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

Join hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, Founder & Executive Chairman at Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Now displaying: February, 2018
Feb 28, 2018

This episode catches up on the latest e-commerce news:

Upcoming Industry Events

* Denotes shows Scot and Jason will be attending and broadcasting from.

Register for the Jason's Webinar on AI in Commerce, Thursday March 1st.

Register to join Jason & Scot at the Path to Purchase Summit in Chicago March 12-14

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Episode 118 of the Jason & Scot show was recorded on Tuesday, February 17th 2018.

http://jasonandscot.com

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

 

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 118 being recorded on Tuesday February 27th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot:
[0:40] Hey Jason and welcome back Jason and Scott show listeners Jason you have a big webinar coming up this week that I think listeners would love to hear about the also it's live video so listeners will actually get to see you,
that's exciting.

Jason:
[0:55] I know I know I feel like I do have a face for podcast so that you know is not necessarily a good thing but I'm a little disheveled right now I sort of torn apart my office to set up a little,
video set up because I'm doing the webinar on artificial intelligence in Commerce,
with episerver and I'm doing it on Thursday morning,
and the reason we're mentioning it on the show is because the last big webinar that they did I had this author I really like and I am embarrassed to say I don't exactly know how to pronounce his name but I think it's near y'all and he wrote this great book called hooked which is a lot about,
how people form habits and and he's a super interesting cognitive psychologist but he did the last webinar and I'm desperate to.
Get a better attendance than him so I think I just passed him in pre-registration and you know hopefully I'll bring it home on Thursday morning for the Jason and Scott show.

Scot:
[1:57] Awesome we're counting on you also it's it's starting to be season here of trade shows and we have I think 3 or 4 we're going to be there together which is pretty exciting going on right now and neither of us were able to attend Izzy tail West so bummer on that one.

Jason:
[2:12] Yeah but shout out to everyone enjoying the good weather in Palm Springs.

Scot:
[2:15] Yeah yeah can't can't blame me for one down so once we're going to get together March 12th to 14th in your hometown Chicago we're going to get the path to purchase Summit,
and it will be at shop talk in Las Vegas and then in PD ID in Austin March 18th to 21st,
and it be the idea is May 15th to 17th so it's going.

Jason:
[2:37] Exactly and I'm I'm speaking at shoptaw Canton PD but I'm particularly looking forward to Pat the purchase cuz I'm just going to be in the audience heckling you.

Scot:
[2:45] Yeah yeah I look forward to your heckling it'll be funny usually want to do that no one realizes who you are and it's Robert so it's always good.

Jason:
[2:53] Even when they know who I am it's generally super awkward.

Scot:
[2:55] Psych episode of the office but looks stretched out and more painful.
So since we're hitting the traits of circuit and we do that we do have a lot of guests lined up we're going to the Sobe we missed last week due to me I was on a little bit of a holiday so this week we're going to catch up on news and then,
it'll be a little bit of a news coverage drought so we need to kind of knock this one out and of course when it comes to news it wouldn't be a Jason Scott shows without.
Amazon news new your margin is there opportunity.

[3:38] Big news today it's been kind of timely that what you were going to do the podcast today which is good we appreciate Amazon working this out for us then else one of their biggest Acquisitions ever they are spending a billion dollars to acquire ring.
Rings cool as in October I think Rings kind of classic case study there for other option verse so the CEO the founder went on Shark Tank and was rejected by all the sharks I thought it was,
terrible idea admittedly the name wasn't that good was called doorbot.
They just kind of her like you know we can't see how or why anyone would use this thing so just goes to show you that sometimes when all these experts and your is reject you that you need to just kind of hang in there then they caught the eye of Richard Branson and he invested some like $38 I guess he really,
saw used for the product Amazon was an investor to the Alexa fun and they raised a considerable amount of VC.

[4:32] Rivers word that they were out raising Capital at kind of what's called a unicorn valuation or north of a billion dollars and Amazon has picked him up for a billion bucks.
What do you think about the new station.

Jason:
[4:44] Yeah they I really appreciative of Amazon getting all the news in before our go on their deadline I think that's always very considerate of Jeff,
number one listener thanks again,
and I think it's it it seems like a checks a lot of boxes for Amazon I think Amazon his has had a major push into devices and smart home obviously they have you know this huge put on hold with the,
the Alexa but you know they,
they bought that camera company not long ago I mean I feel like just as a consumer product space they've been particularly interested in that space and then you add to that that this that ring could be an integral part of,
giving Amazon delivery people and Home Service people access to the home like it you know it suddenly is synergistic with their supply chain and reverse Logistics Ambitions and so it seems like.
It's pretty it's a pretty clever investment and you know a lot of us were talking about after the big Whole Foods acquisition,
then maybe we wouldn't see another big retailer acquisition but that you know didn't necessarily mean that Amazon wasn't going to continue to be aggressive so to me this is.

[5:55] Another great example of them.
Trying to be in a build or own a consumer brand that has even competitive differentiation in the marketplace.

Scot:
[6:06] Yeah that really cons pros got let down if you can't think about the other,
folks really active in the space you have apple who's really playing catch-up they just kind of came out with their smart speaker and as we discussed on the show it's,
not not really clear that's going to be a big hit and it really doesn't do much more than be a speaker and then you have Google and.
Google is just kind of frantically also playing catch-up they acquired Nest which gave them the thermostat and they put Dropcam into that cycle of a camera and then they have the Google Home Smart speaker.
You pointed out to me that those things actually don't really work well together which is kind of funny you know it's cuz they're all it in the Google House of devices.
And then you know they there was talk of Nest coming out with a ring competitor,
so no now Amazon has bought the number one doorbell device Irene was working on a cool security camera which I tried the private label ish kind of Amazon home.
Cameron is not very good so I'm hoping that the the new ring camera will displace that or or at least have a better offering in that category so it's going to be pretty.

[7:14] I agree with you at the cut checks a bunch of boxes for Amazon so you know I get into the.
Alexa ecosystem will be great it kind of helps with home automation security which is this huge area that no one's really conquered yet,
then you have the delivery you know and and then another area I watch her the clothes that Amazon seems to be encroaching and more and more is home services so imagine some kind of an Amazon either.
Either, Marketplace from services with like a cleaning service or Amazon actually does it themselves through employees.
You know you could have all this time together and in one seamless experience so you could have it kind of.
The Holy Grail experience would be you you order your groceries through you know that your Alexa wish list they are delivered to youth from at Whole Foods.
And then you your do all this while you're at work and then you've authorized ring to allow access to your house to certain folks and maybe there's some.

[8:11] Maybe they hold up a QR code or some kind of authorization there with the ring device that doesn't even require you to answer your phone and see who it is and they place the items in your house so it really kind of.
Thinking through this user experience in connecting the dots and in a really interesting way that is so far ahead of everyone else is getting a little scary to be honest with you.

Jason:
[8:30] Yeah and you know when when you said I didn't immediately think of but the,
you know I think it's another big Synergy for Amazon you know most of these cameras are inside your house right so inside your front door or in your new Nursery or whatever the case is that the primary ring camera is,
on your porch and you know of course there's there's this huge problem in e-commerce of porch piracy where where you know bad people are are coming to people's houses and stealing their packages and that that happens frequently enough that it's a it's a major,
problem for some consumers that are frayed to buy stuff and have it delivered to their home so it literally is a limiting factor for Amazon and so having a,
an army of these devices that you don't have the potential did dissuade porch Pirates you know is even another synergistic thing with Amazon.

Scot:
[9:20] Yeah you could even do some cool stuff with a I wear a ring on her I don't have one they're telling the there's some neighborhood alert feature and so you can almost see you know if there is a.
Porch pirate out there you know a I could,
detected and then turn on all the ring cameras within a 3-mile radius and and you sit all the video to the police kind of a little scary there on the Privacy side but you know when you do think about these use cases is pretty interesting Amazon has all the pieces to do something like that,
actually relatively easily right so think about all the AI and the face mapping and everything inside of the ghost tour,
you're so they could easily apply those out rhythms to detecting hey this package was picked up by someone that's not the owner.

[10:01] So it's really interesting to think about all these Lego blocks that they're putting together and all the internet use cases to have.

Jason:
[10:07] Absolutely.

Scot:
[10:09] Another kind of kind of more on the Whimsical side hq2 search 220 cities,
I'm in is really funny that they kind of went into an in da mood where you know they kind of had this huge hoopla about what's going on in and now all these folks hurt the states there negotiating with her under NDA sermons trying to read the tea leaves and.
You know I think some of the funnier ones that you noticed conspiracy theories I guess I would call them that are out there.

[10:37] There's one that says that Amazon gave a clue that they're going to Austin and if you remember that Super Bowl spot that you and I both kind of thought really won the Super Bowl you know.
It kicks off with the lady asking Alexa what the weather is in Austin so a lot of people have kind of tied into that as a clue and then there's a couple other kind of you know Easter eggs in there that there,
Canyon to sellers country music that plays in the in the thing this little bit of a stretch but evidently.
Austin is has an affinity with peacocks and at the end Anthony Hopkins is sitting there feeding that peacock so I don't people have kind of used the Super Bowl ad is kind of saying is Amazon sending us a subtle clue.

Jason:
[11:18] Yeah most of those a lot of people are from Austin for the record but yeah.

Scot:
[11:26] And then another one I saw it was funny is a lot of people were kind of saying oh they're going to.
Los Angeles and what would happen is actually a local reporter here they're able to file an information act kind of thing and they got.
At least a cover letter for for how the proposal was sent from of a city in North Carolina and it called it project golden.

[11:50] And so then a lot of people said they said there's more evidence was found other other reporters kind of took this q and they were able to file these freedom information act.
Request get some information mostly cover letters ricewood was redacted. Okay it's called project golden that's like.
The Golden State which is Los Angeles or yeah so then everyone but what happened is the person that's just kind of.
Gathering Together The Proposal so their last name is golden,
who played around this hq2 so even though it's in super quiet mode and in a way it's actually causing more more kind of strange things going on.

Jason:
[12:34] Again it's it's evilly brilliant PR and you know they they got all these municipalities to you know,
drop their drawers and in demonstrate exactly you know how deep their willing to do in terms of Economic Development incentives to get Amazon there and you know whoever Amazon picks for the hq2 they know how much money is on the table from these other cities and you can imagine they're going to use all that in negotiation when there,
opening fulfillment centers are other pieces of infrastructure in those cities do you have a front runner in your mind.

Scot:
[13:07] For the longest time I thought Austin.

[13:11] Is it it for me it has a lot of the the elements are looking for so so I can think of this is Amazon's retail business from a people perspective is really well-built out,
so I think hq2 is going to be maybe 5 or 10% what you and I would think of is the retail business and the rest is going to be.
AWS mom so that's where you let things growing like 60% year-over-year,
maybe you put some add business there but but still it's kind of different footprint than the retail business so and and in the proposal and talk about it being largely engineering,
so I think it's going to be kind of these y'all hiring cloud-based engineer types so that really made me think Austin because you have three or four engineering schools right there,
I'm cost of living infrastructure all those things get checked and it's close to Whole Foods which you know I think if I'd spent 14 billion dollars being near that would be.
Pretty nice wind is well within the one thing that is suede me is Scott Galloway has been meeting up making a pretty.
Compelling case for the DC area so three of the 20 are in the DC area Bezos just bought like.
Largest residence in the DC area and it goes on the DL and then it leaks somehow.

Jason:
[14:24] How many owns the Washington Post to.

Scot:
[14:26] News Washington Post is like a toy project and you know they're if you do think about the only thing I see that could cause any kind of existential crisis for Amazon is the government.
And I do think you're having the influence,
being there getting some of those key virginia-maryland folks in your pocket is pretty interesting so so.
I kind of see it as a race between those two Austin if it's a kind of really leaning towards talent and they don't really worry about the government thing I think Austin wins and if they're at the government thing is kind of looming large with them that I think the DC area makes a lot of sense.

Jason:
[15:01] Yeah no I am I tend to lead towards the DC area as well like you if you sort of think of them.
In many ways like Amazon is the next Generation Walmart you know Walmart said really invest in there a lobbying in there and their government relations and,
you know like the guy running the government relations program for Walmart is like Dan Bartlett who's the,
with the press secretary for George Bush and you know there was a bunch of political news a couple weeks ago I had the number three person at the Department of Justice resigned and she resigned to take a VP job at Walmart so I Walmart building these,
this table is like really credible,
Washington folks and if that's important to Walmart like you know odds are it it already is or should be important to Amazon and sew in,
the proximity make some sense when they are just from the odds perspective you got you got three sites so that seems logical the one thing that.

[15:56] Makes me a little dubious of Professor Galloway's.

[16:02] Evaluation is he also throws in New York is the front-runner and is why Jake is because everyone wants to live in New York and I kind of called him out on Twitter he he.
Took the high road and then respond that only people that live in New York want to live in New York that's a little it's a little bit of a reality bubble that New Yorkers have.

Scot:
[16:20] Yeah yeah and you know Newark is on there that's like an no way they.

Jason:
[16:25] Hey that seems like a non-starter to me.

Scot:
[16:27] Yeah yeah you just can't get text out and some of the things that I have and then you saw some interesting news around the go store.

Jason:
[16:35] Yeah I think Jason Del Rey broke this on recode but it appears that they're getting ready to scale that out and open six more of those.
Stores in Time Turner member but I think they they even identified or speculated some of the the potential for sites was.
Austin one of them if I'm remembering right.

Scot:
[16:59] Yeah I think that carved out another couple already in the Seattle area at which makes sense that's what they did at the bookstore stay I think they open to in Seattle and then they went like San Diego Chicago New York kind of thing.

Jason:
[17:10] Yeah if you're really going to Market and try to you know Drive traffic to it it it it's much my door to open multiple sites in the same city because then you can buy.
Geographic marketing Vehicles like newspaper ads and radio ads in television ads you know opening one store each in a bunch of different cities is much more expensive for traffic generation.

Scot:
[17:29] Coon and since this is kind of a clever Segway into the grocery last week in our reader question or listener question segment we did run out of time for one of the ones that came in to Twitter and it was from long-term listener Michelle Grant,
and she asked do you think Amazon will close fresh and Charlie what do you think about the moose and so I think what she's referencing there is so Amazon did do a little bit of a layoff a couple hundred folks and I think it was the fresh team you know cuz now Amazon essentially has there's a lot of irons in the fire when it comes to a grocery store they have Prime now,
they have even like the what is it Warehouse or the the big box thing they have fresh which was the,
jewelry that have go and and the Nets Go curbside thing so it had it in and of course at Whole Foods and now they're doing,
same day delivery they're on their own how do you reconcile all those things.

