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

Join hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, Founder & Executive Chairman at Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Jul 13, 2017

EP093 - Amazon Prime Day Hot Take

Amazon Prime Day was July 11, 2017.  In this episode we give our hot take on this Amazon created sales holiday.

  • Goals for Prime Day
  • History of the Holiday
  • Results for 2017 Prime Day
  • Jason & Scot's conclusions from this years event
  • Interview with Jamie Dooley Head of e-commerce at Dorel Juvenile Group to discuss their Prime Day experience

Amazon Prime Day Recap press release

Amazon Deep Dive EP24 Podcast

Full interview wth Dorel Juvenille Group, Jamie Dooley - EP86

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

A weekly podcast with the latest e-commerce news and events. 

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

Episode 93 of the Jason & Scot show was recorded on Wednesday, July 12, 2017.

New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 93 being recorded on Wednesday July 12th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot & Jamie: 
[0:39] Hey Jason and welcome back Jason and Scott show listeners,
well yesterday was the third annual Amazon Prime day and it's Day show we want to go over the highlights with a Jason and Scott exclusive Prime Day hot take.

[1:09] Well Jason did you take advantage of Amazon Prime.

[1:12] I did not as voluminously as I might have thought I would but I found a few things to buy.

Scot & Jamie: 
[1:18] I think the problem with you and I as we're probably at at Peak Echo so it was,
it's actually frustrating day when you're at pekic Echo and you paid no I think I paid north of like 18190 for my couple of my Echoes and to see it there at at a.
Much lower prices it's almost got a negative effect in a weird way.

[1:41] I have that happen in a couple of ways like certainly with Amazon first party for like but they're also some some other products I purchase from Amazon recently that then went on on Prime Day deals that they gave me a little bit of buyer's remorse in,
night my family frequently likes to remind me that I have a very short gap between desire and fulfillment so it's.
You know I'm not good I'm not going to waiting for those deals.

Scot & Jamie: 
[2:08] Yeah next you need to create a prime day blackout for pretty much all of the spring so no shopping past me.

[2:16] Yeah yeah that that would be the smart thing to do I'm not committing to it.

Scot & Jamie: 
[2:21] So it's funny I probably like you I spending a lot of time for the day looking at the deals and,
really funny one I don't know why it made me think of you but I did and it was this lunch box and it kind of started working its way up as a hot deal pretty quickly and I don't know how many they sold these things but it must have been,
thousands of them but it's a it's a lunch box and the gag is it's this kind of white medical looking box and it's got an EMT tag on it and it says human organ for Trans,
so you know imagine you see your colleague in the lunchroom and they're brought walk in today open this up and start eating stuff out of its kind of like.
Zombie apocalypse lunch box that was a really strange when you know some of the strange ones that you see over the years are like The Yodeling pickle and those kinds of things with this was a new I had not seen this before I am and it was kind,
at the same company makes fake take out boxes that for you to put your lunch in so that he's kind of like you know,
strange-sounding stores in you they they look like Chinese take out and you put your lunch in there any doubt of it just kind of like throw people off that what you're doing.

[3:28] I got it that seems like a lot of thinking type stuff.

Scot & Jamie: 
[3:31] Yeah yeah it was kind of funny it's from a third-party seller where these guys I will have to have one of our interns look it up and get back to you.

[3:43] But I thought it was pretty funny one to bring out for folks.

[3:47] Good luck with that with the interns I can't get those guys to do anything.

[3:53] Scot before we jump into this year's Prime day maybe it's worth a setting the table a little bit and talking about the the history and context answer the first thing I was like to remind folks of,
is the Amazon is not the originator and does not own the market on inventing their own sales holidays there's a,
a great great tradition there but specifically in an e-commerce you know Cyber Monday which is been the biggest shopping online shopping day of the year in the u.s. for many years was really an invented Holiday by one of our former podcast guests and the original team.

Scot & Jamie: 
[4:37] Yeah yeah you know the what to pull up the episode but Scott sober in the,
does that story goes they saw the trend in the kind named it so you know the back before we all had Broadband Sans fight 3G 4G 5G kind of connections you would go to work and you would use that nice juicy Broadband connections that's why that Monday took off and they decided to name it,
that was the first created holiday and then another one we talked about a lot is singles day.

[5:07] Yeah absolutely in that and you know that the global people and or the Alibaba people that created singles day.

[5:17] Would quickly point out that that the.
It's it's become much bigger than Prime day or Cyber Monday are at the moment and so there's a lot of momentum there by the way the the Scott Silverman episode was episode 66 of any listeners want to go back in,
and catch that up,
so we have that Cyber Monday then we had Ollie Bob launching singles day where they took sort of a niche holiday and turned it into a huge shopping day and it's now you know by far the largest single online shopping day of the year globally in the end of course 2 years ago.
Amazon 2015 Amazon launched the first Amazon Prime day.

Scot & Jamie: 
[5:59] Yeah and pretty quickly it has become their single largest day and that's a good segue thanks for a little history on that and before we dive into,
a little bit more details on Prime day I think it's important to take a little bit of a step back and say why does Amazon do this I think the common.
The surface level is to sell more stuff you know if you can take a month like July and make it into a put a peek day in there that that actually helps right and maybe pull forward some holiday things,
and it also helps with Q3 you know Q3 is kind of slow or time. And summer is kind of,
little bit boring any Commerce there's a lot of extra capacity in the system but but I think you know as we go to the episode,
I think that you have to peel the onion on this to really understand,
the first child refer listeners to the Amazon deep dive which was very early in our podcast and career which was episode 24 shame on you if you have not made it through that episode,
but for those of you that the didn't which I know is very small part of our audience what are the keys to Amazon success is the prime program.
Jeff Bezos has a fun crew out there that you're a lot he kind of says we want to put so much value into Prime that you would be effectively irresponsible not to join.
And right before Prime day there's this,
This research company called consumer intelligence research and they they they tend to have the highest approximation of prime users and it came out at 85 million Prime users.

[7:34] I think that's their Us number most other people are in kind of the 65 to 70 million range and,
the other thing that is common about prime is it when someone's on Prime,
they spend at least twice some surveys show twice as much and some show three times as much I believe is more towards the three times,
as much so I believe the prime numbers a little bit lower than that you 5 million but I think the actual usage and the multipliers higher if that makes sense so,
so I believe there's five reasons that Amazon created Prime day number one is to create a generate more sales or what we would call and Industry gmv gross merchandise value I like that term because it encapsulate Stu 1p in 3p,
transactional volume a little bit clearer and that's too deep for this episode but again hours for you to that deep dive,
the number to is prime adoption so again people spend more money on their own Prime and if they can get people to,
try Prime data shows that,
dead again this is from survey data so take it with a grain of salt this is not Amazon releasing this but as people there's nothing surveys out there I think you get a pretty clear picture that once someone enters a Prime trial 73% become paid numbers,
flip side of that is 27% of people probably just join Prime for the 30 day,
trial. And then turn out but 73% stick which is when you look at online trial rates is actually pretty high usually they're kind of been to tend to 15% stick on Amazon 73%.

[9:09] Then if people stay a year then the retention rate goes up to to greater than 90% so if they is kinda like the roach motel once you check in to prime your chances of checking out are pretty slim and Amazon's got a lot of devious things.
Genius depending on which side you look at it for forgetting you deeper into Prime and accessing one of the many kind of spokes on the Hub,
the third reason for this is an Amazon has an increasing we talked about this a lot on the show portfolio devices so getting more devices out to you and in your house,
creates more stickiness in all those devices are tied to Prime Lenny's flywheels overlap each other the 4th when is prime day,
drives engagement of the Prime offering and adds value so so it's kind of foreign five together so by driving engagement of saying okay I'm using and maybe you're enjoying today shutting will try video,
Prime music try Prime Pantry Prime here's some exclusive deals Prime now try,
Echo deals that are for Prime members only try some of our private labels that are prime exclusives,
the more they can get you to activate inside of the Prime family and offerings and ecosystem the more kind of stuck you are in the web and,
you're the fifth one is that that making sure that you're reminded every year that there is a big benefit in this annual sale is one of those many benefits that exist,
Nordstrom's is kind of famous for their loyalty program they have their annual sale and giving people today's exclusives or something like that to go shop.

[10:43] Sets on the surface it feels like it's a reason to sell stuff but in reality I think the real reason and benefit of prime day is to drive Prime sign ups and add to the value prop in the seals are really just the icing on the cake.

[10:58] Yeah I would totally agree like of those five benefits the the sales while like certainly valuable and important as probably the least important of those five reasons so they.
They recognize all those opportunities they launched the first Prime Day in 2015,
and serve remind people how that went you know it was generally viewed as pretty smart and favorable that they had created their own holiday so I think they got like a good vibe and there was some Buzz coming out of,
that first year but it was not what I would call a home run right like so there was a lot of the narratives from 2015 where.
The man the deal sold out super quick and so a lot of people weren't able to take advantage of the deals and and we're somewhat upset,
there were some actual you know customer-facing technical problems and so this hashtag emerged on Twitter Prime day fail and folks were complaining because.
The card didn't work and they weren't able to take advantage of the lightning deal and then the deal expired and they missed out and they were upset there were some.

[12:06] Vin deals in in the prime day so they were there some kind of.
Products with they were underwhelming that you know not very many people are interested in and or the deals weren't very good it was a little confusing to even find the deals.
And you're going back to one of your subjects.
You don't half of Amazon essentially is is that that 3p Marketplace and those guys really weren't included in the first Prime day it was almost exclusively for Amazon products and for 1p products in so that you know both was bad for customers cuz so many of the things that customers buy from Amazon or 3p,
no certainly bad for all the 3p Sellers and then you know wow Amazon paid lip service to it being sort of a global holiday and being in all of the Amazon markets,
from the volume standpoint you know it really only was meaningful in the u.s. in the UK.

[13:01] So in spite of all those challenges like you know I think the big win for that first year is you know that they were able to say that they added hundreds of thousands of prime users in that one day so regardless of those challenges,
that alone would have made 2015 a success.

Scot & Jamie: 
[13:18] Yeah yeah it was it was definitely rough riding and on the 3-piece side I think they were so secretive about it,
that didn't tell anyone about it literally until about 24 hours before they just had told us you know maybe like 3 days before that there was going to be something happening in to get the servers ready,
so that was kind of funny and you know.

[13:38] It's only two years ago which is which is crazy but Amazon had some candles that line was getting kind of old and tired,
they're the tablet's they had where did really didn't find kind of the niche that they have found now that's kind of like you know this value kind of tablet they were there still kind of,
premium tablets and they just come off the failure of the fire phone you and I are the only two people that think in the globe the have them,
and so there was a lot of that that device stuff that they could sell in 15 so then 16 came along and you know what how I would characterize that is typical Amazon fashion they learned a lot from 15 and in 16 they are they.
They righted the ship in and fix a lot of the wrongs the deals were more aggressive they they now had Echo to kind of go out there and push.
Call you and I bought a couple that multipacks tobacco so I think we bought some three packs of. Some of those kinds of things so if you are kind of,
early adopter it helps you kind of get echo in your whole house which was nice.
The spread the deals to the day so instead of having them all at launch and then it won't come through them they they were much more well distributed they open the valve a little bit for 3p and,
then when the dust settled they announced that it was as big as Cyber Monday so they had actually created a day that was kind of into that top 5 kind of a day,
two or three day for them dad and more countries so they expanded it they were in,
nine countries and 15 Inderal and 10 in 16 but I would say they they got more serious about it and we're countries and in 2015 it was probably United say 80% attention was US 20 UK and then like.

[15:18] Almost nothing in other countries and then 16 they realize they could create more of a global push so there's a lot of push special an Indian and then.
Again with the dust settled at Amazon announced that the sales were up over 300% from the previous year so 16 it feels like this really got a lot of traction.
One thing to highlight is the top 10 deals from last year so I think that's kind of interesting as we can look at what,
sold this year something to this quickly so the number one was this air vent cell phone holder,
number two was an Amazon gift card so it's like a $50 card with $5 off which is effectively 10% off anything you want to buy from Amazon some in the ear headphones noise-canceling from pose a USB thumb drive that worked on both USB C and normal us,
Echo was number 5 fire TV stick was number 6 fire 7 tablet was number 7 pressure cooker was number 8 and,
one of those 5-port Chargers was an Amazon Basics 1,
number nine and then one of those power Banks or or a movie like charger but it wasn't the movie was the 10th largest so.
So that was really the the kinda the Highlight there from 2016 feels like they had addressed a lot of the technical issues and in really kind of,
started to get their sea legs on the Steal.

[16:38] Yep and then when it came time to talk about prime this year Amazon made some,
some pretty significant changes to the program so one of the biggest ones is it's no longer Prime day it's Prime dazed.
Because they've extant extended the deals to 30 hours so it actually started the evening of the 10th and ran all the way through the 11th.

[17:04] So you got six more hours they really sort of.
Try to prime the pump and get more people using their Alexa to do shopping and so they actually started offering deals.
Alexa users that were willing to use voice two hours earlier so that started at 4 p.m. eastern time and that was a clever way to to get people to start doing a voice Commerce the.

[17:30] They greatly expanded the the number of deals that greatly expanded the the opportunities for three peas to have deals globally they added China India Mexico.
For the first time they now had so many deals that they had to offer some some filtering so that you could filter deals by category and a little bit by price point so they started giving you some some basic tools to.
Turn call through all the deals and find the ones that you're interested in they had a lot of exclusive deals to the Alexa platform.
And they even had some International deals where you could do some cross-border shipping for some things in some markets.

Scot & Jamie: 
[18:18] Yeah and then so that was kind of lead up and then when the deals went live again we're talking about this year,
I always think it's interesting to kind of see what they highlight on the homepage is kind of like those that is really kind of priority deals that they're launching and I think it helps you read the tea leaves on what's their priority for that Prime day,
so there was the you're obviously echos a really big push so the. Was 34.99 versus 4999 so that's like a,
that's a really low entry point to get into the family at like now at 3499 did is some interesting bundles with the. I saw him bundling it with the whole Sony speaker,
that little Sony speaker only added like $15 so that was interesting,
the main line Echo was 89.99 or his 179 sets half off which is very aggressive and I think I think.
I think it 179 they're probably making a little bit of margin on the hardware I think it 90 they're losing money so they must see you know some some,
data from putting these devices out there there must the razor razor blade thing must be working for them or I don't think they would be selling a,
prices you and I both know did it was funny that they had a really good deal on Oculus where is effectively $100 off of via an Amazon gift card,
another really big seen this year was home automation so they were really pushing folks like yourself and I that have already kind of,
flushed out the The Echoes in the house should really try to do more home automation I took advantage of some of those but so some of the things like the higher-end Philips hue light bulbs kits were rather.

[19:49] Attractive price some of the plug automations I don't do the locks but I saw those were pretty aggressively priced so you can tell that that was a really big scene was was getting people to activate home automation in connection with the echo,
another one that's really interesting I saw was some of these ancillary parts of the Prime mucosa.

[20:09] So they have Prime now which is same-day free 2-hour delivery and paid 1 hour delivery that's in about 45 markets now most of the stuff on Prime now was 25 to 35% off,
plus they had this $10 off coupon that if you hadn't used the service before you could use on your first two orders,
there's a program called Amazon restaurants which competes with Uber Eats.
Push mates in all those kind of food delivery companies and in cities I don't have that where I am but where you are in Chicago they were pushing,
people pretty hard on that Music Unlimited,
Prime Pantry so those programs we've talked about on the show had pretty substantial discounts Prime Pantry with 35% off your first use,
and then a lot of the private labels that was talked about on the show everything from apparel to amazonbasics and whatnot those were very aggressively priced up to 50% off.
So heading into the day internet retailer magazine projected that for 2017 that they would have their first billion-dollar Prime day.
And they were kind of saying it would be about a 20% increase.

[21:20] Zach that's kind of lead up to the day and when it first launched and here we are the day after and now have some early kind of hot take results that we can walk you through,
Jason you want to take a stab at some of those.

[21:31] Yeah so you know.
Amazon has issued some press releases of their own most of the stuff that they give us is sort of a relative number so how things did this year versus last year and then you know there's some third parties that do their own estimates based on surveys and things like that,
so one of the the Amazon.

[21:53] Claims was that they sold 7 times as many Echo devices this year as they did last year so and I would have argued they sold the awful lot of echo devices last year so selling 7X.
Is pretty impressive I think they mentioned that 50 of the top 100 sellers on the platform ran.
Ran promotions and I think you know some of the Animas have said that this probably ended up being about a billion dollar day for them instead of put that in perspective.
A normal Q3 day for Amazon's about 444 million dollars in Revenue so it's a little more than than twice a normal day as a result of of this pig sale.

Scot & Jamie: 
[22:39] Yeah I know that equates to when you start doing the math it's like you know between one and 2% so this you know I think people,
you hear about these things that are like wow this is going to increase Amazon's overall sales 30% or something and certainly for the day it does but in the the overall vast sea of GMB that is Amazon actually.
Doesn't move the needle that much but if they can add 10 20 30 million Prime users into a subscription into a trial period and and like I said at the top of the show 75% stick.
That's huge when because those guys were are now in the ecosystem now they have to come like moving to the next up witches get them you get them loving 2-day Prime shipping and then get them using something else and then Delp Delp stay around forever,
what are the interesting themes you and I have talked about a lot of the last year is Bran's really waking up to the Amazon opportunity and one of the guys we had on this show on episode 73 or the Wall Street analyst Omar Asad,
he had a note out today and in his take away was.
Did there was just this crazy level of participation from softline Brands this is topical because we had a lot of news here lately where we've had Nike coming onto the platform and and whatnot.
So so you kind of rated the different brands and and how they did and.
Let me kind of pursue this in the Brand's he saw take,
Shakira advantage of prime day would I would imagine this is kind of a.

[24:12] We're going have a guest on later that will kind of walk us through how they think about it but you have kind of the foundation is you know you have to have product Prime eligible that's important which means they need to be fbar you can use self Rafael Prime and then.
That's that's the platform then you need to offer deals into the different deal platforms Amazon has been kind of another dial you can turn as a brand of selling 1p,
and even 3p most of these that is we'll talk about her one piece Amazon gives you quite a bit big of the big ad platform so they have AMG which is display ads and Ms which is search ads.
So the highest levels participation in the softlines category coined Omar were awarded to Calvin Klein Hanes Carter's Lee and Wrangler VF Corp Levi's Puma.
I feel like this is a who's who's list of who's gone the show fossil guess and Skechers the ones that kind of underperformed or really didn't,
dissipate are let me see if I can get this right Gap American Eagle Lululemon Vans and and Nike I need to make sense I think.
You a lot of those guys kind of proceed themselves beat up,
so some of them are on the platform very aggressively it all a lot of them view themselves to be kind of a premier or luxury brand a lot of her new the platform like a Nike so Nike just started selling no literally.
Days ago right it's been kind of formalized I don't know if they're late actively selling very much so I think next year will be a year for that so it's interesting his takeaway was this is kind of the year for four Prime day that Brands really woke up and participated in the end of material weigh.

[25:53] Yeah and I then I kind of think you know there's Brands they were very clearly playing defense.

[25:58] And you know they're on their and they're they're they're doing some participation but they're being really careful not to sort of poison.
There other channels and in markets with promotions and then they were brands are playing offense and we're saying like Hey we're going to take advantage of this day when we have huge incremental traffic with my intent and try to sell as much stuff as possible.

[26:21] So the like looking at the official Amazon announcements they said Revenue was up 60% year-over-year.
Which is obviously very good it's not as good as last year which was sort of in the area of 300% up but obviously.
You know now they have a bigger base they said 3p was up more like he wasn't very helpful statistic,
they said that they were a record number of new Prime members tens of millions in a 50% more customers this year than last year,
more folks joined Prime yesterday than any other day in history and the number one product sold was the Amazon Echo.

Scot & Jamie: 
[27:08] Yeah and another one they highlighted a lot is they've gotten they worked with the manufacturer and I can't remember who it is but they made this TV maybe it's the element I believe it is and it's 55 inches and it's Alexa enabled,
and I haven't seen one but I talked to a lady there and it is pretty wild you you can say the whole experience is through,
everything you can do on a remote you can do to the Lexus so they've built this skill and you just going to say Alexa you know go to Channel 5 or Alexa find,
you know the two men then whatever your favorite show is fine Star Trek next Generation or whatever and it will it will do all that stuff,
so that's a relatively new product that was announced earlier this year and they promoted it very heavy another big element of.
Prime Day this year is Nate they ran a lot of TV deals which I took his kind of putting a bit of a bull's-eye on on Best Buy and this TV day,
they hiked it a lot going into they had a lot of them in his to be aggressive and actually sold out in 2 or 3 hours which means at to get this deal really over performed what they are expecting.
They did put out a list of best sellers by country I want kind of take it went to that for once I wanted to just chat about quickly,
pretty much an every country there was a private label offering so if Riggs ample in Mexico the number one seller was an Amazon basic,
Cable in Japan happy but happy belly pure bottled water was a top seller that's a private label brand that they have for cpg there's.

[28:40] What other Canada the double a batteries the Amazon basic double a batteries were a top seller so what what's interesting is,
private label seem to do very well this year I saw him pushing it very hard and in the u.s. deals also is a bunch of accessories so whenever someone buys that TV I'm sure then you get on Amazon basic HDMI cable,
I'm so that was interesting to see a lot of private label push they didn't put any other stats out on that the other stat that was interesting is they said,
stop base which means you're using the Amazon app on on your smartphone those orders doubled so if the whole day,
orders grew 60% and does effectively doubled between hundred percent they really over indexed which means desktop Ryland group.

[29:23] Percentage when you're 30% Amazon does a lot of things where you can always see the deals and track them you know that the app experience is truly better than the desktop experience they said they sold 3.5 million toys again,
it's a nursing number but I have does a lot of reference.

[29:41] Another one that's kind of interesting is this this voice Commerce so they're so aggressive with the Alexa deals and pushing those early,
I looked at them they're pretty good too had a 3D printer on there that was normally $600 for like 250 or something like that and,
that's some really interesting deals on there they had Greenies that were more than half off there's a PR firm kind of pushing stats that say,
before Prime day 19% people had purchased using voice in a 33% additional intend to if we kind of when the dust settles on Prime day I think we're going to see.
You know 30 to 50% of folks,
either having use that for Prime day or will it with their new Echoes they will be ordering something online so so that's pretty interesting Callen came out the survey also right before Prime day that said,
they believe 13% of us households have echoes,
and you know if if it's since we have this Echo. As the top seller and eyemagine the normal Echo was up there these TVs it's going to nursing you know I think,
by the end of this year with holiday and Prime day maybe we start to see 20% of households,
that's pretty interesting because you know Amazon is on their lap of this thing and and the rest of competition is really kind of stuck on the starting blocks.

[31:01] Yeah absolutely that that's one where it felt like they came in the prime day with a commanding lead and then for that to be the the biggest seller and 7 times more than last year,
they're absolutely lapping the field in terms of a penetration there so if they can turn your point they probably did make a bunch of money on any of those devices so the magic question is going to be vacant.
They can turn that into customer value over time.

Scot & Jamie: 
[31:26] Yes sir so let's wrap up this segment with kind of what what were your your big takeaways from Prime Day this year.

[31:34] Yeah what's it looking at the day in aggregate I definitely feel it was a big win for the 3p sellers there we saw a lot more 3p sellers participating,
there as a result doing a lot more deals in a lot of the Amazon advertising Vehicles which can be very effective.
In addition to making some nice revenue for Amazon where vailable the three-piece hours for the first time so so definitely.
A win on the 3-piece side of the fence.
On the one piece out of the fence why we don't have real data I strongly suspect that by far the biggest win we're first-party Amazon products and so that's.
You know certainly that the echo family that we've talked about but also the Kindles and all the new private label stuff.

[32:24] That they're starting to push and that really leaves me too.
To my biggest takeaway from this whole thing which is to me the big winner and Prime day is the Amazon Echo System way more so than sales like almost everything we've discussed up till now.
Was Amazon using prime day as a tool.
To get people more addicted to the rest of Amazon so using more of their services discovering more of their services.
And you know getting more value for that Prime membership and just making Amazon more sticky and increasing the customer lifetime value of all those Prime members and you know wow.
I think that's in stark contrast to singles day.
Which is really just a day to buy stuff like we really haven't seen Ali Baba turn singles day into this powerful flywheel for Ollie Baba.
For the rest of the year like you know maybe they that use singles day a little bit to get new international brands on the platform but it really is.

[33:28] Kind of a one-day Wonder for Alibaba and to me the Amazon approach is almost the exact opposite it's way less about you know Dublin sales that one day and way more about.

[33:40] Making Amazon much stickier and making it in a much more difficult for consumers to choose to buy stuff.

[33:47] Elsewhere after they get addicted to all the stuff that they were encouraged to try for the first time on on Friday so in that way I think.

[33:55] Prime days a home run for Amazon in this year only sort of the extended that when I will say you know they're still things that aren't perfect as a result of having way more deals.

[34:07] You need to give users way better way to filter those deals and find the deals that are relevant to them and you know while they added some super rudimentary tools in the mobile app.

[34:17] I would I would say they were very deficient and so I like to say that they had a signal-to-noise problem this year that it was probably harder than ever before for consumers to find the deals.

[34:28] That would have gotten them excited and so I suspect that something will see Amazon work on and in years to come I mean you and I used to joke about.

[34:37] You know there being no search in the in the Echo skills go to store and in that same way like you know there's actually is no search.

[34:44] For for Prime Day deals for example you know I'm curious I think it depended a lot on category but in a lot of these categories.

[34:54] I'm not sure that the prime Day deals are necessarily the best deals of the year.

[34:59] So it's a promotional day but but not necessarily A deeply promotional day for everything you know I do chuckle.

[35:08] The reason Amazon doesn't give you any hard numbers for for any of these things are obviously they don't want to but they don't have to because this whole day is not financially material to them right in so you know what ones are reminder.
Yeah they do no more than double sales from 450 billion to 2 a billion but that's still not a meaningful.

[35:31] Bump in the in the overall Amazon Echo System so while they brag about the day a lot it's really not about that that.

[35:40] Financial stuff and then I guess my last.

[35:43] Big takeaway is that by far the biggest winner of all is the the echo echo system or the echo platform.

[35:53] Is a quickly lead to hit mute on on my device in the room.

Scot & Jamie: 
[36:00] 8 devices in your house just woke up.

[36:02] Exact side note for people that haven't listened to all the previous episode shame on you but my sister-in-law is actually named Alexis so all the devices in my house have to answer to Echo not to Alexa.
But I do think.
There there is a a holy war going on to win that that end home intelligent agent every other retailer in in the world has huge reasons to root for anyone but Amazon winning it.
And you know we we in our CES recap this year we talked about all the products at CES that had Amazon built into him you know they certainly have the Lions.
Market share and then they're the only one that have a huge promotional event like this so it just it feels like.
Despite the fact that you know a lot of people have a lot of reasons for to not see Amazon win in this category it's getting hard to imagine anyone anyone really catching them at this point.

Scot & Jamie: 
[37:01] Yeah I think voice Converses the big wind and.
Not only is it just the device lead that they have but Google is stuck in this weird place where,
yeah because they don't control a consumer experience for ordering anything with with exception of Google Express,
you know it's this really it's hard to build that so if you say to Google Voice you know order me an air filter for my house they've got some Partnerships with eBay and that kind of thing and but you know,
what are they going to do like shop that order out to Home Depot and Lowe's are you going to have to go and set a preference for everything you want to do it.

[37:39] Is that becomes an important part of this this home assistant,
it's kind of game over for Amazon and then you know let's say Google does go solved that how are they going to monetize it their whole business is Mata,
monetized off ads and you know a lot of the Google things the music and all has all these ads in it and it's like a really terrible user experience compared to that,
now more more people are coming out with these assistance to Apple's it hasn't hit the market yet but they're already announced one Samsung has one coming out in Alibaba analyst 1,
forgiveness cost at T Mall in the name so you everyone's working hard to catch up but I think Amazon has this inherent kind of.

[38:18] Advantage not only with the device penetration but with the use case of ordering stuff now you know you could argue home automation is a lot more level playing around,
but again if they can get to 20% kind of out there and US households and it's clear from the deals that are running they want you to do more home automation they're already kind of got a commanding lead and and again if that kind of starts to become your standard and you start to use that,
ecosystem are locked into it it's going to be heavy sliding for these other guys trying to compete,
voice Commerce is kind of really interesting one to watch this year I mentioned the brand thing earlier,
and I'll refute one of your points a little bit you kind of talked about it not being in material sales day and I agree but it is financially material because of the Prime Subs so if they get 20 million Prime subscribers the average Prime users.
Spends about $1,200 to make math easy let's say they spend $1,000 a year,
well on the day it's not a significant impact that's a 20 billion dollar add to the Top Line and that's like it oh that's like Walmart's entire online business.
Doing the math right so so there is a long-term Financial impact by those Prime subscribers and then,
the more they can keep them and you let say the number is 85 million if they don't want to turn in those folks so if they can get you to use another spoke on that benefit and lock you in even longer again it's kind,
but huge win and it keeps you from going to other retailers.

[39:46] For sure and and I guess I meant to sort of lump the Prime Membership into that.
Thing one of the powerful drivers in that ecosystem versus talking about the revenue.

[39:57] I would make just one other point that you so reminded me of on the how commanding this this voice, sweet is and how problematic it is.

[40:08] You know.
More more products are going to be built with voice in them and if all the manufacturers have to build Alexa and because that's the strong consumer preference think would that means to every other retailer like you can go buy a bunch of Samsung refrigerators in Best Buy right now,
and those refrigerators I'll have Alexa in them and so guess who's shopping list,
when you are you're using with that product you bought from Best Buy is enabling you to shop at Amazon right and you know it's not exactly Apples to Apples but Walmart selling a bunch of Samsung phones that have the Amazon app in bedded in it and so you know you can tell how commanding this Echo System advantages when your competitors are forced to sell products that are,
that are sort of gateways to your echo system.

Scot & Jamie: 
[40:54] Yeah yeah one other aspect of it we talked about it a little bit on the show but I want to kind of bring it up again,
as I mentioned the report on Brands and one of the levers brands have to pull is,
the advertising so so I'm pretty convinced I'm hearing more and more when I talk to brands that they are spending more and more ad dollars on Amazon and there's two platforms and so folks are interested in. We had,
we had Melissa Burdick and Andrea on and they talk a lot about these platforms we don't have time to go into it today,
but I'm convinced this is going to be not the next billion-dollar business for Amazon but it could be 30 or 40 could be the next.

[41:38] Cloud computing for Amazon because bran just can't get enough of these ad dollars into efficacy is super high we see a lot of people moving money out of,
Facebooking Google into Amazon's add platforms and this day another win for this day was getting all these Brands to activate and get into those things you know,
I ate when the if we could speak inside the Amazon curtain I think maybe the biggest Chunk on margin probably came from Those ads would be interesting and then,
the huge long-term win is now they got a Brands kind of activated on those platforms AMG and Anna's I think that is is a huge huge.
10 20 30 billion dollar opportunity forum.

[42:21] Yeah I totally agree.

Scot & Jamie: 
[42:23] Well that's our view of what we saw for Amazon Prime day but we wanted to bring in a live first-party and third-party seller to understand what they saw from the frontlines of this exciting e-commerce holiday.
Jason join me in welcoming back to the Jason Scott show Jamie Dooley.
As a refresher for everyone Jamie is the head of e-commerce a dorel juvenile group we did a full episode with Jamie and one of his colleagues and that is episode 86 so,
hi if you want to learn more about what they're up to as regards Amazon listen to that episode and tonight we're really here to get a fresh hot take about,
Amazon Prime Day Jamie welcome back to the show xcaret.

[43:09] Hey Jamie thanks very much for doing this we totally appreciate it so obviously the the biggest and most important question how were your Prime Day sales.

Scot & Jamie: 
[43:20] They were very strong so it to remind everyone wear a hybrid so we we sell both.

[43:27] Directly to Amazon as 1T and we're a Marketplace seller or three-piece all as well.

[43:33] The data for Marketplace sales comes their way real time so we know that we had.
Fantastic day on over the third over the course of 30 hours.
As a Marketplace our sales were up 600% year-over-year and it was the second biggest day we've ever had on the market place II only Cyber Monday last.

[43:56] So it was it was certainly a very very good day for us on the market side on the one piece side that the data takes usually at least two days to get to work.
And we're recording it's now only day after Prime day so we're still waiting for the final sales data to come but as far as we've we've seen we had a record-setting day.
On Prime day again for even the one piece eyewear.
Almost 100% of our lighting deals fold-out many of them in the first 30 minutes and then where is subscriber to one quick retail and they were able to give us.
Intraday reads as well as a final estimation of what our sales were no looks like we beat all of our forecast.

[44:41] Well congratulations.

Scot & Jamie: 
[44:45] Yes 600% is amazing because Amazon announced they were up 60% so you over indexed by a factor of 10 which is which is pretty awesome set that leads me to ask you mention Lightning Deals,
and you know this is.
Did you guys participate in 15 where are was second last year so then been doing it for 3 years was last year when you really get serious about it or we actually was 15 kind of when you started.

[45:11] I'd say we we really got serious about it last year.
But this year we we we took it to another level as well.

[45:26] So what what were some of the things that work well for you I know a lot of of both 1p and 3p people that are using what I would call different platform so different deal that they,
they got a different deal for mats that I hadn't been in before also more people are in other parts that you go system like maybe Alexa deals Prime now,
Pantry that there's kind of a wide range of things what were some of the platforms you guys utilize this year to get such a great result.

[45:56] Sure sure to remind everybody we're baby Products company so we sell strollers and car seats and Hardline items that really aren't.
They don't play very well into a pantry or even to Echo there they require a lot of a lot of kind of stuff a lot of.
Merchandising online and there is there's a lot of there's a lot of consideration that's required but what we we use the combination of of a mass and.
We had a number of Lightning Deals as well as what it called Chianti's or or Prime member promotions that were on the.
On the Friday deal page when when the customer.
Navigated there and then we had aggressive pricing on on our everyday items as well I'd say on the one piece side we had a very good combination of.
Traditional TNT's and Lightning Deals as well in in combination with.
Advertising that we we we bought through Amazon as well as using social media and other external traffic drivers to drive even more traffic back to those promotions on Amazon.

[47:08] This great Jimmy a couple of follow-ups was that would you say it was a pretty similar promotional strategy to your 2016 so like when you look at that 600% comp is that mostly because.
Prime day was more successful for three peas or.

[47:26] Or because you know you also got got more sophisticated in your in your marketing.

Scot & Jamie: 
[47:33] I think we on the marketplace side if I had to say what what drove the 600% year-over-year growth.
Definitely one part was we have more items overpriced and obviously that that's that's really the name of the game on Prime day so that that certainly helped.
We did you ever tizing much more aggressively this year and.
On the marketplace side there were a lot more opportunities for 3-piece hours to to take part and Prime day so for one example to work really well for us with headline,
search ads were available to Mark play for this year they weren't last year it's actually I think it's still in beta right now we were fortunate to be part of the beta program.
We we watch that drive to some good sales growth.
And I think we that come in combination with just many more items aggressively priced and and Prime dad's I think that that was the key to success of the marketplace.

[48:34] Got it and that that seems consistent with the general Trend that we've heard and talked about for this year that.
Prime prime day was just much more accessible the two three piece sales so the fact that you're you were able to get many more products badge than you had a bigger palette of marketing tactics available to you that that all makes perfect sense that you'd blow it up with with 3p,
that might imply that while I'm sure your 1p will be way up this year it may not be proportionately up as high as three peas that is that a affair guess.

Scot & Jamie: 
[49:08] I think so yeah we are we have obviously had a much bigger base of sales to the cop from last year's Prime day.

[49:17] So yeah we're not going to say I would expect us not to see 600% your growth if we do then I expect to be a CEO somewhere next year.
Even if we even if we see no 104 just under 100% urea go that's going to be a huge win for us.

[49:35] The promise if you do 600% 1p growth this year your current CEO is going to take credit.

Scot & Jamie: 
[49:43] That's good.

[49:46] Totally fair a related question in your category or or specifically do you like how aggressive do you have to get on promotions are we I mean are we talking like.
20% 10% 30% like is it is there a is it similar to other promotions you do through the year do you have to get more aggressive what's the general.
Promotional philosophy.

Scot & Jamie: 
[50:09] It's it's.
It's not great it's it depends depends on the category and then it depends on the level of competition so in general what I saw in a lot of categories was,
it only took 20 20 to 30% discounts to do some significant damage one of our biggest competitors.
Most of their deals were running at about 20 to 25% off and I know they did I'm pretty sure they did extremely well most of our promotions hovered around the the 20 to 30% range and we sold out of our inventory for,
lighting deals in in sickness and in a very quick amount of time.
My takes away from this Prime day and it builds on last year as well as that you don't need to.
To be at 70% off I need a robot aggressive deals out there that call them loss leaders or attention getters.
We found we had some of those too but in general we focus on profitability too and we didn't feel like we needed to.

[51:16] Start a race to the bottom in our categories and I feel like.
In general what we saw across our categories and other categories was the same you didn't see every deal required to be 60% or more.

[51:30] That definitely mirrors with what I sort of informally saw it felt like people were a little conservative with deals in their core products and maybe a little more aggressive with with some of the the West core products if you will.

Scot & Jamie: 
[51:46] I think we saw that and some of the day that one quick retail gave us too so we know that Amazon sales were up 60% but there was a 114%.
Lifting promo count according to down so you thought many more deals but I did was there they weren't quite as aggressive and then I've seen reports.
I'm all over the media where they're saying conversion rate was actually down for Prime day so I'm curious to see if that's at validated but that would all imply that.
Progressive deals potentially across the board but not deeper so.
What will then you and I are were chatting about is one of the interesting things is on on some of the non lightning deal deals you know they utilize that feature we had to add it to cart to see the price,
why do you think that is what's going on there so I know that I've talked about this.
I felt like that was sort of like burying the we we had and we had an item that was priced $50 off and the customer really had a,
went and searched to see that they were getting a 30% discount on one of our top items and that was really consistent with with,
with a lot more deals at work and keys throughout the deal.

[53:11] My opinion is that it allowed them to prevent Walmart and other competitors from price matching them as easily.
I know that said you know what this Amazon ever going to come out and say that they're only really too big categories of a promotions that you can have to get onto the prime.
Hyundai page deals of the day does he the Lightning Deals are pmt's and Amazon official word to us.
Can keys are designed to allow you to be on that page with slightly less aggressive discounts so that would be widened Art discount,
pricing is a set-up but I do think it helps avoid price-matching and we saw that in our category there was just a lot less price matching from Amazon's top competitors,
on our deal because they were they were pmt's and they were harder to describe.

[54:07] But I guess one of the ironies there and tell me if it's different in your category but you know they sort of hurt the customer experience a little bit by bearing a lot of the deals in the,
the carts to avoid letting our competitors price match but it kind of felt like most of their competitors unlike last year sort of sat out this year so it almost seemed like,
like they had no intention of sort of aggressively.
Trying to ride on the prime Day coattails this year at least I didn't see big indications of that did you.

Scot & Jamie: 
[54:41] No I didn't either so I I was actually that was one of my surprising observations would this last year.
Competitors like Walmart even,
they took a shot anyway I didn't see that I saw most of most of Amazon's direct competitors almost in feet,
day in the week to Diamond maybe they'll plan something for later in July but any Amazon on that day and they only.

[55:09] Yeah I think eBay obviously did some like pretty serious National advertising that was sort of counter Prime programming and let you know they did a special deal with the Google home but the,
you're right that the sort of traditional omni-channel retailers Walmart Target like really didn't see any indication that they were trying to make any head of the day.

Scot & Jamie: 
[55:31] Amazon credited manufactured this Holiday Inn is they've done a great job with us.

[55:38] Absolutely any promotions you saw from others that really surprised you.

Scot & Jamie: 
[55:44] Well I think one of the ones that I was surprised didn't happen as it was it was also not just Prime day with national blueberry.
Muffin day and there were no blueberry muffin promotion so that was that was my biggest surprise I couldn't find any promotions to get me a cheaper blueberry muffin delivered.
But I think the some of the ones that I thought we were actually our kind of our we talked about the last.
Discounted just kind of product but it seems like in our category somewhere I competitors took some really big shots with with some deep discounts.
One of our biggest competitor to deal with a day which they have some fairly aggressive discontent what was interesting was that they had some new merchandising that we've never seen before.
With the car completely custom land and gauges on mobile and desktop that they were very interesting so it looks like they spent on a significant amount of money to make that happen and it'll be interesting to see whether.
What are the sales actually paid off for those.

[56:47] Interesting I definitely agree with you I think there's a huge mess on the blueberry muffins I myself actually missed Prime day because I was spending all day at the Muffin Shop.

Scot & Jamie: 
[56:59] The morning was completely shot.
How many muffins in the morning your teeth were blue all day.

[57:10] Cool Jamie really appreciate you coming on and you know we record this show late at night cuz we both have,
allegedly have day job so I appreciate you taking time one last question so based on what you know and I know it's early what,
what did Vice would you give to both Brands 1 p.m. 3 payout there for next year.

[57:34] The things I say were one plan it out as early as you possibly can.
Some of the some of the issues we saw this year had to do with just operations and Terriers not being able to pick our ship and saw.

[57:48] To deliver them to Amazon DC's or two-and-a-half 3 weeks out from Prime day so.
In retrospect next year I'd advise our is get your product into Amazon DC's as early as you can.

[58:04] And I think just in general planning in advance probably needs to start in Q4 or earlier for the next prime day is depending on the items that you want to promote.
I'm already in existence today I already have sales history today already have product reviews if they don't you need to build all that up before Amazon even going to consider them for a major deal and then even want you to get those approved.

[58:31] They're going to need it before casted in depending on whether you're Lee X or.
Your 90 days or 120 days or six months to have them into fakturert and shipped here you're talking about potentially you're 9 months in advance that you need to start thinking about your promotional strategy for.
Prime day so far in advance based on your company's Lee X is number 1 number 2 is is expected the things are going to go wrong.

[58:59] We did a lot of contingency planning with what we.

[59:03] Is it going to go on call of a dead and we had a whole team of of of of e-commerce professionals from is to Ops 2 merchandising and sales all.

[59:14] Call pretty much working off and on The Whole30 hours and you'll eat we did have a lot of things go wrong on our end and it on Amazon so I think having a good contingency plan is is it real.

[59:28] Yeah I think.

[59:30] Third is just making sure that you know your competition and and having a good understanding of what's going to go on with pricing I think a lot of the deals we've heard.
Other sellers just they lose they lose out on the light and gillikins cancelled a few days prior to.
Prime day that's a very common thing and we were fortunate not to have that happen so the more that you can understand your your channel strategy and they make sure that the pricing that you have set up for for Prime day is going to hold out for the day that's.

[1:00:06] Wow what Jamie that is terrific advice,
and that is going to be a great place for us to land because it has happened again Wii U,
used up all our allotted time so certainly like to remind listeners that if you enjoyed this episode we love to continue the dialogue on our Facebook page and if you really enjoy the episode we'd sure appreciate a review on iTunes.

[1:00:31] So until next time happy commercing!

Jul 12, 2017

EP092 - Artificial Intelligence Deep Dive


"We're in the middle of an obvious disruption right now: machine learning and artificial intelligence. It is a renaissance, it is a golden age. We are solving problems that were in the realm of science fiction for the last several decades." - Jeff Bezos

This episode is a deep dive into all the use-cases for Artificial Intelligence and machine learning in retail.

Insight Generation

  • Analytics - Google Automated Insights
  • Multi-Variable Regression Testing (Correlation) 
  • Targeting - Best Audience / Next Best $
  • Social Listening / Sentiment
  • Campaign Attribution / ROI

Business Acceleration

  • Inventory Management/Forecasting
  • Merchandise Compliance
  • Checkout - such as Amazon Go
  • Product Design - such as Stichfix
  • Tagging/Unstructured Data
  • Fraud
  • Price/Promotion Optimization
  • Logistic Optimization
  • Drone Delivery

Customer Engagement

  • Natural Language Assistants
  • Virtual Agents
  • Guided Selling
  • Visual Search
  • Search
  • Recommendations 
  • Fitment/Return Avoidance
  • Personalization
  • Loyalty/Retention

AI Vendors Discussed


    1. IBM Bluemix Watson 
    2. Google Cloud Platform 
    3. Microsoft Azure
    4. Amazon AWS  -  including DSSTNE (pronounced “destiny”), the Amazon recommendation engine

Retail Specific Vendors:

  1. Twiggle - Search
  2. - Visual Search/ Personalization/ Recommendations
  3. - Visual Search / Video
  4. Simbe Robotics - “tally” Robot / Shelf Audit / Inventory
  5. Focal Systems - Computer Vision / Inventory
  6. Luminoso -  Analytics

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

Episode 92 of the Jason & Scot show was recorded on Monday July 10, 2017.

New beta feature - Google Automated Transcription of the show:

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


[0:25] Welcome to the Jason and Scott show this is episode 92 being recorded on Monday July 10th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:40] Hey Jason happy Prime day Eve.

[0:44] Happy Prime day Eve to you Scott.

[0:47] You were recording here on July 10th Prime deals have launched the Alexa deals exclusives came out days ago I think I don't like 5 days ago and then now here at 9 to watch somebody else it's pretty exciting.

[1:00] Yeah if you made a bunch of purchases yet.

[1:03] Hi man I'm kind of just kind of keeping you in Iowa.
One of the things I suffer from that I think I have is already have a fair number of Amazon devices so does seem to be the most discounted items and unfortunately already have a pretty full dance card there.

[1:19] Yep I'm in the same boat it feels like there's a lot of deals but it's slightly tricky to identify the deals that would be personally interesting to you like as as is a problem with Amazon in many other areas Discovery is not their strength.

[1:34] Yeah did see some pretty nursing with Deco and sipping pretty dramatically off younis I've seen some 30 40 50 per cent off so it's pretty pretty good.

[1:43] Yeah if you haven't invested in the hardware this is definitely the right time to buy the hardware and other way to extend till I Kindles and stuff too so the lot of interesting things you can do with Kindle tablets,
you can Jailbreak come and put other operating systems and stuff on them so I know a lot of people that use prime day as an opportunity to stock up on Hardware.

[2:02] This is our first show in July we took a little bit of a vacation there how was your fourth of July.

[2:09] It was great my mom was in town got to spend some time with her grandson and so we had a good time everyone in my family enjoys the 4th of July except MacGyver who definitely does not enjoy the 4th of July or a dog.

[2:22] I got to get my ThunderShirt.

[2:23] We've escalated from the Thundershirt to Pharmaceuticals.

[2:28] Quaaludes.

[2:33] Yeah I don't think he's getting quite as strong enough jokes to appreciate it but at least it's helping him take the edge off.

[2:38] And then I guess you're stuck around Chicago then.

[2:43] We did.

[2:46] Dumb like mine anything else one of the nice things about Chicago being so flat is all the windows in my home face West and so from any room in our house you can actually see like for commercial firework shows in parallel.

[3:01] Yeah I see you have to go nowhere to enjoy the fireworks.

[3:06] Courtney retail trips to 247 in the gun down to see the Amazon bookstore there in Chicago.

[3:13] Been to the Amazon bookstore a few times and I think we've talked about my visit there I have not been to any.
Super exciting new retail I was in the Bay Area since our last show and I've talked about the beta store before in Seattle that the original beta store was in Palo Alto so I got a chance to visit that and it was.

[3:37] In a frankly pretty similar to the the Seattle one and I did finally get to visit a.
Up in San Francisco I'm a little shame that's been been so so long but I finally got to visit a next generation Apple Store.

[3:51] What was that all about.

[3:53] Well it's been pretty widely covered in the Press like these are the stores that have like the expert Grove and they have a lot of the organic elements and have a big video wall these are like the the Angela Earnhardt.
Next generation Apple stores in you know I think they are improvements.
I don't know that they make a big deal of difference in Amazon's business model like seems like they have the same voluminous number of people and employees as.
The traditional Apple Store so I'll be curious if they ever came out and said like but the it's a much more expensive store to build I'd be curious if they feel like they like their.
Never better return.

[4:39] Got it cool sounds like you had a good time where you able to see any good movies.

[4:45] I am no I did not were woefully behind on movie so Wonder Woman's at the top of the list of ones I haven't seen I feel like being a parent of a toddler is very detrimental to my movie-watching.

[4:58] Absolute you're way behind on your movie-going.

[5:01] I am I am I'm jealous of you and your ear like premieres like you can take your kids to the premier's.

[5:09] Yep you have already seen Spider-Man Despicable Me 3 caught up.

[5:14] Is a lot of talk about how the Spider-Mans are are much worse than the last generation is that your take.

[5:22] I like I like this one in the Tobey Maguire I didn't like the one in the middle so I guess I'm counter Spidey.

[5:30] Got you yeah so there's some there's some like critical videos that have gained traction on the internet that compare the Tobey Maguire ones to these current ones and they there they come down pretty hard on the current ones.

[5:47] Yep.

[5:49] Cool solicitors we've been doing a lot of interviews lately and it's time to mix it up and we're going bring back one of our most popular segments.

[6:13] Deep dive this week we're going to do a deep dive into all things artificial intelligence and how it may impact Commerce.

[6:23] This year's annual letter to shareholders Jeff Bezos talked a lot about Ai and machine learning so here's a little segment from that.
These pictures are not that hard to spot they get talked and written about a lot but they can be a strangely hard for large organisations to embrace we're in the middle of an obvious one right now machine learning in artificial intelligence.
It's a Renaissance a golden age Bezos said we're solving problems with machine learning in AI that were in the realm of Science Fiction for the last several decades.
So I also remember when Bezos kind of dropped in one of those interviews earlier in the year that they had a thousand people working on machine learning so.
Jason this one is squarely in your real house so I'm going to kind of take back burner here in simply interview you for for the audience so once you kick it off and give us your definition.
Of a i and she running a lot of people using these all over the place so it's want to hear your your kind of foundational of you of of how we should think about these things.

[7:18] I do think the definitions are all over the place in that that creates a lot of confusion there sort of the,
a technical Definition of artificial intelligence which is not what anyone in our industry means when they talk about artificial intelligence cuz they like.
Real artificial intelligences was called artificial general intelligence or a GI that's the whole notion of a,
computer being able to do all the tasks that a human can and being like you know technology being indistinguishable from a human being and so,
nothing that we're talking about is anything approaching that and there's certainly like that technology is not in the near Horizon for us that's.
You know at least 10 plus years out and their lot of people that.
Smarter people to me that argue about if and when it'll ever happen and if it did you know you could have any get to that.
That Singularity that Ray Kurzweil likes to talk about.

[8:14] So most of the time in our industry one they're talking about with the Ruby talking about is applied AI or what the scientist sometimes call Nero AI or weak Ai and what they mean by that is.
The Machine's ability to do one specific thing as well as a human being can.
And so you know a classic example of of Nero AI is Siri.
Being able to do a very specific set of tasks like a human can in this.
Highlights the real problem with the definition of a eye is unless you also Define the set of tasks you're talking about.

[8:55] You can't really understand what someone means when they're when they're talking about applied AR right so if.

[9:03] I said like in the 1970s that hey we just invented a computer program that can play chess right like the.
Back then the the the Nero task was the ability to follow the rules of chest it wasn't necessarily good at chess and couldn't beat a good chess player but just being able to play chess was a very classic definition of AI in the 1970s.
Today for for any of us to really think of Chess as AI you have to be talking about a chess program that can beat a Grandmaster.
Right and so the the task that you're talking about change dramatically from just playing chess to playing Chessa to Grandmaster level.
And so it it's kind of interesting the AI is always shifting when when you know recommendation engines for e-commerce first came out,
that was state-of-the-art AI you know when folks like Netflix and Amazon first launched those features,
that that was the The Pinnacle of AI you know today you know you've got a dozen vendors you can pick to plug into your website to do basic product recommendations and most of us don't think of those as.
A a current example of a I-44 example so,
the definitions are constantly shifting and then we have this problem of their these three terms that get used kind of interchangeably in our industry there's,
artificial intelligence which is what we've been saying so far there's a related discipline called machine learning that gets used interchangeably with artificial intelligence a lot and then there is this third term.

[10:35] Cognitive Computing and the there are specific definitions of each of those but when you know in the in the world of,
e-commerce and vendors they're all using this using them and using them interchangeably I'm in so it makes it really hard to,
know what folks are are even talking about.

[10:55] So that's helpful I think the thing that the listeners price struggle with is how much is reality and how much is hype so for example when we were at shoptalk if just a couple months ago really,
every vendor there for so there's this explosion of new vendors so if we had a fair number of vendors are in history and now there's no.
Really a doubling or tripling and it seems like every one of the vendors is a redo of an existing vendor but with a machine like machine learning a I kind of an angle so now there's on site search.
Adword bidding machines product recommendations upsell engines email optimizations that.

[11:36] Brazilians of these kinds of things if I'm a retailer.
Should part of my 2017 strategy be to just go and figure out all the vendors I have today and find a machine learning version of them and if that's not the answer then where.
Where can someone have the biggest impact for for listeners that are out there with us technology.

[11:55] That's a great question Scot we should do a podcast about that.

[11:59] We're right in the middle of the chest.

[12:00] Oh geez alright well I'm going to start while I come up with an answer but,
in in all seriousness your hypothetical is I would send it as exactly what you shouldn't do you know there's no reason to just go look for versions of all your turn to experiences,
never provided by a vendor that's bolted one of the AI words onto their service because that,
that word doesn't make that service any better or worse than it was before and totally agree with you you know vendors are both in these things on right or left like we.
You know there's some folks that I be in that take it really seriously but it's fun to poke fun at them,
they have this technology or they would call cognitive Computing technology that they branded Watson and some days it feels like they've just added Watson to the front of every product that IBM sells.

[12:51] And so you know the is that a better version than the last version because it has the word Watson in front of it but well.
Not necessarily should you pay more money for it because it has the word Watson in front of it like I certainly not.
I was looking at the vendor list from irce there's 22 vendors that have bolted a Ion 2.
You know their existing product and I'm getting these like calls everyday from vendors saying hey I know you weren't interested on probably before but we pivoted and we're now in a I you know so and so and we would love some of your time to talk about how we should take.
Take our product to all your clients and.
You know you sort of implied in the question that's a bad strategy nothing's going to be better by just buying an AI version of it.
Going back to our friend and number one listened or Jeff Bezos.
She talked about machine learning as a sort of a horizontal layer right like so it's not a in point it's a it's a technology that enables,
new kinds of experiences and he has this pretty simple definite definition that I like to use he says,
like over the past decades computers have broadly automated tasks the programmers could describe with clear rules and Ayala grissom's in what modern machine learning does,
is allow us to do the same for tasks where describing the rules is much harder right so,
playing chess is a relatively defined set of rules and you could write a computer program that follow those rules but what machine learning let you do is.

[14:30] Make a program that can play chess really well even though the programmer themselves might not be able to write a set of best practices for actually playing chess,
and so what what we're really looking for our specific use cases in Commerce,
that are made possible or made dramatically better by adding this horizontal layer by adding this ability to,
to do fuzzy stuff that was hard to write rules for in the past,
and so what I would say rather than looking for labels like you ought to be thinking about specific use cases,
that are made much better or an able for the first time by underlying Technologies and decide whether any of those use cases are particular helpful for you.

[15:20] So that's helpful what what are some.
Where some examples of where retailers can use this technology in and maybe give folks a little bit of framework for helping him think about this so that they can kind of formulate a plan and figure out how to start sampling some of these things.

