EP208 - Elliot CEO and Founder, Sergio Villasenor
Sergio Villasenor (@sir_gee_ohhhhh) is the CEO and Founder of Elliot. Elliot is a modern, mobile first e-commerce platform that describes itself as: "The easiest way to sell there, there, there too, yes there & yes all the way over there. No-code e-commerce platform for every there & where you want to sell."
In this interview with Sergio, we get a great overview of Elliot's features, what sets it apart, and what their vision for the first is. Sergio also breaks some news about the platform. As of April 1st, they will offer a free SaaS version (except for payment processing fees), and will open source the entire platform.
You can join Elliots WhatsApp group by sending a message to 347-715-0728, and get early access to new features.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 208 of the Jason & Scot show was recorded on Thursday, February 20th, 2020.
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.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this is episode 208 being recorded on Thursday February 20th 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:38] Hey Jason and welcome back Jason Scott show listeners well listeners we have a real treat for you today in today's show we are going to explore one of the big new trends and e-commerce platforms
called headless Commerce or
no / low / 0 code please welcome to the Jason Scott show Sergio Villasenor who is founder of Elliott welcome,
[1:04] Hey guys happy to be on the show.
[1:06] Sergio we are thrilled to have you and I feel like Scott May of potentially even inadvertently introduced controversy
already just in the description and the intro so
I do I do want to jump to that but before we do listeners always like to know just a little bit about the background of our guests so could you tell us what led you to your current role as CEO at Elliot.
[1:31] Yeah happy too happy to give that background,
I spent the last 10 years in e-commerce coming more from the engineering side of things working with mid to large Market Brands predominantly at agencies or software companies,
most notably One-Stop internet which was a PC back agency that worked with Brands like Lululemon John Varvatos dragon bone J Brand,
and over that time had built kind of my own blueprint and flavor of tech that allowed Brands to stand up e-commerce stores or supply chain technology that help them either streamlined how they sold online or offline or just across borders.
[2:07] That's awesome and did I hear a rumor you also played college football.
[2:11] I did I played at the University of Nevada Reno I played free safety there.
[2:16] Awesome so that makes you the like debatably the fastest guy on this podcast.
[2:22] Depending on what we're racing against yes I would say I asked this.
[2:24] I don't know if you've ever seen Scott her I run but at the bar is very well.
[2:29] Unless it's a Starbucks Jason can haul ass for a Starbucks.
[2:33] I was about to say for the right Frappuccino y'all might be.
[2:37] But potentially true.
[2:39] All good.
[2:41] So give listeners and let's start at the 30,000 foot level because I follow you on Twitter and it can go deep very quickly what how do you describe Elliot at like a cocktail party kind of scenario.
[2:55] Yep Elliot is just a new Commerce platform that allows sellers to stand up storefronts
that can accept payments and shipped globally instantly without writing a single line of code adding an app or Plugin you don't even need to use your credit card you can just come on Elliot launch of store sell and less than 5 minutes.
[3:15] Got it okay so when people hear that I'm sure the Shopify and Bigcommerce and some of this what I would think of as the software as a service type platforms probably come up how do you guys compared to something like that.
[3:31] Great question I would say that outwardly most people would perceive us as being a,
SAS e-commerce competitor to a Bigcommerce the Shopify and other incumbents in the space however Elliott's very different in the sense that we,
part of the payment processor and Merchant of record on every transaction so we're more like a Marketplace except as most people in the United States and Western Society no marketplaces don't necessarily provide the most brand new experience,
we provide immediate global distribution but in a very branded way
where you can create different websites looks and fill that are all properly conveying your brand message and tone on the URL that's yours and owning the customer data except we just provide access to a payment processor
and Merchant of record service that allows you to sell in chip.
[4:20] Just a quick question on that Sergio so.
I feel like an obvious analogy to you guys is going to be Shopify and in the Shopify echo system,
there's a you can choose to use a Shopify payment processor or you could use a third-party payment processor.
Is Shopify with their own native payment system is that most similar to you guys is that fair or is there still a distinction in your status as seller of record versus theirs.
[4:55] There is still a distinction between the two if you opt in to shop pay it's still your brand on let's say the bank statement whereas when you come on and sell on Elliot Elliot would be seen on the bank statement very much like square or another Marketplace,
so that's where we differentiate.
Between Jack and fire Delia.
[5:14] Got it okay totally fair,
and I know you guys got some private funding last year just went or,
early last year just went live middle of last year so they do I have those dates kind of right and and be if you got any traction do you have any clients that are using the platform that our listeners would have heard of.
[5:39] Yes a bunch of questions there so I'll take them I won we are we are venture-backed to date we have raised a little over five point two million dollars,
most notably from sus Adventures SV Angel pentland Ventures which is the Venture arm of pentland Brands who owns Brands like Lacoste and track Smith and Speedo,
and yes today since launching the storefront platform that everyone now just more enthralled with on October 17th of last year,
we have on-boarded over 1,700 Merchants from 92 countries some of those Merchants include predominantly Shopify shop for five plus Brands like rooted goddess dough Mifflin and others as well as other startup brands,
they're kind of coming into the scene like a shotgun and next which is actually actually Aladdin,
Etsy style Marketplace or even co-working spaces here in Brooklyn like at those club that uses Elliott as their cash flows point of sale systems.
[6:35] Frankel your reference Team all do you guys have a front door that Aggregates all this
kind of I don't know if you think of them as stores but all the all the brands that are selling on the platform or does each brand kind of have its own front door.
[6:51] Each brand has their own front door it's very much their brand we haven't set up Elliot as a Marketplace as you would know it today were if you went to Team all or Amazon or Lazada or zalando,
it would be very much those Brands shopping experience,
if anything down the road will roll out Marketplace features that other connect Brands and consumers in our own unique way and fashion in flavor but that is still to be unveiled.
[7:17] Got it and then because you're kind of speaking my language of marketplace is here let's say I come and I want to set up Scott's shoe store
and then I want to invite other third parties in it seems like you'd be uniquely positioned to do that because you're already kind of just be like another another,
another flavor another kind of seller on my own site is is that a capability you guys have today.
[7:40] Correct yeah if you actually go to shop Latin x.com that's actually a multi-vendor Elliott storefront so as a user of Elliot,
Hugh Scott wanted to create a Marketplace and add bankers and have variable commission rates with split orders and payments you would be able to do that just out of the box.
[7:57] Okay very cool so in a way you're competing with Miracle on that side of things because that's part of their value proposition is helping people kind of add a Marketplace to their storefront.
Is that a fair comparison.
[8:12] Correct yeah when we look at the competitive landscape that Elliot,
erupting really were disrupting a 600 billion dollar ecosystem of software spending e-commerce platforms headless Finance product in order Management Systems cross-border tools,
multi-channel software fulfillment software single sign on One Tap check out,
if anything what we're implying and striving to do is a lot like what Apple did in the 80s for personal Computing which is just completely reimagine and re-architect the entire category and come out with,
entirely different way of thinking about how to sell and buy products.
[8:48] This is awesome so there's a ton of follow-ups I'm dying to ask but I feel like I should get one more precursor question in because I also don't know the answer to it how did you come up with the name Elliot.
[9:00] Well despite being an athlete I am a nerd so the double out and is typically an operator for or so when we initially launched Elliott the Elliott logo was fouled out Elliot with period,
so it was e-commerce or iot we just believe that this generation of Commerce began and ended with Ellie.
[9:20] That is definitely a more geeky answer than I was expecting.
[9:25] Alternatively though on my more hood side and you know when we took it to Google and we searched the Elliot Urban Dictionary came up and it had 20 very vulgar definitions of why Elliot was an awesome name and I was like reinforcements done.
[9:44] Rami Malek did a great job of Bohemian Rhapsody so I would not mind that comparison need.
[9:50] Where does where's the cow come from.
[9:55] The cow is a tribute to my grandmother so you know I came from very humble beginnings my parents would work one to two what
two or three jobs each I get dropped off at Grandma's house at six picked up at seven eight she was a crazy Cuban woman that
lived and died by all her beliefs one of those was drinking a whole glass of milk at every meal so she passed away last Christmas as I was kind of,
getting Elliott's and market and it was a very simple way of tributing someone that had a huge impact on my life in a very simple way that meant a lot.
[10:26] That is terrific so let's jump into the product a little bit before I go into the specific questions I'm kind of curious what,
what you perceived as the sort of Gap like in my mind there's there's a dearth of platforms out there there's,
big establish ones that are kind of long and the teeth there's you know new ones that have gone a lot of traction lately like you know you got to one of the e-commerce shows and you throw a rock and hit 10 of them
what what do you feel was missing from the ecosystem or what did you guys expect to do better they caused you to launch Elliot.
[11:05] Yeah that's a great question I think ultimately what we saw at a very macro level was 5G and smart most 5G and smartphone,
proliferation continuing to rise globally,
as consumers and Brands became hyper-connected I think the thing that was lacking was access to tools that allowed creators of products to actually not just say hey I have a store but actually be able to connect and ship to,
consumers around the world typically that toolkit from across border fulfillment perspective and an on-site cross-border UI ux 1,
it always been a very Enterprise tool kit specifically either flow or globally or for free now Pitney Bowes.
[11:47] And the reality is that there is not Financial inclusion in the world and creators of products come in all various shapes and sizes so.
If anything we saw people becoming more connected to Brands being able to connect with them instantly you know if you're in New Brand today you're building an audience that is by default global,
we believe that you should have access to tools to tap into that and maximize the opportunity that you're already building on the gate and four more established brands,
just sell and,
any more of like a click of a button I don't want to have to go back to engineering and say oh six eight months build shit the the moment in pop culture that was trying to capitalize just passed so forget it and if anything it's just making it easy streamlining sailing,
and equipping non-technical operators with the tools to compete globally because the reality is that consumer Demand only increases,
consumers say hey if I find your brand online I expect the same level of service from you if you're a new brand as I do Nike and it's tough to compete.
[12:50] So tell me more about the cross-border stuff so so we'll go with Scott shoe store
I want that to be a cross-border store so there's there's several elements to that there's the shipping and then there's also you know is this going to create a DOT co uk
got ya got it Etc and is it going to translate the language for me and all that or what to what level do you go on the cross quarter side.
[13:18] Let's touch a lot of levels of granularity here let's just take the basic storefront,
every store comes with i18n you can serve up one site for a global audience no subdomains need,
each of these storefronts comes with multi-currency multi-language duties presented at the time of check out paid DDP with local payment and shipping options mind you all that's just out of the box so if you're a first-time seller,
every storefront that you have on Elliott just comes with that,
with that being said there's a lot of things that also come with that there's the Fulfillment side what happens post purchase and transaction,
since the duties are paid GDP we provide commercial invoices customs declaration forms the whole nine let's say I don't have HS codes for proper duties and taxes as long as you have a product image you upload it
for able to assign an HTS code with a 97 percent great with our image processing services to ensure that the duties are properly calculated as well and my new,
all this is just out of the box.
[14:16] Yes about you guys being Merchant of record it kind of
this is the huge benefit right because you can kind of umbrella everybody in this one you know by being able to implement this cross-border functionality and have everyone underneath it
and then how about the shipping so so let's say I'm going to ship an order you know to the UK do you guys do like a borderfree cross ship where I ship to an address in Miami and it gets reshipped there or
or are you let allowing me to set up with the career of my choice of how to ship internationally.
[14:49] If your store had a UK Shopper when they go to check out they would see Royal Mail and we would do some type of her smile consolidation.
The same if that consumer was in China they would be the same type of first mile consolidation with SF Express so typically that first mile consolidation would go to a major airport of either LAX O'Hare or jail.
cool and then so I get how this is codeless do you guys sit in there's a big movement in e-commerce is headless where you can kind of take some of the services underlying an e-commerce platform
and if I already have some kind of a front-end I can drop those in as is that a part of the market you guys deal with our you're doing much more of this kind of self-service really small business that,
doesn't want to do any coding at all.
[15:41] You know will work with major Holdings companies we already do and which is why we developed a headless Jam stack for an end right out of the gate that will become publicly available,
April first however there's already Brands using it,
the benefit to having this Jam stack front end is that you can create more robust friend and shopping experiences.
With the same cross-border infrastructure so unlike other pwas in the jams X space.
This store that you deploy as a developer can already accept payments it can already ship cross-border through the LED API and key already available to you in your admin,
it already has a multi currency multi-language i18n baked in natively it has local payment and shipping options that is inherited,
and it's round graphql API it's completely serverless so it's kind of this move from monolithic to micro service to serverless it's extremely fast it runs across five clouds for redundancy,
it has a Geo partition table database so you don't need to stand up an instance of Magento to be EU compliant for gdpr anything you can sell from a single command center for the Superfast front end that you can serve up statically across five cdns worldwide.
[16:55] So I grabbed everything you said there but I'm not sure every listener will let's unpack it a little bit what's a jam stack and does it involve peanut butter as well as the gym.
[17:10] Clay it involves a little bit more it would.
The peanut butter the jelly and the toast.
[17:15] Yes sir Jason I know what a jam stacking a PW is but you know again cocktail party level or let's say you were talking to the business person at a brand how would you kind of unpack the that and help them understand.
[17:30] Yeah that's a that's a great question,
I would say that we allow you to run a highly scalable application that super fast that never goes down,
that's accessible worldwide and that you can recruit for a very cost-effective way developers to build on top of on top of that,
it's not platform dependent so as you move from platform to platform.
You can you know D riskier investment have a friend in that you can live with the next five to six years and sell a lot of products there.
[18:05] Got it cool and then when you say serverless across five clouds are you talking about AWS zones or that's more it will work on Azure Google and AWS are all debuff.
[18:20] All of the above including tencent Ali Cloud select Allen Russia and gcp.
[18:25] Oh nice so you can surf or China you can be behind the great firewall of China with with that model.
[18:32] You have to love the ability a tunnel across cloud.
[18:42] And so when you were when you say code with what I'm hearing is,
no development required everything you need out of the box so click buttons instead of write scripts is that.
Sort of what you're getting at.
[19:03] Yeah and I would say that to that point Ellie is very much a start to scale platform meaning that.
The idea that we're going through is that Elliot you don't have to graduate from like let's say I start a business on Shopify and then I moved to like demandware sfcc.
With Elliot you're able to start no code you're able to evolve and grow your business and go to low code so we have a motto at Elliot that we Champion called Nolo which is really the movement from starting a business using a visual Builder,
to your point not coding anything,
but as you grow and scale we have the front and flexibility to for you to create more robust front and experiences that better blend content and commerce and all the things that we see more mature Brands and needing as they grow their.
[19:53] Okay so and you correct me if I have the wrong notion.
In my mind like I see a big difference but I also see a similarity again going back to the shop of I analogy the one of the things that seems like particularly strong and cool about you guys is,
your lack of dependency on plugins right so.
Like you can argue as a strength or a weakness for Shopify but a lot of the functionality you need to run your business is available in the Shopify Echo System but it's provided by a third party and so the,
the downside of that is you have to turn on these these 20 plugins that each provide this this point solution and that introduces a lot of,
potential slowness security risk stability issues there's a lot of baggage that comes with,
turning on all these random plugins and their interoperability with each other and what I think I'm hearing from you is we try to avoid the requirements of all those plugins by providing all the native functionality for all the main features that,
stored underneath do I have that right.
[21:10] Yeah you have yes you have the gist of correct.
Specifically we provide the payment and fulfillment infrastructure we are working with developers to better integrate marketing tools on site however,
as an approach being a start-up we are focusing on kind of categories like beauty and fashion and lifestyle specifically small Home Goods,
where purchase intent has typically already been established at the by the consumer on a third-party channel so if anything,
we can remove a lot of the what is quote unquote traditional on-site plugins and apps because in the next generation of Commerce we see them as being irrelevant,
because there's no need for ugc on a website when you live in an Instagram and Snapchat world the ugc has already been presented to the consumer on,
the tag IG posts there's no need for reviews because half the reviews are you know Wise or,
misconstrued or you know as a consumer I've already kind of read the reviews that's all my favorite influencer saying oh my God look at that makeup look at that glow kit like a lot of the on-site dependencies are removed in certain categories and we're aligning our go-to-market strategy around that belief.
[22:19] Jason has a two-hour talk he gives on the importance of social proof and you just blew that talk up.
[22:28] Yeah I feel like that is that's I get the sentiment behind that,
I'm not sure we're at a world yet wherever you sell or real I can rely on adjacent UD U GC instead of ugc right at the point of purchase but.
[22:44] I 100% agree with you and just to level set we are building a company that's going to be around for the next three decades and.
We have to make decisions and bet on verticals and be strategic and Nimble and that's just one that we're betting on.
[23:00] Sure fair enough I was going to go to a happier example first and it was like like the for example this got already brought up if I'm on almost any other platform and I want to offer Marketplace functionality
I'm gonna go get a third-party you like miracle and and
plug them into my platform and do a complicated integration in your providing out-of-the-box Marketplace functionality because you've decided,
early on that that's an important feature set for for future sellers.
[23:29] Correctly believe that.
For future salaries that was for things that they had to do they had to create landing pages specifically One Tap check out product landing pages stores,
cash this point of sale,
and marketplaces all of which are the store types that you can create with our we call experienced builder in Delhi.
[23:49] Yep and so and we didn't touch on this but before you launch the storefront you actually launched a sort of a single page One Click by experience that seems like,
like perfectly suited for,
you know products that you're driving interest on on Instagram or Whatsapp or any of those sorts of platforms.
[24:12] Correct and that that payment page had all of the cross-border tooling and fulfillment that we're discussing here,
if anything it was a very strategic way that I can align our investment team and backers and team internally.
Just be like hey like here's the vision we can simplify the checkout final purchase intent is being established on third parties it works great for painted pages,
and the Assumption when we launch that product was,
we believed that store owners that used us specifically then in advertising channels on social media SMS email.
That they would love the Simplicity and they did they saw a 10x increase in checkout conversion and the sentiment was.
If you guys make a very lightweight storefront version of this we believe very firmly as customers of you,
that you guys can compete in unseat some incumbents so that was always the broader Vision it was just nice to hear it from the initial adopters and I think when you have an investment team it's nice to go through those milestones and get the feedback like that.
[25:16] Sure so so we start with the payment page migrate to the store front and then you also just mentioned cashew spos so is that something that's currently available is that something you're working on
and I'm assuming that's the sort of omni-channel piece of this that you would imagine a seller that has both a store and sells online.
[25:41] Correct So within Elliot when you create experiences and just to let everyone know what experiences are.
Elliot admin unlike Bigcommerce and Shopify you don't need multiple admin panels to run multiple stores you can create multiple shopping experiences and merchandise merchandise the product within them from a single point.
With that being said,
within an experience cashless POS is just one thing that you can create as a part of our experience Builder it is already available that allows you to shorten the checkout flow,
on top of that you can also further checkout you can also further shorted,
the cast is point-of-sale solution to have a very Apple like shopping experience its QR code based and already available within the admin.
[26:27] Dodgers so it supports sort of a mobile POS solution that runs on on handheld Hardware,
yep and then you're specifically saying cashless which again kind of like bypassing ugc I can imagine it's super easy to see that the future is going to be a retailers cash West.
They're like there are a bunch of municipalities where it's kind of illegal to have a cashless store right now.
[26:53] That's fine you know doing bad things usually resulted in good next steps.
[26:59] Okay and then you you highlighted it hey one of your very first insights that cause you to build this whole platform was was the trend towards 5G and ubiquitous smartphones
um you alluded to pwas so,
is that your framework for the mobile experience you get when I hit a an Eliot storefront from a mobile device.
[27:28] That's correct yeah it's a progressive web application using server-side rendering specifically next JS and if anything we're expanding that,
for a multitude of reasons but come April 1st you will be able to as a developer you know grab that front end build more robust,
shopping experiences and will continue to build on top of that belief system over the next year or two.
[27:52] That's awesome though and so the out-of-the-box experience is is pwa the mobile web experience that you provide is is pwa based which our friends in Canada do not support very well.
[28:07] I can see why they would.
[28:13] So talk a little bit about the fees how does your fee structure.
[28:20] Yep I'm gonna give you guys a jam so on April 1st we're actually announcing that the self-service site of Elliot will be completely free no additional commissions on top of the standard stripe pass through cost for payment processing.
That's just that on the Enterprise side we have a commission rate based structure with a cap that goes between one by percent.
And that varies based on the level of service that you need but come April first anyone will be able to sign up uses Elliot for free.
[28:52] Okay so I have to poke around at this little bit so April 1st you know everyone's Radars up are you sure sure about this this is not an April Fool's kind of setup is.
[29:04] Actually a part of a campaign called April fools but no the pricing that I.
Your percent going live April first.
[29:13] Okay because I know you're a bit of a jokester so I just want to make sure that we're I'm nailing you down a bit here and then.
[29:19] I like to clown around but when.
People's money I take it pretty serious.
[29:23] And then there's no subscription or anything there or if I find a Kardashian and I do,
300 million on the self-service not that it's still free except for the underlying payment fees.
[29:39] That's correct long as you use our payment processor and Merchants records services for fulfilling and domestic and international it's free.
[29:47] Got it,
and then it wouldn't be a Jason and Scot show if we didn't talk a little bit about Amazon how do you do you guys you know so the CEO of Shopify is kind of like gotten into this mode where he's kind of the.
We're arming the rebels to take on on the you know the Empire of the death star of Amazon do you guys view yourselves in that kind of a light or how do you think about Amazon.
[30:14] I wouldn't describe myself as the Death Star I think that they only fired once or twice right.
[30:21] If you are the death start make sure you put a grill on your exhaust vent.
[30:25] Now in this metaphor your ear Luke Skywalker not.
[30:29] Amazon's the Duster.
[30:30] Reading at the very least right come on.
[30:34] No but in all seriousness I don't know guys like we're just creating our own lane of Commerce,
like we're doing things very differently I can't say that we are going to be like Amazon are going to be like Shopify we're just going to be like Elliot ultimately,
the difference between both of the narratives for both Amazon and Shopify is they have their own marketing jargon that speaks x y and z,
ultimately what I'm more interested in is providing Financial inclusion for the next generation of entrepreneurs not requiring an abundance of apps that high total cost of ownership,
and I promised everyone that that's always going to be what it is so I will not just arm the rebels I will fight alongside them.
[31:18] What if someone reaction is that Amazon could take to this as they already have this whole AWS stack and they could kind of unbundle parts of Amazon and put it out there on AWS
now they haven't done that but that could be an obvious reaction if they did that what's your reaction to them doing something like that.
[31:41] I believe it's like fundamentally we would fill that,
directionally in terms of product Vision that were on the right path and you know if anything will be doing something similar,
because already underlying Services specifically around HS code classification image processing invoking serverless functions at will likely be doing the same so if anything it will be validating for us.
[32:05] Always a good answer and then on the fee structure so let's say I go to your self service product and I set up my own little sneaker marketplace,
do I have flexibility to set up the and I want it to be you know where I collect,
twenty percent or something like that it you guys will handle do I have flexibility there how does all that work.
[32:34] Trick question yes you have flexibility to Define your commission your sellers commission you can have variable commission rates so you can have more than one seller with a different commission rate depending on your business agreement with them.
[32:46] And then do you give me some Frameworks for that or do I need to kind of come up with T's and C's on that cider or are they effectively kind of signing up underneath the the Elliot T's and C's.
[32:58] You can actually add your own TNC when you invite what we call an Eliot line of Endor they'll be opting into your and are tncs.
[33:08] How many how many folks are running these kind of marketplaces on the platform.
[33:15] Two dozen now are running them they span everything from Barry,
culturally specific Market places like shop land next to leave or launching like Papa brochure and like the marketing like the grocery space so
they're diverse they span multiple verticals with anywhere between 20 and 200 vendors.
[33:37] Yeah yeah that's a you're going to cause an explosion of marketplaces I like that.
[33:44] I do too and I love.
[33:49] Let's talk about the opposite side of that that Scott might not love as much though so so you got this great stack for helping me I have a brand and I want to sell my product direct and I'm using your stack,
but increasingly people want to sell Direct on a
on a brand-new experience that they own which could be Elliott and they also want to sell on marketplaces right so when you added the.
