get stuck there or do you start spending way too much on customer acquisition and I think that's a mistake we see a lot so,
so they're there are definitely lots of pitfalls and there's some good examples of of companies that have been able to steer clear of them.

Scot: 
[23:59] Let's jump in turn next question and then we can kind of Go Lightning round on a couple days maybe we'll see.

Jason: 
[24:08] Wait that wasn't Lightning Run.

Scot: 
[24:09] How's Jason Scott lightning room,
okay second question this is from RE nahmani he is the CEO of an israel-based digital agency,
and he says I'd like to talk about mobile conversion rate retailers are getting more and more of their web traffic from mobile yes but those users are 1/2 or 1/3 is likely to convert,
they don't seem to be coming back on desktop so what's happening we see this across-the-board we're year-over-year traffic flat revenues down due to the vice mix over indexing on mobile how do we think about this Behavior.
Where are the users buying stuff e-commerce is growing let me see okay so yes.

[24:53] And then I'll take that over to you cuz you have a clever name for it.

Jason: 
[24:56] So we've talked about that on a couple episodes I call it the mobile Gap and it it's it's very real you know most sides are seeing,
their Mobile Traffic grow much faster than their desktop traffic so they often would characterize that as,
there traffic is shifting from desktop to mobile and the conversion rate on that mobile traffic is much lower than it was on desktop and so you go gosh,
that's.
Potentially not a very favorable Trend and we we for sure talk with that with the are friends from Adobe around the holiday episode but I think I think it's coming up on a couple shows and I was actually surprised to find out that we haven't done a deep dive so maybe that something will.
Will do it at future show but I know you and I have done a number of live presentations were weave weave debated the Mobil gas.

[25:44] And I guess what I would say to Arya a couple of things.

[25:52] Most clients if you looked you mentally at your desktop and your Mobile Traffic your traffic probably supposed to go inside look up there traffic isn't flat there traffic is actually increasing.
It's a one of the things that's happening is some of those mobile visits that don't convert well are incremental visits.
And of course there's a because it's so much harder to buy something on a mobile device there's a lot more friction to check out.
There's way you know West support for plugins in your browser so your payment information is less likely to be.
Be stored in there and we joke a lot about a taking three hands to check out on a mobile device right one told the phone one that tap the virtual keyboard and 1/3 to hold your credit card.

[26:36] The that that friction you know makes it less likely that people check out people also on mobile devices are are generally in a more micro moment context.
They might be at the red light in the light turns green or they might be in line at the bank and get to the front of the bank or you know they might be doing something.
Weather going to get interrupted in the much shorter. Of time so all that friction leads to too much more abandonment and so.
We are seeing things where we're at experiences that reduce the friction improve the mobile Gap they don't make it go away but they you know if you look at the best mobile checkouts they have our mobile free mobile apps then.
Then the traditional bad mobile checkouts have also a percentage of that is.

[27:25] Not real inserted incorrectly measuring conversion so so most sides you know.
Back to the simple formula conversion how many people bought versus how many people visited the site and of course mobile gives people a bunch of new reasons to visit your site so a bunch of mobile customers are coming to find out your store hours or if you have something in stock.
Or what store is near than those are all things that used to do with the Yellow Pages in the in the analog phone.
And with the newspaper in those visits are not coming to your site that customer had no intention to buy online they're ultimately going to go to your store.
It does look like non-converting Mobile customer so so some of its an attribution problem and then the last thing we talked about is this Multi-Device attribution problem where.
Because it is harder to check out on a mobile phone a lot of people will build their list do their pulmonary shopping on mobile.
And then they'll ultimately consummate the purchased on their they're desktop browser where they you know are more likely to have payment information stored or or use a keyboard.

[28:28] A password Plug-In or something like that that that makes it easier to pay.
And because of the way that because we use cookies when you come back on your desktop you don't mess in your not authenticated as much users are.
You look like a different visitor than the visitor that came on mobile so instead of it looking like got window came to my site twice and bought on the second visit it looks like.
Got Wingo number one came to my side and mobile and didn't buy and some unrelated Scot Wingo came to my site later on a desktop and did by the.
Yeah I don't think that's the the dominant mode but that absolutely is a mode and interesting Lee it at Publix this week we built this database with that now has over 2 billion device IDs in it.
That we can map back to individual users and sure enough view you see if there still is a pretty substantial.
A chunk of Christ of a shopping happening on a bunch of these e-commerce site so.
All of that is interesting but here's the real bad news.
You asked the great question at the end if that's the trend then how is e-commerce growing e-commerce should be shrinking everyone's moving a mobile and mobile doesn't come out as well why is he Commerce not drinking.
And the bad reason for that is because not every site suffers from the mobile Gap.
And the sites that don't suffer from the mobile Gap are you and the biggest most dominant sites in the markets right so.

[29:59] Well no sides have a very low percentage of authenticated users Amazon has a very high percentage of authenticated users,
and by all accounts has a very healthy mobile conversion rate right and so you have some of those sites at the top of the echo system that have a disproportionate Cent percent of the traffic and sales also way outperform the industry averages in Mobile and that is driving a lot of the e-commerce growth.

Scot: 
[30:27] Yeah yeah we could probably do a whole show on this so I'll just kick it the next question before I get into a controversial topic that we have to go back.

Jason: 
[30:36] So are you saying that was not a good lightning round answer.

Scot: 
[30:39] That was very good and I'm not going to ruin it by it by adding on third question is from Alexandra volakis.
I said it's about omni-channel so this is another one that squarely in your Wheelhouse in a centrally.
And I'm kind of tripping this little bit how do you decide where it's best to ship from so I think what what L Alexander Andrew is kind of thinking about is you get an online order you've got ship from store or you've got a moment Center.

[31:10] You probably have some complexity there you probably have you know Boosie's on each other guys have hundreds if not thousands of stores that could ship the product and then you have like let's say you have 5 phone at centers.

[31:21] What's the what's the logic you would kind of work with a retailer to think about that do you just kind of go.
Product is closer to the consumer here or ship from there or do you kind of is it cheaper to ship from the store or is it more expensive and how should people think about that.

Jason: 
[31:37] Yep that's a great question and most retailers that have gotten successful with pretty complicated,
fulfillment channels where they have a lot of different choices,
either because they're feeling from store have a lot of different fulfillment centers there they're all using pretty sophisticated software sometimes that even uses machine learning to build a model for deciding how to do for filma and so normally we we call those the solutions of order Management Systems,
the big Enterprise ones all have like very robust logic in them,
but at the end of the day that the way you're implementing that logic for most cases is you're actually thinking about three big factors you're thinking about the cost of a fill so you want to optimize the lowest cost to fulfill,
you're optimizing for the customer experience in the customer experiences is generally two big factors one is how fast you can get it to that customer so you want to get to him as quickly as possible obviously and another is,
you want to get multi-item orders to the customer together so you'd rather ship everything in one box,
not only is that more economical many cases but it's also just a better customer experience then split shipping from multiple fulfillment centers and the third is this this notion of inventory potential.
And that that can get a little more complicated but essentially what it amounts to is.

[33:12] Whatever fulfillment vehicle you fulfill for this order is going to leave inventory in the other for film of vehicles and what is the likelihood of there being further demand for,
that next piece of inventory so when you're getting really sophisticated you you may.
Choose a film that vehicle that isn't your cheapest because,
it's likely to be the only demand in that particular fulfillment set of vehicle and there's likely to be other demand in the other fulfillment channels that's even lower cost for the rest of your goods,
so I'm not sure I explain that super clearly,
but like at at one level or another you basically are are putting together an analogue Rhythm that that optimizes for that customer experience that potential the cell and that that cost of fulfillment and,
you know there are both a number of Enterprise off-the-shelf tools that do that in there a lot of the custom software that a lot of retards have,
built over time to do it.

Scot: 
[34:16] I will kind of dispute one thing so I actually like it when when Amazon since we split orders and they send them to me that when the stress available at I think that's a better customer experience I don't think it's a better.
It's cheaper,
for the retailer but you kind of implied it's better customer experience get all your stuff together that assumes that all would come together but I think most times you're having to choose you know do your hold up so it's one of the least common denominator problem.

Jason: 
[34:42] So great potential Nuance like I would certainly agree,
that to a certain extent like if if I'm an option to get two things faster than the other things and I and then option is overtly presented to me and I choose to get them as fast as possible I agree with you I'm a shopper that appreciates that and so,
best customer experience for each customer is probably defined differently one problem with that experience is it can get very complicated right,
and until I always use the Amazon versus Jet analogy and Amazon tends to make all those decisions for you but they tell you what they are and Jet you know is,
is it sort of in the middle of giving you the choice of all those decisions and letting you choose for yourself as it split shipping actually both companies kind of let you choose for yourself but,
what that the more friction that's in that choice like you actually see conversion go down,
but the bigger issue is you and I are the least typically e-commerce Shoppers in the world and so for the overwhelming majority of people that buy stuff online they don't understand any of the nuances of fulfillment they don't understand that there are multiple fulfillment center that have some of these goods and so for most users they simply believe that when they order three things that they're using together in a project,
that that those three things are all coming from the same source and so when the the the seller chooses to split ship or even just drop ship from one of the items from a manufacturer and it arrives on a different day what we see is.

[36:17] A huge influx in customer service calls so customer service calls on switch shipments are way higher because customers just think.
Something got left off the order they ordered,
shoes and running shorts and a running shirt and they're using all three to go for a run and only to arrive you must have forgotten to ship me the 3rd and they don't understand that the third is coming direct from the manufacturer or from a different Warehouse or from the store and so,
you know for those customers it's a bad customer experience to split ship but for sure,
I'll totally agree with you and there's an elegant way to offer that to the customer make them understand then the best customer experience reach customers whatever they choose.

Scot: 
[36:57] Yeah and then another thing all Throne of this is I think the omni-channel dirty secret is this ship from store and buy online pickup in-store,
usually kind of sucks because I don't think stores know what's in the store like past half the time so so you know.
Show me my worst online shopping experiences have been shipped from store and buy online pickup in-store and you know the ship from store stuff goes wrong because they're stock-outs where they thought they had the widget that happens you know.
Lot more than a fulfillment center they also have you know they always say well just walking around the store in someone's cart we don't know where it is but I think their inventory is just really really bad at in stores and then the other thing is wrong kind of having.

[37:45] Stuff cuz you got this salesperson there and they're trying to you know.
Imagine you're in the shoe department at one of these retailers and you have to know about the shoes and then some on my order comes in and there's got to be part of your day where now you're.

[38:00] Pick Pack ship person so we get a fair I would say the things we actually get that are in stock.
You know a pretty material 5 10% there's usually some kind of error like we've been sent someone else's stuff or they did leave something out or you know if that kind of thing so.
I know there's this kind of glassy omni-channel all your problems are solved but I found that most people really just don't do this for a while what are there any industry stats that you see her on that or.

Jason: 
[38:31] Oh yeah so you're for sure right then did most people when they first do it totally suck at it in the one thing I would say is that there is a maturity curve there and when people get over that curve and get good at it,
the customer satisfaction with the experiences very high so I would say like the.
The benefit of being excellent at both of those experiences at at ship from store or buy online pickup in-store.
But the potential upside is is true and very high, it's.
It's easy to do it poorly and most people start out doing poorly so first actor.
You're you nail that in-store inventory is a huge problem industry-wide and retailers never.
Like the primary impetus to have super accurate inventory was.
Was really your balance sheet for the most part like people don't even like purchase based on their inventory levels in in many retail stores in the old days.
Inside like these experiences are the first ones to really put pressure on inventory accuracy in the store.

[39:37] Inventory accuracy is getting way better there's both both machine learning and newer inventory systems have made it much.
Easier for stores to get better at store inventory most of the big retailers now both Target and Walmart have robots running around the store taking pictures of shelves.
And they're taking inventory based on this picture so they've actually taking people out of the equation,
we're starting to see some new store concept that have intelligent shells so they can actually the shells take their own inventory and no right when there's out of stocks and things like that so the future of inventory accuracy is getting better,
but at the end of the day almost every retailer I've ever worked with it started as a ship from store program started out with horrific metrics and so you know usually you have this,
this error code item not found and you have this you don't sort of,
percentage fulfillment like of all the orders I sent to a store what what percentage got filled and it's,
totally common to see 50% of in-store orders be item not found or you know only be able to have a 50% fill rate when you first start shipping from store for,
because of the inventory issues in the Employee Staffing and incompetency issues and I'll and the customers having the inventory and their Card issues all those things you can have huge failure rates in there and that creates a hideous customer experience,
I've seen 90% item not found or 10% fill rates in some customers when they first want ship from store.

[41:09] But if you many of the same customers I worked with it started out at 50% fill rates are now it like 94 96% fill rates,
so over time they're able to put systems in places and process in place and be smarter about when they send the order to the store and trying not to fulfill when they have really thin inventory and only one in stock,
and by implementing all those things the fill rate goes way up and you can today absolutely look at a Target and Best Buy and see that they're generating a meaningful economic advantage against Amazon,
by being able to ship at a significant portion of their e-commerce but business from the store one zone get it to customers fast and cheap.

Scot: 
[41:54] I'm learning a lot from this we should get that list of questions for Julia.
Guitar chorus is the P silent or talk how do you think about singles day are there some retailers who take part of the vent in the US Amazon focuses more on Cyber week,
and doesn't really do anything on single stay why is that.

Jason: 
[42:20] So great question will be talking more about this I am not bullish on Singles day becoming a global holiday that's.
Heavily the big factor here in the US and then there's a variety of reasons for that it already is a holiday in the u.s. is Veterans Day which is,
somewhat problematic for turning it into a high-volume shopping day Alibaba just doesn't have a significant presence here at the moment,
you know said they were they were years when when,
Alibaba was having huge success in China and they're making noise about next year is going to be a much bigger Western holiday and.
What that's morphed into in my mind and perhaps we'll have them on the show here in the near future to defend themselves is,
they're they're making it a much bigger deal for us Brands largely to sell to,
Eastern consume customers that are celebrating singles day so I think it's because singles to become a huge event for a lot of my clients for example,
but it's because they're selling to customers in other markets it's not because they're selling in the US,
all that being said you know I think it is possible to to create a new holiday here certainly Prime day is it is,
a great example in the in the west but you know another interesting one is,
Cyber Monday has become a very big holiday in Europe and as most of our listeners are probably aware.

[43:57] They're not celebrating Thanksgiving in Europe so it is possible to create these shopping holidays I just think the dynamic of trying to create a holiday on Veterans Day a couple weeks before a very traditional shopping.
you know for non-income and Company is is a rolling a rock up a pretty big hill.

Scot: 
[44:21] And I will be a little facetious and Amazon does participate in.
I'm single stamp but they do it in China so Amazon runs T-Mobile store in China and they saw other devices there and it just shows.
China's interesting to me we talked about Amazon all on the show cuz it's the one area where Amazon has not been dominant then you argue with either the number three or four player in China.
And it's because Alibaba has really kind of dominated with a.
Different local way of doing things that that Amazon I wasn't able to replicate so because of that you have some really weird things that must be kind of painful for Amazon tap to do but example as they do sell Auntie mall now and then,
they do accept Ali pay so this is the one.
Region where you know Amazon doesn't control the entire payment world so I can the US they don't take Paypal because they have the power to kind of say no we want all that to flow through our system so.
Little car fun fact for you if you didn't know that.

Jason: 
[45:23] I did not know that the only part that's pretty funny.

Scot: 
[45:28] And then the last question so Melissa Burdick another kind of friend of the show.
How is the bankruptcy of Toys R Us going to impact Amazon this holiday is it going to be a bloodbath and pricing with,
Toys R Us cutting prices at the stores because the bankruptcy in an Amazon matching and then this kind of Race To The Bottom.

Jason: 
[45:49] So interesting question unless confident in my answer here but I think there's two,
two issues is this holiday. Going to be a bloodbath of discount pricing number like regardless of Toys R Us like are a bunch of retards going to start you know early and aggressive discounts and is that going to drive.
Pricing down for the whole holiday. I think it's an open question and frankly I'm very nervous about that like all of the the early forecast for Holiday are for,
for pretty significant growth and robust sales and the unspoken truth in a lot of those is most years we have that kind of growth it's because,
we sold stuff really cheap and discounted really deeply and potentially because we had too high of an inventory position and then you don't have to Discount more deeply,
so I think the fact that there been a bunch of bankruptcies and More Store closures than usual this year and more distressed inventory his,
has flooded the market and that that's cause more inventory full price inventory to get abandon on the shelves so I do think we're going to go into this holiday season with retailers in a little bigger inventory position than they'd like.
And so I'm just frankly concerned overall,
that then it's going to be heavily promotional holiday. What we already seen some early indication that it was going to start their sales super early,
so all of those things could just turn it into a bloodbath not because of Toys R Us current current bankruptcy status.

[47:19] Actually think.
The Toys R Us in the current status has a disincentive to aggressively promote like the stores have to operate profitably over a holiday,
and so I think they're not going to be the first one to drop their drawers on price like I think if they become really aggressive and promotions it's going to be later in the season,
as they see how the the holiday is is shaking up but I think the.
At this point they're not looking to liquidate inventory or those kinds of things like I think that's,
you know if they decide they have to close 300 stores and they hire Gordon Brothers 2 to come in and liquidate inventory like that that potentially create a bloodbath but I don't think that's going to happen until 2018,
so I kind of suspect toys is not going to be the the fuse that lights the.
The the discounting fuse but I'm not sure that we we aren't going to see a bloodbath nonetheless.

Scot: 
[48:24] Yeah. I would just add I'm an e-commerce software guy and I've learned a lot about retail over the years that I didn't know and I know Melissa used to work at Amazon so she.
Definitely got kind of a similar kind of DNA on the digital side.
And does really good Bloomberg article that will link to in the show notes that talks about how all these retailers these traditional retailers have really loaded up on debt,
and you know what what happens is they get acquired by private Equity Firm and part of their model is to take the Assets in leverage them pretty highly meaning piling on a fair amount of debt.
And what does this done is left.
The entire segment pretty exposed to a Destructor like Amazon because in in Toys R Us has a good case study that you brought up,
so Toys R Us has something like four or five billion dollars in debt and this debt comes in these tranches so you have all that dead out there and I'll have maturity dates and,
Toys R Us couldn't actually deal with about 400 million of that which is what pushed him into bankruptcy so what happens is when you yo so Amazon has no debt and you a lot of retailers argue that she doesn't even care they don't make a profit.
Talk about down the show but what what happens if you have a competitor like that.
Come in and make a pretty small impact on you so maybe you'd lose five or 10% of sales doesn't feel like that would really.
Australia upside down.
What's Insidious is Amazon it knows everyone's margin because they have all this data and you may lose 5 or 10% of sales but that's probably your most profitable stuff and maybe lose 15 or 20% of a profit.

[50:02] Are Eva. And that's what this debt is all priced against is.

[50:07] 1015 years ago when this debt was piled on everyone assumed that your profit margin would be the same.

[50:14] And then you have a new competitor, long.
And they're able to Chisel a enough profit that it really tips you over so this article doesn't really good job of kind of,
because really in-depth and looks at at that which is pretty interesting and has a whole map that shows kind of the hot areas and the whole point of the article.
Apocalypse is just getting started to date when will you get from a debt perspective it looks like we're just at the beginning of a bloodbath the thing I've learned in this was too I guess we had on the show is.
These at the mall level Aldi's anchor tenants effectively don't pay much in rent and there are because the word anchor they're there to draw other people in,
what happens if so let's say you're a small mob a store and one of the anchors goes out of business usually is written in the lease that.
Because you were drawn there by an anchor if an anchor leaves you.
You are now free from your lease so these balls are unwinding at a pretty incredible pace and.
There is a I don't follow it that closely but there's a lot of rumors that some of them are going to be sold and the mall for large Mall reach because they are in such a stress situation so.
So so this kind of gets Amplified didn't did these things are not mutually exclusive so now you have stores at malls that are anchors and have huge debt and if it's caused this kind of death spiral that's happening there.
At the mall level is kind of what I called Mulligan so interesting things that I wouldn't have learned about until the podcasting and try to understand what is going on out there.

Jason: 
[51:47] That's why everyone should start a podcast.

Scot: 
[51:49] Absolutely or listeners last question so this is from James lecourt how do you see augmented reality playing a role in e-commerce and when do you think it will be mainstream and accessible to the smaller retailers.

Jason: 
[52:04] Another interesting question James we've done aviare are deep dive and I think Scott and I are sort of an alignment like VR is,
truly interesting for some other reasons but I actually don't think it's it in the near-term very relevant to e-commerce I think augmented reality is potentially.
Way more relevant but it's I think most of the use cases in Commerce are actually digital in-store use cases.

[52:33] So warning more about getting more of the digital content to learn about products when you're in a physical store augmented reality in e-commerce the big use cases you think about are things like.
How will that art look in my house will that furniture fit in my house what.
You know what would this clothes look like on a a virtual representation of me or me and this me or these kinds of things.
And what's interesting the.
Rudimentary version of that technology is all out there oh I should mention the like virtual makeup stuff when beauty stuff which is has become quite good.
So that the technology is all out there it's involving very quickly and so both Google and apple have really robust.
New AR kits building in the latest version of their operating systems.
And you look at the kind of experiences you can have on those those devices these latest devices that are using these they are kids.
And you go man that's really compelling so if you have an iPhone 8 or an iPhone 10 I'd highly recommend you download this app called House craft.
And how scrap uses AR to place Furniture in your house and it's it's amazing it's much better than some of the rudimentary stuff you've seen from.
Some of the retailers Warby Parker has already leverage the AR kit in their app.

[54:07] For virtual try-on of sunglasses and so you think about the face recognition technology that's in the iPhone 10 and the hundreds of measurements it's taking your face.
Warby Parker take out of the AR kid all of those measurements put them into a deep Learning System,
in recommend sunglass frames to you that are best suited to your face,
and it creates an amazing AR experience and so you look at those things and you go man that is the future that that really is going to become mainstream,
but then there's a big Debbie Downer in terms of how fast it's all going to happen,
does AR kids only work on a small percentage of the hardware that real people own right so it it only runs on the the latest and greatest Hardware,
so we have to wait for a couple upgrade Cycles to everyone,
I want to get up to that that hardware and then at the moment those best experiences are really only deliverable through apps,
and we've talked about this a lot on the show as well but for most retailers in for sure for small shops,
it's next to impossible to get a a meaningful volume of customers to download and use your Mobile app and so what we really need is this robust AR capability to to be available in the web browser,
not in the app and it is coming it's just still probably a couple years away so I think right now we're at the point where.

[55:40] On the Best Hardware in an app customers are seeing experiences that really can drive conversion and sell more stuff and I think we're going to see more examples like the Warby Parker app that are going to be very very persuasive but it's probably another 3 years before,
the majority of consumers have that capability in a web browser and that's when it becomes really meaningful for those medium and small size shops.

Scot: 
[56:03] Yeah and I would add another challenge for a small size shop is the 3D models so,
to put your products into this 3D World you have to have models of them and this is not a trivial skill set for folks to have and there's not a great solution for just kind of imagine you ran I don't know,
sports store and you wanted to put everything into a virtual world there's no really good off-the-shelf solution for kind of scanning that stuff that,
a mere mortal can handle and build the models so that's another one is like how do you partner with this assume your retailer multi-brand retailer you're going to partner with your Brands and they're going to have to have a level of sophistication where you call and say hey I really need 3D models for all your stuff they're going to have to know what you're talking about how many brand struggle just to get you the.
Current tenant to the digital assets so that that's going to be an interesting challenge to see who solves that because you could end up in this scenario,
because worst laws applying all these other things that pretty quickly we get the hardware as Jason mentioned all that stuff solved and it's pretty easy for you to have a platform but you just don't have the assets.

Jason: 
[57:11] Yep and although I would point out just got you take that the that iPhone 10 sensor array in the Notch and you put it on the turntable and you suddenly have a pretty darn good cheap 3D scanner in so,
you know,
you you could imagine that the ability to to 3D scan and very high-quality at very well cost is something that Moore's Law is also going to deliver to us over the next two or three years.

Scot: 
[57:38] Cooper we really appreciate it when asking the questions there and we have about 5 or 10 minutes to catch up on news and it wouldn't be a Jason Scott show without Amazon news.

[58:03] Jason you had let's kick it off of you you walked into your Whole Foods was that today or yesterday and you had an interesting situation tell us about it.

Jason: 
[58:15] Yeah that was today so there's a nice,
two-story Whole Foods in my neighborhood downstairs is a very fancy coffee shop upstairs at the store and when I walked in the store today a big chunk of the coffee shop has been taken up by these.
Temporary walls with all this Amazon signage and it looked like they were implying some kind of shopping experience was coming and that I got a chance to talk to some of the,
the employees that we're doing it and it turns out they are this is a permanent installation.
It's going into a bunch of Amazon stores in Chicago and it it basically is a Amazon device store,
it's going into Whole Foods so another you know men's staffed place where you can go and get a echo demo or a Kindle demo or a fire.
Demo and it sounds like they're going to have inventory for sale in the store and in ready to go.

Scot: 
[59:14] Cool Sorry Amazon bookstore has that like little apple like section so you're kind of fishing it'll be like that couple tables.

Jason: 
[59:21] Yeah and in fact I got to see the pictures and they look like they're straight out of the Amazon store.

Scot: 
[59:26] And then there's also a nursing news where I forget who broke this but,
Amazon is doing the nursing thing so if your third-party seller and Amazon to text that your price is a competitive what they'll do is they'll actually discount it and it says,
sold by the third party seller but then discount provided by Amazon so,
you know Amazon is pretty well known in history that they monitor prices across the internet in near real-time so I think what's happening there is they probably realize they were expensive in a couple areas especially that,
part of the curve where they rely on third parties to sell things someone exclusively and they decided they.
Wanted to not be disadvantaged there so they're actually funding that and it's a nursing so you had on average are going to pay as a third-party seller you pay Amazon 10% but then they kind of are selectively say you're effectively In-N-Out.
The ones I've seen have been under 10% but they couldn't hear you actually go beyond that and say that we want to be competitive enough here that will fund even pass what the third-party is selling to us.

[1:00:37] Actually figure out how to do a Google Search and Google Nexus Amazon.
Pretty much real time and I found about 3000 items that that had this set so this is out of Amazon's like four or five hundred million this is not a huge thing at this point but the thing I thought you would find interesting is.
Everyone I can I did look at all three thousand but I page through pretty quick they were all in the beauty category.

Jason: 
[1:01:01] Yeah it it was super interesting and clever so obviously is as most of the regulars that showed no Amazon has a pretty sophisticated pricing I'll grab them on their 1p product,
and you know when they sense a competitive situation they're they're very likely to be a fast follower,
and they they see a lot of advantage in overall customer lifetime value even if they have to sell something at very narrow margins or even negative margins in the short term and you know the liability traditionally of the marketplaces you,
Amazon doesn't have control over the pricing of that 3p product and so then you think about hey what are some categories that Amazon doesn't compete in in 1 p,
but would really like to control prices in the 3p and you know there's certain kinds of products that that are tougher Amazon,
and one of them would be like private label Cosmetics that have no interest in selling on Amazon but they want a third parties and gray marketers will by and and list on the Amazon market so that could actually be like,
Ulta products.
That should be exclusive to Ulta that's on the Amazon Channel and this tool gives them an opportunity to gives Amazon an opportunity to get really price competitive on that and,
you know and in many cases that grey market product.
Like the sellers are relying on selling because of convenience and so they often aren't super price competitive so this is a way for for Amazon to offer a competitive price in those categories were.

[1:02:32] It wants to compete in the long run so that that's pretty clever but was interesting is there's a bunch of.

[1:02:39] Not obvious unintended consequences of this program and it it's going to be funny to watch them all play out so there's all these things you wouldn't think of that initially but I'm sure Amazon stock through.
When is something like returns so you know the seller offered offered a cosmetic 450 bucks Amazon discounted at 2:40 bucks.
The consumer only paid 40 when you return it.
You know Amazon has to refund part of your money and that seller has to refund its at all that stuff has to work out.
But another big one is some of those sellers.
Either have the other authorized sellers of a product they very likely have you know are complying with some some pricing requirements from.
From their supplier so they they might have agreed to offer prices.
Only at map price minimum advertised price in Amazon potentially could be discounting below that minimum advertised price so even though the seller is complying with their their pricing agreements.
They're involuntarily out of compliance with that agreement because of this Amazon discount and I think another scenario is.
Sellers that a promise to offer the same price to multiple marketplaces and then Amazon discounts at so effectively they're no longer complying with that agreement and so.
You know those are all going to be some some that potentially sticky situations it's going to be interesting to see if any manufacturers come go after their sellers.

[1:04:16] As a result of Amazon's price Judo.

Scot: 
[1:04:21] Yeah yes, interesting to see how this plays out their solutions to these things so if you know you can imagine that if you don't want Amazon to do this there could be a knocked-out kind of thing and they've done that with a bunch of other programs,
all the things are solvable but it is pretty interesting to see Amazon do this and you're there must have been some pressure in the beauty category that cause them to think about doing this.

Jason: 
[1:04:45] What other things maybe is an opportunity for someone out there like maybe Channel advisor should do it but if you were a seller that used to be selling that good at,
50 bucks and you were competing against guys that were selling it at 60 and you suddenly see that Amazon is dropping their price 245,
there there's a strategy of optimizing,
your price in order to entice Amazon to discount it as opposed to trying to compete for the buy box yourself.

Scot: 
[1:05:15] Yeah I don't even know if you as a third-party seller know when this is going on I don't think you get notified other than by seeing it on the site.

Jason: 
[1:05:22] I think you have to have a side scraper that would do that for you so I'd it's a complicated sonar.

Scot: 
[1:05:27] Yeah and Amazon to really good at shutting this down or so I've been told the so.
In one of the biggest things in the news this week that was really interesting was Amazon private label and on episode 103 we did a deep dive in Amazon private label and what's exciting this week is the Deep dive.
1 things that inspired us to do it was there was some rumors that they were going to be competing with Nike and UnderArmour in the kind of athleisure and apparel.
Sports apparel segment.
True Amazon fashion some of those actually watch this week so it's kind of funny I think these things hit the Press like either Amazon just incredibly fast or are they only get wind of it right as it's at the end of its cycle.
So so this week there's these things get discovered too so you can actually go watch when Amazon files the.
The trademarks for one of these in the news somewhere lawyers and a lot of investigative reporters that dig into this so the two Brands and will put links to these in the show notes can we do that.
Jason are these two wacky to put insurance.

Jason: 
[1:06:37] No I can't I put them in the show notes.

Scot: 
[1:06:39] So so the first one is so there's three in the Sporting Goods category Rebel Canyon.

[1:06:46] Two words Peak velocity two words and good sport one word and I mentioned it in the show.
How do you how do you know and when you consider these to be officially a private label and when it has its own kind of logo and a fair number skews I do it all these meet that criteria,
ceramic Canyon is a mix of prime exclusive and it has some nine Prime exclusive,
divide 131 items and it's mostly men so it's men's sweatpants shorts and sweatshirts and these are on the inexpensive side so these are kind of like,
$30 kind of competing with that champion level of sportswear and then Amazon describes it as a way of life in a stallion,
we're on the regular.

Jason: 
[1:07:31] Or Scott and I call them work clothes.

Scot: 
[1:07:33] I called Misses catch.

[1:07:38] So it has a little bit of women's to velocity is.
You can touch more experiment is prime exclusive there's only 7 skews and then this is kind of higher in sweat.
Scot stuff so there's like an $80 hooded fleece jacket so I have some more fleece in higher in kind of quality.
And then it also has moisture wicking in breathability who does that sound like.

Jason: 
[1:08:04] Yeah that those keys are exactly in Under Armour wheelhouse.

Scot: 
[1:08:09] I've seen people kind of actually find the corresponding Under Armour and Nike shoes and the similarity is Eerie another one is called good sport and this is the one that's all together one word goodsports does have humpback.
Capitalization these are prime exclusive there's 32 screws out there as of this recording this is quote-unquote men's and women's moisture wicking your athletic wear so very interesting and.
You know some of these folks on Wall Street a pretty interesting they actually can kind of figure out the supply chain and what.
I read an article that said that these are coming from Taiwan and they're using a manufacturer called make a lot industrial and.
Eclat textile and these are two of the largest producers for Nike and UnderArmour so.
Yeah this kind of Outsourcing things to China in a way as is kind of.

[1:09:05] Backfiring a lot of Brands because the same factories are working directly with the Amazon cutting out.
The middleman which in this example are the brands themselves in selling these things with an Amazon brand on them.
Two quick other ones so another thing that was interesting is and I didn't know about this when I saw Wayfarer stock go down like 5% one day and I was kind of like that why.
What's going on there and what happened is people found that Amazon also has launched to Furniture private label brands of the first ones called rivet and this one is.
Pretty robust so has over 800 skews and it's called stylish and versatile mid-century modern furniture and decor this is very much out of my wheelhouse so I don't,
I don't know I'm not an extra on this at wear sweatpants is very much in my wheelhouse these are the kind of talk about being exclusive on Amazon free 30-day returns in a one year warranty so that's pretty interesting just called rivet.
It has an interesting little logo Amazon usually just use the word and kind of an interesting way it's called Stone and beam this is furniture for comfort and durability let's see the.
When will she analyst talk about you know the the compared sofas rivethead kind of $700 sofa and Stony being was more like $1,000 so far is kind of way to compare those installing a beam has A3 year warranty wears rabbit has one so.
Interesting as I was poking around on these things I was I was actually trying to replicate that finding the same.
S'mores kind of skew with Nike and UnderArmour so I was searching a fair amount for Nike you know how I Amazon they have the whole.

[1:10:45] Frequently searched people that search for this brand frequently search for these so I was searching for Nike and they said people that search for Nike Free going to look for pink philosophy Rebel Canyon and good sport has come like a man that's kind of scary.

Jason: 
[1:10:58] And especially since it's impossible that people are frequently.

Scot: 
[1:11:01] Yeah I have a feeling they're not.
And then last little piece on this I guess two little things so Amazon puts out a little bit of a holiday gift guide and,
very high especially at the Fashion section of that gift guide are all the private label Brands so you flip through there and there's a lark and Ro which is the women's fashion lovely tote which is their handbag to fix witches shoes and accessories in an Amazon essentials on the basics are really highlighted in there,
and in the Fashion World this is got Brands pretty much all twisted up I I don't.
All the second hand from some articles but it seems like it's really got people agitated.
The last one in the private label stack is cpg you and I have covered this Amazon put a diaper out there and then they yanked it off the market,
quickly they weren't happy with the quality and got some bad reviews there now put the relaunch diapers and,
the article I read actually went and said it kind of names the old manufacturer I don't remember and then the new one is like Kimberly-Clark which is evidently a manufacturer a lot of these these diapers so,
inner ear shows Amazon is really focusing on this private label area and they're willing to be patient and grind it out and find the right products and keep just kind of chewing with this.
Seems to be pretty strategic form.

Jason: 
[1:12:25] Exactly and baby geek is wearing MamaBear diapers right now so we'll be looking for the the full review of that in a week or two.

Scot: 
[1:12:32] You're fast on that man.

Jason: 
[1:12:36] I think you can't just order them yet I think you have to it's a prime exclusive and you have to request it and my wife was nice enough to do that for a test market so we have a box of them here now.

Scot: 
[1:12:48] Cool.

Jason: 
[1:12:50] Well Scott it has happened again we've used up slightly more than are a lot of time but great conversations I particularly like all the questions from listeners and we'd love to keep a dialogue going on her Facebook page so if you have any,
thoughts are follow-up questions about today show or questions you'd like answered on the future show we'd love to,
meet you on Facebook and and let us know what you're thinking of course if you enjoyed Today Show we greatly appreciate you taking that couple minutes to jump over to iTunes and give us that 5-star review if you didn't enjoy Today Show you're welcome to call Scott and give him your opinion in person.

Scot: 
[1:13:29] Thanks everyone we really appreciate this questions and I look forward to keeping the conversation going.

Jason: 
[1:13:35] And until next time happy commercing.

Oct 31, 2017

EP106 - Amazon's Q3 Results Hot Take

This episode is a hot take of the Amazon Q3 Results as well as a few misc pieces of news

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

Episode 106 of the Jason & Scot show was recorded on Sunday, October 29th 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 106 being recorded on Sunday October 29th 2017 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 wow what an interesting week it was in the world of retail and e-commerce.
It really showed this tale two cities that we've been talking about Jason you had JCPenney pronounce a miss and their stock took a 15% haircut.
And put pressure on all the other department store stocks.
Not news you want to have heading into the critical fourth-quarter then over in this that's the analog side of the story so does that say.
One of our cities in another cities which I called digital City it had we had Google Microsoft and Amazon and it's really weird but this.
This quarter they lined up their announcements all on Thursday,
and each one of them really handle a blue away expectations so Friday Amazon Spike $228 and its about $1,000 stock before then and now its about 8.
$1,200 stock that's a 13% jump in one day which is the most of that group of folks that that announce Google.
In Microsoft and Amazon.
You know what happens is there was an acceleration in the third quarter of both growth and margins that stunned many Amazon Watchers.
But for our listeners it probably wasn't a surprise because we have really been seeing some bold moves from Amazon especially since Prime day at this quarter.
So in fact Amazon usually Falls within this guidance that they accept the quarter before and they really blew that away by about 5% this time in this episode we are going to do a quick take in.

[2:13] Dig into the reasons why.

[2:29] So today we're going to spend the bulk of the show digging into Amazon's 3rd quarter cuz I think it's really important for everyone in the industry to understand the Dynamics that are setting up in both the online and offline world as we head into the fourth quarter.
Jason how are you doing.

Jason: 
[2:45] I am doing it was exciting week with all these announcements going on and I'm a little sleep-deprived cuz I had to get up at 3 a.m. in New York to get my iPhone orders in.

Scot: 
[2:57] I did the same thing how did it. I know about half the people I know they did the that within the set of people that did 3 a.m. only about a half got an order off were you able to get an order in.

Jason: 
[3:08] I did I would give it a I was 142 so I I was intending to order a phone for myself and my wife and I should mention.
In my wife's case it's kind of part of her birthday package so it was somewhat more critical and my wife and I are both in there.
Annual upgrade program which like frankly the main reason we're in that program is because you're supposed to get priority.
For that the new phones so we have both pre-qualified for the next phone earlier in the week so we did like half the the ordering process.

[3:44] How you do a week in advance got up at 3,
was not able to order my wife's because it turns out you have to do it through the store and the app did not like me changing Apple IDs on my phone to her Apple ID to place her order so,
kind of suckly I had to use my Apple ID and place my order which went super smooth and I have my phone coming out on Friday.

[4:12] And then I had to call my wife who is sound asleep and wake her up and talk her through placing the order on her phone and she was also successful but she got like 2 to 3 weeks to every window so now I'm I'm dreading the fact that.

[4:27] My phone's going to come on Friday and her birthday phone is like going to come a week or two after that.

Scot: 
[4:33] Yeah it's interesting I was able to get I had to order for so I've got all of my phones have been waiting for the 10 so,
I got to off on Verizon pretty quickly and then to on Apple I'll be interesting they all say Friday so we'll see who can live up to those expectations,
it's funny I'm not in that program and those two people I know that are in that Apple program had a trouble with or treating her so excited before he let me put it in my car and it's already I just have to press a button.

Jason: 
[5:03] Yeah to their credit I will say in past bones it actually has worked out in our vanity but I I would 10 degrees right now it did not feel like it was expedited deal this time around.

