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

Join hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, Founder & Executive Chairman at Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Now displaying: October, 2018
Oct 26, 2018

Happy Birthday, to Jason's wife, Leila!

Scot Wingo is contributing the Forbes Digital Council, and writing about his new Vehicle 2.0 Framework.  Introducing Vehicle 2.0.  Jason Goldberg is also contributing to a regular retail column on Forbes, starting with his first article: What Competitors Are Missing About Amazon's New 4-Star Retail Concept.

Scot is appearing in a national TV spot promoting his alma mater, North Carolina State, "Think and Do!"

Jason is leading several sessions at GroceryShop October 28-31 in Las Vegas, including a keynote interview with Sam's Club Chief Merchant Ashley Buchanan.

Amazon Earnings:

  • Amazon's third-quarter earnings beat Street estimates, but its revenue and fourth-quarter outlook fell short of expectations.
  • Revenue: Revenue increased +29% Y/Y (+30% ex-FX) to $56.58B, 1% below the Street's $57.11B. 29% Revenue growth was below consensus expectations as Int’l revenue disappointed with a ~$1B shortfall.
  • North America revenue (ex-AWS and ex-WF) of $30.10B was up 25%, in line with 2Q18 growth. International revenue of $15.55B was up 13% (+15% ex-FX), a notable deceleration from 27% growth in Q2 (+21% ex-FX). AWS revenue of $6.68B was up 46%, down from +49% growth in Q2 but in line with expectations. Physical Stores revenue of $4.25B was slightly ahead of consensus expectations.
  • Amazon's "other" category, aka advertising, jumped 123% to $2.5 billion in revenue

  • AWS revenue: $6.68 billion vs. $6.71 billion estimated, according to FactSet
  • Net income, meanwhile, grew more than 10-times from the year-ago period, to a record-high $2.8 billion, marking the fourth straight quarter of topping $1 billion in profits. The $3.7 billion in operating income far-exceeded Street estimates of $2.1 billion
  • GAAP Operating Income of $3.72B was higher than the Street's $2.12B. Gross margin of 41.7% came in above the Street's 40.5%. GAAP Operating Income margin of 6.6% was higher than the Street's 3.7%. Profitability, once again, was a positive surprise with Op Inc ~$1.5B ahead of consensus expectations,

Other News:

  • Implications of the US pulling out of UPU Treaty
  • Implications of Sears bankruptcy

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

Episode 149 of the Jason & Scot show was recorded on Thursday, October 25th, 2018.

http://jasonandscot.com

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

Transcript

Transcript
Jason:
[0:25] Welcome to the Jason and Scott show this is episode 149 being recorded on Monday October 25th 2018 I'm your host Jason retailgeek Goldberg
and as usual I'm here with your co-host and television spokesmodel Scott Wingo.

Scot:
[0:46] Hey Jason welcome back Jason Scott show us nurse yeah yeah yeah.
So if you're at the front should I guess we'll will preface it's been a couple weeks but a show out so apologies to everybody we have been just crazy busy and what Jason's referencing there is
I did a small video for this NC State thing and then end up being in a promotion that they
are nationally a lot of people have seen it so that's been fun we'll put a link to it in the show notes so NC state has the motto which is thinking do,
I am and I'm featured in there talking about they can do.

Jason:
[1:26] And they are airing at like on ESPN during the games.

Scot:
[1:30] Yeah when the when the college's nobody watch college football UIC usually during halftime they get two spots that they can kind of do a promotional video about University each University gifts and this is one they've been running for.

Jason:
[1:45] That's it's totally awesome I'm just saying it's my animated screensaver now so just so you know.

Scot:
[1:50] It's a little creepy but whatever floats your boat Jason.

Jason:
[1:56] Not even the weirdest thing about me.

Scot:
[1:58] Another fun fact is we are both contribute to Forbes you had a really good article where you you went through your Amazon go store the force Star Story.

Jason:
[2:13] Yeah and you are like some fancier CIO contributor if I'm not mistaken.

Scot:
[2:21] Yeah if you have the tech Advisory board or some such
and I am writing about vehicle 2.0 which is a framework we've developed its if he for thinking about the future of cars which seems like it wouldn't have anything to do about e-commerce but it's kind of interesting.
The first of all you have a.
Perspective on how fast or how slow this vehicle stops going to go in and then second of all there are overlaps there so for example
imagine autonomous vehicles delivering packages.

Jason:
[2:54] Yep for sure and I suspect in the not-too-distant future will be ordering a lot of packages from our vehicles and in many cases getting delivered to our vehicles.

Scot:
[3:05] Yes sir that's good and then the in exciting car news so Tesla's new operating system came out so that that has been fun to play with and a lot of the folks that are in the same demographic issue and I the most exciting part about the parade
this is the Tesla West Nine is they have an Atari simulator in there as one of the new Easter eggs so that you can't do this while you're driving so full disclosure there.
Sadly but I guess safely but it is a lot of fun to play on the touch-screen the various old Atari games,
most fun one probably is Missile Command because he was always super frustrating to have to deal with that track ball and you can never get
faster left right it in your little basis would get destroyed so now you can kind of do a two-finger thing and it makes it a lot easier to save your bases file.

Jason:
[3:57] I am always jealous when you get a new upgrade because I just think that's the coolest thing that you're you go to bed and wake up in your car has been upgraded it makes me want to like go out and get a fancy new cup holder or something for my car.

Scot:
[4:10] Yes you could. You could get a Tesla you should.

Jason:
[4:14] Yep despite the fact that my wife and I have no commute in the car is almost exclusively used by a three-year-old shirt.

Scot:
[4:21] Call Anna Jason you got a lot of stuff you can be doing here either this week or next week.

Jason:
[4:31] Yeah the the these next two weeks are super busy for me on the personal front this is the busiest week of the year for me tonight is my wife's birthday,
inside of a side-note shout out to you honey happy birthday she most wanted to celebrate it by having me catch up.
With the podcast cuz she knew the listeners were frustrated with the,
the Gap we've had and her main request for her birthday is she wants to go to the Star Wars experience in Orlando on a joint vacation with the windows so we're going to have to.
I think we're gonna have to find a way to make that happen.

Scot:
[5:13] Absolutely that is one birthday gift I'll be happy to help make happen.

Jason:
[5:17] Exactly and then it's a crazy fertility week apparently in my family because in addition to my wife's birthday.
Tomorrow is like my mother's birthday my mother-in-law's birthday and my father-in-law's birthday.
So so we're doing a lot of birthday celebrations this week and then Sunday I shoot out to grocery shop which is this new trade show in Las Vegas this will be the first year.
Mainly focused on digital disruption of the grocery category.
It's put on by the same folks that started money 20/20 and Shop talk.
And I think they were hoping to get like a thousand attendees in this first year and they actually sold out capacity of the venue at 2200 people.
So it's it's shaping up to be a really good event and I'm dramatically Overexposed at the event so Sunday night I'll actually be doing the keynote interview with Ashley Buchanan who's the chief Merchant at Sam's Club.
So I get to talk to him about digital at Sam's and we'll talk about scan and go and some of their partnership with instacart and some of the other things they're doing hopefully I'll have some.
Samara tough questions I'm doing a piano on.

[6:36] Brands using product content help build a brand since we got.
Folks from the Boston beer company which is like Sam's Sam Adams we've got Chobani what unit or disrupted the the yogurt space and we've got the wonderful company with the almonds and pom wonderful Fiji Water and all that stuff.
And then I'm doing a panel on the evolution of the cpg retail relationship we've got constellation Brands which is.
A big house of brands in alcohol space I think has Corona amongst others you have a elf Beauty and then a Fairway Market which is a great bespoke grocery retailer in the New York City area so.
Some topics that are near and dear to my house heart and I'm looking forward to seeing everyone at grocery shop and the.
I do have plan I know you're not going to go to join us so that always makes me sad but I do think we're going to get the opportunity to record a couple shows from there with some of the the grocery industry makers.

Scot:
[7:38] Next year they're going to Rebrand the sink to Jason talk or something like that cuz it seems like you're just doing everything there.

Jason:
[7:45] Yeah I think that was actually there original premise and then they found out like that the only for family members I could possibly get to attend we're all celebrating their birthday and so they decided to scrap.

Scot:
[7:56] Expanded to smother people in the loss of that that looks good I look forward to seeing all the social media that comes out of that and and he ran to the interviews any trip reports.