Jason:
[18:28] So I do think fresh as a standalone fulfillment center,
model probably does go waste of you if you think about it like.
Amazon Fulfillment centers that they generally ship products from them or do One Day deliveries with their Flex drivers from,
they've got these Prime now for filament centers which have a much smaller SKU assortment but you know really optimized for that one and two hour delivery,
in the fresh cities they have a separate fulfillment center that has a lot more cold storage and accommodations for perishable in the drivers,
deliver out of the limited assortment of the fresh profillment Center which was different than the prime now fulfillment center which is different than a,
fulfillment center and now they're announcing that they're going to start delivering inventory straight from Whole Food stores and so what I think is going to happen is that that fresh.
Fulfillment center as a standalone entity goes away most of the volume for delivering perishables in groceries is going to come from the,
the Whole Foods store the Whole Food store. She has a much larger assortment then then fresh did,
and I do think Amazon's continuing to build out there,
fulfillment center capabilities for cold and Frozen so you know we wouldn't be surprised if they have cold capabilities,
in Prime now fulfillment centers and they continue to fulfill some some.

[19:59] Cold items from Prime now but I would imagine that those are mainly items that are synergistic with other,
other types of products that people buy from Prime now so maybe you need some like,
cables in an emergency router for your office and you can also buy you know a case of soda or water you know it wouldn't surprise me if they had those kind of skews in Prime now that you know if you're going to order bananas and milk,
that's more likely going to get fulfilled from a Whole Foods rather than a standalone fresh Depot.

Scot:
[20:30] On the show you guys talk about curbside wins delivery.
Is kind of tougher and probably doesn't win sounds like you just going to reconcile that all down two more like delivery dude do you think Amazon does continue with that curbside I think it's called Amazon go pick up or something.

Jason:
[20:50] Amazon Fresh curbside is it fresh pick up Amazon Fresh pick up,
yeah so there are these two first pick up locations in Seattle I continue to strongly believe,
that the majority of digital grocery shopping is going to be pick up right so you're going to order your digital groceries from Walmart or Kroger.
Or Amazon and you are going to drive to that store.
A surrogate location for that store at a convenient time and have someone to load your groceries in your trunk and that's.
The economics of that are just infinitely more favorable than the economics of delivering a fresh and we can get in the all the reasons why we just explore delivering perishables are much uglier than the economics for delivering.

[21:41] White goods in general merchandise there are niches we're home delivery of fresh make sense and you know rich people in New York and Chicago and California you know where are certainly going to take advantage of that and you know I think.
All of Amazon's offerings at the moment with the exception of those two locations are home delivery in so you know I was kind of answering the Fulfillment question through that lens but I also think I'll be utterly shocked if.
After Amazon turns does Whole Foods into home delivery venues they don't also offer a curbside pickup option.
For pickup at Whole Foods and what's going to be super interesting to me when they do that is,
what and if the pricing difference is between having his groceries delivered and picking them up at the store because at the moment the deliveries free as long as you you know trigger certain thresholds.
And you know but the the cost for delivery are much higher than the curbside pickup cost so it seems like.
You know there's there's going to be a strong argument for there being some price savings if you're willing to pick him up.

Scot:
[22:50] Prequel show thanks for the question sorry we couldn't get it to it last episode of a glad we were able to pick it up kind of rolled up inside of this Amazon Go News,
I'm just wondering I don't think I wanted to pick your brain on the big news kind of over the last week or so was Walmart really miss their e-commerce growth goals for Q4,
I am so I think they came in at a paltry 23% which is kind of fun,
because that's not too shabby but you know why she was expecting 50% which is a Dunham Park orders and then it there analyst day which we talked about on the show,
they're kind of being in their chest and saying hey in 2018 we're going to get this thing cranked up to 60% of the result of that.
Stock have been on quite an upswing since the jet acquisition and a lot of this good e-commerce news and it had a single worst day in history,
I'm from up with a percentage in a point bases so that did not go over well with the street then,
are there is a flurry of Articles you know is Lori on his way out what's going on what what's your take on what happened there.

Jason:
[23:58] Yeah so I mean just a brief moment of silence for all that that value that was lost when they announced that they're e-commerce crew at 23% when they're,
Industries only growing at 16% and oh by the way,
traffic in our stores was up in our stores grew by 3.2% which our store volume is way higher than the,
the unlined volume and way more profitable so they actually like reported really good financial news with this this one miss about what,
you know economically is kind of a relevant portion of their business and they they got cream for it but of course.
You and I are listeners know that that that you know in the long run that that winning e-commerce is is Paramount and so I do think it's fair that investors are.
I really nervous about that that Miss.
So that being said it's interesting cuz you know Walmart had these three phenomenal quarters where they went 63% growth 60% gross 50% growth,
and you know when they are doing those two were a bunch of Acquisitions and everyone's like oh the Acquisitions really paid off.
And Walmart really pushed back on that and said no no no the bulk of this growth is organic.
You know the boat Boca this girl isn't jet or bonobos or ModCloth are you almost out of those those things and so now year later when they kind of lapped those acquisitions.
And the girl that is way down you know people are speculating it's because the the Acquisitions are now.

[25:30] You. They've been in there for a year and said the cops are against.
Against the business Windows Acquisitions and so that hurt them you know Walmart came out and said that they had some Logistics misses and you know that that holiday really had a different mix and that caused them.
Tamisium shipments of missing opportunities but what I haven't seen talked about a lot which to me is really the hidden story of both Walmarts growth and Walmart's Miss.
Is the last topic we just talked about which is grocery so what what listeners need to remember.
Walmart is first and foremost a grocery store I think between 50 and 60% of the revenue is grocery.
And you know a year ago they started rapidly rolling out buy online pickup turn side grocery.
Two individual Walmart stores and so about a year ago they announced they had their thousand.
Grocery pickup store and you know my contention is a huge part of that e-commerce growth is they went from zero groceries to you know some grocery store sales in a thousand stores.
And so now they've lap those thousand stores those those thousand stores are in the comps.
Answer now the growth you know doesn't look as spectacular unless you open.
Another thousand stores which Walmart actually announced they were going to do,
and conspicuously absent in this in these latest announcements was any indication of whether they they hit their goal or didn't hit their goal or they were behind and I really think some of the young to be interested to hear some of the.

[27:03] The stock analyst you know you know if if they asked us questions and if they got good answers cuz to me.

[27:11] We really need to be thinking about these these e-commerce grocery stores a little bit different than pure e-commerce when when Amazon as a product of their e-commerce catalog it's available in all 50 states simultaneously.
The grocery is a store by store basis so you almost need a same-store sales number for e-commerce to really see the true growth.
In an Eakin e-commerce Grocery and so I like that that maybe evolution of the retail financial reporting that we we start to see.

[27:45] One other thing that caught my eye related to that mess is there was funny to me probably not funny to Walmart.
A Blog on gardeners website from a guy Bob head to who's one of the good retail Analyst at Gardner and he was talking about how he seen some substantial price fluctuations at Walmart.
In a centrally he tells the story about how I-44 research she tried to get his family to buy all there.
Their stuff online from Walmart they were they are Walmart shoppers apparently but he tried to get his wife to use walmart.com and she diligently tried and they actually failed because.

[28:23] Walmart online pricing was so much higher than their in-store pricing and so you know Bob speculation is.
That you know part up part of this mess is that they have this disparity pricing strategy between e-commerce and in-store,
and you know that he seen the shift more recently took two closer to Universal pricing and he thinks that might be something at Walmart suggesting.
In response to some of their they're softer e-commerce growth.
In that that is potentially interesting there is this you know huge urine everyday low price retail or it's it's part of your.

[29:04] All brand proposition knew you'd expect to see the lowest price everywhere and if prices are higher online like you know.

[29:11] You can understand why that would alienate the core Walmart Shopper and so that that to me is a interesting part of the story that we haven't heard a lot of Anna's talk about is.
Is the pricing part because we have separately seen Walmart make some announcements.
That you know I kind of funny announcements to hear a retailer make which is.
They're shifting focus of their online inventory to be more profitable and they're actually asking cpgs to make.
More expensive bundles and more expensive products for them so they can get the AO Vivo online up to get profitability up and the sort of.
You know implication and all of this is,
hey we're getting tonight's e-commerce growth e-commerce is going to be meaningful for Walmart but one thing that sucks about it is the economics and you know now Walmart's you know trying to shift to be more more profitable online and so you know when you talk about this growth.
You know is it is it profitable growth in his part of the the softness and Walmart's growth because they have shifted.
They are trying to shift the next to be more profitable online. You know what I don't know but those are going to be the interesting things to follow.

Scot:
[30:18] Any other Walmart new phone cover.

Jason:
[30:24] The couple other interesting things they they they have announced some new brands.
So they watch a bunch of new apparel Brands and I think they officially I think we're might have already been out but I think they officially announced them today as well I'm so again props to them for getting on our data Toro schedule but cities are Brands like time and true,
Tara and Sky nation and I think I'm one call George,
and you know for those that are intimately familiar with Walmart's apparel they've they've had private label apparel for a long time like that you know.

[30:58] It doesn't have a particular good reputation for style or quality and yet I think it's a pretty big seller into these new these new brands are.
Like we were singing The Marketplace the seems like there's a much bigger effort for them to be real brands that are distinct and not simply private label.
And so I think like the shift is yours going to see retailers talk about not their private label but they're owned Brands and so I think Walmart would say the only boats and ModCloth are owned Brands and now time in Fruit owned Branford.
For Walmart so it's going to be interesting to see if they're able to kind of move up market and get a better reputation in a peril.
You know apparel and everyday will prices haven't historically.
You know I've been two things you think I'd together so so I think that's working against them a little bit but they also announced a private label for mattresses that seems like it's directly competing with a Casper's of the world in that that brand is called them.
All is well I believe.

[32:00] And I think some of the new brands are interesting they also announced a couple of redesign so earlier this month they they did a pretty substantial redesign to their mobile app.
And what they did is they put a much more robust what I call in store mode they I think they call it the store system.
And so this is the notion that if you have the Walmart app and you run it in your house you get one experience but if you happen to be standing in a Walmart store and you open the Walmart app.
You get a very different experience that's tailored to the kinds of things you like to do if you're in the store so when you do a search it.
What does the search against that stores local inventory they have maps in the app now for all the stores and they help you find products they connect you with the local customer service and the local service offerings like Walmart pay,
and MoneyGrams and all those sorts of things in the in the store and said they're they're making the the in-store experience on the mobile app much more robust which is interesting and then.

[32:55] They the automatically redesign the home section and they made it you know much richer and content and you know they have some some new shopping utilities like.
Shop for furniture by style for example and things that you know who's more likely Walmart was a pretty straight catalog site so adding this kind of,
editorial element to their site was interesting and then they have teased that in the coming months we should expect to see a pretty substantial redesign of the whole walmart.com so I'm,
I'm always super interested to follow big retailers when they do design refreshes and and see what some of the new thinking might be there.

Scot:
[33:32] Yeah when I saw the all's well so an ounce of the witches the mattress and maybe think they probably went and tried to acquire Casper purple there's like six of these things now I can't keep them all straight Lisa,
are there several others,
and they probably didn't like the prices and then you know that it does seem like they're dime a dozen now so I think they're all coming out of a similar kind of a design studio and tractor in China somewhere and they just kind of said let's just do this ourselves I'm almost in surprise that Amazon hasn't done one hour or maybe Amazon hasn't really realized it.

Jason:
[34:05] No it wouldn't shock me if we see that in the near future.

Scot:
[34:08] Quick one. Since we just talked about Casper I did notice they opened a store in New York City which is continue that Trend we talked a lot about on the show with these.
Digital native Brands getting a certain scale and then having to open stores are I guess they're more showroom me so the mattress you could understand that we're.
You're the only so many people they're going to.
Trust in store trial and then home trial in the return policy and it is I've enjoyed seeing them in Target stores and I know you care so much about them and,
it is nice to have at least get to see one feel it I lay down on it and see what it's like before you take that did to me it's more the time risk of you know.
That's another thing I have to ship it back and all that so that was interesting.

Jason:
[34:52] Yeah absolutely Anna and as we talked about on the show number times I,
brick and mortar stores are a great marketing vehicle for online sales and unlike a lot of other marketing Vehicles which are pure expense you know the store can often pay for itself or be profitable and drive a bunch of traffic. E-commerce business so you know,
opening showrooms particularly in high traffic areas like New York City you can make make a lot of sense for bran.

Scot:
[35:17] Couple quick hits so over on the pier Place side eBay has been pretty quiet on that position front and also in keeping with their timing today they announce who won the first positions in a while another Marketplace and it's pretty interesting so,
eBay has a long history of not doing well in Japan they they had their own Japanese offering,
end of the exit of Japan in 2000 they also didn't do well in China they really struggled with with Asia and general General,
partnership with Yahoo auctions so if you look at the the Japanese Marketplace market today.

[35:54] Dominated by rakatan Yahoo auctions in an Amazon does really well in Japan as well and so they actually just acquired a startup called the starts called juices.
And the name of the marketplace I don't know how to say it so I'll spell it is qoo.
And then one zero I would she so I think you would be cute n. JP that's pretty interesting and I saw a rumor that they paid $700 for that,
so you have to kind of thinking a why would you pick 2018 after you've been out of the market for 18 years.
And my my reading the tea leaves on this is a really good job on kind of,
cross-border trade and enabling people around the world to order from.
Order from sellers across the world and then doing some interesting things with reshipping and,
Google translate and just make the entire eBay catalog as much of it as possible available in areas where the extra don't have a presence so so I imagine when I read this stairs,
there is demand for for you know.
Probably cross-border trade product and this gives them a platform to kind of put that on where is before their Pi just doing this kind of localized and I kind of caught up it's kind of a,
that's kind of a country page where you'll you'll go to eBay. JP but.
The listings are all coming for the US and Europe in and they've been Google translated in that kind of thing so this will I think.

[37:21] Their interest must be that they're seeing something in the date of the newest in Russia for example some of the largest countries for them where they do this and Brazil in other countries.

[37:30] Another couple quick ones back to omni-channel Macy's was in the news this week because they had an awesome 4th quarter,
and I hope you're sitting down Jason but they're same-store sales grew 1.4% year-over-year,
so that was a no cause for celebration I think there was a Wall Street expectation that they actually have negative same-store sales for the last three years they have been contracting so it is good to see them having increased it just kind of interesting you know that.