Scot: 
[5:14] It seems like usually using the store work better cuz they would bring up the API is that the stories is fast and then the website was second with the seems like this time they switch those for some reason another weird observation there.

Jason: 
[5:27] Yes I tend to be hitting Refresh on both just too Archie had two iOS devices when logged in with my wife when I logged in as me and then and then the web browser and it we ended up using the store app in both cases.

Scot: 
[5:42] Yeah I need the cloud guy. The iCloud is so yeah it's tricky weak weaker sit daily.

[5:48] Speaking of Apple before we jump in the Amazon you did I saw on the twitterverse you did a really cool visit to the the new flagship store there in Chicago.

Jason: 
[5:58] Yeah just just last week they open their their new store in Chicago they've always had a big store on Michigan Avenue and so they move the store few blocks and opened.
The new the new Apple Store concept was it called the Town Square concept so they're there been a few of these I want to say.
The first one might have been in Memphis there definitely is one in San Francisco and all the new stores that are open or are based on this.
This this New Concept but this is the first one in the Midwest and it supposed to be there Midwest Flagship and that it is it is very impressive store the differences between the traditional Apple store in East Town Square stores,
I'm going to call it subtle.
You know this is largely the reimagining of the Apple Store under Angela Earnhardt who used to be the CEO of Burberry.
She came over to Apple.
And this is why Julie her concept and so the big thing is hey we're not just a retail store where at ounce where where where like the center space where people come to meet there's some controversy about them trying to own that.
That positioning a lot of City centers don't don't particularly agree that apple is the center of their towns.
Dave made the stores more organic so the genius bars go away and they literally have trees green trees in the store and it's called the Genius grow and so you know.
You used to hang out under the trees and meet your Genius who then takes you to a to a table to to help resolve your issue in the wet.

[7:36] You and I might have called shelves they not called The Avenues and have upgraded the displays for some of the the Apple products.
So I can the old days they wouldn't have a very elegant display for headphones and how to have these like beautiful white.
Wooden mannequin heads in the headphones are on mannequins they have wood grain modeled.

[8:00] IPhones that the cases are mounted to so you can see them the actual cases mounted on the on the shape of the phone you know stuff like that.
The the biggest new thing they've done those they have a big seating area in every store this kind of meant for just ad hoc meeting.
It has some interesting like saw sitting there like bean bags that are under stools.
And they have a a giant beautiful large format display and it's actually 6K resolution so super high resolution.
And they have community events and stuff there so so in this.
This new Apple Store what they did is they moved it from the middle of Michigan Avenue to sort of the the end of the shopping strip in Michigan Avenue right on the the river in Chicago.
And so they now the whole front of the store is a glass window facing the river at super beautiful they had concerts going all all weekend for the grand opening.
I'm in there you know doing graphics on the big screen and they had a band in front of the screen.
And tell Buzz there's actual wait to get in the store most of the weekend as people are coming to check it out and.

[9:10] When humorous but potentially sad unintended consequence.
Is these giant glass windows right on the river apparently were confusing the birds and so they started finding.

[9:22] Dead or injured birds that had tried to fly into the Apple Store and so now they're apparently.

[9:27] Making some adjustments to the lighting to try to help the birds figure out that they shouldn't try to fly into the store.

Scot: 
[9:34] Ouch that it was Town Square but not for the birds I guess.

Jason: 
[9:39] Exactly yeah so so.
You know you will get all this stuff and it's the merchandising is a little better again they they do spend a fortune on some premium materials there's like actual Limestone and there's.
There's a marble that comes from a single query in Italy and the amazing glass architecture that they do for all these stores.

[10:07] Interesting that's all part of the the brand experience which is a super important part of why Apple has the stores.
I have not seen any announcements about how the this model store compared to the previous model store and they actually.
Make any substantial changes in the financial metrics of the store.
It's not obvious that there's like dramatically higher converting experiences like it's a very incremental upgrade in in most cases and.
Specific to the Chicago store the Michigan Avenue store was never convenient right it's a huge tourist destination it's a huge shopping street but if you.
You know it's a really difficult or to drive to and certainly there's no parking there and now they moved it to a place where do I go there literally is almost no Road access so it's a very pedestrian access door.
If your interest in your walking Michigan Avenue it's easy to get to but like.
If you are a resident that would be the store you would most avoid because it's the logistics are super complicated and normally in retail.
You would you would you know desperately try to avoid those.
Does transportation Logistics problems but I think Annapolis case that that store is just really designed for the out-of-town visitors that are on Michigan Avenue and it is a it is a cool historic site that used to be at.
A young Courthouse vet but more importantly it was it was the site of the first settlers in Chicago so the first kind of cabin that got set up for it by a permanent resident of Chicago.

[11:38] Is now this this big guy Apple Town Square store.

Scot: 
[11:42] Can I get a smartphone.

Jason: 
[11:44] Exactly push me over the edge I ordered a bunch of iPhone tens although I Kyle met in my head I keep saying iPhone x.

Scot: 
[11:53] I have a problem that to you have this Xbox to do that and think over the years.
And then this is a nice Segway into our Amazon coverage you we were talking about this podcast to go where you were,
doing something on Amazon and it kept hitting you in saying don't you want to come to this pickup store you explored that further and tell us what you discovered.

Jason: 
[12:16] Yeah so I've been at this a literally happened while recording a show that I was you were explaining something and I was falling along on the Amazon website and I put something in my cart and it offered me this new.
Pick up an Amazon location option that I had never seen before.

[12:33] And that's because Amazon had his just opens to Dedicated pick up locations in Chicago and so.
Tired of these locations they had something very similar on a lot of college campuses they had these college pickup locations.
And these these stores are very clearly a close cousin of those locations and effect.

[12:56] If you look at some of the URL patterns that's it seems like they're kind of the exact same URL pattern as the the campus pickup locations but.
You don't need a school ID on these and then they tend to not be on campus so one of them is just in a high-traffic area in Chicago that happens to be.

[13:13] A little less than a mile from me and the other is right outside of DePaul University so accessible to the public but presumably also useful to DePaul student.
And I sent you the value property or is this is a Amanda location.
So it has specific hours with a bunch of lockers in side the location and so you can place an order on Amazon and have anything delivered to the lockers as opposed to.
Your home and you can also take your returns to that location and so you might be saying hey Jason Amazon already has a lockers all over the place including this whole food stores.

[13:49] How is it different to open a new a new location with Lockers in side in the big answer is most of the Amazon lockers that are unattended.
Will only hold your package for 3 days so you have to pick it up within 3 days of delivery or they take it back that's obviously cuz they have a finite number of lockers and they don't want stuff just sitting in them for a month.
I'm so at this pickup location near your.
Items can stay in the locker for for a little more than two weeks for 15 days and the reason they do that is because the items aren't actually in the lockers the lockers.

[14:23] Don't have backs.
And behind all of the lockers is a Amazon little mini Amazon storage fulfillment center so all your order is it shipped there held in this fulfillment center and when you walk in the store and scan your barcode saying that you want to pick up your order.
A human picture order from that that little storage area and put it in one of these lockers so your products tend to live in that Locker for 2 minutes.
Before the front opens and went in the front opens you can actually see through the locker to all the the storage stuff.
So in that way they don't tie up on the lockers they can accommodate a lot more packages a lot more different size packages but it does require labor.
And said to me that's a a little bit of a trade-off the unattended lockers you generally have 24/7 access to them.
These Walker's you can only get two in the stores open the stores open like 9 and 9 during the week and noon to 9 on the weekends.
So I actually did try my first pick up at like 10 a.m. on a Saturday and couldn't get it but it is it is interesting that the pickup.

[15:27] Is a significant part of the e-commerce experience it's become a big Battleground and we've seen lots of other Innovations around pick up.
Amazon's also rolling out these lockers that they call Hub lockers which they're providing two buildings.

[15:44] To allow package deliveries in the buildings and you know the Hub lockers don't just take Amazon packages they also take us in UPS and FedEx so they're kind of a utility for the building machine Amazon Footlocker's in all their Whole Foods.
Some sort of interesting side note on that a lot of the whole foods are in malls and a lot of the other stores in malls have contracts with them all that.

[16:07] Only certain that certain kind of product can't be sold by other retailer so.

[16:11] There now ain't like Target is enforcing those small contracts to not allow Whole Foods to have lockers that would receive products that are restricted from other sellers in the in the mall so that's been kind of a.

[16:24] A funny little thing we're seeing fly fight out and then of course this last week we've seen Amazon launch Amazon key which is.
Amazon having access to a Smart Lock that they provide so that a delivery person can actually come into your home and drop off your package and you can monitor them over an Amazon Cloud cam which is kind of their version of Amazon Nest cam.
And interesting Lee Walmart had announced about a week before that they had a partnership with August smart locks and they were doing.
Doing service similar programs or seeing all these guys make a bunch of new plays in new pickup models too kind of you know accommodate all the edge cases for people that don't have coming in.

[17:04] At their home or office and at least pickup location certainly seem like one of those and then of course the pickup locations also provide.
Four very easy returns so when you have a return you can bring the product in an open box or a no box.
You you can log into terminal in the store see your history order history so you want to return something.
And just throw the box in the print you a code right in that that store you throw your return into a poly bag you put your label on top of the polybag.
Drop it in the slot and generally within 10 minutes they'll have received that return you'll get a credit right away instead of you know waiting.
To mail it back to a fulfillment center you don't have to do any shipping or packing or any of those sorts of things.
Until the return Logistics feels like another area where we're starting to see a big e-commerce Battle Ground and once again the course Walmart announce these this mobile Express returns.
Which is sort of a similar experience you don't need a box you don't need to wait in line to return anything at a Walmart store so this seems like the the the new areas for fighting or are pick up an anniversary Justice.

Scot: 
[18:17] About how big was the Amazon pickup store.

Jason: 
[18:20] It's not a huge door I'd say it's about 1500 square feet.
I haven't been to both in Chicago yet so I've only I've only been to the one and you know there's definitely some like a couple motivated employees in there that are like trying to spread the word and I brought home a bunch of.
Amazon swag that was custom labeled with the address of this this location.

Scot: 
[18:43] Do they sell Echoes or anything like that I was just just lockers and drop off.

Jason: 
[18:48] Yeah I know no said no product merchandising whatsoever they weren't selling anything that none of the terminals in the store could be used to like browse the inventory or purchase anything so it's purely a post-purchase experience either pick up or return.

Scot: 
[19:01] Russia.

Jason: 
[19:02] At least for now I would say they a service they were heavily promoting and they actually had,
sidewalk signs and all these things is in Chicago we have a somewhat of a unique offering that I think Amazon starting to roll out to more places but we have same day delivery that is not Amazon Prime now.

[19:20] I'm still at work close enough to a number of fulfillment centers that a lot of items in Chicago you can order by noon and have delivered by 9 p.m. and the sets actually delivered by a fleet of WW2 Amazon employee so it's not the w.
It's not the Amazon Flex delivery people it's not UPS it's guys that work for the Fulfillment center driving stuff up from Indiana fulfillment center did it to deliver it to customers in Chicago,
and so they're kind of leveraging that same day service with these lockers to say same day pick-up in the locker right so you can,
you know order something before noon so like the locker for delivery and then 3:00 picking up that same day I actually found that to be a little bit annoying would actually like 5 hours from the main fulfillment center that most most goods come from from.
From Amazon and said that,
you know most same-day deliveries do end up getting delivered right around 9 sometimes 10 and the store closes at 9 so in my case,
I ordered a I did a test order at like 10 a.m. promise for same-day delivery and I got a notification at 10:15 p.m. that I could pick it up same day if the locker but of course the locker have been closed for now.

Scot: 
[20:35] We found a bug.

Jason: 
[20:37] Yeah yeah yeah so I Growing Pains.

Scot: 
[20:42] I wonder if they're working on stopping that 24/7 there's kind of working up to work to it.

Jason: 
[20:47] You would think it would certainly like you can imagine them adjusting those hours as they see demand and there are newer fulfillment centers that have open closer to Chicago so I'm somewhat curious if,
there is a plan in Works to shift some of that same day delivery volume to the the light closer Wisconsin fulfillment centers.

Scot: 
[21:08] They must love you guys cuz they're trying so much the stuff there so I'm sure they'll figure it out.

Jason: 
[21:12] Yeah or there's some senior Logistics exact that has an apartment here or something.

Scot: 
[21:18] We are just such a big Prime user they're doing it all for you.

Jason: 
[21:21] They're just trying to get off early mentions on the Jason and Scott show that's why they did.

Scot: 
[21:25] Just just listens and priming the pump.

Jason: 
[21:30] Masters of PR.

Scot: 
[21:32] Cool. Thanks for those those reports from the field always interesting to see what's going on there in the big city is shy town.

Jason: 
[21:39] Yeah hey I know we have a lot to cover but I did mention the Amazon key would you ever trust Amazon to have access to your front door.

Scot: 
[21:46] Don't think so I like the ones that give you access to your card like that doesn't really bother me at all like people putting stuff in my trunk but you know access to the house is just a whole nother thing.

Jason: 
[21:58] Yeah. I think that's that's been an interesting conversation is you know you know the trust issue has come up a lot and in many metrics Amazon is one of the most trusted,
companies out there and yet that still feels a little scary to folks and it'll it'll be interesting I actually saw me because,
just wave as people are using it but I actually saw the less blowback when Walmart announced it than I did when I was on an esta.

Scot: 
[22:24] Yeah yeah I don't know if the Walmart thing was as widely distributed.

Jason: 
[22:30] Know that I mean.

Scot: 
[22:31] May have been part of it.

Jason: 
[22:32] But even that being the case you got to give Walmart some credit like you know,
I feel like it's a moral Victory these days when you're launching customer experiences ahead of Amazon I mean it like Amazon may have gotten much more buzzed but they did have to announce a week after Walmart.

Scot: 
[22:51] Glory is.
I think he's really good at reading these tea leaves and getting in front of them I do want to try the Walmart quick return experience because it felt like an oxymoron when I was reading it cuz I've never had a quick return I've never had a quick customer service anything at Walmart.
It's getting worse like I got on my Walmart and I swear they've cut the number of cash registers down by half there's this like 56 Bank of cash registers and there's two people working at I don't know if it's just when I go to Walmart or something but it's crazy.

Jason: 
[23:19] Interstate yeah I can speak to that I know I was Eliza Express Returns part of the solution you do have to get to a person in so they have an express lane.
In customer service dedicated just to the end in my experience that can be super helpful but that can also have.
Unintended consequences right to my analogy is if you think of them TSA Pre at the airport so when it first launched in only a few insiders had TSA Pre.
You can fly through pre and it was awesome now you got two most airports and us and it's not uncommon to see the pre line being much longer than the regular line because everybody.
Is in the know right and so you know it'll it'll be interesting of if that Walmart Express return is heavily leveraged.
Well Walmart scale the lanes to support that or will it eventually get gummed up.
I will tell you just simple things amuse me but when they launched the service they had a bunch of videos showing the experience,
and in all the videos like a different Shopper you know gets in this fast line skips all the people standing in the slow lane and get their service,
and I I watch those videos and I'm laughing cuz I'm like wait all those annoyed customers in the slow lane or Walmart customers to and it's almost like 100 making fun of their their customers and best of all they,
they hired different actors to be the stars of each of these videos but the,
annoyed customer in the slow lane is the same customer in all four videos so I'm thinking that's the most crude Walmart customer of all time.

Scot: 
[24:52] And you know what's going to happen is when people see people he's not lying they're going to get in it and argue and be like well why can't I be in the Express on I don't know if it's not clear who gets to you.

Jason: 
[25:04] I'm the guy standing in the back of the line at Starbucks that then pulls out his phone and does mobile order and pay cuz I realize it would be faster than thought you could you can imagine some of that in Walmart too.

Scot: 
[25:14] Yep you and I.
Cool well we definitely want to save a big chunk of the show for Amazon's third quarter results and there's so much to cover we can probably go for three hours so I thought the best way to carve this up would look at some of our favorite.
Platforms if you will. Amazon has yours five areas we want to cover,
Court Commerce which includes the marketplace is the big one there's some interesting Wholefoods updates would be the second one,
wilted bits around the ad platform we want to cover that which is number 3 in the number for would-be Alexa and conversational Commerce some really interesting topics there and then fits his little bit of a catch-all just been resting other.
Nuggets that we kind of got out of the release so to be able to cover this and not have to go.
Define everything over and over again we do point you to a couple of our other episodes if you want to if we say anything in this.
Part of the show that doesn't make any sense to you then I would recommend going back to episode 24 which was our Amazon Deep dive we recovered a lot of these these topics and then.

[26:18] Episode 89 we did a deep dive on the Whole Foods acquisition and what we thought was going on there. And then also Prime day when I talk a little bit about that today but you can get Fuller coverage by going to episode 93.
So that at the high-level Amazon's revenues came in at 43.7 billion that's be billion which is 34% year-over-year growth and that beat the top end of Wall Street estimates by 2%.
Jason way this works is companies come out and whenever they release a quarter they tell you what they think the next quarter is going to look like that's called guidance they usually give arranged historically I think like 9 out of 11 times in the last cut off,
of those quarters Amazon is coming within the range sent you to give a renter Q3,
and historically there's like almost a 90% chance they'll fall in there this time that they actually came in way above their own guidance so,
Wall Street loves it when this happens that's called a beat and then with the company then gives forward guidance for that next quarter if that exceeds what everyone's thinking that's called a beat in a Race So This is a classic,
beating raised you know it's kind of a You Know Not only was it a beaten raise but it would kind of trounce both numbers top-line and bottom-line forward current all that stuff.

[27:33] You and I talked about this a lot there's a common misperception that Amazon is not profitable operating income beat expectations at 347 million Amazon doesn't really focus on the operating income is a metric they look at free cash flow and in that,
performed very well during the quarter as well as we look at it as we drill into the core Commerce peace.
Commerce retail grew 28% year-over-year growth,
so just kind of a line folks e-commerce is reported by Consular that's my favorite metric at about 15 to 17% year-over-year growth so Amazon the retail part of Amazon is growing twice the rate of e-commerce which is pretty impressive.
What.
Books on Wall Street loved is in the second quarter a crew 23% see how this kind of 5% quarter-on-quarter acceleration so you know if we were charging this out there would be one. At 23%,
YouTube and another died at 28% for Q3 so a pretty material acceleration of the business from second quarter to the third quarter.

[28:36] So as you and I talk a lot that's the revenue for the core Commerce peace and that hides the underlying gmv so.
GMB is when he's confusing things let me give kind of a little background before I go into some specifics,
the the way it works is think about Amazon is to businesses you have the first party business which is a typical retail piano they get things from manufacturers mark them up.
That's cause what they pay the manufacturer and then sales is what they saw them to the consumer so $50 which is marked up $200 revenue is $100.
Easy peasy what complicates things is Amazon has this thing called The Marketplace or what we slang and Industry call the 3p and what happens there is I take that exact same widget at $100 and now because the accounting rules this is not.
I get a lot of people to think Amazon's doing something 2 Furious it's just the the Gap accounting rules would Amazon sells $100 widgets through a third party.
The they can only recognize their commission which is about 10% or an issue call this their take rate so that same widget that if it moves from one penis 3p now Amazon only gets $10 worth of Revenue.
Just has the unintended consequence of hiding a lot of the impact of Amazon.
It would call that transactional value of that third-party that hundred dollars not the $10 commission which is revenue we call that gross merchandise value in the world of marketplaces all of eBay.
Got revenue is derived from transactional gmv a portion of Amazon's comes from 1p which where are GM vehicles Revenue in a portion comes from the third-party marketplace where Revenue equals.

[30:18] 10% of gmv because that take red so with that being said the.
What's frustrates people on this is Amazon doesn't really sees numbers and historically all Amazon would tell you was the percentage of units that come from third-party last quarter for example that was 51% that went down to 50% this quarter because you had one p got all the Whole Foods,
first-party sales in there so it cut it for the first time you saw things kind of go from 3p to 1 P from a growth rate but it's cuz of that acquisition.

[30:51] So starting in 2012 at Channel advisor we came up with estimates on GMB because we wanted to help retailers really understand this and and at least put a number out there that we thought was an educated guess.
So we go to the calculus of figuring all that out.

[31:08] What were you would end up with for example last year our estimate was about 277 billion just kind of put a number out there for for a rough estimate.
Then at the end of 2016 Amazon change their financial disclosures and finally started to release.
Did something called 3-piece seller service revenues and.
The trick there though is that includes revenue from the marketplace but it also includes all third-party revenues from performing.
And didn't really tell you how to split that up so there's this really wide range of gases that come out of there so so Wall Street now kind of takes that number and backs into it,
and they come up with an estimate of 200 250 billion for that same time. So.
The my way of doing it ends up at 277 they end up at 200 to 250 so you see these varying numbers to make it even more complicated.
In that metric Amazon doesn't count books as one p they move them to 3p if the publisher counts it that way so it has this weird.
Dynamic of of I I would not count that one of the reasons were off is they put a lot of the books over in.
3p and I think they should be over one paper anyways for the purpose of the discussion what was just think of it as you.
Between 200 around 250 billion last year just kind of put a number out there that the agrees with both systems of doing this so.

[32:37] That being said when you when you look at this what's interesting is historically first party has grown about 20% and third party has grown twice that pace at 43% maybe think about that for a second,
to me that's the part that really competes with both retailers so so you have.
Amazon's overall is growing 34% if you take out AWS it's growing at.

[32:58] The Commerce peace is growing at about 30% but then when you look at the.
The marketplace is growing at 43% so so really kind of interesting and something that retailers need to be aware of.

[33:11] But what's happening is it's kind of an iceberg situation so what we see in Amazon's quarterly numbers is the tip of the iceberg which is their revenue you have to unpack that to get to the third party DMV.
Add it to the first party DMV to get the total gmv and I think that's what matters because when Amazon third-party sells $100 widget.
Walmart loses $100 didn't lose $10 on in the same is true for grocery and everything like that so so the total gmv is what really matters isn't how we should be sizing Amazon.
So if we if we now look at the third quarter by my calculations of that 43.7 billion in the quarter,
about 4.6 was from AWS so we take that out so it's clearly not in this bucket and that gives us there's some other Revenue but it's really relatively small and doesn't change the calculation so essentially 39 billion dollars on this from the retail part of the business.
Of that 33 and a half is the first party which Lee's 5.6 billion dollars front for the third party so.
So when you look at it that way third-party is actually a pretty small percent of revenues you about 20%.
But then you have to take the 5.6 billion from third-party and x 10.
Because of the the 10% thing so now you have 56 billion in GMD from third-party 33 billion ish from first-party you had those together and you effectively get 89 and a half billion in GMB for the third quarter so.
By my calculations Amazon is effectively add in 90 billion dollar quarterly run rate from DMV that represents about a 360 billion-dollar average.

[34:51] Annual run-rate.
The u.s. is the United States 60% of Amazon so if you just want to look at to you as soon as I'm out of that 360 billion it's about 55 billion for the us and that gives the u.s. business a 215 billion run.
So so just let me kind of put that in terms that.
That makes sense so last year if you look at the third quarter on you end up with about 13 and 1/2 billion in June be so effectively Amazon Grew From 13 billion.

[35:27] You make sure I get this right you should have JC Penney who I mentioned at the top of the show there at 12 and a half billion dollar retailer with with.
1100 stores so Amazon affectively grew your ear if you look at the DMV between Q3 last year and this year at JCPenney plus an extra billion dollars.
The entire JCPenney not just online sales.

[35:51] And then what's interesting at the Q3 2014 billion run rate it's going to be effectively a 50% growth so.

[36:01] Joe Young Thug what it means is that Amazon will have if you look at the u.s. revenue.
E-commerce which I want to look at a couple of the numbers like for sure they have 400 billion in the US at this kind of run rate Amazon will take him about half of the.
Total online sales when you want to unpack the DMV and it's good because we're starting to see emarketer had some date out that started include the TMV a lot of people have if not really.
Done this the right way I think in the now more than where you're starting to see people unpack that which is good.
So going forward on Amazon put out fourth-quarter guidance.
Between 56 and 60.5 billion again that really kind of was way above what Wall Street was asking for the fourth quarter this implies that the low range a 28% growth rate in the high range 38% growth range,
32 at the midpoint.
You take that midpoint and you seem something similar to three metrics you're effectively get to gmv of about 110 hundred twenty billion,
45 of that comes from first-party 75 from third-party so.
You look at that you're of your growth what happens in fourth quarter for Amazon as they just really search and,
start to just take mass of share in the fourth quarter and then it kind of sustains going in the next year so effectively if you look at Q4,
last year verses where they're projecting just a midpoint of next year it's effectively two and a half JCPenney is that the effect.

[37:33] Gobble up in market share so and that's just at the midpoint if they come into the top range it's like three or four JCPenney's so I know I went to a lot of math,
the punchline is Amazon is growing is about.
Now it's more than twice as big as people think it is because of this hidden DMV under the surface.

Jason: 
[37:53] And it's important like I can't overemphasize half the media that covers Amazon.
Still get this wrong right and they still just the use Amazon's reported revenue and talk about Amazon size and it's like just fundamentally wrong.

Scot: 
[38:11] Yeah I wish Amazon would just give it to him being number but the interesting thing haven't watched Amazon for 20 years now.
Is one of Jeff Bezos his favorite classes was game theory in Game Theory you never want.
Anyone really know what you're up to and until you absolutely have to tell them,
there's a lot of case studies over the history of Amazon where they don't disclose things and they always play kind of funny games with math where they'll say so so for example we don't know how many prime subscribers there are they don't disclose the DMV should go back and do things but they got rid of some of my favorite ones that used to break down,
the difference between media and electronics and General Merchandise so we had an idea for how those two categories are going as a switch some of these new metrics they got rid of those so,
it's always this game of of kind of,
why people think it's in the Furious but what Amazon's doing is in my experience when they when they think they have a strategic Advantage then they try not to tell people what's going on in that part of the business stuff because they want to protect,
The Secret of that strategic management and I'll definitely put this market place as one of the top ones that they.
3 purposely do not disclose what's going on here because they don't want people to know how big this is.

Jason: 
[39:24] Yep and is it you sort of implied it but it may be as worth also stating that well it's possible to be profitable or not profitable in one piece else it's almost impossible to not be profitable in 3-piece house.

Scot: 
[39:39] Yeah if you the best proxy is Alibaba and eBay which are pure kind of marketplaces and those companies have like,
85 to 90% gross margins and then like 30 40% kind of net margins so you know a very profitable business of posited that the marketplace has been kind of cash cow that's really fueled started in 2006 all the way for the last 12 years that's what's fueled all the build-out in,
Prime wellness centers all that because it's a hugely profitable kind of a line that the Amazon his pets humble down.

Jason: 
[40:14] Yep and your point because they don't have to break it out they don't show The Profit just from the marketplace and so you you get a lot of the this narrative where they they have to share the profits from from AWS in there they're fabulous and so you get a lot of people talking about well,
AWS is the,
the the profitable component that carries Amazon and in reality this this Marketplace is almost certainly a much bigger and more equivalently profitable.
Business that that just say they don't have to disclose his ass as overtly.

Scot: 
[40:48] Yeah one of the one of the folks that really gets this is Mark Lori so he don't know the whole reason I started yet was effectually to go after this cash cow and then obviously Walmart has bought into that night,
after imagine he spends a lot of time internally kind of helping educate folks there that this is going on because if you're a traditional retailer in my experience there are even more kind of.
Blind but have a harder time getting their head around it because there's no offline analogy you know you can't point to something and say We'll look over there that's how that works cuz it's such a weird anomaly of the online business Amazon.

Jason: 
[41:23] Yep yep me you mentioned Prime members anything else we should cover on the the marketplace before we jumped.

Scot: 
[41:33] Quicken International really accelerated so it grew.

[41:38] North America grew 35% International Group 29 International a couple points due to the impact of currency exchange of so everything I say takes that out,
but I think the last quarter grew 26% so nice kind of quarter-on-quarter 26 to 29 per cent in the management team,
I specifically called out International AWS and Prime / Prime day is as the the key reasons that they beat their expectations so I'll kick it over you do for some prime coverage.

Jason: 
[42:11] Yep and that you did trigger I guess it one last piece of editorial on the on the growth of the marketplace so if you add up that hole general merchandise value and I think you said that that you got that.
Empire growth is somewhere between 28 and 38% so we call it let's call it 32% growth the.

[42:33] The second largest e-commerce site which is way smaller than Amazon in the u.s. is Walmart they last cup of quarters have grown even.
Much faster than that on iMac or so much more bass in so you think about,
man Amazon which is arguably half of e-commerce are ready and they're growing at 32% and yet the industry average for growth is about 15% and so the reality is.
There has not been a heck of a lot of growth for the rest of the e-commerce industry outside of Amazon.

Scot: 
[43:05] Yeah yeah I think small folks really struggle you seem eBay announce the results we didn't cover it specifically I think they're GMB grew five or six percent you know I think some folks had a surge kind of as they they played catch up but I think a lot of them are really starting to slow down as they they run into the Amazon buzzsaw.

Jason: 
[43:26] Yeah for sure and so as we talk about besides let's talk about prime prime is another one of those things that Amazon does not disclose as you mentioned in so it's left a lot of third parties to sort of,
estimate what the prime memberships are in there was a lot of Buzz and a lot of articles,
earlier this month I want to see around October 18th of the consumer intelligence research Partners released their updated estimate they've been doing an annual estimate for I think,
two or three years now and this year they're estimating that there are 90 million Prime subscribers,
which is up 25 million from their previous estimate right so they were,
what was that 65 Million last year and 90 million now answer that that generated a ton of buzz but I think you and I have taken that with a grain of salt because,
I'm not sure 90 million Prime subscribers really passes the smell test to me what about you.

Scot: 
[44:26] Yeah an enhanced again to it that's a u.s. number and there's the Census Bureau says there's 125 million households so that that would be like you know 60 to 70% coverage which feel tie,
now there's not I've seen studies that show that kind of coverage at the high-end so you don't,
got more affluent homes over index on Prime and they get up into the 67% but I think that's pretty aggressive to look at the whole us when,
what I read the Wall Street research things were Amazon Street clever and they say we have tens of millions of subscribers and then they always everything is always relative like.
It was our biggest day or we saw a 2X increase in sign on state they never give you a number when I,
there's a fair number Wall Street folks that run surveys Witcher are always tricky but they're going into the you have tens of thousands of people in the survey sand,
they they effectively kind of get to 60 million in the US and then another 30 internationally Prime hasn't been out in as many countries they're just really rolling it out to India for example most people.
The metric size C say 90 million total 60 us and 13 on us so that would make this number pretty aggressive because I think you would have to have another.
30 on to that that 94 International so you it would be like 120 million all in so I think it's it's an over.
Overstatement no one of the other things is.

[45:58] All the Wall Street people are looking at paid Prime there are some free Prime program so there is prime for students and Prime for moms so maybe that adds another 5 or 10 unpaid Prime members and their but he and I have a hard time getting that 90 million in the u.s. number.

Jason: 
[46:12] Prime for government assistance as well not to.

[46:16] Yeah and I I-10 and greet like just a couple of kind of benchmarks you can use to to just sort of check this,
which tell you that 90 million is potentially possible but highly optimistic so so one thing to know is the analog equivalent of prime memberships is probably Costco membership so I think it was by far the most successful,
membership base retailer out there and they have been phenomenally financially successful for a long time predicated almost exclusively on the revenue they generate from their memberships and Costco has 90 million,
members so,
you say hey if Costco could do it Amazon certainly could get there but it's doubtful there are ready there a particular you reconsider what,
percentage of the u.s. population have embraced digital shopping versus the the percent that have have shopped in brick-and-mortar right and that brings me to,
the second metric I like to look at the these Prime studies are not very big like this eirp thing I want to say was it a few thousand.
Respondents in my memory might like what's even say generously 10,000 there's a much bigger studies that study,
retail buyer penetration into the the the retailer in America that has seen the most us consumers is Walmart 95% of the u.s.
Coshocton Walmart,
89% of the USA shop in McDonalds. You drop down to like 85% at Target and then you get to some of these these retards that are ubiquitous but Target more fluent Shoppers like Starbucks has reached only 48% of the US.

[48:00] Despite how many Starbucks we see out there and those Studies have an Amazon is about 42 to 45% of the US have shopped Amazon so,
there's a good news bad news thing there if your Amazon you go man we're performing terrifically and we've only reached 45% of us so we have a lot of growth left but if they only reach 45% of the US there's no way they could have 90 million Prime subscribers.

Scot: 
[48:24] Yeah and they're so there's two metrics there's 300 people in the US and then 125 million households so I think it's the one you just said would be against the 300,
45 yet should be like a hundred fifty million people have shocked Amazon see what expect you to be hard for.
More than half of those two really be primary I'd be shocked so.

Jason: 
[48:45] Yeah nevertheless it was a interesting in the the Q&A after the,
the announcement that the CFO had to answer a number of questions and you don't want it one of the questions is,
hey how come you guys like see the guidance like what went better than expected and interesting Lee the cfo's answer was largely that Prime memberships,
outperform their expectations expectations and specifically that Prime day,
was driving a lot more Prime subscribers than expected and that,
that that was having a carryover effect throughout the the corners so that Dad is super interesting wheat of course in our Prime Day episode we've talked a lot about the real gold Prime day being to get more Prime subscribers and here we have some some evidence from the horse's mouth that that's,
exactly what it's what it's a exceed succeeding and doing.

Scot: 
[49:45] Yet even tired that International acceleration to Prime day being strong globally and getting a lot of global signups on Prime so the flywheel is Prime and Prime day is a way to remind people that it's out there,
getting pulled in that flywheel in and get the flywheel going even faster.

Jason: 
[50:04] Yeah and I might take away from that that's terrifying is just,
you'd expect that you know is Amazon girls they get more Prime subscribers at some point you hit this equilibrium where you've captured all the easy,
Prime subscribers and it becomes much harder to acquire new ones and here's the CFO saying hey we've had pretty consistent Prime growth,
and now we're seeing it accelerate and beat our expectations that that tells you that there's a lot of gas still left in this this growth tank.

Scot: 
[50:33] Yeah the other clue in the financials around us and again it's a little squishy but there is a line item called subscriber Revenue,
and this is another way Wall Street kind of takes that in in the inside subscriber you have the revenue that comes from Prime.
Which comes in many flavors now you have people prepaying annual you at like 99 bucks and you have monthlies go through here but then they have a number of other subscriber program so you have Amazon Prime music you have.
The book program I think audible kind of falls into hear some parts of Ottawa so it's a little again it's so hard to pick a part.
But what they said is the expression Revenue grew 59%.
Not your rear and that was an acceleration it was I think 53% in the last quarter so again that kind of correlates to what's going on there and then they talked also about.

[51:30] The echo so they said let's see.
Within subscription Services music especially is working really well with Echo we're seeing a lot of growth in that area as we increase the number of Echoes so you and I are both examples of this where you have to pay a little bit of an upcharge you get,
you get Prime music for free that were with your Prime subscription but to access it to your Echo you have to pay that $5 extra month this is one of those things you just kind of forget.

Jason: 
[51:58] A couple programs yeah you can pay 5 bucks a month to get it on a single Echo and they call this.
Prime music unlimited so it's a bigger category library and you can have it available in a single Echo for five bucks a month or they have a family plan which makes it available to,
on the mobile phones are five of your family members and to all the Echoes you own in in one household for 9 bucks a month,
so I suspect you and I are paying nine bucks a month.

Scot: 
[52:27] I suspect that's true yes I remember I started with the first one and then like everyone want to listen to different music and it would specifically tell her she can't do that and then I was annoying so we upgrade it is very effective.

Jason: 
[52:39] In the in the last quarter they also added a feature to to the echo that enables multi-room music for the first time so now you can,
you can email that same song to a bunch of different echoes in the same time or different music in each room it is become.

[52:55] Pretty cool in terms of music playing device.

Scot: 
[52:59] You're very so no seeing that capability to shoot music to where we want to but at a fraction of the cost.

Jason: 
[53:04] Absolutely and I'm sure it was not Material in these reporting but there's actually one news source of what I assume is going to go into the subscription revenue for the first time they have added a.
In-app purchase option for one of the echo skills.

[53:23] See you now can pay a premium if you're using the Jeopardy skills to get access to more jeopardy games.

[53:32] So I am not a big Jeopardy player on Echo apparently that's a big thing that I've totally missed,
but I guess by default on the free app you can play 6 rounds are Jeopardy a day and you can only play that days Jeopardy so,
now they blunch the service where you can pay extra,
to get access to as many games of Jeopardy as you want every day and that in and of itself may or may not be interesting to you but to me what's interesting about that is,
that means they put the mechanism in there to have,
in-app purchase revenue for Echo skills and when you look at the other app ecosystems out there like at the iTunes Store the Google Play Store all the big money is in these.
Free to download and an in-app.
Purchase options in so that that potentially is a whole new economic ecosystem that's getting added to the Amazon juggernaut.

Scot: 
[54:26] Yeah it's interesting there there's a big tie in when you're watching Jeopardy and always fast forward to the commercial said it,
makes you stop because it looks like you're back on Jeopardy but then it's an,
a 30-second Amazon Echo Jeopardy tie and Commercial and then a big fan of mr. robot and they're doing a really big,
think they're where you can the robots about this this devastating thing that happens on 59 so you can say Alexa what's the five nine news and it kind of like gives you news from the dystopian future so I don't know if there's any in-app purchase there but they're doing some really clever tie-ins with TV and then NFL and all that stuff's all tied together with the streaming part of what they do is just really getting to be pretty interested in an integrated with what they're doing there.

Jason: 
[55:12] And in The Coincidence Department it this week is actually the seven year anniversary of Watson winning that Jeopardy tournament and it it's funny to think,
back then they had to rent the building next to the Jeopardy Studio because the IBM Watson computer that that,
played in that that tournament was the size of the house and now of course there's a similar amount of processing power in the the new Google home Mini.

Scot: 
[55:41] Cool about Switching gears to your favorite topic grocery would what did you pick out early surround Grocery and Whole Foods.

Jason: 
[55:49] Yeah so a couple interesting takeaways it was only mentioned in the earnings.

[55:56] They eat a lot of people are asking questions and we're interested in the future plans and Amazon did not disclose very much about the their future plans for Whole Foods.

[56:07] Which going back to your point I think they like to play their cards close to their best when they can what was super exciting for the omni-channel nerds in the room is.
Did they did add a new line item to the revenue reporting so for the first time they have offline Revenue line.
And that the revenue in there for this first quarter was 1.3 billion.
Which is a predominantly their Whole Foods revenue and that's from a partial quarter so I think that's only about 30 days of the quarter that the Whole Foods was in the Amazon number in so I assume that's.
That's a new flavor of one Pier Avenue that shows up on this this separate line for physical stores the book store revenue is in that number I assume.
Amazon has some kiosks and pop-ups and other things I assume all those things are in that number as well but I think they essentially said that all those things combined are somewhat in material.

[57:03] In that number and sort of dwarfed by the the Whole Foods number so.
Let you know this this first quarter that's not a particularly interesting number but I think it's going to be interesting to watch it grow and.
I think enough quarters where Amazon makes big investments in growing the book stores which there are a lot of bookstore scheduled to open and maybe where we don't see a lot of growth that Whole Foods it'll be interesting to see whether that number moves at all.

[57:28] You know if it's exciting for me that that number is going to be in there in the future.
I didn't necessarily learn anything from this one it is interesting they are defining.