Jason:
[8:11] I do so,
we've talked about Amazon go on the store on the show we did talk after they open the first go store in Chicago they have open to other go stores in Chicago so now we have a.
A fleet of ghost tours and then this week or last Thursday Google opened a pop-up shop shop here in in Chicago for the holidays.
So Google has done pop ups for several years but they've always been in New York this is their first year in Chicago so I was eager to see.
What that look like and I I went and visited it this week so I'll talk about that in just a minute and then.
They have announced their first permanent retail store in the US and that is going to be in Chicago there's no official date on when that's opening yet so we're continuing.
To watch for updates on that but I'll be interesting to see what a permanent Google Store looks like but the pop-up is really sort of.

[9:12] Very similar to pass Google pop-ups it's it's focused on the Google Hardware products so the pixel 3 phone their new home hub which is there a voice assistant that has a screen built-in so it sort of.
Competing with Amazon Alexa show.

[9:32] They you don't have a a couple cool accessories I've never really smart a wireless charger for the pixel phone.
So you know you go to the pop-up they have all the products they had them on launch day.
Which would which is kind of cool as the first place outside of Verizon you can get the pixel 3 phone.
And they set up a couple of fun vignettes to sort of demo the capability so they have sort of a.
A fake record store you can go into and play music using the the Alexa assistance in there that their new high-end audio Fidelity speaker.
You can go into a tree house and do a bunch of home automation stuff so you can you know give commands to Google and you know see the shades in the tree house go up and down or change the lighting in a few different things.
And they have a kitchen vignette and in the kitchen vignette you can have a bunch of Easter eggs you can give commands and it'll like pop open a drawer with candy in it and some stuff like that so.
Some some fun little vignettes to kind of get you experimenting with a Google product but sorta in typical.

[10:44] Pop-up shop fashion you know it it really felt more like some sort of Museum exhibits where you could go in and try products rather than a working retail store.

[10:57] And you know the it was very sales assisted experience you know there more Google employees in the store then there were customers.

[11:06] You know if if you are specifically looking to get Hands-On a Google product it was great opportunity to do that but I'm not sure as a pure retail store.

[11:15] It was all that that interesting or or Works particularly well and in my mind the big change from previous Google pop-ups was just sort of the.
The visual treatment so in the past they've done he's really kind of techno treatments with a lot of like.
Animated light things and fiber optics and you kind of got a very sort of Tron feel from the the Google pop-ups in this Google pop-up was a much more.
Sort of the Vintage organic feel so you know instead of a house they had a tree house and they they don't sell these other they should they they're like merchandising all of the.
The the phones and he's cool Google tool boxes that they made for the store and so is very white.
Sort of organic store with a fake tree in the middle of it and it was two stories and so if you live in Chicago you're interested in some Google products totally worth we're checking it out there are a couple features in the pixel 3 that I'm super jealous up as a.
IPhone user they have dramatically improve new spam telephone spam filters which.
I feel like I'm getting a lot more telephone spam so that seem cool and they have a great new visual search built into the the camera and incredible new will light features for the camera that seem to be class weaving.

Scot:
[12:40] Awesome I don't want to.
Get you an agitated but I am ambidextrous and my pixel 3 actually just arrived today and I'm going to crack it open after this podcast so I'll do it boxing next week and tell you about all the awesome teacher missing.

Jason:
[12:57] Exciting I I probably will add one of the beat to I think it is going to be fun and if you have already gotten one spot I do suggest you get the the Google pixel.
Wireless charger.
It's really smart and clever like unlike traditional wireless chargers it recognizes each individual phone and you can have different settings for each phone it basically turns the phone into
a mini Google home hub when you put the phone on the charger it has a bunch of unique features that
I feel like everyone else should have thought of but give always the first ones to implement.

Scot:
[13:31] Awesome I didn't know about that so I appreciate that
cool wall decals caught up on outside and it wouldn't be a Jason and Scott show without.
Amazon news your margin is there a opportunity.

[13:59] Yes Jason said at the top of the show it's Thursday October 25th and.
After the market closes today Amazon announced their third quarter earnings and just kind of position awareness if you listen to podcast
setting up for Holiday 18 and
I like good stuff going on in a little while kind of shaky here in the last couple weeks the stock market's gyrating a bit tariff kind of stuff is accelerating were to talk about some things there later than the show
around China impacts so for me this is a really important set up cuz this is kind of the one the last data points work
it going into holiday 18.
Add a reminder for everybody we tend to think of e-commerce as Baseline going about 15% 1/5 overall retail tubilee grows low-single-digit so 4%
so with that being said Amazon did announce their ornax and it's kind of a mixed bag so he was a little light and and I'll go into why but then profitability exceeded expectations so
as of the recording of that show the stock is down a tad and a smoke so.

[15:20] When you peel the onion on on the top line revenue came in at.
30% year-over-year growth is 56 billion and that was about 1% will at the street was looking for so that one person.
Turns out to be about a billion dollars so what's a billion dollars between friends who was largely on the international side
Amazon doesn't really give any details about things but reading the tea leaves their you know it feels like there's
there's some stuff going on they did annualize some things like suck exertion of some changes they made in India
but then also you know I think a lot of the Wall Street analysts are or feeling like this is
Felix of tariffs and packed so when item is sold from China and us that counts as
it's where the seller is that that counts is international Judy and Skip Bayless so so that could be Amazon on the little bit of that passes Air Force they're going on
Ding and revenue little bit more when you look at North America and you take out just when you just get the retail North America that snow cloud computing.

[16:33] Whole Foods is a 25% begin to put this in perspective Amazon overall grew about 30% even that it's amazing you know huge 800 lb scale
North America grew at 25% and then
International only grew about 15% which is a pretty steep deceleration from last quarter is 27% of us continue to do really well that 46%
and a physical stores came in right at expectations one of the stupidest things we like to talk about on the show is the advertising that continues to grow
triple digits that grew a hundred 23% and is now 2.5 billion dollars and
yeah that that just kind of looking at the trend overtime book with this the show notes so you'll get you one of 18 at 132%
U2 under 29% you 323% so little bit of a slow down but really just continues to be white hot
that eternity Jason for some other highlights.

Jason:
[17:42] Yep it's always hard to talk about a Slowdown in growth when it's still over 100%.
That's a first world problem for sure but it's it was sort of a bifurcated story you I got the,
the revenue was a slight Miss for the quarter but earnings for the quarter were really strong so they were.
2.8 billion for the quarter which is the their highest earnings ever that means that's four straight quarters that they've earned over a billion dollars in profit hopefully that.

Scot:
[18:18] Jason.

Jason:
[18:20] I was just going to say I hope I hope that finally puts to bed the the silly myths that they're not profitable.
That is wildin more profitable than they were just a short time ago so that is like 10 x their profit from a year ago
and that earnings was a pretty solid beat on the market expectation so on the one hand you go man they say we miss Revenue but they blew away earnings that should be a great story
but then you know they gave their guidance for Q4 which was a little soft and disappointing to the market
and the ramifications of that is this after hours trading their stock took a meaningful dipso their stock was down 9% tonight,
if that holds tomorrow it is conceivable that Microsoft which had a good earnings report yesterday
well at least briefly pass Amazon is the second most valuable company so I'm not sure that says anything particular negative about Amazon but that's a pretty impressive run for Microsoft
will get themselves on the mixer.

Scot:
[19:31] There's a little bit of overlap so one of the reasons Microsoft doing well is azure which is their competitor to AWS
it seems to be really doing well and and kind of
sticking out of a definite second position and nudging out IBM in Google that were trying to get that that second position by the Amazon seems like seems like it's
pretty quickly becoming a two-horse race between Microsoft and Amazon.

Jason:
[19:56] An in general Microsoft is still way behind in Cloud but.
As a result able to grow much more quickly and of course in our category of retail what are the one category where
you know Amazon faces some headwinds and their major retailers that obviously don't want to use AWS and there's some big powerful retailers like Wal-Mart they really discourage their vendors from using AWS so
retail is one one particularly lucrative category for Microsoft azure.

Scot:
[20:26] Yeah on the.
On the marketplace side one of the metrics than Amazon does discloses 2% of orders are units that came from Marketplace sellers last quarter it was 53% and it held steady at 53% again.
Don't spend picking up about 1% every quarter so stabilize here at 53%.

Jason:
[20:53] Yeah and then there you know there after their names there's always the Q&A with a couple of the Business Leaders and,
I'm always looking for tidbits there and one question that that Amazon got asked is about ads on the Alexa platform and I was.
Happy to see there the guy that weaves investor relations for Amazon say that that they have no plans to,
put in the ads on the Alexa platform in the day exclusively want to focus on it being a good customer experience so.
Not shocking but but good to affirm that that they're not going there.

