Amanda Tolleson, the Chief Customer Officer at Birchbox. In this broad-ranging interview, we discuss Birchbox's core business, their price increase, their personalization strategy, and their new partnership with Walgreens.
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Episode 185 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from the etail East trade show in Boston on Tuesday August 20th 2019 I'm your host Jason retailgeek Goldberg
and unfortunately Scott was unable to join us today so I'm solo but we made up for it with a great guest,
on the show today please welcome Amanda Tolleson she's the chief customer officer at Birch,
Amanda just finished a keynote here I know you mainly came to talk to us on the podcast yeah but super generous of you. Also.
[0:56] Squeeze me and you know to talk him.
[0:59] Exactly which I think was wise of them because it seems like the audience really loved it and the topic was a tracking a customer who's inherently not looking for you.
So I want to talk a little bit more about that but before we do I measure most of our listeners are somewhat familiar with Birchbox but in my experience people,
don't always have the exact right perception about your business model so can you kind of give us the the updated elevator pitch.
[1:27] Absolutely and you're very right people usually know one thing about us but not the full story so far Xbox is a beauty and grooming retailer,
I'm really focusing on a new way of discovering Beauty and grooming Surly Discovery at the focus of our business model but still we have the full purchase model,
so you can actually buy full-size products from us as well as Beauty and grooming instead of beauty but we have grooming as well,
I'm so what we're best known for is the subscription box right kind of picking up the subscription box economy which is taking over the world in some ways.
[1:59] You guys are sort of the Birchbox up Birchbox.
[2:01] Yes exactly yes yes exactly where so I got to stay until we get a lot of fun free press where it's like in the Birchbox of blank just launched it sucks or it's just sex toys I get some fun ones in there for sure so there's some like
pros and cons that we definitely have kick-started that industry.
Things are best known for that but we're definitely not in the business of just building a subscription box company or the business of it being away a better way to discover Beauty in particular because,
beauty is so overwhelming the internet options on the internet and an easy way to
explore discover products has to have a personalized set of products you thought a profile personalized that a product gets into every month.
You can just cover them in the ease of your home beauty regrouping and then we have an easy path to purchase where we have anything that you get from us in your sample box you can then,
purchase for full size on our website complete that pass,
and then we also have a focus on someone physical details we've had a physical retail store of Our Own in New York in this will get into we have a partnership that slave focused on that,
how did the end of the day what we're really trying to do is create an experience for the Casual Beauty consumer so this is a consumer that.
That really is not there by the industry beauty is not their top interest they don't spend a lot of time it was going to be easy efficient delightful exciting. There's you have more questions but that's kind of Genesis of Birchbox.
Is it serving a consumer or a better way.
[3:27] Awesome and like today all of these these subscription Discovery boxes and different things like sound like kind of common but you guys are 9 years old,
and it was a completely foreign concept when you first launch so I'm just curious I know you haven't been there for all nine years you're far too young but the.
If you know like what was the origin story was that like a super scientific evaluation of a gap or.
[3:54] Yeah so actually do know it even though I know as I am so young in my teenage years,
it's hard to imagine that I wasn't business school at the same time as the cofounders answer to my best friend from business school and I was their marketing friend as they were like launching the idea explore ESO actually do have inside so really it was a mix of things are kind of the same or the business,
the business Insight story in the personal Insight Stories the business is a story is when we were in business school there's a lot of,
a lot of industries were having your seen massive growth in the penetration of online shopping I'm happening so clothing Etc right and what they noticed was,
beauty is not having that it was not having that grow within online it was but others were in the question was going to fly,
I was at not happening so the insides are being well because of key part of discovering Beauty the sampling is trying to products right so,
if I'm just picking from images online how do I know if that foundations going to work with me I don't even know what a Serum is right there's a huge part,
a critical part of the shopping experience for beauty that was missing in the way it was set up for copying the way other online retailers for other industries were doing it had to be something new and different enemy.
Unless it was just for replenishment which is basically what a way to the time is only replenish my shopping for beauty so instead of Discovery shopping in the personal Insight was just like who you know.
[5:12] That they are the two co-founders alien kathi are not that this beauty obsessed customer they're not they weren't like obsessive beauty industry wanted to get in it was more than,
they had a friend Molly who's the co-founder Force employee Birchbox worked at a magazine and she basically had access to a sample closet,
and she would send samples to Haley on the co-founders at business school with a note that was like oh I saw this I thought you'd like it this is why I thought you'd like it,
and that so those that like personal experience of like well this is a great way to discover Beauty basically someone slightly more knowledgeable than me who knows me well enough just any product
I trust and I'm willing to try even if it's something I've literally never heard of in my life so that's kind of like that that was an amazing experience okay can we come by in that inside of a,
a true Human Experience that was beneficial with this industry inside of why the hell is you know what can I say hello massari.
[6:06] I guess just go market as an explicit show on iTunes.
[6:09] That's exciting.
[6:11] Exactly your kind of risque.
[6:13] So the kids the kids won't get my insights I guess it's too bad so buying out with the industry inside that's that's how I was born with those two four two two things happening at the same time.
[6:25] Very cool said she was getting Birchbox before there was virtually.
[6:28] Exactly they couldn't part of the experience before it and then like it was kind of how do you how do you grow it how do you make this so you know it's 7121 right so we have like an algorithm for example that takes your profile and how do you Skillet to be,
millions of people you can have that same Personal Touch experience.
[6:45] My next question was going to be why isn't Katrina a South Korean influencer but now now I totally understand it makes perfect sense.
Now you are the chief customer officer of Birchbox which is a I'll call it in emerging tight.
So what what does a chief customer officer is it a better paid Chief marketing officer or.
[7:11] I'll take that back as a to-do on my to-do list for Converse.
[7:14] Yeah that's your kpi.
[7:15] So really it's something I've seen happening a lot adidas D deciso direct-to-consumer businesses where.
At the heart of the Insight is about a consumers that a consumer need and ultimately the whole business needs to be focused on that consumer in building an experience with marketing is thinking about oh here's a customer when a Target,
and the rest of the company is not involved in that write the best marketing the best way to engage a consumer is pretty product for them that's really resonant is it mean
feels good feels their needs and then we talked about it so it's really to make it was really to elevate that concept of like we we as a company or focus on his casual Beauty consumer has repeating grooming consumer the entire company every single function in some way,
need to know about that understanding and using Corvette in their day-to-day decisions of what they're doing and there's a core part of our strategy rather than in marketing.
[8:10] Awesome that makes total sense and it should clearly be paid better.
Then see him out. There's anything wrong with this email we have plenty that our friends the last question and you you maybe give us a little ready but how did you come to this role what was your free Birchbox experience.
[8:29] That's a pretty Birchbox I was on the Consulting side so this is my first quote on quote in new client side job I still some.
[8:36] Congratulations on escaping as a as a current consultant people like you give me hope.
[8:41] So I I could have had but mix of jobs in Branson salting and customer research so did a lot of work around what is your brand stand for who's your Target customer
how do you take your bread equitation it into new lines of business from all different types of Industry
ended up I loved I still let you know I could totally end up going back to that side like that the intellectual.
Diversity essay of kind of those different problems that you got to get you to talk into all different types of people and companies is really interesting but had this,
you know urge to see like how do you follow it through all the way through the execution and what does that feel like and so,
ended up jumping into Birchbox really not and I am very much a cash app you can sing or not cuz I was looking for a beauty company job by any means but I think when you're moving to something new in a start-up the biggest to me the biggest turtle as we trust leadership,
even if it's a great idea if you don't have great leaders and you don't have good decision-makers then if they say doesn't matter so I knew obviously copy and Haley from business school so it gave me great confidence,
but I didn't have kind of I started the director brand marketing,
and then I'm going to see about overtime and then as I took on this job now Chief customer officer where I'm over the marketing team still but I'm also over are experiencing which is digital product creative content Community social as well as engineering.
[9:58] So that is awesome and then as I mentioned of your topic today was attracting a customer who's inherently not looking for you,
so I'm dying to find out I'm teasing I already heard it so I know I know what you were talking about but I'd love for you to share Their audience time and what the the key points were but I I will start by pointing out,
like you upfront you have to admit there someone in the world that's not inherently looking for you what shockingly like some companies struggle with that that realization.
[10:28] Yeah yes it's really hit me as this focus on his casual Beauty consumers only we have to admit to ourselves is that,
they're not the it's not the thing they're most interested in their lies about that's it that's it in definitionally who they are they're not the video says they are there's a beauty obsessed with most of the beauty industry focus is on which makes sense because they're hyper engage hyper users that are
is there hobby is their passion and they're going to spend way more per person but they're really only maybe 15 to 20% of the total people engaging with UD,
and there's this huge white space of people which we call the council meeting is about 70%.
[11:05] And there. It's not like so what some people get confused when I say that's we're not going after Beauty and engage people that's another 10% or something on the bottom that they're not they're literally like give me my soap and that's it don't talk to me about it we're not trying to push a
boulder up the hill but we are trying to change perceptions of the industry beat for me they were trying to overcome this customer,
mostly it when they've engaged with a beauty experience they got into a beauty retailer are they've seen a beauty influencer let's say on Instagram they felt like this is clearly not for me.
This is clearly not designed for me as a consumer which is okay maybe I'll run in that store and try to find something but I don't I didn't enjoy it you know it's not for me and so the concept of beauty experience can be designed for them.
Is foreign is an Uber, this is very upfront that we have to get over and we have to think a lot about how do we look and sound different from other Beauty retailers in our advertising so that they will pause and look at our Instagram bad,
Atwood most of the time they're not going to look at it are in the influencers right now but we don't work with beauty influencers even though that's,
how to learn to do as a beauty company because our customers are not following Beauty influencers are following lifestyle influencers are food influencers and so those people can talk,
you know they already had the loading they can say hey.
[12:19] You and your beauty is not my top priority either but I found some interesting stuff via Birchbox it really improved my life and then it's just about being.
Where they are witches we can get into like the kind of partner with Lorraine butts just like,
we found once they find out that we exist in who it's for people love it our best customers are the customers who were not with this casual you can actually write us letters and say oh my God I can't.
I never thought of company could be for me if UTI discover these pot never heard of a serum I've never heard of dry shampoo but they,
completely change my routine in this amazing way but we have to get process that hurdle of getting over just like getting them to stop long enough to pause long enough to believe that this experience can be design.
[13:04] Awesome to you perfectly framed a kind of daunting marketing challenge so how do you sell that marketing channels what were you talking about today that was a clever tactic in that way.
[13:13] So when is this is the view still a sheet for some Beauties offline so we are we've been online for most of our.
[13:19] Wait there's an offline.
[13:20] There's something called offline it's new.
[13:22] I'm totally.
[13:23] Is there a new and so you don't online a lot of it is like you have to drive the traffic to website right so that's Dino
I have to like an odd or it for shirt like a huge weight is just like customers like you they talk to their consumer but there's something is very active that needs to happen to come to your experience
I VS1 power off line is just as a passivity about it either they see you in a store window walking by and they stop in or
example just being in a place people already or shopping for our consumers are you shopping for beauty so and thinking about that we have partnered with Walgreens,
where are for sure the Casual Beauty consumer we listen lots of our studies like it's shopping drugstore Brands right there shopping at the drugstore for their
Beauty and if we can have a space right there the feels comfortable and welcoming and inviting and replicates all the amazing person experience we've all mine physically.
It's an immediate overcoming of that barrier that we have of getting attention because they're there right and they it's interesting and they're going to go check it out.
[14:22] Very cool answer this is a sort of exciting new thing that you that's alive now that you haven't experienced inside a handful of Walgreens to start.
[14:32] 11 we started with 6 Plus December we just opened five more.
[14:36] Got you in I know there's one in my hometown of Chicago other big cities that was nurse could find one.
[14:43] Yes we're in New York and Chicago and LA in San Francisco.
[14:47] Perfect so you've got a bunch of the big Metropolitan is covered and what is the experience going to be when I walk in the store when am I going to see you different than a traditional Walgreen.
[14:57] Yeah so a couple things we focused on we're making sure that it felt something new right both knew but also,
self aware of the space it was in so if I knew I mean how can we bring the Birchbox brand to life in the space so we thought about what are the things that are.
[15:15] Most important in the experience of our consumer that they love about her subscription box are all 9 website I'm so things like I feeling warm and welcoming and,
not intimidating to this consumer so even in the design of the space I'm thinking about the colors we using Brighton friendly
lots of woods we use a lot of Home elements like wallpaper and like the tiles that you know the backsplash on your kitchen will use that element in part of our design is to make it and we've heard that we've had we've done some intercepts in the store people feel like,
warm is your friendly ass feels welcoming but also making sure that it felt,
it wasn't cut off from the rest of the Walgreens store so we're not trying to create this a store and sore feeling in the sense that,
oh I'm walking out of a Walgreens into a Birchbox as much as Walgreens and Birchbox are together presenting this experience that is you can very easily your shop across both.
Frosty of prestige brands on the table to bring it to the store for Walgreens and then also we definitely expect the Casual consumer to still be feeling her basket with him or drugstore Brands so making sure it felt like there's an ice floe,
and a key part of that too if there's a beauty consultant,
that we're only in stores that are the woods called their beauty differentiator storms the Walgreens has invested a lot in this beauty strategy to keep for them and they trained,
3000 stores they treat Beauty Consultants really help you with your knee is it in the beauty Consultants work across both are our area as well as the rest of the beauty.
[16:44] Hey Santa by understand this at Walgreens that experience is much more of a sales assistant experience so they have a
A salesperson with a specific training and subject matter expertise and you're much more likely to get help and advice than you would in a main line Walgreens store for exam.
[17:00] Yeah yeah so this is it yeah that they have specifically trained Beauty Consultants that only work in The Beauty Department so we trained them are brands are trying on other so very different than the day it introduced.
I think a couple years before a partnership with us and he's already been on that journey and we will have that experience by coming together.
[17:18] Show me to put some pictures of this experience from my Chicago store on your weiner show notes but so
Shopper walks in the Walgreen they're going to see this this
premium space that has a different feel but still organically feels like part of the the same shopping experience and is it going to be strongly branded Birchbox is it co-branded.
[17:42] Is evolution only rented Birchbox so you know that you're it's a Birchbox environment but again feels very fluid between the two and then we have some I really tried to bring to life,
so there's kind of design of what I talked about that also the actual a sitting Twitter engaging within the space,
the replicator Birchbox experience so how do you bring for example the surprise and Delight of the subscription experience to a physical store,
so we have something called the build your own Birchbox BYOB.
[18:08] Which is often disappointing when someone finds out that it.
[18:11] Customers you don't have might have a different interpretation it's Dino so but the idea there is that you're able to.
[18:19] You know we have a stamp lately we have samples and get a pack and make your own Birchbox you know where was five or six samples you can tape home experience that it's a way for us to start a conversation about what the subscription boxes are for,
we focus a lot on having Indie Brands be a part of the experience they are discovering and depressy is brand versus a really well-known Brands because,
begin that discovery that Delight the thing that I would never have found on my own as a key part of it so that's a key part and then in the full-size shopping experience,
really focus on how and we learned this actually in our in our own store that we have launched and brought it to this was.
[18:53] How does a consumer actually want to shop physically how do you make it as easy into it as it is in the Box on our website to discover products list take what's a good cleanser for example the most Beauty retailers the way they categorize things,
so if I want to cleanser or an eyeliner I'm going to go to like 20 different locations will get all of the different I don't the only thing I know about the differences that there's this x vs R and Y,
how do I know what's right for me so the way we set up our merchandising was by hadiyah categories
more I say intuitively to the consumer rights cleanser I go to the cleanser section and then we have to think of it like a jeans wall and try to visualize if you don't have pictures or you have been a column
going down with my B cleansers and then you have horizontal going across which will say like detox or moisturize right or acne prone you know what what are the ways that we can help a consumer make a more informed decision about what could work for them rather than putting on the onus
on them to have to do a lot of things about the beauty industry to make episode.
[19:51] Perfect so you've sort of a sort of things by use case our problem rather than by brand which I know the early days of cosmetics,
like in the department store the only way to shop was by Brandon so it's almost like you had to get some kind of education before you could even know what you were looking for.
[20:08] And it prevented Discovery rightly we actually find a lot or casual be the consumer if she before she finds out she is like my mom use Clinique and therefore I use Clinique nothing wrong with that but it's a great brand but.
You don't even don't know how to store something else or do you know where to start yours like I'm just going to stick with Clinic because that's what I know.
[20:24] So in this section I can make my own box and then,
am I paying for that one box and walking out with it and I sent you a bought some samples or if I actually subscribe to Birchbox and the one I take with me is just my first box.
[20:40] We hope it's the latter we have both options but it's definitely an intro selling tools I want to just feel like how it's a fun experience we found with uses in events in general.
People love it it's like candy people line up to do this so it's it's kind of an it's an enticing experience to get people even into the space and we definitely try if someone's interested to up-sell them and say hey if you like this will you can get this box for free if you sign up for 3-month subscription,
for us obviously the goal is definitely to try to convert into subscriptions but you can also for it up price we could we charge you more per box if you do just one,
but you can just walk away with the box of him.
[21:15] Perfect so I can buy a box of samples I can subscribe which as far as I know is sort of a new thing from Walgreens Walgreens hasn't had a lot of,
like subscriptions and replenishment service outside of actual prescriptions,
so that's super interesting and then I assume I can also shopping by the full-size product in this is an interesting part of the partnership to me you're bringing a bunch of.
Aspirational independent Prestige brands that,
historically might not be willing like wouldn't be willing to sell on the Shelf in Walgreens so you're giving Walgreens access to some aspirational product that they might not otherwise have.
[21:57] Yeah definitely a big part of you know I think in any great strategic partnership you want to make sure that you're bringing equal value to the table,
I'm in your sock equally solving a big business challenge for the other So Raven Birchbox brings to the table for Walgreens is innovation Wright County innovation,
9 years of focus on this casual committee consumer which as a.
