EP133 - Hot Take: Adobe acquires Magento
Adobe announced that they are acquiring Magento commerce for $1.68b. It was disclosed as part of the deal that last year magento’s revenues were $150m, so that’s a 11X multiple which is pretty awesome. Adobe’s largest deal in decade.
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Episode 133 of the Jason & Scot show was recorded on Monday, May 21st 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:25] Welcome to the Jason and Scott show this is episode 133 being recorded on Monday May 21st 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your hoes Scott Wingo.
[0:39] Hey Jason are welcome back Jason Scott show listeners this is one of those unusual times.
You're actually recording back-to-back shows and Publishing them simultaneously that's because we had previously planned put out our.
NPD idea show recap which you should be able to find right there in your favorite podcast listener,
device select / technology,
and then the universe was curveball there was a big announcement after the market today and that announcement was that a Doe B is acquiring which into Commerce for 1.6.
Billion dollars that's billion with a B it was.
Disclosed as part of the deal that last year magenta revenues were a hundred fifty million that's already some analysts notes that are saying they would expect that to be about 180 million this year that's 11% multiple witches.
Pretty awesome for Magento and also adobe's largest deal in over a decade.
So what we're going to do here is a pretty short show because it is very timely and,
just got to get share some background on these two companies and their aspirations and some of the things that have happened to them before and then.
Jason is our resident.
[1:58] E-commerce platform Guru I'm going to send him some lightning around rapid fire questions to kind of get some analysis what that means for both Adobe Magento and then some other.
[2:11] Books out there so we can kick it off with a brief history of Magento.
[2:16] And I'll cover that and then Jason oil run you run us through adobe's e-commerce history.
So would you do was born in 2007 it's an open source project which means you have this collaboration of people,
they got together and there was a commercial company and Roy Rubin and you've cut his eyes at you.
[2:38] Aren't you don't know a Metroid but I never met you oh so I'm going to assume that's you got a ride.
[2:46] Listening you can write in and I would have better phonetic.
We have six new they released this isn't what they were planning on doing was taking a.
You know I previously open sourcing in making improvements but they did so much changes they came up with the whole new offering and so.
That started as a community project and then they monetize it to an Enterprise offering that initially just had some support and then later on had,
kind of different feature set than the community offering Bob Schwartz join in 2009 he is a guy that I think pretty much everyone in the world e-commerce is met several times he still out and about,
a great guy has enterprise software background really ramped them up and.
[3:27] Side note is a Jason and Scott show Wisner as well so shut out to Bob and Bob used to run e-commerce at Nordstrom.
[3:34] Hey Bob Hope you had still had some more options in here somewhere I'm not sure if that's possible but hopefully did he so then they sold Magento to eBay for $180 which was a great eggs.
Because we didn't raise a ton of capital of my recollection is maybe 20 to 30 million.
[3:53] Pair to today's companies you know, 6 x 2 money raised so that was good eggs.
[3:58] And by the way I think a bunch of that raise was from eBay.
[4:03] Yeah yeah eBay wasn't investor through the PayPal site but they.
A combined company at that point and it's part of that deal they got PayPal integrative Magento that was kind of what they were after there,
oxa 2011 eBay acquired the whole entity and owned it until 2015 eBay had bought both GSI and Magento and then,
put them out in 2015 along with the PayPal split so eBay sold the Magento asset to a private Equity Firm called permira.
And that was for about 200 million so kind of sideways kind of a deal I don't know the specifics that I've heard mentioned took kind of went sideways while I was in the in the eBay ownership Cyril the key people left.
[4:48] Then once it was free from eBay in 2017 the private Equity Firm raise an additional 250 million from a large Chinese investor called Hillhouse capital.
We actually had the CEO of Mark Lavelle here on episode 50 of the Jason Scott show so that was exciting to have him on a side note we do have a 10% finders fee so when there's an exit,
I at we and you put on the show we would like a 10% finders fee it's just a small thing of it is like that it's just a very small thank you to the podcast doomed.
Look at you that exit it's hard to nail down exactly how big Magento is because unlike a sass platform you no one there.
Publishing the source code out there they don't have many people are licensing dinner price version they don't really know how many people are using the Community Edition.
There are companies that spider the web and they'll kind of show tell you there's this many websites that they don't know how big they are from a sales perspective so it is hard to know how many active users there are over gento.
I've seen kind of numbers in the 300,000 range for both Community Enterprise I think Enterprises in the low thousands so like 1 to 3000.
And that is a brief history of magenta.
[6:09] Yep and I just one other side note on how hard it is to know what size they are like also because it's it can be at one time.
License or or download a free version like you don't know where there's someone that that got your software is still using your software a year later and so there's actually a lot of sort of.
Orphan sites out there that might still be turned on but aren't actively selling stuff that are running running Magento so it makes it even harder to know how many how many active sites you know with meaningful volume Iran on the planet.
[6:41] Yeah a lot of times you'll see this announcement you know like he was Pottery Barn Pottery Barn.
That's a huge win the you dig around you look around and they find it's like.
The kids furniture couch category in Australia.
So it's really tricky. These things can pretty seamlessly be integrated with each other and and you'll find a lot of times,
I see Magento used by larger players as a cross-border trade kind of thing of increasingly that's going over to different platforms like Shopify because just the ease of use of spending those up is a lot lower than the on the SAS guys can spend up a new store pretty quickly compared to the open-source guns.
[7:25] Yep for sure Magento for some smaller Brands it's their primary platform but for many bigger Brands it's a.
A utility platform that use for particular use cases in and you know smaller markets would definitely be one of those,
I was in a side note it's mainly an on-premise solution but there have been a couple efforts over the history of Magento to sell it is SAS so I think even during the eBay ear or maybe right after that you bet your other was this product Magento go,
that was sort of intended to be a low in SAS solution that might have competed more directly it was low but now Shopify.
But yeah it's you know it's it's a mix of of implementation patterns for for Magento and as we talked about with Mark.
[8:15] The bulk of users are on this first generation platform that the Troy and you are put together magenta one when Mark was on the show they had just released a major,
re architecture Magento this called Magento to but you know obviously.
He a significant number of those the small clients did not immediately move over to to Magento 2 and so you know there's.
When you're talking about the Magento installed base right you know one of the questions that you're you want to know is like what percentage of the users are even on the the current.
[8:49] The newest iteration of the platform review off.
[8:54] Yeah so then why would a Dobby care about this day how's the Titan with Photoshop.
[9:00] Adobe has a very popular product that we are all from there with Call of the Adobe Creative Suite which is like a Photoshop and Premiere and the the audio editing software we use for this podcast called in addition,
but they have another Suite of products that they call the Adobe experience cloud.
And this is a sweet of sort of Enterprise products that are used to host a lot of commercial websites so the.
To my way of thinking the disorder,
Cornerstone of the experience cloud is Adobe AEM which is there big CMS I think it's the most popular most successful CMS in the world it hosts,
tons of Big Brand websites like Mercedes-Benz and all these different.
Brands that you don't have non transactional websites would use Adobe AEM it's hosted SAS solution for for those kinds of.
[10:01] Use cases you actually can also buying on on Prime version of am still but then there's a bunch of other app.
Pieces of the experience Cloud that are pure SASS and so the one that comes up the most often in the Commerce world is.
A product they bought a number of years ago called omniture which is a web analytics platform that competes with like Google Analytics.
That's been rebranded Adobe analytics over the years and it's a very popular e-commerce analytics sweet that used by a lot of commercial websites we've had Tamara on number of times,
change some of the data from.
From that platform and they have a bunch of other e-commerce tools that they bought ATM was originally from a company called a software.
They bought an image technology called seeing seven that that a lot of website you use to resize images on the Fly four different sides.
They now have a other marketing tools I got DMP campaign manager.
[11:09] Sort of a next-generation ESP personalization engine they have a a b testing platform that used to be called the Adobe test and Target.
Insa Dave Dave sort of in the same way that they put together all of their their creative software for end-users together.
[11:27] They put this whole sweet of Enterprise packages together that are used by big companies to host websites and the one big glaring hole in that sweet is an increasing number of those,
does companies that are relying on the Adobe experience stack to create their web experience.
Want to sell stuff online and Adobe did not have an e-commerce platform so you know what Adobe historically has had is a.
Integration framework to let you use the Adobe experience sweet alongside someone else's e-commerce platform like.
[12:02] IBM Oracle sap or Magento elasta path and I think digital River or the big ones.
So for a long time we suspected that adobe did want to own a platform.
You know obviously I mention IBM has has their their big platform and they're trying to grow out a full marketing Suite to compete with the Adobe experience platform.
Oracle you know bought a number of companies and is put together a marketing Suite that competes with Adobe in or colognes.
Several e-commerce platforms but I think the the one we think of most for e-commerce is used to be called atg.
[12:43] And then back in 2013 sap bot hybris.
A lot of people were using hybris and Adobe together at that time and they were you know they were rumors that adobe was one of the.
The bitters on hybris and lost out to sap in 2013 I'm not sure that deal size was disclosed but like all the estimates were over a billion dollars back then.
Then we know in June of 2016 like the most successful.
SAS base in a B2B Cloud out there salesforce.com bought demandware and I think that was 2.8 billion dollars.
And I think it was fully disclosed that adobe was one of the bidders.
Fordham and where and so we seen Adobe out there trying to acquire a Commerce platform and seems like today's the day they got it done.
[13:37] Cool so that gives us the background let's do kind of a little lightning around here what's this mean for Adobe so they've got this content peas that got this experience Cloud why,
yeah you know why does Adobe need an e-commerce platform.
[13:54] Hot tub,
again like most of the brands that are hosting websites on AEM and that are tracking analytics on Adobe Analytics.
[14:05] Either already are selling Goods or want to sell goods and so historically adobe's had to partner with someone that provided an e-commerce platform and the functionality of that e-commerce platform competed with the functionality of the Adobe experience Cloud so.
Adobe would want you to save the data and they experience the customer data in the experience cloud and I would want you to say the customer data.
And in Webster Commerce and promotion engines and all these different things and so.
[14:34] Now Adobe has the potential to have a seamless solution that allows all these brands that are hosting websites on AEM to sell Goods,
and you know they can have a very homogeneous solution that shares data across all these these different pieces of the solution.
[14:54] Got it,
and then so most of the Magento customers are kind of SM he's so small medium size Enterprises it sounds like the Adobe customer service trying to make transactional you mention Mercedes-Benz that's obviously you know very large company.
Probably I don't know how big this Adobe content management thing is but it's probably pretty expensive so it feels like adobe's going to want to take Magento upmarket does that is going to create a problem for existing users.
[15:22] Potentially you registered it on paper this is not a perfect match up right it's a well-known popular e-commerce platform and a well-known popular experience platform so that you know that superficial level it makes sense,
right below that you're exactly right like the the bulk of the Magento customers are long tail smbs or you know mid-market at best and that the core Adobe customer is an Enterprise client you know there are you likely spent several million dollars on their implementation of the rest of the the,
the Adobe experience Cloud Adobe is a pierce a solution,
you know it the moment you know most of the magenta stuff is not sass add Adobe stack is mostly based on Java the Magento stack is based on on lamp or PHP so,
like they're they're definitely going to be some,
some challenges I got you know it's super early I haven't seen a Doe B come out with the message yet but hopefully in the in the next you know several days they should really put out a message to put the Magento customer base at ease,
because if I was in Magento customer I might be nervous that adobe is going to move them up Market going to want to move it to a SAS illusion,
and a lot of in a small businesses pick magenta because they could own it they could,
you know customize it and have access to the code themselves and they could host it themselves and so you know I think,
on the one hand I'm sure those customers are excited that there's some deeper pockets and you know potential for bigger Investments to kind of accelerate the Magento road map.
[17:01] But you could also imagine that the Adobe is going to shift the Magento roadmap in a way that isn't particularly advantageous to a lot of those SM Beats.
[17:11] Cool so another Domino has fallen or I like the musical chair metaphor so so now we've got to know the Discover the marriage here between Magento in Adobe one of the companies that's kind of always mentioned that doesn't have any Commerce platform now on the large software Cloud side,
is Microsoft you can make a stretch and say.
Google does Charlie have one you can even straight to say Amazon doesn't have one but but Amazon was in that business and kind of got out of it I think they pretty squirrely believe though.
[17:44] The marketplace is coming to the Future there I guess eBay doesn't have one but they don't wanted and didn't really suggest it very well so it's a.
Now that's that's one side of the equation then you have Shopify and Bigcommerce shopify's a public company with about a 20 billion market cap.
That's a really big bite for someone to take there and then Bigcommerce is private but they've raised three or four hundred million so that's going to be probably a bigger lift than.
Magento what what do you think is the next Domino toppling in this platform world.
[18:18] Yep I don't know that there's going to be an immediate counter-reaction here so the.
The other you know the Enterprise company that you mentioned that has a lot of the other elements of a quote-unquote marketing cloud like you can really think of.
Sap IBM Oracle salesforce.com and now Adobe,
really competing for the same core Enterprise customer right and in today I'll even need complete offering skin to compete with each other the the other company that competes with the awful lot of those Stacks is Microsoft,
and so you know you on the one hand you'd say hey they would be a really interesting acquire now Microsoft at the moment doesn't have a CMS or a e-commerce sweet but they do have a very robust Erp system,
Microsoft dynamics that includes a CRM that competes with.
Salesforce.com they of course have the the web hosting Services through azure,
so you on the one hand you could imagine Microsoft wanting to more directly compete with IBM Oracle sap and Salesforce in Adobe but on the other hand,
Adobe actually I think is moving most of their SAS hosting services to azure,
and they're actually several a cms's I know a sitecore and episerver that RT run on the Microsoft stack so there is a.
A counter argument that that Microsoft is doing well by supporting.
[19:52] Multiple players and that you know if they were to acquire a single CMS in a single Commerce platform.
Did they would potentially alienate some other partner so you know I don't know whether the calculus is there for Microsoft.
Show choir and I would say Microsoft in the distant past did on a Commerce platform and didn't do very well with it it's actually.
It changed hands a number of times and is I think now part of the sitecore solution.
So you know maybe they they eat are a little tainted from their their previous unsuccessful Commerce ownership that they don't make that play again.
There are a bunch of smaller Converse platforms that don't have the kind of traction that Magento has from a customer base that are much more.
[20:40] Are arguably more modern architecture there's folks like Commerce tools and Symphony Commerce mahzu there's a host of these other you know.
Companies that probably hoped to be acquired but never you know don't have the customer base yet that the Magento does.
I'm so will they continue to go out alone is it going to be harder for them in this world where you know that their competitors are owned by these big Deep Pockets.
That's going to be interesting play and a dark horse to buy a Converse platform to me would be some of these social networks so could you imagine Facebook,
buying a Commerce platform either to make available to their their customers or enable better at Commerce,
functionality and their echo system could you imagine Pinterest.
Or you know Instagram or SnapChat you know having more robust Commerce features to integrate into their platform would be another.
[21:37] Potential play like that there's some problems with that but you know there will be guys that you might you might see sniffing the tires on some of these these e-commerce platforms.
[21:47] Sniffing the tears I never heard that usually you sniff around or you kick tires at yes.
[21:51] The tires or sniff around yes I don't know if I mentioned this or not but this is the second show we recorded in a way.
In a row so I'm I'm mixing some metaphors sorry.
[22:04] I'm not the brightest bulb in the in the knife drawer away.
[22:06] Any last thoughts on the platform Wars as it were before we close up.
[22:18] No I mean from my perspective I'm excited to wear a big Adobe partner I should say and I'm excited to see them making a bigger investment in Commerce oh that is exciting it again.
Yeah I don't think Magento is a plug-and-play Panacea for Adobe and so it's going to be interesting.
Adobe has done a really good job of integrating all their other Acquisitions but they they were not in a particular hurry to do it they took a long time,
and slowly evolved all these Acquisitions into this this more homogeneous Cloud so you know where they going to do the same slope play with Magento,
that would be good for the existing Magento users but it would take a long time for Doby to get value out of this acquisition or you know will they do something on a more accelerated Pace to build Magento into the kind of.
Enterprise solution that fits the rest of the Adobe stacked like I'm going to be really,
eager to follow that and I would argue that we're still having those same conversations around demandware and Salesforce in that like Salesforce with predominantly of B2B play,
demandware you know Excel to be to see you and wasn't very good at B2B.
You know they were not on the on the same stack and so you know along while we're watching Adobe in and Magento figure out their negation plan I think we're still closely watching.
The the demandware which is now called Salesforce Commerce cloud and Salesforce integration play out and then I think we mention this.
[23:53] This is maybe a couple weeks old news but the Salesforce actually bought another Commerce platform called Commerce cloudcraze,
that is a pure B2B e-commerce platform that was actually built on top of the.
The Salesforce tax so so so sources continuing to evolve there there, strategy in some really interesting ways as well so this.
[24:16] We kind of been static in the Commerce platform Wars for a little while and this is you know where this this month we're seeing some pretty exciting disruption so I'm I'm eager to see how it all plays out.
[24:27] Yeah who knows maybe sap and Oracle decide they could always use one more platform.
[24:32] Yes I do like.
[24:36] Clearly these platforms are all have a significant amount of volume through it and you know a lot of the Legacy sites are on them I think it's an open question whether these any of these Legacy platforms are the future of the business like there's,
there's an argument that we're at the the most recent trend is I'll call it done platforming is actually moving off of these like shrink wrap full-featured e-commerce platforms.
And moving to a lighter-weight set of apis and microservices you know you talked to a lot of cio's and that's the.
The the kind of stacked that they're more interested in but we don't have a ton of great examples of big retailers like embracing that model just yet so it'll it'll be interesting to see if.
Any of these big Legacy platforms kind of transform in that direction or whether they.
They continue to win out against that there's newer architectures or whether some of these up-and-coming architectures can can kind of disrupt the market.
[25:34] But that's a great place to retrieve the quick-hit cuz I know we wanted to get it a short quick read out for a listeners in as things evolve what will you know.
Potentially do a deeper dive on some of these platforms down the road but if you have any questions about the platforms or would like to discuss this and more length.
We certainly encourage you to jump on our Facebook page and the post a question and will,
will get back to you as always if you found any value in this heartache we would love it if you jump over to iTunes and give us a a 5-star review.
[26:07] Thanks for joining us everyone and remember if you're going to sniff the tires make sure the car is not running.
[26:14] And while you're doing that have a happy commercing.
EP132 - NPD Idea 2018 Recap
NPD held it's semi-annual customer conference, Idea in Austin Texas on May 16th and 17th. Jason and Scot both presented content at the show. This weeks episode is a recap of the show.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 132 of the Jason & Scot show was recorded on Monday, May 21st 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:25] Welcome to the Jason and Scott show this is episode 132 being recorded on Monday May 21st 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Coho Scot Wingo.
[0:39] Jason and welcome back Jason Scott show listeners will Jason we're both back in our local areas here I think your local are you okay.
[0:50] I am I am your correct.
[0:52] I never know where you are these days we were both in Austin recently and we had a real fun trip down there it's rare were in the same city much less at the same conference and we both spoke on separate topics at the NPD idea conference.
[1:08] Did you have fun.
[1:09] I did it was a great conference I enjoyed the conference and of course it's always fun to get to spend some time with you in person I feel like we we talk all the time via VIA the microphone but it's it's fun to actually see you making funny faces when I say stuff.
[1:24] Absolutely yeah it doesn't come over to the the podcast quite as much as in person.
[1:29] No we might have to start doing this as a video Call Me Maybe.
[1:32] Okay so tonight we thought we would there.
[1:39] Wanted to share some of the insights from the show this is a pretty interesting show that we attend and let me kick it off by explaining who is NPD the provides data 2 / 20,
and how this works is because I like Nielsen Nielsen I think does this for cpgs and NPD does it for non CP Jesus how I can I think about it.
Large scale systems across.
Over a thousand retailers that opted into this program that data is all swirled together anonymized and then also mixed in with over 12 million consumer.
For surveys and output of that is really interesting data that they Brands license and retailers to understand things so for example.
Let's say you sell.
[2:31] I don't know what's a good idea if a GoPro style cameras or anything like that action cameras you can use in PD data to see how is your model doing versus the competition.
How you know how much is the number one doing the number to cross different retailers things like that.
Every year they every other year they get some of their top customers together and categories like apparel Automotive Beauty.
Construct Tronics jewelry I sent you everything but cpg and they look at the trends that are shaping the industry.
[3:06] And I've spoken of this a couple times and it was exciting to have you there this year the theme was Under Fire On Fire.
And it's got a clever theme so what are trying to articulate there is.
Retail is under Fire everyone's feeling that but then there are certain segments that are doing really well so there's certain segments that are on fire.
[3:31] Unfortunately had a conflict and I was not able to get down there for the first part of day one but you were there and we're able to attend some really good session you told me about so let's start the recap there on the morning of day 1.