The product catalog to launch a storefront did you guys think about any tools,
for helping Elliott sellers Syndicate on the other marketplaces.
[34:31] We did so we began to release those based on the uploading of our community,
most notably starting with print on Demand with prettify however over the next 12 months we will allow Brands and sellers on Elliot,
to participate in multi-channel selling so yes it is a big belief of ours too and this kind of goes back to the initial narrative which is we want to create an admin panel were sellers can participate in the more unified approach to selling.
That includes selling on third-party channels and if anything we believe that the product in order management system that we have currently will be able to support that.
[35:13] Awesome and one of the things that always comes up so you you have a,
a very cool architecture you have a bunch of cool and the Box features you have a super appealing onboarding experience and if it's not obvious to listeners yet one of the cool things is,
there's no barrier to signing up and setting up a store and it is kind of to me absurd how fast you can get to a,
functioning store so so instead of listeners taking our word for it you should you should jump over to Elliot dot store and fire one up and see it for yourself,
so I feel like that's all awesome and to be applauded and I can imagine you winning a bunch of customers
on that set of benefits but I didn't work with a bunch of Enterprise clients and their a royal pain in the neck mostly because of edge cases,
and so they have a million reasons good or bad why,
the out-of-the-box Shopify experience doesn't work or demandware experience doesn't work or or you know frankly to the extent that.
[36:24] Oracle ACL sapr have out-of-the-box experiences why those don't even work right and every client has some new promotion that no promotion engine has ever seen before
or some new you know shipping model or some new attributes for the catalog is.
Like and so I feel like the more customers you want to capture the more and more you have to have some answer to those edge cases like
is the is the answer for you guys sorry we don't some if that truly is a deal-breaker we don't support it is that we support that through third-party Integrations is it,
we supported through our Jam stack and you develop your own Edge case Solutions like what how do you guys think about that.
[37:12] You're really making me give you guys all the gems today.
I haven't said this anywhere literally only two of our investors go.
About this but come April first Elliot's core platform will be completely open sourced and there's a couple reasons why we're doing this,
number one we're providing cross-border infrastructure from an on-site through our Jam stack technology which initially is going to live with next JS but we'll be going to Gatsby and nuts.
We also provide cross-border fulfillment that's what we do as a company we allow you to transact process payments and shipped globally instantly.
We are offloading and open sourcing our admin panel and the shopping experience is with the one exception being the checkout function specifically what processes of payment and creates a compliment.
With that being said you'll have all the unified approaches to selling on Elliot.
Except for the more Enterprise customer you'll be able to clone the admin you'll be able to work with leaving agencies like you know Accenture and Deloitte and sapien,
and it's completely selfless and that's our answer to it.
[38:37] Very cool so April 1st is a big day for you I feel like we're.
[38:41] The big difference.
[38:42] I feel like we're taking time between now and your first time getting a little stressed out just being on the podcast.
[38:45] I am looking I'm looking at her to lead engineers and they're looking at me look at you look at me you look at.
Looking at me like you asshole you really just said that on.
[38:57] I'm super nervous on April 1st that I'm like fall for some dumb prank on Twitter and I feel like you have reason to be a little bit more nervous.
[39:05] I have a lot of reasons to be nervous yes but I promise you that the April Fool's marketing campaign will not be a joke on you and the only person that could potentially be is on me for over promising but I doubt that will do that.
[39:18] Cool let's so thanks for sharing that with our listeners we appreciate any kind of breaking news on the podcast that's,
I've been following you on Twitter for a while and I'm a Serial entrepreneur been at this game for a while no tons of entrepreneurs you have a kind of a real fun style and very
transparent way of building the company share a little bit about your thoughts on that and you know what
as a leader how you think about things in your company and now you want it to be thought of you've said you've given us some hints you want this to be around for three decades and things like that
tireless there's a little bit more about your vision there.
[40:00] Ground the company or.
[40:02] Vision culture you have you know you're doing a lot of fun kind of interesting stuff that I'd love to try to capture some of that if we could.
[40:11] Yeah that means it's to kind of focus on one culture making a big believer of mine is transparency like radical candor.
I believe a lot of us like to think that we can do that there's very few that actually employ that train of thought,
if anything when I think about creating a highly scalable and fast moving company.
You have to instill very early on radical Candor but in a very respectful way so bending how I act on social media is providing transparency,
speaking my mind not being afraid to,
you know put my money where my mouth is and I would love for that culture to resonate through Elliot which specifically is having great governance.
Being able to be challenging being able to talk through ideas and more importantly being confident and Resolute in your decision whatever that may be.
[41:06] Cool it let's talk about kind of radical transparency one of the things Mark Lori did a jet is everyone and I don't know the method here but everyone knew what everyone else made it was like very public and you know talking to him there was a good sight of that and kind of a distracting side of that do you go to that level of
[41:28] We do not we do not say how much someone makes but we do allow people to do is come in have an opinion,
create a platform for them to feel confident in speaking that opinion removing the bias that comes with opinion based on gender and race and all the Nuance that comes with the world we live in.
With regard to pay I don't know if whoever just do that maybe we will maybe we won't I know I joke and Ali with team members because I am actually the lowest paid person that Elliot I make $19,000 a year so maybe it starts there but for me.
The bigger issues are ensuring that people that do come in feel like they have a platform and a structure to speak their mind.
Do it respectfully and be able to invoke change where they see it necessary.
[42:17] And then as you were saying that I was immediately going to Tony how do you say his name Jason Tony hsieh is that right,
yeah founder of Zappos he does there need deeper neck deep into holacracy and then Sergio don't know if you seen this or not but he publishes an Evernote of what he does every day and there's all these people that have built
he's a certain format and there's all these people that built stuff on top of there which is kind of a fun thing to think about have you studied some of that kind of stuff and how do you structure the company it seems like
you're going to have a really different way of structuring the company.
[42:57] I haven't studied any of that total transparency I just behave how I behave just instinctively I can't say that I've read a lot of books so I've studied a lot of people I just kind of am this way.
It is what it is man I don't know how to I don't know how to put it in any other words and then what was the other question.
[43:21] So sorry for Matt do you have an org chart are you like the CEO and there's like a box with your name on there and then there's a line down to the CTO and or how have you organized the company.
[43:33] That's a great question so we have not created that vertical hierarchy I think of.
Creating a company in pods so building blueprints that you can deploy across ideas I markets opportunities,
so if anything were a flat organization we operate as a pod we have a blueprint that we know works and we'll use that blueprint to replicate product lines build into opportunities and go into new markets with.
[44:01] So pod is like a little functional unit that may take Elliott and go after I don't know the you know the office office furniture vertical or something like that.
So so more kind of like a little little teams that can go tackle something that are relatively independent you should read a book on her locker so you're basically kind of
yep you've got in there naturally but you may find something beneficial for him at or you may want to just stay on your own path but yeah the way you're describing it sounds a lot like this interesting new way of doing things called holacracy that you may find interesting.
[44:40] I will check that out.
[44:42] Dude you have a lot to get done before April first I recommend you not read any books.
[44:46] April 2nd I'll send you as a as a thank you for being on the podcast I'll send you a bunch of books on April 2nd no distractions until then.
[44:52] I appreciate that okay for sure.
[44:58] You know one thing we didn't cover when we're talking about George structure can you give a super rough idea of how big the company has become in terms of number of inputs.
[45:09] Yeah between full-time employees and contractors or now over 25,
that spans everything from product marketing growth sales Str saec SMS which is crazy when I look back,
and October 17th when we actually launched the platform that were talking about because it was literally myself and the two lead Engineers I'm looking at right now polynomial fa.
And that was it so that's the team size now and from where we came in October.
[45:40] And let the record show we're recording this show pretty late at night so it's alarming that you're staring at your two developer still that kind of implies you have long days.
[45:54] I would say yeah we do have long days and.
It is tough but ultimately the dates are fine they're challenging.
And if anything I appreciate that they are here accompanying me while doing this podcast and.
Them trying to make all the crazy shit that I just talked about reality.
[46:15] Yeah well it sounds like you've already built some pretty cool crazy shit and props,
ABS to those guys I hope you keep it rolling and that's going to be a perfect place for us to leave it because once again we've used up all the allotted time for the show
so if listeners want to continue the conversation you can jump on our Facebook page and ask questions or you can hit us up on Twitter and Sergio if folks want to get in touch with you I'll certainly put a link to the Elliott website in the show notes but how could someone get in touch with you personally.
[46:52] Link in the show notes is great one thing that we've actually done for those that tune in find us on podcast like this feel free to join our WhatsApp group you can text me at three four seven,
seven one five zero seven two eight,
actually add you to our WhatsApp group and you actually get exclusive drops access to functionality exclusive merge and invites to our own Ellie experiences that we actually don't make up.
[47:19] That's awesome and presumably you could also call that number if they want to talk to you.
[47:23] You can give me a call anytime I will literally pick up.
[47:27] I sort of believe that.
[47:29] How it is and that's real.
[47:31] Yeah and if you just want to follow sir Zhu and not chat with him I strongly recommend his Twitter its Sergio won't you take a shot at explaining this.
[47:41] It is 3000 with five agent.
[47:45] Angie will put in the sun it's a little hard to spell,
Sergio we appreciate you being on the show he with this kind of deadline of April first looming and congrats on what you guys have built we look forward to seeing what you build over the next 30 Years.
[48:03] Awesome I appreciate the time guys thank you.
[48:06] Great talking to you Sergio and until next time happy commercing.
EP207 - "Billion Dollar Brand Club" author Lawrence Ingrassia h
Lawrence Ingrassia (email@example.com) is the author of "Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy". (Amazon Affiliate Link)
In this interview with Larry, we discuss many of the brands covered in the book including Dollar Shave Club, Warby Parker, eSalon, Mohawk, Anker and Tuft & Needle, as well as many of the ecosystem companies that developed to enable the DTC movement including Facebook, Quiet Logistics and Locus Robotics.
We discuss the trends of DTC companies turning to brick and mortar. New ways to leverage data to identify product niche (what Larry called the "money-balling of DTC), and what the future may hold for DTC.
We also cover events that happened after the book was published, including the FTC's blocking the Harry's acquisition, Caspers IPO, management challenges at Away.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 207 of the Jason & Scot show was recorded on Tuesday, February 11th, 2020.
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.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this is episode 207 being recorded on Tuesday February 11th
20/20 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners Jason as you all know one of our favorite topics here on the show is the big move where brands are going direct to consumer
and of course we spend a lot of time talking about digitally native vertical brands also known as DMV bees
today on the show we are really excited to welcome Lawrence and Gracia.
Larry has been a business journalist at top Publications including Wall Street Journal New York Times and LA Times Larry is the author of the book
billion dollar brand Club how Dollar Shave Club Warby Parker and other disruptors are remaking what we buy
the book was just published in January and we are really excited to have Larry on the show Welcome Larry.
[1:20] Thank you guys.
[1:22] Very we are excited to have you in the topic of your book is
super relevant and pertinent to our audience so before we jump into it can you share with our audience a little bit about your background and how,
you know you sort of came up to the point where you wanted to write a book.
[1:41] Yeah you know I worked at newspapers for many years I was the senior editor really loved it retired a few years ago and when I retired and I wanted to delve deeply into something that I thought was interesting and I've been fascinated by the world of,
entrepreneurs and startups and.
I actually had a kernel of an idea when I retired so and it goes back to 2011 and that was before most people actually at even,
I thought of the idea of direct to Consumer Brands and back then I heard about a company.
Dollar Shave Club it was actually before it had the name Dollar Shave Club it was an idea of a friend of my daughters.
Now I had been business journalists as as you guys noted for long time and eating had covered Gillette at one point.
It is one of the most powerful Brands not just in the US but the world has great products as great advertising,
and it's maintained a 70 percent market share for decades I think that's worth repeating because that's just unheard of in any consumer product 70%,
market share in the US for decades and so I didn't tell Michael Dubin who was the founder of Dollar Shave Club but I thought to myself,
this is the dumbest business idea I have ever heard.
[3:03] You're going to compete with Gillette by selling razors and Blades online like really.
So then you know kind of fast forward to 2016 I'm driving to work at 7:00 a.m. I'm listening to NPR,
and there's a story about Unilever buying Dollar Shave Club for 1 billion dollars.
[3:24] And after grabbing the steering wheel tightly to keep from swerving into the lane next to me I said to myself out loud he did it Michael,
expletive deleted did it and I had two thoughts quickly first,
oh my gosh was I wrong not just me but lots of so-called smart people who scoffed at the idea you know Venture Capital investors who turned him down competitors including Gillette that had ignored and dismissed him.
And second in this is where really the idea kind of grew was how did this happen how did The Impossible or what most of us thought impossible become possible,
because nobody thought that the razor business could be disruptive in fact after my book was published I got a I got an email from an executive at a big consulting firm who does Consumer products and he said if somebody had told me that.
Ten years ago that the razor business is going to be disrupted told them that they were crazy so it was the same reaction that I had.
And you know what it was disrupted gillette's market share fell too low 50% range within about four or five years just unbelievable.
[4:33] And so as I started reporting I quickly realized that the Dollar Shave Club story well while amazing was really part of a much bigger story it was a story about,
Revolution that has changed what we're buying and how we buy things and it's not just razors its eyeglasses mattresses bras contact lenses sneakers luggage cosmetics.
Dog food vitamins hearing aids you know you've named it and you can buy a new brand and often several new brands that have been launched online and so that was kind of where I got going is a let me kind of find out about this world and why this was happening.
[5:09] Rico we're glad you you wrote the book on it so it's been great so so you do spend a lot of time in the book on Dollar Shave Club.
What do you think was the magic there you know they had the viral-video the subscription model with what do you think was the lightning in the bottle that they capture.
[5:28] Yeah so let me you know kind of pan up to it like 5,000 feet and then go back to Dollar Shave Club so you know a couple things that these companies.
Had in common but I found early on you know first of all the main formula for Success was actually quite simple.
These entrepreneurs and their young and trumpeters mostly in their 20s and 30s spotted a problem and figured out a way to fix it.
[5:58] But by offering a lower price or better value or improving the customer experience or just eliminating the hassle.
You know these problems now may seem blindingly obvious but the big companies had never fix them.
[6:12] And the second thing that is really interesting about most of these companies is that the founders knew little or nothing about the products that they were introducing them when they actually started their business.
How can that be well actually you know kind of it turned out to be an advantage rather than this advantage and the reason for that is that they.
We're thinking outside the box,
you know kind of thing they were constrained by oh we can't do this or that or the other thing because you know that's not how the way things are done in our business,
conventional wisdom can be a real problem for companies.
So Michael Dubin was an out-of-work internet marketing guy was looking for his next thing but he thought razors were ridiculously expensive and frustrating to buy because they're often locked behind a glass case so his solution raises it to half the price shipped right to your home with the monthly.
And often it's not one thing it's often several things that lead to the success and you mentioned the video which went viral.
Which you know kind of our blades are blanking great.
Shot for about $5,000 1 minute and 30 seconds I've had Marketing Executives and marketing professors tell me that they've watched it so many times it's taken basically recited by line.
[7:31] I've quoted a lot of it to him which he finds really annoying.
[7:35] To Michael.
[7:39] Yeah every time I see him my first sentence is I'm good at tennis.
[7:43] That's right and that you know kind of but if you look at this Warby Parker to you know this was the pioneering online eyeglass company that was started as a class project.
For students who are getting an MBA degree at the University of Pennsylvania's Wharton Business School.
And you know kind of a figured well if it doesn't become a business at least we'll get class credit for it but they wondered as many people,
probably have why does a pair of glasses cost,
$700 so their solution was classes for his littlest $95 with five frames shipped to you at home so you could try them on before buying them.
Again kind of in retrospect a very easy solution in a simple solution to a problem that a lot of people had but it was people outside the business that thought of it.
And then you have the founders of all these mattress companies including tough to needle which actually was the first one it was before Casper.
[8:43] These guys were software Engineers who got tired of working for software companies and one of them had bought a mattress and you know what as I'm sure,
both of you guys would agree at everybody I talked to buying a mattress going into a mattress store is a truly miserable experience your stock by a Salesman,
tries to steer you to the most expensive mattress you lie down on it for 30 or 60 Seconds,
get it home and realize you don't really like it your back is killing you and so you call the stories they can I return it and they say yeah.
20% restocking fee plus a hundred dollars shipping and at that point you can't go out maybe I'll keep it so you know kind of their idea was a foam bed in a box,
reasonable price free shipping and if you don't like it free return after 30 to 60 days if you don't like it so you know kind of,
all these startups the most successful ones spotted a problem,
so I need and pink the way to fill it and I think that's what was the Real Genius of Dollar Shave Club and then of course they have to figure out a way to Market it to get attention which Michael Dubin did with his video,
it helped in his case that you had a giant that was in Gillette that was a bit.
[9:57] Complacent even arrogant.
Pick one of the tidbits in my book is that early on one of Dollar Shave Club investors called Joel and said hey would you guys be interested maybe in making an investment in Dollar Shave Club and they were dismissed out of here.
It was like nope you know didn't even take a meeting.
Well that came back to kind of be kind of what they ruled that day because for five years later to let did.
With a hood nobody can remember it having done it lowered its prices because it was losing so much market share and again it's because,
Michael Dubin saw that they were vulnerable and then attacked it on his terms rather than competing on gillette's terms.
[10:40] Cool the haven't seen a lot of people talk about the exit and detail were you able to get any details of you know why they sold win and was there a bidding war or anything around.
[10:51] He had taught he had talked to a few people but I think that Unilever came up with you know kind of this outrageous number and it was kind of like yeah right I'll take it,
you know kind of I wondered if they overpaid I think they were buying you know a growing business,
I think they were buying on an entrepreneur who might help them think about how,
e-commerce is changing the way that products are being sold so there is a combination of those things.
[11:22] Yeah it's interesting because you know something like six to twelve months later P&G had an activist in their really disrupting things because they didn't buy Dollar Shave Club so it kind of made me feel like
maybe they'd either totally missed the boat or they had kind of low-balled it ended up not winning.
[11:38] Probably at that you know at that point probably PNG couldn't have bought Dollar Shave Club for any trust purposes it might have been able to invest in them you know kind of the first year to because it was so small but you know kind of by the time Dollar Shave Club had
you know ten percent market share in volume you know kind of or maybe even a little bit more
it might have been very hard for that to pass muster with antitrust regulators.
[12:04] Yeah and we may get an opportunity to talk a little deeper into the antitrust issue because there's there's been some recent developments there but one of the things I really enjoyed about the booklet is I sort of feel like,
it would have been sufficient.
To just have like some great biographies of these d2c companies that have caught our attention and we're all talking about and and you certainly do have,
some nice biographies of the you know the origin stories for some of these these Brands and in you know.
Most I would is I was already familiar with but for almost every one of them you you know you uncovered some interesting tidbits or had some,
some good background that was news to me so it was it was fun to read those biographies and I particularly like you you sort of introduced a framework for these companies I you highlighted the fact that,
you know some of them really entered the market by trying to have a better experience than their predecessor so you know Dollar Shave Club being an easier way to get razors then,
go to the store.
[13:09] Not just priced yes.
[13:10] Yeah defeat product jail like some of these like we're about price you know and you know Finding finding Windows of opportunity,
somewhere about like dramatically improving a the product from what was previously available
and then someone about using data to uncover sort of an unmet need.
[13:33] Yeah that's that's a really good point so when I started looking at the book I didn't want the book to be like one chapter after that kind of telling the story of this company that company other company I wanted to to matically,
slow and and you know getting back to that moment when I was sitting in the car and said to myself oh maybe there's something here,
and then kind of why is this happening you know kind of and why now and the answer I quickly Learned was technology.
[14:03] Technology had leveled the playing field and made possible what had not been possible you know 10 or 15 years ago so if you go back to I mean all these,
problems that these entrepreneurs all had long existed I mean mattress stores have been kind of ridiculous places for a long time Gillette has long you know added you know kind of little features and so that they can justify increasing the price,
but it was very the barriers to entry were much much higher,
10 or 15 years ago especially if you wanted to create a brand that was a national brand so you know kind of 2005 even up to about 2010 you want to introduce a new brand you know kind of you have to go to a retail store you have to say mr. Walmart or Ms Walgreen,
you know can will you carry my product and they like why I don't need to carry your product first of all have limited shelf space and save all have all these other brands that are doing quite well you know kinda is a pretty cozy relationship so,
dinner that comes along and that means that you know can e-commerce allows companies to introduce products introduced new brands in ways that would have been really difficult before,
the internet has unlimited shelf space you know kind of your website is yourself space.
[15:20] And then second okay so you've got that she'll straight how do you get anybody to notice you again go back to you know kind of 10 or 15 years ago and you would need a multimillion-dollar,
advertising campaign really you know kind of tens of millions of dollars advertising campaign on TV you know kind of radio newspapers if you wanted to get any attention,
Gillette spends hundreds of millions of dollars a year but all of a sudden you know kind of Technology first with Google but then most importantly with social media,
like Facebook allows a company to spend your thousands or tens of thousands of dollars to Target those customers who.
Are most likely to buy your products.
And because you have this relationship online and you're kind of selling all your products on lied you're learning a lot about your customers Behavior,
and you can keep fine-tuning the product the message whatever.
Again so and the final technology that really you know that Leap Forward that really made all this possible was in logistics so.
[16:25] It's hard to remember but in the early days of e-commerce you ordered something and you know you were happy to get it in a week or two right and thanks because thanks to Amazon,
push the envelope and forced everybody else it got to the point where you could order something it's something within it two days or even one day.
And again the convenience factor of getting something going on and getting something made possible,
this revolution is taken in front in front of our eyes so you had kind of Technology changes and it's going to continue changing,
is made you know these.
Companies these startups possible and enabled them to challenge much bigger much more deep-pocketed companies in ways that would have been unimaginable.
[17:12] Yeah I agree what you think about so there's been a lot written I've written a couple books and I realized that a lot has happened since you probably put the book to bed but.
[17:24] Yeah when you're when you're writing something when it's live and it's actually kind of evolving you know kind of it's really you know interesting interesting challenge.
[17:33] Yeah so a lot has been written and I think Andy done at bonobos to set a lot around you can get these businesses up to 100 maybe 200 million and then the conventional wisdom has kind of fallen over that you need to open stores so so we've seen away as open stores sometimes they're called guide shops but they're essentially
stores to go experience.
[17:53] Warby Parker.
[17:54] Warby has it cetera.
[17:56] Third love is dabbled in it tough to needle and Casper both have as well
yeah and so when I started seriously working on the book two years ago I think you know basically there was Warby Parker,
with stores and you know kind of,
one or two others it was kind of really small and as I got into the reporting and more open it up I said you know what I have to write have to have a chapter on retail and where does retail fit in this I mean it was something that you know that that clearly was becoming,
a trend among some of these startups and for just the reasons that you say so a couple things were happening,
one social media marketing was so successful.
Everybody started doing it so it became a bit more expensive now it's still one of the most effective ways to acquire customers.
[18:56] But it's more expensive than it was in the past so the cost of that is going out
second you have you know kind of the type of people who are most likely to buy online and to respond to a social media ad you're getting to saturation point now that may be a little bit of an exaggeration but a lot of the people are most likely to do it I've done it.
And finally then you get to like that eighty to ninety percent of retail in this country is still done in physical stores.
[19:24] And some categories is even higher,
Neil Blumenthal one of the cofounders of Warby Parker told me it's like 95% in eyeglasses so there's no surprise that they were one of the first,
startups actually go to physical retail so the new thing that you hear a lot of is multi-channel,
that yes you can build you know kind of a brand it might be depending on the product that might be 20 million it might be 50 million it might be a hundred million sales but to scale it up you're probably going to have to be,
multichannel I think most of these Brands still have more than fifty percent of their sales online and over time I think you know
the percentage overall of retail that online is going to continue to increase but that's why these brands have moved their oh and the final thing is that you had a lot of traditional retailers having problems and going out of business
so guess what retail space became a lot cheaper.