David. They've been going after them too but they're up there more than Beauty right there so many so many things are selling Wares were so laser focus on knowing that consumer and then for sure our relationship or our existing relationships and Trust we have with our trusty partners,
is it a part of it and for them obviously bring us scale they bring us amazing physical retail experience we don't have and that just like being in the place they have it has a consumer of the casualties were there.
[22:42] We have a lot of locations so having that so yeah for sure a big bend a big Focus for Walgreens and for us is like bringing in great Brands so that it feels like.
Fullbeauty destination in the point is not that it's going to shift all to be this type of the Cindy Prestige brand that's not the 80s that we believe that consumer and likely experience they're going to want is to shop for.
There are more Indie Prestige whatever reason if there's a need or brand or product they like as well as their drugstore Brands and have it be a seamless experience across that they can shop.
Draper Temple and we do have a check out in our space but it's not a Birchbox only check out.
I just there to facilitate the experience if you want that but you could buy other Beauty Brands are in the drug store 2nd and Walgreens section if you want you can buy your toilet paper there if not it's made to feel integrated to bring them together and stay there.
More options and Beauty to explore and having all of that available to Walgreens customer is definitely a big part of their strategy.
[23:40] Awesome in so I can totally
fill my prescription make a custom box and get some diapers and go pay for all of it at the the front cash register at the Walgreens which is cool so is like obviously you're getting access to all the
but traffic to Walgreens normally gets because you're you're bringing something elevated to the Walgreens experience are they marketing you guys at all or you doing any joint marketing are you doing any any any campaigns outside the store to drive people to these stores.
[24:11] Yes definitely they're very excited know both of us are very sad about the partnership and think of something interesting and new so we're both talking there,
4 in the locations in the area so we are working our customers are they are there. We did Big launch event.
For the storage to make sure like in the cities you are aware of it happening we've also have done download with some digital app,
before it's too late friends are people in the store being advertised being so there's a lot of a lot of focus on how are we getting not just converting who's there but also how we getting new consumers end in two different ways is there a,
one thing we definitely look at his are we getting people who shopped at that Walgreens before but I've never even engaged in the beauty category which were done anything like move it on right,
example of that Walgreens right getting them into the store.
[25:02] Got it and so beyond that digital marketing is like if I go to any of your own digital experiences or Walgreens own digital like is there like can I find out which stores have the Birchbox experience.
[25:14] So are we definitely have you know what location was retail locations you can find out where we are as well as we actually do have a small digital.
There is no give you look if you just a Google Walk Birchbox Walgreens the most likely to Walgreens I'll come up where they talk about where we are but we do have a small digital shopping experience to,
exactly omni-channel with Walgreens I'm so you can buy there's like a Birchbox there's a Birchbox section all in the Walgreens website.
Well that is similar to everything I just talked about physically you can see in the digital with a different look slightly different look and feel a little more elevated a little more information and you can just check out,
name is offline the online you can check out with a full basket with other things from.
From their mother be sections are the paper and have it shipped to you so it's it's not as big yet where the focus has been on the physical but we definitely have that too.
[26:05] And the super Advanced question so don't feel bad if we're not at like 10:30 blacked out yet,
Services riding so you and we'll talk about this morning at the sac that why you can do things like trade a box and do things like that,
can you do those like on E channel experiences inside of the Birchbox location so I can I do a return for example if I got a full size item or.
[26:33] I know you could not yet he bought one from our website you couldn't return it to the Walgreen.
[26:37] The probably be bothered at the Walgreens you.
[26:39] Yes definitely yes those kind of their separate experience in that but if you buy a subscription you really slow into the Birchbox inscription experience and we have talked a lot about how do we.
Think about what is valuable in the intersection of the subscription and Walgreens so.
Example of something that we could have your box deliver to the Walgreens instead of your house if you wanted right that could be an option so I'm or you could.
We have customization as we said we'll talk in a little bit is a big part of our experience for people who live close to one of these Walgreens you can say the way to customize your box at 1:50 to go in and do build your inbox in the wall,
so we definitely are having a lot of conversations on how how do we create value by the fact that,
play there's no place like the full-size shopping in the lake getting a new consumer in our world but in trying to marry the subscription experience with the the Walgreens and how,
thinking about you there there's there we just we don't wanna just launched something just to have that we want to make sure it's a trade-in value.
[27:38] And then one other question about the Walgreens experience beyond the stores that have this
physical presence I read that you also did an integration with Walgreens where there's beauty advisors in all the stores can sell digital Birchbox inscription
[27:56] Yeah so in all of the beauty differentiation sources but they call it the ones that are more depressed or more upgraded in Beauty the 3000,
yes we're at 11 physically but yes been 3000 Source we just launched this month actually any beauty Consultants can sell a subscription,
I'm to a consumer and one thing that were really interested in learning and testing there is that.
Can different than how we do online and digital is at one of the best places to best ways to explain that I have a Birchbox human-to-human in Dracula
talk like this here physically I have for a talk about the Casual Beauty consumer and what we're about
I always have people come up after it's like oh my gosh I had no idea I'm the Castle View to Consumer I would love this I thought it was for my friend who's the beauty obsessed so there's something about us,
human to human conversation that can really quickly break through that kind of going after consumers not looking for you that we're hoping to leverage in this
model the beauty consultant selling it so that's very exciting that's when we're launching and then in general were so kind of
playing around with formats so as we grow and we don't want to go to more storage we don't just want to roll out the same thing we want to test it were exploring smaller format subscription or,
only affordable kits like we do a lot of kids some which is going to bundling a simpleton to a theme so.
Really trying to still test and learn before we roll out so we know what works where.
[29:21] Got you into one of the things that's really interesting me about testing Warren and especially like to.
It's complicated because you're you're not making beauty products yet so your.
[29:32] Wish we have we have our own own brands.
[29:35] Dutch okay so we have some oven Brands yeah and Anna,
a plurality of of wholesale Brands but then you you amalgamate them into this new product that's called Birchbox right I think of you is a direct-to-consumer brand even though you.
Are you could one could argue your a wholesaler.
[29:56] Yeah we're both our retailer and have our own product which is this.
[29:59] Exactly but so normally when you know the reason companies do directions to Consumer is.
Number one better margins and number to direct relationship with a customer so you get all the states that you can use to rapidly evolve and do test and learn and and do all these things and if you,
if you were to just sell your boxes to Walgreens and let them sell them to Consumers however they choose,
you you'd be lacking that day that you wouldn't know those customers there be a bunch of detriment and so you don't you see direct to Consumer Brands like struggle when they try to,
partner or expand with a a big retailer to get better reach but the relationship you guys are doing scenes,
much more novel in integrated because you really aren't getting disintermediated from that customer even though they're meeting you through the Walgreens and I wonder if that's going to be.
A model we see you anymore.
[30:58] Yeah I don't mean it's definitely,
harder to get there today but it's the only one we were interested in in the sense that yes it was right before I sent a strategic partnership that's kind of what I mean,
hearing about your product and sell it and see how it does not. It's not just a pure reach I guess that's a part of it but it's how we,
how are we influencing to get how we're trying to build something together that is new and different and how are we both bringing different skill-sets to the table that also sharing learning ISO as your reference data data the ability to share both of us.
Combine what we learn and share data is a new critical part of the setup of the partnership so that we have that dataflow happening between our companies and it's not.
It's not a ice not just set it and forget it by any means it's is how is that comes from believing this is a massive massive opportunity,
this is not an opportunity that's like let's do it in a couple stores not see what yeah you know is that I think.
[31:55] It's a lot of work if you're just doing it.
[31:57] Yeah I like rays that like that because of belief on both as if this is a massive opportunity to build this together that we did a lot of work,
because I found the conversation started,
a year before we even launch of of what this partnership was it was a lot of alignment at the top levels of leadership of those companies that we believe it's a huge opportunity there for this is the type of investment really make this is the type of information we need to do this is
how much testing and learning the news that happened that were bad alignment was critical to make sure that we were doing this in the right way.
[32:31] Got it inside of her listeners Walgreens is based in Chicago so we know Amanda said she's working closely with Walgreens with a basically means that she was visiting my home town and never drop me a line one.
But I'm not hurt I mean I am but but I'll get over it so I want to pit a little bit though the Walgreens extreme sounds totally cool definitely encourage our listeners to go.
[32:52] Yes please go visit.
[32:53] Check it out and let you know I do think there's something here in terms of.
Future models for collaboration between digital native Brands and traditional wholesaler so it will be eager to follow it and I'm going to charge you to be super transparent about all those analytics and sharing with us.
[33:08] No no problems there with some.
[33:12] Yeah yeah I'm sure I hear that stuff so I just.
[33:16] Their suggestions so what's going on at Birchbox.
[33:30] Yes on the corps experience were really focus on evolving Barber products and be Innovative Innerspace in designing spiritually Catalina consumer and
one day tactic we had this year which is an enabling tactic was to raise our price for the first time so we never raised Our Praise,
and I nearly raise our price for the first time and then the point being so we can invest back in our experience and really improve it and continue to innovate,
I'm to talk about a couple of things they're so there's going to taking the course. We have right now and making it better every thing from the merchandising that's in it to the algorithm and how we match of people with products to contents over Ark,
Advil consumer you can probably imagine education is critical cuz it in there just not that familiar with the industry so how are we giving them.
[34:13] Having them know what a Serum is why you would use it right is like a baseline of information having more content in the box and then how can we evolve the experience of the box to an able not just the discovery piece but also if I let you know,
we're not trying to just make you discover forever if you find something you love and we want to help you purchase that so I'm a couple elements there that were introducing or just about to introduce one is the ability to swap your box for a full size item.
I'm so you know this sucks and you can pick from but if I'm like I don't want to discover do samples this month I like the full-size you can do that,
we have also related to that is we have this ability to have add-ons so you can have items shipped for free with your box so if you want to have items you,
love and discovered you can have a ship and then we introduced swap your box for.
Which is really out next month everyone we did a test around it was before like so you we have loyalty points as many retailers to what you can use to buy full-size items on the site so you can swap instead of give me a box that once you get credit and we can spend later,
and we also have our customization options we've always had which is just you can pick a sample that's coming you can pick up. Mint so trying to make.
Give the customer choice right to say there's a lot of reasons why your you may be very different points in the Journey of Discovery versus having found something you love it,
how can we give customers options and how they engage in that subscription experience every month instead of being in a.
[35:36] Donna and tell and just to make sure I understand these are all sort of proactive experience is so I get some kind of
messaging that hey here's the box that scheduled to come to you this month and I have some option to opt out of getting more samples and instead get points or a full-size product.
[35:52] Exactly you're the man experience if you don't do anything you'll just get the personalized box for everyone just gets that with some people have some for some people to subscription the benefit of subscription is.
Not activity basically right.
[36:03] Set it and forget it.
[36:04] So we definitely have a huge portion of our consumers do that but then we also have people who want more control more decision-making and their experience especially if they may have said oh you know I've discovered a lot of things I like right now I'd like to take a break from Discovery but I really want to know.
It's almost like the layaway concept has been around forever right layaway some of this money so I can buy that shampoo or mascara that I really like.
[36:26] Well one of the.
Sort of unpleasant parts of a subscription business is even subscriptions that customers really value there's this phenomenon of subscription fatigue.
And so you know you can imagine I get a bunch of value out of the samples but one particular month I haven't tried any of your samples and they're all sitting around my sink and I'm having a guilty moment and then I get an email that the next one's coming and I'm like,
and I would argue this like subscription fatigue has been super challenging in like the meal kit.
Example so it seems like some of these amenities are clever ways to kind of combat some of that subscription fatigue and I can get some other utility without.
Turning off my subscription and then then and then you don't come back to the the samples when it's more fresh and exciting again.
So that's why make sense I'll be interested to see how that goes,
the reason prices had to be an entrepreneur all of the siege The General,
cheaper and there's a couple examples in retail that didn't go that well raising place I'm thinking about the JCPenney for example that you did that with some consideration.
Did you feel like.
You knew you would lose some customers as a result of raising price but they they weren't the right customers and the extra money would give you more resources to do a better experience for your customers that kind of.
[37:54] Yeah I mean the decision-making was more.
Less around Lake and now is the date we have to raise our brightest and more around we fundamentally believe we need to continue to evolve and improve our experience,
and we cannot deliver the value we think is demanded by our customers at the price point that we've been at we can't because other things for us to write like.
Should we delay shipping is having a big part of the price right we don't charge extra shipping included that's one of every year right like so it was just more of a reality check I like we can't like,
living in the reality of the world ran in the prices that they are we don't.
Really we can stand behind our product if we can't innovate and explore anymore and in order to do that,
we need to raise our prices to create the belief that we can create more value by doing that versus the cost of the of the rising and the prices but it was definitely I was just right but it's both exciting and terrifying.
For sure right changing your face after 9,
especially as the marketing head is going to be in charge of the comms and figured that was like definitely really scary and I think it came from at the end of the day our biggest value in the thing that's going to make us successful is the community policing us.
[39:04] We believe we had that and because we had that if we were super super transparent in our, so if you were about why we were doing it was very upfront about it we give them multiple months ahead of time that we were doing it.
What we are trying to achieve and knowing it would be perfect and that,
they would be on the journey with us and that's what we found me actually found amazing response from our community list they're waiting another still like we're going to see
but they were like we believe in you verse possibly believe you can create more value and better for your so you did it one time before we believe that you you can put this money to good use and we really found that are,
we got they had much lower we had about a Superfecta. What we thought might happen from a term perspective so customers leaving subscription is a much lower.
[39:49] We don't need no impact would just really amazing and we also we did some smart things I say in the price change a couple of things one was having some Legacy pricing so we have for our Aces which our customers are most loyal,
Empire that was a communicate if you be more transparent as a business is like if you spend like to be in Asia to spend $400 with us in the,
if you can if you spend that with us we can afford to give you a $10 box,
even though we're going to Beth Moore in it right and then for our current customers we basically provided a slightly lower we got like as pretty as long as they say a subscriber there continue to have a lower price for the new customer coming in yes we've already,
you know you already given us money we appreciate that you were going to give this to you so trying to do some smart things like that and then the price will be introduced with tiered.
[40:38] I'm so again to communicate their relationship or trying to hang out with our consumers if you subscribe on just the month to month subscription your price is higher if you want if you commit to 12 months your price is lower per month I'm just a just trying to be.
Upfront and make it is obvious to customers as we can what we.
What makes a viable customer to us and in what the will allow us to invest more industry.
[41:02] Yeah I know it's only make sense in some ways it's funny I think of your subscription,
as analogous to some of the the membership fees at a retailer charges so I almost think of it like,
the membership fee I paid a Costco and then that enables me to then buy products or the membership I paid a Amazon Prime and coincidentally like Costco famously,
successfully raised that membership price in the last 18 months and Amazon is now.
[41:32] Oh yeah it was on Prime say I mean how many times.
[41:33] Yeah it raised raised it a couple times and so it does seem like if you think of it not as the product but as access to the product.
Like there is some some president of that being successful so it sounds like,
it's it's it was initially going that way for you and that's a perfect segue to the Future so maybe leverage some of your previous Consulting XP
nice to put your future has had on 5 years from now when we're sitting here at the,
the 2025 Utah least how do you feel like the the beauty shopping experience is going we'll have a ball.
[42:13] Yeah probably just end up in a lot of Industries but just like.
Technology loves you like really into interact with a product like online with it feels physical today we know Birchbox.
We wants to know how these technologies that are merging where the weight alike.
Hack the all my friends having some way to sample and testing those to send you some papers in the mail but for sure there's a lot of technology which is you know.
Look at my face and what is the colors look like on my face or like I just think it's definitely to go in that direction of how can sampling online of beauty products be fully digital
I think it's got a long way to go over when I see you in a bit actually being
truly useful I would say but I think in five years I bet they're going to be a whole Suite of new technologies and products that are out there that help you.
Really discover and use products that can work for your hair your skin excetra via these digital interactive AI.
[43:08] Oh I got I think you're right I think like whatever the virtual trying experience is today and there's already some evidence that today is virtual trying experience I'm now seeing some day that we're customers prefer,
virtual lipstick try on inside of a beauty store as a.
Physical Tryon because you know.
[43:26] Just how accurate is the accuracy is where it's like.
[43:29] Sure sure they even in today's date it there might be a preference incident your point five years from now like one can only imagine how.
[43:38] Especially other I think I would see colors kind of different colors.
[43:42] I feel like they could finally nail my Foundation color you think I'm looking forward to that cuz it's right it's a real challenge at the moment nobody sells this blotchy color I don't know.
I appreciate that and that I'd say that's going to be a good place to end but that's slightly too
too long because we didn't really need to talk about my my beauty routine that we have used up all our allotted time so if listeners have any questions or comments we'd encourage you jump on our Facebook page or send us a tweet.
As always is a great time to jump in iTunes and finally give us that five star review that you've been meaning to do
Amanda is folks want to find you online or you on the interweb somewhere do you have a do you use LinkedIn or Twitter.
[44:25] I only said yes.
[44:26] Okay cool cool so LinkedIn is the way to go and we sure appreciate your time thanks for being on the show.
[44:32] Yeah it was really fun.
[44:33] Until next time happy commercing.
EP184 - Tapestry CDO Noam Paransky
Noam Paransky is the Chief Digital Officer at Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman. In this broad ranging interview we discuss Tapestry's vision for a Global Digital Experience, some of the challenges with global localization, organization structures for a house of brands, and the future of commerce.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 184 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this episode is being recorded live from the etail East trade show in Boston on Tuesday August 20th,
2019 I'm your host Jason retailgeek Goldberg and unfortunately Scott wasn't able to join us today so I'm solo
we're going to make up for it with a great guest joining us this morning is known bransky he's the chief digital officer at tapestry regular listeners will likely remember the tapestries the parent company for Coach Kate Spade and Stuart Weitzman
welcome to the show no.
We are thrilled to have you I mentioned in the in the intro that tapestry is sort of the House of Brands and I know you're relatively new to the real can you come and talk a little bit about how that
sort of evolution from coach to the tapestry evolved and what the thought process behind that.
[1:18] Absolutely so,
tapestry is obviously the holding company for family of Brands the idea of building a luxury brand holding company has the vision of our CEO of Victor Luis,
who I report in to as.