[37:57] Walmart gets the snot beating out of them for her for 23% growth and e-commerce Macy's I didn't see what they split it out but you know they grew 1.4% and it's kind of like you know,
the through the woods and everything is great. So you know that that is still growing shorter there are smaller than overall retail which I believe was in the high 3% for for offline so that was interesting,
what other kind of couple things.
take out of that announcement they now say they have a third of their skus are with a call Exclusive which to me means more like private label or if they have work with a brand it's only available at Macy's and that seems to be doing well which is at one of the things you and I buy stale retailers to to focus on.
And then they required a beauty product called bluemercury at Sephora.
And I'm not an expert on this and it's evidently to doing really really well and you know it is exclusive to them and I think they're starting to really kind of.
Push that pretty hard the last one I saw that was pretty interesting kind of in the financial news there's been a lot of rumors are Nordstrom's going private and looks like.
Now there's there's all these rumors that that deal is getting done the stock reacted to it so and I noticed that,
Jason is added them to code Commerce which will be his little kind of Sideshow that he does array shop talk he added one of the Nordstrom store that so it'll be interesting you know you can imagine.

[39:25] Is there something going on that's all Jason's going to ask about so you can imagine hopefully maybe a deal will be done by late March or that you know that they're kind of have some timing setup that they can talk about it then or something maybe read too much into that but I thought that was interesting.

Jason:
[39:37] Yeah I know for sure because they normally don't do a ton of publicity so far I think it's Eric Nordstrom that's going to the recode dinner it'll be interesting to hear what he has to say and I I'm sure you're right that you would certainly get some questions about the,
they going private I would do just just one site week Macy's so bluemercury the Cosmetics company their brand that Macy's bought in it and it's killing it luxury cosmetics in general are doing really well it's one of the fast-growing categories and so I told to and Sephora these,
two Standalone Cosmetics retailers are are growing really fast like you're doing much better than then retail in general.
For all of our our cosmetic Savvy wesner's I'll point out that Sephora is a retailer that carries a bunch of Brands including some private label so,
they're probably not the most direct competitor with bluemercury but you know you can think of like a Revlon or L'Oreal or or those those kind of Brands is competing with blue Mercury but evidently the analyst.
I have talked about bluemercury being one of the the crown jewels and one of the great assets assets that Macy's is hat.

[40:46] So do you feel more more cosmetic aware now Scott.

[40:54] What notes are they both carry a bunch of national Brands they both have their own stuff but the the the real Innovation here is why.
Before Sephora.
If you are interested in shopping for Cosmetics you probably went to a department store when you are a young girl and you became a certain age your mom probably took you to a department store to get your first cosmetics and,
all the Cosmetics were shop and Shop so you had the first and foremost pick a brand with your feet so you walked to the Mac counter or you you walked to the,
repair counter or whatever whatever Cosmetics you had an affinity for and you shocked by brand,
and so support I had this sort of game-changing notion that like hey people don't want to stop by.
Brand necessarily they want to shop I use case so I had to put all the foundations here from all the brands and let's put on the moisturizers over here from all the brands and that,
that concept played really well with consumers in and Trigger 2 for on this rapid growth in Ulta is a more recent competitor that is kind of followed in in support his footsteps,
and done a really good job of adding Professional Services to the store in a salon and things like that so that's now you really have the whole Cosmetics history.

Scot:
[42:09] Collective I was thinking we should do a deep that the boom you just did it right in the middle of news awesome the Deep dive delicious nugget inside of some e-commerce news.

Jason:
[42:18] Exact just wanted to establish my Qualls as knowing more about Cosmetics than any dude should know.

Scot:
[42:25] You die definitely bouncy.

Jason:
[42:27] I appreciate it so going back to omni-channel there was also a few interesting news nip it's about Target so one that caught my eye because it validated smart-aleck opinion I had,
you know a couple months ago Target acquired this company called shipped and shipped as a.
A third-party delivery service that would deliver purchases from a variety of stores to a consumer's home and there.

[42:55] Yeah you pay an annual fee of like $99 and then you get free home delivery you know.
Over some purchase threshold like 35 bucks or something so Target bought them and at the time I was like Hey that may be a good acquisition that may get Target some good capability for home delivery that they want but.
They're likely to have overpaid because.
Shipped was this two-sided marketplace where you know they tried to acquire customers that were customers of ship to not Target and they pay $100 to ship to be a member,
and the reason that they would get a bunch of customers is that the utility those customers get as they get free home delivery from the bunch of retailers to ship Ted 2,
appeal to a bunch of retailers and they had to appeal to a bunch of consumers and when one retailer buys them suddenly it's much less appealing.
For for ship to work with all these other retailers in that you know it has this negative Cascade effect on the whole two-sided Marketplace model,
and at the time of the announcement that I've no no no we're going to contain around another standing in entity and we're going to continue to.
To try to support all those retailers so you know interesting side-note 60 days later shift is no longer delivering goods from Walmart so.

[44:12] You may have paid your $99 under the belief that you could get free home delivery from Sam's Club and ship just pulled that that rug out from Target has pulled that rag out from under the ship's customers.
You know which in my mind means shipped is at the end of the day going to end up being a convenience delivery tool for Target purchases which.

[44:30] Maybe super useful but it's it's a different model than the original ship model so I found that you know interesting or self validating made me feel good about myself.
And then there was kind of an interesting interview that we saw with Brian Cornell the CEO of Target I think he was on Squawk Box and you know who's making the point about.

[44:52] The value of Target stores and how you know they're very successfully shipping from stores and they're making major investment and remodeling stores and how how important stores are Little Mix,
all stuff that I wholeheartedly agree with that I'm glad to see Target doing and if it's I think that the Marquee quote out of this whole thing you know the kind of got the headline was.
Brian Cornell says e-commerce is in everything most us Dale Sale still happen in stores.
And I have to be honest I don't love quotes like that because in my mind you know half of all Target sales are digitally influenced.
And you know dis deciding that a sale is a store sale or an online sale at this point is kind of silly that 70% of all their online orders they ship from the stores and now they have this ship thing to deliver from.
From the stores like you know I don't think Brian should be talking about his e-commerce sales versus Is Us sales and the my sort of.
Smart aleck metaphor is it's like the old retail Guy saying the only profitable part of our stores the POS because that's where all the sales are driven in the shells don't drive any sale so they're less valuable we should not invest in the shelves.
Obviously like it doesn't matter where the sale is consummated like the whole customer experience is super important.

Scot:
[46:07] Feel like there's a joke in there but I didn't get it some kind of old school retail joke.

Jason:
[46:14] Yeah I'll put the laugh track in so people will think that everyone else got it even if you didn't.
But we are up on time. Because I know we're trying to make the news episodes a bit shorter as a is an amenity to our listeners,
I do a reminder when I get in to see some of you in Chicago at the path to purchase Summit Monday March 12th,
Scot is going to be part of the Great track on Marketplace in Amazon selling and I I'm going to be.
In the audience learning from that one and we'll be podcasting some live shots from there so.
Hope to see some of you then as always love to continue the the conversation on Facebook so if you if you have any questions or comments about this episode or 100 out some of the many things. And I got wrong feel free to jump on face.
And we'll keep the conversation going and as always if you loved the show we would greatly appreciate that five star review on iTune so this would be a great week.
Finally jumped on the website go finder show all you have to do is type e-commerce in the iTunes where the first one they don't show up.
Click on that 5-star review and we will be forever indebted to you.

Scot:
[47:23] Thanks for joining us everyone and also when you're on iTunes hit the Subscribe button to lock people just download each episode which is fine but his subscribe it also helps us on the rankings and we appreciate that.

Jason:
[47:34] Absolutely so until next time happy commercing.

Feb 17, 2018

EP117 - Listener Questions

Amazon launches"Ship with Amazon"

Listener Questions

Q1: Amit Agarwal- Thanks for the amazing podcast. What is the future trend in pricing ? EDLP or coupon based pricing?

<Jason> Most new retailers will adopts EDLP, promotions aren't as effective in the age of transparency, but it's very hard for existing promotional retailer to switch.  Eventually we'll get to more dynamic, personalzied pricing.  Every Nanosecond Low Pricing #ENLP!

Q2: Kiri MastersWhat are the coolest or smartest things that brands and retailers are doing with voice commerce? And, what is within reach for smaller brands who don't have a $200k+ budget to drop on developing skills, etc. Where are we on the maturity curve?

<Jason> Transactions are limited to recurring and replenishment purchases, so Pizza places and Starbucks have the early lead.  Brands like Patron and Tide have made good use of voice skills for top of funnel marketing.  Small brands should think about voice for on-site search, and voice SEO on search engines.  It's VERY early in the maturity curve.

Q3: Patrick ParolineHi guys I love the podcast listen to it every week. When the numbers say that e-commerce revenue is up 17% does that include Amazon? If so what would be the e-commerce industry revenue increase if you took out Amazon? I believe you guys said that Walmart.com growing and 60% and Amazon at 30%. Would this mean if you removed these two companies then e-commerce as a whole is contracting

<Scot> Good question!  If you take the top 3 retailers out, e-commerce growth is very modest:

  2017 GMV 2018 GMV 2018 Share YoY Growth
Amazon $177 $230 49% 30%
eBay $35 $37 8% 5%
Walmart $15 $24 5% 60%
Other $173 $177 38% 2%
Total $400 $468   17%

Most e-commerce data is based on or correlated to the US Commerce Dept data, which is somewhat suspect.  Jason and I both believe the total market is probably a bigger, which means "Other" is probably bigger, and growing faster than 2% but still much slower than Amazon/Walmart.

Q4: Ari Nahmani - Mobile payments in 2018 - can we hear more about Android Pay / Google Payments API, Apple Pay, W3C Payment Request API, etc? Do we have any data that shows that when implemented properly, these things truly reduce the 'mobile gap'?

<Jason> Apple Pay and GooglePay have loyal but small user bases.  Paypal and Pay With Amazon have proven that digital wallets do improve conversion.  W3C Payment Request is great, easy to implement and likely to improve conversion, most sites should have it on their roadmap to implement.

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

Episode 117 of the Jason & Scot show was recorded on Thursday February 15, 2018.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show at this is episode 117 being recorded on Thursday February 15th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot:
[0:40] PJ's women walking back Justin Scott show listeners,
will Jason's covellite Newsweek to our couple things want to cover before we jump into listener news we warmed up the old Facebook page which,
is my responsibility and I have to have a met a couple that I have not been very active posting to our listeners there so one of my New Year's resolutions I know it's so late for those here.
Late February is to try to be more active on there and then gauge hook so we are going to be able to handle on some pretty great listener questions so we got today.
I before you jump into that you have a new gadget on here about.

Jason:
[1:19] I did I'm a very romantic guy so for Valentine's Day I got my wife a apple home pod.

Scot:
[1:25] Wow nice that will last longer than a dozen roses.

Jason:
[1:30] Yeah it will although I don't think it was a big hit I think she appreciated the gesture and my super artistic wrapping you can you can't even imagine how impressive that was.
But the homepod itself I wasn't personally very excited about like I had read a bunch of mediocre reviews as we talked a lot about on the show I have a house full of Alexa devices.
Extra Alexa devices at the moment.

[2:01] Into the really wasn't anything I was looking forward to in a homepod but my wife is heavily steeped in the Apple Echo System she had mentioned it a few times.
And she is very heavy Apple music user so I figured okay well you know what I mean it's present for her she's been talking about so we'll we'll go ahead and get one and I'll surprise her.
And I'm sorry to report that all of the mediocre reviews we sort of experience first-hand right I guess.

[2:33] Like I don't think Siri is as useful as as Alexa in general and the version of Siri on the the.
Homepod is kind of a dumb down version of Siri so it was kind of annoying it seems to understand us a less than.

[2:49] Then the Alexa does I will say the audio Fidelity is great like the audio it's definitely a higher-quality speaker than any of my Alexa devices which are all Amazon first-party ones I don't have any of the.

[3:00] The third party speakers sounds great but the voice interface sucks and it's it's just not compelling to have this.

[3:09] Extra Gadget in your house just to play One music service.

[3:16] And so I think even my wife whose Apple fangirl and kind of disposed to like their stuff I don't think she likes it enough to keep.

Scot:
[3:25] Man do you have the so I've read a lot of people that compare it to the Sonos Sofia what their name is for the one with Alexa.

Jason:
[3:32] I think it's the soonest one that has Alexa in it and I played with it.
I haven't had it in my house and I think those are mixed bag so I could this has really good audio quality in general I actually have a bunch of Sonos speakers.

[3:49] And people are saying that it's comprable audio Fidelity to the homepod if anything it's maybe,
a hair lower-quality there's some pretty sophisticated auto-tuning in the Apple speaker that I'm not sure the Sonos matches but that sentence is a hundred bucks of alas,
you know it's it's debatable whether it has worse audio Fidelity and it supports Alexa and there soon going to add Google Assistant to it as well so way better value way more utility the only reason I even bought one.

[4:23] Is it actually Amazon slightly neuters all the third party speakers so,
the only music service that the third party speakers. Port is Amazon music which is mostly what we use in my family on the Alexa devices but if you're a Spotify or Pandora user and you know there's a very good.
Spotify experience on the on the indigenous Alexis I think I think that might be what you use if I remember right.

[4:52] Spotify got yep good sapientrazorfish clients so we certainly like Spotify.

[4:59] But they're the the.

[5:04] Amazon doesn't currently make that available on the 3rd party speakers that have Alexa in it which isn't like clearly an intentional way to disadvantage the speakers.

Scot:
[5:14] Directions to Sonos I have also a Sonos system and it's pretty agnostic you know so I can like being Spotify to it XM radio I think it'll do Apple music.

Jason:
[5:26] I think it will and.

Scot:
[5:29] Just weird that that one is going to be like almost a step back for them.

Jason:
[5:33] Well so whistler's check me on this but I think the actual case the Sonos one speaker is a Sonos speaker and so it actually runs the Sonos firmware and you can use the Sonos app so so you can run Spotify.
Using the Sonos app on your Sonos one speaker what you can't do is use Alexa voice commands to play,
Sonos to play Spotify music on that Sonos one.

Scot:
[5:58] Look up a lot about the speaker Market here and then I've seen reports that the homepod is leaving white rings on Aaron's furniture did did it also damage your furniture.

Jason:
[6:11] So it is not where we have it on Formica desk so it may be a little safer but so it's not on like a nice piece of wood furniture but I have seen the same report it is,
the speakers both slightly smaller than I expected it to be I mean it's it's it's about the same height as my Alexa's and it's a little fatter and I expected it to be.

