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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Now displaying: July, 2017
Jul 30, 2017

EP095- Listener Questions and Amazon Earnings

Amazon Q2 2017 Earnings Summary (PDF from Amazon)

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

Listener Questions

  • Kiri Masters:

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

  • Josh Tarasoff:

    Hi Jason and Scot--What is your take on Amazon's strategy behind buying products at full retail price from marketplace sellers? Here is an article:

    Thank you. I love the show.

  • Anup Gosavi

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

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

  • Lauren Quaile Tonkin:

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

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

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

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

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

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

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

New beta feature - Google Automated Transcription of the show


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

Jul 23, 2017

EP094 - News

Amazon News



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

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

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

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

New beta feature - Google Automated Transcription of the show


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[29:47] I have them.

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

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

[30:51] Area.

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

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

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

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

[31:24] Yeah that would be best.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[57:03] Monkey tip line.

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

[57:10] Retailgeek call Jeff.

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

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

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

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

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

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

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

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

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

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

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

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

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

[1:01:10] It's it's an addictive cat.

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

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

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

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

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

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

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

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

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

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

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

Jul 13, 2017

EP093 - Amazon Prime Day Hot Take

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

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

Amazon Prime Day Recap press release

Amazon Deep Dive EP24 Podcast

Full interview wth Dorel Juvenille Group, Jamie Dooley - EP86

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

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

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

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

New beta feature - Google Automated Transcription of the show:


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

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

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

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

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

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

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

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

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

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

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

[3:43] But I thought it was pretty funny one to bring out for folks.

[3:47] Good luck with that with the interns I can't get those guys to do anything.

[3:53] Scot before we jump into this year's Prime day maybe it's worth a setting the table a little bit and talking about the the history and context answer the first thing I was like to remind folks of,
is the Amazon is not the originator and does not own the market on inventing their own sales holidays there's a,
a great great tradition there but specifically in an e-commerce you know Cyber Monday which is been the biggest shopping online shopping day of the year in the u.s. for many years was really an invented Holiday by one of our former podcast guests and the original team.

Scot & Jamie: 
[4:37] Yeah yeah you know the what to pull up the episode but Scott sober in the,
does that story goes they saw the trend in the kind named it so you know the back before we all had Broadband Sans fight 3G 4G 5G kind of connections you would go to work and you would use that nice juicy Broadband connections that's why that Monday took off and they decided to name it,
that was the first created holiday and then another one we talked about a lot is singles day.

[5:07] Yeah absolutely in that and you know that the global people and or the Alibaba people that created singles day.

[5:17] Would quickly point out that that the.
It's it's become much bigger than Prime day or Cyber Monday are at the moment and so there's a lot of momentum there by the way the the Scott Silverman episode was episode 66 of any listeners want to go back in,
and catch that up,
so we have that Cyber Monday then we had Ollie Bob launching singles day where they took sort of a niche holiday and turned it into a huge shopping day and it's now you know by far the largest single online shopping day of the year globally in the end of course 2 years ago.
Amazon 2015 Amazon launched the first Amazon Prime day.

Scot & Jamie: 
[5:59] Yeah and pretty quickly it has become their single largest day and that's a good segue thanks for a little history on that and before we dive into,
a little bit more details on Prime day I think it's important to take a little bit of a step back and say why does Amazon do this I think the common.
The surface level is to sell more stuff you know if you can take a month like July and make it into a put a peek day in there that that actually helps right and maybe pull forward some holiday things,
and it also helps with Q3 you know Q3 is kind of slow or time. And summer is kind of,
little bit boring any Commerce there's a lot of extra capacity in the system but but I think you know as we go to the episode,
I think that you have to peel the onion on this to really understand,
the first child refer listeners to the Amazon deep dive which was very early in our podcast and career which was episode 24 shame on you if you have not made it through that episode,
but for those of you that the didn't which I know is very small part of our audience what are the keys to Amazon success is the prime program.
Jeff Bezos has a fun crew out there that you're a lot he kind of says we want to put so much value into Prime that you would be effectively irresponsible not to join.
And right before Prime day there's this,
This research company called consumer intelligence research and they they they tend to have the highest approximation of prime users and it came out at 85 million Prime users.

[7:34] I think that's their Us number most other people are in kind of the 65 to 70 million range and,
the other thing that is common about prime is it when someone's on Prime,
they spend at least twice some surveys show twice as much and some show three times as much I believe is more towards the three times,
as much so I believe the prime numbers a little bit lower than that you 5 million but I think the actual usage and the multipliers higher if that makes sense so,
so I believe there's five reasons that Amazon created Prime day number one is to create a generate more sales or what we would call and Industry gmv gross merchandise value I like that term because it encapsulate Stu 1p in 3p,
transactional volume a little bit clearer and that's too deep for this episode but again hours for you to that deep dive,
the number to is prime adoption so again people spend more money on their own Prime and if they can get people to,
try Prime data shows that,
dead again this is from survey data so take it with a grain of salt this is not Amazon releasing this but as people there's nothing surveys out there I think you get a pretty clear picture that once someone enters a Prime trial 73% become paid numbers,
flip side of that is 27% of people probably just join Prime for the 30 day,
trial. And then turn out but 73% stick which is when you look at online trial rates is actually pretty high usually they're kind of been to tend to 15% stick on Amazon 73%.

[9:09] Then if people stay a year then the retention rate goes up to to greater than 90% so if they is kinda like the roach motel once you check in to prime your chances of checking out are pretty slim and Amazon's got a lot of devious things.
Genius depending on which side you look at it for forgetting you deeper into Prime and accessing one of the many kind of spokes on the Hub,
the third reason for this is an Amazon has an increasing we talked about this a lot on the show portfolio devices so getting more devices out to you and in your house,
creates more stickiness in all those devices are tied to Prime Lenny's flywheels overlap each other the 4th when is prime day,
drives engagement of the Prime offering and adds value so so it's kind of foreign five together so by driving engagement of saying okay I'm using and maybe you're enjoying today shutting will try video,
Prime music try Prime Pantry Prime here's some exclusive deals Prime now try,
Echo deals that are for Prime members only try some of our private labels that are prime exclusives,
the more they can get you to activate inside of the Prime family and offerings and ecosystem the more kind of stuck you are in the web and,
you're the fifth one is that that making sure that you're reminded every year that there is a big benefit in this annual sale is one of those many benefits that exist,
Nordstrom's is kind of famous for their loyalty program they have their annual sale and giving people today's exclusives or something like that to go shop.

[10:43] Sets on the surface it feels like it's a reason to sell stuff but in reality I think the real reason and benefit of prime day is to drive Prime sign ups and add to the value prop in the seals are really just the icing on the cake.

[10:58] Yeah I would totally agree like of those five benefits the the sales while like certainly valuable and important as probably the least important of those five reasons so they.
They recognize all those opportunities they launched the first Prime Day in 2015,
and serve remind people how that went you know it was generally viewed as pretty smart and favorable that they had created their own holiday so I think they got like a good vibe and there was some Buzz coming out of,
that first year but it was not what I would call a home run right like so there was a lot of the narratives from 2015 where.
The man the deal sold out super quick and so a lot of people weren't able to take advantage of the deals and and we're somewhat upset,
there were some actual you know customer-facing technical problems and so this hashtag emerged on Twitter Prime day fail and folks were complaining because.
The card didn't work and they weren't able to take advantage of the lightning deal and then the deal expired and they missed out and they were upset there were some.

[12:06] Vin deals in in the prime day so they were there some kind of.
Products with they were underwhelming that you know not very many people are interested in and or the deals weren't very good it was a little confusing to even find the deals.
And you're going back to one of your subjects.
You don't half of Amazon essentially is is that that 3p Marketplace and those guys really weren't included in the first Prime day it was almost exclusively for Amazon products and for 1p products in so that you know both was bad for customers cuz so many of the things that customers buy from Amazon or 3p,
no certainly bad for all the 3p Sellers and then you know wow Amazon paid lip service to it being sort of a global holiday and being in all of the Amazon markets,
from the volume standpoint you know it really only was meaningful in the u.s. in the UK.

[13:01] So in spite of all those challenges like you know I think the big win for that first year is you know that they were able to say that they added hundreds of thousands of prime users in that one day so regardless of those challenges,
that alone would have made 2015 a success.

Scot & Jamie: 
[13:18] Yeah yeah it was it was definitely rough riding and on the 3-piece side I think they were so secretive about it,
that didn't tell anyone about it literally until about 24 hours before they just had told us you know maybe like 3 days before that there was going to be something happening in to get the servers ready,
so that was kind of funny and you know.

[13:38] It's only two years ago which is which is crazy but Amazon had some candles that line was getting kind of old and tired,
they're the tablet's they had where did really didn't find kind of the niche that they have found now that's kind of like you know this value kind of tablet they were there still kind of,
premium tablets and they just come off the failure of the fire phone you and I are the only two people that think in the globe the have them,
and so there was a lot of that that device stuff that they could sell in 15 so then 16 came along and you know what how I would characterize that is typical Amazon fashion they learned a lot from 15 and in 16 they are they.
They righted the ship in and fix a lot of the wrongs the deals were more aggressive they they now had Echo to kind of go out there and push.
Call you and I bought a couple that multipacks tobacco so I think we bought some three packs of. Some of those kinds of things so if you are kind of,
early adopter it helps you kind of get echo in your whole house which was nice.
The spread the deals to the day so instead of having them all at launch and then it won't come through them they they were much more well distributed they open the valve a little bit for 3p and,
then when the dust settled they announced that it was as big as Cyber Monday so they had actually created a day that was kind of into that top 5 kind of a day,
two or three day for them dad and more countries so they expanded it they were in,
nine countries and 15 Inderal and 10 in 16 but I would say they they got more serious about it and we're countries and in 2015 it was probably United say 80% attention was US 20 UK and then like.

[15:18] Almost nothing in other countries and then 16 they realize they could create more of a global push so there's a lot of push special an Indian and then.
Again with the dust settled at Amazon announced that the sales were up over 300% from the previous year so 16 it feels like this really got a lot of traction.
One thing to highlight is the top 10 deals from last year so I think that's kind of interesting as we can look at what,
sold this year something to this quickly so the number one was this air vent cell phone holder,
number two was an Amazon gift card so it's like a $50 card with $5 off which is effectively 10% off anything you want to buy from Amazon some in the ear headphones noise-canceling from pose a USB thumb drive that worked on both USB C and normal us,
Echo was number 5 fire TV stick was number 6 fire 7 tablet was number 7 pressure cooker was number 8 and,
one of those 5-port Chargers was an Amazon Basics 1,
number nine and then one of those power Banks or or a movie like charger but it wasn't the movie was the 10th largest so.
So that was really the the kinda the Highlight there from 2016 feels like they had addressed a lot of the technical issues and in really kind of,
started to get their sea legs on the Steal.

[16:38] Yep and then when it came time to talk about prime this year Amazon made some,
some pretty significant changes to the program so one of the biggest ones is it's no longer Prime day it's Prime dazed.
Because they've extant extended the deals to 30 hours so it actually started the evening of the 10th and ran all the way through the 11th.

[17:04] So you got six more hours they really sort of.
Try to prime the pump and get more people using their Alexa to do shopping and so they actually started offering deals.
Alexa users that were willing to use voice two hours earlier so that started at 4 p.m. eastern time and that was a clever way to to get people to start doing a voice Commerce the.

[17:30] They greatly expanded the the number of deals that greatly expanded the the opportunities for three peas to have deals globally they added China India Mexico.
For the first time they now had so many deals that they had to offer some some filtering so that you could filter deals by category and a little bit by price point so they started giving you some some basic tools to.
Turn call through all the deals and find the ones that you're interested in they had a lot of exclusive deals to the Alexa platform.
And they even had some International deals where you could do some cross-border shipping for some things in some markets.