Coach first bought Stuart Weitzman and then is the Kate Spade brand was integrated into the portfolio,
wanted to have a name the conveyed the the aspirations of our company.
And ultimately you know we we describe tapestry is a new york-based house of modern luxury lifestyle brands in our ethos is really focused,
on luxury being inclusive in its nature.
[2:07] That's awesome and I'm always fascinated by the chief digital officer role I found there's a fair amount of diversity and sort of the scope and approach should I just be curious what what is a CDO do at tapestry.
[2:22] Certainly there are many different ways to tackle the role of the digital leader in Enterprise.
Designed a few organizations as a relates to to digital and in how to approach it and,
fundamentally if you are a single brand entity versus a portfolio entity there are some different considerations in terms of thinking about the role of the organizational structure,
specifically with tapestry we're trying to build a global scale digital capability because ultimately tapestry is a platform so our visual activities at the Enterprise level should be building a digital platform people processing technology,
ultimately the end of them responsible for all things digital in the Enterprise,
but there is a web of ran digital leaders and then centers of excellence that we're building the crate that scale platform so.
Fundamentally about being a team captain and making all of these things sing together creating scale and leverage brand Independence integrating those things to create the Desire X team approach and outcome.
[3:30] Got you and I'm always curious in a house of Brands there's kind of the State versus Federal right side sometimes a CDO is like a center of expertise that the the brands can use,
sort of at their discretion and other times did you lose more federalized in this video is like putting guide rails in place that all the brands of my respected Apollo is there like.
Eyewear in the spectrum is tapestry.
[3:56] Will potentially somewhere in between or altimate lie in the midst of our journey of really articulating at a detail level exactly how everything is going to work as a as in four months in and we're building this Outlet.
My view is at the Tactical level there's more sameness than different so how we think about our Tech stack,
wireframes General experiences within the guardrails of what the capability is gets built at the Enterprise level,
the brands are ultimately masters of their own destiny in terms of the stories they're going to tell the assets that they build to create those emotional connections and we try to make sure that basically at the Enterprise Al will do plumbing that we,
develop the tactics excetera.
Allow that amplification to occur and we're learning across the family of Brands so is something is working for someone else we can I take that and we can make it back to another bread hey you guys should try this of course it's going to be their voice their content,
their DNA but ultimately the journeys that we can build in the successes that we can have can be pretty Universal as we as we approach them.
[5:01] That's why it makes sense and you mentioned you're new to tapestry but you're not new to this kind of role can you talk to us a little bit about your background and how you came to the role.
[5:10] So my last role was very similar role with The Gap Bank portfolio Brands Gap a very mature and her prize platform,
I had had a universal shared shopping carts and something like 2004-2006 up the the platform the tech stock was already,
integrated as I enter that role so that role is more about you know organizational I meant and you know evolution,
I'm versus building scale Center of Excellence so here it's,
or a new is a portfolio only two years old and name as is tapestry so taking learnings from that rule adjusting and then applying them to the role here and then before I was it,
Gap and cannot rule out as a consultant for almost two decades doing digital transformation type work.
[6:00] Got your listeners can't see the disdain on your face when you said consultant.
[6:05] Cuz I cuz I was looking at you.
[6:07] I know I didn't take that personally I told her appreciate that like well hopefully it gives me hope that my career will eventually take a better turn so.
[6:14] You can always home.
[6:15] Exactly it's important to have dreams of nothing else and I feel like that that Circa 2005 Gap Inc website is permanently ingrained in my brain because like in that year,
every client was you know having this debate Universal card,
separate sides and you guys were sort of the gold standard for having integrated that Universal part so I your your side.
[6:39] I can't I can't take credit for that for that decision but it was it was very wise for that portfolio at that time.
[6:45] Yeah but it is funny it's it's I feel like everybody is in a different situation you have at the moment 3 luxury brands in the portfolio but,
they they do have pretty different value props and I presume sort of core customer targets.
[7:04] Did you occupy distinctly different space,
so in terms of thinking about the evolution of the platform and potential points of integration you certainly have to take that into account versus the very clear shared space that was occupied in my house roll.
[7:21] So obviously you came here today mainly to be on the podcast but as a.
[7:27] Without question.
[7:28] Yeah but you are super nice guy so you did agree to also do a keynote at that you tell.
[7:33] Absolutely I'm just I'm just here to give.
[7:35] Yeah you are a giver and I I just got to catch that Keno but the title was reimagining the global digital experience which it sounds super simple.
[7:45] Very simple yeah it's a small world.
[7:47] One sentence clean out your drop the mic and walk out and for people that were unlucky enough not to make it like Kenny I like what was your high-level POV what were you guys talking about.
[7:57] A lot of it was,
if I'm really what I wanted to convey the audience is just to share how they knew in this role how I think about a portfolio of Brands and how to,
tackle building capabilities and so for me it goes back to this how do you create,
a scalable Global platform people process technology I think,
in our industry but especially to the piers that we work within the other functional areas you say digital and they think two things right off the bat website and Technology.
And of course digital has become so much more than the website and it's getting more and more disaggregated across,
and touch points all over the globe but he then no social climber social activity and,
and how that's kind of the first point of ideation and inspiration yes ultimately all the way down to the website and also into the store but it's much more the website and it's much more than technology it's the people
in the process and then yes the technology all those things need to work together so there's a lot about just articulating to the audience,
how I was thinking through those elements and hopefully they could get a sense for how they could Advocate and their organizations to balance those things out to advocate for what digital can be and should be and how to integrate,
the rest of the organization at large into those activities.
[9:22] Yeah and it is funny because I'm a hundred percent agree it's super common mistake that when people think about it they.
You go right to the lowest common denominator and the technical bits and bytes in the platforms and.
Sure those are important but so often the success and failure is much more predicated on the experiences you create with those platforms and I would argue
the hardest part of all of this is the organizational platform and getting the sort of the alignment and governance and getting like all the talented people in an organization running in the same direction instead of different directions.
[9:59] I think that's the challenge of leadership across any discipline ultimately bringing digital experiences the life are very,
cross-functional cross-discipline is kind of where the rubber meets the road for all of these things it's it's the kind of first place that they converge and therefore was a very complex dance needs to occur to execute that,
successfully night and I think that's a lot of what's missing in today's retail environment is bringing all the disparate pieces and ideation and,
objectives of the organization distilling that down in the kind of clear experiential and functional swimlanes that then be executed against.
[10:38] And doing all that for a single brand is difficult. You know I give you your blue belt save that if you can,
even just get that alignment in a single go for a single brand when you had multiple Brands and different stakeholders with you know they're starting from different povs.
I getting their skills like that brown belt and then we have to do a global issue and so many different markets have different sensibilities and.
Structure and experiences in us may be very different than what the right structure and experiences in China for example.
I'm so pretty good luxury one of the things I find fascinating I want to put words in your mouth but.
The majority of luxury brands in the US are not super excited about.
Trying to sell through a platform like Amazon for example in your silent me nodding.
[11:30] No comment.
[11:31] Like obviously every whether you want to or not every brand,
has Amazon there's lots of interesting conversations about that but the majority of luxury brand so far have made the decision that it's it's not brand additive to be on a you know everything type store.
And like obviously we've seen your brands.
I continue to invest in their own digital properties in in my sense is that why you sell through wholesale the majority of of tapestry sale.
[12:00] House Majority is correct.
[12:02] Direct-to-consumer through both your own retail stores and your digital properties so now you get on the plane fly to China.
[12:10] Awesome awesome.
[12:12] Sorry you have to I actually think it's super cool it like yeah but one of the things that super fascinating to me about China is.
Owned properties are important in you have to invest in them it's extraordinary difficult to conduct transactions in high-volume on your own properties in the the consumers are just been habitual.
Does the team all marketplaces in the JD's the world.
[12:36] Yes that is the prevailing consumer Behavior.
[12:39] Exactly so even a luxury brand generally has to have a T-Mobile store and you but you know what I I'm assuming you guys do as well.
[12:48] We do is Stuart Weitzman our other two Brands currently are not Auntie mail but that is that is where the consumer is transacting digitally at scale in China without question.
[13:00] And one of the like obviously that's Ali Baba's benefit one of the things that's really interesting to me you'll get a big Market Place in the US and all of that product,
is still indexed on Google so even if the the consumer starts of Journey on Google if that product exists on Amazon they're going to find it on Google and Amazon is likely to win the sco when it's going to snow.
[13:21] There's a lot of forks in that road and I question.
[13:23] The Amazon specifically doesn't allow their their pages to be indexed by bat out so it actually.
Almost makes it it's a huge disincentive to start a product search on the search engine in China like even more so than the US.
Consumers just go to Team all the start that search because that's the product catalog of done if you will.
[13:46] Yeah I mean the journeys are familiar different in China on.
Many many layers the percent of Journey starting in search where they ultimately end up is certainly one of them there's also a big difference for between team on Amazon in terms of customer data sharing,
very very different approaches between T-Mobile and Amazon so built the whole digital landscape there is very different both in terms of where she transaction China what her journey looks like,
and ultimately the the Platforms in general are quite different whether it's the $0.10,
platforms whether it's team all-weather is Little Red Book there's a whole different ecosystem
in China so as we think about China we at we announced and teased are trying to next round of June our last earnings call and that's really going to be an effort.
To invest in local China ecosystems and teams to.
Adapt in leverage the ecosystem that's in China and then plug into our Global ecosystem where that's appropriate self there to be certain activities that need to be done on a on a local basis and things like,
content that we want to leverage globally and frankly bi-directionally so that we're creating content China and we're lovers and other markets and vice-versa but creating those points of integration but also the regional differentiation that China requires,
and not focus.
[15:08] If that wasn't complicated enough one of the interesting Dynamics there so many cities at such ridiculous scale that people don't even understand here.
[15:19] Is there a funk of forty or cities that are bigger than Boston that.
Most of the people are in the room today have never heard I would I would bet any amount of money that that's the case so that the size of the cities in China the rate of growth the speed at which the revolving as is quite breathtaking.
[15:34] Yeah it is amazing and it is but it does create this interesting challenge does Tier 1 and tier 2 cities have pretty robust retail infrastructures and so you you can tackle luxury by opening,
gray brick and mortar and having this amazing high-touch experience that the the tier-1 City Chinese consumer like has mostly come to it,
for luxury go to that chair for City when your point is still bigger than Boston and there may not be that brick and mortar retail infrastructure and so my sense is a lot of brands are thinking.
It's simply not going to be possible to scale brick and mortar to all of those cities and so in some cases we're going to have to LeapFrog.
The in-store experience and served as customers with a new digital Ledger experience that like frankly I'm not sure anyone's perfectly invented yet.
[16:25] Now I mean there are a number of challenges and opportunities so as we think about our business China represents,
first the coach brand China has tremendous awareness and brand equity and said it's an amazing business to be a part of them to work with.
And we're looking to provide that same kind of scale to other two brands in China but,
I think what you just described represents the opportunity that is China so while there are the issues of what is the retail footprint look like over time how does that start to mature at the same time,
you can kind of say there's a certain destiny,
to that because ultimately the infrastructure will propagate these are millions and millions and millions of people in these cities who aren't serve bye-bye luxury malls.
[17:05] Then there's the transactional piso is our objective in 3rd or 4th tier cities to,
transact was it to build the brand awareness and desire ultimately a lot of those people are coming into first and second-tier cities,
is Taurus and so they can purchase in those cities but just even though ensure that
are brand awareness and desires propagating into those markets bills that future Equity as the infrastructure of olives and then of course transacting digitally as possible.
Ultimately when people are spending that kind of amount of money,
in any country let alone China for that kind of product that there's that desire to
look see feel touch and experience that kind of immersive 360-degree experience inclusive of the stores and sell those things have to get into a sink,
overtime but will continue to extend our own properties into China will value 8
Partnerships with others but ultimately I think the number one objective is to to penetrate without awareness into those in a 3rd and 4th tier cities and make sure that were,
one of the top brands in consideration for that consumer as the infrastructure develops out and as they come into first and second-tier cities to visit in the shop.
[18:18] You said it perfectly articulated one of the tensions that I think is really interesting and luxury customer experiences.
Utility inconvenience versus sort of experience and engagement,
it's over 4 years and you asked like the gold standard for customer experience in retail was our friends at Nordstrom you know that the staff is famously and able to do anything necessary to serve the customer in 4 years
they scored the highest in any way you would measure customer experience or satisfaction.
But in the modern era it's kind of funny or modern I should currently some was going to give us into this in five years and laughing at us going that's the mall.
[19:05] For sure.
[19:07] Today Amazon actually scores higher in a lot of the customer satisfaction in the X's then Nordstrom and they're obviously not doing it by,
doing that concierge high-touch bespoke experience better than Nordstrom but what has happened is they,
change the dimension and they've made a low-friction inconvenience and speed the things that.
Customers value right in luxury like I don't think the customer has shifted that they don't care about that sort of Engagement and bespoke experience but I think there are occasions in touch points when that low friction.
Convenience is super important even for luxury brand and their other occasions when that high engagement is super important and I wonder like how you think about.
Sort of balancing those two things in Franklin even understanding what the consumer wants at any given moment so you can sort of deliver on that.
[20:07] That's the age-old retail challenges give the customer what they want and sell a lot of what we think about what we focus on is,
how do we how do we get to some ground truth about that,
in terms of the the MPS of say one retailer against another at least in in my travels would have seen is the demands are different,
so if your replenishing toothpaste,
what will get a high mtscores fundamentally different than you know that's $1,000 drafts or handbag the expectations are fundamentally different the dimensions are fundamentally different even if it's the same consumer,
and then across different customer cohorts you have,
just different frames of reference it's the same reason that I'm like I TripAdvisor a 3-star hotel might be the top-ranked but surely on a like-for-like basis if the room was $1 they wouldn't get the same score there's the context of the.
The price and value so is released to Amazon compared to someone else there's a lot of Dimensions to to consider but I think for us.
[21:08] Where we where the customer wants to be frictionless of course we want to be more fresh unless where the customer wants to be educated or have some more ceremony around the transaction we need to provide that as well,
and ultimately this is we aspire to have this kind of Lifetime engagement with the consumer of course everyone talks about lifetime value but.
When you're a luxury brand you're playing as a very long game around being,
consistent with high-quality and backing it up with service for perpetuity and that's in that's what really separates,
a luxury brand from a brand that's native from or transactional because ultimately that it's it's the power of time the crates that permanence in that true brand value and that's the stewardship that were responsible for,
for me within a set of capabilities that then prop up the brands and their day-to-day activities to allow that,
two occurring continue to evolve against the changing consumer landscape but that's that's the reality the difference between like the ultra Ultra frictionless environment you would see.
Does someone like a value retailer on Amazon is really trying to play in and then in the luxury space we are trying to provide but consumers perceptions of luxury will evolve,
it will need to evolve to a certain extent to meet the customer were there at while providing that longitudinal stewardship of Our Brands.
[22:31] And I'm sure it's a small cohort but I have to imagine your favorite cohort are the people that buy thousand-dollar handbags with the amount of consideration that they bite toothpaste.
[22:40] Without question yeah we're at work we're fine with that but it but at the end of day even if we get the transaction like-for-like.
Yeah we want to ensure that that transaction comes with that emotional attachment that.
That that aligns with that lifetime value cuz sure it's great to have the thousand-dollar hand-eye but we do want,
their next and I was he want to sell him some ready we're at we want to sell him some shoes and so ultimately we just want to make sure that they feel,
really good about the purchase and they have this Affinity to the brand that they connect to this great experience great product excetera so even if yeah we could get many one second one and done purchases ultimately,
our responsibility is to create that deeper level of Engagement.
[23:29] Luxury was a little late to the digital game for a long time and that you know some of the luxury houses were sort of famous for
our brand is built in the dressing room not on the web page and while I understand that sentiment I feel like,
consumer behavior is necessitating that luxury does figure out digital and I think we are starting to see.
More segments of luxury Shoppers that use digital at least as a part of their shopping Journey or their primary shopping Journey.
Is there any examples out there that you think I should have best-in-class of recreating that brand engagement that that you would traditionally have in a great store on a digital property like what is the analogous experience.
[24:17] I don't think I've truly seen that yet I mean I think for starters the statement that luxury is kind of late to the game II think that's technically and tactically,
accurate I think the interesting piece that is hard I think for us digital professionals to absorb.
Is that the traditional luxury houses have had a tremendous run over the past five or 10 years despite the fact that they didn't,
have these big investments in digital and that just highlights that first and foremost it's a Brandon product game,
and so if you have what people desire and I think if you look at say a Nike as an example if you have something that people desire enough they will go to the most friction Laden experience possible like lining up around the street corner overnight,
to get their hands on that products so first and foremost and I'm part of why I came to tapestries I wanted to come to a company that was really focused on product.
Because it starts with great product is a digital practitioner I can't I can't sell,
digital right is IT consulting I guess I can sell digital in-house is a leader I cancel digital digital has to be a supporting element,
and if you don't have product that people desire it doesn't matter how frictionless or how inspiring your digital experiences that the dots are connecting goes back to the,
team sport stuff that we were talking about before so luxurious Gwen quit late to the game but are the masters of maintaining and building brands for you know sometimes decades and creating that product designer and inspiration.
[25:46] So being in the space I want to take the connective tissue of that piece
and build a great visual platform the connect that into and I think that that was damaged us as we hopefully continue to build our portfolio over the years so that's that's what I think is super intriguing about this proposition in the in the luxury game but
I think it also highlights that,
digital isn't always as important as this digital practitioners would like to thank it's got to be connecting into a greater healthier.
[26:16] No I I told a green item I didn't mean to imply that what genus are who have two Bunch on the table by not moving earlier.
[26:24] Well maybe maybe it did but man I mean you know some of the players that done tremendously.
[26:28] Yeah and for your point.
Having a product and having that mindshare with the customers ultimately and a much more valuable resource than being good at Digital Light in back. Even argue we're going to an interesting phase right now we're a bunch of,
people that I would characterize as good digital,
practitioners including some places you've words are struggling at the moment there are some some of the the best most successful retailers in the space,
are not necessarily particular good a digital so I absolutely don't think there is a pure,
correlation between being great at digital and being an economic success it's,
it's one element of that overall customer experience and while I can my day job I like to talk it out of the lot it absolutely is not the the most important element in that.