[6:33] Maybe taller but it's it's super heavy for its eyes like it's very it's very dancing it's because it has this big subwoofer in the bottom then I guess it's just now putting so much low.
Low energy that it's moving around a little bit and it has like this white rubberized.
Donut on the bottom of it and apparently when that thing moves around it it's leaving a mark.

Scot:
[6:59] So you're just about the same size as the old the original XO kind of the cylinder or more like the little one that has like a felt kind of filter.

Jason:
[7:07] Yeah I know so it's the same height,
patches I'm staring at them side-by-side it's it's like a touch shorter than an original of Alexa cylinder it's much it's much better than Alexa in fact it's it's.

[7:25] Diameter is probably like at least twice twice the diameter of the Alexa.

Scot:
[7:31] Well.

Jason:
[7:32] And it does have a weird it it it's also covered in fabric but what's it weird it freaked me out the first time I picked it up it almost feels like you can Dent it it almost feels like it squishes in a little bit.

[7:44] And then it seems like it it restores it's ya.

Scot:
[7:48] Yeah that makes you were either going to punch her thumb through the thing you don't want to do that.
Cool thanks for that Gadget experience report it wouldn't be a Jason Scott show without some.
Amazon news new your margin.

[8:15] Okay this one dropped it was bad timing for us from a podcast perspective cuz we recorded our show last Thursday,
Idol episode 116 and then sure enough Friday morning so big amazon news dropped and this is Amazon you know.
It's not clear if it was,
leader what happened but yeah they've been working with some third-party sellers for this full-on delivery service that's called ship with Amazon so it's going to Pilot in La it looks like and articles I read said.
It's going to roll out in 240 cities pretty quickly and the reason that makes sense is prime now is in 40 cities and Prime now built this super like.
299 car delivery Network called Flex So reading those tea leaves you know what I'm thinking is happening here is.

[9:05] Amazon started Flex to work with their 40 Prime now the foeman centers which are a different footprint than their normal.
Fulfillment centers then they started doing some deliveries out of traditional fulfillment centers with their own network of flex drivers and also.
Actually Amazon employees and whatnot and then now it looks like they will offer to third-party sellers the ability to ship with Amazon where if you were a third party and La let's say you were.
I'll pick on my friend Jackson who's I-84 city has a big Warehouse in LA and someone in La bought one of those products they could get that product in 2 hours and an Amazon driver would come to his Warehouse.
Pick this up and take it to the customer and so that would Leverage The flexnetwork so.

[9:52] That's pretty nursing and you know I we've been talking a lot on the show it was my 2017 prediction that I react for this year that Amazon will get more into dolak Direct Delivery and here you see yeah it's it's not.

[10:06] That hard to jump from that part of the Venn diagram to hey you.
Retail RX Nordstrom's here's your fulfillment centers we can help you deliver as well and then you can even adjust that product into the.
Burgeoning Amazon Fulfillment system network with airplanes and everything and effectively have a full-on FedEx UPS competitor.

Jason:
[10:31] Yeah and I think that's something that that you in particular but we've we've discussed on the show a number of times that that that seems like a likely play for Amazon to make.

Scot:
[10:44] Yeah it is there since internet retailer and I'll put in there this cuz I know you how I feel about surveys but they did a survey of I think it was 200 retailers and when I looked at, the size of sellers you know,
you know and it but then like a good a third of them were more larger retailers and I are 500 types awesome like 70% said they would,
it was either strongly try or are we.

[11:10] Only 30% said they wouldn't use an Amazon shipping service in the 70% said half of that 70% said it would have to be a bit cheaper than current offerings and I think it's very very interesting.

[11:22] This holiday,
probably not because usually impacted but next year's come you're very interesting because I know you said when you draw the lines of the amount of shipping needed out there and what's available Amazon will it consumed most of it and you know seems like Amazon's read those tea leaves and is finding a release valve with this new ship with Amazon program.

Jason:
[11:44] Exactly and you know a couple of things kind of come to mind,
the day before and a podcast we we had talked about some of their seller fulfilled FBA programs and including a new program where they were putting their own software and customers warehouses in,
clearly like those two pieces of news are at least partially related you can imagine if a bunch of.
Shippers are running Amazon software to manage their shipment and you know that that,
Doppler could take that shipping method and and you don't have sort of a biased towards Amazon shipping service.

Scot:
[12:27] Yeah yeah it's good if it's going to be interesting to see how this plays out and then you know a lot of people will say,
well you know this route is unprofitable that routes and profitable I was kind of stuff but you don't have me watch Amazon kind of decompose other markets pretty quickly they were the prophet is so don't go and you know it there.
Their profit is your profit is their opportunity right so they're going to go and they're going to find the routes that are most profitable for third-party shippers and they're going to pull those in the house cuz it'll by Logic if it's.
Probable for for the shipper it will be.
Amazon will have the best savings by cutting that Loop out so so so we really interesting to see what happens when they start doing this you know you can only look at it from a low Amazon just overdid 1.1% of volume because that .1% of volume could be like,
8% of margin of the deal that people have one with Amazon supposed to be really interesting to watch the positioning here.

Jason:
[13:26] Exactly I think like they think they don't have to completely match,
UPS and FedEx is Network to disrupt them right if they just take some of those most profitable deliveries and bring those in-house you know that that can create enough of an inflection point that causes some new unique paying for UPS and FedEx and I think,
I don't think Amazon wakes up in the morning and goes how can we ruin UPS is life and I think they're more thinking about how they can make their own lives better you know this,
saw some of their their Peak demand problems that solves like controlling one of their fastest growing expensive lines which is shipping and in the long run you could imagine then building all kinds of.
Reverse Logistics services that UPS and FedEx just might not be that interested in but that are.
Really important customer experiences for e-commerce right like so easier returns.
You know you you hypothesized that hey there's a bunch of warehouses that are all all the Feeling by Amazon and they all have Amazon software in there like Amazon could have literally trade a new Marketplace.
For warehouse capacity and sort of flex store Amazon Goods in other people's warehouses that are running their software you know you in a two-sided Marketplace exactly.
Like they do for for 3rd party selling so so lots of interesting new things that could evolve from here that make the super interesting.

[14:55] A couple of things like that that I had to point out,
I do feel like you have been talking about this for an awfully long time I know calling Sebastian was one of the first analyst to talk about this but I did have to chuckle a little bit like I feel like the entire all of Twitter broke their arms congratulating themselves.
Predicting this.

[15:14] And I'm not sure like that you know it you had to be the cleverest person in the world to predict this 3 months ago that Amazon would eventually try to monetize this like you have given that that's the model they've.
They followed with so many other things so I did I do think it's funny I may be made a joke that like the only person on the planet that didn't fully predict this is the CEO of of ups that kind of had a.
Last year that we don't believe that there is for Amazon strategy is to do it themselves and the reason we believe that is is we have this huge infrastructure we're investing in technology we have a great Mutual relationship with Amazon.
Like you don't obviously that was a bad day at UPS when when Amazon when SWA week.
And coincidentally enough this is the month when our friends at FedEx and UPS do their annual rate increases and so this year if you're a shipper.
You're the base UPS and FedEx rate went up by 4.9% so that's a huge.

[16:17] Operating expense for most e-commerce business is to absorb mini which are struggling to be profitable already.
Now they're their operating costs are 5% more and oh by the way most of the shipping went up even higher because.
FedEx and UPS are really design for business-to-business shipping so they're highly optimized for taking package it Parcels 2.
Businesses their least efficient at deliver at residential deliveries and so a number of years ago they introduced a surcharge.
For residential deliveries to kind of compensate them for the for the the greater expensive this home deliveries and those surcharges went up its kind of,
on a sliding scale so it's there's not an exact number but the surcharges went up like 8%.

[17:05] So very meaningful increases from FedEx and UPS and it's cool you know they're there.
Maxed out on capacity they're not growing as fast as demand is growing and so they're trying to you know maximize the value of the capacity they have by charging more.

Scot:
[17:21] Yeah yeah and a couple other interesting facts so FedEx says no one customers more than 3% of their volume so that you know a lot of people read that and say that's kind of where Amazon is Amazon definitely sends,
you know the most between faxing UPS to UPS and UPS says Amazon's about 10% of their volume so it's not cataclysmic for any of these guys.

[17:45] To go to go to lose some of the Amazon business what would I think everyone underestimates though is Amazon just kind of you know.

[17:53] Picking these very profitable businesses and offering them even if it doesn't involve Amazon it all eventually and then that's going to be your just like cloud computing you can you can host Netflix host you know on 8th and it's like.

[18:06] Competitor using their Cloud infrastructure which is the old world off on the world doesn't make any sense at all,
but enough for Netflix economically are so attractive they're willing to do that and you don't so what if I don't know,
I don't Walmart would never do it but what if Macy's start Cent shipping ring what Apple started doing deliveries using Amazon Network you know that starts to get.

[18:29] Pretty interesting and mind-bending of what some implications are.

Jason:
[18:33] The apps absolutely I will look like,
minor props like UPS and FedEx are well-run companies like there's they're smart to be making the most they can on the capacity they have and props to them for not having a huge customer concentration problem is that in most B2B business as you you have a much bigger concentration problem then your largest customer being 3% of your business.

Scot:
[18:57] Yeah cool so that was the big news let's make sure we will make sure we cover these listener questions so let's jump into him.

[19:10] Questions questionnaire questionnaire questionnaire questions Jason we got for really meaty questions,
and it was good news for me three of them were really in your alley and one is mine so let's ask you the first question so this is from admit Agarwal and he says thanks amazing podcast so clearly am it has impeccable taste,
and and is awesome to begin with and he wants to know what's the future Trend in pricing everyday low pricing or coupon base.
Pricing?? So maybe.
You know I know your ninja live on this but maybe give us a 101 on What is edlp what's it mean online and then where do you think kind of retail pricing goes in and eCommerce pricing.

Jason:
[20:00] Yeah,
so so edlp is an acronym for everyday low prices in the retail Echo System the retailer that then most.
Support cdlp unit it literally is sort of kind of their their core value proposition is Walmart so in in general they they very aggressively try to get,
prices on all their goods as low as possible and in general the pricing does not fluctuate a lot based on sales and promotions.

Scot:
[20:30] The idea is the consumer doesn't have to worry that they're getting low price they just kind of know and and all automatically roll it back if if target has toothpaste at a buck you know you can count on Walmart to do a quick roll back and I'll be at like $0.99 so.

Jason:
[20:45] NN light they don't make as big a deal about it being their cultural diversity different reason Costco is a great example of edlp like they,
Costco literally has hard rules for the merchant about,
the maximum margin they can take on a product so when the price to them goes down they they are literally mandated to pass that price on to the,
the customer and so you know and you don't answer I walk through Costco looking for sales you your condition that everything in prayer and Costco is a.
Consistent like you know good deal based on volume and and all these things and in so.
Those are the kind of retailers that are on the edlp side of the spectrum for a long time JCPenney was the poster child for promotional pricing and they still are very promotional but what made in the poster child is.
When the former retail Guru from Apple Ron Johnson went to JCPenney he tried to change them from their highly promotional pricing strategy.
To essentially edlp and said that that really raise the profile of how promotional.

[21:53] JCPenney had been before but you know I would argue Macy is very is very promotional.
And you know frankly most of retailers is pretty promotional said that the outliers are there.
They're the largest retailers in in North America are the edlp retailers these new hyper aggressive grocery stores like Aldi and Lidl are also a deal.

[22:20] So what's the future.
I think the future is edlp like a if you just do a survey of the most successful retailers.
They're edlp another and this is straining the definition of edlp slightly but another hyper successful retailer that edlp is Apple.

[22:40] Like not not very promotional like the low price isn't particularly low.

[22:46] You know it's very rare that they have deals and when they have deals they're not very deep.
Very very consistent pricing and you've never seen a sale sign has never popped up anywhere in an Apple Store.
So you work at all this successful retailers they're all edlp you look at a lot of the struggling retailers there more promotional.

[23:08] You know I'm not sure that's that's a complete causation vs. correlation the reason I say that you DLP is the future pricing is.
Because of digital disruption right like thanks to all the research we now do online and you know are huge access to information and the fact.

[23:28] That you know there are no more secrets in the world anymore we've shifted from this world of what I call Price office gation where you essentially.
Only saw the prices the retailer wanted you to see and when they did this kind of like fake is was pricing where they show you a low price high price Market out and show you a low price.
You have no way to know that that high price wasn't really the price that was offered yesterday.
Until you would believe the retailer today you read some app or some blog or you get some some.
Email newsletter,
and you you know exactly what retailers are playing what games with pricing until you we now have work this emerging world of perfect transparency.
And in the world a perfect transparency promotions just aren't as effective.
As they they used to be a lot of the the promotions rely on the psychological tricks that don't work as well when the customer is fully armed with all the information and who has a better deal.
And how much more or less you're paying than the best deal in all these sorts of things so I sort of feel in general that transparency is.
Forcing the world to edlp the most successful retailers are edlp and then I have to throw a huge caveat out there as.
Both Macy's in the distant past in JCPenney more recently have proven to us.
It's next to impossible to transition from being a promotional retailer to and edlp retailer.

[24:58] So when customers are accustomed to those promotions they punish you when you try to make that transition and no return that I'm aware of his been willing to stick with.
That transition long enough to make it work,
so they all have tried taking an early hit and kind of reverted to the original pricing model in the same things are the plays out every holiday season when retailers,
rely on promotions to sell more over the holidays and to comp against last year when they were also promotional in so we like most retailers that like.
Have a history of promotions become addicted to those promotions and so far it's proven to be a almost unkinkable addiction so,
don't expect to see a bunch of retards Sayo Goldberg said edlp beats promotional pricing so we're going to switch,
I think you're going to have to wait for those business models to those retailers though to sort of expire or turn out and you'll see the majority of new retailers emerging and it's really all the Disney DeBrands adopting.
Much more edlp pricing strategies and then the one big caveat on all of this is the new replacement for promotions in this edlp world because,
personalized Dynamic pricing right so we're just starting to see this but in lieu of a one-size-fits-all 30% off on these deals.

[26:29] Are all the custom offers you're going to get when you abandon something in your car that's based on,
your unique shopping behavior in your past purchases and all the evil data that the marketers have collected about you and so you know I think Amazon's a perfect example of a highly dynamic edlp,
pricer.