So you know a company could kind of test retail in a way that was it going to cost them an arm or a leg they can see how it worked without really kind of going all in.
[20:31] Yeah and you know it's interesting you mentioned the the evolution of Facebook and that that you know emerged as a new tool that allowed more efficient marketing,
there was one of the in a blurs for a lot of these companies but you also covered a lot of other aspects of this sort of,
product development through you know go-to-market ecosystem that that sort of evolved to create this this opportunity so you covered some of the.
[21:02] The infrastructure as it were right.
[21:03] Yeah yeah exactly so I.
[21:05] The things that people don't see very often I you know as a business journalist I got really fascinated by that stuff.
You know kind of the company that you know kind of figured out that you know face could,
Facebook could really be a way to reach Target audiences and of ampush,
based in San Francisco found by kind of three College friends roommates who went to Wall Street and got bored I'm doing Wall Street and said hey let's start a company and they figure that out you know kind of done very well.
And then there's you know the logistics companies which I found extraordinary fastening go into a modern warehouse and it's not like what you would have seen.
Five or 10 years ago certainly not 10 years ago,
where are you know kind of a lot of forklifts and people carrying things around and racing around you know a lot of their automated to a large extent they're a lot of robots there people there and they tend to tend to do the things that robots aren't yet good at.
But the amount of innovation that's going on there to make that.
Product that you quick on and then get it within 24 to 48 hours is amazing it's kind of cool it's actually kind of cool.
[22:16] For sure and so you you had some interesting stories in there so like one of the companies you profiled in that ecosystem quiet Logistics I was familiar with them but I didn't really know the back story,
they were early adopter of these first robots for automating warehouses in the robot they adopted was this Kiva systems robot.
And then you tell the story of how they were subsequently he though.
[22:41] So keep your hat size yes so this is is I love that story coming Kiba was acquired by Amazon,
in Amazon you know kind of not long after acquiring Kiba said to the people that keep it been selling to is like basically we're not going to support we're not going to you know after a few years we're going to stop,
you know kind of servicing the robots that you have and these guys at quiet Logistics who had built the nice business who had spotted the e-commerce,
Revolution coming and built a business totally on having an automated Warehouse they've been in the warehouse business for years and it sold a another warehouse company they had built up a decade earlier but they say hey this is a new opportunity they're like.
What you're not going to surface the robots anymore what are we gonna do you know kind of that's our own business model and so they had the idea,
why don't we build our own robots and so they went about kind of hiring,
engineers and higher robotics experts so they built their own robots and lo and behold that business is so successful that they spun it off and it's now sewing robots,
two other Warehouse companies and two ups and all over the world.
[23:57] Yeah that that was funny and I'm trying to remember Scott were you an early investor in Kiba.
[24:03] Thanks Big thanks for watching that.
Had the opportunity and at that point it was just random pitched it was described as ant algorithms in a warehouse full of robots and it didn't make sense to me but I was wrong.
[24:19] Dab to teasing you you at least four on the list of people they called.
So that was a great story Larry another one that I think is in some ways one of the most important Trends in the whole book is you described a number of entrepreneurs that,
really leverage data that previously probably didn't exist.
To help Define the products that they offer so I'm thinking like E Salon or Mohawk or or anchor could you talk a little bit about one of those.
[24:50] Yeah so I think this is one of the things when you have a disadvantage when you're competing against a bigger rival.
You need to have some other Advantage you need to play by different rules and actually you know kind of you guys remember the the book and in the movie Moneyball by Micheal Lewis.
So Moneyball basically was about how.
A small-market baseball team the Oakland Athletics.
Couldn't compete with big Market teams like the Yankees who are rich in could you know kind of pay for more Talent so they had to figure out how we going to compete and they came up with the idea of data analytics to find players who were undervalued.
And within a few years after embracing data analytics they became highly competitive.
And and you know kind of vague were you know going toe-to-toe with the Yankees in many ways so.
To me what is happening in retail in the creation of Brands is kind of the Moneyball.
[26:04] These companies in addition to seeing a problem in looking for a way to fix it also recognized that you could use data.
Technology barley but also data to spot opportunities to improve your products to connect with your customers so a lot of people call it this is direct to Consumer businesses also say it's connect to Consumer businesses,
so early on before they get big enough that they decide they need to offer you know kind of have retail stores as well.
These companies are doing all their business with people online.
[26:39] People are coming to the website they know everything where did you come from how much time did you spend on the website what are you looking at.
What are you ordering how many times you come back before you order they can just gather a lot of data to learn about their customers and to improve their products.
[26:58] In some cases one of the things that some of these brands of do he's having more customized products and that's where he's Lon as come on E Salon offers customized are coloring.
That is you know just about as good as Salon but what more expensive but better than the off the shelf.
Hair coloring that you would get from one of the big name brands and how does it do this its Gathering data all the time from its users has a questionnaire.
It's using AI to analyze that data when we mix this for these for the woman who answers the question are this way.
This is what she like sometimes we will tweak it and give her a slightly different than what she thinks that she wants because our experience has shown over hundreds of thousands millions of people answering the questions and of this is what is going to work best.
And so their product is like 20 or 25 bucks depending on what kind of subscription you have and you know it's a lot less than you might spend at a hair salon and it's and it's a very good product again that would not be possible.
[28:08] Without being able to collect the data and you know kind of fine tune.
It's a product but also it's the marketing it's the pitch kind of to see somebody comes to your website you know kind of how long you're going to stay there.
Every you know kind of incremental Improvement in each step along the way.
[28:28] Means that you're going to have more customers and more customers stay with you so initially they started I think they told me like you know fifty percent of their customers were coming back because they were still trying to figure out the formulation and now 70%.
Come back after the first purchase they get people past their third purchase they know they're going to have until 8:00 purchases if they get past their 8 purchases they're going to have them like just about forever again and they know this because they're measuring every bit of data.
[28:56] Yeah I mean one of the examples in the book that really struck me was when a woman ask for the lightest possible blond they know that she actually doesn't want the light as possible blond and that she maybe want something with a slight bit of blue tint in it.
[29:11] Yes because because I know from people who've gotten the lightest possible Dom who fit the profile that she fits that they have a lower kind of Second Coming Back conversion rate than they do when they kind of tweaked it a little bit,
it's you know kind of it really is a type of rocket science put it into a computer for retail purposes.
[29:32] But I like that metaphor so you could almost think of them sort of anchor money bald Belkin right like the the you know the traditional accessory providers.
[29:44] Yeah well one of the challenges I think for some of the startups is that you know,
what happens when the Yankees starting you could start using data analytics right they got money and data analytics.
So now you know having said that I think the Oakland A's are year in year out Fielding better teams.
Did they ever did before data analytics going to watch.
So so even though it may be harder now that everybody is using the same tactics and I think a lot of the big companies are starting to learn some of them are buying some of these companies,
some of them are buying expertise,
so so that's going to make it a bit more challenging for companies but still you know I think that there's a lot of potential because you have the technology out there that makes it easy to introduce a.
[30:39] Yeah and you know what you know finding that metal part maybe just one step further that's a great point you make that
when the Oakland A's are the only ones using the Moneyball system they were they were suddenly identifying valuable players that other teams didn't want because they didn't know they were valuable,
so they had this competitive Advantage but once the whole world adopted this this Quantum metric,
system suddenly everyone knew those value and so it was it was harder to gain an advantage from that and then in some ways it feels like.
DDOS is playing out very similar when you were the only ones leveraging this like targeted audiences on Facebook.
You had this great competitive Advantage but now that everyone's using it they you know bit up the prices and it's it's less of an advantage than it was for that first mover.
[31:29] Right right there's no doubt about that there's no doubt about that.
[31:33] Cool one one thing I wanted to talk about is so a way has been interesting and this probably happened,
post publication of the book so they've had one thing that's interesting is so so Amazon is kind of cloned their model so there's an Amazon basic suitcase
Target just announced Their Own Line of suitcases that look very away ish and then they had their own kind of implosion with the CEO,
sending some unsavory slack messages internally kind of kicking yourself upstairs and then re kicking yourself back downstairs what do you make of the tumultuous times there.
[32:10] Yeah so I think implosion is probably to stronger word clearly embarrassing for the CEO
to be berating her,
employees the way that she did in a very demeaning way and I think that she has said she's embarrassed but you know one thing I would point out.
These are startups most of these people have not run companies,
and often you have you know entrepreneurs who aren't great managers you know witness Steve Jobs at Apple,
right or Elon Musk at Tesla I mean both of these executives.
Were incredibly incredibly difficult to work with and the second thing I would say is that you know,
especially when you're in the mode that away is in you know competing first of all with other startups which it ended up as the leading,
new luggage company and now competing against other existing players trying to get into its pace and copy what it's doing,
you know it's a life-or-death situation for a company and so you know sometimes emotions boil over I think the big question there is.
[33:30] Will that bad publicity affect ways image overall and you know you go on social media and you see people saying oh I'm never going to buy it anymore and oh I wish I hadn't bought it and.
You know what week later those same people are outraged by something else.
So I'm not sure I mean I think time will tell how much it's going to affect them but,
you know they have a good product at a at a good price it's a value price right it's not the most expensive and it's not the best product but it is you know a good product at a good price,
and I think it could end up being one of the winners only time will tell but I think it could be.
[34:07] Yeah yeah another one you know I feel like demonstrating how liquid all this is like obviously you you
you know the you mentioned our shave club was sort of one of your your first interest in this space and their well covered in the book and you alluded earlier to gillette's prodigious market share
so like the the interesting news from last week and this week as last week the FTC filed the complaint and said that they were actually going to oppose,
Harry's acquisition by Edge well because they felt like number to March it.
[34:45] Which own chick.
[34:47] Yeah exactly so Schick number to acquiring Harry's which some people think is number four behind our Shave Club I actually have some data that looks like Harry's may have a bigger market share today than Dollar Shave Club.
So calm three or four number two by his number three or four and the FTC was concerned that that would dramatically a road,
price competition so they they block the merger and and then this week Edge well announced that they weren't going to fight it so there are.
[35:17] To the consternation of Harry's well you know like I'm not sure what the most recent data is the data that I got from an independent source,
that tracks sales said that Dollar Shave Club sales and market share was quite a bit bigger than Harry's but separate from that,
I think it was an interesting decision I'm not a little bit of a puzzling decision you know kind of the FTC is letting Sprint,
and T-Mobile merge.
And put not Harry's and sik or Edge well merge the barriers to entry in Mobile.
[35:54] Communication is much higher than the barriers to entry in razors and actually one of the things I think you know getting back to the whole point about how easy it is to introduce a new brand we let's say that Harry's,
you know starts raising its prices and starts doing business more like chicken Gillette had long done it that cozy relationship,
to me that would prevent a you know kind of two things would happen because of the way that the world has changed one dollar she would help Dollar Shave Club being in there as you know kind of offering this alternative view of the world.
it's quite possible that another brand would come in and say Hey you know kind of these guys you know kind of are leaving their customers behind they're not being true to what they were and obviously there is a market for what they were doing.
[36:42] And I think that's one of the kind of long-term getting back to the Money Ball issue kind of one of the long-term benefits of what's happened is that
we as consumers have more choice and
likely will have more choice in most consumer products going forward because it is so easy to introduce a new brand there's been a democratization which leads
how did the fragmentation I don't think we'll ever see a prey on that you know kind of like Gillette has 70% market share in the future but that's good you know that's not bad,
you know I kind of finally I think part of the reason that that edge well sik backed out was it paid I thought the price that it offered was quite a rich price it was like 1.3 billion was even more than Unilever paid for Dollar Shave Club,
so although there was an awfully Rich price maybe they kind of at the end got cold feet and said oh maybe we're paying too much for it you know kind of let's let's let that.
[37:36] The I think the investors must have agreed with you because I feel like Edge well stock is up since the merger was called off.
[37:43] Right right,
but long-term long-term sik Edge well is going to have to figure out how to better service its customers right because it was distant distant distant you know kind of number two to Gillette forever and it had,
combined combined Harry's and Dollar Shave Club I think had more market share than Schick so that says something about the way they were doing business before the way they need to think about doing business going ahead.
[38:10] Oh for sure and like I mean two things,
hey like it's going to be interesting to watch it because you know in many respects when they announced this merger they said and we're going to put the Harry's guys in tired of our strategic plan going forward so they sort of announced to the world,
that we don't have any good ideas and we're trusting them to take the brand forward and so now what do you do when you don't have those guys.
[38:34] Right I mean you know you maybe you try to hire that talent but sometimes that entrepreneurial talent and that just kind of feel for what the customer wants is not so easy to duplicate in focus groups and such.
[38:44] No but so I'll admit very personally selfishly I'm disappointed that they're not going to litigate with the FTC because per your point,
in the ftc's complaint they made a lot of interesting claims and one of the claims was that,
Harry's was able to capture significant market share and become a relevant player but they sucked up all the opportunity to do that and that it would be much more difficult for anyone to follow in Harry's,
footsteps and therefore it was important not to allow this merger and like well as we discussed already in some ways it probably is harder to be the third or fourth mover,
in other ways,
like the the friction is considerably less like and it's hard to imagine that Amazon couldn't be a significant player or Target couldn't invent a razor.
You can play or so.
[39:44] Well Amazon as you noted earlier I think you mentioned it with.
[39:48] Yeah they're already in the space.
[39:49] In the space but they have there are at least 200 new brands at Amazon has introduced,
over the last few years and I mentioned this in my book that are there have amazonbasics Brands but this is separate from that these are brands that you don't know her necessary Amazon Brands unless you really drill down,
they actually have a shoe brand called I think it's called Collective 206 kind of crazy name for a shoe brand but anyway they introduced a knockoff of all birds,
wool Runner Shoes recently and all birds took a shot of them and say oh your stuff is not sustainable materials and but in some ways Walmart is I mean she's me Amazon is validating.
What all birds is doing and it's somebody's it's giving a threat so you're going to have,
all sorts I mean the opportunity to introduce new products new brands is you know kind of higher than ever before and then getting back to my point if Harry's changed the way it did business.
So that it charged higher prices and and you know kind of acted more like chick that would create an opportunity for somebody else in the marketplace I truly believe that.
[41:04] Yes can be interesting to see
you know if more of this gets blocked and what's going to happen one one other topic I wanted to just touch on quickly that happened kind of post the book is the Casper IPO so you know I think Casper raised money as a private company at around
one to 1.2 billion and then they really struggled price in the IPO the kind of,
we're talking about a 15 to 17 range and a pricing it at 12 its trading off of that
it's interesting because I've seen a lot of people argue that these brands should get kind of one times revenue and then other folks have argued that a lot of these brands
because they're more efficient they should get
two three four times so this one ended up kind of going right in I think they're trailing 12 months Revenue are about 400 million and now their market cap is right around 400 million so they.
[41:55] Or 500 or something like that but pretty close to it.
[41:58] Get a pretty quickly zeroed in on that one X do you think that's going to throw kind of a wet blanket on things or do you think that that I.
[42:04] So yes but with a caveat so let's look at the mattress space overall and how disrupted that has been.
So if you go back five years I met mattress business retail mattress business in the u.s. is about 15 or 16 billion dollars a year.
If you go back five years about 50 million dollars was done direct-to-consumer the bed in the Box friends.
[42:30] Last year it was two billion dollars and if the.
Barriers to entry fell in a lot of categories the barriers to entry in the mattress.
Category collapsed because it's so easy to make a mattress and sell a mattress you get somebody to sell you foam you know you get somebody
just to so the bits together the top together and then you kind of get a machine that crams it down and puts it in a box and send it you had dozens does is I've actually heard hundreds but you know dozens of doesn't serious serious players and I think that they're probably going to be,
you know kind of maybe a half-dozen that emerge so in this in this you know kind of,
fiercely competitive free-for-all bare Knuckles free for all the way I described in the book Casper raises a lot of money and,
besides that it has to spend a lot of money to try to knock the others out of the box and become the leading and and I think that.
They made a strategic mistake I think they spent so much that it validated the whole category,
right so when you went and searched for mattresses online you found Casper but you also found tough to needle and purple and others,
and the second thing I think that they thought maybe that you know is like a network effect you know we spend moral kind of get others you know kind of have to drop out it hasn't you know kind of those others have thrive,
so if you guys heard much about purple innovation.
[44:00] Okay so purple is a public company it stock is traded.
It came it actually didn't start selling mattresses until like 2016.
Its stock has doubled in the past year it's market cap is now 700 800 million I think it's sales are 4,500 roughly the same as as Casper and tough to needle,
which was sold about a year and a half to go to Sur to Simmons for four to five hundred million dollars we started as I mentioned by these kind of too.
Software Engineers who just decided they wanted to make a product they raised virtually no money they had no Venture Capital Mike they had to be profitable from the start.
And they were and they sold the company they each together they had 90% of the company so you know kind of both of them did very very well
so I think that Casper you know kind of rather than being a poster child for all DTC companies is more of a poster child for,
kind of format a poorly managed DCTC.
You know I mean we're going to see time will tell but when you have profitable companies in that space and their unprofitable then you know kind of it says that somebody doing something right compared with them.
[45:20] Yeah it's it's a funny so a number of these guys have been on the podcast so Joe Mega bow who's the CEO of purple has been on in JT Marino has been on and one of the cool stories JT told us was,
um that yeah you know that you know he mentioned that he hadn't raised any money that you know some of these these
Venture funds that we're starting this emerge specializing in data see all wanted to invest and they didn't take the money and that his his version of the story was Casper was specifically created as a,
alternative to tough to needle that could be Venture funding.
[46:01] Right right yeah though I I talked to him too as you know in the book and he told me that same thing but he was you know can it again they were high they had to be very disciplined.
Right because of the way they spent.
[46:14] Yeah no I really admire that.
[46:16] And I think that that Casper was undisciplined now that you know the final thing I would say about it is that you got you ever heard of a company called Tesla.
So a year ago.
[46:27] Single-handedly is keeping them afloat.
[46:29] So year ago.
Tesla was like almost given up for dead right oh we can't get the production right you know kind of they have they can't get you know kind of mass production of cars right it's you know kind of he's running out of cash you know he's got so much debt and now it's stock is at all-time high.
And they're making money and why because they fix their fundamental problem which was you know they had a great brand name and a great product but they were kind of Highly inefficient the way they made it
but they appear to have gotten that under control Casper's has still has a great branding I don't know if they can pull off a Tesla.
But you know sometimes the the rigor and the discipline imposed On You by public markets can focus the mind and make you be a lot more efficient than you were and we'll see but I wouldn't count them out quite yet.
[47:18] No I think that's that's certainly fair so,
you had this front row seat to all of these interesting Evolutions obviously so you know most of them are still sort of playing out like if,
if you had to put your prognostication hat on like how is all this going to play out like is are these got companies a blip on the radar and Joe Ed and p and g are going to keep on tickin for for another hundred years or you know like are we seeing the start of a.
[47:48] Great question so I think that there will be billion dollar brands.
That have you know market cap or kind of they go public and there will be a billion dollar brand so they Corby Parker probably wants to go public you know kind of I don't know that they're making money but I think they're a lot closer to it than for example Casper,
there will be other brands that will be you know kind of modestly successful.
And then there will be other brands that will be Niche brands that will be successful and niches have you guys ever heard of a company called lens simple.
This is one of my favorite one so so if you have a pair of eyeglass frames.
[48:29] That you really like maybe what a couple pair of designer frames a couple years ago and you need a new prescription and you kind of go back to the,
optician and you say hey can you know can I got a new prescription just put new lenses in my frames they look at you like you're crazy I don't know we want to sell you another pair of frames,
this company you send them the frames and they put in your new prescription they send it back to you.
So I think that they're going to be a lot of Niche players like this and then they're going to be companies that fail in the in the luggage space you know kind of away emerged as the leader among the startups and there were a couple of companies rate in and blue smart that ended up going out of business.
So you're going to have you know kind of a whole array of this but I think the the ability to you know getting back to it bent or bury the ability to introduce Brands means that you know kind of.
Things have changed forever just like Moneyball started with baseball and now data analytics is used in every sport.
So you know can a big companies will fight back none of those companies are going to disappear but if unless they figure out a way to connect to Consumer better,
they're going to have lower market shares and you know again I don't think that's a bad thing actually maybe as an investor in those companies that's a bad thing but for consumers.
That's a good thing because in the end more choice is better it keeps the big companies honest it makes them he's like Gillette lowering its.
[49:58] Prices by an average of 12 to 15.
A couple years ago I mean unheard of that never would have happened without Dollar Shave Club at Harry's coming along City.
So we kind of we're in the early stages of this Revolution and I think the revolution like all revolutions you're not exactly sure where it's going to end up but you are pretty sure that it's not it's going to look quite a bit different than where we started.
[50:26] Yeah no I would totally agree with that and I feel like we're lucky to be sort of in the in the front row at a time when we are going through this revolution because it's it's not the status quo.
[50:38] Yeah very fun to very fun to watch.
[50:41] Yeah for sure and so until you write the sequel that's going to be a great place for us to leave it tonight because we've once again used up all our a lot of time but in the event that listeners have questions or want to continue the dialogue
we always encourage you to jump on Twitter and send us a note or leave us a message on our Facebook page
I'll be sure to put a link to Larry's book in the show notes so that listeners can find that without doing anything dangerous while driving.
[51:08] And and you can send me an email to my email address is on my wedge page web page which is www Larry ingrassia.com so.
[51:18] I will I will put that in the show notes Larry thanks very much for being on the show tonight we really enjoyed our conversation.
[51:25] Guys Jason Scott very fun thank you so much for having me.
[51:29] Thanks I appreciate you taking time to fill us in on your book and hope everyone orders a copy ASAP.
[51:35] And until next time happy commercing.
EP206 - Amazon Q4 2019 Earnings Deep Dive
Amazon released their Q4 2020 earnings on Thursday Jan 30th. In a holiday quarter that has proved to be challenging for many retailers, Amazon soundly beat analyst expectations, and raised their governance for Q1 2020, driving their stock up. Amazon's market cap is currently larger than the next six largest retailers combined, and their competitive advantage may be even greater.
In this weeks episode we do a deep dive into all the details of the earning report. We look at top line results, AWS, ads, physical retail, and Logistics. We break down what it all means, and leave you with our conclusions.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 206 of the Jason & Scot show was recorded on Friday, January 31st, 2020.
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.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scot show this is episode 206 being recorded on Friday January 31st 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:38] Hey Jason and welcome back Jason Scott show listeners
it's exciting times in the world of retail and e-commerce Amazon reported their fourth quarter results back from 2018 feels like a
a year ago even though we're still in January of 2020 and they were so impressive and important to I think everyone in the ecosystem not only retail but e-commerce and shipping that were really going to focus to do it
dive in this episode
on really understanding and unpacking these results probably in a deeper way than we've ever done so look forward to taking you on that journey and love any feedback you have on that before we do that Jason you in a couple short weeks are going to be representing the podcast sadly I can't make it
but you will be in each OS tell us about that.
[1:27] Yeah I'm very mixed feelings I'm super excited to go to Palm Springs Palm Desert area in February which is a much warmer than it is in Chicago as you.
You may know and we have a bunch of I think pretty interesting guests lined up for podcast so so stay tuned for that but of course it's always sad
to be an industry event without you and I always feel like I'm cheating when I record a.
Show without you but obviously there is a segment of fans who feel those are the best shows in their favorites.
[2:00] Yeah your mom and it's pretty much pretty much it.
[2:04] I'm pretty sure she's not in that segment.
[2:06] Boom Cooper I look forward to seeing who you can rope into doing some interviews those are always really good but that is coming up in let's talk about Amazon.
[2:23] News new your margin is their opportunity.
we're kind of mixing it up as I mentioned at the top of the show this was such a big quarter that we think it's really important to spend a fair amount of time on it so so we're going to break this into three parts so we're gonna talk about the setup going into kind of holiday and what we learned before Amazon announced
I'm going to go through the highlights of the results there we can spend the bulk of the show on an analysis really kind of picking apart what's this mean for the industry
so Jason want to take us through the setup going into Amazon's.