[57:41] Physical stores as when the customer selects the item in the store so if you.
Purchase something pick something out online and you schedule it for delivery to A Whole Foods.
Locker for example or to one of those pick up locations that I talked about earlier.

[57:59] That would that would still be considered an online purchase and that someone interesting because there is some variation in terms of different retailers,
omni-channel reporting what what order do they consider an in-store purchase versus an online purchase so Amazon is clearly said.
Brass it depends on where you select the item not words for Phil.

Scot: 
[58:21] The same day they always called the revenue net sales and now they call it online sale so so for the e-commerce people that's kind of exciting so now they have online sales and physical sales so pretty.
What is a Wall Street analyst kind of said well you know what what else can you tell us now you've had Whole Foods on your belt for a Whole 30 days about the future.
You're the CFO.
Again plays a pretty close to that said nothing to announce but I think over time you'll see more cooperation and working together between fresh Prime now at Whole Foods and,
we certainly seen that with the private label and it'll be interesting to see if if they leverage your for example we we speculated that that Prime now ability to do same-day delivery would be really nice,
you know Whole Foods has partnered with instacart it doesn't make sense for Amazon to.
Your fuel competitor they're effectively and use the prime now Network just called Flex to do same-day delivery so that was my read on that one I may be reading too much into it but.
But interesting to see what they're going to do now that had the integrated for 30 days.

[59:31] Another one that was too quick when I know we're Up Against Time the Amazon doesn't break out the ad business and we have talked a lot on the show about when we talked to brands,
especially especially manufacturers removing dollars from Google advertising over to Amazon and.
You'll see if I did give a little hint there so this lives inside of the quote on quote other line Amazon is specifically historically said advertising is the largest component of that there's a lot of dogs and cats in there I think there's some.
I'm so the audible stuff that's not a subscription ends up in there and you know what you actually look Amazon doing like 80 different businesses and a bunch of them kind of live inside of here if it doesn't kind of the revenue.

[1:00:15] IPhone to the previous categories.

[1:00:19] But this line grew 58% in the CFO explicitly said advertising grew faster than other itself which means greater than 58%.

[1:00:30] I'd be shocked if advertising wasn't growing north of 100% year-over-year based on annual anecdotally when I talk to folks this is the one area that.
Everyone is really excited and seeing really good efficacy and then inside of Amazon everyone's moving over to these teams which is always an indicator the hot teams to be on it Amazon are Echo,
private label and ads so you know I'd be surprised if it's not going well north of 100% so.
I look forward to the day when it grows so big that Amazon has to break it out, see how big it is I think it's going to shock people I think this is going to be this kind of you know next multibillion-dollar business in this could be,
really really really really bad for for definitely Google maybe in Facebook as Facebook gets to be a certain size.
Yeah there's going to be a fight for one of the largest groups that spends money in and that's Brands and Retail and it's going interesting to see who wins this advertising Dollar Battle.

Jason: 
[1:01:28] Yeah I will say it's I have a feeling in the short run is going to be a mixed bag because that the estimates I've seen our kind of already in that 1 billion to 2 billion size business and in,
I'm I'm sure you're right that that Google and Facebook,
hate seeing a third player have a meaningful presents there but in some small way like again let's go let's be generous and caught two billion that that's still pretty small compared to Google's 90 billion,
so for now it's not a hugely material competitor and I have a feeling with some of the antitrust conversations that are likely to come up in the the next couple years at Google and Facebook,
don't be surprised if that the people making the strongest case for how big amazon are are Google and Facebook as they tried to demonstrate that they aren't monopolies.

Scot: 
[1:02:20] Absolutely.

Jason: 
[1:02:24] So this next one I know you have a lot of passion about because I feel like I saw you fighting about it on Twitter how many Echoes are out there.

Scot: 
[1:02:34] Yesu sisters interesting so the specific comment on the call was this was actually in the Jeff Bezos quote so if you're interested in the Amazon I definitely recommend either reading the transcript or listen to these calls out but also Amazon puts out a very lengthy press release,
and,
a lot of its kind of far away it's bullet points of everything they've announced in the last quarter which you know if you listen to show you already are well-versed in of course but I will skip right to the Jeff Bezos quotes kind of gives you an idea of what they want to focus on,
I'm in the second piece of that quote I think the first piece was about prime day and.
AWS and how awesome they were this is the quote so.
Customers of purchase tens of millions of Alexa enabled devices so that was kind of interesting choice of words given Echo devices.
Over 100,000 5 Star reviews and active customers are at more than 5 x since the same time last year and they talked about another explosion of skills and that kind of thing.
So

[1:03:38] So I was thinking so I put a tweet out there that said wow 5x is pretty impressive and I was thinking they probably went from 6 million to 30 million maybe 7 240 million.
I don't think Echo would be half of prime at the fields aggressive so I was thinking somewhere in that range,
and a guy John Wilson I think he's a listener he kind of said what I said.

[1:04:07] I think it was actually smaller I think,
yeah I read it was 20 million I was like that's really weird because they didn't disclose that what happened to someone took this the kind of felony Amazon strap that took this tens of millions Nate their logic was well they wouldn't say tens of millions and lessons at the very bottom of that range so let's say,
you effectively 20 so I kind of came out with the number 20 because that's kind of how they read that math and then they said well,
it must have been four million to 20 million so I just kind of thought it was interesting that.

[1:04:37] Someone in his point was at Lex has a lot of hype and now lot of reality if it's just barely getting to 20 million users so I think it's kind of funny that you know when people fall into these Amazon traps that they've set.
I read these things and I kind of think who would they say tens of millions is actually probably towards the higher and higher into that there,
they're definitely the first thing I think is something big is here and they're hiding something and then the second thing I I tend to lean towards more of the middle of the range towards the height of those kind of a fun kind of argument to get in with John there and he agreed at the end that,
this article kind of took a lot of Liberty with that quote.

Jason: 
[1:05:13] Yep that's a tricky you got to get into the Amazon mindset and not the the traditional mindset that a lot of folks are used to one slight tangent I totally apologize cuz I know where it was,
going to be way over time for this this episode but you mentioned the Highlight section of the press release my favorite antidote is there this long list of highlights one of the Highlight bullets is,
completed the 13 billion dollar acquisition of Whole Foods and another one of the Highlight bullets is that they successfully had bring your daughter to work day.

Scot: 
[1:05:43] Yeah it's really of a potpourri of what happened last quarter.

Jason: 
[1:05:46] Exactly so pretty pretty broad range of accomplishments is all.

Scot: 
[1:05:49] Yep yeah they don't really order them anyway I have a musty chronological order so we have never understood how they're ordered in there that's kind of random.

Jason: 
[1:05:59] But I'm guessing that bring your daughter to work day has to be a lot more daughters because there's some interesting information about how the the headcount is grown in Amazon.

Scot: 
[1:06:09] Yes sir one one analyst said hey if I do the math your head count is up 77% year-over-year and it doesn't take a rocket scientist to say alright if your revenues are going 34% in your head counts episode 87 percent that's.
That's a lot of.
That's a lot of expensive added on not as much revenue Sony unpack it actually a big chunk of that came from the two Acquisitions so they now include the entire Whole Foods employee base and then,
acquired that Marketplace out of the Middle East called souk I think I'm saying that right souq and if you take those out then it was 47% year-over-year and what.
The reason that is higher than Revenue growth is they've already started to.
Kind of get in front of the seasonal hiring so they previously announced there are hiring 120000 seasonal workers for fulfillment centers primarily so they kind of intimated that they've made a fair amount of progress on that.
But it's pretty crazy so as as someone who the biggest company I've dealt has about 700 people in it and that's a lot of people to connect.
Understand and manage and keep your head around what it was doing Amazon has 542000 people.
So I was kind of Blown Away by that that's like over half a million people working for Amazon,
so then I got checked in to see if we'll how many does Walmart have Walmart has shoot point 1 million people in the US alone so that 500 Cash number is global in Walmart's at 2.1 million so.

[1:07:43] I guess I I didn't feel so bad about Amazon's headcount after I looked that number.

Jason: 
[1:07:48] Yeah although it is interesting to see those those men trucks that are growing faster than Revenue I know another one you and I briefly talked about is shipping costs which are,
we're up by 39% this quarter and that's a huge line item that keeps rapidly going up faster than.
The net revenue in most cases.

Scot: 
[1:08:09] Yeah and all these Wall Street reports allege red 15 to 20 of them is kind of do pros and cons and cons the number one thing they have all picked out this fulfillment cost are rising now it's hard to pick that apart because.
Amazon has two buckets in their constant moving around what's in these buckets again kind of makes you wonder what's going on.
They're building so many fulfillment centers United you and I talked about it and you know when we go to the news I always kind of rattle off three or four new fulfillment centers there's some sleep building out 30% growth in square footage of fulfillment centers in.
Do that a lot of that's fronted loaded and they have to Door County rules make him take some of it up front and so it spread out sir.

[1:08:50] Some of that does get distorted by the county rules around building where things but at the end of the day they're just shipping a massive amount of free product in and that's getting more more expensive so I do think they have that's another reason I kind of continue to think they'll.

[1:09:04] Continue to.
Chabot at that by doing Direct Delivery I think a lot of that goes into the pockets of UPS I think they're like 3/4 ups a quarter.
Other which is FedEx and USPS I think they chip away at that overtime pretty aggressive.

Jason: 
[1:09:20] Yes but for sure and that that's going to be an interesting one to continue to follow again expenses are going up at their Investments are just.
Huge and nobody's keeping Pace there and you can assume everyone else that's growing their costs are going up to but they they may have less of a long-term solution than Amazon does with all those Investments.

Scot: 
[1:09:44] Two two cookies and then turned over you for the last,
who wanted to hit on so quickly and cloud services which is called AWS so first of all but Google and Microsoft are doing really well on cloud it's turned into a three-horse race I don't hear IBM come a lot and cloud computing so I think.
They're getting kind of left in the dust you may have a different opinion of that.
Curious to hear it by Amazon web services grew 41% year-over-year and is now as an 18 billion dollar business the margins on this Roi like this Marketplace.

[1:10:16] Pure.
Very high gross margins very high net margins it was impressive is this is a kind of way subscription kind of business is the annual run rate kind of scales up and doesn't have seasonality like we do and in a retail business last quarter it was a 16 billion dollars a year,
and you'll run right now this quarter it grew so much is an 18 billion dollar in your room so this is this is wildly successful,
and part of the margin beat was thanks to AWS.
Another kind of update a couple things we've talked about on the show number one is Jeff Bezos being the richest man and as I've mentioned before that kind of hits this point he crosses.
Gates at $1,000 so whenever Amazon. Goes above that it happens so it is search now up to kind of this 1100 and.
Aside from Sun unforeseen thing happening I think it'll stay about there for a while and and therefore he is the richest.
Person again said congrats Jeff on that so hopefully we can buy more rockets and stuff like that,
the thing is really there's this interesting kind of race to the first train dollar market cap company so after the announcement here's kind of the current order as of the recording of the show,
I'll do it in reverse order David Letterman style number 5 we have Facebook at a 516 billion dollar market cap so little over halfway there to the trillion number for we have Amazon which was the last and is now left,
in front of Facebook at 530 billion.

[1:11:45] Next you have Microsoft is 646 billion the third largest market cap company and then number to you have Google which is now called alphabet at 715 billion and then number one drum roll.
People at 842 million apples.
Entire chances of getting there really rely on the iPhone 10 so I'm glad you were able to get your orders in because.
If they have this is kind of been called a monster upgrade quarter for them and if it comes in the way everyone thinks it will then they may actually get there before Amazon will see it,
it would take about a 20% jump in their stock to get them to train dollars so it all hinges on how this new iPhone does the,
the counter argument to that is they remember they only made three or four million of which is why everyone had a hard time getting him in those first 15 minutes so and,
and there's components there are that are hard to get too so we'll see it's going to be interesting we'll update you on this race to a trillion dollars and and how it goes and then.
Did the last thing you wanted to cover was it really tied to the third quarter came out right before then it was some shocking news around something new that Amazon.

Jason: 
[1:12:54] Yeah at a reporter uncovered that Amazon had been issued a.
Mail-order prescription license in at least 12 States in so that's some pretty strong evidence that Amazon is getting into the prescription pharmaceutical business in,
quick side note prescription Pharmaceuticals includes both drugs but also there's a lot of them.
Prescription medical equipment that that potential is in that market as well and so as we've seen in a bunch of other Industries lately where when you get that first indication,
the Amazons entering the category we saw all the traditional player stocks take a quick dump.
I'm so they are down like four to six percent for Walmart Rite Aid CVS and serendipitously we saw CBS.
Announce this potential acquisition of Aetna.
And we thought we talked about like Whole Foods is a big acquisition this and the acquisition would be something on the order of magnitude of 60 billion dollars but there's.
There's something very interesting about so it in the same week seeing.

[1:14:06] Amazon become a potential Pharmacy and that same week seeing CVS try to get out of the pharmacy business and become an insurance company.
That that could go down as one of the smarter moves of the the the decade we will have to see but then.
I really think this this retail drug industry is at a huge inflection point in potentially in great Jeopardy cuz these.
All these doors are our stores that primarily sell merchandise out of convenience they selling that generally the highest price points and the way they're able to do that is 60% of the traffic and all their stores.
Are coming in to pick up that that prescription in the back of the store,
and while they're in there they serendipitous we discover other items and buy them for convenience or whatever else so if,
Amazon or anyone else is able to take a meaningful chunk out of that walk in prescription business via digital ordering an in home delivery of prescriptions,
it's very hard to imagine how any of those drug stores continue to operate or at least I operate looking anything like the way they look today,
and I would just add you know Amazon's the scariest competitor you could possibly have in your space,
but they're already are a bunch of digital startups in these other states that maybe only have a license in one state but I think of the company like capsule in New York which is doing a terrific job of disrupting the the experience for prescription drugs in New York and you go man of the Amazon can scale that out to all states.

[1:15:40] I'm I'm not sure what that looks like for the the future of of your Corner Drug Store.

Scot: 
[1:15:46] Yeah and another,
news story in that vein at Walgreens and Rite Aid or merging and as part of that the identified 600 stores are going to close,
I think all those Ruby Rite Aids and interest 2000 Rite Aid so,
that's like you know I want me to come out there at 6:20 to 3:10 30% of the stores are going to close so I can see a lot of stores closing is that as these guys kind of consolidate and get ready for for the oncoming Amazon Onslaught so we'll see,
do you are we over drugstore does there I know you talk a lot about being over over retailed is there are we over drug stores at to the same degree.

Jason: 
[1:16:26] That's a good question I have not seen any stats on the like drugs or density per capita relative,
two other geography so I I don't know I I'm going to go to a search right after the show and see if there's any data sets out there,
but it is you know to the extent that the drug stores,
overlap outside of prescriptions they overlap a lot of other store types right like you you can get your your toothpaste at a drugstore or,
grocery store or a super store they certainly fall into that you know that that big bucket of being over stored and you know in the same way you can think about.
When a bunch of the Sporting Goods specialty retailers in the u.s. closed that that had a particularly profound effect on vendors like Under Armour that didn't have a lot of direct-to-consumer distribution.
There's a ton of products that are primarily distributed through these drug stores and your point like a bunch of the stores throat.
Closed because of consolidation or because of consolidation and Amazon competition or any of these things,
you know there there's a ton of private providers that are suddenly going to be left without the level of distribution that they're used to and that's going to dramatically affect their financial fortunes as well.

Scot: 
[1:17:45] Yes Sue another industry potentially being disrupted by Amazon want to see how it plays out.

[1:17:53] Cool thanks for joining us for this quick take on Amazon's third-quarter results if we were going to summarize it I would say this is what we would call a clean beat and race so this really sets up Amazon for a huge 4th quarter,
I mention to the updated guidance there that has a 32% growth rate at the midpoint,
I'm just coming after Amazon blew away the previous guidance so you could even see getting north of 36% if if they repeat that Amazon cited.
The growth and Prime subscribers do the prime day,
International acceleration and then some of the growth in other areas like ads and amazon-web-services and then they really highlighted what's going on with Echo / Alexa and the whole conversation.
I'll Commerce to these are some of our favorite topics and we will continue to keep you updated on them at the Jason Scott show.

Jason: 
[1:18:41] Absolutely and because Amazon blew away their guidance so much we felt empowered,
to blow away our our budget as well so I apologize for the slightly extended edition of the show but we think it's all super interesting and hopefully potentially useful to you in your day job so if you like to continue the conversation we had,
let me to join us on Facebook and of course,
as always if you enjoy Today Show we really appreciate you jumping on the iTunes and giving us that five star review if you didn't Love Today Show you we certainly encourage you to send a private email to Scott and with that we want to thank everyone very much for listening.

[1:19:20] Until next time happy commercing.

Oct 24, 2017

EP0105 - Stitch Fix IPO Hot Take

This episode is a hot take of the Stitch Fix IPO Filing:

  • How IPO's Work / Jobs Act
  • $1B Exits in E-Commerce
    • Zappos - $850m 2009
    • Quidsi/diapers - $545m -2010
    • Kiva - $775b 2012
    • Trunk Club - $350m 2014
    • Jet.com - $4b  8/16
    • Dollar Shave club - $1b 7/16
    • Chewy.com - $3b 4/17
    • Zulily - went public with $2.7b
  • Stitch Fix Background
    • Offering
    • History
    • Financing History
  • Stitch Fix financial performance
  • Stitch Fix Customer Value / Churn
  • Personalization and Machine Learning
  • Company size and roles
  • Conclusion

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

Episode 105 of the Jason & Scot show was recorded on Sunday, October 22nd 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 105 being recorded on Sunday October 22nd 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot: 
[0:40] Hey Jason and welcome back Jason Scott show Sanders,
we started working on a little new show this week and as we got into it real realize that the big news that is dominating the retail and e-commerce world is one event.
stitch fixes S14 their IPO so as we got into it.
And started working on this week we realized that the stitch fix IPO is really a platform that we can use to talk about some of our favorite topics here on Jason Scott show,
it's a little bit of everything Jason it's got,
Ikea's venture capital and exit e-commerce subscription Commerce which we talked about one of your favorite topics personalization machine learning and AI.
There's an Amazon undertone where you know this is one of the few companies that's made it out hopefully knock on wood and then Amazon dominated world how are they doing that,
and for all our e-commerce retail us there's this really interesting KP eyes are key performance indicators here like the cost to acquire customers at lifetime value turn,
and one of our other favorite topics is private label and digital native vertical Branch so stitch fix IPO covers everything.

Jason: 
[1:52] It's like our last hundred and four episodes all rolled into one it's amazing.

Scot: 
[1:56] Yes clearly Katrina over there with says must be a big lesson her because she's kind of wrapped it all into one company which we appreciate.

[2:06] To a lot of the distance, interesting stories so we were at code Commerce now we reported this on the podcast for those either that follow this so in March there was shot talk and Jason Delray the Commerce and had the founder of stitch fix Katrina up there and,
she kind of baited her and said that his sources are saying that there are over 500 million in Revenue side I think a lot of people in the street didn't really believe there are that large,
and then she said I can't talk about it but we aren't a billion dollars yet so that was really interesting cuz she.
Not only was a denial about 500 it actually kind of put a bracket on it that simply said.
I'm not going to deny 500 I'm going to say we're less than a billion so then it gave us kind of the sliding scale of somewhere between 500 million and 2 billion is kind of where they were so speculation was running rampant with that and then they hired a.
CFO of the Hennessey low change and y La here we go boom the you know they're actually.
977 Million Dollar business this year which is.
Pretty darn impressive there you're just as runs August to August I believe which is why they can talk about 2017 it's not over yet.
So you know I think it's really interesting that here is this.
Pretty big company like I'm in the billion-dollar Revenue Club here and then another thing that's interesting as it's pretty Capital efficient so it's profitable which is good and then also they raise between 40 and $59 in venture capital in a lot of these other billion dollar companies have raised hundreds of millions of dollars of capital so.

[3:41] Really interesting case study they also talked about at the code conference that,
you know they're there watching and other categories so they've launched men in that business in six months is where it took three and a half years for women and they watch plus and it's already doing it more in its first month,
students first year so we had a lot of nice kind of little data points from that conference and then,
you know the the s-1 launching has been pretty exciting to read through that but Jason I've read through it with a fine-tooth comb and are.
Job in this hot take / deep dive is to pick up that you see parts for you guys and walk you through it.

Jason: 
[4:22] For sure and we're super lucky as a regular listeners will know Scott is the financial markets Guru amongst the two of us,
partly because I'm completely inapt and partly because of you you actually took your own company successfully public and presumably learned a few things along the way so I'm hoping you can get things started by giving us all a primer in the IPO process,
and I'm going to start you off with a question and I may have misread this but I had had to pick up a couple places that they may have filed.
Earlier in the year confidentially and then there's all this talk this month about this them doing the s-1 filing was that a red herring is this in a new filing or are we just seeing what they filed back in.
In July or August.

Scot: 
[5:13] Yeah the.

[5:16] So what happened is the way IPOs worked before 2012 was you filed your S1 and everyone could see it and the super annoying because.
That's ones go through usually like 10 or 20 drafts so you submit it and then the SEC is the government body that regulates these things will come back to you and I'll say,
Jason what did you mean by that sending you don't answer and then I'll be like okay it while you need to tell potential investors that so there's this like back and forth also.
You may not you may not know it's really the kind of a.
Nonlinear risk point where you decide to file this one because you've really hung yourself out there and maybe have a bad court maybe you're talking to the SEC for 6 months it usually takes and yeah the back corner in there or,
markets turn South so to help companies go public in 2012 they passed the jobs act which.
Which does Stanford jobs but it actually stands for Jumpstart our business startups and what that allows you to do is date they separate the the filing so.
As a startup and they're certain definitions around this you can choose to have a confidential filing so.
We did ours we were totally confidential but I think stitch fix action now it's just that they had filed confidentially was just a signal.
The car says it was their choice you can you can do that or not there's probably some reason they decided to do it.

[6:44] So in July they announced that they had filed confidentially so would that allowed them to do is to work with their Bankers work with SEC get a quarter kind of under their belts and,
then you expand I also let you see how other IPOs so in that time frame they were able to see how Blue Apron did for example or United Snapchat had gone public by then but they,
I could see kind of how it worked so that that kind of.
It's really nice because it gives you the ability if you want to you can actually kind of yank the filing and not go public financing of the kind of put themselves out there but it does help with this whole process so that's what that was all about.

[7:27] So
So yes it so we went public at Channel visor in 2013 did this whole process we did the confidential filing work with SEC and,
actually use the same Bankers in the same banking team that song stitches could just,
sent them a note and they said yep we're working on stitch excite I know exactly the kind of hell what's going to happen there it's going public is a very very exciting kind of a thing that sucks with lots of stress kind of power concert.
Pretty interesting times and excited for for this company to get out we we haven't had a lot of IPOs in the market and in quite a while.

[8:03] So

[8:05] You know this is just one of the most-watched IPOs in a long time because we really haven't had a lot of e-commerce IPOs and then I posed that we've had kind of a dud larger digital world,
how can I put two out there Snapchat they went public at a $30 price point in its now 15 and a blue apron when,
public at 10 and is now five those are not really successful IPOs so so it should have come.
Bad Dana Point out there then we have this company that I'm surprised everyone with the scale that it's at and there's this kind of.
Waiting group of e-commerce and digital companies that are not be watching this and really closely and if this IPO can go off not only price well but staying well for for a year or two I think it means good things for this does not cohort of companies that are.
Are probably ready to go so in there are the ones that that I kind of think about our you have wish which is the marketplace with largely Chinese Goods box Pinterest house Flipkart stripe.
Fanatics instacart Warby Parker in Casper and Kendra Scott Kendra Scott's like more old school but I thought I'd throw it in there because it's kind of interesting.
Most of these are unicorns which means they have received a billion-dollar private company valuation and you know any kind of thinks through the scale that they have to be at to do that.

[9:27] Your bus is companies can have Revenue that are are very much north of a hundred million if not kind of closing in on 500 million in a billion dollars so they're definitely in that kind of class of companies that have the scale the growth brand to be able to go public.
Also it's it's interesting cuz we don't have a lot of data on public e-commerce,
that's because a lot of the ones that get ready to go public get snapped up by Amazon that's actually you know not out of the question that maybe Citrix doesn't actually make it public there's there still this is kind of the.

[9:58] The about halfway point of that six-month process imagine before the end of the year though price and go out.

[10:04] But a lot of times he's S1 stimulate buyers to come out kind of say this is my one time I have to buy this before it becomes public.

[10:13] Can I take a new bladder so so why keep an eye on that.
The the public companies that are out there there's only three so you have CafePress and Overstock and those are kind of.
Micro Capstar kind of sub billion dollars the most successful public e-commerce company so around is Wayfair it has a six billion dollar market cap that's about two times its revenues I think.
If you were going to hold my feet to the fire on stitch fix at a billion dollar Revenue.
Growing 30% I think it probably is what's a 325 x multiple so I think we're going to see a a market cap.
You know it does three to five billion range so much better multiple because it is much more subscription kind of recurring Revenue than you Seattle airfare which kind of has to sell.
Everything each time so she Furniture you know I don't think you know in your life when you need furniture and then then you can out of the furniture business for a while.

[11:13] Yeah yeah they're definitely you know just a different model but yet a lot lot better gross margins and net margins.
And another thing I look at when I see these s ones from IPS perspective is what is the banking Syndicate the the blues to Blue Chip Banks are Goldman Sachs and Morgan,
and what you do is when you look at the page and it actually put a digital copy of it even in the PDF or on the s-1 over with sec.
There's different positions they mean different things the lead Banker gets this position is a larger font. There's all this kind of History around this that we can't going to but it's pretty interesting and.
The.
You guys look at the left first and the largest upper left is called lead left is Goldman Sachs and this example so Goldman Sachs is the The Bluest of Blue Chips.
Yeah you know Jim Cramer calls them golden sacks slacks and another good company is they rarely do things with with Morgan Stanley those two kind of go head-to-head it's kind of like.

[12:13] Oh I don't know Canton gun LG your two sports teams that are bitter rival State they look they usually don't do well together.

[12:23] There you go there you and then.
So you don't have Morgan Stanley on this week if you have JP Morgan which is very good bank and then you have Barclays RBC Stiefel Piper Jeffrey and William Blair and what will you do here is your thinking short and long-term sign,
simultaneously,
to the bank's you pick you want a great firm that's going to help you sell your IPO so they have relationships with the buyers of IPOs which are institutional buyers which tend to be hedge funds and mutual funds and.
All these banks have that and they will do a great job selling this company.
But then the secondary consideration is longer-term what you're trying to do is get a great internet analyst that are are great analyst this is called a cell site analyst dick in.
Advanced buy-side analyst that your company is awesome and in public about it and you're in the show we talked a lot about you know these analyst we've had several on the show talking about the things that they report on and.
Goldman Sachs you have all these guys have really good analyst and,
many of them may be familiar with socks on the show so it will be interesting to see so he's Terry is the big guy e-commerce guy over Goldman Sachs I imagine that's who will cover it and,
all down the line there there's some really good unless she wants to go public there's this waiting. And you have the analyst cover it and and it's good as a company to have.
People that really understand your business out there banging the drum so that that's kind of what you do when you do the banking process last couple little points on the public market.
Thinks there's ticker symbol is going to be S fix and they're going to raise $100 this is really just a placeholder what you do is you put out this initial draft and then you start to get reaction from.

[14:04] From buyers are early reaction and then,
as you see how the markets going you raise more and then you come up with your pricing and that kind of thing they're using their guitars to public market so you go on the New York Stock Exchange that's what we did at Chow visor they have chosen to go with the NASDAQ it's kind of a,
six to one half dozen the other I do like the another aspect of an IPO it's a raising money kind of a thing and then it's a pyramid.
And I do like the pr aspect of the New York Stock Exchange you get on CNBC get to ring the bell you're right there New York NASDAQ you just go and press a button at the NASDAQ Market Center in Times Square if so that's exciting in in grandiose,
New York Stock Exchange.
22 is what we're going to run to hear is called the prospectus and that's the s-1 which is to the technical number given to these documents by the SEC.
And it's only one.
People read these aren't familiar with them they get really bogged down at the top the first 50 pages of an s-1 are really cya it's a bunch of lawyer stuff to keep people from suing so.
Pass that stuff and don't get wrinkled up and it feels like this kind of effort lawyers called a parade of Horrors it's like literally a list of all the things,
the wrong it is a really weird way to collect unit tell people about your company but it's just kind of the way it's done so.
You know it's like everything that could possibly go wrong with your company and then you're like an end here's here's why we're so excited,
it's really strange strange way to do it but it's done to reduce risk of litigation so skip to that and go right to the management discussion and usually there's a letter from the CEO so.

[15:39] Yeah we'll put a link to this over on the SEC in the show notes or or like to download the PDF and use your fine function and go right to management discussion.

Jason: 
[15:50] Awesome tip let the record show channel advisor got to wake or ticker symbol then then the stitch fix it.

Scot: 
[15:59] Xperia S fix SF 49959,
another thing that is good about this is we haven't had a lot of Billy dollar exits and e-commerce so if if my math right you again this could be hopefully north of Two And in that 325 range depending on how it prices.

[16:25] There hasn't been a lot of VC investment in the e-commerce industry because we haven't had a lot of exits ovc dollars chase the exits,
and exits are commonly referred to as liquidity events at the two most popular are acquisition or m&a and an IPO so just,
quick history here.
If some of the bigger one so we had in 2009 we had Zappos at i850 million Quincy diapers.com it 545 million that's Mark Laurie 1.0,
and then we had Keva at 775 I don't know if I can count that as e-commerce but but I know this guy saw us let's talk about it 2012 Trunk Club which is very relevant to this one was acquired by Nordstrom for 350 million in 2014,
that's not in the billion-dollar kind of close to Club but I thought I'd include it because of the proximity to stitch fix,
and then. Mark Lori 2.0 soljet to Walmart for 4 billion on August 16th that guy had like a five five billion and just suck the last 4 years.
It's pretty good. Shave club was acquired by Unilever for a billion and then Chewy was recently acquired by PetSmart for 3 billion,
Zulily was an interesting one that kind of got the the double whammy so they went public I had about a three billion dollar valuation and then work wired that IPO didn't do well over time that's fatigue with our customer base,
hot and then it was acquired by QVC for 2 and 1/2 2.4 billion in August of 2015.
Seems like a lot when I say it like that but but since 2009 we've really had like 9 kind of exits 6 or so that are over that billion dollars.

[18:03] And three of them were in the last 18 months this is an industry we really need a lot more of these kind of exits to keep venture capitalist investing so this is really important for industry I think we all are all need to be great for this to do really well and in kind of.
Bring people back to the e-commerce fold-in Amazon his cast of pretty dark shadow when you talk to people that I know that are trying to raise money,
you know they say it's Amazon question that really stops am at you every BC wants to know how is your five or ten million dollar company to go to survive in an Amazon world than now if this does well people and say well so I'm sure we can.
That's some of the implications at a macro level.
Jason why don't you would kind of gone a pretty long way without actually saying what's just fixed us why don't you bring people to speed on that.

Jason: 
[18:53] Yeah for sure so stitch fix is.
You can think of is an apparel retailer they were founded in 2011 and they had what.
I believe it was a novel concept back in 2011.
They would sure ate a box of items for a customer and initially this was targeted just at women and so you would do a subscription and you can in that subscription you would get a box.
Of 5 items of apparel and accessories and you could.

[19:25] Cheap all some or none of the items in that box so essentially you paid $20 up front.
Which was that sort of a styling fee the first time you use the service you fill out a survey so that the The Stylist can get your preferences they stitch fix picks five items they think you'll like and want to keep,
they send them to you if you like him you pay for him if you keep all five you get a 25% discount if you just want to keep some of them you pay for him and send back what you don't want,
if you like none of them you can send the whole box back and you're just out the $20 styling fee and I should mention the styling fee is waived if you keep any of the items.

[20:04] I'm so back in 2011 this is the founder of Katrina Lake like literally.
Getting customers to pay her for a box she would go shopping at Nordstroms by things know what the return policy was at Nordstrom's.
Send them to the customer and the customer and keep them she would return them to the the retailers that she bought them from so she's.
She's managing all these sort of return she's almost like a personal concierge,
for the Shoppers and she turn this into a very significant Automated Business so over time that that business model is sort of evolved.
Initially it was subscription-only and you could kind of pic.
The frequency of the subscription you can get a box every month every other month every six months you know I'm a different set of periods.
They they.

[20:54] Shifted to a model where you can still can have that subscription but you can also just order a fix on demand so you since you don't have the pressure of a box showing up when you don't need one and whenever you feel like you just need to refresh your wardrobe.
I want something new to you you can go online hit the fix button then and I'll send you a new box.
Originally they were all selling other people's products,
and they they started to develop their own Brands what they they call it exclusive Brands and so now portion of the,
the products in the Box are coming from stitch fix which will talk more about it later they also added men's much more recently in Ascot mentioned the men's products scaled-up much more rapidly they've also offered plus size boxes,
and I think the newest offering is maternity boxes and so all of this from a CEO Katrina Lake who's now.
34 years old which is pretty impressive.
You know we're talking about the rare of 1 billion dollar e-commerce exits in the the relatively small number of of e-commerce companies that successfully doing lipo when you talk about those companies that are led by a woman CEO.
It's it's like even extremely more rare which is I think exciting and and pretty awesome so you.
If you were to read her letter in the s-1 she kind of highlights.

[22:26] The Three core principles of the business right the first one is that they're always customer-centric that they're always focusing first on the needs of their customer.
Number two,
personalization is the future we'll be talking a lot about that and number three they think they have this unique combinations of humans and data and they have made some very substantial investments in AI which will be talking about and they think that unique combination of humans and data are better together than either.
Human stylist or artificial intelligence is by itself so that.
In a nutshell is the business order effects get these byproducts keep what you want.
Send back what you don't and I would argue that it spawned a large industry of similar competitors.
In the same category as in an other categories like Children's Apparel for example before we go too much further,
do you want to dive into how they they were funded by once they got beontra Tina's original Nordstrom's credit card.

Scot: 
[23:32] Yeah yeah and she used to work at Poly where I don't know if you ever met her back when she was there at the podium for founder is an ex eBay guy that I've met several times and so she was she was kind of early on in this this whole industry to start with c.
Pretty pretty neat that sheep spun out of that and it's.
Effectively lap them I think at this point so I share your enthusiasm for female Founders and see is I think it's great the only other guy was kind of what he said that the only one I could think of.
Was Meg Whitman at eBay I can't think of another you know kind of a the CEO female CEO kind of in our industry.

[24:10] Yeah the IPO level so they are capital efficient and you.
The sky saying they only raise 45 million you know it is interesting because 45 million is no no that's not chump change but you know it takes a lot of capital to build a business like this and I think.
How many billion dollar businesses have soaked up your I said it before but 100 200 300 million to build a good almost take.
500 million pop service is very impressive and so the funding history.
In 2011 Lightspeed Ventures did a seed round.

[24:52] 2013 two headed around from Baseline and then very quickly on top of that and and,
so I was in February 13th and then in October 13th at a 12-9 Darby with Benchmark and then Benchmark is the company is one of the Blue Chip VC's in the Bay Area,
girly a bill girly is on their board from their heat that that's one of the firms that did eBay and Yahoo in the early days,
I also an outspoken Uber investor and then they did a series C.
In the sea 24 in 14th 6,
teen ceduna 14 and then dated a top off kind of in 2017 of 12 million and,
I just called a mezzanine round so ABC and mezzanine for those who that haven't raised Venture Capital with the way it works is in an IPO the same way you.
You issue new shares so each time that kind of value the company at a pretty money you added this Capital you get a post money and then you get diluted I mention this because I saw a lot of conversations on Twitter when you look at the ownership.
You end up with Baseline at 28% Benchmark 25% light speed at 11% and then Katrina Lake the founder at 16%,
there's obviously a case there that says that's not fair Katrina should own 80% of this as a founder of you,
we are doing is kind of making this bet on your is Venture Capital you get you get more than just Capital but just kind of keep it to that conversation you're making this.

[26:27] To you when I take this 45 million and give up you know 85% of the company there should be a bigger outcome then if I didn't do that and.
You're clearly these kind of cases you take her 16% you multiply it by that that 3 billion you get like 450 million kind of evaluation of her ownership,
I probably the right choice but you don't you never know the other side of the outcome you know maybe if she'd bootstrapped this and waited 5 more years it would actually she could own 80% of it and have just a bigot as an outcome in fast-moving markets where you have,
companies like Amazon swimming around its speed that is definitely something that that takes is probably a good choice to raise capital for.
And then sink that covers.
Big pieces so we don't want to get too bogged down in the financial stuff but Jason do you want to hit some of their revenue highlights.

Jason: 
[27:23] Yeah so they've had an ice hockey stick which is I think one of the things that that has caught a lot of folks attention 2014,
they they reported 73 million dollars in Revenue,
2015 the ramped up to three hundred forty-two million dollars in Revenue 2016 they they doubled at 2 730 million dollars in revenue and in their fiscal year 2017 which is over as you mentioned they were just under a billion dollars at 7977 million dollars which.
Parenthetically has to has to kill them that they didn't quite get over that.
That be so so it's been a pretty good ramp up and,
several of those years were profitable it looks like they they ramped up some expenses in 2017 and maybe weren't as profitable.

Scot: 
[28:17] Yeah and then the growth rates to just look at the growth rate between 14 and 15 like almost 400% growth so crazy but that was exciting time to be there and then from 15 to 1613 per cent growth death definitely Torrid but not as crazy as 400%,
and then between 16 and 1734 per cent and in this is where you know what I'm imagining happened is that kind of said.
Yeah should we go raise a $59 in turn around or should we just slow the growth rate get profitable and prove the model.
This is interesting decision because what most pundits would tell you is while she loves growth so if they could have.
I have gone public at 100% growth rate that probably would have been a different outcome than 34% but you know I think in hindsight it may actually.

[29:09] Better that they're growing a little bit slower and more profitable because with the.
I mentioned it the the Snapchat problems and questions around their ability to get profitable and then Blue Apron kind of hitting the skids.
I think this is this ends up being a nice balance between growth and profitability of so so it will have to kind of see how it prices and then you know.
What I'm engine is if they.
Delray's over north of $100 that gives you a quite a bit of jet fuel to get that that engine going back up so I bet very quickly they'll try to get back to triple-digit growth building unnoticed looking at some of the numbers they don't.

[29:47] The NEP now they don't specifically breakout sales and marketing or art effectively,
marketing but I do kind of wrap it up into a number that has gnats GM and that is actually growing a good bit faster than Revenue so,
between in 2016 840 per cent versus Revenue at 1:13 and then in 2017 and grew 55% versus 34% in.
What you will you see inside a subscription models is in the early days you know it's you can you find your early adopters and it's pretty inexpensive too.
Get to them but then as you grow your having spend more and more and more on the acquisition of of customers are the metric commonly known as cat that cost to acquire customer.
Did you see any other metrics around that Jason.

Jason: 
[30:35] Yeah it was like I was the one of the really interesting things is are they.
Capturing repeat customers and what's the lifetime value of those those customers,
so they they did share a couple of things to give us some insight into that they they reported what they called this repeat rate which is.
The percentage of customers from the previous year that purchase in the subsequent year and so they're sitting in in.

[31:05] 2016 that was 83% and in 2017 that was 86% which sound pretty good,
they also did this kind of convoluted cohort analysis that I'm going to rely on you to try to decode if anyone is cuz I I frankly didn't follow it it didn't seem quite as an.