[27:23] That and I think over the longer. These things will play out because ultimately customers have an expectation expectation that there are the places a shop or going to become more.
Customer-centric more personalized if you don't have those foundational capabilities it will become a greater challenge but so many elements at play two to bring together.
[27:43] Yep yep and where is early days but we're starting to see.
Some third-party digital retail emerge that's focused on luxury and trying to cater to luxury and it's it's it's.
Timmy I think the jury is out on whether they have the exact right experiences or not but it's it's going to be interesting to see if they start to change customer expectations.
Bare luxury shopping we should be watching them closely whether we are in bed.
[28:09] Yeah I think.
I think it's the experience of experience has evolved across all sectors right it is changing consumer expectations and perceptions and so in my position I got to be close to that and see,
where a customer wants to go and try to ideally be a step or two ahead so that we can build into that.
[28:27] So what's pivot for a second we talked early on about like one of the difficult most important parts of these kinds of digital transformation being the organization how does tapestry structure itself I do you have all the.
The digital expertise like federalized and you support all the brands are there.
Digital folk sitting on each of the brands and does the digital Merchants next to the brick-and-mortar merchant is it the same person.
[28:55] It's it's a I would call an ex and we're going from point A to point B with a creation of my role but ultimately.
We were independent brands that rolled up in the one into one portfolio so each brand had their own digital capabilities,
digital it was first federalized and now we're trying to create centers of excellence to then plug in and create scale,
for those Brands so it's going to be a next ultimately it's a team sport the.
The site merchandising the assortment architecture the day today commercial plan in those decisions were going to reside in the brand and then,
the the foundational capabilities the plumbing the enablement,
will be in centers of excellence so we're looking to bolster or digital teams I'll put in a Shameless plug like I did this morning but we're hiring for tapestry across all,
digital disciplines roster Jensen pull string within WinCo brand functions but ultimately for it to work properly,
everyone needs to act seamlessly it becomes a more specialized model than when you have distinct brand teams without the federalization but it's a again,
Amex so that ultimately folks going to be more specialized more focused and then were,
we're learning across the portfolio you talked about him goes like the the blue belt brown belt black belt.
[30:20] It can be difficult to operate in a portfolio because you're trying to trying to build a lineman and consensus to a degree right and you've got disparate opinions you ultimately need to build and Define a demand management process today,
you're clearly hearing articulating and partnering with business stakeholders to say,
you want this capability what's the value there's the dollars and cents piece the input and output related to cost and then benefit was also a strategic element you have to incorporate and then each item is not just its own business case but,
things connect together to become greater than the sum of the parts.
So you got to you got to manage through that which is a challenge but also an opportunity cuz you get a broader View and then similarly in terms of implementing things,
There's an opportunity to get one partner one brand to try something another brand to try something else and ultimately you can move at greater velocity cuz if something works for 1,
my past experience is about 99.9% of the things that can quit win 4-1 win for everyone,
I think one occurrence where it was did no harm and then the rest one so you can you can kind of with a portfolio more quickly propagate you do get to some scenarios where
Regional differences really do manifest especially on the experience and then the the third party partner enable mint front,
they can be somewhat the stink but a lot of these things will propagate successfully across a lot of the globe.
[31:48] I think that maybe another one of the advantages of Euro versus mine is.
Well you have a portfolio there's some commonality to that portfolio is a consultant I have a probably a much broader portfolio and it's definitely true in my world that there's things that can win for one client and actually do arm for another client.
And like you know those warnings are real tough it makes it it makes these.
[32:12] So that's why your test that's that's the beauty of of structured test.
[32:15] Exactly I was just going to say like it is to me it really underscores this danger of best practices right in his notion that there is.
[32:22] And benchmarking and yeah there's that you have to apply contacts that is a former consultant to a current one right there's always there's always that contact store marketing efficiency will if you invest,
what's the Benchmark on market efficiency if we invest $1 will get an Infinity return,
if we invest a billion dollars will get a much lower return because ultimately a lot of the media's biddable and there's an audience sizes and all of the supply-demand,
economics come in the play as is overall aggregate brand Health sobran that's healthier and sometimes scale channels much further than a brand that's in a different stage you need to think about the funnel composition differently.
Yeah these things all have to be taken in context and you got to be able to read the the distinct numbers.
[33:05] I think you just crystallized the failure of Facebook marketing in one sentence right there no data driven decisions like show me the data if we're going to go to the pinions let's just use mine.
Almost no one takes that advice but I'm I'm trying.
[33:21] It's very clear though since I since the concise mask.
[33:24] When confronted with the risk of taking my opinion people are suddenly much more open to collecting data.
Yeah and I want to give it today. But just one car to find question you mention you're hiring for digital talent in New York you just moved in the cool office space in Hudson yard.
So you get if you working digital at tapestry you can literally have Mama Food fried chicken for lunch everyday.
[33:51] You can you can watch people crawl along the vessel like an ant farm every day lots of lots of fun things to to CVI we got great new offices at Hudson yards this beautiful place and I,
we were one of the first tenants maybe the first tenant in Hudson yards and so the team is having a live through construction for a couple years when I join that construction was kind of finishing up so I get the benefit of this whole new kind of,
City from scratch finally fully functional at the coast which is awesome.
[34:20] I'm personally hoping that that's also style customer experiences don't catch on too much as I out of shape retail consultant it's a disaster for me every.
[34:29] It does prove if you build it they might come.
[34:31] It does indeed feel like Mama focus should have been at the top of the vessel maybe would have made sense but I tease data,
one of the things that we talked about earlier in the show is this whole notion that like your digital properties have to wear two hats.
Have to be transactional when a customer wants to buy something but they're also the brand ambassador and they are they.
Best digital dressing room and I feel like that's a,
a potential challenge for attribution right so if I'm equipped and I'm selling a $20 toothbrush I want every visitor that comes to my site to buy a toothbrush in that visit right and so my answer jimano's pretty simple like what,
percentage of the people that came to my side.
[35:16] Conversion rate is black and white good or bad.
[35:18] Exactly but in your world there there's a ton of traffic across all your your digital properties that may not consummate the transaction but may have been wildly successful for you is a bran.
So do you have a super robust attribution model to sort of account for that is that like something a.
[35:39] We're working on that I mean I think there's I think there's a few layers to the cake there so attribution My head goes first the marketing and how do I think about marketing efficiency so we're going to tackling the typical econometrics models to,
understand Diablo left more rigorously were talking about some Alpha Pilots with some Partners to help us kind of balance,
econometric models and multi-touch attribution models there's,
there's a whole journey that that were going to be undertaking I think some of your question all he's also gets into,
the context of Journeys in Journey productivity and objectives at the session level and then objectives at the,
visitor level and we're really looking to unpack that as we tackle rebuilding our experiences as we unify,
are platforms over the next year or so and it's a really meaty exercise to get into I think the important thing.
[36:31] Is to not get trapped in the in the historical norms and quit best practices but letting the data unlock what's really happening.
How do we think about if a customer might come back 6 times,
before they didn't go in the store by handbag how do we track that progress how do we understand that and how do we evolve and adapt the experience at each stage is really where are,
thinking is that but the idea of conversion being black or white or a car abandoned being bad carb and may very well be highly predictive of the future store visit and we can do that as being a very productive activity cell,
we're really trying to get into the depths of the data and understand it and not get into the typical funnel analysis cuz we're not playing a session game,
and really trying to think about,
what does she want to accomplish and how do we evolve a morph that experience to make sure that each touch point is a creative and to me that's super meat is a very complex,
but it's really something that we can sink our teeth into in our space and if we get that right that creates an advantage in the marketplace.
[37:39] Yeah that makes total sense it's funny.
A lot of digital amateur companies will come to me as a consultant and they're like hey we built our funnel and we want to hire you to double our conversion in the funnel and my smart aleck response is always,
that's super simple we're going to stop letting all this unqualified traffic coming.
[37:57] We're only going to let repeat visitors back to the site where done.
[38:00] Exactly and yet no one's taking me up on that approach I proposed it many times we got to figure that one out.
So I want to give it to the future but before I do I had,
one more specific questions about about customer experience that came up in your session you mentioned in China that the brick-and-mortar experience that luxury customers expect a super high touch experience in so you talked about some of these,
wildly successful sales associates that are.
[38:32] Tens of thousands of social followers.
[38:34] And to me that's actually the most interesting thing like I feel like that's a common model in China is the sort of influencer as sales associate.
[38:45] The importance of influencers more liberal even more important than I didn't hear you.
[38:50] I'm actually very bullish on influenster other than the difficulty in scaling and sometimes and to me that influencers I care most about are those those micro influencers it's not the.
The paid million follower sorting out to me that's that's broadcast advertising that does Micro influencers are super powerful scaling on ends up being the challenge,
in China One of the cover ways they scale of me is they have all these employees who did they turn into influencers you own it.
[39:20] A volunteer but yes.
[39:21] Well sure you own a bunch of stores with Associates that likely decided to work in your store instead of another store,
out of some strong brand Affinity in brand loyalty like is that an opportunity for luxury in the US to do a better job of enabling the employee base as home phone service.
[39:44] I think it is I think the China right now allows for the greatest scale.
To really scale amplify that one to one engagement and really dig in and in refined that.
[39:57] Then take those learnings and then adapt them for the us but I think generally especially in our space,
the the sales associate is a central figure in engagement is a huge opportunity I think.
Today the the lens is a little too limiting where we we can I get boxed in dequeen Co clienteling systems and so okay you so she can send an email or a text look very,
rigid views of the engagement based on,
the platforms that people buy versus thinking more broadly about the clienteling experience and then how do we identify where that associate has,
a potential Central role in that engagement and continuing the nurture that cuz again we're playing is long game in our space and.
You know what what would appear play like what an Amazon with a low-friction can't replicate to this point is that human connection that that sales associate,
is creating and so I think we've got a plate of that strength and figure out how to permeate that more broadly in our experiences and engagements that's it that's a lot of what we're thinking about him thinking about you blocked out of how we parse out the globe,
and where we have this permission to engage at this huge scale at a very personal level.
Build and refine our view and tactics and then take that and then look to employ that in the rest of the globe I think u.s. space companies tend to take a u.s. Centric approach.
[41:20] Take the Playbook here in just kind of push it out and there's a lot of,
Beyonce old stories about that so I think it's more about learning globally and having this by directional sharing and testing and evolution.
[41:31] It's an interesting funny I do talk about one of the the best ways to compete with Amazon his obviously to sell stuff than Amazon
doesn't sell and you talked about the personalized experience in the opportunities there I like in the lawn when I actually think that's going to extend.
Do personalized products as well and I think that's an area where I know at least coach is already experimenting with some made to order product.
There's so many trans we're seeing right now about customers wanting distinctiveness the.
These different potential ownership models into me the.
The opportunity for personalization is an exciting foil against the Amazon Amazons whole model is we've got a hundred seventy warehouses that are super close to the customer give us a million pieces of your property and we'll split them up amongst all those warehouses.
Does warehouses are huge for a teacher can manage that suddenly go away when the customer wants something.
[42:32] For them unique.
[42:33] Unique to them and I think some of these like we're still Sterling the nail personalized experiences so it may be a little while before personalized products are its scale but to me that is one of the interesting risk factors that Amazon has in the.
In a long-term beyond that is your thinking about the future if you were to sort of put your futures hat on and think about I don't know five years out.
Is it like in your mind has the luxury shopping experience for medically changed is there. A wager any guesses as to how the consumer or the experience might be different than 5 years.
[43:07] I think there's still a high level of store centricity I don't think we'll see.
More than 50% of the transactions occur in online I think will be some number materially lower than that I think that ultimately if if some of us are successful the brand engagement will be more immersive than continuous.
Versus just these big moments of coming into a store or a campaign launch but I think they'll be more of this always-on connectivity with,
the resources that we have the bear weathers the sales associate at whether it's a ai-driven kind of product finding experiences whether it's more game of Acacia around product engagement and or product customization and just,
customers playing with those permutations and ultimately slowly over time,
you know finally getting the product the way that they want it and then transacting it and maybe a mix of some Automation in the customization to.
[44:00] Help them in that process because ultimately people want to create they want you need product getting started can be kind of the key impediment so part of it is trying to think about.
You know how do we create,
that inspiration around what could be in letting that go I think also the the kissing cousin the product customization allow these drops right so people you know if it's a limited edition of 300 500,
people can see it they like it and I know that everyone's not going to have the same thing that they can express themselves in a more unique and individual level,
and I think that's been a lot of the the attraction to the drops that and just the exclusivity of it so I think I think the drop thing will continue but I'm hoping that.
There's a little bit more from the drops to more engagement of product customization cuz I think we can play really well in that space and I think it's super exciting to allow the customer to.
Fully Express themselves from product perspective with within the context of the brand value proposition super interesting to me.
[44:57] I totally agree I think it's fascinating and I feel like that vision is a great place to leave it because it's happen again we've used up all our a lot of time if folks have questions or comments are welcome,
continue the conversation on our Facebook page or hit us up on Twitter as always this episodes of great time to jump over to iTunes and finally give us that five star review You've been meaning to do,
appreciate being on the show if folks want to find you online what's the best way to.
[45:26] LinkedIn Stephanie the best way to hit me up and I'm highly responsive so particularly if you're interested in discussing careers or Partnerships with tapestry please hit me up on LinkedIn look for the conversation.
[45:39] Awesome and we will put your LinkedIn profile in the show notes thanks again for taking the time today until next time happy commercing.
EP183 - Jason Del Rey Land of The Giants Podcast
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 183 of the Jason & Scot show was recorded on Thursday, August 8th, 2019
[0:24] Welcome to the Jason and Scott show this is episode 183 being recorded on Thursday August 8th 2019 I'm your host Jason retailgeek Goldberg and as usual you with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners we are really excited this week to have back on the show Jason Delray Jason is senior correspondent
Commerce at recode he's also produces the industry event code Commerce and now joins Jason
retail geek and I in the pantheon of famous podcasters
he was last on the Jason Scott show on episode way back on episode 67 which was January 17th back then he was senior editor so I guess congrats on the big promotion to senior correspondent.
[1:14] I don't know if that's a joke or not but I am I am happy to be back I was going to make a sport Sports Talk radio joke which is second time long time you know.
Okay well we'll keep going thanks Rodriguez.
[1:34] It's good to have you back we don't get to make fun of the next enough so.
[1:38] Oh man it's going to be a long night.
[1:42] So is it true that your appearance on the Jason and Scott show sort of ignited your whole passion for podcasts.
[1:50] I mean I honestly did not know what podcasting was and then I came in you guys taught me the ropes and how many years later is this I don't know took me a couple years to like.
Build up the courage and skill set but here I am so thank you.
[2:09] Cool fucking to the club it's exciting to have you up in the in the in the podcaster realm.
[2:17] Only for a few more weeks but hopefully they'll be a long tail of listeners that all at all extend the Land of the Giants fan club into the rest of this year.
[2:31] Absolutely and we are going to need that into that but before we get in a Land of giants I want to talk about one of your other projects it's near and dear to Scott and eyes heart.
I think it might have been three years ago now but you started a series of events code Commerce.
[2:52] Yeah that's right so we started we started with these one night one night,
what we would consider a live journalism events and we started inside of shop talk I think year one of shop talk
we did a sort of separate one-eyed event within shoptalk that required a separate ticket and it basically 3 hours you know an hour
some ways food and drinks and networking and then usually three or four
what would you like to drink or no BS interviews with.
You know people like in past years you know we've had people like Jack Dorsey talking about Square
Katrina wake pre-ipo talking about Stitch fix Mark Lori several years ago and overtime we built that. Into a standalone
today event that's why we're going on Year 3000 New York City Standalone event,
that happens every September and so we're only about a month out.
[4:03] Yeah and so and you have announced some of the the guess you're going to have for the Cher show.
[4:09] We have so we've announced maybe maybe about three-quarters of the lineup which I'm super excited about we have.
Entrepreneur founder CEOs like Jennifer Hyman Rent the Runway Julie Wainwright we just took the real real Public Market Lori from Walmart
Jeff Rader that Co CEO and co-founder Ari's which has agreed to sell for,
make 1.3 billion dollars.
I cookies in the CEO of Birkenstocks in the US and the founders of away
digital native luggage or they would call themselves as they call themselves travel company,
so that that's that sort of off the top of my head that those are some of the great guess we'll have and we are and there's a few more as well.
[5:09] Yeah that's going to be exciting away is kind of controversy on the show because Scott is a big fan and Advocate and I'm not so much.
[5:18] Should we got into that now or should we save that.
[5:21] Shirtless Jason took me like 6 years again to buy a four-wheel bag and didn't even get in a way I don't I don't know what he was thinking.
[5:31] I will say that,
we are a I I have a I have a new wish four-wheel bag that was purchased by my wife at
TJ Maxx and so if that doesn't give it away I'll just say it it's not in a way back and it was probably about a third of the price,
but I am very fond of the look of the waybacks and I'm very very interested in whether they are able to do what they say they want to do which is,
build themselves into really a.
Multi products brand that sort of incompetence has all the different types of products you could need or want.
Intrexon sort of in your travel life.
[6:25] It's honestly like I have a critique of the product and but more seriously of the company like the
the Super Bee product line coming me miss your bag is perfectly fine I travel a lot more than either of you I've already been on planes on her 50000 miles of this year
it's alright it's like it tends to be worth it to invest in the most durable bag possible and for me that like I really like a bag that can.
Expand into a soft-sided expandable bag works better for me.
[6:56] Yep so what it was so what is your brand of choice.
[7:00] So I might I have a Briggs & Riley.
[7:04] More expensive more durable like I've already been with Scott when he was repairing his away bag and you know I would argue I've many more miles on that I've never had a proper.
But that's I mean both bags get you get what you pay for with just fine.
And I don't have a huge could take my bigger thing and you know maybe I'll get a chance to bring up on in your conversation with Jen.