[3:46] So there they kick things off with a bang,
you mention a lot of great brands that end it also tends to be really seen your stakeholders from a lot of the brands and retailers which is kind of cool so it's pretty,
impressive intimate Gathering into the first keynote was actually the CEO of Target Brian Cornell so that's a pretty good gift as we would say in the industry and I'm always.
[4:13] Like obviously I always want to hear what brand has to say it's always it's always great when these guys coming events are willing to share,
[4:21] The CEOs of major retail organizations are super polished and their they certainly don't come here with the intention of giving away any Trade Secrets and they never do so.
You know you got a kind of moderate your expectations you're not likely going to get some.
Revolutionary new announcement from from Brian at a show like this but you know I think it's interesting to hear his his take on on a lot of the things that targets going through in trying to do.
And he spent a lot of his talk.
[4:51] Really talking about the sort of changing role of the store and you know he was pretty damn that he's like hey you know these stories today have all these super important roles we.
Yeah we have customers that come to the store to pick up orders that they placed online we have a lot of curbside pickup now we're using the stores as an inventory location to do same-day deliveries to customers home.
We ship over half our e-commerce orders from the stores to the customer's home you know customers use.
tattoo sort of exploring evaluate products and now many customers want to check to make sure the products are in stock before they come to the store you know all these different use cases of how the target guest wants to use the store.
That are very different than the use cases the guest had.
Even seven years ago when you know most of the newest Target stores were built and so you know he spent a lot of the time talking about the challenges and opportunities of.
You know taking a test or if it was designed to solve one particular set of problems and leveraging it to solve.
A lot of newer very different problems and so I found that interesting.
And then he did Chef to talk a little bit about their their acquisition last year or this year rather for shipped and shipped is.
A delivery service so they are so you can think of the Minnesota personal shoppers before the target acquisition they supported a number of retailers.
[6:26] You could order products from their website they would go to a retail store pick up those products for you and deliver them to your home.
And in so you know I think most of us talk about them is primarily being a same-day delivery option.
And you know Brian to mention that I think that they have curbside pickup.
And over a thousand stores now and then they're quickly moving to same day delivery in a thousand stores leveraging these the shift employees that they have.
They've hired but he is real Focus was.
Did the delivery is the least important part of the the shipped experience that these are the magic of a shift in the reason at Target was particularly interested in and then versus some of the other vendors that into space was.
That ship that had this intimate personal shopper model where they.
They did that try to maintain full-time employees and they would try to send the same employee to the same customer so that all I read them you know I always tried to match up the same shop or with a customer so that that Chopper will get to know the customer overtime.
That communication tools built in the platforms or the Shopper has questions are asked to make substitutions.
They can communicate in real-time and apparently a high percentage of the the shipt personal shoppers are moms and so Brian kind of talked about it being,
a moms to moms service and that the the target gas really value this personal relationship that they were starting to develop with this.
This formerly shipped person personal shopper that's now a core part of the new Target experience.
[8:02] Wrinkled so then after that they followed up with another strong keynote this one was from Google.
[8:10] Answer this is a dude I'm pretty sure this is not the name his mother gave him but he goes by Astro Teller,
and I was familiar with that sir I haven't seen him speak before though and he was I thought he was awesome so she is responsible for the moonshot program at Google,
and you may know more about this than I do but like in general I think of the moonshot program is the portfolio of,
initiatives at Google that are all intended to develop new billion-dollar plus Revenue businesses so like the autonomous vehicles would be.
The the big Marquee thing in the in the moonshot program.
[8:51] Yeah they would they transition to alphabets I think they call it X and then the self-driving is spun out as,
waymo there's a couple other things they've done but inside of their.
[9:08] I think this drones the balloon internet's flying cars that you're so a lot of really wacky stuff in there so.
Plenty of interesting things going on in that that group.
[9:19] And will come back to Wacky but as you can imagine a guy named Astro is pretty good at talking wacky so,
he he he was mainly talking about,
Innovation and he started out by defining this thing that he called level 1 versus level 2 Innovation right and so level 1 Innovation that are like those things that could make your business 10% more successful and the level to Innovation are those things that could make you you know 10 x more successful.
And so you know he's not the only guy talking about 10% versus 10x but his point was.
[9:57] The first time you can't you hear any good 10x idea it's going to sound crazy,
and so like by definition to be successful at these kind of 10x Innovations in any organization you have to be comfortable sounding crazy and you and you have to cultivate environment that safe enough that,
the people are comfortable enough proposing things that sound crazy because he's like you know his is premises fundamentally.
These things that are so disruptive to the business that they could you know Drive 10x growth for the business.
[10:32] Like just are so disruptive that they that they don't sound rational or safe.
Upon you know first consideration and so kind of funny line.
He is a no-show hands in the audience imma give you a choice between two options and you raise your hands and tell me which one you would rather do.
Would you rather do an initiative that has the potential to generate a billion dollars in new revenue for your company but only has a 10% chance of success.
Or would you rather do something that will generate a million dollars but has a guaranteed success and.
Not surprisingly that you know basically everyone in the audience raised her hand and said hey we would rather do the billion dollars with a 10% chance.
Mathematicians on their listen to podcast with quickly note that like the.
The weighted value of a 10 billion dollar opportunity with the 10% chance is still a hundred million dollar opportunity versus a $1000000 opportunity so.
So statistically speaking that that's the.
The better risk but then he asked the funny frog question how many of you fundamentally believe that your boss always supports the billion-dollar opportunity versus the million dollars guarantee.
And way less hands went up and so he's like Alright so.
[11:55] Here here here's my Innovation solution for you you don't need a new innovation strategy you need a new boss.
And so he you know you kind of went into this this whole premise about how organizations are just.
Young wired to avoid risk and that you know even though it's irrational you know most most organizations are are built to reward.
In a biased towards the $1000000 in guaranteed Revenue versus the the 10% chance at a billion dollars shot and how companies that want to be successful you don't have to think differently.
He even kind of went into even some of the things that you you should do to be a successful level to Innovation company.
And you know one of the big points he had there was that you should always tackle the hardest part first.
Any he talked about how that's kind of counterintuitive that a lot of people that you don't want to get a quick success under their belt so you know the tackle the part that seems.
Easiest to do and you know you talked about how when you explain to someone rationally why they should do the hard part first.
They say they kind of get it but it doesn't really change behavior and so he has come up with this kind of silly metaphor.
To make it more apparent he's like if your boss assigned you to get a monkey teach it to recite Shakespeare standing on a pillar.
[13:22] Should you start by teaching the monkey how to recite Shakespeare or should you start by building the pillar.
[13:29] And his his point being like sure you could start by building the pillar and you get a early way in and you can say you are 50% through the problem because you solve one of the two problems.
[13:39] You're never going to teach the monkey how to recite Shakespeare so building the pillar was a complete and utter waste of time whereas if you would have started with the problem of.
Training the monkey to recite Shakespeare you would have quickly learned you cannot impact training monkey to recite Shakespeare.
And therefore you know you would have moved on and then a company that rewards level to innovation.
That that quick learning and failure you know what would have been rewarded versus versus penalized so that was kind of.
[14:09] The premise of his talk he was a super engaging heads funny antidotes.
My favorite part of his presentation was definitely the off-script moment he he walked through a bunch of.
Future technologies that he feels like are going to create 10x opportunities for fur companies so he was talking about bioengineering he's talking about it and he wasn't so much selling any of these specific ideas but just talking about how.
They trigger these kind of 10x ideas and you know some of the things that you might do with them sound sound crazy at first,
and one of the points you if you wanted to make was about you know some changes to cybersecurity and so is a precursor he said he he asked everyone like,
Teresa hand if they were you know primarily concerned about cyber-security today and,
how much snow in in the room raised their hand and it was it was his reaction was hysterical he it was kind of a No-No moments,
and he's like he's like oh my God forget all this stuff about innovation.
I have bad news for you the bad guy is already in your network like you've already been breached.
I didn't realize this wasn't already coming. And so this whole whole like absolutely correct narrative about how.
You know sophisticated intrusion has gotten and how you know these kids that attend that the hacker conference is if I break into much more secure networks than retailer networks for fun and how like all these networks are almost certainly already breached in there already people inside your network.
[15:44] And that if you don't have a business model to protect your customers data when you've already been breached you know you're probably in Trouble In fairness to the attendees,
you know he went right after Brian Cornell from Target so you know a ton of target people were in the audience and if you work at Target and you you you been the victim of the very public breach that had a material impact on your business,
you probably don't in a public room raise your hand and say hey I'm super concerned about cyber-security right so you know maybe maybe people just felt like it was inappropriate,
to share that concern publicly and that's why they didn't respond or maybe they had question-answering fatigue by that point.
But it was a funny diatribe that Astro went off on and and I certainly true like we all should act like like the bad guys already internet work.
[16:35] Got it yet maybe it's cuz Brands a lot of brands of these conferences are pretty early on their direct consumer turning so maybe they may they're not even really thinking transaction websites maybe while they're not retailers in room should be pretty stuff.
[16:51] Yeah and I will do it on another show that there been a lot more breaches and in retail in the last couple months in particular Avengers there a lot of retailers rely on it been breached and it's doing a black eye at a Best Buy in Sears in a bunch of others.
[17:05] Yeah but what I find interesting is it's the ones I've seen usually are not through the Commerce side because the Commerce sides kind of got more thought around this usually is to the physical point of sale which is the entry.
[17:18] Yet the physical plant cells have been a disaster and then some of these recent ones were where Aunt like ancillary things like the.
The chat system that the retailer uses for customer service that you know you can also change an order via chat and so there's a Commerce function in there and your point is.
It's not leveraging the same technology as the normal e-commerce site and doesn't you know apparently and in several cases didn't have the same level of security.
[17:45] Cool and then who was up after Google.
[17:49] So then the afternoon keynote and this is all on Wednesday so Wednesday was kind of a full day I think most of the attendees maybe showed up Tuesday night or early Wednesday morning.
Tuesday afternoon keynote after lunch it was a gentleman Michael Dart who's at the a t Kearney and.
He has written a book called retail seismic shift how to shift faster respond better and when customer loyalty and I want to see it came out.
Late last year maybe like November or so so it's probably about 6 months old though.
[18:28] And so he did it talk about consumers of the future and had a lot of good points in it I think we're going to try to get him on the show here in the upcoming episode.
[18:38] Yes so maybe we should let's give just a little taste and then we'll.
[18:43] So a couple of the things that jumped out of me and that's that's got subtle way of saying that we're going to slow an interesting thing I just never thought about is one of the trans he talks about his dematerialization which is this sort of shift.
From atoms to pixels.
And he had an interesting stat that in order to create a dollar of GDP in 1930 required about 4 kg of material.
Like you had to make into something to sell to generated our GDP.
That that same GDP in 1990 so 60 years later you can make with one kilogram so so the amount of of atoms I got cut down by 1/4.
Only 25% of the atoms are required 60 years later you know fast forward today and you only need a hundred mg so one tenth of what you needed in 1990 in so there's that just.
You know this this strong shift in the economy away from from Material Goods driving the the economy.
[19:47] He you know then kind of went into the the bifurcation topic that we talked about a few times on the show so you know he had to stab that 65% of the.
Of the population was in the middle class in the 1970s and today it's only about 40% of the population is in the.
The middle class so you're getting you know Uber rich people and poor people and you know his his promises one of the ways that that plays out in.
Retail is you have these on one end of the spectrum price base retailers are really focus on offering low price and that cohort a Retailer's he.
Believe have grown 35% is there is there five year growth rate.
[20:28] For the price face retailer 37% on the other end of the spectrum the luxury premium brands of actually grown even better at like 80%.
And all the retailers in between that he would call the balance retailers that aren't like aggressively focused on price and aggressively focused on luxury experiences have only grown at 2% so it's sort of showing the.
The growth and Retail is exactly mirror the bifurcation of the population of we've had Casey well and brought back from the Delight talking about that on the show as well.
You know you had some interesting statistics on on malls we talked a lot about how the a malls are doing a lot better than the rest of the malls but he actually has some statistics that all malls are down 9% it's just.
The a malls are traffic is down 9% over the last couple years from a better starting point so they've gone from like growing to flatware as the BNC malls have gone from Flat to losing 10% of their traffic in the last 2 years.
[21:30] Yeah on the malls he also I'll put it out as a teaser from having the show he had the the.
[21:38] Worst Mulligan prediction I've heard so he had the highest number of Mall closures that he's thinking are going to happen so I was a little surprised by that but that's interesting.
[21:50] But it is true that like only about like 20% of the malls would be in this like a category so I think did he say their UE thought about a thousand miles we get taken out of the system is that when I'm remembering 13.
[22:03] I think you said 1300 out of like 1500 I think there's only like 200 remaining.
[22:08] So that's that does still mirror that kind of a versus B and C ratio.
Sign out we'll talk about another show is the Planning Commission in Miami-Dade Florida just approved a new mall project which they're very few of those in the world,
and this mall would actually be the largest mall in the US who would be bigger than the Mall of America in Minneapolis and so that.
Can a bucking the the the mall again in friend is we could have a new bigger motor than we've ever seen before which would be an interesting evolution.
And then the last thing I'll touch on from.
Michael Jordan's presentation he was talking about this Matrix that he called the the con Matrix.
Is developed by this one on barbercon who's the professor at Ward and she she would have booked a couple years ago called the shopping Revolution.
And in her world like.
You could draw this 2 by 2 Matrix that all retailers fit in on the left side of the Matrix are our retailers that are focused on product benefits and so I'm proud of benefits on one end of the spectrum you have.
[23:16] People that focus on The Prestige of the brand and so she would use like.
Louis Vuitton or Warby Parker Saks Fifth Avenue or Zara Nike is kind of brand.
Branda Advocates there and she would use like Eataly or Sephora as experience face retailers as the other end of that that.
That extreme in in the other side of the Matrix would be people that focus on customer experience and their the.
The spectrum is from people that primarily focus on a low price so she's got like Costco Walmart TJ Maxx in Burlington and that.
That quadrant and then frictionless.
As the as the other end of that spectrum and she has Amazon is the primary example of a frictionless and so kind of a different Spectrum this would be way more apparent if I were able to drop for you on the podcast so maybe I'll try to put a picture in the.
In the show notes but as as you'll hear a lot of retail pendants talked about like another 10 to be the Spectrum there tend to be areas.
Any Spectrum where retailers can really Thrive and do well and then the the retailers that are really struggling and we talked about Molly get in and we talked about retailers that are seeing negative growth.
It's almost always the case that there.
[24:38] The ones that have fall in the middle of the spectrum's and haven't really made a committed effort to own.
You know one of one of the the pillars and so this this was another one of these Matrix is where.
Where that you know you kind of look at at her Marquis examples in each each of the quadrants and say yeah that makes perfect sense and then you'd say you know folks that kind of fall in the middle of this this to buy to our bar probably in trouble and.
And you know at the moment that that's sort of what's playing at in the marketplace.
[25:10] Yeah so then that was all really warm up so those were those were a sort of the three opening acts Target Google,
because then we all went to a even bigger room where they had their biggest session of the show which is this whole session about marketplaces and sign up for our listeners Scott,
is a second-year Scott's done this talk and it was super annoying for me because every time I would talk to the the women planning the show about my session that say Hey registrations great you're doing really well you're right the second most popular session,
but you're way behind Scott.
[25:51] Yep so that was fun I was I was coaching them to make sure that you knew that I was figured a little fun competition there would be.
[26:03] Yes and I I was a little just cuz you did get to pick your topic and I sort of I I accepted a topic they put in the agenda.
[26:11] But you knocked it out of the park will get to that in the second yes or no.
[26:13] Thanks man so what did you talk about in marketplaces is that a thing.
[26:17] It is yep so two years ago and I did my skin.
[26:22] Standard Amazon talk which is essentially for long-time listeners if you go way back to episode 24 we did the Amazon Deep dive so that's kind of a lot of the same content,
that I gave that talk and this time they wanted to kind of widened aperture and talk about marketplaces so just just a quick summary about what we talked about.
And what will do is.
I'll send you a pediatrician that we can put kind of a copy to it in the link to it in the show notes if people want to go to the presentation so.
The Purge for Marketplace is really interesting because you know you and I've been at the salon time I've been at this Marketplace thing for 20 years.
[27:02] And what I found is there's a huge desire for Content that.
[27:07] Pretty basic for what a retailer or a seller with the Cabana Marketplace because what's happening is all these brands are starting to think about going Direct.
And they're just learning all the basics that that you know.
A retailer or a seller has already there I'm kind of version 8 these guys are on Virgin once so.
But it is always fun to kind of go back and revisit these things because the world has changed so much just a simple thing and you and I had a fun to scream about the marketplace and how do you do to find it so for example selling a car on over.
[27:42] Talk is that a Marketplace or not I would say by strict definition probably not because.
Well my definition marketplaces you sell off of your website.
There's transparency for the consumer who you're buying from and then the business model is a percentage kind of a business model not a traditional wholesale markup so once you have that wholesale markup in there it's just a drop ship relationship.
[28:07] First party retailer not a Marketplace so so in this talk we we probably talked about yo.
Taking a step back and talk about consumers what do they want yeah we've talked about that a lot on the show don't think they'll be any surprises there then what is a Marketplace.
[28:23] So just answer that question the types of marketplaces so you have pure plays like eBay you have hybrids like Amazon you've got a new social ones you got at base now.
and then we talked about the pros and cons of selling on Marketplace and then some takeaways for the Brand's so it was,
when I'm in the middle of training I can never remember the questions I don't know if you recall any that were Salient for listeners but.
There was way more questions we had time for and then we had to go to a break and then had a lot of good discussions around marketplaces.
[29:00] Yeah and let the record show I think you like I certainly agree with your definition that like,
Wayfair is a drop-ship program more so than a Marketplace but what you call and Marketplace.
That I totally understand after you explained it but like I think myself in a lot of other people don't immediately think of his Marketplace are some of the the social selling models in like when Google sells products through pla Zoar,
shoppable pins on Pinterest or some of those things and then once you draw the picture I totally get out it is a Marketplace but I think those are the the the the one that outliers that kind of surprise,
are the sneaky marketplaces if you well.
[29:40] Yeah and when you're selling on eBay and Amazon.
Don Juan differentiator is day or The Merchant of record which do I think about is when the consumer gets their credit card it says Amazon not you know Jason's Mouse shop so.
But then to July these new models they're using so his new payment systems like a striper Braintree and they're asking you to,
the merchant to now be The Merchant of record so it's kind of an interesting hybrid in that way.
But it still has a percent of sales model there still a fair amount transparency does Consumer they're dealing with a third party so I.
I continue to put those in the marketplace bucket but you know a lot of people don't.
Realize when you're using things like Wanelo or there's this many of these now there's,
we are well over 200 Market places that we track it down visor and more everyday and there's all kinds of really interesting models there is super vertical ones like.
Reverb for professional music.
[30:42] Or there's some for you know that dinner Morpher city-dwellers that are in the apparel category and it's kind of like high-end apparel so you're a pair of sunglasses that.
Probably you and I wouldn't buy for $600 but there's someone out there that that is into those kinds of things.
[30:58] Yep and I think one of the marketplaces that you introduced a lot of the audience to for the first time probably was wish and I happened to notice they're running like national tv ads now.
[31:10] Yeah yeah wishes really,
yeah they don't disclose a lot but there's all these rumors that they have crossed over a billion dollars at um they're spending a lot of money on National branding so they've done,
I need to be a sponsorship so drawn symbol logos their logos are on jerseys they're doing a pretty big ad campaign around their Marketplace.
I think of them as a cross-border Marketplace some most product available on wish is being sold direct from China and they.
If I'm in a lot of supply chain things and whatnot.
[31:44] The result is you get super cheap product which really applies that value or any consumer we talked about and bifurcation.
But the trade-off is cuz a lot of its kind of on the literal slow boat from China it does take awhile to get there so it's one of those kind of trade-offs that consumers seem to be willing to make,
I'm the one thing I worry about witches Amazon is now I got kind of all the same stuff at the same price but then it's an FBA so now you get it 2 days so it can be interesting to see how wish does against that.
[32:16] Yeah yeah the the television that I noticed,
it was like a dad that had bought like SmartWatches for three kids and they each got like 10 bucks and so the kids are you know it's it's he's low-cost like sort of surprise and Delight moments.
But I did have a take away from their their big NBA sponsorship is if you if you are building a business and you decide to use it professional sports endorsements,
make sure the players know what the heck you do because there's some really funny videos on YouTube of like reporters asking.
LA Lakers what which isn't as they're wearing The Witcher logo on their uniform and they they have literally no idea.
[32:54] And then after my session we went to a one that you were excited about which was the jinsy panel.
[33:03] Yeah I probably made Scott go to this one and.
You know this is kind of a common model at a lot of shows is you you bring actual Generation Z folks.
To talk to the audience and like help help give them the more accurate you know representation of of this.
This Persona that you don't lot of Market marketers are targeting and what what's a little different about the MPD version like very often.