[3:05] Yeah so obviously Q4 is a super important quarter for all of retail and it's been a little checkered coming into this Amazon announcement so MasterCard which
has a panel of all people that shop with a MasterCard had reported that retail sales for the quarter were decent I think they said
total sales were up three point five percent which is average to good.
Growth rate for total retail and they said e-commerce was up 18% and so that,
in and of itself didn't seem so surprising but then individual retailer started reporting.
[3:51] And the folks that you you might have expected to be distressed we're generally more distressed than expected in the people that you might have expected to do well also seemed down so it's been this odd thing where MasterCard said hey overall
it was kind of an average quarter and then the overwhelming majority of people that were reporting
we're reporting a pretty disappointing quarter so you know that that created extra anticipation coming into.
The two biggest retailers which were Amazon last night and then Walmart is on a really goofy fiscal year and so they won't be reporting toll February 18th,
if I have it my memory serves but so.
You know you wouldn't expect JCPenney's to kill it but they were down like 7.5% Cole's was down which has off-price retailer had traditionally
been more resilient bunch of the apparel companies were down Macy's was down L Brands was down even some like value stores like five below
which is in that dollar category those guys were down and Target was up but they were way below their guidance.
[5:06] In general you know reading into this quarter it's felt like a pretty depressing quarter we've also seen a lot of evidence that the quarter was way more promotional
in any quarter ever which means profits are likely going to be down and we've heard anecdotally from a bunch of these retailers that manufacturers,
have way more inventory than they usually have this time of year and so there's a lot of distress inventory that manufacturers are trying to
pump through the retail Channel right now so all sort of bad indications leading up to
Amazon's announcement last night so Scott can you tell us how that what what how it transpired.
[5:48] Yeah I would say that it was Wall Street was was
extremely surprised pleasantly surprised in the world of public companies you have this kind of you know what what's the current period expectation and then what's the forward period expectation so the current period and this conversation of fourth quarter of 2019
the forward quarter would be q1 of 2020 so this is what's called in Wall Street lingo a classic beat so they beat the fourth quarter of 19's expectations and then they raised the q1 2020 expectations.
When you do that you frequently.
I'm have a pretty immediate and exciting stock action and that was certainly the case here so Amazon stock surged today Friday to 2008
that's a price not not a year which is a over 7% one day increase if you follow small stocks you know that may not seem like a big deal but this is a trillion dollar stock so 7% is
seventy billion dollars of market cap that was created so I don't know how that compares this probably like 20 JCPenney's or something something like.
[6:56] Yeah so I did look at it and it's fluctuated a little today it actually like as we're recording this show it's.
Slightly nominally under a trillion dollars but,
it's the equivalent of the next six largest retailers in the market so Amazon's market cap is the same as Walmart plus Home Depot + Costco + lows + CV s + T.J.Maxx.
[7:20] Yeah but even just the 74 billion created today is larger than many individual retailers.
[7:25] Oh yeah the 74 billion today is a larger market cap than TJ Maxx or Target it's.
[7:32] Wow so you talked about it but that put some work just shy of the trillion dollar Club I think they're going to get there and we'll talk about what Wall Street thinks that's going.
Shoot Em Up There,
but just for folks that are tracking this apple is ahead at one point three five trillion and Microsoft's 1.3 trillion so Amazon's flirted with the trillion market cap club and I
you know I think it's pretty safe to assume here that they're going to get there pretty quickly and stay there for the rest of 2020
so let's talk about the highlights that caused this this exciting and peeled onion a bit so you know,
one thing that's not customary for Amazon is talking about how many prime users they have so in they're releasing on the call they talked about having a hundred fifty million Prime users and in the fourth quarter they sold more Prime memberships than they ever have before in any other period
that's pretty material because you would think maybe Prime day would beat fourth quarter but you know that's not the case so so fourth quarter compared 30.
Prime days in third quarter so so they must have sold more Prime memberships from the holiday sales than they did from Prime day.
[8:39] Last time they announced this it was for the calendar year 2017 they announced it in 2018 and they said they had a hundred million so they have added 50 million Prime subscribers over a two-year period essentially so that's pretty impressive
from that there's a line item that counts that revenue and that's called subscription services that accelerated to 32 percent growth again kind of supporting that,
that that kind of more vague statement that those more sign ups than ever before those pretty material acceleration of that metric and then another nice thing is that's that's five billion dollars just for the quarter so that's essentially.
Customers giving Amazon money in the future for you know fast kind of quote unquote free services that you know helps Amazon's cash flows which is pretty amazing I don't think we ever see anything
quite like that it's kind of like prepaying for products on this you we see subscriptions but you don't see kind of like almost.
Soccer is a service type prepayment so then.
[9:42] The third party unit share came in at 53 percent of overall units meaning first party was 47% that was steady now what,
what that doesn't capture is and I'll talk about this in our deeper analysis is unit volume is not the same as gmv and we'll talk about,
so the transactional dollars you could have unit volume
kind of flat quarter-on-quarter but you could have a huge surge in the dollar volume because the average order value could go up in three p down in one p there's a lot of things that can change that.
The revenue from what they call 3rd party seller services this is largely what they charge sellers use FBA That Grew 31 percent year-over-year and surged,
I almost wonder.
If they're having a problem keeping up with this demand because they're building out fulfillment capabilities at about a fifteen to twenty percent clip and if the demand for FBA is growing at 30% you know that that's.
It's going to be interesting and it will talk about fulfillment side in a second
I talked about this being a beat so Revenue came in 2% above the top line which is a I would say a moderate beat but what really surprised everybody was.
The operating income it came in 34 percent above the high end of where Wall Street would think so
what happened here we'll talk about this in the gnosis so.
[11:02] Amazon so this was obviously a big question in Amazon said you know it was overall adoption of the Prime platform due to the new prime one day offering
so if you remember in Q2 they started offering one day Prime and this isn't available on every product they're working to get it on more and more products all the time but increasingly you will find products that are available to come in one day.
Versus used have to pay a fee for one day delivery anywhere between like three and ten dollars it always varied based on what I saw the.
[11:36] Um inside of that Revenue grew 21% year over year to 87 point four billion paid units grew 22%.
This gets Wall Street really excited because.
Because Amazon has you'll talk about this the cloud computing which is Amazon web services or AWS the ad business you know those things kind of.
Could be used to prop up growth and The Core Business which is we would think of as retail could be growing slower.
Paid units takes those things out so when paid units accelerates and is growing you know I think you talked about the high-end Mastercard at 18% this is growing faster than kind of what we thought was pretty
you know aggressive number that is a really big signal that something has changed and most Wall Street analysts kind of view that as the signal that prime one day has really been a game changer.
[12:27] Within their North America grew 22% year over year and International Group 15% another thing that's interesting is North America's well over two thirds of the business now Internationals about one-third so that's how you can have you don't take those numbers and average them North America as growth is able to swap
the growth on International incidentally both those were above wall Street's expectations and then you know you and I speak a lot and we always hear that Amazon is not profitable.
Well operating income came in at 3.9 billion so that is pretty darn profitable by my calculations
Jason you dug into the cloud computing stuff how did that go.
[13:06] Yeah so first caveat you talked about the the rumor that you know people out the talking point that Amazon is not profitable if they don't have that talking point they have this talking point that.
Amazon is profitable but exclusively because of AWS which is also annoying and not true
but that being said AWS is a darn good business and so they had another good quarter of growth revenue for the quarter was to nine point nine billion which was up 34% from the corridor
they're by far the market leader so when you're the market leader and you're growing at 34% that's a pretty good story and it did beat Wall Street expectation.
However it is part it is a clear deceleration of the growth so.
You know from as far back as i q 1 2017.
This this business has been growing 40% or better every single quarter and then Q 2 of this year for the first time at dip below 40 it was 37 percent growth last quarter 35 percent growth
this quarter 34 percent growth so it does feel like.
The law of large numbers is starting to kick in and and this crazy growth rate is slowing down a little bit but like for any business.
This is still great growth in its great growth.
[14:34] On a big number and it is highly profitable business and then the other you know thing to keep in mind about this whole AWS service is.
The bulk of the the Computing world is still not yet on the cloud right so there's a lot of estimates that you know it's maybe ten to fifteen percent of all compute is on the cloud right now so the.
Potential future market for these Services is very large and you know it is.
Certainly a challenge for their biggest competitors Google and Microsoft.
Interestingly Microsoft reported today and you know they have a competing product called azure
and as your you know on a much smaller base is growing much faster so they they dramatically beat Wall Street expectations.
Who are Juliana Azure 62 percent growth which also made some news so it's a pretty competitive.
Hot cycle but Amazon continues to do a lot to maintain their lead and I think they also rolled out something like a hundred new AWS services this quarter.
[15:46] Yeah there's there's one argument and this is not our purview so I'm not an expert on this but
that Microsoft's kind of stuff in The Ballot Box because I think they put Office 365 another cloud computing there's simply kind of taking the office build it kind of license converting it over to cloud and then kind of counting it in that as your number if I understand right.
[16:07] Yeah I think that is potentially true but I'm not actually sure that is stuffing The Ballot Box because of you you know if you think about they.
Previously they had to sell those customers on office every.
Year and often people didn't upgrade right and so if they're successfully able to migrate all you know a big chunk of customers to Assassin model and they're delivering that from the cloud like
that that actually is indicated of of them growing the business so I you know I'm not sure I would call that super nefarious but for sure it helps to have some super popular products like that to Goose your Cloud business.
[16:45] It's not a nefarious it's apples and oranges will agree to disagree.
[16:49] Fair enough okay yeah as as per usual.
[16:51] But you're on how about the ads business Jason.
[16:58] Yeah so this was another I mean I feel like we shouldn't be saying another bright spot because they all seemed like bright spots
but so Amazon has this segment of Revenue they call other which is not exclusively but mostly this the advertising business and it was another huge quarter for that the other segment of group 41% to 4.8 billion
so you know they were on a run rate to do 10 billion in 2019
and I think with this number they're actually going to have an added it up but I think this actually puts them at like 11 or 12 billion for 2019.
[17:41] Are they I think last time I looked they were passing Snapchat and had a bead on Twitter set that kind of.
[17:47] Nope they passed them both.
[17:49] Okay yep so they just have.
[17:51] They're the third largest digital advertising platform in North America.
[17:56] Yeah those Facebook and Google are so big it's gonna.
[17:59] Yeah yeah we'll talk about that a little bit more in the in the analysis but definitely a good quarter for ads and it's having a ripple effect on the rest of the retail industry.
[18:11] Cope about physical stores.
[18:12] Yeah so this is a new category Amazon had to add after they acquired Whole Foods.
And this is down 1% it's about the only thing in the whole earnings report that was down and it was down 1% to 4.4 billion it was also down 1% last quarter.
So this is almost exclusively Whole Foods that I think there's like 80 other stores besides the 500 Whole Food stores.
[18:42] And it is interesting that it's down again you know normally brick-and-mortar retailers growing at like three or four percent you know Amazon's doing a bunch of interesting things in the whole food stores and and their stores that cater to a relatively affluent customers.
Which is you know a segment that has been more resilient so you'd you would kind of expect it to be up.
Um and the thing that really kind of skus this number and makes it not all that useful for me is Amazon has aggressively converted those Whole Food stores to home delivery stores so.
You know they launched a delivery service out of Whole Foods and they used to charge per delivery or they would.
Sell a separate membership they did away with all of that and so you now can get free two-hour delivery from a whole food store
and they haven't disclosed how many customers have are regularly using that service but if you use that service you're in their e-commerce sales not in there.
They're physical retail sales because they they.
[19:45] Attributed based on on where the order is collected and those orders are collected on the web so I suspected we knew what the.
The sort of bow purpose and home delivery number was from Whole Foods and added it to this like you know I'm not saying it would be a huge growth but it probably wouldn't be negative but
as it is you know they're they're slightly declining in a market with where other Grocers are slightly growing.
[20:12] Yeah that it's interesting too because they've opened up so many of these kind of little bookstores and four-star stores and all that jazz you think that inorganic growth would help this number so it must.
Either it's like seriously declining in there having trouble just treading water or to your point there we categorizing it and we there's a one piece of data we can't see to really understand what's going on.
[20:33] Yeah and probably very likely a little of both.
wrinkle so then that was that captures kind of the highlights of fourth quarter 2019 now let's look forward again a Wall Street thing is you give guidance so companies give a range of how they think things are going to go.
And they did a beat and raised on guidance so revenue for the first quarter of 2020 was guided to above analysts and.
Amazon says 73 billion at a
a midpoint if they get that would be twenty two percent growth they're essentially saying look The New Normal is 22 percent growth so buckle up.
So that's going to be interesting there in Amazon's historically somewhat conservative so there could almost be I won't see ya shot that
maybe like 25% I don't know you get the sense that they are seeing something in the data from prime one day and that is a game changer and really.
Almost changing the business.
But that being said it was a little mixed because margins were muted and guidance and they were very careful to call out exactly why in all.
Pick that apart when we go into the analysis side Wall Street brush that off they effectively said look,
you guys have shown us that this is paying off this investment in prime one day we're comfortable with you continuing to do that and in Amazon's got really good about articulating.
[21:59] How much they're spending where it's going and what's really interesting about it is it's kind of forever dollars which is nice so effectively capex investing into new things that will be used for years and years so.
So then another area of investment that they specifically called out as India there's a lot of press Jeff Bezos was in India you've probably seen the pictures of him wearing
kind of a funky jacket and doing like a lots of fun things in India it's a huge market for them and announced they're going to invest a billion dollars,
don't think they put a time frame on this I kind of mentally.
Wrapped it up to 2020 but it could go beyond that certainly not going to be 1/4 that's a according to emarketer that's a two hundred billion dollar a year in five years area that's growing really rapidly and then Amazon again
kind of in a uncustomary way they.
[22:50] Put out some data around that market they said they have 550,000 sellers now sixty thousand of those export products and then they've created 700,000 jobs kind of amongst their three peas in India there there
exclusively third party so they don't have a first party kind of business and they've created those 700,000 jobs since their 2013 launch.
They did announce a huge investment fulfillment centers will talk about in the end
now section and then based on all this data and the results of Q4 analysts nudge their price range is up
between 2275 and 2500 I saw some a little bit higher than that but that seems to be kind of where everyone's clustering in that that section so again they kind of ended the day at 2008 I think they only have to get up to
2100 to be in the trillion dollar Club so and I'll start expecting that they will get there and stay there.
[23:44] So those are the results we did the set up heading into this this announcement the highlights now let's really dig into what
this means and do it dig that deep dive on it I wanted to spend some time talking about this prime one day so so one way to think about Amazon is it's a capital intensive business because of fulfillment center parts of it.
Unlike eBay so eBay is a pure digital business they don't have fulfillment centers or delivery trucks or anything like that they may have some office space but other than that it's pure digital business
and what's interesting is Amazon has now
kind of shown to Wall Street look we're gonna go into these invest modes and we're going to invest heavily against something that we think is going to work but then we're going to have a harvest mode and that's what gets Wall Street really excited because when they have these Harvest modes Wall Street is
perpetually surprised where I surprised investment works and then they're surprised by how much profitability comes out of that Harvest so I would characterize that is what's going on here so Amazon again started in Q2.
And what they did is they said they announced prime one day they said we're going to announce 800 million in that quarter and then in Q3 announced about a billion and then in Q4
they've now announced that they spent one and a half billion all on prime one day.
[25:03] So you throw all that together and you get about a four to five billion dollar investment in this new initiative that seems
that's a really big number and it's very easy to be skeptical on that but now we're seeing that 22%
paid units number accelerate nicely so
Rin that entering that Harvest mode and what Wall Street analysts are thinking is once we kind of lap Q2 that those investments will taper off
the infrastructure for Prime Monday will have largely been built they'll still be some more but maybe it's going to be like 500 million kind of
level of investing and then we're going to hit this really big Harvest Motes that's what's got everyone excited.
[25:43] Where does that dollars goes when we say four to five billion dollars where does it go it's all in shipping infrastructure
so it's more fulfillment centers one of the big things about so if you think about this supply chain the end of the supply chain the the start I guess in the supply chain is the Fulfillment center so the products being there for consumers then a then that then you have the consumers
primarily a residence so in the middle the two important pieces where I think the
bulk of investment are going is sortation centers so to be able to ship all this stuff one day you have to sort it into
not only zip codes but zip plus 4 so that you can get it on a truck that's going to do a very tight route and be super efficient so Amazon's invested
heavily in that so used to be they didn't have any like five years ago they had very few sortation centers there were relying on the USPS FedEx and UPS for that function so now they've built out that
and then they've also built out the trucks I go to work every morning I have about a 30-minute commute and I probably see 30 Amazon Prime trucks on one of the major highways here in this area so.
[26:45] And those are just trucks following you to deliver.
[26:47] Yeah like slow down we're trying to give you all your packages so you know.
So again this amazing amount of investment and then what's also interesting is they build these things but then they you know.
They're going to last for very long time you know fulfillment centers last for presumably 10 plus years they the insides frequently have to be updated but you know the big kind of the pad the walls all that stuff in the sortation centers I think
that technology lasting longer and of course trucks last a relatively long time so so what they're building is they already had more infrastructure than anyone else and they are just kind of like.
Quadrupling down on that infrastructure so so.
That's kind of what prime one day means and then you know my other point on it is consumers love it so consumers are buying more and more frequently and signing up for Prime because they love the one
prime one day feature.
[27:46] Yeah and I mean I the way I think about it like that faster delivery service does mean they win more orders against other eCommerce sites so
you know maybe you ordered something from Amazon instead of Walmart because it will arrive faster but also it just entices households to
order more stuff online that they previously might have ordered or purchased in a store and so like it you know they're not just stealing share from competitors like they're actually like increasing.
They're addressable market so.
[28:23] Yeah good point.
[28:26] So that that is very strong the.
Question I get asked a lot about Amazon lately when I visit other retailers is around the ads the.
[28:41] You know as we've already highlighted a little and we'll talk about more Amazon has this Rich echo system and everything feeds on everything else and so you know increasingly Amazon has this great Diversified Revenue.
[28:55] Echo System right and all these different places they make money and you know all the all these Services they make money on that support the retail business like FBA
fulfillment all these new things if you're a traditional retailer that you know is
just has e-commerce with all those other services it's really difficult to be profitable.
And so in general when we look at you know a omni-channel retailer that you know they generally have separate accounting for their e-commerce business and that e-commerce business generally isn't profitable or certainly.
It's less profitable than their brick-and-mortar business and so you know most retailers are looking for ways,
to improve profitability and then you see wait a minute you know Amazon's building this huge highly profitable advertising business,
on top of the retail business.
So estimates are right now that that Amazon's ad business is about 9% of All Digital ads.
And so to put that in perspective Google is currently I'm sorry Facebook is currently at.
22% and Google is it 36 percent so Amazon's already the second largest Advertiser the forecasts are of course for Amazon to gonna grow much faster than those other so.
So the 20:23 forecast is.
[30:19] Amazon at 14% Facebook at 20% and Google at 31 percent so that you know they're potentially getting much closer to the size of these other.
Big guys and they have a ton of other revenue streams that these other big guys don't have in General ad sales is highly profitable because.
The cost of goods sold is almost negligible.
And so if you're Walmart or Target or any retailer in you're struggling for profitability on e-commerce and you look at Amazon you go man
I need to get some of that lucrative advertising business to supplement my business as well and so we've actually seen a bunch of other retailers.
Invest more effort in their own sight monetization efforts or their own retail media efforts and,
Walmart used to Outsource ad sales to a company called Triad and they fired Triad and and built an internal team
they have now launched a bunch of Their Own Self Service apis so that you can programmatically by ads on Walmart.
Target you know double down on.
They're their ad sales team and they now call it R and L Kroger bought a division of dum-dum humby and rebranded and they have this hole.
Precision marketing thing but I'll be honest at the moment.
[31:42] Like obviously none of these these retailers have close to the traffic or eyeballs that Amazon does so they're you know they're certainly not getting the same kind of share and at the moment all the dollars that every other retailer is getting in their ad program.
[31:57] Um are what I call Trade dollars which means sort of your the.
Frito-Lay sales team at Walmart and Walmart agrees to buy you know a billion dollars of free delay and Fritos and part of the trade agreement when Walmart agrees to buy all this Fritos is that Frito-Lay will kick in.
Some advertising dollars and historically those dollars might have been used in a store circular or an in cap or some kind of sampling program in the store and increasingly,
those trade dollars are getting used for digital ads on Walmart.com
but those dollars are all being paid by the sales team you know that sells stuff at Walmart and what's unique about Amazon's ad sales is
they're not just getting trade dollars there's a lot of Chief marketing officers that have a budget to build their brand and they're deciding to take dollars that they used to invest in Google and Facebook
and put those dollars in into Amazon because there's a lot of eyeballs there with a lot of high buying intent and so at the moment,
it feels like.
Like a huge Advantage for Amazon that they're getting these these incremental dollars and other retailers are are trying but really not being successful to sort of follow suit.
[33:17] Yeah it's interesting I get your point on there being no cost of goods I would say I've had more random people that aren't in our industry
complain about the searchability and findability on Amazon lately and I think it's the ads kind of you know so I think there is a quote-unquote cost of goods maybe maybe a better call it a cost of
consume user experience or something.
I do worry that it feels like we may have crossed over a point where the ad load is too high and it's kind of confused the buying experience and then you know there's been a lot of negative press around counterfeits Bad actors
those folks are going to be very aggressive on the ads because they you know they presumably have
better margins than anyone because they're selling a product that is counterfeit thus doesn't have the normal.
Price structure of a real good so it's gonna be interesting to see is there a point where.
Windows Amazon say hmm your customer experience is suffering from the ad load.
[34:17] Yeah no for sure if you're a business that just sells ads so you know that's
almost the exclusive revenue of Google or Facebook you know there's this,
this like familiar pattern they like create some organic benefit that gets a bunch of eyeballs to come and they trick people in a building an audience there by giving them free eyeballs and then they increasingly take away all the organic visibility and make you pay for visibility right so used to be you could have funny interesting content on Facebook and people would see it
now you know nobody's going to see anything on Facebook unless you pay an ad for it and that that's not the world's greatest customer experience but it
it kind of works if you're exclusively an ad platform but in Amazon's case where they're trying to provide all these other customer benefits you're exactly right it absolutely
roads the customer experience as more and more of the pixels on the first page of search results are paid for pixels instead of organic pixels and a lot of people point to that as
the most obvious deviation from Amazon's stated goal of being the most customer-centric company on the planet
is you know when
you asked for Duracell batteries in you use and you get an ad you know that takes up half the screen for for amazonbasics Batteries like you're clearly not being customer-centric.
[35:40] Yeah yeah it's gonna be interesting to see and then another interesting thing is whenever I talk to folks and say well we're a shopping target comes up a lot so I don't know if there's something about the Target demographic that really
doesn't like those those add load but you know in my mind this is like maybe the I don't know if I'd call it an Achilles heel it's like a little tiny microscopic.
Spot on a hill.
[36:01] And Mark Lori did an interview at the code Commerce show asked her which would have been like September
and he specifically called it out he's like look we're gonna
lean heavily in the ad sales and we want to improve our our site monetization Revenue but we aren't going to do is compromise the customer experience the way
some other people did and he didn't he didn't name them but it was pretty obvious he was talking about Amazon.
[36:26] Some large book stores in Seattle.
One of my favorite topics is gross merchandise value or gmv longtime listeners will be aware of this but bear with me so when Amazon reports their revenue
it includes only their revenue their derivative revenue or their take rate
from the third party sales so if Jason sells $100 Star Wars toy on the third-party Marketplace Amazons
Blended take rate is about 15% so Amazon so while Jason you know sold a hundred dollar widget
and presumably Target and Walmart lost out on that hundred dollar widget Amazon's revenue is only $15 from that
so so there's this hidden transactional value in Amazon that makes Amazon actually larger than you would think it is
so let's do put some numbers on this Amazon's revenue for 2019 was 280 billion.