Scot:
[26:52] Yeah yeah the it's interesting because someone asked me Walmart,
Cyprus NASA you know how do you think about Amazon in a DLP DLP world and I think of it as like every nanosecond low pricing right so full disclosure one of our futures at Channel advisor is every pricing engine and worship to these things and this is a very popular functionality for sellers cuz once you get to scale,
you literally cannot keep up with the marketplace it's effectively a stock market for products on Amazon every,
every sin is constantly repricing and sometimes it's up sometimes it's down.
So this is why you know the Amazon bookstore doesn't have prices because they may find the,
book that you're looking at 5 minutes ago lowered his price somewhere and they want to lower that price in a physical world you you can't change prices that quickly because the infrastructure just not really quite there yet so.

[27:49] What is that do so.

[27:52] Select Plus use Walmart to pick on them so they're they're edlp but then online they're going to be competing with Amazon so do you have these periods of time where your online prices are are very kind of more dynamic in your storage cuz of the,
the nature of the the store being slow to be able to change prices.

Jason:
[28:09] Exactly that is the common practice right now is that very few really Progressive retailers have adopted what I call Universal pricing which means.
They are for the same price to you regardless of Channel.
Because they're edlp in the stores and they are there more to your point that you know there more Dynamic then daily online and then in the case of.

[28:38] Walmart specifically like you can even think about the you know as as they sort of Jetta fi the value propositions at Walmart right,
where you know jet will give you a custom discount based on your purchase as you're buying a bunch of stuff from this particular fulfillment center,
so I'm going to make other purchases from that fulfillment center cheaper,
or you're buying products from this particular vendor on the make other purchases from that vendor cheaper or you know that you opt out of some of the optional cost.
And those sorts of things a big version of Walmart adopting that strategy more more globally is when you order something online from Walmart.
And you're willing to have that item shipped to the store instead of to your home.
Walmart has a very efficient delivery vehicle for delivering items to store and so.
You're some of that savings that they're getting by not having to use UPS there now passing on to the customer and so the the ramifications of that.
Greater Dynamic pricing online and then the definite ramifications of the personalized pricing online that your Point University retards have tried to do.
Personal product pricing in in store.
Has resulted in there being some unfortunate price fragmentation where you know there are now.
Multiple prices at at Walmart right and I I feel like that's a imperfect compromise that Walmart has to deal with because.

[30:07] Technically part of edlp should be it's the same low price everywhere.
But because they're trying to offer this Dynamic pricing in this personalized offer system the pricing is different and.

[30:20] Frankly getting more complicated not less because if you order online groceries and you're going to do curbside pickup.

[30:28] Should you pay the same price for someone to walk around that store and pick all those items for you as someone that bought them in the store and did the work them self like you could you could you don't argue.
That there should be a different price for curbside pickup in a different price for delivery and in general we've learned from the psychology of consumers that they don't like paying fees so they'd rather those cost be.
Built into the the product prices but then that means wait a minute there's an online price at Walmart on a grocery pick-up price at Walmart and an in-store price at Walmart and you know that it flies in the face of the,
original Sam Walton edlp premise so it's a it's a tricky clean world at the moment in the long run,
I think stores figure out how to get more dynamic in the store and then we get back to more Universal pricing in the same offer everywhere and,
you know that my colleagues are laughing at their wissen to this right now because I'm famous for every year pretty thing that this is going to be the year when we start to see much greater adoption of electronic price tags in electronic bag tags.
Because retailers need to get more dynamic in the store and daily repricing is no longer Dynamic enough in these electronic back tags are the way to do that and every year I predicted in it it never seems to happen.

Scot:
[31:50] 101 interesting outcropping of this that I find really fascinating and if we run into this a lot of Channel visor is.
All this this topics that we talked about create and efficiencies in the system and when you have in efficiencies they can get to be pretty wide you have.
Product like all product arbitrageurs so for you it was classic example is.
The arbitraging between offline and online so someone will become an expert at something like a lot of these guys are involved in the sneaker world so that they'll have a really good idea of what you know.
Every line of Nikes and Adidas and whatnot are worth more than they know that like Footlocker and the the stores they do their markdowns on Thursdays.

[32:34] So the lineup at the campout look at there and they will literally load up car loads of these things.
Take him to Warehouse sell them on eBay and Amazon for like 30% milk.
I brought that because you know the store is inefficiently running this algorithm and there's these people that that are taking advantage of their their you know.

[32:54] Whatever I would argue it's inefficient because they're they're arbitraging and getting the value from that in efficiencies.
And then you know it gets even more crazy because there's people that will look at the inefficiency between Market places like eBay Amazon and Walmart and no actually take still discover a product on,
what's a eBay bid selling for 30% more on Amazon that it does for eBay for whatever reason maybe eBay search engines kind of wonky or something there's a variety of reasons these things happen,
that should take that product list on Amazon never touch it and then someone buys on Amazon and they'll go then go buy it on eBay and then ship it.
To the Amazon consumer so it's like a zero inventory Arbitrage that you can do and then they are.

[33:43] Adult for this kind of thing so most people build custom soccer for that but I've run into folks they're doing hundreds of millions of dollars in gmv,
and you know what you take fees out and stuff it's not usually look at it but they can maybe make five to 10 points if they pick their arbitrageurs right so these are these are $109 businesses usually without any employees that are run by robots that sit there and and do Wall Street level arbitration on products between stores Market places and things like that it's pretty,
pretty wild funny when you think about it.

Jason:
[34:16] That's I think that the crazy high-volume version of that below volume version I think it is pretty common it's a common side hustle for college kids,
to do the online or offline to online Arbitrage there now I like three or four mobile apps that you can literally install on your phone,
go scanning go skin skus that are on sale in these retail stores or even better go to stores that are having bankruptcy liquidation sales and apple tell you in real-time what products are profitable,
to buy from that store and go list on the marketplaces in the App Store,
darn polished and sophisticated they factor in like all the FBA handling and return rates and everything is pretty sweater.

Scot:
[35:02] Scream isn't,
well we could go on for pricing for the whole show but we have more questions this will probably be a short ones that's hope so but will first of all thanks for that awesome question that was great hopefully we kind of dug into the the Rita we're looking for question number to this one's also for you Jason what are the coolest or smartest things that brand retailers are doing with voice Commerce,
and what's Within Reach for smaller Brands who don't have a hundreds of thousands of dollar budget to drop on developing skills and in that kind of thing and where are we on the maturity curve so it's kind of three questions in there so so I guess question number one is what are some cool skills you've seen that the show what brands are doing with the,
The Voice Commerce guys.

Jason:
[35:43] I'm not that I want to answer your question but I want to take one step back and sort of highlight like a lot of times when people talk about,
voice Commerce they're talking about actually doing transactions you know so like you know Alexa order batteries type.
Type of experiences and that certainly is one element of voice Commerce like I would point out there's a lot of other parts of voice Commerce there are.
Marketing tools and so a lot of the skills in the Alexa echo system that are skills that are published by a brand are actually more marketing tools.

[36:19] Primarily trying to drive more interactions with the brands and more brand awareness and more brand Affinity than they are sell a specific product like you know immediately and so,
when you say What brands are doing the really smart things I actually think,
voice voice transactions are relatively nascent so it's pretty small like in general we think there's probably 30 million of these devices and in North America right now so it's you know addressable Market compared to the,
190 million households online is smaller you know 8.

[36:57] Small majority so maybe more than 50% of those those devices,
have ever been used for a voice transaction and that certainly isn't the most common way that those households do transaction so the total number of transactions on voice there's no good data out there but,
but our guesstimate sorry that it's pretty low and so I'm not sure I point to any brand other than Amazon and say hey good job,
selling a bunch of stuff directly from your voice interface so that the,
the ways that voicing most interesting are from one of these marketing things and so,
there are clever things Patron has a great skill for helping people explore in the stuff discover new cocktails that all conveniently enough.
Can be made with Patron tequila,
but it's a relatively sticky skill that has like a high,
active user rate that helps Patron build a brand once once that skill you know gets into the Zeitgeist of those homes it's hard for another brand to come in,
you know with an alternative Bartender app right and like to me one of the Marquee examples of this is the tide stain app which is kind of clever,
you know you if you spill some pomegranate seeds on your table cloth and now you've got this pomegranate stain and what's the best way to get that stain out is it.
Vinegar as a club soda how should you pretreat away what should you do so this app gives you advice on how to to treat all the different stains.

[38:34] That you might come across and it's branded by tide and remind you to use,
tide products to help laundry all this thing so I think some of those kind of brand Affinity apps are the smartest apps then you know there are a few categories were voice,
transactions are more common so I think the the Pizza Hut app is a good example of a highly recurring,
consistent,
transaction that people tend to do obviously in my personal Echo System the the Starbucks voice ordering app would be most useful,
because I travel so much I go to so many different Starbucks that it's actually not super useful in my household but,
for many people I'm sure that the the Alexa app to trigger a Starbucks mobile order in and pay is is,
a relatively high volume app so I think those are awesome good ideas I would also remind users that,
there's a significant amount of voice search going on so Microsoft has 20% of all Bing searches are boys I don't know what the Google percentages is probably not as high because it's not built in the Everett.
Every Google device but every laptop is running Google but.
It also is probably as a meaningful number and then more more e-commerce sites are building voice as an interface into their own website so if you're,
a brand that has Shoppers shopping on your own e-commerce site and they're heavily mobile users it off and is easier to say a search query then to type it on a mobile phone.

[40:09] And so you know we're starting to see some meaningful adoption.
From voice search on your site and so when you say like hey I'm a smaller brand I can't afford the investment the patron or Procter & Gamble made in there.
They're Alexa skills.
And I would highlight is that she not that expensive to build a skill it's pretty expensive to market the scale which both patronen and Procter & Gamble do quite a bit of.
Some of the the lower-cost ways to implement Voice or it's it's pretty inexpensive to have a third-party partner add voice search to your existing,
e-commerce search platform and it's super low cost to start doing some voice SEO to start optimizing your keywords for the things people say,
into being instead of the way the things people type so I think it's still super early days I think voice is.
A more useful tool for marketing than it is for actual transactions I think in the long run we're going to see boys shoes for a lot of transactions but it's going to be a specific type of transaction which are those.
Replenishment Auto fulfillment type orders I think you can use voice a lot to add and delete things from.
Your regular shopping list so you're going to say Alexa cancel this week's groceries because I'm going to Mom's house for Thanksgiving.
You're going to see a lot of those kind of things but I don't think you're going to order brand name dresses in specific sizes with particular Prince from,
you know your favorite dress designer via voice cuz I just think saying all those attributes and knowing the.

[41:44] The unique brand terms for each each designer is is super unlikely.

Scot:
[41:52] I saw this reminds me of a funny cartoon I saw the other day where someone says to the Alexa Alexa order me a Kleenex and it says ordering Amazon basic tissues and their said they spell out Kleenex and Alexa again says tissues and then they're like,
Amazon Kleenex and it's like I don't understand what you're saying.

Jason:
[42:11] I think that that ironically that could drive pups to be the second best selling facial tissue online because.

[42:20] Little problem with the synonyms at the moment but yeah it's and it's it's going to be for that replenishment stuff there's going to be huge fights to be the default brand and lots of interesting stuff but that's probably a whole separate show on voice Commerce that we should do sometime.
I want to get to our third question which is from Patrick per line.
And Patrick says hi guys I love the podcast to listen to it every week thanks very much Patrick I do too when the numbers say that he Commerce revenues up 17% does that include Amazon.

[42:54] If so what would be the e-commerce industry Revenue increase if you took out Amazon I believe you guys said that walmart.com is growing it at 60% and Amazon at 30%.
Would this mean that if you remove those two companies then e-commerce is a whole is contracted.

Scot:
[43:11] Oh yeah thanks.

Jason:
[43:12] Can I have that has math in it so I'm proposing you answer that one.

Scot:
[43:15] Yeah thanks Patrick for the question that it is a very good question and this is one that I've spent a fair amount pondering so let me let me talk to you.
Talk you through some of it I'm go this pretty quickly will will put some stuff in the show notes if I lose you anywhere so first of all.
You know what what's interesting is there's a lot of sources for the data so that's one of the big variabilities in this whole thing so you have the four sources I track and I'm sure there's more but the the four main ones are comscore US Census Bureau,
Forster and emarketer.
What are things you always notice is the comscore US Census in Forester tendo line with each other they'll be in the ballpark so silver example they'll say.
2017 e-commerce the United States was around anywhere between 380 and 420 billion but any marketable say 800.
And to emarketer is very inclusive of everything so I think they actually put cars in their tickets grocery.

[44:16] You know Events maybe even hotels or something so so you know when you're looking at these data sources it's important to understand what's in there and what's not,
I tend to like the comscore the Census Bureau in the forest one because they they do not throw the kitchen sink in there and it makes kind of thinking about this a lot easier,
so
what I did is I took the Census Bureau data and I'm and if you look at 2016 they say us e-commerce was 359 billion and if you look at 2017 415 but I'm such a difference of 56 billion and to your point,
you're 16% growth so so.

[44:55] That's it that's an important number so 56 billion increase your rear in the United States was 16% growth now let's look at Amazon.
Amazon's 2016 Revenue was 135 billion.
And in 2017 was 177 billion that's the global number so you have to Amazon's pretty much right down the middle of domestic and non-domestic,
and she have to give it a chops and it half and we do that you get the US is 68 billion in 2016 and 2017 88 million that's a difference of 20 billion or 30% growth which you correctly called,
and so you'll get that number that 20 billion and we had our 56 billion for overall Commerce then that means Amazon drove 36% of that growth.

[45:41] Then if you took if you took Amazon out then the remaining piece crew 10%.
So that's interesting number.

[45:51] But this is the common thing that I think happened to allies numbers longtime listeners will know that Amazon's revenues are essentially,
Banner reported cuz the third-party Marketplace and so we at the Jason Scott should like to look at the DMV so it's kind of Handy is I took the.
Total Amazon numbers and I cut them in half to get to the US will you can effectively just kind of double them again to get ballpark GMB it's little bit more than that but this will this will make you feel a little bit better because it under reports Amazon app,
I believe so when we do that we're back to kind of you know.
Amazon's gmv in the u.s. for 2016 being a hundred and thirty six billion then 2017 was 177 billion for difference of 41 billion okay so I think that's the real number that we look at for Amazon and again.
E-commerce grew 56 billion Amazon Groove 41 billion now you have all you're left with is 15 billion coming from other places or 4%.
So so you're kind of left you know what that tells us is that and learn if he Amazon grew 30% then the rest of world group had to grow 4%.

[47:03] Just kind of fact check that when you look at eBay they just reported their 2017 numbers they grew kind of around 4 to 5% in the US so kind of lines up right,
do we have Walmart at in there I think they're growing at 60% and then they want to go to 40% Jason you can fact check me on that one.