Literally like the show organizers will go to a high school and get like five regular high schoolers and have you know some moderator ask them questions about how they shop or what brands they like and whether they like going to malls or not.
In this case these are almost I'll call them professional Generation Z spokespeople.
There's a guy I got to meet a couple of times now Connor Blakely who.
I don't I don't know how old he is but you know he's probably like 19 and he started a company called youth logic and they essentially cell,
need this kind of advisory service to Brands and so is a brand you you higher.
Connor and he sends some genze folks to your office to.
Serta evaluate your offerings and and talk about you know how they're seen through the the jimsey wins so Connor was on the panel one one of his employees Madison bringman was on the panel and then.
[34:34] Another gen Z expert that it start his own company called Jen's iguru a guy named Jonah Stillman and I think Jonah actually got Mark Cuban to invest in his company.
So we have these kind of three genzie's they were interviewed by the moderator who is Alexandria Levitt.
I wrote a book about about some some other customer to cohorts in the past.
Lacerta interviewing and they're all the typical funny moments like they.
You know it some point they talk about olds and you know referencing like parents that that don't get something and that you know they.
They talked about super old people and they were talking about people that were like 35 and older which you know probably was every single person in the in the audience.
There's a lot of of a interesting dialogue about.
Authenticity and purpose so you know like there's this notion that like genze like brands with a purpose like.
The Tom shoes you know buy one get one kind of program but how Jen's he's really good at smelling out these inauthentic purposes.
And that you know a lot of Brands Make Mistakes by having these inauthentic purposes Connor use one example of a you know company that bought a Super Bowl ad.
Do I got a message that they are that they have an environmentally friendly purpose and conures like.
[36:06] Hey if you really have an environmentally friendly purpose you would have wasted five million dollars on a Superbowl and and his you know kind of thing was,
what you have to understand is jenzie grew up digital they've been bombarded with all these messages after multitask much more than any previous generation and so is a result they're much better at curating information and he he going to bluntly put it,
like we we have more attuned BS meters than previous cohorts,
and so you know you just have to be really careful about being being inauthentic with him and so there's some interesting takeaways,
you know I thought the panel did a good job but I personally I do Wonder,
if this is the last cohort we ever have to talk about because I like I do have this kind of premise that all the behaviors they were describing,
like I can find you 60 year old to behave exactly the same way and in the old world of like television advertising like one of the only things we can know about her audience was how old they were and so we could kind of Taylor are commercials to a particular age,
but today I feel like we have much more granular tools to the market to individuals and so I just I just wonder if,
is like the differences between Millennials and gen Z are are ever going to be as important as as you know once the the differences between Boomers and and gen-xers was.
[37:33] Yeah I kind of came away from the panel with called.
Cognitive dissonance where says there's like six examples where they would say one thing and then they would like say something that totally countered it and it was really hard.
To get your head around so the one example is in the early part.
UConn reslife Genji's love them all is great I got them all the time and then someone else then several times you can tell that they haven't been to the mall a very long time because you know the guy was trying to describe what.
Abercrombie looks like now and he couldn't really kind of articulated cuz I don't think he's been in an Abercrombie in a long time and then some.
[38:10] Fun of Abercrombie from like 4 years ago but you're right like they have chain.
[38:13] And then someone said if you had $100 what would you do in one guys like buy stuff in fortnite and you know the girl was like I buy some Nike stuff but she's not going to go to the mall for that she'll go to.
I assumed she'd order on.
[38:27] She also said you know I just buy everything from Amazon and I know from my Gins ears that you don't got to college age kids they do not like to go to the mall and you really have to kind of like.
So there's some that was kind of one example there's like six or seven other ones were just kind of like you just counteracted what you just said like 6 minutes ago. I don't know it's hard to nail down if I can.
There's no actual thing to do.
[38:56] Yeah no end to me part of that is like,
I'm sure you can find Jen's ears that do go to the mall like an N relative to other cohorts yeah there are there are more 16 year old kids at the mall then there are 60 year olds at the mall,
but like it's going down across all cohorts and and you know the point is being today you can know which 10,
gen Z years really do want to go to the mall and you can have a message for them and you can know which ones like by 95% of the purchases on Amazon and you can have a different message for them so,
that's kind of my death of the personas as we move into a one-to-one world.
[39:36] Yeah I did not one thing the folks at NPD do a great job at is the entertainment at their shows is top-notch so they shuttle us over to Austin sea life which is exciting I never been there before I and we saw,
a country music band which was runaway June and then the Doobie Brothers and it was kind of a long day so I actually enjoyed the opening acts kind of more than the closing act but that was just going to be so that was good.
[40:04] Yeah and I I know nothing about country music so I had never heard of them so that way it's got a fun and I think it's a trio of young women that sing harmonies and one of the women was the granddaughter of John Wayne.
[40:18] Yeah that was kind of neat neat fun fact.
[40:22] So then we that was day one and then Day 2 began with you drinking three venti latte and then we went to go see Don Unser he is the biggest titles VP of sales there in PD he's the head sales guy and in one of the guys that leads there vertical teams and he had a really good presentation of some of the insights they've gotten from their data.
[40:49] And so.
The a Scott was nice enough to have bought at least one of those lattes for me that morning said thank you very much I appreciated that I had to meet early for breakfast with my panel so that was super nice of you.
So MPD because they have access to this really rich data set Don and in particular is super well known for doing these retail Trends Decks that leverage update a lot and so this was kind of a.
A permeation of that like he had some key retail Trends from the date in there and then you also had some.
Hypothesis about like how consumers were actually changing as a result of some of these Trends which that was maybe a new spin on it.
So is you mentioned upfront MPD tracks these 20 core categories across a whole bunch of retailers.
And so it was the first thing he shows is MPD money so I'd which is kind of.
How big each of the categories that they track is and whether it's growing or shrinking in so this was.
A March 2018 view looking at growth over the last 12 months and you had you know category like the biggest category with by far the most significant growth for them as video games.
So that category was growing at 18.4%.
And it's a decent-size market it's like a 36 billion dollar market as they is they Define it Prestige Beauty was growing at 9.4% small appliances were growing at 7% Auto Parts at 5%.
[42:24] Toys at 5%.
Consumer electronics at 4.7% a house where is it 3.8 and then you kind of dropped in all these categories that had.
Pretty nominal gross box office supplies Footwear perishable grocery Dry Goods Health and Beauty AIDS.
And then you got into the bottom categories that were laggards for them apparel was basically flat accessories which is like sunglasses and things like that was down 2%.
And then the big loser which is probably no surprise to anyone as Video Entertainment.
Which young for most of The 3 Tails used to be movies that they sold on these plastic circle is called DVDs.
And that that was way down at like 12% so.
All told if you total up all 20 categories and MPD follows their following about 1.8 trillion dollars in consumer spending.
All retails probably about 3.8 trillion dollars so it's a good chunk of all consumer spending and on the aggregate all those categories grew at 1.8%.
You know but it's interesting to know that you know they're these big opportunities and in things like video games and Beauty less opportunities and apparel and accessories.
And if you're a subscriber to MPD.
That the even more granular view which Don didn't get into is super important cuz you look at consumer electronics and you say oh my gosh it's growing at 4.7% that's good news but then you look you look at the Grand your data and you see that like.
[43:54] You know flat screen TVs which is the bulk of of the market you know it's kind of flat to down and it's things like headphones and smart smart speakers that are responsible for all the growth in the Consumer Electronics category,
that's really kind of the the magic value of NPD is having that that.
Granular look at what's happening in subcategories what's growing what's ranking you know what's on Trend versus off of trend.
The one of the things that Don broke out that was kind of a new-look that I haven't seen them talk about before is that this concept of.
Distribution of of Shoppers based on the amount of their spend is online versus offline so they so.
See if I can describe this in a way that this possible to follow there's a chunk of the u.s. population that spends less than 10% of their their makes less than 10% of their purchases online.
[44:55] And that chunk is 43% of all consumers spend less than 10% online then there's a cohort that's been 10 to 25% online that junk is 18% of the population another 20%.
[45:10] 20% spend 25 to 50% online another 13%.
Percent spend 50 to 75% online and then they're 6% of the population that spends more than 75% of their budget online,
and said you know they had this kind of interesting distribution and you say oh my gosh the overwhelming majority of consumers 43%.
Still you know which is the biggest by far one of these cohorts still spend less than 10% of their daughters online.
You know the easy take away there is there's a lot more online gross and you don't call back to Michael Dart from the day before like he made the point.
Nobody knows what that.
What the final equilibrium will be on online versus offline shopping like Michael postulated that it could be 50/50 eventually but what he says I do know is.
That is a one way Road people are only moving from offline to online that there are not people moving from online back to us.
Which only makes some sense so.
[46:12] You take mpd's new idea of breaking down the distribution of spender of Shoppers by these different different spending patterns.
And then he you didn't break it down by retailer and you get some really interesting insights right so.
Less than 1% of Amazon Shoppers spend less than 10% of their budget online so that big 43%.
[46:36] Amazon only has 1% of those guys like those guys are not Amazon Choppers yet which is like frankly great news for Amazon.
And Walmart is exactly the opposite right like the biggest chunk of Walmart shoppers spend.
Less than 10% of their of their budget online and a tiny sliver of the Walmart Shopper spend 75% online and so you kind of you know those are the two extremes.
Amazon heavily biased towards predominately online Shoppers Walmart heavily biased towards very casual online Choppers.
And then you know what was interesting as they showed Target Best Buy in Kohl's which had surprisingly even distribution across all of those different colored so it's kind of interesting Target Best Buy in Kohl's.
[47:25] Do just about as well with the the guys that spend 75% of their budget on line is they do with it that the women that's been less than 10% online versus.
Walmart and Amazon you know I tended to be heavily bifurcated and so I thought I thought that was sort of an interesting new.
New dimension that I hadn't really thought about before.
[47:46] Yeah it was really cool it kind of need to take away was you know once there's another one where.
[47:55] The big guy is so close Target at such a loss share as people went towards online in Amazon.
With exception of Best Buy so it showed in one takeaway was Best Buy seem so kind of figured out how to stop erosion so you're what are they doing to do that and then you know there's definitely this battle for that 43% of people that are.
We think we'll come online and your Walmart play wants to keep them in the Walmart family in Amazon,
wants to extract them over onto Prime and that's going to be a really interesting Battle Ground over the next five years was one of my takeaway isn't it was just,
we heard Mark Laurie talk about it Amazon hasn't really talked about specifically but some of the moves they've made with going to monthly prime number you know.
[48:38] Paying Prime fees with cats all that stuff has been kind of along the same lines so it's going to be interesting to watch that that battle come to play.
[48:46] Yeah yeah for sure and you know it.
[48:51] I mean I always enjoy Downs presentations cuz I just think the the date is super valuable and it's like you know we have all these urban legends about how things are doing.
Let there be super useful data sets the MPD provides like there's another one I didn't cover but that they do frequently.
Where they show the fastest-growing subcategories right and that's all you know much more important than the big categories are you find out there like a shoes my beat Footwear might be flat.
[49:21] Performance running shoes is a huge growth opportunity right now.
And you know they even particularly talked about how in the subcategories.
You can really see trends go viral so I can example that use is like Office Products is not a particular growth industry right now but.
Elmer's Glue like in that the adhesive category is booming.
And the reason is booming for for you no parents that don't have have like sub 10 year old children at home is there's this huge trend on YouTube of kids making goo.
And slime rather yeah.
And you know they're all these different ways to make an all these interesting you know things kids are doing with slime in the primary ingredient for all this slime is Elmer's glue and before this trend.
Office product companies mainly sold for Nas you know bottles of Elmer's glue that you'd use to glue paper together and now they're all selling 5-gallon bottles of this this this glue and you know selling a much higher quantities.
[50:31] Yeah it sucks I won't get into it it's a problem so I'm fine just taking over our lives.
[50:36] Yeah it's interesting to see those Trends in and be able to react to this trans another one is like the instapot is the is this you no booming small cooking appliance which has you know lifted the whole small appliances category at the MoMA.
[50:52] So that was the highlight there and then there was some random guy talking about last mile did you go to them.
[51:02] I did I did I was actually the moderator for that one.
[51:05] Oh yeah yeah.
[51:07] Yes it might have been hard for you to follow because they had to like shrink down the room a lot from the earlier Marketplace one you know not make it look empty with with just interested in something as trivial as.
You know how you get the goods to the consumer.
[51:24] Is more intimate setting than the marketplace.
[51:28] But I thought we had a good day so so I had three subject matter experts on the panel we had Jamie sadlowski who's the VP of customer experience at Walmart VP of marketing.
Owns the Indian customer experience for Walmart and this is you know Scott Walmart is doing you know a ton of new last-mile experiences.
We had a Jarren Waldman who's the founder of curbside so there a vendor.
Curbside pickup programs for a bunch of retailers including like Sephora Nordstrom CVS.
And Jared has kind of cool past he had the it started a mobile geolocation company that ultimately got bought by Apple and so Jaron actually ran the the mobile geolocation team at Apple for like 4 years and.
You know a big part of the value proposition of curbside is that there's some really smart technology for using your phone to geo-locate you and get your order ready you know as you pull into the parking lot.
So he had had some good good povs about.
What customer expectations were in in The Last Mile and then we had a gentleman named Warren schauble who's from.
A consulting firm called Gwen industries that specialize in drum Technologies.
And Gwen is his bosses name who was the former president of DJI so you know certainly credible.
[53:04] Drones face but these guys are selling like industrial drones for a lot of B2B uses.
And of course you know drones are fake only talked about in The Last Mile and and I was certain pleasantly surprised orang was was.
Turtle refreshingly candid that like.
Really the regulatory environment in the u.s. is is we we are miles away from drones being an important part of the The Last Mile solution in the us cuz we're.
Where you know there's still some very significant regulatory barriers but he did mention that most of the other technical barriers that you know the ability to build these practical drones that can carry heavy payloads.
And the software capabilities to do the traffic management and delivery like you know he felt like those problems.
Used to be big big technical challenges and essentially are completely solved and so you know in his mind at this point.
[54:01] That the one barrier to two drones being important part of of The Last Mile are regulatory but he doesn't think there's going to be a resolution of that anytime soon.
We did get to talk a little bit about autonomous vehicles and and you know their role in the last month which was interesting.
The big takeaway from Jaren and Jamie is kind of going back to this Persona thing that like.
You know the old world where we have like buy online pickup in-store consumers versus home delivery consumers versus in-store consumers and what you know both curbside and Walmart it started independently learned is.
[54:38] Every consumer is a user of all these different experiences and that it's it's just really based on context and that there's a.
In a soccer mom that loves curbside pickup for her regular groceries but you know how to certain occasions when she wants home delivery and she really wants to shop in the store for her own Christmas dinner meal so.
You know thinking about.
All these experiences being important in different context for the Shopper as opposed to thinking about these experiences being the one and only delivery method that different consumers would use I thought was pretty interesting.
[55:12] You just back up a little bit I think it'd be good for listeners you had a great.
It kind of opening setup which was good and you talked about the existing carriers and how much package volume they can handle and how much they're growing versus e-commerce maybe maybe run to that.
High level for folks.
[55:32] Yeah yeah so we've talked about this at a high-level a couple times before on the show.
The in general e-commerce is growing at you know call it 15%.
And that the carriers are growing their capacity at about 8%.
So you know we we we have a clear mismatch there.
For this show I showed some more granular data that Kalin and put together and so you kind of paint a picture for for how eCommerce companies are using the different carriers and and you know don't you know,
the primary carrier that Amazon uses for the last mile is the US Post Office.
And that's because their fulfillment center so close to the consumer that Amazon's big problem is not.
[56:22] Moving the goods across the country they they mostly do that in their own private Network now they're their big problem is the Last Mile and the US post office has the by far the most economical.
Route based delivery solution for that last Mile and so you're saying like 44% from memory of of all of us.
Amazon packages get delivered by the US post office then UPS of the big air air carrier for Amazon.
FedEx does do some deliveries but it's only like 5% and then you know a growing chunk I think it's like between 13 and 15% of Amazon.
Packages get delivered by Amazon Zone people in that that's obviously a growing percentage.
So then you break down that like the US Post Office is growing at like,
their capacity light 8% UPS and FedEx are growing actually even slower and you go man for for these big e-commerce sites like Amazon and Walmart that are growing like 35%.
They're they're consuming much more capacity than the post office and and ups are growing and so you know you think about Amazon investing in their own delivery Network,
that's not too bad just reduced costs or to threaten the viability of of the commercial carriers it's really cuz they,
they simply enough to meet their own growth expectations need more capacity than they can buy on the open market.
[57:53] Yeah I thought that was so so super insightful and really cheated up nice and I just kidding it was a really good paneling.
Learned a ton.
I wanted to ask her side guy a couple things that he mentioned they're doing a lot more food curbside delivery in when he starting about food now these places have a curbside vendor like curbside and they've got six or seven other kind of pickup and delivery places at one point,
[58:20] Does the supply chain that the soccer they're using consolidate because you don't need restaurants think it like the six iPad sitting there so let's try to get Jaron on the show and see what he has to say about that kind of thing.
[58:31] Yeah yeah that'd be awesome we we we did not,
talk about that specific question so that be great when I asked him he definitely did take usra sort of the fastest growing component and I do think.
That like he's providing.
Software that essentially the retailer buys and owns versus a lot of those delivery services are sort of outsourced Solutions and be well you're certainly right like there's a but you know a,
a desk full of tools that these are restaurants in Key West hours are using at the moment.
[59:04] Cool and then your panel wrapped up and then I had to shoot out and then did you get a chance to see the rest of the show.
[59:13] I didn't say there was one other.
Breakout session that I did not get to attend but like I should we should have said for each of these hours during your session in my session there were a couple topics that you could choose then obviously we we were both you know the.
The most interesting one to choose.
[59:34] There a couple couple sessions during the last one there was an interesting case study on Sony.
Sort of rebounding from really losing a lot of their brand Prestige to focusing on making some really hard decisions to get out of some categories and reinvest in others.
I heard I did not get to attend that but I heard it was interesting and then the final Keynote.
Then unfortunately a work emergency called me away for was the A-Rod was in town and and.
You know talked a little bit about his own entrepreneurial Journey which I imagine was was interest.
[1:00:14] Yeah I wonder if Jayla was there.
[1:00:17] I did not see her yet I feel like she would have drop me a line if she was in town but.
I feel like it's a good thing that we didn't have a deep brief recap on a ride because it's already happened again we've used up a perfectly good hour of our listeners time.
So if you have any questions we didn't get to or or if you're at the show yourself or had any any comments we would love to hear.
Your questions on Facebook and we can keep the conversation going there as always if you enjoy this show you know it only takes about 10 seconds of your life to jump over to iTunes and give us that 5-star review.
That that really helps us with visibility on the podcast and we we really do appreciate.
[1:00:59] Yep thanks everyone for listening and thanks to the team it in PD for putting on a great conference and for having Jason and I are speakers we really enjoyed the show and appreciated the opportunity.
[1:01:09] I absolutely in until next time happy commercing.
This episode catches up on the latest e-commerce news
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 131 of the Jason & Scot show was recorded on Thursday, May 10th 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:25] Welcome to the Jason and Scott show this is episode 131 being recorded on Thursday May 10th,
2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners.
Jason our podcast schedule did not allow for it so we missed May 4th so I'm going to use this opportunity to hit rewind go in the time machine and wish you a late fee May 4th May the force be with you.
As I hope you know I was thinking of you on May 4th I was kind of sad that we didn't get a chance to talk and I was carefully following your social media feeds to see if you would like post any any pictures of you like,
with memorabilia are in costume or something so what what what did you do for May 4th.
[1:18] Yeah I'm soaps first of all I don't know if you know or not but May 1st kind of controversy in the hardcore Star Wars community.
I don't have a lot of passion on this but a lot of people feel like it's kind of like our Hallmark holiday in the Star Wars world because the movie came out on May 25th so everyone's like what the heck made for Seattle.
Funny pun but we should really be celebrating May 25th so just some fun diversion Star Wars.
Factor for cocktail parties so I celebrated.
I buy first I do have about cosplayer so I was not a Princess Leah or anything this year but I do have some pretty awesome Crocs from our friends at Crocs have some Stormtroopers and some cheese,
this year I decided,
tour of the Stormtroopers which was exciting and then I have a new Han Solo movie jacket that I got that's pretty cool it's kind of retro 70s kind of kick,
jacket exciting thing for me on May 4th was I had an inkling that tickets will go on sale for the Han Solo movie so I was able to jump on those work some Fandango Magic,
and secure up,
have good set of tickets for myself in a bunch of friends so going to go see that on the 24th at 7 p.m. you're welcome to fly in from Chicago and see what this would love to have you.
[2:41] If I can get a hall pass from my wife I'm totally doing it.
[2:45] What you can bring her and Beta key we got room for all you guys.