[15:36] So so what's do exactly that was jump into some specifics and I I like to,
kind of divide the experiences into three buckets the first bucket I called the insides generation bucket and that's all of the sort of,
analytics data processing type things you can do and I'll go into some examples in just a second the second buzz bucket is what I've called business acceleration it's,
saving time or money or reducing complexity from from various business processes.
In the third bucket is customer engagement it's it's new customer experiences that you couldn't do before the customers appreciate and make you a better Merchant ER or a better solution for those customers.
So let's they're talking about some of the the specific Commerce use cases that might fit in each one of those buck.

[16:32] So the first one I like to talk about in the insights bucket is.
Basic web analytics so we've had web analytics for a long time and you know they don't come with key and reports and dashboards and you can make your own custom reports but all of the traditional Analytics.
Require you knowing the smart question to ask and then the the analytics engine being able to show you go find the answer to that question you asked.

[17:03] And so you again you could you could put into find rules for what was in that dashboard and what wasn't.
What machine learning let you do two analytics is find insights that you weren't smart enough to ask the question for.
And so this is already being built into a lot of the traditional analytics product so there is now a beta feature in Google Analytics.
Call Google automated insights and essentially instead of you having to define a segment and ask a smart question like.
How do mobile users convert versus desktop users or how do first-time visitors convert versus repeat visitors or things like that.

[17:43] Google will use machine learning to evaluate all your data,
and suggest segments that that are particularly interesting or highlight some unique opportunities for you so it's.
The the analytics engine becoming smart enough to ask the smart questions that we aren't smart enough to ask.

[18:06] For the first time and that's an example to me if something is pretty exciting in the machine learning space that makes Commerce operators much better.

[18:17] So another one that you and I were talking about earlier is this notion of discovering correlations outside of web analytics right so there's there's a lot of.
Behavior is in Commerce that that have have.

[18:35] Correlations or there's urban legends that that supposably things correlate that might affect how you run your business so I sort of the the,
the famous example in e-commerce is weather and you know that type of product you should offer when it's raining versus Sonny and of course all retailers complain about whatever the weather is in playing that that was the reason that their sales were off.
And so it's interesting to know what the correlation the real correlation between weather and sales are the famous not obvious correlation that turns out to be Urban myth is,
the beer sales correlate very closely to diaper sales.
And you go will guys would have those two have in common and it's it's in theory it was that the the dad got sent to the store to get get a new box of diapers and he also of course grabbed a six pack of beer.

[19:27] And you mentioned you were using some interesting correlation tools at spiffy.

[19:34] Yes yes sir.
My latest company does On Demand Car Wash and detailing and you note small companies still getting off the ground essentially and.
So one of our folks was playing around with the Amazon machine learning and the,
play the story really is that some of the stuff feels like you have to be a multibillion-dollar company to play with it but we found the Amazon stuff is really approachable we'll put on Lincoln the show notes to took on this model that we used in essentially what you do is you can upload a.
Transactional database withing about a really long spreadsheet.
Spreadsheet with bunch of transactional data on every row you can put in there what you know about that transaction so obvious things like they OV the skew that kind of stuff in our world of car washing we know the vehicle.
We know the location the zip code and some those kinds of things so you know what it's spit out with those really interesting and we also know the weather so.
We were just doing this to really kind of.

[20:32] Play around with the weather part of it but it was interesting as it said your inversely correlated to the weather which is the first inside it offered which was too obvious when we were looking for so when it's raining no one wants their car washed,
but then the next thing it did and it said your model customer drives an American SUV probably Yukon and.

[20:51] These are the top three zip codes that are correlated to your sales in Sunny warm weather wow those are things we had never even really.
Kind of thought that you could figure out but it it is what it does you can come look at that data.
And sniff out these correlations that that human just can't process so in all that is done to a pretty simple you I or you can upload a spreadsheet so,
why the stuff feels like it's pretty science-fiction E when you hear about it but that was an example that I wanted to share with listeners where we were able to get some pretty interesting insights just by by using a web-based interface Steven API this with Amazon web.
Web stuff.

[21:31] Very cold and so that's that's an actual business user versus a data scientist in that case.

[21:38] Absolutely.

[21:38] Awesome yeah so those are those are great examples other common ones that we run into an in Commerce or around like targeting and best audiences so you know again,
we have a lot of data about all the people that have bought from you in the past who you know what are the look-alikes that you should be,
see you know buying from Facebook or other ad sources that are potentially most valuable to you you know in other all the marketing activities,
that you could be doing for your business which one is going to give you the the best return for the next dollar of marketing spend you have so you know we're seeing these,
these machine learning based analytics tools,
get really good at defining Target audiences and helping figure out next best dollar sort of related to that are,
the ability to do attribution and Roy models so you know,
traditionally in in e-commerce we all use this model called the last click attribution which is whatever the last thing that guy did before they bought something,
that's the activity that got 100% of the credit for the sale.
That's kind of the default model in most of the analytics tools still and too many people use it and it's completely wrong headed.
You know that sort of like saying like what's the most valuable thing in my store will it's the cash register cuz everyone uses the cash register read before they buy something.

[23:09] The so there are all these other attribution models that give partial credit fractional credit to all the different marketing activities that led up to a purchase in the problem has always been.
Will which model you know is most accurate for my business and you had to pick them out all,
and you really didn't know if you would pick the right model or not so now with machine learning,
the program kind of analyze your data and picks the best attribution model for you and so you know for the first time to your point business users.
Using kind of web-based analytics tools can start getting these really sophisticated Roi calculations and customer lifetime value calculations.
Without having to be a data scientist that could smartly pick the right attribution model.
And then I guess the other area of inside generation that's getting a lot of traction right now.
Is this whole notion of sentiment analysis or or more specifically for Commerce will call it social listening right and so that's this.
This notion that man you have this fire hose of data of people talking about you on Twitter and Facebook and we chat and.

[24:19] You know should I what should I be doing to enhance my reputation are people talking favorably about me or they speaking negatively about me which tweet should I flag for for customer service follow up.
In the old world where you just had to have an army of people read all these things to make decisions on all of it it from most companies.
The volume with such that it just didn't scale and didn't make sense but now with machine learning you can actually,
process the entire fire hose or social media and do a pretty good job of categorizing all of the the dialogue about your brand or product or business into actionable buckets that tell you,
you know.
Weather weather audiences are looking at you favorably or negatively with it they like your new products are don't like your new products and more specifically what what specific,
comments and social media you should be taking action on a responding to to try to improve your your reputation and customer service.

[25:22] Assume you're doing all that at spiffy Scot.

[25:25] We're just playing around with some correlations at this point.

[25:28] Nice I wasn't.

[25:30] I think some of the cinnamon stuff some of the Wall Street guys are like reading the Twitter firehose to try to get cinnamints on stocks and things it's I'm not sure that use case but it is pretty nursing.

[25:39] Yeah well I didn't you know once or the interesting one is the.

[25:44] Retailers are starting to report less and less data to the analyst which I know irritates the analyst to no end and so they're looking for all sorts of new tools too sore to get a read,
like what weather Retailer's quarterly financial performance will be in any of those are these machine learning tools in some cases it's.
Taking pictures of parking lots in malls with drones and using those two to evaluate like whether traffic is up or down in the mall and all sorts of interesting things like that.

[26:17] Grateful so that's Insight generation than the second bucket you talked about was business acceleration what are some examples that you seen there.

[26:24] Yeah what's up the classic one that's that's probably the highest Roi today that you see use the most by slightly more sophisticated operators is,
the whole machine learning for inventory management in forecasting so you know kind of taking the the,
buying a responsibility like out of the hands of the merchant Prince and and you know having them just guess how many of a garment you should make.
Or how many you send to each store and instead using the data to sort of accurately tell you,
what your inventory level should be in an even more accurately forecast your sales.

[27:08] So there's a whole host of retail and e-commerce tools that are focused on using machine learning for inventory management and forecasting.
One that I like that is not quite here yet there's some great demos and a number of retailers are testing at Target I know his testing it.
Is what we call merchandising compliance.
So if you think about a brick-and-mortar store a lot of the displays in that store are paid for by a brand so,
Procter & Gamble might buy an end cap for tide and so the tide is supposed to not just be on the Shelf but beyond the end of the shelf and it supposed to get some special signage and Procter & Gamble probably paid a lot of money.
For that in Cap Toe to Walmart or Target or whomever and so in the old days when you when you pay that money,
you would then hire a bunch of college students or soccer moms,
to go visit every store and take a picture of it and send these report cards back to Procter & Gamble to say whether every individual Target store,
complied with that merchandising program or not because you're paying a lot of money for it and what you find is in a significant number of stores,
they didn't put they didn't execute the in cap are they didn't put the signage out there used to be a stab that like half of the custom,
printed signage that gets sent to the stores the merchandising the temporary point-of-purchase displays never got put out on the shelf and so all the brands had to spend a fortune sending these armies of people out up to the stores.

[28:46] To measure compliance and what we're seeing now is,
you can have a Roomba like some kind of robot that roams the the floors of the store with cameras and takes pictures and uses computer vision to match those those pictures against us,
the planet that the planograms that the intended store layouts and you can report on,
you know which stores did or didn't comply with those displays and you can take corrective action more quickly and you can save all that money of the Brand's having to spend people out to the stores to measure it.
And then you can even use those pictures to tell you when,
for example all of the particular SQ of tide is out of stock and not on the Shelf cuz it might be in the in the back room and not on the shelf and obviously in that out of stock situation,
you're not selling any tide so so using computer vision for merchandise and compliance,
you know is it's still early days but there's a ton of money and friction to be saved by doing that.
And one of the expenses will talk about next Amazon go,
is it a that's sort of one of the underlined capabilities of Amazon go then Amazon go extends that that.
Capability by also letting you check out right so the Amazon go store that we've talked about,
uses cameras to take pictures of the shells and know what products are on the Shelf but it's also using cameras to follow the Shoppers and know what Shoppers are holding which products so that it can charge them for those products when they walk out of the store.

[30:22] So I would characterize Amazon go as a you know a potential future use case of artificial intelligence for retail.

[30:32] Regal and then what am I favorite examples is the Stitch fix goddess they talk a lot about private label and one of the reasons they came up with private label was they would they would send all these products people.
Would buy them but they would say I liked.
The strap on this the design of that in the near able to synthesize all that feedback and essentially the machine morning would say you need to produce this garment.
Bob for this audience of people tussle bit more about that.

[31:03] Yeah I think that's that's a great use case is serve using machine learning for product selection and product design right soap,
going back to the kind of old Merchant Prince model you know the Mickey drexler's of the world would decide what what you note,
the design of the shirt is that was in gap or J.Crew and you know,
it was as much art as it was science and you don't very often you know they would make good good selections and then sell a lot and then make a lot of money but occasionally they would design something the market didn't want and they.
Have a ton of it in stock and lose a fortune so what folks like Stitch Fates are doing a saying hey let's not have Merchants what use the data to tell us what products to,
to offer to our customers and eventually not just what products to buy and offered our customers but she's the data to decide what,
products to design for our customers and offered them and sew and Stitch fits particular case they have like 60 attributes for every garment so,
things you wouldn't think of but like how many inches is the top button from the collar of what's the ratio of the waist to the chest in the in the size 6 what you know what what kind of cuffs does it have what kind of treats does it have their defining each garment at a much more granular level of attributes,
and then they're using machine learnings to say what are the combination of those attributes in a woman's blouse that sell the best to which of our customers.

[32:35] And so you know originally that use that to the side,
Which Wich prod third-party products to carry but more and more of their scent they're using those attributes to Define what products they should manufacture themselves and offer to their customers so it's really replacing the merchant,
with with the data and then so instead of having a buyer or Merchant you you have a analyst.

[32:59] Yeah and then the is a good time to kind of Jack the.
The thing that gets pretty nursing your out this is when you think about business models you know one of the favorite business models the last 10 years is Network effects so the classic example is on Marketplace like an eBay where.
I order more modern would be maybe an Uber where you have supply and demand and more Supply brings more to me into this flywheel effect happens.

[33:22] So more drivers brings more writers writers brings more drivers or more sellers bring more buyers Etc.

[33:30] I think I think when you start to think alot about this machine learning and II and you use that Stitch fix example that the reason to be able to do that is because they have all this great product data.

[33:39] So

[33:40] Data becomes almost the Next Generation Network effect so it's almost like this date and network effect where the more data a company can get about consumer behaviour preferences and those kinds of things they're going to have this Edge that no one else has and.

[33:55] Yeah I know they're kind of called action I.
Usually talk about with retailers are especially Brands is this what you need that connection with the customer because imagine your brand is not signed Direct.
All that data is out of your hands right now and you're there will be a day when you will be at a severe strategic disadvantage for developing products I think.
Trace how you feel about this if you don't have that direct connection to Consumers and you know also not only as the data.
Important baby start flexing your muscles around these things are really understanding how to apply so he's techniques to that data.

[34:28] Absolutely and in so I think you're exactly right with most of the current state-of-the-art machine learning models the big competitive Advantage is,
having the data set to train the model and so the more customer interactions you have the more data you have the better model you'll be and the better you're able you be able to serve more customers into your point,
you the better your flywheel will be right.
An end so that's that's true for a lot of these these different cases and specifically with the manufacturer versus retailer it's.
Once this data becomes key you start thinking about whoever owns that relationship with a customer has,
access to a way more valuable asset so like one of the examples I always like to use as the tire industry and you think about the the tire manufacturers of the world,
for the most part they have no idea what kind of vehicle in what ZIP codes,
there their tires getting installed on and they don't know how the tire the the customers use those tires and have no idea for example how long those tires,
last on specific vehicles in specific geographies,
I'm in so they know they know very few Out reviews about their Tire once it leaves the factory but a good retail that installs those tires on the car can start collecting all these extra attributes,
how many miles are on the car what kind of car is it that how frequently do they change their brake pads what ZIP code do they does the car live in and all the sorts of things and that retailer can start using those attributes of that data.

[36:03] To start doing things like much more accurately predicting which Tire will work best for which customer on which vehicle in which geography,
and said they're all sorts of interesting things that come into play there and so if you are that that,
product manufacturer tire manufacturer whatever like one of your big strategic challenges right now is to figure out how,
to start developing that relationship direct with a customer so you can be capturing that data.

[36:36] In the business acceleration and I want to talk about that a little bit more and some of the customer engagement things but there are a couple other business acceleration ones that we should probably just touch on one that's getting used a lot right now is.
The idea of tagging or evaluating text,
so tons of brands have a lot of texts about their products that they someone typed into a super old database that they used to print the packaging that goes in the store,
but the Torah conversation about attributes earlier that wasn't structured data like someone wasn't smart enough to say,
we should have a field for whether all these snacks are Kosher or not and we should have the field to say whether all these next are gluten-free or not right like kosher and gluten-free might have just appeared in a,
text description somewhere in so there tons of product manufacturers that have,
piles of this unstructured data that isn't very useful for machine learning it isn't very useful for search and filtering and all these use cases that are super common in e-commerce and so what you know you either have to,
pay a bunch of copywriters to read all your unstructured text and cut and paste it into fields,
or you can start using these machine learning models to automatically tag your data and turn unstructured data into valuable attributes.
And one of those common when is pictures right so you imagine that you're in a product category that's heavily uploaded to Pinterest or Instagram.

[38:10] You don't know very much about those pictures which which you of yours is in that picture is it being portrayed with a man or woman,
is it being for traded a beach or a ski chalet and all these different things that would be interesting to help you decide when to use that image the.
Machine learning can tag all of those images and make them much more valuable in in all of your Commerce experiences.

[38:37] So we're trying to see that a lot a common one that's being used right now is almost all of the latest fraud engines.
Are using machine learning so this is a classic example where.
You know fraud used to be a set of static rules so you would write rules if people try to shop our side in the US from Nigeria we won't let them shop and if they.
Try to ship the product to a hotel we won't let them by that.
And with machine learning we can be much smarter about what attributes.
Trigger a secondary screen for fraud and what that does is it gives you weigh less false positives.
So you're able to sell a lot more Goods to a lot more people and not offend them by by treating them like their prospective criminal when they've done nothing wrong,
and said that the fraud models are both getting much better at catching fraud but equally important they're getting far fewer false positives as a result of using,
this machine learning instead of a set of hard-and-fast rules one of the business accelerations that that Amazon has particularly made famous.
Is the whole field of price optimization.
And so you know I obviously you don't we talk a lot on the show about Amazon changing 2.5 million prices a day and they're there.
Their approach is much more sophisticated than just being the lowest price on everything right like they're there a strategic low price provider and you know more and more of that,
it's not possible to to just write a set of rules about what your pricing for every product out of be in so you're starting to see retailers.

[40:14] Turn over the keys to their pricing models to these sophisticated machine learning systems that optimize price and optimize promotions and offers for individual customers and unity earlier Network effect point,
those models are most powerful when you're you know at the high end of the volume and you have a ton of transactions and a ton of skews to apply those models against.

[40:41] Yan is a reminder we had a guest Andrea who was on and relay and she was talking about how.
A lot of times even a vendor's negotiating with a robot on the other side and Y episode there's not only are they optimizing the price the consumer sees but there no that's feeding into some engine that then kind of coming back to the vendor and saying you need to price the product at this.

[41:00] Absolutely and so you know I think Amazon is kind of the gold standard in in Commerce for that and see you're seeing a lot of other like when you,
to your point when you had to have a thousand data scientist to write your own pricing on rhythm,
you know that that was a huge advantage to the people the top of the echo system like Amazon but.
Today you know it is easier to buy an off-the-shelf model,
that you just have to have enough data to feed so there's there's vendors out there like Boomerang which are every bit as sophisticated as Amazon's pricing engine but you know it's available too much smaller operators.
You know as long as there they have enough data to put into the model and so that super interesting.
At the moment the big challenge you have is how do brick-and-mortar retailers do that sort of real-time price optimization like it's pretty easy to change the price.

[41:57] You know from second to second on Amazon it's much harder when there's a paper price tag next to that product.
And it's on the Shelf in the store so that's that's an interesting organic when we're going to continue to see play out.
Another one that I am azaan is particularly great at is this whole notion of logistics optimization.
So once you're bigger than a single Warehouse you start getting you know all these issues about what's the optimum Mount of inventory have in each warehouse and where should you put all that product where is going to be most efficient to get to the most of your customers.
And if you're wrong about that that whole supply chain planning you can cuss yourself a fortune moving products around or shipping products inefficiently to customers.
And so using machine learning to optimize how many excused and which fuse go into each Warehouse.
Is super important in you know when your Amazon and you have what do they have now Scot 112 fulfillment center something like that.

[42:59] Yep thereabouts.

[43:01] Yeah that that becomes a.
A critical challenge an Amazon spray the only one that has the problem at that scale and they're also probably the only ones that have the solution at that scale.
And then I guess the last business acceleration one that you know I don't think we're going to see immediately but gets talked about a lot is.
Like obviously all the technology to get that drone to your house to deliver the goods.
Is a great example of of something you can only do with artificial intelligence so if we ever see drone delivery be economical for certain customers like that you know that that will be exclusively enabled by.
Buy artificial intelligence and machine learning and I would remind listeners whenever I say drone people always imagine these super expensive flying things,
we are also starting to see a lot of wheelbase drones and so there's an interesting Pilots going on in in San Francisco and then,
Maryland right now with with the drones that are sort of autonomous vehicles that drive on sidewalks and deliver things like pizza and stuff.

[44:10] So I'm excited about renting a house in one of those markets and get a drone pizza delivery.

[44:16] Call Sears a lot in the business acceleration in the country cap that sounds more like.

[44:23] Cost savings um I guess there's some that impacts the customer experience but the next bucket is where you probably would customers are going to feel it the most which is what you're calling customer engagement.

[44:34] Exactly and this is the stuff that that tends to be the most sexy it's the most visible to customers and,
you know there a lot of things in this category that have their own buzz and then their own own spot in the hype cycle at the moment so one that we talked about a lot or natural language assistance and so that's,
you know Siri Cortana Echo,
Google home all of those sorts of things and you know if you if you think about them they're actually an amalgamation of multiple a Technologies right like so there's this this notion of being able to convert speech,
into data and so their natural language processing and then there's the notion of being able to to.
Act on those the sentences,
and give proper responses and so that's the notion of virtual assistants right and so you you have a lot of these things that are like you speak to like Siri,
you have a lot of virtual agents that you type to a chat box on Facebook and things like that.
And you know there's an explosion between those two categories of The Voice assistance and the virtual assistants in in e-commerce at the moment.

[45:53] If you tried any of the the virtual agents Jets Scot you think any of them are ready for primetime.

[45:59] Now the ones I've tried pretty cheesy and there if you stay with them they're pretty unsatisfying they can't answer most your questions until they kick over to a human 20 minutes better.

[46:14] I'm not believing this are quite there yet.

[46:16] No and so it is funny because what what we're seeing is,
customers definitely want customer service via chat and Via messenger and so it's,
a mistake to say oh my gosh the chatbots are kind of not ready for Primetime and so it just hire more phone reps and do everything via phone cuz we're seeing strong indications that customers are less.
Tolerant to sit on a hold line and do something asynchronous like like a talk to someone on the phone,
but it's same time you're right like the virtual agents really aren't cutting it yet at the moment and so where The Sweet Spot is are our live humans at the other end of those,
does chat and SMS strings and I guess the best virtual agents I've seen our kind of maybe just one layer deep and they they.

[47:06] The answer some of the the highest velocity questions and they sort of act as a filter to make those those live agents more efficient by not having them have to answer the same question over and over again.

[47:18] Yeah and they're smart enough to know when to get out of the way that kind of say hey did you are you looking to track a package oh I'm sorry let me write you to a human.

[47:27] Exactly right and well that.

[47:28] Once again a doing there like you know big kind of walk you through of of Sky knowledge-based relentlessly.

[47:35] The best ones are seamless right and and unfortunately like too many of them you know keep fighting to try to keep you in the virtual realm and you know it some point you you stop asking an honest questions and you're just trying to figure out how to.
How to bypass it.
So another sort of adjacent thing that we're starting to see more of in customer engagement is this whole notion of Discovery and guided selling and so one of the,
the ones that got the most bus here is,
North Face uses the Watson implementation to have sort of a guided selling tool for jackets 800-Flowers has a guided selling experience for for gift giving,
you know I'm a little bit you know I have similar feelings to the guy that selling tools at the moment that you you had to the virtual agents I think the idea of them is very interesting and I I certainly agree.
We need to get way better at Discovery and helping people find new products but a lot of the guided selling tools I've seen at the moment just feel to linear and scripted and I'm not sure.
The there there yet recommending products a heck of a lot better than then you don't sort of us structured set of rules used to last year.

[48:58] So that the next one in customer engagement is one and I may have even have to go back this may have been one of my predictions so I'm going to type it again in the hopes that it helps my my annual prediction come true.
One of the cool Technologies in artificial intelligence is computer vision and being able to.
To process images and more more often process video to get insights out of out of that image data.
And so one of the the most common use cases for that is tagging images that we talked about him business acceleration but the other way more sexy one is visual search.
So that's Amazon Firefly being able to take a picture of a product.
And then order it or you know even cooler use case is.
Via an app like camfind being able to take a picture of the woman at the table next to you with the cool handbag and find that handbag for sale or those shoes and that's kind of the whole notion of this see it by it kind of experience.

[50:02] Yeah isn't a lot of people say Pinterest is one of the better ones out there do you know what they're using under the hood for that is it is it some machine learning kind of.

[50:12] Exactly and they rolled it out that,
Pinterest to Lynn's they ruled that out relatively recent like so it's probably only about three months old at this point if memory serves,
and that's a great example it's not products Pacific yet so it's,
it helps you find similar images to the image or looking at there are some more sort of Commerce e ones I mentioned camfind is one company will talk about a couple other visual search companies at the end of the podcast that the,
that the whole field of visual search I would just tell people is getting phenomenally better and so for years we talked about natural language getting.
Twice as good every year and last year the natural language interfaces essentially surpassed human comprehension so the,
the computers can now more accurately understand spoken words than an average human being and that's you not forgetting the fact that the computers can also understand.
People in a bunch of other languages in the same sort of evolution is happening in visual search there's a an academic contest for visual search engines that the several of the universities including Stanford put on every year and the winning visual search engine,
is twice as good every year as the year before and so the quality of visual search is doubling every year,
so if you look at some of the best use cases right now they're already pretty impressive and you go oh man this is already useful today and if you think about the fact that they're getting twice as good every year.

[51:42] You know we're very close to visual search being a super powerful tool and that's going to eliminate a lot of the friction we see in stores where people try to get you to,
use NFC tags or scan QR codes or do things like that like imagine a future when you just hold your phone up to the Isle in a store,
in the phone sees every product on that aisle and it visually recognizes all of them and maybe it even reads the price tag off the shelf for each one of them and it can you know instantly highlight for you,
what's a good deals are in that store and what you'd be better off buying from an e-commerce site at home.

[52:18] In an one thing that's interesting about this is part of the Renaissance on the visual side is it's tied to video games so you know as as people's demands for video games of higher the.
The game processors that they're these high-end floating-point machines I've got more sophisticated than ends up that's a great platform for vision in.

[52:42] Incognitive I think but I hear it more used for the vision stuff.
So it's interesting is now is part of like AWS Amazon's leasing out you can actually lease out gpus Witcher game processing units,
I end up as the cost of those is come down it's it's made this video stuff get even smarter so there's a hardware part of this that's pretty neat so this stuff is.
You're not only is the machine getting smarter because the amount of data is going up but there's also Moore's law on the back end helping it as well.

[53:10] Absolutely and the kind of math that all of these machine learning models use is the kind of math that that I think technically their Graphics processing units not game processing but,
yeah but their primary you were right they were invented for games for sure in our friends at Nvidia like being a prime example the,
that that the kind of math that those chips are good at is the kind of math the machine learning uses and so that is one of the gating factors for machine learning getting better is having access to big,
server Farms of these gpus and and to your point all the big vendors of of cloud computing you know that's the new Battleground is,
you know not not CPUs and cores but the gpus.
And what's that that's really enable to Renaissance in machine learning that these academics can now rent.
Like these these amazing supercomputers for short periods of time to run their experiments and refine their models.
Another one that that's super common in this is like a classic example of.
Making an existing technology better as opposed to enabling a new capability like visual searches enabling a new capability but obviously a core function of every e-commerce engine is it search function and,
that search has gone incrementally better every year but it's a largely gotten better because we put better data into the search so we put more attributes into the surge the.

[54:41] The underlying technology for deciding which product is most relevant to which user hasn't changed a heck of a lot in the last five or 10 years and machine learning is now like the first big incremental Improvement to,
to search in a long time and the way to think about this is the results,
of search that are most relevant to you based on all your past purchases and behavior are probably different than the search results that are most relevant to me,
and so using machine learning they can say hey what's every search result I've given to every customer,
and which ones are the search results had successful purchase experiences in the ends and which ones didn't,
and what did the customers look like that had those successful purchase results and now you know we can personalize search much more to each use or,
based on everything we know about them and make search much more effective and relevant that it's ever been before.

[55:42] But that's a classic one we've always had search engines now every search vendor saying their search engine is machine learning based,
and that really you know you can't just look at that label and say oh that's the new search engine to get like what you really need to do is test the search engine and make sure it's going to work,
better for your audience and with your your product catalog in that that goes double for this next category,
recommendation engines so you know we can take recommendation engines for granted at this point like there's so many out there and and you know for a while there's been kind of parody of these,
these recommendation engines but but you know it don't lose sight of how powerful these things are,
you know a few years ago we saw some data that 75% of all the views on Netflix were driven by product recommendations and this is pretty old now but back in 2013 there was a leak,
that 35% of all the revenue from Amazon came from the those product recommendation tiles and I believe the,
the plug recommendation tiles and Amazon emails were even higher converting than the ones on the product detail pages and so recommendations are super important and of course using machine learning,
you it should be no surprise for listeners at this point you can make recommendations much more personalized and effective for each customer,
then sort of static rule-based recommendation engines that are that are kind of the norm that are out there now.

[57:16] So that I'm going to go a little faster cuz I know we're going to come up on time here pretty quick,
Annette's category that super interesting in the apparel business returns or are crushing cost,
and most of the returns are result of fitment issues so something wasn't the size you expected or didn't fit the way you wanted and Source turn to see machine learning get used,
to solve fitment problem so in the old world Zappos tighter going to buy two sizes of shoes that guaranteed one was coming back in that was super expensive so now what you want to do is use data about all the attributes,
to accurately recommend the size and maybe even remind a customer that they bought another size before and it fit better in the order they bought this size before and had to return it,
tell people get the right size the first time,
and avoid buying stuff you're also seeing this get tied in with visual search where you're actually using the camera to help measure the size of the customer and then match that to fitment data tell them by the right stuff so watts of stuff,
in machine learning happening around fitment and return avoidance,
the whole General filled the personalization this is really hard to shop for right now cuz every vendor is hyping all kinds of new new artificial intelligence and machine learning,
capabilities and it's really hard to separate the hype from the reality with all those products but it certainly is true that machine learning,
generates more personalized experiences and so there's tons and tons of new vendors out there in that space you know folks they're still in loyalty programs and retention programs are those can be dramatically improved by Machine learning so we're starting to see the first generation of machine learning based loyalty programs.

[59:01] And that's kind of the the main use cases that we talked about right now and in customer engagement.

[59:08] Got it okay so does summarize what got three buckets Insight generation and that's kind of.

[59:16] I think of that is like next Generation analytics so so analytics that not just Splats data but comes up with insights,
business acceleration and that was things that that help you save money improve your forecasting pricing in even practice on,
in the customer engagement which are the more forward front-office things are going to improve the user experience learn more about your customers and give him a better experience,
people are interested in this soap so first of all.
Maybe lay out a lil road map so so a listener is a omni-channel retailer Dave.
Get out there like a lot going on in their world right now where does this fall into part ization and where are some places they can nibble and then where do you recommend they go for more information.

[1:00:04] Yeah so in terms of what your focus should be like you know my high-level advised is ignore the labels don't go look for an AI product but instead look at the list that we just gave you and will put it in the show notes and say,
which of those things do we feel like we're most efficient at and we're leaving the most money on the table like art,
are you know we not making good decisions about who our audiences are and how we should Target our advertising or we not making good decisions about our pricing or we're paying too much for fraud,
or are we in or not doing a good enough job of helping customers discover the right products and add more cards to the more more skews to their cards,
and you know our returns to high-dose or two things and so focus on your biggest pain points,
and then say alright you know what Solutions out there are using machine learning Technologies to best address that pain point so that would be my sort of,
high-level advice and then in terms of specific vendors if you're going to build your own solution,
they're they're sort of a 4 horse race for the underlying Technologies for all of these machine learning capabilities and as you sort of alluded to in your experience at spiffy they,
none of these vendors require you to be data scientist anymore so they all are like pretty easy tools you probably still have to be a programmer cuz these are mostly api's that you rent,
but it's really a 4 horse race it's four of the big vendors,
all have these big stacks of AI capabilities that you can rent by the drink in there the really inexpensive in you.

[1:01:41] Add them to your own product so if you're going to hire your own programmer to develop any of these experiences that the first one is IBM with their Watson technology and will put links to all four of these,
these Platforms in the show notes one that people don't necessarily think of but is hugely competitive in the spaces Google and they they have the division called Google Cloud,
platform services and they they have a bunch of api's for machine learning,
they actually invented one of the underlying machine learning models called tensorflow and they've open-sourced it so they they have a lot of great tensorflow Solutions on a gcp but you'll also find other vendors now offering tensorflow because it's become so popular,
Microsoft has a complete set of cognitive api's under the there as your services and then as you mentioned,
Amazon has a complete set of AI capabilities that are part of AWS and.
You know they're all kind of analogous like you'll find basically the same set of api's from all of them you'll find a,
a computer vision Library you'll find a sentiment Library you'll find a natural language processing Library a text to speech Library you'll find all these these Legos of machine learning capabilities that you snap together yourself one that's kind of fun that I will highlight specifically for Amazon,
is one of their Legos is called the destiny and it's spelled,
goofy it's dsstne and that's the actual product recommendation engine from the Amazon.

[1:03:14] Website that they added to AWS last year so you you can actually use,
the very system that Amazon juzang and we mention this network effect,
it's a huge advantage to be able to get a recommendation engine that's trained by Amazon already cuz you're benefiting from their network of fat.
So that that's pretty interesting and then I would highlight that there's some more Niche vendors,
there are vendors that as opposed to giving you a low-level API have sort of crafted complete machine language capabilities.
Specific for Commerce vendors and so again I'll put them in the show notes but six that come up a lot there's a company called Wiggle,
it has one of these machine language based search engines that we talked about in the customer experience portion,
there's a company called sentient AI,
that has really powerful visual search capability they also have some pretty interesting personalization recommendation engines,
there's a company called clarify that that has visual search including video which is super interesting if you're someone that,
produces a lot of content on YouTube,
the we mentioned the robots that take pictures of the shelves so that's a company called simbi Robotics and they have the,
tally robot that dumb Target is testing there's another company at a Stanford called focal systems that have the.

[1:04:45] Computer vision library for doing inventory and then luminoso is one of the companies that has a specific machine language based analytics platform for Commerce and so,
there's there's many many more vendors out there but those are sort of six interesting ones to look at to get you started.

[1:05:03] Yes it's it seems like.
And I don't mean to hang up on this but when when I was in e-commerce person just got thinking about our listeners here and I used to buy a solution know you would look at kind of feature benefit.
Kind of analysis and cost and all that kind of stuff it seems like machine learning in some of these things add this like other dimension that's only important which is data so says you look at these Solutions.
Yeah it's really important to understand.
Is this going to operate just on my data is is my data going to be enough to really get a big get big enough bang for the buck cuz I think we're going to see his new models where you're sharing data with other people on a platform.
But then you also need to be pretty cognizant about that because this is really important and watch will property you have and once it gets into these Platforms in his learned.
Even when you leave and take your data the learning stay so it's really interesting kind of a way to think about things you kind of.
As a user of vendor you want a lot of access to data but then you almost don't want your date at a time be.

[1:06:07] In there in the system to use example let's say your.
I don't know sorry blaktroniks train the system on on whatever recommendation Electronics now you switch vendors will that.
Now competitor switch is there did you start using that now they've they've got a solution to spend trained on your data.
Also you know it's pretty interesting that you mentioned Amazon example where it comes kind of pre learned if you will I don't know if that's the right.
Verbage pre-trained maybe better in any advice on how people should think about that element of these Solutions.

[1:06:43] Will know I think you have hit the nail on the head it's the wild west time Electro property and so your,
you're exactly right like you have you know because these are almost all cloud-based Solutions you load your data in it you train it you get to take your data back there's it's very clear that the date is owned by you but when you leave you're leaving that model smarter than you found it and your competitors can potentially benefit from that right and so that,
that is certainly one issue.
But for sure like when you are thinking about areas that you want to invest in and maybe you know the the first area that you want to tackle from a.
Sort of testing out a machine warning capability like like one of the big drivers of of the feature that's going to add the most value to you is the one where you have the most data or the most differentiated data so anywhere.
You have a data Advantage versus your competitors or versus the market that's a great place to look at 4.

[1:07:44] Accelerating with machine learning and that's the big.
Pro in the con of the bill that yourself with these underlying platforms like IBM in Google versus buying a product Eyes solution.
Like at wiggler senscient is you know you need a lot less programmers there's a lot less investment to get a customer experience working out of these complete Solutions,
but they are going to learn from your data and you know your competitors are going to be able to benefit from that if you really feel like you have some,
differentiated competitive Advantage data then that's a good reason to potentially roll-your-own solution using the the the more low-level machine language libraries from from ad the big providers because,
they're they're leaving less of that running behind for the next guy.

[1:08:32] Yeah it seems like it'd be smart to go make a coalition with people that aren't competitors and say hey let's pool our data kind of create our own data pool and.

[1:08:43] I almost wonder if there's like some way to do something little Pine Sky almost like a Dana Co-op.

[1:08:49] No it's.

[1:08:50] Having your own pool of your data isn't as hopefully you still need that other data but you still want control over the day this it's kind of a really interesting turkey challenge.

[1:08:58] There's models out there right now so an interesting one is,
Adobe for device detection right so you don't Scot you and I on a bunch of different devices they all have different cookies on them so it's hard to tell when you visit a site on your tablet and then later on your smartphone that you're the same user,
Facebook and Google know because you've authenticated yourself,
in in the on all those devices on Google and so Google recognizes you across all those different devices so Google has a big advantage over most e-commerce sites and Facebook has a big advantage over most e-commerce sites,
in terms of recognizing each user and so you know folks like Adobe have literally set up a device data Co-op.
So that multiple websites can share,
what they know about which devices you own and your Anonymous so your Pi isn't in there but when someone you know gets any device that,
did Scott Wingo owns they can go to this Co-op and find out what the ideas of all the other devices that Scot own so that they can,
do the Multi-Device attribution and so we've we've seen it there we are starting to see these kind of data,
Co-op submerged in a couple places I think in some cases even competitors collaborating so for example a lot of the insurance companies,
they have to pay claims when a natural disaster takes out a roof,
they're all sharing their data their photo libraries of all the roofs that they've had to repair and what the level of damage was and so now they have this big data repository that they all benefit from.

[1:10:37] When the hurricane strikes they fly a drone over the neighborhood of takes a picture of all the roofs,
add a machine learning algorithm you know tells you in half an hour how much is it going to cost to fix everyone's roof in that neighborhood so so pretty cool stuff.

[1:10:51] And Scot afraid that is going to be a good place to leave it because it is happen again we've wasted a perfectly good hour and tax of our listeners time,
listeners as always we certainly want to continue the dialogue so please visit our Facebook page if you have any questions or comments interview like today show we would greatly appreciate a review on iTunes.

[1:11:14] Thanks for listening you're ruining maybe someday this entire podcast will be automated intelligence artificial intelligence.

[1:11:22] Or maybe it already is? And with that, happy commercing!

Jun 29, 2017

EP091 - Boxed Wholesale Head of Reengagement Nitasha Mehta

An interview with Nitasha Mehta, Head of Reengagement and Boxed Wholesale. Boxed is bringing the wholesale club experience to e-commerce, is based out of Edison, NJ and has raised $132m in capital.

In this episode we discuss Amazon's Whole Foods acquisition, disruption of CPG, private label, mobile, customer acquisition tactics, and customer retention tactics. 

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

Episode 91 of the Jason & Scot show was recorded on Wednesday June 29, 2017.

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


New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 91 being recorded on Wednesday June 28th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Coho Scot Wingo.

Scot And Nitasha: 
[0:40] See Jason and welcome back Jason Scott show listeners in this week show we have a very timely guest,
nitasha Mehta is head of reengagement at boxed she previously held positions at Samsung in Amazon box is bringing the Wholesale Club experienced e-commerce based out of Edison New Jersey and is raised over $139 in Venture Capital welcome nitasha.
Thank you.

[1:06] Soonest Natasha we always like to kick out these interviews by having our guest share a little bit about their background and and how they came into their current roles can you talk to us a little bit about how you got here.

Scot And Nitasha: 
[1:20] Sure,
so I leave here and marketing at Fox I've been off for 2 years now which is been an amazing ride it's been really great to see Nvidia,
be part of that tremendous growth that we've seen over the past two years.

[1:45] Where in New Jersey part of,
companies on Amazon on in Seattle on the content marketing team for Mobile Electronics,
both been in the e-commerce and retail space for quite some time it seemed like a natural extension to.
I joined by a couple years ago and really excited to be part of the team.

[2:14] Pretty cool and you have sort of the unique title how did you arrive at that title.

Scot And Nitasha: 
[2:21] Sure thought of Engagement really has a few different facets,
my main focus is really customer retention and so hyper focus on customer really trying to understand how to find the light messages and promotion,
for a customer at the right time until about one hundred percent of my focus,
an email and push notifications are some of the channels that I meant along with programmatic direct mail and polka Matic display.
I'm so if a pre-owned Compass Bohemian title for the customer experience.

[3:04] Very cool and I always is it I was like it when you invent your own titles so then you can be the the the absolute industry Guru of that title.

Scot And Nitasha: 
[3:16] Absolutely tell us a little bit more about what you did Amazon,
sure so I managed a couple of our Mobile Electronics,
Sanders and campaigns and so worked really closely with apple and Nike on MP3 players and GPS watches as well as Garmin and TomTom not going,
population in 2010 Pacific or GPS devices,
and though many of our on-site popcorn campaigns on the pop form as well as email probably manage over 100,
weekly campaigns across multiple different brands and inventors Regal how.
What do you think about Nike selling on Amazon since you can work for them on the device side maybe you have a point of view on on shoes.
Yes but we home yet actually I'm actually not sure if if not user icon shoes yet but we were the first category with an Amazon to bring them on Direct,
we had a relationship with with,
GPS devices and so when they launched their campaign with TomTom we were able to bring them on which was really exciting at that point but to bring on the he has a venue one of the first category to do so.

[4:46] And then how about a Samsung what did you do over there.
I was on the Punic marketing team for tablet and so it's kind of on the opposite end of the spectrum working with Amazon as one of our customers and so Amazon was one of our largest suppliers,
of iron tablets on other work today cuz they would Best Buy and Walmart on the channel marketing side.
Managed promotions for tablets and this was also in 2012 when tablets,
they still are but when tablets are really On The Rise and was a really exciting place to be at that time.
Then see if it boxed for two years imagine you seen some pretty crazy growth were you like me were you in the first handful of employees.
Boxed is only a couple years old right.
That were about three years old I'm almost four actually and I started when we were almost.
I would say and since then we've.
More than quadrupled so tremendous girls were already running out of space at our third office and so it's been a really exciting ride to you there from you know the very early days.
Free Colts and then does your role change or you've held the same role and just kind of taking over more and more pieces.
Yeah I started in this little a lot of what I've done in the past really like me to.

[6:23] Focus on being gagement in particular and so if I go so slow I've been taking on more over the past couple years and I also have a,
rebagg ball and thunder marketing for work very closely with many of our Brands and suppliers that box as well.
So so imagine boxed has like a typical retail that category teams and all that kind of stuff and even relations you guys have a fun center or is that,
you don't do any of your phone that it's kind of 3 p.m. or something.
No we do have our own system in it and you have 4 at Sears across the country and so we recently just launched our fourth in Dallas,
a few months ago International in the contiguous 48 states.
Are these kind of Amazon 1.2 million square feet kind of Caesar these are iMagic pile of it smaller a little bit smaller that we're pretty close.

[7:29] Nice and for listeners that maybe aren't totally familiar with box but I what's the how do you describe the the value prop with the elevator.

Scot And Nitasha: 
[7:38] Sure,
and once on the last where the online mobile version of your wholesale Shopping Club but we don't have any membership fees and we have free shipping so anything that you normally go to the Wholesale Club on,
and spend your entire Saturday shopping we will deliver on average in two days you and all your books eyes.
As favorite.

[8:07] Don't you imagine the answers both but do you feel like are you primarily trying to take visits away from,
Costco and Sam's Club so you're getting people to recreate that brick-and-mortar experience online or are you you trying to take visits away from Amazon or maybe Prime Pantry.

Scot And Nitasha: 
[8:26] I think it's Holloway coexist with all four,
Costco fans and DJ's they don't have a strong online presence if they're putting a lot of focus on and so we also are targeting Millennials that may not necessarily,
not on the ferry started shopping at his Wholesale Club yet and so.
City dwellers and Millennial moms for example are really a huge Target of ours and and.
A new that we can coexist with all four of these other retailers.

[9:06] Got you in what are the things that somewhat unique about the club stores that some listeners may be very familiar with and others might not is they tend to have different product configurations then art.
Typically sold.

[9:21] At what grocery stores or or even that are sold in Amazon Pantry so you know you might have A4 pack or an 8-pack,
on a grocery store shelf and you might have 104 count in the club club store so we tend to call those Club packs is boxed primarily offering Club packs is that,
are you getting the same configurations or something in between what's the.

Scot And Nitasha: 
[9:44] Yeah so we primarily focus on Club packs or the Bahamas you and so we work very closely with our suppliers on,
customized packaging Pacific to eat, but still you know what's in the Fun Pack.

[10:01] Got you and is it has it been difficult like I I know traditionally in the old days Costco has a lot of Leverage I mean you know with a very small store account there the second largest retailer in the US.

[10:14] I feel like they used to have these.
These kind of draconian vendor agreements where they were the only ones that were allowed to carry a particular configuration so they had exclusivity on this card packs art are you finding it that's less true today or are you you getting.

[10:29] That's like like a slightly different version of Quebec or how is that working are you.

Scot And Nitasha: 
[10:33] Yes yes,
spell largely true what we do is negotiate a slightly different variation or size count for the econ version and so we wouldn't necessarily get a soda.
cut exact size but we would have this form or variation different packaging specific for us.

[10:57] Got it in in in general is are you finding like is a big part of your value proposition.
The value of the products that because they're buying,
Club PacSun you're encouraging them to get a bigger cart that you're able to offer really aggressive pricing or is it the convenience and not having a slap all that big stuff from the store and to the car and all those sorts of things like what what what are the primary things that you think are really driving consumers to use you.

Scot And Nitasha: 
[11:26] I said was definitely convenient but I would say that's probably one of our,
biggest differentiator is and trampolines that are not having for Lego these bolt size 3 six packs of paper towels home especially for myself living in your,
I need to go around the corner to CVS every other day for items but I can just buy one time and had to deliver and open Venus was definitely one of our biggest value Problem by overall,
we don't strive to be the cheapest prices online but the value of having the Club Vive,
RX delivered to your door and not having to pay the annual membership fee is huge Michael.
Imagine you being an ex Amazon person and you guys are in the kind of cpg category with a lot of your offerings what did you think about the whole Whole Foods Amazon acquisition any thoughts on.
Hey I thought it was brilliant and it was 1030 now.
Solution they haven't really nailed down the flash category I'm gone fast food.
Growing but doesn't have the brand yet and so I think this really helps them and help them gain credibility within the fresh-faced and I'm usually beneficial cuz.

[13:00] Because Whole Foods generally have a ton of presence of any and digital and for listening they're really going to help each other and.
Smart across-the-board.

[13:14] And then um the Amazon does have an offering it's it's left I found a lot of people don't know about it and it's kind of under serve but it's the Prime Pantry,
and it seems like that kind of is there trying to solve,
yeah kind of some more problem you guys are with a very different kind of a mechanism I've tried it before and it's like this weird gamification of fun the box and it's like hard to connect.
So it's a lot of work it felt like to kind of like Phil the boxing and going to optimize it.
You feel like you guys have a bit of a white space from Amazon that they haven't really solved the what you're doing or is there some overlap.
Yeah it's a tough I think so I think Prime Pantry and doesn't it's like you mentioned has a brand awareness,
have a very unique brand effect and the fact that we only focus on full and so that's her name differentiator from you,
time pantries yet Enough full disclosure I'm a customer we will use it at my office so we have a startup and.
Yeah it's the food is great for for that.
My family is not quite big enough to eat it that much but booked through the guys have that it works great in an office of 20 people you know we get our and then ordering is is really nice to see you guys have done a good job of.
Be able to reorder things.

[14:38] And for lizards that don't know Scot goes through a lot of snacks so that that's that's a meaningful.

Scot And Nitasha: 
[14:43] They were perfect for you,
and B videos is the flying a huge focus of ours as well and so he's a pretty significant portion of our business that's dedicated to start up like yours.

[15:01] Nice I want to dive just a little bit more into how how you're interacting with Brands and how they view you the one thing on that last question I actually think you're.

[15:13] Prime Pantry is almost the opposite of you write like the pantry is really.

[15:19] A way for Amazon to sell the small packs and entice the customer to bundle enough small packs together that it's cost effective to ship them.
And you're you're selling the big packs which are the things that Amazon normally is willing to sell as eaches even even on there.

[15:36] They're the normal website if you will but.
Honesty Bee Gees I think one of the interesting things that happen is when when Amazon announced the Whole Foods deal all the immediate talk is how that affects retailers right and you know who which retailers are most likely to be disrupted by by this new Force but I feel like there's been this,
the secondary realization,
did it's really a big wake-up call for the cpgs that may not have had very much focus on digital right so your.
Your Procter & Gamble are Unilever or you know Kindle car for those folks,
you know less than 1% of grocery is digital you know you're overwhelming largest customers are predominantly brick-and-mortar and so you know while you're starting to deal with digital it's for a tiny part of your business and now suddenly.
You have the threat that that I can a very significant player could be disrupting your category with digital and so I wonder,
like do you see that that will you know potentially make some of your your brand Partners more digitally Savvy and maybe more open to,
trying things digitally with with folks like yourselves like I could almost imagine that that's a favorable trend for you.

Scot And Nitasha: 
[16:54] Yeah absolutely and I think we've started to see that Trend over the past few years to the fact that many Brands now have a shopper marketing team but are largely focused on digital,
I live in joy tea of my contacts that I have you,
contact conversations with our phone that Shopper marketing team and their.
Much savvy are there in they were you know.
Four or five years ago and I'm so I already started to see that Trend shifts and I completely agree I think especially with this whole foods deal it will continue to grow in that direction and more.

[17:38] The absolutely,
you don't want of the interesting things insert a traditional Shopper marketing there there's a lot of tactics in addition to getting the product on the shelf that are commonly used right like so there's lots of merchandising in Coop and Brands paying for.
And positioning in sampling in and we see some of that,
on on the Amazons in Walmart's of the world is that something that boxed is doing today in terms of like offering digital promotional opportunities for for brands or is that something you're you'll consider as you you advance.

Scot And Nitasha: 
[18:13] No it's actually something that we are already offering which we probably started about a year-and-a-half ago and so we probably,
oh and enjoy these are real estate on both of our site as well as our ass.
And we called many of the placement of virtual and caps and so no at a play on the freaking water and cat food but,
definitely in English.
And excitement and engagement over these placement over the past year as well which which continues with that trend of Brands moving becoming more more digitally body.
Recool the one of the the trends at Costco I don't know about the other clubs but they have the Kirkland brand which is which is their private label and.
And I don't know where it started but it's become quite popular and they sell Auntie mall and that's primarily what they sell is that private label.
I think Amazon is actually sells Kirkland it's odd it's kind of taking a life of its own and it's one of the they sell more Kirkland online than Costco does.
Los customer you guys I really like you guys have a similar offering called Prince and spring maybe tell us a little bit about the rationale of that and how is that going.

[19:33] So if the really started off with just paper towels and toilet paper so two in the fact that he's package good that everyone needs an Zen,
there's huge opportunity there and really being into stop there and our category that's really dominated by another down even the Sherman and so we started that.
A couple years ago and has expanded the printing spring assortment free significance and it's a huge Focus for the company the team has been.
Growing pretty rapidly and now we offer everything from toilet paper to flushable wipes to hangers and most recently it was only just launched,
coffee and so both ground and whole bean coffee all Source locally.
And it's if it's not stopping there we're watching chemo and moving into the food and beverage States as well and so is definitely a huge Focus for us.
And I know she have one of things we love in our office is K-Cup coffee and but it's quite expensive in and noticed your private label is almost like half price of,
what other offerings are which is which is nice.
And it and it tastes good,
okay on the so Jason and mentioned you know the brands and in the things do they eat.

[21:09] How do you navigate having that private label when you're also trying to get the sharman's in the bounties on the side I met you the good news is you're not the first kind of.
Company to do this so I guess it's pretty well-read and ground for him.
Yeah I really just increases over all share with in that category we haven't seen any kind of libation going either way and so again you know I think there is.
There are products that are recognizable that you would always want,
I'm to partner with and and a sore on our site but if we can offer a different selection a different place with wood,
in terms most likely Target a different type of customer your that's really are our strategy that.

[21:58] Got it so I love the fact that you're you're competing with traditional clubs.
In the digital space because I fear going to talk about Costco in particular like they're very admirably retail or they do a lot right so I'm really not trying to pick on them but I freakin called them the biggest digital Luddite in the retail industry.
I think it's very overt like I think they've just made a strategic decision.
We don't want to be digital we don't want to give the customer any reason not to visit our stores and why lie.

[22:33] Can kind of understand that sentiment like ice you know I and I suspect most of our listeners on the digital podcast probably feel like that somewhat short-sighted but In fairness to them it hasn't really shown up on their balance statement yet so.
But what's interesting there model is sell stuff at the lowest margin possible they're super aggressive on price and their primary profit driver is those Club memberships.
You guys obviously aren't doing the membership and that's one of your value props is get those Club packs and get that convenience without the membership.
Bed so I presume you have to make more money selling the goods and then you have this this really inconvenient cost that we all struggle within e-commerce which is shipping.

[23:23] Like do you guys have any strategies for keeping the the shipping costs under control I mean I know it feels like that's a ever-increasing.
Cause we talk a lot on the podcast about the fact that e-commerce is growing at like 20 to 30% and the shipping guys capacities growing it like 8% and so there a.
They're constrained commodity and what they're doing is there charging more for their service as a result.

Scot And Nitasha: 
[23:48] What does,
we offer free shipping on all orders over 49 so that definitely helps with the shipping fees and then on top of that the majority of our orders,
the average order size is 9 - 10 items so we are stuck up service our customers are.

[24:19] Play higher than an Amazon sample or the typical or sides or just one or two products are order which does largely affect shipping but because that were able to eat shipping costs low.

[24:33] Gotcha and I guess one of the things that somewhat surprised me.

[24:40] Based on your category in the types of items that customers get from you I almost would have expected to see some sort of subscription service and I know Scott mentioned you have really convenient reorder service but if you guys ever you know.

[24:53] Like is that an over decision you made not to do some scription and says that something that could be in the roadmap what's the scoop on subscriptions.

Scot And Nitasha: 
[25:01] Potentially be on the road that is something that we have considered especially for certain items but.
Customers into typically reorder like baby next absolute spend baby products for subscription type of service and so that only something like thinking about.

[25:21] I may be remembering this wrong but when boxed first launched my recollection is was kind of a mobile app only kind of a thing and then later the desktop was added and again maybe I misremember yet,
but kind of curious about that mix of of mobile and desktop,
again I kind of like the desktop version cuz usually I'm doing it when I'm at work and I can kind of like,
see the product better in that kind of thing but any interesting insights you can share what you guys have learned there.
Definitely the launch of the mobile app for mobile first and also.
Attack company first and so the majority of our employees are actually on the tax team.
The innovator and improving Dorothy experiences while I was excited. And so we launched shortly thereafter.
The first years mobile is the majority of purchase it.
And the letters how many of our customers prefer to shop through the source of the app the app is really is a convenient option I personally love using the app for me order items,
simple to put process reorder and so I think,
you're having both options really great for a different use cases.

[26:57] And then you know I mentioned earlier and you said this is kind of growing part but the kind of a b2c and B2B element.
Did you guys start leaning into the B2B when you kind of saw how people were using things or or tussle bit more about that kind of how that came to be in in anything you can share on mix or anything would be interesting.
Stressful that continue growing our business.
Meet by the natural extension of epoxy started as a beauty popcorn but because you are stuck up service and deliverable and our own office manager or just the front,
LIRR employees I really am from cartoons and truly,
is our employees love the snacks in the Beverages and we need the paper towels in the toilet paper it just seemed like a natural extension and now that team has been curling pretty,
pretty quickly as well for the past year the huge Focus for us this year and in 2018.
Yeah I imagine that it's kind of where we also use you guys for a funeral off the office supplies again the kind of packaging is good as is that kind of where,
those got out at imagine before you saw the business side there wasn't a lot of the office stuff.
Right yet you continue to add a lot more selection within the office based off as we start to it as we continue to build out that part of our business.

[28:33] Wrinkle.

[28:34] I love that strategy like the more Tech Guys you higher than more snacks yourself.

Scot And Nitasha: 
[28:39] Very true it's hard to keep snacks in stock at our office.

[28:51] Hopefully that permit person has a good promo code.

Scot And Nitasha: 
[28:54] Exactly.

[29:02] So going back to the very beginning of our conversation reengagement like one of the.