I visited their pop-up shop in Tribeca and I thought it was a fabulous piece of retail and and you already alluded to it they get mad when you called him a luggage company they like to call themselves the travel company,
and you you go to this pop-up shop and they very much,
Lycra merchandising and glorifying the travel lifestyle so I know there was a lot of like.
[7:58] Memorabilia and stuff that made you you know sort of aspire to go to destinations and you know it felt like the the luggage was helpful enabler of this lifestyle that away was positioning right and whenever you.
You know either founder talk about the company that's exactly how they talk about it so then they started opening permanent doors.
And the permanent stores are super sterile shelves with luggage on on that like I could replace the away with Samsonite or to me and it would.
[8:34] Exactly the same.
[8:37] Yeah so we will definitely 100%.
Talk about this I think my guess or edit my educated guess is that,
they are going to sedate David they talked about that they're going to open I forgot what the number is but I believe dozens of stores is the ID across the country or maybe not just across the country,
select International markets over the next few years and I think frankly they are still I think they will read thank.
Their approach but I will let them speak for themselves on,
try to remember if they're speaking on September 9th or September 10th at Commerce whichever day I know be sure that this will be a topic we dive into.
[9:26] Yeah I'm looking forward to it I will be there and it'll it'll be fun to hear they're there POV I'll probably check my Briggs & Riley bag so they don't have to see it.
[9:37] Hahaha well I'll bring it up on stage.
[9:41] Awesome alone at the exactly.
[9:46] Cool awesome to see what news comes out will be doing a show we always do a recap show from there and let's talk about your podcasts to land of giants you've got the time recording the Masters three episodes out,
it's kind of a different kind of flavor than kind of what we're doing here with news obviously suits to tell us about Anna what got you started on this and how you're laying it up.
[10:09] Sure and then just so just so I don't know how touchy the search the search functions are on podcast apps I'll just slightly correct that it's a land of giants so
people want to search it's Landon,
Giants and I'll try to make the backstory quick centrally recode inbox me decide a lot of success with podcast over the last few years my colleagues petercopter Kara Swisher they have phenomenal,
interview style shows but there has been a couple of things going on at the same time but what do this first dish heater Costco
friending how he came to me and said you know
you should the companies looking for more podcast you should do something on Amazon and I was like
okay that sounds interesting and then simultaneously their conversations and other part of the company about an idea.
[11:06] Doing a narrative getting into more of narrative storytelling and podcast there's not a lot of great narrative storytelling in the business world as a relates to audio and so there was this idea to do a franchise around the fangs
companies and do a season on each company so short of the idea to do something on Amazon
with that interest in the Fang franchise,
call West End for me the timing was for me at all about a couple of other things one is
obviously there's a ton of discussion around power effect of these right now.
[11:44] NBC in Saucon Valley in the media should I felt like good timing the other pieces
I know you guys know this to from being in the industry,
it's very easy day today till like worried about the next in my case right about the next product announcement the next business Amazon's getting into NYU know I'll have some contacts in my article is but sometimes
you need to force yourself to like step out to the big picture and say like you know,
you know what is the status quo in e-commerce right now like is that healthy what are the what are all the impacts on society
everything this company is trying to do and so I've had all those questions in my head for a long time and there's this seems like a way to I have the time to serve both dive deep and like take a broader look
at the same time so that's.
So why I can I can I can give a little more detail on what we're actually try and what we're actually set out to do with the content if you'd like or I can let you guys ask me whatever you want.
[12:51] So what's up I want to get to a little more of the contact but just to make sure that our audience is tracking so that the notion is there's a season about each of the Fang companies so there's a.
Amazon season I think most people Nothing But Apple Facebook Netflix and Google so it's actually faang,
that's the idea you'll have a season about each of those companies and then you're you're currently three episodes into the Amazon season is there a.
Dick by Jordi know how many episodes that are going to be of the Amazon season.
[13:28] Yes oh yes so there will be 7 episodes and there's a chance that episode 7 will.
Will be taped alive at so Commerce and so if,
is that ends up being the case episode 7 was sort of break from the format we have in each episode so far which is sort of a Storyteller telling a story basically throughout a given,
atopic area involving Amazon and episode 7 would sort of be like a conversation recap of unlike of of what listeners that the Earth were the first six episodes,
and so you can imagine the challenge of trying to break up Amazon's impact,
and interest into six or seven episodes is not easy and so on in episode 1 we should we try to
the iiibeca by I'm curious what you guys think you know the foundation of Amazon's retail
rise and dominance to me is Ben Prime and so episode 1 we both have Amazon Executives and employees telling the origin story of how Prime came to be and then we also
get into the consumer psychology of how Prime has been able to walk us walk you know.
[14:56] Over a hundred million people into Amazon's ecosystem and makes it very hard,
to break out,
episode 2 of I had this big question of like what does Amazon want that you from being inside our homes with Alexa with all the connected devices with ring with Eero with you know.
Basically best smart home and so we exported that question with with an Amazon executive and also.
[15:27] You know some smart people as food asking some skeptical questions about you know what this future of a fully automated home,
I will will,
will feel like in and how that might impact our lives in the future and then third episode which aired so far was that a look at Amazon's impact on local communities among the big tech companies yeah I would argue that Amazon.
Has the bigger the biggest physical impact on small communities around the around the country because of their warehouse Network,
North 710 now large fulfillment centers just in the US and so we went to a small town in Kansas that which was home to one of Amazon
first fulfillment centers and it was number three or four and where they left a few years ago and then told the story what happens when they came and left
and I'm and then I went to my hometown of Staten Island New York which is home to one of Amazon's very new,
Jerry automated fulfillment centers to get the taste of.
What the promise is in a in a small community when when Amazon comes to town today I'll take a breath.
[16:41] Yeah it's it's
yes I'll be curious it's interesting like I told you to greet you that Amazon has the biggest physical footprint and you know they're for like sort of physically has the most impact on those small towns some of the other ones are you know much more responsible for,
deciding who are government leaders are and how we really think so it's hard to know which one has more impact on your day-to-day life but yeah.
[17:05] Totally and then and I should I should say you know yes that's 100% true you know,
part part of Odysseus or the the emission of of the whole franchise Land of the Giants has been,
you know it is easy in our day-to-day getting caught up in our day-to-day lives work Family Family Life,
you know pleasure.
What sort of what the broad impact on what the broad reach of these companies now,
now he's in our lives and and that's not to say it's all bad I mean it's a lot a lot of good and I hope that you know will come across in the in the series as well but it feels like a moment in time where,
you know healthy scrutiny something that the world could use a little more us.
[18:02] Close Amazon been kind of supportive of this or they they didn't really engage on.
[18:08] You know that's.
You know I have not gotten a lot of feedback from the company since since episode 1,
are the few weeks ago so they participated in episode 1.
I interviewed one of the people I interviewed was Jeff Wilke who spent it on his own two decades and is now to CEO.
Best way to get the global retail business and Global consumer and he reports to Jeff Bezos
in episode 2 I did it interview the vice president of the smart home at Amazon.
And you know for a episode 4 which will come out the week of August 12th so.
I want to watch than a week from now you know I got a tour of one of them is on a more automated warehouses for an episode about through Amazon as an employer and Automation and so Dave,
but they also just you know turn down and on-the-record interview for.
In episode that'll be about competition on the Amazon platform and Sherman Antitrust scrutiny so I would say.
They probably participate a little more than I expected but I think they're I think they're kind of still in a way to wait and see mode.
[19:37] Did you did the Fulfillment center the toward was it like Eva based or was it one of the ones like the pallet lifting robot or something that we haven't seen you.
[19:46] It was,
yeah so I don't know what I didn't see in the warehouse so it's possible and had more than I saw but it what I saw it were I don't know that they call them TV anymore but yes the orange,
I think they call them mobile drive units are carrying carrying the 8-foot tall shelves to their stores and their Pickers.
[20:12] Got to go so you don't you like us spend a lot of time to think about Amazon what's what's something that you done the podcast that kind of was a new discovery for you.
[20:22] That's a great question I think I think so far.
It reinforced a lot one of the things I thought I knew about the company over the last six years you know I will say one thing that stuck out to me that's in one of the episodes that is already aired so,
episode 2 is about sort of the smart home and Alexa and.
Yeah I won't give too much away for people living with him but essentially I'm talking to someone who's in the author and futurist about you know.
All the types of things that Amazon might do in the future with the data they can collect and you know I ask the VP of the Smart Home.
Daniel Rausch I said so you know do you guys have a team's inside of Alexa and I know you have thousands of employees working on Alexa that sort of kind of listened to like this the questions coming from the Skeptics of this you know,
as I said that the echo the echo behind me Alexa.
[21:30] I'm going to ignore that I'm sorry guys so they're always always listening.
[21:38] At least you're still has work so they're not too angry with you when your when your Prime shipments stop in your Alexa stops then you know that you fingered the Amazon.
[21:50] I was a little surprised I asked you I asked his VP of a smart home,
you're do you sort of listen to it a lot of the smart smarter Skeptics are saying and what they worry about in the future and Anna try to like maybe we'll work back from you know some of those potential.
You know use cases that people are worried about or you know data collection people worried about and his answer was essentially we were young very Amazon we work back from your problems and you know.
And I we start from a place of optimism always phrase like started,
the amazing company it is today but also miss climbing in 2019 like saying like.
Tapping the site Facebook and social networks and you know it just felt,
I guess I was just surprised they've built a certain lack of knowledge mean the word seems me self-awareness.
About sort of the downsides of you know the advancement that sure the fast pases,
Innovation sort of Eden of even specifically like inside our hugs and that's one thing that sort of stuck out to me,
that was a little surprising I'd say.
[23:15] Yeah that
totally make sense I mean to me that's part of the fun of your podcast is for your point you know most listeners are they show or sort of living and stuff day today and it's like you're there some new piece of news about something Amazon's doing.
Every week if not every day and it's kind of fun on the show that you you kind of,
take that 50000 put View and kind of put it in a broader context then leaves.
[23:47] Yeah I'm like the chat near the challenges we're trying to do a couple things like my goal is to have Jason and Scott and the listeners of this podcast and the you know,
sure the sources I have you had developed over six years day today reporting like find enough compelling story wines and and hopefully new information as well that even though they stay the day they are coming away saying,
that was a pleasant storytelling experience or I learn something new or I never I didn't think of it that way while also being welcoming to
people who don't live this day today but but have Amazon in their lives you know in a big way and wonder about Amazon or 1/4 about Jeff Bezos or you know
shortest sit on the periphery
of these industries and so I think from the feedback I've gotten the reviews I've seen I think we've done a pretty good job at that so far,
but you know we'll have you know episode 6 which will be antitrust and competition on the Amazon Marketplace I can that one like we'll dive into the weeds that in a way that I think even people in the industry.
It'll really really resonate West and I think will be both surprising and hopefully
somewhat news-making so I'll leave that to you.
[25:07] Nice. That's a good teas are a couple of short fun facts on stuff we've already covered I can't let it go without teasing Scott Scott had an opportunity to be an early investor in Cuba and thought it was a stupid idea.
[25:21] Yeah what was NC State Professor he was talking about how he was going to take the algorithm ants use an appliance warehouses and it just didn't didn't make sense to me that Aunt part lost me.
You was right I was wrong.
[25:35] Yeah I know I'm just I'm shaking my head in this empty house right now so.
[25:44] You mention so in episode 3 you visited a,
a warehouse that's now a fulfillment center is now closed you you teased us that you went to a modern performance center and episode for a fun fact for listeners,
Amazon actually gives a remarkably good tour of a bunch of those,
modern fulfillment center so even if you're not a fancy journalist I Jason,
you you can go to a web URL and Reserve at or I take clients on these tours all the time and it's if you're in the industry or you're just interested it's super worth going,
so as you're listening to episode 4 and hearing Jason's description know that you can you can follow it up with aching person experience and I'll put the donation the show notes.
[26:33] Have you been to the Staten Island New York Film Center.
[26:36] I haven't and so an interesting question which I'll see if our intern can figure out while I'm talking to you only certain of the facilities are available.
For the tours.
And I don't think that's an island is so like in your neck of the woods Robbinsville New Jersey and West Deptford are available.
I don't see Staten Island on the list I'm in Chicago and they they have a.
You have to go to Jefferson Indiana and now there's a which is a suburb of Chicago.
It's pretty interesting and I presume you had a slightly different experience at the very least they let you bring a mic and they do like Frisk you for all your digital device.
[27:39] Yes yeah they were there were big they were big no no phone or no camera signs and then
yeah I was going to say another
I'm hesitant to say what I think my memory is surfacing right now and another know something signed but I'm wondering if maybe it was when I visited a different
Amazon facility 5 years ago or 6 years ago and cnx I have a vague memory of a no guns sign but.
Anyway I am a millionaire I don't remember for sure so I probably should have said it but.
[28:26] That's not going to want to listen it'll be safe I'll put Jason's phone number in the show notes.
[28:34] Speaking of Jeff speaking of Jeff Bezos I got a secret I got a little package in the mail today from from.
Kara swisher and the box says Bezos primes and the hundred and hundred billion dollar man and I opened it up and it is a Jeff Bezos figurine maybe like.
A foot high and it comes with a robot that he was spotted with that one of his events a few years ago,
so I can maybe that can be your show mascot.
[29:09] That would be awesome is it I'm assuming because the robot is buff Jeff Bezos and not a bookstore Jeff Bezos.
[29:17] Yeah if you if you Google as I just did Jeff Bezos yellow robot the first image that comes up is Jeff Bezos walking with a.
Yellow shirt of is this a robot dog Boston Dynamics robot dog and he is wearing and just in the figurine is wearing what Jeff is wearing in the soda which is.
[29:40] Patagonia obligatory BCBS.
[29:43] Does it have a drawstring into the Jeff left when you.
[29:46] I couldn't I couldn't see that past the bulging bicep switch on.
A little envious I honestly.
[30:00] That was really your way of just working in that Carrie Fisher knows your address which is impressive but.
[30:05] She actually she actually I've only worked with her for 6 years and she had to text me for my address the other day not that cool.
[30:15] Yeah I kind of assumed that was the case I have to compete cuz I have a current mask mascot staring at me that I was going to bring the code Commerce this year I have one of the pets.com sock puppets.
[30:30] Yes yes and I'm assuming you're saying that the guess we're going to have Julie Wainwright too and I'm back in the day at one point rent ups.com.
[30:41] If I were younger listeners pets.com was one of the the fast runners in the first free internet crash
that was a precursor to Chuy and had television campaigns and it has mascot was this sock puppet dog
the that that's essentially did in fact morph into Triumph the the comedian.
I don't know if you know the backstory here but there are lawsuits in the whole thing that,
that sort of after pest.com left that the comedian that that treated the Triumph character like bought the rights to the Past. Calm dogs,
and there are some real property fights and stuff so it's fun and then the founder of pets. Com is the the also the founder of real real who's going to be at your shop.
[31:35] One correction yes she was not,
not the founder of cats but feels like almost every time.
Yeah journalists are very go see this on almost every time Julie is you know appears that something like.
Pets.com comes up twenty years later and I'm just curious about like,
maybe it's something it's a it's a role she held but I'm curious of what she'll have to do like what she has to do to like not have that be part of the,
part of the story in an only reason I ask is will a,
I had someone reach out to me recently after we announced her and was like really you guys still mention pens.com and it made me think about that and then being like
who is the CEO and maybe it's just a bad person and I should,
I should I should know whether a person is alive or what they're doing today I think it I think it might have been a George something.
[32:46] George Shaheen good job.
[32:48] Okay cool you know maybe it's just a juul he's had some level of success and I don't know that's that's enough that I don't know if that was actually a question but it's something I I was just thinking about recently and so was interested.
[33:02] If I remember correctly after webvan George became the CEO of what was then Anderson Consulting now Accenture.
[33:10] Wow I was going to say something really mean which is probably not right I was going to say failing up but but maybe I actually was not covering.
[33:19] Thank you I think I could be a correct characteristic.
[33:22] Okay sorry George.
[33:26] That way so I have a very minor version of that I started my career and was like one of the original directors of marketing a blockbuster entertainment and in my world,
like every time I go visit a client the the consultant from my saying company right before I get there pops up a slide talking about how you don't want to get Blockbuster.
[33:46] Oh well.
So you view a failed really up.
[33:51] I have but I would actually point out I'm feeling,
down because we sold Blockbuster for 9 billion dollars people always talk about the end when a failure the company was you no railroads are not a very good,
investment today but Anderson Cooper's family did pretty good on the railroad.
[34:15] I am now staring at your LinkedIn which I did not know about this.
[34:21] That I never listen.
[34:23] 1616 month. Of your work career.
[34:26] It's a slide that I have to face every single day as though.
[34:34] Listen listen as someone who grew up so when you were there I'm not going to do the age thing but okay I'll do it when you were that when you were there I was,
I was in Middle School and
Blockbuster was probably one of my favorite places on Earth and I have very fond memories especially now that my parents both my parents are deceased very fond memories of going into Blockbuster on Friday nights and you know,
hoping you what am I remembering correctly that like the case might be out but like if you opened it.
You had it like you found out whether a movie or game was in or not with whether it was actually that the case was empty or not or am I am I totally making that.
[35:21] I know you're probably thinking of an independent video store so I guess what we would have is the box art would always be there with the movie was in stock or not behind and next to that box are would be.
[35:32] Oh yes.
[35:33] 30 or 40 Blockbuster desert called Amaray cases that plastic taste it held the the video.
[35:41] Got it well well thank you for giving me this even this cloudy memory of my Friday nights as a 12 year old.
[35:50] I appreciate you making it a blockbuster night we are so getting back to more tree Topix,
I want we want to transition of the podcast but one question that you you may have inadvertently.
I revealed an answer already but so season 1 Amazon you are the host.
There's you know it least four more seasons are you going to be the host for these other companies or are we going to meet some new character.
[36:26] Most likely not I think,
this is I think there were likely be people with more expertise.
Then I have on those other companies since I have spelled spent the last six years really diving deep into Amazon in e-commerce show.
I don't I don't know what the 100% answer is but that is the 99%.