Of that 87 billion was in the fourth quarter
I used to have my own analysis of this and thankfully the Wall Street analysts do this now so I'm going to quote Ron Josie who's an analyst at JMP Securities Amazon now gives you enough data to kind of back into this number where I had to
you some assumptions so the.
[37:45] So when you unpack the gmv fourth quarter total gmv was a hundred and eighty billion so just shy of about 2X and then the annual gmv was 569 billion again compared to revenue of 280 billion
so what happens in there is 28 billion of that 280 is third party that you have to gross it up about.
Eight times to actually get the DMV this is important because I think that's the Apples to Apples comparison for how Amazon's doing in our industry
revenues important and.
And whatnot but to really so when Macy's or Walmart or any other retailer reports Revenue it's a hundred percent DMV.
[38:26] Asterix and let's have a Marketplace and they're going to do the same thing but they don't have marketplaces that are 53 percent of their business so there there is a little bit of space under that Iceberg but Amazon's is massive it's almost twice as large so
so I think that 569 billion number for 2019 is the right number that's the transactional value that went through
Amazon this excludes AWS excludes ads Etc so Amazon's impact is twice what you think it is
and that gmv actually grew faster it grew at 26%.
And that's because I think the physical stores and so that other stuff kind of ways on that growth metric if we if we you and I kind of share a chart I guess I forget which was actually created so we'll split it split the baby where we show
a lot of people feel like Amazon's not as big as Walmart
well if you that look at GM V again Amazon's 2019 gmv 569 billion Walmart
trailing 12 is about five hundred twenty billion so I would argue that Amazon is now ten percent larger than Walmart on an apples-to-apples basis.
[39:31] One more tidbit there and then we'll dig into the Fulfillment center is first party is growing pretty slow
at about ten percent year-over-year again this is dollars not unit so it's really interesting because
the doll at the gmv from 3p is going very slow but the units are holding steady and what I think is happening is you have a lot of these kind of Kindle units in Amazon music units just kind of like these
one and two dollar kinds of things whereas in the 3p you're seeing big screen TVs and really big kind of priced items so so we don't see it in the unit volume but we are seeing it in the gmv mix
third-party grew gmv grew 26 percent year-over-year in the fourth quarter so.
So you know any thoughts on that Jays agree disagree.
[40:15] Yeah no I generally agree and I think
like not only is that that 3p Marketplace a big deal it's like a again intrinsically it,
it's going to be more profitable than a 1p business because
once again you don't have cost of goods right and so there's way less risk against your capital and and they never reported profitability separate from their 3p sales if they did.
It's totally viable that this looks like a Better profitability Business than AWS would and these days they even have a huge accelerator like not only is the
the 3p huge and growing.
A bunch of the services that Amazon is wildly profitable delivering their primarily delivering to 3p sellers so you know
the FBA premium Analytics
like all of the advertising like they're all tools to help 3p sellers be more successful and they make money on all those services so it's a.
Um you know even if you took AWS completely out of Amazon they're you know they're still is this.
Secret highly profitable business model within the Retail Group segment and it's the biggest part of the retail sales.
[41:44] Wrinkle about any thoughts on fulfillment.
[41:48] Yeah so in my mind like.
The two overwhelming moats that Amazon has these two huge competitive advantages that are extremely difficult for any retailer to overcome is.
The Prime membership and that whole flywheel and the other is this insurmountable investment they've made in fulfillment centers and you talked about this a lot in the
in the prime one-day section
but you know they announced that they're going to build something like why.
47 new fulfillment centers in.
Again it's hard to talk about logistics buildings anymore because they have so many different types right like they have these huge cavernous fulfillment centers which are the most expensive thing and as you mentioned
increasingly they have all these these various hubs and sortation centers and delivery stations and things they add on top of that but.
Super oversimplify if we just talked about fulfillment centers Amazon has a hundred and sixty six of those in North America that are operating right now.
[42:58] The next biggest Ecommerce provider if you count super generously you might say Walmart has 20.
So like they're they're an order of magnitude fewer fewer centers and then you know Amazon plans to build 47 more which is.
You know more than double what anyone else even has and so you know to me it's they've been taking all the cash.
That they generate from this business and they've been making these Investments and as you point out these are investments that are going to pay dividends.
For ten plus years and they make it totally viable for Amazon to increase the quality of their services right
so that you know the most obvious example is they could promise customers much faster deliveries and you know they had.
To make some investments in that they kind of missed their guidance last quarter primarily because of the these unforeseen costs and so I like to talk about you know one day delivery was hard for Amazon and and they gave themselves a cold by doing it but they gave
the all of their competitors the coronavirus because.
Nobody else was in a position to do to do ever anything like one day and you know it's much more expensive and much more difficult and so you know we've seen retards like.
[44:20] Walmart or Target kind of promised one day to match it but there are really only matching it on a tiny percentage of the skews that that Amazon offers so this is a super important super powerful.
[44:37] They do spend an awful lot of money delivering stuff to people so you know a line item they do have in in their earnings report is that that.
Fulfillment costs and it was up 43%.
Year over year so they this quarter they spent twelve point nine billion dollars on delivery it was up huge last quarter to it was up 46% so this is the fastest growing cost they have.
But you know increasingly that that investment is.
In making things more optimal by delivering themselves rather than relying on you ups and u.s. post office.
So you know there was that Morgan Stanley report that came out late last year and it had two pretty impressive factoids in it number one it said.
That Amazon may already be delivering more than fifty percent of its own volume
um so instead of relying on USPS and and UPS more than half the packages they ship you know are now being delivered by their own Amazon Logistics which is.
Part of the only way they could they could do that one day delivery and the Morgan Stanley report says you know you game this out and you forecast by 2022 Amazon will be delivering more Parcels than UPS or FedEx.
[45:56] So this is a you know just another huge huge moat that Amazon has against every other.
Competitor and you know it's it's having a material impact now on the traditional carriers like FedEx and UPS.
[46:15] Yet the Fed Ex gave FedEx CEO Fred Smith he's kind of legendary entrepreneur he's been at this for like 50 years something like that since he was in his 20s
they had an interview with him and I saw a lot of people kind of online.
Mocking his approach and I think they were misreading it so what he said was effectively my read on it was the they had to pick sides right so they realized the Amazon was going to be a competitor.
They chose to not not kind of continue to do business with competitor but now they're more aligned with omnichannel retailers and he feels like.
[46:52] That's going to be a winning strategy and that they will be able to get back on track and become larger than ups and,
better than their he didn't say it outright is that because UPS has chosen other path of continuing to partner with Amazon at some point Amazon will yank that volume,
in these networks live on volume right because if you can build all this infrastructure you got to keep it busy and utilize and then.
That will allow them to catapult forward there is some evidence to support this I saw a lot of people say oh you know FedEx is going to save them all that's ridiculous well I think it's pretty clear.
[47:24] What do you think of which omni-channel guys need FedEx either in a partnership or even,
in an MMA to your point about Walmart having 24 filament centers FedEx could help them keep up with and maybe even pass Amazon's capabilities I don't I don't have that broken down like
like you know
we talked about there with Amazon's fulfillment centers but you know they have a substantial infrastructure across from fulfillment centers for Tatian centers both in ground and air and then obviously trucks and planes so
I think that's kind of what he was talking about is really more partnering with a Target and Walmart maybe both of those guys and providing an alternative to Amazon.
If I'm FedEx UPS I kind of personally think that's the right strategy because you know you partner with Amazon clearly is going to be
race to death I think maybe they'll give you some volume the least profitable stuff but I just don't see it as a winning
winning strategy what are your thoughts and I know you you kind of Drew straws and I got FedEx and you got UPS I'd love to hear what you're thinking what you.
[48:28] So they just just to pile on the FedEx thing like there are some ridiculous things that Fred Smith has said in the past about this base like you know two or three years ago I think he called the notion that Amazon could be a meaningful.
Logistics company Fantastical and I you know I think he's pretty clearly wrong there but I agree with you you know.
This year their plan to sort of you know move completely away from Amazon like is not a bad move because both.
FedEx and UPS have constrained capacity like they sell all the trips that they can make.
And there are more e-commerce is growing faster than their capacity is growing so when you have a constraint supply of something you want to get the most money you possibly can for that.
And the way you get the most money is not go to the biggest customer that has the most elaborate and negotiates the lowest rates right so FedEx can you know better maximize its capacity by partnering with these people.
That need it more than Amazon needs it so that like that seems like entirely.
Smart strategy on FedEx's part I would I would say and then there was this little I don't know how much of it was real versus Tit for Tat but you know there's this small service that's.
People talk about but it's not very large yet and I you're going to remind me what the vernacular is but vendor fulfilled Prime.
[49:55] Yes seller fulfilled Prime and then in their the seller can choose which.
[49:59] Yeah so in that scenario you don't put your goods in.
[50:04] In Amazon's fulfillment Network you keep your goods in your own warehouse and you promised Amazon that you're going to deliver them within the terms of prime shipping and Amazon has to certify you for this
and around holiday this year they said hey if you want to stay certified for so fulfilled Prime you can't ship your packages via FedEx.
[50:26] FedEx on time delivery rate is too low
for to meet our high standards and so they turned off at X in the peak of holiday and then they they turned it back on and they alleged that that's a data-driven decision but it certainly got a lot of Buzz
so slightly contrasting this like UPS has continued to be a big partner
of Amazon's and you know they are the third largest provider to Amazon so of Amazon's the biggest second biggest is the post office third-biggest is UPS
and the you know the thing you have to remember about UPS and FedEx is they both built their businesses
primarily to deliver stuff to offices right so you drive a truck to an office and you get to drop off 30 boxes when you drive a truck to a house and only get to drop off one box it's way less efficient so FedEx and UPS although they're trying to improve
were built for commercial deliveries not residential deliveries and that's where the US Post Office really comes in as they're good at these residential deliveries.
[51:35] And for your point as Amazon builds out more of their own capability that more and more of their likely you know taking the the efficient deliveries themselves that they can make the most money on and giving the the bad deliveries too.
To the their partners and you know their Partners like price their services based on and having them profitable mix and so like that's another way that.
[51:59] That this whole business probably hurts hurts the UPS is of the world but we are seeing UPS.
Add some interesting e-commerce friendly services so I've noticed three big announcements this this month UPS is going to a seven-day-a-week delivery and they're adding a ton of weekend delivery capacity which again when you were.
Primarily delivering you know contracts to businesses.
Businesses weren't open on the weekend so weekends weren't important but now that you're doing e-commerce the weekends are potentially the most important delivery days.
They are UPS is also making a big investment in rural delivery infrastructure which you know we just mentioned is something Amazon's are likely to need.
More help with for longer and then they also this week announced this new technology that they're rolling out that they called Dynamic routes.
And essentially what that means is they're using AI every morning to decide.
Where that that truck driver goes right so that driver you know in one shift is likely going to stop at a hundred locations to do deliveries.
And in the old world like they you know do ever do the hunt same hundred locations in the same order every day and now that's going to be.
Sort of optimized using artificial intelligence to save gas and optimize the amount of deliveries they can.
[53:24] So we are seeing them try to do more e-commerce Centric stuff.
[53:30] You know I would point out and argue if you're Walmart and you get make a huge partnership with FedEx and Amazon is primarily now relying on their own delivery infrastructure.
[53:43] That is still a huge advantage to Amazon because.
By the fact that they own it it's much easier for them to change and improve their own service so if.
Amazon decides customers really like being able to track the driver and know that the drivers half an hour away from your house
they can do that if Amazon finds out the customers really want a picture of the box when it's delivered so they can see where in their building it is
that they can do that they can add all kinds of customer-friendly services if Amazon wants that driver to pick up returns they can do that but if you're
Walmart in you're paying FedEx to provide all these Services you have a lot less control over sort of Designing and improving your own product so.
Again yet another big big Edge to our friends in Seattle.
[54:34] Two last things on fulfillment here in and we're spending time on this because we think you'll see when we do this kind of
put the bow on things why we think this is so important but number one FedEx has a market cap of thirty four point seven billion Walmart is 30
324 so it's.
It would be a big one but it's not outside the realm of possibility it's not like they're equals UPS is 88 billion so that one's kind of out of the realm for someone like a Walmart or Target to acquire.
[55:04] And I think that's kind of where this is going to have to go maybe you know there's there's a corporate strategy there's a whole thing why buy a cow if you just have the milk so maybe there's no need for them to buy these things but.
And maybe some Walmart I'm okay as long as you're not doing Amazon I'm okay sharing that infrastructure with Target effectively so that's gonna be interesting to watch the other thing I wanted to bring up
is the challenge that the carriers have this is the same for UPS FedEx and USPS is residential deliveries they've tried for kind of each individually 20-plus years with the smartest route optimization and sortation.
To get the stops per truck up and there have been range bound to between 70 and 80 stops a day
so so that's kind of the capacity of the system is really driven by how many stops in a residential delivery can a truck make here's how Amazon solves that,
we mentioned at the top a hundred and fifty Prime subscribers now a hundred million of those are you in the United States there's something like 200 million households so the way to get the stops for truck up
is if you're stopping at every other house right because you know I don't know the data but I imagine you know you could probably.
[56:18] 4X that stops so I bet these Prime trucks are making you know certainly double that if not triple that so they could be making 200 stops
in fact I bet that it has changed the dynamic and it's really just how much each truck can hold.
Because I think the stops have gone so high because they've got the Loyalty program where they're delivering stuff to every house every other house essentially not every day but it's enough that it really dramatically solves this this routings.
Stops per truck problem.
[56:49] Yeah all true I will say well you know we talked about there being like a slight negative that other people could attack the one incremental headache that Amazon inherits by having their own Logistics
delivery capability is you know they're now getting a lot of negative press for like you know having all these.
You know there's this high pressure on all these drivers to maximize their deliveries and get everywhere as quick as they can and so there's a bunch of,
Amazon employees and independent contractors working on Amazon's behalf,
driving unsafely on the roads and you know potentially hitting people and causing accidents and even deaths and I think it was disclosed.
Not too recently that like this happened a while ago but the the first CFO of Amazon apparently was.
Actually killed walking across the street and he was hit,
via Amazon delivery driver so the company literally killed their first CFO.
[57:55] I think that was a woman.
[57:57] It was a woman you're right.
[57:59] Jennifer something yeah.
[58:00] Yeah it's super sad story but so they're going to have to deal with that like I you know I don't know people remember but in the 90s all the pizza delivery companies used a promise 30-minute deliveries and you know that created the
the same problem and they sort of figured out how to manage it so I kind of suspect Amazon will as well.
[58:18] Cool so we've gone through the setup we went through the results and then our analysis now we're going to conclude by kind of giving you an action item so so we're trying to say all right we're going to put ourselves in our listeners shoes
a lot of this may seem a little scary if you're a retailer even if you're a brand what do you think about this so
so here's my take my conclusion is prime one day is a complete Game Changer and it
took his kind of a year to figure this out but it's really showing up now number one customers love it.
Number two it's a knockout punch to competitors you talked about it increasing the addressable Market which is great but people are you know competitors already can't do two day Prime now they're up against one day Prime
what's next same day Prime you know I think this infrastructure can largely be used for all that stuff to the number 3 it is effectively.
Kind of already paying for all this shipping and structure so so again I think it's paying for itself right now and it's gonna be around for four five to ten years plus
[59:20] Also Amazon it's offered on a small number of skus so I think there's going to be two to three years where they're going to be able to expand the number of skus that are there available in prime one day and then that will
get them 20% plus growth for two or three years long enough to find the next Catalyst for an acceleration maybe that same day Prime maybe they figure out growth
tree Alexa ads they have so many so many irons in the fire they have a really good chance of finding that next big thing so the action item is I think retailers need to really.
Kind of take action on this for this holiday holiday of 2020 we have a lot of time thinking this and really start figuring out.
Can you partner with UPS or FedEx to offer one day and what's that going to be like and.
How do you build that out because it's clear consumers love it and it's clear Amazon has invested massively in this and will continue to do so based on the results
Jason what was your conclusion and action items.
[1:00:17] Yeah so I mean I think at the highest level they've they've established these two dominant modes Prime and
they're their fulfillment capability and I think this point no retailer strategy should try to be to catch up with him and go head-to-head with him on either of those two things I think just the idea of trying to be in everything store and ship
hundreds of millions of products and the in the same day to any us consumer in competition with Amazon is a lost cause at this point and so you know if you're a retailer you need to think about the white space
that that Amazon's decisions has created for you right and so you know that you've got to think about.
[1:01:02] Products and services that benefit from the fact that you have this brick-and-mortar footprint right and I see
Target in particular doing a really good job of leveraging the store I know I talk about grocery a lot but groceries a perfect example
you know groceries never you know bananas are never going to live in all these giant fulfillment centers and get delivered through the sort ations a center and all that to the consumer there
probably always going to get delivered from a store or micro fulfillment center so you know if I'm
Walmart in particular but any big retailer you know groceries one of the categories I want to try to win from Walmart I really want to think about
services that customers want that might make the Fulfillment centers obsolete right so
you know what's not very good if you're if you own 200 fulfillment centers that have billions of dollars of inventory in it is if consumers stop buying
off-the-rack products and start ordering products that have to be made to order or personalized to order suddenly all that fulfillment infrastructure isn't so valuable so if I'm any other retailer
I might be winning in a personalized products if a lot of these products shift to Auto fulfillment
the ability to ship really fast and quickly may not be quite so important so if I'm another retailer I'm leaning into that
and you know for sure I'm doing things like.
[1:02:29] Thinking about using my customer base to design my own products and sell stuff that Amazon can't sell because you know competing with Amazon by selling other people's stuff I think is just going to be.
Increasingly unviable for almost anyone and that's my shtick.
[1:02:51] I totally agree.
[1:02:52] Awesome well it has happened again we've gotten slightly over our allotted time but I feel like this is a.
Particularly important event in our year and it's well worth the time that listeners spent sort of get their arms around
all the various things that are going on in Amazon and as usual if you have any questions or comments.
Hit us up on Twitter or visit our Facebook page and you know it's time to get some fresh five star reviews so I know I say this every time.
But seriously it'll take you ten seconds jump over to iTunes and give us that that five-star review because we need we need some 20/20 reviews not those those older views from those of you that have been with us for a long time so appreciate you doing that.
[1:03:42] Except when we hope you enjoyed this new kind of format for an Amazon quarterly result where we do have a little bit deeper and if you have any feedback positive or negative we'd love to hear.
[1:03:53] And until next time happy commercing.
EP205 - CES and NRF 2020 Recap
CES 2020 was in Las Vegas Jan 7th - Jan 10th.
NRF Big Show 2020 was in New York Jan 11-14th.
Scott Galloway (ProfG) hosting a 2020 Tech Prediction lecture the evening of Jan 14th.
PSFK Future of Retail 2020 event on January 15th.
We recap them all with a lens on what's relevant to retailers and digital shopper marketers.
Episode 205 of the Jason & Scot show was recorded on Wednesday, January 23nd, 2020.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scot show this is Episode 205 being recorded on Wednesday January 22nd 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners well those of you that are regular listeners have probably realized we has been a little while since we put out a show
and the reason why is my colleague Jason here has been traveling like a crazy man.
[0:55] This is true I have my annual fun start to the year with the whole CES in RF Marathon which I just got back from.
[1:06] I thought this year you weren't doing CS what what what happened we had a client call and Russia.
[1:11] Did end up yes having to go for a shorter than usual stay at CES but I did end up having to make an appearance.
[1:18] What happens when you're the chief digital retail e-commerce strategist goes goes that way.
[1:25] Yes when you yes it's true when you have that many words in your title like unplanned trips are part of the bargain.
[1:33] Coco we thought would use most the show to kind of catch up on that and then try to work some news in there too let's start at CES in the first of all big question did you get any new gadgets.
[1:45] You know a disappointing year for me personally and part of that may be because it was a shorter trip the,
the stuff like the stuff I tend to discover that like I personally want is maybe deeper in the CES catalog and I maybe didn't get to all of those booths this year I kind of had to hit the main.
Main Milestone booths so yeah nothing super excited I got I maybe have a little.
Personal problem hoarding Chargers and cables and so there are some nice new,
um third-party chargers for the Macbook so I did get a new anchor and the new hyper juice hundred watt charging systems.
Yeah no no super important purpose but yes I have some new Chargers that I have to hide from my wife I don't think she even cares about the spending I think she just cares about all the space that the unused.
Chargers take up in our life.
[2:50] Yeah there's a drawer there where they all could live.
[2:52] Yeah in my workshop it's more of a a system of drawers for.
[3:01] They buy hcf like the 1985.
[3:05] I mean people people laugh at me but then we need to find a 30 pin Mac charger for iPhone 3 I have one.
[3:14] Boom I got it yeah.
[3:18] Yeah so yeah got some new Chargers and I did this is kind of CES adjacent but I did get all new
networking hardware for my home office so I think you and I both did internet connection upgrades.
For the holidays and I added a fancy new firewall router access point and switch.
[3:44] Furcal are you gigabit.
[3:46] I am so so Comcast just add a gigabit in my neighborhood so we upgraded to gigabit and then I'm using,
this cool new device called the unify dream machine,
which is from I want to say it's a Ubiquiti networks and they do a lot of.
Commercial Wi-Fi equipment for like schools and institutions and things and so this is a a.
A Wi-Fi access point a firewall and and said a managed switches that are all controlled from their commercial software.
Way overkill for a home network but fun for tinkering.
[4:35] Yeah I think I've seen one of those is it a it looks like a little cylinder.
[4:39] It exactly so historically like they met they mostly make rack-mounted equipment and this is the first time they've,
they've made an all-in-one that that is supported by their sort of,
business level software and it looks like a cylinder and in fact it reminds people a lot of,
discontinued Apple Wi-Fi access point and so there's some people from that we're big fans of that,
that I forget what that was called like they are.
[5:11] I had one I can't remember it's called him.
[5:16] So yeah so people people think it's the spiritual successor to the Apple.
[5:23] Cool what else any interesting Commerce news is he yes.
[5:27] Yeah I actually thought it was a reasonably important year for Commerce,
like the Super Readers Digest version on this show it's the consumer electronic show I personally have been attending for 32 years it's the largest trade show in the u.s. like 200,000 people,
many years ago it was a buying show where people from retailers would go to figure out what they're going to carry for the year now it's mainly a PR show where they try to generate Buzz for new products to,
sell more new technologies but it's where a lot of consumer Technologies where watch for the first time so like the DVD player and the if you go back far enough the VHS.
[6:10] Tape system in the whole VHS beta War played out at CES,
and stuff like that in the Apple the Apple iPhone was famously launched during CES but not at CES as a Steve Jobs sort of did some clever counter-programming,
so people go,
both to like sort of do trend-spotting and see if there's any major new consumer electronics platforms that are coming down the path and from that standpoint I would like there's one big one that had the buzz I'll save for the end,
but there was a lot of smaller more tactical stuff that I think is going to have a meaningful impact on,
retail in particular digital merchandising it retailgeek.
So most of the listeners of this show are probably familiar with e-ink if you ever had a currently have a Kindle book reader it uses e-ink,
and it's a it's an important digital display technology because it's Dynamic you can change the image that's on it,
it's reflective so it works in super bright sunlight and it basically takes no power to display an image so you need electricity to change the image but once the image has changed.
It literally is moving ink around on the display and then you could turn off the power in the ink stays where.
[7:26] Where it was and so it's great for for not using a lot of power in an electronic book reader it,
great for having high visibility even in bright sunlight but a very common retail use case is it's the main display technology that used for all the digital fact tags that I talk about all the time.
[7:45] And one of the big drawbacks of e ink has historically been that it's only black and white or only black red and white or only black yellow and white so very limited,
color palette and so you couldn't do really pretty,
just blaze you couldn't use it for really pretty signs and this was the first year that they were showing full color E Ink that look very vibrant and High Fidelity and so.
You know we'll see you that.
You know maybe we'll have some color book readers in the near future and I suspect we'll see it trickled down to a new generation of electronic.