Jason:
[47:21] Yeah I think it's like last week orders were like 60 62 and then 50.

Scot:
[47:26] Yes now what I think is going on is Walmart's actually pretty tiny in the world were talking about that you know of eCommerce so you have something like three or four percent of Walmart sales are online which is there for near Blaine dollar.
Global retailer so there's really not moving the needle quite fast is fastest of the other things were talking about so it's what's going on here.
The way I like to think about it is let's build a pie chart and and this pie chart is a $400 pie chart that's the 2017,
yo i e Commerce so of that Amazon's 177 billion or 44% of the pie growing 30% eBay is 35 billion that's their us GMD.
X autos and that's 9% the pie growing 4%,
Walmart is 15 billion ish growing or 3% the pie growing 60% actually put the pool table will put in the show notes and where you left with isn't other bucket,
that is about 173 billion which is a pretty big slice of Titans looking like 40% of the pie but it's only growing if you do the calculus.
It can it has to be flat to effectively 2% because of the growth that has been soaked,
now what are things that doesn't jive with that is you have Target growing pretty fast while the omni-channel guys are going fast even some of the e-commerce platforms the report like Shopify.
They're growing their igmp like 20 or 30%,
now they don't report a sings Versailles so that that's a little tricky so they're they're actually kind of getting new customers in there and it's not apples to oranges but you know what's interesting is when I talk to all these data providers and I say.

[49:04] Two things are going on here the the you know there's someone is really losing a lot of Cher and I do think you have that going on so a lot of these stores you know we had more stores close last year than ever before.
And the dirty secret of closing stores is when you close doors and let's say you're you're serious you know when they've closed.
. 1000 stores decorative had one Fury Commerce business and the same is true for all these other folks that have clothes stores and whatnot so that's where a lot of the loss is coming from but it still doesn't a hundred percent at up,
I'm so there's there is a group of folks a lot of them work for the state of companies and what would they believe is happening is the US Commerce data.
Under reports vastly the size of e-commerce and the growth of it and then what happens is.
Comscore and Forrester correlate to that data so there's this Theory out there at and I'm not the guy to solve this is a kind of.
Delete it because it doesn't add up for me when I when I use the numbers I just got to watch you through it just doesn't add up so someone would have to be losing like you know that tree down like 60% year-over-year e-commerce businesses aren't big enough to really.
With a needle on what we're talking about here so so that's that's kind of.

[50:16] The most prevailing Theory amongst people and it's not really talk about much just kind of funny it's like this dirty behind the scenes secret of e-commerce there when talks about that shows and things but they don't really write about it and,
it would they believe is the US Department of Commerce data Vasily under represents the size and growth of the e-commerce market so,
there you go. That is an interesting Theory I have no way of proving or disproving it but it it's kind of I end up Landing there because I can't make the math work.

Jason:
[50:46] Yep and I I-10 the split that baby so I would say I do agree and strongly suspect the US Census Data under report e-commerce and like,
you know just a couple datapoint Spitzer to be aware of the methodology that you have senses uses is pretty underwhelming and just they just weren't designed to track e-commerce into essentially they're sending surveys to a bunch of businesses,
and asking them what their,
the revenue was and those businesses decide whether they respond to the survey in the same businesses don't respond every time and then the US Census uses a bunch of Black Box math that they don't disclose,
to convert you know the percentage of respondents into.
AAA National number and oh by the way the US Census doesn't even report e-commerce they report what they called non store sales which was originally,
catalog sales which are still in this number,
but essentially it's it's what they call everything that's not in a store and nobody gives the people responding to the survey any official definition so you know if Target is shipping 70% of their e-commerce orders from the store,
they may report all of those sales and their their store sales versus non store sales there's there's all kinds of room for,
messiness in the methodology and I will tell you that some reasonably credible Economist have looked at the US Census Data over time,
and flat-out found some glaring inconsistencies and they've written to the US Census asking for clarification and not got very satisfactory answers back and so these guys would say.

[52:27] That there's just too much Black Box math it's impossible to reverse engineer in the US Census there's some funny stuff going on,
and so it's it's easy for me to believe and by the way we should have them on the show one one time to defend themselves but,
it's easy for me to believe their numbers are perfect and SharePoint everyone wants to index to US Census Data so a lot of the other day two sources are based on US Census Data so I tend to believe e-commerce is growing,
is a little bigger Pi then then what a lot of these data sources say and I also believe that directionally your pie chart is still right,
that that Amazon has a Lion's Share of that that growth and so you know you factor out the the three or four biggest players in the e-commerce Market,
and the rest of e-commerce is not growing particularly fast and I have this recurring conversation with all these specialty retailers they're talking about their online and they're you know saying how how dare you know,
trailing the industry average and how concerned they are for their jobs and I'm pointing out that they're actually dramatically outperforming their peers.

[53:35] One last question that we may not have time for a detailed answer but I think we can probably give the high-level answer and then maybe we'll revisit it.

Scot:
[53:44] This one is very much in your wheelhouse and I feel like this is going to take you an hour to answer so let's see how this goes.

Jason:
[53:52] A challenge I like it.

Scot:
[53:53] Okay so this is from Ari and he says mobile payments in 2018 can I'd like to hear more about Android pay.
Google payments day. I guess Apple pay w3c payment request API and etcetera do you have any data that shows that when implemented properly these things truly reduce the mobile Gap.

Jason:
[54:13] And so it is the short answer. We'll do it deeper dive in upcoming show on mobile payments in general there's no,
great public data to show the conversion rate from,
true mobile wallets like Android and Google pay him now merge so we'll just call Google pay and Apple pay,
they're the number of people that use it as a small percentage of total transactions it does appear that that that highly loyal user base do have a much higher mobile conversion rate but there's an argument correlation or causation,
you know one of the rare users that using Apple pay online because you had the strong Affinity with apple and you're buying a lot of stuff from Apple probably and so is it you know,
is it higher conversion rate because you're using Apple pay or are using Apple pay because you're super loyal frequent purchaser,
that was Apple right so it's at the moment those are lower friction experiences there's some evidence that they have better conversion rate but it's all an adult and it's not a huge piece of the whole payment pie.
The there is absolutely some reasonably credible data out there that conversion rate is better with PayPal than without PayPal that's the most ubiquitous.
Digital wallet in North America and you know it's a lower friction checkout experience and so I think we have lots of evidence that every time we take the fields and steps out of checking out,
convergence better when those customers are already in the PayPal ecosystem and that's offered as a payment option conversion goes up.

[55:51] That makes sense to me and we we see it in the date of a lot of her private clients so that makes me think all these mobile wallets have a future or they can get enough users,
and then the one thing you listed that I'm most optimistic about of all of this is there's one thing that's not an actual payment while it's a payment technology and you rightly called it out as the w3c payment request API,
this is an open standard that they the HTML consorcia and essentially published that says,
let's have some better functionality in the browser to safely enter payment information on behalf of customers when they shop and let's let's tokenizing letting you know not store it as.
As some sort of insecure text on the on the PC and some way but let's make it really easy to fill out this form fields for payment.
And they've gotten really good adoption on that API it's now rolled out to all the browsers and so we're starting to see a lot more retailers adopted and.
Two good things happen when a retailer uses this API for their checkout experience,
in particularly there mobile checkout experience number one that checkout experience becomes more consistent and follows a standard convention from site to site so if all Sites use the exact same check out flow and gooey,
users get better at checking out and they're more comfortable with it and so it it actually reduces friction it increases what we call for dents,
and and you see better conversion rate and.

[57:24] That because this this a p i can store all the information that gets entered in that field & Auto in Iraq for you it essentially dramatically reduces the time needed to check out and so once you've used it once,
it becomes much faster and easier to check out on any e-commerce site anyone in the web that leverages.
This API so it's it's one of the things I highly recommend the clients and said easy implementation and everyone should be implementing that that payment request API and their,
in their checkout experience in particular their mobile checkout experience so.
I'll leave it at that for now but like the at the high-level there's not a great public data source.
To show the mobile wallets work but,
you can take my word for it that I've seen it in my individual clients that in general at it does have a measurable effect and for sure if you're interested in improving your mobile conversion rate you absolutely out of look at that WC3 payment request API and implement.

[58:27] And with that it is happen again we perfectly wasted an hour of our listeners time,
so now that Scott has redoubled his efforts on Facebook we highly encourage you to keep the dialogue going on Facebook again all these questions came from Facebook which was awesome so.
If we said some stuff is wildly wrong which I suspect Scott did and I didn't be great great to discuss that on Facebook we'll see you over on that page.
You can obviously find a spoof on Twitter were pretty active there and as always if you enjoy the show or learned anything or it's helped help you,
you're triggering anyway the way you can repairs for all that hard work as you can jump on the iTunes give us a 5-star review,
it's really one of the the primary drivers of SEO and I'll help other people discover our podcast and it makes us feel good about ourselves so.
With that I will leave it until next time.

Scot:
[59:26] Thanks everyone for joining us.

Jason:
[59:28] And until next time happy commercing.

Feb 9, 2018

EP116 - Industry News, Geek Week

 

SuperBowl News

Amazon News

  • SpaceX successfully launched it’s first Falcon heavy rocket, and recovered two of the boosters.  The photos and video of the Tesla in space were amazing.  And there appears to be a thawing of relations between Jeff Bezos and Elan Musk.
  • Prime Now delivery from Whole Foods stores
  • Expansion of FBA On-Site
  • Amazon expands it’s airport plans from 900 acres, to 1100 acres
  • The Spheres launched at HQ1
  • Private label continues to get traction especially premium denim “Hale and Denim Crush”
  • Amazon Go store opened to the public
  • Amazon is the largest spender on R&D, much larger than any other retailer

Walmart News

  • Walmart acquired Spatialand out of Store 8 for VR Capability
  • JD.com Coming to US
  • Walmart – Rakuten partnership ads digital books to Walmart.com

Drug News

Helena Foulkes becomes new CEO of HBC (from CVS) replacing Jerry Storch

Deliv launched DelivRX home delivery pharmacy service

Upcoming Events

  • Etail west 2/26 – 3/1 Palm Desert
  • Path to Purchase Summit – March 12-14 – Chicago
  • IBM Think 3/19-22 Las Vegas
  • ShopTalk 3/18-21 Las Vegas
  • Adobe 3/25-3/29 Las Vegas
  • NPD Idea 5/15-17 Austin
  • SAP Sapphire June 5-7, Orlando

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

Episode 116 of the Jason & Scot show was recorded on Thursday, February 8th 2018.

http://jasonandscot.com

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

 

Feb 2, 2018

 

EP115 - Amazon Q4 2017 Earnings Hot Take

This episode is a hot take of the Amazon Q4 2017 earnings

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

Episode 115 of the Jason & Scot show was recorded on Thursday, February 1st 2018.

http://jasonandscot.com

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

New beta feature - Google Automated Transcription of the show:

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 115 being recorded on Thursday February 1st 2018 I'm your host Jason retailgeek Goldberg and as usual are you with your co-host Scott Wingo.

Scot:
[0:40] Hey Jason and welcome back Jason Scott Sugar Sisters.
Well Jason her here we are on the first day of February 2018 is zipping by and today was interesting because it's kind of like the Super Bowl of two companies.
Well yesterday we had eBay in Facebook announced and then today we have the Three A's Amazon alphabet / Google,
and Apple so a lot of news coming out of those results and the all these companies are announcing how their fourth quarter of 2017 went which is.
Exciting in the world of retail cuz that's the,
the biggest quarter so tonight we're going to really focus in on Amazon on this episode and I were to have a hot take on some of the dialysis of their fourth quarter 2017 results and then at the end we have some time we are going to hit a couple other highlights of some of the other quarterly announcements.
So long tail lizards know this but it's always important to refresh Aaron's memory when you look at these different results it's important kind of think about the Baseline out there and as an industry were growing looks like.
The holiday Ecommerce came in at 16 dating percent retail came in at like 4% Jason is that kind of what it's been.

Jason:
[1:54] Yep yep maybe even a little higher like for 4.5%.

Scot:
[1:57] Go to those are those are kind of the benchmarks and you know I think the the the way I view the world is,
if you're going faster than those are gaining sure if you're growing slower you're losing sure if you're not growing you're.
You're pretty much toast to the role of e-commerce in retail so let's start outside with some big picture things so Jason I thought for you first we talked a lot about.
Conversational Commerce and all.
Echo ecosystem and this is this is probably the most strong bases code I've ever seen in any of Amazon's quarterly press releases for the last 20 years,
read it in its entirety so Bezos said quote our 2017 projections for Alexa were very optimistic and we far exceeded them,
we don't see positive surprises of this magnitude very often expect us to double down so that was pretty interesting and kind of like a,
you know if you have to read that while you look at that picture of Jeff Bezos where he was like you seen the me where he was like super geeky on one side now he's all ripped,
so you have to you have to imagine the rips of Jeff Bezos list of some kind of saying that one they sold tens of millions of Echoes In the.

[3:12] Precious is the issue is not over 50 bullets I would say a good quarter of them were around Echo.

[3:21] Anything you want to add around Echo.

Jason:
[3:23] Yeah it wasn't just funny because I remember it wasn't very long ago maybe even 2 years ago.
Echo was just trying to get some traction and I think you mentioned to a reporter that you thought that it potentially could be the next billion-dollar business from Amazon and that was a,
shocking surprising prediction that the people were asking you to back up and you know.

[3:48] Tens of millions of of a echo devices get you pretty close to there.

Scot:
[3:54] Yeah yeah yeah yeah if we assume so I guess the lowest you spend is like 40.
Four. And then you're the most you can spend is like 150 so I imagine the average is a hundred bucks.

Jason:
[4:10] That would even sending it a hundred bucks each either so that's that.

[4:17] Exactly so as per usual you you were right and then you know I think it's one of the scariest as I keep seeing about this is.
What you did now the top two selling products on Amazon. Like are that that Echo. And the fire stick.

Scot:
[4:33] Yeah and since we're on the topic over on the Google side they were asked when they're going to start monetizing it and they're CR sudar.
Which I think is how you say he said that they're really just focused on the user experience and nailing that and monetization is very far away so that was interesting that you know that date.
Why do people read that quote is in committing their little bit behind and they can't really worry about monetizing until they catch up with where Alexa / Echo are.

[5:03] Cool so continue with the big picture Amazon's total revenue in another footnote is if he heard me say some numbers that may be a little bit out of line with what you read and special leases or are seen in the news.
I always take the voice two sets of Amazon numbers there's the ones that are just the wrong numbers and then there's the ones that taken to the consideration,
the effects of foreign currencies in Wall Street sign that's XFX set of the excluding the foreign exchange changes so if a British pound oscillates 20 or 30%.
That will just your earnings so if you strip that out it kind of is more apples to apples so I was going with the Apples to Apples numbers so that being said Amazon's revenue accelerated in the fourth quarter 36%.