[21:40] The and then you know kind of following up on the analysis of of the quarter I think you know people are definitely looking at that International softness and you called out like that they laugh their suit.
Acquisition so that that probably had a material impact on International growth and then there's this big.
Indian holiday it's right on the cusp of a shopping holiday that's right on the cusp of Q3 and Q4 so.
Last year it was in Q4 this year it's in Q3 and so they're cute their comps.
Mirror over a year are challenge cuz the holiday was in in one year and not the other.
One piece of speculation is another report out there estimating the size of the Prime Membership.
And that they are reporting that that growth in frying is dramatically slowing down which is,
not a huge surprise
you know the Amazon themselves they said they have over a hundred million Prime households and that's a global number but in North America there's only like 120 or 240 million households depend on how you count so it
and it has to be getting harder for Amazon acquire more.
Prime households and if it is in fact true that they're requiring us households than that certainly would have an effect on on future quarters growth so that's going to be an interesting thing to what.

Scot:
[23:09] Yeah yeah once you've kind of have every household on Prime then it becomes a
saturation game to see the one thing on the fourth-quarter guides that you mentioned is it was a little soft on Revenue but but about
8% off on the prophet side and Amazon's not being specific about it but one thing they did announce that we haven't heard on the stove is there
increasing everyone's wage for warehouse workers to $50 there's a lot of controversy around this so so this was a reaction to a lot of politics going on Bernie Sanders has been kind of lighting them up these ladies kind of
but I think as an ox we're kind of silly things where they'll take Jeff bezos's net worth in / 365 and don't say that that's how much he makes a day or so.

[24:05] Forgets the 20 years where he you know took tons of building Amazon but whatever I do dress and
there is a point there that there is a large disparity between his of the top echelons of Amazon warehouse workers to Amazon straighten that out by
$50 an hour doing so they get rid of stock options and some other things that they don't like that
I can't win so that in the lot of people trash come over getting rid of those things so that being said it is a prematurely and talk to
literally hundreds of thousands of employees so a lot of speculation that.
Big head wind on the bottom line going in the fourth quarter is going to be that that wage increase Warehouse her.

Jason:
[24:52] Yep and I I think they were specifically asked if that it was going to have a material impact and Amazon didn't comment on
the exact impact of the wage increase but that that wasn't pretty like from my view a pretty Savvy move
you know there's been this trend in retail for a while you don't return a really competing for talent you know unemployment is low so it it's hard to get people and we've seen both Target and Walmart you like dramatically increase there
starting wages in an effort to improve the quality of the workforce and then you know Amazon came in and LeapFrog them in and Amazon is competing for four people at this point to fill those Protomen centers in so that like I'm sure there was some political advantage
in doing that like that you know I do think in a lot of ways it's the right thing to do I was here for the employees.

[25:48] But it also just is a capitalistic thing to do in terms of making sure that you get the input the workforce that you need in this competitive environment so
be interesting to see even what economic impact it has
but the other question that they got about the financial impact in this going to happen thank you for is
the u.s. postal rate increase that is coming and am I was pretty clear that they did not feel that the
postal increase was going to materially affect them into me this is another one of these sort of funny ironies
where.

[26:28] You know that the president that appears to have some animosity towards Jeff Bezos adopts an issue and then some some which situation gets past like the sales tax
Supreme Court ruling or now this postal rate and
you know that you like him superficially is tweeting that this is going to have some negative impact on Amazon Amazon.

[26:52] Has more ways to deliver packages than everyone else they have more of their own package delivery and so the operations folks and Amazon or like no we're just going to be smarter about which of our delivery vehicles we use only think we're going to be able to absorb that rate increase
and of course no other retailer has those levers to pull in so like the
postal rates going up actually is a competitive Advantage for Amazon versus the rest of the market that doesn't deliver 15% of their own packages like Amazon does.

Scot:
[27:24] Yeah to that vein couple of tidbits so
there's a lot of video surfacing of Amazon order to something like 20 to 40,000 Prime delivery dance these are really nice there these Mercedes sprinters
and I don't know about you in Chicago but in the Research Triangle the Raleigh-Durham area I probably see four or five of those a day right now and it started where they were going to large corporations so
where were there a lot with my stuffy and your folks are reporting to Neo at Cisco and Citrix and MetLife.
All these large employers there seeing the Amazon big ants go there a couple times a day and then now it seems,
large Prime neighborhoods deserve this kind of replicating the FedEx Ground model to FedEx ground
not realize this but the next error is W-2 employees FedEx Ground as a 1099 network of local stores that are given
license to FedEx brand and they operate ground on behalf of their local businesses so,
Amazon your kind of started.

[28:35] This mix of some fulfillment center employees are driving these things and I talked to several of them and the ones I've talked to her are full on Amazon employees
but a lot of them also are these 1099s ramazan will set you up in your own little 1099 delivery to you
certain number of packages and effectively a dollar per package so your point pretty fast meeting at Amazon that really wrapping that up.

Jason:
[29:05] Yep.
A couple of other pieces of Amazon news not necessary related to earnings but Amazon did launch a new credit card in partnership with Amex this
I think maybe you last week that was targeted at small businesses and it has some interesting features it's a no fee Amex or if the first time you can get a free MX
and.
They sort of have variable terms for each purchase that you can select at the time of purchase in Amazon so that so there's a unique user interface in Amazon for purchases better.
Completed with this credit card and so you can say for example that I want to use my Amazon reward points to pay for this purchase or you can say I'm going to,
pay back this credit card charge in the next 30 days and you get 5% back for doing that or you can select these 90-day terms.
You know take 90 days to pay for the purchase so kind of an interesting tighter integration between Amazon and Amex.
You know what I'm always interested in those kinds of tie-ins because you know payment is such a.
A potential competitive advantage in the e-commerce pay so it's interesting to see Amazon doing that.

[30:26] I mentioned earlier that we now have 3 ghost tours in Chicago we also had the the first go store open in San Francisco this week so these things are rapidly opening.
Side note kudos to the Amazon real estate team they've actually done a phenomenal job of hiding a lot of these stores from the media which is you know.
Carefully carefully watching property managers to figure out where all these stores are and I I know it's Amazon's been a pretty good job of surprising us all with some of these openings.
I had an interesting little debate with some folks on Twitter this week.

[31:01] You know as as it seems clear that they're opening a network of these stores and there is that Bloomberg report that they're going to have it three thousand of these go stores buy.
2022.
Doug Stevens a retail author and and subject matter expert me to tweet saying.
You know that 7-Eleven is now on the clock.
They're going to get dramatically disrupted by Amazon and they're really not ready for it and I sort of made a smart alec or reply.
You know while I've never would tell anyone not to worry about Amazon I'm not sure that first and foremost Amazon go is likely to affect 7-Eleven I said that.
You know probably print amazed year or hobo pie.
Are at much more risk from the Amazon go store then 7-Eleven is and my contention is the ghost or is really a restaurant.
You know whose main mission is to get you lunch when you only have a half hour lunch break and that it's it's not really a competitor to a traditional convenience store in so some folks on Twitter jumped in and we had a we had a good healthy debate about that then.
Obviously the Ender Wintergreen I'm right.

Scot:
[32:11] Or they got blocked.

Jason:
[32:14] Yeah alright I just scream them exactly a side-note top three categories at 7-Eleven.
7-Eleven sells a ton of gas which Amazon go stores don't sell yet 7-Eleven sells a lot of tobacco which Amazon doesn't sell
at all and then they sell a lot of alcohol which Amazon go only sells in one store in Seattle
so you know where food is in a growing part of 7-Elevens business it's not even a top 3 category and it's it's like 95% of the skews in this this ghost or so that's why I think Joe is much more of a restaurant than a traditional convenience store.

Scot:
[32:53] When one last reminder is it's been a little over a year since it was on announce their hunt for hq2 so Alaska chelation is that we should be hearing about that here in the fourth quarter.
Amazon said it would take about a year now it's firm you this involves a lot of details and local governments and stuff so I.
Adders reversing a ramp up of speculation around hq2 stuff I'm kind of interested.
You know there's a lot going on in Chicago not pick on Chicago's great City.
For all the other stuff they've done the kind of event Seattle York and Chicago but now they're just really pouring it on in Chicago I wonder if that so I could slide indication that maybe Chicago's kind of pulling into one of the top.
Possible locations for hq2.

Jason:
[33:50] Yeah it would be interesting with my wife and I were driving around town today and there's a ton of trains building conda commented like do the the condo developers know something about Amazon that we don't know.
That. Why do you think Chicago is a interesting market for Amazon and you know it's a good test Market because it is it does.
I have a broad representative demographic
I personally would be a little surprised if it's here but that being said I suspect we're all going to know pretty soon.

Scot:
[34:28] And then you use it surfaced at nursing little spot between Amazon and eBay.