[31:28] As straightforward as I might have expected on one hand but on the flip side I guess I was pleasantly surprised that they tried to get some disability to that at all.

Scot: 
[31:39] Yeah and what you're trying to do coordinate a Caesar are very confusing because,
we're trying to do think of it like a graduating class so teach your graduating class let's say you had a bunch of seniors that graduated in 2017 from high school,
and then you followed him through college and the rest your life and you kind of saw what happened to those people that's a cohort analysis secret you lock in time this group of customers acquired from a certain. And you see what happens to them.
So
The first thing to do in the cohort analysis is they they look at a 2014 cohort and they show the value from that Court was 639.

[32:19] And then the value of its dollar so than the value of a 2015 cohort with 718 so I think it is a fault this 14 people.

[32:28] From 14 15 16 17 and they said those guys generated 639 / user / that life.

[32:36] And they followed him and they said that.
That actually went up pretty nicely you know about I will see what is that 10% in so that's good that shows inside of that cohort what you have is a lot of factors you have to learn so it's people that say.
I tried this I'm no longer going to use it.
It's more complicated in these models that do you have the on-demand like when does someone turn maybe they're on an annual plan you have to wait a whole year to see if they've turned maybe they're there every two years they want to get a fix or no.
If someone moves from a monthly to accordingly that's not really churn so you.
It gets really hard to measure turn so inside of that 10% increase you have some customers they're leaving but then you also have some customers that are buying more.
So what their kind of saying here is the customers that end up buying more.
Hope you're over Road by about 10% economically.
The factors of turnt that's what's the story they're trying to tell I'd it's interesting I bet you know we don't have privy to this but I bet if we looked at the initial as when they filed this wasn't here and this is a reaction to Blue Nile to Napoli now but Blue Apron.
Yeah I just felt like my at yeah it felt very much like a oh crap we have to really kind of figure out explain to people what's going on here.
Then if you take that data point then they kind of looks and looks like the 16 cohort came down a bit and then they start looking at some of the first half's and what you see there and they had a little blurb in their hair that said.

[34:07] The call in first half of a year so it's kinda like the six months.

[34:13] Piece of the second six months they show you some of that and it's really fun and loaded so what happens is people by a fair amount in the first six months and then it kind of declines there,
Ina,
they talk about it as an opportunity it's also kind of weakness but it's not fair to do for them to get better with the data science this mirrors personal my wife.
That was a stitch fix user had it for about four or five months and you have by the end of their had had.

[34:41] Acquired enough clothes in it was kind of burned out by the processor forgetting to return it and getting fees and all this kind of stuff so hopefully something a little bit of yellow flag something they need to work on when I do my mask.

[34:54] They give you just enough kind of figure this out so this is the first half of 2016 is 3:35 but then the total was like an essay.
5061 FM 506 so that when you do the math in the second half is 154 if so.

[35:10] Literally dropped by half over at the pier to be here so let's see what that be 2/3 would be in the front half and then a third on the back half so interesting kind of.
Trend air it's not clear how much that Stern and I got two people saying I don't want to box it all or how much is you filled up their wardrobe in their closet they're good to go.

Jason: 
[35:31] Yep and I I guess I should have mentioned another potential way to think about this is we did not mention the growth interactive customer base but,
the back in 2014 when they did 73 million and sales they had 261,000 active customers with their defining as.
Someone that bought a box in the latter the received the box in the last 12 months and if you look at their growth of active customers.

[35:56] At the end of 2017 they are like almost 2.2 million active customers so the the growth has been.
Year-over-year it is always the same order of magnitude as their revenue growth but it it has been slower.
Then the revenue growth so that the the fact that they're the revenue is growing faster than active customers.

[36:21] The week like on the surface looks like a good thing because it that that implies that they're they're driving greater Revenue per customer as as they get a a bigger and more mature customer base.

Scot: 
[36:31] Yeah yeah yeah I agree in,
I have a feeling that as they do their Roadshow so wanting to keep an eye out for if if this is topics interesting for you,
when you do your road show you actually have to record it and it's part of the SEC rules that anyone can watch the road show so it's on Retail Road show if you go to Retail Road show.com you will find that,
don't be a window of time in any sings expire pretty quickly so but Jason I will treat when it's up in what you have there probably is Katrina and probably the CF oh and maybe someone else maybe the cool actually walking you through the Roadshow and I.
Bats that they have to peel out a little bit more information cuz I think investors are going to be very keenly tied into this and trying to understand really what I think.
I think that's the one piece missing hearing and people don't want to know that so it's me an option to see if they have to disclose that.

Jason: 
[37:28] When are there fun tidbits when you were talking about this this sales and marketing spend they did mention in the ass one that they actually hired miller-brown to do this aided awareness study so essentially in like May of are in December 2016,
they went out and interviewed a bunch of women that were in their target market which are women are making over $50,000 a year that live in us and said,
are you familiar with stitch fix and 28% of the women that they surveyed said yes in,
in December of 2016 so then in May of 2017 after they sort of double that adds fan that aided awareness went up to 41%.

[38:11] Like I would take it away Ernest with a pretty large grain of salt.
Cuz you're you're asking someone if they remember if they're from they were something in a lot of people will just frankly lie because they don't want to say,
they're not friendly with something but if it's true that that 41% of their target market are now from there with them.
Like that implies that the the next big tranche of growth is probably harder to achieve than the.
The last one was cuz it's it's a heck of a lot easier to go from 20% to 41% then it is to go from 41% to 75%.

Scot: 
[38:50] Absolutely yeah yeah and then I Delray had an interesting article about talking about how you know it's really kind of a non Coastal audience I don't know,
is data that really supported that but I think when you get too many people you have to kind of be spreading out to the Midwest and what not so interesting.

Jason: 
[39:06] Yeah and I think part of it is just that their price points are like these are not like,
super premium price points and you know in general these are not Designer level Apparel in so it's,
you know it's it's meant for sort of a more modest consumers and I think there was even I can't remember was in the interview or something that Katrina said recently but she talked about that they at one point had a pretty bad.
Inventory glitch where they weigh over bought and the,
the root cause of over buying the wrong inventory was it they were buying sort of on-trend stylish stuff and their customers were we're responding that they didn't keep any of the items because they were inappropriate to wear at the PTA meeting for example or that you know,
the the the sort of everyday occasions that their customers were we're hoping to use the products for it so I think that that helped Define the.
The Target in the use case for Katrina.

Scot: 
[40:08] Yeah that and that's a really good kind of transition to the AI machine learning in the personalization it's this is kind of a it's really interesting weed from that perspective I've never,
you seen anything quite like it so and I know you spend some time on it so it should take us to that.

Jason: 
[40:23] Yeah yeah it so it's it's almost hard to talk about machine learning and personalization separately Katrina and her in her letter talked about those.
Tubing Big premises personalization is super important and then machine learning plus humans you know being the secret sauce,
and the reason it's hard to talk about separately is because largely what you're doing with machine learning is.

[40:47] More personalizing the the offer in case the actual products to each customer.

[40:55] So I do want to start by talking a little bit about this how they use AI overall,
so you fill out a 60 question survey and then they want to pick the five items that you are most likely to keep and they said they don't have a standard starter box so it's not like they're sending the same box to everyone.
Everyone's box is going to be different based on current trends.
Seasons what they have in inventory right now and the the answers to the 60 Questions that they know about you and so one way to do that is have a stylus that.
Read your 60 questions and then have him or her go pick the five items in another way to do it is to to use some sort of algorithm to pick those items in so initially,
the the model at stitch fix was let's establish a computer algorithm to pick those items and then lets it let the stylist.

[41:54] Override it so we know what will pull up a list of candidate items for The Stylist and maybe you know that has eight items in it and you let the stylus pick the final five or maybe that the algorithm shows the first.
5 in the stylus can say yay or nay but interesting Lee.
Early on they hire this guy Eric Olsen to be their Chief algorithm officer and build this Audrey them to figure out what you you send in that first box based on the answers to your survey and.
Eric is an interesting guy because he was literally the VP of data science at Netflix which we all use as one of the best examples of.
AI driven businesses I think he was also a data scientist a Yahoo to a super credible guy that's been working at stitch fix on the this interesting answer to this question.
How do I pick the five right things to send to this first customer so that sticky so that she buy some of them so that you're she's profitable but also said that she keeps using the service,
cuz it does first five items are wrong your your odds of getting another chance or dramatically lower.
So then they're also going to use a I once you.

[43:06] Pick some of those first items and don't pick some of those first items they're going to use that data to refine the items they send you in subsequent boxes and that's where they start getting this really valuable contextual data that's both implicit and explicit like they,
implicitly know you return something and they can make inferences about why you returned it but there's also an option for customers to tell.
The Stylist why they didn't like something until they get this explicit information the him was too long it didn't fit me well.
All all of these sorts of things and so very early on situation was a believer in leveraging deep learning.
As the merchant instead of heading human sort of dictate what styles customers would get exposed to which Tamiya super interesting.
But then in more recent times it actually taking it to the next level so we mentioned.
That they started watching their own products and I'm not sure we said this but if it sounds like about 20% of all their sales are from what they call Exclusive Brands which are predominantly.
Brands that they created and they're actually using AI to design the products they offer and so what they'll do is they'll say hey.
We have a big segment of customers that don't like a neckline lower than.
8 cm and the majority of product we buy from third parties have this 10cm neckline and so we're going to design your own product and it's going to have a 7cm neckline and said they're actually using their they broke each.

[44:45] Each piece of apparel into 60 different attributes and they're using a guy to define the attributes that their customers would want that might not exist in that Marketplace in so they're using that too to dictate what what new products.

[44:59] The build which is super cool they had not that I have seen disclose any.
Hard data about how successful that AI is or how successful that AI versus a human is but another in RF event there the interest x on it in San Diego this year and one of the speakers was this woman Megan Rose,
and Megan is the founder of a a smaller company that in some ways is stitch fix for jewelry it's called Rockbox and.
Very similar to stitch fix you get a box of five pieces of jewelry to keep what you want you buy it.
You return what you don't want the others extra model where you can kind of rent The Jewelry by just keeping it for as long as you want until you want a new piece,
but they also are leveraging aai's their stylist and what I found interesting is Megan shared some of the statistics that when they transitioned,
from Human curators to machine learning the purchase rate on the first box increase by 300% so that that computer was.
3 times more likely to pick items that that customer would keep they were able to improve their inventory efficiency by 85% when they went to the the AI BAE Systems and they they still cheap stylist but they have the.
The way I am.

[46:20] Inform the stylist exactly like stitch fix is doing and that enabled them to reduce their stylist cost by 30% so.
stitch fix is getting anything like those results that's super substantial.

[46:34] Improvement via this machine learning and what's terrifying about it and cool at the same time is.

[46:42] If you had a great stylist a great person picking all these products,
and she kept doing it and should get better over time and the first time she reads a survey she gets it you know I'm kind of right but by the,
thousand times she's read a survey she's much better at it right like this the person wouldn't learn over time and her hit rate would keep getting better but then when you hire the next person.

[47:04] They would start at zero just like the first person did right and the magic thing about this that this machine learning algorithm is.

[47:13] It has learned from all two point,
two million customers of stitch fix and it keeps getting better and better and so it it's scales much better and we worms much faster than a human can come in so you don't potentially the more customers in the more time in service all these things get in the better of the algorithms get,
the the the profitability metrics on this business potentially keep going up.
Much faster because the conversion rate just gets better over time whereas a lot of other things we do tend to regress to this mean and you kind of keep the same.
Same conversion rate over time so it's going to be super interesting to see you know if the actual performance of the company kind of bear out.
Does hypothesis is but for sure a hypotheses I always say that wrong for sure.
Ate a significant angle of stitch fix is.
Personalizing the offer based on this machine learning I think they said they have over 75 data scientist on staff now.
We used to joke because every time Katrina would speaking an event the number of data scientist she claimed,
had that double then it it almost didn't sound credible but now that we see the the.
Numbers behind the business it it turns out that we probably should have been joking cuz it seems like they're all sort of credible number isn't in line with the the revenue growth that they've they've been experiencing.

Scot: 
[48:44] Yeah one of those things I thought was interesting as they also have a section in there that talks about.
Their usage of data science and the obvious one is you went through all this The Styling algorithm,
and then they also talked about nustyle development and then what you covered another one is so they have something like how many was it was 3,400 Stylistics.

[49:08] Yeah there's a human stylist so,
actually have the kannada matchmaking algorithm and so this data science will actually kind of say you know maybe,
maybe some The Stylist our new moms and I'll map you up with other new moms so I don't know what day they're looking at but that that's kind of cool and then these 3400 Silas,
many of them are part-time so I don't know how the interface works I've seen Amazon. Do this with customer care,
you do the thing where you can kind of check-in check-out and and then there's an online your face where you can kind of do whatever style posting things they do did they talk about an application in the s-1 about,
I thought that was interesting kind of a matchmaking is how to use data science that use a lot of demand forecasting so you know.
Understanding.

[49:56] This is is interesting because they send all these products out right so the return rate is pretty important and it's not entirely clear to me what happens to all the stuff.
The comes back out of it goes in other people's boxes or what happens but there's some demand forecasting that has to happen there,
and then there's merchandising optimization which is.
Understanding how to order what size color and style kind of information and even talked about they use a lot of data science in the filming centers in a used one example they have five fulfillment centers so there's a matching of,
which people go to which data which fulfillment center and then also they optimize inside the Fulfillment center using the data science for pick path optimization so I thought it was interesting that they've,
this YouTube Don't this engine and they're using it in like I bought this at like 7 or 8 different,
parts of the business so there's really good scale from those 75 data scientist.

Jason: 
[50:53] Yep and we should mention I think they filed a number of patents as a result of all this right like they have something like eight eight pending patent application.

Scot: 
[51:01] Yeah I also thought it's interesting day they love data science but they also talk about there's a human kind of check elements I guess you know.
I guess maybe something has arrived at these things sometimes like it want everyone thinks they need purple socks or something that don't have humans to catch them.

Jason: 
[51:19] Yeah I interpret that is twofold like that there is sort of the final check but I also think that they have decided that customers respond better.
To a human interaction so I think,
the reason that that one of those core principles is AI plus humans is you know there's a lot of businesses where they would just try to get the AI really right and have a very impersonal experience,
and you know just have to let the customer know the computer is selecting these items for you I think the stitch fix model is.
That they would like you to build a relationship with that stylist and rely on that stylist as a person,
and if you're going to fight or stitch fix I think they want you to feel like you're firing your friend Susan who's your stylist not just fire firing some.

[52:06] Some computer that's that using math to pick out that's for you and so I think the human element both has a practical element but I also think it has a strong marketing branding element for them as well.

Scot: 
[52:19] Yet they get this really interesting case study and then we can move on from machine learning they said one example or Delila embroidery neckline knit top is purchased 52% of the time,
and then what's interesting is are algorithms,
I can determine How likely a client is up to 80% to purchase the item if we include it in that's in her specific fix them so they can kind of show the power of the you know if you just blast it out to everyone you get 52% but if you can like use the machine learning.
Machine engine you get like a order of magnitude higher conversion rate which is pretty neat to your point on the,
what they're saying about the machine learning stuff is it used to be in that venture capitalist would look for your eyes looking for a company that has a bit of an unfair advantage and that unfair Advantage used to be Network effects,
you like marketplaces are the kings of this like eBay or buyers Springs more sellers is this network effect LinkedIn the more people social.

[53:19] That works out this too but now it's interesting is those that data on 2 million clients and think about all the.
The transactional data there's there's probably I don't know zillions of Dana Point's there.
Any company even an Amazon that has to compute these guys that they're going to have to climb that mountain so it makes it really really hard for a startup to catch up,
you pretty quickly dwindle down the number of Cups companies that,
eat here too but maybe three or four you can have maybe a Macy's and end their advantage would be they have more customers so they can get to that two million pretty quickly so.
Pretty interesting application of machine learning and I think this will be the first machine learning IPO that I've I'm aware of so that'll be another kind of neat thing and that it's also in our space of e-commerce.

Jason: 
[54:06] Until I mean two things I would just highlight there that.

[54:11] I think they're trying to generate you know a version of a virtuous cycle here or an Amazon flywheel that they.

[54:19] Significantly invested in their own machine learning Tech and so that they have that capability that we just covered but they also have a business model that just gets them more.
Valuable data right so if you think about it and most apparel manufacturers are totally disintermediated from the customer so they get.
No data from their actual customers and even if you're a retailer or even if you're a vertically integrated retailer your the Gap and you make all this stuff and you sell it through your stores once it leaves your store for the most part it's gone and you don't you have a return rate you wanted to be as low as possible,
but you really you know this this try-before-you-buy send them five things get back what they don't love.
Get you a much more valuable data source so the fact that they both.
Have this more valuable data and then they have proprietary technology to act on that that data is a potential flywheel for them.

[55:19] Oh, I still think it's interesting and somewhat controversial the amount of investment they made in the the.

[55:29] The core machine learning technology right like so I could imagine when they they say.
Started this in 2011 and I assume that machine learning came in a couple years after that 2013 you could look at it the state of what was out in the market and say if I'm going to be good at this have to build it myself and if I wanted to be a core competency I need to.
To build it myself and for sure you need your own experts but.

[55:52] The last five years have seen such a huge Improvement and evolution of the off-the-shelf tools that it almost certainly has to be the case that.
These guys have spent a bunch of money building their own machine learning tools that are frankly probably inferior to the the version of tensorflow the Google gives you for free today and so it.
It is they may have been a little early in the curve having expertise about their data and about the the.
Applying machine learning models to their data and having a unique data set seems like a huge competitive Advantage I imagine some smart people could debate about how valuable their their investment in their own.

[56:40] Machine learning technology was versus leveraging some of the the amazing technology that's coming on the market now but but I'm not sure whatever know the real answer there.

Scot: 
[56:49] Yeah, tell if a competitor can get there with a lot less and catch up then it was worth it get a couple of anything else on machinery.

[57:04] A couple other, miscellaneous little tidbits they talk a lot about being a good brand partner in this one so they they talk about they have over 700 brand partners and some of those brand selected to provide some exclusives in in the stitch fix this and then as Jason mentioned they do have their own private label and they call that exclusive brands,
I am Jason Howard debating my reed was 20% of fish stitch fix his exclusive Brands were were privately,
20% of everything was their own private label but you kind of red it is 20% could be kind of including those non stitch fix brand Partners exclusive thanks.

Jason: 
[57:44] Yeah they did mention that that some third-party Brands give them exclusive products and so like I'm quite aware that 20% of stuff that stitch fix design or a combination of stuff that's only sold by stitch fix.

Scot: 
[57:56] Yeah and this reminds me of our Amazon private label discussion where where.
Part of Amazon's private label strategy is there their data science is saying look we need a widget like this and no one's doing it you know we need batteries that come.
24 to a box and not in a packaging that you can open and quantity 8 so interesting to see that.
Another little tidbit is so they talked about Outsourcing the manufacturing of that private label called exclusive brands,
but in 2017 they actually acquired a pretty large thing as 20,000 square-foot facility that's actually an apparel making.
The equipment and & Company in Pennsylvania somewhere so it it felt like they were going to go all the way over to clean the grading and start actually making their own things and United States which is pretty interesting.

Jason: 
[58:45] Yeah although I do think in the s-1 they they made it very clear that the right you should not expect them like to actually fabricate in the US that they wanted some capability in the US for experimenting purposes but the like.

[58:59] You should not invest in them based on the premise that they were going to become a US manufacturer.

Scot: 
[59:04] Yeah and then people wise they have.
Pretty impressive 5800 people total 86% identify as female so that it is,
pretty amazing what you put 55% of the management team to have 5 helmet centers / 1.5 million-square-foot 1,500 employees in the Fulfillment centers,
3400 Silas 200 client experience Associates million customers that's like what does that 1 / 100 no a thousand.
Yeah so that's good ratio there did you dream team is actually pretty small I was surprised 95 Engineers so that's.

[59:44] Pretty lean mean for kind of scale they're at and Sadie I guess the 75 data scientist get it closer to effectively.
150 which is closer to what I would think it would be so that's how the people break out largest chunk is the stylist and then the Fulfillment center employees followed by.
You know the client experience Associates and then a relatively small Engineering in data science team.

Jason: 
[1:00:09] Yep and this was not surprising I suspect to you or I but I still talk to a lot of people that aspired to be a billion dollar e-commerce business and they still imagine that they're doing that out of a single fulfillment center.

Scot: 
[1:00:24] Yeah no.

Jason: 
[1:00:26] And I at yeah I mean yeah.
Not very possible and I'm like this is a perfect example of what you know again at their they're not at a billion dollars yet and there and they they have a customer-facing business where humans interacting with every customer and yet still the largest portion of their,
their workforces you know that are close to the the second largest piece of those Workforce it as all those fulfillment employees.

Scot: 
[1:00:51] Yeah I wanted more information on,
fulfillment centers just because again I imagine that that almost every box comes back with something so imagine the it's the reverse supply chain that I'll Eat You Alive on the stuff so.

Jason: 
[1:01:09] Reverse Logistics are much more,
challenging than I mean things are very hard to reverse Logistics are in order of magnitude harder in your right like that's cooked into this model is there's always going to be a high level of reverse Logistics so that that would be an interesting area to have some unique competitive advantages and if they do they they haven't pitched them very hard.

Scot: 
[1:01:30] Yeah and the day of science didn't necessarily cover that and you know,
Gillett Wisconsin to it so what cities send out of too many customers let's say every month they send out a million boxes will probably less a900.
Thousand come back with at least one item coming back so I'm have all of them but you know that's hard someone needs to go through there and figure out all that out you kind of know but you have to match it up happens to it. I don't,
do the brands allow them to kind of like put it back,
or do you have to liquidate it and then does each of these fulfillment centers have an outbound peace and an inbound if they put it back on a shelf that's like a whole it's really super inefficient to like open a bunch of boxes and put all that stuff on shelves that doesn't seem logical that I have a lot of kind of questions around that I bet.
probably the Harry part of this thing.

Jason: 
[1:02:21] And there is like so I think this is more rumor than real problems but so all of these industries are plagued with a little bit of the like.

[1:02:30] Oh wait a minute is this close stuff that already got returned from some other retailer right and that.
The fuel gets playing there several of these services and I think including stitchfix have at some point shipped products that arrived at a customer's location with another retailers price tag on it.

[1:02:50] Right and that you know puts all kinds of questions in the in the mind of the consumer and you start wondering like waiter is this a TJ Max kind of play where they're getting the.
The leftover stuff from some some retard where they couldn't sell and then their there they're selling it at at you know predominantly with price which is part of the reason I have such good margins.
The.
And and the explanation that that stitch fix gave and I think you know this is blown over several years ago now was no no no no we're not getting anything.
Back from a retailer that were selling a customer but sometimes we buy something from a brand and we've had a brand make a mistake and send this inventory that was pre labeled.
With another retailers labels on it before and so that you know then then created that whole set of conversation.

Scot: 
[1:03:38] Do you feel like the brands would let them return the stuff.

Jason: 
[1:03:41] I think you could I thought I do think Brands would let them take returns and resell it I doubt any brands are getting them stock balancing you know you like.

[1:03:53] There's very little stock balancing in a pair of these days where you can actually just return stuff that doesn't sell you know they're there often can be some sort of negotiated terms where that the inventory doesn't turn gets.

[1:04:06] Gets tossed reduced overtime and you get some price concessions and things that way but yet no I think.

[1:04:15] That that stitch fix probably feels like a pretty traditional retailer in,
having a match their supply to demand as well as they can and then having how to start a smart strategy for liquidating the inventory that they're not able to sell.
So I thought you know I think the date they pay some of the same Challenges ever no spaces there I did there's one other.

[1:04:41] I think that the s-1 reminded us up but we but we could have known before this stitch fix is running on an Amazon web services.

Scot: 
[1:04:49] Yeah yeah it sucks so does Netflix and always makes me wonder like do they sleep at night we're going to Amazon can you.

[1:04:57] I don't think Amazon would ever do this but there's the potential for someone to Cana,
take a little peek in there and see what's going on under the hood so that that would it's like one of those very very tricky situations there's not really a great Alternatives that I have found two but you know you're kind of your funding and your competitor and your competitor has potential access to your your secret sauce.

Jason: 
[1:05:20] Yeah and even if they had no access even if they're completely aboveboard and they would never look at the data you are you're still funding your competitor.

Scot: 
[1:05:30] Absolent yep so that's Amazon wins no matter what.

Jason: 
[1:05:36] I would prefer the record I would say like I mean AWS is a great service there's lots of reasons to use it it does to me feel like Microsoft with Azure in Google with Google Cloud platform like have some pretty competitive offerings these days.

Scot: 
[1:05:50] Yeah yeah once you kind of get married in the one who sings it's a little bit of a roach motel it's hard hard to check out.

[1:05:56] Degree architecture at some level that you have to do so Jason was kind of.
Land plane here with what do you think so we've gone through a lot of highlights and some impressive scale on Revenue growth slowed in a little bit,
can't look like it's going up a little bit I'll TV hard to call with the cohort analysis looks like it's a little challenged on the back half of the first year,
what's your conclusion Justice IPO mean that the subscription Commerce is the future or or or what do we look like your.

Jason: 
[1:06:26] Yeah well said to me that's a that's a funny question the.

[1:06:32] Yeah we should have we should have mentioned earlier when you talked about it to some of these previous companies there there have.

[1:06:38] In the past been these tranches where there was some trendy fatty thing in a bunch of companies had an exit based on that fad right and said the most most obvious recent one would be flash sales you know everyone got up.
Advanced evaluation and a bunch of flash flash sale companies had.
Had favorable exits in the beginning and less favorable exits at the end and you know today it's pretty clear that there's not a very exciting market for Standalone flash sales that you don't potentially that.
A tactic that a retailer would have but it certainly isn't of itself a business model and so when I look at these guys if.

[1:07:17] If you're evaluating them on the basis of subscription being the winning model.
I think subscription is more likely to be a trend like flash sales I think it's a super valuable tactic.
That retailers are smart to use but I don't think that the winning formula in e-commerce is just to go all in on subscriptions and part of the reason I think that is.
Most of the companies we think of as subscription model businesses have.
Why do they had to abandon their subscription model in order to be successful right and so you know stitch fix.
Is a very Soft Cell on the subscription model like they started out subscription-only today like when you go sign up you'll you'll see in a giant.
Text next to all the frequency option option saying or just get one whenever you want.

[1:08:11] Right into their they're really not hard selling the subscription and they don't tell us what the breakdown is but I would be really curious to know what percentage of.
Obstetrics customers are on an auto replenishment program versus just ordering ad hoc because I feel like in the the actual subscription model businesses,
we we very frequently see this subscription fatigue so your wife wasn't early stitch fix customer before they add the ad hoc model and you mentioned she got fatigue I think that's the fundamental problem with all the the meal kits that are subscription-only as they sort of.

[1:08:46] For economics have to be subscription-based and everyone gets.
Subscription fatigue and you eventually feel guilty that you're not cooking the meals every week or you eventually feel like your closets full of clothes or jewelry or your kid has too much clothes or whatever the case is I think.

[1:09:02] Basing the business on Purely on subscriptions is probably a not very sustainable,
but I think if you forget the fact that stitch fix even has a subscription model and you just look at their fundamentals and you look at the revenue growth over 5 years you look at their operating margins look at their customer acquisition cost.
You know I wouldn't say it's a slam dunk but like.
It it certainly to me looks like there's a solid business they're like is it a good investment as an IPO.
Qualified person on this podcast to say but this is a solid business that that could have largely,
grow from you know based on its own cash flows,
so again I like the business fundamentals I'm not super Amorous of the subscription service being the secret sauce.
That makes sense.

Scot: 
[1:09:59] Again and we're not we don't give a Vespa advice here on the Jason Scott she is so not going to say go by this IP or not but you know the one thing I think wall Street's going to scratch your head a bit on is the growth rate so.
32% and a world of e-commerce growing 15 may not be exciting enough so.
I think that could be a platform for them to actually exceed expectations right so if they get priced at let's say.
2x because of that 30% growth rate the razor $100 and you're able to accelerate that then everyone loves a accelerator accelerating Revenue growth so that you know.
That could be interesting in an with any IPO,
you have to wait at least a year 18 months to really see how the company does as a public company so we'll be watching that really closely here at the Jason and Scott show and Reporting after their first public order and in as part of a normal news coverage will let you know how this IPO goes.

Jason: 
[1:11:01] Yep and Scott question for you let's let's say they get a good price at the initial offering and it's well before the year we don't know how things are going to settle out should we all expect to see a ton of other.
Sort of a style box models like come and try to get a exit and you don't plan on that hype even before we know whether this this really works long-term or not.

Scot: 
[1:11:27] I'll say no so I don't think this opens the door for other ones so for example when box went public could actually feel at times when the first company to goes out it kind of close the door so Dropbox couldn't get out Xbox got out so.
You know I think what will happen though is if the IPO goes well on prices well you will see some other companies I mentioned,
maybe take a run at filing so you know the market background couldn't be better right now we're heading you know the Dow has hit you thousand Mark like.
20000 21 22 23 in the last year or so if anything is probably the biggest risk is that yeah there's going to be working.

[1:12:08] Things are always go up to so there could be a correction at some point and so,
that's kind of that I think would close the window on if stitch fix goes out and we have some these other unicorns kind of waiting by I think everyone's going to be rushing for the exits and I'll be interested to see what the window closes so will Lori port on that as well.

Jason: 
[1:12:28] Gotcha and then I guess just just one other sort of competitive thing that's somewhat interesting you mention trunk, being a sort of similar business model and sold the Nordstrom for 300 million,
I wonder if that comes up at all in in this offering that Nordstrom then had to take a 200 million dollar write down on that on that acquisition right like so that.
That that's a business with a very similar model targeted a different customer base that.
Economically at least did not do well and then of course.
There are 30 or 40 competitors out there with somewhat similar models and certainly not with as much traction is digs fixed but the the competitor that that,
you don't have to concern investors the most is that recently Amazon is of course the announcer product in this space and that's the Amazon Prime wardrobe and Amazon has announced some new unique reverse Logistics to go is Amazon Prime wardrobe that seem like it could be a competitive Advantage for them.

Scot: 
[1:13:27] Yeah and you know us with 300 million customers to push this to you know that that is scary so what seek you know investors will vote with their wallets in and we'll see how it comes out.

Jason: 
[1:13:40] Awesome well that is probably a great place to leave it cuz it's happen again we have used all our allotted time,
we certainly appreciate everyone a listening in for this extended episode and hope you enjoy this deep dive in the stitch fix let's keep the conversation going on Facebook and as always if you enjoy today's episode we sure would appreciate that five star review on iTunes.

Scot: 
[1:14:02] Thanks Everyone.

Jason: 
[1:14:04] Until next time happy commercing!

Oct 19, 2017

An interview with Bryon Colby (@bcolby6), SVP of Digital Commerce at Cornerstone Brands. Cornerstone Brands is a billion-dollar omni-channel retailer comprised of multiple leading home and apparel brands including Frontgate, Ballard Designs, Garnet Hill, Chasing Fireflies, Grandin Road, Improvements, and TravelSmith. Cornerstone is a business unit of HSN, Inc.

We spoke with Bryon about his background, where digital commerce sits in the Cornerstone organization structure, how Cornerstone benefits from it's catalog heritage, the challenges and opportunities of customized products, and the future of personalization.

Bryon mentioned a custom product configurator for furniture on Ballard Designs, which can be found here.

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

Episode 104 of the Jason & Scot show was recorded on Wednesday, October 11th 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 104 being recorded on Wednesday October 11th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot & Bryon: 
[0:40] Hey Jason and welcome back Jason Scott show listeners,
in this week's episode where excited Futura guess that we have literally been trying to get on the show for over a year due to scheduling conflicts between the three of us that has been hard to do but today the stars have finally aligned and we are very excited to Welcome to the Jason Scott show,
Bryon Colby SVP of digital Commerce at Cornerstone brands welcome brand.

[1:09] Where are you located in the world today in the home base of Cincinnati Ohio.
Like being over usually on the road like you guys but I see your point stars align.

Jason: 
[1:23] And just to be clear Brian it hasn't taken a year because you've been doing a lot of other shows right you've been saving yourself for us.

Scot & Bryon: 
[1:29] Whatever makes you feel good then go for a Jason.
Cook and I'm excited to see if I understand you have a Tesla now so we are in the Tesla owners the electric vehicle club together at this point.
Loving it you know can't say enough good things about it I actually thought that was going to be at your giveaway 400 shall I was hoping to get a guest on that one but it was like Tesla's free to your listeners,
yeah we we tried that and we ended up with some stickers that Jason printed on his LaserJet they're so close but we were quite able to get it to that level.

Jason: 
[2:09] It is a premium LaserJet though.

Scot & Bryon: 
[2:11] Is premium gas to color so it's pretty exciting.

Jason: 
[2:18] I feel like you guys have have a lot in common you both had the fancy cars and you both spell your first names unconventionally.

Scot & Bryon: 
[2:26] Yes it's one of those things that makes you very Google Bowl which is a double edged sword.

[2:32] I love you find that bread.
So far 3 other people that spell it my you know my way you know one guy at the local.
Movie theater that selling a popcorn was amazed to see his name tags felt the same way and he's the one there actually is a Facebook group for you know Brian's that's valid Bryon and this guy was it when it started.
I don't know. If you ever need. You ever meet anyone else,
I have met a couple other people there's a lot of Scott wings with two T's so there's that and then there's the hero of a popular novel,
it is at his got Scotland 20 sets and wrestling.
Yeah I run into like two or three every five years or so so so kind of price solar distribution I did I don't know if we have a Facebook group or not I might have to explore the Cradle.
We left a check there about 5 of us on itself but that was a couple years ago is that Super Active like you guys just guy talk about.
I'll leave it at that.

Jason: 
[3:48] And I think there's one other important piece of business we have to get out of the way before we we jump into Cornerstone big movie trailer came out this week.

Scot & Bryon: 
[3:59] Yeah yep the know some some people are keeping themselves spoiler-free so I have nothing to talk about it but I,
where I draw the line is I try not to read rumor sites or anything like that but I do watch the trailers and this trailer was awesome. I'm very excited for the Last Jedi,
tickets are purchased 7 p.m. showing December 14th through the Wingo Clan is locked and loaded for Last Jedi.

Jason: 
[4:23] That's awesome.

Scot & Bryon: 
[4:24] Scotty tractor your dress up you and your family for it.
We don't we usually say that for Halloween and we're usually a bunch of Star Wars characters for Halloween but we're not cause players just never not not my scene but I'm more of a collector toys that canister.

Jason: 
[4:44] It's been interesting that there was some controversy coming up to the trailer about whether the director was excited or not about it but I feel like all the reviews of the trailer I've read even from people that are not like huge Star Wars fans are like it's one of the best.
Made trailers of all times.

Scot & Bryon: 
[5:02] Yeah it's a misunderstanding so it's Ryan Johnson and he he was just kind of tweeting that if you want to stay spoiler-free don't watch the trailer and then a lot of people misread that to say,
the trailer is not good or something so I don't know so then later he was like all caps watch the trailer people it's great I'm excited up moving.

Jason: 
[5:20] Heck yeah that was an odd thing to have had thought he said so that I'm glad you were able to clarify Force awesome,
well with that Brian let's jump into the topic of the day we want to talk a little bit about about your business and what you're doing now but before we get to that it's always nice to hear about how you got there and what you're you're sort of digital background is.

Scot & Bryon: 
[5:46] Sure you know just thinking through it's been amazing and I've been involved so I guess any Commerce incident of 1996,
where are you know it's part of the great team that we actually helped build some of the initial pay for Content sites football number Publishers including USA Today times-mirror the Usos,
Associated Press this is where they had don't you know the publisher that don't websites had no idea how to monetize it and we're looking to monetize some of their archives they're all content people coming in search for so we had that.
Company was called in Fanatics had you know had a technology Riri,
purpose from our consumer consumer product that was out there in the marketplace and turned around handle the customer service the billing,
you know all this is way back when in about 1996-1997 for these customers,
since then you know what has really held the number of different you know a hats in the space but all focused on transactions including are running a digital marketing Consulting Group.
I'm heading out by you know you asked operations of an SMS Commerce startup which was fascinating just about,
it's Wednesday in the year about 2000-2001 so just slightly ahead of its time being able to buy things via SMS was also a managing director at fry and another you know,
kind of Legacy in e-commerce space.

[7:17] Fantastic also group of e-commerce if we're all veterans right now that we had our own not digital eCommerce platform and we helped run some of the online businesses and Technology,
multiple retailers across some.
Different categories including Ann Taylor a good diver craft PC Richards and many others so you know after that for a while and actually said okay looking to jump over,
to the.
Pure retail side so you know the strong desire to actually own the project from start to finish so when I joined Marc Ecko.
I was an apparel company and then of Last Stand and currently as he said at Cornerstone brands.

Jason: 
[8:08] Awesome and the fried that always brings a smile to my heart that I think there's still a few fry sites living in the world then it's obviously been defunct for quite a while.

Scot & Bryon: 
[8:21] Yep yeah they got you know purchase by Microcenter and of course mikroskop purchase so there still are some out there and it is that's all you go to you know shop.org you got any other conferences,
it's one of those amazing get-togethers cuz you see people that you know of work with way you know way back when I just are now you know leaves and heads at all,
under the different colors are other e-commerce companies out there.

Jason: 
[8:47] Yeah so let's talk about Cornerstone Cornerstone might not be a familiar name to some listeners because it's a,
it's a house of Brands and then it has a familiar parents so can you tell us a little bit about about a Cornerstone and who you are.

Scot & Bryon: 
[9:04] Sure Cornerstone wasn't even familiar to me when I joined the head corner,
Cornerstone brands it's a billion-dollar plus retailer it's comprised of a portfolio of different aspirational home and apparel brands that include Frankie Ballard Designs,
Garnet Hill Grandin Road and improvements in overtime with awesome different companies with divested different companies we have a strong catalog heritage,
that's our background but now we're at a point where over 70% of our overall demands is transacted via digital channels with an opening up some new retail store.
So you know where as a whole it's again most people won't know Cornerstone but the brands very well-thought-of Rhymes doing very well.
Well parent company is hsni which of course the other Division if they own besides Cornerstone is HSN which is more 2 Legacy broadcast.
You know broadcast Commerce company that has course has also evolved into a strong digital Anthony.

Jason: 
[10:16] Very cool and one of the things that I was interested me about Cornerstone is the.

[10:23] Sort of portfolio is is interesting Lee diverse not so much in terms of.
The offering a consumers although that's the first two but act like I think some of the Brand's don't have stores do I have it right into their pure digital some of the brands,
have stores,
some of the brand sell products that aren't super convenient to ship until I I sort of think about the whole portfolio and I go man there's a lot of unique.
Different business cases for each of the brands is do I have that right or is it all pretty much the same thing.

Scot & Bryon: 
[10:59] No you're totally right on The Mark with it and it's to the point where it's at extended differentiation extends to the products or the the product photography.
How to get out of quality or of the paper that the catalogs are printed on.
People are usually amazing like oh yeah you know I never even knew that Ballard Designs in front they were quote related,
what part of the same as the wall you know part of the model is and we really we do have a hybrid model here so I we share a digital platform,
fat and other back and operation such as call center and supply chain areas where we would really get operational leverage but then.
The majority of all the customer-facing aspects such as creative product pricing merchandising.
That's all at the Brand level and the strategies for those are really formed at the Brand level so we may have some may say stores are the best,
way for us to connect with our customers others may go with a different private label credit card and all of that ensures that you know,
really strong Believers and keeping a unique DNA of each brand so while we are for a portfolio,
we want to gain leverage everywhere we really focus on not wanting to lose what makes each brand special and their connection to the customer cuz what we normally hear when people come in and saying hey you know what we could save x amount.
I may be consolidating,
you know all the photos shot so you know all the models of the photo shots into one area and it's really ghetto people resisted overtime and you know it's actually been the right call is what we're learning.