Price labels and fact tags for retail stores.
So that was an interesting technology and a way cooler display technology was released by Delta Airlines of all people.
And and so this is a new technology to sort of replace a.
Video monitor in a public area and it's called parallel reality and so Delta Airlines found this technology and invested in the company and they've announced that the first commercial deployment will be.
In the Delta lounges at the Detroit airport later this year.
And what this technology does is it lets a hundred people stand in front of a TV screen and have each of them get a different Custom Image that they see.
so very precisely depending on where you stand you see a completely different image so the use case for Delta in this Lounge is all the customers stare at the flight status display and they all,
see a display that only has their flight information or prominently highlights their flight information.
[9:32] Okay how does it know who's looking and we're there.
[9:36] So first of all as soon as you describe this to someone they're like this sounds like it's going to be some kludgy gimmick and I was super skeptical so two halves of this problem the first half is,
can you really display an image that that is high fidelity and looks like discrete for each person,
and I went in with very low expectations and I was kind of Blown Away like it it totally works,
the the demo they had their like there's like the pixels weren't tiny so you could kind of see the pixels and,
the display is made up of a bunch of.
Of multiple smaller displays so you could kind of see the frame the internal frames so I'd say it wasn't,
but they were super open to saying yeah we know those are the visual flaws like we already have more advanced prototypes that solve those problems and what we deploy in Detroit later this year is going to.
Not have any of those those visual artifacts but basically what it's using is,
beamforming where they're essentially like each pixel is a projector and they can fire different color lights at different angles so by knowing exactly where your eyeballs are relative to the screen,
they can send you an image that's different from everyone else so that's the display technology as it's kind of like a projector inside of a television or.
[10:57] Thousands of projectors inside of a television and it works remarkably well and then you're very,
pertinent question how do they know who and where those eyeballs are to decide what to show each person and the answer to that is,
a combination of Wi-Fi RFID and your mobile phone so this is not,
this won't work for an anonymous use case in the Delta model the reason they're doing it in the lounge is everyone has to check into the lounge and show that they're a member so when you walk into the front desk,
you scan your mobile app they're using cameras similar to an Amazon go set up to track where you are in the lounge,
and they know who you are because you were holding a mobile phone with your unique ID on it to check in and then they're able to deliver your your unique flight information to you so it.
It's a kind of a combination of Amazon go for the identifying the person and their location and this new parallel reality display technology for,
for beaming the different messages and so it.
[12:07] It works better than I expected it seems pretty darn close to real we'll see if they're really able to get this in a while,
lateral out in an airport this year but like if it all works it's pretty easy to imagine a number of use cases for public displays and checkout systems and things like that and retailgeek,
what it would be really handy to be able to show different images to different customers on the same monitor.
[12:30] Very cool was this the big one we're waiting for or know there's more to come.
[12:36] No no more to come so the another interesting technology that like was kind of spooky as Samsung was showing this.
These avatars did they call neon life into these artificial humans,
and so you walk up to all these five or six foot tall monitors and if there's like a person in each Monitor and they can talk to you interact you with you and they look like.
[13:04] Completely real people like in so you would assume this was a video but these are computer generated people that are extremely lifelike,
and so the idea is that you could potentially walk into a retail store and you know there might be a artificial intelligence help agent.
That looks like a real sales associate that you're basically looking at through a glass window that can talk to you in,
and be more human that was the kind of use case that Samsung was pitching the the more interesting use case to me is like an you,
render different shapes and sizes of people and put apparel on them so you know could you could this be kind of like,
a digital mannequin scenario for retail stores and.
It was scary life like in the one thing I would say is they would call this an advanced science project so these avatars apparently took a super long time to build and they say that this technology is still three or four years away from being completely.
[14:09] They have natural language parsing like kids or talk to them and.
[14:12] They did but that wasn't part of the the magic so they were using that were using other Samsung artificial intelligence like in fact Bigsby is their artificial intelligent agent too
like decide what the Avatar was saying and to interpret what you were saying and so they weren't claiming any like.
You know new new Evolution there what was new about this neon life,
technology was how lifelike they could make the visual representation of a person and essentially you know it's,
it's like the next step to like not paying actors to be in the movie and instead having these these digital avatars that.
That will be acting in all the movies and stuff.
But I you know if it gets commercialized I can imagine a retail use case for that the next product that really caught my eye in this got a lot of Buzz at the show and I think this was a,
a darn impressive product came from L'Oreal and it's called perso,
Scot you may have followed this because I know you try to stay close to the beauty and cosmetics base.
[15:24] I do.
[15:25] But so the idea here is,
personalized beauty and cosmetic products that are formulated at home,
so so they initial concept has three different products there's a liquid lipstick product there's a,
liquid foundation product and there's a moisturizer so each of these is kind of a.
A metal cylinder like like one of those Yeti mug type things a metal cylinder and using an app you say I want this color lipstick,
and you know out of a set of holes in the top of this mug,
that exact shade of lipstick or several lipsticks come out that when you then blend them together with a in applicator or your finger like mixed to the particular color that you ordered.
And so the foundation comes out in a color custom color that you ordered the lipstick comes out in a custom color that you ordered and the moisturizer comes out in custom formulation that you ordered so it may be has.
[16:34] You know more moisturizing or sunscreen depending on the environment you're in or the the weather and a particular day and so the
to me the one that made the most sense in the kind of you know coolest use case is the lipstick they do things like you can point your camera at your outfit,
and it will recommend shades of lipstick that go well with your particular outfit and then it can produce,
that lipstick for you and so the reason I thought this was pretty impressive as it seemed to work really well people that tried it were seem to think it was,
not a gimmick that it was you know that they were quality products and they were totally legitimate and you know I've spoken to lots of women that think that the,
the custom shade of lipstick on demand would be,
total useful and I've smoked I've spoke to some women that think the custom foundations would be useful and I just think we're at this inflection point when more and more products are going to be customized for each individual user so whether that means
they're fabricated custom at a factory and quickly shipped to you or they have the ability to be customized in your own home this is essentially a
3D printer for Cosmetics or an inkjet printer for cosmetics and so I it to me it seemed like one of the first viable,
custom products in this category and one little Nuance that I thought was really clever about the whole thing.
[18:01] That the cylinder like could totally sit on your makeup counter at home and it seems like it would fit just fine but what happens when you want to take your lipstick with you and put it in your purse like that wouldn't work very well so it turns out the top of all of these cylinders,
is removable and it's magnetically attached to the cylinder so after you specify a color and it mixes some of that color up
you can just take the top of the cylinder off which is kind of the size of a makeup compact throw it in your purse and take your custom color with you so,
pretty clever and then you buy refill cartridges just like you'd buy refill ink for an inkjet printer.
[18:39] That's where all the money is.
[18:40] Yeah oh for sure but so I thought that was super interesting when you get into the Health Pavilion,
there were a number of players like one that caught my eyes was called DNA nudge and these guys are essentially doing a DNA test
and then they're helping you select,
Foods diet nutrition that match your unique DNA so again going back to this notion of customization that like,
you know the diet you select the foods you buy should all be predicated based on your your underlying DNA that they help you help you find.
[19:20] Did you just come back and say error you are 99% an espresso beverage.
[19:26] That is funny so I have.
Carefully avoided doing any of these DNA because I actually think there's some like significant privacy concerns and I like I don't know maybe I'm I'm.
Overly cautious but like I haven't wanted to just give my DNA to one of these for-profit companies with like dubious privacy policies.
[19:55] I don't know what about you Scott are you totally in on 23andMe do you do it like every month to see if your DNA is changing.
[20:01] I've done both yeah it's pretty interesting.
[20:03] Okay yeah I will be honest I would be totally.
[20:06] Hi I don't have any murders out there I'm worried about.
[20:09] Yeah well I read too much of a boring life to be very worried but I but here's the thing you could have an interesting relative that you're throwing under the bus by doing this.
[20:18] Yeah they shouldn't do their crimes.
[20:20] My fair enough,
yeah so again I can see it I might be being a little silly on that but I haven't wanted to do that so then you know it's the car thing is a big thing here they are,
like the car car tech now tends to get launched at CES not at the auto show.
So you know there's there's you know some interesting electronic prototype cars that may or may not ever see the light of day.
The huge thing I noticed this year in the car Pavilion is that every car seemed to have an Alexa integration like that seemed like that was.
Taking over as the like.
New cabin Tech that everybody was marketing and so I think Amazon announced that they're now over a hundred thousand consumer electronic devices that have Alexa embedded.
From more than 9,500 unique Brands and of course the new device with Alexa in it that I imagine you're going to need is the Lamborghini.
[21:28] Yes absolutely.
[21:29] I think that will round.
[21:31] Finally took me over the edge.
[21:33] Yeah that around out your stable just fine
they're like speaking of am Amazon Integrations I Amazon has a couple booths at the show they have a booth that's primarily focused on the Alexa and a lot of third party you know,
demos with that they have a booth in the home automation section dedicated to key and all the last mile Solutions and things but in the Amazon Booth one of the interesting ones was.
This this cpg company Reckitt beckon sir.
Commonly called RB they make a bunch of products like baby formula and finish is their big brand of dishwashing detergent.
And so they have upgraded all of their packaging to have Dash replenishment built in.
So when you get low on baby formula the box that you bought your baby formula in just recognizes that and automatically reorders more baby formula and when you get low on those.
Those PODS of finished dishwashing liquid the package automatically orders more for you.
[22:47] The saw the Lamborghini thing in the it was funny there was like a poster which had like some amazingly handsome Brad Pitt of time looking dude and he said Alexa I'm hot,
and then she said she she knew to turn on the air conditioner.
[23:05] Yeah yeah context.
[23:07] So maybe wonder how often is Jason uttering Alexa I'm hot to his devices.
[23:13] Yeah I feel like that's not even the most concerning thing you need to worry about me saying to Alexa.
I mentioned Samsung Bigsby earlier computer vision was a big thing I felt like half the booths were doing facial recognition for some nefarious purpose but Samsung built it in a refrigerators so,
in the past they've had these smart fridges that for example had a webcam in them so you could kind of like when you're in the grocery store and couldn't remember if you had eggs you could turn on a webcam and see the inside of your refrigerator.
Which I was like to point out probably wouldn't help you because your eggs are probably in a in an opaque car turn it Carton and you can't see how many are in there,
but that pesky detail aside they're now using Bigsby to do image recognition and take an inventory of your refrigerator so the smart refrigerator knows like,
that you have a quart of milk and how many times you've taken it out and likely how much milk is left in that core.
[24:16] So that was interesting there were a thousand Last Mile solutions that at CES so lots of people like with,
clever approaches and not clever approaches to porch piracy to delivering to your refrigerator to delivering to your garage to your car trunk drones and robots,
Kind of improved efficiency for for bow pass orders for store pick up orders and a lot of technology for like building mail rooms,
notify residents when they have packages all sorts of stuff like that so this is not really a retail show and so it's just interesting to me how,
booths were there like specifically solving a Commerce problem around the last mile.
Um so all those were interesting tactical things that I saw at CES that I think May,
may I make an appearance in the future of retail but by far the biggest platform that that you know was
the most strategically important that really had his coming out party at CES this year is the new wireless technology 5G.
So they've been talking about it CES for a number of years they've had prototype product but this is the first year that they have.
[25:38] Mass-produced products that meet all the certifications and work on networks that are deployed in the real world so this is kind of the
the first time that 5G was truly commercialized at CES and you know I I suspect in in the show's heart of hearts,
like if there's you know one news cycle that they want to win it's the you know the wave of coming 5G products and that everyone needs to throw out all their wireless devices and by shiny new,
new 5G devices and then it's going to magically change the world and there are crazy stats that they you know site about how much faster 5G is than 4G so,
you know hundreds to thousands of times faster bandwidth
way lower latency way more devices that can hang on the same networks and you listen all this and you go man 5 G's going to change the world it's the most important technology of all times and that's mostly.
The articles that are getting written about it but as I talked to more engineers and kind of you know.
Really started to understand what was going on I actually am now somewhat bearish on on 5G I think it's overhyped.
[26:56] Yeah yeah they always the one I see that for his hearse like some remote surgery over 5G and you're like I don't think five G's going to solve the dead spots in fact up I have more dead spots because I won't be honest meat hours.
[27:08] I'm not sure I'm going to be an early adopter of remote Robo surgery but if I am
I'm gonna insist that they have a wired connection to the robot and if for some reason they can't have a wired connection I would way rather have a Wi-Fi connection to the robot then a 5G connection to the robot.
[27:25] Yeah we're going to belt and suspenders that puppy yeah if we're not yeah.
[27:28] Yeah so it's going to be a long time before you ever going to do surgery on me with 5G but like here's here's the,
the huge Wrinkle In 5G that makes it kind of a mess technology for me is.
You know all these Wireless signals are over particular parts of the spectrum right and so like cellular signals and most of what we call LTE or 4G is,
in the 600 megahertz to 6 gigahertz range depending on which company and what what bandwidth they own and so 5G uses that same bandwidth,
and it uses some new band with that the government just sold the carriers that's at a much higher frequency and so it's what they're calling this millimeter wave frequencies and so this is,
20 gigahertz 295 gigahertz a way higher frequencies than the traditional Four G's and all of the,
dramatic improvements in bandwidth that they're talking about only happen on those new millimeter-wave frequencies.
[28:34] So the the 5G technology works on the 4G frequencies and it is faster but it's kind of incrementally faster in the same way that 4G was faster than 3G,
it's so call it
twenty to a hundred percent faster and then you get this you know hundreds to thousands of times faster when you get on millimeter wave and
so couple problems with millimeter wave number one it's mostly not built out and unavailable like there it's,
there are rumors that the the iPhone that comes out this year that will be the first 5G iPhone,
may or may not even support millimeter-wave but there's very limited coverage of millimeter wave in the United States like like when you don't company says they have coverage in a city that's probably one block that they cover
when this millimeter wave technology and then much bigger deal is that high frequency wave.
Is blocked by virtually any kind of structure so not only will it not go through walls it won't go through windows,
um so you won't ever get millimeter wave signal inside of a building for example.
[29:45] Think you're gonna have to do your surgery in a tent.
[29:48] Yeah exactly so a legitimate use case is
hey T-Mobile can compete with Comcast for internet bandwidth for Scott's home and if you buy it from T-Mobile what they're going to do is put a millimeter wave antenna on the roof of your building and run a cable inside of your house and convert it to a Wi-Fi signal inside of your house
and because the millimeter wave can be really fast to that antenna on your roof like they can legitimately compete with your,
your cable modem but you are not going to have a phone that you walk around in your office that's you know downloading movies in a second.
[30:32] Nursing so a lot of infrastructure to be built to solve this millimeter wave from.
[30:37] Yeah yeah and those those
like they need many more antennas and the antennas need much quote to be much closer together to really build out coverage for millimeter wave so it's a huge National infrastructure problem
and it doesn't seem like any of the carriers have really committed to like saturate their Market with millimeter wave yet so again you know most of what the carriers are talking about when they say 5G
is 5G over the existing 4G bands and,
it's a little better like I'm sure we'll all enjoy it but it it's by no means game-changing so that's that was kind of my,
my CES recap I think most people would say oh the big thing that's going to change the face of retails 5G I'm pretty convinced it's actually not but I do think a bunch of these display Technologies are,
potentially interesting and I really think that that this trend of more personalized products is super interesting for Commerce.
[31:36] Cool so then you shot straight from Vegas Rider to New York and would a would you see it enough.
[31:42] I did so yeah I got to do a prolonged my New York trip this year so I got there a little earlier,
as you know you and I were nominated for an award for best retail media and we were one of the finalists so I actually went to the awards ceremony on Friday night.
And I'm sorry to report that we did not win yeah so not a very credible award obviously I'm teasing.
Is actually the first year of this particular.
In our Enterprise and what they're trying to do is recognize suppliers for the retail Commerce industry because most of the awards are targeted at the retailer so that's kind of appreciate that and that's interesting and it was.
Very well-attended event for the first year but that sucked me into New York early so then I did the whole show I got to walk all the show floors,
and my limited time recap on all the show floors was,
that it was a very incremental year so rather than,
dramatically new stuff and new technology that you know didn't exist at the show asked year most of the booths in the main exhibit Halls were.
Here's our 10% better version of what we showed you last year.
[33:04] And a surprising amount of it was really oriented towards cost reduction and,
operations optimization so I would say like,
the it was rare to see customer-facing stories and improving customer experiences at retail it was mostly about taking costs out of supply chain and taking costs out of operations and Staffing and.
And increase Automation and that you know it things that are important to retail but frankly things I would argue like that's been a play in retail for the last five years and most of the good retailers today have.
Taking most of the COS out and you know so now I feel like to really move the needle you need to be thinking about your customer experience and improving,
that and I did not see a lot of great solutions for that on the inner F floor this year,
the one kind of new use case that showed up in a bunch of booths is what I'll call a smart shelf so this is like Amazon go like technology it's like a shelf that.
[34:12] Either using cameras or sensors or cameras and sensors,
knows what's on the shelf and it knows what you take off the shelf and it can probably recognize you and so sometimes this is used for self-checkout but way more often it was just used for inventory management,
for knowing when something was out of stock or helping navigate customers to the right product or or knowing when a products on the wrong shelf for all these kinds of use cases,
so I like frankly didn't think the juice was worth the squeeze walking the two main trade show floors at in RF,
the the floor I had the most fun on is this Innovation Pavilion that they've had for the last couple of years but it was much bigger this year
and to me like all the exciting interesting stuff was was definitely in this Innovation Pavilion and so this is smaller companies tend to be,
startup companies a bunch of companies,
from other countries like Israel was particularly well represented and you know here you are seeing a lot of Last Mile Solutions you are seeing a lot of.
Like using cameras to solve fitment and returns and things like that so I just I felt like there was a lot more interesting.
New approaches to customer experience in The Innovation Pavilion than on the main main interest rate show floors.
[35:39] What was the strangest thing you saw.
[35:42] Strangest thing I saw I probably should have come to rehearsal and gotten that question ahead of time so I could have thought about it.
[35:50] Yeah well I'll tell you an odd experience I had so you know I have this weird Affinity / fetish for these digital fact eggs.
And I keep predicting that they're going to be a big thing and they never are.
So of course I had to visit all of the exhibitors at this boot at the show and there's like six or seven.
Big manufacturers and then probably 20 little manufacturers of these things and then RF and so one of the companies I'm not even going to name them,
they're noted in my mind because they were the first tags that Amazon used in the four-star store in Amazon has changed vendors and they now use a different vendor but this first vendor
um had a lot of interesting tags and some new new technology in their booth in the way I remember what I what I see at the booth in order to kind of type up my show notes is I
take a picture of the booth and then I type my notes below the picture in Evernote so I tried to take a picture of this booth and they
tackled me and told me that no photos were allowed and I'm like,
okay do you have like a brochure something I could take no no we don't have a brochure.
So I'm like so wait you have a giant 30 by 30 booth at the show and you paid a bunch of money to come here and like.
You don't in any way want anyone to remember who the heck you are or be able to contact you after the show.
[37:13] We were never here.
[37:15] Yes I.
[37:16] They make you delete the picture.
[37:19] No and I mean I could have but I mean I just didn't even want to take a picture at that point I was I just thought that was so funny like
ten years ago that was about get super common thing and people are worried you're going to steal their intellectual property but I feel like if you have intellectual property that you don't want anyone to know about
don't buy a trade show booth.
[37:38] Weird that is weird see I knew you had one in.
[37:43] So that stuff was all interesting I went to most of the Keynotes and I feel like this is going to be a Captain Obvious comment to you but
I mostly went all the key notes which are all these big retail CEOs
and I've mostly decided that it's a complete waste of time going to any of these shows and sitting in on the on the CEO Keynotes.
Nobody ever said like they're all perfectly media prepped and they mostly Play commercials about their businesses and no you know nobody says anything very like informative or,
you know that isn't already on the public record at these things so I don't know why I always get excited to hear you know some retail CEO speak when.
Like in reality like it's not bad it's just it's just not valuable or super interesting.
[38:32] Yeah yeah it's tough there at some point their public companies to so they're in their quiet period by the time this show comes out so they can't even really talked about you know anything that's.
[38:43] Oh yeah no I don't even.
[38:44] Air and yeah.
[38:45] I don't even fault them but I just tough right and so you had like Kevin plank who's you know the founder of Under Armour and you know he recently stepped down as CEO but he's like.
Like Chief brand evangelists or something.
One that got like a little heat Michelle gas is the CEO of coals we'll talk about this later but like you know Cole's kind of underperformed a little bit for holiday and,
and so that's that's interesting but she also won the,
the internet Gala award as the person of the year and there are people that are pointing out like what's the state of our industry of like the.
Person of the year is like a CEO that's like let a company for five years that mostly has been in sales and market cap decline over that entire five-year period.
[39:32] Emma close a bunch of stores they've closed Less stores than a lot of other retailers.
[39:36] No I would say they have performed better than most of their peers and their Peril I think that's true and that's why it's kind of news that their their performances starting to,
to soften the the one thing that maybe was newsworthy about her Kina like obviously they get a bunch of Buzz for
being the first ones that were all in on like allowing Amazon returns and their store.
Um and I don't know why this gets so much coverage I mean it's an interesting tactic but to me it's not a game-changing thing.
But you know a big question has been like how valuable is that to Cole's like is it working and and she gave a full-throated defense of the tactic and said that it's working.
Quite well and that we're happy we're doing it and that we've expanded it to all stores but then she said like two sentences that didn't like,
and I'm like.
[40:38] It was very vague yeah.
[40:39] Yeah so so I don't know so that was a little interesting.
[40:43] It was interesting there's a lot of pictures on social media accompanying that article and they showed Kohl's store and had a tiny little coal sign and it was just surrounded by Amazon promotional materials all throughout the front of the store and then inside the store.
[40:56] Yeah and I think one of the things that's happening is you know Cole's is always been heavily promotional.
Like I think when you return something to Amazon you get like a fifty percent off of a Cole's item certificate that you know they're trying to juice you too.
To buy something presumably it's super little margins when you're on that visit,
so that stuff got a lot of Buzz as you know but listeners may not know a lot of my time as in RF gets booked up with,
these these various committee and Council meetings that are going on and so you know we're members of the digital Council which is a big group of.
Of people that are primarily focused on digital Shopper marketing.
And so you know they have a long meeting at the show and you know I'm still on the board of what used to be called shop dot-org now called the digital Advisory Board.
And we have a long meeting during the show and there's usually some interesting content at those meetings so I would say both of those meetings were good and I'm probably biased because I was the speaker the digital council meeting.
And I gave a presentation about like what western Brands can learn from China so sharing a bunch of,
interesting tactics that are going on in China that my hypothesis is you know that people ought to be trying in in the west and.
[42:22] Is this the salty wait for you tried to get your your prediction of QR codes out there.
[42:28] Potentially I'll do anything I can.
[42:29] Talk about it the Ulta.
[42:30] I'll do anything I can to win the forecasting battle against you just got so yeah.
No I did not I did not hit that hard but I got good feedback and I enjoyed doing it it's a scary audience because you know I talk to people all the time but this is like.
50 of my closest work friends that are all like smarter and more digitally savvy than me so like if you say something wrong.
They're pretty likely to call you out on it so which is not necessarily as true in my day job.
[43:04] So I was pleased that that went well and then in a rare treat for me I stayed for a couple days after an RF this year,
and there are a lot of events that other people program to take advantage of everyone being in town for an RF,
so PS FK is a research company that does a lot of great retail content they do a bunch of retail tours in New York the week of in our.
And they had kind of a direct-to-consumer day where they had a bunch of leaders from direct-to-consumer companies come in and talk and so,
I got to send it on that and that was kind of interesting content I think I inadvertently got some Buzz cuz,
unlike some of these really polish CEOs for the big retail companies like the CEOs for some of these startups probably share more information than they should and so one of the founders of neighborhood Goods was there there there.