Correct answer likely answer so no I did I did there is an appointed frankly you know that I had to make you know
by choice I had to make some trade-offs as I've spent the last six months and still end on this podcast series and also working on the conference which was I've not been
able to report and write as frequently as I was I would like so you know where in the beginning of August and the last story I published was a big deep dive into
internal tension at Walmart and that was a month ago so I'm anxious to get back to Amor,
consistent writing a Cadence starting in the fall.
[37:42] Cool I like how you started filling in the middle so you're kind of like doing episode 4 Star Wars style and then you'll have to kind of go do some some will have to come in and have filling before you.
[37:56] Netflix is going to be the prequel.
[37:59] I've always wondered is Amazon the first a in the Fang that has two A's or II a.
[38:06] You know Kramer coins this I'm 99% sure so we can ask him.
[38:14] Know what you tweet we we we all know no one famous actually coins that thing right there like borrow it from someone was less famous.
[38:21] Not the creamer did he had it on his knuckles one night I remember I remember watching the episode.
[38:28] What it is like really fired up here like almost like a knuckle tattoo so is like f a i n g on the.
[38:34] But am I if I'm remembering right just to jump in when Kramer did start using it Apple wasn't even one of the things so I am assuming it was literally faang and I think so therefore it has to be m.
[38:49] Someone has tried to make for the newer companies A+ happen if you heard that one.
[38:58] The effort several chondromatosis they're just not as catchy of Spain.
[39:03] No and now and I can't even I can't even tell you what the A and A+ is is it I'll maybe it's Airbnb anyway.
[39:11] The G is now and they also to make things more complex.
[39:15] That sounds like an Andreessen Horowitz thing cuz it sounds like they're portfolio does their PRT.
[39:23] What's an A+ that I'm forgetting which food at after is who thinks he's an investor he actually is an investor.
Yes he is in a duster sorry Aspen yeah a plus.
[39:37] What in your world A+ is Ashton Kutcher in my world it's the supplemental high-value content on the Amazon product detail.
[39:46] Man we are we are just nerding.
[39:52] Cool sweet recommends that listeners check out Land of the Giants make sure you get the D in there except to get the search right it's great podcast we strongly endorse it here at the Jason Scott shoe
so weak since we have you Jason we thought we just kind of
Heather written about the news without we pick your brain about some topics the one I'm most interested in is we've had a lot of IPOs and recently so we've had
Uber Lyft are out now we got chewy real real they all
Uber Lyft haven't done so great but I think the Commerce ones have done pretty well specially real rely things done quite well what he thinks next I know you follow the shoe guys close to are they tearing up or is it your way just raise a lot of capital.
Country has few you have any insights into what's next in the pipeline.
[40:43] Yeah sure so I'll you know what some of the ones I've been curious about.
And so so wish wishes accompany that.
Assertive gone through phases of being like like very much in the business news and then you know skirt,
out of the news in the business world and you know frankly I haven't checked in on their performance in a while and you know last I saw that,
there are some reporting that there is there gmv or I don't know what they use for their gross number is I want to say was somewhere maybe approaching or around 10 billion and.
[41:29] And I'm assuming most westerners no wish but should I tell them what it is if they down or.
[41:37] Yeah so wish wish I like to think of it is essentially AliExpress but for.
[41:46] The popular in different markets or sort of taobao,
what the Western Schism on it essentially not it's,
it's a mobile shopping app with a fee that specializes in the low price non-branded products that are very very cheap that often,
will take weeks to get to you although they've they've opened up some of their own warehouses to stop for the best selling stuff,
and I'm just very curious about them in it for a long time mainly for you know a lot of stuff they sell,
does not last very long
yeah I've wondered a lot about what you know what the expectation is with different consumers in different countries when they pay a dollar or $2 for something like is it
okay that it,
brakes after 4 tries or no is that going to be a significant turn issue to wish is one you know I don't I don't know what their IPO plans are I could see them going public in the next year but that's one of the companies I'm anxious to dig into when I get back to writing a little more
Casper there's been a lot of talk about I still looking at you know I still work at that company and.
[43:14] Msmm frankly just skeptical of a long-term independent future you know my big question with all these sort of single product for the most part I know they have some other products but single product,
digital native Brands is are they really expanding the markets,
they're in or they just growing much faster than previous iterations in their industry and so they're going to hit a ceiling
much faster and maybe that's obvious the people but it's something I think about a lot and.
I just you know I had to report a couple years ago about talks they had with Target about a potential sale for around a billion dollars
should I trust one like I don't know what the outcome is but I am very curious because like I said I'm I'm skeptical the public company that Casper has a password and public company,
and then some other ones instacart,
I think I wish around the current valuation they seem too big to be acquired,
I'd love to see you in an s-1 filing with those unit economics look like.
And then one that sort of Commerce City but sort of marketplace I don't know what you got if you guys have heard much or,
what that much recently is house Houzz.
[44:38] You know there was a lot of talk around then maybe a year or two ago and the businesses are smart like at a certain point you just want to get want to get your economics write a certain scale and like.
You don't need to be held talking to the business press as much and so that's another one that sort of all my radar to check back into.
I did a good job of talking for a few minutes and not actually answering your question.
Makes me feel like a PR person.
[45:06] Those are good let's see how about that you guys were they big enough for you think they need some time to consolidate.
[45:18] Yeah I I mean iced I still think those are so there's there's good and there's stockx.
data breach which took them a long time to reveal actually I think I just got an e-mail today but I feel like I saw it reported last week maybe.
My opinion is I think I think those are acquisition place.
I just I have trouble I have trouble seeing those guys as public companies then again like you know maybe they you know the real real just went public and I know it's not Sneakers but it is.
It is sort of high price high price point items Consignment second hand and sell.
You know maybe maybe that is a future but my bet would be on both companies acquisitions.
[46:25] We've I recorded your your bets and we'll do a recap show later I'll throw like one slight editorial and let you know
can I think it's an interesting thing about some of these companies that has changed as a result of digital disruption if you were to launch a
a really popular single item company 15 years ago,
the marketing vehicles that would be available to you and it would be affordable to you would like,
put significant parameters on how quickly you could grow so even there was a demand for 5 million people that wanted to buy your product,
it might hate for five years for all five million of those people to find out about your product.
And today that that same five million people will find out about your product one day after you want,
and so what are the things that I feel like digital has done is.
Artificially compressed the sale the initial sales.
For your product info you know the mistake I think some people have made is you know you look at these rapid growth of all these companies and you go oh man we just project that out another five years,
this is a huge business and what you don't realize is.
[47:49] You hate you hate you hate your car.
[47:51] Plateauing much fat.
[47:53] Yeah. Yeah you said that and much more articulate way than I was then I hit that I did earlier but yeah that was
play I was attempting to make was already are these companies and weeks I think we've seen it with some are these companies going to hit a ceiling much sooner than
they expected maybe investors inspect extract and.
And so yeah I mean that's why I don't hear it as much but I you know I grew double overtime you know few years ago I would have laughed after a. Of time when.
A Founder that was like 4 months in or 6 months in would talk to me about like it was confident about.
LTV lifetime value and like modeling out there tax you know because.
Because of that very point you just made like you're going to stir your hitting your target audience much quicker than in the past.
[48:57] Coop's one area I wanted to see if you have any thoughts on this you've done a lot of good coverage around the food delivery companies you mentioned instacart
so there's there's like a zillion of them and
we saw a little bit of consolidation with someone acquired the one that square has always so that was caviar and they got acquired by.
[49:18] Yes yes and there was also controversy around tipping so to give us an update on what you're seeing there.
[49:26] I mean it's like the wild west right it's pretty crazy yeah we had also reported that Postmates had.
In a filed they had a press release very early this year saying they had confidentially filed,
paperwork with sec to go public and we are now in August,
they have still not filed their official S1 paperwork a publicly that is very unusual for a company that will,
that for companies that will eventually actually make it public until we we we have reported that every code that they had talks with some potential acquirers there just has to be Asian I mean no one you know
of the private companies no one's making money doordash is viewed as sort of dick because they have all this money SoftBank bank backed company they have tons and tons of money that they are burning through,
just to gain market share I mean there you know the rumors about them doing some deals with some of the The Big Dig
sort of quick casual and or fast-casual and food chains were there essentially you know,
they're take raid or they're cut is like.
[50:47] Pasta zero or maybe it's zero in some cases and so this is me it's just not sustainable what I've been told and Uber went public,
and had a good public outing
and was a valued you know they were they were thinking they were going to be value to round 120 billion I haven't looked recently but I'm going to try to pull it up right now what are they 70 70 billion
that they were going to wipe they would be wife we to do a deal,
for one of the companies and so that you know that the problem in a couple problems you know,
so I sold my back was they were going to eat there were neither acquired doordash or even GrubHub another public company,
and but at 72 billion instead of 120 billion those deals at those companies market caps evaluations,
become really really big percentage percentage of meaningful percentage of Uber's market cap.
[51:52] And yeah I could I could keep going to ugly one other point just on like the the debate for Hoover on who do who do you acquire you know you choir doordash you kind of a quite you acquire the crazy
show the crazy player in the market that's forcing anyone to just everyone in the mark this sort of lose their heads and burn cash for market share but but that
that's her set you back on the economic side like that does not help your profitability of your business right maybe there's some synergies but like on the face of it no
if you if you acquire instead GrubHub which is profitable business,
you know you've you've gained some NASA volume GrubHub shuja New York with seamless Fusion some Big Moe died in Chicago GrubHub popular Hometown but then you still have the crazy,
cash burner doordash out there and so.
I'm really interested to see what all happened I think there will be consolidation I'm hoping we haven't announced any of food delivery CEOs for code Commerce yet but I'm very confident we'll have one of the heads of want to be Services there,
and what I didn't talk about what is the Tipping scandal,
which is essentially I drove one of you guys for a wants to summarize it but it but I'm happy to get my dots on it.
[53:16] Yeah I think the the summary is the so they they all charge there's just got two buckets there's a there's a delivery fee and there's a tip and,
what's happening is if you if you put a tip-in then none of the delivery fee they're essentially kind of well couple things to do is,
it's legal to skim the tip so you can charge the worker you can you can take out
yo sitting on there's all kinds of rules around us but something like two to 4% essentially covering your credit card fee and whatnot so that's one aspect to this
I think all that stuff kind of unethical but whatever so it's legal and then and then the bigger thing was that effectively you know the
as you tipped then the company was keeping more and more of the delivery fee so they were kind of saying it was like an order so the driver got you know kind of an order from the delivery fee in the tip not an ant.
[54:15] Right and I think this was surprising to an indoor dashes case and I don't think they were the only one surprising to both,
the delivery people when they were in that you know I was tipped,
$8 but I didn't get all that tip and then I think it was surprising to,
customers and doordash initially
sad like we believe in this model we believe our it's more steady income for our delivery people with this model and when they don't when they get you know this is better for them when they don't get a good tip and,
and then the story kind of exploded again a few months later when I think of New York Times writer,
a reporter asked her did delivery I get her first person then of what it was like and this came up again and then
doordash recently gave in or has said they will change their model the problem with the whole space I mean I'm going to paint with a broad brush and I know there's some nuances with each service but
generally like there is just I think most consumers just don't know.
How much they're paying and where it's going and you know maybe for a lot of people they don't care that they're,
you know the price is basically marked up twenty 30% from what they would pay in the store but the convenience is worth it but.
[55:45] I really think there's room for an ethical player to Stand Out by just doing business really the right way the problem is I think the economics of the business at least with the current auditor site and how many services there are.
Don't allow for that.
[56:02] Yep yeah that's at some point prices will go up in the convenience store and consumer will know that they're they're paying extra for the stuff so what we have to just come to get to that normalization.
[56:13] Yeah the the tricky part is sometimes when at normal ization happens then the service isn't as appealing a consumer's rights.
At a similar version is played out with instacart where they were Articuno originally they they had a low delivery fee but they were artificially raising the price of all the goods you paid so it was.
[56:32] Right right.
[56:33] And when customers found out about that that's out really oily and dishonest so you know they started passing through the items at the same price and tried to charge more for the delivery fee
and found the customers weren't willing to pay that delivery piece of eight like 10 only do good in Market Square,
they kept the delivery for you which meant the unit economics for the business don't working in a b c is paying for your delivery.
[56:59] What are you doing I'm just curious and it like do you think any of these bit whether it since the card or you know the the meal delivery companies.
Do you think do you think any of them like go away like they did do you think we're in for a rude awakening where like.
Some of the most sensual like one or two of them like literally collapse even.
[57:22] Why did consolidate in one of them does well for a while but in the long run I'll predict the day all the way in or we change and the reason I say that is.
That they're essentially offering a service to grocery stores in the kids of instacart or restaurants in a case of the others,
providing a customer experience at that Grocery Store retail you know restaurant wasn't interested in providing or didn't feel they could have adequately provide and,
early on when it's not a big business it made total sense to do that as,
that service becomes the dominant method of getting those those companies products.
It becomes increasingly stupid for these companies to Outsource this right and I mean not the analogy to me.
[58:16] Oh I am now remind I've heard I've heard your tape before but I want.
[58:20] In the early days.
Nobody built their own e-commerce I try like we're retailers and so what will pay this technology company in Silicon Valley to operate an e-commerce site for us.
[58:31] Or in Seattle.
[58:32] Yeah so that was either Amazon or company back in the day g s i n g s I became a very successful very fast runner made the owner of billionaire now owns the 76ers the.
In the long run.
All of the the surviving retailers had to find a way to unwind their deals with Amazon and GSI because it just became too important a part of the customer experience and when I.
[59:00] And those DSi deals man I've heard some stories.
[59:03] He was a great salesperson that the contracts were absurd.
[59:08] Team 10 15 year deals yet.
[59:10] Yeah it was amazing but in the case of restaurants there's a huge shift in consumer Behavior.
20% of all restaurant sales are now consumed off pram,
the the deals they have with these marketplaces are unprofitable for the restaurants and so it's it literally at the,
inhibit scales under the current economic model outputs all these restaurants out of business and side note all of these delivery companies are secretly opening,
kitchens and commissaries to start delivering the universe similar to Amazon private label Marketplace so there's more pressure coming in the big successful restaurants that actually have products that consumers want.
They're going to have to own their own delivery experience right in it and you talk to these got these huge companies are announcing oh we're going to partner with Uber Eats,
and I I go like that that's crazy that's your the front door of your your restaurant.
That you're now Outsourcing to someone that's going to disintermediate you from the customer it for a variety of reasons I don't think it's a sustainable model what's the.
[1:00:20] Yeah one one other thing I forgot to mention Little Couple interesting things one is you know
the former CEO ousted CEO of uber Travis kalanick he's in the space I think
here's a company one of his one or a division of one of his new company is called Cloud kitchens which is essentially these like dark,
call dark kitchens or Bay City restaurants that only do delivery.
The other thing is you know how Mazon hasn't come up in this conversation yet but in the end they you know I think they announced shutting down Amazon restaurants there,
attempted delivery I don't think they're out of this I think like I would like,
I think the two wires to me in this space at least in the US are,
Uber and Amazon and so I didn't you know will Amazon do any big Acquisitions right now with the current regulatory climate maybe not but.
Maybe that's obvious to people that they're not out of it but I think some people when they saw them Amazon shutting down out of the restaurants. They were exiting but I think.
I I would not be surprised whatsoever if they if they make a point in the space.
[1:01:46] No I I I think that's very possible with some decent that's going to be a great place to leave it because we've done it again we've completely wasted an hour of our listeners time.
[1:01:57] You got you guys did I didn't want a day like that.
[1:02:00] You know you are a total a willing participant,
the but if listeners disagree and they want to continue the conversation as always you could jump on her Facebook page and leave some comments or hit us up on Twitter,
as always in bed this was the show that that you know finally added value in your life
what you should do is jump on iTunes give us that five star review and at the same time you can subscribe to Land of the Giants in here even more Jason Del Rey.
[1:02:31] Check can I just plug like you should really give it a shot we've been top 50 and top 30 for most of the last week on all of apple and I am open to all feedback,
good and bad I'm on Twitter at Delray Delray Jason at recode.net we have an email address for Land of the Giants,
and I just hijacked your ending there you go.
[1:03:01] Jason thanks for joining us and congrats on the success of the podcast we look forward to hearing the rest of it.
[1:03:09] Thanks guys I'll see you at Code Commerce.
[1:03:11] Absolutely in until next time happy commercing.
EP182 - Amazon Q2 Earnings and News
Episode 182 of the Jason & Scot show was recorded on Wednesday, July 31st, 2019
Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this is episode 182 being recorded on Wednesday July 31st 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your code Scot Wingo.
[0:39] Jason and welcome back Jason Scott show listeners,
Jason has been a while since we were able to get together with given the holiday season 2 vacations going on
and then we had some guests in there that that's important topics you on the cover so we thought it would be a good time to go and catch up on some news
there's been a fair amount going on in the world Lee Commerce as
you haven't been at this for feels like forever kind of Summer's kind of quiet and then here in this kind of Q3. Is where it gets really newsie as we head into the house so we thought we'd go over some of that before we do Jason you have been
a busy traveler I'll tell us about some of the tricks you been on.
[1:26] Yeah yeah I have been on a couple trips full disclosure a number of them have been vacation and so I'm I'm a little proud I feel like you probably beat me on quality of summer vacation but I feel like I at least meet you on quantity of summer vacation.
[1:41] Yeah yeah you were able to get a couple weeks in there and I'm
I can go further because I don't have to carry a 8 lb 80 lb espresso machine with me I think that that kind of limits our options but so fly over to Europe and stuff so we're going to free you from the shackles of the espresso machine.
[2:00] Exactly I don't know if you think you're joking or not but I did I took two vacations I visited my family in in San Diego for the 4th of July and I
went to Upper Lake Michigan with my wife's family and the Upper Lake Michigan lake house is remote enough that I did have to bring my own espresso machine.
[2:20] Oh I know I know I'm familiar.
[2:22] But I'm calling it a big win I actually consumer protip.
Years passed I bought the new Nespresso which is called the virtuoso which is this fancy or system and I was never actually that happy with the shots.