[12:36] So I can practice walk us to how your piece works so let's see you have a front gate Ballard at cetera,
you guys can operate as an agency that supports what they're doing or do you do help them with strategy and they have their own groups so so let's just use something kind of practical that that everyone doesn't e-commerce like like,
I see my Google AdWords do you have a group that kind of like centralized does that say for the various brands or do they do it themselves and you guys,
I had an evil strategy for the.

[13:08] It's really the latter each brand does have right now just for this specific example and it changes of course what you're talking about but for something like sem each brand has their own marketing department.
Then their own people on the ground in a managing their ass Leon campaign.
Where are the cross brand leverage and where my team myself and my team's role will come into play is one in Short helping to ensure,
at all the brands are using the best technology.
More info or let's say I see I'm dead management as well as you know making sure we're leveraging our relationships with our third-party Partners so okay this interests you know again where Billion Dollar Plus,
company,
I'm as a whole but if it was each individual they're going out there as a snow still larger but smaller entities so a lot of that is managed from a central location.
As well as helmets Europe what you mentioned helping a form what maybe some of our strategy should be in the space,
like okay you know it's part of letting you know the shifter increase mobile spend helping to highlight the importance of that and digging into the data so a lot of that is a partnership,
other aspects of you know my team's role here that are shared services where R you know request.
LeBron saying hey this is a project we need to do for our business. On the other hand it could come from a side you know my team and I resent the corporate level to say hey this may be a good strategy for the entity as a whole.

[14:45] Around where things are really pushed off down at the partnership model where the give and take on both sides.
My specific role is again heading up the digital Commerce at the corporate level so it impacts you know what the overall digital strategy should be,
as well as a day-to-day operations and management,
digital platform and technology that is shared among the brands as well as you know what the team here driving learnings and leverage across the portfolio but if it's touching that and you deserve like I said before.
Back in from the brand side so you know an overtime this model has evolved and you know we've looked at all the different,
ways you can actually do this that there you know some organizations that say you know everything should be centralized some saves everything should be at the brands.
We again it's a hybrid model is how we trying to tend to operate some things we didn't my team will get more involved in other times it's where the brands about it.

Jason: 
[15:48] Interesting you had mentioned that a lot of the the brand on the cornerstone portfolio had started as catalog doors and I wanted to touch on that for a minute cuz I think that's super interesting.
Personalized was handled Walmart earnings report this week and Mark Lori mentioned something that I hadn't thought about before but he's like.
Hey we've all been shipping products to Consumers homes for a hundred plus years that's not really the the new thing in that the e-commerce bring for the party.
What e-commerce really changing the party is the the front end merchandising a product that essentially you know the whole delivery thing,
it's something I've been doing for a long time and that you know cataloguers in particular have been doing and the new thing we've all had to learn how to do is use digital to merchandise products in so it like.
Is that true at Cornerstone that you inherited.
Good Supply chains and and facilities for shipping and that sort of thing because of your catalog Heritage or weather like a lot of.

[16:54] Sort of traditional methods that had to be had to be dramatically changed to accommodate your e-commerce growth.

Scot & Bryon: 
[17:02] Wiz.
Cataloguers one of the inmates things I think would see know when I took on the role that I quickly saw was an advantage was that the wreck Market in skill set.
Cuz it's a very different business in terms of prospecting customers and reaching out the customers and it maybe from Hyder having bread,
and mortar stores or whether you're just starting a secure play without that direct marketing background so,
you know a lot of our operations with always been selling direct the customers and ship into them there from the supply chain from a customer call center,
that's always been in place I mean right now we have a small retail store for friends and that you know I'm like a lot of other companies,
that was kind of a you know later stage move that we move that we went forward with so you know and have some of this goes back to.
You know what you at you know your man crush Andy Dunn marriage a sin in terms of you know you're quoted him a number of times that a lot of these think eCommerce pure plays and I'm a big fan of eventually hit a wall.
Because of stacking up with you in the fact of customer acquisition at the right price.
Just so you know you you actually start to say okay we have to get other channels to go after customers but it starts are going to retail in the everyone now it's time to go in the catalogs and the thing is kind of hard work really well,
you know you need that direct marketing skill set but the good part is once you actually have it.

[18:34] Working friends and now I'm really excited because I feel that a lot of digital channels are starting to catch up I mean you look at what Facebook is now offering what Google's offering me know and I've got in a little trouble,
in the news recently just buy,
how well you're able to Target in or if you're from Russia that you can actually buy specific keywords now on it and do respect of look-alike mod,
look like modeling but now with you know you could have specially take what we've been doing for catalogs for a while and go out there and do it digitally.
And the other part with catalogs is that fascinates me is you think okay on the filming of,
you know you guys also we go at that we check our mailbox every day but there really isn't too much in it now and catalogs get a lot of the attention so.
You know digital you. People have also asked well as digital going to kill catalogs and all that but the goal is actually to do a martyr sentence.
Like okay Mel books a lot smarter and integrated with digital and that's what was doing so that's why all the back you know when you say a lot of the back office activities,
you know we of course need to Reno and want to improve on it in terms of speed of delivery in terms of customer interactions but that's been there since day one.

Jason: 
[19:58] For sure so first of all tell me that wouldn't be a great selling book is the kgb's guide to Facebook marketing.

[20:07] She like we should write that right now the.

[20:12] Like so is it true like that you you have catalogs it like that are continuing to be good performers and that you've you've sort of evolved them to to fit better in the digital world that they're still a significant acquisition channel for you.

Scot & Bryon: 
[20:25] Yes they are you know that Nicole is always you whenever you you know if your mailing a lot of catalogs it's a.
Numbers game where are you know a high percentage of them are not going to generate sales the ones that hit well generate you know you know I do a lot of sales so it's over time figuring out more and more.
How to reduce the number of mountains that you do or else reduce unproductive maling.
The Golan is to take some of those Savings reinvested in digital and with digital actually you know have different contact points for the customer.
That is you know right now baby they real catalogs work well they do or the challenge of course is that they tend to be expensive.
They tend to be some things that are out of your control you know what would a long-term you have cost of paper you have postage and all that,
it's you know why won't you know what the start while I was saying you over 70% of our transactions happen digitally you know Catalina.
Catalog for major marketing channel for us.

Jason: 
[21:29] It and it's interesting because you see it going both ways there there you know famous traditional cataloguers that has kind of gotten out of the catalog so you know I'm I obviously think it like a Sears or.
Victoria's Secret and I think even come in your face Crate & Barrel me over Tire their catalog at one point but then at the same time you see a lot of.
Companies including digital native Brands adopting.
Catalogs as a marketing channel and so it you almost have wonder if some of those Legacy cataloguers missed the boat by turning them off when you know maybe there was just a way to to evolve them.

[22:08] I'd be.

Scot & Bryon: 
[22:09] And we started when you started keeping track of it where you know where the 90-day. Exactly you had some major companies such as Victoria's Secret they were out of catalog.
Other companies saying we reinvent you know we're investing in and doing more so there really you don't normally you say okay there's a herd mentality one way this is where it's you know the really isn't,
people argue no finding their own past but Summer Valley more summer mailing a lot less.

Jason: 
[22:35] And Scott do I have it right isn't Amazon even doing some catalogs and some categories.

Scot & Bryon: 
[22:42] Yeah yeah I've seen them experiment usually do a holiday catalog now which is kind of highlighting some offerings that are good gifts.

Jason: 
[22:49] Yep in Bryan I be curious the so when you talk about.

[22:55] Digitally infusing the catalogs I think of sort of two things.
Obviously in a digital let us know our audience a lot better and Target are audio so I better so I can imagine using digital to you no have a higher hit rate and get more of those printed catalogs in the hands of the right people and fewer.
In the hands of the wrong people but I also would be curious about sort of Prince.
Two digital interactions like either their features you built into the print catalogs now to make it.
Easier for someone to to make the jump from the printed page to the the product detail page or or is that not important.

Scot & Bryon: 
[23:36] But it's definitely important I mean we've you know over the past couple years we've tried out a lot of things you know we've done some basic you know,
when I call you now.
Barcodes what not you know when you have the codes in there that okay those were going to be the next stop where you can actually just Decor scan it and have the reader and instantly go to the website.
We've also had different experiments in this some of these were great learning where you could pick your phone hold it over the catalog and actually the product reviews with Sprint.
You can see the product reviews or if we had a couch in Ocala lots of limited space so let's save your show the couch and two colors you can hold your phone up to that page and it instantly scan and the other couches you could get,
so it's done that you know and we'll try some other experiments.

[24:29] I really think we've reached a point where you don't need the coach people saying okay you have this physical catalog then here's what you need to do to get online or here's what you need to do if your phone people are at a point where they're doing it anyway.
So in terms of actively trying to dry them online with kind of said hey you know what we're not trying to drive consumer behavior when I ride in that way.

[24:54] Michael O'Brien listener the show in any kind of heard us,
talk a lot about the Amazon impact out there and,
what is the best way to defend yourself from that is to make your own products you haven't heard it yet but the episode before this one was a deep dive on private label which is a strategy that that everyone's really employing a lot of people feel like even Amazon Whole Foods acquisition was driven by a desire to have a deeper private label offering and grocery so you guys are in an interesting position if I understand it correctly I think,
bus your brands of Lee the manufacturer and the brand the seller of the brand it is is that correct.

[25:35] That's correct but the majority of what we sell all proprietary Goods.
No we do still at the big differentiate or I personally believe this in that you know it.
It gives us now more permission to generate brand Authority and connect with our customers so it also allows us to do a lot more with either you know product customization because it's all under our control,
so it's something you know that we've been firm Believers in and I personally believe it that you know the worst thing you could do is become commoditized.
So I'm doing our proprietary product and then I'm looking forward to listening to your next you know that the cell before this when it comes out but is,
one of the ways that okay if you're looking to compete against Amazon or any of you know any of the other you know larger big boys out there think it's key,
so these brands have been around since the catalog era has if you guys done explicit things with digital to kind of,
accelerate that Loop because some of the newer generations of Brands like a Casper of bonobos Indochina you're one of the nice things about being born digital is you get that real kind of customer feedback very quickly because there's more of a,
put it out quick and get feedback Rose I can imagine the catalog world you know what let's say 15 years ago it would be more of a you know,
some of the product to do testing put it in the catalog and then probably takes 12 to 18 months to get any feedback is that something that you guys have felt in your brands that that your.

[27:10] You're able to close at Loop faster and innovate faster I mean that it's a great that you know part of the challenge always are catalogs is the lead time.
Involved,
actually got things in there so one of the things of course is scaling back okay the knock knock the number about the types of promotions you put in catalogs cuz you talk about being responsive to,
the market needs and business needs a little tough you're putting an offer in a book that you know may go out okay 3 months from now that's going to be off.
Doesn't mean it's not done so that's one thing where you can you know we're gaining more flexibility on mine as well as in the product reviews and then you know that.
From Prague reviews from product feedback from customers even though I may be in the book we're taking that and wearing you know where it integrating work or messaging on the side about the Prada.
So you know we still have again at Heritage we're okay it's still going out there ahead of time but we already know part of it is gaining learning from what some of the digital natives are doing and you know it's family.

[28:15] Yeah, see it flipping where,
and I bet now you could probably you know let's see you have a catalog coming out next spring you're probably planning that one you do a bunch of digital quick things to test that out now and then you know maybe take the winners and put them in the catalog that is that is that kind of inverted with with the evolution of e-commerce.
It's definitely something that we're exploring and yes it is I mean that's where it's great we're okay you could still.
You could still have the print medium that has that lead time but you're able to accept feedback before it goes in there and it's involved in some of the older models,
that had a catalogs get put together and you know what needs to be in them it's really I mean.
That and I really trick it's the shift you know for merchandising as handsome as a whole.
I know that's come up you know I'm different episode and you know the kind of merchant you know the merchandising Prince roll that that's a ball,
now become much more data-driven and you know you use much more real-time feedback and all that are aspects that we.

Jason: 
[29:22] Interesting and you had mentioned that some of the products that you guys make our our customizer personalized for the individual consumer do I have that right.

Scot & Bryon: 
[29:32] Yeah yeah we've been we've been doing it for a number of years and we you know of the past couple years has really been expanding it you know,
because the point earlier about okay if you're going to differentiate one how to differentiate it from Amazon but I know also how to fit the needs of the consumers,
in the consumers really enjoy you know have a lot of trust in Our Brands and in and enjoy them but they also like,
feeling that heavy I have the ability to make it my own Stafford's ample at Ballard Designs which has,
very strong ties to the I'm designer Community with built-in house configurator and this configurator and you know you reviews,
be able to build it where you can have a chair and maybe put the seat collar now you feel that you know you could configure on some,
found my chairs at the 12 different configurations now heads this color.
Alexis color of the you know the chair front and back the welts the seat skirt the chick I'm kick plate you can have all of that customized to it so one of the things we learned as hell you know.

[30:41] People are fat enough fascinated by using a stool or actually able to also expand the use of it in our store so that every Ballard store in their Design Services Center the configurator gets a lot of play You & Me now this is cat time,
really taking it to the nth degree cuz of course knowing one thing by the way you learned at least I learned from this as I can make some really ugly chairs so not everything,
you know how to volunteer to have me come in and do it and waited the three of us have a competition one of these days and it tool who can make the worst looking one but you know we also take a step back and we do a lot even just the basics of product monogramming.
Across all of our all of our Brands we ask you know we do it all in-house there are really strong.
Personalization Center within our DC and we also been expanded to it they stores that within some of the Ballard stores.
Now you could also in-store monogramming.
You could buy a tote there and then go and instantly get it monogrammed with what you want and we were able to turn around like with the recent Star of course hurricane,
you know the first I hate you stand we went in and within 24 hours I mean two teams here that a fantastic job,
wrabel to create customized totes saying okay this is you know it towed for Texas program purchase the toad x amount goes to,
helping a local areas that were in pack,
and you know what that was from a combination of having that monogram and personalization capabilities as well as a team that's always thinking okay how can we pick up products to the next level.

Jason: 
[32:17] That's very cool that we talked several times on the show about that that person was a ship being one of the good ways to to combat Amazon in particular you know it's probably not a perfect note forever but but certainly like.
You know that.
Customizing the product before you ship it to a customer negates a lot of the advantages that Amazon has with the the huge number of fulfillment centers that don't have personalization capabilities.

Scot & Bryon: 
[32:45] Yep and it's also I mean customers you know you still want to get it there as quickly as possible.
Johnny Maddox fan of a custom shower at least this week maybe I'll change in another 2 weeks they're not expecting it to be delivered in 2 hours.

Jason: 
[33:00] Yep.

Scot & Bryon: 
[33:01] Because they recognize what goes into it and they're all so you know there's different price flexibility you have with that.
So you know I know and I'm sure it's going to shift over time I was joking before that there will be no hiding expectations.
Dodge customization is Major strategy for us.

Jason: 
[33:19] Cut in migraines customer expectations rarely ever get lower they do it's not for a good reason.
The the other great thing about precise product though is you probably don't accept returns on that right there turn right it's probably zero.

Scot & Bryon: 
[33:35] Exactly I mean they're always circumstances but no matter what your name is for mothers out there almost customized products the return rate drops tremendously on it whether you allow it or not.

Jason: 
[33:48] Sure I totally get that and I mean.
But I do feel like people sometimes underestimate what a big part of the economic equation returns are in most e-commerce businesses so even when you just.
Dramatically curtail returns that that is a huge economic impact on you know if and when a company can get your profitable in e-commerce oh I certainly like that.
That Trend overall I wanted this sort of flip.
The personalization question for a second though with most people we talked about personalization we're not so much talking about,
personalizing the actual product we're talking about personalizing the user experience of shopping for the products and we talked a little bit about that in the discussion,
but where where do you guys sit in the whole spectrum of personalization are you doing some interesting things is it soda on your road map.

[34:45] You think it's worth it.

Scot & Bryon: 
[34:46] Yeah actually doing doing personalization for a while and you know we,
we've been doing it in and what always fascinates me about is that if a company is doing it really correctly a lot of times,
individual doesn't you know why they don't realize it it just hard to tell personalization unless you know what I do in my spare time if you have enough five different browsers open keep on hitting different categories On fight to doing different things and see if the sites about,
what your behaviors are but we you know it,
different brands of the brands we have you know on the website you go to the home so you can go to the homepage and after a couple visits it actually,
call Paige Cadet personalized that we break it up into dista sites broken up into different if you know whether you called Widgets or different components,
where Venice is you know some of this is basic wear if you're coming from you know a Colder Weather climate,
we're going to show you different products but then that also could extend into what content you see at the ideally if you doing this right where we're also shooting,
if you want to extend that until k then the kind of messages and personalization of people get on the back end if they're calling in to the call center.
Or if they are also you know what day I'm outbound marketing materials that they got.
So we've been doing a lot of that you know the way I usually say it is we've gone a lot better.

[36:18] Personalizing the individual The Experience excuse me at that point in time for that individual in one channel,
where we see the evolution of that is okay then recognizing them on their mobile phone and doing the same as I said when I called to the call center they should have that same experience.
Part of it is you know that challenge with personalization enough spoken to a lot of others about it is actually.
One prioritizing what you want to do but then also had a scallop.
You know it does require more creative resources they have to make an investment in it and it and you know it.

[36:58] It's rare you do personalization in something that you know your metrics just jump off in your the man jumps up it's a lot of singles and doubles.
So you need to do a lot of them and they're you know and just hit a lot of the users to send you know in jail personalized ways and air companies out there,
you know do a great job Zulily does a strong job with it where are you know,
babe I forgot the exact number about how many you know personalized home pages of personalized emails get created every day and I do feel that again it is also the interact with the end-user customers going to start it's going to become table Stakes.
Companies are going to expect that personalization it's just that I think it kind of got over height.
You know really hasn't lived up to its potential yet but you know well of course we haven't spoken about it you know AI machine learning I think that's going to lead to really be the next.
One of the next Generations of what e-commerce is and I'll be around personalization.

Jason: 
[37:57] Yeah it certainly I mean a basic premise is that that machine learning is the way you can you can you can scale personalization particularly when you even get into a I doing content creation.

Scot & Bryon: 
[38:12] It's at if that's true point.

Jason: 
[38:14] It it's interesting like the.

[38:17] Because personalization is such a big word like they're such a broad spectrum right like you could say hey we did a personalization on our site.
And in that could mean you set up a data Lake and collected way more information about all your customers than you ever had before and produced you know thousands of a torn to pieces of content in are giving everyone a bespoke experience or I can also say.
You know you added the words welcome Brian to the homepage right like.

[38:43] And so it's it's it's hard when people talk about having done a project at you and what was the ROI like there's not.

[38:49] It's not a binary thing like I didn't have ratings and reviews and now I do or you know I didn't have 360-degree Prada quotations and now I do,
and you can you know it turn it on and measure the effectiveness.
Personalization is it in my mind is a spectrum minute it's therefore much harder to measure the the ROI of personalization overall although.
You can sometimes do it for individual tactics.

Scot & Bryon: 
[39:16] Right exactly knows individual tactics and normally do singles and doubles and you know I've written a number of round tables with all the retailers on personalization,
you know it always fascinated me because you'll read whether it's our star Gardner you know any of the you know anyone that's doing their annual summations you know.
Top areas that people wanted want to develop in the future next year we're going to spend money and personalization is usually up there but then when you get them,
with the retailers you know on the ground sit around the table and you ask a question okay on a scale of 1 to 10 where is your company,
you know on that where you view where on the road map of personalization I've never had anyone say higher than A3.

Jason: 
[40:03] Yeah.

Scot & Bryon: 
[40:04] And I'm sure you see that all the time when you're with clients that one it's a definition but there's just a lot of dish in there but it hasn't really taken flight yet.

Jason: 
[40:16] Yeah and I guess I would also even say that there are people that have like achieved a meaningful amount of personalization and it increasingly.
Personalization just for personalization sake doesn't automatically win right and so the fact that you communicated uniquely with me.
In and of itself isn't compelling it's if the communication with me made the communication more relevant to me.
Then it's compelling right and sometimes the most relevant communication is exactly the same for a million consumers and when it is.

[40:53] That that's perfectly fine but the the fact that like.

[40:59] You said that a million different emails if it does it's something that's different in those emails doesn't make them.
Resonate better with the audience is kind of a wasted effort and with you know sometimes we see people doing personalization as sort of a checkbox exercise where there you know.
They're hell-bent on doing some personalization so they do something and you know they they can claim that it's more personalized but they haven't necessarily you know solve the problem for their customer.

Scot & Bryon: 
[41:27] I know tire and part of it is then tearing at personalization in an ongoing way and that's why you know the person could sue the email goes to the landing page and it could be personalized to them but then when they're throughout the rest of this site may not be.
And that's where the whole experience you know it's not Barren you know maybe I'm older optimistic on it I think it we are going to get there.

[41:50] Again that's going to be in next week for.

Jason: 
[41:52] Yep I'll tell you one that drives me nuts and I'll pick on a company that's probably generally well-known for personalization that are,
our friends at Adobe right so so that you know they do personalized retargeting advertising like like a lot of B2B companies and and you know so there I'm sure there's a marketing person there that would say hey we have a really effective personalized advertising campaign.

[42:13] And.
So I get personalized ads on YouTube from Adobe and on the one hand that's pretty impressive but on the other hand most of those add show up when my two-year-old son is watching a.m.
Like some kind of cartoon video on YouTube and.
You go hey you know what they yes they personalized that that has something unique for me in it but they completely missed the contacts like why are they buying an ad trying to sell me Adobe marketing cloud in the middle of content design for 2 year olds.

Scot & Bryon: 
[42:46] And that's by that's good trivia it's tough.

Jason: 
[42:50] Yeah yeah I'm bi I'm not making fun of it because that was it you know any easy easy solved but I just I feel like that the state we're in right now is it still early days and getting all this stuff right.
I do want to go back I'm neglected one question we are talking about the personalization of products and you mention the the the configurator that use a ballad for the chairs,
did you have to build something unique that you guys use or were you able to buy some sort of off-the-shelf.
Configuration package and then adapt it to your your products.

Scot & Bryon: 
[43:23] We we we looked at a number or item number of either off-the-shelf products are working with a third-party to build it and I've done some of this again earlier Mike we can figure Raiders and one of learning,
back then was the toughest part about building a configurator is an ongoing support.
As products change read so you know your systems change how you actually keep keep it running so based on that when we looked you know for the Ballard Designs one we decided to actually build it ourselves.
Cuz you wanted specific ties and sir are back in systems who wanted a specific URI for it and for ongoing maintenance.
That was to know something for you third parties for but that was a team here to felt.

[44:11] Cool one of the I saw one of your exact speak at a conference and they're talking about,
kind of you know omni-channel in and store experiences and the digital native,
Brands as you mentioned her are kind of catching on to this and the latest kind of catchphrases o + O which is online and offline and I feel like you guys have had stores for a while but if I call you're doing a lot more of these pop-up experiences,
tallest Tuscan of the little bit of history of of the stores monster Brands and then some of the things that you're experimenting with around other,
online offline interactions.
Some reason retail footprint a small one though for a number of years that actually no predated my company but the majority of them.
In all honesty we're not good and the customer experiences that some of them were,
outlet stores which are fine but they were they look like outlet stores with you no products dumped all over the place and again they didn't really capture the essence of the brands and it wasn't any one person's doing it's just wives.
You know a part of the business that most people did not pay attention to so a couple years ago though,
when from doing surveys and talking to a customer's we start to experiment and Ballard Designs is one of the first this it wasn't a pop up but with a new design you know a new store concept.
Focused on Design Services and you know one of the stories that.

[45:43] You know which is accurate that the present in the Ballard Designs frequently tells is that when we would go and you know we met with a lot of that people that design stores and they're well all I called Design Services that should be in the back corner of the store.
You know what I go through out of the line of sight and you know the people at Ballard this is and this is why again that.
You know the individual bran were the people that helped design the store cuz they are closest to the customer and they understood that it wasn't necessarily a corporate initiative to know that Design Services of watching porn.
African what makes us different so they put that in the middle of the store and you know since then,
and what we also want to look at his okay when we open the store what happens to the business overall and we're seeing in the surrounding you know msas are digital business also takes a little less.
Pics of Bomb Pop,
so you know Ballard that's open some stores in Roosevelt Field mall New York King of Prussia Mall Tysons Corner and we brought on you know some additional I people inside to actually run the retail business operations and,
Hickenbottom doing a great job now.
pain in front gate also by the way which it worth now testing it was Frankie just open the store and in Plano Texas brand new design concept cuz,
Macatawa green our point of view of a beer at the Rack business and cataloger to grow you know Furniture businesses at the,
now that I've grown Frankie Ballard improvements grandinroad without allowing people or giving people the opportunity to feel and touch it.

[47:18] And we Sunday our experiments and all that where it really isn't the same it's good of being there in the store that this seemed like the next and it was the next logical step.
Garnet Hill what you were referring to his they did a great mobile Boutique.
Today is kind of retrofitted a container and drove it around in South Street Seaport New York as well as about the Exeter New Hampshire and opened up the container and it was a mini on a store,
it would help educate people to what the brand wise you know we,
so when the container that we had over $5,000 to it we have local celebrity chefs we have book signings so we can Max an experiment doesn't mean we necessarily going to do it again but we also tried different you know Frontgate had different pop-up stores,
it's a lot of issues learning.
And we learn that customers definitely in a one it's amazing when you're at the store openings that people that have you know only bought from but they are mine.
We actually are in the store it is just a log fast that open and you know you invite some of the top customers in your people discovering the store and just speaking to them about what the brand means to Diamond Phoenix physical location.

Jason: 
[48:31] They call it the show when you said you were traveling a lot is that because you're driving that that container around.

Scot & Bryon: 
[48:37] Exactly. That's fine that's my side stand.

Jason: 
[48:43] Other duties as a.

Scot & Bryon: 
[48:44] My responsibilities exactly so.

Jason: 
[48:50] Impressive impressive.

Scot & Bryon: 
[48:51] Kids dead call at your side hustle that's your side Hustle and I know who to clean a call of course. If I need it cleaned so that we're all set.

Jason: 
[49:01] That's a great time to mention not only if you need it cleaned but if you need it so oil changed mobile one.

Scot & Bryon: 
[49:08] Yeah yeah yeah we we announced a partnership with Exxon today so pretty excited about that.

Jason: 
[49:16] Scot doesn't feel like I follow him but I totally do.

Scot & Bryon: 
[49:20] Thin line between stock and follow their Jason.

Jason: 
[49:24] Yeah yeah but luckily he has a several State buffer to keep him keep him safe.

[49:29] Bryon like I know in your role you get pitched a lot from a bunch of different vendors and you got all these different brands that want to,
try different things and different business users in each of those things and then like you know Scott and I are at a lot of the industry events hearing about the new things.
Help us help us create a little bit like are there any sort of new Trans or up-and-coming practices or technologies that.
That you're particularly interested in or excited about.

Scot & Bryon: 
[50:01] I've been seeing a lot more where.

[50:07] Companies that can and you know their name and some the specific ones that have traditionally come to the table and said,
hey you know we could help you with email on drip campaigns are trigger campaigns or that even we could help you or personalization that becoming a lot more data-driven.
Which excites me and now you know using data and you know new,
that would say in different ways but really trying to maximize in and they're also Focus now on how they're going to tie into your photo ecosystem which goes fast and that's been the biggest challenge you know that if we had one company that did personalization,
an email and one company that made them personalization on the site and they're not talking to each other.
It's a fragmented experience but there's a lot more of that overall I mean for the overall where I seen the future and where companies are doing a lot more if that's why I said it before.
You know I'm one hand I hate it because you know you said we go to all these different industry advance and now you know you it's rare I guess,
Eddie pitched it doesn't mention some kind of machine learning where but I do think it's going to go over that high curves sometime soon but how we intelligently going to recognize,
and I promoted and personalized experiences whether it's emotions Smyrna tractions inventory pricing,
a lot of companies that are doing that now and it's still in its beginning stages but in that way I space.

[51:38] Very interested in and you know just looking around that okay you know.
For Cornerstone in for Our Brands what is the right way to do that immediately I don't think we're at a point yet where I would recommend going to go all in on that.
That you know would want to definitely test it first then that's what I also love it at the portfolio model here is that you know what we are normal,
standard operating procedure is doing a new initiative or finding a new company like you were mentioning earlier its try it on one brand prove it out,
and then actually roll it out to others.
So I mean that other aspects are augmented reality we really haven't spoken a lot about but you know I mentioned it earlier that's not the same as being in the physical store but you know we launched and try with ad,
I've got about a year ago now and the technology finally has reached a point where are you know beyond just Apple adopted it,
states where you don't need markers anymore I mean you got to make this as easy as possible and just holding up the phone and it working is great so.
That's the one area I guess.
The last one if you know I got a whole other our discussion on and this is what I mean we don't have that sell for I'm not even going to pretend to myself that I do it's just.

[53:00] I look at it like okay.
Five years are even ten years out it's so much and you've spoken about the somewhat about what you mean you know that there's going to be disintermediation in that things are going to be come between our brand message and the customer.
We're going to lose some control of that contact and we're going to lose it to you know voice space services such as you know how to sign in Alexa Google Facebook.
Yeah you at all so I no mention on an earlier podcast about you know what Scott Galloway talking about the four.
They're going to control it it's going to have a fundamental impact on Brad's and.

[53:39] Companies that are I think they're going to start to ignore you know partners and vendors as they start to learn to how to solve an address those that was going to be really interested in.

Jason: 
[53:49] Yeah that that certainly is a a big disruption I'd be slightly curious so so we've done a rvr deep dive and I.
At a high level.
Like I think we feel like we are super interesting in the entertainment industry in the gaming industry but it's certainly overhyped for e-commerce.
That you know a r has some really interesting in Store applications and in-home application but almost.
Every vendor in the air VR space for Commerce,
the demo use case that their nana laying is your products right like it's it's the sort of Home Products and Decor products in in you know products that are customized and require some visualization.
Like does it feel like even in your space it's sounding like you're saying it's maybe even still a little earlier and we're just starting to get to the point where it might truly be viable.

[54:44] Is that.

Scot & Bryon: 
[54:45] Oh I think that I think the technology and I mean.

[54:48] Technology is Rihanna's is there in 2 years ago where I was at you no talking at companies that would provide a our services and I like always easy to use the customer just go to the website and imprint.
Page.

[55:05] Pay back page for the wall and the phone of that page and then I'll be able to see it and I'm like you talked about friction.

Jason: 
[55:14] We've eliminated the Scotch tape from the process now.

Scot & Bryon: 
[55:17] So exactly from now and that's what it was yet to see steps and size you know and when,
we went out with you know partner with a company and launched it and it was just really signed out it was really fascinating to me because we would test it out with users and we're going to our stores and show it to them and what really frustrated people as they kept on,
wanted to take their fingers you know when do the pinch move on the product cuz they're like hey I'm trying to get it to fit in the space and it won't fit so I want to grow it and shrink it,
the doll notion you can sure you know it's size on purpose to see if they can fit in so you know you were trying manipulated which just didn't work but.

[55:59] You know it gets a we found them you know what others are fine and I think you got a lot of you know customer interaction with it but you know and I do we did actually see them more customers to know what he'll conversion rate.
You know there's a lot more testing to be done because okay I didn't know those customers were going to convert anyway cuz they were highly engaged so I think that.
It's definitely there and you see all the way you know every really every home goods company now is coming out with it that.
You know what even I mean house did it you know what I think it's great cuz that is multi again multi products in it I I think that and you know what I agree that VR is going to be you know it.
Love Stocker Thrift we have here and everything it's all great but free Commerce application still a heart to you.
The ones that I've actually experimented it that would be are a little wild on the road but they are is going to be here I think sooner than people think.

Jason: 
[56:56] Yeah and one thing that has changed since the Deep dive is both Apple and Google have released these very robust.

[57:06] Trap eyes in their operating system in so it's a good news bad news thing it actually makes it a lot easier to develop.
AR applications in there much cooler cuz the programmer doesn't have to do all the.
The heavy lifting they just have to Define their products and stuff like that so I feel like that's what it's going to be a huge enabler for AR the downside is from the time that Apple and Google like released.
Stuff in their newest technology it still takes a long time before it's in every consumers hands right so you know.
Apple gets most people to upgrade the operating system but it only works on the the phones that are one year older or newer and Google like nobody ever upgrade the operating system and said they're not getting.
The Google AR kit until they replace their phone so it if you like we still might be an upgrade cycle or two away from from those.
Does kids being Broadway to play but when they are it's going to be much easier and cheaper for developers to add those those kinds of features and I feel like that could really be a.
Enabler a lot of this technology for for at least 4 retail applications.

Scot & Bryon: 
[58:14] Yeah I feel the same way me before it was honestly was a novelty.
Oh cool you could do it but it was more people could use it it's going to start to grow with your point when the and I just.
Okay with the adoption rate of the newer you know phones that it's going to be there but it's just easier to use the friction is much more minimum wage now.

Jason: 
[58:36] Yep and I think we know from almost all experiences that when she get that freaking out it makes a big difference in an adoption so,
so hopefully we'll see some interesting stuff there in the future but Brian that is going to be a great place to leave it because it's happening again we've wasted a perfectly good hour of our listeners time,
so I really want to thank you for joining us you know it's it's been a long time coming but.
Totally worthwhile and we wish you all the best with Cornerstone and look forward to following your success I want to remind listeners that they're always welcome to continue the dialogue on our Facebook page and O'Brien hangs out there all the time so if you have any questions we can cajole him into participating as well,
and of course if you love the show we desperately need that 5 star review on iTunes if you hated the show don't don't feel the need to write an interview at all.

Scot & Bryon: 
[59:29] Crack guys thanks so much again I really really really enjoyed it.

[59:34] Thanks Brian we really appreciate your patience on scheduling this so what kind of used grit and gutter done and really appreciate you taking time out of your busy day to share your digital experience with our listeners.

Jason: 
[59:48] Until next time happy commercing.

Oct 12, 2017

EP103 - Amazon Private Label Deep Dive

This episode is a deep dive into Amazon's Private Label activities:

  • Framework for Amazon Private Label Brands
  • Amazon's History in Private Label
  • Advice for Brands and Retailers
  • Update on Amazon Private Label Marketshare from 1010data

Special thanks to Samir Bhavnani and Tim Wilson from 1010data. for providing their data and insight for this episode.

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

Episode 103 of the Jason & Scot show was recorded on Wednesday October 4, 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason: 
[0:25] Welcome to the Jason and Scott show this is episode 103 being recorded on Wednesday October 4th I'm your host Jason retailgeek Goldberg as usual I'm here with your co-host Scott Wingo.

Scot & Guests: 
[0:38] Hey Jason and welcome back Jason and Scott show listeners.

[0:55] Today we're going to continue our very popular deep dive series,
and jump into something that has really caught on in the last 6 months there's been a lot of excitement around this so it was sparked by Mary Meeker really kind of putting a bright Spotlight on this,
and that is the topic of Amazon private label,
Jason I know you have thought a lot about Amazon private label and I think the the real meat and potatoes is know what what I'm hearing from brances there's a couple of questions there,
really grappling with and we're going to answer this questions and give listeners some new data that,
this the first time you'll hear this data thanks to a gas it's going to be on the show but before we jump into that I know you spent a lot of time thinking about this help give our listeners kind of framework for for how to think about these private label offerings are so many now it can be kind of confusing so as to how do you kind of sort them in and organize them.

Jason: 
[1:52] Yeah Scott well I don't think there is one perfect framework at the moment so I'm using a number of different dimensions to sort of think about these and slicing and dicing in different ways and so there's there's sort of for big.
Big Dimensions II think about their 5 depending how you count the the first one is,
Prime exclusive versus non-exclusive product so there's a subset of these brands at Amazon's offering that you have to be a Prime member to get sew-in apparel that something like button-down or good threads in in cpg that something like Mama Bear or wickedly prime or happy belly,
and so you know here.
Obviously there they're partly training use these private labels as an extra inducement to sign up for Prime and.
And more and adding more value the prime memberships the II framework is is.
What we call Amazon branded versus non-branded right in so of this ecosystem of.

[3:00] You know now over 50 50 different brands that Amazon has has invented a handful of those five of those.
You can look at them and immediately know it's an Amazon product because they they would either have Amazon in the name are there so closely associated with Amazon.
And heavily advertised by Amazon that is very Queer as an Amazon product so that's.

[3:21] Amazonbasics that's Echo that's fire that's Amazon elements in Amazon essentials.
I'm but the overwhelming majority of these Brands and Amazon's creating.

[3:33] It seems that they're they're going to reason with extensive links to not make it obvious that it's an Amazon brand and have it feel potentially like.

[3:41] A standalone National brand in sew-in Apparel in particular they've created a bunch of these brands.
And this is things like Scout and Ro James and Erin Waterton Road those those sorts of of brands.

[3:58] So the 3rd framework will uses is to think about them in the different categories and this is the the normal product taxonomy like in a lot of these products fit any Electronics category their increasingly are products in cpg.
There's there's definitely products targeted specifically a baby.
There's a bunch of apparel and now there's some health and fitness and Home and Garden.
And in each of those categories you're you're seeing some of the Amazon branded product and sum of the unbranded product.

[4:31] You pointed out a couple to me that that we're new to me.
You know like there may be even sub-brand so in fashion you're not answering to see like outdoor a fashion like Denali as a specific sub brand in the in the fashion category.
In the last category framework that we use is what I called basic versus luxury and said there are a lot of these products where their biggest value proposition is.
That they're at and appealing price point for a good quality product the matches the product you're used to using.
In tow light apparel is the easiest way to think about this these are the that you know,
the standard uniform button down shirts that we wear in their in their case would rename button down these are like the basic t-shirts and all all these sorts of things and as you talked about on a couple Brands like.
Amazon sort of gives you three tiers of quality you can get a.
An unfamiliar you know typically like offshore products from China at a super low price point.
You can get a amazonbasics product at a low price point,
or you can get a luxury branded version of a product at a higher price point in so a lot of the Amazon products are playing in this sort of basic category but increasingly we're seeing Amazon,
to get products that are moving up market and have their own value propositions that are driving their own demand and they're not just a.

[6:10] Value proposition you know for the same feature set that you can get from a national brand some case they're there differentiated quality and certainly like Amazon Echo would be the.
The prime example of a of a luxury product that's sort of the the category leader with its own unique feature so.
You know you can come use any of those Frameworks to slice and dice all of these different brands and as as time permits what you know we probably need to create some sort of the infographic to put in the show note to make that more clear.

Scot & Guests: 
[6:43] Yes funny you mention that way you actually have to if we happen to have one so just a little history that makes that framework I think that's super helpful.
The background on Amazon private label,
probably the first one that I can find documentation of is when Amazon watch Kendall that was the first time they came out with a product and its really funny because prior to Kendall,
Amazon was notoriously famous for not running TV ads day back in like,
03 they ran a series of TV ads called the sweater women wear these guys singing this people singing Christmas carols by a fire.
Stop doing that when someone ask Jeff Bezos why he said we want to take every marketing dollar and put it into,
free shipping and lowering prices so so then kind of for literally 5 years they didn't really run any TV until they came out the candle they started to do TV and more.