Scot & Jamie: 
[18:18] Yeah and then so that was kind of lead up and then when the deals went live again we're talking about this year,
I always think it's interesting to kind of see what they highlight on the homepage is kind of like those that is really kind of priority deals that they're launching and I think it helps you read the tea leaves on what's their priority for that Prime day,
so there was the you're obviously echos a really big push so the. Was 34.99 versus 4999 so that's like a,
that's a really low entry point to get into the family at like now at 3499 did is some interesting bundles with the. I saw him bundling it with the whole Sony speaker,
that little Sony speaker only added like $15 so that was interesting,
the main line Echo was 89.99 or his 179 sets half off which is very aggressive and I think I think.
I think it 179 they're probably making a little bit of margin on the hardware I think it 90 they're losing money so they must see you know some some,
data from putting these devices out there there must the razor razor blade thing must be working for them or I don't think they would be selling a,
prices you and I both know did it was funny that they had a really good deal on Oculus where is effectively $100 off of via an Amazon gift card,
another really big seen this year was home automation so they were really pushing folks like yourself and I that have already kind of,
flushed out the The Echoes in the house should really try to do more home automation I took advantage of some of those but so some of the things like the higher-end Philips hue light bulbs kits were rather.

[19:49] Attractive price some of the plug automations I don't do the locks but I saw those were pretty aggressively priced so you can tell that that was a really big scene was was getting people to activate home automation in connection with the echo,
another one that's really interesting I saw was some of these ancillary parts of the Prime mucosa.

[20:09] So they have Prime now which is same-day free 2-hour delivery and paid 1 hour delivery that's in about 45 markets now most of the stuff on Prime now was 25 to 35% off,
plus they had this $10 off coupon that if you hadn't used the service before you could use on your first two orders,
there's a program called Amazon restaurants which competes with Uber Eats.
Push mates in all those kind of food delivery companies and in cities I don't have that where I am but where you are in Chicago they were pushing,
people pretty hard on that Music Unlimited,
Prime Pantry so those programs we've talked about on the show had pretty substantial discounts Prime Pantry with 35% off your first use,
and then a lot of the private labels that was talked about on the show everything from apparel to amazonbasics and whatnot those were very aggressively priced up to 50% off.
So heading into the day internet retailer magazine projected that for 2017 that they would have their first billion-dollar Prime day.
And they were kind of saying it would be about a 20% increase.

[21:20] Zach that's kind of lead up to the day and when it first launched and here we are the day after and now have some early kind of hot take results that we can walk you through,
Jason you want to take a stab at some of those.

[21:31] Yeah so you know.
Amazon has issued some press releases of their own most of the stuff that they give us is sort of a relative number so how things did this year versus last year and then you know there's some third parties that do their own estimates based on surveys and things like that,
so one of the the Amazon.

[21:53] Claims was that they sold 7 times as many Echo devices this year as they did last year so and I would have argued they sold the awful lot of echo devices last year so selling 7X.
Is pretty impressive I think they mentioned that 50 of the top 100 sellers on the platform ran.
Ran promotions and I think you know some of the Animas have said that this probably ended up being about a billion dollar day for them instead of put that in perspective.
A normal Q3 day for Amazon's about 444 million dollars in Revenue so it's a little more than than twice a normal day as a result of of this pig sale.

Scot & Jamie: 
[22:39] Yeah I know that equates to when you start doing the math it's like you know between one and 2% so this you know I think people,
you hear about these things that are like wow this is going to increase Amazon's overall sales 30% or something and certainly for the day it does but in the the overall vast sea of GMB that is Amazon actually.
Doesn't move the needle that much but if they can add 10 20 30 million Prime users into a subscription into a trial period and and like I said at the top of the show 75% stick.
That's huge when because those guys were are now in the ecosystem now they have to come like moving to the next up witches get them you get them loving 2-day Prime shipping and then get them using something else and then Delp Delp stay around forever,
what are the interesting themes you and I have talked about a lot of the last year is Bran's really waking up to the Amazon opportunity and one of the guys we had on this show on episode 73 or the Wall Street analyst Omar Asad,
he had a note out today and in his take away was.
Did there was just this crazy level of participation from softline Brands this is topical because we had a lot of news here lately where we've had Nike coming onto the platform and and whatnot.
So so you kind of rated the different brands and and how they did and.
Let me kind of pursue this in the Brand's he saw take,
Shakira advantage of prime day would I would imagine this is kind of a.

[24:12] We're going have a guest on later that will kind of walk us through how they think about it but you have kind of the foundation is you know you have to have product Prime eligible that's important which means they need to be fbar you can use self Rafael Prime and then.
That's that's the platform then you need to offer deals into the different deal platforms Amazon has been kind of another dial you can turn as a brand of selling 1p,
and even 3p most of these that is we'll talk about her one piece Amazon gives you quite a bit big of the big ad platform so they have AMG which is display ads and Ms which is search ads.
So the highest levels participation in the softlines category coined Omar were awarded to Calvin Klein Hanes Carter's Lee and Wrangler VF Corp Levi's Puma.
I feel like this is a who's who's list of who's gone the show fossil guess and Skechers the ones that kind of underperformed or really didn't,
dissipate are let me see if I can get this right Gap American Eagle Lululemon Vans and and Nike I need to make sense I think.
You a lot of those guys kind of proceed themselves beat up,
so some of them are on the platform very aggressively it all a lot of them view themselves to be kind of a premier or luxury brand a lot of her new the platform like a Nike so Nike just started selling no literally.
Days ago right it's been kind of formalized I don't know if they're late actively selling very much so I think next year will be a year for that so it's interesting his takeaway was this is kind of the year for four Prime day that Brands really woke up and participated in the end of material weigh.

[25:53] Yeah and I then I kind of think you know there's Brands they were very clearly playing defense.

[25:58] And you know they're on their and they're they're they're doing some participation but they're being really careful not to sort of poison.
There other channels and in markets with promotions and then they were brands are playing offense and we're saying like Hey we're going to take advantage of this day when we have huge incremental traffic with my intent and try to sell as much stuff as possible.

[26:21] So the like looking at the official Amazon announcements they said Revenue was up 60% year-over-year.
Which is obviously very good it's not as good as last year which was sort of in the area of 300% up but obviously.
You know now they have a bigger base they said 3p was up more like he wasn't very helpful statistic,
they said that they were a record number of new Prime members tens of millions in a 50% more customers this year than last year,
more folks joined Prime yesterday than any other day in history and the number one product sold was the Amazon Echo.

Scot & Jamie: 
[27:08] Yeah and another one they highlighted a lot is they've gotten they worked with the manufacturer and I can't remember who it is but they made this TV maybe it's the element I believe it is and it's 55 inches and it's Alexa enabled,
and I haven't seen one but I talked to a lady there and it is pretty wild you you can say the whole experience is through,
everything you can do on a remote you can do to the Lexus so they've built this skill and you just going to say Alexa you know go to Channel 5 or Alexa find,
you know the two men then whatever your favorite show is fine Star Trek next Generation or whatever and it will it will do all that stuff,
so that's a relatively new product that was announced earlier this year and they promoted it very heavy another big element of.
Prime Day this year is Nate they ran a lot of TV deals which I took his kind of putting a bit of a bull's-eye on on Best Buy and this TV day,
they hiked it a lot going into they had a lot of them in his to be aggressive and actually sold out in 2 or 3 hours which means at to get this deal really over performed what they are expecting.
They did put out a list of best sellers by country I want kind of take it went to that for once I wanted to just chat about quickly,
pretty much an every country there was a private label offering so if Riggs ample in Mexico the number one seller was an Amazon basic,
Cable in Japan happy but happy belly pure bottled water was a top seller that's a private label brand that they have for cpg there's.

[28:40] What other Canada the double a batteries the Amazon basic double a batteries were a top seller so what what's interesting is,
private label seem to do very well this year I saw him pushing it very hard and in the u.s. deals also is a bunch of accessories so whenever someone buys that TV I'm sure then you get on Amazon basic HDMI cable,
I'm so that was interesting to see a lot of private label push they didn't put any other stats out on that the other stat that was interesting is they said,
stop base which means you're using the Amazon app on on your smartphone those orders doubled so if the whole day,
orders grew 60% and does effectively doubled between hundred percent they really over indexed which means desktop Ryland group.

[29:23] Percentage when you're 30% Amazon does a lot of things where you can always see the deals and track them you know that the app experience is truly better than the desktop experience they said they sold 3.5 million toys again,
it's a nursing number but I have does a lot of reference.

[29:41] Another one that's kind of interesting is this this voice Commerce so they're so aggressive with the Alexa deals and pushing those early,
I looked at them they're pretty good too had a 3D printer on there that was normally $600 for like 250 or something like that and,
that's some really interesting deals on there they had Greenies that were more than half off there's a PR firm kind of pushing stats that say,
before Prime day 19% people had purchased using voice in a 33% additional intend to if we kind of when the dust settles on Prime day I think we're going to see.
You know 30 to 50% of folks,
either having use that for Prime day or will it with their new Echoes they will be ordering something online so so that's pretty interesting Callen came out the survey also right before Prime day that said,
they believe 13% of us households have echoes,
and you know if if it's since we have this Echo. As the top seller and eyemagine the normal Echo was up there these TVs it's going to nursing you know I think,
by the end of this year with holiday and Prime day maybe we start to see 20% of households,
that's pretty interesting because you know Amazon is on their lap of this thing and and the rest of competition is really kind of stuck on the starting blocks.

[31:01] Yeah absolutely that that's one where it felt like they came in the prime day with a commanding lead and then for that to be the the biggest seller and 7 times more than last year,
they're absolutely lapping the field in terms of a penetration there so if they can turn your point they probably did make a bunch of money on any of those devices so the magic question is going to be vacant.
They can turn that into customer value over time.

Scot & Jamie: 
[31:26] Yes sir so let's wrap up this segment with kind of what what were your your big takeaways from Prime Day this year.

[31:34] Yeah what's it looking at the day in aggregate I definitely feel it was a big win for the 3p sellers there we saw a lot more 3p sellers participating,
there as a result doing a lot more deals in a lot of the Amazon advertising Vehicles which can be very effective.
In addition to making some nice revenue for Amazon where vailable the three-piece hours for the first time so so definitely.
A win on the 3-piece side of the fence.
On the one piece out of the fence why we don't have real data I strongly suspect that by far the biggest win we're first-party Amazon products and so that's.
You know certainly that the echo family that we've talked about but also the Kindles and all the new private label stuff.

[32:24] That they're starting to push and that really leaves me too.
To my biggest takeaway from this whole thing which is to me the big winner and Prime day is the Amazon Echo System way more so than sales like almost everything we've discussed up till now.
Was Amazon using prime day as a tool.
To get people more addicted to the rest of Amazon so using more of their services discovering more of their services.
And you know getting more value for that Prime membership and just making Amazon more sticky and increasing the customer lifetime value of all those Prime members and you know wow.
I think that's in stark contrast to singles day.
Which is really just a day to buy stuff like we really haven't seen Ali Baba turn singles day into this powerful flywheel for Ollie Baba.
For the rest of the year like you know maybe they that use singles day a little bit to get new international brands on the platform but it really is.

[33:28] Kind of a one-day Wonder for Alibaba and to me the Amazon approach is almost the exact opposite it's way less about you know Dublin sales that one day and way more about.

[33:40] Making Amazon much stickier and making it in a much more difficult for consumers to choose to buy stuff.

[33:47] Elsewhere after they get addicted to all the stuff that they were encouraged to try for the first time on on Friday so in that way I think.