[44:00] Kind of new retail concept there are like a retail Marketplace so vendors paid rent space in their store they open one store and,
Texas in Dallas there now they just opened a second store in Manhattan and they're about to open a third store in Austin and in our industry via all the Talking Heads I would say they get a ton of Buzz,
you know the one thing they don't do is disclosed like any sales data so you know you never know how meaningful their sales are but the CEO at one point mentioned that their best-selling skew by volume,
by number of units and dollar volume is a t-shirt with their logo on it.
[44:42] And so I you know in my mind thinking like that probably says all you need to know about you know how much of the vendors products they're selling that are paying for space in those stores if they're evil logo t-shirts their best.
[44:55] Ouch then he went Savage on social media.
[44:58] I did not mean it to be super- but I just thought that was an interesting data point and then I went into the belly of the Beast,
our friend Scott Galloway who loves his predictions as you'll know.
He had an event he's a professor at NYU and he gave a lecture at NYU,
kind of a couple hours sharing his recap of his 2019 predictions and doing his 2020 predictions so I sat in on that and.
I don't think any of the predictions were very new to those of us that follow him regularly like you know he tends to be pretty repetitive and and so these were mostly repetitive,
predictions but there was a question and answer session afterwards and I thought the question-and-answer session was really interesting and people people asked him good questions and he had you know insightful answer so that would that part was fun.
[45:56] Yeah he's a very anti Sheryl Sandberg Casper and then he's he's been antitussive for a long time and he's gotten his like face ripped off by Tesla this.
[46:06] Yeah so it's funny.
[46:08] Predicting it will go bankrupt and you know there's crazy and it's fraud and.
[46:13] Yeah yeah he thinks it's way overvalued and he
it's kind of funny because he talks about he like he openly talks about this he's like people that agree with me tend to agree with me on most things I got like he's you know philosophically aligned on most things but he's like most of the people that follow me,
like Tesla way more than me
and they have way more digital privacy concerns than I have so he's like whenever I share my position on those two things I tend to get creamed and so like it almost became a joke like people standing up there were like challenging him on his,
Tesla predictions and like you know people came up and like made an argument for the Tesla evaluation and why it was reasonable and stuff and so there were some,
pretty funny back and forth on that stuff and he was making fun of the fact that like that's most likely what he'll get murdered for,
and then he did a podcast after this event where him and Kara Swisher who generally agree on most things on their podcast like got in a pretty heated argument,
on the whole should Apple unlock the terrorists phones and and Scott comes down heavily on absolutely Apple like should,
should immediately unlock the terrorists phones in the privacy concerns are kind of,
BS in Scott's mind and so and he recognizes that like,
that's the other thing he gets a lot of heat for is that most people that follow him don't agree with that position.
[47:43] Wasn't swisher and RF like interviewing the politician or something.
[47:46] She was I don't remember who she interviewed because that was during one of my meeting so I missed it.
[47:53] I think it was Paul Ryan I didn't understand what the heck that had to do with retailgeek.
[47:57] Yeah so there's kind of a tradition that interrupts like a big part of interests job is Lobby is federal lobbying and it that's particularly relevant right now because why.
These privacy laws that all the states pass are passing have.
Potential major intended and unintended ramifications on retailers like a lot of them like arguably make it illegal to run a loyalty program for example,
um so so the lobbying is a big deal in RF it's a lot of their energy as in lobbying and so if you look at the keynote speakers over the last several years in RF
they had Bill Clinton shortly after he went out of office they had George Bush Senior shortly after he went out of office and so they tend to have a
a big name politician and this year it was Paul Ryan but I didn't get to see it
I didn't hear any particularly newsworthy things come out of it but I can't speak to it firsthand.
[48:53] Furcal anything else we need to know about NRF.
[48:56] So that was my in a referee cap that kind of match up with what you followed on social media in the news or did I give you.
[49:03] Was it seemed like kind of the the timing was interesting because you know at the same time you had the Casper S1 filing drop in this kind of,
pivoting to General news but kind of overlapped with an RF a fair amount then you had a fair amount of bad news from Q4
some of this it's hard to tell if it was just kind of there's a bunch of retailers that are kind of in that Molly gedan bucket that held on through Q4 is it's kind of crazy to once you make it to August you might as well not close any stores until
until January so it's hard to know how much is kind of an overhang kind of a holiday overhang and how much is kind of.
The holiday actually wasn't as good as we thought were those some of the topics that NRF.
[49:47] Yeah so not in the formal presentations but in the sort of hallway conversations this this was a big point right and,
you know you and I have talked about on the show we were talking about it in December that I sort of felt like it was going to be a soft holiday that you know they were going to be
profitability challenges in talking to people at this show one of the interesting things that kind of reaffirms that it was a soft holiday is
there is apparently like a ton of excess product in the market which has not been the case the last several holidays and so retailers are getting asked to take a bunch of.
You know deeply discounted inventory from manufacturers and what we would call distressed inventory,
that there's a glut of that on the market this year and so that's a bad sign it means retailers didn't sell through all their inventory the manufacturer didn't move as many units as they expected and now they're going to liquidate all that inventory at low cost which.
You know means consumers closets are going to fill up with with cheap clothes and you know it's going to be longer before they can they can sell new stuff and you know a bunch of more of this like.
You know desirable Brands will show up in TJ Maxx and,
places like that so there's a bunch of negative ramifications and you know it's.
[51:06] The my theory is like it's for two reasons like,
that we just did have a soft holiday and people didn't sell as much as they wanted but the last several holidays I feel like retailers have been super careful about constraining their inventory and being really smart and using a lot of,
new modern tools to predict demand better and so they actually,
we're in really good inventory positions the last couple of years and what's different this year is potential fear of tariffs,
and so my my theory which I have no way to validate but my theory is that a lot of manufacturer is particular know they're getting their goods from China.
Made more stuff before tariffs kicked in as a hedge against potential tariffs and so they just ended up with higher inventory positions and they've been you know trying to sell that through to retailers,
and so as you know we have a glut of product and that that actually bodes,
poorly you know for the end of Q4 but also for q1 sales across much of a bunch of retail categories.
[52:14] So I during the show or around the show you know there are bunt you know holiday earnings announcement started to come in.
Before this show MasterCard released there.
Sort of holiday recap and MasterCard has this product called spending pulse where they Aggregate and anonymize all the,
the spending behaviors of everyone that carries a MasterCard branded card.
And they said holiday retail sales were up 3.4 percent from November 1st to December 24th and the online sales were up almost nineteen percent and so those are decent numbers,
that would calm pretty you know favorably with last year I think those are very similar to last year's numbers.
And that would imply that everyone had a decent holiday but then the individual retailer started announcing their earnings and nobody has earnings.
That seems like they jive with that Master card number right so so not shocking the JCPenney was down but they were down you know lower than expectations so they were down seven and a half percent which is huge,
we alluded to this earlier but Cole's was down point two percent and they've been one of the,
the you know better performers in the apparel category for a while so the fact that they're down was was alarming and surprising.
[53:32] L Brands was down 3% Macy's was down,
point seven percent which they had been up the previous quarter so that was a big holiday Miss and then I think to me the one that was most surprising and alarming and kind of triggered some,
some stock alarm Bells was Target and their same-store sales were only up 1.4 percent versus,
5.7 percent last year so that was a big mix against their guidance and you know you,
you listen to that bloodbath of retailers like almost nobody you know performing above their comps and you try to reconcile that with the whole industry being up 3.4 percent and it just doesn't make sense to me I think,
I think that Master Gardener is just wrong or or like there there's something unique about MasterCard carrying people that you know is different than other spending.
[54:27] Yeah yeah the.
Jury's out I think until we see how Amazon and they report on the 30th and will be here on the Jason Scott show recapping that for everybody that's going to be really really important and then the second most important going to be Walmart and I'm not sure,
you there in Feb 18 kids are in that off-cycle yeah.
So it's going to be awesome to see how that goes because if they both didn't do well then it really is a head-scratcher but even if they you know let's say Amazon grew like 25% or something.
It's kind of makes the,
you can get the e-commerce number to 19 percent but like what the heck happened to the rest of retail who actually grew everyone that we know that reporting didn't it would have to be Walmart or you know.
Someone else I don't know,
Costco yeah maybe it's the dollar stores there's there has been a bunch of strength and kind of like what we call the value plays the dollar stores the Wholesale Club's the T.J.Maxx has maybe those are the guys that kind of saved the day and there's haven't reported yet.
[55:47] Yeah but I think no matter how you slice it like this is another version of bifurcation that like you know if holiday sales are robust like they were not,
robust for everyone that there were you know huge winners and losers and you know if that was the case which it certainly seems like it was
you know you're going to see that play out in you know future store closures and bankruptcies and all the other things that you know retailers have to do when they start to get into distressed.
Situations and you know along those lines I think we have already seen a bunch of announcements now that they've gone through holiday,
the upcoming store closures.
[56:30] Any other news you want to cover.
[56:33] I mean those are the big things like just to recap the store closures real quick like that was like expresses closing a hundred stores JCPenney's closing 6 more stores
Pier 1 is closing half their stores Bed Bath & Beyond closing 40 stores,
a slightly surprising one of me is bows which had a chain of company-owned stores.
Is closing all of their bricks and mortar they're going to be you know a pure brand and Direct online sales only so you know a significant amount of store closures to start the year,
so it's kind of falling into your whole you know Mama gettin story that you like to always talk about.
And then I guess just a couple of small little news items that are like you know pretty interesting in the Commerce base Google made an acquisition of this company called pointy.
[57:25] And I wouldn't expect people to necessarily recognize pointy but pointy is a,
a data company that makes it super easy for particularly small retailers to upload their store inventory to Google.
So that lets you do local inventory ads where we're like you know you do a search for a coat and Google says oh that coats in stock in this store that's a block from you.
And it also you know facilitates the sort of instant purchasing Google and a lot of other things and so it's it was interesting that Google's acquiring this capability to help retailers on board.
Their inventory to Google much easier that you know could be the first of a bunch of steps we see in Google trying to get more serious about Commerce,
and then you know the Gap had previously announced that they were going to split Old Navy off from the rest of the company,
and they kind of had assigned CEOs and then this month announced that they're actually not going to do that they fired that CEO in the,
the son of the founder I came back to run the company so so a lot of drama going on at the Gap right now.
[58:44] Yeah well I think they were another example like I,
I don't know I think it's a high level the story was a bunch of the Gap brands are underperforming the one Gap brand had been performing strongly was Old Navy and you know so there's an argument that like.
Old Navy wasn't getting full credit in the public markets because they're being dragged down by these other brands so you split up.
The strong brand Old Navy from the weaker brands,
and you know maybe you can carve out more value that of course ignores the fact that,
like all of these Brands share a shared infrastructure the same it stuff the same e-commerce stuff the same supply chain stuff when you split them up you got to spend a minimum shh money to rebuild that you know.
For both companies and and I think the thing that made this untenable was.
Old Navy didn't have a great holiday either and so you know they were left with the prospect of potentially splitting up and having two distressed Brands neither one performing very well and.
You know they just spent a bunch of money and and you know their employees Focus was all put on this this.
Split instead of focusing on on customers and in the right product in the right right brand positioning for that stuff so so I think it became scary and they pulled back.
[1:00:08] Must be frustrating imagine if you were on that team and you probably had to separate all the point-of-sale systems and the customer databases and.
[1:00:18] Yo and I'm.
[1:00:18] Pretty far down the path.
[1:00:19] Like I'll be honest I'm sure there were people that were far down that path and the whole time they were doing it we're saying this is stupid we shouldn't be doing this and now they're pissed that they wasted all that.
Because it's yeah it's not going to see the light of day but you know sometimes those are unavoidable things like you know there,
there are storied brand I hope they find their way through it.
But Scott that's probably going to play be a good place to wrap it up because we have hit our usual 1 hour mark so we've used up more than our allotted listener time,
as always if people have a comment or question feel free to drop us a note on Twitter or Facebook
and for sure we need to get those iTunes reviews going for the 2020 year fresh reviews are super important so if you haven't written a review for a podcast yet we'd love it if you jump over to iTunes and write us that review.
[1:01:15] And make them five stars thanks everybody.
[1:01:17] Yeah until next time happy commercing.
EP204 - 2020 Annual Predictions
2019 Recap - Predictions made on episode 159
BONUS: Amazon breaks out prime revenue (No)
An epic fail for Jason & Scot! It turns out the future is difficult to see (and our case the timing is also tough).
Bonus: Cashier-less stores (Amazon Go), blockchain, 5G, big data, and personalization won’t have a significant impact on retail. No DNVB will break out. No major retail anti-trust actions in US. Brick & Mortar Marketplaces won’t take off (Showfields, Neighborhood Goods, B8ta). Shopify won’t compete with Amazon.
Episode 204 of the Jason & Scot show was recorded on Thursday, January 2nd, 2020.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scott show this is episode at 204 being recorded on Thursday January 2nd
2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners will Jason happy New Year happy new decade hope you had a really good last decade and I hope you had a good holiday.
[0:53] I did Happy New Year to you. I'm with you on that new decade but they're you know there's some controversy about whether it is a new decade or not.
[1:01] Yeah I don't believe that it's a it's a 10 plus one problem we'll just to sweep sweep past.
[1:07] Yeah it's the twenties as far as I'm concerned so.
Yes but it has already happened I nailed our intro despite the fact that we typed 2019 in the show notes.
[1:22] Azle Easter I got them there for you you found it.
[1:25] Yeah I was I felt I felt special about myself that I was able to fix that on the Fly.
[1:32] Who said the most important question is have you been able to see the new Star Wars movie.
[1:36] Oh my God Scott I've been thinking about you nonstop because yes I got to see the new Star Wars movie and obviously we'll will be spoiler-free but I I was totally happy with it and enjoyed it.
[1:48] Yeah yeah me too weird thing happen to me where I've gotten to where I kind of like the Mandalorian almost better than the movies so I don't know.
[1:57] So here's why I've been thinking about you nonstop my 4 year old is now both feet in on Star Wars everything.
[2:06] Good quality parenting right there.
[2:08] So we wouldn't want some of the movies there's a ton of like kid-friendly Star Wars content you probably knew all about this but there's like the Lego movies and cartoons and all this different stuff,
and like for Hanukkah he got a lightsaber which he has not been separated from since and.
[2:27] We got a bunch of Star Wars books including I got him,
like a graphic novel version of episodes for 5 and 6 and so now every night as part of our bedtime ritual he's his down with me and we we you know read us a segment from the book.
[2:46] Give us your Darth Vader voice.
[2:48] Yeah I'm not doing any voices on the podcast sorry.
[2:53] Baby geek I am your father.
[2:55] Exactly I have said that exact phrase tan.
The what's super funny is my wife and I like you have enjoyed Mandalorian and we were watching it one night and Stephen King in like you should have been asleep and it came in and saw I like.
30 seconds of Mandalorian which we have not let him watch Mandalorian but Steven is totally 100% fixated on Mandalorian.
So he's already convinced that mandalorians are way better than Jedis.
Like the only character he likes from all of the previous Star Wars work is now Boba Fett and he like he brings them up and every contact and we're like.
You seen 32nd.
[3:44] Team Honda.
[3:47] Anything he's like he's like four and he's asking like.
Like when he sees Yoda in like Clone Wars he's asking like how is he only a baby in Mandalorian.
[3:59] You have time like it's really confusing.
[4:05] Star Wars is super confusing to explain to a four year old white guy because you start with the premise that like the bad guys have red lightsabers in the good guys have other colors and then like,
it's only Don's I knew that all the bad guys used to be good guys and then become good guys again and so I.
It's super like that Santa can that it yeah yeah it's a very convoluted but suffice it to say there's a bunch of Mandalorian and baby Yoda posters up in his room and he's like we're leaving in a Mandalorian World which just makes me think of you.
[4:37] Regal Walden toys are coming out so that it's going to be exciting in the next couple of weeks are all the they held them because they didn't want to spoil some of the plot elements of Mandalorian soon there's a big wave of toys coming so it's good time.
[4:50] I know and in fact a bunch of entrepreneurial people because they did not release baby Yoda toys during the show because they were trying to prove your point keep him Secret.
So everybody and their brother started making baby Yoda toys and like there's been like you know a huge intellectual property Crackdown and there's like you know hundreds of people from Etsy that have been.
Don the cease-and-desist orders over that.
[5:17] Speaking of toys I saw on Twitter that you were going to try to hit one of the new Toys R Us did you make it to him.
[5:24] I did I am wearing a button right now that says I don't want to grow up I'm a Toys R Us kid.
Because I went to the Houston store a few days after it open so there's,
Tyreke and for our listeners like Toys R Us went bankrupt or done at super sad huge disruption in the toy industry,
a company bought the the intellectual property of Toys R Us and they did a partnership with beta who's been on the show a couple times,
the open initially to Toys R Us stores so there's one in New Jersey and there's one in Houston Texas.
So I got to go to the Houston Texas one and it was fun it was fun to see the brand,
back alive and reimagined then it was a you know it's very different than a Toys R Us a traditional Toys R Us store because these are.
Kind of 20,000 square foot Mall base toy stores versus.
80000 square foot big box toy stores but it was a fun immersive retail environment with a bunch of toys and,
this mall which is a a mall Scott like a week before Christmas felt like a ghost town to me like it was.
Tragically empty but I would argue the Toys R Us with the second busiest store in the in the whole mall and.
[6:49] Behind Apple you're exactly right side note people are only in the Apple store to get tech support but still.
But this one was really busy and people like had made a special trip just to go in like the brand is so strong so it looks like these first two stores are doing pretty well and I know there's a plan to open more so
kudos to them for saving the brand and beta for doing a pretty good toy execution.
[7:16] Nice the so
thanks for the trip report this is our annual recap and he's always run long so I think we should just jump right on into it so being the first show of the decade and the year
it is our custom I guess we've done this for fact,
to do an annual prediction and then Square ourselves so way back in episode 159 we had our predictions,
or 2019 so I think what we'll do is score each other to start out with and then we'll put out our predictions so why don't you go to my last year predictions.
[7:58] And before you jump and let me just say I despise this show I've had red
leading up to the show in the reason is is I've never done very well
that however will I have done I've gotten progressively worse every year and last year while I did quite poorly you did stupendous wave and so,
it's like I've dreaded even seen what my predictions were last year and hearing about them so I'm just going to rip the Band-Aid off and we'll get through the show
but your first prediction for for 2019 was that at least 5K more stores would close in 2019
and let's get this out of the way you blew away that prediction coresite which is the
company we most often use for kind of tracking Us store closures had like 9300 stores closing this year
IHL did a study in the world even more store closures than that in their in their study Dope by any measure way more than 5,000 stores closed and you know in hindsight I should have let you get away with that prediction because that's why,
it was too easy.
[9:12] Well no I don't know if there's a lot of people saying but that was kind of going to be the worst.
[9:19] That no so if you had said there is going to be worse than last year that would have been a slightly more predict like.
Tempstar 5000 was less than last year or this year but yeah I agree,
most people thought there be fewer closures this year than last year in that bike by depending on how you count did not prove to be the case that much more controversial thing on the whole store closures is it more
open and closed if you go by the course I track her a lot more closed than open but if you go by other studies,
that are the feel more comprehensive like they're actually were more swords that open then close so.
[9:58] Yeah and I know the size Matters right to some of these are mattress stores which are pretty big.
[10:04] And I whoop all a lot of the people that say way more stores open then close are also counting like restaurants and stores for example and the end restaurants have a lot of charm and so,
a lot of controversy but bottom line you started out of the gate strong you're one for one and.
Your second prediction,
you just you just jumped right into the gutter because your second prediction was that Professor Scott Galloway would basically be wrong.
Which I like as a general principle but more specifically what you're talking about is the,
an inner 9 people the climate a year ago he had just published a book about the the for one of which was Amazon so he was
he was publicly speaking about Amazon a ton and he you know was really beating a drum around having to split up Amazon and they're potentially Amazon would voluntarily spin off some of their businesses because they're so lucrative and so you know the talk to usually about 8 if you ask until your prediction was kind of
to go negative and say
you always wrong and Amazon isn't going to be split up and isn't going to voluntarily split up in any parts of their business and,
you were certainly correct none of those things happens.
[11:28] What have I learned from this anti Galloway bet is that he throws out so many things he gets one right and then looks like a genius show his we work one with hit.
The bus was other ones didn't put the he's ridden the we work one for a good six months.
[11:43] Yep yeah I feel like he the first one that hit for him that really like you know he made a lot of hay en was predicting Whole Foods would be acquired by Amazon and then yeah he was instrumental in that kind of picking the,
he was an early picker of the we were demise the pressure point
he also predicted Amazon would acquire a bunch of other people besides Whole Foods that they didn't in my favorite prediction is about 3 years ago he said that Amazon had peaked in that you should short the stock.
[12:14] I would not have been good.
[12:16] Side note yeah that would turned out not to be good investment advice.
So yeah for your point like anyone in this predictions face like the whole key is to throw a bunch out and just remind people of the ones you got right and not bring up all the ones you got wrong.
But you're doing great you're two for two yeah so third prediction that.
Either or eBay and Alibaba would need to do something big in 2019,
and so you use you propose that potentially they might do some sort of joint venture or some sort of combination.
And I have to say he's got as far as I'm aware that did not happen.
[13:03] Yeah but itself StubHub when you said that's pretty big.
[13:09] No not relative to their socks.
[13:11] It was Lucy 4 billion of 30 billion market cap that's more than materiality.
[13:23] Again I'm dreading my own predictions so I'm grading you very very strictly enough so I'm going to say you're two for three right now.
[13:35] Another thing just point out is the eBay CEO just got up and left one day if that was kind of surprised I don't know if we count that as something big happening or not there's this line with the Borden peace out.
[13:49] Yeah need to do something big.
[13:50] That's kind of a shot.
[13:52] Sell the property will parts of your company and then watch the Executive Suite I don't think that was the spirit of I think you were more proposing they would do something that would help them reacquired growth.
[14:05] Yeah but another thing I didn't anticipate us this anti-china thing that we have going on here right now so the tariffs were one thing but there's just.
A lot of anti-china going on right now that I think is going to make this murderer and possible I don't think the US government would let app.
[14:24] Yeah I think there's there are some number of entanglements there that that would be challenges there aren't there were some little Partnerships there some interesting things we like,
well I guess it's more JD and the Walmart in the US but.
Back on track your two for three and your fourth prediction was that Shopify gets Acquired and you said potentially by one of the big add bass companies like Facebook or Google +,
once again to my knowledge that did not happen are you agree or do you have a argument there as well.
[15:03] I agree and
you know what's really amazing is if you look at kind of your your Shopify when I made this production was their stock is like at 1:44 and they were attending. Nick on all the stuff like 3x so
weather like a 1012 blade on a company now they're $47 company
they're pretty much on acquirable I think at that price and then the valuation multiple is extremely lucky so if you look at all the different
soccer the service companies yet uses range of like 8 to 10 x there's something like 15 to 20 x is just crazy,
good as those guys they essentially don't they will be at choir and not not a choir.
[15:53] Totally agree there they're killing it both in terms of their their financial success and valuations but also their they're just winning in the marketplace and they're like you have continuing to capture more Greyhound away from the Enterprise guys and they're doing a bunch of interesting things
so we'll talk more about them in the future I'm sure but yeah they're a bunch of people that would like to acquire them but for your point like
there is not that's not really economically viable at this point and then number 5,
Walmart stumbles in e-commerce and I took that to mean.
That they're the rate of e-commerce growth would slow over 2018 which was pretty solid gross at like 40%.
And they actually were exactly at 40% again in 2020 so there,
they're growing very quickly they're growing faster than Amazon certainly much faster than the,
the market overall and their growth rate in 2020 or 2019 was basically the same as 2018
so like by that measure I'm not giving them a stumble in 2019 but do you you agree or was you think it was some other dimension they stumbled in.
[17:15] Agree I probably underestimated how long they had to kind of Wind by converting grocery over but I think this year probably will give you the.