Jason:
[34:34] Oh yeah
so you may actually filed a lawsuit against Amazon and it related to Amazon potentially trying to steal top Marketplace Sellers from eBay and the reason I was a lawsuit is
the allegation is that the way Amazon was doing this is they
very systematically infiltrated a private
chat board for these eBay sellers and created a bunch of fake personas and you know what we're reaching out in Contin privately contacting sellers,
through like a pretty sophisticated alleged hacking of this this site eBay communication platform and
you like it it seems like they have a fair amount of evidence it is true it's a little surprising to me that there's someone in Amazon's position would do,
you know I would certainly presume that wasn't a corporate directed to do this but that you know someone had enough autonomy
to do this and can put off of that scale it would be interesting so I don't know what the real story is there but it's going to be fun to watch the lawsuit play out as a an interested Observer.

Scot:
[35:55] Cool so that that kind of wraps up our Amazon part of the show and then we had a lot of listeners that were sad that we we took a little break there so apologies for that and then two other topics that it looks really wanting this hit on IR Sears
and then this really big change to the u p u which is squarely in your.

[36:18] Your wheelhouse Jason saw the Sears side there was kind of two buckets of questions we got from listeners one was really you know some folks selling on the Sears Marketplace or are you in this would apply a guest to vendors
yo what what should I do to Sears in her chapter 11 bankruptcy
what percentage of the time companies come out of bankruptcy other times they don't and when they don't they're they leave creditors sitting there kind of holding the bag and a lot of times adders
even a Marketplace seller would be considered under their left holding the bag
and then the other thing so I'll tackle that one in the other one Jason was over all kind of Redan what's this really mean for retail
my guidance would be
you know it's all a risk tolerance question and Anna scale question so if you're you know if
if you did have a speed bump and you lost you know usually is inside of trailing 30-day payment type cycle
skiers of material enough that you did lose 30 days of that cash because of a bankruptcy if that is you know pretty.

[37:32] Material to your business to be getting packs it out of 10 percentage I would start trimming my sales for selling on Sears and reduced to a tryst September set
yes it was I think that's the prudent thing from a risk management perspective when a company goes into bankruptcy to start limiting your risk,
now if you're someone that that is super risk intolerant and
it is going to bother you make me time to phase out that Marketplace because and and see what happens with the chapter 11 you can always come back and it when the risk is diminished so I would kind of you know.
Figure out your risk tolerance a spectrum of hey I go bungee jumping off Bridges as a super sweet.
Each risk for breakfast all the way to I don't own stocks I keep cash under my mattress and level and then apply that to to your.
Your strategy for selling on Sears and also put it through a filter of materiality is is this more than 10% of your business or not.

Jason:
[38:38] Yeah that seems like totally Sound Advice I can't believe you you gave out my mattress strategy online though.

Scot:
[38:47] Yeah they will talk about inflation some other time.

Jason:
[38:51] Okay.

Scot:
[38:53] It's actually.

Jason:
[38:55] You know every time
one of these is a significant retailer goes under there's always this question like who's going to benefit from them going under or what what's the impact going to be on the rest of retail you know Sears is still like a 10 billion dollar a year retailer in so
that you know it today.
Assuming they don't emerge from the realreal organization and and retain a significant portion of their.
There are 10 million dollar Revenue run rate a bunch of other retailers are going to benefit.

[39:31] The thing I like to point out is Sears has already donated most of its market share to the rest of the market so you know.
There there was a time when they were 40 billion dollar retailer and they've been slowly a roading since 2006 and they probably have donated.
Over a hundred million a billion dollars in in share to other retailers.
Over these last 12 years or so and so you know the the bulk of.

[40:03] The benefit of them going out of business like has already paid off two other retailers.
And you know there's a lot of analysis that goes in a who's going to benefit most from these stores closing and you know who has favorable,
merchandising categories that are similar to Sears who has similar geography to Sears to benefit from the.
The specific store closures.
But in general I think if you look at the macro Trends I I sort of have this premise that were really seeing a bifurcation of retail and where were essentially seeing.
A few huge aggregators that focus on selling every product that's available in doing so at a really low price and super efficiently.
And if that sounds familiar to you in North America and that's because I just described Amazon.
There would be a good argument that Walmart is also one of those aggregators that that's going to continue to do well and in the future we might have a duopoly if he's too big.
Big aggregators and then everyone else is in a really focused on selling curated assortments to specific.
Target audiences and really selling exclusive products that you can't get from the big aggregators in so those big aggregators are.
In the best position to benefit when.

[41:24] You know someone else that used to win based on assortment and scale goes away so like obviously Amazon Walmart or.
Going to take a significant percent of that share that Sears losses in Sears specific case because of a big portion of the revenue is soft goods at a low price point poles is particularly well positioned to.
To get a nice benefit from the Sears stores going away and because appliances what a big chunk.
Of Sears Revenue Best Buy is also in a position to get.
A nice lift from the the the Sears market share lost so I think those are the retailers.
Will see benefit the most but you know.
At this point we're not losing the big one of the biggest retailers in America we're losing eyeshadow up there once was one of the biggest retards in North America so I don't think this is going to be
a title change in the Retail Landscape by any means I think you know it's more sad because of.
The history of Sears and what a dominant position they want had and how important they were to the evolution of retail in North America and frankly in many ways how important they were to the actual development of North America.

Scot:
[42:41] Anderson so you can take off the mattress all the money from of your mattress and put it. It sounds like.

Jason:
[42:48] That probably would be far from the worst investment I ever made.

Scot:
[42:53] What will save that story for a future ship so that's that's good perspective now tell us about this whole Universal Postal Union treaty and what's going on.

Jason:
[43:07] So this is a very little known thing that suddenly is getting a lot of ink so
you know back in 1874 at the treaties burn the world establish this thing called the universal Postal Union later got rolled into the to be sort of a subsidiary of the United Nations and then the idea of this poster 3D was
that every country you would agree to uniform rates for postal delivery so when you're
in France and you want to mail something to Germany you could know in advance what the cost would be to mail that and the cost ought to be,
the same for mailing between every country and each because that mail requires the,
cooperation of at least two Postal Services the one that picked up the package from you and hands it to that that foreign country and then that terminal country that the country that gets it and has to deliver it.

[44:11] They ate their handling of that package the treaty
agreed on how those two postal entities would share the the rates for that shipment and they agreed that that the international shipments would get equal trip treatment with domestic shipment so if the.
Is the terminating country you know couldn't for example deliver International Post much slower or less reliably or with West tracking are these kinds of things.

[44:44] And so it sort of made it very easy and possible for 4 people all over the world to mail things to each other and know in advance how how much it was going to cost and have
pretty good confidence that it was going to get delivered and then overtime this treaty added some other useful things they added some standards like a big stamp should be they added electronic data interchange so that the the
Post Oak interchanges could be more efficient and they added some you know things to catch fraud and crime and and share databases and things like that so so we've all had benefited for a long time from the Disposable 3D
it's got a hundred and ninety-three member countries in it now.

[45:26] So if I feel like that's that's good for the world it's super important in a lot of e-commerce.
Pretty good cross-border e-commerce still gets delivered via the post office so there's a lot of artists that make beautiful art here in the US and they sell it to people in Europe in the primary way they deliver that is.
They mail it via post a post so the one sort of real challenge is,
did there was a clause built into this postal treaty that essentially said developing nations,
would get charged less terminal fees.
And so what that essentially said is more developing poor or countries would not have to pay as much
to have their their post delivered by richer countries and so if you're in one of these more developed countries
you are obliged to accept packages at a lower cost from a developing country and if you lost money delivering that the way you would have to make up that money is by charging the people in your home Market.
More for postage and like there's probably a good argument that that.

[46:43] That mechanism for developing countries was probably fair and had some benefits and made it easier for more countries to participate in the treaty, one of those countries that was flagged as a developing country was China.
And the treaty is super slow and it takes a long time to change
like I think there's not a good argument that China should still be considered a developing economy for purposes of this treaty but but they were and so what that essentially meant is
that a seller in China could sell something on Amazon to it to a buyer in the US and they could very cost-effectively,
male that that good via
post and frankly it was much cheaper to send something from Shanghai to San Francisco then it was to send something from Chicago to San Francisco and ironically that that seller in Chicago selling the San Francisco was
having to pay a higher postal rate to subsidize that cheap delivery from that Chinese seller so treated this really unfair situation where
Chinese sellers had a much lower cost of postal
delivery for cross-border trade then did for example American companies and so a lot of people felt that was unfair and so now the Trump Administration is threatening to pull out of the treaty,
because of that that fundamental unfairness which frankly totally agree is unfair the problem is.