[33:55] Prime days a home run for Amazon in this year only sort of the extended that when I will say you know they're still things that aren't perfect as a result of having way more deals.

[34:07] You need to give users way better way to filter those deals and find the deals that are relevant to them and you know while they added some super rudimentary tools in the mobile app.

[34:17] I would I would say they were very deficient and so I like to say that they had a signal-to-noise problem this year that it was probably harder than ever before for consumers to find the deals.

[34:28] That would have gotten them excited and so I suspect that something will see Amazon work on and in years to come I mean you and I used to joke about.

[34:37] You know there being no search in the in the Echo skills go to store and in that same way like you know there's actually is no search.

[34:44] For for Prime Day deals for example you know I'm curious I think it depended a lot on category but in a lot of these categories.

[34:54] I'm not sure that the prime Day deals are necessarily the best deals of the year.

[34:59] So it's a promotional day but but not necessarily A deeply promotional day for everything you know I do chuckle.

[35:08] The reason Amazon doesn't give you any hard numbers for for any of these things are obviously they don't want to but they don't have to because this whole day is not financially material to them right in so you know what ones are reminder.
Yeah they do no more than double sales from 450 billion to 2 a billion but that's still not a meaningful.

[35:31] Bump in the in the overall Amazon Echo System so while they brag about the day a lot it's really not about that that.

[35:40] Financial stuff and then I guess my last.

[35:43] Big takeaway is that by far the biggest winner of all is the the echo echo system or the echo platform.

[35:53] Is a quickly lead to hit mute on on my device in the room.

Scot & Jamie: 
[36:00] 8 devices in your house just woke up.

[36:02] Exact side note for people that haven't listened to all the previous episode shame on you but my sister-in-law is actually named Alexis so all the devices in my house have to answer to Echo not to Alexa.
But I do think.
There there is a a holy war going on to win that that end home intelligent agent every other retailer in in the world has huge reasons to root for anyone but Amazon winning it.
And you know we we in our CES recap this year we talked about all the products at CES that had Amazon built into him you know they certainly have the Lions.
Market share and then they're the only one that have a huge promotional event like this so it just it feels like.
Despite the fact that you know a lot of people have a lot of reasons for to not see Amazon win in this category it's getting hard to imagine anyone anyone really catching them at this point.

Scot & Jamie: 
[37:01] Yeah I think voice Converses the big wind and.
Not only is it just the device lead that they have but Google is stuck in this weird place where,
yeah because they don't control a consumer experience for ordering anything with with exception of Google Express,
you know it's this really it's hard to build that so if you say to Google Voice you know order me an air filter for my house they've got some Partnerships with eBay and that kind of thing and but you know,
what are they going to do like shop that order out to Home Depot and Lowe's are you going to have to go and set a preference for everything you want to do it.

[37:39] Is that becomes an important part of this this home assistant,
it's kind of game over for Amazon and then you know let's say Google does go solved that how are they going to monetize it their whole business is Mata,
monetized off ads and you know a lot of the Google things the music and all has all these ads in it and it's like a really terrible user experience compared to that,
now more more people are coming out with these assistance to Apple's it hasn't hit the market yet but they're already announced one Samsung has one coming out in Alibaba analyst 1,
forgiveness cost at T Mall in the name so you everyone's working hard to catch up but I think Amazon has this inherent kind of.

[38:18] Advantage not only with the device penetration but with the use case of ordering stuff now you know you could argue home automation is a lot more level playing around,
but again if they can get to 20% kind of out there and US households and it's clear from the deals that are running they want you to do more home automation they're already kind of got a commanding lead and and again if that kind of starts to become your standard and you start to use that,
ecosystem are locked into it it's going to be heavy sliding for these other guys trying to compete,
voice Commerce is kind of really interesting one to watch this year I mentioned the brand thing earlier,
and I'll refute one of your points a little bit you kind of talked about it not being in material sales day and I agree but it is financially material because of the Prime Subs so if they get 20 million Prime subscribers the average Prime users.
Spends about $1,200 to make math easy let's say they spend $1,000 a year,
well on the day it's not a significant impact that's a 20 billion dollar add to the Top Line and that's like it oh that's like Walmart's entire online business.
Doing the math right so so there is a long-term Financial impact by those Prime subscribers and then,
the more they can keep them and you let say the number is 85 million if they don't want to turn in those folks so if they can get you to use another spoke on that benefit and lock you in even longer again it's kind,
but huge win and it keeps you from going to other retailers.

[39:46] For sure and and I guess I meant to sort of lump the Prime Membership into that.
Thing one of the powerful drivers in that ecosystem versus talking about the revenue.

[39:57] I would make just one other point that you so reminded me of on the how commanding this this voice, sweet is and how problematic it is.

[40:08] You know.
More more products are going to be built with voice in them and if all the manufacturers have to build Alexa and because that's the strong consumer preference think would that means to every other retailer like you can go buy a bunch of Samsung refrigerators in Best Buy right now,
and those refrigerators I'll have Alexa in them and so guess who's shopping list,
when you are you're using with that product you bought from Best Buy is enabling you to shop at Amazon right and you know it's not exactly Apples to Apples but Walmart selling a bunch of Samsung phones that have the Amazon app in bedded in it and so you know you can tell how commanding this Echo System advantages when your competitors are forced to sell products that are,
that are sort of gateways to your echo system.

Scot & Jamie: 
[40:54] Yeah yeah one other aspect of it we talked about it a little bit on the show but I want to kind of bring it up again,
as I mentioned the report on Brands and one of the levers brands have to pull is,
the advertising so so I'm pretty convinced I'm hearing more and more when I talk to brands that they are spending more and more ad dollars on Amazon and there's two platforms and so folks are interested in. We had,
we had Melissa Burdick and Andrea on and they talk a lot about these platforms we don't have time to go into it today,
but I'm convinced this is going to be not the next billion-dollar business for Amazon but it could be 30 or 40 could be the next.

[41:38] Cloud computing for Amazon because bran just can't get enough of these ad dollars into efficacy is super high we see a lot of people moving money out of,
Facebooking Google into Amazon's add platforms and this day another win for this day was getting all these Brands to activate and get into those things you know,
I ate when the if we could speak inside the Amazon curtain I think maybe the biggest Chunk on margin probably came from Those ads would be interesting and then,
the huge long-term win is now they got a Brands kind of activated on those platforms AMG and Anna's I think that is is a huge huge.
10 20 30 billion dollar opportunity forum.

[42:21] Yeah I totally agree.

Scot & Jamie: 
[42:23] Well that's our view of what we saw for Amazon Prime day but we wanted to bring in a live first-party and third-party seller to understand what they saw from the frontlines of this exciting e-commerce holiday.
Jason join me in welcoming back to the Jason Scott show Jamie Dooley.
As a refresher for everyone Jamie is the head of e-commerce a dorel juvenile group we did a full episode with Jamie and one of his colleagues and that is episode 86 so,
hi if you want to learn more about what they're up to as regards Amazon listen to that episode and tonight we're really here to get a fresh hot take about,
Amazon Prime Day Jamie welcome back to the show xcaret.

[43:09] Hey Jamie thanks very much for doing this we totally appreciate it so obviously the the biggest and most important question how were your Prime Day sales.

Scot & Jamie: 
[43:20] They were very strong so it to remind everyone wear a hybrid so we we sell both.

[43:27] Directly to Amazon as 1T and we're a Marketplace seller or three-piece all as well.

[43:33] The data for Marketplace sales comes their way real time so we know that we had.
Fantastic day on over the third over the course of 30 hours.
As a Marketplace our sales were up 600% year-over-year and it was the second biggest day we've ever had on the market place II only Cyber Monday last.

[43:56] So it was it was certainly a very very good day for us on the market side on the one piece side that the data takes usually at least two days to get to work.
And we're recording it's now only day after Prime day so we're still waiting for the final sales data to come but as far as we've we've seen we had a record-setting day.
On Prime day again for even the one piece eyewear.
Almost 100% of our lighting deals fold-out many of them in the first 30 minutes and then where is subscriber to one quick retail and they were able to give us.
Intraday reads as well as a final estimation of what our sales were no looks like we beat all of our forecast.

[44:41] Well congratulations.

Scot & Jamie: 
[44:45] Yes 600% is amazing because Amazon announced they were up 60% so you over indexed by a factor of 10 which is which is pretty awesome set that leads me to ask you mention Lightning Deals,
and you know this is.
Did you guys participate in 15 where are was second last year so then been doing it for 3 years was last year when you really get serious about it or we actually was 15 kind of when you started.

[45:11] I'd say we we really got serious about it last year.
But this year we we we took it to another level as well.

[45:26] So what what were some of the things that work well for you I know a lot of of both 1p and 3p people that are using what I would call different platform so different deal that they,
they got a different deal for mats that I hadn't been in before also more people are in other parts that you go system like maybe Alexa deals Prime now,
Pantry that there's kind of a wide range of things what were some of the platforms you guys utilize this year to get such a great result.

[45:56] Sure sure to remind everybody we're baby Products company so we sell strollers and car seats and Hardline items that really aren't.
They don't play very well into a pantry or even to Echo there they require a lot of a lot of kind of stuff a lot of.
Merchandising online and there is there's a lot of there's a lot of consideration that's required but what we we use the combination of of a mass and.
We had a number of Lightning Deals as well as what it called Chianti's or or Prime member promotions that were on the.
On the Friday deal page when when the customer.
Navigated there and then we had aggressive pricing on on our everyday items as well I'd say on the one piece side we had a very good combination of.
Traditional TNT's and Lightning Deals as well in in combination with.
Advertising that we we we bought through Amazon as well as using social media and other external traffic drivers to drive even more traffic back to those promotions on Amazon.

[47:08] This great Jimmy a couple of follow-ups was that would you say it was a pretty similar promotional strategy to your 2016 so like when you look at that 600% comp is that mostly because.
Prime day was more successful for three peas or.

[47:26] Or because you know you also got got more sophisticated in your in your marketing.

Scot & Jamie: 
[47:33] I think we on the marketplace side if I had to say what what drove the 600% year-over-year growth.
Definitely one part was we have more items overpriced and obviously that that's that's really the name of the game on Prime day so that that certainly helped.
We did you ever tizing much more aggressively this year and.
On the marketplace side there were a lot more opportunities for 3-piece hours to to take part and Prime day so for one example to work really well for us with headline,
search ads were available to Mark play for this year they weren't last year it's actually I think it's still in beta right now we were fortunate to be part of the beta program.
We we watch that drive to some good sales growth.
And I think we that come in combination with just many more items aggressively priced and and Prime dad's I think that that was the key to success of the marketplace.

[48:34] Got it and that that seems consistent with the general Trend that we've heard and talked about for this year that.
Prime prime day was just much more accessible the two three piece sales so the fact that you're you were able to get many more products badge than you had a bigger palette of marketing tactics available to you that that all makes perfect sense that you'd blow it up with with 3p,
that might imply that while I'm sure your 1p will be way up this year it may not be proportionately up as high as three peas that is that a affair guess.

Scot & Jamie: 
[49:08] I think so yeah we are we have obviously had a much bigger base of sales to the cop from last year's Prime day.

[49:17] So yeah we're not going to say I would expect us not to see 600% your growth if we do then I expect to be a CEO somewhere next year.
Even if we even if we see no 104 just under 100% urea go that's going to be a huge win for us.

[49:35] The promise if you do 600% 1p growth this year your current CEO is going to take credit.

Scot & Jamie: 
[49:43] That's good.

[49:46] Totally fair a related question in your category or or specifically do you like how aggressive do you have to get on promotions are we I mean are we talking like.
20% 10% 30% like is it is there a is it similar to other promotions you do through the year do you have to get more aggressive what's the general.
Promotional philosophy.