[2:48] That would be fun in honor of you I missed May 4th but on May 5th I took baby geek to Toys R Us cuz I was kind of worried.
That he was never going to get to go to a Toys R Us and I I tried very hard to interest him in the the land speeder bed II it was not a sale.
[3:10] What is just couldn't did like it.
[3:14] So we spent like he's very into Vehicles so we spent about 4 hours in the little electric vehicle section of Toys R Us.
And I got heat he drove everything from the like Frozen themed Beetle through the the yellow Lamborghini and he on his own volition pics.
This GM Silverado two seater pickup truck.
[3:45] Yeah which made my my in-laws from the Flint Michigan extremely extremely proud and so we we bought this.
The Tesla of a toys right like it's an electric vehicle and.
I am now officially the last member of this this long-standing Detroit family to build a GM vehicle.
[4:07] Cooley schedule pickup truck you can pull off shotgun on the back there real cowboys.
[4:13] Exactly there's no gun rack yet but let me just say it was a we live right across the street from a park so we drive it over to that Park and he's already picked up about the four ladies that he's taken for a ride back he was very smart took down the two seater.
[4:27] Nice Draco.
[4:28] Yeah that's a chip off the old block but that's way more advanced than they block the original block.
[4:34] 4 hours in a Toys R Us is a that's pretty that's a long time in a Toys R Us was it so tell me about you guys are there obviously liquidating it was it was a kind of the ones I've been it's been super depressing hip I was yours.
[4:47] Well that's right I find Toys R Us just depressed right before they went bankrupt they were somewhat depressing because it's like you have all these fun childhood memories and it just.
Not that fun or inspirational of a,
environment these days but this particular store I'd say is early in the liquidation so it it absolutely felt like.
Like they had a full inventory of stuff in the store didn't feel like the the selection was thinning at all and you know the deals weren't super deep yet.
So it was enough heat my son will never remember the trip it was fun for me to say I've took him and I do think he had a really good time.
[5:27] And you have pictures and they are in a pickup truck so it's good.
[5:30] Exactly a pickup truck that by the way why doesn't fit in my condo.
[5:35] So you had to pay for a parking spot.
[5:40] I am I am bartering with a neighbor to share one of their extra.
[5:44] She like the most expensive toys.
[5:48] Well and the U-Haul truck I had to rent to drive it home yeah.
[5:51] Cool well wouldn't be a Jason Scott show without some Amazon news but today.
We are going to start with Walmart news because they have been ruling the headlines to Big transaction so first of all about 2 weeks ago go rumors started swirling that they were looking to divest of their,
UK grocery brand which I think is asthma.
[6:17] Exactly right.
[6:19] And they ended up selling that for 10 billion to Sansbury so that's interesting cuz they bought that 528 years ago.
And it hasn't really grown has been kind of growth anchor for them so you know that that has been a bit of a black eye I don't know what they paid for it I think.
I think is pretty even said that they sold it for about what they paid for it but it it hasn't been a huge success so then on the heels of that they turned around and this week acquired.
The majority share of Flipkart India has very strict rules around for an ownership so they.
My understanding is they can't own a hundred percent of it yet there's some path 200%,
but they bought 77% for 16 billion and I think you do the math on that at the Vets out to value of,
28 to 22 billion dollars total for for a Flipkart so you know they they kind of exited the UK and then went into India with the proceeds.
It was an interesting discussion on CNBC so you know this is here we are it's been.
Couple weeks since Amazon announced their first quarter which which recovered on the show was just amazing and if you remember my free cash flow discussion there just pumping.
Billions of dollars if 16 billion dollars is about what they're spending into quarters just for growth an Amazon just just out of free cash flow so.
And so interesting CNBC discussion cuz what happened is the Walmart stock did not react well to this transaction thin and it is hard to cuz it's kinda like we did this m&a didn't work out so we're selling it and the good news is we kind.
[7:54] Came out relatively unscathed in the UK.
By the way we're going to take this plus $16 more and we go buy something even smaller so they don't disclose the revenue of Flipkart of the GMD but.
All indications would be that it's not as large as as as though or you know even close to $16 I would you know the last I've heard it's like.
2 to 5 billion and GMP and then if you can't put a 15% agreed on that you know this is a smaller.
Sub billion-dollar business Revenue was probably so pretty interesting.
The normal discussion ensues which is it's not fair Amazon gets to spend so much but Walmart doesn't so it's kind of interesting to see that,
play out with this transaction where you see yeah I don't know how involved he was you may have some inside of that but this is a very much feels like Mark Lori kind of saying look we.
We got to be aggressive in India we got to get out in front of Amazon and outflank them and and.
You're not to do that and you take grocery. We need to be in India so it feels like.
Doing the right things they're not getting credit which I'm sure must be frustrating inside a couple more quick things there,
eBay was kind of a big winner in this because about 6 months ago they invested 500 million into Flipkart they folded.
EBay. I n into it and then now that position is worth 1.5 billion so nice three-bagger or 3x of their money,
and I think they got free to go and it's not clear if they're just going to spin it off for relaunch but but they'll come back in India as eBay. I n.
[9:28] With a nice warchest from the transaction so so kudos to the corporate development team anyway hopefully there,
at least enjoying some extra pizza or something like that Jason what did you think about this deal.
[9:40] Yeah well first. Just as a reminder to Wisner is the reason that this gets so much players is,
you know any is a potentially huge Market second most populous country in the world you know and rapidly evolving,
population with with an enhanced spending power and very little,
Commerce penetration brutal e-commerce penetration in the country so tons of growth and so you know flipcart is the biggest player but Amazon has been,
China indigenous way,
build a business in India and Amazon is already the second biggest player in India and is actually growing faster I think then put card so,
it's interesting you know Amazon try to do indigenous we compete in China,
and that didn't go very well it's a lot. You know people are like you know they won't repeat that mistake in India and you know so there's a lot of rumors and Amazon was bidding against the Amazon,
Amazon was betting against Walmart for Flipkart alot of us back you I don't know where you were on this cop but you know I assumed Walmart was going to get it,
because in my mind Amazon was only,
would have been interested in foot cart if it was a good value like that they had no interest in overpaying on some strategic basis for Flipkart whereas,
and I feel like Walmart really you know does have an interest in.
[11:13] Establishing some some Global credibility you know Walmart wasn't particularly successful in China struggle in the mature Market in the UK and flipped Asda and so kind of felt like,
you know we seen Amazon reached for Acquisitions before like Jet and that or Walmart rather and it wasn't surprising to see him.
Reach again this time and supporting me almost wonders if Amazon sword I intentionally tried to beat him up a little bit.
[11:39] Yeah there was some talk on CNBC that,
Amazon bid 2 billion above the 16th but the founders chose the Walmart did and it wasn't really clear what was going on with that so I don't know if that was just rumor or actually officially reported and I couldn't find it in writing anywhere so,
but I do think Amazon was either really interested in it or.
It was kind of a win-win that were they made Walmart really pay up for it so it'll be interesting to see how it plays out.
[12:11] The one thing I did I do believe is that Walmart was a more attractive buyer because there's a less likelihood of,
regulatory impediments because Amazon is the number two player if they were to acquire the number one player there there would have been some some.
Further regulatory hurdles in in India I'm so maybe I was just a safer safer way for the four,
stop thinking and Company to get the money back so be interesting while Amazon is there anyone else that Amazon would want to buy there or will they just you know continue to go to loan and try to do better than they did in China.
[12:51] There's always been kind of a third player Snapdeal and in that round I talked about or eBay and Dustin 500 million there was rumors they were going to merge they didn't and I really heard much about Snapdeal lately so that maybe something Amazon,
could pick up.
Probably relatively cheap now cuz they're kind of left at the party without a chair in the music is stopped so I don't know if they really want to Amazon you know their acquisition strategy is.
To get into something to don't have in their dardi have a Marketplace they have invested heavily and FBA for that Marketplace what are the rules in India is you can't operate one p as a foreign entity and I think Flipkart has enough for investors they can't be one piece so all these are pure what I would call a pure Market Place model me they don't have a retail component,
Subway Flipkart and Amazon have been furiously building out the photo centers though to help their sour basis I don't think Snapdeal had the investment.
Not to do that and they got left behind so it said they're kind of the distant third player there that you know I'm paper Amazon could pick him up to you no time to continue to be ahead but I think they'll just got there.
[14:00] Yeah I feel you in a lot of markets you would you potentially acquire Local Company because that would would get you license to operate more as a local company but I think India has a strict rules about,
ownership percentages that mean like you know Snapdeal word indigenous Indian company in Amazon acquired them they would then no longer be considered indigenous.
That the feminine side is interesting to cuz one of the challenges in India is not just lack of payment centers its lack of infrastructure overall its its roads and delivery services and it's a very fragmented Market inside.
My my sense is that the Amazon efforts and the fbar.
The 10th potentially super lucrative because literally like they're building a whole capability that you know it's not like if you don't.
Use Amazon you would just use UPS to deliver this.
[14:56] So that's interesting and then I guess it's the one you know if is Amazon really wanted to spend some money to jump-start their presents and India the other thing would be interesting as there is a big payments player there which is paytm.
I have no idea if they are for sale I think that's you know big investment from SoftBank and $0.10 but that.
[15:17] Payments tend to be a big driver of digital Commerce platforms and obviously in China like I would argue that $0.10 and all I pay are.
[15:28] In a big drivers and so you can imagine that would be a strategic place to invest in India as well.
[15:34] Yeah that's one.
[15:35] So some other Walmart news.
The we talked a lot about retail strategies in general towards what I called owned Brands so essentially.
Treating brands that are exclusive to the retailer that you know usually are a lot more than private label its.
An aspirational brand with its own positioning in marketing in Walmart launched a new one of those last month called all is well home which is kind of there.
Home Goods brand its bedding and mattresses.
And in and of itself that would have been interesting that gets added to the stable of Brands they bought like bonobos and ModCloth.
The weather things that I found interesting about all is well home is that Walmart actually launched.
I stand alone you are out so rather than selling all's well on Walmart.com or even selling it on jet.com you buy all is well from.
All is well home. Com in so that is a sort of,
further step in the own brand a play then we've seen before like you know cat and Jack from Target the super successful brand that it doesn't have its own URL Rocketfish is a super successful brand,
Best Buy it doesn't have its own URL like even you know the world's most successful own brand Alexa,
you know obviously I'm buying Amazon like it doesn't have its own URL so interesting.
[17:08] You know to see if that's a trend that we see more of his these Brands launching with their own URLs and a particularly interesting to me inside baseball thing.
Walmart has built super robust e-commerce platform that they going to spend billions of dollars developing overtime call Pangea and when they watch this all is well home.com all is well home is running on Shopify.
[17:35] Yep so.
[17:36] Ya Allah be with your Shopify to lunch kind of a micro set one clarification on Alexa is he was on does on the yard all day just don't tell Alexis on it it it it like.
You you you obviously know but like if if people haven't looked Alexa was this company Amazon acquired this goes back into the 90s and preacher like 9899 and you would web web users would webmasters wood,
it's all set of tools from Alexa and it would help them rank various websites and you would see your rank so it's kind of shared.
Metrics kind of thing not many people use it today because the the date is pretty.
Yep sketchy and but Amazon only are on the brands they use that when they came up the product they I guess they looked on their sweet of trademarks of the owned and pick that one out to to have the Alexa brand come out.
[18:29] Yep and I think I use it as I could be to be site for Alexa right like isn't it more for like people that want to partner in the Echo System.
[18:36] What else Alexis still has this traffic kind of thing and they try to turn it into a marketing stack so it's kind of a PPC tool kind of a thing a lot of the companies that did so he's metrics.
Headed that way like a lot of comparison shopping engines have gone that way like next time but there's a lot of them don't have a ton of tricks that I've never heard of anyone using the Alexa tools.
and then in addition to this new all is well home website Walmart also launched a pretty substantial redesign of walmart.com,
somewhat controversial like it's a very minimalist design that you know doesn't have a real loud Walmart branding to it so it's the spark is what they Walmart cause the,
the start of Starbucks logo and you don't want you scroll down from the homepage you get a very minimalist search bar at the top of the the site with just the spark and the what the word Walmart doesn't show up anywhere.
[19:41] Just freaked me out cuz I was working on a presentation and I was going to know do a screenshot of a Walmart marketplace,
and I was looking at us like how is even going to know this is Walmart they're going to have to recognize the spark because the word Walmart literally kind of once you leave the homepage it melts away and there's no the menu becomes hamburger menu,
yeah they moved the mobile metaphor to the desktop and yeah it's kind of.
Kind of wild and then you know as you scroll on shop you have this persistent search bar hamburger menu and Spark which takes you back to walmart.com they really have no corporate branding so.
Come on or something so it's kind of saying.
You know where we want to give you more space for search results then our corporate brand and then also you know there's not a lot of browse here so once you leave the homepage and get in to search results there's not.
There's nothing like a lot of bread crumbs I found I got a little lost their it took me awhile to kind of like get familiar with what's going on so it's a bit dark but it's interesting I was doing our desktop I'm sure it's great on mobile I bet on mobile it's it's kind of.
Feels really good on desktop it feels kind of strange it's going to take so long Easter.
[20:57] Yeah I think overall it's way more visual so images are much more prominent and bigger and you know for example like on the pdp's the the skew images,
take up way more real estate than they used to and so I think that's part of drinking that bar down is to have more real estate for the images and then you know the thing that Mark Lori has really hit on in the new design is,
substantially more personalized for each individual visitor but also for each SKU category so you go to Department landing pages and they,
that there's a lot of Rich editorial content that's in very different on the dog food from home from apparel and all those sorts of things.
So pretty big operation for Walmart the thing I've seen most people complain about is not the lack of branding grocery is super Promenade on it and there's a grocery button and it takes you a separate URL with a completely different design aesthetic,
so I think they've that's been the big critique I have seen of the site but I,
I believe the grocery refreshes and fight as well so I suspect they'll they'll match up eventually,
and then some other news on Walmart Last Mile,
they've added some new delivery partners and they're phasing out some of their old delivery partner so so,
about a year ago Walmart you announced that they were doing a lot of them at home delivery for book groceries and general merchandise and they announced Lyft and Uber is.
[22:32] As initial partners and it now looks like they're phasing both of those vendors out they,
they have used several third-party deliveries other delivery services they added Postmates to it.
And then an interesting one of me is they added doordash as a grocery delivery partner.
And the reason that's interesting is part of this I've never seen doordash deliver anything but restaurants.
[23:00] Yeah I know I saw him at shoptalk they you know they were talking about their reason restaurants lovers they only do food so yeah.
You have prepared meals being food like restaurant food so they the kind of I guess when Walmart come calls you yeah you take that phone call.
[23:18] My recollection was that the CEO for.
Cheesecake Factory was highlighting why they were such a good partner because they only did food and I I suspected the CEO of doordash already knew that he was in the throes of appreciating that getting highlighted so much.
[23:38] But it is interesting you know there are all these delivery services tons of people Outsourcing delivery right now like one of the interesting things it seems like.
Walmart is picking players that are willing to provide the delivery service but don't insist on owning the the delivery interface so you know I sent you that would provide delivery is sort of API if you're well so that Walmart could own.
The digital interface unit the big delivery service that Walmart has never partnered with his instacart and you in front of the speculation Why is the instacart.
You know that so far has it seems like they've always insisted on being the the front end for all the orders that are fulfilled through instacart.
[24:21] Got it said they're really just using the 1099 workers of these hooks have you go to Walmart or in the app do you do your groceries and it's delivered by one of these guys pretty probably unbranded out imagine right because you're not using their apps.
[24:36] Just yeah just like.
[24:37] Yeah it's a white label delivery service.
And it is you know these are all pilots in different markets at the moment and there is a pretty substantial pie with it actually does use Walmart W-2 employees,
and this was a system where they essentially like offering an additional gig to all of the existing.
Walmart employees that you can also do deliveries and I think it was some controversy that you know,
like when they first announced his people sort of misunderstood and thought Walmart wasn't wasn't going to be paying their employees for these deliveries.
[25:13] Got it. This reminds me I forgot to put this in the show notes but I was at a Target the other day,
and it's one of the newer ones and I noticed they had code off a part of the parking lot and it says it's got this kind of interesting that's got two arrows and it says Line 1 line 2 and then it's all blocked off and it says coming soon pick up area,
passing and then now since I've done that pretty much every Target I go to has that and I've been deprived 6 targets the field research also known as looking for Star Wars toys but anyway so I was wondering if you know anything what's going on there.
[25:53] Yeah so they've announced a pretty substantial expansion of there curbside pickup program again for Grocery and General Merchandise and is a reminder,
maybe 18 months ago they started a curbside pickup pilot using a vendor called curbside and they they abruptly cancelled that pilot.
And then fast forward about nine months later they bought a competitor curbside called shipped and so these,
so they now own that capability and so these these,
does drive-thru lanes are the new curbside experience that's being managed by shipped and that's a shipt,
and shipped does both curbside pickup for for customers that want to swing by the store and pick him up at their convenience and they also do do home delivery ship from store,
On Target Staffing.
[26:51] Okay so it's not just for shift couriers will shift couriers go there too.
[26:56] I do know I don't know if that's a good question.
[26:59] So shift is going to walk it from the store to that look herb not a Target play.
[27:05] Yeah well so that shipped are target employees but so.
[27:09] I guess you.
[27:10] Yeah so.
And the pilot is an exclusively using employees that were formerly shipped they could be originally target employees it's using some software and infrastructure that ship bought so that ship tones so one of the big things.
Curbside pickup sounds really easy but it there's actually more complication right like do you.
Schedule a time when the customer have to promise to come pick him up or do you use geofencing on the customer's mobile phone if you was geofencing how do you you know avoid,
taking their groceries out that are perishable out to the curb when the customer just drives by the store to go get gas before they come to the store and,
you know if you're using geofencing in the customers mobile app how do you avoid like burning through their battery and having the customer,
uninstall your app because it's there the biggest battery hog on the phone like they're there are all these edge cases in complications and so some of these vendors like curbside and shipped.
A big part of their IP is mitigating a bunch of the Zedge cases than in the case of curbside they're actually.
X Apple employees that where the the geolocation team at Apple that that launched curbside so that's that's.
You know very much what they highlight is one of their core competencies.
[28:28] Walmart curbside you pull up and you call this number and I've,
people people Rave about it but there it does fail a lot of times like sometimes you call that number and no one calls and you know,
and sometimes you call it and they have no idea who you are so there's still a lot of kinks in and making the stuff work.
[28:48] Yeah all of these retards are struggling to make them perfect and I would even say like all of them are piloting multiple experiences so in some Walmarts there's that SMS experience there are some Walmarts that are sort of drive-thru,
venues in Walmart even have some Pilots where it's,
curbside off site so they have dedicated pickup locations similar to the.
The like Amazon what is it called Amazon.
[29:20] Go pick up.
[29:22] Trash pickup I think is actually.
[29:24] Yeah so what's a different permutations out there I don't think the world is a landed on one but it's it's an area where I think all these retailers feel like they can have a differentiated customer experience if they're the ones that,
The Canal at and your point it's it's can definitely be hit and miss at the moment.
[29:43] Brickell well it wouldn't be a Jason Scott show without some Amazon news.
Amazon news new your margin is there.
What the Amazon news I wanted to throw out there. It was kind of a,
quite week for Amazon there's only like four or five things when I'm usually there's 10 and we have to cut it back the one that's kind of near and dear to my heart is in the auto category,
and if you're not a long-term listening to you may not realize this but I am a Serial entrepreneur my third company was Channel visor started that still exist,
German there started that in 2001 and then left around middle of 2015 on a day-to-day basis but still involved at a board level and then started another company,
call Spiffy man we are on demand Car Care who started with car washing and detailing Nevada Doyle change and a bunch of other things were in five markets so I'm,
I'm not keenly watching The Car Care space to understand what's going on there in the subsection of tires there's been a lot of interesting things there,
there's a lot of Pilots of on demand tire sales and installation but that's really hard to do in a mobile kind of setting because the equipment required install tires as non-trivial,
I and the skews of all the tires we could probably do it a whole show on this Jason,
you and I have both been involved in auto parts for a while but it is a is a very complex you set to say the least just for the tires not even counting all the rest of of what goes on with with auto parts around fitment what not but this week There's a really interesting.
[31:27] Announcement partnership between Sears and Amazon this is not the first time these companies have kind of had interactions before,
so Sears is actively selling Kenmore and Craftsman on Amazon and.
That is allegedly going pretty well so the way this is going to work is it satire partnership so it'll be able to do is buy your tires on Amazon,
and then install them at a Sears for a nominal fee so this is.
This is one of the challenges of buying tires online they're a lot cheaper than if you went to your local tire store but you know.
If you've ever done this you literally get a giant cardboard box full of.
For very heavy tires sent to you and then you then it's up to you to kind of holidays around and take them to your local tire installer and say please install these tires I didn't buy from you so it's a,
it's not a great customer experience to say the least and no mirror I'm not aware of any mere mortals that can install their own tires that that's a non-trivial problem to solve.