[29:09] The huge challenges for all online retailers in particular 84 PurePlay online retailers is,
customer acquisition right and I think of sort of the big big player and in the space for the last couple years has been Jet and you know they famously spent,
a fortune on each customer in terms of active acquisition cost what's your strategy around acquiring customers and driving that customer value are there any particular tactic sure,
you're relying on and any that have been predicted successful.

Scot And Nitasha: 
[29:44] Sorry we pretty much,
across the board in terms of acquisition and retention but specifically acquisition-related focus on TV we launched our first,
ad campaign,
the beginning of last year and then we launched another one towards the end of the year I'm working on the 3rd right now as well at Subway has been really.
I'm really surprised MC Market and so really you know building on the Branded dolphin and having that constant exposure in key markets and then print has been used for us in terms of acquisition so,
somewhere to check that is invested a time and direct mail and print we're also focusing quite a bit on that in terms of opposition.

[30:35] Done at night I can majun Subways particularly clever because you know one one large segment of Shoppers that have kind of excluded from the the brick-and-mortar club folks are our folks that don't use that car.

Scot And Nitasha: 
[30:49] Exactly.

[30:54] Yeah so it's interesting you just mentioned a lot of a sort of old-school old-world advertising techniques and I almost wonder in some ways.
For Pure digital play like you know your tendon running a lot of companies that are predominantly doing digital marketing if you know some of the.
The print stuff could potentially be less crowded these days and so the I don't know the signal-to-noise ratio for that kind of campaign could almost be better than it used to be.

Scot And Nitasha: 
[31:20] I agree and that's what we're seeing as well we still have a huge focus on digital Facebook it's probably one of our largest and channels in terms of opposition but.
Agreed and turn the prince and then even some of some other channels that are starting to come back that aren't necessarily a saturated such as SMS.
Is also accused opportunity more suffering gagement but.
I do see a trend of some of these older.
More mature Channel coming back and playing in a very saturated space which is digital right now.

[32:01] Yeah have you experimented with any direct mail I that that detention I guess is another one is those mailboxes are a little less full than they used to be.

Scot And Nitasha: 
[32:10] Yeah we have actually up until I say about a year-and-a-half ago really focus on really use direct mail for acquisition purposely targeting a specific,
Tor zip code and planning our campaigns around that and then we started,
staying programmatic direct now on and this was a brand-new way to rain gauge with friends were really excited to touch with and so we started talking with with a company called pebble.

[32:45] Until what what is pebblepost doing for you.

Scot And Nitasha: 
[32:49] So we didn't micholi at 35 thing with them at to be engaged with,
you think I unsubscribe from our email and go up until that and if the only way.
Really engaged or engage with current customers with email or push campaigns or display programmatic campaign and so this was really exciting opportunity to,
customer that had unsubscribe from our emails I wear either unengaged from them or didn't like the content,
and Shannon promos and Deals if they were still active on our site,
and so how probable works is if a user within our specific segment.
I'm sorry sight but downstairs and doesn't convert within that session I will postal actually trigger ascend,
I'm at our postcard or catalog to that user within 2 to 3 days and it's extremely relevant and targeted.
He started targeting users 8th on what products are what category is actually viewed when they did visit the site and it's completely different,
customer they essentially then either too we send email to which is also a very saturated space.

[34:08] For sure and I guess what I love about that is it it it's almost like analog retargeting like that you're at you know what,
it's their heads Fades retargeting but but via that that analog channel that the you know is potentially a little less saturated that's brilliant,
like you mentioned course email is is very saturated but generally when I talked to folks that still is one of the better Roi tactics for them I'm assuming email is still in your mix as well.

Scot And Nitasha: 
[34:36] Yeah yeah you know this is one of our additional in terms of retention and so I'm still still.
Going to be a huge Focus for us I don't see that changing anytime soon but then again you know a good email campaign may get 20 to 30% open rates right over so even 70% users on the table that were unable to engage with info,
when you think about the number of impression that you get from a physical piece of mail.
Not only two eyeballs but depending on how larger household is because I get a multiple Impressions on a daily basis if you're like me I leave mail sitting on the counter for 2 weeks,
are we by the time.
Convergex that amount of exposure is incredible and.
Target's a completely different user than those who are very email so good.
Yeah I think blue apron's a Believer I'd get something from those guys like every every five minutes from from email.

[35:54] Yeah I think they're actually just looking to step up the the advertising spend is there they're trying to preserve that IPO.

Scot And Nitasha: 
[36:02] Call.

[36:06] One of the things when we talked to folks about the efficacy of their their digital campaigns and particularly email like the big Trend you go to any of the shows these days and you know you throw a rock in your hit 30 sort of personalization vendors,
and it seems like you know the the big the big pitch is always personalization on those marketing channels is that.
Something you're experimenting with is that working or overhyped or what's your what's your POV on that.

Scot And Nitasha: 
[36:33] No I think that's a huge Focus for us and something that we have in focus on for quite some time is really.
Affiliate emphasizing,
a one-to-one customize messages creating triggered messages they found customers havior or purchase Behavior I think that is,
Chris Lyons messages and 101 customize messages that we can send that,
that is our Focus night and definitely something that have a person and direct now is also helping out with.
Just imagine visiting our site and going to our baby category and for some reason or another you don't have,
and upconverting with another question but then three days later you received a postcard in the mail and the content is all babies focus with navy at 20% off discount any baby item on site.
And I think that opportunity there is tremendous in terms of customization.

[37:41] Quinn and you guys are actually doing that or that something you're doing up for it we are doing currently.
So you have that level of of targeting and whatnot in the mail program.
One thing I know you guys do as you have boxed bold which I think is your cash back program and then you have a loyalty program total bit about those and what they're geared towards.

[38:07] Bacco program is our partnership with Emma and so if you aren't a customer and you make a purchase on Fox with your AMEX card,
you automatically given golden box full which is free shipping.
And 3% cash back on all orders so for any regular customer or Montana?
I'm a class program is 1% cash back on every single order and so the more you order from box and more.
Cash back you get and then a mess up my little get 3% cash back.
In the free shipping it just lemonade to the the $50 threshold or how does.
And then said so as a shopper it's kind of interesting it kinda reminds me to Chatta although it doesn't have like the sum of the jet elements because you know when you're first starting your kind of like,
I can't tell if I'm going to save much and it is you kind of go though you just saving it feels like you're saving more and more than like and I was just paid on my NX I didn't really realize I was into some of their special thing,
yeah time to get through you realize you actually saved quite a bit is that that tensioner.
Explain that rational so it's a little bit different than that where the more you ask the car somewhere you're saving,
our cash back program is based on the total part value so if you're sending $100 in the order then you're going to get $1.

[39:46] So you can see it anytime in your account and so the more times you purchase was box you build on your cash back value.

[39:58] Interesting like one of the challenges with those kinds of value props.
And when it's there's almost a little bit of gamification and you're certainly like driving customer lifetime value with the dollars back but I guess the downside is.
You know a customer super price sensitive about one item and they log on your website and they look at the price of diapers and they go somewhere else and look at the price in the.
The total savings may not be reflected in that item priced it does that work against you or.

Scot And Nitasha: 
[40:31] I'm sorry I think they're a lot better value popsci we offer letter.
Different art differentiators but you have so we may not if you,
don't have it the cheapest price on say it's more about the experience I would say we should we offer to free samples on every order so it's somewhere to go wholesale,
shop in Carthage Area 3.
A lot of people go just for the samples so we've kind of levitated that online so you can choose to free samples on every order you'll get the 1% cash back on every order on,
free shipping or no membership see if I think all and all the customer experience really speak for itself,
and then not to mention I don't know if you receive battery if you notice it in your box. But we also have handwritten notes,
to every customer that I was just too so there's a nation with personalized S5 to our entire order earrings as well.
Yeah I seen that kind of borrows from the chewy folks today I don't know who started it first but they were always well known for them yeah.

[41:41] Scot Scot has a giant collection of postcards that same and you guys order a lot of Oreos.

Scot And Nitasha: 
[41:46] Call podcast research those for them the Mondelez episode.

[41:52] Exactly.

Scot And Nitasha: 
[41:53] Oh yes we've done a Facebook live with it with model eating Oreos so and said I love you.

[42:02] Very cool I'm sad to see their stock went down based on the Amazon announcement talking about the impact on cpgs.

[42:12] Yeah but I'm glad you mentioned the sampling cuz that feels like untapped area for a lot of e-commerce players I'm imagining.
The sampling is one of those areas that you're able to use as a shopper marketing program for your Brands is that true.

Scot And Nitasha: 
[42:27] Yeah,
a huge part of our current marketing strategy with our suppliers and and they love it because it's a great way for us to testing products and so for considering a sorting a new item,
stumbling program is a great way to see how our customers will respond to it and then we could also be engaged and put those customers after the fact and send them offers on the full size items,
we do I said or some I am based on what they've actually chosen to add the car,
and a kind of potential there and you're offering,
products that are new to the platform or just even leave I wasn't as limited-time offers or so you're a big focus and comes over sampling strategy.

[43:17] Yeah and so this could potentially be controversial but do you work the your private labels into the sampling program as well.

Scot And Nitasha: 
[43:26] Especially when we launch a new product and that's one of the first places that I will want to watch it as is the other sampling program.

[43:36] Yeah I love that tactic again it just,
there you know so many boxes are going out right now not taking that opportunity to introduce that customer to other high-margin products that they could potentially get addicted to seems like a real mess for a lot of players so I love that congratulations.

Scot And Nitasha: 
[43:53] Yeah.
Thank you I absolutely agree especially for a brand that many new customers haven't heard of other don't know much about a great way to introduce it to them.

[44:07] Cool one thing I thought was kind of a little bit of a non sequitur I was navigating through the site looking at different categories and of the,
one that really stuck out as being an unusual was hotel and travel with,
what's that all about.
Last week and end of the following,
today this is something that our partnership Cena's been working really hard on it and we're really excited about it at all so seem like a,
a natural extension for box,
I still have our vacation packages and now our customers and can go on and and really find some of the best hotel deals I played around with that and I haven't found better deals for for many of the hotel but that I was searching and so.
A great. Please our customers I think of a natural extension of the business.
So your Skype now getting a new variety of non-physical kind of stuff.

[45:19] Yeah if I see if you're on Boston you're looking as backup for your home or your business and why not be able to book a vacation and at the same time and so.
Skyler really excited about this and they don't I don't think this I think this is the beginning of a much larger partnership.

[45:42] Very interesting you don't I'm curious so we talked a lot about your business today we talked you know you're in a category that's,
I would characterize a sort of digitally immature and so you know you're an advanced digital player in a in a space that that seems like it's just on the verge of getting disrupted if you jump in your time machine and look forward to your two,
you know how do you see the the industry in your category changing do you think it's going to look a lot like it looks now do you think it's going to change dramatically.

Scot And Nitasha: 
[46:17] What I think with the time by we mentioned before especially with the Whole Foods acquisition I think,
more and more brands are going to invest more dollars into digital and we're already starting to see that now are at the econ,
your arms of specific brands are growing larger and larger and they have a lot more,
and as well and so I see that really being a huge opportunity over the next year or so so really,
incident and create a new and exciting opportunities with some of these friends,
one thing that I think that I went really love about working with fox,
is the fact that we're so small and then bowl and we're willing to Casting things and new features and so we've actually created features for a brand based on some of their preferences,
and though I see that continuing to be a trend machine shine over the next year or so.

[47:21] Very cool III suspect that as as you know the brand start getting really serious about digital alike as we see some consolidation of you know there's a very long time grocery at the moment and brick-and-mortar grocery.

[47:37] You know it feels like there's almost this bifurcation that you're going to potentially benefit from that like the traditional grocery store is getting really disrupted because it's it's starting to be really driven by fresh and organic.
And you know so so folks are looking for.
One experience to get that really fresh stuff and then once you have that really fresh stuff you say are you know what's the most convenient way to get all the rest of my.
My goods in so it almost feels like.

[48:04] You know where I used to do everything as a One-Stop shopping at Kroger now I'm starting to see people you know that are.
Going to all the or Trader Joe's or Whole Foods for their they're fresh and then they're relying more on club or.
You know are are big online friends for for all of those replenishment items.

Scot And Nitasha: 
[48:25] Construe.

[48:29] Well nitasha congrats on your success so far.
I think that's going to be a good place to wrap up because it is happen again we've perfectly wasted all of our a lot of time.
So when a remind the listeners that they're always welcome to continue the dialogue on our Facebook page and of course have you liked this episode we'd sure appreciate a review on iTunes if you didn't like this episode just send an email to Scott.

[48:55] Nitasha thanks very much for being on the show and joining us.

Scot And Nitasha: 
[49:00] Thank you so much for having me as a pleasure to hop on the podcast you guys are building in wish you guys nothing but the best.
I thought I think you sound like.

[49:16] Until next time happy commercing.

Jun 22, 2017

EP090 - Ken Worzel and Danny Ryder

An interview with Ken Worzel, President of and Danny Ryder, EVP, Online Merchandising & Experience.  Nordstrom is the #17 retailer on the IR500 list.   They are one of the most storied retailers in North America, founded in 1901.  Today they have 354 stores in 40 states and Canada (including full-line stores, Nordstrom Rack, Jeffrey Boutiques, Truck Club, and HauteLook).

In this episode we discuss Mobile, Fashion Retail, Amazon, and Retail Disruption.

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

Episode 90 of the Jason & Scot show was recorded on Tuesday May 23, 2017.

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

New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded live from Sunny Seattle Washington on Tuesday May 23rd.
2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:41] Hey Jason and welcome Jason and Scott show listeners.

[0:44] Today we have a pretty exciting treat for everybody we have the number 17 retailer on the IR 500 list Nordstrom.

[0:52] Which was one of the most storied retailers in North America founded in 1901 and today they have over 350 stores in 40 States and Canada including full-line stores Nordstrom Rack.

[1:05] Jeffrey boutiques Trunk Club.

[1:07] Do I need to sign the show today we have kin worzel who is the president of and Danny Rider who is the EVP online merchandising and extreme.

[1:16] Welcome to the Jason Scott show Kenna Danny.

[1:20] Very much right now.

[1:23] Thank you so much and we can start right off the bat by educating me because I'm always self-conscious when I say how look whether I'm saying it right so can we get unofficial pronunciation.
HauteLook so I am correct that I'm not saying it right.

[1:48] My overlords in Paris are going to be like horrified that I that I butcher that one my apologies monsieur.
This is another first for the Jason and Scott show we are both live so Danny and Ken are here with me in the remote Jason Scott Trio Studio.
And Scott is at our executive studio in Raleigh North Carolina.

[2:18] Bicoastal in a mixture of live and not live it's pretty.

[2:23] Exactly I feel like the five-second delay that Scott has will be super helpful because is is some some loyal listeners will know he he can get a little profane.

[2:34] Do you have a bleeping machine.

[2:36] We've only had to use it when former razorfish are on the show actually but yeah.

[2:45] We really appreciate you guys taking time out of your busy days and it would love to start off with just hearing a summary of your background.
You're rolling compasses at Nordstrom can we start.

[2:54] Sure yeah my roll.

[2:59] I'll let you not been ignored so I can.

[3:01] Exactly cement Nordstrom 7 years now.

[3:03] Now I guess I am I joined actually after a long time probably 20 years as a strategy consultant.
So that was really where I spent most of my time pre Nordstrom.
But I guess the relevant part about that is Northwest a core client of mine for about a dozen years before I join the executive team so.

[3:26] Interesting perspective as a result of having had an internal perspective now but for a long time an external perspective having worked with a lot of other retailers in consumer companies in in the US and in Europe.
And I joined initially to support our strategy team and build out a strategy function for the company is as we were sort of transitioning out of the recession and looking for for new ways to grow the company.
And then subsequently picked up some other responsibilities including our corporate and Business Development activities.
Are data science and analytics teams and then about eight or nine months ago took on the the p&l responsibility for
Which I was.
Is important I think because all those things connected mean if you look at our agenda really for the last 3 or 4 years increasingly everything comes together around how we going to deliver what's been a storied.
Brandon and customer experience how we going to deliver that in a digitally connected world so you know our focus is clearly on continue to be customer obsessed.
Digitally enabled and I'm lucky enough to.
Get to sit in a position where a lot of those pieces come together across the company and I'm also lucky enough to have been able to have pulled Danny long on his journey cuz Danny and I work together for a.
What time in Consulting and when I ended up in in in this gig I decided I should bring the smart guy with the English accent to help me sell our ideas.

[4:53] Danny how about you.

[4:56] Yes.
That's kind of quite pointed out with the accident so I was born and raised in the UK I ask you went straight from college into Consulting a little bit of a not wanting to know.
No knowing what I wanted to be when I grow up and so I went to the Consulting really thinking about to be something to gain experience and then go off into into.
Career somewhere else but I should stay for number of years and really what's my way all the way through the different ranks within Consulting until she managed to work with a lot of really interesting gun.
Dynamic different consumer goods and Retail companies around the world so that series of projects in your.
North America in the Asia and then about five years ago I received a phone call from Ken.
What was really interesting to me is.
It's really the combination of the fundamental changes happening in the retail world right now and just the opportunity to really be at the house or something that's interesting and dynamic and changing.

[5:54] But also from the outside I always thought notion was I really good company very well-run I didn't realize I didn't realize the level of ambition.
Until she being in the retail that is very well-run but also having this constructive paranoid about the world and where things are going but also not patient keep changing is is pretty pretty interesting so.
I joined the company about four and a half years ago originally is policy of the Cobra strategy team what's in a lot of different things across the whole old different parts of the company and then moved into more of an operational Rolla by 18 months ago with an ocean.
So my title is online merchandising and experience and is really three different teams that I support the first assault online merchandising team,
so a large part of what they do is really help inform up buying team on what these election stress you should be for a website and for app.
Using a lot of the customer Behavior data to my she points out where we have opportunities for a Bratz Odette for white space opportunities.
As well as they also then take the merchandise strategies and then strategies and play that out through the content the navigation on the actual product information on the website.
The other two teams I support a focus much more on the features and functionality of the web in the app I'm so this the user experience design a research team so if they do a lot of work in terms of understanding the customer need and then I should going through too much you designing the features and functionality themselves,
the news team is in the product management team to interface directly with our engineering team when she done go build those different features and functionality.

[7:25] So it's a pretty wide-ranging said of interesting different topics,
one of the best things I love about my job is I can go in one day from having a meeting with someone like a Gucci or Balenciaga to that walk down the wall to a different meeting room have a conversation with our Tech Team about the architecture of all different.
What's the difference aleutians and it finally and the day by going to look at some new features and functionality designs and think about how we can create some Co experiences so it's I definitely love those if not almost my job.

[7:55] Cool and I'm not an expert but aren't there sold Nordstrom's at North.

[8:01] There are a team of.

[8:04] 11 of us on the executive team from have the last name on the door so late Pete and Eric are co-presidents of the company.
I have different responsibilities Pete manages our merchandising areas Eric is responsible for a full price.
Brand are Nordstrom brand across stores and and and Blake Spencer lot of his time on or off price business including Nordstrom Rack stores and Nordstrom and.
And HauteLook and then Jamie Nordstrom is president of Full Line stores so my counterpart in the full price business managing our store business.

[8:43] Course need to see there's not many retailers where you still have the family involved to that level set that must be fun.

[8:50] Yeah I think it's fun it's also it's it's inspiring and I think they really they deserve a ton of credit for maintaining I think both the ambition that the Danny highlighted in terms of the admission to be as relevant.
20 and 50 years from now is as the company's been for the last 50 hundred years so.

[9:10] Yeah and that actually brings me to one of my favorite things about.
All of our jobs is it is it Danny's you mention earlier retail is really going through a significant change or disruption right now and I mean you can look at that and say it's a negative thing and scary and all that but do I to me.
It's fun that that Playbook that Danny is Grandfather wrote that was so successful.
Isn't the Playbook that we can all follow today that like the circumstances have changed so much that we all need to.
Sort of invent what retail feels like for these digitally disrupted consumers that we're all facing today in my premises.
The fundamental thing that's disrupted them more than anything else is ubiquitous access to.
The super computer that we all carry with us now though the smartphone in so I wanted to dive into how you guys are addressing that that transition and so I guess I'll start with a softball question is.
Mobile in Portland to Nordstrom do I have that right is.

[10:14] I'm still hung up on the fact that you just promoted Danny to be a Nordstrom that his grandfather.

[10:19] No no not Danny grandfather.

[10:23] There is nothing more important I mean you know I think Danny can can win in this as well but we're sitting here today and I think we're excited to be sitting here.
In large part because we're in the middle of a huge revolution in in customers experiences and what their expectations are in a lot of that.
Is directly related to super computers that started on people's desks and are now sitting in people's pockets and it has fundamentally changed.
Virtually every part of our customer journey and what customers expect from us which again I think you're right you can need to look at that as scary and risky or you can look at it as this massive opportunity and I.

[11:02] We want to embrace the latter.

[11:06] Yeah man just by the Numbers alone it's I think if you don't say mobile is really important to you as a company or as a retail of then I think you're missing a big big big point.
Play quantify we have roughly 700 million unique daily visitors to our website or app.

[11:21] I'm roughly now 2/3 of that comes through a mobile device and that is only growing the actual usage of mobile desktop web experience is declining and saw them at your own TV engagement that was seeing with Nordstrom in additional space is coming through my body Vice.
The big thing is eating things like three causes of emails that we send to customers and now opened on the phone so it's a big deal to buy she think about and I don't need two hands right with customers when they come to a premises but also when we send Communications to them.

[11:50] And I need to make thing for me with mobile is it is the device with which we can she lingcod digital and physical space.

[11:57] And if we truly believe that when one of our adventures is company is the legacy of the great stores we have in the people in the stores and then she.
Giving people great experiences in those doors the phone is the one device that cuts across both the home experience the on-the-go experience in the store.

[12:14] Cool it looks peeled onion on that a little bit how would you guys grade the progress you've made so far on.

[12:22] I guess from my perspective of back to this constructive paranoid I mean it's it's mixed I mean I think there's plenty of things that I think we can.

[12:33] Play Comfort Inn and take pride in in terms of what the organization's delivered and what we've delivered to customers.

[12:40] At the same time we look at how fast everything is changing around us and you know I don't mean just customers expectations but competitors are making us better.

[12:50] And challenging us so I think we we recognized in a wee one of the earliest retailers to be in the digital space a lot of our categories starting.

[13:00] A catalog Heritage that we had and then Translating that into it a desktop e-commerce experience and we were also early to get into the mobile.
As it is a platform in SA.
Vehicle to connect with customers but we see a huge amount of opportunity and and need for us to continue to make progress so mean from my perspective it's a cc plus I mean we still got a long way to go.
To give ourselves the kind of great we'd like to give in to give the experience I think that our customers expect us to give them.

[13:33] Yeah I would haul hot leak in car with AC grade I think we've made some really good progress.

[13:38] Just looking at I think you have to separate out more about web from app and I think on the mobile website we've gone from having a translated version of our desktop experience to watch you having a specifically designed version of arteries.
Specific for the mobile phone itself.
Is part of that doing simple things like designing the interfaces so they all touch friendly on a small screen and as well as making sure that performance is a big deal because of a sea.
Usage on a mobile phone on mobile web is Israelites and very Broad.
And then in the app we actually have a very good Fashion retail app so gets roughly phone off store star reviews in the in the App Store,
but obviously the challenge of that is that reads Fashion retail apps in particular I'm not really taken off in terms of Engagement and that is something that we're going to have to continue to push on his how to make you get people to engage with all app more.
Because apps are expensive.

[14:30] Yeah one thing I Jason I debate a lot is the gulf between conversion rates on desktop and and the mobile web and or apps,
is that one of those you guys grade yourself and do you think that will is closing or will close or at 10 to think it probably won't close it just kind of different things and Jason thinks if you put enough.

[14:50] A payment systems on there it'll eventually.

[14:53] Yeah that's that's a really tough one when you look at the dates.
What will the use queso Festival all the conversion in the conversion rankings of all different channels is highest in the app.

[15:07] That it's not next in desktop and then it's lobotomize web and there is a very significant difference across that Spectrum.
Ken and I to be this a lot about how much do we think we cannot she closed them about Gabba I think we can close a fair amount solve it but I don't think all and I don't think the reason you got,
the reason you can't close all of it is the use case quite often is you're on the bus so you're walking around and you want to just browse and get information,
what's really interesting to me is when you look at the dates of the drop off so I see the product for you rates on the mobile web is very similar to desktop.
Where it really work start to fall off is the antibiotic and then completion rates and that's if I got you as a big drop-off and so I think that just shows that people are coming to look look at products internationally added to the cart.
And then when sums of the actual how that and flows through the rest of the funnel what you get to check out there's a pretty significant drop off and nothing a large part that is the friction in the checkout and that is it's it's hard to check out on this little screen I take it you don't have your payment.
All your payment details saved.

[16:07] Also think that you guys are debated this as well but I think single-session conversion is a bit of an apples to oranges comparison across these devices I mean you look across almost any.
Activity there's more frequent but less lengthy interactions with mobile sessions than there are with desktop sessions and that's certainly true in our categories so I think.
No increase in the we look at even this conversion and engagement kind of measurement we look at it over a. Of time relative to a customer assuming that we're going.
I have experience as we can and should build that in Mobile that's going to encourage more frequent engagement even if it's lower duration.
Can you really I think while look at conversion as a function of that which is can we drive more frequency you might have a lower single-session conversion but against that customer over a period of time.
We think we can close a lot of that Gap now again I think to Danny's point I don't think you're going to close all of the Gap because part of what makes the phone so powerful as a supercomputer sitting in your pocket.
Is it in your pocket so you can use it to look up reviews when you're in a store to validate the purchase you're going to make it a physical environment you look at it on on the bus to see where the closest store is that has that Tory Burch.
A purse that you're interested in so I think there are a set of use cases that are just enabled by the fact that it's portable and that it's with you all the time.
That are different so I also think more generally you know certainly for us and the kind of retailer in the end the brand we have.

[17:42] I think we want to be careful that weird don't get so focused on conversion.
That we're not serving the customers who are coming to us for all those occasions where they're not yet ready to buy or were there looking to be inspired or they're looking to learn about fashion.
And that's a lot of folks I mean that happens in the physical environment but it certainly happens a lot digitally as well.
And so whether that's on a phone or on a desktop I think we're always looking to get the balance of creating a richness of experience and engagement as well as being there trans actually when that's when would people looking to do.

[18:15] Dad said record show I wholeheartedly agree the.
Single session conversion is you know one of the convenient things we have to measure and so I feel like it it has gotten in it in appropriate amount of focus and I certainly agree they're a bunch of.
New use cases that are Nable by that smartphone.
That we never had on the desktop in some of those don't have by intent and that's okay you like there they're great brand Impressions and your point like.
That might be buying 10 tickets fulfilled in the store or some fashion advice to share with a friend or whatever the case is so I think we're all sort of the land on that but I do want to double click on.
Danny made earlier hey there is a big gap between.
Are mobile web in our desktop web but we also have this mobile app which actually has the best conversion in this brings up this.
This frequent dialogue that I have to have with retailers in the whole debate about the role of apps and webs in your customer ecosystem.
Like I'll just say it a front I walk into a lot of retail environments where there's a huge amount of the corporate Treasurer being invested in an app.
And oh by the way there aren't very many active users on that app how do you guys think about that.

[19:35] Yeah so so we definitely think that should be a differential stretchy between the mobile web and app I think that's that's aligning that we've had internally over the past couple of years.
I think you have to take a look at the similarities and differences I think the similarities between the two is that first of all the phone,
it's a small screen with a touch screen in pots you don't have a keyboard you don't have the ability to achieve navigate in the same where you can on a desk of experience so you have to design the user experience in a way that's easy to use an intuitive but also.
Really optimizes for that phone Factor.

[20:10] The second is you can almost guarantee that when somebody is using whether some mobile web or not it's in the context of the world around them.
Which is the desktop you about your.
You're looking at a biggest green you're more engrossed Wars on the phone you basically up Harley parallel-processing either being on the bus or quite frankly I sit home and watch TV and I see I'm on my phone all the time anyway.
Answer the phone itself is actually it's a connection device that lives in the context of other things happening around you and so therefore how you design the experience has to be compelling enough or easy enough that you're not going to make it.
Optimized for that use case.
I guess you think about the differences between the two I think you have to look at the use cases and just the just add a troll owned on how people use the two different form taxes.
I'm so I think you guys are said this in the past but mobile web is a very Broad and very shallow engagement when you want to look at the time that people are spending a mobile web it's a very small proportion of time on the phone.

[21:09] People spending more time in a very narrow and deep playing in apps and so the actual the frequency vs. engagement piece.
Between the Tucson people go to mobile web very frequently but don't spend a lot of time though people go to apps and they go very deep in those apps and spend a lot of time.

[21:25] Unpretty the most compelling piece of data for me is that roughly only fat people on average only use 5 to 7 apps on a regular basis but they go right.

[21:34] And so from that perspective unless you're one of those Fighters have an app so you may have the best shiny app that does a bunch of really cool stuff.
But if people on engaging with and then you spend a lot of money to build something that actually probably isn't doing anything.

[21:47] Look at when you look up the types of Ops people to spending time in and most of them are Awesome form of Google.

[21:55] Yeah I think I think you've guys have talked about this before but we certainly agree that.
They're very different rules for these and I think it would be a mistake for us or any retailer to over-invest.

[22:07] In the app is an example at the expense of having a really convenient engagement experience in Mobile optimized web which is where the vast majority.

[22:16] Archer.

[22:18] The same time there's a subset of customers and in our case it's it's going to be probably our top 20% of customers who have a deep relationship with us as a brand and they're willing to make the investment.

[22:29] To let us live on their phone and you know that's so that's a privilege for us that we need to intern provide them with a lot of value off of that and so I think it's.

[22:38] The learning to Danny spoke so I think it's really clear to us that we need to have an app that serves those customers in a really deep way that gives them the value that they deserve for letting us live on the.
On this precious real estate that's their home screen but we all have to be realistic that that's always going to be a pretty small portion of the total number of customers that engaged.

[22:58] Number customer.

[23:00] Check early if you look at the kind of categories when I mean people we're not a financial institution where people are engaging with us every day.
And you know we're not a financial institution this sense of you know people generally have a checking account with One Bank.
So most people have a banking app on their phone because it's makes our life better with their One banking partner we are usually part of a dozen retailers that customers are choosing between and they're not going to give us all the privilege of living on their phone so we better.
We'd better have compelling experiences both ends of that Spectrum a really great will block them eyes web experience for the vast majority of lightly engage customers and I really high value-added.
Engaging app for those customers that give us the privilege to live in their phone.

[23:46] Yeah it does the last dates race so I think showed that only 3% of time spent in apps on a mobile device is in retail apps and that's because a lot of people.
Facebook always has by Far and Away the most used app in and you really go through social you go through entertainment then you go through Services which could be Banking and Kobe taxis all these different use cases that have been enhanced by put to make you happen to turn up.

[24:08] Yeah yeah I agree I've seen the comscore data there what what's an example of a feature that the app.

[24:17] Offers that's not available maybe on the mobile Weber or the desktop in full disclosure of my wife is a card-carrying Nordstrom member so I kind of know the answer.

[24:25] Thank you I appreciate that.

[24:28] Great things out it's really anything for you accessing the unique capabilities of the phone that could be the camera it could be.

[24:37] That's probably the main we have right now so we threw up right now you can visual search in multiple different ways so you can scan about the barcode of an item in the store,
I know what I should bring up the part of details and you can make a purchase or you can see additional inventory the other thing we have is visual search so you can take a photo and then we'll give you like iTunes to that.

[24:58] Yeah it hasn't rolled out yet to your Marketplace got but another example that takes advantage of of the unique capabilities of the phone is something we're rolling out.
This year and Ashley we've tested here in the Seattle Market over the past six months which is something cold Store Reserve.
And that specifically takes advantage of G location awareness so nature that experiences.
Imagine as it as an engage customer you do with a lot of customers do which start that product discovery on your phone.
And you start the journey there but a lot of you know a lot of challenge in our categories as you still want to physically evaluate the product you want to make sure it looks like what you thought I was going to look like that it fits the way you want it to fit.
And so the stories of experiences start that Journey on your phone put it in a put these items in a digital closet.
Will then before your local stores that you can try a little store will then find the product our team will find a product in the store send you a text message to let you know that indeed we found it for you and we're holding it for you to try it on.
Animal use a geo location awareness of the phone so that we can see when you're approaching the store will let you know that it looks like you're on your way in those products are waiting for you in dressing room 2 on the Metro level of the downtown Seattle store with your name on it.
You come through the door at the products already waiting hanging in the dressing room free to try it on.
You go straight to the dress and you try on the product you can be in and out in 10 minutes having done everything you wanted to do in terms of.
Discovering the product on your terms on your time but also being able to physically evaluate it without having to go through the hassle of sending it to your house and potentially having to return stuff.

[26:32] And you know that's something we've made a mobile only experience because it's really only a great experience if we can connect the dots with the messaging both ways and and the g locational awareness and.
Known the same way that Uber doesn't make sense if it wasn't an mobile only experienced something like that only makes sense as a mobile only experience it doesn't really make sense unless we can connect the dots and really personal way with you.
So I think we're looking when we talked about the sea grade I think it's because we have a whole set of those kind of experiences that.

[27:03] Customers tell us every day it would be great if you could do this for me and we need to do that we need to.
Need to use the phone really to to leverage all the assets we have in particular that the local market assets we have of of people product in place and how do you connect.

[27:19] Those assets to our customers via their their mobile device in a way that makes their life really seamless and really easy and on their terms.

[27:27] Yeah the wheel of the curbside stuff so this sounds like a nice kind of even and now kind of taking it to the next level there,
so one one other question you guys at the top of the show talked about using the phone in the store is there anything else I get you can take a picture and and scan a code and see the online reviews about using with deacons wear,
I approached a shoe display and maybe there's something that lights up on my phone that tells me more if you guys experiment with that.

[27:55] Yeah we've definitely done some testing around that the big lining on anything like that is it has to be really tied to a compelling merchandising strategy because if it's if it's just notifications for the sake of notifications and it's just annoying,
but if you can link it to a great product strategy that I she enhances the experience and somewhat we've really been thinking about is,
whether it's pecans or scanning or other Technologies like some of the light fixtures that I she help you with geolocation to Pieces as well,
it really has to be linked to what are we trying to achieve from the actual product induction diving strategy or the wise it's technology for technology sake.

[28:31] We we like to call those Mass pushes where you just push the same message I've been when they walk by the beacon go spam.

[28:41] One last kind of on this topic of the store I've noticed your Associates are all very well connected their there either they seem to be able to access internet on their point-of-sale system and then many of them have like a mobile tablet of some kind,
I never been to tell if it's an iPad exactly or what's going on at least he's in a case and hard to tell is there any connectivity there where,
you know maybe I have something in my digital closet on my phone and I can push it out to the store associate anything like that.

[29:10] Yeah so we don't quite have exactly that functionality right now but one of the things that were most excited about that is in the process of rolling out right now is really and Hunt selling tools for all sales people,
and that's going to hopefully live on the on that mobile devices so right now we've historically had a text to buy functionality that is really not a very rich experience and pretty clunky and Sons of the signup,
what we just launched about three weeks ago and is in the hands of 400 stylus to be testing right now is a an enhanced,
stop for a sales people that she allows them to search and then send what we call style bullets to customers and then customers can buy from that.
So that will always you continue to enhance and rollout feather but then the flip side of that is can then customers use that as a protest wins right way so it would sales people as well.

[30:00] Yeah we've got a whole road map of of these kind of experiences I think precisely to that that question.
Of of additional ways that we should be making it easy for salespeople and customers connect went when that's when customers want and so to your question I think you will see in the not-too-distant future are starting to turn on.
A functionality for example that would allow customers to both see a visual representation of their closet of what they bought from us in their closet but also to share that inappropriate way with salespeople and stylus when that's what they want to do.
I think is you guys can appreciate me one one of things we're really sensitive to in that context is is making sure that that truly is on the customer's terms I mean what do they want to share with whom and we want to be very.
Transparent and put all that control very transparently in the customer's hands.
So that they get to decide when that's valuable for their experience and so we're just we're working through that.
From a technology perspective but as much as anything also thinking about it from a user experience perspective how do we how do we make that really both easy but also very transparent.

[31:10] Is it they're able to control their information to make their Journey.

[31:16] What are the things that super interesting to me is a lot of the successful mobile experiences we talked about they all 10 to be in.
Certain categories right like so you think of Starbucks and it's you know such a high-volume fast turn and you think of these General merchants and it's it's a lot about like volume of transaction and convenience and ease and all those other things.
In your mind is there anything like different or unique about how you have to think about mobile experiences in the fashion business then some of those sorts of.

[31:48] Yes yes.

[31:56] I'm sure pretty much every kasperi would tell you this but selling fashion online.

[32:00] And part of that is because fashion is an emotional purchase so much of it won't fashion retailers have been good at overtime is helping you find the right product then evaluate the product by trying it on.

[32:12] Helping you all to the products are fits correctly in so it's not positive fashion Discovery is that she very hot so I think what a lot of.

[32:19] How's the next consultant I think in sounds with two by twos a lot.
For me this is 2x2 of experience versus convenience on the mobile space and particular Oshie lends itself to think about that.
Can you take on one axis you have convenience that's what things like the Starbucks of the world have really done an incredible job of making it very convenient so I.

[32:40] Make your life easier and that's where the banking apps Fallen is well because I.

[32:44] I don't pay checks in the Run Channel.

[32:44] Paychex in a brunch anymore I let you do for my phone in my life.

[32:49] On the flip side you have the experiential things which I'm all things like.

[32:53] XO the Facebooks of the wall which is more right entertainment The Sweet Spot is always easy people to do both convenience on experience and that's why things like ways really coming for me or even by which is they've taken what is a truly commodity tide experience historical and made it more interesting.

[33:07] Retail that's hard because retail isn't exactly something you do every day so you don't.
I'm sorry Taylor everyday and you don't mess I asked for product to Vice everyday and so making it whether it's experiential convenient we need to be thinking about what is it that we could be doing for the phone to my she hits on one or both of those.
And that's where I think the challenge comes in and just to make one final plug for fashion in general is.
If you look at the dates or overtime Fashions as a percent you spend a disposable income is going from roughly four and a half cents a two and a half percent.
Can I sync the well this is me hypothesizing but I think the biggest reason for that is more of the move to one line.
Because yes people to buy more experiences ammo Technologies but buying Fashion online is hard.
I'm not basing means that when people use to go to the mall to get product information and guidance and I used to be entertainment people don't do that as much and the facial online shopping experience doesn't lend itself as much to Fashion.
And it doesn't do anyone near as much of a small screen the end of that you have to see the product to buy and you have to evaluate it and take the gets harder and harder to small screen.

[34:17] Agree with all that but I also think it's very easy to sit here and make excuses for why you know retailers and retailers Like Us in fashion haven't been able to Leverage.
Mobilize it as a channel engagement better with customers and it's certainly true that.
Uber revolutionized Transportation but before Rober nobody had done it and certainly true that Starbucks created an amazing and engaging experience particularly in the integration of.
A payments in their loyalty program but before then nobody else had done it in that sector either and so.
You know I think it's easy to point to kind of the convenience aspect and I think it's true that that lends itself.

[34:58] Back to the beginning of the show we were an industry in transformation I think what we're really seeing is that nobody's cracked the code yet exactly but that's not because there wasn't a huge opportunity there I mean if you generalize.
You know even a bit broader I think there's a bit of a.
A narrative going on about how retail is kind of one to the Future Tech and traditional retailers in.
You know I'd like to take the the positive aspect to that we're in a huge business that's a fun business it's an energizing business but you know if they head of zalando recently said you know you can't lose track of the fact.
Fashions a huge business and it's undergoing a huge amount of change but pretty confident that in 10 years you might not have a car but I'm pretty sure you're not going to be walking around naked.
You people are still going to want to buy clothes right and so we're in a business that has had its core.
You know on the one hand the challenge particular as a fashion retailer that you nope the Pete the stuff we sell it if people want to want it they don't actually need it.

[36:00] But at the same time it lends itself to fun and engaging and energizing inspirational experiences so The Challenge on us to how do we take.
This amazing opportunity we have with technology to supplement what we've always done.
Witches to win with fashion Authority and service an experience with our customers how do we translate that.
Into a world where they have a lot more information at their fingertips to their phone but do it still in a fun energizing way so I think it is a hard problem but just because nobody's cracked it completely.
Doesn't mean that it's it's not an opportunity that we should take advantage of her feel really optimistic about.

[36:40] Cat that opens the door little bit I kind of have to ask the question I asked every show wouldn't be a Jason Scott show if we didn't talk about Amazon your neighbors there in Seattle.

[36:52] Yeah yeah Bookseller there in your area.

[36:56] I thought they were just the guys they gave away free bananas.

[37:01] I've taken some of those free bananas as I walk by.

[37:04] I should we we we joke about that so what I asked you tell people is one of the other things I love about my job is.
So we have most of all offices don't located in downtown Seattle and so we have a number of buildings and we're lucky enough Ken and I to be in one of our buildings that she has an amazing view,
and so we have an amazing view Westover the Puget Sound while the Olympic mountains amazing sunsets all that's great however we used to be able to see the Space Needle.
And we can see the Space Needle now because unfortunately there are two new tile blocks between us and the Space Needle that went up in the past two years and that is all friend literally a block away from us right now.
So on the one hand you can say that's a real challenge the other hand as she gives us a very real reminder every day that if we don't continue to move quickly then.
The world is going to end up in the Amazon sphere and so that's something that we really need to be focused on and so.
Takashi to build on what Ken was saying she is really about.
How do we continue to make fashion an emotional patches that people engage where than that she has an elevated experience and truly differentiate from what is more of the convenience and camozzi business of Amazon,
I want we need to do is really focus on working with all best fashion Partners to read navigate the world of digital so the,
they feel there is a very compelling growth path with us so they don't need to go down that commodity path and so that's something that we spend a lot of time on which is how is it that we can work,
with the bronze to create compelling experiences and really showcase their brands in the right way because.
In the same way that we're facing the squeeze on traffic death that feeling it even more and I think for the best friends they want to be in an environment.

[38:40] They feel like that with other great Brands and there is really brand integrity and that's something that we really focused on and I'm making sure that the additional experience really allows us to elevate that.

[38:50] Yeah I agree with that I think you know Amazon is a great company Amazon's a great competitor and I think Amazon.
We owe you know that a gratitude for Amazon for you know helping.
Create a paranoid about how to improve customer experience every day and in a digital world so I you know I think that's with all great competitors and we have a lot of them they make us better.
But I don't think that we look at the world and think that.
Amazon's going to put every other retailer out of business I think there's a little bit of a narrative out there right now that resembles you know The Narrative of that was out there 30 40 years ago about Walmart and the reality is that you know what Walmart was in that massive growth phase.
It's true one more put a lot of retailers out of business.
Yeah it's also true that a lot of great retail stories and a lot of great retail bands came to prominence at exactly the same time that Walmart was growing.
Weather that was Costco or Whole Foods or a lot of other great retailers so I think there's always opportunity whenever whenever there is a competitor that's doing new things and I think we it's up to us to make sure that.
You know wheat we compete in a way and serve customers in a way that continues to build on the things were uniquely good at and the things that customers look to us for.
So I think it's important to be aware of every great competitor out there but also to make sure we're we're right in our own Playbook and we're delivering on that and I think in the context of that.
You know we.

[40:20] The challenge we have is we're a brick-and-mortar retailer that has been an early as always been an early mover into serving customers across every Dimension and we were only move her into.
A digital Commerce in and that served as well but we need to make sure we continue to move forward.

[40:38] Again on the on the dimensions that customers look to us to be great at and I think they look to us.
As a fashion retailer who's going to help them look and feel good and also as a retailer that's going to win on by doing that in a way that makes them feel like we're personalizing that interaction with them.
I think that's the great opportunity we have I mean if you look at digital and mobile and the personalization opportunity that that creates in terms of connection with customers.

[41:07] There's a huge opportunity for us to take what's always been a calling card of ours which is personalized service.
Historically that was defined a lot through just a one-to-one.

[41:16] Relationship.

[41:18] In a store we now but opportunity deliver personalization ATS.

[41:21] Still needs to be done.

[41:22] But it still needs to be done in a way that you know is relevant to our brand and so.

[41:27] I need where we.

[41:28] I think where we are always trying to strike the right balance is a we we need to take friction out of our shopping experience whether that's a digital experience or in-store experience there's no question.

[41:38] Customers want more control they want to be able to.

[41:39] That customers want more control they want to be able to have the journey that they're looking for any given day on their terms and that means.
Take a lot of friction out of the experience but we also you know where where.
Business which is fun and exciting because it's fashion it's you know it's supposed to be fun it's supposed to be energizing it is social and we can't lose.
The context around that we're not in a commodity replenishment business we're in the business of making people feel good not just about what they bought but the whole process of engaging with us and shopping and discovering.
And so I think there's real opportunity win there whether it's in a world where Amazon is or any other great competitor we just have to.

[42:26] It sounds like your strategy is to partner with Brands what we see a lot of other retailers doing is saying.

[42:34] Oh my gosh these Brands can be anywhere so the way to differentiate is to get exclusive brands or by the brands like what Walmart and Mark Lloyd jet are doing you guys invested in bonobos I believe.

[42:47] Is that also part of your strategy or you're really just kind of partnering with the brands and saying hey.

[42:53] I guess part of that would be don't sell on Amazon or you know we can drive a better experience Tulsa Lil bit more about that Strat.

[43:03] Yeah I can I can take a shot at that immediate into context.
Our business development corporate development strategy is very tightly linked to your customer strategy so.
Take the specific example that that you highlighted their Scot which is bonobos.

[43:21] We partnered with Andy and Andy done the founder of pronobis and his team now must be five or six years ago.
And that was really because we we saw that brand born on the web.
A brand that was highly relevant to our younger mail customer we thought it was a real opportunity there that was a win-win for customers for bonobo sent for us for.
For us it was an opportunity to have a Prada.

[43:51] That was limited distribution wasn't being sold everywhere but that would be appealing to two customers that were already in our store.
Alfabeto Bose and I think for a lot of other aboard on the web brand since then it realize that it's really expensive to scale a brand if the only touch points you have with that brand are digital.
And especially when you're in categories were physical evaluation of the product is important and so for them there was a real opportunity to scale their business and scale their brand.
Through our relationship with us and for customers customers want to have the opportunity to to get exposed to brands in multiple places so for us the investment at the time was linked to a customer strategy was never our intent.
Set to own Brands and it was never our intent for example in that context to buy bonobos as a brand our investment there was to align kind of our agendas but also to provide damn at the time with some capital and commitment from us that we were.
Important to them and and they were important to us and that.
Intern really set the stage for a whole number of other relationships we've had since then with a number of great or on the web brands that are important for our customers some of which have involved investment most of which habit.
We've also continued to invest in things that can build our business and our customer experience so that they're not.
They're going to be things that we're investing in because we think the investment.
Is aligned with helping to scale the business or to create alignment in terms of how we serve our customers so we recently invested.

[45:26] In a company called disco as an example because it's a Dropship.
Capability a platform that really makes it a lot easier for us to engage with Brands who are and Dropship relationships with us and really make that a lot easier for them lot better for them a lot better for us.

[45:43] But I think back to the limited distribution question you know are our message to Brands is not you have to be exclusive to us our messages though that we we think that.
We are a great partner for helping to build Brands and expose brands in a full price context where.
We we can provide an opportunity for Brands to scale their business.

[46:07] Providing the full expression the brand of the customer and that's knows you guys know that's harder and harder to do if you're distributed everywhere if your distributor everywhere.
I think for Brands that's a recipe were often times you lose control of your brand you lose control the pricing of your product.

[46:25] And we are frontal turn it for that and alternative that still we think has a lot of growth and I think we've had a lot of success.
I would light a branch and Danny can speak to this about showing them just the power of being in our ecosystem both full price and off-price both in stores and an e-commerce we can bring all of that.

[46:44] To our brand Partners in a way that I think they really value the commitment we have to presenting their brands in the right way and exposing their brands to younger customer and a customer they might not otherwise have.
But we're excited to be in business with brands that have their own direct-to-consumer business have their own stores week we think that.
Recipe works well works well for brand white bonobos but also,
for the more recent things you've seen us do with the likes of J.Crew and Madewell and Topshop and Ivy Park we have a long list of examples where I think it works for customers it works for a brand partners and it works for us as a business to do that.

[47:23] Yeah I would answer that that I think history is told us that exclusivity free exclusives you say can I should be more hurtful I think,
part of that is the stew way you can do a swim until you can have to take exclusive parts of a lion,
all you can have the whole brand exclusively in and historically what we've seen is if you take exclusive parts of the line then you may not get the best products because of see the Browns going to want to sell the best items in more places,
and then with regards to Brand awareness we definitely see that there was a huge benefit for.
Apollon is that she having more exposure both online and in stores in this definitely places where we actually feel that.
Weather is the wrong retail premises or select part is that I shall We Tell Pond is for them that she do allowed the Brand's be elevated and maintaining the brand Integrity Russian pretty helpful.

[48:11] The only thing I would add is that we have a pretty proactive stance now that if we see people becoming Chumash distributed and actually not maintaining the brand Integrity then.
That's a good sign for us that we think the brand is going to be on a sudden points of relevancy and so what we do need to be doing is looking for those next new bronze coming through and taking a really healthy portfolio approach to giving those new emerging Brands a great place to be.

[48:34] Cool you know one of the things that's interesting to me is.
As as consumers get used to all these mobile devices their expectations that are set and so then you got you going to figure out what what the right mobile experiences for that.
Customer expectation but then as we talked about a little earlier.
There's unique and an elevated expectations for how I would use Mobile in a fashion context and it heard means you're just talking there's actually even another tear that you guys have to worry about which is.
Like Nordstrom isn't simply a.
Apparel retailer like you you enjoy a unique place in the sort of fashion ecosystem and have a very unique and differentiated.
Brand value proposition so.
If you thought at all about like what's the the truly unique mobile experience the truly unique Nordstrom experience manifested on mobile.
You know can there be such a thing is that possible.

[49:35] Well I think the Ken's coins earlier there is there was a huge opportunity if we can get that right and so definitely working pretty hard right now to trying to find what that is and I think it starts with having a break definition of what's the role of each of the channel I think with the mobile web.

[49:50] It's really about creating a fast friendly Discovery experience and customers would like to check out they can do that.
What's interesting to me is we actually get more engagement with some of the content on our website on a mobile phone then we had she done him about website that we actually doing all day.

[50:06] How to search people coming to the homepage and then she clicking through to a story so I think.

[50:10] Does a set amount of fast easy convenience that needs to be through mobile web but also is that the sort of fast hit convenient content.
Ons not something that will definitely be playing through and then from the up experience.
It's really in kentish town this how do we create a great experience that our best customers are going to engage with on a regular basis cuz if we want to be one of those Fighters have an apps that customers engaged little regular basis.
How do we do something that allows for freaking engagements and allows a great eCommerce outside of one of our premises but also then also enhances the in-store experience in the linkage the stores.
So all rap is good really going to be all Powerhouse in times of how do I should create richer engagement or not she Elevate the experience and Sons of the shopping and Simpson experience and feed the mobile web is about.
How do we have customers come to on a regular basis cuz they think it's interesting but it's convenient if they want to check.

[51:04] Yeah I think it's fascinating that I.

[51:07] In retail at least a lot of people when they first think about mobile they think of it purely through,
the convenience lens and think that that's that's why how people are using the device and again to Danny's point I think what's interesting in the day that we see.

[51:17] What's interesting in DC.

[51:20] There's a lot of Engagement with content that's how.

[51:22] Makes sense to me people are.

[51:23] Make sense mean people are doing bite-sized engagement all the time with their phone as as a source of information and entertainment and inspiration and we're in.

[51:31] Retainment inspiration.

[51:36] You know we're not unique position I think to Leverage.
Is we have with customers around Fashion Authority do that in a fun way in an engaging way so I think the balance of how do you get that content out there.
In a way that really engaged just customers while still letting them have a frictionless shopping experience when that's the thing they're looking for that's that's the balance were looking to strike.

[51:55] The idiotic right thing about mobile phone is it is a unique device to an individual and so therefore you can truly person lies on the phone and actually.
Does a lot of great things we have in terms of what lives in the brain of all sales people with regards to styling guidance in the ability to show people the right product and so we've been working really hard in the background or really on the days room services that would allow us to do that scale through a mobile device.

[52:19] Quick here's a quick one and then kind of a long one so Apple Android a lot of the data out there suggest that even though people's traffic.

[52:28] Tends to be half and half this is both a pin mobile web the iOS users represent on the web like 80% of of actual sales even though they're they're smaller in traffic do you guys can you guys see something like that on your side.

[52:43] Yeah so actually I think I'll dates are excused for the even more heavily towards iOS nothing apart that is the demographics of our customer so roughly 75% of all traffic comes through an iOS device.
But Android is definitely growing quickly and so I think from from all perspective we don't see needs you thinking about how is that we're all going to play out and between what are system what what are investment in iOS placements through a native app vs. website,
on some light on on an Android device how that looks in the futurism is a pretty interesting question and it's a little bit of all of the above,
not thinking through what that what are the Dynamics between those two platforms cuz I has a big impact on where we want to invest.

[53:27] And then the longer one is just listening to you guys Jason I talk to a lot of retailers and a lot of them have kind of that that Merchant King kind of mentality that you know we're going to go and figure out what's the right.

[53:39] Dress for next season and that kind of thing and what I'm hearing for you guys as data personalization data scientist feels like a real commitment on your side to that to the extent your control sharing it knows this one dude locked in the basement.

[53:56] Did the Guilfoyle picture from Silicon Valley or like tell us about you know sounds like you got some pretty serious horsepower behind this thinking.

[54:02] Yes I'll let Ken's Pizza that cuz he actually supports all data science and analytics team but one thing I would say before he goes into that is,
tell me what's really interesting is if you just sent it over to Daytona algorithms and it's going to give you a lot of good predictions on what's happened in the past.
And Ashley fashion is something choir there is trillion art elements and that's where I buying too much you have a real talent is being able to pick Trends and pick ones can be important to the customers and that curation elements of what customers should be thinking about is that she a big deal.
And so I think,
Paws Of The Magic of where all welcomes together is how do we take that knowledge that exists in the head of all Bonnie team and all sales people it's really see the machines because machines are only going to tell you the review married,
and so from my perspective we looking at some really interesting ways of how do I take the knowledge of the people who I should know product really well so I she get it into the right attributes that then we'll feed the algorithms that it will be more forward-looking is fashion changes all the time.
And that's the one challenge of using data science analytics and something whether there is no constant in terms of customer demand.

[55:08] Yeah I think that's absolutely right I would say data science analytics a big topic it's a big topic for us and I suspect for anybody like us in our industry and what I mean by that is it's cuts across.
All different parts of our business so we've made a big investment it's probably one of the.
The biggest growth areas in the entire company right now is the way we've been scaling that team over the last 18 months and will continue to scale that capability.
Because it cuts across every part of the business including.
Supply chain and where we where we deploy our inventory how much we should be buying of the stuff we're buying but also.
The point about as your Highline Scot I think like what sorts of product we should put in front of customers in a given point in time to be relevant.

[55:56] But there's also basic things that we're working on that customers expect and we should do a better job on which is.
No personalization I think through a customer's eyes is a lot about.
The more they engage with us and the more they let us know them the better we should serve them which means do you remember what size I am do you help me,
by remembering you know which brands I really like and help you keep informed about what's new in those Brands but also,
help me understand what other brands I might be interested in in and to do that in a in a seamless way that you know keeps track of.
How will those activities happen in stores on a phone on a desktop think that's the expectation that we need to live up to and I think to Danny's point that used to live all in.
In a salesperson's had the fact that it now cuts across doesn't diminish.