Scot & Jamie: 
[50:09] It's it's.
It's not great it's it depends depends on the category and then it depends on the level of competition so in general what I saw in a lot of categories was,
it only took 20 20 to 30% discounts to do some significant damage one of our biggest competitors.
Most of their deals were running at about 20 to 25% off and I know they did I'm pretty sure they did extremely well most of our promotions hovered around the the 20 to 30% range and we sold out of our inventory for,
lighting deals in in sickness and in a very quick amount of time.
My takes away from this Prime day and it builds on last year as well as that you don't need to.
To be at 70% off I need a robot aggressive deals out there that call them loss leaders or attention getters.
We found we had some of those too but in general we focus on profitability too and we didn't feel like we needed to.

[51:16] Start a race to the bottom in our categories and I feel like.
In general what we saw across our categories and other categories was the same you didn't see every deal required to be 60% or more.

[51:30] That definitely mirrors with what I sort of informally saw it felt like people were a little conservative with deals in their core products and maybe a little more aggressive with with some of the the West core products if you will.

Scot & Jamie: 
[51:46] I think we saw that and some of the day that one quick retail gave us too so we know that Amazon sales were up 60% but there was a 114%.
Lifting promo count according to down so you thought many more deals but I did was there they weren't quite as aggressive and then I've seen reports.
I'm all over the media where they're saying conversion rate was actually down for Prime day so I'm curious to see if that's at validated but that would all imply that.
Progressive deals potentially across the board but not deeper so.
What will then you and I are were chatting about is one of the interesting things is on on some of the non lightning deal deals you know they utilize that feature we had to add it to cart to see the price,
why do you think that is what's going on there so I know that I've talked about this.
I felt like that was sort of like burying the we we had and we had an item that was priced $50 off and the customer really had a,
went and searched to see that they were getting a 30% discount on one of our top items and that was really consistent with with,
with a lot more deals at work and keys throughout the deal.

[53:11] My opinion is that it allowed them to prevent Walmart and other competitors from price matching them as easily.
I know that said you know what this Amazon ever going to come out and say that they're only really too big categories of a promotions that you can have to get onto the prime.
Hyundai page deals of the day does he the Lightning Deals are pmt's and Amazon official word to us.
Can keys are designed to allow you to be on that page with slightly less aggressive discounts so that would be widened Art discount,
pricing is a set-up but I do think it helps avoid price-matching and we saw that in our category there was just a lot less price matching from Amazon's top competitors,
on our deal because they were they were pmt's and they were harder to describe.

[54:07] But I guess one of the ironies there and tell me if it's different in your category but you know they sort of hurt the customer experience a little bit by bearing a lot of the deals in the,
the carts to avoid letting our competitors price match but it kind of felt like most of their competitors unlike last year sort of sat out this year so it almost seemed like,
like they had no intention of sort of aggressively.
Trying to ride on the prime Day coattails this year at least I didn't see big indications of that did you.

Scot & Jamie: 
[54:41] No I didn't either so I I was actually that was one of my surprising observations would this last year.
Competitors like Walmart even,
they took a shot anyway I didn't see that I saw most of most of Amazon's direct competitors almost in feet,
day in the week to Diamond maybe they'll plan something for later in July but any Amazon on that day and they only.

[55:09] Yeah I think eBay obviously did some like pretty serious National advertising that was sort of counter Prime programming and let you know they did a special deal with the Google home but the,
you're right that the sort of traditional omni-channel retailers Walmart Target like really didn't see any indication that they were trying to make any head of the day.

Scot & Jamie: 
[55:31] Amazon credited manufactured this Holiday Inn is they've done a great job with us.

[55:38] Absolutely any promotions you saw from others that really surprised you.

Scot & Jamie: 
[55:44] Well I think one of the ones that I was surprised didn't happen as it was it was also not just Prime day with national blueberry.
Muffin day and there were no blueberry muffin promotion so that was that was my biggest surprise I couldn't find any promotions to get me a cheaper blueberry muffin delivered.
But I think the some of the ones that I thought we were actually our kind of our we talked about the last.
Discounted just kind of product but it seems like in our category somewhere I competitors took some really big shots with with some deep discounts.
One of our biggest competitor to deal with a day which they have some fairly aggressive discontent what was interesting was that they had some new merchandising that we've never seen before.
With the car completely custom land and gauges on mobile and desktop that they were very interesting so it looks like they spent on a significant amount of money to make that happen and it'll be interesting to see whether.
What are the sales actually paid off for those.

[56:47] Interesting I definitely agree with you I think there's a huge mess on the blueberry muffins I myself actually missed Prime day because I was spending all day at the Muffin Shop.

Scot & Jamie: 
[56:59] The morning was completely shot.
How many muffins in the morning your teeth were blue all day.

[57:10] Cool Jamie really appreciate you coming on and you know we record this show late at night cuz we both have,
allegedly have day job so I appreciate you taking time one last question so based on what you know and I know it's early what,
what did Vice would you give to both Brands 1 p.m. 3 payout there for next year.

[57:34] The things I say were one plan it out as early as you possibly can.
Some of the some of the issues we saw this year had to do with just operations and Terriers not being able to pick our ship and saw.

[57:48] To deliver them to Amazon DC's or two-and-a-half 3 weeks out from Prime day so.
In retrospect next year I'd advise our is get your product into Amazon DC's as early as you can.

[58:04] And I think just in general planning in advance probably needs to start in Q4 or earlier for the next prime day is depending on the items that you want to promote.
I'm already in existence today I already have sales history today already have product reviews if they don't you need to build all that up before Amazon even going to consider them for a major deal and then even want you to get those approved.

[58:31] They're going to need it before casted in depending on whether you're Lee X or.
Your 90 days or 120 days or six months to have them into fakturert and shipped here you're talking about potentially you're 9 months in advance that you need to start thinking about your promotional strategy for.
Prime day so far in advance based on your company's Lee X is number 1 number 2 is is expected the things are going to go wrong.

[58:59] We did a lot of contingency planning with what we.

[59:03] Is it going to go on call of a dead and we had a whole team of of of of e-commerce professionals from is to Ops 2 merchandising and sales all.

[59:14] Call pretty much working off and on The Whole30 hours and you'll eat we did have a lot of things go wrong on our end and it on Amazon so I think having a good contingency plan is is it real.

[59:28] Yeah I think.

[59:30] Third is just making sure that you know your competition and and having a good understanding of what's going to go on with pricing I think a lot of the deals we've heard.
Other sellers just they lose they lose out on the light and gillikins cancelled a few days prior to.
Prime day that's a very common thing and we were fortunate not to have that happen so the more that you can understand your your channel strategy and they make sure that the pricing that you have set up for for Prime day is going to hold out for the day that's.

[1:00:06] Wow what Jamie that is terrific advice,
and that is going to be a great place for us to land because it has happened again Wii U,
used up all our allotted time so certainly like to remind listeners that if you enjoyed this episode we love to continue the dialogue on our Facebook page and if you really enjoy the episode we'd sure appreciate a review on iTunes.

[1:00:31] So until next time happy commercing!

Jul 12, 2017

EP092 - Artificial Intelligence Deep Dive


"We're in the middle of an obvious disruption right now: machine learning and artificial intelligence. It is a renaissance, it is a golden age. We are solving problems that were in the realm of science fiction for the last several decades." - Jeff Bezos

This episode is a deep dive into all the use-cases for Artificial Intelligence and machine learning in retail.

Insight Generation

  • Analytics - Google Automated Insights
  • Multi-Variable Regression Testing (Correlation) 
  • Targeting - Best Audience / Next Best $
  • Social Listening / Sentiment
  • Campaign Attribution / ROI

Business Acceleration

  • Inventory Management/Forecasting
  • Merchandise Compliance
  • Checkout - such as Amazon Go
  • Product Design - such as Stichfix
  • Tagging/Unstructured Data
  • Fraud
  • Price/Promotion Optimization
  • Logistic Optimization
  • Drone Delivery

Customer Engagement

  • Natural Language Assistants
  • Virtual Agents
  • Guided Selling
  • Visual Search
  • Search
  • Recommendations 
  • Fitment/Return Avoidance
  • Personalization
  • Loyalty/Retention

AI Vendors Discussed


    1. IBM Bluemix Watson 
    2. Google Cloud Platform 
    3. Microsoft Azure
    4. Amazon AWS  -  including DSSTNE (pronounced “destiny”), the Amazon recommendation engine

Retail Specific Vendors:

  1. Twiggle - Search
  2. - Visual Search/ Personalization/ Recommendations
  3. - Visual Search / Video
  4. Simbe Robotics - “tally” Robot / Shelf Audit / Inventory
  5. Focal Systems - Computer Vision / Inventory
  6. Luminoso -  Analytics

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

Episode 92 of the Jason & Scot show was recorded on Monday July 10, 2017.

New beta feature - Google Automated Transcription of the show:

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.


[0:25] Welcome to the Jason and Scott show this is episode 92 being recorded on Monday July 10th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:40] Hey Jason happy Prime day Eve.

[0:44] Happy Prime day Eve to you Scott.

[0:47] You were recording here on July 10th Prime deals have launched the Alexa deals exclusives came out days ago I think I don't like 5 days ago and then now here at 9 to watch somebody else it's pretty exciting.

[1:00] Yeah if you made a bunch of purchases yet.

[1:03] Hi man I'm kind of just kind of keeping you in Iowa.
One of the things I suffer from that I think I have is already have a fair number of Amazon devices so does seem to be the most discounted items and unfortunately already have a pretty full dance card there.

[1:19] Yep I'm in the same boat it feels like there's a lot of deals but it's slightly tricky to identify the deals that would be personally interesting to you like as as is a problem with Amazon in many other areas Discovery is not their strength.

[1:34] Yeah did see some pretty nursing with Deco and sipping pretty dramatically off younis I've seen some 30 40 50 per cent off so it's pretty pretty good.

[1:43] Yeah if you haven't invested in the hardware this is definitely the right time to buy the hardware and other way to extend till I Kindles and stuff too so the lot of interesting things you can do with Kindle tablets,
you can Jailbreak come and put other operating systems and stuff on them so I know a lot of people that use prime day as an opportunity to stock up on Hardware.

[2:02] This is our first show in July we took a little bit of a vacation there how was your fourth of July.

[2:09] It was great my mom was in town got to spend some time with her grandson and so we had a good time everyone in my family enjoys the 4th of July except MacGyver who definitely does not enjoy the 4th of July or a dog.

[2:22] I got to get my ThunderShirt.

[2:23] We've escalated from the Thundershirt to Pharmaceuticals.

[2:28] Quaaludes.

[2:33] Yeah I don't think he's getting quite as strong enough jokes to appreciate it but at least it's helping him take the edge off.

[2:38] And then I guess you're stuck around Chicago then.

[2:43] We did.

[2:46] Dumb like mine anything else one of the nice things about Chicago being so flat is all the windows in my home face West and so from any room in our house you can actually see like for commercial firework shows in parallel.

[3:01] Yeah I see you have to go nowhere to enjoy the fireworks.

[3:06] Courtney retail trips to 247 in the gun down to see the Amazon bookstore there in Chicago.

[3:13] Been to the Amazon bookstore a few times and I think we've talked about my visit there I have not been to any.
Super exciting new retail I was in the Bay Area since our last show and I've talked about the beta store before in Seattle that the original beta store was in Palo Alto so I got a chance to visit that and it was.

[3:37] In a frankly pretty similar to the the Seattle one and I did finally get to visit a.
Up in San Francisco I'm a little shame that's been been so so long but I finally got to visit a next generation Apple Store.