[7:39] Typical brand advertising it was interesting in 09 I was so I blocked I've been to this Amazon gig before it was his hip and.

Jason: 
[7:52] Weighted hip now.

Scot & Guests: 
[7:53] I guess I guess so well there's podcast now so there you go before Matt and I found this product called pins on and I couldn't.
You don't figure out what's going on and it was supposed to go today on Amazon so they're kind of pushing it as likewise Amazon pushing the spins on thing so then I kind of went into the bowels of the trademark Registry and figured out it was owned by Amazon,
oh my God this is a new private label so I just worked out a quick blog and then it actually got picked up by lot of press and then I,
I kind of using that same method I found there was a list of six Brands three of them were actually just calling to reserve so they were trademarked but had never been utilized the other three were Strathmore in Denali,
so I kind of stumbled on and then over the years I've watched this pretty closely so so for me and there's actually a lot of Articles coming out now about this or people using that same system in so there was one in court so they're like you know Amazon has,
800 private labels waiting in the wings and so that's a little tricky because,
to me you don't I don't think we talked about it as a private label unless it is on the site and live and there's more than one product for sale another kind of checkbox for me is does it have kind of a logo,
since that point just kind of notes,
over the years they've done more of this and what we hear from Amazon insiders is this private label group kind of outside of,
Kindle an echo is one of the hottest groups inside of Amazon so they're hiring massively they have plans to ramp up private label in pretty much every care.

[9:30] Category so so here's the private labels we know today and I'm going to start with a,
The Matrix taxonomy so so Jason you introduce some slow start,
the ones are good too so we'll go through Prime exclusive first and then not prime exclusive or are generally available and then category so it would start with the things that are prime exclusive and,
that the most they have in the prime exclusive bucket is fashion so they have Amazon essentials,
blessings likes men's shorts at highly recommend those things of that nature. Kind of Basics but down you mentioned,
Ella Moon good threads James and Erin is 22 of them have Row in the name Lark and Ro and Scout and Ro.
May which is Mae and I think that's lingerie only the UK north 11 and Paris Sunday.
There's a new one that's out called the fix and I believe that is prime exclusive,
then the other bucket of prime exclusive private labels are in cpg there you have Amazon elements and I was getting elements and essential elements is fashion,
she did it already Essentials is fashion elements to cpg happy belly Presto Mama Bear and wickedly Prime,
then in the broader categories so these are just generally private label that are not prime exclusive amazonbasics which is the popular accessories to start as Electronics accessories and we've seen,
you know things like a bocce ball sets and their stickers Amazon Basics is exploded past that the simplest kind of things.

[11:07] Denali what you mentioned two dice funny so a lot of time still you can tell they test these things so $2 in strathwood of the ones I've been following the longest stressful it's been pretty true to doing kind of outdoor furniture kind of stuff,
it only started this tools so it's kind of a Black & Decker competitor and tool sets and it's kind of pivoted you mentioned it to function and kind of outdoor.
Pinzon has been there that's a home,
Home Goods kind of sheets and those kinds of things Pike Street actually had one they retired that was a coffee brand it had Pike in the name as well I'm glad he's our have a nod to Seattle and they're so like Molly the mountain you see in Seattle Pike Street obviously,
and then the journey available not prime exclusive fashion private labels are Franklin and Freeman Franklin Taylor.
Iris Lilly that's a weird cuz everyone else has and and up down just two words together Iris Lily and that's exclusive to London and Society New York.
And those are kind of it will put a graphic in the show notes that's part of this Amazon scape I did where I tried to kind of organized these things and capture the ones that are actually the kind of meat,
criteria of you can prove its Amazon,
through the trademark Registry there's actually something more than one SKU for sale and there tends to be a logo associated with it so it seems like at that kind of.
Raises the bar on on what we included here but I think it's the right way to do it.
So it would be great if Amazon told us exactly what their sales all these things are but.

[12:38] Amazon satorius Lee secretive and they disclosed nothing about this there are two data sources out there though that we watch Pretty closely,
and you're the instruction I've talked there's all kinds of different ways these companies collect data and,
so one of them is one click retail and I believe it one click retail does is they have some ability with Amazon either directly or through their brand Partners to get into the,
that the data that's available to vendors and the aggregate that anonymize it and then look at some insights from it,
so according to them just recently here and the first week of October they have said that they believe Amazon private label has has done 300 million so far this year so if you feel kind of through the first nine months of the year in e-commerce and you've done,
300 million then it's probably safe to almost double that so because of holidays and call it 500 to $609.

[13:34] They don't Unfortunately they don't tell us which of private-label is in or not in that but there are they do kind of didn't break down the top categories and in this category as they don't include.
Kindle an echo so I'm kind of assuming that that 300 million number is does not include Kindle an echo so that's the the ones I rattled off but not kind of the devices that Amazon makes and manufactures.
So and then later in the show we're at little teaser here to make it worth your while to stay around we are going to have the second date of Ender on the show as a guest for the Steep dive to help us kind of really,
drill into this in and see if they can shed some more light on it.

Jason: 
[14:14] Yeah and I know Scott it's been a labor of love for you to keep the,
the infographic perfectly updated of course a lot of listeners will will know that Amazon very famous we added a new private label in the last month which is the Whole Foods private label so that's whole 365 from Whole Foods is now being.
Seemingly someone successfully sold on Amazon as a new Amazon private label.
And I think there was a recent retail dive article that essentially said they they sold 16 million of the 365 in the first month and you know it sent you a reply chain problems and sold out of a lot of their guts.

Scot & Guests: 
[15:00] Yeah I think there's some data I'm not a grocery expert like yourself but isn't there data that that that actually for Whole Foods it's a pretty material part of their sales I think I've seen anywhere between 20 and 30%.

Jason: 
[15:15] Yeah yeah and I'm not exactly certain what the breakdown of Whole Foods is the.

[15:22] Like at the top end of a grocery stores there's there's folks like all the annelida land and Trader Joe's that are like 60 to 90% private label,
when you work at a traditional grocery store like a Kroger or Walmart you know they're there somewhere in the twenties and so you know I think Whole Foods is a little higher than a traditional store but but not in the in the Aldi's base yet.

Scot & Guests: 
[15:47] Okay cool before we got our guests on I think the questions that come up the most I just want to kind of,
pink I'm off you just to get the conversation going here so a lot of this gets started because of that,
battery data that's out there that shows that Amazon essentially came out with a private label battery this is like you know,
typical household batteries like double a triple a CD in that kind of thing and it quickly became the number one seller,
so it's a really kind of Sheriff from Duracell and Energizer in those kind of guys so if your brand out there,
and your help as we talk on the show brands are in a different variety of of their current Amazon strategies summer taking a deep I want to do everything so we had for example dorel juvenile while there,
they are doing everything they can on Amazon so that's kind of that I'm going to jump jump into the deep end of the pool and then we have folks dipping their toe and then we have folks there just kind of sitting out on the sidelines when it comes to private label what's your advice you offer to France.
Wooden Amazon.

Jason: 
[16:52] Yeah well so busy brands of the super broad term.
You know I'm I'm answering in terms of the kind of categories were talking about on the show tonight so food and cpg and health and.
Mostly the basic sides of a parallel so you know if if you're talking about Gucci is a brand my answer might be a little different.
But but in general brands have two problems have the problem they know about in the problem they don't know about with Amazon right like the probably know about is.
Amazon is a super-powerful fast-growing platform it's now gotten in their space and making products that compete with him right so so Amazon being a private label competitor or a.
Or you know I often talk to them about being at 8.

[17:44] Brandy manufacturer competitor as opposed to a private label because many of these these products that have a much higher value prop than just a private label.

[17:53] You have to address that the problem that a lot of Brands aren't aware of him and certainly should be aware of is.

[18:00] People just shop different digitally in digitally has fundamentally changed how people shut up and huge.

[18:07] Proportion of of North American consumers.
Are using digital to help them make purchase decisions and so you know Amazon scary both because they're good at Selling Stuff digitally and they're making their own stuff to sell and in so in general when I talk to her and I say hey.

[18:25] First thing you need to learn how to do is be great at selling digitally and you should use Amazon as an example right and so you know in almost any category you can pull up the.
The Amazon label version of their pdp's and compared against you know who you think of is a market-leading national brand.
And you'll just see how much richer and better executed in much better content is on the Amazon PDP so those are really.
Templates for how to sell digitally.
And if you're Brandon most of these categories were talking about I do believe you need to be on the Amazon platform that's where telling the consumers are that's where bunch of the money is.
You know depending on how many Prime members you believe Amazon has does in the most locked in consumers in the marketplace and you're only going to reach him.
If you're on the Amazon platform so even though animal Amazon's a friend of me in general.
I think you need to be on that platform and I think you need to be using that platform to build your chops around digital merchandising and digital selling.
And so I think that certainly a key you know part of consumer shopping different digitally.
You know you need to be thinking differently about how you differentiate your products in in the store it was about the point of purchase.
Packaging in the displays in your promotion strategy International television campaigns.
In the digital world it's a lot more about trust transparency social proof there's a lot of new currencies that you need to start developing and there are things.

[19:57] That you have competitive advantages on because you're this well-known will use National brand so it should be easier for you to collect ratings and reviews and develop social proof then it is for a net new brand launched by a.
A retailer that no one shot from before so I certainly think there's opportunities to improve your your digital merchandise saying that leverage your your core strengths in.
In doing all this I think it's super important that you have a direct-to-consumer.

[20:29] Portion of your business so if you already selling direct-to-consumer you ought to be using that channel as your learning lab you ought to be doing constant s and evolution and different.
Content in in.
Different presentations to really nail how people want to shop for your product digitally if you're not in direct to consumer.
It's time that you start doing some direct-to-consumer pilots and I'm not saying that because you're going to sell a huge amount of direct to consumer product and make a fortune in most cases your not but you need.
When you sent through those wholesalers in those retailers you're basically disintermediated from your consumer and in this new digital world,
you need a direct relationship with this consumers to understand how they're shopping for your product and what is resonating with them and what's not so you need a direct-to-consumer channel if for no other reason than to be,
a learning lab as you figure out the best practices for for all of these things and then lastly I'd say hey while you're losing sleep about your customer shopping digitally and buying the Amazon version of everything,
don't forget about the other thing you should be losing sleep on you know which is this is coming wave of Auto replenishment and just fundamental changes to the way people buy stuff and there's tons of stuff that consumers Buy.

[21:44] Explicitly today when they run out of toilet paper do they run out of dish soap that they're very likely to get implicitly tomorrow either because there's a sensor in there their toilet paper roll or a camera in there kitchen or,
microprocessor in their in their dishwasher and you really need to be thinking about,
how you're going to preserve your current market share and hopefully grow it in a world of Auto replenishment when a lot more of those decisions become.
Implicit instead of explicit so that's a lot to chew on.

Scot & Guests: 
[22:17] Yeah and maybe taking it up even another level I found there's like this a rational thing,
Amazon causes so much fear it causes a rational illogical,
thinking in a weird way I'm so serious what I mean so a lot of times people say I'm not selling a brand will stay within the framework you outlined of we were talking about here on Amazon because of the,
Yep they're just going to take my data and create a private label but then I'll say maybe it's a cpg company I'll say well you're in Target Walmart,
grocery stores and Costco and your products right next to a private label it why why does it bother you so much on Amazon when you've lived in a private label land for a while but what's your,
do you run into that in like what's your how do you why are they why are there not able to rationalize heads.

Jason: 
[23:08] Yeah I do and again it's a devil they know versus the devil they don't I totally agree with you that it's irrational and and when you call him on it you know they have trouble articulating why it is different.

[23:22] The other one that that comes up a lot that's in that that same boat is like.
You know I always ask clients when they say hey I don't want to sell on Amazon cuz I don't want to get them my data if.

[23:33] If you're in the diaper business and you're saying you don't want to sell an Amazon because you don't want Amazon to get your diaper do you believe that Amazon's not getting a very queer to look at the overall diaper Market without you like.
You have to be a really large part of.

[23:48] Of the market to feel like you're somehow keeping Amazon from Market visibility by staying off the platform like in most cases that.
You know you're you're doing yourself more harm than you are Amazon there they're going to figure out all of those consumer categories whether you're there or not and so you know if,
you probably need to be there again if your consumer Products Company.
Amazon has 240 million consumers in the US there are 240 million households in the US.
So that's a pretty big Market to be overlooking that's like saying a bank robber and I don't want to rob banks because I don't like them.

[24:30] It's where the money is right now and so for most brands you need to be there you do need to understand that you are potentially enabling a competitor and you need to do it in a smart way,
but I think most people that are staying away do so you know partly for irrational reasons.

Scot & Guests: 
[24:48] Yeah and the other one is I've given these talks about this stuff and then after someone always comes up and they say we're actually,
it's either the horses out of the barn door it's like about to leave the barn in those say don't tell anyone but Amazon's approaches to be the private label manufacturer for axe or we're actually the guys that makes a battery and how do you feel about that in,
I don't know how to answer that I can kind of see both arguments I'm curious I'll reveal kind of how I think about it but I want to hear how you think about it first.

Jason: 
[25:18] Tricky make me answer first.
Yeah so that's one where I generally and again there's exceptions and every Market but in general I would say no don't do that in the reason I would say that it is,
because manufacturing private label products for other retailers is increasingly becoming a race to the bottom,
you are just going to be a commodity manufacturer and your Expediting Amazon's ability to build their own customer base and test the value props,
for themselves and the best you can ever hope for is to be in a bidding war against everyone else in the world that can manufacture that product once Amazon's won all the customers and so in general.
Well well there is short-term gain and you know you can protect some of your manufacturing capacity to cut other about wise be at risk by by partnering to be the private label manufacturer that's not a way to win long-term I mean you really need to think about the shift that's happening,
every retailer is turning into a brand every brand is turning into a retailer,
and in that world if you are making products for someone else that owns the relationship with the customer,
you are never going to be in a position to control your own destiny you're always going to be you know in a super price competitive situation and it's it's just,
not something that I generally recommend for both most brands.

Scot & Guests: 
[26:46] So the counter argument that I've heard from Branson in this is it's interesting is well we're going to we're going to.
Go ahead and make that because,
we want to it's a hedge little bit we want to see how successful they are and we want to learn from what they do and this is the only way we'll see sales of that item is if we're actually making it so,
there's there's something Buddy there that's kind of part of that short-term wind that I think you're talking about but then I do think that they.
Then they always say you know like.

[27:21] Amazon won't be able to visit outside of batteries but like lingerie I've had someone say well you know where the number.
Two lingerie manufacturer Amazon can't do this. They can't possibly do it and I'm kind of taking over 15 to 20 years I've heard that Amazon can ever do this thing alive,
yeah it is turned out not to be the case every single time so,
that does make me a little concerned when they kind of had the bravado that there are going people that can make this thing this widget.

Jason: 
[27:52] In general in this isn't universally true but like in Moses Brands you end up with two big brands that I bought a market share of number 1 and number 2 and in most markets there's an unknown number 3 that is really the private label manufacturer in in in some markets that.
That number one very often has hasn't made a decision that they're not going to manufacture private label for anyone and so you certainly see like PNG you know publicly say that they don't manufacture for folks,
the most often that number three ends up being the private label manufacturer and they do so be the reason that they're there.
Doing it instead of the number two is because they're just willing to do it for less money,
do you know if it ends up being a commodity manufacturing service that you're providing and this notion that you had some technical proprietary manage and that you know anyone else isn't going to be able to make what you make or or Amazon in particular isn't a meal of the deal with the complications in your category like,
every one of these categories has great complications and there are Technical differentiators and there are IP differentiators.
But what you say to all those barriers are lower barriers than they've ever been before and they're only going to get lower over time so that you know relying on that to be your mote um is pretty risky.

Scot & Guests: 
[29:17] Yeah and um just help blisters kind of put a little bit of math on this so if I am one of those Commodities manufactures what is that like a 5% margin business certain kind of single-digit.

Jason: 
[29:29] Depends on the category but in most cases yeah you're thrilled to make 5%.

Scot & Guests: 
[29:34] And then if I am a if I'm a brand and I'm selling through retail then that's 15 to 20% kind of a margin type business.

Jason: 
[29:44] Most typically exactly.

Scot & Guests: 
[29:46] Identify my grandson direct now I'm taking all that margin that get you all that that Mark up that retail enjoys which is usually somewhere between 30 and 50% I'm adding it to my 15 and,
that's kind of like now I'm Into You know if this 60 - 2.

[30:03] Maybe 50 to 65% margin on this is what I kind of think about that model this is why Amazon is doing it right I mean they can they can they can get a lot more margin that can pass,
two thirds a third of it on the consumer have a lower price keep 2/3 and no action on a per-unit basis be ahead of the game versus being a retailer so that that's why,
private label exist in an Amazon. The first one to discover this they just have the data to kind of go about it very quickly.

Jason: 
[30:32] Exactly.

Scot & Guests: 
[30:33] And then the last question before we get to our guests so we also have a lot of retailers to listen to the podcast what book should they do if they're not doing private labels that something the Explorer should they take the opposite,
all in and kind of take a page out of the P&G Playbook and say we're not going to do private label will have just Brands only here at our retail shop.

Jason: 
[30:55] I'm looking forward to seeing that retailer that would be fun to watch but in general yeah,
I think it's going to be increasingly difficult to make a living selling other people's stuff and when we will get successful retailers across the board there are already selling a ton of Their Own.
you know we talked a lot about Walmart being the biggest retailer in the world like the second biggest retailer in United States is Costco Costco has less than 10% of the number of stores Walmart has any other the second largest retailer,
in the usn there's a variety of reasons behind that.
One of them is that the majority of what they sell is is private label product that Kirkland product in a few other brands represent the majority of of stuff that they sell in they they executed,
very well they have that really interesting methodology of partnering with national Brands to launch new products and deciding if and when they'll they'll launch a house version of.
Of those products in and they they've mastered that process along before Amazon got into the space when you look at the most terrifying grocery retailers that are entering the us right now and scaring the bejesus out of the traditional.
Grocery retailers there their businesses that are predicated on on selling Almost 100% private label products,
me know you got the one that us consumers will be most familiar with already is Trader Joe's in that space you look at traditional wholesalers like in in categories like Office Products or or consumer electronics and Best Buy has a stated strategy to have over 50% of their stuff be.

[32:42] Be brands that they own it just very clear to to be a successful retailer moving forward,
you mostly are going to have to sell your own stuff that you know.
All the Amazons going to continue to be an aggregator of everything it seems likely that Walmart's going to continue to be a meaningful player and aggregators of everything but outside of those two players.
There's not a lot more room for.
Wholesale aggregators of products in so your long-term play your long-term viability is probably at least partially predicated on your ability to build brand that consumers want,
and it will cause them to select you versus someone else and then I would.
I would reiterate that that same Auto replenishment conversation I talked about with the brands if you're a retailer and you know.
A bunch of the products that drive trips to your store or.
Those things in the middle of the store that are going to become you know Auto replenishment products you need to think about how you're going to survive in a world in which,
no one comes to your store to buy toilet paper or dish soap anymore,
you need to think about a water world in which you know when people are shopping predominately opolis it's much harder to sell impulse purchases and so there's a whole set of,
new business problems you need to be thinking about as a retailer in in particular in this Grocery and food category and cpg we're seeing the tsunami of curbside pickup buy online pickup in-store digital order ahead however you want to look at it there is overwhelming evidence that that's going to be a rapidly adopted model in North America and you know that fundamental.

[34:20] Lead changes a bunch of the value props and so have your retailer you need to be thinking about how you win in a world in which curbside pickup is a meaningful part of your,
your business.

Scot & Guests: 
[34:31] Jason one of the big bang moments and Amazon private label happened back in May when Mary Meeker had a slide about Amazon private label in her annual internet update,
that's why I'd showed some sharks that had Amazon baby wipes and Battery offerings and that they had become top sellers so this is behind Brands like.
Duracell Energizer in Panasonic where they were they were out selling you know kind of the name brands not the battery story and I know now that it came out in May with the Meeker presentation I've seen it,
either tens or hundreds of times out there and I really think of it as the shot heard round the world for Amazon Private Label Amazon have been doing private label for a long time,
but that that one kind of data point or especially around the batteries has come up in a probably with me,
30 40 50 times with brands that they were just really shocked by all that and you know if you look at that slide and look at the,
bottom attribution you'll see that that data is attributed to 1010data,
and to join us in our conversation about Amazon private label works cited to have Sameer bhavnani and Tim Wilson from 1010data and they're going to help us peel the onion on this welcome to the show guys.

[35:41] Well thank you hey guys thanks for having us very excited to be talking about Robby Thompson shot heard around the world.

Jason: 
[35:51] Exactly but that that is a big-time right I would I would imagine if you're in the date of publishing business and Mary Meeker quote you that's that's about as good as you can get.

Scot & Guests: 
[36:03] That's basically summoning the mountain right there this is good as you can get it's also a very moment because you realize very quickly,
who actually knows Mary Meeker is excited for you and who like my mother has looks at you like what are you talking about but.
For me it's inside it was very exciting.

Jason: 
[36:24] That that's a tough one to explain to Mom I totally get it in for those of you that haven't seen her presentations they're usually like one or two slides and maybe like one data point in it so if you're that one data point it's huge because you're the only thing she's talking about.

[36:40] Plus or minus about 300 slides in a 30 minute presentation.

[36:46] But she makes it work.
So before we jump into all that though there's always like to get a sense for how you guys came to our awesome industry can you give us kind of the lowdown about your your careers and how you ended up at 10:10.

Scot & Guests: 
[37:02] Sure guess so this is Sameer I'll stop. If you don't mind and the bulk of my career was spent at a research house called MPD.

[37:12] And after spending I'd say almost almost 10 years that's as an industry analyst over at MPD I move more into the business side.
And then a couple of years later my friend Tim who's with me today call me often told me he was starting a company.
Who is focus was going to be on tracking what consumers are buying online and he wanted to know if I wanted to join him and I said yes and I'm going to let him see the history from their my history is I started.
Investigating what people do online little over a decade ago at compete who is required by TNS and then kantar.
Today I believe it's known as millward brown digital and I was so frustrated with the fact that a lot of our our studies.
While they were great it was always just a little short with understanding the lower funnel and exactly you know what it is that people were buying so myself along with Aaron Mendez.
Started the company in Quantico focused on what people buy online and we did this back in 2013 thought maybe we're a little behind the curve turns out we're a little ahead of the Curve.
And during my first call was with Sam and so we we broke one Co-op and then eventually joined the 1010data family.
Help round out their assets around the consumer purchase activity so today we have extreme email receipts.
Credit card data debit card data.

[38:44] We use all those behavioral Deus Ex to get a clear picture really but you're able to paint a pretty good Mosaic of what's going on.
Both online and in-store and in that consumer purchase data is really the Crux of what were me Sam and the rest of the team are working on commercializing and bring it to the market.

[39:04] And if you're unfamiliar.
Internet were headquartered out of New York City and essentially what we are is an out-of-the-box inside right so we we help companies manage data.
And we also help companies understand where consumers are spending their money.

Jason: 
[39:29] Awesome and you alluded to it a little bit but in terms of how you get your Insight I tend to think of you as sort of a large panel that then augments that panel with third-party data,
so

[39:45] So that the panel is sort of the quick stream in the email receipts and then your your augmenting it with some some third-party data is that why that right or can you explain to us.
How you get your your data.

Scot & Guests: 
[39:57] Yes.
Yeah absolutely so we have we have multiple inputs you know really one of the things that I've learned from doing a while is that there's there's no such thing as a perfect date is that they all have holes.
They all have diocese etcetera so it's really about the more different the more information you can collect the more confident you can really be with what's happening so.
We have we are actively scouring the internet or third-party data listening to analyst calls for any you know publicly traded companies we have,
and we use all of the information that's available to us as part of our data methodologies for the projection of our estimates.
However you know we do have our limitations in end you know we use our panel.

[40:49] The way every other handle this company does I wouldn't say that we augment it necessary with with other third-party did a research but I would say that you know third-party inputs are an influence or an ingredient and the date of methodology. Does that make sense.

[41:07] Here's a great here's a great way to kind of think about it so there's been a huge shift,
in the measurement in the measurement world in the measurement of consumer behavior and that shit is essentially has been traditionally if you have a panel,
what that means is consumers are opting into some kind of panel and they're going to get coins in exchange for answering survey questions of some nature,
and that has been Houser the research base is really kind of measured consumer sentiment for decades and decades and there's one kind of fatal flaw in that.
Methodology through well and that's very simply is that people forget so if you ask me where I had dinner with my wife Last Friday Night.
There's a good chance I might not remember the exact name of the restaurant right McDonald's,
and so what what has happened now is that the industry has shifted and because of.
Sort of the move two words digital we're now able to measure actual behavioral data right we're actually able to actually measure what people are actually doing.
Not not what people are telling us they think they're doing or what they want to be doing.

Jason: 
[42:25] Sure and into II like to attend to call that like sort of.
Observed Behavior instead of stated Behavior so like you're not asking people where they shopped you're you're getting access to email boxes and you're actually seeing order confirmations for example.

[42:42] Things like that.

Scot & Guests: 
[42:42] Correct correct.

Jason: 
[42:45] And in general like we're going to talk a little bit tonight particular about.
Your insights on behaviour on Amazon and I tend to think of their being sort of,
two approaches to getting insight into how people shopping Amazon they're sort of starting in the consumer and working backwards which it you know you're going to see all the consumers behavior on all their sites and,
and because a lot of consumer shop on Amazon you're going to see a lot of their behavior on Amazon and I,
I think of you guys in that space and then there's another set of entities that try to,
scrape all the Amazon pages and data that's on the Amazon pages and sort of reverse engineer.
Consumer behavior from the Amazon site itself is is that a affair taxonomy to be thinking about her.

[43:36] You guys do both.

Scot & Guests: 
[43:36] I think you said that you said that pretty much perfect yeah we do the former we can certainly our focus on the former.

Jason: 
[43:42] Awesome well I think that gives us a pretty clear basis to to dig into the reason we're all here tonight which is talk about Amazon private label.

Scot & Guests: 
[43:53] Yeah it in Atlanta one quick follow-up are your guys customers retailers Brands both any any kind of.
You know sizes at like 5 kind of companies or is it run the Spectrum in any kind of guidance to help our listeners can understand who your customers are.
The bulk of our customer sponsor into a few buckets one is on,
when I would say is well sort of well-known Merchants Tire retailers II is consumer brands.
And the third would be financial institutions that since the makeup most most of our Revenue.

[44:40] Got it so retailers are kind of using it for market share and Allison and selection analysis or assortment is that is that these case retailers.

[44:50] Yeah so the primary use case for Merch are retailers would be around assortment right people are buying they they want to know what they should be out there shortly.

[45:03] And then Brands is probably a market share game so you know how am I doing against my competitors on Amazon overall do you guys do,
is this purely online data or is there an offline component kind of like I know the NPD guys have an offline piece as well.

[45:20] There's their stuff there's booking online as well as an offline component.
Certainly the the weaning that we have is this more towards sort of a digital art e-commerce piece of things and what brands,
surprising how little Brands know about the size of markets and the growth of markets are categories within e-commerce so what we've been doing over the last couple years really has been.
Give me brands of blueprint blocking and tackling how big is my category how fast is it growing.
Which retailers are winning in which categories and Amaya tanning a fair share of that total pie,
that's a really good Segway into Amazon private label which is essentially a brand let's start it kind of the what I called that shot heard round the world take us through the wiping battery data and that data you know if it was in,
makers deck in May for all I know it could be a year old and I don't think it had the Lincoln time on it so if you have any new data on there that would love to hear kind of an update as well.

[46:28] Shirt so just I'm going to take a shower real quick staff a try just to talk about just to talk about private label cuz you know some people really get it and some people really don't get it right answer private label has been.
A real affordable price point high quality products for decades and decades Right grocery store chains have been doing it for you know.
And,
what's been happening lately is Amazon Amazon first four actually into private label began with its reading device right with the Kindle in consumer electronics,
and from there Amazon expanded into,
they had like for example the Fire tablet they did a streaming TV stick and then they did the Amazon Echo right which is a revolutionary type of device that everybody's playing catch up,
and then the success that they started having in electronics LED them to start looking at more traditional.
Let's let's call it household essentials type of products where you know they look at where is Walmart on the wicked Side Great Value brand.
I'm so Amazon came out with two lines one one was once called amazonbasics and the other is called Amazon elements and those.
Those Brands essentially well what I would say.

[47:59] First start to cause fear with with some of the brand partners that Amazon had had and basically.
If you look at something as essential as a battery it's been dominated by basically three branch right you know Energizer or Duracell Panasonic.
And what Amazon is able to do is there a little look at you know years and years.
Batteries or something that every single household has to buy on a very frequent and regular Cadence and they came out with their battery brand and there were three able to do that actually advertise that sell it for a little bit cheaper than the brand name.
Are offering and categories like.
Baby wipes or batteries and I think consumers tend to think that they have for the relative same quality yeah they do and mean.

[48:56] One of the things that's interesting when you start thinking about the Amazon private label approach right they have they have ruled out in many different brands since then.
Amazonbasics brand is.
The largest by far right by our data they're on track to do about 500 million this year in us alone all online sales for amazonbasics and amazonbasics brand launched quite a long time ago.
Right now I think of sometime around 2009 and.

[49:27] Today with amazonbasics brand is really lot of the electronic or household Basic Essentials where you don't give me.
care too much about what it is he put in for example Amazon essentials as well the closer or what they did with the diapers cetera.
Any amazonbasics category they have really mastered exactly what it is the customer wants you can look at the date of one of the things that's interesting to me.

[49:59] When I look at.
Example that the battery category would be you just look at the number of skus that are carried and when you look at it the traditional battery players that are out there they carry literally hundreds of skews.
On Amazon whether that's through the marketplace which may or may not be under control depending on how there but the strategy is.
Amazon Basics battery count I think they have something in the neighborhood of 20 skews right and they're getting the great majority of their sales from just a couple of them so they really been able to.
Mega sniper based approach.
YouTube watching these products and they're starting to gain more more confidence you can see that as a start to roll out not just with household essentials but going into,
Health going into apparel and no surprise that they see me rolling out private label and what appears to be all the biggest categories on mine the only category.
Really huge online and growing quickly but they have not entered yet.
Would be path right which is interesting because the 90s.
If I'm a pet food manufacturer frankly if I'm any consumer product manufacturer start to wonder if if they're not competing with me right now what are they.
You know I would not be surprised at all if it was some type of pet food that was rolled out here just because of the size of the category to go straight there.

[51:28] Cool and then on batteries in the chart I saw showed something like Amazon basic battery is like 30% share and the Duracell was 20% and Panasonic was was like 12% etcetera,
that date is still holding and,
another kind of corollary so so I agree Amazon uses data too kind of come out with a better offering and a price point and packaging and stuff but then,
you know the other thing do you guys have any point of view on the search experience in it how they're kind of service in their products versus competing ones.

[52:04] Batteries is a good Battleground to talk about I guess yes 01 1 comment right.
When we put out the dead a few months ago was I think I was 30% or so they've grown it so close to 40% so they're certainly trending upwards.
In terms of an Amazon batteries selling compared to Duracell Panasonic and Energizer in and the rest you see the client everywhere.
At some point though right there right at some point people are going to buy the brand name rice like my wife will.
She buys she buys Tide laundry detergent or she won't buy a generic brand or any other brands always got to be tied and so in many ways.
A portion of that business is always going to exist.
And Amazon will sort of like 10 Mustang right will take a sniper based approach to figure out what the what categories are growing and how can I do something that's different and cheaper at the same quality.

[53:03] I didn't do you so batteries or I Amazon's at 40% how about wipes I think you had them,
they were number 3 in the last time I saw the data and their Huggies and Pampers were ahead in the Amazon was that kind of a 15 16% of day if they displaced either of those guys at this point.

[53:19] They're still growing,
but they're at they have it they haven't they haven't displaced the market leader.

[53:34] Yeah until you've had your filter 615 there's guys at work then right now I can't even can't remember their names I don't have 3 so I can I can keep it all straight are there any other category.
Are there any other categories like batteries were you look at it and Amazon his kind of created an a leading position with without a lot of people knowing about it that that jump out at you.

[54:00] So those are those are by far the biggest ones and.
You know if you take if you look outside of Industry we talked about Electronics in the beginning.
Amazon is completely basically owning the home speaker space right now with the with the ECHO line of products whether it's the weather it's the portable Bluetooth speaker the dock or the.
The show or the actual traditional Echo and if you look at tablet space right which is one apple Amazon's gone in there with a a lower price,
good enough auction and not lower price by.
10 or 20% but lower price for like 60 70 80 per-cent and so they've really offended consumer electronics sales through the point which is fascinating that companies like Best Buy.
Bed Bath & Beyond Target cetera are starting to starting to have been selling Amazon branded consumer technology products.

Jason: 
[55:02] Yeah which is super interesting when you think about it that that those competitors are then willing to carry cell that you know are viewable trojan horse for all of Amazon's other products.

Scot & Guests: 
[55:13] Best Buy and they buy an echo and then that person takes their house and what do they do with it themselves Amazon batteries.
Yeah and that's it you know that's what made it so it gets me so excited.
I'm getting into the home there is the Walmart Google partnership and the Google at home.
I'm very excited to see what the shopping experience is like for all of us 5 years now because I don't know exactly what's going to be today.
Voice searches is a new Pioneer at and I expect up the Google Walmart partnership to be.
Very formidable.

[55:59] People people we talk a lot about Amazon and for good reason. You know they spend more on R&D spend something in the neighborhood of ten billion dollars a year.
Justin research which it's amazing what you can learn how to.

[56:15] Yes they're massive yes they're huge let's also remember we know from the public earnings there roughly 95 billion in sales here in the US.
Which is.
One third of the size of Walmart $20.
Will Amazon and Walmart growing you know High single digits.
So it some point those lines will really start to converge but I do think it's important to get super excited and for good reason with all the Innovative approaches of Amazon brings it still good to remember there.
A third of Walmart in Walmart has within the last year I think we would all agree started to take online very seriously and invest heavily in the channel.
Won't we'll see if those Investments pay dividends but it seems like 2016 is one Walmart kind of said alright these guys are for real let's do something about it.

Jason: 
[57:22] Yep yep I want to unpack briefly the.

[57:30] The size of it Walmart vs. Amazon as is somewhat debatable depending on the lens you look through so so for sure when you look at the earnings you guys had it exactly right but I think most people would would actually talk when they're comparing him with think about.
How much goods Walmart selling versus how much good the Amazon selling and then you'd be looking at Amazon.
Gross merchandise value versus their their revenue and I know Scott was probably biting his tongue cuz he's a guru in all this but,
if you if you actually take Amazon's gmv and compare it to Walmart's gmv and you take grocery out of Walmart's DMV.
Because until very recently.

[58:11] Amazon didn't have much grocery Amazon's probably bigger than Walmart right now in non-grocery gmv but.

[58:23] Be that as it may it's it's for sure for sure super interesting and that good.

Scot & Guests: 
[58:30] I think the key point right is that.
Whomp Walmart's Walmart's one of their retailers that's not that's not resting on its Laurels and then actually trying to go on the offense to better compete for the long-term with Amazon on like a handful of other retailers.

Jason: 
[58:47] For sure I think there's tons of evidence there and we recently talked about a lot on this show it's this year that was the they were calling at the Godzilla versus King Kong battle.
Most of the rest of the world just trying not to be a destroyed build in that in that fight.
So it's going to it's going to be fun to watch but before we got into that you were shifted a little bit to the echo versus for example of the Amazon batteries,
into me the actor was interesting because in my mind that's.

[59:25] The echo has jumped this really scary Paradigm that that it doesn't seem like a lot of other Amazon products have yet.

[59:33] It may have started out Life as a private label home speaker but it's not private label anymore it's the aspirational brand and it has a unique selling proposition and features and functions that the.

[59:46] The rest of the market is struggling to to match and I certainly think of your product manager at Sony you're not talking about the echo as the.

[59:55] As the private label version of your product your.

[59:58] Trying to figure out how you get a piece of that the Amazon Alexa market share for child you guys agree with that like that seems like the difference between batteries wear.

[1:00:08] Hey there just trying to let you know they're not trying to create the world's most desirable battery although I'm sure you know in some circles they've they've done that they're just trying to fulfill a bunch of demand.

[1:00:18] With a a battery that's it at the right place at the right price with the right delivery vehicle whereas the the speaker is really created this aspirational brand that people seek out and give preference to.

Scot & Guests: 
[1:00:32] Yes I'm going to I'm going to make you feel real good I think you're spot on there and if you think about companies like Google and Sonos there now in other now essentially licensing the echo technology to put into their own products.

[1:00:45] Writing so what happened like when I go into the spaces it was it was highly disruptive and one of the things the brands.
Didn't know because Amazon doesn't divulge right bulbs for example Echo sails they won't they won't tell you how many Echoes they sold in a given year. Is it really didn't,
know what it hit him until they got hit with a tsunami.
And they sought writing this on Masters with a flattening of the crimes in a space that up until the echo had launched had been growing like gangbusters for themselves.

Jason: 
[1:01:22] Yeah answer that I guess that's the perfect question we love to know if you have any insight I eat everyone's always speculating about how big the the echo businesses have you guys tried to size that.

Scot & Guests: 
[1:01:34] Yeah echo echo through the first half of the year was about sinkholes about 150 million dollars and.
If you look out right and this is just just kind of red conjecture and sort of a rough gas based on kind of market knowledge,
estimated going to end up end up being in the 350 to 400 range by the end of the year calendar 2017.

Jason: 
[1:02:00] Interesting.
Imagine part of it comes down to what you even count is that going to cuz it's your point if they're not licensing technology to Sonos and I was at CES last year and it was in you know hundreds of products like you.

[1:02:15] Like that the overall revenue from that that that property for Amazon could even be much larger than there their own direct sales.

Scot & Guests: 
[1:02:23] Yeah it's whatever 25-year career it's one of the most Innovative called inventions that have ever seen.

Jason: 
[1:02:35] Yeah so here's the magic question.

Scot & Guests: 
[1:02:39] The revenue.
And they shouldn't.

Jason: 
[1:02:56] Yep so.
Any other products in the Amazon Echo System particularly the Amazon private label products for threatening to to sort of you know a game that same status are you like.
Are you seeing any early indications from from anything else or there any product you you are keeping an eye on because they're there early fast Runners what's the.

Scot & Guests: 
[1:03:21] Within a coordinate.

Jason: 
[1:03:22] No with other Amazon products to achieve the kind of breakout success the echo hats.

Scot & Guests: 
[1:03:28] One of the other things the moving away from technology that Amazon is about to disrupt.
Is basically help health and wellness and so Amazon.
I seen a few things like protein powder or any kind of supplements.
There's there's a lot of question in terms of consumer healthy consumer safety and consider most important consumer transparency right like what's actually in here where does this product.
And if anyone listening has not seen the page for the Amazon tumeric product.
You've got to go check it out it's besides the fact that it's gorgeous you look at this and they're taking something like tumeric right and they're basically saying here's here's where it comes from.
Hear the benefits from it and it's one of the most transparent product detail pages that I've ever seen in my entire life.

[1:04:28] And that's just sort of like their first foray into that right and that's that's something that's you know it's not as boring as you know if they have battery or pot and pan right if it's something that you're actually actually ingesting putting your body.