[56:47] What part of this and it doesn't diminish the value that comes from this long Heritage and in deep experience we have and all of our people with those those folks are emergent teams or whether it's our sales people in stylist.
We have a deep well of expertise I just use a small example.
You know we found that it when we do things like product recommendations even though there is algorithms to support that those algorithms for us perform a lot better.
If we don't just take the buying information from customers have purchased these baskets but we also feeding information about what are best stylist put together.
And so if we can bring the RT in with the science we know that that actually has a better outcome for customers and so we need to put that all together but at the end of the day that's a big data science problem you can even just getting the data.
Connected in a way that you can connect to single view of product across the whole Enterprise with a single view of customer across all their touch points with us.
It's not trivial particularly when you have a lot of legacy.
A technology that that you're in the process of replacing as we are so it's a big focus it is a big growth area there's lots of different places that we see data science and analytics adding value.
But none of that sat the expansive of the art in the business it's it's a supplement to it in our view.

[58:09] Goat sounds I'm getting a mental image of a stylus and a merchant floating in a pool with computer brain connections like Minority Report people are said she needs to see the side of right now.

[58:22] I like it we should think by quest list.

[58:24] Fashion fashion precogs.
You know it's funny cuz this is very Timely.
So we've been talking a lot about mobile there's a huge buzzword I can't believe it hasn't come up yet in Mobile is the the whole mobile-first philosophy and so I kind of wanted to hear you know where you guys.
Come down on that but what what's been interesting in the last week like Google had their IO this this week and their big thing was.
Hey we've been mobile-first now we're shifting its AI first which is the the topic we were just talking about so.
I guess super question like you know are you embracing a mobile first philosophy and is that important and you know is it.
If you're not is it already too late like should we be moving on to the next thing.

[59:16] Yeah I would say so we are embracing my boss first I think to me the definition of mob office versus a fuss.
Is a little bit Falls because if you brought in the definition of marble to go beyond just a mobile device and I see how you are connected to the world which isn't in realities was happening more and more.

[59:32] Then I think my ball first hold and it's really about how do you.
How do you think about the mobile device relative to other connected devices relative to the physical environment except for and so we are definitely still thinking about my ball first.

[59:46] In terms of what about physically mean so I think the greatest example for me is when you look at the way we design not she then execute on features and functionality.

[59:55] Really we definitely are user experience team now stop with the mobile phone screen first and so they will design for the small screen and so the optimized for the small screen make it make it user-friendly make it compelling and then scale it to a biggest green lights on.

[1:00:09] And I see the way we didn't go code again sign execute against eyes very much part so I suppose the mobile device Fest.

[1:00:15] So I think that there's a very real practicality of mobile phones which is you do the work from about fuss.
But in reality what she means is it forces you to be a lot more thoughtful about design because the use of interactivity of a phone with a smaller screen with a touchscreen actually is hotter than a big screen.
I'm sorry I think it makes you fat so and so whether you believe.

[1:00:36] 10 clear what it means in terms of whether it's the mobile phone prices of the connected device starting with the smallest Creole starting with a different use case in the big screen I think makes the design hot or.

[1:00:47] I also think more powerful I mean it's a touch screen and has a camera it has a voice in her face it's geolocation Aaliyah where it's personalized to an individual those are all huge advantages in the kind of experience we're trying to create in terms of connection with customer.
I don't know how to distinguish that from AI first mean AI isn't bringing data in science and AI into the equation in terms of creating a better customer experience that still got to be delivered some.
And the delivery mechanism.
From a personalization perspective is almost entirely now moving to be that device that sits in your pocket so there may be there will be adjuncts to that whether that's Google home or other.
Active devices but at its core you know I think everything we've seen I'm sure everything you've seen is that at the core of.

[1:01:34] Good folks digital engagement the phone still sits right at the center of that and that's not going to change in the very near future.
And so I think mobile first for us is making sure we're keenly aware.
And you into the customer's eyes not just that that's the reality but also how do you make a benefit out of these features that the phone has which should have a lot of richness to our connection to the customer.

[1:01:56] The really fascinating thing for me is something it was embedded in the question which is some of the announcement that came out from Google in the past couple of weeks is.

[1:02:05] What for example enabling Google assistant on an iOS device that's a big deal.
And what that means in terms of Customs engagement with the different apps on a on a device and if they can oh she's swing more usage of Chrome on an iOS device that not changes the game a lot and Sons of the app ecosystem.
I'm in if we can I see you within Chrome if there's a way the People starts when able Progressive web app type experiences that can then,
access the different devices on the third better than the phone that starts to break up the Apple ecosystem,
I was I think how that Dynamic plays out as something that we can need to continue to watch because that's the point we said Elliott developing apps is expensive and living in the app ecosystem is LBC something that is a.
Paradigm that we all know very well but if that starts to break and you start to see different engagement bottles that is a very different way they would I should precise Investments.

[1:02:52] Cool yeah so one of the last questions were tied on time so,
as we look at kind of the first quarter results the there's some charts out there they're pretty interesting and they show,
Mainline retail is really having a hard time of it and no clubs are doing really well so like the Sams in the BJ types and then you see kind of more of the outlet E-Type places doing well I like a T.J.Maxx so.
One thing I've heard said is that you guys you have your main line in then you have your discount and you know I think some Skeptics a well,
the only reason that Nordstrom exists the the main line is to really they make all their money off the discount side the rack side how do you guys react to that.

[1:03:35] I don't know enough to even kind of like having a pinion but I've heard that said several times by people so I kind of want to throw that one out.

[1:03:42] Appreciate that Scot.
Look we're at you can you can read our financial statements to see exactly what we disclose about how we make money but what I'll tell you is that we have a full price business in an off-price business,
predominately we serve a full price customers through RR Nordstrom brand as well as our Trunk Club a business and we we serve Ross off price.
Customers through our Nordstrom Rack brand and Nordstrom and HauteLook and there's an overlap between those sets of customers and.
So from a customer perspective I think the advantage that that we bring to customers.
Is that on different chopping occasions and and it different parts of there their life folks engage with different parts of of the brands that we we offer them.
From a brand partner perspective there's also a real value-add to Brand partners because when we enter a relationship with brand Partners in a waiver the opportunity.
2% there Brandon a full price environment and to sell their brand position that brand very effectively there but we're in the fashion business none of us get it right every season so there's going to be some stuff we buy that doesn't sell,
as well as we all thought it might whether it's the brand or us as a retailer and we have the opportunity to seamlessly take that product and and move it.
Tore off price Channel and that's good for the brand it's good for our customers and it's good for us.
Weird you know we make money in all parts of our business so I don't think that's you know we don't have a substance ation going on between those but we do have.

[1:05:17] A lot of positive connections between that another example would be if you just look at.
Are the demographics of our customers there's a lot of similarities across our customer set but on balance.

[1:05:31] Brand does tend to attract new customers to our brand to to Nordstrom overall they tend to be a little bit younger.
Are there full price customers and about a third of those customers overtime become full price customers so they end up migrating and not only buying in the off-price Brandon Channel but also the full price so we look at this all the time.
From a customer perspective in a business perspective and we have a lot of data to support the notion that.
The Brand's the two brands are additive the full price and off-price business are at added to each other.
An additive to our customers and additive to our brand Partners so we're quite comfortable with that.

[1:06:14] I think that back to the start of your question you know we are in a retail transformation. Right in doing that. You're going to.
You going to see a lot of volatility I think in quarterly results says as a lot of retailers go through the process of moving from their traditional model of.
Competing to a new world and a new model of competing and that's going to have some bumps in the road I think for everybody.
And it's going to show up in people's Financial results and you know not everybody's going to come out of that in the same way I'm pretty excited about.

[1:06:45] What we're investing in and what we're saying in terms of how customers are responding to that but that doesn't mean that it's a.
Completely smooth are linear Journey it's not and that's the nature of being in industry and disruption but that's the also you know it's what makes it fun I mean I said tell our teams a lot.
You know if you can recall the first time you ever walked up to a rollercoaster I think everybody had the same reaction you first time you walk up to a rollercoaster it looks really really scary.
Can you ride that roller coaster for the first time and you get done within about 70% of people go I'm getting back in line and about 30% of people go I'm never doing that again.

[1:07:21] And I think that if you're working in retail these days you got to accept that were a really exciting.
It can be a bit of a roller coaster ride so if you don't like waking up every day and be in an industry that's going through a lot of change it's going to continue to go through a lot of change that I think is really exciting.
But it's going to be a lot of change and so I think you've got to be energized by that you have to feel optimistic about that and I think we have reasons to feel energized that optimistic but it doesn't mean.
The quarter-to-quarter it's all going to be smooth sailing.

[1:07:51] Know that that makes perfect sense and that's a great place to end because it has happened again we've perfectly wasted an hour of our listeners times.
Said that Danny can I really want to thank you for taking time out and sharing your thoughts with our listeners.

[1:08:06] Appreciate Scot preciate Jason thank you for having us.

[1:08:10] Until next time happy commercing.

Jun 17, 2017

EP089 - Amazon acquires Whole Foods Hot Take

Amazon agreed to spend $13.7 billion to buy the grocery store chain Whole Foods Market Inc., which has more than 450 stores.  The grocery category is a $795B opportunity in the US that has largely been untouched by digital.  

  • Terms of the deal
  • Wall Street reaction
  • Impact on the grocery category
  • Winners and Losers

Amazon-Scape that Scot mentions on the show

Amazon Deep Dive EP24 Podcast

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

Episode 89 of the Jason & Scot show was recorded on Friday, June 16, 2017.

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


New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 89 being recorded on Friday June 16th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:39] Hey Jason welcome back Jason Scott show listeners tonight we are disrupting our usual weekly schedule for a new.

[0:47] A schedule format that we call a hot take this is going to be an episode where we really go deep on one big news item.

[1:11] Unless you're sleeping on a rock that big news item today is Amazon's 13.7 billion dollar acquisition of Whole Foods Jason what do you think pretty crazy day in the world of the e-commerce and Grocery on.

[1:25] It it was it was totally inconsiderate I woke up this morning with a full agenda of things I had to do and this completely disrupted it.

[1:33] Cool so let's kick it off at I'm really curious to hear your thoughts you and I haven't had a chance to talk about it so this is definitely a hot take let me kick it off with a little bit of.
Data so the deal was at $42 a share it was announced this morning before the Market opens so that's a 27% premium to the the share price from yesterday.
As I mentioned at the top of the show 13.7 billion dollar valuation.

[1:59] So Whole Foods has 460 stores they are mostly in the US they do have some stores in other countries,
87000 team members I think the last number I saw I had Amazon at 3:40 340,000 so this puts Amazon well over 400,000 employees,
another little nuances there's a 400 million dollar breakup fee and what's interesting about that is the way these deals work is you know they.
You you got there you submit a bid you work with a board the board except said but as a public company they have to accept bids from other folks.
And a deal of this size has to go through quite a bit of shareholder and Regulatory governmental kind of approvals so.
The breakup fee kind of indicates that Amazon felt like there was some risk that there could be a competitor competitive bid and then the market reacted also.
Closing at 4286 today so some hedge fund manager out there is willing to pay a little bit more than the $42 a share as kind of a bit of a hedge to see if another bitter comes in so.
Now that the kids this could be the start of the drama so I have to kind of see using things happen pretty quickly and within the first 15 to 30 days so.
I know relatively quickly if there's going to be another bit or not so that'll be interesting so Jason.

[3:18] What does that is that for a million breakup feet is that in some sort of like a poison pill that makes it less appealing for someone else cuz they would lose the former million value of what they just acquired.

[3:28] Yes so that just means that it has to be 13.7 + .4 so 14.1 so they would have to.
Go to have to cover that and it just means that you know it can't be 13.7 one.
Really so it's Amazon Amazon's argument on that would be this is how much money were investing in this and the Damage that would cause if you chose another bid so yeah.
I don't think it was 5 billion it would be insurmountable but I think it's small enough that it is not really a poison pill.

[4:03] Yeah so I'm really curious what your your high-level thoughts are on this since you're kind of real close to the grocery world.

[4:11] Yeah what should I think.
Thematically this makes a lot of sense we've talked a lot on the show lately about the grocery business and in my opinion at least that,
did the the mass market for grocery is buying line pick up in store or order online pickup in-store in the.
That requires you to have shorts and so you know a lot of the traditional retailers with would say hey this is one area where we potentially have a competitive advantage over Amazon,
you know they've been in the space for 10 years they haven't captured a lot of market share they don't have a really strong brand for fresh and they don't have any of these stores for pickup in-store so then you know couple months ago we talked about Amazon opening in the,
the Amazon fresh pickup location which was their first pilot of a online pickup in-store experience,
you know back then we said and if this works if this proves out to be the right model for grocery pretty pretty likely that Amazon will scale and scale at will either,
mean by someone that has a lot of stores or open a lot of stores and so you know.
Fast forward not very long I think less less time than any of us suspected and Amazon bought 460 stores.
To give them great buying like pickup in store locations that overlap there their existing Prime Membership very well and,
really bolster their their creds in the fresh-faced and it turns out in in grocery what really drives your selection of the vendor very often is the quality of the perceived quality of the the fresh stuff in the produce and so so like on all the scores at this seems like a.

[5:47] A very logical move for Amazon.

[5:52] Cool see you think so the prime pick up hasn't been open long enough to really have much data I don't think so so it's not entirely clear that.
That's winner and now they're putting their pedal to metal there may have been something more even opportunistic because Whole Foods had an activist kind of in their rattling some swords their valuation of been down a lot of folks shareholders had one of them to seek a strategic,
buyers and they've been struggling because they kind of invented organic category and now every other grocery store has organic,
it may not be true organic I don't know the whole Nuance of that but the other perception is out there that now Whole Foods is kind of out there alone with just organic and they're super expensive,
so it goes more opportunistic or do you think Amazon sees something with one of these tests they have going on that says scale now.

[6:47] Yeah it will no I think you're certainly right that they haven't had time to collect enough data to have those tests like influence this but like clearly they could have already made the decision that that buy online pickup in-store,
is going to be a mainstream delivery model for for grocery and into your point like there's a lot of opportunistic elements here in one,
we haven't discussed yet is you know Whole Foods was a little distressed which which presumably affects the price but there's,
a lot of new headwinds coming into the grocery space that we're not going to be favorable to Whole Foods so one of the most feared grocers on the planet is this German company called the Lidl,
and then they literally just Grand open their first crop of stores on the East Coast this week they plan to have 600 stores in the US,
what their model is is super low prices very No Frills on the service but very high quality organic produce so it's,
give you that that great quality fresh mostly through private label and and locally-sourced stuff,
add an extremely low price and then a lot of markets they've been able to get way below the traditional price leader in so,
that's a scary entrance to the US market internationally those guys compete with another German company Aldi quite a bit all the RT has a footprint in the US and they announced last month that they're going to invest.
Another I think four billion dollars in the US to dramatically expand their footprint so if you had Whole Foods that was already in a rough spot.

[8:19] You got all of these two scary new entrance Aldi and Lidl coming in into the market you have Amazon saying shoot we need a footprint of stores we need more credibility in fresh,
to release kale Grocery and you know groceries the biggest.
Consumer retail segment that that you know hasn't really been dramatically impacted by digital yet so I feel like it was just sort of a perfect storm of,
there was a good acquisition Target that had a lot of reasons to sell an Amazon had some strategic reasons to buy.

[8:52] Cool and then one of those guys owns Trader Joe's right so is it Aldi don't they already own Trader Joe's.

[8:59] I think that's a hold is who you're thinking of.

[9:01] Yeah this whole grocery space everyone owns every other one I most like will what about Food Lion and then it's part of a conglomerate that the kind of rolls up.

[9:10] That absolutely there's a lot of like there's these all were independent little Regional Grocers then and there been already been a lot of consolidation so that you know Kroger is the largest.
The stand-alone grocery retail in us that you know they're the result of the ton of of consolidation and then Albertsons Safeway is the second biggest and there they own a bunch of the Regionals including some of the ones you just mentioned and.
You know it just goes down from there although there aren't there still is a long tail there still are a lot of small Regional grocery stores that may be only five or six stores in the market.

[9:44] Tell me one of the things I always look to is it's on the Wall Street reports that are out there a lot of them have covered some of the math weave walkthrough,
one of the ones that was interesting was that you point it out it's the largest acquisition Amazon history so that's kind of interesting and the question was just this this is me we have a new.
Your new world order here is are we going to see some more really big swings kind of a thing that's interesting to think through another one.
So Cowan was pretty aggressive and by their math this makes them the number 5 retailer,
set for grocery and they did all the math of taking grocery out of Costco and that kind of thing and then they projected Amazon could be in the top three by 2021,
and I looked at that that would have to be pretty crazy gross I'm see if I will spreadsheet here I think that got them up till like 80 billion to get the number 3 based on the my back in the boat math.
Does this drive with your your kind of understanding of the grocery market.

[10:50] Yeah although like I do think that there's a there's like retail there's a bunch of different definitions of grocery and so like I think there's a couple different size of Market figures out there but but the direction I think that toy makes sense.

[11:06] Cops in woods,
what do you think about integration so so let's say you are you know you're Jeff Bezos congratulations you're you're extremely rich and you now own you're going to own Whole Foods what what's your integration plan like at where you take this thing.

[11:24] I think you're going to give away a fire phone with every purchase.

[11:28] Something damn you just left I can have to spend them back up.

[11:31] Got you and maybe a Washington Post subscription.

[11:35] Oh yeah you definitely.

[11:36] No I mean like the real answer is who knows like you know superficially.

[11:44] You'd eat a Whole Foods was not very digital you you couldn't order online you know that in fact they Outsource most of their digital Miss to.
Our friends at instacart that I'm sure we'll talk about on on this episode and so suddenly you know if your jet pays us the main thing you're going to do is.
To help help Whole Foods catch up digitally you may integrate ordering into the the Amazon Fresh order portal or you might create your own portal for Amazon for.

[12:14] Foods you're going to.
Definitely you know figure out a way to Market that ordering online to your 250,000,000 Amazon members and your you're sixty or seventy million Prime members and all this or two things that maybe even try to offer some prime incentive for shopping at Whole Foods.
And you know just really use Amazon scale to sort of fixed some of Whole Foods eels.
I feel like it step 1 and then longer-term you know.
That's 460 distribution centers that like are in that last mile delivery Zone to a lot of Amazon's most valuable customers so do you start figuring out how to.
How to turn Whole Foods into a mini Amazon Prime now Depot of some kind and and use it for distribution for more products do ya.
You know start except for the first time accepting,
returns from online purchases in a physical presence and you know some of those things right like so they're about to places that can play out there's a lots of potential synergies in the Echo System that you can imagine,
that that Amazon could have leverage to make you know all these parts more sticky but like you know I suspect like part of the value prop to to Amazon has to be,
that the Whole Foods was sort of a flat ass at and that Amazon has the the unique skills to help resolve that fly and so they they can buy it for the discounted price and then you know turn it into a more valuable asset.

[13:40] How about just kind of blocking and tackling in grocery do you think Amazon can go in there and I certainly not their mindset to be the high price kind of,
differentiator for sure and category so you would they go in there and and lower prices so for like Zappos I could argue while they didn't redo that was Apple's Apple still doesn't like the cheapest place to buy shoes so you know.
But at the same time I think Amazon probably lies this you can't win grocery bye bye being relatively expensive so curious what you think about that.

[14:13] Yeah I do think that both from Amazon's value proposition and and you know the the typical flywheel that they usually like to,
to execute is going to require lower prices that pull more people in that store and then the external pressure that we talked about earlier with you don't Walmart significantly investing and pricing Grocery and all the doubling down and and wheedle entering the market like I don't think,
Amazon strategies going to be to sit tight as the premium offering and you know frankly.
We've all seen that sitting sitting at the premium price point just just hasn't worked for Whole Foods.

[14:51] Yep what do legal in Aldi do around buy online pickup and delivery today is that an area of innovation for them or it's more just like the the super low prices.

[15:00] So we don't know about Weedle in the US yet like they they 10 offer that in markets where it's heavily adopted so I cuive talk a lot about the UK that being on much more common tomorrow Nolan just turn mine listeners,
about 1% of grocery sales in the u.s. is online that 6% in the UK is online and it's mostly click and collect.
So they do offer a click & collect in the UK for example all the has not offered really any digital experience in the u.s. today so.
You know.
It will be interesting to see art like are they looking to be a fast second mover and is the consumers adopt that model they'll jump on it like they did in some of the foreign markets.
Will the threat of Amazon cause you know all of these retailers to come to accelerate their digital plans like you know I think that's.
Going to be one of the fun things to watch and I should mention the while we've been talking the the Jason Scott show in terms of frantically been trying to get my attention and point out that as usual Scott was right Jason was wrong in.
Trader Joe's is owned by all these parent company.

[16:05] Stop stop happen again.

[16:12] So one one thing that's interesting is in for listeners that haven't listened every episode first of all shame on you and II of also Prime now is in 46 markets I think last time maybe a couple more they've opened up some International and still it was caught 46 248,
and the way they do those deliveries is Amazon has their own Uber like.
Driver system called Flex so you know one of the things that it's interesting I know you're a big fan of the Click and Clack model but it seems to me they could scale that up pretty quickly I I've heard that there is.
A lot of the demand from drivers cuz it pays orders of magnitude more than an Uber kind of a thing just got better than City and you're you're bringing groceries around and not people and and evidently.
People tip better for whatever reason I guess they appreciate groceries more than people so you know it seems to me one thing that could do pretty quickly is have Whole Foods have a better delivery kind of experience where there's no.
Charge or it's part of a prime offering would you don't you do you think that's likely or you just start convinced that's kind of.
The best way to solve the grocery problem.

[17:21] No I think it's very likely and there's a segment of Shoppers that want that right like both from a geographic Stan,
point and from an economic standpoint I just don't think that that segment of Shoppers is the mass market so for sure,
Whole Foods in a Musa a reasonable amount of volume in home delivery through their instacart partnership it's it just wouldn't be profitable if the VC's weren't paying instacart to deliver those groceries right inside of certainly.
Amazon will be in a much better position to take that over and scale it and add some operational efficiencies there and so I suspect we will see,
both better click and collect experiences and better home delivery for you know the customers that want that and and you don't can be home at the right times to accept the deliveries.

[18:09] Cool what when area I kind of read some things about was.
In an area that's near and dear to your heart is payments and you know one of the Welsh you guys pointed out that one of the areas that gets the highest complaints about the the Whole Foods experience is waiting in line at the checkout,
see the Gammas on could apply some of their payment kind of methodology and then another the first thing I thought about was the ghost or at I know that's not really ready for prime time but,
you know there's got to be a lot of automation at the checkout there do you know if you were going to do that Amazon's assets what would you do to speed up that checkout experience.

[18:44] That one of the first things you could do is they could do a Starbucks style digital wallet they've got you know payment information stored for 240 million Americans,
it's so they could make it super low friction to use that storage in for me that's that stored information.
By showing a barcode on the Amazon mobile app as you go through the cashier and that as they do in the Amazon bookstore for example.
So adding that digital wallet that that links to the payment information you already have them fight with Amazon would be a super easy step.
The the Go stuff like obviously this is a place where they could ultimately leverage it or deploy it but your point you know I think it's a ways away and I think.
That the traditional Whole Foods layout is not going to wind it is not going to be the easiest environment to deploy Amazon go in so I don't think that's something we'll see you in the.

[19:40] In the early days but I could certainly imagine that grocery shopping is a whole new reason to have the Amazon app on your your phone and to Leverage.
Mobile payments maybe as part of getting you know.
Some some from them benefit for checking out right like it essentially Amazon is the world's greatest customer Affinity program and they could bring that to Whole Foods now.

[20:03] Yeah and I haven't had a chance to talk about on the show but they are released this new payment system called Prime reload.
That that's pretty nursing so the way that works is minor standing is there they're trying to get people to use Bank transfers instead of credit cards credit cards have a 2% fee Bank transfers are,
are very very inexpensive for merchants so the the way it would work is almost like a Starbucks card where do you load a tax dollars on to it at a time draw it down and then you get 2% cash back because Amazon's no longer you know having to fund that credit card transaction,
that seems pretty you know applying that to grocery is pretty exciting I've never seen our true percent back kind of program like that and grocery do you think that would be a natural one to kind of play out here.

[20:48] It absolutely could it's interesting like you know we've all been surprised.
That is taken Amazon that long in this particular case cuz that's a huge savings for them again all these customers have that stuff store they have a high level of trust with a customer like all the normal impediments that you would think we keep you from.
From aggressively shifting customers to to those electronic fund transfers instead of the credit card interchange transfers.
It's surprising it's that it's taken Amazon that long so so certainly now that they've done it you can expect them to leverage it in these doors one when nuance.
Our friends at the credit card company that are pretty clever and they usually build into their terms of service that have you want to accept their cards you have to promise to give their cards equal weight and equal billing with all other payment methods and so.
Like very often it's against,
it is is potentially against the terms of service agreement you have with Visa or Amex to offer electronic funds transfers for 2% less,
and that's why most retailers don't do that but you can imagine that Amazon at this point has enough volume that they have the leverage in their negotiation and you know it may be that we had to wait this long for the future and Amazon because,
it took this long for them to negotiate new new terms and conditions with a credit card companies that allow them to do this.

[22:11] I always heard you couldn't explicitly charge more for credit cards and but I thought maybe they were being sneaky by charging last bit sounds like you think that.

[22:19] So there's consumer protections about charging more right into that can literally be a criminal offence but the,
the charging less is is certainly not illegal but again the you know Visa you know knows that you need to accept Visa in so they can say,
hey as part of your agreement for accepting Visa you have to promise not to make these other vehicles cheaper.

[22:42] Cool another area that kind of popped my mind when this was announced this because I did that Amazon scaper I took all their brands and put them onto one.
One chart.
Your folks are listening in her haven't seen that yet it said Billy Billy Amazon skateball one word and it's funny I set down to do that and then I just like started working on.
I thought okay I'll have to have an area for all their retail offering so I'll Prime now and all that on there and then.
You know this that the other and that's like I'll do the private label stuff now and I thought okay obviously have Amazon Basics and then as I started to kind of go through all the times that I.
Founding Father folks talking about different.
Private labels there's like 50 private labels at Amazon and a lot of the newest ones are in this kind of grocery category you have wickedly Prime some of them are prime exclusive some aren't.
You could talk about Mama Bear and then another interesting thing I didn't know about Whole Foods I'm not a huge Whole Foods Shopper they have a very large private label called everyday 6365,
so so another really interesting thing here is Amazon has to pass here they can put their private label stuff into Whole Foods and then they could also.
But the everyday.
365 for sale on Amazon and Prime now and fresh and where were all these different mechanisms using private label factored into this at all.

[24:09] I do I think you nailed it like there's a bunch of synergies what will be interesting there is,
will the brands get equal-weight like like so the the whole food brands have,
probably better consumer recognition today and you mentioned Eglin 365 everyday but there's also this like whole trade and engine to a number of these brands that whole food Shoppers are familiar with will be super,
easy to imagine seeing those on Amazon the bigger question is brands that are brand new to Amazon that Amazon's just investing in like happy belly right for nuts and almonds do they keep investing in that or do they you know.
Or is there an overlapping 365 degree at the n65 everyday nut pack and they they just adopt the,
the whole food one or you know do they take 365 brand and use it for all the Amazon food like they're there lots of permissions I can play out it's going to be interesting to watch but,
I would definitely imagine that that private label was another valued aspect of the Steal.

[25:11] Yeah then come expanding from private label out of ring know Amazon has had a lot of,
water brands just in general but I'm sure in the cpg category that don't want to sell their one of the most popular or the most.
Popular ones we heard about his Honest Company and I would just just out Jessica Alba's company wouldn't sell on Amazon so then Amazon created their own diaper line and some his other things some of that worked Amazon elements in some of the Denton but Amazon seems really want that kind of product,
imagine that this gives Amazon just another kind of hammer to say to brands well you know we're going to kick you out a Whole Foods unless you sell your whole assortment at all the Amazon offerings so so there's also kind of an interesting selection angle there do you think that's going to happen.

[25:58] Very well could and don't forget Whole Foods is an incubator for a lot of those socially-conscious products oh.
You know that they have a model where like individual entrepreneurs can pitch Whole Foods and Whole Foods might put you in one store or one market and you know if it does well there you could eventually expand to,
to their National footprint in so they have this great system for onboarding those Brands like really early in their life and now you know it just.
The final win isn't getting in the 460 Whole Food stores it potentially is you know getting on the Amazon platform and and reaching turning 40 million customers so.
So I absolutely think that that that Amazon will use the Whole Foods leverage with some of these brands.
You know to get more of the more the brands they want info in front of more of the customers they want there's also an interesting one one of the most successful private labels out there is the Costco brand Kirkland Anna a fun fact,
Amazon sells more Kirkland online then Costco does.

[27:06] So they're the biggest distributor the third largest retailer was Jet and after the Walmart jet acquisition jet is actually phasing-out Kirkland off the site and so.
Now really interesting thing and you know this is highly speculative but.
Could Amazon double down on the Kirkland relationship like could they ever have smaller packs of the Kirkland products in Arnhem propria for club and start selling through Whole Foods.

[27:37] Who who initiated that stoppage at Walmart was at Costco or Walmart who said no mas.

[27:45] Minor standing is that it was that it's a Walmart decision to buy Walmart I assume that's Mark Laurie but but to phase out cuz obviously Sam's.
Gladden and Costco are direct competitors.

[27:59] Now course is you know Jets also a Marketplace so I'm sure there's still going to be 3p sellers of that stuff.

[28:06] Yeah II.
Two kind of specular things about that position I wanted it seems kind of silly to me but I just want to bounce Matthew one was will surely they'll close the stores and just convert him into fulfillment centers that doesn't make sense to me because,
you know these stores are chosen to be in high traffic retail areas that's not where you would both of them the sooner that you can ommix don't work.
So this was like some of the folks saying this for like clearly you know it.
It wouldn't even have like pick up there just be a fulfillment that seems kind of silly to me into the second one was some way to leverage the third party system in Amazon and liquid doesn't make sense in that world is.
Yeah the pricing the stuff of filming is really really hard with a physical footprint of the 3p model doesn't really work and physical.
So that down didn't really resonate with me either maybe there's some things like with some certain.
Yeah maybe like some Farm kind of stuff could be almost like 3p also what I'm more of a commission kind of a thing to help with margins or something but I don't know that down didn't make a ton of sense for me either how do you feel.

[29:12] So there and I don't know Whole Foods does much of this but there is a sort of the analogous thing in Martin to 3p would be sort of consignment sales in,
In-N-Out breaking water into their you know there are some grocery that would,
try a product on consignment but I don't see that as a big play if they were going to be a big three pleat 3p play it would be some kind of in whistle experience in Whole Foods right like so if you're,
shopping the vitamin assortment at Whole Foods and they don't have what you want like.
That you know there's a kiosk in there and you know could that now have the entire.
Assortment of Amazon and including all the 3p Sellers and you know could be there be some incentive to ship that that product to the store that's better than shipping it to home who knows right.

[29:58] But you can see it you can imagine a play like that potentially coming in for sure agree with you there's no way they just bought these two for the real estate to convert to fulfillment centers I think the smarter people are talking about,
could it be a store and NFC not could it be exclusively NFC.

[30:14] Yeah even then I mean the Whole Foods I've been in there too pretty jam-packed of people and product it's hard to kind of see him cut enough cutting out much so that for fulfillment center but we'll have to see.

[30:25] No the only way that that works is if there are categories and whole foods that are losers in the Amazon decides to get out of.

[30:31] Yeah definition so.
If you projectus forward do you think that Colin is right and we're going to see Amazon kind as a top three grocery player in like in and let's start to kind of move the chess board around what.
What happens to SAS mean does Walmart take a run at this does Walmart do anything differently it seems like they've kind of place their Bets with the jet acquisition and and Lori and and some things are doing their densities traditional Grocers react United know you've talked on the show about cougars actually,
pretty Innovative and thinking about some different formats and things would tell us going to what you think the three-year chessboard looks like on this.

[31:15] Yeah so I think this is a giant new piece of pressure on that market that's going to fragment,
the traditional grocery market right in there will be a few survivors like hard to imagine grocery is a winner-take-all thing where there's one one National provider,
but you know they're going to be a few survivors and it's again that long tail of grocery rain that we have right now is likely to go away as all those small players aren't able to compete and so,
the young we do projections in the show all the time so I'll throw out some silly ones.
I think Walmart is making big bets in the space and is likely to be one of the winners I certainly think Amazon is one of the big three and then the big question about who the turtle in is is,
if it's the big and comment that's able to survive and hang on and that would be Kroger or if it's one of these new market entrance that's like all the yearly told it that that takes that third spot,
but I would definitely say net net this this was a really bad day at Kroger this was a really bad day at Target you know those guys were already buckling down the hatches cuz they you know they had all this grocery competition coming in the market and you know the last thing you needed is,
the world's most disruptive retailer you know dropping dropping 13 billion dollars in your category.

[32:44] Yeah that's a good Segway into kind of the next segment that I call who wins and who loses so if we think about the winners I think kind of obvious ones or Amazon one today I think their market cap went up much more than what they're paying here so effectively.

[32:59] Market cap accretive Whole Foods obviously this is a great win for them they get to keep the brand that get to keep the CEO of therein,
this like this by the best outcome for them I think they're another one and all kind of say this now and we'll talk about it a little bit later I think consumers when I think you know they're there hasn't been Innovation grocery.
For forever you know we we go to the speech place there's a an IGA there which used to be if I know more and I do like a.
Was it starts of the day you have this old timey grocery store you go in there and it's no different than our Kroger or a Food Lion or Harris Teeter or or anything like that so there really hasn't been.
Tremendous innovation in this category and I think consumers going to win cuz you're going to have more choice and.
Amazon is going to come in and really create amazing customer experiences which is what they're really known for and their lower prices sets I think you know as a prime user I'm excited you know.

[33:56] I may actually start going to Whole Foods more if I can check out faster or there's some really compelling reason to get me in there to do more stuff any winners that I didn't say anything.
Think about.

[34:08] Yeah I know I do think those are the big Winners I got you know I think there's potentially some secondary winners are some of those brands that suddenly get exposure to a lot more more.

[34:22] Potential consumer so some of those those like Whole Food suppliers that could send them now you know.
Yeah have a much more prominent president positioning on the Amazon the.

[34:37] You know again it'll be interesting to see what they do for delivery there you know could be some some winners there in terms of better delivery options and you know I think that's going to be a pretty.
Easy Segway to who the losers are right.

[34:51] Yeah and I almost said suppliers but then kind of some of the things I've read kind of say that those suppliers have had a really easy whole time with all foods that they don't really put pressure on them at all and I think those days are over so so they,
it may be let's put them on the fence so and I think they win with more distribution but I think they're going to lose with getting kind of the the cram down here that they've avoided for probably 10 years.

[35:17] Yeah although I would argue sometimes those forced to sturdy measures aren't fun and don't feel good but they're not necessarily bad for you.

[35:25] I'm sure we asked the brand that would disagree with you.

[35:29] I sold create a third category winners losers and kind of on the fence and put the suppliers in there,
let's go to the losers so yeah you hinted about it earlier Whole Foods had a relationship with instacart and,
I know that they were an investor in instacart and I don't know if this is rolled out at every store but I think it was it was pretty close and you know,
all the dish been in the data out there about the scale of this but instacart was the delivery partner and I can't really see him as on keeping that at all because they already have this Flex thing Amazon likes to vertically in a great whenever they can so it feels like instacart is you know,
Banda on the short block for getting kicked out of that it is that you agree and in do you have any more information on that program.

[36:17] Yeah I don't have any more information instacart wasn't in every Whole Foods in and their relationship with slightly different in different markets the level of integration that they had with Whole Foods for example I think there's some pilot markets where the.
For the integration was very deep the and I think they are certainly a loser,
I would almost say that there the amount they lost today is slightly overblown cuz everyone talks about oh man there this 3 billion dollar valuation company that you know suddenly,
is going to go away and I guess I would argue that I don't think they had a sustainable business model yesterday right like an.
Not creative data path to profitability you know they mainly exist existed to augment capabilities that retailers should have had natively and and you know.
Would probably going to have needed we at some point and so I'm not sure if they had a super viable business model other than 2.
Keep taking more VC money to subsidize the cost of delivery and so I think you know their problem was true yesterday they just probably have a lot less Runway to discover that that's their problem today.

[37:28] So they're winners in the Jason world short where austerity is good.
Can tell you haven't been an option or Jason.

[37:37] I resemble that remark but.

[37:40] You been on the short into one of those new Cycles.

[37:43] Oh I've been on the the business end of Walmart Bender negotiations many times.

[37:50] But yeah I think is this definitely going to affect instacart but you know again I don't think instacart was on some path to a Rosy future before this.

[38:03] Glad I noticed you and I were both mentioned talk to about getting a quote to a reporter and were in that and you mentioned Target what is being pretty heavily impacted talk us to your logic there.

[38:16] Yeah what's up there not a traditional grocery store but that was one of their growth strategies right and so big part of their growth strategies these five signature categories and one of those signature categories is called Wellness.
And a big part of Wellness was organic organic food and health food and so won't Target who made a major investment in.
Upping their presence in that that market like they do have Grocery and they they've tried to use grocery to drive incremental trips and they haven't been super successful and so again they were one of these guys that were like.
Shoot we're trying to win on organic fresh when weedles coming into the market that doesn't feel very good and then you know to have.
Amazon partner up with with Whole Foods you know really makes it less likely that that.
The target is going to win by by having these these Wellness food products in their stores and then you know we're not talking about alone on this show,
Walmart also had an acquisition today of bonobos and that you know.
That is probably not not favorable to to Target either and so Target just looks like there.
They're standing still in a world where there their traditional competitors are all making you know pretty seismic leaps forward and so that that just can't feel very good at Target today.

[39:38] Yeah I didn't know it but one of the Wall Street notes eyes I saw today said Target Outsource some of the Pharma stuff to CVS and their idea was Target should just Outsource this whole grocery kind of experiment to a Kroger or or someone just so you like actively get out of it ASAP you think that's a viable strategy for Target.

[39:59] It is possible like so again if you know grocery is super thin margins anyway and so if you're not built for those margins like you're using it for traffic and you're losing money so if there's someone else that's willing to take that over for you and you still get the benefit of that traffic and you don't have any of the risk of of the losses.
You can imagine that that being the case in.
In the health case you know Target tried to run their own pharmacies and in weren't super successful so Outsourcing them you know,
what was probably not on the world's most favorable terms to Target and you know I suspect that would also be the case if they had to have Source grocery at this point.

[40:38] How many Target stores have groceries do you do tobacco.

[40:42] I do not know.

[40:43] And then you know how big it is for them isn't like 5% temperature 20%.

[40:49] I also don't know that so I will refrain from taking a guess.

[40:54] Ducks about Kroger are they they definitely were a market cap loser today I think you know one interesting thing is if you add up the market cap from the grocery kind of category 40 billion dollars was lost today so so so not only did Amazon ad,
you know plus.
Stop about 20 billion to their market cap that they took away 40 out of the market so kind of a positive swing for Amazon of 60 billion there and quiver was one of the,
biggest losers in this just from one day Wall Street think so but what kind of more should TJ do you think Kroger is in this puts them in a tough spot.
With the same kind of logical Aldi Lidl coming in and now you have this other kind of unknown player.

[41:36] Yeah cuz I got that you know they were one of the largest traditional players in the space and that you know there they were.
Under Siege from Walmart and ALDI and Lidl and you know you could really look at what all the illegal do and say man there,
they're incrementally better than how we've traditionally done it in the US and so they're going to be a formidable competitor but.
Amazon is likely going to be an exponential disrupt or not an incremental one,
and so that's that's a lot more pressure on Kroger like Kroger certainly has made some strides in the last year 2 in digital and they've rolled out.
Quick List which is their version of Quicken correct in like 3 or 4 hundred stores and you know by all accounts it's been wildly successful but those initiatives what really good in a space when no one was making any digital progress and so you you kind of got to look like the most Progressive of the,
the traditional players and now suddenly you Dome,
you don't want that Progressive and so that that you know that's going to be tough at Kroger that's a formidable new competitor in in the space and they're the incumbent.

[42:47] When I was surprised at for Milwaukee respectables Costco I think last I looked they were down about 10% or so yeah the.
I just don't think of them as grocery because you know your.
If you think about the layout of that store maybe a quarter of it is grocery but but clearly I must be missing something what what is this cause for them.

[43:11] Yeah so you know that this gets into the definition of grocery right like so what,
what percentage of their products are at risk there the least digital company on the planet right like there,
executives are still talking about how we don't really want to encourage people to go online because we'd way rather than come to the store and you know there,
there you'll be easy to make fun of them were it not for the fact that they're wildly successful.
So you know to put things in perspective Walmart's the largest retailer in the US largest retailer in the world woman has 4,000 stores Costco's the second largest retailer in the US they have 727 stores.

[43:53] So they're there that you know they're doing well and they have a formula that works well for their their customers.
You know they sell products that are now going to be in competition with Whole Foods Amazon Amazon going to make Whole Foods better and that you know that like just has to have some effect on Costco what is interesting.
Yo Costco probably does not look at Whole Foods is a direct competitor right like both from from the the products that.
Are high velocity in both both stores are very different and the size of the packs are dramatically different as well and so the the Costco assortment looks a lot closer like Costco grocery products with a lot more like.
Amazon grocery products in terms of being cost-efficient to ship right like you want to ship the 36 pack of toilet paper not the 4 pack of toilet paper.

[44:48] So you know it'll be a little interesting if the combination of Amazon in Whole Foods means that more of those packs are available to more more Whole Foods customers but.
But I think.
At this point like I don't think this is a game changer for Costco it's just you know another aggressive competitor trying to seek wallet share.

[45:10] Yeah and then the big ones Walmart so in the Amazon deep dive we did pretty early on to remember that was owed on that one.

[45:18] I don't you should have prep me for the show we should have like rehearsal or something.

[45:23] This what happens when I do a hot take so anyway we did this episode called Amazon Deep dive will have put it in the show note so you can find it a little bit easier he was one of our first 10 episodes or so in there we talked about.

[45:38] Episode 24 Amazon Deep dive.

[45:40] Oh yes I remember it so well and one of the things you and I talked a lot about is the fact that when you just look at Amazon.
Revenue numbers it's like 160 million for this year as was projected,
but inside of there is that third-party DMV which I think you have to kind of unpack,
so one of the things I like to do is say if you take Amazon one p and 3p for this year you actually get up to 300 billion dollars and then now we're going to layer in 16,
from Whole Foods so you really have a 2017 Amazon that could.

[46:16] If this deal goes through it again this kind of enough they won't get the benefit of a whole year but think of run rates Dow BS 316 billion dollar kind of Revenue run rate company.
Walmart estimated revenue for this year is 485 so Walmart is still considerably bigger than the.
Find energy of Amazon in Whole Foods but number one if you take grocery out.
Amazon's already bigger than Walmart in the number to the disparity of the growth rates is about 20%.
And the kind of project that out not too far I think it's like two and a half years then with this acquisition Amazon.
Could be bigger than Walmart all in including grocery by you know call it so that that's.
Pretty amazing and that that assumes there's no other big acquisition no what if what if I don't know what else is buyable out there from from that standpoint,
it seems like some of these things are almost unbuyable like a Kroger I don't think either Walmart or Amazon could buy that or and it sounds like Trader Joe's and so he's other International ones are so big internationally that they can't be acquired so but even without an acquisition I think the.

[47:28] We are going to see Amazon has a shot at being bigger than Walmart by 2020 if my math holds up so is Walmart Loser on this or you know I think it's kind of overblown with what's your take on this.

[47:40] Yeah I think in the short-term like again nobody likes seeing their competitors get better I'm sure Wal-Mart looked at Amazon as as.
Like their most significant competitor and so then to see them enter a space that Walmart's enjoyed a lot of success and then Amazon hasn't had a lot of success in.
Like that you know that I'm sure nobody's thrilled that that's happening at Walmart I do think they're well-positioned to be one of the survivors so if you if you look at this move in the long run and say oh this is going to force a lot more.
Industry consolidation and only the people that are able to adapt an offer good digital experiences to their customers are going to survive and you know only people that able to offer like really good products at really good prices.
And with all these good digital touch points are going to survive you know Walmart has the resources to do all those things but remains to be seen whether they will or not.
A lot of these other retailers don't and so like well I'm sure in the short run this isn't favorable and you know I think.
They made an acquisition today and they probably would have liked a happy new cycle about.
I have Progressive they're being in digital and making great progress and buying you know increasingly bigger bigger and more profitable digital companies and I think that that news I got totally obliterated by.
By this much bigger acquisition that that Amazon did so you know I'm sure in the short run that that didn't feel good.

[49:01] But yeah I think what we are setting up is going to be the Epic retail Battle of our careers which is.
You know going to be this this Amazon vs Walmart.

[49:13] Anyone else we've left off the loser list so just a couple of throw out there I saw in the stock Recaps SVU gets mentioned a lot and I guess that's super value but they seem to be,
I'm kind of micro cap on this I'm not sure what's going on with those guys.
But they were down like 16% and almost feel like something else caused it and then a couple I thought about are some of these pure digital folks that are kind of tangential to this space Blue Apron box,
any any thoughts around those guys or any other folks you think her potential losers from this do.

[49:48] Yeah I don't know that those are like I think of anything their acquisition prospects may have just got in a little kiss right like because.
Again Amazon is going to do more Progressive things more quickly than the grocery retailers are used to doing and so even in an Amazon doesn't do any Acquisitions and they build all these features out organic.
The the other significant retailers are going to need to make Acquisitions to keep Pace with Amazon right and so you could imagine.
Amazon launching you know their own meal service and that making Blue Apron look like more of an acquisition Target now you know they're going through a IPO right now so.
So you know I don't I don't know how that complicates all that but you could certainly imagine.
You know box being a box acquisition being a defensive play to stay in the digital realm in competition with with Amazon with the you know Prime Pantry type type experience.

[50:44] Crinkle one area that I saw that was interesting and I kind of.
Talked about of the top the show is there's a couple articles out there saying that this is going to trigger this huge antitrust kind of thing and,
it is weird angle they all took was there worried about job is being cut at Whole Foods that's not really any choices about any trust as more about will consumers be harmed and I just don't think yeah sure Amazon's really big but Amazon is like.
Not even a player in grocery or.
Physical retail if if Aldi Commerce is 10% and Amazon is a third of that 10% and that's being generous if you unpack the DMV most people don't need to do that so maybe they would say 25% of that 10 billion.
Microscopic thing and it doesn't feel like there's some Monopoly being built here and even.
Even then they'll be like number 5 and groceries so do you think there's antitrust risk your.

[51:40] Yeah well so I should caviar this by saying that every single lawsuit I've been in for antitrust with a doj I've lost.
So so so take my opinion with a grain of salt but that that being said I don't think this is an antitrust issue I don't even think they're going to look at it that hard because it is the space is just too wildly fragmented you know.
You like from that you know most of the,
the buzz and the the disruption in the fear about this is not liked by looking at the numbers and adding them up it's.
By Young speculating about the the strength and skill sets of of Amazon being applied to this new category in the more serious way and you know the doj is not going to have an opinion on that they're just going to look at it and say.
That just doesn't fundamentally you know a road choice for consumers and you know therefore be bad for consumers.

[52:34] Awesome those were the the big kind of points I wanted to hit on this hot take anything else you wanted an.

[52:40] Well it's you talked about some of the market cap losers I was I took a quick look at it Walmart's market cap and it seems like they're down exactly 13 billion dollars which would have been enough for this acquisition.

[52:53] So like here's a crazy question like since people could still bid on this like.
Couldn't couldn't form Walmart step into this the the bidding like I don't feel Whole Foods would be near as valuable to Walmart as it as it is to tie Amazon but could they do it as a defensive market cap play or is that all likely to.
To settle out and not be.

[53:14] Yeah market cap it doesn't actually give you dollars to spend on something sensible apples and oranges so you know their challenge probably would be.
I think they have enough cash I think their challenge would be the creativeness of it you know Walmart is held to a very pristine EPS number and if that changes our goes down that has a much more dramatic impact on their stock than anything,
so sorry I almost think that that would be a problem and you know so so I don't know.

[53:50] I don't think that would drive it if they want to do it it's going to be up crap we got to kind of get in here and keep this a set from Amazon kind of thinking yeah I think the I think they.
I think if they actually won it would actually hurt their stock worse than what you seen because my guess would be they would have to lower their numbers pretty effectively and you know the thing is I don't think Walmart knows how to go.
Whole Foods office their playbook doesn't really work in his whole different customer but but you know so I think they're going to have to your list let's pretend they want it they ended up spending.

[54:24] 17 billion dollars I think that's going to be diluted and.
In the way Walmart get Side by Wall Street. Gets Amplified almost by like a thousand so I think they would actually lose like 60 billion of market cap or something pretty substantial if they had to come out with a pretty deleted Acquisitions or weird way,
we were played those board games where you can come like getting a 3-way trap I feel like Walmart may be a little bit of a three-way trap here if they really think through them plication of of.
Of this site if you're Amazon you may actually be okay for them to go but by this and spend more and it's kind of like a win-win for Amazon.

[55:01] Very interesting okay well Scott I have enjoyed ripping with you on the exciting news for today.

[55:10] Yeah yeah we appreciate you guys,
coming in for the hot take and hope you don't mind a little bit of extra Jason Scott show this week so we will be keeping track of this as it develops at you know where your go-to source for e-commerce news,
and this is something we'll be watching very closely.

[55:28] Yep and if you have any thoughts about the news or feedback about the show we'd love to hear from you on Facebook and if you enjoyed the episode feel free to write us a review on iTunes until next time happy commercing.

Jun 16, 2017

EP088 - PwC Partners Steven Barr and Byron Carlock

Steve Barr (@Steven_J_Barr) is a partner in the Consumer Markets practice at PwC, and sits on the NRF Board of Trustees.  Byron Carlock is a partner who leads the Real Estate practice at PwC.  We sat down with Steve and Byron to talk about the current state of the US retail market and what the future may look like.

In this interview, we discuss, Mallageddon, Omnichannel, Grocery, Mobile, and of course Amazon.

PwC Consumer Markets Homepage

PwC Real Estate Homepage

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

Episode 88 of the Jason & Scot show was recorded on Thursday, June 15, 2017.

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


New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded on Thursday June 15th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Cohoes Scot Wingo.

Scot, Steve, And Byron: 
[0:39] Hey Jason and welcome back Jason is got show listeners,
Jason tonight we have two guests on the show that are going to help us better understand some of the retail and real estate dynamics that we've been talking about here in 2017 first we have Steve bar Steve is an over 20 year veteran of pricewaterhousecoopers which I'll call PWC from here on out,
where he is focused on the consumer Market Steve is a frequent for contributor on topics around retail Brands and cpg he's also on the Board of Trustees for an RF,
we also have Byron Carlock and he is the national partner and real estate practice leader with PWC and Works close to the Steve to understand physical retail Trends and how they impact commercial real estate industry he's been at PWC since 2012 welcome Steve and Byron.

[1:28] Thank you John long long time listener first-time caller.

[1:34] We are excited to have you guys on the show and we always like to get things started by giving a listeners a little bit of a perspective about your backgrounds and how you came into your rolls so maybe Steve we can start with you you want to tell us how you got here.

Scot, Steve, And Byron: 
[1:49] Yeah it's good it's really great to be with you so I leave the consumer markets practice at pricewaterhousecoopers which includes our retail practice are consumer packaged Goods practice.
And our travel and tours and practice.
The practice includes our advisory Consulting business and our traditional audit and tax practice I've spent my entire career focused primarily in the retail and consumer space and like I said I'm glad to be with you tonight.

[2:18] Traffic in Byron.

Scot, Steve, And Byron: 
[2:20] Sure and I'm on Byron Carlock I leave the national real estate practice I came to the firm from industry five years ago.
And spent the first half of my career with the Trammell Crow family a prominent real estate family based in Texas with many companies in the various.
Real estate categories of office retail multifamily.
Hospitality industrial and then I ran three routes for a sponsor before coming to the farm.
I also lead the practice across our lines of Services of.
Assurance tax and advisory my jobs almost as fun as Steve's but I'm more the dirt guy and so I'm watching our industry go through an interesting metamorphosis especially in the retail category.

[3:10] Awesome well as the the dirt guy Byron let me kick it off to you and you know so 2017 is you've been an issue for a while and I've got a majun this is kind of,
what is the most brutal years you seen us as relates to Store retail you seen over 5000 stores announced that are closing this year we've had folks on the podcast that say we can get to 10000,
and you're in that Plies Mall closures in the 20 to 30% range over the next two years,
watch County help us frame it giving your long exposure to the market and in the physical retail side how,
what are you seeing out there is it the worst year you ever seen in and any other pontifications would love to hear.

[3:51] Sure I'm going to put it in more of an evolutionary disruption time frame because I think it's very interesting to sit back and realize.
The 90% of retail sales still happen in brick-and-mortar.
And so although e-commerce is the fastest-growing phenomena in retail it's still only 10%.
Of the total spend and so what happens in brick and mortar is very important.
And certainly worth watching and you're right the store closures are going to be big we can get 7700 somewhere around in there so you're right between 5 and 10000 and the square footage vacated you know in the tens of millions of square feet.
But what's interesting for the real estate.

[4:36] For the Realtek perspective is on that which is vacated it's an offer it's an opportunity for landlords to rehab and reposition.
Answer there's National articles you know this week in the Wall Street Journal talking about.
The mall might not have any retailers in it and some of the different uses that that real estate is finding as landlords reposition the real estate.
So I'm coming at it from a bit more bullish perspective from the brick-and-mortar perspective in that I think we'll see New Uses even though those vacancies will.

[5:16] Eradicate certain retail Concepts week we refer to sometimes as the mediocre in the middle.

[5:24] Got it 60 what's your take on kind of where we are from a 30000 foot kind of you.
It's interesting one of the things Byron and I chat about frequently is the question of whether were over stored or under demolished in life what I,
yeah and what I mean by that is there are some great properties and some great locations.
I really just don't have the right retail for for today's consumer.
Transformation there is no question and you guys wouldn't have any back on the show if we didn't acknowledge that.
There is some significant headwinds for certain retailers but we have a number of our clients and I'll lean with Byron toward some level of optimism because the number of our clients.
Or investing in some very unique properties focusing on.
Experience and press partnering in ways that might be non-traditional from a historical standpoint but really connect with with today's consumer.

[6:34] Yes what's really interesting you know I feel like I am definitely on your guy side of the fence as a pro brick-and-mortar guy Scott is really the,
the digital doom-and-gloom guy on the cough but I think even he concedes that the brick-and-mortar is going to continue to be a really important part of the mix I will say however that,
I do start getting nervous cuz you mentioned that average,
10% of sales are online in a lot of segments that are important like particularly in the malls.

[7:06] That that percentage is more like 15 or 20% and 15 or 20% feels like an inflection point when it can really disrupt a category.

[7:16] Yeah do you think we're going to see some some actual category disruption or do you think it's just going to be the the weakest players in each of those categories that that we see go away.

Scot, Steve, And Byron: 
[7:27] Steve began alluding to it's all about the experience so it's that category.
Can create an experience in a reason for someone to be on the showroom in the store and experiencing the product and learning about it then that disruption can be stalled if not why why take the time out of your busy schedule to get.
And so the consumer needs a reason to be welcomed into the store and feel as though it's a worthwhile experience.