[5:48] And that's up from a 34% growth rate in Q3 and they came in with a 60.5 billion dollar Revenue number which is not too shabby and you know every.
Every quarter public companies tend to give guidance in this was very much at the top of Amazon's guidance Wall Street was expecting.
Let's see.

[6:11] Yes so this was also above wall Street's expectations are expecting 59.8 and so does exceeded by it looks like .7 which doesn't feel like a big deal but that's like $709 so.
That's that's pretty pretty nice beat the key drivers of the quarter were amazon-web-services Wishes the cloud computing and then they have this,
tricky category called other Revenue,
and moose while shooting let's agree the biggest Chunk in there is ADS so that business we talked about a lot on the show which would include the AWS and AMS and AMG businesses,
That Grew that also accelerated growth and it grew 60% versus 58% the last quarter.
Amazon had a very high probability and prove pretty dramatically in the quarter Marjorie gross margin sticked up last quarter they were 35.2 and they took up the 36.4 so that's what you would call a hundred basis points kind of move which is.
Pretty substantial at these levels on the conference call to see if I owe attributed it to the North America business and Retail doing really well at scale eight of us contributed to that as did he actually caught the ad business is starting to kind of.
News the needle on Gross margins here which which I think is pretty interesting because it's actually pretty small I think it's.

[7:32] 6 billion annualized so that would be like.
Maybe 2 billion at this point in the fourth quarter so it must be just pure margin feel to move the gross margins of the larger 60 billion dollar business.
Not any meaningful way enough for the CFO to call it out so a lot of folks are reading the tea leaves there and saying that it that ad business is really starting to.

[7:54] Can I show up in ways it hasn't before.

[7:58] And hopefully they'll be a day when it gets to be big enough that they have to carve it out like today w x and they crawl curious is really see what's going on inside of their.

[8:06] Let's see about that.

[8:10] They also made kind of another one of these kind of things you have to parse where they said more new members joined Prime in 2017 than ever before which I think you know when your growing.

[8:19] The rate you're going you would assume that's the case.
But then most estimates out there Amazon does not disclose the number of prime memberships out there most folks kind of put it in about 60 million us households out of.
250 us households so it really good penetration there some surveys as you go up into the upper upper income levels you get north of 50% penetration and they did say 5 billion items shipped with prime over the year.

[8:47] That puts Amazon and I just put that in perspective not even half of Walmart when you look at it this way,
so that's interesting but you know Walmart I don't think they've announced yet but they did typically have been growing kind of you know their eCommerce is growing pretty strongly now overall they've been growing low single-digits I I would be surprised if they don't,
youngest Walmart comes in above maybe 5% growth All In.

[9:17] Doesn't it was a nice surprise is this is the first quarter we're prophets of come in over a billion no you and I talked a lot to people that the number one thing.
That you hear when you talk to Executives about Amazon is,
oh well she's giving a pastor unprofitable there a money-losing kind of business the only thing inside of their that makes money is the cloud computing etcetera etcetera know those things are true so if you took cloud computing out the whole interview at Amazon still makes money I even if it took ads out I'm sure now it is true that you carve out the retail business that show you a p&l for North America,
and international North America is quite profitable and then International is still losing money but that's because they're building enough they're investing like you know,
two billion dollars in India there still investing in China they just watch Australia you know there's something going on down in Latin America Brazil so so,
it's just because that investing pretty heavily there so.

[10:15] Not only did prophets come topically dollars for the first time in a quarter that came in at 1.9 billion this is really big surprise for Wall Street cuz I think they're expecting more like 500 million now it was so that is one time so Amazon did say that about 800 million of that 1.9 billion,
I was from the new tax plan that rolled out so they're decrease in the corporate tax rate in United States helped out Amazon pretty immensely.

[10:40] But you know what's interesting is you not talked about this but but it really doesn't care about profits which sounds weird and the reason they don't is when you're public company it it's almost impossible to.

[10:52] Grow profits in a way that makes sense because of the way accounting treatment happens,
yeah your Revenue gets spread out your cost gets spread out and all these things happen so Amazon believes a better measure of how the business is doing is free cash flow and that was 3.3 billion so a lot of cash getting generated Amazon even though they continue to invest in a torrid pace and fulfillment centers in those kinds of things.
So that's the big picture Jason you want to look at the retail side.

Jason:
[11:22] Yeah and I just one sort of thing that I always chuckle about like there's a number of people that feel like,
to some extent Amazon manages their Investments to make sure that they don't have a significant profit,
inside like under that Siri you can imagine that they were like mildly annoyed at the the tax savings that kind of came in with this big lump profit at the end of the year.

Scot:
[11:46] Yeah they didn't say that on the cob but it's possible.

Jason:
[11:52] Inter on the the retail side of the business and we will break this down when you get into the marketplace but from a pure Revenue side North American revenues we're at 37.3 billion for the quarter which is up 42% year-over-year growth so again,
you know you can tear that to the the kind of.
Ecommerce industry growth at 16% and you know they're they're continuing to eat up a market share at a,
a pretty scary place so I can I really only know of one retailer with meaningful volume that's,
potentially going faster than then that's that's Walmart and obviously they're growing a much smaller number and cheer Point International grew slower at 22%,
and you know that's that someone interesting like obviously they're still in in the early investment stage in a bunch of these markets but the but they're,
they're sharing a lot of those markets is much smaller so you know it it's actually easier to grow much faster and so that,
to me that that highlights the fact that they still have their work cut out for them to to win and be a meaningful player in some of those big big International markets particularly India that there,
they are in a knife fight in.

Scot:
[13:04] Yep absolutely and then I will be in the marketplace which is where I spend a lot of my time so the way I think about it is if there is a,
the pie chart of Amazon or our kind of a diagram,
you have AWS and other if you pull those out your left with the retail business and the retail business has two pieces what we call one p which is the traditional wholesale model in 3p which is the marketplace model Amazon is always historically been pretty.

[13:31] Kind of Silent about giving details about the marketplace the one the two things I do talk about our unit growth so overall in the entire retail entity unit growth was 23%.
Pretty interesting and it makes you kind of say all right if the retail business if you kind of look at the the midpoint of that 42 and 32 the retail this is probably true kind of mid-30s unit growth,
you 23% how did they grow mid-thirties,
and that's just selling that's an increase in average order value essentially so you know the value per unit that goes through is gone up so everyone gets a lot of nice multipliers in their model up because the scale they're at so how these to talk about.
The number of users that requiring that slow down pretty dramatically and but then Revenue itself accelerated that's another indication that the revenue per active user was really.
Growing because of prime the other metric they disclosed is they talked about a unit mix between 1 p + 3 P that is now 51%,
that's not a high water mark I think she wanted you to as a 51% and Q3 a dip to 50% because of all the echo,
Prime Day Day stuff and it came back here to 51% for the holiday quarter so long was long time ago she was the show know that this is,
Marketplace peace is really important because you know to really understand the impact of Amazon there's their associate iceberg,
and we really only see the tip of the iceberg and that that big kind of mass underneath the water at Amazon is the marketplace so here's how it works on the canal walk you through the mail so if we round numbers they did $60 in Revenue.

[15:10] 5 billion of that was eight of us so you take that out and now you have essentially 55 billion in retail there's like a billion or two of ads in there but let's keep,
math simple at 55 billion now.

[15:23] Well it says 51% of units were three p that doesn't mean that you take that 55 in / 1/2 because the way Amazon a recognizes revenue for each this,
pieces of business is different in the 1p world Revenue equals sales so I saw hundred-dollar widget.
My road is $100 easy reptile rooms used to doing it but in the 3p World they County Road SE,
when a third-party let's say we have I don't know Jason's audio shop and you know he has all this awesome audio equipment he sells $100 mixer on there a Amazon collect $10 as the commission so now what happens is you have the revenue is actually the $10,
and the transaction value of the item sold as what we called gmv or gross merchandise value in the world of Market places so you have this kind of.
Weird thing that happens where the actual transaction the volume is not Revenue anymore it's a small percentage that Amazon takes his commission or we used were taking it so.

[16:23] If you take that 55 billion for the quarter,
and when I do my analysis on this about 47 billion of that is first party so that leaves caught,
but that 8 billion for third-party is really just the commission rate and.
I argued if you want apples to apples this to other retailers you have to gross that back up.
Because when someone bought the audio device from Jason store on Amazon vs Best Buy,
Best Buy lost $100 even though Amazon only made $10 if that makes sense to the transactional value is the Zero Sum game out in the world of retail,
so if we take that 8 billion that's the revenue for third-party,
and we assume just going to keep it easy to take rate of 10% you have to effectively * 10 and you get 80 billion so first party was 47 billion and then third party is about 80 billion,
so you're by my math when you had this up the total gmv for the quarter would include 1 p + 3 p is 129 billion.

[17:32] This is all a very long way of saying essentially Amazon's Choice as big as people think it is and when you look at that context you know if that's what they're doing it accordingly rate.
20 billion multiply that by four you get 480 billion then an Amazon Apples to Apples is as big if not bigger than Walmart at this point we actually look at the transactional implications.
So did the other natural question is so if I'm saying 47 billion first party.
80 billion third party this kind of like 1/3 2/3 out of the total why is that unit number 51%,
and do you know the number gets very skewed the the bulk of one p units and Amazon her books and digital items they even include like if you bought a 99-cent app on your,
you know you're your fire your Kindle kind of device that counts in there so.
It seems have a much lower aov compared to 3p so so.
But that's the unit mix is 51% but the GMB mcscuse higher towards third party so usually kind of like how to get the ends up being like 62% this year versus 38 on the other side so.

[18:46] Now.
Other there's other ways to calculate this an Amazon is is gives when they release their quarterly The Q's which is there SEC document state day damn it. The annual one.

[18:57] They'll be some numbers in there that give us another view of that and when you look at while she puts out there in the ballpark might my way of doing it tends to come out a little bit high so I'm kind of in the other 129.
And I've seen some of the analyst kind of looking more at like the 1:20 so we'll see you don't no matter how you slice it though.
Pretty huge Amazon's bigger than people think it is and this whole entity is growing at in a 38 36% year-over-year and they're really just kind of.

[19:30] Destroying Shear I'm sure we'll start to see articles coming out where you know I seen Art summer day where they got half of the e-commerce growth but I think it's probably actually be bigger than that and I think they they definitely took up a lot of the overall retail growth when you looking at the scale these numbers.
Another last thing is,
you're one of my favorite things every year is the Bezos annual letter that doesn't come out until they do their final SEC documents in this works little Insider baseball on your public company you put out this quarterly reports and you do a very quick audit on that,
with Auditors to put them out but then when you do your annual and you have to go back and kind of do a forensic audit of the entire year so that'll go on and then usually in the first week of April is when Amazon publishes,
their annual numbers to the SEC which will include an annual report and that will have the business letter so we have to wait in Fortune until April to read that.

Jason:
[20:25] Yep and that definitely will be worth waiting for I mean great great breakdown I know there's a lot of detail there for folks that are newer,
that gmv point Scott makes a super important I just like to think of that as that's how much money consumers gave Amazon in exchange for goods or how much of a consumer's wallet Amazon got and so that's why,
when you're comparing any other retailer that the really important thing is what share of the consumer spending did Walmart get versus Amazon versus Target or anyone else and so if you're up,
a retailer that doesn't have a Marketplace like Target and you say you you sold 50 billion dollars for the quarter.
That's how much of the consumers dollars you got 50 billion bucks and then in Amazon case they said they they got.

[21:13] 43 billion in Revenue but that actually equals 82 billion of consumer spending and so obviously.

[21:21] There they are out there killing it now Walmart also has a Marketplace it's a much smaller percent of their total revenue but so Walmart is another retailer where did you want to look at him really closely you also would try to back into a.
GMB number versus Revenue.

[21:39] So moving forward Amazon doesn't think they're slowing down either so they they set their their q1 guidance in that.
47.8 billion to 50.8 billion so that would be somewhere between a 34 and 42% year-over-year growth so.

[22:03] You know it so middle that's 38% which again growing much faster than the overall industry.
Second biggest player in the industries Walmart they are growing even faster than than Amazon in e-commerce at the moment and so when you.
You talk about the 16% average there on a heck of a lot of retailers that are growing at 16% and most other e-commerce sites are actually.
Doing much worse than that because the two guys at the very top of the echo system are are growing so fast.

[22:34] You know it's it's crazy to see the biggest players in the industry growing this this fast.

[22:43] So you know the interesting to see what sort of numbers the Wall Street analyst put out in terms of their projections for the 2018 and 2019 models but I don't think they they do the these disclose to their names cause that writes got.

Scot:
[22:58] Yeah I saw one guy updated this model and he said 20 18 lb 234 billion and 2019 lb 284 billion so.
Still still really big numbers one of the things that was you know making some of the Wall Street guys a little skittish is.
The revenue guidance like you said is pretty solid at kind of like a 38% growth point at the midpoint,
evidence of used Amazon coming at the height side there was kind of thinking it'll be 40% so we'll see but then their bottom line guidance was pretty light so it's kind of like 300 million to a billion which kind of either is conservatism or Amazon saying.
Hey we're going to,
we had a great fourth quarter we're going to go to another investment cycle so the Wall Street folks that that Paul Amazon the kind of live in fear of these kind of Amazon ghost these Harvest. Swear they'll Harvest a bunch of investment state made this this year is very much a harvest year so you're really good bottom line.
Probably under spent on capex from an entry no overachieved on the bottom line as well and then,
Aaron lives in fear that they're going to wake up one day and say alright we're going to best.
Three-blade dollars in original content or you know a you know our whole load fulfillment system with trucks and everything or,
so that's just kind of things ratchet up there the worry.
Turn off the wall of worry gets higher and this is the one kind of negative that I saw everyone call out was you know what.

[24:28] What could they be spending that much money on that's like an incremental billion and a half of spend and they're going to Wawa color on that and,
they're kind of elusive on the phone call about giving any details what's going on there so it's going to be a wait and see you through the first quarter one thing I always watches the announcements around number of fulfillment centers so that's what we'll keep an eye on that,
add to my knowledge I didn't see them announce any in January which is kind of unusual they may have been in a quiet. So maybe we'll see a little bit of a raft of those coming out now they've announced earnings.