Into this year I retired it and bought the older Nespresso original system.
And much happier with the shots there's a much greater diversity of coffee available for its was actually able to buy.
My Starbucks pods to go in that coffee shop by my lattes were both much better and this little town we we stay in North Point Court last year head Giro expresso machines in the town and they sure they had to poop so I feel like.
Like it was all green light.
[3:07] Nice nice you're you're making America better.
[3:11] But so in between all of that Leisure activity I took the opportunity during the Heatwave to go to Las Vegas.
For a new show that interact has launched this year called in RF next and they cleverly spell it like the Hipster kids NXT.
[3:31] It's very cool to drop any kind of owls so kudos.
[3:35] Exactly it sweet speak.
And they the.
Important to me because it's somewhat of the spiritual successor to the shop. Org annual Summits when shop.org used to be a separate entity from NRF.
Into this was the first year of this new format it's in Las Vegas in the summer it's at the Four Seasons hotel which is like a kind of cool luxury hotel inside of Mandalay Bay.
And it's less of a trade show there's no exhibit hall and more of a a conference with.
Certain interesting approach to content curation what they do is they they have.
Key notes that everyone attends on a topic and then they have breakout sessions which are deeper Dives on the topics from the keynote and you sort of picked the.
The specific tactic that you're most interested in for the deeper dive so you might have liked.
Akina ain't no bunch of good retailers that did Keynotes Zulily DSW Shoes untie.
[4:42] Dick's Sporting Goods Peapod.
Lilly Pulitzer to Value H&M JustFab I think with all the main presenters and you know you might see that the CMO giving a presentation on the keno to set up high-level case study about what they're doing and then you might have the.
The director of email marketing doing a breakout session specifically on on Dick strategy around a b testing emails for example if that was what was interesting to you until you both you got a mix of kind of high-level.
Strategic content and like you do more Hands-On tactical button-pushing contents as well which I like.
[5:22] Brickell what were what were your your your most and least favorite topics.
[5:30] Yep so there you know.
Everyone is tackling different aspects of what I call the next best dollar problem that like.
[5:43] A lot of the traditional tactics that repairs of used to drive traffic and drive conversion like.
Either aren't working as well as they used to or are becoming more expensive and more competitive and so you know our readers are challenge with like what is the right mix of tactics and
you know how do we evaluate what tactics to do and then you know how do we optimize and get the best bang-for-the-buck for all of those.
Like primarily traffic generation tactic so a lot of.
Surf interesting examples of how to tackle influencer marketing an email marketing and.
Bike shopping cart abandonment campaigns and in topics that we talked about for a while but like kind of what the the latest state-of-the-art is in optimizing those tactics out.
You know there's a bunch of General stuff there and then the 1st came out of the day was sort of a.
A much more overview of the market Keno which is from an acquaintance and former colleague of yours Pascal finette who's.
At Singularity University but I think you hired him a channel advisor at one point.
[7:00] Yeah that's goes way back Pascal is a super smart person in here and Germany for us for a while he's a great guy and we stayed in touch so hopefully he gave give a good presentation there.
[7:14] So I thought he did a really good job and his his whole presentation,
is there an interesting angle on something we've talked a lot about about bifurcation in retail and he had an interesting Paradigm for it like he he talked about traditional retail being a pyramid and at the bottom of the pyramid you had,
very high-volume low-margin transactions.
And at the top of the pyramid you had much of lower volume higher margin transactions and so you know for the most part it's like.
[7:51] Discounters and super high efficiency stuff at the bottom of that pyramid so that's that's Walmart T.J.Maxx dollar stores things like that and at the very top of the pyramid.
It's typically luxury brands,
and you know then there are a bunch of retards that are historically a compromise of those two things right and so that's,
that's all I like the mall based apparel companies that's that's gap that's Bed Bath & Beyond its Staples it's all these these different retailers and his premise was that for most of the history of retail.
The best place to be was that compromise in between the two extremes and that as a result of our our current disruption in the marketplace like what's fundamentally happened is.
The customers have all bifurcated to either
the the super high efficiency retailers at the bottom and the super high-value read you know High luxury retailers at the top and the
the segment of retail that's getting decimated are all those retailers that are trying to live in the middle and so he takes his pyramid and he he takes the bottom and the top and puts him around and it's it's sort of.
Like an hourglass so that the pyramid has become an hourglass don't kick in in the the the.
The dramatic conclusion being don't get stuck in the middle.
[9:18] The sands of time are running out.
[9:20] Yeah it was a little awkward that I'm sitting next to a little Gap team is he pops up beside that says and the Gap is in the middle.
[9:26] They without the computers to start working on the resumes.
[9:30] I don't think it was news to any of them that that was a challenge they had to overcome.
Yeah but so that was a good conference and of course like,
cuz it was a little smaller to maybe about four hundred attendees the networking you know is one of the highlights you know I got to see a lot of old friends of yours and mine and meet meet some new friends
share a couple adult beverages and and make fun of people.
[9:55] How about where are digitally native vertical Brands their represent.
[10:01] There were so like JustFab was one of the presenters they were number of,
the DMV be sort of in attendance so they they definitely had some some representation that it it's it was a pretty interesting mix of.
Frankly you know all all portions of that of that parent of Pascal's pyramid.
[10:28] Cooper another one of the takeaways can you share with us.
[10:33] You're grilling me I mean like those are the the big ones that we have time to talk about right now because I heard a rumor I know you have this whole separate gig in the automotive industry that you're cheating on me with
and I heard you were at an auto event while I was here so did you did you get a new cars.
[10:57] I did not but it was fun because this was an event that was actually in my backyard the one of the Publishers and autospace I didn't even know this until
Teresa Lee is based out of Cary North Carolina which is in the Research Triangle Park area and they put on an annual kind of it's not funny how
things once you've done this in several Industries It's relatively similar to kind of
are e-commerce road so they have kind of like the big show their one goes to this kind of like you know the current stage and then they have the more forward-looking show that they kind of do the smaller and we're in a hot soak.
Kind of like interests next for Autos this was in Raleigh so it's actually nice to get to drive to the conference house by 2 so I was invited to speak about.
[11:43] Changing car ownership landscape which is not the topic of our podcast but it is kind of fun you know there's an in the
my world my e-commerce World in my Auto World are all colliding so we we talked a lot about these new models the most popular ones are there's two companies ones true and ones get around the CEO of truism eBay dude and then the get around
my folks are both marketplaces into
takes time for at least learn to talk about all the time and see it seeping into the Auto World another interesting company in that space is called ACV auctions where there's all these physical car auctions
require acres and acres of land in kind of silly because you ship all the cars there and then if people fly there and then walked around and and
bid on items and then they blow to back up and shut them somewhere else there's two shipping's in there there's this ACV auction company has gone and it just on a digital marketplace around that so very kind of eBay 1.0 asks to be in a different industry but then see the
the similarities the other fun thing is a lot of the presentations were you how do we make it like
easy for people to buy cars the carvana has really disrupted that World by effectively taking e-commerce.
[13:03] Stuff that we know well and applying it to used cars so now all the dealers are trying to figure out your pay if Jason walks in on a on a
Sunday afternoon in Chicago how can I sell him a car in less than 8 hours so that it's kind of funny they're trying to figure out you know.
[13:21] The basic blocking and tackling of that that we had knee Converse for a long time but but it's funny to watch them,
figure that out and there's a different set of vendors different set of players so it's a lot of fun.
[13:32] Yeah I know it is it's funny when I get teased a lot from
my tenure at Blockbuster entertainment which is now kind of a joke but we sold the company for a bunch of money and a lot of the management team and that the founder of Blockbuster took that cash and started AutoNation in the hole
the whole premise even back then was,
like the inventory in any given used car dealership is the local inventory in that one dealership so you know a very small assortment free Chopper
but what you really need to do is aggregate the assortment across the whole the whole country right and that's that sounds like that's essentially what's happening with these options as well.
[14:14] Yeah yeah and then yeah so they'll traditional models are all changing to the CarMax has the realtor now adding digital and it just kind of funny to watching.
The same waves we were kind of in the end of the sixth inning or whatever you want to say I guess Amazon would say they won but you know if we've been that day one for 20 years
daughter Ministry of feels like it's way earlier in that and it's going to go faster because we don't,
we don't have all the new waiting for people to trust payments and smartphones broadband and all that it's all all here today so it's just feels even more chaotic to the folks that are in the middle of it.
[14:49] Sure I will say and I've been falling carvanha a little bit as a
start a digital shopping experience and there's a bunch to admire their butt from the commercials like you get the impression that if you bought a car on your mobile phone from carvana it would get delivered in this cool carvana delivery vehicle.
Or you go to a vending machine and the car would come out of the vending machine and I was kind of disappointed to find out that like.
Yeah in most cases some dude just going to drive the car you bought to your house.
[15:17] Sure we'd moessmer delivered on the little flatbeds they don't have the commercial tissue this really big one but they bring them on these little flatbeds.
You by Ada price on so many cars in Chicago that there haven't.
[15:32] Got you okay good I'm glad I'm glad to hear that cuz that felt a little bait-and-switch e and I'm hoping they've all been detailed by gets 50 before they get to.
[15:40] That's what we're going on there's a lot of lot of cars to clean up their thanks for bringing that up.
[15:45] Hey I'm here for you man.
[15:47] What's one of the big news items we wanted to talk about is last week Amazon revealed their second quarter earnings since they came out the stocks been a down about 10% feel a little bit of pressure and what would happen there is it's kind of mixed quarter so it's Amazon you look over the long Arc since it went public
I was at a whiteboard I would draw these kind of stairsteps there and and see what happens is the,
they'll invest will bits the stair goes sideways and her words, like what's happening this is going to work out
and then do that that's what cycle Revenue growth will accelerate in the woods happy on Wall Street and then the Amazon will say well we need to go through another investment cycle so they've been pretty used to this
the telegraph this if you want if you remember that's when they took the auctioneer to announce
next day Prime so that's the real theme of the quarter is the mixed aspect of it so positive
camaco season of the quarter was one day Prime really increased demand that was that was good and exceeded while she text
Haitians pretty handily on the top line but at the same time I'm delivering on one day Prime really
shoot away at probability so you know I can have this mental image of they press the button on the website and then the.
[17:08] Total chaos happen to the Fulfillment centers in there just kind of getting their arms around that also you throw Prime day in there that wasn't a cute too but it's kind of body language was that it was a lot of little bit harder and more expensive to implement one day Prime
I'm too we're going to dig in the next level down is and we thought we kind of cover on positives and negatives we drew straws and I got the positive side Jason sits on the positive side
Revenue accelerated so Revenue at Amazon grew 21% year-over-year excluding in any kind of
benefit or hadwin from a foreign currency that exceeded expectations by about 3%
pretty material at Amazon's you know billions and billions of dollars to exceed by 3% hundreds of millions of dollars kind of come out of that one area that
everyone looks that pretty closely is within the Commerce business or what they called the online unit the there's a unit growth so that's effectively
no to the number of things sold so paid units that it's kind of slow down over the years to about 10% that.
[18:16] That metric which is kind of a forward-looking metrics that popped up to 18% so that's probably the best signal that the one-day Prime is working really well and then I think imma call Amazon did call out that you know
that that was driven that salvation was driving by the introduction of 1-day Prime one-day Prime's benefit was largely centered around North America because in most of it to go to 2
UK for example it's such a small little island are that pretty much prime has been one day for awhile since you out a lot of Europe they're already kind of at one day Prime.
[18:52] So it has a business impact on their National side so a lot of this growth came from the North America side
so North America Revenue accelerated to 23% year-over-year compared to 19% q1 that's a 4% bump due to one day Prime and then
the other thing that made Wall Street excited was you know whenever Amazon releases a quarter they talk about the next quarter so.
[19:17] Ouachita been projecting Q3 to be no X and then Amazon guided that pretty significantly ahead kind of keeping it this mid-20s growth rate at the mid,
another kind of interesting kind of in this we get kind of inside baseball here on the call Amazon talked about
Amazon is very methodical in these autometrix Sue on the call they revealed that they have about 10 million items right now that are in this kind of one day Prime
so think about these concentric Rings where you have at the center at the same day you have Prime now and then some cities have
car that same day delivery that's Prime now is like was like 5,000 skews and then I think maybe you get up to 10,000 20,000 skews for same-day so then the next thing out which is next day is now 10 million
and then the next train out which is I think there's about 30 to 40 million Prime
eligible products total supposed to be like the next thing out which is 2 days going to probably have caught 30 to 40 million so
they're really kind of focused on this this kind of ring that is that one day Prime so you know theoretically I think they could get you know.
[20:37] 4 * 40 million
items that are effectively available to put into that one a prime will it get it all there I don't know I have to kind of wait and see how they go but ten millions not a not a bad start
so it's it's going to be interesting and now they've revealed that number will get a slide about it we'll try to track it on the show here for you guys so you got to see if I was if I was them I would kind of try to get that up to
20 million die holiday I think that would be no cuz pretty material holiday bumps and then what you begin.
[21:07] Last couple things within third-party that segment of Revenue grew 23% year-over-year which was a nice little
acceleration retail subscriptions which is kind of our Prime lives that grew 37% and then one thing we watch on the show really closely is the Amazon ads now they put in this other category in blush and Rose have a way of kind of
looking in there and pulling out the ads business so so the ads business was up 37% year-over-year really nice growth and then the estimates are that this is that about a 13 billion dollar run rate,
I'm going 42% year-over-year so the projections have kind of been edging up we talked about this for a couple years that they were there
you're pretty high now I think they're raising them so I'm seeing a north of 30 billion from Amazon ads by 2024 that would
you're the ad
guy that would definitely put them up into the the Facebook kind of snow level certainly that would exceed I think Twitter and Snapchat
it might stay singers and they're not growing as fast as is Amazon's business so don't put them up in that kind of elite air with Facebook and Google if I'm remembering by my ad.
[22:21] Yeah they're they're clear third they're like you. They still have a significant amount of ground to make up on on Amazon and Facebook and Google but they also have like a pretty good Gap ahead of everyone else.
[22:34] Yes those are the positive sit in the question is why was the stock kind of down and I'll turn it over to our curmudgeonly Jason to give you the negatives.
[22:44] Yeah I think it's because I'm such a positive guy that it it just feels better getting the bad news from me,
11 seidman on the advertising I saw a new and interesting datapoint today that I thought was kind of fascinating there's this company out there jumpshot we've talked about them before
they have tricked a bunch of consumers in the stall installing there plug-in in their browser.
Variety of utilities but then whether means is they get to collect data about how all those consumers are our shopping and their web browser and they,
they sell that industry data so they get they claim they can watch millions of Shoppers in North America on Amazon and they said that in January of last year.
6.6% of all product detail page is the people looked at on Amazon where clicks from a sponsored at.
[23:42] So by December it was 10.5% of all quicksand so there's this like they have monthly data and you just see this daddy step up that like,
Amazon has essentially double the amount of page views as a result of these.
These paid placements in that this very much follows a trend you see on the other big advertising platforms that you know originally.
You know Facebook had a lot of organic Google had a lot of organic content in overtime as they.
They've you know optimizing monetization on their platforms or less and less of the the content with C on their platforms is is organic and Marvis paid so where.
We're seeing a very similar progression happening For Better or Worse on Amazon.
[24:30] That Flippin to the the negatives from the earning report the first one was that their AWS growth rate was slightly below expectations so.
[24:43] To put this in perspective.
The growth rate was still 37% so it's a very fast growing business it's a wildly profitable business in Amazon has by far.
The the largest share of that business and I would say you like one other positive about that business is that there's still a ton of growth left in that business so you know by most people estimate something like 5 to 10% of all the.
Computing jobs in the world are done in the cloud and the rest are all still done in local data centers and things like that so there's still a huge amount of growth as.
Compute my grades from
from the local to the cloud and Amazon you know has this this clear commanding lead but the rate of their growth is starting to slow down and particular Microsoft and Google.
Wow much more than Amazon are now growing faster than Amazon so that's like not unexpected but it's interesting to see that play out and obviously there's,
a lot of mistaken Impressions out there that the.
That the revenue from AWS like pays for the unprofitable retail business for Amazon and hopefully our listeners.
I have learned to debunk that but be that as it may the AWS revenue is is very beneficial to Amazon.
[26:09] Giannis this is not a cloud computing podcast but Microsoft actually their Cloud Revenue just passed their non-cloud revenue and that was really well-received by Wall Street
they are now in that that
Elite Trend dollar market cap where Amazon has kind of Fallen well below that due to the headwinds from this investment cycle.
[26:31] Yep yep so it's it's super interesting to see this this Microsoft Resurgence they also announced that they're going to
invest more than a billion dollars in this openai platform that they're going to accelerate via.
Azure which is their Cloud platform so I say interesting stuff happening in the cloud space I like to think we're all the beneficiaries because the the tools and services that these guys are all offering.
Like they're they're so competitive with each other that they keep wildly improving and expanding every quarter so.
So it's a fun space going back to the retail side of Amazon's business a little bit more overall gross profit decelerated Amazon so is,
22% versus the last quarter was 27%.
[27:22] As you mention like they took a little hit because they had a good quarter last year and then their guidance was that they were going to.
Make more Capital investments in the subsequent quarter and expected things to go down and that's that's kind of how it it played out but they.
You know still still it's no fun to tell people that you you made less profit than you you did in the previous quarter.
Their operating income was also down a little bit and you know you meant I think you already mentioned their there.
There's a third quarter guidance was also a little lower as a result of this slightly lower profitability and I look at all three of those things and that to me those are all symptoms of.
They made the shift to one day Prime and it was a little more expensive and difficult and messy.
Then maybe they they anticipated and sew-in you know I think as we talked about in the past.
[28:28] Any inefficiency you have when you accelerate everything they they get Amplified in exacerbated and so you know the the.
Putting the accelerator on a lot of these processes if you don't have the exact right inventory in every fulfillment center instead of having expedite a shipment from one for filming Center to a customer now you're having to expedite shipments from to fulfillment centers to a customer things like that so.
Like this doesn't seem like a horrible shock to me and I I feel like I have a pretty high degree of confidence that.