So is this going to work is starting to pile it in 47.
What the locations they're called Sears Auto Centers and they're going to start an 8 cities and,
Adobe in 47 of the store is Nate said he's now serious has 400 locations in 21.
200 technicians out there so they do have a really big footprint around tire installation Auto Care and the way to work is this so,
you go to Amazon your Prime user they don't supposed to say this but I'm imagining this will be a prime only feature you select your tires that you want to buy so it's so you get a nice lovely.
[33:02] Mommy upset at michelins it's up to you the consumer to figure out that they fit on your vehicle or not,
Anna. Then at checkout you will get an option just like an Amazon Locker or something like that where it'll say Jason you live in Chicago and we have a.
Pilot with the Sears near your house there and would you like to have these shipped to your Sears Auto Center on 1 Wacker Lane and have them installed for you you choose that and then,
you are given three possible appointment times that you choose and then it wouldn't when you show up at that Sears.
Center at that time they want saw your tires for a nominal fee you don't have to buy the tires from them obviously.
So that's that sounds good and what I have learned the hard way on the stuff is you know the,
in Excel and I call it these things work really well in and go awesome but you know you mentioned the edge cases of curbside I can think of like 60 edge cases here the number one I am going to call is,
getting the wrong tires the vehicle of this is going to be a pretty common thing.
OEM screen very specific about tires so if you buy a Lexus they have very certain tires they want you to put on there there's a lot of decisions around if you need one tire should you buy all 4 how do they wear,
rotating the tires the same time there's like a Plexi there that's just really hard to capture an e-commerce is that that's going to be a challenge and then the scheduling of this is going to be tricky but I've learned about.
[34:39] These customers that want you know automated car care is.
They really like convenience and there's not much convenient to me like I don't say to myself a while I really want to go.
Hang out at the Sears Auto Center for an hour while I install my tires so so that that's kind of a,
of the places that install tires. All of mine are are inside malls inside Sears inside of malls so you have to deal with mall traffic the mall parking and all that kind of stuff to get in there so,
I'm going to be interesting to see how this place but you know it is good news for Sears at any Lifeline when you're drowning is helpful their stock was up something like 17% this is like,
yeah they're at $3 they bounced at like 3:50 and never was super excited,
that's like the most their socks prison in in years now but I'm a little skeptical about the user experience on this one and see how they're going to nail it especially with that once yours takes over the time this thing I'm just not really sure those windows are going to work and how engaged this this year's.
Low-level employees are going to be on it.
[35:42] Yeah and you you could imagine there's all kind you know suddenly Sears is competing with Amazon for pricing on the tires that Steve Sears historically sold them all those sorts of things to write like.
[35:54] Yeah there's Channel conflict now it's serious maybe thinking is,
okay at least I got the customer in here now we can try to sell them on breaks in an oil but I know thing I have found is when when you talk to people about.
Car Care experiences the number one experience people hate especially females is the upsell experience also known as the Jiffy Lube experience they hate going in for a.
$50 oil change and leaving Having spent $400 they come home and their husbands like.
What the heck you know why I just spent $40 and they're like well I got new brakes why you know,
balance didn't check the shimmy on every tire and I got a cabin filter,
and I got the premium oil filter and so you know there's there's actually lawsuits around all the stuff around the the upselling of these kinds of things to make these Services profitable has resulted in a really bad customer experience so,
and then you when I think about Casey and and the Deloitte model of the bifurcation you know we deal with this every day at Sophie,
the that customer on the convenient side do I think is Amazon Prime user they like zero friction in their life because Amazon stream to have you,
you press 2 buttons and stuff shows up your house 2 days later what could be more convenient so it's interesting to see how smoothly this goes because that customer is really really hard to please and sending them to a Sears Center where I think just give me some upsell and some challenges going to be interesting to see how that works.
[37:25] Yeah for sure I mean it's funny one of the I think probably the original Legacy player in the spaces Tire Rack and their model as they they essentially sell you that tired of it you Commerce and then they they put together their own.
Network of independent dealers that they chip the tires to you and you go to that dealer in that dealer would install it for you,
and there's some very happy customers but they they have a lot of unhappy customers if you read the ratings and reviews and when you talk to people like one of the biggest problems they have is.
Tire Rack shops those tires to that independent Tire Dealer and a customer comes in between the time that the customers about the tires comes in and,
the the deer sounds that that customers tires to someone else.
[38:11] You can see that happening at Sears to you know if they don't have him get it off yeah.
[38:14] Yeah that's what I mean do I like you think about the the advanced things I fit Manton all these other issues but like just simple like you know commingling of inventory and those kinds of things could all all be challenges that I have to get worked out.
[38:29] Any other Amazon news outside of tires.
[38:34] I'm thirsty if we had mentioned on the show that Kohl's and Amazon are Partners give us an update on that.
[38:40] Yep so last year Kohl's announces pilot where you could bring Amazon purchases,
to a cold store to return them and they sent you became a return center for Amazon that's now in 42 stores and if they're their quarterly earnings call they the CEO called that program a homerun and essentially said,
did they had a discernible increase in traffic and all the stores that accepted Amazon returns and that that seems totally viable to me that's it.
Felt like a win-win it's one of the rare partner with Amazon cases where as far as I can tell.
Kohl's really isn't giving up any data to Amazon right so it's not like.
[39:24] Amazon is getting to meet and steal at Kohl's customer as a result of this this is really Kohl's getting to meet an Amazon customer and gets an opportunity to surprise and Delight them and sell them something when they bring their Amazon returns in,
in sounds like like it's working well for them so far much earlier but this,
this month Chico's started selling their apparel on Amazon,
and Shelley broader the CEO there you know is saying that that immediately after the product went live on Amazon there seeing an uptick in traffic to the stores and today they will do I feel like,
by virtue of being on the Amazon platform they're getting an opportunity to introduce the Chico's bran to a bunch of prime customers for the first time which is then,
driving more sales to the stores in Chico's let you buy an Amazon return in the chico store so they're getting some visits that way and in that that seems interesting I I guess I'm.
More skeptical in the chico story than I am Nicole story.
[40:32] You don't the one I'm skeptical to azra saying that what occurred to me was the podcast we had with dorel juvenile wear,
they had done a fair amount of AMS and mg and it drove store.
No traffic for them they don't own stories but it drove like Downstream Costco Walmart Target kind of visits so I could see where I think it could make sense is if as part of this launch Chico's went and they not only buy it you know a bunch of headline Search terms for like Chico's but,
yeah maybe now you starting to browse Amazon and you're seeing you know women's blouse and pants and skirt and now people,
you just having listings wouldn't do this but if they had a fair amount of marketing budget I think that could drive people in the stores.
[41:18] Yep no I I could definitely see that I think in general Chico's has a lot of head winds and.
[41:26] Yeah they're in malls there you know where someone older customer they're in their parallel space which it has a bunch of indigenous challenges until you know a lot of us as soon they were on Amazon because they were somewhat distressed in in,
needed to find some some some new eyeballs so there's there's a school of thought that it wouldn't take that many net new customers walking in the Chico's to be favorable to Chico's.
[41:48] Oh my my middle schooler would say burn.
[41:51] Yeah yeah not don't mean it to be pretty good harsh but you know,
they are one of the first players in this category that right so I'm certainly watching and trying to learn,
we talked a little bit in the Walmart case about owned Brands Amazon of courses is dominating the own brand space,
and they watched it but I think isn't another new one that we haven't talked about in the show yet they wants to wag which is there pet food brand.
They may have had a few skews but they they want a whole line of dog foods and what's interesting to me is.
How robust the content and selling on Amazon is around wag so you know you go to the the pet department on Amazon now and it's a.
Personalized editorial Rich page it doesn't it doesn't feel like.
Just another page in Amazon catalog it feels like a real landing page for pet owners and then the the department Pages for wag are are super robust and.
As is usually the case.
When Amazon makes pdp's for their owned Brands they really execute all the best practices so whenever we're talking to Brandon about you know what what kind of content they have to have in their pdp's.
You know we always use the Amazon owned Brands as examples in these wax cubes are going to be another another good example like they're there very long Rich pages that have a lot more content to help you feel good about you know finding the right food for your dog then.
[43:27] Yeah some of the national brands that have been selling on Amazon.
[43:30] Is MacGyver enjoying some wag dog food.
[43:33] So MacGyver is a super Elite one percenter that's probably eating better than I am so no.
He get some fancy Boutique food from you know I'm a cow that was probably like massage by a Japanese Wagyu dude.
He probably eats the best in her family and he also officially has the most expensive haircuts in her family so.
[44:01] Man if you guys are adopting a sign me up you get out of an electric vehicle.
[44:08] The three-year-old gets his own car and in parking spot and the the dog gets a groomer that comes to the house and gives him a you know full day spa treatment so yeah everyone in my family but me is pretty high on the hog so I you know.
[44:21] Songs going to pay for all this.
[44:25] Exactly that's what you asked you were you were posting some new job listings on Twitter the other day that you found interesting and I'm like I might need to do some of those two moonlight.
[44:36] Yeah I thought you would be a good applicant for one of those interesting there or is this was a recruiter on LinkedIn you saying hey I'm working with a large top-tier cpg brand that's looking for a head of Commerce and your Amazon experience is a is a would-be is a,
very strong nice to have kind of thing so that was interesting like a year ago no one would have thought to make that part of a job requirement for e-commerce of the CPT and now it's it's kind of.
Top top line.
[45:05] Yeah that night I think that's actually interesting and I probably would have replied but you also forwarded it to our friend David who I feel like his way more qualified and so I didn't want to apply and then get rejected.
[45:18] So they were also two big Tech conferences this week that we generally follow for big news that's going to affect the Commerce Pace Facebook's big developer conference,
and I think there's some controversy I'm still calling it a fate but I think you've heard some people call it fate.
[45:41] So if you don't know what the official ruling is there but they had their conference two weeks ago and then this week was Google IO which is there big developer conference.
Did you have any takeaways from the either of those.
[45:54] There's a lot of stuff to talk about outside of retail but I think probably the big news for this podcast is there was a lot of retail news you know so we've we've had you know.
Google talking about.
You know they're making some changes in Commerce so we've covered on the show with their new Express is Comic-Con Marketplace is how I think about it but they did tweet.
Google Express and then Facebook had in the last.
Fates or Fates they have increasingly down a lot around messenger and talking about transactions their favorite company talk about their is everlane where do they show the post transaction messaging happening in Facebook Messenger.
I saw no e-commerce kind of related content from both these guys you maybe the big news for me at Facebook is a reorg they're tired of all the team and the guy that was,
CEO of PayPal,
who they moved Messenger to blockchain Technologies so it's kind of like he,
felt like to me they threw this against the wall or let's go create a WeChat we bow type you know chat.
Commerce teen and it feels like either.
Either he is moving on cuz he's not interested or there said let's try watching now so yeah I may be reading too much into that but I thought it was pretty interesting there.
[47:19] Yeah and I think I was part of a bigger reorg I think a bunch of execs kind of moved around so it's.
It's going to be interesting to see how that all plays out from Google I O I saw a few little things like in years past or much more substantial announcements that I felt were sort of court of Commerce.
This year you know before the conference Google Consolidated several payment Technologies and so now it's just Google pay you know which consolidated,
Google Wallet in Google pay and Android pay and that,
that is a digital wallet that's been available on apps on the Google echo system for a while but they extended it to the web so you can now use if you are a Google pay user you can.
Pee in a Chrome browser in a mobile web situation if the is the e-commerce site supports that.
So there's a bunch of mobile web sites out there that you know would probably benefit from adding support for Google pay.
[48:22] Apple did that earlier in the year and so you know there's a couple reasons to update your your mobile web experience.
Google did announce some new versions of the Google home that have screens in them so you know in theory that could be Richard Commerce experiences you know I'm not.
I'm not sure that the Alexa show where the screen has his been you know the the the fast runner in the Alexa family and so I I kind of suspect.
Is it that the Google home screen will be even more niche.
[48:58] Google have some does have some really interesting mobile technology so you know a big one that's getting a lot of traction is amp.
Which is a technology for rendering lighter-weight faster rendering mobile pages and originally you know it had some really great user experiences but it came with a lot of baggage.
Can I type A constrained by Google and Google's been spinning it off and making it much more open and adding a bunch of capabilities that are a lot more e-commerce friendly.
And in their continuing to do that so you know some of the the complaints that people had about amp for an e-commerce site they've.
There a dressing in announcements from Google IO so definitely of your eCommerce site.
I would be thinking about implementing amp in my mobile experience in in the other big mobile technology that Google really was first to Market with his Progressive web apps which is this kind of notion.
Being able to download binary code on demand that have a real app like experience without having to force the user to go through the App Store and download an app and another password and reinstalled the app and.
And all of those sorts of things and said that they're continuing to evolve pwa.
[50:19] But that standard is never really got a lot of traction because if it wasn't supported in the Apple echo system.
And you know frankly the overwhelming majority of mobile Commerce happens on Apple devices so despite the fact that Google had this great support for pwa.
It didn't make a lot of sense for eCommerce sites to implement pwa is because you were only addressing.
The minority of the market that were you know Google shoppers.
Apple in the most recent operating system you know finally implemented pwazon Safari so now.
You know I expect we're going to start seeing that be a best practice as well so at all those Google Technologies together in a couple other things.
And almost every conversate on the planet you know could probably do with a pretty substantial Mobile update right now because there are so many new beneficial Technologies.
[51:11] Good thing to do before holiday.
[51:14] Exactly in an if you're going to do that you should probably be starting right now.
So feel free to call me at work and we'll take care of you.
Scot that's going to be a good place to end it for this week because we we have used auto added a lot of time as we're trying to shorten his up and make him just slightly more concise but if we've left you wanting more or you have any burning questions.
I would love to continue the conversation on our Facebook page so jump over there and then drop us a line and then I mean Scott hangs out there almost 24/7 so.
And you always you always get a response there and of course if you enjoy this show the best way you can repay us for all the time we put into it is to jump on the iTunes and give us that 5-star review.
[52:02] Thanks for joining so.
[52:04] Until next time happy commercing.
EP130 - Comcast Ventures Daniel Gulati
We caught up with Daniel Gulati (@DanielGulati) at ShopTalk 2018. Daniel is a partner at Comcast Ventures a venture capital firm that focus on early stage consumer internet investing. Comcast Ventures was an early investor in Away, MealPal, and recently invested in Zola (hear Zola founder Shan Lyn in episode 98).
We spoke with Daniel about his background, his book, Passion and Purpose: Stories from the Best and Brightest Young Business Leaders, his portfolio companies, the direct to consumer market, competing with Amazon, and the future of retail.
Episode 130 of the Jason & Scot show was recorded on Tuesday, March 20, 2018.
New beta feature, Google Transcription:
[0:25] Welcome to the Jason and Scott show this episode is being recorded on Tuesday March 20th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Scott Wingo.
[0:38] Hey Jason and welcome back Jason and Scott show listeners we are live here from the shop talk show in Sunny Las Vegas and excited to have on the show Daniel Galati
[0:48] Daniel is a partner at Comcast Ventures and has Ed Stinson retail with BCG fab.com fashion Steak & More.
His current portfolio companies include away mealpal Pancho shine and athletic welcome to the show Daniel.
[1:02] Hey guys great speaker.
[1:05] So before we even get into it I know you you I had a little experience with Fab is my name bringing.
[1:13] I had to do a double-take but I would say it was it was a roller coaster ride at 5 but that old good memories now so I think we're good.
[1:23] That is the beauty of.
[1:24] Yeah that is video time.
[1:26] Daniel one of the things we always like to do early in the show is get get a little flavor for sort of how you you came to this industry and.
[1:35] What your tournament regulation was.
[1:37] Totally my matriculation well.
[1:41] Paid extra for using big words I'm not quite the sesquipedalian.
[1:46] I like it I just woke up.
[1:46] I just write that down so I guess I kind of made a winding road kind of photo ID Road into BC so started my career straight out of undergrad at a company called Boston Consulting Group B C J.
Management consulting firm and really a BCG focused on actually read retail clients so like very large retailers.
And you know at that time this car 2006-2007 a lot of those retailers were really thinking about just starting to think just starting to think about technology kind of customer facing.
So I think historically they had to wait till. Kind of court and Court it is kind of his back office efficiency box that they had to check.
And kind of with the growth of Amazon and and and some of the some of the other early e-commerce players Rita's or technology is a customer-facing vectors of strategic tools.
Really starting to shift to the to the full front so a lot of my time there was cutting my teeth on filming digital strategy technology is big is Big retailers.
[3:06] I figured out that I had a passion for technology for early stage of embryonic Technologies and wanted to kind of double down there.
So you're off to a few the BCG few great use a BCG went to Business School.
And started my first real company called fashion sacred Marketplace for independent fashion kind of vertical eyes that see.
I was at a time where the fashion industry specifically was kind of opening up so.
You know it's going to sound really Antiquated but this is 2009-2010 where you at Young blogger is coming to New York Fashion Week to the first time I don't like posting these like.
Amazing photos of all the stuff that was going on.
That's one of democratization of the industry of never really happened before I think fashion was always cuz it's closed.
Closed-loop industry and so what you had was you had these new wave of consumer demand that was Unleashed in consumers were really.
Trying to go beyond the traditional luxury brands.
And an answer to the aperture so different types of fashion from different types of designers.
Was increasing and we will try to hook into that so we we.
Rent in your eyes Venture Capital group the team ran the business for a few years.
[4:42] And a little company in New York called fab.com was just getting started in 2012.
And at the time it was basically the fastest growing e-commerce company you're definitely here in the US.
And and maybe even be on that and you're sad was really for those that don't know if that was really a.
Highly curated design Centric e-commerce destination.
[5:14] Dynastar was kind of a flash sale and then kind of built kind of more going to carry that stuff around.
[5:18] Did will actually start a bit actually.
[5:20] Hook up yet.
[5:21] So was it what we had was kind of it was a hook-up site and then it became so to be a social media site.
For the gay population that was Jason Bradford's stick and I had a big following and so have been pivoted to these comments destination.
And so they did amazing numbers Haven today the number is kind of throw out there you know you're over a million dollars a month in the first 25 days and to the popping up from there.
And I really built their business off of Home Goods actually like Home Goods in and.
Home Furnishings in and fashion was always something that they almost needed to get into because of how big it was but just didn't have the right and DNA and and you know we're doing 20 other things that they around the core business.
We ended up joining forces in January of 2012.
And a whole team went over night I ran the fashion vertical essentially in fashion when did not hear from you know nothing to Fab's biggest vertical softwoods the palace Pacific rated men's and women's wear.
Fab's biggest business.
He was a bit of a sign of the times I think you'll group and some of the other companies had had popularized kind of online shopping fit for Apparel in a way that.
[6:53] I'm didn't exist before end and also from imagine spective it was it was actually really attractive so.
Had a great time there for let's roll let's pros and cons didn't want to get back into the early stage well.
I'm sorry you're ended up joining Comcast Ventures entrepreneur-in-residence and I've been there since you know 2014.
[7:20] Temples in New York right so they knew the Jew what did you move out to SFO.
[7:24] So I move to San Francisco in January of last year.
So I spend a lot of time in this photo New York e-commerce saying which is like a pretty new singing group in 2007 and and.
[7:39] It's all double click people a lot of it is.
[7:41] What a double quick people.
[7:42] Double click Mafia that doesn't get talked about as much as I like the PayPal Mafia but there's an East Coast double-click Mafia that's behind most of the companies are.
[7:49] Totally light where R investors in a lot like really happy messaging in a company called Zoeller and Shannon was obviously a joke group and.
[7:58] She's been on the show.
[7:59] Stream the show and and and and that. Sort of an issue Cadre that 2007 2008 cohort is kind of old gone in and done really great things in in your bed.
To that it was pretty small community now it's a really big Community with all the d2c brands.
The time they went that many that many folks in and he come over there and so you want to jump over the VC had the.
So have those relationships and had the privilege of some pretty red boss daily deal fudge.
It was not hard to kind of bear hug the the sector and come and get to know everyone and then and then you know as I start breastfeeding Comcast Ventures.
Your San Francisco is West Coast is kind of too much too big to ignore and so I moved over here and and and try to call the New York from here as well.
[8:58] Brief side note one of the founders of half.com Jason Goldberg and I share the same name and he's somewhat of a polarizing figure so I get.
[9:08] I used to get like a ton of funny emails intended for him and so we would talk to him I do want all these and he's like only if they're really.
[9:17] I guess I'm not know my experience.
You're reporting directly to him was I've not seen many people that kind of rally troops the way he can rally troops right like internally as well as accidentally with investors in touch I think it's no.
It's not anyone who's ever met him into those environments I don't think would be shocked.
So the amount of capital he's able to continually raise I think he's a great he's a great Storyteller and and a great salesperson in into the best.