[48:13] If we do in fact pull out of the treaty.
What that also means is that all those sellers in the US that want to ship via post anywhere else in the world can only do it if the United States negotiates a individual treaty with a country you want to ship your goods to sew.

[48:30] That that potentially would mean we need a hundred and ninety-three postal trees that we have to negotiate one and one with each of these countries,
many of those countries we don't have an ambassador with right now so I guess it would be a big Challenge and so while I think pulling out of the upu fixes this this.
Fairness imbalance with China
it's going to create a bunch of new headaches for people in the US that do cross-border trade and so what you know frankly the best out come here and what what I think a lot of his hope is the case is Milli by threatening to pull out of the upu we could put.
Pressure on the the governing bodies of the upu to sort of fix this this China Gap
to keep us in the treaty and so hopefully this is just some sabre-rattling it causes them to rethink the developing nation clause and we stay in the treaty but if we do pull out that'll be you no good news for some people that are competing with China but it'll be bad news for a bunch of other US base sellers.

Scot:
[49:32] One of the companies that seems potentially most impacted is wish so
Bocas wishes Marketplace are Chinese sellers Supervalu oriented so they're not using FedEx or anything like that
they are using the postal system and the wish founder was actually kind of saying to you earlier point about it is kind of ironic that.
By raising the postal rates it actually kind of helps Amazon versus other retailers that this is another interesting kind of example actually oddly benefit Amazon
because you know now there won't be the goods from wish that you're competing with
Amazon isn't the middle sister where they bring products are from China on boats called Dragon Boat so it'll have to get a lot of their goods they skirt this this
this just don't understand how that works correctly.

Jason:
[50:25] Yeah. You're exactly right and this is again the biggest sellers I actually have more options right and so even
and I don't know how true this actually is Betty wish claims that hey this isn't going to be you know to join material to us because we are selling enough stuff from China to the US
that we can be a cost-effective freight forwarder so we can put all those small
packages on our on boats bring containers over here and then dump them in the US Postal System to be delivered domestically and not have international right and because we're a big seller we have enough volume to aggregate to do that
where as you know smaller sellers wouldn't wouldn't have that option so remains to be seen whether which will be able to
follow through on that if we pull out of the upu treaty but like certainly it's your point Amazon.

[51:16] Already doing that and there was a I think Jason Delray did an interview with the CEO of wish and he had a funny comment like when the
the Diplomat talk about pulling out of the UVU one of the reasons they say it is it's totally unfair the US Post Office is losing three hundred million dollars on.
On postage as a result of this deal and the wish CEO offered to pay it
and obviously like that's not the the total cost that's lost from from this this imbalance but it I thought it was a funny snide remark.

Scot:
[51:57] Hearing you describe it almost could be an eBay proxy on eBay benefits from a lot of this stuff too so it'll be interesting to watch that and then in the world that talk a lot about ePacket do you know what that is and if it's a fact about us.

Jason:
[52:12] Yep like so that is a specific postal product and it
if I'm remembering right it's indexed to the upu rates but it's not actually governed by the upu rate so it would be
possible for us to change the ePacket rates without pulling out of upu but it would require the US Post Office to change
some of their their pricing policies and I think that might require a vote of Congress if I'm if I'm not mistaken so it's a
a slightly special case but it basically is indexed to the rest of this problem.
I'm so it's all it's all going to be interesting to watch like I never thought I would get a chance to talk so much about the nuances of international postage systems.
I think my my father-in-law the stamp collector would really enjoy it.

[53:09] And that's going to be a great place to wrap it because it's happen again we've used up all our a lot of time as always
if we got anything wrong or are you have further questions or want to discuss anything from Today Show would love it if you jump on Facebook and leave us a comment will try to reply right away as always if you benefited from the show
now would be a great time to jump over to iTunes and give us that 5-star review
if you hate it today show Scott's a personal cell phone number will be in the show note so you can give him a call and let him know.

Scot:
[53:44] Absolutely look forward to hearing from everybody thanks for joining us everyone have a great week.

Jason:
[53:49] And until next time happy commercing.

Oct 3, 2018

EP148- Amazon 4-Star Retail Concept Store 

Amazon 4-Star, Amazon’s latest brick and mortar retail concept, opened in the SOHO neighborhood of New York City on Thursday, September 27th. The premise that its assortment of merchandise available in the store is rated 4-star or higher, curated by customers, a top seller or is new and trending on Amazon.  Jason was on-hand for the grand opening and gives a first-hand account.   "What Competitors Are Missing About Amazon's New 4-Star Retail Concept" from Forbes.

  • Overview of Amazons brick and mortar formats to date
  • Description of the Amazon 4-Star Store
  • Digital Fact Tags
    • SoluM is the hardware provider 
  • Checkout Experience
  • Implications for other retailers

Upcoming:

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

Episode 148 of the Jason & Scot show was recorded on Monday, October 1st, 2018.

http://jasonandscot.com

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

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 148 being recorded on Monday October 1st 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host,
Scot Wingo.

Scot:
[0:41] Hey Jason welcome back Jason Scott shirtless nurse well it says you have a special treat for you this week we.
Jeff Bezos says you know is one of our top listeners and he knew Jason was in New York last week and he thought that would be a good time to open an exciting new store
the four-star store in Jason Our Lives always in a city on a new Amazon thing opens a reporter is going to give us a trip report today.

Jason:
[1:10] Yeah I know it's super excited to talk about a 4-star I'm sad because the last show we were together so now I'm having to get used to the the separation and doing it remotely against God.

Scot:
[1:23] I know I know well I'm sure we'll see each other next couple years.

Jason:
[1:27] I'm looking forward to it already.

Scot:
[1:29] Cool let's kick it off by so you know you and I fall asleep closely maybe not everyone else's is obsessed with the Amazon physical stores
let's kick it off once you give us an overview of the different store formats that are out there.

Jason:
[1:49] Well so I think the first brick-and-mortar store than Amazon ever opened was probably the Amazon bookstore the original one in the University Center in in a suburb of Seattle.
Now I want to say there are 17 or 18 of the book stores open.
Instead of this is like the.
They do Intex sell books they also sell Amazon Hardware in the store some of the key unique concepts of the store.

[2:21] Amazon has Dynamic pricing their pricing on a line changes all the time they want to offer the same price in the store that they do online so the store has no price tag so you have to use the Amazon app and scan everything in the school or store.
To learn what the price is when you make your purchases you get in line at a traditional cash wrap but instead of paying with a credit card you're highly encouraged to use,
the Amazon mobile app to check out using your Amazon digital wallet so they have kind of a.
To my way of thinking convoluted High friction.
Checkout experience and I expect we'll talk about that more and there's a lot of speculation about the purpose of those book stores.
It it seems unlikely to me personally that that Amazon has identified the dead tree book category is a category where they desperately have to get more market share than they were getting online and so they open.
Book stores because they thought that that was the category the world needed more of my my promise has always been,
that Amazon has these really successful Hardware products like the Echo and the fire and the day recognizes that they needed a demo environment in a customer service environment for those and that the the books were kind of.
The decoration around the Amazon Echo Store if you will.

Scot:
[3:50] And then what other formats are there out there.

Jason:
[3:55] So a couple formats cropped up after that.
Amazon head-to-head Amazon Fresh for a while and today you want a couple of these Amazon Fresh pick up locations in Seattle so these were,
places where you can order your groceries from Amazon Fresh and instead having them delivered you could drive through almost like a bank teller.
I drive through bank to our kind of situation and they would put your groceries right in your trunk,
they're very fast service level so you can get your groceries delivered like 30 minutes after you place the order these two stores.
Open shortly before Amazon bought Whole Foods so this at one point was there.
That you know what like the tip of their Spear of their brick-and-mortar grocery strategy and then of course they,
they are upset the industry by actually buying a brick-and-mortar grocer.
So they they have of course they have the Whole Food stores is another Amazon format and they,
they made a lot of progress in digitalizing I think I just joined a new version of that were there.

[5:03] The grocery store so prior to the acquisition you could not find out what Whole Food carried in the individual store you cannot see inventory now you can shop the whole inventory of all the Whole Food store,
they've added a ton of omni-channel feature so you know Whole Foods delivers.
In many markets they have curbside pickup I would very fast service levels in in mini markets they've integrated
Amazon Prime into the Whole Foods experience so you you get discounts on product of your Prime member and you are now using,
your mobile app in your barcode to get that Prime discount when you checkout at the front Whole Food store so Whole Foods is there only one of those Concepts and then.