Jason:
[25:01] And there's a whole you know there's there's a big crop of openings that they try to get done before holiday obviously so it it makes little sense it would slow down.

Scot:
[25:11] Yeah they they I'm sure they need a month just kind of breathe.

Jason:
[25:16] Yeah so one other piece of interesting Amazon news that's come across my desk this month is not directly related to the earnings but I still think is exciting is it appears a lot of.
1p sellers on Amazon are getting new options for what content they get to put on their product detail pages.
I'm so historically there's basic content that you provide to Amazon and Amazon you know puts on that PDP for free and then there are like richer media options that would let you do things like.
You know have some product comparison charts are some some animated tutorials explaining your product or videos or things like that.
And those are often called a A+ content and they're super important to.
The the engagement and conversion rate on those on those pages but they're you know they generally have been a premium thing that Amazon has as charged for.
And this quarter we're seeing Amazon start.
To give away a bunch of what were the traditional a plus content options so making them free to any seller and they're adding even more exotic.
Options that you can pay for it so it's essentially a lot of sellers are getting the option to customize their pdp's to a far greater extent than they.
Ever been able to before and you have given an Amazon has become such an important distribution point for so many products.

[26:47] That that's really important to a lot of sellers so it's interesting to me that they they continue to evolve that pretty rapidly.

Scot:
[26:54] Could you know there's always this kind of it's hard to keep track of these things are available to 1 p and summer 3p and summer both do you know.
Is this is an on both sides or is it just for brands or is it is it also third-party sellers.

Jason:
[27:10] Yep so I have primarily seen this exclusively on the one p I can't definitively say that it's not available on the 3p but like one of the things you have to think about it's it's hard for Amazon to sell.
Actual like extra product attribute opportunities on the 3p side because all the seller share.
The same PDP into essentially.
You know one one seller would be paying for that extra content and then all the the other people piggybacking on that listing would be riding along for free.

[27:43] So like for the most part I see that these opportunities at the PDP level are exclusively to one piece hours but but Amazon isn't quite frankly they're not very good at life.
Publishing open price West and saying hey here's all the programs we have in here's how much they cost and they're the same for everybody you know what it feels like for the most part of the offer everything and negotiate everything on a.
Need your account by account basis and so like not not every Star tends to get the same options for the same deal.

Scot:
[28:22] Cool so that's kind of some good Roundup of Amazon's quarter any other interesting Amazon news before we kind of widen the lens look at other companies.

Jason:
[28:33] I think I think that's an interesting conflicting rumors out there about Amazon's effort to monetize ads on the Alexa echo system.

Scot:
[28:46] Gulfport what are you here.

Jason:
[28:48] So they're there had been some rumors at the beginning of the year that a few big sellers had been offered a.

[28:57] Promotional opportunity.
2 baht to be the recommended product via voice Commerce when someone's ordering a product for the first time so so is that sounds more complicated than it is so you say Alexa to order batteries and you bought a bunch of batteries before,
Amazon going to use your purchase history to try to predict what batteries are talking about,
but if you've never buy batteries before Amazon is going to come back and say I have a Amazon elements 8 pack of double a batteries is that what you want in you,
can say yes or no in so there was there was some rumor that like Brands were given the opportunity to be that that Amazon Choice product and then last week Amazon sort of came out publicly and said no no no,
you know we we've looked at at adding adds to the the Amazon Echo System and we just don't think that makes sense and we think it's disruptive to the user experience when so they,
they sort of explicitly said that they're not doing that so so,
the stuff you heard about Google like that could be that we don't see ads from any one invoice which I don't think any of us are going to feel very bad about.

Scot:
[30:13] Yeah one thing that was interesting that there was a lot of talk about is so a lot of the the business and world leaders were at Davos and I need to use that platform to announce that this kind of interesting contortion of,
Amazon Berkshire Hathaway and JPMorgan Chase are going to pull their efforts and work on Healthcare and is very nebulous they're going to start a company,
it's not clear who's going to owner run this company and it's kind of going to be dog food in whatever this is they build for their own employees sounds like what they're doing,
but you know this causes ripples throughout the world because that we talked on the show there's been Talk of the Amazon opening kind of a pharmacy online and then you start to say.
Amazon nursing pieces that kind of think about your Amazon.
Using the cloud services to kind of have health services so,
yo a nice portal for employees the ability to manage all the healthcare programs and then Berkshire Hathaway has a big division that does insurance so they could kind of provide that.
Then you would also need some kind of a you know a financial service piece around that too so that's give me something to really watch but that's good.

[31:27] This kind of thing could disrupt the entire insurance industry or you know all the HR systems out there so or it could be a big nothing Burger so I have to kind of see where it goes it's kind of a,
free nebulous right now but it was all the Talking Heads could talk about for for quite a while.

Jason:
[31:44] Yeah yeah and your point like it it you know if it's them trying to aggravate their buying power across those three Enterprises that's,
probably not a very meaningful so you know did the three of them together don't employ as many people as Walmart so they're probably not,
going to let you know make dramatic changes to healthcare system but if Warren Buffett and Jeff Bezos and Jamie dimon are trying to collaborate and figure out a,
a new product or a new a new way to solve the healthcare problem for employees that you know.
Is there a free smart guys that have a broken paradigms before so that potentially could be interesting and exciting.

[32:20] Another piece of non Amazon news that has has everyone buzzing is.
Early in the year I think the first week of this year the Supreme Court announced that they were going to hear a case which is I believe South Carolina versus Overstock.

[32:41] Dot-com and so this is a case about sales tax.

[32:46] At the moment there's a the Supreme Court has ruled on one sales tack case which is.
North Carolina versus quill and in that ruling essentially they said that in order to be required to collect sales tax.
You have to have a physical presence or a Nexus in in each state in so if you have no presence in that state you're not obligated to collect text a lot of lawyers were really surprised by that that ruling.
Because there are a lot of other occasions where your required to comply with the States laws even though you're not physically in that state.

[33:24] But be that as it may that's been a lot of land and e-commerce texting for a long time is.
If you have a if you have a physical presence in a state you have to collect tax if you don't have a physical presence in that state you don't.

[33:37] So again most of the omni-channel retailers with brick-and-mortar stores in every state.
There they've always had to collect tax Amazon has has slowly negotiated into paying taxes in in essentially every state as they've opened more.
More of fulfillment centers in distribution centers and so today Amazon Flex tax in every state that has a state tax oh.
A couple states don't don't have sales tax like a Portland Oregon and in the maybe Nevada or Florida.
But sit there collecting tax everywhere said they're not really affected but if the Supreme Court rules in favor of South Carolina South Dakota in this.
This new case the which they could you know here in a I want to say March of this year that suddenly obligates all other online sellers to start collecting tax.

[34:30] And there a couple interesting things that happened then.
Number one like you potentially have to calculate a different tax to collect for every municipality which potentially could be more than a thousand different tax districts in the US.
So that becomes a huge burden for small companies that are selling online to have to figure out all these taxes.
It's probably a huge Boom for the commercial tax companies that will sell services to all these guys so you can you can you know that's an extra fee for all those like you know small Shopify sellers.

[35:03] And in my mind the biggest entity out there not collecting sales tax.
Is actually Amazon 3-piece sellers Sowell Amazon collect tax on other one piece sales they leave it up to the individual 3-piece sellers what whether they have an obligation to collect sales tax or not and overwhelming majority.

[35:22] Don't except for in the state they're doing business in and so if the Supreme Court ruling goes against Overstock it could have a very pronounced effect on three-piece selling on Amazon.

Scot:
[35:35] Yeah and it's pretty complicated to because there's a bunch of scenarios right there's there's a scenario where I'm I'm a seller on Amazon,
and I have Nexus in North Carolina which is where my warehouses and I'm shipping all of the country so that's one so what most sellers do there is they say they collect the sales tax for North Carolina and Amazon has settings for this so say it up 7% in North Carolina I will collect that but the other states I don't have a Nexus etcetera,
maybe you're more sophisticated Celerity out to our houses so that gives you 2 points in Nexus but and.
Amazon doesn't really open on this Amazon says you're responsible for figuring out your own texting.
So so Amazon's listen to saying we're not going to your lawyers here we're not going to accept any liability for you collecting you're not collecting that you tell us what you want to do and then they actually give you some,
they rolled out some nicer apis that give you kind of that you know this this tax software used to be hundreds of thousands of dollars and now Amazon's rolled out whatever they use sellers can have access to it for you still pay for it but not really at the scale it's it's pretty reasonable,
but then it gets complicated right because I'm using FBA.
And you don't there's a PA is pretty much in Most states I think like 40 States and you,
it's not very easy to get from Amazon where your product is once it gets kind of into that cloud of warehouses it gets distributed out and you also don't.
You don't have a lot of control over today selling Amazon hey please don't put my product in Illinois cuz I really don't want to pay state sales tax there that's not really how the.

[37:11] The phone network works so.
What most sellers do is they just kind of say well you know I'll I'm small business how can I take the risk on that so this this could be you know.
Can I kind of clothes McPherson these guys that you know they may I end up having them a relatively complex set of States they need to figure out and,
not a lot of great infrastructure for figuring out where their products are the release valve on that would be so perfect Prime and there was a release a press release Amazon's investing more and more around giving sellers that are kind of larger scale the bility to have their products Prime enabled meeting their Prime eligible and are primed as they like to say and,
and then using their own warehouses to get them to the consumers and two days that could be,
you know it's interesting Amazon's doing a lot more around there obviously I think it's primarily cuz they want more Prime eligible product but you could see it as a,
a way of kind of if sellers were freaked out about this and wanted to have more control over Nexus that that's the answer essentially.

Jason:
[38:10] Yeah yeah I can imagine there that Amazon is it is potentially rooting for South Dakota in this case because,
a lot of the 3p sellers feel like one of the reasons they can be competitive in one of the reasons they can they can sell their goods even when Amazon is also selling their saying Goods is because of that tax advantage right and so potentially if they don't have that tax advantage to two good things happen for Amazon.
The one that Amazon 1p product wins the buy box more often.

[38:41] And number too it's hurting and suddenly forces everyone in the Amazon Echo System 2.
Comply completely with with the law and it eliminates all this gray area of who's collecting what tax on FBA.
And so that you can imagine in some ways Amazon would say hey in the long run that's cleaner now in the short run that could mean three PCL slow down on Amazon which is you know one of them are profitable elements so.
So who knows one thing I would point out.
Is the Supreme Court rules in favor of South Dakota so now everyone's obligated to collect tax everywhere it's very likely.
The Congress doesn't just sit Pat right so there was a lot of of work on legislation about at what kind of sales tax internet sales company should be collecting.
A number of years ago and there was this thing called The Marketplace Fairness Act in.
The the main notion in Marketplace Fairness Act is hey every online so I should be collecting tax but which should be a simplified tax so we don't have all this.
This complicated math and so instead of having a thousand different tax rates maybe we agree that all online sellers pay one simplified tax rate.
And so you can imagine of the Supreme Court rules in South Dakota's favor that might be the impetus.
To Congress to pass some sort of like that and.

[40:13] Conversely if Overstock wins there's like 8 more cases from other states that that are also in the queue and potentially could get to the Supreme Court later so it's not like.
Even if if the Supreme Court rules in favor of Overstock that this is over so it's the interesting thing to follow.

[40:31] Moving on to a couple ass little news news Clips UPS also had their earnings call.
Yesterday or today and one interesting thing that came up they had a good quarter as well.

[40:48] But the.
They there they beat their estimates in their stock still took a little hit largely because they announced that they're capex spending for next year was going to be much higher.
Then it had been in any previous year and the explanation for that was that they're being forced to invest a lot more in sorting centers and airplanes.
To make all the the residential deliveries that they're doing for Amazon more profitable and so you know that the sort of pithy had a headline is that UPS has an Amazon problem.
They're having that invest a lot to to deliver what they're already delivering to Amazon and of course.
Amazon's needs are only going to grow you know potentially 38% more.

Scot:
[41:34] Yeah and the other two could be a bit of a trap here where,
they're having a grow their infrastructure to support Amazon and Amazon is growing in structure outside of UPS so it's some point you know if your UPS you have to kind of start to wonder how far ahead of your skis can you get on that before it gets kind of risky.

Jason:
[41:51] Exactly if this was a video podcast we'd be playing Admiral Ackbar saying it's a trap right now.

[41:59] Reference I threw in there just for Scott in the last earnings that jumped out at me from this week eBay had their earnings called yesterday,
and I I think they the like met or slightly better beat their earnings but the,
the big drama was in there called they announced that they're.
Mandatory partnership with PayPal whom is a reminder that used to own and and spun off as a separate company when they spend them off,
the spin-off included in agreement that eBay we keep using PayPal for a certain period of time so that. Of time is now expiring and eBay has announced that they plan to shift payment providers from PayPal to a big European payment processor called Aiden,
and so that,
they probably has some implications on eBay but it has potential huge implications on PayPal because I think eBay is something like 18% of PayPal's Revenue.

Scot:
[43:04] Yeah they the CFO of.
PayPal is on CNBC any shows 18% but it was like their slowest growing peace there's little shade there's something going on between those two companies are definitely got to get zika nomics driving it but it seems like there's some more kind of,
they are not really getting along very well right now.

Jason:
[43:22] Yeah and it's like I would like to cenarios I you can totally imagine that this is an actual break up,
and if so that is interesting that says something about how competitive in the marketplace PayPal is if eBay really feels like there's a meaningful savings to be had by shifting to this,
to another payment processor that,
you know potentially said something negative about PayPal's competitiveness but you could also Imagine the eBay and PayPal are negotiating their first,
fees agreement since they're they're sort of mandatory partnership expired and all of this could.
Potentially be somewhat posturing is there sort of negotiating with each other so you could think of it a little bit like the showtime having a break up with Time Warner or while they you know.

[44:08] Weather negotiating how much the cable company should pay for free HBO or Showtime or something.

[44:15] And with that we have Perfectly Used up the allotted 45 minutes we had for today as we're trying to get the shows a little bit shorter for our listeners so we greatly appreciate.
Your participation in the show today and if you have any questions or thoughts as always we love to hear from you on our Facebook page or on Twitter we we have a couple of good good questions that came through this this weekend fact on Facebook.
So I think I have some answers there in fact.
And of course if you enjoy the show we would very greatly appreciate you taking just a second jumping over to iTunes and giving us that 5-star review,
we don't we don't charge anything we don't run any ads on the show so that way you can you can pay us for all the time we put in that show as right as a nice review on iTunes.

Scot:
[45:06] Yep thanks Wilson there buddy.

Jason:
[45:08] Until next time happy you comercing.

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