[3:51] What was that all about.

[3:53] Well it's been pretty widely covered in the Press like these are the stores that have like the expert Grove and they have a lot of the organic elements and have a big video wall these are like the the Angela Earnhardt.
Next generation Apple stores in you know I think they are improvements.
I don't know that they make a big deal of difference in Amazon's business model like seems like they have the same voluminous number of people and employees as.
The traditional Apple Store so I'll be curious if they ever came out and said like but the it's a much more expensive store to build I'd be curious if they feel like they like their.
Never better return.

[4:39] Got it cool sounds like you had a good time where you able to see any good movies.

[4:45] I am no I did not were woefully behind on movie so Wonder Woman's at the top of the list of ones I haven't seen I feel like being a parent of a toddler is very detrimental to my movie-watching.

[4:58] Absolute you're way behind on your movie-going.

[5:01] I am I am I'm jealous of you and your ear like premieres like you can take your kids to the premier's.

[5:09] Yep you have already seen Spider-Man Despicable Me 3 caught up.

[5:14] Is a lot of talk about how the Spider-Mans are are much worse than the last generation is that your take.

[5:22] I like I like this one in the Tobey Maguire I didn't like the one in the middle so I guess I'm counter Spidey.

[5:30] Got you yeah so there's some there's some like critical videos that have gained traction on the internet that compare the Tobey Maguire ones to these current ones and they there they come down pretty hard on the current ones.

[5:47] Yep.

[5:49] Cool solicitors we've been doing a lot of interviews lately and it's time to mix it up and we're going bring back one of our most popular segments.

[6:13] Deep dive this week we're going to do a deep dive into all things artificial intelligence and how it may impact Commerce.

[6:23] This year's annual letter to shareholders Jeff Bezos talked a lot about Ai and machine learning so here's a little segment from that.
These pictures are not that hard to spot they get talked and written about a lot but they can be a strangely hard for large organisations to embrace we're in the middle of an obvious one right now machine learning in artificial intelligence.
It's a Renaissance a golden age Bezos said we're solving problems with machine learning in AI that were in the realm of Science Fiction for the last several decades.
So I also remember when Bezos kind of dropped in one of those interviews earlier in the year that they had a thousand people working on machine learning so.
Jason this one is squarely in your real house so I'm going to kind of take back burner here in simply interview you for for the audience so once you kick it off and give us your definition.
Of a i and she running a lot of people using these all over the place so it's want to hear your your kind of foundational of you of of how we should think about these things.

[7:18] I do think the definitions are all over the place in that that creates a lot of confusion there sort of the,
a technical Definition of artificial intelligence which is not what anyone in our industry means when they talk about artificial intelligence cuz they like.
Real artificial intelligences was called artificial general intelligence or a GI that's the whole notion of a,
computer being able to do all the tasks that a human can and being like you know technology being indistinguishable from a human being and so,
nothing that we're talking about is anything approaching that and there's certainly like that technology is not in the near Horizon for us that's.
You know at least 10 plus years out and their lot of people that.
Smarter people to me that argue about if and when it'll ever happen and if it did you know you could have any get to that.
That Singularity that Ray Kurzweil likes to talk about.

[8:14] So most of the time in our industry one they're talking about with the Ruby talking about is applied AI or what the scientist sometimes call Nero AI or weak Ai and what they mean by that is.
The Machine's ability to do one specific thing as well as a human being can.
And so you know a classic example of of Nero AI is Siri.
Being able to do a very specific set of tasks like a human can in this.
Highlights the real problem with the definition of a eye is unless you also Define the set of tasks you're talking about.

[8:55] You can't really understand what someone means when they're when they're talking about applied AR right so if.

[9:03] I said like in the 1970s that hey we just invented a computer program that can play chess right like the.
Back then the the the Nero task was the ability to follow the rules of chest it wasn't necessarily good at chess and couldn't beat a good chess player but just being able to play chess was a very classic definition of AI in the 1970s.
Today for for any of us to really think of Chess as AI you have to be talking about a chess program that can beat a Grandmaster.
Right and so the the task that you're talking about change dramatically from just playing chess to playing Chessa to Grandmaster level.
And so it it's kind of interesting the AI is always shifting when when you know recommendation engines for e-commerce first came out,
that was state-of-the-art AI you know when folks like Netflix and Amazon first launched those features,
that that was the The Pinnacle of AI you know today you know you've got a dozen vendors you can pick to plug into your website to do basic product recommendations and most of us don't think of those as.
A a current example of a I-44 example so,
the definitions are constantly shifting and then we have this problem of their these three terms that get used kind of interchangeably in our industry there's,
artificial intelligence which is what we've been saying so far there's a related discipline called machine learning that gets used interchangeably with artificial intelligence a lot and then there is this third term.

[10:35] Cognitive Computing and the there are specific definitions of each of those but when you know in the in the world of,
e-commerce and vendors they're all using this using them and using them interchangeably I'm in so it makes it really hard to,
know what folks are are even talking about.

[10:55] So that's helpful I think the thing that the listeners price struggle with is how much is reality and how much is hype so for example when we were at shoptalk if just a couple months ago really,
every vendor there for so there's this explosion of new vendors so if we had a fair number of vendors are in history and now there's no.
Really a doubling or tripling and it seems like every one of the vendors is a redo of an existing vendor but with a machine like machine learning a I kind of an angle so now there's on site search.
Adword bidding machines product recommendations upsell engines email optimizations that.

[11:36] Brazilians of these kinds of things if I'm a retailer.
Should part of my 2017 strategy be to just go and figure out all the vendors I have today and find a machine learning version of them and if that's not the answer then where.
Where can someone have the biggest impact for for listeners that are out there with us technology.

[11:55] That's a great question Scot we should do a podcast about that.

[11:59] We're right in the middle of the chest.

[12:00] Oh geez alright well I'm going to start while I come up with an answer but,
in in all seriousness your hypothetical is I would send it as exactly what you shouldn't do you know there's no reason to just go look for versions of all your turn to experiences,
never provided by a vendor that's bolted one of the AI words onto their service because that,
that word doesn't make that service any better or worse than it was before and totally agree with you you know vendors are both in these things on right or left like we.
You know there's some folks that I be in that take it really seriously but it's fun to poke fun at them,
they have this technology or they would call cognitive Computing technology that they branded Watson and some days it feels like they've just added Watson to the front of every product that IBM sells.

[12:51] And so you know the is that a better version than the last version because it has the word Watson in front of it but well.
Not necessarily should you pay more money for it because it has the word Watson in front of it like I certainly not.
I was looking at the vendor list from irce there's 22 vendors that have bolted a Ion 2.
You know their existing product and I'm getting these like calls everyday from vendors saying hey I know you weren't interested on probably before but we pivoted and we're now in a I you know so and so and we would love some of your time to talk about how we should take.
Take our product to all your clients and.
You know you sort of implied in the question that's a bad strategy nothing's going to be better by just buying an AI version of it.
Going back to our friend and number one listened or Jeff Bezos.
She talked about machine learning as a sort of a horizontal layer right like so it's not a in point it's a it's a technology that enables,
new kinds of experiences and he has this pretty simple definite definition that I like to use he says,
like over the past decades computers have broadly automated tasks the programmers could describe with clear rules and Ayala grissom's in what modern machine learning does,
is allow us to do the same for tasks where describing the rules is much harder right so,
playing chess is a relatively defined set of rules and you could write a computer program that follow those rules but what machine learning let you do is.

[14:30] Make a program that can play chess really well even though the programmer themselves might not be able to write a set of best practices for actually playing chess,
and so what what we're really looking for our specific use cases in Commerce,
that are made possible or made dramatically better by adding this horizontal layer by adding this ability to,
to do fuzzy stuff that was hard to write rules for in the past,
and so what I would say rather than looking for labels like you ought to be thinking about specific use cases,
that are made much better or an able for the first time by underlying Technologies and decide whether any of those use cases are particular helpful for you.

[15:20] So that's helpful what what are some.
Where some examples of where retailers can use this technology in and maybe give folks a little bit of framework for helping him think about this so that they can kind of formulate a plan and figure out how to start sampling some of these things.

[15:36] So so what's do exactly that was jump into some specifics and I I like to,
kind of divide the experiences into three buckets the first bucket I called the insides generation bucket and that's all of the sort of,
analytics data processing type things you can do and I'll go into some examples in just a second the second buzz bucket is what I've called business acceleration it's,
saving time or money or reducing complexity from from various business processes.
In the third bucket is customer engagement it's it's new customer experiences that you couldn't do before the customers appreciate and make you a better Merchant ER or a better solution for those customers.
So let's they're talking about some of the the specific Commerce use cases that might fit in each one of those buck.

[16:32] So the first one I like to talk about in the insights bucket is.
Basic web analytics so we've had web analytics for a long time and you know they don't come with key and reports and dashboards and you can make your own custom reports but all of the traditional Analytics.
Require you knowing the smart question to ask and then the the analytics engine being able to show you go find the answer to that question you asked.

[17:03] And so you again you could you could put into find rules for what was in that dashboard and what wasn't.
What machine learning let you do two analytics is find insights that you weren't smart enough to ask the question for.
And so this is already being built into a lot of the traditional analytics product so there is now a beta feature in Google Analytics.
Call Google automated insights and essentially instead of you having to define a segment and ask a smart question like.
How do mobile users convert versus desktop users or how do first-time visitors convert versus repeat visitors or things like that.

[17:43] Google will use machine learning to evaluate all your data,
and suggest segments that that are particularly interesting or highlight some unique opportunities for you so it's.
The the analytics engine becoming smart enough to ask the smart questions that we aren't smart enough to ask.

[18:06] For the first time and that's an example to me if something is pretty exciting in the machine learning space that makes Commerce operators much better.

[18:17] So another one that you and I were talking about earlier is this notion of discovering correlations outside of web analytics right so there's there's a lot of.
Behavior is in Commerce that that have have.

[18:35] Correlations or there's urban legends that that supposably things correlate that might affect how you run your business so I sort of the the,
the famous example in e-commerce is weather and you know that type of product you should offer when it's raining versus Sonny and of course all retailers complain about whatever the weather is in playing that that was the reason that their sales were off.
And so it's interesting to know what the correlation the real correlation between weather and sales are the famous not obvious correlation that turns out to be Urban myth is,
the beer sales correlate very closely to diaper sales.
And you go will guys would have those two have in common and it's it's in theory it was that the the dad got sent to the store to get get a new box of diapers and he also of course grabbed a six pack of beer.

[19:27] And you mentioned you were using some interesting correlation tools at spiffy.

[19:34] Yes yes sir.
My latest company does On Demand Car Wash and detailing and you note small companies still getting off the ground essentially and.
So one of our folks was playing around with the Amazon machine learning and the,
play the story really is that some of the stuff feels like you have to be a multibillion-dollar company to play with it but we found the Amazon stuff is really approachable we'll put on Lincoln the show notes to took on this model that we used in essentially what you do is you can upload a.
Transactional database withing about a really long spreadsheet.
Spreadsheet with bunch of transactional data on every row you can put in there what you know about that transaction so obvious things like they OV the skew that kind of stuff in our world of car washing we know the vehicle.
We know the location the zip code and some those kinds of things so you know what it's spit out with those really interesting and we also know the weather so.
We were just doing this to really kind of.

[20:32] Play around with the weather part of it but it was interesting as it said your inversely correlated to the weather which is the first inside it offered which was too obvious when we were looking for so when it's raining no one wants their car washed,
but then the next thing it did and it said your model customer drives an American SUV probably Yukon and.