That Amazon is going to operationally get this stuff all squared away and
you and me talk about this in in other news later in the Shell but like however much pain it's causing Amazon to do one day Prime delivery a bunch of other retailers have already announced that they're going to match the one day service and others probably will and I can virtually guarantee you.
It will cause more pain to all those other retailers to try to hit that service level than it's causing Amazon.
[29:30] Yeah absolutely yeah some of the Wall Street folks are kind of saying it's a knockout punch in there there's a lot of interesting kind of language around that that the the demand they're seeing from it.
Is there a tributing just to really kind of is going to,
if it stays in Amazon and get the cost down it is going to be late to away at the the sheriff not only online but the offline folks will moved on Lancaster.
[29:56] Yeah I know you have talent follows Amazon pretty closely and they they.
They have a pretty sophisticated model for how much opportunity think there is for hims on how quickly they'll grow and then they do this big consumer survey every quarter until right after Amazon announced this last quarter
they surveyed all the customers about how their shopping behaviors might be different if they could get stuff in one day and they had enough Confidence from that survey
that they had to dramatically increase the
addressable Market in their in their model and therefore like the the amount of Headroom for growth Amazon had because I felt like,
offering one day delivery was going to change a lot of shopping habits and and help Amazon capture a lot more wallet chair.
[30:43] Yeah one final announcement they made that's near and dear to your heart as they talked about adding two more go stores which will bring the total to 13.
[30:52] Yeah and it depends on how you read the announcement but there's two to four that are currently scheduled to open so maybe two of those they had already announced,
and they added two more but two of them are in Chicago,
and we have a number of ghosts tours I want to say we have three or four here now but one of the new ones that's opening here in Chicago is actually opening in one of the buildings I have an office and so it's at the merchandise mart.
[31:21] So that that'll be fun this was not Amazon news but there was a sort of interesting article.
That that came out that someone had done an analysis of the,
the shopping carts one of the credit card companies of the like spend in the Amazon go stores and they reported that the average ring in the Amazon go store is.
Much lower than the average ring in a traditional convenience store so so they were saying that like.
A typical consumer visits a ghost or like two to five times a quarter and a typical consumer visits a 7-Eleven like.
427 x 1/4 so they get 7-Eleven get slightly more visits then I go store but then the average ring in the convenience store was like $25 and then the go store it was like $14 and so the.
The takeaway from this is that you know people are tending to buy one item or just a couple items in the go store in a slightly bigger card in it.
Typical convenience store in it adds to the the the high-level speculations that the C's go stores at the moment are wildly unprofitable so it's,
it's very interesting and typical Amazon that like in spite of the fact that the the unit economics don't don't seem to work at the moment.
You know that's not curtailing Amazon's ambition to keep keep scaling and growing and learning.
[32:51] Have you tried the the coffee that I have seen some of the newer ones have the coffee thing have you tried the.
[32:57] Yeah they do have a coffee bar I confess I have not because I have very goofy specific tasting coffee but I will I will have to try the coffee when they open one in the merchandise mart.
[33:08] Well we need you to take one for the the podcast team and even if it's sub below your standards we want to kind of hear you're all the Gory details.
[33:16] Yep. I'm embarrassed I'm embarrassed to say that that I haven't I mean I think two things you think of when you think of the retailgeek are Amazon go stores on coffee so somewhat embarrassing to me.
[33:27] You can just walk out without paying this can be even more fun.
[33:30] Yeah yeah as I was like to say they they invented just walk out but they broke just walk in.
[33:35] What if you go in and get your coffee drink it and then fill the cup again will they charge you for lunch test that Force.
[33:43] Yeah well yeah that it is funny that there is a little bit of a history of background like you think you're joking
but this this ties into this so I kind of broader theme that there was some news about these last couple weeks which is about Amazon's overall grocery Ambitions and that the reason I say this that ties into coffee ago stores is because
there's an interesting recode article about the history of the ghost or in the evolution of it and,
it started out as a full-service grocery concept and in fact the idea was that you chop all of the.
In a live store that use Go technology to just let you grab whatever you want and leave and that you'd buy all your consumables,
I just ordered them on your mobile phone and they'll all be packed enough for Film It Center that was attached to the store and they be waiting for you as you walked out of the store.
And somewhere along the line it was deemed too complicated and one of the biggest reasons it was too complicated was.
[34:54] All of these items in a grocery store that have variable quantities that you have to weigh or count,
or you don't have different sizes of the same thing we're tricky for the camera to recognize and so,
the camera knowing whether you have 12 or 16 oz of coffee in your.
In your cup and your point whether you drink half of it and refilled it is a tricky Edge case that apparently Amazon aspire to do originally and then kind of avoided when they rolled out.
The ghost or so.
But it's interesting how Amazon handles that in these go stores but they they there is now construction going on in the original.
10000 square foot lease that Amazon took in Seattle when they thought they were going to open a grocery store and so there's lots of speculation that in the not-too-distant future we're going to see a new grocery concept.
That that may include some of the Amazon go visual search capability computer vision capability but but the Amazon may be stepping back to that more ambitious original.
Original Vision so we're all eager to see what happens when they they peel the paper off the windows of the storm Seattle.
[36:19] So that is kind of interesting in the grocery space another interesting tidbit of news I saw recently from Yuna from the the Seattle corner of our country.
That kind of feels very Amazon asked to me is Starbucks made an interesting announcement.
They did a partnership with a POS company to sell a product ties version of their mobile order and pay two other restaurants.
[36:52] So are they now it's any who's going to be taking the outer or how's it going.
[36:57] Yeah so I did not see in the in this original article.
Who like it may have already been pre-sold to.
But essentially this was like the chief digital officer Starbucks that help build mobile order and pay left Starbucks to start this new company called Brighton,
and now fast forward a year later Starbucks has done a deal with him at bright room,
to sell the the technology stack in the software stack to other retailers and to me that feels very.
Amazon AWS cuz it like you you build something to solve an internal problem and then you say like.
You know rather than keep it as a proprietary manage for us we're going to scale it and monetize it by by selling it to the rest of the industry.
[37:53] You'll be interesting to see who takes out or not.
[37:57] So I'm up interested to see if other people up take it there a lot of categories that maybe aren't directly competitive with Starbucks but want this capability and so,
you know I it is easy to imagine it being successful motor mobile order and pay the huge deal in the in the restaurant space right now and and something with a credibility of the Starbucks offering would be interesting when I'm super interested to see is.
Included in this deal would they ever consider using Starbucks as a payment method.
So can I buy my Five Guys burger on my Starbucks card for example.
[38:36] Yeah yeah so be interesting to see how if it's a universal payment system ER or just kind of you know a complete private label into another brand.
[38:44] Yeah I kind of suspect the first version will not include payments but it's interesting to think about and you know it could also open the door we seen a little bit of this like Kroger's it has invented some in-store technology that they're trying to sell the other retailers I get just going to be interesting to see if this is
a play that becomes a more you know Common part of the The Playbook going forward where I would argue historically
whenever a retailer meant anything proprietary they they want to keep it as far away from the rest of the market as possible and keep it as a sort of,
unique competitive advantage.
But there was also a lot of logistics news in the last couple weeks have you been following all this cotton.
[39:26] I have a few yeah. I kind of use it that Amazon is caused so much destruction or one's kind of working to keep up have what what do you think about it.
[39:36] Yeah no for sure and some of it very directly so this is slightly old news at this point but like in the beginning of July.
FedEx add their earnings and either during their earnings call or within a day of that earnings called they announced that they were not renewing their contract to provide Express services to Amazon.
And when you first hear that you go oh my God that's a huge deal.
Be reminded FedEx have the smallest chunk of Amazon's delivery and FedEx has a couple.
Products that they sell the Amazon only one of which is this this are delivery and so this is really FedEx walking away from one piece of Amazon business,
and you know if your regular listener the show hopefully it wasn't a total shock to you because I've said for a long time.
[40:27] The carriers are having trouble rapidly scaling their capacity and in so if you have a finite capacity.
Do you want to sell that capacity to the highest volume user that you don't have the most negotiating power and pays the least or do you want to sell that capacity to eat or smaller retailers with more with less Leverage,
they will have to pay more for that and then you know apparently FedEx answer was.
Yeah we we can make we can better product profitize are our capacity by selling it to other retailers and walking away from from Amazon who presumably.
You know as a Biltmore more of their own capability or you know where we're turning the screws for a better and better deal from FedEx.
So that was big news at the same time in that earnings call they did acknowledge than Amazon is a potential competitor in the space which like that also should not be.
Shocking but like you know up to this this point like FedEx had consistently said that that Amazon is a great partner and not a competitor so it's kind of funny that they finally acknowledge that.
[41:37] I think they've all slipped it into their or their 10 case there's this guy competitor kind of category in everyone's going to start it but Amazon in there.
[41:46] Yeah and I think I got triggered first by Amazon listing them which is never never good news,
the FedEx and UPS are doing some interesting moves the going back to the capacity problem they are both going to seven-day-a-week delivery so they've added Sunday as a delivery day,
that is going to be interesting to watch out you know Amazon was just a lot of their own deliveries here in Chicago already like has been delivering on Sunday for some time and Amazon has a u.s. postal deal with.
For Sunday delivery so like and I feel like the consumer expectation is it is is expanding the seven days and now we're seeing the other carriers.
Trying to figure out an offering in that space and they're also doing some interesting things about reverse Logistics and so.
UPS and FedEx have both like greatly expanded the their locker program and their pickup locations and I think.
Last week UPS announced that they had done a deal with CVS Michaels and Advance Auto Parts to use those 12,000 stores as.
Pick up locations for UPS packages in my mind that the CVS one is particularly interesting because.
CVS I believe is also a pickup and return location for Amazon so you know.
[43:12] It seems like as the healthcare industry is getting more challenging and and the prescription drug business getting more challenging like CVS is doing some interesting things to repurpose some of the the square footage in their stores.
[43:24] Have you is there any anecdotal evidence how these return programs are doing it for everybody like is Kohl's benefiting from the Amazon thing or are people just kind of like.
[43:33] So the 3rd party traffic monitors feel like holes traffic was up and Kohl's claim that their traffic was up,
demonstrably in the pilot stores when they first
when I first started taking returns and so Kohl's is totally Double Down they've expanded the returns to all their stores and Colts is really improve the logistics around the return so you cannot walk in a Kohl's with just a unpackaged item that you bought from Amazon and your
order on your smartphone and Kohl's will take it back box it and do the whole thing for you a CVS will take that package back but they don't do all of that boxing Logistics portal you have to bring the package,
can a ready to go in a CVS store and I know people always say like Josh kaul
poses in bed with their competitor I actually think this is the smartest partnership I've ever seen a retard do with Amazon because,
this this partnership is not giving Amazon access to Kohl's customers in any way this this partnership is really exclusively giving Kohl's access to Amazon's customers.
[44:43] Yeah yeah I guess I'll never announce it let you know there's some percentage shopping in the store which.
[44:52] Yeah exactly if you have to walk through that store you're going to serendipitously discover something and closes protected well suited for that because they're a little bit of a
treasure hunt store anyway and that you know they tend to have a thin inventory you know of that turns regularly with lots of deals and so
if you are Kohl's shopper
and that triggers a couple extra visits when you're returning something you know you're very likely to discover something and if you're not a Kohl's Shopper it's even a bigger win for Kohl's if they get you to come in that store for the first time.
[45:23] And then I'll give you the privilege and then you every time I go to Kohl's I get in line behind someone that's optimizing their their triangulation between like some kind of cash back thing
Kohl's cash and something else and it's crazy like.
[45:41] Yeah we call it doing a leveraged buyout on a t-shirt.
[45:45] And then invariably they'll like walk away from a cart full of stuff to run and get like this was
it's not BOGO but you know if I bought this and this I got double Kohl's cash and I can apply them in this and then they want to split the transaction with their significant other and it's like
no they did a line for people that don't like just want to buy stuff and get out of store.
[46:08] So for sure that's a common complaint in a number of retailers and Kohl's in particular like the more sophisticated those those reward programs are in the greater percentage of customers that are in those reward programs and take full advantage
the more acute that problem is
in the case of the Amazon returns it doesn't hurt you though because the Amazon returns as a separate counter within Kohl's so you're not waiting in line behind
any of those people to return your Amazon package at Kohl's and a bunch of other retailers like Macy's a big part of their answer for you,
if you're not that super high Rewards customer that's doing that really complicated transaction there they're trying to get you to do mobile,
Scan & go and check out without standing in line because they know that check out is a big a big pain point for them.
[47:05] Yeah I'm not sure that the average Kohl's Shopper Macy Shopper has,
then as early in the Doppler that technology as you probably are but like I I do think they're going to continue get more more traction we're seeing more and more stores.
Go that way and that's that such a perfect segue to.
Something we'll talk about in in just a minute but I had one more news topic I wanted to touch on before we get there.
[47:31] So there's this awesome quote I use all the time that I think Andy done originally used maybe four or five years ago e-commerce is awesome.
As long as you don't care about anybody off and
the sort of ominous you know message there is customers are loving it it's a it's a better customer experience in many ways for a lot of use cases boat but when things you shouldn't lose sight of is
the the unit economics of e-commerce are almost always unfavorable versus traditional retail unit economics and,
two big reasons for that are shipping and returns and it's it's just been interesting I've seen some some.
Not optimal news for eCommerce sites on both of those those costs this this month
so you know one thing there's a report every year that comscore does called the state of the online retail industry and they share a bunch of data and Trends the Desi from there you know millions of customers that shop in their panel
and one of the staff they always share every year is what percentage of sales every quarter were sold with free shipping.
And so for holiday this year 85% of all e-commerce orders had free shipping.
[48:56] And like three years ago it was 65% of all Commerce orders had that had free shipping so increasingly this is probably isn't surprising customers expect free shipping and they only by when they get free shipping,
and that that's currently you know ramps up the the profitability challenge for retailers and then you know when you,
you talk about like you know Amazon stepping on the gas and Walmart and Target quickly following them with one day shipping you know when you not have to give away free 1-day shipping,
that's a real challenge to to e-commerce profitability and then.
For many retailers the double whammy is returns tend to be much higher online and I saw a horrific stat this month,
there's a logistics company called optoro that did a study
and I'm not sure if I told you this I haven't been able to look in their methodology but they are claiming that the average rate of returns
for e-commerce orders over the last five years has essentially doubled so the percent the percentage of returns at every e-commerce retailer twice as high today as they were in 2014.
[50:12] And I don't know if that exact number is accurate this came from a Vogue article I'll put a.
Lincoln the show notes but but even if it's just directionally accurate your returns are going up.
That that's a huge stress to profitability in the example I was like to use
when revolve had to disclose their Finance his revolve is a Edition Ada vertical Brandon the apparel space in 2018 they had almost a half billion dollars in online sale they sold 499 million online and
on their books they they wrote down 531 million dollars in costs associated with returns.
[50:59] Wow that's not skilled.
[51:02] No nosso the unit economics on that suck.
[51:06] It's a minus 20% or something.
[51:09] Exactly and so obviously there's a ton of people working on,
the problem of returns and there's a lot of you know interesting things that the people are doing above make it less expensive to do returns and diminish people's,
interest in return but like early on an e-commerce industry you know everyone encouraged you to buy multiple sizes and send back what you didn't need I think I've sort of Zappos has.
You'll be one of the first big retailers to really do that and now they're desperately trying to untrain all those customers to stop doing that.
So not so you know that's going to be interesting stuff to watch as more and more of a sales volume shift to e-commerce were going to have to figure out these.
[51:53] I'm not sure how you entertain people out of free shipping and returns so sweet.
[51:59] Yeah I haven't seen it done in general it's very hard to unring a bell.
So wrapping up as we're coming up on time here I have a couple upcoming trips that I'm excited about and we'll get to talk more about some of them but I'm actually headed to.
Indianapolis and Dallas next week and the one of the reasons I'm excited about dialysis there's a couple stores,
that haven't been to yet in the Dallas Market so one of the sources Neighborhood Market that this is one of the physical Marketplace stores.
[52:34] Like merchandise a bunch of degenerative Brands and others in a physical space in the,
the the store essentially collects rent from all the other brands in the Brand's keep all the the prophet of there or their sales so it's sort of a digital Marketplace.
[52:48] In a physical manifestation they're going to be opening a store New York soon but I'm going to get to visit their original Plano store next week.
[52:55] And then also in Dallas Sam's Club has a store called Sam's Club now which pair are skin and go conversation Sam's Club now,
doesn't have a traditional check out so the only way to get out of the store is to scan and go and ask him super interesting virtual reality feature or augmented reality feature is to
let you get better product information and wayfinding and stuff in the store so it's up a store that's totally designed around using your mobile phone while you're in the store so I'm I am,
excited to see that and then,
a little later in the month on August 20th I'm going to be at Eataly East which is a long-running e-commerce show
in Boston and I know you can't join me but,
I will be sure to take good notes and do a trip report there and we may be able to put down a couple of interesting interviews from some of the
set from some interesting retailers that are attending that show so hopefully more on that and then if any of our our listeners are in Brazil or
are familiar with Brazil I'm going to be doing my first trip to Brazil ever at the end of this month and I'm excited that Mercado Libre has invited me to come speak at their customer conference so,
looking forward to checking out some of the the Brazilian retail and I'm eating a bunch of the sellers on that platform.
[54:23] Hope you can screw them on marketplaces.
[54:26] I have a feeling they already know a fair amount about marketplaces but I'll certainly try to add my spin but it won't be in Portuguese.
[54:34] Yeah talk slow to the translators and keep up the I learned that the hard way.
[54:40] Well that's that'll be easier because I'm such a slow talker just naturally oh wait nevermind I'm allowed talker that's what I am.
Yeah so that is all the news we have for this week I apologize probably little longer than we hoped but that's part of the ramification of us not laying down a new chauffeur for a little longer than usual.
[55:02] And thanks for joining somebody.
[55:05] Yep and as usual of you enjoy the show we sure would appreciate that five star review on iTunes if you do have any questions or comments about any of the news from the show feel free to hit us up on our Facebook page or on Twitter and until next time,