Jason: 
[1:04:42] Yeah for sure and it makes perfect sense that you'd say that to a category that Amazon's focusing on cuz if anyone has seen a picture of Jeff Bezos lately will see that he's getting totally jacked.

Scot & Guests: 
[1:04:54] And you're absolutely right I don't know if it's the tumeric or the CrossFit.

Jason: 
[1:04:59] Yeah so any like any early data on any of those health and wellness products I got it was it was vitamin E the first.

[1:05:08] The first supplement in that family or you know and is that like catching any meaningful market share away from the the big player.

Scot & Guests: 
[1:05:16] Yeah I think so I think it was we haven't published anything yet just cuz they're sort of.
Just starting I think I think we still need it I think we still need several more months of data,
affordable to do that but I can I could almost be a picture conversation we're having with our marketing seems like first half of next year we got to call the state on how Amazon Student Health and Wellness.

[1:05:38] Yeah it is a good day also started off very slow roll out right like the last time they enter.
That's an answer something I was broke this personal was when they lost their first version of the Amazon elements diaper.
Right back in 2014 15 so they're being cautious in what other category think about an additional help which is booming and they're being very cautious with their approach to be a little more aggressive and not quite as shy.
But their approach into fashion where they watched several different brands and in fact they're at their fastest growing private label brand is actually.
Clothing line name Scout and Roe which is up nearly 6X this year.

[1:06:22] So big they are going after all the high-growth categories online and in some categories like apparel they're being extremely aggressive,
watching a lot of lines.
Depending on the type of apparel line you're talking about its they're giving a different names of people can feel like they're connected to it in a little bit of a different way.
And in areas like health and wellness where it is.
You know something that I'm ingesting it's certainly very much more personal than something is a piece of clothing they're being very slow and deliberate with their approach which is the same way that they approached.
So I have no doubt that,
even the tsunami you see with an elk and wellness sector online Amazon elements will be there soon and I'm also curious to see what happens.
Right I mean that the Gap CEO.
Nike just another one to be watching.
Yeah that quick follow up on health and wellness what what is the brand they're using their is it a Amazon element sir.
Amazon elements you mentioned Prime exclusives do you guys to your data can can you get an idea of how many folks are Amazon Prime.

[1:07:48] Yeah we we have an indication I don't have it don't have all of that data to the sort of sitting in front of me we've done analysis in the past on.
You know on Amazon Prime members what's happening now is an Amazon Prime is being coming a pretty a fairly significant portion of of the marketplace because.
The offerings make it an absolute legitimate no-brainer for.
Anyhow you don't need any kind of like middle-income in a bob sort of families if you're not a prime number I kind of don't know what you're thinking.
Actually woke.
I love it's the contact I'm a huge fan of man in the High Castle.
One of the ways that we all know we read many articles about how important my membership is to the Amazon strategy.
I was very surprised and we had to go back and double-check was very surprised to see that.
Almost half of Whole Food Shoppers and not Prime members and.
I thought I was like who would be that way and then I realized in my family I have to Avid two siblings.
Tapping into half and Whole Foods Basin members which is only.
Because we can see that if you're a Prime member and you shop at Whole Foods you spend over $300 more per year at Whole Foods.

[1:09:25] The non Prime members non-prime.
Non Prime members shop at Whole Foods spend $1,000 a year at Whole Foods and cry members stands close to $1,400.
That's why they call it whole paycheck.

[1:09:47] Old paycheck I went to Whole Foods soon after the right right after the acquisition and things like that,
yeah they still have a lot of room to go on that.
Cool and then you said on the on the,
fashion apparel side Scout and row is up 6X how about another one that I thought was interesting was button to down and then they also have,
goodthreads a couple others any other of those apparel items really breaking out or is really mostly discount.

[1:10:30] You know it's it's it's really a scoundrel there's also a lark and Ro but you know we see that argument.

[1:10:37] About 90% 85 90% Cowan Road beating up 6X there's no one else really more than doubling.

[1:10:46] Franklin and Franklin.

[1:10:56] Any ship can you give us a number like Amazon's private-label apparel items are doing 100 million or were they included in that like 500 million dollar number you said of the top of the show.

[1:11:08] They're included in that 500 million dollar number at 500 million number isn't just Basics it's kind of the whole family of Amazon private labels but doesn't include Echo Out imagine or Does it include.

[1:11:21] It doesn't kudaka right another way to say it may be more sensationally would be Amazon yeah does that include Kindle.

[1:11:37] Yes I got it that's cool Jason Aldean.

Jason: 
[1:11:44] Hey you think so like obviously.
If you're a cpg brand you certainly you know should be taking notice of all of this stuff or really any any sort of national brand that the Amazon is going to play in like.
You need any thoughts about what brand should be doing in response to Amazon private label strategy do you guys,
have discussions with with Brands about what they're with their sort of defensive tactics are or should be.

Scot & Guests: 
[1:12:14] Yeah this is probably the most popular topic of 2017 that we have that we have with all of these with all of these Brands whether it's actually PG or consumer electronics,
Navin even outside of that there's other specials of the word about what's happening over there.
You obviously continue,
right there give you continue what you're doing at Amazon and you continue to spend money with Amazon you continue to get your customers buying products from Amazon because Amazon controls such a gigantic portion of the market right you got to fish where the fish are,
and the fish the Fisher in Amazon's Pond right now with the second piece and this is the part that.
Some brands are not going to be able to be successful in doing and that is to form a team and understand.
What is are outside of Amazon strategy going to be and that's a very difficult question for a lot of Brands to answer so.

[1:13:19] One alternative is to not sell your products on Amazon at all and then,
you're giving up on Amazon right you're giving up on all of that all of that traffic that they're generating for you and then we start looking at will where else can we go right so it's a one-off in is.
A direct-to-consumer play and the reality of direct-to-consumer is that it's going to end up.
Not even hot like like nice data points from customers that really like your brand already anyways.
I was very very few exceptions direct-to-consumer is not going to be a significant portion of your business what we do about the rest of the market.
And what you have to do is start figuring out what other Merchants do I focus my efforts and my best people on.
To start growing my salesman to start understanding a world where ultimately.
Amazon especially if they enter into my category is going to take a bigger and bigger piece of that category every single year.

[1:14:26] Southern Tier brands are basically Hostess salvation.
It sounded like that but no threat brand-mark Rendon are absolutely not host that I gave that example earlier there's always going to be a.

[1:14:44] There's a portion of the market that no matter what isn't going to buy a private label brand right and that's,
that's one of the predominant reasons right lie Amazon like if you go to the Amazon page you might see an advertisement for rock and roll actual consumers may never actually know that,
so if it's something like a slab Amazon is the ultimate definition of a frenemy for these brands.

Jason: 
[1:15:10] For sure and that just does feel like the new world is every everybody has a lot of Frenemies out there and we all have to figure out new business practices.

[1:15:21] You know one thing I failed to ask I would bring it up on time but I do want to see if I can squeeze this in so when I look at at Amazon private label success I actually think.
We're bundling two things together number one.
Amazon is a great operator they have you know this access to a huge amount of consumer data the levers that data to figure out what.
Products and prices to offer at and they're great at producing their their private label and and you know increasingly National brands,
but they also are a terrific online seller and we are just seeing a lot of shift from in-store purchases to online purchases and I have a theory that.
You don't even at Amazon offered no private label products you know we still would see that a lot of the best sellers.
Digitally and in particular on Amazon are not necessarily the the brands that,
have one shelf space in retail store so I guess I'm I'm curious if you have any data either either validate that promise and you know any examples of.
Brands that are doing pretty well and digital or out punching their weight from brick-and-mortar or am I completely wrong in that.

Scot & Guests: 
[1:16:37] Now you're your spidey sense there is a spot on it in one of the it there's no matter what industry we talk to.
Whether you're a retailer or your Merchant.
Ultimate Warrior manufacturer one of the few things that is a constant with online is that your competition online is it different than it is in store.
There are a lot of Brands launch online there's a lot of fragmentation that's created.
And these brands of lunch online tend to be pretty Nimble you know for a while they're actually even remember Taste of the Wild used to be the number one brand for dog food online until.
Brick-and-mortar well-known Brands kind of woke up and someone like you both look on it to go over but we definitely see.
These little pockets of small Brands within toothpaste and you seen,
Brands like Marvis shoot up and then shoot down we've seen another brand that pops up to mine right now that is right show me a company called,
RX bar which.
Dina basically started online and had and it's just grown absolute gangbusters and then you think about companies servicing about the protein spider space which is a gigantic space companies like Vega,
had to go to a lot of their their energy to focusing on line and they've really capitalize on the palm the plant protein Trend which like a Vitamin Shoppe or GNC has been what I would say.

[1:18:14] Enough glacially slow to adopt.

Jason: 
[1:18:19] Interesting well it certainly has become a more complex and dynamic space I think it,
it can be a real challenge but the the foot side is it's kind of fun because the Playbook isn't written and we're all,
we're all sort of trying to figure it out but we certainly appreciate you guys spending some time with us tonight to put a data plans on on some of these interesting Trends and where it's raining a lot more conversations about them in an upcoming podcast but that's going to be a great place to wrap for tonight because it's happen again we've wasted a perfectly good hour of our listeners X Samir and Tim super appreciative for you coming tonight and sharing the 1010data set with us as we try to decode Amazon private label.

Scot & Guests: 
[1:19:09] Thank you very much guys was great thank you just got thanks a lot man thanks. Tim and good luck with 1010 have a good night.

Oct 8, 2017

EP102 - Code Commerce, Shop.org, and News 

Code Commerce

Code Commerce (the first stand alone commerce event from Recode) was Sept 13 and 14 in New York City.

  • Andy Dunn - CEO of Bonobos
  • Laura Albert - CEO of Williams Sonoma  
  • NBA Commissioner Adam Silver and Fanatics Executive Chairman Michael Rubin
  • Pinterest President Tim Kendall
  • A Tour of an Amazon Prime Now facility in New York on West 34th

Shop.org 

Shop.org was September 25-27 in Los Angeles, CA.

  • Marc Lore - President of Digital at Walmart
  • Adam Grant - Author of the Originals
  • Scott Galloway - NYC Professor, L2 Founder, and Author of "The Four"
  • Tech Lab

Amazon News

  • Amazon looking for a second HQ location. Scot thinks Austin, Jason suggested Houston or Detroit.
  • Amazon launched a new set of Alexa based devices
  • Amazon renewed - Certified pre-owned products
  • Amazon opening 6 new Fulfillment Centers in the US (and 40 in India):
    • Oregon - Salem (8/28) 
    • Ohio - North Randall 
    • NY  - Staten Island (9/6)
    • Michigan (9/14) 
    • Oregon - Portland (9/18) 
    • Ohio - Euclid (9/18)
  • Alexa in BMW
  • Kohls taking Amazon Returns

Other News

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

Episode 102 of the Jason & Scot show was recorded on Wednesday October 4th, 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 102 being recorded on Wednesday October 4th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host of lingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners.

[0:43] Jason fall is go time in retail and I was looking in.

[0:49] You know it's going by so quickly that you and I've been so busy,
we did our listener appreciation event we had indochino and it turns out we have not done e-commerce news and Analysis since early September so here in episode 102 going to be kind of a quick hit of some of the news that's come out in the last 30 days,
I so kind of mid to late September that we thought.
Maybe many listeners are experiencing the fall like we are where are your so heads down getting ready for that critical holiday season you'd want us to help our Steven and figure out what are the Nuggets of what has come out in the last 15 or 20 days,
alright so we're going to focus on those two of the nuggets are really trip reports and on both of these.
I have to admit Mia Copa to our listeners.

[1:42] Epic fail really I did not make it to either these events and I plan to go to both so the first was recode and that was in New York and the second one was shop.org in Los Angeles.
And I have righty of things so hurricane kind of kept me from the first one then on the second one to scheduling conflicts between you and I and in a couple of.
Things on the on my other day job side kept me from going there so I am on the edge of my chair to hear from you how those two events went.

Jason:
[2:11] Yeah and let me first start by saying for the listeners that were participating in the pool Scott played the hurricane card at 1 minute 40 seconds end of the episode so,
so can graduation to whoever one that,
and yeah there's so much going on I feel like we're going to have to go faster this is probably a 20 lb in the 10 lb bag episode let's jump right into Rico door code Commerce more more technically so for listeners that don't know,
recode is great publication they have a very famous show on the west coast every year called code,
and more recently they've launched a series of events that were specific to Commerce and most of those events lived on top of another Commerce event so they would have a dinner and a few speakers at,
a shoptalkshow or in a RAV4 when one of those sorts of events and they've all been great events,
so this was their first effort to turn it into a standalone event it was a day and a half.
I'm just dedicated to speakers that they lined up in New York and for a first-year show I think it was really successful they had a pretty good turnout all the logistics seem to work out pretty well and.
As is usually the calling card for these coat events they were able to get some pretty impressive speakers that you know I was interested to listen to.
So because your time we're not going to be able to cover all of them but.

[3:42] But really quickly a guy always look forward to hearing from his Andy Dunn who's the founder of bonobos there purchased this year by Walmart so he had a good good conversation with Jason Del Rey,
you know a lot of it the usual ground was covered talking about like digitally native Brands and how Belushi Andy is on those and talking about how life is living inside of Walmart and,
the cultural challenges that exist there andy is a guy that.
Is is very bullish on the omni-channel experience and so living inside of Walmart and having access to their stores was.
He felt like nothing that was a pretty big advantage and so you know I thought like he was well worth listening to.
A little later in day one we had the CEO of William Sonoma water helper.
You know a great brand great CEO I was a little disappointed at in her comments at a digital show she did not come off.
Super digitally-savvy if I'm being frank and it's interesting because William Sonoma is a.
Traditional retailer always relied on the catalog they Embrace digital early,
and Gina today more than half of their sales are online and she spent the whole time talking about how stores were a differentiator and how how important the in-store experience was.

[5:13] And how you know they sold a lot of categories that they felt like people just didn't want to buy online.
And I think Furniture was specifically one in wow like I absolutely think there's a huge competitive advantages to a store experience and I think it's super important to honor.
The stores it it sounded like a little bit like one of the old CEOs defending their investment in stores against the onslaught of Amazon.
And that just seems surprising coming from the CEO of a a retailer that's been so successful in digital I would have thought she would maybe be a little more.
Maura balanced and nuanced and she just seemed to be a strong advocate for the stores.
So at the end of that day one it was kind of interesting joint presentation with Adam Silver who's the NBA commissioner and.
The famous calendar industry Mike Rubin who's the executive chairman of Fanatics he also happens to be one of the owners of the 76ers and.

[6:17] Famously started a number of successful companies in our space including GSI.
And ShopRunner and I think was even on an episode of Undercover Boss.
So my group has won the most successful guys in e-commerce so it's always super interesting hear from him you know you talking about Fanatics which is made to order.
Jersey's online I think that's a super interesting category because I do think.
Personalization is a a big up-and-coming play in.

[6:49] Digital Inn in retail I think we're to see you a lot more products personalized and you know I think there's a lot we can learn from an early player like fanatics.
It was a little funny seeing the two of them on stage together.
Because you know my grooming is very anti Amazon and talking about how to compete against Amazon he mentioned that that Amazon tried to do the custom jerseys for the NBA before Fanatics took it over and.
Wasn't successful and an implication being that was too hard for Amazon but Fanatics was able to make it it it work at scale.

[7:25] And let you know I think there's there's a lot of interesting insights there and.
You know he's sitting next to the commissioner of the NBA who sang Hey Amazon the super important partner and we're going to let you buy any of the jerseys you want customized on Amazon and essentially Amazon is going to be an affiliate for a fanatic so you know,
what while Michael was talking about half and addicts had a differentiated experience from Amazon Adam Silver with saying,
but if you prefer Amazon or your Prime member you can you can get anything that's been at Excel straight you know that's licensed by us straight from.
From the Amazon and we understand that we need to be there because their big player and the the fall under that is,
you know Amazon out punches their weight as a retailer in terms of mine share with with folks like Adam Silver the NBA commissioner because you know there's there's a realization that,
Amazon is the content publisher and you know one day could own,
the rights to broadcast NBA games and you know already has the rights to broadcast some some NFL games now and in so you know it's an interesting Dynamic talking about like.
The retailer and the content publisher and you're sitting there next to Michael Ruben who's a retailer and an NBA owner so it was kind of a.
Convoluted set of of interrelated issues but but I found it fascinating.

Scot:
[8:45] Cool that's definitely a whirlwind tour of the did you get to stock and done much at all.

Jason:
[8:55] I did not I left him alone,
I will say props to Jason Del Rey Athena this is the reporter at at Rica that specializes in Commerce so this is really his event he I thought he did a bunch of interviews day one but I think yours also getting kind of,
unfortunately he was under the weather so I think he was a trooper and most impressively he's a huge,
long-suffering Knicks van and I sort of expected him to just have a lot of mixed questions for Brad I'm sober and he totally refrain from any personal comments so so Props to,
previous guests on her show Jason Delray for doing a good job even shorter updates,
Tim Kendall is a present at a Pinterest was on I thought he was really smart and it was interesting like you know he talked about how he thinks,
a small minority of people on the Pinterest platform want to conduct a Commerce transaction on his platform and that's fascinating because most people would talk about Pinterest having the highest buying intent of any of the social networks and he's flat out saying most people don't want to see a buy button,
on Pinterest he's right you know we have shoppable pins their increasingly successful but in most cases,
what customers want is to get inspiration on Pinterest and then they want to go to the e-commerce site to actually consummate the purchase and so that that was interesting,
you know there for many years there's been a lot of folks out there talking about how you know.

[10:26] Traditional e-commerce sites might not even exist as all the purchases move to Facebook and Google and in Pinterest and here's the president of of,
the one that supposed to be most successful and he's saying hey you know that doesn't seem to be what our customers want to do,
so I thought that was super interesting and then they too they move the venue to Hudson yard which is a.

[10:50] A really interesting new multi-use development going up in New York that's going to put a lot of retail can I have an Amazon bookstore,
and they did a bunch of on-site opportunity so you could go to her the the newest Nike Town you could visit a couple digital startups,
and one of the options was to visit an Amazon Prime now for filming Center that it's in Manhattan on 34th Street.
And so I'm sad to say I did not get to go on the tour it signed it booked up really quick but I did hear from a few folks that went on them,
and you know the reminder is is Scott reminded me right before the show there's 45 of these Prime now facilities.
I'm out there and they're they're designed to hold the smaller sort of stuff that people wanted in one day and they do the one or two hour delivery,
I said it's one in Manhattan is right in the heart of Midtown is on 34th Street which of the story retail street it's across the street from the Empire State Building it's on the same.
Street is the largest Macy's in the world and what a lot of people were surprised by when they walk in this facility is,
there are bunch of Pickers running around pulling stuff out of bins and there was almost no automation.
In that the facility at all and I and you know most of the attendees expected to see a bunch of Kiva robots or,
you know at least some sort of out of me to picking system and what apparently they were told is,
that at the moment like every one of these facilities is a different configuration and that it's still too early in the evolution of this concept.

[12:24] For Amazon to cost-effectively Skillet with automation,
and so I I just found it interesting that they already got 45 of them out there and in their world that that's not enough yet to automate it and that that,
you know these things you know I have a lot of clients that have automated fulfillment centers for e-commerce that that looked a lot more advanced than apparently this Thing 2.

[12:49] Did I surprise you at all.

Scot:
[12:50] I think even know where that.
Offering isn't its life cycle it doesn't suit so Amazon always going to start some the customer works the way back and what that means is,
you're okay being inefficient on the back end as long as you can still deliver a great customer experience or I would say they probably put the.
The bulk of their effort like 70% or effort into the front end and the front end is getting better all the time and you can tell they're just like really iterating that super quickly for example when they close the whole food food steel that stuff was in there a day one and in that kind of thing so it does fit in with the,
the Amazon DNA to to hide sometime hamsters in the background going on there.

Jason:
[13:35] Yeah well and sure enough you are correct so then you can barely get home from that show do a little bit of client work and then back on the plane to Los Angeles for shop.org.

Scot:
[13:50] Yep and so fun Jason fact you truly are the retailgeek you met your wife for the first time seven years ago was that Dallas.

[14:01] Did she see you kick a I remember that one vividly because we got to go to the the Cowboys stadium in kick field goals did your wife like see you kick a field goal and say if that's the man I'm going to marry is that kind of how it went.

Jason:
[14:13] So partly I did go to that event with my now wife she did in fact see me kick a field goal and it's highly unlikely that that.
Favorably influence her in any way and it's equally unlikely that she she at that point realize that she would one day marry me I took a little more work.

Scot:
[14:35] A lot more feel quotes.

Jason:
[14:37] Exactly yeah it is true that my right leg maybe one of my my best assets but it's still not that good.

Scot:
[14:46] Okay well congrats to you on seven years meeting go meeting your wife just shows you that shop.org anything can kind of happen when you're there.

Jason:
[14:55] Exactly I remind people you know I want talks about you know how important the networking is if he shows and you know I certainly agree with that.

Scot:
[15:03] Cool suicide from relationship status changes what was going on at shop.org this year.

Jason:
[15:10] It was an interesting year a lot of changes in,
you know what what to me is that I could sort of the one of the quintessential shows in our industry,
I said that she was in Los Angeles at the Los Angeles Convention Center,
the show is in Las Vegas next year the shows always moved but after next year they haven't answered it's permanently going to be in Los Angeles so this is kind of the new home of the show of the Las Vegas Convention Center is is,
is a great facility it's very large in the whole downtown area around the convention center that used to not.
I have any amenities and you know frankly wasn't very nice and,
are you leave wasn't very safe has been heavily gentrified and it was a super interesting Vibrant Community that's kind of.
Popped up and in a most importantly for the professional trade show attendees amongst us there a lot of good hotels now to stay out there,
so I like the venue the production values of the show where you know felt like they were like you know Franklin upgrade from past years and I suspect that you know what some of the newer shows like shoptalk out there that they can raise the bar for everyone and it felt like,
like shop kind of followed suit,
the Treaty of Paris interesting because the what they now down as they've taken all the content and put it in like auditoriums,
all around the trade show for so the trigger for a sort of the Hub in the whole event they set up this really comfortable garden with like casual seating and free drinks in the middle of the trade show for so people could kind of loiter.

[16:49] I know there's a lot of concern about like,
noise pollution from from all the the content being around the trade show floor and I would say that stuff all worked out really well,
if anything the convention center was so spacious that even though the the booth space was apparently a sell-out it just felt really roomy,
In-N-Out on the good news that felt really comfortable on the bad news it made the show feel less busy.
Because the tiles just weren't as crowded as you you might be used to from previous years,
but they did have this new section on the floor that I really like it's sort of the technology Pavilion so it's a bunch of small or newer exhibitors in many cases a lot of exhibitors from other countries and instead of being extravagant boost that you had like pods in this area and so there was a lot of the the cool Innovation stuff was in that section,
I think it was like an expanded version of something we saw at in a rough this year so I like to see that Trend continue,
and then I did not get to catch all the content I unfortunately had a pesky client that,
wanted to meet in the middle of shop.org in another city so I actually had to fly in for the last day.
So I didn't get to catch all of the presenters Wednesday was a good day.
The Adam Grant is a professor at NYU and wrote a great book called The Originals he's actually a.
An organizational psychologist that sort of helps figure out the most successful organizational structures he gave us.

[18:21] A really good presentation in the morning and you know one of the key themes that I that he talked about is.

[18:30] How.

[18:32] What a negative effect of the wrong people in an organization or in the wrong roll or on the wrong team can have any organization so he had to start a quote that resonated with me.
It's nice that the right people on the bus but it's much more important to keep the wrong people off the bus and he was he was talking about how that's a common organizational mistake.
I just liked his presentation because I really feel like.
Organizational change management is one of the most important things for any any retailer or brand in surviving digital disruption.
And it's kind of one that people don't think about it very much so it's interesting to see an academic that's exclusively thinking about that.

[19:08] And then his the presentation right before him is a Scott Galloway who's super well-known in our industry.
Professor at NYU does very funny does a lot of really.
Thought-provoking controversial humorous content and so for the most part I hate him because he's generally just like a better version of me.

[19:33] Funny are better-looking right more often kind of thing and he has a book that just got published yesterday.
And the book is called the four and it talks a lot about the that these the sort of you know four horsemen.
That are in his mind Google Facebook Amazon and Apple.
And he has this notion that each of them in a sort of appeals to a particular brain part part of the body so.
Google you know it appeals to the brain and is really associated with our rational self.
Facebook is not associated with the heart and is associated with our emotional sale.
Amazon is associated with the gotten really in a deals with our sustenance and needs and Apple has by far the best position they're associated with RR reproductive organism.
And and it sort of associated with sex in so you know I think Professor Galloway like.
Basically would say an is on it or apple is likely to be the most successful most profitable of the four companies as a result of of there,
you know picking the right organ to go after but he had a lot of interesting,
content if I have a criticism of Professor Galloway he repeats a lot of content and he's so popular that like most of his stuff is on YouTube so I,
frankly if you are a close fall of hers I'm not sure of his I'm not sure you saw a ton of new stuff at.

[21:06] Shop.org but if you're not super familiar with him you know I think it all is really interesting stuff that that would definitely makes you think,
I have already purchased this book and I'm looking forward to reading it I got one book ahead of it in my queue.
But I was glad to see him there and you know we probably should break down and have him on the show at some point even though I am kind of jealous of him.

Scot:
[21:31] He seems to have it in for Amazon lately like everything I read he's kind of saying they don't pay enough taxes they should be split up.

[21:41] It's kind of interesting he seems to Canada if I have a an anti Amazon bias in the last like month and a half or so.

Jason:
[21:48] So he didn't interview with Tara Swisher on recoat a couple weeks before Amazon bought Whole Foods and he,
he mentioned that Amazon could easily get in a brick-and-mortar that you know I'd be simple matter for them to buy someone like Whole Foods and so he he's gone a lot of credit for correctly predicting Amazon's acquisition of Whole Foods which I think it's Toy Fair again I fall in lot closer than most people and I I know he just makes a lot of unlikely predictions,
and some of them come true and his kind of and as you get it would expect a lot of them don't come true in most of us forget about those and,
you know one of the funny ones that he he sort of makes fun of himself is,
about two years ago he predicted that Amazon had reached its peak and was likely to fail and that their lack of stores was a,
an Achilles heel that they couldn't overcome,
International in his presentations he he likes shows a graph of their stock price in the last 2 years and he started marks that point when he predicted they would fail and of course they're the.
Fastest growing stock on on.
The market since he predicted they would fail so I think that may make him slightly negative on Amazon but I think you know she I think his position is.

[23:02] Doterra bad things for society about all four of these companies and that their you know are matters of great concern I keep you know he.
He talks a lot about the.
Facebook's influence on the election and that you know because Facebook to leadership is so young they probably don't fully appreciate the thread that Russia is to us I think he talks a lot about.
Some of the downsides of all the power that's aggregated in Google I think you definitely likes apple the most of any of these companies and you're exactly right he's talked a lot about,
the fact that you know for every dollar of Revenue Amazon generates they employ half as many people as a brick-and-mortar retailer used to so he thinks knitting at the really bad for jobs and because you know,
they've been really successful in his mind it not earning a profit like he definitely believes they're very profitable company that manage their R&D to make sure that they don't,
book a significant profit every year which I think he agrees is a smart play but that that's resulted in them not having to pay a lot of taxes and so it you know he shows a graph of.
Amazon and Walmart over the last 10 years and Walmart is.
Has paid 84 billion dollars in taxes in those 10 years in Amazon's paid 1 billion dollars in taxes and of course the market is rewarded Amazon you know with with.
Vastly more market cap growth in those 10 years than it has.
Walmart and I thank you rightly points out you know there's some of these Trends there they continue you know have some.
Meaningful social impact so I'm looking forward to hearing more about that when I read his book but you know he definitely the guy with strong povs and and he generally has a.

[24:43] A pissy way of sharing them.

Scot:
[24:47] Cool any so that's good any broader Trends you picked up on has this machine learning thing kind of have we gotten past that or is that still everyone's banging that drum.

Jason:
[24:58] Nope that is the drum,
like the big train that all the presenters are talking about it both shows that you know a boy Tori got had to get stamped on every booth at shop.org is the whole deep learning cognitive Computing thing,
and you know we've done a couple deep dies on that so I'm not going to rehash all that territory right now.

[25:23] It is a super important Trend butt,
like in my mind a lot of its importance is getting diminished by the fact that it just being treated as a throwaway buzzword by so many people in our industry for so many different purposes.

Scot:
[25:39] That it on shop.org.

Jason:
[25:41] Well the one and I did not get to see this line but I got to watch a recording so Mark of Lori did an interview Mark does not do a ton of public speaking and so that like there's a great gift for shop.org so you get,
Andy done at Rico Dandy reports to Mark market reports to Doug mcmillon the CEO of Walmart.
You know which I imagine has to be a funny Dynamic cuz you know Marcus is probably worth multi billion dollars between.
Selling of Quincy to Amazon and selling of Jetta Walmart it was kind of the one-year anniversary of the sale and it was just it was interesting to hear his his POV on the Acquisitions he talked a lot about another,
all the Acquisitions that he's made and when he's continuing to make find a kind of falling into two camps so he would say he purchased a bunch of these companies.
Just for their merchandising chops and their access to product lines that Walmart didn't have access to so you by ShoeDazzle to get more shoe expertise and to get more shoe lines that the relationships with the vendors and and smart merchants,
alone make that sort of an immediate Roi acquisition for Walmart and then he would talk about their acquisition of the digitally native Brands like bonobos and ModCloth,
being a much longer term strategic play and,
you know this this goes to a a show that I think we're going to do next week about private label an Amazon private label in particular Walmart and most big retailers have a big strategy to.

[27:15] Build more important house brands that you know used to call private label but in some cases these far surpass.
Private label and it seems clear that you know part of Walmart strategy to build this portfolio of valuable brands of consumer want that you can't get on Amazon is through acquisition and so you know he I think you would categorize ModCloth in Bona BOCES.
The first of of presumably more Acquisitions in that space so it just kind of interesting to hear his framework for the acquisitions.

Scot:
[27:47] Awesome any other shop.org updates.

Jason:
[27:51] I think in the time we have that's probably going to have to cover it because I feel like we,
you know it's been a busy just news months since we last did news and I know there's a ton of the Amazon news and some other industry news we want to jump into that.

Scot:
[28:09] Yeah and it wouldn't be a Jason and Scott show without.

[28:27] So the first big piece of Amazon news is what is commonly referred to as hq2,
so on September 7th that Amazon I just kind of randomly put out this announcement that they were accepting.
Rfps for their second headquarter City and these are peas and courage cities to be.
Aggressive they had to kind of till the end of October to submit their bids and and it also is very detailed.
Unlisted what Amazon was looking for in a city and important things and and how to highlight your city and whatnot then that is really just dominated the the the.
The new cycle for for the last 30 days so probably actually be glad when they make their announcement some kind of will tired of talking about HQ to be honest.

[29:18] What it was now so I kind of felt like Austin was a good one because the biologic is Amazon.
The retail business is Amazon is relatively mature and really got a core density.
Both in Seattle and then the most number of employees for retail are in the phone at centers so it seems like you're going to open another headquarters level kind of operation is mostly going to be.
The the newer generation Amazon things I'm sure they'll be some retail folks there but it'll be the minority let's say 10% so they're going to hire.

[29:54] 8000 people maybe 800 will be kind of retail random people and then the people that are in HQ around retail tend to be buyers and and developers of the site.

[30:03] So then you're left with like who else is going to be in there and where I kind of come out is the echo family the AWS family and these kinds of folks and,
when you look at Amazon's R&D budget I think that ends up being a lot of Engineers so so I think you're going to let you know if I,
if I kind of play that out Amazon near needs to be near an engineering Hub and.
Austin's really good one we have one here in Raleigh-Durham Boston's another area and then, like that Carnegie Mellon quarter there so.
The Northeast has a lot of negatives that so I don't really think it hits a lot of things they want to do there so I coulda ended up with Austin it's kind of his is where I think it is so did you give it a lot of thought to this one Jason.

Jason:
[30:44] A little bit like there's been a lot of interesting talk since they want us if it's a scam if they already have a location and that in that this is just a big PR stunt that.
Did they ran soda.
Be interesting the people speculating that all think that the the foregone conclusion is a different city so they're not unanimous in that which is funny.

[31:07] Austin certainly seems like it's in the running I jumped on Twitter early on in this and you know trying to make it out of the box call Houston it just been hit by the hurricane and I I really think the whatever City wins is going to have to pay a fortune in Economic Development funds to Amazon to get them there so there's going to be,
huge concessions Amazons not going to pay any,
property taxes for for 20 years and whatever this headquarters is and it's it's frankly probably going to be an economically bad deal for whatever city does it,
it's a little bit like bidding for the Olympics,
and so it has to be a city that has a bunch of money to waste on that and I informed that criteria I think Austin might struggle to come up with a package and it occurred to me,
Houston's going to get a bunch of federal money they're going to need to rebuild the whole city they have proximity to a lot of the same universities that Austin does and so I thought it could be interesting that could be a way you know a great PR move for Amazon to help,
rebuild that you know the hurricane damage City and in Houston I haven't heard anyone else jump on that bandwagon so if I'm,
if I'm right that'll be great but the lack of people that agree with me has me a little nervous about that prediction you know the.
The sort of emotional favorite for me would be you know they really want to win the pr bad all they had to go to Detroit and Revitalize Detroit and Detroit actually does meet a bunch of there.
Their criteria so it's going to be interesting to see how it all plays out like you know I don't know.

Scot:
[32:44] Yeah yeah I don't think Detroit has enough engineering people there so we'll see.

Jason:
[32:49] University of Michigan though.

[32:57] So that I did see some interesting press releases about a potential new Amazon device which was a wearable they were glasses that had Amazon Alexa built into them in so that,
when you first see what about glasses you think about a.
Yeah heads up display and Google Glass and all that it was actually the glasses were. Convenient way to deliver the earbuds to your ear,
and the idea was to have a in a persistent access to this always-on digital assistant in Alexa and so it'll it'll be interesting to.
To see if that product ever meets the light of day as we record this Google just just made their big announcement for the new pixel phone and one of the accessories they announced was I said that your butt,
that are specifically designed to put the Google assistant in your ear at all time so it seems like like that.
Yeah I could be an interesting battle grams of you know what year based personal assistance.

Scot:
[34:01] Yeah and that's my big ass cuz I know,
dresses listening so mr. besos the big ask I have for a new platform for Echo Alexa is wireless earbuds so I have airpods in the Syrian or face is just terrible I can never get it to play music on Spotify or anything else but Apple music.
So would love for you guys to salt that for me.
What it was I was excited about so it shall advise over the years I've gotten a lot of these folks that sell refurbished product and there is there's a big set of consumers that love the option to trade down to this kind of product to that has been.
Retail certified that it is it is I've been.

[34:44] Yukon to a process usually by the manufacturer certified that it's like new and it has a warranty,
I also know this refurbished so Amazon's had kind of weird policy on this that kind of let it you do it but then they don't give you the tools as of that kind of seller to be successful and is it not really meeting the customer's kind of needs so.

[35:04] They announced that a new kind of marketplace area called renewed and that that's exciting cuz I think.

[35:11] That's a really big area Amazon hasn't nailed yet and it's going to be good for a lot of the larger sellers to do that.
This is just kind of like super not sexy but it's really important because this is where Amazon is really kind of.
Dominating your woman that's first phone is in her build out so just kind of looking at some that we haven't talked about on the show quickly and just starting kind of.
Towards the end of August to August 28th announced a million-square-foot Facility in Oregon in the Salem area.
And then they also at about the same time the Ohio so organized Ohio in those are about a million each and then they are doing their first fulfillment center in New York and that's going to be in Staten Island that's 855.
Thousand square feet then on the 14th of September the announcements again with a million 3rd or 4th in Michigan.
And then in the day it's kind of funny like a literally 20 days after they announced the second fulfillment center in Oregon they announce the third and this is going to be in Portland and it's going to be a million square feet.
Something's going on in Oregon's so there's there's a lot of Amazon love in Oregon right now on their building fullness centers as fast as they can just kind of find land.
And then the kind of in that Vein on the 18th they announce that yet another Ohio one this one's and Euclid so it was kind of.

[36:36] Smaller is 600000 square feet which is kind of a.

[36:39] Effort by Amazon Sanders and some microphone the center that must have been some function of the land I checked and it still a normal FC it's not up sortation Center or prime now or anything like that the other one is.

[36:52] The Washington Wizards was kind of talking about the Indian e-commerce market and just kind of.

[36:58] Dropped the Amazon now has 44th element centers in India this is priced me because I don't think they would announce a lot of new filling centers in India that I've seen this is pretty well researched I thought they had like 10 so.
Does a little surprising to me.

[37:14] Pretty sure the Cialis would not say that without having fat checked it six ways so I think that's a new data point that's pretty interesting that that indicates that the the level investment.
Amazon's making India who sings her hundred million bucks to build out so that that kind of feels like.
I was surprised 3 to 4 billion dollars there which frame signs effectively nothing but you're pretty interesting that that India is releasing stupid wrap up as well.

Jason:
[37:44] That is crazy I wonder is there a way to make money on the stock market I feel like tons of investors forget that Amazon is going to spend a fortune every Q,
3 opening a bunch of fulfillment centers to get ready for the holiday season and just seems like there's always that's always going to be a negative profits quarter for them as they say is they.
Spend all this capex on these fulfillment centers in I might surprise by people being surprised by it.

Scot:
[38:09] Yeah what it does is it kind of likes all these ones that are now it's still kind of a crew and they won't hit the piano until they launch they opened is my understanding how the accounting work.
Listening to your point it's like they take this really big non-cash hit the Dave I've been doing out the cash overtime and it will create this kind of you know negative accounting thing on there their typical leave it on this one of the reasons,
they really like to focus on free cash flow and versus because you have cash cash is cash and accounting rules don't change the cash coming in and going out and so,
when your building dis many phone as soon as you can imagine that the accounting rules really start to add up on you.

Jason:
[38:48] Yeah I can only imagine I maybe should have mentioned in the shop.org announcement that,
that are recapped it was a surprise event that Amazon put on Indian asked a bunch of new Alexa devices and the first thing I found interesting about that was unlike Apple or Google it like,
you don't announce the event several weeks in advance and build up a lot of anticipation.
As far as I know Amazon didn't give anyone any morning they sent out an email in the morning saying hey we're having a press event in Seattle in 4 hours.

[39:21] Which which means you know there's a bunch of reporters that now have to live in Seattle and they announced a significant refresh of the whole.
Alexa line in so we mostly driving cost down so.

[39:38] They took what used to be the bass Alexa and they shave $50 off of that they improve the speaker improve the Aesthetics a little bit.
They they put a new product in the line at the the price of the old or Oxo that now includes a home hub so the ability to control a lot of home automation devices without a third party hub.
And so what that means is.
You you don't even need the Philips Hue White kit you can just buy individual bulbs and you can control them direct from your Alexa and so you know clearly one of the things Amazon that has has.
Noticed is that setting up.

[40:17] That configuring home automation is still too difficult and plugging in and getting interoperability between all these products is difficult so it seems like they're trying to address that problem directly and make it.
Easier to unboard new products and add new products to your smart home.

[40:33] So that'll be interesting and in the goofiest product that they watched in this thing is a set of buttons that are designed for family games and I think particularly designed for like a version of.
Of a trivia in Jeopardy that that you can play on the Alexa where each family member has a button and you hit your particular button to buzz in and get a chance to.