That's why I think there's a lot of things that Fab didn't do right I think Jason also has a lot of a lot of strength.
[10:03] In fact he's just starting a new gig which is in the.
[10:08] So he found that follow that and start getting that email the you also we talked a lot about Amazon being a friend of me they for sure for you because you have a book that's for sale on Amazon.
[10:21] I dare I do so passion and purpose. This is going back to 2011 when it was published.
The book was really your kind of written at a time when.
The economy was talking like this was post financial crisis you know recession was in the air and more importantly.
So the ins the core institutions of business were being very much attacked right so I.
Why do people pee in the cross the sun on the banking system I think that's a fair characterization.
I think large companies are big corporations kind of the Fortune 100 with being.
[11:12] Torn down in the in the media and dosage kind of General anti-business anti-capitalist kind of climate right.
I really didn't drive with what we were seeing you know it business school and end with some of the folks.
[11:27] The icons in under which was.
[11:28] But I come tonight which was folks that we using business and they're in their own start a company specifically to kind of be a force for good.
And so the book was really a bad hey how did how can we eliminate the stories these kind of green shoes.
Folks that are your whether it was in sustainability whether it was in cleantech whether it was in your more traditional kind of Industries trying to.
Generate profits but not disregard their obligations to other stakeholders.
And so sent you the book is about those people in those stories and trying to provide some inspiration to.
The folks in an engender more trust in kind of market economies and and capitalist system is more generally.
So I would say Amazon in that do not census is a friend because you know we pretty much know all about all that product for Amazon. Books fit on the Cowboys.
[12:37] Brickell let's dig into to Comcast Center so,
every VC that I know has kind of really good kind of a synopsis of what the firm's sweet spot is you guys are interesting cuz you have that Comcast word in there so I would love to hear and understand how that brings the weight of a large corporation to two potential startups,
and then would love to hear kind of a Lil Bit about some portfolio highlights of the company's you've invested in while you're there.
[13:01] Absolutely so yes the way I think about it it's kind of VC Plus.
Right so at Comcast Ventures we are first and foremost financially motivated.
So it's a it's a completely separate your full of capital all of the partners around the table are.
Compensated based on the performance about investing right which is I think.
Fundamentally different from a lot of kind of quote-unquote strategic funds out there right so first and foremost was looking for.
Great companies Great teams in promising sectors and yoga with the with the goal of generating Roi on this.
[13:49] Plus part of it is really around a relation. Kind of special relationship with a soil P which is come to you.
Comcast NBC you when you when you can I think about it between the Coca-Cola video Business Wireless bsmd side of the business.
Your media side of the business the theme parks out of the visit you want to go on and on and on.
It's kind of rare the startup company Weatherby you consume a company or Enterprise company that doesn't have something to gain from a relationship with compass and BECU.
So where possible and kind of time these things right.
Auntie on both sides we try to we try to broker relationships between between both sides and so really good example of that is showing aggression.
So your NBC has your original programming.
And and your TV can be really great customer acquisition tool and so y'all better pull for a company shine wear.
We really tried to look for opportunities to integrate the shine message in the shine product in the shine story.
Into core Embassy you don't listen to the NBC slight that's a really really it's one example of many of how.
[15:21] Play a tool not every VC can bring to the table.
[15:26] Is one of these things when nothing is again you have to kind of time these things right nothing is promised and lots of stuff but it's something that I think I find at least it helps me differentiate in the Moc.
[15:38] Yeah must be nice to because you could you let say your shoptalk you see this interesting marketing technology from assassin der you can go to you know imagine there's like a.
Yo of Pride the best marketing people in the world you can go to and say Hey how do you feel about this cool new email thing or because you know cuz you guys are doing it at a scale that so you know top 20 kind of a scale and they may say wow that's pretty interesting or,
oh I've been doing that for 8 years and after that. Must be nice on your side to go and be able to get some real verification from.
From practitioners that are doing the stuff on a daily basis.
[16:12] It is that's all true I think the other point to make is.
[16:18] You think about kind of I think I'll give you his financial returns almost proceed strategic value.
I feel like there two ways you can look at it one is hey let me just take what Comcast NBC you can currently interested in.
And go in investing of sectors by that's one lens and that's a lot of strategic funds corporate funds if the other lands like let me go out and find the best companies.
And yeah I think we take that approach because we feel like those companies.
Future I will actually be most beneficial to someone who come cost me see you right so that's one kind of premise which is kind of financial value per seeds.
[17:03] Eventually eventually create strategic value not the other way around necessarily.
I think secondly if you actually look at the data and I was going through this the other day it's kind of like the the hottest sectors of today.
[17:19] Accurately predict the best returns of tomorrow I took you look at.
[17:26] You're so old I threw that the different life cycles attack you know.
[17:33] If it can be the case that.
[17:33] Can be the case that you're a hot sector today generates in a great great returns but in general we see that your prices got bit off you get a lot of me to competition to protect I'm sorry.
What we really try to focus on his Less on.
Sir sector-wide bats but he only the only stage and more and like the individual.
Companies in the individual teams and we feel like they're building something kind of unique and interesting I think we we definitely take the point of view that.
[18:06] Have to be you have to be contrarian rights to make money right.
[18:12] Go to the you are just some of the normal DC kind of parameters is there a guy's is a certain stage we like series ABC seed and then is there a certain kind of investment amount that you're looking for,
what's nice about strategic books is a lot of times I have a lot more flexibility than you know like certain BC will go to their limited partners and go get it.
Pretty boxed in LW you know we are a you know,
we're looking for series B and their company has to have 5 million in revenue and Scooby consumer internet and and really very specific are you guys where do you find that special.
[18:45] I would say historically we would have more specific and today we're very.
When much more General ride sir historically and I think this is the driving Factor he was kind of around the table would just kind of mole latest stage in their orientation right so we used to.
Your before I joined sent me focused on I didn't say post-series be investing.
And probably more heavily on the Enterprise so I've been consumed inside.
Your ad tax ass even infrastructure was kind of more of the focus I would say since then I've lost you in five or so years.
Your appetite for early-stage investing has kind of dramatically increase the man we still we still do a lot of growth growth investing and was still.
We got a grave to the Enterprise to be practiced by.
Your what we saw was your mormal companies getting through locked up by deep-pocketed BC pretty early on in their in their life cycle.
And you're the facts about it was just like we weren't getting a shot if we went already in those companies and so.
Increasingly we you know I focus on Seton series I investing almost exclusively and my colleagues and so.
You're when you still have put it all together we are a.
[20:16] Relatively sector agnostic your and now stage agnostic I think there is some there is some markets that you going to where you kind of say.
You know we want to let this play out a little bit and come in a little bit later and and right Bigga checks later.
What weekend are we now it's too pretty big effort equipped off this year.
And your we've been tracking the space for a number of years and for a variety of different reasons felt like now was a time so come in and.
And we're focusing on early stage investing in in in that area and there's some other markets where.
Call Madison's is one example of that where.
We feel like we can be really competitive at the light stage as well as the early stage and we're happy to sometimes let things play out before kind of jumping in with an investment so it's highly.
Secta dependent the teal point I think we've got the flexibility to too so to enter it at most points in the in the business cycle.
[21:22] So give us some so I went through some of the portfolio companies maybe give us like a little kind of summary of some of the ones that would be most appropriate for like the shop talk kind of obvious.
[21:32] Yeah so just a couple that I've invested in your one of them is a company called a way which is a direct-to-consumer travel brand.
So I invested in that company in July 2015 was was when the seed round but Don.
And really the the thesis around the investment was you've gone.
[21:57] You've got these pretty big incumbents in in Stamps not into me that don't actually generate a ton of.
Excitement with consumers and yet at the same time your luggage is a 9 billion dollar category domestically in.
Yeah it it's a it's a it's a huge Market opportunity the same time those play as one.
Digital natives right and so.
You know you could see the opportunity from pretty dramatic shift if someone came in you know applied the DDC model to that industry.
And instead of Market themselves is so it is aspirational travel ranches what why is Don and I think.
I think it's going a lot faster than than even to the.
Investigative have would have predicted and I think that growth is being pretty astounding.
They I think you've successfully created like one of the things that I would think about is what makes a great DC brand right like why does away succeed when others even in the category of failed.
And I think the thing that makes a really good day to see if I think that away what is white has done really well is created This Woman's aspirational World for the consumer the kind of stepping right so it was never about.
Nickel specifications of the suitcase it was never a. Even the suitcase it was about the story around this lighting of the travel the global traveler last all that these millennials.
[23:38] I think really took too early.
And the fact that matter is when you create that aspirational lifestyle that kind of gives you the license to sell a lot of things to the consumer right like starting with luggage but today they announced.
Front pocket you know last week they announced your aluminum luggage a lot of other really interesting things in the pot.
But you could have you could have only done that if you had first kind of laid that brand Foundation nothing that's where in the DDC will receive the bifurcation where you know.
You would have glossy or away or Casper you guys done such a great job selling the lifestyle to the consumer.
And I mean the ones that we see the less successful and just kind of pushing product and playing the same kind of LTD cat game is everyone else in and you got feels a lot more on Sanibel to us.
Yeah I think of ways been a really exciting company for us and I think.
To give you an example of as more of a Marketplace investment led the series a round in a company called mealpal.
Which is a subscription service for meals that you pick up.
[24:54] Meals that you take off.
[24:57] So that the.
[24:59] This is made by individuals kind of so like I'm a cook I have some extra capacity I want to join the marketplace.
[25:05] Restaurant meals so existing existing restaurant in the thesis there was really.
The market for a $15 cheeseburger delivered to you for an $8 delivery fees pretty tiny Market I think we got.
[25:23] You're looking at that Mark.
[25:24] It's a it's a you know.
The top 1% top of top of Market that you kind of solving for that and it's a pretty.
It's a pretty crowded Market actually if you think about all the different plays at it there in that space it's a mealpal was really coming out of it What attracted me to point of view which is.
Instead of charging for delivery we going to contact cost out of the chain I'm going to I'm going to give value to the to the consumer and so they're actually going for.
You're essentially the most affordable restaurant lunch you can get right into the.
The The Innovation there is such kind of the pricing model Innovation there is really to these restaurants in the thousands of restaurants on the on the platform there in 13 series you're going really quick way.
The Innovation there was really supply-side innovation.
There their deals with with the restaurants and kind of how they get the restaurants to the Albright profitably is being I think pretty unique.
I did exactly the business actually has to Marshall a lot of really.
Interesting elements right around data around to the operational aspects of the business around you know managing me.
Whole Fleet of restaurants in are there a lot of things I have to kind of come together to have this. Lee seamless consumer experience and I think.
[27:01] It's one of those it's one of those like complex coordination businesses where you know if you get a ride to Canby it can be really powerful and I think you know the end of the day the market for a $6 restaurant launches.
Channel more times bigger than the market for a $19 cheeseburger delivered to you so that's why we got excited about that one.
[27:22] Can you go to these restaurants now and I got his one Chinese on today they really have 10 devices lined up and they've gotten enough to Uber Eats tablet the GrubHub tablet there's usually like to local ones like,
in North Carolina we have order up and something else and it some point you're like this is not sustainable.
[27:39] The last thing we wanted to do was just be another kind of delivery player right we wanted to really crave I for these restaurants.
[27:47] What is interesting to me about that space though is that.
[27:51] For a long time we had these are the traditional segmentations of these.
[27:54] Segmentations of these bites.
[27:56] Different ways that consumer saw their eating problem like groceries versus Ready-to-Eat versus USR versus fast casual in life.
[28:04] The digital disruption of all of those businesses if it feels right at the moment like all bets are off and they all are potentially competing with each other for the consumer use cases.
[28:17] I think that's definitely true I think we in the food space generally speaking have.
I think what stopped in the in in the food space.
Is that you're trying to combine you know Logistics which is essentially a very low margin tough complex business with.
Your food prep which is a food supply chains which is like a really low mileage and top business with delivery which is a really let you know like it.
I think we're a lot of these players have really Fallen is is impetigo somebody's restaurant today.
Maple is a pretty good example where they're just really really low margin complex businesses that done a lot of cash you know I think we could companies it's one where.
Retention is is is Yokai the issue there any kind of what happens if you just kind of Chun through your early adopters in your Cactus and it goes off popping up and and kind of Hit the ceiling on.
Basement running through your audience so I think we theoretically agree that you know that.
Grocery stores selling full movies online in a way that it hasn't in the in the past but I think that will be the domain of the logic.
Players so like I just walked into my local Whole Foods on the weekend like the whole front portion of the whole foods with the Amazon 2-hour delivery Prime Bridge.
[29:54] And I think that like when you have that scale when you have that physical full praying you're you're really well position to.
Century like execute on an omni-channel play right which is order online and they speaking store your kind of leveraging both your online and offline assets.
I think for a company starting today.
[30:21] It's kind of subscale I think we feel like the the the ones that are going to win have to have a pretty big balance sheets.
[30:32] I'm wearing dresses in a company in instacart which is a company that space where they have a really big balance sheet and they are doing really well but.
Your takes it takes awhile to get there not every company and get the.
[30:47] Yeah it was interesting I moderated a panel on the future of grocery at the show yesterday in one of the the That's My Pan was the founder of Chef.
[30:56] And he is so there I mean okay company in his POV was very much.
[31:02] The future of me on kids is on demand Not subscription because of the fatigue issues you mentioned and that it's most likely store pickup versus direct-to-consumer which feels like the sort of your bed mealpal as well.
[31:14] Yeah and I think again that's one where.
[31:18] Tren can always favors the incumbents little bit more than the disruptors.
And so yeah we never want to throw the baby out with the bathwater when when making Investments why we we try not to redline categories we try to really focus on the individual companies that will be the winners.
But I think that one is at your pretty capital-intensive one.
[31:45] Switching topics right away cuz you you mention to instacart and it suddenly dawned on me.
[31:53] You you must have some relationship with Unilever because I know you're both investors in instacart and you have a really famous exhibit in our in our space that use Ulta Unilever.
[32:05] Yeah so your Dollar Shave Club was an investment that one of my partner is Rick Ross co-lead you know that.
Business I mean from the get-go was pretty early stories about every business is a roller coaster and nothing goes up and to the right I think that's one where.
We pretty much went up into the ride.
Time you're right from the get-go right from the video all the way through the 2 to the exit I mean with a few exceptions but for the most part was a very very healthy business kind of early on and so stay that way.
You know I think increasingly.
For a lot of these big e-commerce Acquisitions you know whether it's in jet whether it's a Dollar Shave Club where there's a chewy.
[32:54] It always becomes if you're obviously the fundamentals are important I think.
[33:00] Critical to to Taconic stop the conversation.
I think a lot of the times these companies and now thinking about how quickly e-commerce is happening and.
The fact that if they don't move quickly they're kind of going to get left in the dust and so they're almost thinking about these Acquisitions as.
[33:22] Extent of market cap.
[33:23] Percent of market cap when was like an insurance play and I think that's what's driving a lot of these kind of strategic multiples I think Dollar Shave Club could have definitely been Justified on fundamentals.
But I think that was that was as much a fundamental kind of lead m&a story is it was a strategic Ma.
[33:47] Yeah I think I read some stories and I don't know any of the numbers but I think they were putting some pressure on like Gillette and they're like starting to feel it at the cash register.
So I was more than insurance policy is really on to something and eating our lunch.
Totally and I think it was that was more of like a P&G story but I think the Unilever was a great opportunity to kind of get a shot at running the the male bathroom right so like it was a story around raises but I think.
Other ancillary products.
[34:21] Scot some interesting knock on effects there's an activist very active and P&G right now and his whole thesis as you should have bought Dollar Shave Club and you're not doing enough to go to racton,
and it's really interesting to see these these really big brand get shaken up from the top down because they day or not interesting enough and direct consumer in France.
[34:41] Totally and I think you know this way cuz you have to give the Toys R Us and use your that's one where.
[34:47] I just feel like that company is being really slow doing today you know it's it's they you're in this huge category.
[34:55] Huge category.
[34:57] You've got the biggest physical footprint you know in the world in the category you've got almost ubiquitous awareness amongst consumer and and and Muldrow.
And so why it's not.
[35:13] I think I could have done a lot to Sriracha themselves into this new era and I kind of didn't see the result on the retail side what we see is almost.
Application of like retail so I think it's fashionable to come out and say and Retail his dad these retail apocalypse whatever.
I think what we're really seeing is there pockets of retail that actually make a lot of sense in that a growing really quickly like off price is really good example of.
Actor value segment of retail is growing really fast.
And I'll pry specifically are you okay to Ross you work at a TJ you look at a Nordstrom Rack you'll get a Saks OFF Fifth like all of the growth in in in the causes businesses are from the off-price channel.
Increasingly Seymour Mo Supply made for channel made for a price you know I think on the other end of the spectrum you got a lot of growth in luxury I think it was as you see the premium ization of also different categories in.
The rich getting richer and I think the growth in the luxury segment kind of place to that I think where we see a lot of.
Issues a kind of the middle ground right so where you know you know the value play to the consumer you know the luxury play.
You kind of a middle play which I think is increasingly kind of nothing play because I think that's where.
[36:45] A piece is that where e-commerce your kids you the hottest that's where I was on hit you really hard and I think that's where you saying a lot of these bankruptcies in and what not wear.
There's no basis for differentiation in the consumers mind and you just never going to win on price and selection and so that's where they're all failing.
[37:04] Yeah but if you're if you're neither value or convenient then you're toast like Toys R Us isn't like a convenient place to go and it said we not value Macy's allow these guys are closing stores are kind of stuck in that.
The Death Valley in the middle there we had books from the light on and they have a really good report about this when they called the retail bifurcation and it got really good data around that that that's a definitely something that that all brands and retailer should have in mind I think.
I'm going to think about who they're going after,
you kind of brought it up so it was big into it and it wouldn't be a Jason Scott show we did talk a little bit about Amazon how much does that factor into your investment decisions you know what kind of,
you know what used to be like when I started mine when I first companies I was like oh my gosh what do you know about Google and then it was you know,
there's always some company that that's kind of top of mine with investors seems like Amazon's definitely least in the Public Market Chino they they open up pharmacy license in you have some little part of Florida in like all the,
all the drug stores are down 30% is that when you guys go in is that like one of the main things you think about.
[38:02] For sure yeah I think it's really hot if you know if you have latest at our soul was Amazon is taking like 60% of every new e-commerce tall are coming on stream.
And that piss and his actually.
Going off of velocity is so I think he's got a tumble is a couple years ago that number was 50% now 60% and so they're actually increasing their share of new e-commerce dollars which is.
Kind of scary at the same time like.
[38:35] You're speaking to a Avicii friend of mine, talking about shop talk is always become like how to play defense against Amazon.
[38:45] There's some retailers again that's that's probably the right you know it's probably a gender item number one.
[38:51] But I don't think that.
[38:51] I don't think that it is a given that I'm as on will you know when across all categories all geographies or.
Your consumer segments is that right I think there was a time where you could serve.
Draw boundaries around what Amazon would do ride like they would never get into it supposedly never getting to Fresh That was supposed to be never be able to do high-end fashion like boundaries and now being kind of broken down as Amazon.
And needs to be in the biggest markets and will be in the biggest markets at the same time you know I think you.
As investors we really think about what are the stop with the consumer. What are the vectors on which consumers make their buying decisions.
Price convenience selection experience all the way down to the list and I think you are seeing like I think the data C.
The revolution is coming. Because you've got proprietary product not available on Amazon you got right brand stories and you've got your value for money.
[39:57] And I think.
[40:00] I think you're you're seeing the success of these Brands I think.
In a world where I'm is on his is actually you're gaining share I think you're both things can be true but I think you can have vibrant.
Lifestyle brands that are worth your billions and billions of dollars and you can also have at the same time I was on kind of growing and you know I don't think those two things are mutually exclusive.
You know I think that they're they're all the pockets right like I've been feeling a lot of time in.
Sir cross-border near the international weather it is retail is based of the Seas or.
Trying to play the geographical Arbitrage between for the east and west and kind of like what wishes done before are the categories and we've seen some great companies in the space that are really trying to.
Reinvent the value equation for consumers like I think they did it say brands are really educated consumers that.
Traditional Brands can be a riff off right and I think.
You look at businesses like Hoshi look at businesses like wish either either going to be really really want me we shorty is a really really big business.
In part because it is a value play but also because it's fun right it's fun to shop wish like we're investors in a company hold holler it.
[41:27] That the vector those guys are competing on one of the back doors is a shopping experience.
[41:32] And so.
[41:33] And so that's another thing that we're looking at here which is.
I love this company shop shops which is kind of live streaming platform where influences can kind of come on in and talk about the products that they're excited about it and eventually have continued transact like.
That's something shopping as entertainment feels like something that I'm is on.
Ward get too early.
And so you know. Yes roundabout way of answering question like yeah we definitely think about Amazon same time and we try to be full full. Where I'm is on would be weak.