[7:54] Yeah and I guess I would have to serve two thoughts the first would be you know in addition to the numbers you shared we're actually seeing.
Many of our clients have their. Or their their direct businesses grow.
20 to 30% in the end in fact as you both know well.
Some have even grown in the in the 40 50% range and something that said we called the last two holidays.
And you know those have come true so we're seeing there's no question we're seeing the massive shift.
The other point I would make and having listened to your show for quite some time I know when I open up the topic of omni-channel.
I think there's a lot of people that talk about on the channel and I don't think many retailers are are are doing that well.
But I do feel as if the retailers are on a continuous journey of improvement.
And some of the retailers are starting to do it well but I continue to be very disappointed with.
With many of the store base retailers often my family gets tired of shopping with me because often what I do is I walk into the store.
You know what I'm doing,
my work thinks and I walk as if I'm just any consumer and trying to feel is it what's what's that experience for me if I've done things like buy online pickup in-store and I continue.

[9:30] Be amazed at how many stores make it very inconvenient for,
the consumer to really have that buy online pickup in-store experience difficult to find a parking spot,
if I have an impulse purchase or a different need there isn't a separate checkout Lanes sometimes it's very hard to find the the,
the pickup spot within the store and so we really do need to see the Retailer's transform at the store level,
and counterbalance,
the convenience that comes with online shopping but like I said I think some are starting to do it well and others,
if they don't do it you know I think they're going to add to that list of of dead banners bankruptcies and store closures.

[10:22] Yeah it it is shocking how much bad omni-channel there still is out there I know I have the luxury of living a few blocks from an Amazon bookstore and so I'm a horrible person,
but my soda pass time when I have too much free time on my hands is just to try to go return Amazon purchases at the bookstore.

Scot, Steve, And Byron: 
[10:42] Yeah and what's your experience.

[10:44] That they don't accept returns from Amazon it's me just being mean but are there any retailers you think of that you would point to as a sort of shining beacons of really taking advantage of the wrecking water footprint and doing omni-channel well.

Scot, Steve, And Byron: 
[10:59] Yeah I can think of several I don't know if we're allowed to mention particular client names.
Excuse me particular company names but yes there are some they're doing extremely well that make sure you feel like you are welcomed into the store almost as a treasured guests because they know your time starved they know you want special service.
Play make you feel like your visit was worthwhile.

[11:22] No I mean I don't know I mean for example and I'll give you a couple cuz I think sometimes we can think we can speak in terms of examples but you know what Gucci is doing at the upper end this year.
Is a game-changer and when you go in the store and you see something you like you better get it because if you don't get it it may not be there tomorrow.
Limited production runs with the special embroidery while statements that become interesting accessories to any outfit.

[11:52] It's really a fun experience at the designer level.

[11:56] Even all the way down to HomeGoods in a perch who you go in and get to see demonstrations in the cooking kitchen or in the luxury bathroom.
And you think wow I want to live like that.
And so when you see those experiences that make the product come alive it makes your store visitation worthwhile.

[12:19] Now if it's a roll of toilet paper.
Are bath soap or laundry detergent the commodity stuff is going to be sold on price and convenient.

[12:32] An empire in what would I would add to that is you know so often when we talked about how many Channel I think there's a focus of it being.
The online transaction store but also we see some retailers doing an extraordinary job of if I'm in store and they don't have the style or size that I'm looking for,
several of the leading retailers are able to access their inventory real-time often with a handheld device.
Somewhere you know exactly where I'm shopping and in many cases you know make a commitment to me.
How to get that old to The Shopper overnight or if you're in a large urban area in many cases on same day and.
Bonobos is an example of that is extraordinary I often go into markets.
And two tours in a recent Market visit.
Explain that I was shopping or just doing the tour and what was staying at a hotel and didn't want to carry bags and they made a commitment to me that.
By the time I was back at my hotel room in Times Square that they would have a package waiting for me so I think it's important to think of,
omni-channel you know going going both ways but some some are doing it well.
But that also means then that some aren't doing it well and what's especially challenging as same-store sales Decline and there's significant deferred maintenance from Information Systems.

[14:14] And investment in store associates in others it almost becomes self-fulfilling for those retailers that just don't have the resources to get it done and that's why I think this is going to be a balance of.
The winners are going to continue to win and as Byron a said you'll being stuck in the middle or I would say you know being a struggling retailer.
Really something transformational is going to happen or we are going to continue to see a decline but I I do believe those clear winners are there there's no question that they're very bullish on,
specific real estate in specific markets at very strategic specifically.

[14:56] Yeah I would definitely agree Steve I think is you alluded to a lot of the.

[15:01] The most successful omni-channel experiences with Chompers really require excellent.

[15:09] In-store inventory accuracy in so if we see a lot of retailers investing right now in New processes and Technologies and systems to get that that inventory much more accurate so they can use it in a lot more customer experiences.

[15:24] Another Trend that I think is interesting an omni-channel I'm curious if either of you have any thoughts.
We now seen a couple retailers kind of announced that they're redesigning stores around these omni-channel flows so target has a new store model I don't think they've open one yet but that literally has sort of a.

[15:44] A separate entrance for the fast visit you no pickup Goods type stuff.

[15:50] And that entrance is literally you know more convenient and separate from the the the full brows customer and I know.

[15:59] Starbucks already has a prototype store in their corporate headquarters that's a pure Order ahead pick up in in Branch experience where you literally can't order in in the store.

[16:11] Do you see those kinds of trans catching some some wind.

Scot, Steve, And Byron: 
[16:15] And I do know they're working at work harder at making it easier to return.

[16:31] Yeah and end,
it's actually great example and the reference I made a little little more subtly earlier was it was actually you know to the Target Model by the way I would say is,
I'm in a worse thing several of the mass Merchants so you know Walmart and Target really begin to execute.
Very well in the store I think those companies would would say there's always an opportunity for continuous Improvement but I think they're realizing,
the Strategic imperative,
to improve that experience and I'm quite optimistic that the leading retailers are are going to be able to pull it off in fact I think you know I think we're going to start to see,
even greater separation but I would expect those retailers,
and a few others to to separate themselves and and and do it quite well what will what will be interesting.
Will be you know at what page can they do that because.
This isn't just about you know onesies and twosies there they're going to have any of these retailers no specific brand they're going to have to transform these stores.
Very rapidly.
Happened to listen to your most recent podcast and I think that you know the conversation around the period of time that some have forecasted that it might take to transform.
You know the Sears locations as as they close United quite an extended time arises I don't think there's enough time to do it at that pace and.

[18:05] And he's going to have to make decisions that we're going to have to accelerate this and transform the in-store experience immediately.
To continue to stay relevant to smash especially with Amazon.
And look while I'm intrigued by how Amazon is is disrupting our world.
I'm continuing to be curious at what point will Amazon be disruptive and end.
Folk music may think you know I'm a bit crazy because we've seen them as the the disruptor.

[18:43] Will the time come when Alibaba and you know enter the US market or will the time come when some transformational player we've seen it in retail and sometimes it's a very long life cycle.

[18:55] I really can't stress enough the need for retailers.
To accelerate that pace of change and even for the disruptors to continue to disrupt themselves,
so thanks for bringing up the the a word it wouldn't be a Jason and Scott show that kind of talk a little bit about Amazon let's take the angle Steve will start with you and then I want you to chime in so,
it sounds like your recommendation retailers this to innovate and stay in front and Amazon could be disrupted the what about Brands I know you guys talked to a lot of brands with what do you say to Brands when they're,
you know when they're saying hey what what should we do about Amazon and we see people that have a spectrum of their evil adult partner up at all all the way to Univera deep Partnerships with.
Curious how you advise folks on them yeah it's Steve I'll go first and Byron if you want to jump in.
The age-old question here is that that question of Channel conflict right and not only.
For for their own branded stores but in many cases for their Retail Partners from a wholesale perspective and.
I'm not sure there's anyone right answer depending on the category I get much of my Amazon information from you two gentlemen.
But we know well that as they've entered certain private label categories.

[20:26] Steve quickly gas is Amazon a quickly gained a significant market share in a number of categories and I think the the most recent Mary Meeker internet Trends presentation which was fascinating.
Was one at one of the latest examples where they talked about Amazon share with batteries and I think the other category she mentioned it was.
In the in the baby category so Brands I don't think there's anyone right answer but I think I can tell you this.
Our clients are struggling with what to do and how to do it like they're all coming up with.
Individual Solutions some are arguing that just like a regular wholesale partner and others are looking to.
Come up with unique School offerings and product that not only for Amazon but for there are other wholesale partners and then for their own branded stores.
And I think we're going to continue to see folks have that dilemma and as we know there are a number of luxury players or some.
Unique players whether it be lvmh or Birkenstock or others that have made choices of not partnering with Amazon or.
Disengaging from pretzel prior partnership with Amazon so an interesting Trends to watch but I don't think there is a single answer that it applies to any category Byron I welcome your thoughts.
No I think the biggest.
The big disruptor to watch there's Walmart I think their acquisition of and their rationalization of that business into their retail model is the game changer as a southerner you know going to Walmart as a spiritual experience.

[22:08] And to make that experience convenient.
For those that want to do it over the Internet only broadens their ability to compete head-to-head with Amazon and so I think that's worth watching and when they make returns exchanges and pick up the.
Everything like that convenient in the store think about all the distribution Outlets that they've already got on the ground in your neighborhood.

[22:34] That make that experience all the easier because I think that's the one who watches the disrupter for the big a in,
one thing I've been mean nasty from a commercial real estate perspective here in our region the warehouse kind of segment is really heated up as as e-commerce has grown it is is that a national thing is they're kind of a Spider-Man in balance for that warehouse type space that,
it's important for that that amazon-like experience.

[23:00] Yes I need for three years running in our emerging Trends publication industrial has been the leading product category and it's obviously,
driven by the demand because of because of the importance of fulfillment in the new economy and so industrial is a darling I don't see it changing and the use of that industrial space is already changing to adapt to.
The environment related to returns and so you see some industrial parks adding retail elements so,
returns of e-commerce merchandiser actually sold out the back of the warehouse.
And so it's interesting to see whether or not industrial buildings become.
You know many outlet malls in the future as of adjunct service to the customer that is.
Using the goods that are moving through those warehouses yeah we have a,
but the ability to access for the Planes Trains and trucks during the holiday season has become,
very challenging for for you know many of the retailers in MN online providers so it's it's not only a competition for the industrial space but a competition for,
all of the components of that supply chain including the last mile.
That's right that's very important to note I mean so you got your large you know million-square-foot distribution centers that can be remotely located.

[24:37] But you cannot deny the need for smaller spaces close in for last mile delivery and so the competition for four walls that are compatible for that last mile delivery is heating up but it's also using space that might otherwise be underused.
And so you're seeing vacant Office Buildings.
Turn into last-mile fulfillment centers for pickups and deliveries you're seeing self storage units.
I'll be available for you no nighttime delivery.
Of the goods from the remote distribution facility and then distributed out by The Last Mile deliver first thing in the morning.
And so the use of four walls can be fungible and I think that's one of the things we're learning about this disruption is space can be used for multiple things and it doesn't always fall into the traditional categories that we thought it did.

[25:31] Cool and then Steve one last Amazon kind of nuance see if you've talked about how they're going to impact retail and brands,
how about the cpg your grocery category you know they've they've got the ghost or we just kind of walk out with things they've got the pickup store that had fresh for a while that's in several cities they've got Prime now Pantry there's almost like eight platforms they're experimenting around so that it seems like they're pretty serious do you think they're going to,
going to start to make some inroads there or do you feel like groceries too tough for Amazon.

[26:03] I think they're going to make significant inroads in it and it's interesting I'll give you something that I'm watching that may not be obvious to to everybody but you know in in in my day,
I'm 52 years old all of the large cpg companies in my life professional Life Time opens,
I'm office is and had a mandate to be located in Bentonville and there's no question that continue to be true given,
the tremendous strength and capabilities of Walmart which I continue to believe is is is going to do continue to perform well but what we're seeing is the same consumer packaged Goods companies now.
Placing folks in Seattle and so Seattle.
Seattle the new Bentonville from a cpg standpoint for the additional Bentonville cuz it's not it's not an origin and so that's my signal to say.
Cpg companies know it's imperative.
Set the alarm with with Amazon and the other thing that we're seeing is our consumer packaged Goods companies are taking a hard look at containers and scuse sizes,
wait so that they're optimized for.
The Amazon delivery model in really far for everybody's delivery model but there's no question Amazon is is going there I saw a.

[27:36] Presentation very recently not not vouching for the numbers but the forecast there was that by,
2023 that Amazon would be the equivalent of 2000 grocery stores,
in in in the US which if you compare that to you know that's the comprable size to something like I believe a great example would be like a Kroger so there's no question.
That's there going to be a significant player it's also interesting though a little bit off of Amazon but,
many listeners may know when you you know well Lidl is is has said they're coming into the u.s. and they're going to open 100 stores in the near-term primarily in the east coast and in a very targeted area,
there's going to be continued transformation in the grocery retail space.
Far beyond just the the Amazon facts I think they'll be a little effective and some others.

[28:39] Yeah it's I think the grocery space in fresh in particular is going to be super interesting to watch because that feels like a space that no one has really wrapped up yet like you know Amazon has.

[28:51] His head the pilots with fresh for a long time but you know isn't.

[28:54] In that many markets yet we just seen Walmart put a lot of weight behind digital fresh Kroger but your point like.

[29:04] All the I think it said there's they're going to spend four billion dollars incrementally in in the u.s. to grow their grocery business and I think those Weedle stores I think the first grand openings are today.

[29:16] Down in the east coast so that seems like a.

[29:20] An area where we can see a lot of new store openings and I guess what I'm curious I've heard some people say that.

[29:28] Grocery is already more like the the density per capita of grocery is even more over stored than retailing General in the US so does that mean.

[29:39] A ton of traditional grocery is going to close to make way for these guys you think that they're going to evolve you think we're the markets going to be able to tolerate.

[29:48] All these German Grocers coming in and in serving customers in new ways.

Scot, Steve, And Byron: 
[29:54] Yeah I think my answer would be I think it's going to get to,
the in-store experience that in-store experience can be different depending on who the consumer is it could be on the value end.
Or it will be on the premium experience and thinking of,
the Wegmans of the world are the ages of the world and the Publix where you know when you're in the store is it it is it can often be you know an extraordinary pleasing experience so,
look who it is no question their razor-thin margins in grocery retail and it takes,
almost Perfection which which several of the leading players on do do quite well but that tells you though there's.
There has to be some disruption to come there,
Ellen with the growth of online whether it be Amazon or or now is the German grocer isn't and you know some of the existing players you're not done growing whether you know whether it be.
Trader Joe's of the world or some of the regional and National Brands ghetto Kroger and others continue.
To transform their stores and do exceptionally well.

[31:10] Yep I think for listeners it's going to be interesting you know traditionally the way we do retail is like the super premium in-store experiences,
what for super premium products you know so Byron mention the Gucci example earlier right in the super you know value products tended to come with pretty.

[31:29] A value oriented experiences of wheedle is going to be an interesting blend because they're a super low price points which means,
the store experience is No Frills you bag your own groceries you have to pay a deposit for the shopping cart cuz they want to make sure you return the shopping cart so they don't have to pay a guy to go get it,
but then they're going to have very high quality organic.

[31:52] Produce in there and so it it if that's an interesting interesting trade-off to say hey get the high-quality products in the No-Frills environment so I'm going to be watching.

Scot, Steve, And Byron: 
[32:02] I think about yeah but think about what you just said in that which I think Mary's with what Steve was saying earlier their systems mirror their delivery.
And so their price point is complemented by what they do versus what the consumer does in order to get that price and I'm going to guess that their systems and become extremely sophisticated on sku management.
To know what's going to sell when and so they very cleverly marry a systems and process and experience.

[32:34] To the consumers expectation because the consumer pretty much knows what that bargain is when they walk in the store.

[32:41] No and I think you're exactly right Brian Byron there.

[32:44] Probably the most quantitative retailer out there in terms of measuring the efficiency of everything.

[32:54] Tut in and building the systems and processes to be highly optimized for the experience and value proposition they think customers want so I mean the only question is going to be whether American consumers,
want with what with their offering because they're very good at delivering what they offer.

Scot, Steve, And Byron: 
[33:11] Sure it's with an contrast that with the grocery store as a spiritual or Community experience where you go do everything from your wine shopping to your Fresh Foods to that evenings Gourmet takeaway to flowers to a massage.
I think I think what what we're seeing is.
Experience offerings that fit the taste and budget of the buyer in different location.

[33:36] That makes perfect sense.

Scot, Steve, And Byron: 
[33:38] Steven know it's early yet but your your holiday forecast is widely read and can you give our listeners a little taste of what you're thinking about for holiday this year here here we are in June so I'm asking you about holiday well here we are in June and I will tell you we actually are about,
to Launch.
Are our first Global holiday survey so you're you're not asking too early here's what I can tell you about holiday in advance I it was interesting two years ago.
For our press release when we lost our holiday survey which usually comes out in early October two years ago we we had a message that said,
you know an overall same-store sales increase and I know it just simply was a measure,
did not matter and it fell flat and I was very surprised that it fell flat so last year.
We should have walked away from that but I'm going to go back to it this year because it's simply doesn't matter I'm,
I am insanely bored with the holiday forecast to come out and and,
you know it comes out from a wide range of constituencies it safe overall holiday sales are going to be up 3 or 4% because that's that's what they say every year when you deal go down earlier,
and you take what happened last holiday wear overalls you know online was up 27% but like I said earlier we saw some key players Pro.
In the 40 and 50% so I think the there there we should come up with new measures that matter and one of them will be another continued growth.

[35:17] Of online which I continue to believe will grow somewhere overall near 20% but even that is is a measure that,
blind to the fact that a few folks will continue to grow at a 40 to 50% clip with,
with their online offering the other thing is I think we're we continue to be in a mode where consumers are going to spend a portion of their holiday budget especially Millennials on,
themselves and on experience friends and family I'm going to a show,
or a concert or the like so when we think about holiday I don't think it's right anymore just to look at retail sales but we really need to look at experience and then I think we're going to,
pull into our holiday Outlook the growth of post travel airplane travel and Automobiles and so holiday now is,
a far bigger picture than just retail sales but no question we'll see significant online gross I'm a little bit concerned here in June and we'll see we'll see how right I am that retailers are seeing,
there I left and desirable results for year-to-date and that they're going to be,
very tight in there ordering for holiday ends over the years my clients you know you never know what the weather's going to be like and you never know what,
geopolitical or other events may occur but if we end up having a strong holiday but they were extremely conservative on their ordering they actually may miss on opportunities that the flip side of that is when we seen bad weather and other things.

[37:00] When there's too much than they go Promotional and they go promotional early.
It really wipes wipes out their holiday self retailers have it have a dilemma because of they look in their crystal ball you know is the glass half-full or half-empty.
And we'll see but I do feel good about digital and online continuing to lead the way.

[37:25] And I will save some of that contextual I just returned this week from the real estate Round Table in DC which is the Gathering of.
250 of the nation's real-estate CEOs and we had one presentation by a former fed governor and he said the bridge between where we are and holiday is it relates to that ending level is going to be confident.
And so when we digest what it's going to take to inspire additional confidence we have to really analyze everything in the.
Geopolitical jobs and and mood of the buyer to determine how bullish they will be come November December.

[38:04] Yeah you know what I think there's going to be another one of these interesting ones to watch I think traditionally that's always been true and the consumer spending has index very closely to consumer confidence but it it seems like we're seeing a lot more standard deviation in that that correlation the last couple of years,
and I'll be on some other things I'm really nervous about for this holiday season Steve I think you're exactly right,
nervous retailers are going to go in with tight inventory but I think one of the other impacts is.

[38:35] If 7700 stores truly close before holiday this year that means our friends at Gordon brothers are going to liquidate 7700 stores worth of inventory and,
you know that that's going to have an impact on on prices and consumer demand as we as we hit holiday.

Scot, Steve, And Byron: 
[39:00] Is you know not only the Gordon Brothers on the liquidation but for some of the,
banners and brands that are continuing but perhaps having to go to the off-price channel to sort of the,
today action Ross stores we may see some some really really tremendous deals from a consumer perspective in in the value Channel.

[39:25] And I'm sorry Byron you were going to say something as well.

Scot, Steve, And Byron: 
[39:28] Everyone loves a bargain I'll give her just reminds me of of Stanley Tangers quote years ago and good times people still want to bargain and bad times they need a bargain.
And So It Goes liquidations May draw people out to spend in a way that inspires additional confidence so if that is going to be one worth watching because I think there will be a lot of closings and liquidations that.
Put some Bargains in the market to get people out to experience those.

[39:54] Yep and I think there was one quarter Larry on that that quote though everyone loves a bargain except for the manufacturers.

[40:03] So I didn't want to change topics another topic we have on the show a lot is mobile and.

[40:13] In particular you know if.

[40:15] If e-commerce is a you know small sliver of total retail sales but it's the fastest growing then you know mobile is a small sliver of digital sales but you know the fastest-growing and you know we've been talking loud about brick and mortar stores.

[40:30] What are the things that's really interesting to me about mobile and brick-and-mortar is we've got all these consumers they may be our only spending 10% of their stuff online but.

[40:39] 50% of their purchases are being influenced by digital so they're getting used to having all this digital information when they make purchases in the the obvious way to give him that digital information when they make purchases in brick-and-mortar stores is on mobile phone so I guess I'm curious,

[40:56] You guys are seeing anything interesting happening in Mobile and you know if there any experiences that you've that you've seen or that you're optimistic about in terms of Mobile use in stores.

Scot, Steve, And Byron: 
[41:08] It's Steve and there's there's no question that the phrase we often uses is a mobile matters and,
Siena resting to Think Through the story I told her earlier in the podcast around how the stores need to transform to keep up with.
Digital the same thing is true with respect to mobile and what I mean by that is it's only,
a year or two ago and it's unfortunately true for a few retailers today where if I'm in store and I want to use my mobile device.
I really get,
small version of their website and it's not a mobile design website but the leading retailers have now taken it to one click capabilities,
and so those folks that are transforming the mobile experience I had my own personal experience where I will I won't name the retailer but I was at an outdoor retailer and the particular,
shoe was on sale I wanted to have that shoe they didn't have it in stock the sale ended that day,
they didn't have the in-store capabilities to take care of me so I wanted to buy a my mobile and I was typing on this small keyboard and it was incredibly painful I was able to complete the transaction but there was nothing user-friendly about it,
that same retailer is now transformed their mobile site and with one click and using.

[42:38] In one of and Apple pay Samsung pay type options truly I think in,
two or three very quick clicks,
I'm able now to complete the same transaction if all retailers can get to that stage we're going to see explosive growth in Mobile,
especially as Millennials and gen Z years continue to take up a larger portion of of the demographic of of the act of shoppers.

[43:08] Byron any thoughts on mobile I know I just think alongside that comes the ability to fulfill the order as promised and then make the returns easy if it doesn't work.
I think a lot of folks are still working on their systems not only in the handheld convenience that Steve was just referring to but on fulfillment and returns as well.

[43:29] Call Ann on the film inside,
there's some data out there that indicates UPS and FedEx or not able to keep up with with the demand is that something easier view of thought about and kind of corollary to that is is I've kind of been a long time believer that the Amazons eventually going to,
directly compete with those guys would love to hear your thoughts on that too.

[43:50] I think it's overwhelming I had to do a return last week and it was a rather large item and I had to get the house and I asked for the time band which is usually 2 hours and it was eight hours and I inquired with the customer service.
Representative why is the band eight hours and she started laughing mr. we've got a lot of stuff to pick up today.
And we just don't know when we're going to be in your neighborhood and I thought that was you know it was honest but it was also I think indicative of what you were saying.

[44:22] Yeah and I don't have any specific use not a specific area of expertise for me but I you know I do believe extraordinary companies find ways to transform themselves in.
And I certainly believe all of the companies in the category especially the leading players.
They're going to come well prepared for in the context of holiday but overall they're actively transforming their businesses and.
Absolutely no question.
I think we're in for front floor for quite a battle,
quitbit it back to mobile Steve the last year you know we saw for,
so two years ago we saw Africa Millennial kind of oriented folks traffic going over 50% last year we saw transactions get there for the millennial kind of audience and,
other folks are kind of the past half traffic and getting towards 50% transactions sounds like you follow Alibaba I think there are like north of 80% transactional volume coming from mobile do you think this is another holiday where we kind of Step function up,
midnighter is the US going to look different I do think we like to think we stepped up and,
I'll put a Shameless plug in for our holiday survey how about we.

[45:55] Think about getting back to you in October when we went when we haven't released but it's an area of specific Focus for our upcoming,
holiday survey which which I said it being launched and why like I do expect that Trend will be exactly as as you said we'll look forward to sharing our holiday Outlook late September early October.

[46:19] We will certainly take you up on that.

Scot, Steve, And Byron: 
[46:22] Similarly will be releasing emerging Trends in real estate for 2018 and it will have a significant dedication to what's happening in retail that maybe we should maybe we should do a rematch of this in October.

[46:36] That would be terrific let's do this until we get to October where is we're coming up to the end of the show,
if you had a you know 30 seconds in the elevator with the CEO of your favorite retailer what's the number one piece of a go to advice you have for retailers this year.

Scot, Steve, And Byron: 
[46:56] Mine would be make the visit special yeah and NN mine would be.

[47:06] Focus on the consumer which clearly many of them are doing but in the end if you're taking care of the consumer I think the rest of it will find a way to take care of itself.

[47:20] Yep and then flipping it around what about to the the CEOs of the brands.

Scot, Steve, And Byron: 
[47:29] Yeah and I'll I'll take this one first plan I would say innovate and personalize.
And I think if if they're able to if you think of the leading brand whether it be on the electronic side in the Footwear & Apparel side there's no question the leading brands that are.
Constantly innovating and focusing on personalization are the clear winners.

[47:59] I have to agree 100% with that comment so let's take it out further so we were kind of looking six months for,
what's kind of you guys have been in the industry for a while so let's project out to 3 or 5 years what is retail look like you know do we have are we all sitting in our dark basements with VR goggles on like but Jason's doing or are we know what does that experience like are drones to like dropping things we have to catch him,
I would love to hear your thoughts Byron let's start with you.

[48:31] I think there's some of that that's all I was I was at a luncheon in Dallas couple of weeks ago where Ross Perot Jr shared with us that he has agreed with Uber,
to be a pilot for their new Uber Elevate drone system which will be people people delivery and package delivery in and they'll be parking there drones in.
In in Dallas and so he feels a little bit like The Jetsons but I think it's a promise just like driverless cars are upon us,
and they'll change the way we live the way we do our errands the way we receive our Goods I don't think it'll be overnight but I think it's gradual and will be here before we know it and the groundwork is already being laid for that.

[49:16] Yeah and what and what I might add I would show you I just did a market tour to New York and visited the World Trade Center and made a trip up to Columbus Circle so that included,
the Apple Store.
It at the World Trade Center the Amazon store Columbus Circle and I live in San Francisco and in the Embarcadero Center offices.
They've opened a new Sephora store and there was one thing in common from all three of those examples stores were completely full.
And the reason the stores were completely false is because they have extraordinary offerings they have exceptional Associates.
Innovative products so I believe in three to five years the retailers that continue to do those things are going to continue to have those full stores that we saw and we're going to continue to see them being extremely relevant.

[50:16] Well guys that is a perfect place to leave off I,
couldn't agree more and it is happen again we've wasted a perfectly good hour of our listeners time,
don't forget listeners you're always welcome to continue the dialogue on her Facebook page and if you like today show feel free to leave us a review on iTunes Steve Byron very grateful for you taking the time to share your insights with us in the listeners.

Scot, Steve, And Byron: 
[50:43] Thank you very much for having us it was a pleasure to join you and I look forward to listening to your next podcast,
awesome and just briefly how can people find out more about your your thoughts so you know we talked about the holiday preview that you guys do so would love to if you direct folks there,
and any other writing that you guys do that you think would be interesting if you if you have a place people can find that where do they look for you online.

Yeah you can do that and then I occasionally contribute to Forbes probably not as often as I should but I do and I find and I do try to release retail trends,
on Twitter and you can find me on my name and then like Byron said that Peter and we have landing pages both for our real estate practice and also for,
our consumer Market practice which includes the retail practice and we'd love to hear from you directly or,
folks want to follow us in any one of those medium we'd be thrilled to the follow along with you Ausable position it's.

[51:57] We sure will until next time happy commercing.

Jun 9, 2017

EP087 - UBS Equity Research Analyst Michael Binetti

An interview with Michael Binetti, Equity Research Analyst at UBS, covering apparel and footwear brands, department stores and speciality retailers.  His coverage universe includes:   Abercrombie & Fitch Co,, American Eagle Outfitters Inc, Chico's, Coach, Express Finish Line, Foot Locker Inc, Gap, Hanesbrands, J. Jill Inc, JC Penney Co ,Kohl's Corp, L Brands , Lululemon, Macy's, NIKE, Nordstrom, PVH Corp, Ralph Lauren Corp, Ross Stores Inc, TJX ,Under Armour Inc, Urban Outfitters and  VF Corp.

In this interview, we discuss Omnichannel, Mallageddon, Brands vs Retailers, and of course Amazon.

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

Episode 87 of the Jason & Scot show was recorded on Tuesday, May 30, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode is being recorded on Tuesday May 30th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot & Michael: 
[0:39] Hey Jason and welcome back Jason Scott show listeners Jason you're on the road again.

[0:46] I am I am in not Sunny New York City today.

Scot & Michael: 
[0:50] Cool well I finally get to ask if you've been to the Amazon store it's opened and there was a lot of Twitter activity over the weekend and I'm assuming that's going to be on your list of places to visit.

[1:02] It is today was my first day here and I did not make it today but I will over the next couple of days candidly,
I'm not expecting to see anything that we haven't seen in the Chicago store and in fact it sounds like it may be a subset of the Chicago store so what for a full report in the next podcast.

Scot & Michael: 
[1:21] Copo listeners I'm sure on the edge of their seat for that,
and what folks one of the topics we cover a lot here on the Jason Scott show is what I like to call mall again that's the Relentless drum beat in the last year year-and-a-half of store closures Mall closures and pressure pressure on physical brick-and-mortar retail,
top listeners understand better what's going on out there in the exciting world of physical retail we decided to go right to Wall Street.
Jason physically went but we're virtually going to take you there today on the show or excited to welcome Michael binetti,
Michael is a managing director at UBS covering apparel and Footwear brands,
department stores and Specialty retailers he has a very broad coverage universe and it may actually be simpler to list the things he doesn't cover but let me take a shot at this is a covered Universe includes Abercrombie & Fitch American Eagle Outfitters Chico's coach Express Finish Line Foot Locker,
Gap hanesbrands J.Jill,
JCPenney Kohl's L Brands Lululemon Macy's Nike Nordstrom PVH Corp Ralph Lauren Corp Ross stores TJ Maxx Under Armour Urban Outfitters and VF Corp,
well that was a mouthful Michael were real excited to have you on the Jason and Scott show exercise 3 guys thanks so much for having me.

[2:40] Cool and you are one of those rare while shooters that is not in New York is that right actually when we work at I work at in New York for a month and I'm in Chicago.

[2:51] I love to have Fellowship Coggins on the show of Michael good deal.

Scot & Michael: 
[2:55] Although you're not here very much I think.

[2:58] This is true I am not there as much as I would like to be but the next time I'm there we'll have to have you back on the show and we can make fun of Scott together.

[3:07] Good deal so before we jump into it love to get the listeners a little bit of background about how you came to the retail business can you sort of walk us through your your background a bit.

Scot & Michael: 
[3:20] Absolutely so,
quick intro on me and I want to go into research and Dustin research straight out of business school I'm about 14 years ago ready I got really lucky.
Right out of school I got a job at a big global bank UBS I've been here the whole time I started out just randomly getting a job on the consumer and Retail team as an associate on the restaurant sector but that sector didn't have enough Amazon risk for me so about 9 years ago.
Ask me if I wanted to cover some of the retail stocks and so I started out covering the Branded apparel and Footwear companies that you just mentioned Nike and Under Armour and Ralph Lauren and Coach it's been super fun in the best part of my job is.
Even though we're just grinding it out here analyzing spreadsheets and income statement I cover the consumer sector,
and not just any sector the apparel and Footwear names so when you tell people that they jump right in and everybody's got an opinion on these brand cuz we all interact with them every day and use them and I can't tell you how many times.
Ghetto people outside of the industry to try to help me out with my stock calls with stories about how many kids on their kids soccer team or wearing Under Armour and Nike and versus what they used to be so it's great everybody knows he's breath.
I'm about five years ago UBS asked me to have the department stores those guys have a lot of secular challenges today but they're still really big companies,
and it's really important where American shop for these categories and then about two years ago we had of the off-price retailers you just mentioned like TJ Maxx and some of them all retailers like Lululemon American Eagle so pretty broad coverage at this point,
we really liked at the heart of everything that's in the consumers closet the brands they buy and where they go to buy them.

[4:55] Nice and Michael is it's ironic if you would have stuck it out in the restaurant industry long enough I have a feeling the Amazon risk would have eventually gotten there.

Scot & Michael: 
[5:03] Tranchulas will get their boobs getting there too.

[5:06] Exactly.

Scot & Michael: 
[5:07] Yeah or you could have jumped to cloud computing and avoided it with nothing.

[5:14] Maybe like Logistics or telecommunications or something like that maybe.

Scot & Michael: 
[5:21] Cool what let's kick it off kind of it at thirty thousand foot level it's right in the middle of Q2 kind of 2/3 way,
done with the quarter we've seen the q1 results come out and then we're starting to see the same store sales for May so we have pretty good read on the house 17 is shaping up for folks give us a,
it was kind of broad overview of what you're seeing out there quite a disappointment.
First quarter earnings season conference call this when we heard from.
Anna management teams of these companies giving us their outlook for the year for second quarter and I would say the thing that's different is,
that they're trying to embrace him more conservative posture and realize that you know they don't know what's coming as well as they thought they had the last few years so he's learned,
and I'll from some painful quarters in retailer last 2 years it will become more conservative as they is they look at and the first quarter results which broadly,
guest in our expectations the bad internally in our own expectations on Wall Street and they've taken a pretty conservative posture,
for me the results of Ben mix a lot of these guys reported in a middle of months when they had you know.
Sales numbers moving around around Mother's Day and things like that so I think people if it's tough to say if if,
these companies are being conservative because they don't have a clear view with the calendar shifting around or they're just playing,
not liking what they're seeing and wanting to stay on the very cautious side though say in general the same-store sales outlook for the near-term and for the year have moved down.

[6:57] I from these companies as a gauge of what they think is going to be happening over the next three six nine months.
Interesting are there so if you'll hear coverage Universe who's kind of on you know I don't know how you you do your ratings but you know,
anyone anyone that you know when when you're out there talking to investors who do you usually kind of .2 is as someone that's kind of surviving or are doing well right now.

[7:26] Yeah I would say probably the best example to be in a PVH Corp which listeners may remember the old Phillips Van Heusen company.
Am980 PVH few years ago they own Calvin Klein and Tommy Hilfiger name brands that they're much more well-known for these days and they're just really position themselves well it's it's privately you know within a group.
Includes Nike it's the most Global name in our coverage of a full loan for region business Asia Latin America Europe so they've got a lot of global whitespace to attack and they're they're doing a really good job with it.
I'm in and I would say the names of this mushroom animus is that right now are very few and far between.
Ross stores at a good you know if prices everybody loves value America after all right he doesn't love low prices gas prices Ross stores and TJ Maxx headquarters.
Mainstream retailers PVH is fairly limited story right now,
pdhc sarson cuz when I think of Tommy I think Ralph Lauren Ralph Lauren you know is is not doing terribly well right now it isn't that Global diversification that they have or like what what is a dissenting apart.
Yeah, some much you know is much as you listen to me be in the u.s. here and no no the brand here it's a much more powerful brand in in Europe even than it is here and now starting to expand pretty aggressively,
into Asia for Tommy that has its Origins obviously in the u.s. in the in the 90s it was very popular and it kind of went by the wayside went out of fashion but they really restored a lot of strength to the Brandon.

[9:06] And you're up and it's really a great sound Basics preppy red white and blue type brand and in Europe is got a lot of momentum there.
Ralph Lauren on the other side I guess and tell me was coming from a lower base so you know for them to grow and succeed was a little bit a little bit easier during the most recent few years when Ralph got really big.
And really broadly distributed selling lot of similar products in the red white and blues and you know what's happening in the end markets in the Retailer's I'm right now that are.
Motion are going backwards I'm so if you were really big heading into the going backwards been even more painful for for Brands like Ralph Lauren.

[9:46] And Michael one of the things that that I've known as it sounds like in North America like the biggest compliment you give someone is that they're doing less badly than the than the industry is it.

[9:59] I mean.

[10:01] Is that right like are there any even like really small apparel brands that you think of and you say like wow they're really growing or bucking the trend or or is it like.
Just answer the universal accent at the emit the moment that that apparel is pretty tough in North America.

Scot & Michael: 
[10:16] Yeah it's more Universal than it has been when I,
first cover the sector in the late 2000 even in the recession there was there was moonshot little companies that were clearly going somewhere like Under Armour and Lululemon they were just moving really really fast,
any big enough to be on people's Radars in the investing Community is not clear-cut set subset of small Brands and retailers like that,
today the ones that are the most interesting are ones that are kind of got one foot across the bridge into.
E-commerce and digital and they're not quite big enough to be public companies yet to recover Brands let we got cover company like VF Corp and owns about 30 brands.
They're probably looking around for some Acquisitions in areas like that PVH which we mentioned before on recently bought in and online Intimates business,
True & Co which is base pay,
Mia women go on and do a fit quiz for their their bras and for some of their Intimates in and you come out of that quiz really feeling like I just retail ask me some really good intuitive questions I'm going to trust them with purchases in this category that's really specific,
the teeny tiny brand you know there are just there just aren't that many.
I'm Like You Under Armour to lose of a couple years ago that are a big enough SB public company stocks that still fit in that have very high growth rate today.

[11:36] Interesting it it it it seems like one of the potential challenges even on the acquisition front like some of the SharePoint the sort of the the pre public.

[11:46] Play the pure digital plays the revolves are bonuses or something I know they're not pure digital but digitally native Brands the.

[11:55] It almost seems like they're struggling to get big enough that they're even an interesting acquisition Target for the vfc of the world.

Scot & Michael: 
[12:03] That's a very very good point in,
analyst Urbana bus Which whichever you prefer to grab that it had and I've had a relationship with Nordstrom for a long time so some people have wondered if,
that would be something I would make a good pairing or if Knorr would want to have them in house for whatever their reasons are that hasn't even come about,
that's the kind of model that people need to be thinking of scaling it up into the Brave New World or you know verses in the past Under Armour new how to become a big brand.
Able to look at a lot of things Nike did and they had a booth blueprint a Michael Kors was able to look at.
How to say here's how we're going to do this cuz he's guys are trying to figure out how to have inventory list stores and different kinds of shopping experiences and still you don't have,
very strong online presence to your kind of wandering off into the Wilderness turn yourself in a lot of ways and it's not quite as easy as it was back in the day.

[12:57] What's that scale need to be for this may we have some fledgling Brands out there listening what what do have to be for a one of these brand houses too kind of consider you to be interesting.

[13:09] I guess there's a couple ways to think about that but or if he has since we brought them up I mean and we mentioned trueandco which is you know,
TVH didn't mention how big it was my son says that is very small they characterize it is in significant earnings of a really that was a very small acquisition but they really wanted to latch onto the technology and the expertise inside of that company and frankly if they can.
Take what they learn from that acquisition and use it for Calvin Klein's women.
Intimates business and lay that Big Brand on top of a new capability while that that could end up being a homerun for them for VF Corp which is a much bigger.
Company uses the last big acquisition they did was Timberland.
And that was that years ago and why the big gap is now they said look we really,
find something at the billion dollars and revenues are bigger we really want something that'll move the needle it or company that we can sink our teeth into and those billion dollar Acquisitions have proven very hard to come by.
So I wouldn't I wouldn't be surprised if the industry shakes out and start settling on things closer to the three four hundred million dollar range on as being a very you know good sweet spot even the ones that thought in the past billions Where I Wanna Be.
2000 scale or business.

[14:23] We seeing some other segments where you could just pay a billion dollars for a company that's probably only worth three or four hundred million to get there too I'm not sure that's a good strategy but.

Scot & Michael: 
[14:32] TV tray you be trading some balance sheet flexibility be paying up for a brand and I'm to try and bolt on some earnings in that case and,
can work your benefit that's about on yourself and your board of directors like letting you down on yourself you know,
coach just bought Kate Spade in a lot of people's eyes are very similar Brands if you peel back the onion a little bit there fairly different cake too much younger brand and Coach to set look we think we can run this better we can put it on our supply chain.
We can use our big Global Assets in China to to Really tap into these guys opportunity fast coach the thinks they can take it and they can extract or any doubt of this fashion the company could on a standalone basis.
So you know definitely there's people out there looking for a particular environment to your point earlier if it's very very tough out there and the guys,
we're feeling most comfortable with as stock Investments are the ones that don't necessarily need the economy to get better the consumer to get better for the stock to work they have internal projects like,
coaches. Cuz they have to work on and pound some earnings out of that even if the consumer is pretty tough.

[15:41] Sure what are the things we hear from a lot of the traditional brands that have big investments in brick and mortar is.
You know the beat the omni-channel drum they like a one of our competitive advantages is going to be on the channel and and you know there's all these unique advertising and customer experience advantages around,
having physical stores super question,
do you buy into that do you do you feel like there is a potential competitive advantage in having stores and if so are there any brands that you think of is doing.

[16:14] Omni-channel particularly well.

Scot & Michael: 
[16:17] All those two answers to that there's there's the guys to have a lot of stores today that are saying you know stores are in advantage.
But the reality is they probably need to go backwards,
start app like you mentioned a couple of us like that it don't in stores today that don't have to distract themselves it how do we sublet these things how do we sell real estate in monetize it over the next two years they can just say look like we starting from scratch.
We don't want to get you a thousand stores you want to get to 100 and that's a much cleaner path forward those are most of those are small company.
I'm not as far as I think the second part of your question was just in our they was it are they good yummy channel breaking motor guys.

[16:57] Yeah or is there any particular brand you think of his being better than the pack in terms of of leveraging those stores for a competitive advantage.

Scot & Michael: 
[17:05] Yeah I would say that the sum of the,
teenage brands that cater to a customer is a digital native and her much more digital fatty Urban Outfitters has a very very big e-commerce business I think it's up over over 30% which would be at the high end of,
of the group that we cover one interesting little fact the way was I think American Eagle asking no smaller,
Henry Taylor in the malls in the US on their first court all I think they said that.

[17:37] Internet penetration as a percent of sales was up something like 700 basis points year-over-year.
And I know just from listening to your show you know the average for overall retail in the US much less the apparel sector and much much lower in that so that's kind of a.
Now that's kind of a heart-stopping comment when you hear small retailers hitting that much of their traffic Move online obviously speaks well to how well they're doing.
I'm sure digital business but I'm fat that's kind of datapoint the stops if you cover your socks like I do to have several hundreds of thousands of stores at that kind of day point makes you stop and say well where where are we really headed here.

[18:14] Yeah even if you're starting it even if you're starting at a really nice and base that's a big number so.

[18:22] That that's very interesting one of the the.

[18:27] Certain narratives you hear a lot speaking of eCommerce and and seeing it get bigger for some of these these retailers in the e-commerce industry the story is All oh well the.
Apparel is in the tank and department stores are going away largely because of.

[18:44] Of the shift 2 online buying right and inside that you know the digital guys are convinced it's that that that's really the Big Driver and you know they're these Church floating around on the on the internet that show sort of you know.

[18:58] 20 years ago department stores being 10% of of consumer spending and other down to a couple and and you know 20 years ago e-commerce was 2% of consumer spending and now it's up to 10 and so it sort of looks like they flip-flopped and you could say oh well.
That's where it went but then I know,
you you look at all the growth in those those discount stores in it you know that they've taken a bunch of market share from someplace and so is I'm guessing the answer is both but do you have a.

[19:24] A sense for.

[19:26] For where the consumer is Shifting is it going from from brick-and-mortar to digital or is it going from full price to off-price what's the.

Scot & Michael: 
[19:35] I mean both of those I would say those are very much both themes in a very both very very powerful obviously he Converses you're suitably powerful but if you look at if you just look at it.
Big off prices you think about TJ Maxx and Ross and then Burlington which is gotten to be a bigger business your last few years and just look at what those those companies percentage of total,
us consumption in in the apparel category.
Can you look at the period before the Great Recession and there was kind of humming along as a small percent of the total industry and then when the recession hit it was just unbelievable ramp.
Kids coming out of college with no job so maybe in the past they would have said to themselves you know I'm really a department store Macy's or Kohl's person.
Yeah that's where I go to shopping and maybe TJ's like out of a secondary.
Destination for me those days are over when you come out and you are on it an unbelievable budget that you never thought you'd be pressed to and and it became a very primary,
call source of the primary destination for parallel for a lot of those consumers that were really stretched and you just saw the numbers hit the ramp and then the recession ended and the consumer just never left those stores.
Today just kept growing boxes and it seems or sales growth I'm in there just in boxes that's been way on top of what the industry Trends are there,
Panther outpacing the department stores by anywhere from.
606 10 percentage points as far as their growth rate every quarter that goes by at this point so that is you know it's not e-commerce which is the sexiest thing to talk about.

[21:13] But it is a very powerful value equation and drives a lot of customers into those boxes on eCommerce is obviously the other one.
And if there's different in again within my group there's the retailers that have to deal with their traffic being down significant amount and the Brand's figuring out look you think the consumers to once he's products we just got to figure out how,
give it to them where they want to buy them and that they should be in OK shape longer-term but there's still it's not it's not a graceful transitional put it that way.
When did ironic things about that is the Discounter is usually don't they under index on eCommerce so you mentioned like some of them all bass team folks are kind of in the thirties my understanding is department stores are pretty anemic when it comes to e-commerce.

[21:58] Yeah I think they're around there many many years behind and again they're trying to they're trying to retrofit Legacy assets that were built to,
yeah I have back rooms and some consumer and some customer service people on the floor and cash registers to trying to retrofit those things to be able to ship from the stores make their inventories more efficient,
yeah I think.
Tell very well aware of the situation they face trying to make the generator return off those old assets but if they you know if any one of the executives in these businesses had to add it to start over if you ask him how many stores would you have old you differently.

[22:36] I know you hear a lot more discussion about building for the digital future from the ground-up hope there's no doubt that in their DNA and in their hearts they're very much trying to figure out what to do but I do know that it's obvious,
just from looking at stock prices as a scorecard that it's here at your at a generational change in the pressure on that on that category right now.

[22:58] Yeah I mention of the top of the show the mall again,
you know there's there's been this I just read an article today that was on Business Insider that you know there's 3600 store closure so far this year and they I think they just straight line to that and they said all that equates probably 10,000 this year,
do you have a model on that or like what's what's your point of you of your how bad is it is where are we are you know your Chicago and saw use a baseball analogy is this like just the first inning of this whole thing are where are we in the,
the stretch what's going on here I mean for sure,
Helen am I working on getting the department stores under a lot of pressure but they're still the center of the Wardrobe for a lot of,
in the Middle America if you look at them as like a Bellwether you've had Macy's come out and say we're going to.
Close 100 stores you that JCPenney come out and say we're going to close 138th and Sears is not a stock to recover their closing a bunch of stores.
I'm struggling for a long time so you look at those you think about with those malls are going to do in the Macy's drops off the end of it you know.
We're not even close but not everybody's announced.

[24:08] Got everybody say after first quarter with just a little. Time to judge you know we have to bunch of these retailers have you noticed any impact in the malls where.
Macy's or JCPenney went away and I say you know probably not enough time somebody that won't we can probably fast forward for you what's going to happen in that mall.
And they just know it must sees companies have not yet,
straight down analyze the data on come out to their investors and say look here's how many stores we're going to have to close based on what's going on base and all the traffic going to e-commerce based on our co-tenants me Smalls going away so there are there are.
Hi Times of closures, I mean the article you read today.
I wouldn't be surprised as a very close and and frankly even for Macy's and JCPenney the world that is in town so many stores,
to tell you what they think they need to do today based on the situation that's still a moving Target I've you know I've no doubt in my mind they'll be closing more stores on as time goes on.
Interesting Lee when we talked to retail experts about it and say you know Macy's going to go from.
Call middle 700 stores down to Mid 650 store that I don't mean to pick on Macy's just that they're good bellwether,
how did they know that's enough and do you know what an organizational undertaking it is to close 100 stores and so.
You have a wanted to see Penny 1000 stores wanted to.

[25:38] It's so physically hard I mean employment lawyers in the retail industry to go through each store and figure out how to unwind a very old lease agreement how to,
I don't mind the coach energy cause you have a lot of these malls at Macy's goes away that lets store like the gap.

[25:57] Abercrombie look at their lease and say hey we sign this you know under the agreement that you were going to have a Macy's here and look I'm going away we don't we can get out of this lease right it's it's a very very very much of a.
Spider's web gets kicked off anything start,
I'd no idea I had for bigger numbers explain that a little bit more so I'm I'm I'm in e-commerce guy so the co-tenants he thinks it sounds like what you're saying is the anchors they have their deal with them all but then like the small stores they have some way of attaching and saying,
alright we'll pay you this rent but we want that anchor to stay is that a pretty common thing and,
it is if they look at them all they say look them all desirable times has the set of characteristics they're going to want and I'll population surrounding them all within 20 minutes drive time to has so much in so many over 100,000.
Income household incomes when you look in the mall and a market that's got to malls and one of them's older mall like if your coach think about it you say you know.
Honestly you so agree to these terms that are at the top of the industry for good amols on rent but you know it's it's contingent on it being enough demand from consumers over time.
In that mall and one way to become lock that in and she say what we want co-tenancy with.
Call or some such as the following ten retailers and we want to see an Apple store they're going to the store that because we don't go to the store we don't go and open a Coach store in the mall.
Populations moved on and all the guys in a nail salons and ice cream shops left it there by such a way of protecting themselves so.

[27:31] When you go to say we're going to close on you stores boy there's a big group of people at the table for the sit down and stare at you know the Macy's closes.
How many retailers it triggers Arco Tennessee cause it allows them to get out of here allows him to move 10 miles down the street to the newer shopping center that got better traffic or we can renegotiate the run slower.
Turn down if we don't try to keep them it's just he becomes a very complex process and lots and lots of hands are at the table during those discussion.

[28:02] Do you have a estimate of how many malls will close if if you're if you kind of think 10K is directionally right on stores do you guys look at kind of what them all Impact is.

[28:13] You know our retail experts that we lean on to help us was thinking through that pointed to the maybe twenty 30% of the malls in the US eventually rule will go away.
No time frame on it cuz it for example we hosted we hosted a dinner recently with a couple of very very prominent experts and in.
Real estate in retail real estate II said just as an example and its much-talked-about you know if its ears was to end up going away.
It would take ten full years to repurpose.
Chose those Sears boxes is Sears literally just went lights out at some point and I don't have a view on whether they will but if they literally want lights out.
It would take ten full years to sit down store by store and say what is this community need.
Can we convert this into a Cheesecake Factory can we turn this into a bowling alley return a new brew pub.
You need to be a call center Industrial Center or does it just need to be pulled down so it can if there's going to be.
A lot of in a one-off evaluation what to do with each of these at the end of the day I wouldn't be surprised to get the 20 or 30% of the malls and not the numbers you were talking about.
Call now to include things like obviously Sports Authority went away last year I put some of those stores or not,
yeah those are all there's a mix there it just kind of put some balance on it 20 to 3% of miles how many malls are there in like fifteen hundred miles are in.

[29:36] Yeah I've heard numbers like that it depends on how you get into definition like cold as a retail recover them they're largely off mall that there any power centers that include,
you know a Lowe's or a Target or Best Buy a lot of times it's you know that the numbers changed a little bit depending on how you define it but I would say 1500 gas,
so 30% would be like 500 Miles closing or some some period of time down the road.
And probably several hundred of those you can't even if you live near one you probably forgot it was there like there's some pretty old real estate there.
So that's pretty gloom-and-doom any any Silver Linings in there you know I think that you know in.

[30:17] I think that I'm not a Retailer's is Dad kind of person but I do think we need to know.

[30:24] Total industry store countdown much much lower before returns in margins can stabilize on note from a lower base of assets from smaller number of stores I'm so I think that.
Who's going to be on right now on the retailers too.
Remove a Crosley to reposition themselves to be able to kind of work through some of what's coming so next year's is a consumers continue shifting online,
equilibrium of stocks will have a little bit easier time Brands like I said though the brands are sold within those part of it right like you think about.

[30:56] You know Macy's or even a Sports Authority or Footlocker there's a lot of businesses selling other people's brands.
And then you Grandpa Foot Locker Nike and Adidas and Under Armour they went and built big strong Cool website for the last five years -
Question exist before she's got a brand that are sold inside your boxes.
Available to Consumers elsewhere in some situations you going to work through that you can see some natural advantages for the Brand's who they don't have to worry about.
And taking down all these brick-and-mortar that they set up over the last hundred years or whatever might be but they got to figure out how to get there.
Product to where the consumer wants to buy it and big size and Ricky in in Europe they've got it.
Big online retailers that are not cold Amazon believe it or not and they got like a midday so since the londos and things things that are.
Call different names and Amazon it's not everybody wants to shop for everything on Amazon we don't really have any that's not have any public companies to cover.
In better just retail apparel apparel and Footwear retailers online so that it's really about just figuring out,
Mia where the consumers going to buy these products in 5 years and frankly that's the that's the question that would Flomax these Brands the most right now if you ask him the very simple question to a Big sophisticate Brand company,
just say hey you know right now you're sold in everyone in Macy's doors or everyone of.
With some other sporting good stores stores where is the consumer going to buy your product and five years.

[32:27] Is it surprising to hear unsophisticated of an answer you get from some people and it just tells you the very smart people I really don't know exactly where the ball is headed right now.

[32:38] Yeah I mean it is the obvious answer for those brands that they have to go direct is that what you're saying or what are the answers do you.

Scot & Michael: 
[32:49] Some of them well yeah they should all they all have to have a direct there's no doubt about it you're your own website.
Will be worried you know you have to skin the game to leave the Retailer's to show any third-party retail if your Nike you say look we we showcase this product this way it did really good here's a bunch of the day to behind it,
let's build out some things on your website to maximize this opportunity came along I'm use it showcase your very best product you relief pentacle.
Product you can use it to Showcase a very wide array of your product and then you have to go out to the brick-and-mortar world or to the.

[33:28] Together by retailers any other thing with the product you got to make sure it's not the same,
your Nike exercise shirt at Macy's that it is a Kohl's that is a JCPenney's got to be different product and consume any to get different things in different places so that it does you know I think the next five years will be easier for the brand cuz you don't have to deal with,
they're not they're not free of things like that is scratch your head about and say okay this stuff is quite a bit of burden to us do we go to Amazon do we even go.
A lot of a lot of the concerns they have at Amazon today or concerns they had with other blank you know insert name of huge retailer from the past.
Hanesbrands recover they they've been dealing with in Walmart's temptation to want to carry this very strong brand at a lot of mericans like on their shelves.
Same time it's really profitable for Walmart to go manufacture their own private label underwear and put it on the Shelf next to Hanes you know Amazon a lot of problems and concerns they have about going in the Amazon and what it means for them,
not exactly brand new to them but it is the next round of old retail problems.

[34:32] Yeah that it's interesting so you know we've had a lot of brands on this show and obviously a big topic for them as is going direct like it feels like one of the big impediments to go Hinder.
None impediments but downsides to going direct for them is they sort of benefit from the in efficiencies of the wholesale market so your your Nike and you you come out with a new skew and before there's any consumer demand for that skew.
All the wholesalers have to buy enough to fill all their shelves and so when when your distribution channel gets way more efficient and you're you're selling through Amazon on Demand or through your own website on demand.
Suddenly you're not selling those shoes until the consumers actually want them so that feels like that's a little bit of a challenge on the brand side and then.

[35:17] At the same time those wholesale retailers are looking at their future and saying.