[40:56] To answer a question that Alexa asked so like I thought it was Goofy but I'm sure I'll order it said about them.

Scot:
[41:03] I'm surprised you haven't preorder this.

Jason:
[41:06] And I guess I forgot one important when I have pre-ordered some of the products in advance I can't even remember which ones are pre-ordered there's a new version of the echo. That has a screen on it.
And this looks like it's predominantly made to work as an alarm clock so.
You know it's a small form-factor device with a smaller screen than the.
The Echo Show and it seems like much better ergonomics and it's designed to sit next to your bed and you know I can have a persistent clock face and do all these different things.
You know that you I know we both have lunch echoes in her house the you're my wife and I each have a clock next to our side of the bed like the last thing I'd want to do is add two more Echoes to my bedroom and I feel like they'd all be competing here are commands.

Scot:
[41:51] Yeah yeah that's what I guess.

[41:56] The did you see that there are another car OEM at Alexa at the BMW they're going to have the Alexa capability.

Jason:
[42:05] Yep and that seems like a pretty cool car to have the Alexa in you know voice interface makes sense in a lot of places,
but for sure you know one of the places that makes the most sense is in the car cars of Ed,
natural language interfaces for a while and they all hip hugely sucked in so you know.
Seems like a pretty big competitive Advantage for for BMW to have what everyone you know feels like is the you note for this along digital personal assistant and the best natural language interface,
in their vehicles.
The book side is if you're any retailer other than then Amazon you know it sure sucks to keep seeing Echo win all these OEM deals,
you know if anyone ever needs to do any add any products to their shopping list or do any auto reordering or any of those kinds of things while they're driving,
you know Amazon certainly going to be in pole position for all the all those orders which is not good news if your Kroger or Walmart or Target or any of those guys.

Scot:
[43:11] Yep I the most controversial Amazon news he recently was Cole's announcing they're going to take Amazon returns about half the folks I kind of saw a comment on it said this is genius this is going to drive foot traffic to Kohl's you know people come into Kohl's they'll drop off their Amazon returns in the shop and that that's a genius thing the other half said,
this is a deal with the devil they are going to know the coals is simply paying to to run Amazon return center sport where they fall out on that one.

Jason:
[43:44] I think it's really smart,
and the reason I say that is you like there's all kinds of opportunities to partner with Anna's on their front of me and almost always,
there's some huge downside to partnering with Amazon you're exposing them to a bunch of data that they're going to use to compete with you you're giving him a bunch of Revenue that they're going to use to compete with you you know all these Frenemy Arrangements.
by definition have have something in it and it's pretty unappetizing but the Kohl's deal as far as I can tell the super one-sided.

[44:19] Kohl's isn't giving up any data about their customers they're not sharing anything proprietary with Amazon they're creating a reason for a bunch of of digital Shoppers to walk in the cold store,
during holiday season and there's going to be an opportunity for serendipitous Discovery there it just seems like.
You know when one of the the most favorable deals I seen someone do with Amazon in quite a while so I thought it was smart what what.

[44:46] What do you see as the potential downside.

Scot:
[44:50] Well that's good take a broom in the store so I imagined me an Amazon Locker kind of thing so it's not entirely clear how many.
Ask me up a minute so you know if it's an Amazon Locker then that's essentially having a big amazon ad in your store.
And then who's to say that people can't order stuff and pick it up there so that I don't know there's a trade-off there and if you have to staff at that's even kind of a little stranger so we'll see.

Jason:
[45:19] I don't think we've seen the details yet so that's fair enough it's funny when I say that if you shop at Kohl's so they set up a bunch of extra customer service centers during holiday so that you know you can,
do returns and and a half after checkout and.

[45:36] You know things like that and so I just sort of assumed that I would be an extra function you could do it any of those return terminals in the.

[45:43] In the store in Holiday would be to return your Amazon packages.

Scot:
[45:47] Could be we'll see.

Jason:
[45:48] It's been over a month since the Amazon took over Whole Foods and we're starting to see some interesting.
Recaps on the how that's played out you know.
Everyone of course made a lot of buzz when it look like Amazon was lowering a lot of prices,
on day one when they took that over and you know Amazon got huge amount of PR credit for that which you know,
probably negatively impacted market cap on how much other grocery stores but it's been interesting we're now starting to see some.
Evidence that that.
Does price reductions dramatically improve traffic in the stores and they drove a bunch more bodies into the store we certainly saw evidence that there they're selling a lot of the Amazon private label 365,
on Amazon platform and maybe even sold out of a bunch of problem products and created some supply chain problems,
but I've also seen some interesting analysis that,
did all of the price Cuts early on were pretty strategic and that a month in it doesn't look like it's really cheaper to shop for a basket of 100 items at Amazon Whole Foods,
then it was before the acquisition and so you know the way they've lowered some some prices that they actually raised some other prices and that you know it,
it looked a lot more like a perception change than a fundamental pricing strategy change.

Scot:
[47:17] Yep the one of them.

[47:20] More interesting reports was from Foursquare where they actually kind of can measure store traffic if they look at at check-in translate they believe that the traffic was up 25% since the acquisition so,
whatever they're doing seems to be driving more people into the stores which which is I think the desired go there.

Jason:
[47:36] I was also surprised in a day when they did something really impressive to me they had a car displays in all the stores,
which is non-trivial to execute but a month in it looks like a bunch of those displays were even temporary and so it does not appear that they're going to be permanently merchandise saying Alexa and all the Whole Food stores at least.

Scot:
[47:56] There's a bunch of interesting m&a so it was just kind of go through the sand and talk about it come out in a package so Walmart acquired parcel.
Plated was acquired by Albertsons Ikea Acquired taskrabbit and there's kind of a definitely a delivery on demand theme there what do you think about those acquisitions.

Jason:
[48:21] Yeah I mean that they all certainly make sense Walmart had already announced that they were looking to do same-day deliveries in New York I think that's primarily for Jet and so parcel is a,
you know presumably the vehicle that used to do that you know meal kits are exploding category and in grocery home delivery of meal kits has a bunch of cause problems as we seen in,
Blue Apron so so Distributing them through a you no pick up in grocery store makes a lot of sense so I thought that was an interesting play by Albertsons and then the taskrabbit one is kind of most interesting,
one of the big big at impediments to Ikea stuff is Ikeas are in inconvenient locations with giant parking lots,
and you know it's often not not appealing to drive out to and a Kia and then you get something that you have to assemble at home and so I don't know what percentage of taskrabbit tasks are actually buying in assembling Ikea furniture but,
you know it potentially address is like you know a pretty big impediment to a key expanding their market so that could be really clever.

Scot:
[49:29] Young speaking of m&a we're celebrating the one-year anniversary of Jet and Walmart so congrats to all those guys and when this happened there was enough.
Kind of like the Kohl's return thing there was about half the folks thought this was genius another half thought this is going to fail this marketplaces tiny Walmart's just going to let you know not be able to grow it and yeah I think the results look promising so far as to certainly the stock like,
stock market likes it so Walmart stock has reacted really well over that that. And then you know e-commerce has grown I think the last quarter they announce is about 63% growth so,
I know that that's all pretty good news do you think it was a is it time to call it a success.

Jason:
[50:17] Yeah well I'm not sure that one year is a short of time to,
to make that determination on a three billion dollar acquisition but I actually think the first year was successful it clearly drove some cultural change at Walmart they did a bunch of other Acquisitions that it's doubtful they would have done,
without my glory being there so that that certainly seems to add a lot of value in a Walmart just needed a good story to talk to the market about Heather competing with Amazon and,
the jet acquisition certainly gave them that in and they've had this,
terrific performance and I do think some of that is definitely related to to Mark in the new team in the directions they're setting but I also think,
a lot of that growth is coming from Walmart's expansion in a digital grocery which is probably something that was underway,
before Mark got there and so I'm not sure you can contribute all of the phenomenal e-commerce growth Walmart and last year to jet,
but that the.
The progress that they made that in many ways is most impressive to me is in the year that since that acquisition,
they've expanded form like 10 million skews online to 57 million skus online which is,
largely through the marketplace which I know you know something about but that seemed like,
you know a pretty significant change and is apparently driven a lot of their success as the larger assortment and the the shift to focus on everyday essentials so.

[51:51] Add all that up and I certainly don't think anyone has indigestion about the acquisition it at Walmart at this point.

Scot:
[51:59] Yeah yeah I'm a big fan of the selection stretchy nothing.
Mark you mentioned it at the top of the show from the shop.org interview acquiring this Brands a lot of people look at that like it's crazy but I think you get access to anything that you can make exclusive like like the cost of for bonobos or any of those kinds of things that's a huge in this kind of selection battle and and,
Alec Mark Clearly understands that and it's starting to play the game kind of at the same level Amazon has been so I think it would be fun to watch.

Jason:
[52:29] For sure and speaking of that there was some new news like just this week which was the jet is launching its own private label grocery brand.

Scot:
[52:39] Yeah this is so kind of a little teaser here,
private label is a huge topic Laden's kicked off Mary Meeker had this presentation that she does every year and she talked about.
Private label in the context of Amazon and showed the batteries Amazon private label battery is kind of taking a risk than one spot so since that and I kind of the spring,
private label is really flared up and we're going to do a deep dive in our next episode so,
I definitely stay tuned for that that topic will be specific to the Amazon private label offerings Sofer as as relates to judge you think.
That's a smart plan or what what's going on there.

Jason:
[53:18] I think it's a really smart plan for all of Walmart to own some successful private labels and I think relative to some of their competition that's been one of the area that they are areas that they haven't made as much progress as they like so I certainly you know I'm interested to see them try it like I don't know enough about the program to know the nuances of the brand is it actually branded yet or is it just something they're testing in jet first and,
eventually go to Walmart like I think those are all going to be interesting things,
things to watch but I certainly think in the long run Walmart in jet need to own some exclusive Brands and going to cpg space is certainly going to get a lot more,
competitive before it's all said and done.

Scot:
[54:08] Yeah and I know we're getting tight on time so going to kind of the lightning round the holiday forecast for coming on in RF always does it at shop.org and they said all in its going to be 3.624% this holiday which,
it seems to be pretty darn bush,
and I think in that call it at you implies that non-acidic caught non store Commerce is like they're kind of coded word for e-commerce you stay so I prefer e-commerce and I think they said 15% for the holiday. PWC is out with theirs and,
they are showing that she didn't put a.

[54:46] Number they said people going to spend 6% more this year than they did last year and I don't know if that means like.

[54:53] The forecast is 6% because you got kind of like at all I guess you could assume more people will shop for less people show up an endowed chair that number.
So and then does not like.
Around 90% said they're going to shop in stores so I guess that makes sense with about 10 to 12% of sales online so.
All good but I guess 84% said they also shop online so I guess this proves omni-channel is a thing.

Jason:
[55:20] I think you might be right I think it is a thing yeah I feel like a number of the holiday for Castle come in and for stores they're all in that like 3 and 1/2 - 4%.
And then you don't you see, Miss 15% like I'm sort of Ebenezer Scrooge on these things in a way it's a silly thing to predict because.
That the growth is so dependent on the pricing in the promotions like you can grow much bigger by by selling stuff cheaper and losing more money in so pretty thing the growth without also predicting the the promotion levels is.
Not super useful to me.
But these guys are all burden by like data and scientific methodologies and You Know It dance mathematics and all that sort of stuff I don't have any of that stuff and so to me it seems like.

[56:08] Aren't you don't think your holiday season is going to be as rosy as these guys are all painting like I think if we get the 4% growth in all of retail,
it'll be because it was a hugely Promotional and unprofitable holiday. I think we just have way less doors and so there's going to be blessed up in the pipeline which means manufacturers are going to,
I sold the last stuff through I don't think it's going to be a bad holiday season and you know any hugely negative comps but,
4% feels a little Rosy to me and I actually think the account number could be higher but a huge caveat there,
even though it's 15% you know Walmart's grown 60% the last two quarters,
a lot of that from grocery and groceries opening super fast at Walmart so they're going to have way more grocery for this holiday so they could do 60% for this holiday and Amazon's going to do 25 or 30% for this holiday which essentially means the rest of e-commerce is down.

[57:07] If that whole industry only grows 15%.

Scot:
[57:10] Yep yep I think.
Abortion e-commerce said I think we're going to see kind of a high teens number from I think it's going to really be a year of acceleration on that one controversial speaking promotions promotion that's out there is the Marketplace Marketplace that focuses on bringing really super cheap Chinese Goods into the us there now says 30 million dollar NBA sponsorship and a lot of the NBA jerseys now feature the wish look up so it'll be interesting to see if that.
That is very kind of in-your-face kind of promotion for an e-commerce company that we haven't seen before.

Jason:
[57:45] Yeah and I mean it makes perfect sense cuz when I'm watching basketball something to happen to me all the time as I suddenly realize I need a particular color fidget spinner and only 6 weeks and so I think now it's going to remind me where I can get that.

Scot:
[58:00] You have an emergency.

Jason:
[58:03] A six-week emergency.

[58:05] I think it's totally interesting that they're making the investment and and like in a bylaw demetric switches making.
You know it is an is a meaningful player like I do I'm not a big fan of the customer experience of 6 week delivery I think that like.

[58:22] Has got a limited appeal in in this world and which were we're getting to minute delivery from from our friends in Amazon.

[58:32] But I think that's probably a great final word luckily I didn't invite anyone from wish to have a counter perspective,
and we have used all that a lot of time so,
hopefully Wizards where will the stick with us through the fire hose treatment and got some interesting stuff as always weeding courage you to continue the dialogue on Facebook if you disagree with any of our positions we'd love to hear about it there's anything we didn't cover that you like to hear about suggestions are always appreciated,
of course if you really enjoyed the show,
we love you to go to iTunes and give us that five star review if you hated the show you know don't feel it necessary to leave a review at all.
And thanks everyone for listening.

Scot:
[59:19] If you need to show you can call Jason on his home phone number which is just getting thanks everyone for joining us and happy Commercing.

Sep 22, 2017

EP101 - Indochino CEO, Drew Green

 

An interview with Drew Green (@Drew_Green), CEO and of Indochino.  Indochino is one of the largest made to measure menswear brands globally with active customers in 50 countries. We spoke with Drew about his previous e-commerce startup Shop.CA as well as Indochino's business model, Amazon strategy, and the future of the indsutry.

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

Episode 101 of the Jason & Scot show was recorded on Thursday, September 14th 2017.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 101 being recorded on Thursday September 14th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Tahoes Scott Wingo.

Scot & Drew:
[0:40] Hey Jason and welcome back Jason Scott show listeners this week's episode we have a really special treat for you,
in a world where everyone's really scrambling to survive against Amazon we wanted to highlight a brand that is really thriving please welcome to the Jason Scott show Drew green CEO of indochino who is joining us live from Vancouver,
thanks guys I appreciate you having have an assignment scratch.

Jason:
[1:09] It's entirely our pleasure let's get the really controversial questions out of the way early did Scott pronounce your name right.

Scot & Drew:
[1:16] Hey daddy daddy didn't say where to me but that's that's okay cuz I don't use the at the end of Green.

Jason:
[1:23] Awesome and you don't want the things we always like to start out with is get an idea of how you.

[1:32] Came to your current role on so before we talk about your control can you tell us a little bit about your background and in what way does the origin story for indochino.

Scot & Drew:
[1:43] Yeah well I don't know what I do both because both her are bit different so you don't myself I've been in you know e-commerce.
Retail for almost 20 years first company we we built up was really the time of time of my life I was told to double click in the late 90s and from there.
I have this amazing journey by double-clicking New York I love being out of retail.
And as you know double quick was was acquired a couple times by private equity in the Google and then went to have the privilege of.
Going to a company by the name of shop.com and helping build that into a top 10 multi-category retail destination in the US and the UK and that eventually became part of.
Market America which I think is that isn't IR 500.
Iri R50 excuse me online Merchant sound of my own company and I really enjoyed that Journey House shop.ca here in Canada.
Multi Merchant market place that has since been Amalgamated with.
Several Brands under an umbrella company called emerge Commerce of which I'm sure.
And you don't back in 2015 it feels like.
Feels like quite a few years ago but but really only a few years ago I really got the opportunity to come into indochino.
And help transform the way men dress and it's been you has been an incredible few years you know the business has tripled in size.

[3:18] Are we done so probably attracted some world-class Partners investors and of course.
You every success starts with a team would God just a fantastic team at the company.
Your top to bottom so it's it's been a great experience indochino was founded in 2007.
So you know we've been around for for just over 10 years.
And have become you know the last few years have become really the market leader globally answer to what does that mean while it means that from a made-to-measure custom apparel standpoint I don't believe there's any other company in the world.
I cells and produces as much as we do and so that's had somewhere very proud of but you know we treat with a lot of care and a lot of humility because you know we want to continue to build the Great business not only for the team here but.
Obviously first shareholders.

Jason:
[4:13] Terrific some before we jump into indochino actually have a shop.ca question.

[4:19] So I use them or I should say you all the time as an example of one of the the first e-commerce sites to turn their entire customer base into affiliates.

[4:33] Am I being truthful there I feel like that.

Scot & Drew:
[4:36] Yeah that sucks yeah that's actually shop.com and and so you know that was post-acquisition that that occurred.
And you know that is the that is sort of the bread-and-butter or models at that market America's built their business on and and you know they felt that that was the best application for.
Shop.com I mean shop.com originated as a Marketplace not unlike.
Amazon Marketplace but it was bifurcated we had both you know card transactions as well as affiliate transaction.
Orly cost as it would be known but yeah Market America turned it into a almost a pure purely and consumer affiliate site after they acquired.

Jason:
[5:19] Don't you very cool and did you have you applied any of the the best practices from that in your current gig do you guys do like customer referrals and all that sort of stuff.

Scot & Drew:
[5:30] Absolutely I mean I think you know that the interesting thing about that is I think it's excessive.
Going to take you out online only but it really any retail business is based on.
Your consumer advocacy or or fandom as we can talk about sometimes it into Chino you're the more that you can have fans of the the product of the brand of the experience.
In particular for us that in the channel the experience.
Yeah really the more the more not only are you going to grow about the more efficiently you're going to grow you know when you have customers that are telling.
Your friends and fam.

[6:07] They had a wonderful experience and the noset friends and family coming and make breakfast it just creates a really efficient gross and so yes certainly I would say that refer-a-friend weather.
Whether through paid or unpaid is probably a second biggest Channel at its cheetah and so certainly we feel like we have a ton of fans.
You're talking about the Brandon and appreciate an experience we deliver,
cool the server folks that may not have had the opportunity to to use the site Maybe,
can I give my dog a quick picture of of indochino you you said kind of measured so does that mean someone comes to me and measure so and I know you guys have it you didn't take so long to hear what that is.

[6:51] Yeah so if you think about you know bespoke or made-to-measure custom apparel.
You know it's an industry that's been around for hundreds and hundreds of years you know man have gone and gotten measured and.
You have been able to to create their own garment what we wanted to do was you know create a platform essentially to allow it to be mass-market to allow anybody to measure themselves.
Girls online only first pick their Fabrics pick their customisations their personalization such as a monogram.
You know I'm on the Garment and and really create a one-of-a-kind garment and so you know we were the first globally to ever sell made-to-measure online.

[7:36] Really proud of that but we realized in 2015 and really what what I've been driving the most.

[7:43] After years is you knows our success is based on an omni-channel experience and really giving customers the choice of.
Did I buy online which I calls or the self-serve mode or getting a full serve experience and whatever that 70 show rooms across North America.

[8:02] Yeah that's a good Segway cuz I kind of mentally put you guys in the bucket with but no bows and Stitch fix and kind of what what Andy done calls digitally native vertical Brands and then just like those guys you guys,
open up the showrooms where they're kind of a smaller Outlet the no kind of a traditional retail experience and kind of different unique buying experience,
so tell us a little bit more I think that's all been in your 10 year or did the company have some started.
Yeah I mean we we we've essentially opened every one of our showrooms or relocated them you know 2015 to 2017.
We really felt like to be.
You know that the Undisputed leader and made to measure but also to compete with ready-to-wear that we needed to provide customers with an omni-channel experience and you know what it's really allowed us to do is to open an app.
You know the made-to-measure experience to customers that just might not be comfortable.
Making their first purchase online as it relates to a you know for the $500 purchase offer a garment and.
Yes really become actually are number one acquisition Channel think about online only business is really scaling that business from a media perspective.
And you know you are a retail environment not only benefits customer but it really benefits are model and creates you don't media efficiency from.

[9:33] I'm back from a girl's perspective you know we'll have averaged just over 50% growth year-over-year lost.
You're so 2015-2017 and we're seeing a declining across for acquisition and cost for crossbow order.
From a media perspective in that you know almost entirely to do with with our our commitment to retail and channel.

[9:57] I'm having not add up to you being a showroom may be described it as it's like I'm imagining 2000 square feet some some examples that kind of thing but then I've seen pictures of Foosball Tables kind of curious where that.
Yeah you know every showroom that we have it as I mentioned we got 70 you going to us were in Boston we got to in New York to in the Philadelphia area.
Now one in Washington one in Chicago San Francisco and Beverly Hills every showrooms a bit.
Different and unique but they all have a very open Design Concepts and they all allow for you no appointment no I won't what we have isn't as appointment base model where the customer would come in.
They would be masked with what we call a style guide for that hour and that's the guy that I said would help them create their at their garment they would walk them through and get the measured.
They would have the customer you to pick out fabric since we got almost 300 fabrics for suits in almost 300 rabbits for shirts.
So they would pick their fabric that they're stitching and pick other customisations and personalization said you know at the end really allows them to.
You know create this one-of-a-kind garment that that nobody's going to be there not going to go to a party or dinner or an event and see somebody wearing the exact same everyone is is entirely unique a customer.

Jason:
[11:26] That's awesome.

[11:29] Question about the sort of omni-channel experience so it makes perfect sense that their children's could be your top acquisition Channel you go in there you you get fitted you get that first suit and have a great experience,
but I'm presuming that now you have their measurements on file and now that that customer has a lot more confidence in your brand,
are you able to turn those kind of full service customers from their first experience into more cell service customers for subsequent orders is that.

Scot & Drew:
[12:00] Yeah that that that's exactly what happened so course you got some customers that just you don't prefer either the retail environment or our showroom environment but.
You know the reason that we're investing in retail in such a big way is that the majority of our retail first customers actually come back on their second third and fourth purchase and buy online and so it Christmas really sort of official relationship with a customer.
We get it right the first time.
Bathroom showroom perspective but because we've gotten it right there the other entirely comfortable coming back and buy it online you know we don't have a subscription model but if you looked at.
Yes they do that the repurchase rate in our business here is almost like we do you know customers are very loyal to the experience very loyal to the brand.
And frankly you know what we found especially these last couple years is you're made to measure and custom apparel is becoming mainstream.
And so you know a young man or or you know someone at that house that experience was made to measure is saying you know what.
I no longer want to buy a suit their shirt and Blazer pair pants off the rock I want to I want to create my own, because it's not easy and it's a crime.

Jason:
[13:12] Cool yeah you know one thing I filled it to ask about is can you talk just a little bit about what the like sort of into end time line is for it for a customer that buys a product like you know.

Scot & Drew:
[13:24] Yeah absolutely so that you know what you're doing if you're doing me buying processor.
You know what we are at from an internal perspective because the conversion final you know it does take some time so it's not a an instantaneous purchase your you're choosing all your selections on the Garmin.
But once you've done that and you know the Garmin essentially arrives and.
Right now under three weeks we've we publish for is the expectation but we've really improved that through your different Partnerships and optimization supply chain.
And so if you think from start to finish your you're basically creating your own garment your own one-of-a-kind garment and receiving it and under in under 3 weeks.

Jason:
[14:10] Wow very cool.

[14:13] In my my senses like sort of old-school made-to-measure garments when you go to a local tailor or certainly like you have some of the the International Suit house is like the.
Like one of the big pain points traditionally with me to order is that there's a super long lead time.

Scot & Drew:
[14:33] Yeah yeah I need a Nazi that you're absolutely right I mean some.
You're on some environments your weight 5 6 7 weeks for your for your garment and we've really.
You got to really compete against made ready-to-wear to really be an alternative to off the rocks.
You know we feel like we've got to get that that turnaround time you don't continue to optimize I continue to approve it and we don't have a timeline for it we don't have.
Your specific launch date but our goal is to get at under a week.
And you know once you get it under a week because think about your own experiences buying a suit even if you buy off the rock you're still going to have to get it alteration so.
You know when we are at under a week in terms of production and and final delivery.
You know we're entirely competitive with ready-to-wear and and just that much more appealing to two all types of consumers.

Jason:
[15:31] Yep that brings up another day question that so.
One of the Banes of the apparel industry in general in e-commerce is the return rate is higher than we'd all like and I am curious if,
the me to order it helps resolve that problem because you've got a chance to meet the customer and you you know that you have less fitment issues or you know.
Part of me feels like even with a bespoke tailor and a made-to-order suit like they're often is more than one round of of adjustments if you will if I'm if I'm saying that right how do you handle that that's what it's about.

Scot & Drew:
[16:08] I mean neither of us are really question cuz if you know what I think back to you know the first time I took a look at this business and and the things that really jumped out to me was the fact that.
You don't return rates were so low you know they were two three sometimes 4% depending on the time of the year and as you guys know and e-commerce in apparel Footwear.
That's that's incredibly low number now we've actually been able to get a returns to well under 1%.
I'd have been there for over a year now and again that's that's an incredible number now we do have.
Alterations by a small percentage of the Guard.
You know sometimes if it's not made to the customer's exact specifications will do it what we call a remake but again that's the the minority of of of the garments that we create.
It's all Rino return rate as one of the most incredible things about this business because if you compare you know two other apparel or paralyze a category.
You're most of the Power Rhonda you know in the twenties or even 30% from a return perspective.

Jason:
[17:19] Yeah I think I think most people would give us some significant body parts in exchange for getting down to a 2 - 4%.

Scot & Drew:
[17:25] Well I absolutely because it because it's the biggest impact online only.
Apparel retailer it's it's it's very difficult and I from a model perspective it's very different.
Difficult run p&l perspective then so you know where we're pretty proud of the fact that you don't return rates are so low.

Jason:
[17:48] And then when I scratch.

[17:51] On on the general business I noticed on the website you also have weddings in your in your taxonomy and we recently had the Zola on the show so we we've done some talking about how lucrative the the overall wedding industry could be what,
how are you guys playing in the wedding space.

Scot & Drew:
[18:11] Yeah me back that really goes to the customers that we serve an alien are number one and for the core demographic would be Millennials 65% of our transactions online.
Or are serving you know that Millennial mail it's a little bit lower and in our showrooms closer to 50%.
But really what we committed to a couple years ago and it's become our fastest-growing demographic is the is the wedding Market.
And so you must send you message foosball tables earlier and call you know one of the things that we've done with each other room is set up a groom's lounge and that's really just serve that market.
And to really become you have a place that that young man or any age men can get can get themselves in there and their groups party you know fitted for their wedding and so I would I would say that wedding is probably our fastest-growing segment.
And certainly something that we're going to continue to focus on,
it wouldn't be a Jason and Scott show if we didn't talk about Amazon a little bit so Jason I do a joint talk or we talk about you know,
the obviously how big amazon is how much they're soaking up the growth out there but one of the big rabbits we give people on protecting yourself is to wrap a service around a product and seems like you guys,
done that dude you have any fear of Amazon doing that or do you feel like this is a quadrant e-commerce are probably not going to get to,
yeah I was watching you can never live live in fear you you got to.

[19:46] You got to continue to innovate and continue to ideate you know whatever business you're running I think.
I just have a tremendous amount of respect for Amazon and and within the apparel categories are obviously very very committed to it and doing some amazing things.
You'll for us one of those things that we really.
You're committed to not just to not this to differentiate ourselves from Amazon but really I would say the entire apparel category is really not.
Not put forth that we're selling a product we've really focused on selling or even just providing an experience and so more and more.
For our customers what we Aspire and what we try to inspire is the fact that we do provide an experience and it's it's a totally different experience than.
You're going into a store going online and buying an item in that instance you really just buying a product right and and for us it's entirely different.
It or whether it's you know the interactions that they have with our saw guys and how what they're trained or the you know the online experience of pretty on Garmin we've really focused on selling an experience versus a product.
Call you guys have obviously caught the eye of you season an environment when it's really hard for me, she kind of companies to get funding I noticed madronas in there that's that's a really kind of real consumer Blue Chip how much,
Capital if you guys raised yeah we're really we're really fortunate to have you no work last set of investors we got.

[21:22] Madrona and Scott Jacobson at Madrona as my partner there.
Yeah I'm deeply involved with the success of the company at Portside equity which was formerly Highland consumer is also very very involved.
And our success and has been you know a big force and driving it we also out of strategic investors so we have no Diane group that's based in in China and one of the largest.
And best suit manufacturers in the world owns a part of the company.
We got a media company here in Canada that that took ownership in the company and will continue it to round out and look for what possible.
And you lots of that say you don't really good position to be in,
the best time to raise money is when you don't need it in my experience,
to quick one so you kind of peaked my curiosity with the millennial kind of,
concentration at any interesting observations as someone that's been in the industry for a while about in your all these kind of it's kind of funny meme that says joke around office money orders are killing this any other but they're they're obviously,
not killing YouTube suits so any observations you can share about what you see in there.

[22:42] Well I think there's a few different things I think number one you know it's a it's a the demographic that really takes a lot of pride in.
And being their own brand and your for us I think that's why we resonates so well with Millennials you know they're able to create.
You know one of a kind in the Chino which in a lot of ways becomes a representation of who they are and and their own brand and so.
You know I think that that we are just the experience the product that we provide really fits into that.
They're also they become and we see it in our.
In our lifetime value studies and repurchase rate studies extremely loyal you know if they if they enjoy something if they like something.
You know they're going to be loyal and they're going to tell their friends and so.
But it is important to get it right I think that's true and in any demographic.

Jason:
[23:43] When it when the things it's interesting to me in the short of a custom product space which I I sort of put you in.

[23:52] You know all customers but in particular Millennials in and Western CSN genze as well like the.

[24:00] There seems to be a strong preference for more individualistic process products and in sort of you know Wes following the pack but.
They also want people to know that it's individualistic so I I'm almost wondering like are you know that I think there's certain features in your product that,
sort of reveal it's a made-to-order product as opposed to it you know looking like a ready-to-wear product like to do you find customers like.
Intentionally select those pictures so that they're sort of broadcasting a little bit that they that they wearing a maid.

Scot & Drew:
[24:34] Yeah I mean that's not what I mean about being able to create their own brand right there not.
You know they're when they're creating an indochino garment they're creating something that's truly one of a kind.
And they're able to you don't put a monogram very very easily you know what that the jockey on the shirt or on other parts of the Garmin.
You know they're able to pick their own lining from dozens of different choices are able to pick a fabric.
And maybe mix. Fabrics you know applecross the suit and so you're really there's dozens of difference.
Customisations in personalizations and if you know you kind of look at all the permutations that could be great just literally tens of millions of different types of suits.
I could be created I think that's really feeling you don't know if you guys remember but I always hated you know in high school going to a party and.
Bought a sweater at you know whatever retailer and then find out that there's three other guys about party with the same sweater or same jacket out of you and so yeah that doesn't happen within the Chino grated your own again one of a kind.

Jason:
[25:44] I totally get your point but I don't think Scott or I got invited to parties in high school very much.

Scot & Drew:
[25:50] I've I've seen Scott of the few parties I don't know then I don't know.

Jason:
[25:55] I am teasing you like to see your urine.
That's one of the Leading Edge category in terms of made-to-order I do do you see that extending two more generally the other consumer products like the fact that that's a continuing Trend or do you think it will stick with you no particular vertical.

Scot & Drew:
[26:14] Are you know what's another great question that I do think that.
A big part of the future retail is going to be more customize and personalize product and the more of that you know retailers or companies or any tractors can get away from.
Commoditized product I think more success than the house and so I really do feel like at the highest level custom but I'll say is custom.
Your product is is is really the future of retail in a lot of different verticals but certainly in a Peril for sure.

Jason:
[26:50] Yep and obviously that's that certainly helps you build a competitive moat.

Scot & Drew:
[26:55] You know what does I mean you'll think about competitive Moses you got to be you know aware of of what you need to do to to protect and grow the business and you know we constantly look for.
What are call additional Motes if you will but you know where we're at work we're humbled by the response that we're getting from consumers right now.
And we're very excited about what you know what the decades ahead are going to bring some.

Jason:
[27:25] Another area is our future looking that I'm always interested in and I talked a lot about fit man we talked about,
in the ready-to-wear space the return rates are huge and typically the number one reason for returns are are fitment issues you obviously saw that for the subset of your customers that go to a show and they think they can get.
Measured by a tailor but to enable more people to be self-service and reach more people I I imagine you're always interested in your how to best get measurements at home I know there's at least one company in the space that tries to use,
the mobile phone camera for fitment and I I think you know I suspect that strongly a gimmick but I do know there's a lot of phones coming out with sort of,
3D scanning capability in that,
you know I've always speculated that potentially is really useful for fitting in are you guys looking at all it does sound kind of Technologies.

Scot & Drew:
[28:20] Yeah we are I mean we're always looking at new ways to create and craft a perfectly fitted garment I think.
You know if it's an extremely complex business right in terms of creating you no one to one product on app for Consumer bases and.
Well those take that Technologies are full and you know seem to be enough to come in and out I I do think the back-end operations of how you create.
You know I shouldn't Wonder one product her customer is is the most important the last thing you want to do.
Is introduced the technology that you're going to end up with you know return rates that are closer to you know traditional apparel on so there's going to be a lot of Technology development around.
You know how you get measurements or how we get measurements but you know how I kind of like what we're doing right now in terms of the technology that we used to.
We got the garments right on a one-to-one basis.

Jason:
[29:21] Gotcha another Trend like in this are the Jason spaces that I've been a little interested in last quarter Adidas did this interesting pilot wear their weaving sweaters.
On demand in a store and then I think it's Ministry of Supply in Boston literally have a.

[29:40] A blaze or weaving machine in the store and I'm going to say Loosely they make a Blazer while you wait I think it's like a three or four hour process.

[29:51] So obviously not not super convenient or scalable right at the moment but like is that a potential.

[29:57] Opportunity for you or competitor for you in the future iqc the technology ever getting good enough that a lot of the stuff gets made in in real time in stores or ship same day to customers are those kinds of things.

Scot & Drew:
[30:09] Yeah I mean I think anything's possible as we you know as we go through the years and decades ahead of deep deep thought of being able to create.
You know garment like we create but do it same day or in the store or have it delivered the same day I mean that's an incredibly.
You know bold dream or delivery but you are hot for my from a super spective I do believe that were one of the fastest in terms of how we produce.
Supply chain all the way through the consumer demand and like I mentioned earlier you no more costly off to my second tweaking. Because once you get it down to under a weeks you've got something very very unique and highly competitive.
You know what is essentially about a 7 billion dollar Market North America on South.
Yeah I've seen I'll call them campaigns or product launches that you mentioned but I think we're a little ways from being able to scale that I'm a space South.

Jason:
[31:12] For sure for sure it does certainly seem like that kind of you know early tip of the spear examples on which are always interesting but probably not economically viable for the last question.
Anything else that has you excited or interesting about the the future of Commerce in general or or your space in particular and India.

[31:31] Trans you are seeing on the horizon.

Scot & Drew:
[31:35] You know what man like I said as a technology e-commerce guy I'm just.
I really really big fan and really interested on how retails of all day you know it's that's what's got me most excited and interested on how.
Online-only Brands transition into either or not the channel environment or how do they leverage retail to drive their business I think there's going to be.
Thriller credible Innovations and developments over the coming years and we hope to be part of that we think we are actually you have big part of it and Four Mile from a later shift perspective in and leaving the weather.

Jason:
[32:15] Terrific I think that's actually going to be a great place to,
to wrap up because it is happen again we've used up all our a lot of time so Drew I really want to thank you for joining us in the sharing the indochino experience with the RR listeners and I'll remind listeners as always,
you're welcome to continue the dialogue on our Facebook page if you like today show we would certainly appreciate a 5-star review on iTunes if you hated today.

Scot & Drew:
[32:44] Absolutely do not review cuz it was probably my fault if you hate it you guys are great I appreciate your time today.
Thanks truly look forward to hearing more about the success of indochino.

Jason:
[32:59] Until next time happy conversing.

 

Sep 17, 2017

EP100 - Get to Know Our Listeners

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

Radz Mpofu @RadzMpofu

Kevin Harmon @imadness Facebook 

Ted Fifelski  @ted_gives

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

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

http://jasonandscot.com

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

 

New beta feature - Google Automated Transcription of the show:

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot & Guests: 
[6:31] No idea.

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

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

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

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

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

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

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

Jason: 
[10:16] Exactly.

Scot & Guests: 
[10:17] Shop.org.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot & Guests: 
[18:37] Canada.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot & Guests: 
[22:28] Yep.

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

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

Jason: 
[22:40] Deaf deaf.

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

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

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

Jason: 
[24:13] Okay I'll.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason: 
[49:36] #j

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[1:09:49] That does a use case.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sep 8, 2017

EP099 - Tulip Retail CEO Ali Asaria and News

Amazon News

Other news

Digital Retail Newsmaker

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

 

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

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

http://jasonandscot.com

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

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

New beta feature - Google Automated Transcription of the show:

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[41:36] Thank you so much for having.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot: 
[1:07:21] Yes I heard I heard.

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

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

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

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

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

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

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

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

[1:12:18] Which makes perfect sense.

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

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

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

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

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

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

Aug 30, 2017

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

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

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

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

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

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

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason: 
[17:05] Got it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[31:33] What what.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[47:27] Targeted vehicles.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Aug 21, 2017

EP097 - Industry News

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

Amazon News

Other News

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

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

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

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

http://jasonandscot.com

New beta feature - Google Automated Transcription of the show

Transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[3:01] Absolutely.

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

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

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

Scot:
[3:17] How's your vacay.

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

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

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

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

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

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

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

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

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

[5:50] Just do it.

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

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

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

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

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

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

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

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

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

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

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

[12:51] Yes true.

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[20:27] I didn't stuff.

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

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

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

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

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

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

[22:42] In Q2 this year.

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

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

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

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

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

Jason:
[25:31] I love it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[48:17] Thanks everyone and.

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

Aug 5, 2017

EP0096 - Listener Questions Part 2, and News

Amazon News

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

Listener Questions

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

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

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

 

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

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

http://jasonandscot.com

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

 New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scot show this is episode 96 being recorded on Thursday August 3rd 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners Jason you're you're at home the rear of the sign this is the first week this year you've been home so that's pretty exciting.

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

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

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

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

Jason:
[1:39] Exactly.

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

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

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

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

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

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

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

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

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

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

Scot:
[4:04] Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[8:48] Yeah I know I try to.

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

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

[9:16] The primary reason.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Scot:
[27:46] Yeah this was a tricky one cuz it was reported everywhere and it was hard to chase down the.
The source and its in a Bloomberg article will put it in the show notes and seems like the author saw Amazon's logo on their site and that was almost kind of the.
The Germ of the whole article who's winning pieces you know how they became a unicorn not stuff which is great but then you know it is weird because so stripe is.
Primarily used for mobile payments and I just got to imagine that core Amazon which one you think about amp.
Mobile is the the Amazon app I find it hard to believe they would use stripe but the.
Interesting thing about Amazon culturally,
is every team is independent and so the cost of that is you don't get a lot of reuse of sometimes nowaday forestry used to the the cloud platform called AWS whi