[20:51] These are the top three zip codes that are correlated to your sales in Sunny warm weather wow those are things we had never even really.
Kind of thought that you could figure out but it it is what it does you can come look at that data.
And sniff out these correlations that that human just can't process so in all that is done to a pretty simple you I or you can upload a spreadsheet so,
why the stuff feels like it's pretty science-fiction E when you hear about it but that was an example that I wanted to share with listeners where we were able to get some pretty interesting insights just by by using a web-based interface Steven API this with Amazon web.
Web stuff.

[21:31] Very cold and so that's that's an actual business user versus a data scientist in that case.

[21:38] Absolutely.

[21:38] Awesome yeah so those are those are great examples other common ones that we run into an in Commerce or around like targeting and best audiences so you know again,
we have a lot of data about all the people that have bought from you in the past who you know what are the look-alikes that you should be,
see you know buying from Facebook or other ad sources that are potentially most valuable to you you know in other all the marketing activities,
that you could be doing for your business which one is going to give you the the best return for the next dollar of marketing spend you have so you know we're seeing these,
these machine learning based analytics tools,
get really good at defining Target audiences and helping figure out next best dollar sort of related to that are,
the ability to do attribution and Roy models so you know,
traditionally in in e-commerce we all use this model called the last click attribution which is whatever the last thing that guy did before they bought something,
that's the activity that got 100% of the credit for the sale.
That's kind of the default model in most of the analytics tools still and too many people use it and it's completely wrong headed.
You know that sort of like saying like what's the most valuable thing in my store will it's the cash register cuz everyone uses the cash register read before they buy something.

[23:09] The so there are all these other attribution models that give partial credit fractional credit to all the different marketing activities that led up to a purchase in the problem has always been.
Will which model you know is most accurate for my business and you had to pick them out all,
and you really didn't know if you would pick the right model or not so now with machine learning,
the program kind of analyze your data and picks the best attribution model for you and so you know for the first time to your point business users.
Using kind of web-based analytics tools can start getting these really sophisticated Roi calculations and customer lifetime value calculations.
Without having to be a data scientist that could smartly pick the right attribution model.
And then I guess the other area of inside generation that's getting a lot of traction right now.
Is this whole notion of sentiment analysis or or more specifically for Commerce will call it social listening right and so that's this.
This notion that man you have this fire hose of data of people talking about you on Twitter and Facebook and we chat and.

[24:19] You know should I what should I be doing to enhance my reputation are people talking favorably about me or they speaking negatively about me which tweet should I flag for for customer service follow up.
In the old world where you just had to have an army of people read all these things to make decisions on all of it it from most companies.
The volume with such that it just didn't scale and didn't make sense but now with machine learning you can actually,
process the entire fire hose or social media and do a pretty good job of categorizing all of the the dialogue about your brand or product or business into actionable buckets that tell you,
you know.
Weather weather audiences are looking at you favorably or negatively with it they like your new products are don't like your new products and more specifically what what specific,
comments and social media you should be taking action on a responding to to try to improve your your reputation and customer service.

[25:22] Assume you're doing all that at spiffy Scot.

[25:25] We're just playing around with some correlations at this point.

[25:28] Nice I wasn't.

[25:30] I think some of the cinnamon stuff some of the Wall Street guys are like reading the Twitter firehose to try to get cinnamints on stocks and things it's I'm not sure that use case but it is pretty nursing.

[25:39] Yeah well I didn't you know once or the interesting one is the.

[25:44] Retailers are starting to report less and less data to the analyst which I know irritates the analyst to no end and so they're looking for all sorts of new tools too sore to get a read,
like what weather Retailer's quarterly financial performance will be in any of those are these machine learning tools in some cases it's.
Taking pictures of parking lots in malls with drones and using those two to evaluate like whether traffic is up or down in the mall and all sorts of interesting things like that.

[26:17] Grateful so that's Insight generation than the second bucket you talked about was business acceleration what are some examples that you seen there.

[26:24] Yeah what's up the classic one that's that's probably the highest Roi today that you see use the most by slightly more sophisticated operators is,
the whole machine learning for inventory management in forecasting so you know kind of taking the the,
buying a responsibility like out of the hands of the merchant Prince and and you know having them just guess how many of a garment you should make.
Or how many you send to each store and instead using the data to sort of accurately tell you,
what your inventory level should be in an even more accurately forecast your sales.

[27:08] So there's a whole host of retail and e-commerce tools that are focused on using machine learning for inventory management and forecasting.
One that I like that is not quite here yet there's some great demos and a number of retailers are testing at Target I know his testing it.
Is what we call merchandising compliance.
So if you think about a brick-and-mortar store a lot of the displays in that store are paid for by a brand so,
Procter & Gamble might buy an end cap for tide and so the tide is supposed to not just be on the Shelf but beyond the end of the shelf and it supposed to get some special signage and Procter & Gamble probably paid a lot of money.
For that in Cap Toe to Walmart or Target or whomever and so in the old days when you when you pay that money,
you would then hire a bunch of college students or soccer moms,
to go visit every store and take a picture of it and send these report cards back to Procter & Gamble to say whether every individual Target store,
complied with that merchandising program or not because you're paying a lot of money for it and what you find is in a significant number of stores,
they didn't put they didn't execute the in cap are they didn't put the signage out there used to be a stab that like half of the custom,
printed signage that gets sent to the stores the merchandising the temporary point-of-purchase displays never got put out on the shelf and so all the brands had to spend a fortune sending these armies of people out up to the stores.

[28:46] To measure compliance and what we're seeing now is,
you can have a Roomba like some kind of robot that roams the the floors of the store with cameras and takes pictures and uses computer vision to match those those pictures against us,
the planet that the planograms that the intended store layouts and you can report on,
you know which stores did or didn't comply with those displays and you can take corrective action more quickly and you can save all that money of the Brand's having to spend people out to the stores to measure it.
And then you can even use those pictures to tell you when,
for example all of the particular SQ of tide is out of stock and not on the Shelf cuz it might be in the in the back room and not on the shelf and obviously in that out of stock situation,
you're not selling any tide so so using computer vision for merchandise and compliance,
you know is it's still early days but there's a ton of money and friction to be saved by doing that.
And one of the expenses will talk about next Amazon go,
is it a that's sort of one of the underlined capabilities of Amazon go then Amazon go extends that that.
Capability by also letting you check out right so the Amazon go store that we've talked about,
uses cameras to take pictures of the shells and know what products are on the Shelf but it's also using cameras to follow the Shoppers and know what Shoppers are holding which products so that it can charge them for those products when they walk out of the store.

[30:22] So I would characterize Amazon go as a you know a potential future use case of artificial intelligence for retail.

[30:32] Regal and then what am I favorite examples is the Stitch fix goddess they talk a lot about private label and one of the reasons they came up with private label was they would they would send all these products people.
Would buy them but they would say I liked.
The strap on this the design of that in the near able to synthesize all that feedback and essentially the machine morning would say you need to produce this garment.
Bob for this audience of people tussle bit more about that.

[31:03] Yeah I think that's that's a great use case is serve using machine learning for product selection and product design right soap,
going back to the kind of old Merchant Prince model you know the Mickey drexler's of the world would decide what what you note,
the design of the shirt is that was in gap or J.Crew and you know,
it was as much art as it was science and you don't very often you know they would make good good selections and then sell a lot and then make a lot of money but occasionally they would design something the market didn't want and they.
Have a ton of it in stock and lose a fortune so what folks like Stitch Fates are doing a saying hey let's not have Merchants what use the data to tell us what products to,
to offer to our customers and eventually not just what products to buy and offered our customers but she's the data to decide what,
products to design for our customers and offered them and sew and Stitch fits particular case they have like 60 attributes for every garment so,
things you wouldn't think of but like how many inches is the top button from the collar of what's the ratio of the waist to the chest in the in the size 6 what you know what what kind of cuffs does it have what kind of treats does it have their defining each garment at a much more granular level of attributes,
and then they're using machine learnings to say what are the combination of those attributes in a woman's blouse that sell the best to which of our customers.

[32:35] And so you know originally that use that to the side,
Which Wich prod third-party products to carry but more and more of their scent they're using those attributes to Define what products they should manufacture themselves and offer to their customers so it's really replacing the merchant,
with with the data and then so instead of having a buyer or Merchant you you have a analyst.

[32:59] Yeah and then the is a good time to kind of Jack the.
The thing that gets pretty nursing your out this is when you think about business models you know one of the favorite business models the last 10 years is Network effects so the classic example is on Marketplace like an eBay where.
I order more modern would be maybe an Uber where you have supply and demand and more Supply brings more to me into this flywheel effect happens.

[33:22] So more drivers brings more writers writers brings more drivers or more sellers bring more buyers Etc.

[33:30] I think I think when you start to think alot about this machine learning and II and you use that Stitch fix example that the reason to be able to do that is because they have all this great product data.

[33:39] So

[33:40] Data becomes almost the Next Generation Network effect so it's almost like this date and network effect where the more data a company can get about consumer behaviour preferences and those kinds of things they're going to have this Edge that no one else has and.

[33:55] Yeah I know they're kind of called action I.
Usually talk about with retailers are especially Brands is this what you need that connection with the customer because imagine your brand is not signed Direct.
All that data is out of your hands right now and you're there will be a day when you will be at a severe strategic disadvantage for developing products I think.
Trace how you feel about this if you don't have that direct connection to Consumers and you know also not only as the data.
Important baby start flexing your muscles around these things are really understanding how to apply so he's techniques to that data.

[34:28] Absolutely and in so I think you're exactly right with most of the current state-of-the-art machine learning models the big competitive Advantage is,
having the data set to train the model and so the more customer interactions you have the more data you have the better model you'll be and the better you're able you be able to serve more customers into your point,
you the better your flywheel will be right.
An end so that's that's true for a lot of these these different cases and specifically with the manufacturer versus retailer it's.
Once this data becomes key you start thinking about whoever owns that relationship with a customer has,
access to a way more valuable asset so like one of the examples I always like to use as the tire industry and you think about the the tire manufacturers of the world,
for the most part they have no idea what kind of vehicle in what ZIP codes,
there their tires getting installed on and they don't know how the tire the the customers use those tires and have no idea for example how long those tires,
last on specific vehicles in specific geographies,
I'm in so they know they know very few Out reviews about their Tire once it leaves the factory but a good retail that installs those tires on the car can start collecting all these extra attributes,
how many miles are on the car what kind of car is it that how frequently do they change their brake pads what ZIP code do they does the car live in and all the sorts of things and that retailer can start using those attributes of that data.

[36:03] To start doing things like much more accurately predicting which Tire will work best for which customer on which vehicle in which geography,
and said they're all sorts of interesting things that come into play there and so if you are that that,
product manufacturer tire manufacturer whatever like one of your big strategic challenges right now is to figure out how,
to start developing that relationship direct with a customer so you can be capturing that data.

[36:36] In the business acceleration and I want to talk about that a little bit more and some of the customer engagement things but there are a couple other business acceleration ones that we should probably just touch on one that's getting used a lot right now is.
The idea of tagging or evaluating text,
so tons of brands have a lot of texts about their products that they someone typed into a super old database that they used to print the packaging that goes in the store,
but the Torah conversation about attributes earlier that wasn't structured data like someone wasn't smart enough to say,
we should have a field for whether all these snacks are Kosher or not and we should have the field to say whether all these next are gluten-free or not right like kosher and gluten-free might have just appeared in a,
text description somewhere in so there tons of product manufacturers that have,
piles of this unstructured data that isn't very useful for machine learning it isn't very useful for search and filtering and all these use cases that are super common in e-commerce and so what you know you either have to,
pay a bunch of copywriters to read all your unstructured text and cut and paste it into fields,
or you can start using these machine learning models to automatically tag your data and turn unstructured data into valuable attributes.
And one of those common when is pictures right so you imagine that you're in a product category that's heavily uploaded to Pinterest or Instagram.