[35:21] Shoot there aren't going to be a lot of middlemen in the future if we want to maintain a relationship with a consumer we need to build our own Brands and it seems like we're watching a lot of retailers.

[35:32] Can a moving beyond private label and trying to build their own aspirational Brands and you know you certainly like Amazon's got a full complement of a of.

[35:41] New apparel Brands but you also see.

[35:44] Target and you know rumor BestBuy rumored Walmart Acquisitions and all these these.

[35:52] Traditional wholesale retailers look like they're investing in the brand space are we on a collision course.

Scot & Michael: 
[35:59] I guess I knew problem you know I'd probably half of the products sold at JCPenney or Kohl's or private Brands private exclusive brands with a new design and develop in house so it won't be a new problem.
But it's same time as you know I just have a natural bias when any company brand or retailer tells you here's this thing that we're going to do big part of our strategy and our growth and.
Top really that related to what amazing at it's an encore saying we're going to do great and I got to develop.
Luxury an aspirational brands in here.
Hodges Companies got a lot of expertise in real estate selection and product you know procurement and interation of really cool questions of apparel for consumers all the sudden we're actually design and now we're going to find,
relationships of factories in China to do this efficiently in and build sourcing offices on the ground neck it's a tricky it's a tricky game.
The brand that there is Thursday you know Karen the stick to going to going to rock you on all the retail you own all the pain there's a lot you can make a lot of money if you your Nike and you sell a pair of shoes through your own website and it really efficient,
and I really high price points and don't have to mark it down and sometimes that can be for example higher than you would sell it for at Footlocker or Finish Line and that that's great and you get all the rewards right what if it's really doesn't sell,
you get all the pain,
there's no one no one to share the pain with that scenario a lot of these realities wholesale Brands If the product doesn't perform they'll go.

[37:37] They'll go back and it'll go back to the Retailer's know if they will offer you some money after the fact to help with marking down the product I didn't perform it will take them back when we Tire Factory Outlets will clearstone some through spell for consumers don't walk in here and see,
stacks of shoes or shirts on sale and start thinking bad things about our brand on the brand want that either.
So yeah that's when it kind of comes to Village and everybody's got a vested interest in not having a leftover inventory they didn't perform laying around.

[38:04] For sure I feel like some of the other.

[38:08] Challenges you hear about apparel brands in particular is I've never to bunch of times that,
did the trend is just that apparel like good apparel Casa lesson so you know pretend to be the consumers buying as much apparel as she ever did but it just.

[38:24] Cost less and therefore less Revenue to those Brands than it used to be as by chains get more efficient to manufacturing gets more efficient than all of that is that a risk for these apparel Brands is that they're there a RVs are just going down.

Scot & Michael: 
[38:40] If you look at your point earlier about near the off-price there's our who Pride themselves on having product if you're 60% below equivalent product at department stores they've obviously occupied a lot of the incremental.
Retail square footage in the country over last 10 years also you've had names like H&M.
Zara Zara in a new one if you start a Primark is coming over from,
call from the UK there you know to start a build stores on the East Coast never even lower price than any of these guys is if you think about it all every square foot of retail that's being added in the physical world and in the US,
is charging lower prices than the square than the square footage that was here before there is pretty consistent downward.
Pressure on on pricing and its industry.
Overton over time these brands of been able to manage it when you have things like a big shock to the system like,
Manufacturing in China and currency goes one way on you and all the sudden you're buying things a lot more expensive than you thought you were when you build a factory there then they can't really keep up,
with some notification Airy pricing on Apparel in the US over time in Spanish been okay but if it's not a,
can a great situation to be in when your ear pricing mechanism is going backwards on a consumer's,
Sesame looking over their shoulder and saying look I can get this you know whatever Levi's are Skechers shoes whatever it is I can get these at TJ Maxx and Knots last season's.
Product but it's so much lower on price point than enough going to win the day for me as that wind of my purchase.

[40:15] Yeah I got it and then I guess just one more on Brands the other thing you here is that the,
just the basic model for creating desire for a particular apparel brand is.
Dramatically getting disrupted right and so you know that you hear the old model,
tell it you know yet the merchant princes the Mickey drexler's or whatever they decide what's going to be hot and they they.

[40:38] You know go to Fashion Week and show that stuff and it takes him like nine months to get those products into the market and everyone buys the same thing because it has the same logo on it and you know that these days,
it's a lot more likely to be some micro influencer on YouTube that's that's driving demand for something you know in a much shorter turn then then it is Mickey.

Scot & Michael: 
[40:59] Yeah that's a great Point example of Mickey Drexler J.Crew example,
they own all their own products or they can say this is catching on Fast let's go quickly where's you think about the relationship you point to before with Leica,
Ralph Lauren in the main cheese or Calvin Klein at Macy's so much can speed up when there's no more people in the decision-making chain so there's advantages and disadvantages to being able to speed up and Chase Trends these days and say that.
There is a degree of every brand that opens their mouth and retails up in their mouth they've got a speed and issues going on to try and speed those things up to chase Trend faster I'm to your other point and back in the day what you know what you want to say to wear until I was cool as what.
Okay, cuz they're good Dell Latitude to a good people at Macy's,
found the product they brought to your town in the stores that and I'll meet you looked at it said that's an aspiration purchase me this when I want to look like it's what I want people think of me when I dress and.
Remember being a kid and you know we had to go we had to go on vacation California for me to get a pair of vans that I saw in a movie on some guy or something like that right like those days are done.
So now your point see somebody I didn't scream she somebody music video she somebody on YouTube that's an influencer or so you know like coach just signed Selena Gomez one of the most.
The highest Instagram following as you can imagine the amount of viewership that they get by going through her and is also.

[42:32] And with younger consumers there's a bit of a bit of social currency that happens within the first kid at your high school to show up at the party on Friday night with some Brandy song.
Funny YouTube clip in the background and you know you figured out where to find it if some small retail in California on the internet and how to ship to you and I was yours you found it in your first and you want when call that social currency.
I'll be in the first one to find that those kind of things just did not happen,
15 years ago or more so for sure these things are changing very very quickly it's a whole different mindset than one old Merchants who used to really do a great job of picking out very good collections with her own for 12 people.
Thought about it some it is very different than it was.

[43:13] Yeah yeah God bless Sean Penn for wearing those vans in the Fast Times at Ridgemont High.

[43:19] I'm tracking you know one of the insightful things I heard recently and I wish I could remember who I first heard it from but they were talking about that,
Instagram problem and that like in the old days you were you know if you were a kid in high-school you were one of two hundred or maybe even one of 2000 and you know it was possible to be,
pretty unique by just getting to a good store and you know spending a little bit more for the the premium product or whatever but but.
Trying to be unique amongst your your pool of 10,000 Instagram friends is a is a whole new level of Challenge and you basically can't do it in a mall.

Scot & Michael: 
[43:59] Yeah it's pretty tough now it's um.

[44:02] Yeah I'm a girl and going to school and then in the very clear Trends just ran through your school like wildfires like if this was the aspirational brand if you remember some of the Brand's eighties and nineties that ran through like in big big size,
as friends you know like we just had a big one was already we still have on with you know with Adidas selling their very old decades-old 30 year old,
Superstars and Stan Smith every kids got have a pair and I was like a clear,
old school trying to me like I just came through and that's what everybody wanted that's how I used to be those are getting fewer and further between it's much more and micro merchandising and individuality.
You know the formula for that is really not you know going to your traditional department store,
and seeing you know what they got in in the stacks and racks in the stores he's this what num,
one follow-up on Canada brand topic,
what do you think the answer is in five years where is the consumer going to buy your product what brand and I know this isn't your business but if if you left Wall Street and went into Consulting and you're you're sitting there at McKenzie or,
what else kind of Consulting places and debris and asked you what what what you think the answer is.

[45:18] I do think we need I think we'll get to a point where there's going to be some platforming I think that right now if you and I wanted to go start a brand today.
Very affordable relative to history to do that to find decent manufacturing capacity and in Asia or elsewhere bring it on to the US stores to get good distribution from.
Yeah most of the digital native eCommerce sites with you know that are.
Trying to be better brand your good best in the inspections good better best trying to be better and best there still you know they're still fighting for their namesake as well,
so you can probably find pretty good butiki at distribution for a brand right now if you're a startup,
no good better better best friend though so that guy was his barrier to entry right now is fairly low but I don't think it stays well I think it's going to go up I think it's getting and he's getting harder to compete I'm priming,
everybody walking around with them all in their pocket these days straight you don't have to walk in the store and haggle with somebody I know the lowest price immediately thanks a lot to hear your good friends at Amazon I know the lowest price that I can find this thing on,
quickly and I walk into the store armed with it I think it's going to get harder and you're going to see you know prices continue to compress and I don't know if manufacturing of it cheaper or more expensive but,
listen to chasing low-cost manufacturing overtime,
then you go through some of the things we were thinking about early in the year were a lot of these stocks got hit really hard when there was talk coming out of Washington they were going to put a tax on the border well guess what industry Imports just about everything.

[46:51] From across the border to these stocks got hit really really hard.
I'm at station one that was like a primary conversation you think about that and I think you're going to get to a point where you going to find more these brand saying you know what,
I want to get myself attached to a big supply chain like a VF Corp mph owns a basket of brands are coaches now certain owns and Brands I want to leverage their manufacturing efficiency,
relationships in Asia there and branding internal consultancy whatever the hell you know if you have courses very good at building,
you have them on the show before like North Face and Timberland and vans they're very good a Consulting these guys on on their marketing strategies in their distribution strategies I think the value of that is going to go up.
I won't be surprised they're still companies of some size but I wouldn't be surprised if you see much more fragmented apparel and Footwear Market going forward.

[47:45] Got it that's a good Segway the you know what kind of nibble around the edges and it wouldn't be a Jason Scott show if we didn't spend a fair amount of time directly talk about Amazon I realize they're not in your coverage universe so I'm not going to ask you like Eva. A three decimal places or anything but,
you know how from,
The Winds of your coverage Universe you had kind of Macy's probably 3 years ago Terry Lumber and kind of famously said oh good luck and apparel you know you guys won't be able to,
deal with returns without having stores and now that that that turned out to be a bit of a bad call are these guys still in denial about Amazon do they have a strategy or where where are retailers when it comes to their their Amazon strategy.
You know there's been a lot of turnover among Executives in the space lately and one of them on our way out the door actually said to me recently.

[48:35] I sexy and I probably a lot of headaches and over next few years probably retiring a great times I like that,
Amazon the competitor to corrected me on that answer you know or Amazon is just you know if you think about your Harvard case study were the four drivers of consumer purchase and think about how big convenience is in the fact that everything can get delivered to you.
Today's our last now that's a real kick in the gut have to deal with for anybody so I would say though I don't think Terry was,
strong though I don't say no I think that the consumer does like having a place nearby to go return things and you think there is value in brick and mortar it doesn't look like it and looking at some of the stock prices in my group.
Because they're all got to go from a lot of brick-and-mortar to a lot less brick-and-mortar but I do think there's value in store count of a certain size and then there's a lot of.
There's a lot of reality in in his comment that you know about what Amazon has been are not going to want to deal with and look they're not going to go away it's a high margin category and you can make a lot of money on it but.

[49:40] Right now if you look on their on their website it really looks like it's it's much more focused on predictable.
Inventories and in categories that are more basic that they can look at and say we know with some certainty,
how much is it going to go out the door and it's much less in categories like you would expect to see at like Nordstrom,
make an example of those guys got a nail fashion every quarter it's like we're a very fluent person who cares a lot about this season,
does the shop for their clothes and when that stuff doesn't sell,
spring they got to sit down and come up with a markdown strategy get it out the door figure out how to work with friends to you know move product Crown all those things that's a whole different part of retail and just figure it out you know,
predictable inventory flows and categories like you're basically vies jeans or basic hanesbrands,
underwear and t-shirts and stuff like that but a little left over at the end of the season,
coin in Iran this a Tad earlier but I want to drill into it you've you've done some really interesting research on you know what,
lbrands dagradi Amazon be kind of the in your coverage Universe you have the book in so you have Under Armour who is dramatically embraced Amazon and you have Nike that's essentially shunned Amazon yeah what.

[51:00] Where do you think bran should fall on that Spectrum or you know what are they talking about what are the kinds of topics that the brands are thinking about in this hole kind of Amazon dilemma.

[51:09] How's it going question we do a lot of work on that and talk to a lot of people in the Amazon ecosystem on that at the end of the day in this category would specific is Brands care the most about what their product.
Looks like and and pricing of spray there because our pricing but.
I want name brand but she go on Amazon right now and search on one of the Brand's I covers very very.
Basic product and is it in one of Ryan's doesn't have a relationship with Amazon the search that it comes that comes up on Amazon is,
it won't take you long to realize that is not what that company wants its product looking like a lot of it is like doo took a shirt out of a box,
it's like rain cold and they just threw it on table and took a picture of it now it's on Amazon instead there's a lot like there's not like a wrinkled shirt.
I am at the top of the searching right so.
Those are the things that these Brands care about like they need to inspire you to like live a better life by the clothing that you wear and that's what he seen all the Billboards right and that's not always reflect and I am so,
that's what I'm thinking about there's trying to think of it then you go like I'll call it out because it's writing it down really nice job but like Levi's,
research on Levi's on Amazon and you click on the red Levi's logo itwist you away to a virtual Levi's shop and shop at Scot.
They're advertising campaign videos that they created at Levis that show the product exactly how they want on their models you put into the product full size runs full color runs it's like you know you're actually dealing with like.

[52:44] Hundred percent legitimate Levi sales and leveraging all the great things about Amazon same time.

[52:50] That's what all the brands are trying to figure out now I don't know if if it is Levis just happens we first there because they cut some kind of a different deal or accept less profits upfront or anything like that but,
they're in their first brand of the great example of really doing Amazon well in the consumers us,
consumers I think everybody wants to figure I will have to figure out how to do that,
eventually because look there's not a lot of transaction growth in the US you're either talking to folks like you J Max and Rossiter.
Drawing category you talking Amazon if you want category gross everything I have to wrestle with this eventually.
But those are things that they care about the most and probably the things that you know the only sit down to table impound out fama's on the most of the next few years,
yep and then I'm by no means a fashion Guru but I figured you'd have a point of you on this they just announced today that they've hired,
I'm going to totally butcher this but Christine Beauchamp is that it,
and I think she's been around a lot of your coverage universe as kind of a well-known fashion executive Williston It Ralph Lauren and other places maybe Jason,
nose better not do that is that a what's that mean to have her at Amazon.

[54:03] Go to the point of seeing when I said earlier that they're not going away in this category and there's some things that there maybe not the best at.
But in no way should anyone expect them to go away they're going to keep investing in it I think they bought a full.
Square Block in Brooklyn to build a photo studio for their apparel business a few years ago and I remember riding around in cabs in New York and half the taxis in town had a Amazon fashion.
Advertising on the top of the cab there you know you're not going to go away I don't I don't I don't think I was foolish enough to think that they're going to go away and stop pushing in this category.
But you do see you just keep moments like that go by and you're like well this is a turning point this is the datapoint to they're getting more not less.
Serious about this category they want these brands in I guarantee you they're circling the Nikes and Ralph Lauren's of the world of European luxury guys they want they want those guys on Amazon,
very very badly and I'm sure some extent all those guys want to figure out how to have a very and profitable relationship with Amazon to,
recently back around like firing her like a reminder very serious about this.

[55:07] Yep in that.
I'm always trepidatious when I anytime I hear this sentence yeah but this this next category will be extra hard for Amazon and have unique barriers because I just feel like they've.
Knock down so many barriers in categories that they moved into.

[55:23] The one you do hear about a lot lately is that the higher fashion guys go yeah Amazon has totally done great in apparel but.

[55:35] Fashion is a whole different thing from apparel and and you know Amazon doesn't have the right DNA to win in fashion like.

[55:42] Do you hear that and what what what's your point of view there is like should the fashion guys be worried about Amazon.

Scot & Michael: 
[55:49] Absolutely you know there's there's a bit there's a bit of a stigma about being you know what,
how do you call the everything store for anybody right like what I'm Walmart or Target or any retailers in the past is the commonly everything store in the country there's a certain amount of like you know I'm going to,
going to go to the new store in town called cold cuz I don't,
I don't really like buying my shirts at the same place I buy my dog food in toothpaste and I want to feel like a fashion relevant human being and and things like that but you know at the end of the day if you kick out that.

[56:22] A leg under the stool that is convenient it's just so easy to get the stuff and it kind of got the product that I want anyway and it's called fashion and and high fashion stuff if they get their hands on it and they can.
And they can sell it to me in this way that I like buying things,
I would not assume that they're not going to be able to figure out fast and look a lot of stuff at shirts and pants at lightweight foldable it's very easy to ship it's you know I think I'm on your last so you were talking about them getting into Pharmaceuticals and stuff.
What can seem Easier by comparison and selling high-end shirts on you talk about trying to figure out how to get into Pharmaceuticals.

[56:57] That absolutely one of the X and a gun.

[57:00] Amazonians on the show was talking about a category like live plants being a little tougher and then I finish that show only to find out that my wife had ordered a bunch of live plants for aquarium from Amis.

Scot & Michael: 
[57:13] Nothing safe yeah I got a life plan for Mother's Day on Prime now it it came it was really well done.

[57:25] Impress events Garrett.

[57:28] A couple things I just want to cover up quickly one of the plays were seeing from a lot of the traditional department stores is the if you can't beat them join them strategy and it seems like every department store now has a,
in an off-price concept is that.

[57:45] Of a long-term viable strategy for those guys is that you know they they they make a lot of noise about it not being cannibalistic and and stuff but.

[57:54] That that seems questionable.

Scot & Michael: 
[57:57] Yeah we'll see I say it's now it's it's always easy to set up 10 or 20 stores in and look at the economics and said he was first time 20 that we put in the very best markets we could think of to do this they're going really is going really well what's going to the next 20 that's fine,
mistake to think like that that's good economics but you know we'll see when it when it become you know to become a scalable business you know what.

[58:20] If it's tough to think about you think about it like what people at TJ Maxx and Ross to their kind of like you know there's other Like the Wolf in Pulp Fiction either here to fix problems for you if you got too much inventory at the end of the season,
or TJ Maxx we can buy some of this leftover stuff from you Levi's or PVH Calvin Klein whatever it is we can buy,
a lot of it we got a lot of stores and we can break it up and then do it we call camouflages for you across thousands of stores that consumer doesn't come in and see.
Tile to the ceiling of Calvin Klein shirts in there like there's a problem with Calvin Klein based on the small number of units in here right so,
that's a lot of value for them to you know that they put cash on the barrelhead take a huge amount of inventory off your hand at the end of season and they never come back from Mark talamonti so the off-price there's a lot of value like that you know I think about.
Your Kohl's or Macy's or even Stacy Penny tries to get in something like that different animal,
same guys that are buying NC's and stuff from you her going to coming back to you and saying every want to cut it also serve this functionality of like solving problems but likes on the problems occur in our other stores so we're going to,
figure out the sitter's processes you it's it's a much more complicated say.

[59:33] Got it one of the so one of the other Trends who wanted to kind of.
Check in with you on is this athleisure kind of trend it is very hot and and going really well and you glue lemons in there you put Nike and Under Armour in there and there's a lot of other kind of things going on there but it seems like Nike and Under Armour have kind of,
slow down is that something else going on there or is athleisure kind of run its course.

[1:00:00] I don't think I've leaders down there still a lotta man from the retailers who are,
questions like that I was think about who's standing closest to the consumer and has good insights as to what consumers town and they want in your calls in your Macy's in your JCPenney's or they're all you know still expanding their,
space dedicated to these Brands you talking about and Lululemon slow down a bit and on most recent quarter but if you know I would say there there,
far from the worst situation I have in my in my coverage groups I still think athleisure is very much a,
Megatron it's been going on with a Lulu Lulu I killed in 2007 Under Armour 2005 it's a little it went on for a little too long they call it a fad or Trend I happen to think that a lot of problems right now,
yeah even the best of the brands we have trouble when the top 5 retailer in the US goes bankrupt and that's what happened last year was Sports Authority.
Search all kinds of extra inventory sitting around there's there's unplanned liquidation sales going on here and there that are causing distractions and you know,
your point earlier it's an industry that has a long lead times Brands order stuff from factories 9 months ahead of time if I'm boats coming over from Asia,
right after retailer shut down and we are shut down in middle of last year already ordered Christmas.
Ernesto shows up in the stores and I think that's causing a little bit of pressure on pricing.

[1:01:30] I would say that there is to be share a little bit of complaining from the From The Trenches about the impact of some of the Innovation coming out.
Lately from the brand hasn't been a splashy to really give the consumer a compelling reason to come on into the stores so that a split between the two,
Jason are doing our best I think we both.
That's a lot in yoga pants so hopefully that'll that hoe.

[1:01:59] Straight that's that's an image I won't be able to unimagined what about Footwear is it basically the same to the transit or playing out there or is there anything unique happening in the shoe side of the business.

Scot & Michael: 
[1:02:11] Nina Footwear it has slowed a little bit to be fair I would say you seen a lot of momentum out of Adidas over last year if she Nike Under Armour slow down and Footwear side.
In general the Footwear category is I would prefer to apparel it's if it's not very hard to manufacture apparel.
And it's you know there's a lot more competitive encroachment all the retailers get a great product and from the brands they eventually got to try to go figure out how to do a private label version of it and there's nothing two factors lined up waiting to help you with that.
Is much different actually really hard to manufacture the stuff does not as much competitive problems with.
Private label things like that but has slowed down a little bit there's a little bit of lack of innovation there but I would put my money on Footwear coming back faster than apparel though,
so once we started, de 30000 foot level and kind of take you back there to close it out,
sounds like we're going to trim 30% of malls as last stores to close we're over stored those kinds of trends,
and where does it end Dewey Dewey level out at some equilibrium or are they going to a bit of a tailspin here because no one of the things I've seen is when these guys do close the stores they,
you know that seems like they're always a little surprised by how much revenue they lost like that there seems to be a little bit of a domino effect,
we've also heard from folks on the show that it hits our online sales how do you how do you land the plane when this is going on.

[1:03:45] And that's why I'm going to the point earlier was about you,
we hear brand you have to we're going to be distributed in five years is not clear answers the same for retailers they're very much answering like look we can see you know with some reasonable visibility out 12-18 months in our business we're going to need,
you know and and and check it again I mean Macy's like I said his closing Hunter this year they did close 60 in the prior-year in a couple before that so it's is getting bigger right now across the industry I think you'll end up,
Luc Big Brothers change like that and like the for 600 store count probably eventually if you got and you got some stores like you know like Lululemon or Kate Spade which coach toast,
what's the starting point is a very low store count and they probably just by cut it off at that point in focus on how to your point you close the store there's been.

[1:04:40] There's a lot of focus on transferring your sales right if you're if you're a JCPenney or Kohl's clothing store in the market you want to try and test a few of these and figure out what the best way to kind of redirect traffic to your next closest store e-commerce site.
Please retail if it'll just flat out tell you look when we close the store we lose every penny of the sales in that zip code it literally goes to zero,
and there's more hopeful people that are close stores and bat and I won't think anybody out but they say we think we can retain about 25% of the sales,
a nearby store Ecommerce I mean the range of the answers that different companies have had for what they can retain is so wide that I would consider,
I think there's a huge amount of risk if you hear anybody tell you were going to retain those fails and it put a lot of things to choose or not because you're not trying to figure it out but,
I got to go lower how much sales did we lose as we close the stores is very hard to predict and the other variable is,
what happens to my forecast I laid out here about what I'm going to retain in my stores when like a bunch of other stores around me close that I didn't really think about.

[1:05:44] And that market just goes colder that mall goes darker you know everybody's kind of reroute to them all down the street that I wasn't planning on them going to.
I think it's going to be the ability of these guys to forecast their sales which reasonable certainty is fairly reduced right now.

[1:06:04] Very cool and Michael it is happened again we have used a perfectly good hour of our listeners time so we want to thank you very much for joining us and if folks are interested in following a research online where can they find you or follow you.

Scot & Michael: 
[1:06:18] Yeah that's what everyone you know our clients have access to research we have a lot of private Wealth Advisors associate on the best of you get access to it and then we do we do a lot of media like this so we're always early findable somewhere.

[1:06:35] Thanks for joining us we really appreciate it.

[1:06:40] Until next time happy commercing.

Jun 2, 2017

EP086 - Dorel Juvenile Group Bob Land and Jamie Dooley


An interview with Bob Land is the VP Consumer Engagement and Jamie Dooley is the Head of E-Commerce at Dorel Juvenile Group.  Dorel Juvenile is the world’s leading juvenile product company and has over 11k employees globally. They have a portfolio of 11 brands include Cosco and Safety 1st.

In this interview, we discuss Dorel's to to market strategy, including:

  • Wholesale
  • Direct to Consumer
  • Marketplaces
  • Physical/Popup DTC
  • B2B

In particular Dorel is a hybrid seller (1p and 3p) on both Walmart and Amazon's marketplaces.

Jamie will be one of the speakers at "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, hosted by Scot Wingo.

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

Episode 86 of the Jason & Scot show was recorded on Wednesday May 24, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded live on Wednesday May 24th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot, Jamie, Bob:
[0:40] Hey Jason and welcome back Jason Scott show listeners you know Jason some of the feedback we get says that some of our jokes especially yours are juvenile so we have perfect guest for the show tonight.

[0:52] Internist that that feedback is mostly from my family.

Scot, Jamie, Bob:
[0:57] Guy cuz they get to live with them all the time so tonight we're really excited to have two members of the door old juvenile group e-commerce team dorel juvenile is the world's leading juvenile Product Company and has over 11,000 employees globally they have a portfolio of 11 Brands including Costco and safety first,
we're excited to have on the show Bob land who is the VP of consumer engagement and Jamie Dooley who is the head of eCommerce welcome Bob and Jamie hello.
Alright cool so what what part of the world I'm in Raleigh Jason is back home in Sunny Chicago where you guys at.

[1:36] I am in the Backwoods of Southern New Hampshire and put our company is actually headquartered in the u.s. in Foxboro Massachusetts probably about 15 minutes away from the.

[1:51] And I'm in the back words of Boston okay so the first Speaker there was Jamie and II was Bob for those either don't recognize their voices.

[2:01] We always like to start the show by getting a rundown on your background and how you got to your current rolls and maybe a little bit about what the the scope of your role is now so Bob can we start with you.

Scot, Jamie, Bob:
[2:14] Sure sure I'm I'm kind of the the old man of eCommerce it seems I started off in eCommerce in 1995.
Not sure how often you you hear that but I work a Polaroid and I was a product manager on it,
try to call to make a print you know those machines that you going to a CVS or Walgreens and you can't hear photo,
we did that 95 and we use the internet to you know send some photos to the Internet so it was.
Kind of an early beginning I went to Rensselaer which is a little College in Upstate New York engineering school lunch and 1999 and if you know those guys.
Happy tailor.
And then for CVS Pharmacy in around 2001 when I got into the affiliate space know if you guys are the affiliate world like I do but I started.
And a Commission Junction.
And then it starts from 2006 all the way to 2011 where we got bought by rapper 10 which is a pretty large e-commerce player out of Japan.
That's why I stayed for a while on their leadership team and then found dorel that's our video ad from our new CEO recruiting people for a digital transformation so I've been there been here ever since.

[3:44] End and how long is ever since when did you get to dorel.

Scot, Jamie, Bob:
[3:47] The three and a half years but then e-commerce terms is talking about sweat 7 is that the multiplier.

[3:54] I think so so you're off probation then.

Scot, Jamie, Bob:
[3:59] Double secret probation.

[4:02] Awesome in Jamie what about yourself.

Scot, Jamie, Bob:
[4:06] Well I'm just tangentially my probation officer I need to call him after this process will that I'm a giraffe.

[4:14] That was one of the conditions of your parole if I'm not mistaken.

Scot, Jamie, Bob:
[4:18] And absolutely was so so I went to MIT for graduate school.

[4:24] That's like a liberal arts college in the in the Northeast.

Scot, Jamie, Bob:
[4:29] Yes yeah it's a little small school and I actually I was one of the only people in my graduating class but actually went into retail so I would I got recruited out of.
Alabama teacher to go work at the Bayern brick-and-mortar for target with snow very traditional Japanese e-commerce go go to MIT and then go into rock music.
Has the buyer of rock CDs for for Target.
And then what is a brick-and-mortar bar Provo Target in and Staples and then ultimately ended up back here in New England working for Wayfair where I was.
The director category management for a number of categories including the baby categories that I was really my first entree into the baby space as well as toys and game rooms.
And ultimately went to Dunkin brands or Dunkin Donuts headquarters where I where I live retail merchandising in eCommerce and then more recently was the,
director of e-commerce merchandising strategy for Toys R and
Most recently I've been at the route for about a year-and-a-half now and I'm head of e-commerce where.
I actually came to the company name because Bob and the leadership team and painted a really exciting vision for.
Transforming what was already a very well-known company in the baby's face into more e-commerce focused and digital organization.

[5:59] Very excited to a part of that change over the last year we made him take the Kool-Aid right off the bat.
I was keeping track and I think between the two of you we've got 480 of the IR 500 so congratulations on that careers.
Pretty robust set of companies to work for thank you.

[6:23] So what's up let's kind of started a high-level and kind of work our way in peel the onion is at work so,
you know you guys were at retailers before and a vendor there and now you're at Brand so tell us a little bit how do you guys think about channels and then just just,
macro online offline in and how,
no important that is for you guys dabs about you in so that they must be pretty important and then as we know and then within the channels within online I'll pry have a follow-up so just start there.

[6:58] Sure so we saw into a number of different channels and just high-level so you guys are so of the listeners and everyone understand.
We were the largest manufacturer in the US of baby products that everything from strollers car seats to infant Health Products like thermometers.
Safety monitors and probably the product.
People probably with his the Baby on Board sign in a lot of cars that that is so when we when we think about Channel there's obviously we went to the traditional brick-and-mortar retailers.
We we silent appear quite online retailers as well.
We also have a very strong and growing DTC Channel weather and I can talk a little bit more about you what comprises Rd to see Channel marketplaces.
Start with kind of don't think of Market places around my marketplaces as part of Vita C.
But if so that's probably another Channel we looking at and then we have we we have done physical stores and pop-up stores so Wickham orders is kind of our own channel.
And then we have some B2B channels list.

[8:18] Cool so Mom.
What your summary of the scope of of online and is this kind of guys or Ground Zero or is there been some progress.

[8:29] Yeah I think we've had some Dennis progress over the last probably the last year-and-a-half and in terms of not over not only just a digital transformation in the mentality of probably approach,
e-commerce but from a sales perspective as well so the industry.
Depending on the category were and we Runnin so many different categories and Rd Commerce penetration ranges anywhere from 10 to 50% off,
30% and we're certainly not work with a lot of our competitors haven't been at and wait there to know that we're certainly at the high end of.
About scale in terms of.
Penetration relative to the rest of the industry and we're obviously a really big company were bitching about a billion dollars a year.
E-commerce business is certainly one of our fastest growing parts of the business that work cited about that so we feel like.
But you were going to really embraced the change and we continue to see things coming out of the hangout e-commerce.
It's kind of nice I was allowed to go as broad as we have.
In that you know we didn't when I you know only doing gay to see or only the e-commerce group,
where in the space we're going to be call a consumer engagement but really it's we have the the brand marketing budget as well.
We have call center we have to see via Parker places with several different groups under kind of One Umbrella.

[10:06] So we from our perspective if we you know we feel that we should start selling,
Autoflower call center upselling services or things like that we're absolutely he was in our Charter to do something like that so it's it's a nice bit of freedom,
inside of a relatively large company do you guys operate at so we had Greg,
poster on from VF Corp and they they're kind of like a sinner for e-commerce and then the brands kind of feed off of that in other places other,
other kind of houses brands with talk to there's almost like independent groups that kind of run things how are you guys set up at a macro Essence macro level.

[10:49] We're a core team so each one of the brands.
So the five really that we operate out of out of Foxboro and.
The week of the group the go-to-market team on once the NPD process the new product development process goes to a certain point we do all the launch planning for the company,
read we really don't get into Channel management is probably what we draw the line with the sales team but it's really a core group.
That that.
Works to really extend the the brand marketing so the brand teams really only get to work on product development.
And core brand development and then we really do the activation now part of the brand.

[11:38] Got interesting you know,
I'm always fascinated I have some clients that are brands that very robust direct-to-consumer business is and then I also have some some brands that are super early in their DTC journey and those guys are always terrified about the channel conflict issues,
I'm sort of assuming by how robust your your channels are that that that if there were any concerns those concerns of sort of played out in the past is that the fair characterization or is that still something you have to Grapple with.

Scot, Jamie, Bob:
[12:15] I think we still we absolutely grapple with it everyday I wouldn't say.
It's it's a huge obstacle for trying to run eCommerce but we're certainly mindful of.
Are we evolve our Retail Partners as we're managing to the Sea,
and I think we've approached it where we we don't we don't want to actively compete with our major Retail Partners uncertainly in my career taking Amazon honest is never a good idea.
Walmart or any of the other.
Major retailers video into our goal is to provide regardless of the channel to customer purchased directly.
Rr1 PV terrorism cell,
on the marketplace is and then our call centers in P2P our goal is ultimately to have all those channels work worth in Harmony and not trying to shoot against each other first.

[13:17] Ghana and I'm assuming you're sort of Court digital team isn't just a supporting the DTC so you're probably also providing content and assets and stuff for your for your 1p partners for their own e-commerce efforts is that.
Is that true.

Scot, Jamie, Bob:
[13:32] Yeah that's absolutely true I think that's part of how we tried to,
just saw the vision to our Retail Partners and throughout the organization is that what we do from a contract perspective or everything that we're doing to enhance the customer experience online is certain Morrison.
Healthy overall company attorney just to this point it's taking awhile No 3 or 4 years now.
It's like a data Liberation movement had 7 or 8 products,
catalogs you can spread all over the world all these different databases and recently called salsify a kind of bring it all together.
And really once we took moves like that and really didn't rely on Legacy systems anymore of your completely rebuilt the marketing technology Stacks we we train the prods managers to develop,
content in in you know the way that it should be developed for online so it was kind of it's getting to a point where it's a lot easier than it used to be.
Wow the barriers have been really knocked down at not to say that we don't find new barriers kind of every week I'll place in front of us but I think the systems that the kind of the level of.
Citizens have a really empowers everybody we would taking a lot of cost out of the business to you nobody not by giving off of these Legacy systems cell.
What a nice Pivot Point here.

[15:05] Yeah I find that.

[15:09] Often is a cost savings for brands that you know in the old world you under nose to you or treating the same content multiple times for multiple touch points and when you're when you get those more robot systems you get better content reuse often.

Scot, Jamie, Bob:
[15:24] Yeah I agree absolutely we also we're spending money in the wrong places,
so you don't know gone are the days we have to do $30,000 photo shoots for a single product launch as far as I'm concerned for dorel anyway.
You know we do social,
social photoshoot we invite you know parents who live within 30 miles of the office to bring their cute baby in for the day and we shower them with gifts and you get amazing photos out of a session like that,
and you're doing consumer engagement so it's kind of my fault now.

[15:56] Place very interesting we might want makes for that more but I do want to touch on something you you introduced a little earlier so Amazon is one of your Retail Partners you're selling to them 1p you're also selling on marketplaces and I'm presuming one of those marketplaces as is Amazon so you're sort of sailing,
food through two methods and we often call that sort of a hybrid model is that do I have that right and if so can you can you talk our listeners through how that's work for you.

Scot, Jamie, Bob:
[16:31] Sure yeah and that's absolutely right yeah we are hybrid we we've sold by 1p for over a decade.
1 times and then we launched on Amazon Marketplace about a little over a year ago and it just took off and fantastic and.
I think we have a really good partnership with our vendor managers on a one piece side and we're we're fortunate enough to have the Rangers for top managers on the marketplace side so I think so.
Yeah meet me at some pretty wacky goals to his phone e-commerce perspective.
Last year and we beat them pretty and within certainly the marketplaces were a big part of that in addition to the overall eCommerce performance.
Water brands I talk to you they get really confused by this that kind of say.

[17:24] Alright so I get the whole sale thing why would you have 3 piano,
an answer to this. Like from from your perspective you know what was it that led you to kind of explorer that and and what are some of the levers that gives you to pull in the in the Amazon side effects.
I think for us when I got hired I was hired to talidi to see and I don't think we really knew how we wanted.
Focus mostly on transfer store on marketplaces physical store.

[17:59] What is strong physical store on sales revenue stream in Europe.
So I looked at it from a wax way and I think from from traffic perspective certainly it was it would be easiest to go after online marketplaces that was one of the.
The major factors that. I thought about when we were.
Trying to decide which do we focus on first focus on all them now but you only have so much resources in the beginning.
I love that we have the safety net that you've done your podcast the parking lot about craft items and then we can go.
A safety net for when or if Amazon decides to send to crop out items we can put them on the marketplace pretty easily and then.
Our products kind of engine in six pockets and I talked about this in the session I do,
and I are coming out where we will get it from A New Perspective an existing catalog perception online on one exclusives or what would call Alexander's.
Accessories and then exit 17 closed. So it gives us the flexibility to.
To go in and decide how we're going to approach each one of those product buckets for each one of our friends in our portfolio and gives us a lot of options for how we want to we want to drive sales for each of those.

[19:31] Graco so in the early days how much skew overlap is there between 1 p and 3p a lot of the folks I've talked to they the first explorer 3p because you know they presented,
10000 skews the Amazon Amazon spot 1000,
and if you would initially is a way to get the rest of their product line up there is that the case with you guys it sounds like there's a little overlap there cuz you do that safety-net kind of do listing approach.
So there's absolutely no overlap on the Amazon side Amazon actually doesn't allow that so if anyone from Amazon is going to kill the lamp.
What we and other and other Mark of places that does allow us and a little bit of a safety net so if the one piece side goes out of stock already.
The house of a three-piece.

[20:27] In just a clarifying question on the overlap.

[20:33] So does that include out of stocks so if if Amazon carries ask you and they go out of stock can you sell it as 3p until they come until they make another by or or do you just stay away from those cubes entirely.

Scot, Jamie, Bob:
[20:48] Why I think this.
If you're if you're sticking to the letter of Amazon's policy is that if Amazon carries an item or merchandise is an item on the one piece I'd you can't set that I'm up,
on the three people and their algorithms actually flag,
you and tell you that you don't know what to do that if it if it's a text if you have an overlapping you on the marketplace.
There is any one of the other.
The oversight that a lot of people have is that it's not just really one p vs 3T there's three different types of freaky and three different types of One Piece One of the types of one piece is from where.
You're you're not the seller record it's not a Marketplace relationship with one.
Amazon is still the seller record but it's very much like what you talked about Jason if Amazon goes out of stock it automatically defaults to a Dropship order within our warehouse.
That's almost like a Marketplace you can take advantage of his laundry feeding the SI weight.

[21:55] Got to and have you experimented with any vendor the field FBA stuff in your portfolio.

Scot, Jamie, Bob:
[22:03] Yes absolutely we actively use a PA now and we continue to work out any but the cost of shipping is one of our biggest challenges and seven e-commerce.
E-commerce player and certainly you as a friend so FDA is certainly getting more expensive so we need to make sure we're watching that obviously is a very.
Very powerful traffic drivers.

[22:33] Yep.

[22:34] And then on the one being three-peat one of the the complaints I often hear or one of the obstacles to being a hybrid seller is obviously Amazon has tools for One Piece settlers in Vendor Central and they have this Seller Central 4,
for three-piece hours do you use those tools and just use them separately,
play for both sides of your business or if you look at any of the sort of third-party systems that try to agregate those two tools.

Scot, Jamie, Bob:
[23:04] Yeah yeah so we are we both we do use both systems vendor Central and Seller Central.
Anyone who is both knows that the day that you have available to you on that much more robust.
Been trying to figure out how to drive more cell weather looking stop at the conversion or just all the metrics the jobs available.
And was your business even on the one piece side even if you have one with the skull premium Ara.
You don't have access to that kind of data so to answer your question yeah we looked at a number of third-party Data Solutions,
some of them I think some of your other around previous speakers on the podcast like Lisa or Andrea,
or one foot retail or friend you those are the solutions we've looked at more about the more we're about to sign a contract actually this week with one of them as you mentioned between,
what size of the business in concert,
cool um I know you guys are real active on Amazon advertising and we've touched on that with some pass gas but would love to hear how you guys think about it and maybe just for listeners you could recap,
the I think people get kind of I know I do get confused there's all these kind of alphabet soup that gets thrown around and since your hybrid you have every,
every tool available to you so maybe give a quick rundown of the tools available that's one p and 3p and then which ones you use and then would love to hear.

[24:40] Any thoughts on the efficacy of those programs.

[24:45] Sure so at a very high level I'm just so many different programs that Amazon has but I mean I think the paper forms from.

[24:55] Formed if you were wild about nine months ago.
There was just a much more defined difference between what you have available is a one piece and what you have available to speak also AMS has three different types of.
Advertising on there is lots of products there's others headlines and then there is,
but you only as a 3p so are you only had access to sponsor products on the MSI where is One Piece a drive axle.
So from that perspective on the one beside you I talked about this even a couple of months ago and today is a one-piece so are you have just much more.
Options available to you from a marketing perspective advertising perspective available.
What we're hearing is that all three types of of a nice advertising are going to be available,
Sellers as well so I think you're starting to see Last of Us and certainly is not about your podcast Amazon is going after the digital advertising.
I wouldn't be surprised to see all options offered to post 137.
On the AMG side.
It's more of a branding experience if I necessarily something that's going to be easy you usually try to sell so we can use both but though.

[26:32] We found that at least in the past AMG is is not have the tire off an artist is a mess with.

[26:42] Contra listeners OMG is,
more like banners and it kind of brand oriented advertising so CPM style advertising in AMS is more search CPC type advertising and there's there's several flavors of it with an Amazon of where things show up but that's kind of the the broad distinction there.
Right and I am hearing about a lot of different beta program that there's the testing on the AMD side 30 when I getting much better be targeted.
Open up advertising office again so.
I think it'll be interesting to see what I am to get better I would have said,
did this kind of a question and what's what's take this out of dorel just for a second cuz you guys are,
you have been around that at retailers and all so do you guys think there's risk to some of the other AD companies out there you know so pretend you or at Toys R Us made as bags ample and you know I'm sure they have a huge,
Google about didn't you know,
seems like Amazon lose a lot more your there's the stat that always comes out that 55% of products are just started Amazon think that's a bloomreach stat but then there's also a Forester head supporting data on that up till about 2 years ago so,
you know it it's kind of interesting to think you could this really be a challenge to,
Google and and we're seeing broadly people really, they experimented year ago and now they're shifting budget directly out of Google Wallet over towards that side how do you guys think that's that's.

[28:20] Something that could happen I do yeah I have p.m.

[28:28] I'll defer to Bob with a bob has a much deeper background and digital advertising sign on them yeah I think you know.

[28:39] Even just thinking about Darrell and what we've done we've really it's almost like you're shutting down our brand advertising.
You know I'm pushing the money really over into Amazon just because it's almost becoming.
Some of the weirdest as well.
So if I say it well I'm going to do this launch a new product all that effort goes into launching that new product on Amazon with AMS.
And if I'm looking sumur all the time I don't know how much they're still going,
to know bloggers who have been paid to do a review on a product I think it's almost like letting the people vote so if I want a product I'm going to go to Amazon going to trust that whatever I type in,
it's going to be if it's a bestseller with great reviews,
how much more convincing do I need to buy that product so even some of the more considered buys I think if there's going to be a shift if it's already not know happening now.

[29:44] Yeah what do you think about so I've also heard from Brands and about this common affiliate thing so what they're saying is you know,
I advertise on Amazon and I thought I would get lift on Amazon and I can measure that but I'm also single lift off Amazon yeah what's your reaction to that.
Oh yeah absolutely it's relatively well known about the kind of $1 for.
I'll spend on Amazon equal $7 outside it varies by category so you know when baby like our products receive more like an $8 left and I was out of Amazon that's the tricky part is is.
It's not that straightforward to measure you know it we're not seeing exactly those numbers so I think it takes it takes time.

[30:32] Very cool so does it feel to you like that's a trend that's unique to Amazon in North America and they're just becoming a great ad platform or is it a shift to reach Arizona like we are you guys also investing in like,
Walmart's equivalent which would be w/imax or or any of those sorts of things.

Scot, Jamie, Bob:
[30:53] That's a good question Walmart.
Even even for a mess we don't use the reporting that I am s at all really we really kind of built our own reports and will do the same with W Max.
And really have concentrated a lot of the other dollars right there because with guys like Triad and hooklogic can come your other choices on the on the other retailers website they've always.
Kind of obscured the Bry.
To some degree so it's been it's been tough I'm hoping that those systems evolve a little bit more in their little bit less opaque I think they're going to have to to stay competitive.

[31:46] Dangerous a wino there's a bunch of wmx salespeople listening right now so I'm sure you'll be hearing from them from the.

[31:53] What will will will be that point home that that transparency and access to data is one literally one of the impediment with folks spending money with you.

[32:04] So

Scot, Jamie, Bob:
[32:06] I think you're pointing that out that's one of them I think she was the thing through the the challenges with.
Madison mdfl now it's won the data for the day is just not easy to come by and it's not a Preposterous some of the more that was advertising Channel.
Second is mobile mobile experience and desktop experience of War.
I don't know that anyone including Amazon it's real practical.
Mobile experience.

[32:44] Yeah which is interesting because you would you would certainly think like it is hard to believe there's a technical or skills and pediment keeping someone like Amazon from building.

[32:54] A great advertising platform and great report and a great mobile experiences.

[33:02] Just feels like they haven't got around to it yet but hopefully I don't know if you know this but Jeff is a big listener the show so you know this could be triggering an email as we speak.

Scot, Jamie, Bob:
[33:12] Does a Jeff email happening right now.

[33:18] Should be on the advertising are there any other considerations that you guys think about it in terms of maximizing your your results on Amazon,
I noticed I and I should have mentioned this up front I've got a 20 month old in the house so I'm the big user of your products.

[33:36] You've dramatically slowed down my midnight snacking because like all the the safety first products in my kitchen make it much harder to get food out in the dark.

Scot, Jamie, Bob:
[33:46] But thankfully that's pressure machine isn't protected.

[33:52] Exactly just just a product idea for you is some LED lighting and some of that stuff might be helpful.

Scot, Jamie, Bob:
[33:58] Will cost us a penny more to make them glow in the dark.

[34:02] Exactly.

[34:04] But I have noticed you guys are well represented in all the different Amazon programs and so you know you have a lot of add-on products I also noticed you guys have some Amazon Choice status,
product so you know I guess I'd be,
pictures do you overly like try to achieve those things with how are you managing your portfolio of all those those sorts of things.

Scot, Jamie, Bob:
[34:29] Where are the where walkie to have it I wouldn't say that we we were able to.
Tell you exactly how we go out I mean certainly bourbon is a profitability quotient.
Turn on internet with your private label Amazon.
All I got for those were going to answer your initial question as we look at managing the business there's just.
What I've been talking about the last year-and-a-half if we break eCommerce and Jeff's into seven centers of excellence in,
Amazon a particular kind of fall into one of those centers of excellence be we live and breathe it's almost like a religion where.
One of them is marketing and another is information technology Partnerships and people.
So each one of those are you looking at and we break it down from quarter-to-quarter.
From year to year and suddenly we have a now next future plan for all of them.
Respective definition.
Which one of the bed say from Amazon perspective we talked about the marketing operations is probably just fine.

[36:00] All the all the other ways and everything dipped Amazon train their customers to a second term to find shipping Apartments.

[36:09] Got it in,
what you don't want to do things that we haven't talked about that scares a lot of people per ticket on the one piece side of Amazon his pricing like do you hit is that been an issue for you do you have a strategy or any any pricing tips for,
for folks that are going to put their products on Amazon's platform.

Scot, Jamie, Bob:
[36:32] Bob's Bob's advice to me in the beginning with don't lose money so I try to price my products while products not to lose money before 1.

[36:45] Can you make it up in volume if you do.

Scot, Jamie, Bob:
[36:47] Exactly.
My kids are starting to do the new math so maybe you can but I'm old school so I don't know how to turn it negative.

[37:03] We know one of the things we talked about a lot and you mentioned it earlier when you talked about third-party data switch.
Is the we say the date is more important and we're crossing with your friends as much data systemically to make the decision we have map policies for a number of our friends that certainly helps.
I mean it's the Wild Wild West when you don't have enough policies so the constant challenge to take a look at and what's going on dynamically in the forecast.
Pricing stand for in where would possibly looking at ways to differentiate.
I think we're going to see a boom in brands that traditionally may have not looked at map policies.
Just because of what you know Walmart continues to be priced leader you know Amazon will continue to follow but now you got Target saying they want to be a price leader to and in others.
So in that kind of environment as a manufacturer brand gear you know it's like maybe I would have traditionally had a map policy on my premium products only but that's going to change use my.
Roll out of my policy for my mqp in Opp lines as well just took for protection.

[38:23] Wow yeah that is interesting I could totally see that there are a bunch of other 3p sellers that sell your products on Amazon I'm assuming most of those are authorized sellers is that.

Scot, Jamie, Bob:
[38:38] I would say it's a mix so.
That's not the challenge is simply word been a lot of great partners that you sell in the marketplace and then there are some that.
Yeah we're not exactly sure how they so I think we're starting to see and evolution are not just Amazon Marketplace but,
I'm Walmart's and others where it's harder to be that Arbitrage type of cell are in I think we're hoping that'll help with,
look at Channel management we're constantly looking at how to make sure that we have a clean Channel well only authorized stores and food in.

[39:19] Yep you having to invest some significant resources in that.

Scot, Jamie, Bob:
[39:25] Yeah I think we are,
we have already and I think we always keep trying to go for the very top.

[39:36] It's much as we'd like to spend as much as we could on each of those centers of excellence and one of them is more Channel Management telephone number.

[39:49] Not totally get it so another topic that comes up.
Is the you know those rare occasions win you you fall out of compliance with Amazon and one way or another and the obviously the big Spector looming over everyone's head is suspensions is that.
Is that coming to play for you guys at all like are there any common mistakes or tips you give to folks to avoid getting in the Amazon Penalty Box.

Scot, Jamie, Bob:
[40:18] Yeah I think for us we had the fear of god guitar organization did not want to.
Ever end up getting suspended and no fortune.
We've had just an amazing operation to approach every yes I weigh very aggressively so the shipping.

[40:42] I need this more than just on time shipping at that way but others is a number of them that we've been fortunate to have a great class functional approach with my advice would be certainly have.
A good set of.
Watch all team members who are Partners in the business to understand what you're trying to do set the vision and then and check in on a very regularly.
We were trying to brick-and-mortar First organization so that was a lot of the time we spent at least in the first 69 wants was just educating.
A lot of people within the organization of Argo how we Commerce works and specifically how Amazon work.
And I think the more communication we were able to have and then.
Huge amounts of visibility to every part of the company Bob's a big believer in that class is really Champion Joe having everything.
Are white dashboard in every department so they can so that we can really track you know are we are we tracking to be with shipping so how are we doing this today so I think are the Penalty Box as Bend.
Great team effort and I think it starts with setting the vision for everything.
That's why one of our favorite the software platforms is geckoboard.
Which is Wheel of software that does one particular purpose but doesn't really really well and I want just allows you to push up.

[42:16] It just allows you to creep dashboards on a monitor so I think what we did or invest heavily in the operations and consumer support.
Those are two big pillars for us so even if the point where we had to sacrifice and maybe you know advertising dollars marketing dollars to really get that those two pieces of the business really humming along,
and are the call center just wanted you know national award for for excellence which is really really cool in it but we had to ramp up.
You know social support Amazon answers answer programs on other retailers it's really we had to,
where do expand the team and be in more touch points with consumers so we think that's really going to pay off long-term.

[43:08] And just one last point about suspension beyond the SOS from operational perspective there are dozens of ways you can get yourself suspended in the cellar whether it be,
Aaron products at all the wild with 1p or any reviews or seller ratings or selling counterfeit products oh,
I think what we had was a couple of subject matter experts.
Or through all the different essays and rules and everything that Amazon foot.
On on the portal to allow showers to know how to optimize a business intro we communicated that very clear with ravioli,
cool so that that's been super helpful to hear,
some some real world stories from you guys about how you manage Amazon and let's put a little bit and talk a little bit about Walmart so imagine you guys have a long history of selling wholesale to Walmart are you participating in the marketplace and and,
I guess I would make you one of the very rare hybrid Amazon and Walmart so so curious what your doing on Walmart.

[44:16] Yeah we are we are hybrid for Walmart as well we launched,
probably the best possible time to launch on Walmart marketplace was in November 4th.
Trey doesn't want to watch anything.
But it's as if they really had fantastic resolved even before last year so really out of the cave you were very fortunate to see.
Well and I think I would a little bit last year e-commerce as a team we exceeded our sales goal.
But your dog and 16 by 70% and certainly Walmart marketplace was with a big part of getting us a star sailboat certainly crushing that pool.
Cook any other channels marketplaces or you know anything you think that's kind of interesting that you think other brands would find kind of fascinating.

[45:17] I will wear on eBay as well and we're on chat we watched on chat about a month before they got bought out so he might feel like this that had something to do.
I think we're always looking at different opportunities to find what are products in front of many customers are too small.
Yeah for eBay some people kind of view it as an outlet kind of a thing or other people just kind of put their main line on there and do you guys have a kind of certain part of your hot how eBay fits into the strategy.

[45:53] I wouldn't say it if it will you we've completely solidified or crystallized on her arm how how how we approach eBay.
I think we do have a healthy mix of a farm products as well as what we call Mike SSM ignoring clothes on eBay.
Again you brought it up about Channel.
Certainly there's some good extermination candy Bays doing a lot to try and improve the merchandising especially the baby category so we're we are happy to part with them and help help.
Apart of that the improvement in our categories.
Yeah found eBay is very good brand religion so they're there being a lot more friendly DeBrands lately and I think a lot of that has to do with how Who Came From Home Depot he can understand that Dynamic better than them folks hit that maybe didn't have that experience.

[46:53] Yeah I'm a big fan of how a lot and having watched him what he did at Home Depot was when she was really impressive so I'm hoping they can do the same.
What we don't want to do is just go on to any Marketplace for the sake of being there so I say that we have a crystallized our strategy but we do think very closely about know what Ridge Marketplace.
What is Protonix Place Mall.
It's easy to launch a new Marketplace you know as we see fit.
Know if we want to try something else we can easily be up and you know I matter with no days or weeks so that it's not really a huge investment if we want to play with something which interesting is watching at Walmart marketplace evolve.
Just month after Mom very interesting focused as a company and we're going to benefit from it and other reports and dashboards going to get better,
it's it's an interesting year to be on Walmart marketplace that's for sure.
Yes seems to be a big big area and Lori's in there swinging the bat like crazy so we'll see what kind of comes up,
requires and he's an amazing guy I mean we were we were riveted.
So while he certainly has a captive audience so we're definitely big fans.

[48:24] So yeah funny funny story between Mark and me I interviewed with Mark at Quincy.
Where do a month before they close the deal with Amazon and then we visited with Market Chad about a month before Walmart plaza Sol.
I feel like I got to start taking more meetings your guy you should get out of stock options I don't know if that's,
that may violate some ethics thing but that's not my problem that's your problem,
what questions do you guys are in a lot of places in earlier you mentioned you have kind of six categories of products is there I know some some,
brands have kind of a good they look at these channels and there's some mapping that happens where they'll say alright,
Channel B I'm going to put this type of product there but not this type of product and you guys have any how do you think about that,
but everything everywhere that's another valid strategy as well no I think we definitely.
Where were careful when in will have a specific kind of game plan for.
Access Imaging Closeouts versus completely different strategy for how we're going to approach this.
Anything for my Walmart exclusive so yeah it's none of that spray and pray kind of approaches to the TV.