[17:29] I feel like that's a common theme in all of our predictions ynm that I've noticed both you and I are sort of afraid to double down and be like wrong one year and then say say it again the next year but many of our predictions come true a year after we predicted.
[17:43] Lyrics the Alexa are pause airpods I did like 2 years and then it came up here I didn't God darn it.
[17:49] Exactly which is frustrating yes so being super brutal you ended up 245 which is way off your your historic average.
[18:02] Yeah I usually bat 500 but it wasn't wasn't there this year I mean on the stuff I feel like e-commerce slow down a little bit.
[18:13] Oh no I for sure feel like it has and I do think.
[18:16] But the pace of innovation is really slowing which is makes up makes it harder to throw out big predictions.
[18:21] Yeah I also feel like
it is this point like it's the timing of many things is tougher to predict than the actual events themselves and the Horizon is now longer than a year for your point so that's
that's that another challenge with this whole predictions thing but I'm not remotely confident that I didn't any better so so
with no further Ado let's let's see how I did.
[18:51] Yes yes so your prediction so let's jump into this the first one is you were very giddy you probably had just visited three or four of the Amazon stores and you said look
I am sure this can be over a thousand Amazon physical stores by the end of the year
so I think.
Whole Foods helps a lot here in this is there were there were a bunch of Articles out there that Amazon was going to because Wall Street Journal that they're going to have,
thousands of Stories the right now we're sitting in about five to six hundred so you got Whole Foods
500 Whole Foods there's some pop upstairs for Stars book stores throw all that together you get sky like 555 75
so that's a pretty big Miss 57% is f on any grading scale so sorry I did not get that.
[19:53] Yeah no I'll be honest I thought,
perhaps Amazon go with scale and much more you were generous that they were actually a lot more pop-up stores the last year they closed most of the pop-up store so it's possible there's fewer Stars this year than they were last year of you
if you included those so yeah I wildly miss that in the only like slightly interesting thing in that in that whole thing is I feel like the one concept that has scales slightly More Than People realizes the 4-star store
so there now 15 for Star stores which is like coming up on on you know the number of bookstore so pretty soon we might have more,
more 4-star stores that we have book stores but nowhere close to a thousand I was wildly wrong.
[20:38] What are the clothes the popups cuz I've kept an eye on them in our malls and they're pretty popular MMOs price at the.
[20:46] Yeah yeah well you know for a while they had a ton of them in Whole Food stores,
and yeah I feel like they opened a lot of them in places where they could get real estate rather than in places where.
Where there was a like strategic audience need a few pop-up stores their main are some kind of interesting Concepts so that yeah I don't I don't know.
[21:12] So that's 0 4 5 4
for those homegamers keeping track of the score then your second one and this was one where I think the timing probably is going to be what
this was on the heels of Target buying ships and here we are a year later that's gone really well you have Target,
Ecommerce accelerated they're constantly talking about how should you store is doing well and all those initiatives that if they can anchor on ship,
so your prediction was that in 2019 Walmart would buy a last-mile firm and that did not happen I think the big
idea and last-mile will there be a couple one was going to
just kind of Associates kind of on their way home free stuff and then the second one is this whole body camera thing where they're going to
pop Associates right in your house to deliver stuff I don't think that is really caught on either.
[22:10] Yeah I know II do I agree I think they I made that prediction cuz I felt like,
that honey how stuff is really growing for them and they would need more Last Mile capacity and I still think that it is true,
I didn't foresee that last year but you know
like as whole food as a FedEx has kind of gone push the last run away from Amazon
that the company they're running to is Walmart and so we we've seen some like bigger strategic Partnerships between Walmart and FedEx and now that you know they're starting to be some some economic weakness at FedEx,
I do not want to talk about this year's predictions but that
you could almost imagine at one point that that could be an acquisition or some kind of deeper strategic partnership but nevertheless
did not happen last year.
[23:03] So that says 045 stole your third one and I think you made a comment last year that you need to be less specific to this one's kind of interesting.
And they said there could be another big bankruptcy but then you said such as JCPenney
one of the office guys Bed Bath Beyond need and Marcus so you kind of had an ore in there or are you know we could have took her to this again.
Being generous since we're sitting here at over to there were a lot of bankruptcies so we had the seat jabri we had Forever 21.
What's rue21 was that a result 2018.
[23:49] That might have been 18 or not sure.
[23:51] One of the maternity stores Payless shoes and we'll see we had there was one of the mattress stores.
So there were there were some pretty high-profile bankruptcies.
[24:07] I'm taking the win but in hindsight like that was a lame prediction like of course somebody's going to go bankrupt every year so if you're not specific at Tulane prediction and if you are specific the names I mentioned.
I still am taking the win and I would point out like the one that gets talked about the most which is actually one of the smaller ones is Barney's was like the,
start a story brand that went bankrupt and I know the one that almost doesn't get talked about but was most crushing and near and dear to your heart is sugarfina.
[24:37] Yeah. Steer.
Okay so your fourth prediction.
[24:44] Wait wait let's recap the score I'm now one of the three.
Infinitely improved over over the previous two.
[24:50] Yeah yeah
you're all on at are two more to make up some some room here so your fourth prediction was that mobile Commerce Revenue would pass desktop and lessors of the show know you are a big fan of pwa
which is not a rap band it's some kind of a technology for mobile stuff and also the new payment apis and some of the other stuff you thought we're going to close the mobile,
I'll defer to you since you're the guru on this didn't did you.
[25:21] Yeah did we mention that that e-commerce is slowing down a lot,
none of those things happened at near the scale that I thought they would end so for sure no
mobile Revenue did not pass desktop revenue and I I thought I could like save face and say well that didn't happen
it did happen on the big shopping days
bright like so you know you could kind of make try to make an argument that oh I totally happened on December Monday or things like that but the reality is even over the holiday. If you'll get November through December,
60% of all revenue happened on desktop 35% of Revenue on mobile and 5% on tablet so bottom line I wasn't even close.
[26:12] Yep sorry dude so let's see that gives us one out of four,
all right last chance on number 5 on this one,
Scot of one of your anti predictions you said following things are going to be fads and not take off voice Commerce AI That's customer-facing social commerce virtual reality and boxing.
[26:38] Yeah and again not a very awesome prediction but I'm going to take the win on that and say that those things are all we're all basically feds at least in 2019,
the one that feels like it's trying to get some traction and some some aspects of social commerce but but I would still argue they weren't like.
Meaningful in 2019.
[27:02] If I give you that one.
[27:03] Yeah I'm desperate for I'm desperate for a win that would give me the 22052 at least IU.
[27:08] Yeah yeah and then you threw out because you're you're Jason you just couldn't stop at 5
got a Bonus and you said Amazon is going to breakout Prime Revenue you're really specific I had to go back and listen.
Cuz I had a feeling you're kind of get a little slippery on it so Amazon has not broken out that's that's a no.
[27:31] Yeah what really happened is I misspoke what I meant to say is that callonwood breakout primary.
For Amazon and I yeah I said it wrong.
[27:43] Yeah but since I was a bonus will you know we won't
we won't count it so it's practically a tie this year so which is to me that's a loss cuz over the over the The Arc typically beat me by three or four answers.
[27:59] And so it would be a win for me but since you basically came down to my level it doesn't I don't think it feels good for either of us but at least.
[28:06] What are you get better.
[28:07] At least we've established our credibility now so I'm sure it was on the edge of their seats to hear our wise predictions for next year now that we've shown how I'm nipotent we are.
[28:17] We're going to rebound to I can feel it go do you want to join to do yours first.
[28:22] No I want to hear you're so I can potentially use them.
[28:27] Yep so here's my five predictions so I mentioned earlier that Shopify is kind of gone up 3x in a year that just feels you know,
very nose bleeding to me and there's a lot of new competition coming out so I think whenever you have a value creation event like that where they've essentially created 45 billion dollars out of town are there could be a lot of money chasing Shopify,
I don't know what their weaknesses but every company always has one so it's going to be interesting to see,
what comes after them what angles they come after and all that good stuff so that's that's my prediction is that they're going to wilt a bit and you know I'll put a.
[29:14] I need to put something more specific there I'll say they did kind of stay at this market cap or go down
10% somewhere between kind of here in temperature I don't think there's going to be another kind of like huge run up type your and it's going to be largely
your folks waking up to say wait there is competition out there for this business model.
But you don't think that doesn't get talked about this to turn just has to be like through the roof right so just on a unit turn to have to just be turning tons of customers and now in a cohort,
it probably is its revenue for the cohort pipe the GMB for the cohort crime makes up and then that's what drives the revenue,
overtime it just feels like there's going to be sup Rider light shown on part of their business model that isn't,
this kind of perfect kind of price for protection company.
[30:09] No I would agree with that I do think that maybe the one thing that that mitigates that a little bit is they are starting to successfully go upmarket a bit and get like some slightly more.
Stables lower turn customers with higher gym be so so maybe that balance is out in the long run.
[30:29] Yeah it's like a million at the base of the pyramid though and it takes a lot at the top of the pyramid.
[30:35] It just takes one Kylie Jenner.
[30:37] That last.
That's my first prediction my second one and another prediction we would kind of I can't remember which was did that for a long time is part of me just like the earpods I was saying,
Amazon will get into delivery that is,
that would be a double a man because it sucks such an obvious once and for the longest time FedEx UPS said no no no there are partner or not our competitor
the bloom is totally off that one right now where was like okay this is bad in fact you mentioned earlier FedEx is like getting hammered over this
and so did Amazon kind of dug the knife in further where they won't even let seller fulfilled Prime sellers use FedEx because they say the service level isn't good enough.
[31:32] Yeah you talk about throwing some holiday shade.
[31:34] Ouch ouch so as a result of FedEx is under a lot of pressure right now and I think it's going to cause some kind of interesting thing to happen
you know you got eBay out there kind of rudderless right now you could see FedEx eBay you could see you mention Walmart I think there's going to be some interesting,
kind of marriage that happens with FedEx in and it's can be driven from the world of e-commerce.
[32:04] Get I like that one.
[32:06] Predictions for 3 this is not my forte but there's just a lot of Buzz around returns so there's several startups you could probably write them better than I can save Mall.
BCS contact me about this which means it must be like just kind of,
yeah they're all trying to solve returns problems and there's all kinds of clever ways of doing this of no Consolidated return centers different ways of managing the supply chain that kind of thing so I'm going to say 2020 will be the year where
you know they're just probably be some kind of a winner that emerges from that and they'll be kind of like ShopRunner has try to do and not to successfully the offer a prime and
a network of retailers that form an alternative prime one of these startups will be successful and I guess I'll Define it as.
Raising over a hundred million something like that something that's like pretty pretty.
Obvious that their leader they'll be pretty successful in in kind of taking a run at offering an on Amazon,
multi retailer multi-brand approached returns.
[33:25] So that's funny I wrote a similar prediction I didn't end up using it because I thought it was two wonky but I
totally agree with the sentiment it does like I think it's returns it become a huge acute problem and so you know we're seeing lots of new investments in the hole
reverse Logistics base to try to solve it so it that that seems reasonable although somebody raising a hundred million dollars is not peanuts so the so I like your.
You're taking a stance.
[33:58] That's my third and fourth one is a keeping with my mall again which has been a winner for for two years in a row I'm going to say you know what you call 9000 store closures in 2019
it's a good start. So I think we're going to have many more store closures I'm going to say at least eight thousand so continuing to keep,
about the same as last year if not more I think we are going to see,
I just feels like we're still over stored in a lot of different categories like drug stores that kind of stuff so I put that one out there.
[34:34] And then this one this is one of these I've made a long time and I'm always wrong but I've some reason I'm back to it this year I just finally believe
Google has is waking up to the Amazon Fred and and starting ticket much more seriously now they're there,
terrible branding job at it but I think execution wise there is something there they have this Marketplace which is essentially called shopping Google shopping.
Actions and you know the sink,
they're getting pretty serious about it and I think this year they're going to get really really serious about it so what's that mean so I think I think.
Overall I think I could see them actually in the hunt to buy an eBay or FedEx or something like that that could be interesting
and then you know another one is the shopping actions is it's always just been this kind of on the edge like well a little Beyond 2% of
Android latest Android lollipop popsicle
Twix and yes it is a being like percent of a percent of a percent and not Material so so I'm thinking they get pretty serious about it meaning it's going to get a lot of exposure I'm on
not only just some fraction of Android but across all Google properties.
[35:59] So I like it how like what were you cancel BC to know that that that happened like you expect them to be like I'd top 100 retailer like what would what's the.
[36:11] I think yeah I think 10% of shopping traffic going through it would be material so I would come start there.
[36:20] Oh wow yeah that's quite mature okay.
[36:22] And I would look at like search marketing as someone like the referee on this search marketing.
Was that search engine land or one of those.
[36:31] Ya SE land.com.
At least to get the ball rolling you know the last month they announced Bill ready who is that executive PayPal is the new,
like VP of Commerce a Google so they like they haven't a new person to sort of weed that initiative so that maybe bodes well for your prediction.
[36:53] Yeah I worry about it because these payments guys want you when you've been in the payments world everything looks like a nail so so I worry we're going to get Google pay 8.0 embossing.
[37:07] So yeah supposedly and I I don't know but I think he's got some non-competes and supposably like is being hired explicitly not to get involved in pain.
[37:17] I did not know that.
[37:19] So maybe that will benefit you.
[37:23] Let's we can only hope.
[37:24] Yes yes I like it though.
[37:27] All right those are my five what are your five.
[37:29] Awesome duck so my first one is I'm just going to take yours from last year and protect them for this year.
Thinking of you just missed the timing and given all the ones that that have happened the past that's my new strategy so last year you predicted it Walmart,
would would have a hiccup in 2019 so I'm going to say in 2020 is the year that the Walmart rate of growth slows down and I don't,
actually mean that that,
is a distressing anyway I just think sometime this year they're going to finish rolling out online grocery pick-up to all of their stores and they're going to have to comp against,
stores that were opened last year where has for the last few years they've had this benefit of opening a bunch of stores and going from zero to some,
some big number of digital grocery so I think it's going to be much tougher to maintain that 40% growth rate so I expect that growth rate to go down,
which is enough kind of natural and then I'll throw out a wacky one and say I also actually think that this might be the year that Mark Laurie exits from Walmart.
[38:43] Just think like,
that he's probably been there awhile like we weave you know started to see some of hit a lot of the jet people have,
kind of transitioned out now Andy Dunn has transitioned out that the guy has basically unlimited funds in the bank like I think he may just be like he's accomplished with what he can accomplish it at Walmart and we we might see a Changing of the Guard.
[39:08] Did Nadal Ray say that he had like four years to make a trillion dollars but so it feels like they're being expensive choice.
[39:18] Yeah I think it will be a I think he could afford an expensive choice I don't know how that would all work out like I could imagine him to go shooting some sort of payout,
it made sense for both parties will see.
[39:35] Is that a nand or nor.
[39:37] Yeah so I want my official prediction to be that the rate of growth slows but if Mark Lori does away this year I want permission to go. Galloway and just like launch a website that's called Jason predicted that Mark would we.
[39:52] Got it so it's amore with the Galloway Asterix.
[39:56] It's the color its color exactly.
So then my next permit prediction again following the trend that I like to always you always make some Amazon prediction so I'm going to steal that and.
How to be honest like part of me feels like this is too easy and not a very controversial prediction but so many things don't happen that that like I do think it's fair
I think this is the year that Amazon finally opens its own grocery concept bike separate from Whole Foods and I think it's going to be
targeted at a more affordable price points and I think it's going to dramatically heat up the sort of digital grocery Wars and most notably,
the Walmart Amazon Kroger battles.
[40:46] So number three is that I think we're going to see a lot more emphasis and talk about
owned Brands this year and that's going to significantly grow as a part of retail so last year about 5% of all retail goods were,
like private label type products and I think it could be dramatically bigger in 2020 I think it could be sort of in that 8 to 10% range.
Which would be a huge disruption in the retail Marketplace.
[41:19] What's your data source.
[41:21] The 5% is actually 4.6%
and I will have to I do have to get my intern to pull it out
but that's predominantly focused on like the cpg and grocery
space so it's one of those those Data Tracking companies but I'll find it for you.
[41:47] So it's not Jason Goldberg go to himself.
[41:49] No no no I we need a credible we need a credible external.
[41:53] Is a data point out there were on the lam purses.
[42:00] Yeah I like that one we just put it in the Echo chamber and and it'll become real.
[42:06] That'll be interesting so that does that include digital native recall brands or this is more just like Target spending up.
so I'm primary thinking about omnichannel retailers like Shifting the focus to Brands they own rather than so like to be it's more of the the,
Captain Jack's of the world like I think Walmart's going to make a major effort to grow their own Brands Target you know me
is is putting a huge effort into their new grocery brand and I I just think,
the big macro Trend in in retailers we're going to see a couple retailers really try to can compete on,
sort of Assortment and being the everything store and then in North America to me that's Walmart and Amazon and every other retailers going to try to win by selling stuff that no one else has and so I just think that's going to result in a lot bigger,
Pechanga retail selling their own stuff instead of other people stuff.
[43:12] We shall see ya.
My fourth prediction is you know you you have on the area that there's a lot of momentum at the moment and returns and reverse Logistics another one for me is the installment payment space so I said installment payments are going to dramatically heat up
and I think that's going to result in at least one major acquisition in that space so I think like,
when I talk about installment payments I'm talking about a lot of these companies that are sort of alternative credit means a lot of them are kind of like,
Finance your purchase in for for monthly payments that kind of thing and cities are friends like affirm and afterpay and Karma and I I just think that
you know next year you see one of those acquired Maybe by a major credit card company or Bank
you know I think some of the big traditional Financial folks are going to want to own a piece of that hot space And so there's going to be some good acquisitions.
[44:15] Who who do you think this is an addiction but I'm curious who you think the buyers are going to be like traditional like Financial folks like City or or is.
[44:26] Yeah so I think I think the big the big Banks participating banks that have a retail credit Division if you are receiving retail credit services so you do private label credit cards for like Best Buy,
these guys are now taking a chunk of that space and and they've accomplished something that you've always wanted to do which is their built into the checkout flow
which is super valuable to these credit card issuers and so I could easily like imagine
one of those credit card firms wanting to acquire one of these guys I also think you could,
you know it could be a PayPal or,
square or you don't even like one of the big credit networks like Visa.
[45:15] Singing payments do you have plans to move to Africa this year.
[45:20] I was going to but I've been told that I only have one job and so I'm not qualified to to like move to Africa and remotely do my two CDL jobs.
Who would you be referring to buy a by chance.
[45:36] So Jack Dorsey CEO of Twitter and and square
it's just kind of randomly said he's going to move to Africa for some. Of time if she can get Scott Galloway it really angered him he's very upset about.
[45:52] Yeah but In fairness like I think of you a shit like Square in particular you're like,
why is my guys been in a lot of his time on this Twitter thing and then now he's going to do it from Africa like that that would seems like,
that would be a legitimate reason to have some concern.
[46:12] Yeah yeah yeah.
[46:14] Yep I would love to visit Africa but I think it would be on vacation and then my V prediction.
Is one that I feel like I used to do all the time and then you know I skipped a year,
so what will try it again I think this is going to be a year that digital in-store really heats up and the surprising piece of that is
this much-maligned a technology that people in our industry like to make jokes about the the ugly QR code I think is going to make a
a major comeback at retail and we'll see a bunch of of a Retailer's deployed QR codes for various forms of mobile wallets and particularly for like,
letting you scan products and read reviews and things like that ends in retail stores.
So those are my five and then.
[47:08] DuckTales risky people hate QR you want a visceral hatred of York.
[47:12] Yeah I feel like it's it's a bit of sneaky success I feel like there's a lot of people but they're pregnant primarily pendants that like have all this negativity around the QR code but didn't secretly you know.
There there's a bunch of of use cases where the QR codes have been like Paramount like it's,
it's you know a huge chunk of all payments at Starbucks and it's Walmart pay which is secretly been a success and it's you know it's it's Snapchat and if you go to China it's everywhere is WeChat so,
so hopefully we'll see you by usually I am dead wrong in these things so I am not overly confident about any of them but.
But I'm at least throwing it out there and again because the bonus is always treated me so well I thought I would throw a bonus in this year.
[48:03] What do you have for this year.
[48:06] So my bonus is I'm just going straight negative because I'll be honest when I first read these forecasts all five of my forecasts are things that we're not going to happen and then I realized
that I can't I can't be that guy right so so I tried to make more optimistic reasonable forecast but then I reserve the right to point out all of the Ebenezer Scrooge bah humbug,
moments so here's my long list of things that are not going to happen this year cashierless retail stores like Amazon go blockchain
5G big data and personalization none of those those Technologies are going to have a major impact on retail Talking Heads are going to go crazy about them and write stories about how you know if you don't do it immediately you're going to go out of business,
but I think they're going to be the examples of success are going to be few and far between I don't think,
everyone loves to talk about DJ need a vertical Brands but I don't think any of those are going to break out in a be particularly successful in 2020,
I for sure don't think we're going to see any major retail antitrust actions in the US.
[49:11] So that would be my negative Scott Galloway prediction I also don't think the the brick-and-mortar marketplace stores
so that's beta showfields neighborhood Goods I don't think they're going to have a huge success or break out in 2020 and Shop of eyes getting a lot of Buzz right now but the the,
thing I hear most about Shopify is that they're going to become a viable competitor for Amazon and I actually don't think they're going to compete with Amazon at all in 2020.
[49:42] Yeah that the people that say they can compete feel like they think it Shopify would have some front door kind of marketplace Tech experience that kind of what you think people are looking.
[49:54] There's people that talk about maybe they aggregate traffic and have some kind of marketplace experience where you could shop across multiple vendors you know they they bought a logistics company this year in the rapidly building out there with just aches and on paper that looks like,
fulfillment by Amazon and some people are like oh that's competing with a fulfillment by Amazon but as I as we said earlier in the show I admire Shopify think they're making a bunch of the right decisions and they're doing really well.
None of the services they provide to a client in my mind.
Replace or compete with any of the services Amazon provides in anyway and like,
I think they're for the most part synergistic in there they're going to have a lot of customer overlap but it's the end of the day
Amazon is in the business of generating a huge amount of traffic and monetizing that traffic and they sell that traffic to their customers
and that's exactly the opposite of what Shopify does Shopify does everything for you but get you any traffic whatsoever and you are totally responsible for bringing your own traffic and so I just think,
that's a that's a,
both sides of that strategy makes sense for both companies but I just I think all the pendants that are like oh you know the secret competitor for Amazon's going to turn out to be Shopify I just don't see it.
[51:15] Any other bonuses you want though there.
[51:21] No no no no I think I press my luck enough
hopefully that you know there's some nuggets in their our listeners will be able to use they shake their 2020 and that will be able to redeem ourselves when we unquestionably
I enter the new decade next January.
[51:43] Yeah you know what
maybe it would be fun as if listeners I'm just doing this off-the-cuff so what if listeners wanted to add some and we could kind of like aggregate
some of the better ones in and talk about them on the next show but then also when we do the recap see what had a third competitor which of these listeners and see how they do against you.
[52:05] Yeah that's a great idea because I it's it's kind of boring coming in second so I feel like third would be that's why I've been to just.
[52:14] Looks like it would feel better if it smells cancer.
[52:17] Fair enough. So maybe I try to take only the worst products that be funny I try to cherry-pick the worst predictions and then it still be me
so yeah I'm totally in on that if listeners want to
jump on to Facebook and we leave any of their own predictions or hit us up on Twitter will be happy to aggregate them put them in the show notes and include them in our recap next year
and that's going to be a great final call to action because it's happen again we've used up our a lot of time so definitely love to hear all of our listeners predictions and also feel free if you just think,
Scott and I are crazy
and you want to refute any of our predictions we'd love to hear your thinking behind that and as always the beginning of the year before you get really busy at work is a perfect time to jump on iTunes and finally give us that five star review.
[53:10] Things are running Jason congrats on salvaging a tie out this year.
[53:15] Thanks very much it it it it feels good to be West behind than I usually am thanks everyone for listening and until next time happy commercing.