[38:10] You don't know very much about those pictures which which you of yours is in that picture is it being portrayed with a man or woman,
is it being for traded a beach or a ski chalet and all these different things that would be interesting to help you decide when to use that image the.
Machine learning can tag all of those images and make them much more valuable in in all of your Commerce experiences.

[38:37] So we're trying to see that a lot a common one that's being used right now is almost all of the latest fraud engines.
Are using machine learning so this is a classic example where.
You know fraud used to be a set of static rules so you would write rules if people try to shop our side in the US from Nigeria we won't let them shop and if they.
Try to ship the product to a hotel we won't let them by that.
And with machine learning we can be much smarter about what attributes.
Trigger a secondary screen for fraud and what that does is it gives you weigh less false positives.
So you're able to sell a lot more Goods to a lot more people and not offend them by by treating them like their prospective criminal when they've done nothing wrong,
and said that the fraud models are both getting much better at catching fraud but equally important they're getting far fewer false positives as a result of using,
this machine learning instead of a set of hard-and-fast rules one of the business accelerations that that Amazon has particularly made famous.
Is the whole field of price optimization.
And so you know I obviously you don't we talk a lot on the show about Amazon changing 2.5 million prices a day and they're there.
Their approach is much more sophisticated than just being the lowest price on everything right like they're there a strategic low price provider and you know more and more of that,
it's not possible to to just write a set of rules about what your pricing for every product out of be in so you're starting to see retailers.

[40:14] Turn over the keys to their pricing models to these sophisticated machine learning systems that optimize price and optimize promotions and offers for individual customers and unity earlier Network effect point,
those models are most powerful when you're you know at the high end of the volume and you have a ton of transactions and a ton of skews to apply those models against.

[40:41] Yan is a reminder we had a guest Andrea who was on and relay and she was talking about how.
A lot of times even a vendor's negotiating with a robot on the other side and Y episode there's not only are they optimizing the price the consumer sees but there no that's feeding into some engine that then kind of coming back to the vendor and saying you need to price the product at this.

[41:00] Absolutely and so you know I think Amazon is kind of the gold standard in in Commerce for that and see you're seeing a lot of other like when you,
to your point when you had to have a thousand data scientist to write your own pricing on rhythm,
you know that that was a huge advantage to the people the top of the echo system like Amazon but.
Today you know it is easier to buy an off-the-shelf model,
that you just have to have enough data to feed so there's there's vendors out there like Boomerang which are every bit as sophisticated as Amazon's pricing engine but you know it's available too much smaller operators.
You know as long as there they have enough data to put into the model and so that super interesting.
At the moment the big challenge you have is how do brick-and-mortar retailers do that sort of real-time price optimization like it's pretty easy to change the price.

[41:57] You know from second to second on Amazon it's much harder when there's a paper price tag next to that product.
And it's on the Shelf in the store so that's that's an interesting organic when we're going to continue to see play out.
Another one that I am azaan is particularly great at is this whole notion of logistics optimization.
So once you're bigger than a single Warehouse you start getting you know all these issues about what's the optimum Mount of inventory have in each warehouse and where should you put all that product where is going to be most efficient to get to the most of your customers.
And if you're wrong about that that whole supply chain planning you can cuss yourself a fortune moving products around or shipping products inefficiently to customers.
And so using machine learning to optimize how many excused and which fuse go into each Warehouse.
Is super important in you know when your Amazon and you have what do they have now Scot 112 fulfillment center something like that.

[42:59] Yep thereabouts.

[43:01] Yeah that that becomes a.
A critical challenge an Amazon spray the only one that has the problem at that scale and they're also probably the only ones that have the solution at that scale.
And then I guess the last business acceleration one that you know I don't think we're going to see immediately but gets talked about a lot is.
Like obviously all the technology to get that drone to your house to deliver the goods.
Is a great example of of something you can only do with artificial intelligence so if we ever see drone delivery be economical for certain customers like that you know that that will be exclusively enabled by.
Buy artificial intelligence and machine learning and I would remind listeners whenever I say drone people always imagine these super expensive flying things,
we are also starting to see a lot of wheelbase drones and so there's an interesting Pilots going on in in San Francisco and then,
Maryland right now with with the drones that are sort of autonomous vehicles that drive on sidewalks and deliver things like pizza and stuff.

[44:10] So I'm excited about renting a house in one of those markets and get a drone pizza delivery.

[44:16] Call Sears a lot in the business acceleration in the country cap that sounds more like.

[44:23] Cost savings um I guess there's some that impacts the customer experience but the next bucket is where you probably would customers are going to feel it the most which is what you're calling customer engagement.

[44:34] Exactly and this is the stuff that that tends to be the most sexy it's the most visible to customers and,
you know there a lot of things in this category that have their own buzz and then their own own spot in the hype cycle at the moment so one that we talked about a lot or natural language assistance and so that's,
you know Siri Cortana Echo,
Google home all of those sorts of things and you know if you if you think about them they're actually an amalgamation of multiple a Technologies right like so there's this this notion of being able to convert speech,
into data and so their natural language processing and then there's the notion of being able to to.
Act on those the sentences,
and give proper responses and so that's the notion of virtual assistants right and so you you have a lot of these things that are like you speak to like Siri,
you have a lot of virtual agents that you type to a chat box on Facebook and things like that.
And you know there's an explosion between those two categories of The Voice assistance and the virtual assistants in in e-commerce at the moment.

[45:53] If you tried any of the the virtual agents Jets Scot you think any of them are ready for primetime.

[45:59] Now the ones I've tried pretty cheesy and there if you stay with them they're pretty unsatisfying they can't answer most your questions until they kick over to a human 20 minutes better.

[46:14] I'm not believing this are quite there yet.

[46:16] No and so it is funny because what what we're seeing is,
customers definitely want customer service via chat and Via messenger and so it's,
a mistake to say oh my gosh the chatbots are kind of not ready for Primetime and so it just hire more phone reps and do everything via phone cuz we're seeing strong indications that customers are less.
Tolerant to sit on a hold line and do something asynchronous like like a talk to someone on the phone,
but it's same time you're right like the virtual agents really aren't cutting it yet at the moment and so where The Sweet Spot is are our live humans at the other end of those,
does chat and SMS strings and I guess the best virtual agents I've seen our kind of maybe just one layer deep and they they.

[47:06] The answer some of the the highest velocity questions and they sort of act as a filter to make those those live agents more efficient by not having them have to answer the same question over and over again.

[47:18] Yeah and they're smart enough to know when to get out of the way that kind of say hey did you are you looking to track a package oh I'm sorry let me write you to a human.

[47:27] Exactly right and well that.

[47:28] Once again a doing there like you know big kind of walk you through of of Sky knowledge-based relentlessly.

[47:35] The best ones are seamless right and and unfortunately like too many of them you know keep fighting to try to keep you in the virtual realm and you know it some point you you stop asking an honest questions and you're just trying to figure out how to.
How to bypass it.
So another sort of adjacent thing that we're starting to see more of in customer engagement is this whole notion of Discovery and guided selling and so one of the,
the ones that got the most bus here is,
North Face uses the Watson implementation to have sort of a guided selling tool for jackets 800-Flowers has a guided selling experience for for gift giving,
you know I'm a little bit you know I have similar feelings to the guy that selling tools at the moment that you you had to the virtual agents I think the idea of them is very interesting and I I certainly agree.
We need to get way better at Discovery and helping people find new products but a lot of the guided selling tools I've seen at the moment just feel to linear and scripted and I'm not sure.
The there there yet recommending products a heck of a lot better than then you don't sort of us structured set of rules used to last year.

[48:58] So that the next one in customer engagement is one and I may have even have to go back this may have been one of my predictions so I'm going to type it again in the hopes that it helps my my annual prediction come true.
One of the cool Technologies in artificial intelligence is computer vision and being able to.
To process images and more more often process video to get insights out of out of that image data.
And so one of the the most common use cases for that is tagging images that we talked about him business acceleration but the other way more sexy one is visual search.
So that's Amazon Firefly being able to take a picture of a product.
And then order it or you know even cooler use case is.
Via an app like camfind being able to take a picture of the woman at the table next to you with the cool handbag and find that handbag for sale or those shoes and that's kind of the whole notion of this see it by it kind of experience.

[50:02] Yeah isn't a lot of people say Pinterest is one of the better ones out there do you know what they're using under the hood for that is it is it some machine learning kind of.

[50:12] Exactly and they rolled it out that,
Pinterest to Lynn's they ruled that out relatively recent like so it's probably only about three months old at this point if memory serves,
and that's a great example it's not products Pacific yet so it's,
it helps you find similar images to the image or looking at there are some more sort of Commerce e ones I mentioned camfind is one company will talk about a couple other visual search companies at the end of the podcast that the,
that the whole field of visual search I would just tell people is getting phenomenally better and so for years we talked about natural language getting.
Twice as good every year and last year the natural language interfaces essentially surpassed human comprehension so the,
the computers can now more accurately understand spoken words than an average human being and that's you not forgetting the fact that the computers can also understand.
People in a bunch of other languages in the same sort of evolution is happening in visual search there's a an academic contest for visual search engines that the several of the universities including Stanford put on every year and the winning visual search engine,
is twice as good every year as the year before and so the quality of visual search is doubling every year,
so if you look at some of the best use cases right now they're already pretty impressive and you go oh man this is already useful today and if you think about the fact that they're getting twice as good every year.

[51:42] You know we're very close to visual search being a super powerful tool and that's going to eliminate a lot of the friction we see in stores where people try to get you to,
use NFC tags or scan QR codes or do things like that like imagine a future when you just hold your phone up to the Isle in a store,
in the phone sees every product on that aisle and it visually recognizes all of them and maybe it even reads the price tag off the shelf for each one of them and it can you know instantly highlight for you,
what's a good deals are in that store and what you'd be better off buying from an e-commerce site at home.

[52:18] In an one thing that's interesting about this is part of the Renaissance on the visual side is it's tied to video games so you know as as people's demands for video games of higher the.
The game processors that they're these high-end floating-point machines I've got more sophisticated than ends up that's a great platform for vision in.

[52:42] Incognitive I think but I hear it more used for the vision stuff.
So it's interesting is now is part of like AWS Amazon's leasing out you can actually lease out gpus Witcher game processing units,
I end up as the cost of those is come down it's it's made this video stuff get even smarter so there's a hardware part of this that's pretty neat so this stuff is.
You're not only is the machine getting smarter because the amount of data is going up but there's also Moore's law on the back end helping it as well.

[53:10] Absolutely and the kind of math that all of these machine learning models use is the kind of math that that I think technically their Graphics processing units not game processing but,
yeah but their primary you were right they were invented for games for sure in our friends at Nvidia like being a prime example the,
that that the kind of math that those chips are good at is the kind of math the machine learning uses and so that is one of the gating factors for machine learning getting better is having access to big,
server Farms of these gpus and and to your point all the big vendors of of cloud computing you know that's the new Battleground is,
you know not not CPUs and cores but the gpus.
And what's that that's really enable to Renaissance in machine learning that these academics can now rent.
Like these these amazing supercomputers for short periods of time to run their experiments and refine their models.
Another one that that's super common in this is like a classic example of.
Making an existing technology better as opposed to enabling a new capability like visual searches enabling a new capability but obviously a core function of every e-commerce engine is it search function and,
that search has gone incrementally better every year but it's a largely gotten better because we put better data into the search so we put more attributes into the surge the.