And make investments accordingly the other datapoint is like it when you talk about Fanatics or chewy or like these are all.
Your horizontal multi-brand retailers right.
Arguably competing head-to-head with Amazon so like some of the biggest outcomes that we say some of these companies alike actually.
Directly competing with Amazon and so I don't think it's a given I don't fall in the camp that like your multi-brand retail was Dad and it's kind of Amazon forever and ever.
I think that you know.
[42:49] For those companies I think the main.
Echo by which a computer customer service and so you really trying to get the customer to shop you for a particular category ride for cherry wood.
[43:03] Yeah I think Pat's I think my pad I think Cherry Fest and I think if you can do that you can't really compete against against I was adding takes a lot of things really hard to do that increasingly difficult to do that like a job is to really try to find the.
[43:19] We we hear that a lot though the shoppertainment component being a potential differentiator the sort of.
[43:27] Discovery X-Type experiences nothing Amazon strengths but you put all those things together in the the big winner that we think at the moment is the most defensible against Amazon is branded live marijuana plants.
[43:40] Just as I am.
[43:41] I'm done with Dad.
[43:42] I'm going down I'm doubling down.
[43:43] When I before I move on from the Amazon topic so the one tactical kind of thing that a lot of Brands struggle with and you're just too kind of pick you up you mentioned a way which is kind of a travel company.
Should they sell on Amazon so you created this this brand if you're not an Amazon you're missing like 60% of e-commerce so.
An unbiased on this one cuz you started companies helps people selling Amazon so but it is an interesting dilemma because you know.
The argument against it would be all right now we're going to educate Amazon in this category were going to show him our best sellers will come out with private label but you're kind of like you know damned if you do damned if you don't so.
[44:22] Yeah I think where I coming come down on that is it really depends on the company I think if you are building.
I think the risk with selling on Amazon for direct consumer that brand that's what we're talking about is.
You get your scent to get commoditized weed in the Amazon environment I'd still like.
What what happens is you of your number x on a list of products and your the consumer is essentially.
Intent driven enough discovery-driven in and very very very price conscious right and so if you think about a brand that is trying to tell its story.
Amazon the Amazon environment just doesn't give you much.
Breath to give you much rope to tell your brand story right and they're going to a discussion earlier then give you any,
way to create this world that consumes kind of step into going back to what makes a great Lifestyle brand.
There are a ton of risks or d2c brands that are trying to tell this all encompassing story.
Deciding to go on Amazon for the volume and find themselves speak commoditized I actually think about it last is like Amazon copy your and I have so much dead already without you being there that like.
Went out investors in older than me if you look at all soon as such old is on Amazon like there are hundreds of CopyCat products already right.
[45:53] Weather old veggies on there or not I think that that activities would have happens.
So it's I think on the brand side it's it's kind of tough to two face. Commoditization.
That's it I didn't Amazon I'm actually looking for companies that are leveraging Amazon of the platform right and so like I think that.
[46:15] You know I think that there are really interesting things you can do with Amazon data outside in.
I think they're really interesting things you can learn from trending products on Amazon.
And I think some at the same time on the supply chain side things are getting a lot quicker than they've ever being right to life.
I'd love to see more companies that are actually kind of.
Playing to the strengths of Amazon and really trying to leverage Amazon and you talk about some of the biggest companies in the world like.
A lot of a lot of becoming get started because you have some sort of distribution unlock.
I need to think about gaming space single on Facebook right it is very obvious example where you know.
You kind of unlock this proprietary distribution you can get this guy really quickly.
Amazon could be. Now for for the right types of companies you know.
Types of companies will be aspirational lifestyle Brands but I think there are other types of companies that are more kind of data-driven foston you know companies that you can see being I could built on Amazon and being very successful.
[47:29] If you are you trying to see any like Amazon ad Tech deals yet that seems like I've been coming space.
[47:35] Definitely we pray like every off AC haven't really focus on that Tech recently.
But yeah I think there's some really interesting I think I think Amazon itself is only starting to get into the potential of the their platform in that in that respect I think.
Name something that we continue to look out for and we've seen a couple we haven't really.
Well I'm really dog and I think to the extent that we will but suddenly interested in that in that space in those opportunities I also think that like.
I think about bonobos is an example on on Facebook you on Facebook open that right rail like one of us was right there and I think they had benefited a lot from those early.
Nordstrom sales perspective but just from an iguana spective like if you were on Facebook you were in their target market at that time like you sold but overhear you sore but other side and I think Amazon.
Add ecosystem is out of similar kind of point in time out where it's not.
I think in a couple of years it'll be very very expensive I don't think it's quite there yet so there's this kind of this window of time.
[48:49] Not if it's going to be interesting to watch I think you know special.
[48:53] It's becoming important platform for all the brands into your like months earlier contrarian point like I.
[48:59] Probably wouldn't be very excited about adtec around Google or Facebook at the moment but but Amazon may be an interesting space and we had a couple of interesting guest on the show that I want a pivot the.
[49:10] I want to put it though.
[49:13] One for the last last set of questions before we have to break.
[49:19] All these Trends due to the sort of the traditional notion of a store I know I am in particular you you.
[49:26] Mentioned the way which I think.
[49:30] A way which I think I have a couple stores.
[49:34] . yeah yeah so we spend we spend a lot of time thinking about then you store format right and I think.
[49:43] That probably gives it away right which is like when not we don't think about it as.
[49:48] This this nice wipe out of physical retail you think about it and he's probably a pretty consensus of you we think about it as the innovation of the stall format.
And what does that actually mean right so you know you know why is example display the the easiest one to Think Through.
Yeah you going to the store you got to walk to the back of the stores to find a suit,
right like it is it's it's a it's a very intentionally design store.
Around giving the consumer a inspiring the consumer to think about travel and.
And really dig into that you're the next.
Yeah that actually like it's funny like in the New York still have got a cafe with all these travel guidebooks a lot of people sit there and read these guide books and.
Yeah it is the stores are intentionally designed to kind of make you think about traveling and have you think about traveling always give you this.
Oasis like in your day to kind of have that space and and.
[50:54] How do you buy into that buy my cell right now.
[50:54] How do you buy into that that last all right and then I serve at the end of that process your hair if you want to buy suitcase we have them to.
That's a very different it's a nuanced but very important distinction.
Between your something like that and you're the physical store as a repository of product.
When you think about the physical stores are product repository that's kind of dying and I'll Ghibli.
That death is kind of going to come about foxes in a lot of people think I think it's one of those things where you kind of declined 2% a year and then you cut a full off a cliff because the operational Leverage is is such the bad happens.
[51:44] If you can and we think a lot of that stores as experiences and what does that mean for the individual brand and not trying to push you Prada.
And I think some of them are tactical parameters that are typically smaller format stores typically less inventory in the store sometimes no inventory in the store.
Typically an online offline sync right whether it be.
The conversion happens online and pickup happens offline or is some data collection online and you know the inventory fulfillment happened I'll fly out of whatever the parameters are.
Your we talked about small short-term leases only said about Tactical.
[52:35] We really it's.
[52:36] We really it's kind of rare the direct-to-consumer brand at scale that won't have their own stone at work I think that store network will look very different to the incumbent stone at work.
[52:48] I suspect a you may well be right and Daniel that's going to be a great place to leave it for today because it's happen again we've used.
About a lot of time so folks want to continue the conversation we didn't charge you to jump on her.
[53:01] Page and leave us some questions if you enjoyed Today Show we would certainly appreciate you jumping on iTunes and giving us that 5-star review.
[53:09] Daniel thanks for doing this today if people want to find you online what's the best way to find you.
[53:13] You can tweet at me I'm at Daniel Galati Daniel gulati on Twitter.
[53:20] Awesome thanks Ryan coming.
[53:22] Until next time happy commercing.
EP129 - Amazon Q1 Earnings Hot Take
This episode is a hot take of the Amazon Q1 2018 earnings
Episode 129 of the Jason & Scot show was recorded on Monday, April 30th 2018.
New beta feature - Google Automated Transcription of the show:
[0:25] Welcome to the Jason and Scott show this is episode 129 being recorded on Monday April 30th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:39] Jason and welcome back Jason and Scott show listeners.
[0:45] Will Fox tonight we want to focus on some Amazon news because there's been a lot of really big amazon news that his hit the wire in the last week or so and we've been.
Bisley publishing are shoptalk interviews and wanted to interrupt the flow of those coming out so you get something a little more timely here and so that you know how to,
did Justice Amazon news and think about what it means for your business Jason wants to kick it off.
[1:12] Yeah so two big events that we're going to talk about tonight early last week,
Jeff Bezos released his annual shareholder letter and as we talked about several times on the show this something that he publishes every year he publishes one for the current year and he republish is the first one he wrote which is.
97 if I'm remembering right is that.
[1:34] That is correct.
[1:35] Ding ding and highly recommend you read the 97 one if you haven't,
what will you talk about that a little bit later but then later in the week Amazon did their earnings announcement and tons of interesting things from both events so that's what we want to talk about tonight.
[1:57] Yes we're going to jump into the earnings let's look at the high-level and then we can kind of dig in so one thing that's kind of interesting is there's a new accounting standard coming out I know you're excited about this Jason.
[2:10] Oh my god I've been like my family have been on pins and needles for months waiting for this.
[2:14] It's a sit-down folks it's a it's a big one buckle up and so the.
I know this because I am involved to the public company but the there's a group called The General accounting standard thingy Gap,
and they have come out with a new way of recognizing Revenue that's called accounting standard 606 and this is.
I'm packing all kinds of businesses one example of how it's impacted Amazon is.
Amazon used to take Prime subscriptions and waited heavily towards the fourth quarter because that's when I got a lot of sign ups in this standard says you can't do that you have to allocate it,
equally amongst quarters you can't do weighted averaging and things like that so it causes a little chaos and in the world of looking at these kind of results because you said we have apples and oranges so tonight on the show we will.
[3:06] Do our best kind of straighten that out whenever it comes up but it's interesting just for folks to be aware of cuz you'll start to see some really weird numbers coming out and if you see the 606 that's a clue that just the rules are changing under underneath it's not the company doing some kind of weird shenanigans.
So that being said.
Best way to come to give us a $30,000 summary of Amazon's first quarter is it was a blowout quarter so not only did Amazon exceed pretty much every Wall Street expectation and its own kind of guidance but I watch even more closely is,
the growth rates and pretty much every growth rate we track here at Jason Scott show is accelerated,
which is pretty impressive so they had a very strong fourth quarter so to accelerate year-over-year coming off of 4th quarter.
It's just pretty impressive it just shows they've they've kept a lot of momentum I'm also you know we haven't had prime day it's just kind of a few one kind of a normal.
A kind of boring quarter to be honest with you in the world of e-commerce usually it's a breather quarter but Amazon you know it doesn't take breathers they just soaked up a bunch of Cher.
[4:13] The Lucy so we're going to talk about the marketplace briefly at but then when things you want to spend a little bit of time on is the ad business ever going to jump into that and worked at the show then we have in the past.
Jason wants you kick ass off with the overall results and then we'll will dig into the marketplace.
[4:33] Yeah first thing that caught my attention was shortly after their announcement I saw like a Jim Cramer segment and he called this quarter for Amazon like the greatest quarterback company ever did you.
[4:47] I did that saw that yeah.
[4:49] He may be slightly front of hyperbole but that seems like kind of a big deal.
[4:53] He is prone to hyperbole my favorite is when he famously wrote on his knuckles Duke 600.
Got turns out he was right but yeah so which is Facebook Amazon Netflix Google so he watches these stocks all pretty close.
[5:12] For sure for sure answer the first time we want to talk about is the growth and before I make the big reveal let's remind listeners like what kind of growth numbers are impressive so,
in most cases you hear folks talk about the typical annual growth rate for e-commerce is around 15%,
inter put that in perspective.
[5:37] Good a brick-and-mortar retail growth right now is maybe 4% averages like 1% so 15%.
Is much faster growth.
Then retail is a whole already which is kind of impressive but the 15% number actually has some controversy that comes with it so.
Most of the folks that site these 15% numbers in.
They vary slightly so do you know if depending on whether you're getting in an RF number or a comscore number or a drug number from the US Department of Commerce 15 could be 17 or 16 in a lot of that has to do with.
Their definition of retail exactly what categories are are in or not in their number.
[6:22] But most of those companies based their estimates on Raw data from the US Department of Commerce and the 10 all come in with North American grow that right around 15% and so when we look at a company crossword kind of comparing it to that 15% number,
I will say that most of the companies we tracked are growing substantially faster than that 15% in it.
[6:46] Kind of throws that 15% in doubt you know it's so for example Amazon alone is.
Right around 50% of all e-commerce you know arguably a bigger percentage of the growth some of the other big retailers Walmart and Target.
Best Buy you know if all of those huge companies are growing at north of 15% it's it's actually hard to figure out how you land at 15%.
In there there are some Economist that you know fine fall in the Department of Commerce is methodology for tracking e-commerce a also.
I'll just throw that out there for your consideration but that being said.
Amazon q1 number was 51 billion in Revenue which is a 43% year-over-year increased so.
What you dramatically above that 15% if you take out currency fluctuation that's 39% it at the constant currency if you take out the Whole Foods acquisition they grew at 27%.
In that the thing I like to remind people is usually we talk about.
The biggest players in the industry and then we talked about the fastest growers in the industry so usually you're talking about you know.
Company X maybe it's Walmart you know what they say the hugest percentage of the,
the retail market and then you're talking about Warby Parker is the fastest growing or so it's it's extremely rare and you know frankly scary.
[8:22] When we talked about Amazon in in eCommerce and we talked about them has both the the dramatic market leader and.
One of the very fastest Growers.
[8:35] So one thing I always like to remind people like whenever you see these kind of numbers you always get someone in the room pointing out that hey that's great but like,
you know it's easy to grow when you're not profitable in your you're sort of buying buying market share and you know so there's this common diatribe that that.
Amazon is funded by eight of us and now maybe the ads and that the the core retail part of their business isn't profitable.
And I would really encourage people to sort of update their they're thinking on that there's unit significant evidence that most parts of the the retail business and mature markets.
Are profitable their operating income this year this quarter increased 92% to 1.9 billion in the first quarter so if you back in the math.
The bulk of that that growth came from the business in AWS so it is fair to make the argument that,
those are the the fastest growing businesses in contributing the most to the revenue but you know remember the Jeff Bezos,
always talks about revenue and profitability not being the the the,
key success criteria and the fact that free cash flow is really wet at Amazon's trying to optimize for free cash flow bassist the the retail businesses is like the majority contributor to their revenue.
[10:06] Yeah that's a good point. And the reason free cash flow is more miserable is because it's cash right and you pay stockholders back in cash not operating income operating income is an accounting.
Space thing that,
importing a lot different businesses but it's really hard and Amazon's business for it to matter because you have all these rules that spread Revenue out even though you got the cash and then they also spread out cappex to appreciate it so,
I really kind of distorts what's going on so FCF is a better way to look at Amazon and how they're in the business so it's when you look at that free cash flow came in at 7.2 billion best down from 10.1 a year ago,
but it's not down because when operating reason it's because.
What you have is you have total free cash flow you subtract out Capital Investments and then you're left with kind of net free cash flow 7.2 this year q1 is down from the 10.1 last year.
But if you take out the Investments they're making and quote-unquote your property and Equipment purchases and I'll talk about that in a second the gross.
Freak Ashley was 18 billion and then they've invested.
10.9 billion and capex this quarter so we kind of say yourself you you made this point earlier you know if they're so big and they continue to grow how do they do that they are still investing at a just tremendous clicking other taking about.
No more than half of that free cash flow and investing it back into growth and that's that's pretty crazy no not many businesses I'm not an expert on Walmart but I think they.
[11:41] They're probably dusting I would imagine 10 to 15% into growth and hear Amazon's ingesting like 50% of free cash flow into into growth and you know where that and it's out what is that it's a lie.
Buying rights for movies and things for the streaming that's a small part of it the two biggest chunks are going to be equipment for the cloud computing and fulfillment centers you know they they continue to build fulfillment centers that just on Norma's clip they're building out.
Prime facility in CVG you know so just amazing amount of investment in infrastructure they're making to keep this business growing at the pace it's growing up.
[12:20] A year ago that that same kind of investiture.
What's 7.4 billion say ramp that investment up from 7.4 billion to 211 billion a year of a year so that.
[12:32] Pretty sad when on capex that's why I went down your weird but it's because I think they're increasingly bullish that they can grow this business for the foreseeable future at least 2 x this rate of e-commerce which is which is.
[12:42] Pretty crazy yes I'm point you do run out of.
Performance tuners to build a I would imagine they continue to invest in the.
Like the same day infrastructure with the planes and whatnot.
[12:56] Yeah and again all those Investments are out of long-term competitive Advantage it's a moat against everybody else.
[13:01] Yeah and at some point when they stop doing those Investments That free cash phone number in a right now if they weren't doing this investment would be 18 billion which would be.
A lot of cash but if you keep going 30% you know that that number you know could conceivably get up into 30 40 50 billion dollars in free cash flow and that's why.
That's how Wall Street salary this thing.
Because if you look at kind of though you know the the single-digit billions that they're making an operating profit you're like wow why is this thing worth.
Nearly a trillion dollars it's a free cash flow and that's what Wall Street you know it is watching and when you can see a packed free cash flow being like that it it's it makes sense to invest at the pace that while she does.
[13:45] Yeah and oh by the way they also drop 22.6 billion and 100 which is way more than any other company like way more than any tech company invest in R&D.
[13:56] Take us on into the sum of the Interior results.
[14:00] Yeah so is it a reminder like the break their revenue down into these three big lines of business that are you no material to there,
their revenue so the first is North America so North America was up 46% year-over-year so that drove 1.1 billion and Prophets,
without Whole Foods that's 26% year-over-year growth so pretty healthy in North America which is.
Their most mature Market International was up 21% based on constant currency and they lost about 622 million on that.
So you know a couple of things to know if they're that lost was actually.
Much smaller than most of the analyst were forecasting for international a lot of the international markets.
Are much newer in Amazon is investing to win those markets you know some of those markets India in particular is you no potentially.
The biggest prize out there either India or China but India's largest perceived as like the the biggest potential consumer Market that that you know doesn't have a dominant player that already has it locked up.
Like Amazon does North America or like Alibaba does China in so it it really is like the the biggest battle out there and you you wouldn't expect to be turning a profit in those kind of you know early.
Investment markets at this point so the fact that that on their whole International portfolio they only lost 622 is actually.
[15:35] A substantial piece of good news for Amazon.
[15:39] And then the 3rd big chunk for them is AWS Amazon web services.
That also had phenomenal growth That Grew at 48% based on your VR constant currency and prophets were like 1.4 billion.
So you don't amazon-web-services once again 48% when you're already like the dominant market leader is super impressive.
I think in the the shareholder letter Jeff Bezos talked a little bit about how.
You know that Amazon really had this sort of 6-year Head Start before they had I think we called the like-minded.
Competitors enter the market and so they they got this like 6 year old Vantage over everyone that they've really you know continue to keep their foot on the gas and just kind of you know take that early lead they were given and there.
They're using that to keep building it and and you know so far they they haven't run out of growth opportunity there which is pretty scary and amazing.
Saturday a business which we like to talk about a lot is there add business in it isn't yet big enough that it gets its own segment so the ads are kind of blended into those.
Three buckets so there are at least they're in a 2/3 buckets in the North American International numbers.
And what we'll talk a little bit more about them later but then the.
The other shoes piece of news which I think it's most of the consumer a buzz this week,
is that Amazon also announced a substantial increase in the price of a Prime Membership so they jacked up Prime 219 bucks a year,
which is like a 20% increase for consumers.
[17:34] Yeah he had that goes into effect May 11th so if you're not a Prime member this is your chance to get it at a discount and it's it's it's interesting they're doing it now you got to presume Prime day will be sometime in early June so I think they're kind of ramping into Prime day I think they know they did have a lot of data that shows that's a big sign up time so there,
third there some method to the madness on that date are you going to cancel your Prime Membership Jason.
[17:58] I am not potentially my wife and I which each one of them,
for those not in the know One Prime Membership not only covers the whole household you can actually share it with five family members,
and so someone silly that my spouse and I each have a Prime member but membership but you know those were these valuable assets that we both brought into the marriage and we're both love to let go of our,
old old Prime memberships at work white and financially irresponsible.
[18:31] I look forward to hearing who's a subscribe and save as to be recreated.
[18:35] Yeah I as with most things I think it's pretty clear that my wife is going to win that.
[18:41] Cool let's see let's do a quick review of marketplaces so long time listener still remember that Amazon does not disclose the size of the marketplace from a GMP perspective but they do disclose one metric which is the mix between and it's a unit mix between 1 p.m. and 3 p.m.
so that came in at a new high of 52% to 52% of the units sold on Amazon or third-party and.
[19:07] We probably said this a thousand times so I'll just run through it very quickly so Amazon's revenue for the quarter is 51 billion and the third party is counted the other.