[49:54] Got it you guys are.

[49:57] I'm going to characterize you as very digitally mature for a branded manufacturer in the in the digital Spectrum in interesting Lee a lot of clients that are,
very large wholesale businesses that are really just getting started on the digital side of the fence and you don't.

[50:17] One of the big challenges you always run into is.

[50:21] Getting an organization to change its all this institutional inertia and all these antibodies that are in the organization that fight all of these kind of new initiatives,
it sounds like you got to go through that in your you're beginning and Darrell like do you have any advice for for folks that are just getting started on their Journey.

Scot, Jamie, Bob:
[50:45] Go ahead because I've never heard that before.
I'll say that one of the reasons I came to dorel was because.
And our CEO told me on a vision where they already started down that kind of mentality show.
And made the investments in just a lot of the out-of-the-box thinking in terms of Technology Investments.
And resources were a lot different than most of the other cpg companies and other vendor partners that I work with another retailers.
Even being your 2016 at the bottom bathing how many still just trying to figure out e-commerce oh.
I arrived having seen a vision that was already somewhat said I was just sort of evangelizing that Vision but I think that's the big that was the really important part of our successes.
Evangelizing that Vision in getting people excited and I think in many cases this kind of Captain Obvious with a lot of people.
It's almost a threat to their job so number one you have people who will get and say am I going to be out of a job in six months because of his e-commerce.
Or this is 20% extra work for what it was already a very hard job so I think.
I've been walkie I think we had a cross-functional team for 100 people that really jumped on board but I think we also had a really strong Vision that was able to get people energized with from the top down.

[52:24] Bob Probert already established.
It was a very difficult have a full head of hair too but now not so much but I think you know what we're trying to do is digital transformation from the inside,
what is the most difficult in my opinion and in my experience and I don't recommend it it's it's just it's the long path but because you do have to you know evangelize quite a bit and you know I understand it's going to slow you down a little bit,
what are the things that I'm trying to do is build a startup type of culture we're just the sense of time is is very different.
So you know instead of people communicating in the email they're there now communicating and giora.
Is it just a complete shift and in first I would say just get the the early adopters like you need a ring of people that get it,
are we have a dining kaybern on our team that is a web Technologies guy that we just we know that we can throw anything at this guy and he's just amazing.
And he can quickly integrated system or develop a database or so I think having kind of a crappy team to start with.
Yeah the Band of Brothers kind of thing helps a lot but then you have to just keep converting the people who want to be converted and then kind of work your way down the curve to the people who you know they're going to be really resistant.
Where I'd say we're Midway down that Journey right now.

[53:54] Then cool it sounds like I don't to put words in your mouth it sounds like you had a blend of evangelizing some of the Legacy employees that were most susceptible to become part of the digital solution and then you brought in some some outside digital disruptors,
is well I eat Jamie does that do I have that right and does that seem like the right approach to.

Scot, Jamie, Bob:
[54:21] Yeah I do I really think that one of the big mistakes is to go kind of Whole Hog you know out of the gate what one is to do almost nothing and just talk about transformation and that that's just seen companies I've been at companies that are done that.

[54:36] But just to be clear that's fine as long as you're paying a consultant like sapientrazorfish while you're doing that.

Scot, Jamie, Bob:
[54:41] Exactly that's exactly what I say but no you know what's funny is it's almost like if I took a step back for a second the the the key.
To to Our Success so far has been lots of quick wins and constant wins,
so not just sitting this massive gold in a way out there but really understanding let's let's just a few small goal let's let's get all of our product data in one place so we can actually use it okay,
let's go with salsify salsify not very expensive so I can put it on a credit card so it kind of scrap a system together,
and then build kind of agile process ease around that and then people gravitate toward the money,
now you can just follow the money if we're making the you know massive Headway and there's dollars and the dollars keep adding up people tend to say,
you know I want that maybe I haven't had that in my team and I want to go on that team I want to be on the successful team so you just kind of read this internal inertia and guys like Jamie it's easy carries that flag,
and people just want to follow him.

[55:56] Very very cool by the way this is going to sound super cheesy I call that stair step approach The Stairway to awesomeness.

Scot, Jamie, Bob:
[56:04] That's exactly what it is.

[56:06] Yeah they like you know you you paint that aspirational picture of where you want to get and you just can't do it in one giant big bang project so the stairway to awesomeness is the way to go.

Scot, Jamie, Bob:
[56:16] And if you give Jason six beers I think is the number somewhere in there 4 to 6 he will sing Stairway to Heaven but it's Stairway to awesomeness and it's it it's a thing to behold another time,
yeah yeah yeah no no beer is here on the podcast this is definitely a dry podcast.

[56:35] Either did I.

Scot, Jamie, Bob:
[56:39] So we have about five minutes for one last question and I wanted to get super high level you guys have both had great careers and in retail and Brands and digital,
where do you see the future of e-commerce is it going to be no Celexa after smartphones or you feel free to kind of go,
two years outer are 10 years out so just would love to hear your thoughts seven haven't seen kind of the the play out so far.

[57:10] Bronco versus Bob's is probably better than mine so I don't so I think your two two things I see one or.
I would have to it a little bit earlier is that I think so.

[57:24] What what's available for a one piece and what's available for three people I think it's going to start to quote the gas going to start.
Obviously the growth Amazon enjoying a large part of that is I think he's going to start more more.
More of that consumer experience I've become more consistent on orthopedic in one piece.
In particular I think about advertising and one of the gaps that I see that I think expect is probably going to happen and I hit just.
You say it with artificial intelligence but I think ribbon Predictive Analytics to help.
To help cpg brands in to help anyone who wants to use digital advertising or to use it for,
projector for casting I think that needs to happen and I think I just it still seems really Nathan I think I see a lot of solutions out there.
Don't take into account all the dozens of of sales drivers and forecast in the theaters that are need to be followers and I think they're supposed to Lucien to still feels on in the brick-and-mortar world.
You're not taking into account estimated ship windows or find a drink or the dozens of things that can help to drive,
sales on e-commerce side that's just don't doubt it don't get back turd in then I don't think this is any human being to make those decisions.

[58:58] As they're using them to the forecast there the sales or Churchill Drive their advertising can I think it has to be any item,
that's a prediction I'd see Captain someone diacetyl.

[59:16] Yeah Predictive Analytics it's definitely going to be pervasive in all everything that we that we do.
I worked at a company where we built our own real-time bidding engine and it's it's very complex but as computing power power gets better and this more people working on projects like that,
a lot of the manual activity 72 will just gravitate toward that kind of naturally taking over I see a lot of near-term stuff.
Nothing that's important where I really think that retailers will start understanding that no Prime is not a shipping program.
You don't like I really do think that once other big retailers develop Prime like programs and it you know the full breath and power of a program like that fell under the sun understanding the the game.
And I really I don't like I haven't seen.
Seems kind of small attempts at a prime like program but nothing nothing even close to it if if it's not a shipping program what is it.

[1:00:24] It's I mean it's like it's a massive loyalty program it's it's the stickiness that the.
That you just can't get out of it it has unbelievable unmistakable value.
I think they've gone well past the you know the yearly the annual fee for the program in terms of value at this point.
I really do think that that is a massive way to build loyalty.

[1:00:54] Go to know you guys are both.
Deep in the world of Amazon do you think it's game over or do you think that you know just like we saw in.
Bob you're old enough to remember this used to be that you know no one could be the IBM there you would just like it,
people just call him up to get mainframes installed and then suddenly Microsoft took over and then it was Google and now it's Amazon you know what do you any votes on like the next Dark Horse you know is it going to be a company we've already heard of it is it some company that's like,
two dudes in the garage right now that's a good one Jamie want to go first for that one.
So I yeah I mean history tells us no one no company remains thought when I first Are we more than more than 50 years even if it's still around and I think she's somewhere.
They're fucking a trance of Walmart's probably one where they're starting to come around they made been made my friend information.

[1:01:55] I think one of the things I think about is on demand that you fart a lot of them.
Disruptor obviously Amazon going after 2 but.
Medium different different category next Amazon.

[1:02:20] Oh that's crushing I've spent like 85 episodes trying to to get Scott's ego down and you just told him that he's the future of e-commerce crate.

Scot, Jamie, Bob:
[1:02:28] You're going to pay me in cash my check,
what's what's amazing to me it almost seems like Amazon is is Bucking that the you know the old trend of you know IBM companies like that just kind of,
really having to Pivot hard and and swallow hard to and now it major inflection points is the scale that's the thing that gets me,
it's no looking at you no announcements from Target sing over going to spend a billion dollars and,
supply chain up when Amazon spending well 18 billion,
yeah it's just the scale is is something to really think about it how do you how does a disruptor in a two guys in that garage.
Really really break into that no no I'm not saying Amazon perfect I've noticed a lotta,
a lot of Kinks on a on a daily basis in the armor or chinks in the armor where they're even like my guaranteed shipping package didn't arrive in 2 days.
Several times now so you know there's definitely some Growing Pains there.
But I got to think it's only another giant it's got to be like a Walmart that really really can can keep up with those guys.
I also since I worked at racquet and I would not discount all these guys that are overseas currently that have just been watching the market patiently.
Rakuten Alibaba out there they're just massive groups that certainly have the power to and they're not known to be first movers remember.

[1:04:08] They they watch and they're perfectly fine to be the second or third yeah they're the only guys that have kind of beat,
Amazon Kenosha Amazon didn't do well in China and continues to be kind of like number three or four there and I don't know about Japan Amazon's done pretty well in Japan but yeah they're they're definitely rocked Anna's is still a major factor there,
oh yeah oh absolutely I think probably going to the guarantee for me is the.
You can check back thirty years from now I think when Bezos decides to retire a walk away that's definitely rest I mean you work at Target and,
dominant really when Bob all that stuff down on that was I was really when started,
start to struggle Walmart Walton and I can see the same thing no one ever gave us has to step down no disrespect to the rest of the leadership team but it's a pretty big dr. Phil.

[1:05:07] I think your point that no no Empire was forever Jeff is made that point and said but what you really want to do is just make sure that your Empire outlives you.

[1:05:19] Repeat the same strategy there because it has happen again we've wasted a perfectly good outside I really want to thank you guys for spending an hour with us and sharing the knowledge.

Scot, Jamie, Bob:
[1:05:38] Thank you thank you.
Yep Bob and Jamie thanks for joining us and low plug here for Jamie and I Jamie is going to be one of my speakers at the internet retailer Conference & exhibition also known as IRC on June 6th I do a day there that's called Amazon and me where,
we go pretty darn deep about these kinds of topics in a,
12 hour Extravaganza so if you're interested in that topic join us then and Jamie will be there,
what's the just went through 18 decks on this whole thing so you're talking about hybrid is that right Jamie is that the topic.
Yeah I'm talking about how to manage your Amazon strategy whether you're one p3p or Hut.
Yep so overall strategy yes and your presentation is awesome so people are going to love it thanks guys and hope to see Jamie I'll see you there and I hope to see some listeners there.
Thanks looking for toys.

[1:06:36] Until next time happy commercing.

May 26, 2017

EP085 - FutureCommerce Joint Podcast Part 2

Brian Lange (@brianjlangeandPhillip Jackson (@philwinkle) are the hosts of futurecommerce podcast. 

In this first of it's kind, Co-Podcast Jason & Scot team up with Phil & Brian to record a two-part podcast.  Part 1 can be heard on futurecommerce.  This is part 2.

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

Episode 85 of the Jason & Scot show was recorded on Thursday May 11, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 85 being recorded on Thursday May 11th 2017.  I'm your host Jason retailgeek Goldberg and as usual I'm here with your Co Scot Wingo.

Scot, Brian, Philip:
[0:38] Hey Jason are welcome Jason Scott show listeners tonight we're doing something really Innovative in the world of podcasting I don't know if this phrases ever been used or not but if it has it,
its trademark Jason Scott it's a cross podcast that's right or maybe we'll go at the Omni podcast,
pull in the flavor of e-commerce this is part 2 of a cross podcast episode,
and we are Co casting with Brian and Philip over at futurecommerce so before we jump in you need to go to your favorite podcast app right now and add futurecommerce And subscribe and then go listen to the first part over there,
in the come back over here or if you're a fan of Back to the Future you can listen to this one first,
I did feel like you're doing time travel back into the past listened episode 1 real flexible here at the Jason Scott show so which ever one of those floats your boat we will courage to go do that,
will pause for a second while you figure it out okay welcome back Jason let's bring Brian and Philip in as we continue,
they're episode guys do you name your episodes what what was our episode going to be over on your side.
3433 I don't know somewhere in there.
436 that's the that's the name you have to get a team meeting with your audio Engineers over there to figure out,
how to how to do it to get a consensus built and then this is our episode 84 so welcome to the show guys.
Thank you thanks happy to be on this is quite an honor actually.

[2:13] We we are happy to have you let's let our audience get to know you just a little bit so maybe Brian you want to start by giving us your background.

Scot, Brian, Philip:
[2:23] Usher Yeah so I'm born and raised in the Seattle area and I got into a little start-up out here that did,
basically Payment Processing both across physical and digital,
and so they actually processed like checks and so they also they also had it online payments to all and that sort of wet my appetite,
4 for Hardline Commerce in Hartford for Commerce I should say in general and and then made my way over to digital agency called classy llama,
and they're there a specifically Magento agency really long time ago until agency and got to help build up that agency and I've been in a couple different agencies right now I'm at an agency called,
something digital with Philip we're primarily a Magento Focus agency but when we're dead across the board,
and in parking with another platform as well and.

[3:28] We we are I've really enjoyed getting to know everything you know kind of,
the entire education of what it means to be in Commerce through this process.
Certainly there's a lot that I still don't know but really excited to to be talking about digital Commerce and I've been able to work with some really cool Brands to bring their digital Commerce experiences to to life.
And I.
Instagram started futurecommerce with Philip we were working at can basically competitors at the time in.
Kind of got to know each other through different conferences we live in the same world and.
There was this this one one late night we had we restarted really really kind of getting down deeper into the.
Into the details and and and,
I think was actually had irce in Chicago 3 years ago or something like that and we started a friendship and in really a series of conversations that,
led to and us being like man these aren't these are really interesting topics for talking about we should record this and so.
That's how I up in podcasting Phillips kind of got a little bit earlier story of getting into podcasting so let him get into that but yeah that's me.

[4:57] Your thoughts about your career and how you got into to be the podcast Ninja,
yeah thanks I so I actually I took a left turn at Albuquerque if you will I got.
I dropped out of Theological Seminary after two years and I joined a band.
And I did that for 7 years and you know we were like touring around it was super cool and you know you like recording and doing all these really cool really neat things and,
but it's interesting you know like the one thing that was sort of a Mainstay that held over from my high-school days was that you know it's really good with computers and.
In 03 so it's more of a long series of events you know you kind of look back on your life in your like one of these things is making me money in one's not and,
and so why don't we stop the one that doesn't make me any money in focus on the thing that does and found a lot of good fortune there and Ben been truly fortunate to,
to have the you know nearly at 18-year career now in in eCommerce digital Commerce and so you know it's great kind of growing up in the industry from the late 90s,
where people were in on the dock, just figure out how we were even supposed to do this stuff online and then sort of watching things mature and best,
actresses emerge and I yeah so kind of growing up and and working directly for a bunch of merchants and then you know doing a lot of.

[6:29] Direct Consulting and then you know finally finding my way into.
You know actually being a subject matter expert an e-commerce so then and now and heading up the digital Commerce team at something digital which is.
The best named digital agency ever and.

[6:51] Although I do also like classy llama.

Scot, Brian, Philip:
[6:53] Classy llama yes.
Something to drill actually it contains its own origin story right in its name which is skids funny but you know just kind of getting to know,
Brian and the people in our industry and and you know having some success in podcasting you know I have another.
Podcast called Mage talk which is a magenta Focus podcast that.
Has about 70,000 listeners a month of this point and you know that's really taken us to a new place worldwide kind of talking about Magento talking about you know the future of that platform.
I really also wanting to tell other stories and so you know in the last year-and-a-half we launched two other,
properties futurecommerce to really talk about retail and general and talk about the the transformation that retail is undergoing right now and the challenges to you know not everything is so exciting in the future you know there's some there's probably some dark,
days ahead and there's there's definitely dark side and we touched on that someone the show so the show's been not quite a year yet and 35 or 34 episodes we're not really sure at this point we've lost count but you know we're we're trying to really,
you know do I think what a lot of people struggle with witches remain consistent.
We want to have consistent content and I think that's something you guys can appreciate so yeah so futurecommerce we also launched another podcast property this year.
I called Merchants to Merchants which is stories Merchants telling their own stories and it's for merchants.

[8:26] I specifically in stories of merchants talking about their own experience you know among themselves so we'll get a panel if you know 3 or 4.
Retailers together and ask them to improv them to talk about you know what's easy and what's hard.
And you wouldn't believe that the kind of feedback that comes out of that and it's real honest content where it's not just someone like me who thinks they know everything.
Just kind of telling you what to do which is usually what you get in these sort of mediums right you get a couple white guys that just pontificate on the podcast and that's not an uncommon thing in our space but to get people from diverse backgrounds in to get people that are,
that have very different two stories to you and have different aspirations and different struggles and get them to actually tell their story it's really thick.
Stories there so it's kind of cool I think we run this really interesting journey and for me it's it's really about storytelling and it's really about.

[9:28] You know shared experience so but yeah delighted to be here I'm a big fan of guy show so pardon me being a little Starstruck.
Thanks thanks it is awesome you're building a whole network we can Jason I struggle just to kind of get this puppy out once a week so I'm I'm amazed at folks that can to do that,
the key is to just neglect everything in your life and your job.
And then you can really be successful to let us know how that works out for you.

[10:03] Okay well listeners if you're listening to this two-parter in the chronological sequence when we last left you in this cross podcast episode we just finished talking about some future Trends and we thought we'd bring it back to the Here and Now,
now if you're listening to it out of sequence if you're one of those original trilogy people,
let me just say Darth Vader and Luke are not related at all there's nothing to see here these are not the droids you're looking for Jason you on that kick it out with us some some news.

[10:31] I do but before we jump in the news I do want to take advantage of the fact that we have some Magento gurus in the house so for listeners on this podcast.
I have been slightly negative on Magento and I'm I'm prepared to be schooled but I want at least get my POV out there and and you guys can help me see the light we actually had Mark Lavelle and Peter Sheldon on episode 50,

[11:03] Magento is is arguably the most important platform in the eCommerce Echo System I think there's probably more sites on that platform than anything else in my company we we do play a lot of that platform in Asia.
We don't personally do as much here in North America book what has been a concern for me is you know.

[11:26] Did that for a long time there's been this version 1 of magenta that had all these blood features that had had all these users.
And you don't have this rich rich community of developers and plugins and in all the all these sorts of things.

[11:41] And what you tended to run into is.

[11:45] You know these these kind of whether they're true or not like hey yeah and magenta was great for the long tail it doesn't really scale for the Enterprise clients and in full disclosure.

[11:56] Like Magento did struggle to.

[11:59] To sort of list a bunch of Enterprise clients like they would often list Enterprise clients and you'd go talk to those clients and they'd be like yeah we're using it for a small project in the corner it's not our.

[12:09] Armed army in platform and so you know that was kind of my first red flag at magenta was on magenta one while it was super popular.

[12:16] It didn't seem to catch the top of the echo system and then after years of waiting and promising and changing hands a couple times and I think they probably got screwed by by being acquired by eBay for a few years there they finally launched version 2.

[12:31] And what's scary to me and what what what you know sort of came to light in this conversation with Mark and episode 50 is.

[12:39] There are not a lot of sites that have migrated from version 1 to version 2.

[12:44] And so you know arguably there's there's some improvements and and fixes inversion to butt.

[12:50] No you can't you can no longer say Magento is the most popular platform in the world because there's you know a relatively small user base on the current version of Magento,
so it seems like the majority of those users got left behind and frankly some of the most beloved features like the the rich ecosystem of third party plugins.

[13:09] You know is is.

[13:10] Dramatically different in a magenta to today so so my kind of talking point to people has been magenta to probably has a lot less momentum that then magenta one did and it's a day.
And I'm unprepared for you to tell me why I'm completely off base.

Scot, Brian, Philip:
[13:26] So you've caught up on 80 plus episodes of Fire,
inventory all that you had for the magenta platform and I actually applied that you were able to do that in two minutes that's kind of impressive skill.
You know I'll I'll start out here because I don't believe that Brian can be succinct I'll say.
If it's fair,
if if Mark and Peter who are the CEO and I think the VP of strategy at Magento respectively if they can't change your mind on,
and qual your fears on Magento then I don't know that I'm going to do any good but I will say this listen I can only speak from my own personal experience.
As somebody who is admittedly a fan boy and his hung a good portion of my there the latter part of this.
In a career that I have the last 8 years I'm Magento and I'm pretty well decorating the magenta space.

[14:30] You have actual decorations by the way don't you are you like a black belt.

Scot, Brian, Philip:
[14:33] Yeah I might like,
I'm a two-time magenta Master which is a a sort of a notable Community Spotlight award that they give out so I'm one of like 7 people that have,
received it twice and I'm a four-time Magento certified developer and I've spent a lot of time in the trenches doing a lot of magenta work and specifically Yuna rescue for.
Rescue work for large builds which is you know something that no other platform can tell is the number of rescues that happened what I would like to say is that.

[15:04] I think with the with the I don't know with the ubiquity of the platform,
Imogen - once were the success of the platform magenta one I think,
any shift of years that represented a rer connector that that sort of leaves no quitiquit leaves people behind,
I is going to be a painful one I don't think there's any way,
just to get around that I think we've seen that in major in in any major software Rev,
you know Windows 10 most notably recently has had some major I had some major hiccups you know moving people across from platforms and sort of forcibly doing it at the end of the day and I think,
I think it's a it's not an easy thing in software. I think what's what's really complicated is e-commerce and digital Commerce in and of itself,
is a difficult problem space to solve and everybody wants.
You know everybody wants open architecture easy to build on an open ecosystem so some of the sort of.

[16:10] Little points that you mention are are things that I think are are being currently rectified I think the last check.
You know 70% of the people are 70% of all technology Partners had Magento 2,
compatible Integrations at the first of this year and it's growing,
you know we we do a tremendous amount of magenta work it's not all that we do we are we are also Shopify plus Partners but our deal pipeline is full.
We're we're seeing a tremendous demand for Magento so we going to speak for ourselves seeing a tremendous demand for magenta to and specifically magenta one clients looking to come over to Magento 2 now I do think that some of that could be under duress.

[16:58] So I wanted this count that but I do think that magenta has a lot of promise and if.
If you want to continue to sort of get the benefit of what a platform like Magento has to offer which is a freely available piece of software that is enterprise-grade.
Were you can you know download it and start your business and then grow into an Enterprise platform it's sort of.
Ready and the promise of Magento is that it grows with you right you have something it's available freely at the low tier and you can grow up into you know,
billion dollar business is running on Magento but I think,
there are challenges along the way and we have to be very honest about them and we can't glaze over them I think the the internet retailer 300 the B2B 300 which is a new segment for for the IRA Ting Magento owns the the btb 300,
I don't know that they're going to stay there forever and Magento sort of.
Found their way into it kind of like mr. Bean finds his way into good situations because because because Magento isn't a B2B platform it's not capable of doing B2B out of the box,
people adapt Magento,
to do it and I think that's what you're saying is that magenta is extremely adaptable and so the success of Magento has nothing to do with Magento I mean I think anybody will tell you that I think Mark Lavelle would tell you that the success of Magento is the community.
Is excessive Magento is the,
the sort of dedication of a lot of hard-working and brilliant people in the International Community especially,
that contribute to this platform to make it a better thing and you're not going to get that on hybris and you're not going to get that on demandware.

[18:34] Now I mean you might get scalability and speed that's another conversation but you're you're not going to you know you're also not going to get sort of that promise of what.

[18:44] Magento offers which is a you know this this Rich ecosystem of makers but I anyway now also not been to sync,
yeah I was going to bring that up Philip just to add on a little bit to what you're saying I think this is Ben actually,
how you mentioned pain but also opportunity because while the gento had a very broad ecosystem that you can system wasn't very difficult to navigate,
before and you know sort of modernizing the platform has now allowed Magento 2 in in bringing a new Marketplace into in the play has allowed Magento 2,
I do a much better job of curating their ecosystem,
which is been very good for it and yeah while it's taking a little bit of time for some of these module developers to 2 rerelease,
they're extensions for the platform.
I think the great thing is which it is rejected a whole bunch of them in for good reason sure and ends you know I think now we're getting you know I'm not going to say it's either the cream-of-the-crop but we're getting.
We're getting a much better picture of what actually works and doesn't work in so when it when whenever you tell her comes into the Magento world it's it's not quite as scary,
as it used to be it's not quite as wild west does it used to be it's a lot easier to to to be successful,
in the new paradigm and I think that's what scares you mentioned customers.

[20:20] I think that's what scared some of them away before cuz it just felt it felt it felt down market and you know it felt like there was a lot of weird stuff available to you and yang.
And so now now magenta is really tailoring itself to be Enterprise,
Enterprise reading and I know what they released their Commerce platform they're about to order their Cloud platform they're about to release a beating e-commerce Cloud this this summer the functionality this container that platform is is,
make the total cost.
Of of implementing Magento for me to be quite a bit lower and I don't think that anyone else is going to be able to touch that total cost of ownership from the BV perspective here coming out.
And soap,
there's a lot of things to really like about where Magento is headed was a lot of positive Memon in there also,
necessarily add a ton of features in Magento one on a regular basis and what we're seeing with Vicenta to is there were insane amount of.

[21:30] Product announcements that just happened here in Imagine,
are they added social that you know how speed to be you know they they had it as a CMS which magenta one was definitely lacking adjust a ton of tools a ton of innovation a ton of movement that's happening in,
directions to reinvigorated and you know I think.
Part of the other the other gripe with Magento at least you know at least one of those sort of inside baseball grapes for people like me is that yeah magenta was sort of slow and and and you know.
Adopting were worth keeping up with the times I think it started to show its age after some time and and they they say it in a nice way now it's like we have the youngest platform of anybody.
Which I think you know rightly so like it still has the name Magento on it and I would say you know it is Magento ask but it is a different platform.
It is not a simple upgrade to get from 1 to 2 I think that's a problem.
So yeah I think that there's I think there are there's still a lot of challenges ahead I think we're we're going to see.
We're going to see continued uptake through 2017 I'm interested to see what happens through the end of the year but you know Magento did just actually Place into the the leader.
A quadrant for me the new Gartner magic.
Quadrant survey so you know they are showing some promise there but a good portion of their ability to compete in the areas that matter is because the the platform is extendable.

[23:09] And I and N because there's Community enablement for those features magenta doesn't kill an improved and personalization.
In a magenta doesn't have native B2B right now it's coming but it's not there.
And so there are other platforms that I think are nice players that are better suited for different types of business I think you know but from a broad Market perspective Magento is.
Now I'm jective Lee owning it right now you know I think they have to continue to push hard to stay ahead.
They're not going to let you know they won somehow to this point but they're going to have to work harder to to keep that lead,
what do you think Scott and Jason does you guys seem to be real quiet over there.
I'm not as negative on Magento as Jason is but one thing I've noticed over kind of like the last five years is 5 years ago.
Every SMB I talk to you it was like I'm going Magento and then there were some I think you called and rescue Sanuk that was good I have some people calling refugees so I don't know the right one,
you know what would happen is these SMB is they got into these projects they didn't realize all right I got to go to developer designer and a host and that's like a.
That's pretty serious project for a 20-person company to handle that I can finally eCommerce business they can,
you can't just stop shipping product in the middle of all that either so a lot of them have abandoned it and gone to the either the Bigcommerce for the Shopify the SAS platforms at that SMB level.

[24:43] Nice I like magenta really miss an opportunity there they had that go thing but I think it was just so down size that it was kind of useless and I have to,
admit I haven't kept up with all the announcements but it sounds like you just talk about a cloud,
tussle bit more about that do you think they're kind of that parody with the Shopify Zappa Converses and I realize you guys talk about all the platforms so,
Brian I wouldn't put this in the same category it's not it's not what I would consider as you know software-as-a-service this is mine I know they're kind of migrate away from the terminology but it's more like platform-as-a-service so you actually still have,
it's more like a stack of of hosting and monitoring tools with support,
and you still have all the flexibility that you did with magenta before it's not like you don't have access to source code into the code and and the ability to make changes soap.
I wouldn't put it in the same category as big Commerce or Shopify I would still I would actually.
In the say that that their Crock Pot Farm is more competitive with like a demandware or or I should say Salesforce Commerce cloud or hybris then then with Shopify is not they're not they're not very similar at all.

[26:00] Do you think they need to do that.

[26:03] No I don't think they do I mean I think it would be a shift in direction for them right now honestly the the Magento brand I think it's built on you know sort of,
I don't know there's there's some complexity to Magento just inherently and and so you're never going to get the.
The fuggin playability that you would get from someone that you know has from other players that are.
You know specifically keeping you away from the internals and focusing you only on you know a a Walled Garden of of really good intuitive user experience you know for the merchant features to publish producten,
spell magenta also has a different strategy right so it's it's better probably fit for a retailer that sees there.
Their digital Commerce platform as one part of a larger piece of a young as part of their Ani channel strategy they see it as a property right this is an asset or this is an acid on their books as much as any,
in a brick-and-mortar store with with the frontage would would be considered a.
An asset and you know if you own that asset if it's a if it's an actual you know if it's ones and zeros that you've developed and you put.
Time in money into developing on and you own the platform and you on the hosting and noon you own all this relationship sandwich ento could go away tomorrow.

[27:30] And and that thinking can continue to still run well then great like that's it that's a real asset and accountants sure kind of like that I supposed and that's one way to think about it,
you know I think there's a devaluation that's happening right now in in digital Commerce where we're just looking it's sort of like commoditized.
Web property,
enablement and so we're kind of buying into the shop of eyes of the world and we do Shopify some demeaning it by any means but you know you buy into these sort of all in ones where they they on the hosting they own the code,
they give you a very select few areas where you can make sort of customizations and also by the way they own payments to.
And and and while that gives for some really great you know they rolled Apple pay out to 250,000 Merchants like overnight that's cool,
but if Shopify goes away or Shopify changes something on you your your kind of going along for that ride it's not an asset that you own outright and you have no say in it.
And I think for some it's it's an ideology I think as a business that you just have to buy into that you're okay with that.
What we're saying on the rescue side of things not to continue to beat this but but what we're seeing is that.

[28:49] You know it's it's what I like into like you know once you have your first like.

[28:55] Can you come out of a break-up right you you have this great relationship with you know a significant other and then maybe you get hurt in that relationship and you break up and you realize you kind of look back and you do a post-mortem you're like there's a lot of things that I expected that were just unreasonable expectations.
Right this isn't her fault it's probably my fault too like it's both of our faults.
But it's not entirely just her right it's also meeting and I think what we're seeing is that there's a class of a merchant,
who is becoming more who's coming to the understanding that.
Maybe the problems with Magento also also have to do with their expectations of what digital Commerce should be and their expectations of what,
you know they're there unreasonable expectations of how something should work and behave and and and so does temperate those those are becoming tempered does expectations becoming tempered and there now better,
yeah they're going to go into the next relationship with with a little bit more open mind and and maybe a little more grace for when they you know get through the hard stuff I don't know it's a bad analogy but I think you understand,
I'll try to go.

[30:01] Know for sure I'd get a and I should say you like my general POV is all of these platforms tank right like I.

[30:12] This is way harder than it should be and compared frankly to other platforms and other parts of the business like it's shocking how much work we have to do and how much risk and how many rescues there are because you know of all those issues and and I would certainly agree,
that those issues are on client side and the platform side and the integrator side.
I think I think my favorite client ever is a big retailer CEO he calls me and he's like hey you know we've hired three svp's of e-commerce here none of them did a good job we fired them all and they all went on to be wildly successful at their next companies.

[30:50] And he's like it's come to my attention that it might be us not them.

[30:55] Sci-fi like that that that level of self-realization is rare but it was enjoyable.
I feel like you guys made some great points like you have underscored what I think is still one of the the marketing challenges of the new Magento and that's like.

[31:12] They used to be good at certain things the new platform is much better at other things but.
Nobody seems to want to really like say hey.
This is our new Focus this is what we're really good at and you know they want to talk about how good they were at the old magenta one and at the same time talk about why that you know.
Hey that was the Wild West in the plugins were super dangerous now now I'm enchanted to in the plugins are much better vetted but we don't have as many.
So I wouldn't I chuckle the great irony here is that that Peter Shelton used to do the Forrester wave.
Son and his whole job was to say hey here all the platforms and here's the here's the use cases that each platform fits in the best right here's the box that you put a shoes Platforms in and it.
It's hard for purchasers because Magento is fighting so much to get put in a box like are you know are they in our right is their goal to being on from solution that just competes with with SI p and IBM is it to be,
a cloud offering like like Salesforce is it to be a long tail like.
Shopify like like they're absolutely is a strong place in the Echo System for them I have no doubt about that it's it's confusing because they won't help buyers by saying.
This is where we fit in and you underscored like one of the.

[32:33] That the great ones there they're really prevalent on the B2B top 300 West even though they don't have native B2B features.

[32:42] They're not prevalent on the IR 300 the top 300 retailers you know which is like the native feature said that they they more support and so it just it's it's hard to figure out exactly what they want to be when they grow up right now is kind of my.
Might my gripe.

Scot, Brian, Philip:
[32:58] Sure yeah yeah I do think that they sort of on the top 1000 to do so I do think I agree with you totally I think.
There's going to be a challenge with Magento philosophically going forward it's interesting to watch of how much of their.
How much of their Community are they going to start to usurp by putting by replacing their communities enable met with core features so that they can play in the larger spaces,
because nobody you know what you know I've seen deals actively lost.
Because Magento didn't have personalization out-of-the-box and you had to go to certona like that lost a deal you know and that's.
That's a silly thing to me to get upset over but at that level people don't want it have multiple.
You know relationships with multiple vendors they want one relationship with one vendor that does everything sort of poorly but they do everything,
but that's just my take to everything kind of suck,
but I don't think I want to mention about Magento and this is this is not something that's been talked about enough and it is I think it's really important point which into I think over a year ago now actually released.
And all of this and what are the things that I have.

[34:21] First got that to order management system.

Scot, Brian, Philip:
[34:23] Yes.
Yeah nothing to call um I'm calm that's the that's the nickname and one thing I love about him, is that.
You're right now in the order management World in and it was talk about futurecommerce for a minute order management is is is probably yeah,
what are the most important plays going forward,
I think if you're going to if it going to look at what you know what technology holds the glass going forward order management is probably that technology,
the thing that I love about him, is that for again total cost of ownership perspective.
You know that the competition is is IBM and Manhattan.

[35:15] And those are very expensive Hot forms right now that I take a lot to implementing and yes they are very powerful they're great platforms.
But emcon is also really powerful and can be implemented for about a tenth of the cost.

[35:32] And so that is that.
All on its own I think it's going to start to shape how Magento enters the market,
it's going to take some time still going to be a year or two I think before it really starts to take hold but this is this is something where it's it's not sexy.
But it is the future it's the least sexy thing actually ever my my my take is is right you're right on,
I've been calling the death of the shopping cart for the last two years and I know I'm late to the game because a lot of really smart people have called that before but you know that the paradigm,
that we're currently operating underneath.
Is still a real world Paradigm being modeled in the digital space the idea that we go to a branded location to put.

[36:21] You know items in a basket and then push it to a check out and then give some payment information this is a dead.
Paradigm and it's it's one that's being challenged in that metaphor is being challenged on every single device that we interact with it's not a desktop computer today and so once,
we get more towards the one click sand and ambient Commerce with anticipated anticipated purchase,
behaviors and we sort of let more of our life go on autopilot and more things are on demand one click.
We don't need shopping carts anymore and Magento has no place anymore in fact most of us won't be interacting with Commerce in the same way 10 years from now that we are today.
And so what does a company like magenta do to future-proof itself it has to get into a different to a different every different area from area.

[37:12] I think we're management is the Crux of that and there are too many businesses today and don't realize it but they're building order management into Magento.
Yeah an order management is its own specific Challenge and nice and it says it is a very nice software market right now.

[37:30] And one that I think does need to struction.
But it's not one that's going to get a lot of people to temperature tension and I think magenta will be there to capture a lot of that business for the people that are trying to do the Alexa purchases that are also trying to do buy online pickup in-store they're also trying to do,
purchase is in,
yeah God forbid a rnvr purchases like whatever the heck that looks like so you know yeah it's an interesting thing that as business moves,
news away from Brandon portals,
Starman and branded direct consumer portals on the internet they were trying to drive people to I think instead of shopping being a destination shopping is now at our destination wherever we are and and that is the transformation,
so I think.
You're right Brian order Management's the Crux of that and so you know Magento digital Commerce as a shopping cart is probably a dead or dying platform in the next 10 years anyway,
how long for all the other ones along with everything else.

[38:30] Except Blue Martini Blue Martini is going to survive.

Scot, Brian, Philip:
[38:33] The fabric.

[38:37] So I totally get it and I do agree LMS is as.

[38:42] Definitely an opportunity to differentiate and most of the OMS Solutions out there right now or sort of design for how people fulfilled orders five years ago not orders are.

[38:52] Yo what we need today much as what we're likely to need in the next couple days couple years so that's going to be an interesting space totally disagree that OMS isn't sexy I would say cpq is way less sexy than illness.

[39:05] But I do want to change topics a good stuff on the platforms we did mention a couple times during the platform conversation the internet retailer B2B 300 list and.
The the the beat of C 500 or 1000 list in that reminded me of my pet peeve of the week.

[39:24] So those lips are super valuable to our industry there a list of the.

[39:28] The top companies in different sectors and how much revenue they do and what platforms they use in all these sorts of things so so when you're talking inside baseball you want to have that list so you know how many of the.

[39:40] Top 500 B2B companies are using Magento for example so they just released this year's list.

[39:48] For the the IR 500 which is the original list of retailers and they become the most annoying salesman in the planet like I get more spam.

[39:58] For this Westin anything.

[40:00] And I need that list so I click on all that spam and I go to the site to buy the list and it's impossible to buy they have like so many different plans.

[40:08] That you can't figure out like which is the plan you actually need and when you click on the price for any of those plans it takes you to a contact us form where.

[40:18] You know someone someone has to have to communicate with the salesperson that goes I don't know how much can you afford.

[40:25] I hate that whole experience I fought my way through all of it I got the list which is way more expensive this year than it's ever been before and.
Wouldn't you know it they've totally nerfed it like in the past they they gave you their estimate of actual revenue for every company on the list and now unless you pay literally tens of thousands of dollars for the list you get these like.
Really course estimates like they do over a billion dollars or they do.

[40:53] 500 million to a billion or they do 250 million to 500 million so I don't have any action here but I'm just saying I Feel Like These Guys Brewing that product like that it was the Super Value.

[41:06] For that the industry in the fact that they make it so hard to buy and then they're their diminishing.

[41:12] The the level of a product you get just seems like he's actually the wrong wrong Trend these days.

Scot, Brian, Philip:
[41:19] I'm just to get back at him you should just go ahead and torrent that that report it doesn't.

[41:26] Santa really show him.
That's the thing is that I know both of you sort of have a vested interest there again in those that comes that particular company my my my guess we'll be like can't anybody just sort of crazies lists and create their own,
could there be a competing product at some point is closed.

[41:51] If only there was like some industry Trade Organization that Evan was members of and they they somehow like either gave it all that day.

Scot, Brian, Philip:
[41:57] Philip II nice.

[42:00] We should find some board members are.

Scot, Brian, Philip:
[42:05] Will Jason it wouldn't be a Jason Scott show without some Amazon news so it's been a bit of pretty busy week on the Amazon front and futurecommerce guys would love to hear your your hot take on,
the latest entry to the echo family the Echo Show what do you guys think about it.

[42:24] I mean it's it's it's been a huge complaint that there's been no.
Screen for the Echo and so this isn't a very natural step in the progression of no voice first interactions.
And so I mean I applied at Amazon for releasing it obviously.
I'm I'm excited it's finally here I'm really excited to see how people start applying it I think there's a lot of application maybe even in a business level for the Echo Show,
I mean I think it's it's it's great I can't wait to start using it.
Next step for the product and probably an obvious next step for the product I'm more excited about the features not necessarily that the show.
Enables but the butt that the all of the echo devices have received which is calling and messaging.
I'll let you seem like a natural progression for the product so you don't need the show to do it it's landed on most Echo devices today already but you can you know call somebody and have a voice conversation with them,
if they happen to have a an echo in there in your customer in your inventory in your contact list or you can leave them a voicemail or are you can just,
play old text messages back and forth which I think is the natural progression and I do think that there's a place for it but.

[43:57] You know I was wrong about the original Echo so no longer allowed to be you no crusty about anything that Amazon does.
Yeah definitely big time and now I have like 4 of them in the house so it's you know.

[44:15] And your podcast is available on it which I'm totally Joseph.

Scot, Brian, Philip:
[44:18] To be the first time.

[44:23] Actually I will I so I am way more excited about the echo look which is the camera device which I'm sure you guys were recovered but we.
You know we we covered it on episode 33 of Commerce we we like you know in general I think we're both high on the product I like the idea of.
Personalized recommendations that are for my body type where as you know I just have you know what's just say it I have a ghetto booty I have this I have a weird body shape.
And it's hard.
For me I have I have very wild range of sizes that fit across many Brands and I think if if Amazon can solve that for me I'm I'm definitely looking video I don't know if I need the fashion advice so much.
From a body data and a even mention Magento in the brain Amazon is a branded manufacturer actually making their own clothes and they can sell me clothes that fit I'm I'm kind of all in on that I like that idea.
Google what's a what's a ghetto booty.

[45:29] A light sides of the very large Terrier.

[45:38] I have a booty design for podcast.

Scot, Brian, Philip:
[45:41] This is kind of a good Segway into the overall Amazon topic,
no you guys talked to a lot of retailers you know it's usually one of the first things that Jason I get what you guys,
you know when people ask you should we worry about Amazon how do we compete with them what's your general kind of framework you you work from do you think they're going to dominate the future or their kind of going to be 25%.
I feel like you you just set the tee up for me so I'll set it up and Brian you knock it down I don't think that Amazon is your competition I don't.
You may think Amazon is your competition and you may hear every podcast and every you know I think piece on medium that says Amazon is your competition but Amazon's out your competition it's,
your customers heightened expectations of you as determined by their great interactions with Amazon that is your new competition and so Amazon setting the new Norm,
but that doesn't mean that we can't compete with Amazon if it means that we have to give the customers a reason to come.
And I think Amazon has to be part of your strategy I think they are owning everything.
No I'm quite literally I mean I think I just got a recommendation for someone to come wash my windows from Amazon's Professional Services like thing which like they're doing Angie's List now I didn't even know that,
it's crazy they're doing everything but I do think that Amazon needs to be part of your strategy and I think.
You know there are any able to platforms field do that side because one part of the pie.

[47:14] And I'm setting it up so Brian you knock it down AKA Channel advisor.

[47:24] I think you know if you're if you're.
Certain retailers Amazon definitely competes with you.

[47:38] If if you're if you are a brand who makes shoes shirt Amazon isn't competing with you buying your own shoes from.
No I completely goes out until we start to get to the basics conversation,
but I guess that's not any different than you know selling at at Costco that has their Kirkland brand right or anyone else does generic Branch button rings to two larger retailers,
in general but obviously I think you know we're seeing the effects of that right now it's not just Amazon but.
You know we talked about Macy's briefly on part one of very briefly but you know I think they're definitely feeling the effects of competition with Amazon and so you know.
Yes I think if you're talking so Philip if you're talking about.
Sort of that that small the medium and even large sided large medium Brands and retailers out there that's.
Yep you're right they're not really competing but we start to talk,
you know a Tattler trying to press level I think there is some some competition and I think that's where you going to the question is is it is it going to be all Amazon in the future,
now if Mark Laura has anything to do with it I would say probably not definitely some.
Big opportunity Unison and I just love his mindset and strategy around what he's dealing right now with Walmart I think he's changing actually he's actually changing the Walmart brand right now.

[49:18] With his with his the moves that he's making in the stigma around Walmart is going to have to shift.
In order for them to remain competitive and in a certain sense they do have one competitive advantage and that is they've got.
A very large set of retail stores scattered throughout the country and so there's there's going to be there's going to be a fight it's not just it's not just going to be all lamps on all the time that's said.
I mean We've joked that our show is the Amazon show because it was on his doing so much cool stuff all the time and you know it's it's it's actually mind-boggling how much.

[50:05] Innovation is happening in an Amazon right now I may live in Seattle so I can be around at all the time.

[50:13] Like they're going and doing things that that everyone's been talking about doing or when like man you know futurecommerce you know a couple if we had started a couple years ago.
We would have been like oh yeah the whole walking to a store pick stuff up and walk out thing that's that's pretty find a future well Amazon just released a store that does exactly that,
you know they're taking risks and they're making moves that no one else's is making,
it's so yeah they're going to dominate in certain ways they're going to be in the Forefront and then they're going to their going to they're going to actually,
lead Arc are retail to its new future.

[50:58] I mean the concept is one thing right like I don't want to hijack your your your very.
A very poignant sort of soliloquy they're my my what I'm trying to but I was coming back to was.
What their Notions in the things that they're doing aren't necessarily.
Things that can't be replicated by other companies that already have.
Retail square footage to do it like if if if Walmart made a decision to do you know to do.

[51:32] Walk out of store you know they have they at least have the.
They actually have stores they don't have to go build them you know they actually have they have some of them got a leg up there and you know while the the notion is nice wasn't the the actual public.
Beta push back from Amazon already I think that you know it's not trying you know I'm just.
Thanks for sharing that the other news we definitely want to get to is,
you know today a lot of retailers release their same-store sales in and kind of a preview of earnings Macy's does both kind of together,
so Macy's has kicked the day off with a really sour note and the Saints were sales for the first quarter were down 5.2% year-over-year yeah I think Wall Street was looking at three down three so is almost,
twice as bad as folks. There's a number you'll see out there 4.6 and that's kind of this piece of Macy's that's called license to known I'm not an expert on that duh nursed and what's different but that was only down 4.6,
then you have Kohl's was down 2.7 Dillard's down for sacks down 4.8 and then Nordstrom's,
all in was down .8% but then you can actually Nordstrom's is to business there is the off-price and full price the full price was down 2.3%,
so you know.
I talked about in the show it's usually from the context of these malls closing but not all these guys are Mall retailers but it's pretty brutal out there you know it.

[53:06] It says it is a really rough time in in retail I've listened to you guys talked about it a little bit on your show,
any what what is your insight into that what's causing it without the what's causing it I think if you know.
If from a political perspective about the ability to you know create jobs and and and make an and keep the growth factor happening in our economy,
if you needed a distraction from retail crisis you know firing the head of the FBI was one way to do it.
Because nobody's talking about what you're talking about right now Macy's down 17% on the day after after that that report there after the that forecast come out today and I think we're.
This is what we all should be talking about ostensibly is that we're in a crisis and it's not just one that the Wall Street Journal had a heaven headline on but what's causing it I mean I think I think part you know.

[54:06] Part of it is you know changing and consumer expectations and demands and.
The the old end of the stalwarts can't keep up anymore and and so and especially because.
Malls of the destination I think is is an Antiquated idea.
So I mean I'm not going to say anything new about that subject that has already been said but I think the the idea that we're going to transform the retail experience into a different experience by layering digital on top of it.
Is is as is is the I don't know it's the retail equivalent of,
in a Weekend at Bernie's let's just prop up the Dead Guy and pretend like he's still alive for a little while,
yeah what one angle you guys may have on it that I wanted to ask about is when Shopify does their numbers they talk about a gmv number and,
it was a pretty robust I can't remember the exact number it was like north of 10% which which is kind of interesting so if your theory is Amazon's running away with it and taking share,
it seems like the SMB online would just be getting pummeled right but,
does she almost a bell curve where it's the omni-channel retail guys are getting pummeled they're not doing great online or offline Amazon's doing well and then there seems to be this kind of group of some bees that you know have,
you have to somehow figured it out what can you guys talk to all those folks would what is it they're doing that that's kind of causing him to Bakken and do you see that in your businesses.

[55:36] Good question I think that S&B is have done a good ass and bees have done is really do what we've already talked about a little bit which is there not competing with Amazon there there,
creating experiences for their customers that really cater their customers well and so they've gotten really specific and really honed and intuned into what their customers.
Are interested in in need and want and you know created product differentiation in and then you know and you know maybe they're selling through Amazon so you know Amazon,
Amazon's profiting from that but they're also profiting from that and so it's.

[56:16] It's you know I mean it Philip I'll let you speak to that to some degree as well but I think.

[56:24] The beautiful thing about being small is that you have the ability to to really focus,
and so do you start of mid-tier Amnesia and retailers I think that their strategy in terms of of early like that their Market was the same as Amazon's market and so they're getting killed because.
They're getting beat at their own game and so that's some BS that's not ever been their Market there their they're targeted.

[56:55] I have nothing more to add to that that's another thing is.
I will have a few points.
One thing is first of all you've got a generation that's now, sat coming into purchasing power and this generation has been through one of the worst recessions in history in American history.
Mom we're a lot more careful with our money and so and on top of that.
You've had insane amount of competition online and you've had sites come up like Retail Me Not in these passive Commerce sites like dealnews and Slickdeals and others ends.
They've created expectations about pricing and purchasing that that are more widespread than,
then what we used to think of us is crazy extreme couponers Extreme Couponing is not a thing that that a few people do now is something that everyone does.
And so were our expectations around what we pay for things.
Are are just completely different now and so even even Neiman Marcus is we talked about this on the show but they're saying price sensitivity is a big deal right now.
And so I think that's playing a big partner so not only are we are we coming out of the Great Recession never but now we have ways that we can save money and so I know I fall into an extreme category here but I would I would probably be.

[58:32] Categorized as an exploitive Shopper where I can I'm I'm buying things that I probably lower in lower than it took for a retailer to buy them,
because I know that I can wait I can wait around with my passive tools and way for price alerts and pick up that pair of Clark's 420 box.
And you know instead of the the retail price of of 120 or whatever it is.
I do have actually something to add which is I think that we're.
And III want myself into it even though I'm a gen-xer which by the way gen-xers have it worse than anyone because we're caught between two you know I'm jective Lee awful Generations,
my my take is that we are moving into a generation of people that are.

[59:22] That want to experience things for themselves and.
And so smbs who are offering lifestyle and who are offering you know a sort of way of life and connection with their brand and whether that's outdoor.
You know Outdoors or Source you know the Forever Summer sort of idea whatever that might be it's their goods and services that are around experience and I think that that sells pretty easily because it's the inexperienced as me being somewhere.
Living and maybe sharing it on Snapchat but I'm I'm going and I'm doing and I'm experiencing interesting things and these are the things that I bring with me.
Instead of you know the traditional you know hardgoods and soft goods that used to just outfit our homes,
you know where we spent most of our time and then take you no one vacation here I think we're we're kind of living life differently now and so maybe this is the new normal.
And we talked about this on futurecommerce we have it a retail analyst by the name of soccer pond at the Rodney and she shoots formerly of Andreessen Horowitz and done a lot of work in the VR space Butchy she has this theory that.

[1:00:35] You know you know maybe retail needs to rethink its model and operate more like Silicon Valley which have have a much longer investment curves and venture capital,
sort of 2 to back and have investment that gets you through they need to just generate profits and instead focus on the need to actually expand the,
the ubiquity of of you or your brand which I think is interesting take.

[1:01:03] No it definitely is an that's actually going to be a great place to leave it for this week because it is happen again we have wasted a complete our of our listeners time so.

[1:01:14] Brian Philip we certainly appreciate you coming on the show and helping us to do so.

Scot, Brian, Philip:
[1:01:19] Yeah thanks guys we really enjoyed opportunity meet your audience and experiment with this whole cross podcast concept,
if you guys liked it be sure to let us know on Facebook or Twitter or wherever it is you like to leave feedback if you leave feedback in iTunes we always appreciate,
the five-star kind of feedback thanks guys thanks for having son straight.

[1:01:43] Yep until next time happy commercing.


May 21, 2017

EP084 - Amazon News, Walmart Earnings, RumorsAmazon News

  • Prime day - 30 hours long, sometime the week of July 10t
  • Amazon market cap crossed 2X Walmart
  • 20yr anniversary of Amazon IPO - A $10K investment then would be worth $6,410,000 today
  • 1 click patent expiring
  • Amazon expanding into Pharmacy and Furniture
  • Amazon B2B impacts Grainger (Now predict that 80% of the sales by 2021 will be online)
  • Brands moving ad dollars from Google to Amazon


  • Strong Q1 earnings- Ecommerce up 63% (40% organic), GMV up 69%
  • Same Store Sales up 1.4%
  • Went from 10m SKUs a year ago to 50m SKUs today (Amazon has 355m)
  • ThisIsStory opens Fresh themed story
  • Walmart files IOT Patents

Other News

  • As earning season wraps up, discount retailers, dollar stores, and warehouses are up, while department stores are down.
  • Samsonite purchases Ebags  for $105m 
  • Google IO - Google is all in on artificial intelligence
  • Target tried to buy Caspar and settled for an investment
  • Target may be trying to buy Boxed

Scot will be hosting "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, he can be found in the Channel Advisor booth #607 for some of the show.

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

Episode 84 of the Jason & Scot show was recorded on on Friday May 19, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 84 being recorded on Friday May 19th 2017 I'm your host recent retailgeek Goldberg and as usual I'm Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners Jason spend a little over maybe a week week and a half since we have chatted how have things been if you've been how many cities have you had since we last caught up.

[0:55] This may be the first time I've been able to see this all year but I have hit zero City since we last chatted I meant home in Chicago for almost two straight weeks.

[1:07] She is she's at she has helpfully packed my suitcase and is eagerly awaiting my departure to the West Coast on Monday morning.

[1:16] Put it right by the door there.

[1:17] Exam.

[1:19] Cool so I guess we can't talk about any trip reports any other things going on you want to highlight before we jump into it.

[1:29] I do you know where you like to talk about the fan mail we get on the show but I got some angry fan mail this week.

[1:39] Well it's always the same angry fans Jason Delray of recode.

[1:47] What did we do to engage mr. Del Rey.

[1:52] Yes what's the argument sorry about don't get an argument with people that buy their ink by the Barrel in there.

[1:59] DigiLink.

[2:00] The digital anchor pixels by the barrel.
So if you recall last week we had a great conversation about Amazon with Andrea and the.
Topic came up of jets and I did mention that the Jason Del Rey.
I had written the article that sort of implied that that perhaps jet.
Close I'm sorry that the Amazon closed Quincy.
Out of spite for Mark Lori you know who's not competing with them at Walmart.
So we had a little conversation about that and Jason me actually very kind note to clarify that I had I had soda misrepresented his position and then.
He's really doesn't think that,
did Amazon close Quincy because of Mark Glory but he does think that some animosity for Mark Lori might have played into,
the communication around the closing of Quincy in the fact that they said like what we closed it because it was too difficult or not possible to make it profitable and so so Jason series more of that like the communication may have been a little more of,
negative as a result of the of the.
The Jeff Mark animosity then then the actual business case then I suspect that he's probably right like that certainly does make a lot more sense.

[3:28] Yes it's almost like you know Amazon kind of crap that if you will.

[3:35] Exact exactly that I quickly showed up on a crap report and they in the shutter shutter down.

[3:43] Google that's said there's been a ton of news in industry and as I always like to say it wouldn't be a Jason and Scott show without some Amazon news.