[54:41] The underlying technology for deciding which product is most relevant to which user hasn't changed a heck of a lot in the last five or 10 years and machine learning is now like the first big incremental Improvement to,
to search in a long time and the way to think about this is the results,
of search that are most relevant to you based on all your past purchases and behavior are probably different than the search results that are most relevant to me,
and so using machine learning they can say hey what's every search result I've given to every customer,
and which ones are the search results had successful purchase experiences in the ends and which ones didn't,
and what did the customers look like that had those successful purchase results and now you know we can personalize search much more to each use or,
based on everything we know about them and make search much more effective and relevant that it's ever been before.

[55:42] But that's a classic one we've always had search engines now every search vendor saying their search engine is machine learning based,
and that really you know you can't just look at that label and say oh that's the new search engine to get like what you really need to do is test the search engine and make sure it's going to work,
better for your audience and with your your product catalog in that that goes double for this next category,
recommendation engines so you know we can take recommendation engines for granted at this point like there's so many out there and and you know for a while there's been kind of parody of these,
these recommendation engines but but you know it don't lose sight of how powerful these things are,
you know a few years ago we saw some data that 75% of all the views on Netflix were driven by product recommendations and this is pretty old now but back in 2013 there was a leak,
that 35% of all the revenue from Amazon came from the those product recommendation tiles and I believe the,
the plug recommendation tiles and Amazon emails were even higher converting than the ones on the product detail pages and so recommendations are super important and of course using machine learning,
you it should be no surprise for listeners at this point you can make recommendations much more personalized and effective for each customer,
then sort of static rule-based recommendation engines that are that are kind of the norm that are out there now.

[57:16] So that I'm going to go a little faster cuz I know we're going to come up on time here pretty quick,
Annette's category that super interesting in the apparel business returns or are crushing cost,
and most of the returns are result of fitment issues so something wasn't the size you expected or didn't fit the way you wanted and Source turn to see machine learning get used,
to solve fitment problem so in the old world Zappos tighter going to buy two sizes of shoes that guaranteed one was coming back in that was super expensive so now what you want to do is use data about all the attributes,
to accurately recommend the size and maybe even remind a customer that they bought another size before and it fit better in the order they bought this size before and had to return it,
tell people get the right size the first time,
and avoid buying stuff you're also seeing this get tied in with visual search where you're actually using the camera to help measure the size of the customer and then match that to fitment data tell them by the right stuff so watts of stuff,
in machine learning happening around fitment and return avoidance,
the whole General filled the personalization this is really hard to shop for right now cuz every vendor is hyping all kinds of new new artificial intelligence and machine learning,
capabilities and it's really hard to separate the hype from the reality with all those products but it certainly is true that machine learning,
generates more personalized experiences and so there's tons and tons of new vendors out there in that space you know folks they're still in loyalty programs and retention programs are those can be dramatically improved by Machine learning so we're starting to see the first generation of machine learning based loyalty programs.

[59:01] And that's kind of the the main use cases that we talked about right now and in customer engagement.

[59:08] Got it okay so does summarize what got three buckets Insight generation and that's kind of.

[59:16] I think of that is like next Generation analytics so so analytics that not just Splats data but comes up with insights,
business acceleration and that was things that that help you save money improve your forecasting pricing in even practice on,
in the customer engagement which are the more forward front-office things are going to improve the user experience learn more about your customers and give him a better experience,
people are interested in this soap so first of all.
Maybe lay out a lil road map so so a listener is a omni-channel retailer Dave.
Get out there like a lot going on in their world right now where does this fall into part ization and where are some places they can nibble and then where do you recommend they go for more information.

[1:00:04] Yeah so in terms of what your focus should be like you know my high-level advised is ignore the labels don't go look for an AI product but instead look at the list that we just gave you and will put it in the show notes and say,
which of those things do we feel like we're most efficient at and we're leaving the most money on the table like art,
are you know we not making good decisions about who our audiences are and how we should Target our advertising or we not making good decisions about our pricing or we're paying too much for fraud,
or are we in or not doing a good enough job of helping customers discover the right products and add more cards to the more more skews to their cards,
and you know our returns to high-dose or two things and so focus on your biggest pain points,
and then say alright you know what Solutions out there are using machine learning Technologies to best address that pain point so that would be my sort of,
high-level advice and then in terms of specific vendors if you're going to build your own solution,
they're they're sort of a 4 horse race for the underlying Technologies for all of these machine learning capabilities and as you sort of alluded to in your experience at spiffy they,
none of these vendors require you to be data scientist anymore so they all are like pretty easy tools you probably still have to be a programmer cuz these are mostly api's that you rent,
but it's really a 4 horse race it's four of the big vendors,
all have these big stacks of AI capabilities that you can rent by the drink in there the really inexpensive in you.

[1:01:41] Add them to your own product so if you're going to hire your own programmer to develop any of these experiences that the first one is IBM with their Watson technology and will put links to all four of these,
these Platforms in the show notes one that people don't necessarily think of but is hugely competitive in the spaces Google and they they have the division called Google Cloud,
platform services and they they have a bunch of api's for machine learning,
they actually invented one of the underlying machine learning models called tensorflow and they've open-sourced it so they they have a lot of great tensorflow Solutions on a gcp but you'll also find other vendors now offering tensorflow because it's become so popular,
Microsoft has a complete set of cognitive api's under the there as your services and then as you mentioned,
Amazon has a complete set of AI capabilities that are part of AWS and.
You know they're all kind of analogous like you'll find basically the same set of api's from all of them you'll find a,
a computer vision Library you'll find a sentiment Library you'll find a natural language processing Library a text to speech Library you'll find all these these Legos of machine learning capabilities that you snap together yourself one that's kind of fun that I will highlight specifically for Amazon,
is one of their Legos is called the destiny and it's spelled,
goofy it's dsstne and that's the actual product recommendation engine from the Amazon.

[1:03:14] Website that they added to AWS last year so you you can actually use,
the very system that Amazon juzang and we mention this network effect,
it's a huge advantage to be able to get a recommendation engine that's trained by Amazon already cuz you're benefiting from their network of fat.
So that that's pretty interesting and then I would highlight that there's some more Niche vendors,
there are vendors that as opposed to giving you a low-level API have sort of crafted complete machine language capabilities.
Specific for Commerce vendors and so again I'll put them in the show notes but six that come up a lot there's a company called Wiggle,
it has one of these machine language based search engines that we talked about in the customer experience portion,
there's a company called sentient AI,
that has really powerful visual search capability they also have some pretty interesting personalization recommendation engines,
there's a company called clarify that that has visual search including video which is super interesting if you're someone that,
produces a lot of content on YouTube,
the we mentioned the robots that take pictures of the shelves so that's a company called simbi Robotics and they have the,
tally robot that dumb Target is testing there's another company at a Stanford called focal systems that have the.

[1:04:45] Computer vision library for doing inventory and then luminoso is one of the companies that has a specific machine language based analytics platform for Commerce and so,
there's there's many many more vendors out there but those are sort of six interesting ones to look at to get you started.

[1:05:03] Yes it's it seems like.
And I don't mean to hang up on this but when when I was in e-commerce person just got thinking about our listeners here and I used to buy a solution know you would look at kind of feature benefit.
Kind of analysis and cost and all that kind of stuff it seems like machine learning in some of these things add this like other dimension that's only important which is data so says you look at these Solutions.
Yeah it's really important to understand.
Is this going to operate just on my data is is my data going to be enough to really get a big get big enough bang for the buck cuz I think we're going to see his new models where you're sharing data with other people on a platform.
But then you also need to be pretty cognizant about that because this is really important and watch will property you have and once it gets into these Platforms in his learned.
Even when you leave and take your data the learning stay so it's really interesting kind of a way to think about things you kind of.
As a user of vendor you want a lot of access to data but then you almost don't want your date at a time be.

[1:06:07] In there in the system to use example let's say your.
I don't know sorry blaktroniks train the system on on whatever recommendation Electronics now you switch vendors will that.
Now competitor switch is there did you start using that now they've they've got a solution to spend trained on your data.
Also you know it's pretty interesting that you mentioned Amazon example where it comes kind of pre learned if you will I don't know if that's the right.
Verbage pre-trained maybe better in any advice on how people should think about that element of these Solutions.

[1:06:43] Will know I think you have hit the nail on the head it's the wild west time Electro property and so your,
you're exactly right like you have you know because these are almost all cloud-based Solutions you load your data in it you train it you get to take your data back there's it's very clear that the date is owned by you but when you leave you're leaving that model smarter than you found it and your competitors can potentially benefit from that right and so that,
that is certainly one issue.
But for sure like when you are thinking about areas that you want to invest in and maybe you know the the first area that you want to tackle from a.
Sort of testing out a machine warning capability like like one of the big drivers of of the feature that's going to add the most value to you is the one where you have the most data or the most differentiated data so anywhere.
You have a data Advantage versus your competitors or versus the market that's a great place to look at 4.

[1:07:44] Accelerating with machine learning and that's the big.
Pro in the con of the bill that yourself with these underlying platforms like IBM in Google versus buying a product Eyes solution.
Like at wiggler senscient is you know you need a lot less programmers there's a lot less investment to get a customer experience working out of these complete Solutions,
but they are going to learn from your data and you know your competitors are going to be able to benefit from that if you really feel like you have some,
differentiated competitive Advantage data then that's a good reason to potentially roll-your-own solution using the the the more low-level machine language libraries from from ad the big providers because,
they're they're leaving less of that running behind for the next guy.

[1:08:32] Yeah it seems like it'd be smart to go make a coalition with people that aren't competitors and say hey let's pool our data kind of create our own data pool and.

[1:08:43] I almost wonder if there's like some way to do something little Pine Sky almost like a Dana Co-op.

[1:08:49] No it's.

[1:08:50] Having your own pool of your data isn't as hopefully you still need that other data but you still want control over the day this it's kind of a really interesting turkey challenge.

[1:08:58] There's models out there right now so an interesting one is,
Adobe for device detection right so you don't Scot you and I on a bunch of different devices they all have different cookies on them so it's hard to tell when you visit a site on your tablet and then later on your smartphone that you're the same user,
Facebook and Google know because you've authenticated yourself,
in in the on all those devices on Google and so Google recognizes you across all those different devices so Google has a big advantage over most e-commerce sites and Facebook has a big advantage over most e-commerce sites,
in terms of recognizing each user and so you know folks like Adobe have literally set up a device data Co-op.
So that multiple websites can share,
what they know about which devices you own and your Anonymous so your Pi isn't in there but when someone you know gets any device that,
did Scott Wingo owns they can go to this Co-op and find out what the ideas of all the other devices that Scot own so that they can,
do the Multi-Device attribution and so we've we've seen it there we are starting to see these kind of data,
Co-op submerged in a couple places I think in some cases even competitors collaborating so for example a lot of the insurance companies,
they have to pay claims when a natural disaster takes out a roof,
they're all sharing their data their photo libraries of all the roofs that they've had to repair and what the level of damage was and so now they have this big data repository that they all benefit from.

[1:10:37] When the hurricane strikes they fly a drone over the neighborhood of takes a picture of all the roofs,
add a machine learning algorithm you know tells you in half an hour how much is it going to cost to fix everyone's roof in that neighborhood so so pretty cool stuff.

[1:10:51] And Scot afraid that is going to be a good place to leave it because it is happen again we've wasted a perfectly good hour and tax of our listeners time,
listeners as always we certainly want to continue the dialogue so please visit our Facebook page if you have any questions or comments interview like today show we would greatly appreciate a review on iTunes.

[1:11:14] Thanks for listening you're ruining maybe someday this entire podcast will be automated intelligence artificial intelligence.

[1:11:22] Or maybe it already is? And with that, happy commercing!