[5:47] Inside of many of the Whole Foods Amazon has a hardware pop-up shop and so there now 37 or 38 of these Amazon pop-up switch is a,
format you know. Dedicated to the Amazon Hardware so that's mainly Echo fire ring,
antonym of amazonbasics products and as we know that those are all expanding lines they're adding new skis used some of these pop-ups are not in Whole Food stores,
and then not included in that count Amazon has also done a shop and shop inside of a bunch of Best Buy stores that has a lot of these physical things,
so those are is far as I can remember where the main,
Amazon brick-and-mortar formats leading up to this this new Amazon 4-star store that just opened in the Soho neighborhood in in Manhattan.

Scot:
[6:43] Cool so it's good over you so give us an idea of what.
What it's like when you walk in this thing
one thing I saw online a lot of people are not questioning the name for Star it's almost kind of like why not just have five-star stuff so I would love to hear your thoughts on that and then you walk in and give us a lay of the land is a
categorical or some people say it's a bunch of random stuff I would never buy just kind of all jostle together I love to hear your kind of like a little tour of what you saw there.

Jason:
[7:16] Yeah they got some merchandising is currently in the eye of the beholder we haven't explained it to her listeners
the concept behind the four star store is that everything in the store has earned four stars or more on the Amazon platform,
or is a hot seller or is a new and trending products,
so it's essentially it's their taking these products that are doing really well on the Amazon e-commerce platform and putting them in a physical store format and so yeah you know.
Haven't given a lot of thought to the name the.
You know you're right like it's open a misinterpretation that it's tough that's rated for not five-star it if it really is meant to be four star and above.
In many of the products in their likely aren't 4-star because they're their new new trending products as well so so the.
The merchandise in the store is a little broader than the name might imply it's a 4000 square foot store which of the similar footprint to the book stores,
and the physical fixturing in the store in the signage in the graphic elements are all very similar to the bookstore so if you shopped a bookstore the.
The visual merchandising in the the four-star store with feel very similar to you.

[8:42] There there's One Merchandising element that's dramatically different and we'll get to that in just a minute but the main thing that would feel different about the four star store from the book stores is.

[8:54] Quite simply the merchandising assortment that is in the stores and in fact you actually can see some of the.

[9:03] The Fingerprints of this store in the earlier book stores so in the book stores.
At some of the unique gondolas they had four books is they would have a gondola just for books that were rated 4.8 stars or above,
at the time that was a novel concept that that you know that they had a merchandising display unit dedicated to well-reviewed products and then they also had a gondola for stuff that was rated 4.6 stars and above,
my New Yorkers for the store in New York so they had Us store that had you know that was very sensitive to.
Well reviewed products from other people in the same Market is you and so in a way you can almost think of this door as taking those couple of innovative displays out of the book stores and turning them into a,
a whole brick and mortar store there is very very clear wayfinding so the.
You like that the signs for the categories of products are pretty clear and in so you both have sort of tables that have things like,
new and trending products you would we have a category for like,
products at 10 to get purchased together you have a table for things that are hot in Manhattan you have those kinds of.
Of curated assortments based on on on ratings and reviews and user-generated content.

[10:30] On tables in the middle of the store in the most of the walls of the store are little micro categories so pet products or travel products or kids products,
and then there's a couple big category so they're their there are tables that are dedicated and labeled as Amazon product separately there's a home automation section,
there's a fire section,
there's a big section in the middle of the store that I'm pretty sure is a vendor funded display that's for the the the iRobot.

[11:10] Artificial intelligence vacuum cleaners.
And so you have a bunch of these categories and I think it's toy fair to the unit people that walk in and say hey it feels a little hodge-podge G disorienting.
To me what that is is you got a.
A category of pet products sitting next to a category of travel products right and you you know there's there's not necessarily.
In an obvious association between those two categories and yet they're their merchandise adjacent lie in the store.
I'm not sure if I mentioned it earlier but they're even tables for things like amazonbasics cookware for exam.
So that the assortment can feel a little.

[11:58] Random the or or you know there's some objects of positions of the assortment but in a way that's one of the things that's interesting to me about the store,
you know ink increasingly we talk about stores like Amazon's website as being the.

[12:15] You know the absolute winner at things like a sort mint and convenience and priced and so we talk a lot about you know the best play for a lot of other retailers is to be at the other end of that spectrum mbn that sort of.
Accuration in Discovery into the Spectrum where you you know you you could be surprised and delighted to discover some new product that you didn't even know you wanted,
did the retailer help you find and none of the previous Amazon Concepts were really very good at Discovery and certainly Amazon's website you know has not been successful at Discovery,
yeah they've done the number of Pilots including one we talked about last week the the Amazon Scout experience to try to get better Discovery but that's always,
been sort of a a gap for Amazon and it's it's been one of the.
The plays you seen a lot of other retailers do to try to compete against Amazon and so now you have this new store format that I do think,
has a strong element of surprise and Delight but if you went in there to shop for Amazon products if you went in there to see the new echo or to see the the the microwave oven which side note it's not in the store yet.

[13:28] You you would discover some other products that are highly rated that a bunch of people are buying on Amazon that you probably didn't know existed and said there is that kind of fun element of surprise and because it's a broad assortment
a lot of people point it out like you know it's a pretty it's a particularly good assortment if for example your shopping for a gift for someone because there's
a wide variety of different things for people with different tastes.

Scot:
[13:54] Coop's what,
we'll see where this was the biggest swell a lot of people in New York love that store called story that you know,
Angels kind of every quarter that has a theme of the tend to be seasonal like around. X day it'll be love and home
Macy's acquired that I believe and then that's a store that's like really just focused on Discovery and then we've had beta on the show where is really around device Discovery at what time is the Apple Store you can have that time.
How would you kind of rate this and that Spectre mode stores oriented towards discovery.

Jason:
[14:37] So it is much closer to the,
the sort of beta end of the Spectrum in in fact I would in some ways that share some common strengths and challenges with the beta format right so
you know like Bay that you're your apps to discover some new stuff when you walk in that store that you didn't know existed and that's great but will I get beta,
there probably aren't a lot of customers that have a particular product in mind.
And then are going to go to the beta store to fulfill that particular product right so you know to me one of the challenges with the beta format is it's very strong if you just want to discover something you didn't know existed but it's it doesn't you know,
do particularly well as a destination for products I already know I need.

[15:25] Into what's interesting about this Amazon 4-star is it does have a little bit of both like a view
new that you're all your friends were talking about Echo and you finally want to jump in and buy an echo or do you already have an echo and you want to learn about more home automation products that you can integrate with your Echo,
this store is going to be your destination they have the broadest assortment they have in staff
Nina in-store people that are trained to teach you they're doing in-store demos and things like that and so it is your demo for Amazon products and then you're going to have that beta style Discovery experience,
around the Amazon products so in that way it's a little bit better of a blend you did you mention story Into Me
story also is a very much a discovery experience but it's a much more,
carefully curated Discovery experience so.

[16:20] Everything in story is going to fit into a single theme in that theme is going to change every couple of months or every story is they call it right so you know if it's a,
a local food base theme all the products in the store are going to be related to local food and how to prepare it and shop for it and buy it,
until there is a cohesive theme and you know the the cohesive team in beta is sort of tech gadgets if you will,
then you know that there really isn't as much of a cohesive theme in this Amazon store it's more of the decoration bye bye rating,
plus all the Amazon products but I do think.

[17:03] This is going to end up being a destination store that's a mission for people that decide they want to buy Amazon products if you want to see that microwave oven before you buy one,
I think this door is clearly going to be your destination if you if you live in the New York area and then it is going to be.
Another store in a popular shopping district in SoHo that people just want to go into brass and see what's new in hip and they're going to expect to see fun new stuff every time they walk in the store and compare that for example to the,
the world's most successful retail concept Apple,
like I would argue that there's very little fun surprise when you walk into an Apple Store I mean you know when they first want to take care of a lot of third-party product but as they have launched more of their own products they really.
Apple is really narrow the assortment to just stuff they sell and when they you know bought beats they said they didn't want to sell other people's headphones very much and so,
in general all the products in that Apple Store are Apple products and they change at best once a year and so you're really surprised when you walk into an Apple store that you're going to be able to walk into this Amazon store
you know it certainly every couple of weeks and in discover some new stuff so that's an interesting play for Amazon.

Scot:
[18:18] Go see you're getting you got the vibe they're going to be changing this products pretty frequently like where they like running around like oh my God this is now below for stars and here's the new thing in this is hot and turned in her.

Jason:
[18:29] Yeah I definitely don't get the sense that is going to be real time but I think they are committed to two very frequent product refreshes and that certainly is one of the things wall,
will want to watch.