30 greatest between 10 and 15% I use 10% to make the math easy so really when you when you.
When you back into it what you find is there's a huge hidden amount of sales happening at Amazon because they only can count 10% of those sales for the third party Marketplace so the ends up that about,
67 billion of that 50 billion is revenue from the third party Marketplace multiply that by 10,
her actual number so this is.
I used to be the only one that would pontificate on this so when I run it to my calculator I end up with the quarter at a hundred.
The first party stuff has a lower aov because most of the digital.
Apps books and those kinds of things are are in first party and they have a lower aov so it it kind of.
Excuse the third party tends to be higher average order value so it's.
Unit wise is 52% but volume-wise were looking at almost like 66% or 64%.
Third party 40% first party so that people are kind of.
[20:37] Picking a part of those clues in and then figuring out so they tell you.
Seller Services Revenue in inside of their is FBA fees as well as third-party fees so if you make some educated guesses you can do something so one of the one of the Alice JMP,
baseball schiano's pick this out there all around the same range they came in at 1 p.m. 31 billion third party at 70 billion so a total of 101 the right in the ballpark of where it where I've been guessing which is good so.
The punchline of this is Amazon feels like a 200 billion dollar pastry Taylor but there really a 400 billion dollar pastry Taylor so just in this quarter.
Yeah it feels like 50 billion which is the top line but there's another 50 or 60 billion have a hidden under the mass of the ice,
which is this Marketplace in we always encourage people you and I are on a Jihad to tell all the retailers about this so that they don't underestimate the the impact of Amazon I just just reading an internet retailer.
They're kind of doing that they missed it at this time and that all this is frustrating what other little nugget on the marketplace side Amazon is really pushing this new functionality called Amazon Global selling they were talking a lot about it at.
[21:50] Shoptalk for example this is what allows small or businesses anywhere in the globe to search Lee use Amazon Fulfillment Network and load balance globally so you could be a seller in the UK.
And have a practice doing well and if you allow Amazon they will load balance it.
Across Europe into China and Japan that even in the United States so they had interesting stat that.
The first time I saw where they said in 2017 Global sellers sales grew more than 50%.
Exodus this kind of cohort of people doing Global selling their sales grew more than 50%,
and now it represents more than 25% of third-party sales on Amazon so strong to be a pretty material part as this kind of cross-border trade functionality that Amazon has now.
We know at Shell visor one of the red hot pass for this is China manufacturers over to the US and then to Europe in other markets.
So so Amazon is kind of got rid of all the middle men in the import world so you have these factories directly shipping product into fpa's across the globe,
and that product is getting sold on Amazon so it's kind of the wish model,
put on steroids and that is a huge kind of growth area but it also frustrates a lot of the sellers on Amazon because you know they're up against I'm selling a brand in microscope,
and there's a Chinese manufacturer signed exact same thing out of the same Factory without a brand for half price so that it does cause a lot of lot of angst out there in the world with this this program.
[23:25] Yeah and I think it's,
Rite Aid the program works crazy well I get super hard to move goods from country to Country in Legally sell them and customs and Tara sent by,
it used to be that that there was a huge competitive advantage to this like relatively small pool of people that have the expertise to navigate all those systems and Amazon really takes all the complexity out of that like kids in their dorm room can now do cross-border trade which,
you know what uniform was not possible and so is as more people adopt this system like,
the fact that it kind of raises all tides in it it it also makes you know counterfeit product and and all those things sort of more ubiquitous we available it is a growing concern.
[24:14] Yeah. I don't think that people underestimate it's just like just kind of Fino translation so because Amazon has this a sand catalog if they take a certain widget,
and translate it you know it gets translated into for five languages the next person to come sell that widget doesn't have to do the translation for just kind of say,
yeah yes that's the same Mason and they get the automatic translation that's been done they get to ride on that investment so,
if you're doing your website or something like that you don't get that benefit you going to translate it over and over and over again for every SKU where's Amazon gets this really nice kind of I reuse out of their catalog which is another huge benefit of this program.
[24:52] Yeah you know one thing I've never asked you know Diddy translate like the reviews or the reviews country-by-country.
[24:59] Country by country.
[25:01] Okay so they still have to build up the start of social proof in each welcome Market.
[25:06] Anything else we want to talk about in the marketplaces this week.
[25:12] Dallas jumping to ads.
[25:14] Yeah so you know they have this Revenue line they call other services which we think is mostly their ad business you know what else is in other services anything meaningful Scott.
[25:27] The do some of the do a branded credit card and they do some other,
they do on-site advertising so that ever tizing were talking about is a mg and a mess that tends to be 95 to 90% of the Intensive purposes it's the advertising business which is the new helping sellers promote their products.
[25:49] Got it yep and said that whole pool guy grew a hundred 32% year-over-year to 2 billion dollars for the quarter so I think that is one of the this is one of those categories that was affected by the 606 Gap.
Reporting is that true.
[26:05] Yeah if you if you met that out in group a paltry 72%.
[26:09] Well then I don't know why we're even wasting their talking about it.
So like this is more than one of these classic models where you know Google and Facebook are the dominant digital advertising platforms that have the bulk of the revenue and,
you know Amazon it at a much more base is there for able to grow much more quickly.
But 72% is is still a red-hot growth and I think they worked that's up from 60% growth last quarter so I.
The pace of growth is accelerating.
[26:42] And you know as a reminder for somebody games on the one of the reasons ad revenue is super exciting is.
It's highly profitable like you. Much more so than been selling physical Goods you know to the extent that it successful.
It's an ear recurring Revenue stream and so it's almost like a more valuable dollar of Revenue than some of Amazon's other sources of.
Of Revenue in the Amazon is really quickly and merging.
As kind of the the third digital advertising platform and so you know you seen a lot of buzz in the trades about it.
You know when people try to analyze that number they get to a couple different places like I think I've seen some estimates in the like 5 to 6 billion dollars a year.
I seen some people estimating 8 or 9 billion dollars a year for 2018 I have a feeling some of that has to do with.
Whether they're looking at the old accounting of the new accounting there is some seasonality that advertising for a for a lot of these products.
[27:52] The I think there is an anise out there that kind of try to forecast this Revenue out to 2023 and they got 236 billion.
So that put you in the order of magnitude of Google and Facebook although you know presumably those will both be a lot bigger by.
By 2023 than they are today but today Facebook said about,
like just under a 50 billion dollar run rate so like 48 billion dollars so they Amazon's really able to get there that's a meaningful third competitor and that's a pretty nice,
like ancillary Revenue stream for Amazon on top of all the other well-established businesses that they have.
[28:29] Yeah and we will talk about this we've been pounding this drum for probably 2 years that you know a lot of folks think this will be the third leg so that retail being one actually,
marketplaces I would call the second and then AWS the 3rd and then adds the 4th you have billion dollars and then you and I have talked about,
a voice like Alexa being number 5 so so I think there's kind of five legs to the store which is just not fair that you only need three but anyway that's the life of the Amazon.
[28:56] It's a very stable stool.
[28:57] It is a very stable stool and you know I said I think.
It's going to be really interesting so Facebook's had some stumbles here you know,
Google has some headwinds in certain areas in fact Google had a really nice quarter and they're shocked and removed much and I think a lot of it is people are starting to think when does this you know,
so if Amazon is growing this business at cause 72%,
when is the start to eat into Facebook and Google and it's long been an industry metric that something like 25% of Google's revenue comes from product-based terms which makes sense cuz they're you know if you kind of think about the verticals at Google you have time for a retail vertical I finance vertical Auto those kinds of things,
the feels like it would be a pretty big one Facebook also and I either Superior amount of product that's advertised on Facebook we had them on the show several times talk about all the great offering they have there so it's going to be really nice to see is this wraps up.
Do yo at some point there's got to be some share that gets taken and,
maybe maybe the lines cross faster than we think there are if maybe if Amazon on its path that 36 billion maybe Facebook doesn't keep growing it kind of the pace it is because there's going to be some loss of share somewhere in there,
I am when we at Chalmers are we talked to Brands specifically they are moving big dollars to this in a lot of it comes from your Prime.
More you got more data than I do on this but a lot of it's coming out of old school media but it's coming out of Google budget some things that because they're just feeling like this is actually more miserable than the Google stuff because if you're a brand is hard to go buy Google ads because you usually have to find a retailer to do it and it's really complicated you have to trust their data and it gets really.
[30:44] Really murky but if your brand you get really good data back from Amazon on exactly what's going on so so to the Brand's it feels like one of those measurable things are doing,
hi the last point we we had,
Jamie from Darrell on and remember he was talking about how they can actually measure offline impact of Amazon advertising because so many people are starting their product searches Amazon they saw.
Stop sales at like Walmart and Costco go up when they did a very kind of isolated programming Amazon so this is a pretty interesting area of Amazon and we're keeping a close eye on it and courage to run to,
to watch this because and if you haven't experimented in your business this is where I be.
Putting a lot of effort heading into holiday at 18 because I think it's going to be a really big opportunity.
[31:29] Yeah for sure to so one thing I don't you mention Jamie just a piece of side news Jimmy is actually left her out and he's now running e-commerce for Keurig which is a,
interesting to report having a back on the show to talk about his experience there in the near future.
[31:46] In your two interesting things about advertising the.
At the moment the reason that you probably don't feel like Amazon's growth coming out of Google and Facebook is because it,
it is like all digital advertising is growing very rapidly as it's coming out of the traditional sort of dead tree media right so so print in intellivision and if you think about,
the the traditional base advertising,
your most advertising comes from Brands not retailers and they start they do two kinds of advertising like they do advertising to build awareness for the brand so they'll buy a Super Bowl at the by ad in a magazine that just says you know Mercedes-Benz cars are great or you know Bounty towels are the quicker picker-upper or whatever whatever the case may be,
and the success criteria for those ads are just how many people saw.
[32:41] Or maybe they'll do some study to say how many people remember our brand as a result of seeing that at rights of the the the.
The outcomes of those ads are that the ad reached a person and that maybe the person remembered it.
And then brands do this other kind of advertising with a partner with a retailer and what they called trade advertising and most of that advertising is like.
Ads in the paper for their products you know what we call store circulars.
Or even a lot of the advertising in the store the the point-of-purchase advertising is funded by manufacturers.
So when you think about digital the.
A lot of the Google advertising is replacing that brand awareness advertising I'm in it has the same kind of success criteria like how big was the audience that's on my Google ad,
one of the things that super you know interesting and appealing about the Amazon ads are that you your success criteria is,
how much good you sold rights are you you do get much lower on the funnel as people start to lose confidence in these advertising Vehicles the safe place to be is the advertising Vehicles where you can actually measure a true Roi.
And so Amazon actually has a big competitive advantage over Google and Facebook and being able to quantify the value of the ads which is super interesting.
But the other interesting thing is Amazon can actually draw ad Revenue.
[34:12] From both of those old school models right so Amazon can get ads from the CMO at Procter & Gamble that used to buy a Super Bowl ad,
an Amazon can credibly make the argument that you'll get more eyeballs on our platform then you will on the Super Bowl,
but they can also get ad revenue from those trade teams that were you know historically buying store circulars in it and advertising in store at Walmart and instead get them to advertise next to the products,
an Amazon and so systemically those are two big advantages over the other big digital platforms it in the long run make Amazon a real scary competitor to Amazon Facebook and Google.
[34:51] Absolutely and there's a fair amount of add load on the site.
But you know if there's an auction underneath there so there's a fair amount of room to run so Google for example has had you have near the same ad load the tweet that but you know call it around the same ad load and and they continue to grow the last 10 years so so just within the current system,
but but Amazon hasn't even there kind of version 1 L on a lot of their tools and they haven't even really started with video so one of the smartest Acquisitions I think Amazon did a lot of people don't pay attention to his twitch so you see all these people now that are making,
there's this guy ninja he makes like $500 a month streaming fortnite and other games,
well that uses switch for that and you can imagine that's a pretty interesting audience for people to monetize so there's.
This really interesting things that they can do and they're also doing the Thursday night NFL so you could even say.
Musterbrand let's run in NFL ad and I can sell you exact exactly how much tide you sold this ad versus just eyeballs.
[35:54] For sure which is very powerful I think that NFL deal maybe one of the main reasons they're able to get away with a hundred twenty bucks.
[36:01] Yeah absolutely.
Cool last little piece on the quarterly earnings everyone Wall Street is very much a what have you done for me lately things are like good job great quarter what's coming next work so it's Amazon's practice to provide for guidance and they released their Q2 guidance,
and it's going to come in at a growth rate between 34 and 42% which is 38% of the midpoint this the succeeded what all Wall Street was thinking there so,
I am kind of classic Wall Street parlance it was a beat so the current quarter.
[36:35] Expectations and then they race was being raised which is kind of what you want and it was a it wasn't kind of a wallet and a huge jump up kind of thing,
so correspondingly you saw the stock really take a nice move and then most analysts have raised their price targets up into the socks kind of in the 1500 right now most people have raised the stock up to the highest I saw this 20/20 which was actually a,
a phone number where that is that's right when they get to $20 so Scott debit over at stifel raised it up to 2020 kind of saying,
county is Chester this will be the first trying dollar stock,
I'm to the point we we pretty regularly about once a quarter when we do these shows we talk about this race to a trillion dollars so when you.
Public companies you have a market cap and that's essentially taking the number of shares outstanding of multiplying it by the share price niggachu a market cap,
use Yahoo finance or something it's already calculated for either so last time we visited this Jason Amazon was kind of going back and forth.
What's number 3 and 4 with Microsoft so today if we look at this the number for company is Microsoft at a 718 billion dollar market cap.
[37:47] Number three is Google at 7:06 and Amazon is now number two so this move they've had up in the stock from about a thousand to 1500 over the last.
It's beautiful up to the number to market cap company is 760 billion which is only about in a 340 billion shy of a trillion and 10% away from the lead the lead right now Apple + 838 billion.
Apple is announcing tomorrow Tuesday or Wednesday there's a lot of concern around Apple there,
you know we talked about the the new speaker they have you were not a huge fan of that one and,
that has been kind of dud the iPhone x hasn't been blowing off shelves and they have a China problem so there could be.
Because you have this kind of combination of looks like Amazon how to blow out there's a lot of concerned about Apple watch can see how they come out.
But but anyway long-term if we can't think about this leading up number 5.
Is Facebook at 497 think I should drop pretty considerably since this whole Russian interference thing is going to come up and in Autumn so.
The the number for listeners to keep in mind is when Amazon gets to 1700 they should be in the lead and then when they get to just around that 20/20 number,
they should hit a trillion dollars so it weave,
I've been calling that they would be the first to get to Troy and for a couple years and it seems like that was a long shot and it's increasingly looking like it's theirs to lose so we'll see.
[39:23] How much will you personally make it they do that.
[39:31] So we mentioned in the outset that Jeff also released his annual shareholder letter so you know there's a bunch of interesting facts in that way every year but this is one huge Marquee fact that caught everyone's attention and was at,
some of the big reveal and that fact is the Jeff Bezos does not know how to do a handstand.
[39:56] They're so yeah so kind of a painful personal admission.
[40:01] Yep. So he told a little personal story that involve the fact that he's going to do a handstand and after he got through that he mention that oh by the way we have a hundred million paid Prime members.
[40:12] This is a surprise cuz they've been very private about this for since Inception so I think everyone was caught off guard when they're reading the letter to see that and it caused quite a frenzy.
[40:24] Yeah I feel friend the show Jason Del Rey like predicted back in in like 2015 that he thought this was going to be the big year that Amazon Finally Revealed their prime number and so he was was only off by 3 years which is.
Better than some people but so that we were talking a little bit before the show that number.
[40:45] It requires a little bit of context but it certainly was in the range of a lot of the estimates,
the verse folks have been making right like I mean certain order magnitude would you you call that like soda in The Sweet Spot of those estimates.
[41:01] Yeah there's so the washer guys were kind of clustered right around this hundred million number and so couple,
couple things so she act all these parts would but these guys a very closely so that person why they said over so that gives us some pretty big range you know something somewhere over,
I got a hundred million and one up to Infinity so there's there's a big range there but I think we can assume,
you know I doubt it would be more than 110 so I think I would guess it's between 100 and 110 I don't think they would.
[41:30] He would have said over a hundred ten million if it was over a hundred ten.
[41:33] Maybe but then they're very catty to so for all I know it could be like a hundred fifty so it's really hard to guess what you guys.
But that being said so if you take that hundred million and it's paid so just remind folks do see a couple free entries into Prime and if she'll does off when used to be Amazon mom's now,
if wrap that up in the family program Jason was talking about we can have multiple people on a Prime account and then so it's kind of more of a household thing and then number to used to have free for students,
this is largely to get their textbook business which is quite lucrative,
I'm in Amazon now doing it does that to give 6 months free for students that's a very long extended trial program and then four-year discounted until they graduate.
All those programs up now pretty much converted to two paid so the only free Prime out there are people that are either in their 30-day trial or their 6-month trial with their students so it's a largely survey people and they say their Prime I think,
but she can be paid maybe plus or minus 10% but but pretty small. There is a global number so most Wall Street people had,
weed when you take Amazon and you want to take their Global number and parse it I usually go 6040 so 60 us 40 International which is kind of how there,
their GMP goes so some example that add number at 2 billion is probably 60% us 40% International now ads are probably less developed International so I made fudge that look at 7030 or 8020 but I do think for her prime,
pretty mature and all the markets so I would say that hundred mine is going to be 60 us.
[43:07] Although there are a bunch of Prime benefits that are exclusive to North America still right like grocery a lot of the digital video content.
[43:18] Video ethics National now.
[43:21] Okay the the like the prime the grocery delivery from Whole Foods is certainly unique to the US.
[43:34] Okay so I'll give it to you so 60.
[43:39] But in the UK you get same-day so it's kind of.
[43:43] Yeah but that's a tiny little island that's cheating.
[43:45] There's a pretty big part of your 2.
[43:51] Oh they're not part of your anymore he didn't get the memo.
[43:54] It hasn't happened yet we're working Liam.
The the one outlier is there's this company called cirp in a few what it is like consumer information research protocol and they had Amazon it 99 in the US so I think they kind of are off a bit now.
you guys find out to do surveys of really small numbers in the extrapolating so they like survey 10 people in 9/2 Prime and I like well certainly 90 million people in the US have,
it's not that bad but I think that's the little bit off so.
You know the way to think about this I always see this like 60-70 80% of us households have Prime if you take this number and we see it 60 million there's a hundred twenty six million households in the US so this puts a right at 50%,
I'm so 50% of households in the US have Prime that that feels right to me and then I think if you know if you parse that and look at demographics.
Yeah if for household this is the way the Census Bureau defines it for household incomes over a hundred and twenty K you're going to look at like 80 90% penetration then as you go lower it's going to get off.
Yeah down at the sub 50k it's going to be 20 30% of us households so so at that all fuels and checks out to me.
[45:08] Yeah two things are interesting to me so you crank up Prime membership to a hundred twenty bucks a year you have a hundred million page users you,
start the every year with 12 billion in Revenue before you sell I think.
Which is a pretty nice asset versus every other retailer on the planet that starts in zero every year with one exception which is our friends at Costco.
[45:36] Give me.
[45:40] And so I always like to compare Prime Membership with Costco so Costco has 90 million paid members in Costco is almost exclusively and I think is exclusively North America so not so there still,
significantly ahead of Amazon which is interesting and just a reminder on on Costco's model,
what is an oversimplification but Costco almost drives to break even on all their sales and essentially make.
There their annual profit be that that Costco membership fee that they earn every year.
[46:26] Inside like pretty interesting you know Costco membership is less expensive than a Prime Membership but like it's Costco members tend to skew older than Amazon members at the moment so it's kind of interesting you,
you would certainly think that if you're looking for with a cap is on Prime members it's certainly not the 60 million there at now it's at least the 90 million and since Amazon has a much broader demographic than Costco.
In North America.
You know you can imagine it's even north of that so you know maybe one day after Amazon passes that that trillion-dollar Mark you you know we could see them.
I'm in that 90 or hundred million just in North America.
[47:07] Yeah I've seen analysts do a bunch of surveys on this and there's a pretty high enough it's almost like 85% overlap of Costco and Prime members is pretty high.
[47:18] Yeah for sure and then the other interesting thing to me about crime is there was also some news it was alluded to in the shareholder letter,
but the Whole Foods is actually in the process of turning off all of their existing Affinity programs and it's a pretty clear that they're going to be replacing.
The the Whole Foods Affinity programs with Prime in those Whole Food stores and that's going to be.
What a real interesting set of new experiences and you know another lucrative reason that that people might.
[47:58] Become Prime members or at the very least retain their Prime Membership.
[48:05] And with that it is happening again we've used up all our a lot of time we tried to be a little more concise for this deep.
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[48:42] Thanks for this five stars everyone and thanks for joining us this week.
[48:46] Until next time happy commercing.