[18:41] The I hinted up front that there's that the merchandising mostly feels exactly like the Amazon bookstore but there is one dramatic difference between,
the book stores in this door and that is that this door.
Uses digital displays are what we call Electronic shelf labels or sometimes they're called electronic fact tags.
In front of every product in the store so there's a little e ink display in front of every product and what that lets the the Amazon 4-star,
store do is it let that store show that Dynamic price in at that price changes throughout the day,
the prices updated on that on that ticket in real time and of course in addition to having a price on that ticket
they also show the average star rating and the number of reviews that every product has got it has and so since all of those things are kind of real time and can be changing on the website all the time,
it makes sense that they went to a digital display in the store so that you get that updated information so it's not so much,
but they're changing products out every single day but at the very least they're updating all that information about the products every single you know our,
and then interchanging out the products fairly frequently.

Scot:
[20:02] Is it you know when you say this I imagine like a little candle kind of cut to fit on the Shelf is like is it an Amazon product they've made for this or is it a third party.

Jason:
[20:14] It is not it's a third-party product so there's a.
Vibrant competition out there for these fat tags some other retailers use them Whole Foods interesting enough was an early adopter they use them in some categories like the beer category.
Kohl's has deployed them pretty much everywhere in New York City there's a very popular photography store.
That's a e-commerce site to the rest of the country which is called B&H Photo and they use all these fact tags the in many states,
if the price of the cash register is different than the price on the Shelf the Retard gets fined and so one of the reasons that a retailer might want these electronic fact tags is to guarantee that the cash register price is always.
To the shelves into a lot of retailers particular in Europe have deployed this technology just to protect themselves from that kind of Regulation,
I'm in consumer protection laws but increasingly we're seeing that you can also use these digital fact tags to give customers a better experience and if you're someone that's going to change prices frequently.
Frank Zappa Warren Buffett owns a store in Nebraska called that are in Omaha, Nebraska Furniture Mart.

[21:27] They they sell a it's a huge Furniture campus but they have a 50000 square foot consumer electronics store that's kind of like a Best Buy in it,
and that store spreads all their competitors prices every morning and they update the price on everything in the store to be lower than any competitor and they do that using these digital fact tag,
so we're trying to see him,
yeah it is a display technology that's very similar to the Kindle and I did do a little spelunking when I was in the store and and their particular solution comes from this this Bender called,
so um I'll put a link to to their products in the in the show notes but it's s o l u - m.com.
And you know typically all these vendors make a wide variety of sizes they have some color capabilities so you can add Getty ink in like three colors,
but mostly what Amazon's using our bar kind of the least expensive products in the in the line so they're the two smallest format tags than Amazon's using and they're just black and white.
These things are run on a battery they clip to a shelf just like a paper sign would.

[22:38] Store updates prices on a server that talks to all of them you use a mobile phone with Wi-Fi to update pricing,
and then there's a zigbee server which is a flavor Bluetooth that used to actually update all the all the individuals back tags in the store.

Scot:
[22:58] White so I have been in an Amazon bookstore and their you kind of used app why do you think they're using this instead of the app based approach.

Jason:
[23:07] Two reasons number one like I would if you actually go back to our bookstore first first show I suggested back then that I was surprised Amazon wasn't using electronic fat tags in the bookstore because
I felt like forcing customers to use the app is a.
High friction experienced some customers will do it some won't but it's slower and you know customers shot the store they don't have the app and so,
I was kind of surprised they didn't have fat tag Justice all the pricing problem but now in this poor starving store they've doubled the problem because they had that they have the dynamic pricing problem but now they have the problem of showing you what the ratings and reviews are
like that's the whole premise of the store and so they can't get that social proof available for every product than that's you know,
it's hard to deliver on the on the promise of the store and so I think they needed the fact tag to have the real time updates of the of the the star rating,
and the dynamic pricing and so you know I think that that's kind of cool I'll bet you we don't see any new book stores open that don't have these,
these these tags in them and I'll bet you if if Amazon does deploy this this format a little more broadly that it's another nudge to a lot of other retailers because once you,
have the ability to see the star rating in the store for a product.

[24:31] You really want that everywhere and you you certainly want that at Target and Walmart and you know once once the expectations are raised that you can easily get that like I think a lot of other retailers are going to have to.
Have to match that capability and are least I certainly hope so.

Scot:
[24:46] Cold out how often do these things update like when you're in the store did you see them updating or you think it's like that once a day thing or.

Jason:
[24:52] So I didn't I didn't see any updating I didn't have the patience to stay the same
United change a review and see it see a change I pray I should have done that in hindsight
in my mind I I know if I'm working with these tags that it's totally viable to change the price multiple times a day so I just imagine that they're probably refreshing the tags every hour or every,
couple hours in the stores you don't want to constantly refresh him cuz they are running on a battery and so for example if you.
If you updated every 10 minutes or something that you know that the batteries would would last considerably last time.
These tags actually don't use any power when they're not being updated so one of the benefits of the E tank is it needs electricity to change but once it changes.
It doesn't take any power to two.
Keep its display State and so then when there's igby goes to sleep you basically have a tag that's that's electric but isn't isn't drying any power from the battery which is pretty clever.

Scot:
[25:54] I kind of believe V Amazon 6S for mandevilla themselves cuz they've got all the underlying technology and.

Jason:
[25:59] I'll be totally honest.
Yeah I'm familiar with the number of these tag manufacturers I was not familiar with this particular manufacturer and I was somewhat surprised when I you know
climbed underneath that is playing was looking at the back of these things to see the day they were a third-party product I tend to agree with you I can feels like something,
you think Amazon would have engineered and then maybe potentially sold the other people.

Scot:
[26:26] Did you get arrested.

Jason:
[26:28] I did not get arrested.

Scot:
[26:31] Did you get caution to the work of the lake sir sir get down from that ladder.

Jason:
[26:36] I feel like I have this whole skillset about being really slick and smooth and retail stores and and you ain't getting a little another Eyes Photography and stuff and it's mostly wasted skill now because in the old days,
they tried to catch you and they really frown on that like now like every single person in the store is taking pictures for Instagram and what not and so.
If you like being stealthy is a is a valued skill in the stores
I will say One Missed opportunity I was really happy to see the digital fact tags he missed opportunity is what you can also do on those digital fat tags is you can throw an NFC chip,
inside of the fact tag.
In effect this manufacturer even offers that as an option and so is we we covered last week the newest Apple products can now read NFC chips with in the background and so what that would mean is.

[27:33] You shop this door you see the price you see the number of ratings and reviews and you could take any Android or any brand new Apple phone and just wave it in front of the price tag and it could open the Amazon for the detail page and let you actually read the reviews for example
and so to me that would have been a nice link,
to the customers mobile device for the people that want to do a deeper dive or at the very least Amazon owns their own 2D barcode technology called smile codes you would have expected,
there to be a smile code you can scan for each of these products in at least so far they they have not gone that way so maybe that will be there next door concept is though,
the lad smile codes in the NFC chips to the to the digital Factory.

Scot:
[28:17] Someone told me on the tag anyone can shop in there but it will actually highlight if there's a prime discount so there's certain things that were either Prime exclusives our heads exclusive Prime discounts did you see that.

Jason:
[28:29] Yeah I did not notice any Prime exclusive but I did notice product that had a prime discount and so then the tag use this kind of is was format and said they say like with price.
You know 1999 Prime price 1599 or whatever.
So you could see that that you know and they they this store like I got you know I didn't count how many skus are in the store but like it it,
it would not Shock me if 40 or 50% of all the shoes in the store are Amazon products between Echoes Kindles fires.
Amazonbasics you could easily imagine that have two products in the store Amazon Prada.

Scot:
[29:15] Sagittarius fortune.com.

Jason:
[29:17] You you may yeah usually I have a muted for podcast but because we did a special episode tonight I decided to leave her on and she's punishing me for it.

Scot:
[29:25] What else can you highlight about about the storks prankster.

Jason:
[29:34] So the instapot was prominently featured I know that's a super product Everyone likes to talk about the.
They did have some digital displays for some of the Amazon product so.
Particularly for like the the ring doorbell displays they they had a button you can push that was built into the table and they are like a 20-inch monitor built into the table and they played a video sort of.
A demonstrating the the the ring value proposition to customers and said that you know these were these richer interactive tables most of the Amazon products.
Out and available for customers to try and use and then tried to set up good demo environment for all these products.
This is all live merchandise so all the Amazon or non Amazon products if you wanted to buy something you you grabbed it on the Shelf there's an inventory on the shelf and you will you walk to the cash register and and buy it yourself.
The.

[30:37] You know so in general I walked in that store and I might go out you know this is a more fun store to shop then any of the previous Amazon Concepts I've been in pain so I thought that was really favorable and I actually think.
The idea of merchandising the store based on customer social proof is really smart and I think it's very smart for two reasons.
Does ratings and reviews it become like the most persuasive attribute in selling stuff online and and you know there's a lot of studies that each other like 2nd or 3rd behind price as the,
the primary attribute to customers care about Amanda cases they're more important attribute than the brand name.
Anythink gosh all those ratings reviews are ubiquitous available online they're not available in any brick-and-mortar format right and so who's the first retailer to figure out how to leverage ratings and reviews in a brick-and-mortar store.

[31:30] What a surprise it's Amazon I think that's really smart I think a bunch of other retailers are going to.
Have to move in that direction and we've also talked on the show a lot about this trend of moving away from.
Sort of intuition bass merchandising to data-driven merchandising right in historically,
you know if you were opening a store that was going to cater to gift-buying you'd hire some Merchant and they would you know be responsible before deciding what Pool Products They Carried and they would use their own intuition,
and if they did go to,
new product trade shows and they look at stuff and they say I want that bad in that and I don't want that bad in that and it would be entirely based on their own previous experience and intuition,
I'm increasingly we see some of the really successful online retailers like Amazon and Stitch fix.

[32:20] Replacing those merchants and their intuition with data scientists and their evidence and so you know now you got an example of a brick-and-mortar store that's largely curated.
Based on data in this case review data rather than the intuition of a merchant and so you know again,
traditional retailers probably look at that and look down their nose at it but I think it's the direction that retail is going in and it's not not wholly surprising that that Amazon is.
Pushing pushing the world in that direction more so than then you know we need traditional retailers currently.

Scot:
[32:58] Calypso summarized by give us like a couple things you loved in a couple things you hated and then what do you think this means for the future of retail.

Jason:
[33:08] Favorite things like I think the overall concept of of merchandising based on social proof,
I really loved I loved some of the the clever cross merchandising categories like you know things that are frequently bought to be together like that's that's not a.
Merchandising approach you I've ever seen in a in a physical store before so I I liked some of those obviously I really like.
The electronic bag tags in and letting customer see you live ratings and reviews in the store,
and I I love the the surprise and does Dwight element in the fact that you don't know in advance everything that's going to be in that store and you might might discover something new so to me those were all the,
the big wins the thing I hated is,
that the checkout experience as far as I'm concerned totally sucks and I think I think they totally missed it it it is the same checkout experience at the bookstore but I didn't like it in the bookstore and now I think it's even more acute,
in the store where they have a higher velocity of purchases and more skus so.
You get to the front of that line and the clerk wants you to open up your Amazon app.
And go to a bar code reader in the Amazon app and scan a barcode that the clerk has at the point-of-sale counter so the first problem is.

[34:29] You may not have the Amazon app installed.
If you do have it installed you didn't need Wi-Fi or cellular connectivity which they were actually having problems with cellular connectivity in this store.
If you're both of those then you have to be smart enough to know that the way you check out is by clicking the camera icon in the app which is totally unintuitive.
That's arguably the most stupid thing I've seen since Amazon since Windows put shutdown on the start button.

[34:57] So I got to click the camera I get the barcode reader I scan the barcode that Amazon provides me and then that generates a new barcode on my phone that then the cork has to scan so it's a handshake the barcodes.
Which is.
There's some potential security arguments in favor of it but it's really convoluted in high-friction and it just watching people check out it felt like I was sitting in line in The Genius Bar watching,
watching the Apple Genius you know folks trying to help people with problems on their smartphone and they were having to do like tech support for every customer to help them check out.
And you know I found myself just saying like geez can't you guys just use the.
The barcode reader in and swipes on credit cards here cuz it would be much faster and more pain less than this was an.
You know that the huge huge irony of course is that the Amazons store format that gets all the buzz,
is Amazon go in the whole value prop the whole premise of Amazon go is,
we make it really easy to check out and so then they had this other really interesting format and Amazon for star and the one thing that they get wildly wrong as it's the world's hardest or to pan so I guess that's.
That's a room for improvement for Amazon.

Scot:
[36:12] And what so you luck the checkout what's this mean for the future of retail.

Jason:
[36:21] Yeah so remains to be seen whether you know this is something that Amazon's experimenting with where it's you know there's a way to look at this and say,
this actually is just an evolution of the bookstore that you know I opened up by saying that my own personal theory is that the book stores are really about selling in Deming demonstrating Amazon devices and in the same way Apple had to open their own store stat to increase their,
their market share with their products and you know we see bows and a lot of other people have their own stores to tell their own product stories.
Amazon need their own stories to tell their product stories and this is just a.
AA higher-margin more interesting version of of what they launched with the bookstore and so that's true it wouldn't be surprising at all to see if we of a few hundred of these.
The stores you know in in in some. Of time and if that happens then I think a lot of the best practices with his from the store are going to become consumer expectations that a lot of other stores are going to have to match,
if it just stays as a novelty in New York you know I think it's it's something that the.
The retail Talking Heads like you and I will talk about but you know it won't necessarily.
By itself Drive new customer expectations and therefore Force other retailers to evolve.

Scot:
[37:45] I am,
I forgot twinsies did you get any vibe that it's I've been down to Soho there's a lot of popups like down there and that it's pop-up or did it feel permanent did anyone talk about that.

Jason:
[38:00] Nope not today very explicitly said that this is a permanent store and not going to be a papa but you are right like there's a lot of similar stores.
In that neighborhood that are sort of medium ish turn pop-ups that might be there for 3 or 4 months.
Google opens a store over Holiday Inn in a very similar space.
But this this feels like a permanent one in again like there's a few bucks or they're under construction so they may may be very similar to the ones were familiar with better that you know the next book store do they plan it open.
Yeah I won't be surprised if they're four star stores instead of bookstores or or you know a closer blend between the two like this just feels like Amazon evolving their own format for merchandising their own products and I think there's a,
a lot of logic in in Amazon doing that.

Scot:
[38:52] Yeah and you know relentlessly analytical so I'm sure they're taking those you know that 4000 square foot is split up into sections and they know the revenue per square foot per day,
etcetera and I bet they'll have that as an input into your comparing this format versus all the other ones and and their it feels like they're iterating towards something that you know is an optimal store.

Jason:
[39:18] Oh for sure and I'm sure part of the reason they're so adamant about getting you to check out with the App instead of a credit card is for that analytics right when you check out with that app
they're they're able to associate you and all the shopping you did in that store and what you bought and what you didn't buy with your Amazon account and all your history and so you know I expected the
did they're taking it very hard look at that data and that's part of the reason that you're highly discouraged from from using an anonymous credit card when you check out there.

Scot:
[39:49] Did you see any instrumentation like her cameras or anything that could be you know kind of go like technology at least kind of seeing which part of the store you went to or anything like that.

Jason:
[39:59] Nope they have some and I wish I would have needed a ladder to find out the vendor but they have traditional,
retail traffic monitors in the store and not just in the front of the store so to your point like they're probably able to do heat map to the whole store but these are like.
Mortified webcams in a in a security case and so they are great for understanding traffic and dwell times and things like that,
but they weren't near dense enough to resemble the sort of Amazon go Style,
attract everyone's face you know perfectly throughout the store and the store doesn't fact have a public bathroom which is one of the things we talked about you you can't do in a ghost or if you're trying to track the customer perfectly at all.

Scot:
[40:43] Last question did you find anything exciting that you bought.

Jason:
[40:47] Well so I did I was traveling and I too I try to travel light and so I couldn't buy anything big but in all these new store formats in the go store and then again in His Four Star
format they had some branded merchandise and so I've been buying the permanent shopping bags from all the different store formats and they have.
This sucks steel water bottle with Amazon graphics on it and the name of the store and so you know now I have one from.
Go and and four star so I feel like I'm starting an Amazon brick and mortar retail collection.

Scot:
[41:24] Rick will have to put those in the show knots loves you.

Jason:
[41:27] Got it I wasn't happily upload some pictures.
But Scott that's probably going to be a good place to end this Amazon 4-star special edition of the Jason and Scott show
as always if people have questions we didn't cover or you finally disagree with anything that we said on the show we'd love to hear from you on Facebook if this is the show that that finally pushed you over the edge
take the extra 30 seconds to jump on the iTunes give us that four star review or five star review either way it would get us in the Amazon store so,
we would certainly appreciate that in a special shout-out to all our new Spotify listeners this is the first episode going live,
on to Spotify along with all the other podcast formats that we've always supported so happy to have the team Spotify in the the Jason and Scott show Family.

[42:23] Until next time happy commercing.

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