[4:07] Yeah Scot it feels like there's another interesting stuff going on and Amazon this week I think we finally got the announcement about,
Prime day for this year and I'm I'm struggling to even call it Prime day because I think it's now Prime days plural.

[4:27] Prime day is prime day 30.
Yeah Dave it's weird because there's several news reports picked up and said they're hearing from Amazon that it's going to be the week of July 10th through 14th,
betting person was in 11th that's kind of where I'm going to put my money and then it's going this year it's going to be 30 hours were just kind of interesting which is like kind of random it's a,
day in 6 hours so I guess they're trying to pick up another nice 18 hour window and then.
The six-hour window when when most folks are asleep and then pick up a morning would be my guess.

[5:09] Yeah you could you not yours you could imagine they're just creeping it ever every year and that eventually it will be like in always on promotion.

[5:22] Or cynical person might say that they're making sure that they dramatically beat last year sales numbers.

[5:28] That is now it should by its nature since the six hours longer to see that's going to be one sick so the 18% more juice from hours assuming a linear distribution.

[5:42] Thanks for doing public math on the show that's always impressive to me.

[5:46] Yeah yeah this is why we have to delete the other two shows.

[5:50] I was just going to point out no editing involve folks.

[5:54] I think also someone exciting we had talked about the the likelihood that this was going to happen but Amazon had a nice little uptick in their stock in their valuation is now officially twice that of Walmart.

[6:12] Yeah yeah and I haven't seen anyone else who visited the word perilously close to that point that I've calculated again in real time on a show probably around midnight a caveat there,
that's a basis would be,
close to the number one richest person with over a thousand in the stock is kind of hovering around the 965 970 so we're not too far away from when I think that too so,
let's see I think I have some kind of a strong showing in Q2 or some kind of catalyst gets it over $1,000 I think we'll kind of see some articles about the.

[6:50] Yeah that that is going to be fun to watch regardless that's a really high tax income tax neighborhood with with Jeff and a Bill Gates end up there.

[7:04] And I will one doesn't even that same neighborhood does I meant within a mile and a half you got two guys paying a lot of income tax.

[7:11] I thought you meant the neighborhood of the top five on The Fortune 500 not the physical neighborhood.

[7:14] No I'm just saying that that police force in Seattle is well-funded is what I'm.

[7:21] Absolutely.

[7:22] The PTA is is the coppers are overflowing.

[7:27] Yet another nursing one is this week was the 20th year anniversary of Amazon's IPO and you know when that happens with these accessories is he always interesting data points and if you put a dollar in your every dollar you invested in the IPO 20 years ago it would,
each of those dollars would be worth a $641 today so if you done a thousand that would have been worth 641000 and if you done,
you can continue the math 10,000 will get you up to 6 million and that's why Jeff Bezos is at the heading towards the top of that list because he owns a lot of Amazon.

[8:05] He invested about $2 in in that original IPO.
I think that's mostly true but when you say when you invested or you might get that I would point out that back then you probably get a paper stock certificate and I would have lost the certificate so I wouldn't of came the money but.

[8:24] Even 20 years ago the paper was really just about sibo and you're registered and it's okay if you lose the pay.

[8:30] Oh thank God I was losing a lot of sleep over that.

[8:33] So you should actually check there's every state has a place to go look to see if there are someone looking for you to deliver that lost share of Amazon stock.

[8:44] Luckily right after the Libyan Prince they're usually calling me so I don't I don't have to look it up.

[8:50] It's odd anniversary year for Amazon it is also the the.
Anniversary of the Amazon one-click patent and the reason that's interesting is it's the the final year of the Amazon one-click patent so that expires this year.

[9:09] Who do you think will see a rush of people kind of coming out with one click now that they can't.

[9:17] I suspect that we will like I feel like you'd only on Amazon like.

[9:24] Exercise the pageant really aggressively and I think that you know they got a licensing fee from eBay if I'm.
If I'm remembering right but I feel like people had been skirting the line on that patent more and more in recent years and so you know maybe it won't be a,
a watershed moment but I think it in certain sites it's certainly going to make sense and so I do think we'll see more of that.

[9:47] Nothing eBay doesn't license that's why I have this weird kind of two-phase commit it's kind of like you know,
buy and then you can go to the PayPal flu and even unit they try to integrate those things are there still a two-faced but apple is one of the biggest licensees of one click.

[10:05] Okay so I may have remembered it wrong I thought eBay was the company that the Apple actually prosecuted the pastor that Amazon prosecuted the Pats and again and there was some settlement or something but I'm a.

[10:17] This will be a fun thing for Lester's to help us research Sean I definitely do Apple license is a very large licensee I don't know who Amazon tutor.

[10:27] Answer those guys I'm certain are looking forward to that patent expiring if nothing else.

[10:33] And then there was also some news that it looks like Amazon is getting more serious about a couple new categories,
Furniture in potentially most interesting the the Pharma industry the Pharmaceuticals.

[10:48] Yeah.
You know what's what's fasting about these rumors are Amazon announcements I think they a lot of them come out of job postings so the two I read kind of hit read between the lines of job posting this and then talk to me Amazon source,
but each of these days so CVS was down pretty materially the day the farm and news came out and then Wayfair and a couple other Furniture companies for down pretty substantially the days the furniture.
Sucking out so.
Yeah it's kinda it's really interesting your last 20 years to see this work like 20 years ago I run laughed at Amazon and if they announced we're going to come out for my run be like or if they even if they acquire NC,
I care too much about it oh no sorry the other guys did but they weren't investor and.
We're playing in that area and everyone scoffed and now when they're just so with that they're getting there they put a job putting out stocks go down to 20% so pretty amazing.
How much to move the needle here in the last 20 years.

[11:48] That alone is a very powerful in both these categories are interesting cuz to your point.
Superficial like there'd be a reason that both of these categories are.
Difficult and obviously there's a reason that neither one was the first category that Amazon went after and there you know there's only going to be reasons that the Legacy in that the incumbents in those two segments,
are saying here's why we don't think Amazon will be as successful in our segment as they have been in all these other segments and and that of course,
you know I gets the hashtag Famous Last Words Furniture is interesting because it's not likely that the.
The enormous of fulfillment center infrastructure that Amazon has is very well suited to Furniture in so that you know there are some third parties that have built these these Furniture distribution Networks.
And they often require like white glove deliveries and you know very regular size stuff and even though.
Amazon has built a couple of distribution centers or Phillips centers for a regular sized items but the really design for things like big screen TV's not necessary sofas.
Inside of Amazon where to get really serious about furniture.
It would be interesting to see if they would build a new fulfillment center infrastructure or how they would it would handle that that whole part of the thing because it doesn't seem that could leverage all the existing FC's.

[13:16] Yeah and that's that's one of the keys they report so some of the job postings are 444 falmont centers that are going to be designated specifically furniture and Appliance so so but they never been contact with that.
Name an end to point and never to my knowledge I know they got a pair of them at centers that have kind of steaming and ironing and kind of some very apparel they have a grocery footprint,
they have a small item that return footprint that have a large item that's largely is for large Electronics this is the first time I've kind of seen,
any Donuts Center tag with furniture and Appliance in and then certainly it sounds like they're building for sale that's.
Pretty interesting and going to be a whole new new them footprint to see what they're doing.

[14:04] Yep and that that is a category that you look at and say has not been very digitally mature a lot of the the.
The traditional Furniture retailers would say like oh gosh people aren't going to be able to aren't going to buy furniture they can't come in and see it and so they hid them under invested in.
In digital in e-commerce there's certainly some exceptions out there so that's an interesting category and then potentially even more interesting is Pharmacy again bunch of unique challenges about.
The distribution Network for that and in that case particularly the delivery and dispensing has a lot of regulations attached to it.
But you talk about disruptions you know you have three very large chains in in the u.s. Walgreens Rite Aid CVS.
And the something like 60% of the revenue from all three of those chains is Pharmacy.
I said that literally is their reason for being that drives all the trips to the stores and then they hope to sell all that all that stuff on the Shelf as a,
serendipitous Discovery when you're coming in the store to fill your prescription so so it won't have Amazon was able to disrupt.
Pharmacy in and you know really really own direct-to-consumer.
Fulfillment for pharmacy that that would be those those chains could not survive without walk-in Pharmacy.

[15:31] Yeah do you think the whole prescription thing in management of that is insurmountable or you think there's actually a better customer experience to be had in there.

[15:40] Yeah I know I think it's exactly the opposite I think it's inevitable that the majority of prescriptions that people are going to want home delivery like it just is a better experience it's a chore to have to go.
Pick that stuff up like there's a subset of that industry that you need kind of on-demand fulfillment so you just had a medical procedure and you need to stop on your way home and.
And get some pain meds or something like that but the overwhelming majority of Pharmacy are these.
The stuff that the majority of Americans now take for for chronic conditions and so you're just.
Virginia if your whole life and it's a heck of a lot easier to have that stuff,
show up at your door there's some really Innovative companies that are tackling individual markets like I think of capsule and in New York for example and you know Amazon certainly has the resources to.
To go after that and saw that on the national basis and you know if and when they do that that's going to be a scary moment for other traditional drugstores.

[16:44] Another category that's interesting we talked a lot about on the show and I know it's kind of a hobby for both of us to follow this one and it's kind of the B2B industrial category,
and I'm just kind of the brief history here on this a deep dive cuz this is definitely out,
that we should go deep run but that the Amazon piece of this is what she back in.
April I think it was April of 2015 Amazon launch time.

[17:14] Amazon business they used to have the thing that preceded it was Amazon Supply and it really signaled.

[17:21] That Amazon is getting pretty serious about B2B and you know it's funny a lot of the B2B players really kind of laughed and said you know we have this network of.
A thousand stores we have same day delivery there's no way you'll be able to counteract that and I would maybe think of this is Granger I was just one of the big players in this kind of B2B category and Industrial.
Lovegood's has had a really rough first quarter so it started out they they.
The mr. numbers worse than they ever have and then it took awhile for them to kind of come out and explain what was going on and they really just a simply said they've seen a seismic shift over Ecommerce and dinner.
They called out specifically but reading between the lines it sounds like Amazon strategy is really taken root and it is causing them a world of hurt,
one of the things I thought was interesting is when they came out and said kind of readjusted expectations they said they now predict that.
Over 80% of sales by 2021 will be online and that cause analyst to take because they're so.
Built out in the stores and all their margin is kind of.
The accounts on people coming in the store analyst came out and cut their whole long-term margin Outlook by more than half.

[18:36] So there's definitely see changes going on in that part of the market we haven't had a ton of time to talk about it and I think it warrants a deep dive.

[18:45] That we should talk I've been to that one either,
Factor there that seems really scary for Granger a lot of these B2B companies have contract pricing or negotiated pricing with each individual customer so there's,
their tents and not be a public price and,
you know they rely on price application you not knowing how much anyone else is paying for the goods and so Granger's had an e-commerce site for a while,
but they they charge like the highest possible price on that e-commerce site so today,
you know that the customers are buying online we're paying the highest price and one of the other things that they announces that they've had to dramatically.
At as all shoppers are shifting the purchasing online they're their price sensitive online and so you know how to say Amazon,
has the exact opposite pricing philosophy so they had to dramatically lower their prices and so it's a double whammy you say like wait a minute all your stores are so your sales are shifting online away from this huge investment in brick-and-mortar that you have,
and you're having good to dramatically reduce the margins you get for online sales you know that doesn't give us a lot of confidence in your future.

[19:53] Yep that's when I want to talk about it really news but it's kind of trend I just wanted to bounce off you and see if you're seeing the same thing so so it's my talk to.
Brands all the time.
And yeah I don't really causality but because I think we talked a lot about Amazon comes up for really interesting conversations over the years used to be.

[20:19] What should I trade you be in that kind of thing,
now what I'm finding is in Pride like the last 10 to 15 conversations I've had with Brands there they're really getting very serious about advertising on Amazon and I don't really see this out in the press three much but no.
I now hear that stat come a come back to me that that I use all the time and that you no more searches are done on Amazon then for products than other sites like Google and it for she was the first service this like for five years ago and now there's several sources for the data,
Answer the conversation goes you know what we're doing is restarting it's been a lot more on Amazon ad Platforms Night if I have to that AMS Nama and we can go into that on.
If I do Deep dive on this too and certainly you know it had gas like Andrea and most break talk about it on the periphery.
What you interesting is what I'm seeing is this very quick lifecycle where brands are starting to the test and then it is a brand that you know.
There their name brand so they have a lot of marketing dollars already in all kinds of different buckets,
and at least we're starting to see them slash those at dollars it towards Amazon rapidly,
also some folks have moved north of 30-40 50% of their previously mostly Google ad dollars over to Amazon and it's because of that so they can measure very.

[21:50] Easily how it is moving the needle on Amazon itself but they're also seeing a very powerful spillover effect off Amazon.

[22:00] It's hard to quantify that and I've talked to some of the other doing and its proprietary nothing.
I don't want to go into it now cuz though I think it would reveal who they are but it's really fascinating to see this and I would not have guessed this would happen this quickly and I just kind of wondering are you are using the same thing in the hearing the same discussions.

[22:19] Yeah absolutely.
In it it it feels like for a couple reasons like certainly one is there is this like shift 2 more miserable,
forms of media and more more sort of green eyeshade evaluations of marketing spend and your point when you advertise on Amazon you can it's Noah believe that that had resulted in the cell whereas a lot of other advertising Vehicles it's not been so the KP eyes have to be more,
more wishy-washy and frankly like there's a lot of ugliness in the whole digital advertising space about like when you measure things like impressions.
How accurate those measurements even are and is it about that sing that are person as that below the,
the the full the never invisible to the human eye on all these sorts of things come into play into the the ads on the Retailer's site,
you know certainly have an advantage and measurability but I actually think it's it's two other factors that are really driving it like that.
The top on when you mention like hey if Google is been a traditionally effective way for me to advertise in particular. I've been really effective and then you start to hear that weight 55% of all.
Search traffic starts on Amazon not Google you say man my portfolio of of pieles should.
In 55% of those dollars should be going to Amazon not to Google in so you're starting to see Brands want to make that shift.

[23:51] And then you have this third problem for the account teams that are particularly responsible for selling their own products on Amazon.
There's a Amazon has this great virtuous cycle for Amazon which is when you launch a new product on Amazon the only way to find it is inserts right like unlike a lot of other e-commerce sites where.
We're about 90% of the users are using the nav and maybe 10% are using search Amazon is almost exclusively a search based.
Experience and the only way to show up in search is to have a high velocity of quick through on your product.
And when you're a new product you don't have a high velocity of quick through so.
You literally have to see the system by buying ads to improve your visibility so people could through to your product detail page so that you can get some volume so that you can start organically showing up in search.

[24:44] So it almost necessitates that you make that that investment and what's what's been interesting to me is.

[24:52] You know a brand of spending money on marketing like these tennis spend money out of a couple budgets and so usually.
The first thing you see is that there's a sales team at you know Procter & Gamble or if you know you pick any brand.
And they're responsible for selling the family care products through Amazon and they have a sales budget to invest in promotions on amateur Amazon that help himself just like that.
Promotion budget to invest in in-store Shopper marketing at Walmart tell them so.
And into those are the guys that originally are investing in these these AMS services to have their products show up so that they can start getting that search visibility.
But there's a much bigger marketing budget that's owned by the CMO and that's the sort of brand building General awareness budget,
I'm in that usually the budget that's invested digitally and things like like Google and so the interesting trim we're seeing is a lot of brands have always had a presence on AMS,
MN other retailers advertising platforms.
From those account teams but now it's becoming much more common that you're seeing the CMO allocate part of the brand building budget to showing up on these retail or sites and well.
Amazon's the by far the largest Network in the US the Walmart advertising that work W an ex is very big target has a meeting full of network,
Best Buy has a meaningful Network like almost every big sight there there's a separate team that's called the site monetization team and they're focused on on selling these marketing products brands that that died.

[26:31] You don't want visibility on the sites.

[26:33] Young I'm kind of curious if this going to start to show up in a lot of the ad tectonic companies.
Results on specially Google because it does seem to be this,
the kind of destroyed the Google milkshake so it'll be interesting to see if if we start to see him it back or maybe you could just big and diversified enough it doesn't it's not Material or something that we should if you're interested in this maybe,
Too Deep dive ideas maybe we could get some Worcester feedback on you know which one of these is most interesting so we've got a Amazon marketing platforms and entrance and then we've got the B2B DS2 topics there.

[27:15] Yeah good stuff and I guess one of the thing I would say there,
one thing holding Amazon back a little bit at the moment is there ad platforms are not nearly as advertiser-friendly as,
since somebody that their Core Business Like Google right so there's lots of friendly api's that all the Aztec guys can build products that talk to on things like like Google and the.
Technology you can use to interface and execute your ads on on Amazon and and you don't even greater or stand on all the other retailers sites his is.
Relative William in church so that feels like with the one area that needs to change for it really to catch fire.

[27:53] Yeah and we've had several guests on the show say that they're pretty big kind of aspirations there so I think they'll get there.

[28:00] There's their zero doubt that they could solve that problem and likely will.

[28:04] Cool exit on Amazon you think anyone's going to slow those guys down.

[28:13] Well I guess it depends on what you mean by slow them down III I certainly think that they're going to continue to grow and capture more market share in so if you're if you're picking a winner it's it's clearly got to be there,
but I don't think it is a one-horse race and so I do think there's some other retailers that you know of,
in a position to carve a pretty big pies for themselves and the one you think of the most in the one that you know frankly at the moment has a much bigger than Amazon is our friends at Walmart.

[28:46] Yes yes oh Walmart had their first quarter earnings out and I think.
Most of the reaction I've seen has been really positive some some folks are saying you're out of the woods and others are calling and green shoot so kind of,
yeah different levels enthusiasm but mostly enthusiasm the one metric everyone's really excited about and I thought was.
Pretty awesome is Ecommerce was up 63% year-over-year to you as a reminder e-commerce cornichons going about 15% maybe at 2 gets 14 desktop in two or three said that night maybe.
Natural north of that but called 15 to surrounding and,
Amazon consistently as a company grows in the mid-twenties and then if you take out a bunch of pieces the egm part of Amazon instead of the marketplace are growing,
to clear around 30% so twice the rate of e-commerce so here you have something growing for X rated eCommerce witches witches great now Walmart hasn't been consistently doing that they've been all over the map here,
so you're one skeptic one skeptical think people could say as well.
The last year they didn't have a jet so is this all inorganic growth into the Wall Street analysts have taken some of Walmart's comments but I gave him enough data to back into it and,
no the ones I've said have estimated that the organic growth was 40% your beer so still a really good showing ahead of Amazon's growth rate and then when you later in the jet would she have the Dell 23% or you get took up.

[30:21] Pretty significant growth number so you have it too early to call that the strategy is working but there is definitely this is better than - 5%.

[30:30] Absolutely and you know it,
a huge warning sign for everyone else in the industry Let's Pretend analysts are for sure right in his 40% organic growth so the whole e-commerce Industries growing at 15%.
By far the largest player in the Commerce industry that alone is is like 30 or 40% of the industry,
is growing at 30%,
and this and like most likely the second largest player in the Commerce industry is growing right now at 40% so that actually does not leave a heck of a lot of growth,
for everyone else to get to that 15%.

[31:10] Yeah there's there's two kind of outcomes if if the industry keeps going at 15 then.
Online people to share will what I actually thinks going to happen if I grinning kind of a golden HD Connor Square I think if you don't just ties into the mall again theme I think we're going to actually see the,
Tire e-commerce sea rise and we're ghosts are too.
Bump up from that 15% we've had for years and start to get up towards the 20% that that's kind of yeah I think that's what's going to happen because and then the,
and what that'll do is the percentage of sales that are online is going to start accelerating it's been kind of if you look at the comscore data in the Census Bureau data,
it's in the sky like straight line for a while and it.
I feels like the elbow the curve so I think this between q1 and Q4 I think it be a attic will start to see the really interesting inflection point there.

[32:01] I think that's totally possible I like to think of it is,
the really isn't an e-commerce industry like they're a bunch of product categories that are each a different places in there,
certain maturity or adoption curve in in general across all the segments we see you once they get about 20% of their their Sales Online like it becomes a major disruption for the the incumbent model in so I think they're just,
a heck of a lot more retail segments that are that are rapidly approaching that that 20% threshold in so like I do think that you can,
that you could imagine a bunch of those crossing over that threshold then driving up the overall industry average.

[32:46] Coupler just two bits of so if the first time they just close the DMV number in that was up 69% so when,
when Revenue grows slower than gmv that mean to take rate is going down at I don't think that's enough of a Delta to be concerned it usually that can be explained and mix so all these marketplaces have.
No a different mix a different take rate for electronics let's say is usually some 10% and then some of that jewelry is north of 15%,
what is a nursing kind of trend watch over time which could indicate that there's some price pressure there or something like that,
I'm Sims 4 sales improved 1.4% in the physical stores so that's good and.

[33:29] And that beat analyst estimates.

[33:32] Yes that was an improvement and you know it.

[33:37] Walmart's been on about a year Journey may be teaching months where they've been investing in stores in hiring people and raising their,
wages and cleaning up the stores really focusing on you have the day today blocking and tackling at the store level and that's an indication that that seems to be working and as we know later than other same-store sales numbers out there and 1.4% is,
printable right now it's going to got a plus sign in front of it which I think many retailers would,
really like to have on their teams for sales the quality of earnings growth improves which is good and then what the guys always measure on the sun and this is I've been being this drum for.
Pearl every 15 years is at this point in time Amazon has you know,
over 3 and 55 million skews so when it comes to selection no one comes close to Amazon it's that marriage of the one p and 3p model that does it Walmart seems I've got religion around this and it's widely reported,
that they went from 10 million skis a year ago to now that 50 months can still drop in the bucket kind of 1/7 of Amazon but you have to go up 5x in a years is pretty impressive when for you know.
What was yes 15 years and be a Walmart has been kind of in single-digit millions in here the last couple years they've they've really started to get very serious about adding selection.

[34:59] Yeah absolutely in it it seems to me I mean when Amazon or when Walmart first wants to Marketplace like you know they didn't get immediate Traction in there you know they were kind of,
judicious about who they let on to the marketplace and I know the sellers like really complained about.
The platform in the the the tools and how many schools you can on more than all these sorts of things when you see that jump from 10 million to 50 million my section is that they fix the bunch of those problems in the third,
they're much more seller friendly than they then they were originally.

[35:39] Couple other little things in the Walmart world there's a great store concept that I can't remember we never talked about on the show,
call the story or or formal name this is story which is a retail space in New York City and it's kind of an interesting concept they they.
Are a great mix of Commerce and content,
they come up with a theme every month or two and they redesigned the retail space.
Based on that thing so the theme could be.
A category product like health or you know measured self or innovation or something like that,
and you know they design a complete retail space around that theme in so,
when you go there from month to month you you wouldn't expect to find the same product you'd expect a completely different sort of Rich immersive experience,
from the original concept they have been able to sponsor a number these stories so they had Brands come in and say hey we want you to develop a whole store concept around,
are our particular brand and this month's story debuted a new A New Concept in the space and it's it's fresh.

[36:58] You and I have been to several shopping at work meetings at at that store it's really cool it's kind of.
Antiques curation to the the Instagram think because the store is the simply just wipe and replace every wish you do every 2 or 3 months is it courtly.
Every month with what's that site.

[37:17] I think it tends to be about every 2 months but I don't think it did so I got to fix schedule.

[37:20] Come on Sia yeah yeah so are you going to go I think you're going to be in York City going to go stop by.

[37:28] Yeah I haven't been to this concept yet it just open I think my next trip to New York is maybe end of next week or two weeks from now and so I will,
definitely look forward to checking it out and hopefully we'll be able to tell our non New York westerners about it after that.

[37:45] And then no one other piece of interesting new Walmart news this week is that Walmart's I filed for a number of Internet of Things past tense,
in the, space so like everyone's really familiar with Dash buttons and dash Auto replenishment Walmart has patented and number of sensors.
Detect when a consumer is likely in need of replenishment so it sort of,
implicit is a replenishment instead of explicit so you don't maybe it's a toothpaste holder that can tell you when you're out of toothpaste,
but other interesting play with some of these sensors are designed to tell you when the product you bought the perishable product you bought is about to expire so I could warn you that your.
Your milk is expired or your cheese or something like that I don't know she's never expires now that I think about it but you get the.

[38:44] Cheese expire this green stuff on it.

[38:48] That green stuff in cheese I'm just getting I think it's penicillin no that would be bred never mind.
But in any case interesting that the Walmart is investing in that in that ipspace we talked about.
The internet of things and Auto replenishment on the show a couple times and it is very likely that five or ten years down the road sort of 40% of the goods that you.
You buy in the grocery store today are likely items that magically show up at your door because your house knows you needed him so,
I think that the retailers that are investing in returns and brands that are investing in that technology now are are wise to do so.

[39:32] Yeah yeah one news item to kind of break out of the Walmart side that we were remiss and covering and so we had this flurry of activity there were Walmart bottom of Oaks in between shows of one of our gas company was acquired so Samsonite acquire D-backs was cofounders Peter Cobb is good on your end we've also had John Norma,
two of the three or four Sounders on on the show.

[39:59] Acquire.

[40:01] Yeah yeah I'd say so.
I don't think it's a huge stretch to say that we basically put this deal together but anyway so it was acquired 405 million,
that's great outcome for everyone in and you know this trend of,
brands of accelerating their digital footprint by buying e-commerce players is as fascinating in its.
A shout-out to our friends at ebags and congratulations on that one.

[40:27] Yeah absolutely it's going to be interesting to see I got his bags has a lot of that digital expertise Samsonite now also owns to me so it'll be interesting to see how they're able to leverage all those those new digital chops,
across like you know both of the stores brands.

[40:47] And then I'm also in news so we're,
Walmart usually one of the last folks reports or kind of heading towards the end of the q1 reporting cycle and I saw a really cool chart where well one of our joint Twitter friends Ryan Craver has been tracking the sand,
what is he shows kind of graphically same-store sales Trends and you know this was fast about this chart is.
Yeah he has what he has kind of groups without call value-oriented retailers or their counterparts so things like Burlington Coat Factory which is a discount on Nordstrom Rack.
The Nordstrom Rack piece of Nordstrom Rack shoes TJ Maxx,
Dollar Generals in the dollar stores then there's a grouping for department stores and there's a grouping for wholesale clubs and it is a tale of three cities so wholesale clubs in generally the discount guys are doing well with positive same-store sales results and.
Department stores are doing really really poorly with with severely negative same-store sales.
So we'll put this in the show notes or check either my handle or Jason's on Twitter and by the way both retweeted this so you can see it there but it's really,
interesting graphical display out of this where consumers are spending their money is actually an end the feast and famine that's going on and offline retail right now.

[42:15] For sure I mean it plays perfectly into the,
the retail Armageddon that we talked about that but you know protect those department stores are super distressed as consumers are making different decisions about where to shop been increasingly it's at those those more value-oriented retailers.

[42:33] Yeah and one of the young,
no one of the folks that did not make it out here in the last week or so as a retailer or rented towards team some all based retailer oriented towards teams called rue21 the file for bankruptcy so remains to be seen if they'll be closing all their stores or what's going to happen to the bankruptcy but usually it does mean store closures.

[42:57] Yeah in it.
I mean then we talked about the number the earlier bankruptcies a doing some interesting buzz on Twitter one of the bankruptcies was Gander Mountain and what kind of interesting,
that Gaynor was bought out of bankruptcy by Camping World in the reason Camping World might be interesting to some listeners is the CEO of camping world is the star of retail Park a profit show on CNBC if you ever watch this.

[43:30] Leon's Marcus Leon saskia.

[43:35] Exactly and so Marcus has been Super Active on Twitter and he's been super transparent a gander had a.
If memory serves like 60 stores and campers world is going to reopen like,
20 of those stores in so you know he's been like sharing real-time data on Twitter as they make the decision as to which stores they can reopen versus which ones they they.

[44:02] So that is really confusing because,
the stores all say the stores closing and we're liquidating everything then he is saying no no no no the store yes or selling all the stuff but the stores going to stay open so I guess they're going to,
no they have their own supplier relationships and Logo replenish the stores and then they're also rebranding them the brand is like.
Cinnamon Big Gander Mountain it's just Gander outdoor but he wanted to create a bunch of distance between the brand but it's like the same essential name side,
Nas represent tracking.

[44:36] No I think you got it,
exactly right I think he did not buy the inventory the distressed inventory in the stores so the Liquidator the did has the right to sell all the stuff out of all of those stores and then the stories he reopens he's going to have to replenish your point prison while using the campers world supply chain that he already has.

[44:56] Yeah that's commuter Sting If you can make that work because it's certainly very confusing consumers I forgot it's pretty in the weeds try to explain that to him.

[45:05] Not for sure I just found the thing interesting you know if this had this this kind of thing plays out all the time when returns go bankrupt and I'm played out you know 15 years ago or 10 years ago when when Circuit City closed.
They give you work in a Circuit City store you have no idea if you had any potential for a new job or what was going to happen and you know you'd be waiting until you read something in the newspaper and now you've got like.
All this this real-time information you jump on Twitter and the you know Marcus is out there tweeting list of stores and saying like Hey we're going to hire people in that store so I did.
I think that's another interesting ramification of the of digital disruption.

[45:47] Yeah that's good point I think it is super helpful for the employees to have some some in real-time information what's going on.

[45:53] Absolutely So speaking of digital disruption another big guy digital event this year or this week is Google IO.

[46:05] You would what you think about that I was not able to watch it real time I read several the summaries and,
yeah it sounds like Google went from in the early days being kind of search for Sony search to than mobile first and now everyone's saying there AI first so the AI Buzz was a Google IO and you have to get excited you're going to be in it's like,
you know,
this thing you can hold up your camera and it'll decode something in the real world and Google's had several iterations of this and they've all been kind of you know nice demos but not like,
game-changing cell I don't know I felt like a real use cases so interesting to see if something was like changing for you.

[46:50] Yeah we'll see nothing I would call life-changing but I do think it's interesting,
why is one of these double-edged swords and we we for sure need to do a deep dive in there if you turn on on AI for Commerce because it is over hyped Buzz thing right in and so you know all the big,
Big Rita a big big guy technology companies are talking about becoming a I first in and innocently that was the big play from from Google in,
you know my argument is no one should be excited or buy something because it is or isn't it,
bike was not an outcome and you don't people like I need some of that good at so so we'll we'll talk about that a little bit on the Deep dive,
but I do think it is true that the AI is enabling a bunch of,
much more interesting user experiences and much broader a digital user experiences then have been possible here to for so so I do think that is on the cusp of enabling,
huge of systemic changes to how we shop across a bunch of categories and I am excited about that and you know that,
but I would,
I would encourage people to get much more excited about this specific use cases that are likely to affect them and why they're going to be a better experience than that it has the AI label or doesn't have the a highway.

[48:21] So I think it be fun to do a show where we talked about what some of those near tournament fart termed use cases are but I know one person that's in my camp on this is our our number one listener Jeff Bezos.

[48:33] So she possible Deep dive so if you want to let us know your thoughts,
tweet at us or I'm Scott Wingo Scot Wingo in Jason his retailgeek.

[48:49] Or go on her Facebook page and let us know which of these deep-dive topics is most interesting for you so to recap we have business kind of with an flavor of Amazon business what's going on we have.

[49:03] Artificial intelligence and then we have Amazon advertising and and that platform so let us know what's interesting to you.
Jason one big retailer that's been pretty active here in the last week's news that we haven't talked about his Target have you been tracking all the I don't know it's news I think it's more like,
gossip at this point now have you been tracking what's coming out at Target and interesting macro things going on there I'd love to hear your take on.

[49:32] Yeah so I think there's some gossip and some news I think they also did have their earnings call this week,
and I did not write it down in the note so we're going from memory so don't hold me to these numbers I think they basically beat the analyst expectations but they definitely had negative same-store sales so,
in my head I want to say that that the animals were pretty thing that be down like 3.7% and they would only down like 3.4% or something like that so.
Definitely not the you guys want to beat analyst expectations but definitely not the kind of thing you claim victory on and and pound your chest about.
When you're just just the shrinking a little more slowly than an analyst. Yes.
They also did an ounce pretty good e-commerce growth I think also above that average so again from memory I want to say.
Then I was like 20% eCommerce growth.

[50:33] But it's interesting like all of those things at Target are in this backdrop of news we talked about in the last several months that the target is really curtail the lot of there.
Forward-looking initiatives in program so they.
You know they have these stores of the future that we're half built then they they announced that they were closing they had this big goldfish initiative.
And now this this Innovation officer westering feel that you know they're working on all these Innovative things and they hired a bunch of people to build them.
And they they abruptly pulled the plug on all those things and parted ways with Wes.
Their Chief digital officer you know they left the company.
Maybe 4-5 months ago they're cheap Innovation officer Casey car of the company this month so it really feels like.
Target is investing all of their chips in their near-term fundamentals like they're they're trying to improve the guest experience in the stores,
and they're all in on the winning in these five signature categories that they're focused on in store.
At the expense of a lot of these these other initiatives then like obviously there.
Their results or to belittle why that you know they don't have an unlimited amount of money to invest in all these initiatives.

[51:56] So it's going to be interesting to see how that played out but in that context we we got some some rumors from her friend Jason Del Rey that he wrote an article about today.
And that was all that they announced that they are selling Casper inside of Target stores,
and that's that's not rumor that that's news they're not actually they're selling the mattresses on the line but they're selling a lot of the accessories in the store so so the Casper have a footprint in the store,
and if you want to buy a mattress you can buy it direct from Casper but you can also now buy it from and the ship it direct to your home,
for people that aren't for my red Casper you know that that is clever combination spring foam mattress that they're able to.
Compressed down enough that they can actually ship it in a UPS box in so this,
this is kind of in line with a lot of other moves we seen Target they like to surprise and Delight their guests by having these popular brands that you wouldn't necessarily expect,
Cabot Target in so regionally that was like designers that were too high in for that you might have thought were too high in for Target but more recently it's been some of these digitally native brands that are showing up in Target so it was Harry's razors and now Casper.
And what Jason's article says is the target tried to go a lot further than just caring that they actually tried to acquire Casper and then when that was unsuccessful that they've taken some sort of investment and Casper.

[53:33] So that's interesting.

[53:34] Yeah and I think the number that was been thrown around as a billion do you have you heard what Casper is revenue run rate is how I remember when they crossed like a hundred million me was 2 years ago I heard an update on that.

[53:48] Yeah I don't have a number in my head.
Like for sure that they got to like a hundred million in like their second year of existence so I know there's a lot of talk about that but I don't know.
Where they're at right now and it's interesting for Target to take an investment in them right so.
If if I don't know that makes Target a majority shareholder or a minority shareholder or what sort of you know board seats and all those sorts of issues but you could imagine.
Why does Casper sell on Amazon today and will they continue to sell on Amazon with with Target as a majority board member,
would any other retailer B12 Kay Casper with Target as a board member and might see,
sales velocity on those on those in those other retailer stuff like that like it can get messy for a retailer to have an investment in a brand that they're not exclusive to.

[54:51] Channel X the thinking goes if I'm going to make these guys are Rockstar.
And I can't own it then I want to participate in that Rockstar creation cycle that's probably what's going on from Target side.
And they probably wouldn't do the deal without investment and then there's also stuff the offense part of it in their defense that kind of says.
And so you things can come with your pretty real needy right of first refusal kind of things so that you keeps one else from buying it are you have at least two by two that so I wouldn't be surprised some of that was in there and in,
Must have really wanted the distribution or her felt like it was worth it to accept the investment in any kind of other entanglements that came along with it.

[55:35] Yeah and that does it mirrors Casper's a prototypical did you need a brand.
You think about someone like both of those right like very similar,
they cut a deal to get distribution although their primary Channel distribution is direct they cut a deal to get distribution in Nordstrom and they'll at Nordstrom to take an investment in them and so,
in that way this this deal doesn't look so different from that and of course none of us as a sort of aggressively open guide shops at showrooms Casper has some some guide shops or not shops Casper has some showrooms.
So it feels like it's falling on a pretty common playbook for these kinds of companies at this point.

[56:20] Yeah and I don't say it feels like I'm outside I don't have any inside information on this it feels like a game of Music chairs is accelerating so,
now we saw Walmart scoop up a couple of these really quickly and the Rumor persistent rumor is bonobos is going to Walmart so then if your target your kind of like.
You know why I need to get in the chair here and we also have heard rumors that they were going to pick up boxed up which is more that Amazon Pantry style kind of competitor so so I think what you're seeing is you know you start to look at the digital I need a vertical brands that are out there at scale,
your dollar shave club's been picked up so now you have Harry's in the Casper,
there's it does to the three largest wins mod causes a lot of times mention of that discussion and bonobos those two are off the table so you're really left with.
Pretty small number of scale over hundred-million-dollar companies there and I am I leaving any off.
Which puts two chicks in there I don't know if that counts.

[57:23] Yeah they're slightly different animal but they're like even you know probably larger in scale at this point I think there was some they publicly announced and you know we we have I can only take their word for it at this point but they clean a satellite.
760 or 780 million in annual sales so that's that's a pretty good size company of that church.

[57:45] Yeah feels like a four five billion kind of a swing it back there so it's pretty serious to me.

[57:52] Exactly some of these might be a little more digestible then than Stitch fix at this point I do think you're right like there's no.
Diminishing number of these I think there is another interesting play where these guys are playing some defense.
Another piece of innovation is so fast now that all these companies that have disrupted Industries,
are not getting very long honeymoon before they themselves are getting disrupted so you think of Dollar Shave Club as disrupting Gillette and Shake.
And you know you could talk about the cool video in the subscription service in all that the real reason Dollar Shave Club disrupted.
Gillette is because you at sell $7 razor blades in Dollar Shave Club sells one dollar razor blades but now you've got dorco who's the.
Razor blade supplier to Dollar Shave Club launching their own subscription service and selling $0.20 razor blades.
You're like hey wait a minute like I was that young fun disrupter with the shockingly low priced and now I've got guys below me in the same thing as happened Warby Parker they're a bunch of direct-to-consumer,
frame manufacturers that are even coming in and even let you lower price points than Warby Parker and the this mattress industry is,
particular competitive so either at the Casper wasn't even the first they were really I would argue the first one to get sort of mainstream awareness.

[59:24] But there are five or six a significant players in this new digital direct-to-consumer mattress space and if you're you're Casper you know you would have had a big incentive to get,
eat a dick the kind of visibility in distribution you get through through Target to differentiate themselves from that competition.

[59:45] Yeah there is a,
an interesting data source CB insights had shown when the rumors about Casper came out that there's three or four other mattress companies that are actually in the neighborhood of sales is caspersen Target must be really enamored with Brandon and think that there's some absurd you there with their there.
Fire door password.

[1:00:07] Yeah yeah absolutely so it's a it's a fun spectator sport to watch all the stuff planned out right now.
So Scot we're coming close to time but I know you have a pretty cool event coming up do you want to remind the listeners about it.

[1:00:24] You know one of the biggest shows the year for e-commerce,
internet retailer Conference & exhibition which is commonly abbreviated IRC and last five years I've been doing a Amazon Workshop they're called Amazon and meet so I'll be at internet retailer love to meet up with any letters that happened to be there Channel have a booth and I'll try to spend some time there,
I'm a bad founder and don't know the booth number but I'm sure it will be in the guide there so I'll be at the booth and look for to see you there and then I'm also speaking at a venture capital friends about,
what's going on in Destin DC and that's June 7th so look forward to seeing everyone as I'm starting to hit the road here in the early summer.

[1:01:12] Graco I love it that you are potentially traveling more than me.

[1:01:16] Yes I may have to I may be able to a trip report so it's going to be pretty darn exciting.

[1:01:21] I tried to be a cool and find the booth number for you while you were talking and I sent you exhibited in too many hours to eat.

[1:01:28] Yeah her for quite a while.

[1:01:31] Exact,
I still have to put that on the show notes and with that it has happened again we've wasted a perfectly good hour of our listeners time so we certainly want to thank everyone for listening and encourage you to write us a review on iTunes of you enjoyed the show and we would love it if you'd come to our Facebook page and give us some feedback about which of those deep guys would be interesting to you.

[1:01:58] Until next time happy commercing.


May 11, 2017

EP083 - Andrea Leigh, selling on and negotiating with Amazon


Andrea Leigh is the owner at Andrea K. Leigh Consulting, which helps clients sell on and negotiate with Amazon.  Andrea enjoyed a 10 year career at Amazon where she served in a number of Buying and Category Leadership roles.  Andrea is a recognized expert on Amazon, who has written a number of helpful articles about Amazon on linkedin:

We spoke with Andrea about her background and experiences at Amazon, the digital grocery market and Amazon's efforts in the segment, and the best practices and common pitfalls in working with Amazon.

Andrea will be one of the speakers at "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, hosted by Scot Wingo.

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

Episode 83 of the Jason & Scot show was recorded on Thursday May 11, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 82 being recorded on Wednesday May 10th 2017 I am your host Jason retailgeek Goldberg and as usual I know Scot Wingo.

Scot & Andrea:
[0:39] Hey Jason and welcome Jason Scott show lister's let me first apologize it is peak,
pollen season here in sunny Raleigh North Carolina and my allergies is amitab attacked me and I have a sore throat so I apologize for the the lowness of my voice however I will be doing some Darth Vader quotes later so it will come in handy,
Jason before we dive in it's been about a week and a half before we chatted any road trips you want a report on.

[1:08] I do have a couple of days or so very sorry to hear you're feeling under the weather it's sort of Harkens me back to our famous shop talk shows where I didn't have much of a voice.

[1:19] And our live listeners are totally on it that I've got a bunch of my text messages since I just did the intro in this is actually episode 83 so I want to apologize.
For the falls.
Boss intro a minute ago but thank you to all those folks that are listening in the show Live this week I was I got to do a trade show in town in Chicago in my hometown which is a rare treat for me.
Mwb research does a show every year for the B2B in this week I'll be to be online so I.
I just got to go do a presentation there yesterday and talk to some folks about B2B e-commerce which is her that interesting contrast to the the retail stuff that we talked about.

Scot & Andrea:
[2:02] Yeah did you get a lot of questions about Amazon business that's whatever you ask me.

[2:06] Not as many as I would hope I would take it as a better sign of people were a little more concerned in that space about Amazon business,
perhaps a parallel the sum of things we'll talk about today.
There's some really Advanced B2B e-commerce companies but the general level is pretty digitally immature and so,
you know you tend to be talking to people in that industry that you were talking to retailers about maybe four or five years ago,
and I have a theory that that a lot of the cpg space are also somewhat digitally immature and a rapidly trying to catch up and so we we we make it to hit upon that in today's episode.

Scot & Andrea:
[2:45] Coolest part of your talk to call the audience to Julie immature.

[2:48] The love I do talk about the digital maturity curve and I let them judge for themselves where where they're on but my talk.
Is ironic cuz I I was mainly talking.
To stakeholders they were really interested in watching B2B initiatives inside e-commerce initiatives inside their company about how to get c-suite buyin and since I've been kicked out of some easy sweets I thought maybe that was.
And ironic choice for me.

Scot & Andrea:
[3:16] Old Town ironic if your c-suite the immature.

[3:19] Exactly I've been in a lot of sweets just for a brief period of time.

Scot & Andrea:
[3:22] You're mature getting kicked out of six weeks.

[3:25] Exactly how I'm high on the kick after blow on the maturity curve.

[3:31] Just got one of my favorite thing,
the show is you know from time to time we get some nice listeners that right in and say nice things about the show and had told her to reorder top and something and I always enjoy that,
but I thought you liked this week I may have gotten my favorite piece of fan mail.

Scot & Andrea:
[3:49] Go to zip front and what they say.

[3:51] Yeah so it is from a listener and Marie who runs the e-commerce site called dog and she's a regular listener and.
Had a recent occasion to go to our website where the show notes are and.
There there's an about me tab there with a picture of me and my dog MacGyver and so Emery who obviously is in the dog industry so I'm a guy her and wrote MacGyver a piece of fan mail.

Scot & Andrea:
[4:17] What are you going to read it first.

[4:19] Well I won't read the whole letter as she's right kind of currently Doug quality focuses on.
Elder dog quality of life in and products that the older dog specifically need and she was nice enough to say that in the Guyver looked like a spring chicken and probably didn't need any of her products,
but she is she certainly offered hook MacGyver up should should the need ever arise and I was laughing because she doesn't know this but the MacGyver is a frequent guest on the show MacGyver is Jenner sitting on my lap for the show and so he was,
very pleased to find out that he finally got some of the recognition that he he well deserved.

Scot & Andrea:
[4:56] GoFundMe you wear at shoptalk it sounded like he was he was doing your part.

[5:00] Actually he is a man of few words but he's much more insightful than I am and I don't know this but I think you have a couple dogs that have at least made a cameo appearance on the show as well don't you.

Scot & Andrea:
[5:13] Yes sometimes in my podcast recording studio here which is also my home office ad my 10 year old Border Collie kit sits on the floor and that we have A1 year old,
Cavalier named Lulu and she usually sits on my lap but tonight they are elsewhere hanging out with the kids.

[5:31] Nice.

Scot & Andrea:
[5:33] We'll just before the podcast goes to the dogs we have an exciting guest for listeners tonight.
As you listeners are well aware I'm a little bit obsessed with all things Amazon and every time I talk to tonight's guest I learned a ton about that what makes Amazon tick,
and really spent a decade and Amazon from 05 to 15 and now runs a consulting firm called Andrea Kaley consulting or she helps Brands and sellers with their Amazon strategies as well as other e-commerce growth in it,
I'm hosting a workshop that internet retailer Conference & exhibition which is commonly abbreviated IRC.
And Angie is one of our speakers talking about Advanced strategies for Brands and wanted to go she ate with Amazon and you're welcome to the show thanks for having me.
Cool and so we got Central covered with Jason in Chicago on East in assume you're in Seattle in 7 days.
How's the weather is it is it typical Seattle are you guys getting your sunny days.
Know where we got a little bit of fun but you know it's still we still have to get to the Fourth of July before summer really starts here cool so um.
We really want to jump into it so one background statement before we jump in.
Sometimes be a few back for listeners will jump right into Sonny's topics and I neglect to cover some of the basic so tonight when you use phrases like one p3p hybrid,
we see one PSP specifically in the Amazon context that usually that someone has a wholesale relationship or a first-party relationship with Amazon third-party usually refers to more of a Marketplace kind of relationship.

[7:07] Are the hybrid is a lot water brands now that exploring kind of a dual approach so a wholesale Ana Marketplace approach just wanted to let her listeners kind of have that that little glossary there at the top of the show before we do it.
And I'll turn it over to Jason who is dying to kick off.

[7:24] Thanks, let me highlight for a listeners that are not driving weather listening to podcast that the whole one p3p hybrid thing also makes for an excellent drinking game.

[7:39] So it's winter before we we get into that and III.

[7:43] One p3p question for you where I think there may be some Andrea Scott controversy early I hope there is but before we go there.
Maybe we can start with a little bit of background about you and sort of you can walk us through how you got into this industry and what some of your experiences.

Scot & Andrea:
[8:02] The absolutely so I said you know probably the majority of my career at Amazon that was there for 10 years from 2005 to 2015 and I was on I worked in the retail group for the entire time,
I'm in different roles as actually started as one of the founding original buyers for the grocery category and you kind of,
migrated my way to the company and number of different roles,
including divisional manager for the baby category and working on getting the Amazon,
baby registry can I prevent in and then good good order with customers as well as a leading category teams for Amazon Fresh,
Rawhide most recently before I left and for the longest actually for a little over three years was a category leader for a hard-line soft lines.
And consumables for Amazon Canada where and we watch consumables and softlines on while I was there I also ran the prime program and Canada and Italy Avon with it with the transportation team,
in addition I've worked on the,
crab process for Canada help develop that and get that thing running up there if that some of the term that everyone is familiar with that's Amazon's term for can't realize any profit.

[9:32] Which is through their way of identifying items that are unprofitable for them.
And I left Amazon two years ago to start my own Consulting practice where I work now with Brands a lot of them that I worked with while I was at Amazon,
you know to help them achieve their goals on Amazon whatever those might be gross profit you know I saw him planning.
Etc and in the category leadership relate Amazon if you're not familiar with that sort of structure at Allegan General Manager and you're responsible for all of,
a buyer vendor management planning in the stock management marketing product management sometimes the technology teams as well so that's a little bit about that rule the last years I have been working.
And Consulting can I have them working directly with Brands doing some speaking and doing some writing.
And a man actually really partner with Melissa Burdick the kind of team up for Consulting practice and so that's,
that's kind of what I've what I've been up to.

[10:41] Questions about that you went from being the evil buyer to helping Bray.

[10:51] Kind of like going from the federal government to becoming a lobbyist is there a man.

Scot & Andrea:
[10:54] You know it feels like there should be,
the Empire is not but I mean I really feel like for the most part the work that I do is really Amazon's best interest I mean when it's actually one of the reasons I wanted to start my order form I mean in the early days of the Amazon Vendor Manager spent a lot of time with her and I spend time with my brand I'll be in them figure out how to grow how to use the platform head understand it to be successful and kind of coaching them and teaching,
and you as Amazon,
skilled and crew become more automated and that's my role grew and I took on my two teams I just found that I was sending you know very little time talking with brands,
an Amazon in Genoa spending very little time kind of in that teaching capacity,
and so you know that was kind of one of the reasons that I wanted to do this,
I think would just like a small amount of Education about the Amazon platform,
no Brands can see some really amazing success by applying some really basic principles and it's not hard you know it's it's I think it can be pretty straightforward once you understand how Amazon is different from other retailers.
Quarter certain types of Brands you properly work with her show cpg seems to be a real house kind of area for you or your little bit all of them.
You know I've been all over the map where's and small and end in any number of different categories but I will say that this species tend to have kind of the biggest challenges on Amazon pretty early because they were you know they're they're off and doing a pretty sizable businesses.

[12:34] In addition to I'm just having a lot of products that are really difficult for Amazon to ship profitably so I think they kind of think they they have the most challenges,
I'm as it relates to Krista voorhis with the with the,
a platformer a business model where products are shipped directly to customers often in the single units but I've but I work with all kinds of brands.
Across all categories.

[12:59] Nice and you mentioned um baby for a while and if I have the time line right the Quincy acquisition happened right in the middle of your tenure.

Scot & Andrea:
[13:08] Right in the millimeter exactly and it's funny because I remember when they first got on our radar and we were and we were really thinking about like they're getting some really great friends on the site and how are they doing that and I remember thinking like we should go for this we should do we should go get them,
we should call them but I'm and it's it's really interesting but I mean you know you know how all acquisitions go it's pretty it's pretty hush-hush internal lake cinemas that stuff happening.

[13:37] Yeah but so did you literally go from hating them and they were an amethyst to like becoming a partner.

Scot & Andrea:
[13:45] You know I had moved on to another category by the time we actually started integrated integrating with them but you know I was there I was definitely there for the acquisition piece and you know they were doing.
Three steps hi I'm just doing a really nice job pretty Leanne,
Beano getting new customers and as we all know that time when the consumer becomes a parent is just such a pivotal point in terms of brand loyalty and brand switching is really high at that point and they were really they were seeing a lot of success with some of their marketing tactics,
in an option that consumer as well as you know getting a lot of kind of more perceived higher-end baby Brands to to partner with them.

[14:31] Nice and I don't know we've talked about this on the show and I will surely understand if you don't want to share an opinion but you know there's been a little controversy is his Wizards probably do know.

Scot & Andrea:
[14:42] Fish.

[14:43] They spend down Quincy Quincy this year and there's at least one of our friends in the media Jason Delray that that.
So it has this hypothesis that it literally was out of spite for markquart who's who's competing with them Amazon it at Walmart and I'll just pay for the.
I personally don't believe I don't know what the real logic was behind spinning a down I can imagine there's a story that we don't know but I have a hard time.

[15:14] You know potentially several hundred people are getting laid off space. Out of some competitive spy on the part of of Jeff.

Scot & Andrea:
[15:23] Yeah I read Jason's article about that.
Yeah I read that article that I mean I think that's possible and obviously I don't know I don't work there anymore but I,
email Amazon just serve god with a needed out of that relationship,
and there wasn't a lot of sense in keeping up separate websites me over the years Amazon had tried to spin out other web sites and it's just really challenging it's really challenging to drive traffic to a new site I mean as hell with the endless launch and then take down they got so mad it is so much traffic through going to their native site so kind of continuing to some,
pour it into additional websites just seems really.
Really tough and I'm not really sure why that would be a great strategy for them and you know if you think about like they sort of got what they needed that of that Arrangement they were able to you know take out app,
who is Fab a fast-growing and competitor that was getting a lot of traction you know this is going back like 10 years ago.
And then them from sort of like,
becoming you know a real material competitor and then in addition to that you know they were able you know to integrate some of that inventory or those Brands under their own site no maybe some of the brands or harder for them to.
Dino to acquire so I still feel like they got what they needed and it's really expensive.
Having a Second Sight means possible there was some slight there it is truly when you look at that whole it's Story I mean it's like a soap opera.

[16:58] Terms of the level of drama.
I mean it's just fascinating but I think Amazon is a company with more Integrity than.
You know that one that might you know I have all that and you know I just have a lot of people suffer.

[17:18] No I think the URL consolidation makes a lot of sense and there are just good business reasons for.
Amazon ultimately to go there at the one I I guess ironic thing is they thought they were making an acquisition to take out a competitor and all that money that used in the acquisition ultimately was used to create a new competitor so I guess.

Scot & Andrea:
[17:37] Flatbush feel like soap opera or irony I'm not really sure that's why I need that's the real twist in it.

[17:46] The irony of me is that I use the word irony wrong all the time.

[17:52] So changing topics you mention the crap program in Canada and we we talked about a crap a little bit on one of the other shows.
But maybe you're in a good position to confirm or deny.
The rumor is that that was started as an internal term that was not intended to be.

Scot & Andrea:
[18:13] Yeah.
Exactly what I read in one of my articles he was not intended to be public-facing it all it was a term that was developed by the finance team like I'm very clearly recall this and I don't know I can't imagine they share this room just funny,
and you know I remember seeing in the fruit one of the first meetings where the finance team brought us this program and the program itself makes sense you look at stuff is unprofitable and figure out how to get it more profitable,
I put the acronym Chris is really terrible and I member we all kind of looked at each other like this or go it's like really and you know I don't think it was ever meant to be other two vendors but now it's out there and now it's like an industry term.

[19:01] It's it's really awkward cuz they a category that's particularly vulnerable to crap is of course toilet paper in so when you're,
to a cpg manufacturer that's talking about their total,
trapped out it's really on the potty humor goes goes downhill really fast.

Scot & Andrea:
[19:19] Yeah and I mean I don't think that I don't think the procedure of that was lost on them right I mean diapers and toilet paper or two of the kind of like really on really difficult items to ship,
take us to Harris profitably and so I'm pretty sure that was so,
Davidson strategy around the name but the funny part is like by the time I left we were just tossing it around in meetings and like it was the term has lost all of its like conversations,
and I think it's funny now and I talked with Brands and I and I talked about crab and,
really quiet like Amazon came up with it hasn't explained it so disgusting.

[20:02] So the shocking part to me is not that any of that happened the shocking part to me is when you move to Canada that you didn't find a nicer friendlier term for Canada because it's Canada just say is nicer.

Scot & Andrea:
[20:10] You know that's a really good point like at that point it didn't even occur to me that when we started the program in Canada we could have called it something else but you know it's too late now.

[20:25] So one one last topic before I let Scot get a word in edgewise,
at the beginning the show you talked about or Scott introduced the concept of one p and 3p and we talked a lot about 1p and 3p.
And when a 3p seller is using FBA as their distribution strategy.
Scot and the show generally talked about them being a 3p seller that uses NFPA and I've noticed in some of your writing that you call.
FBA sellers to pee so I'm just curious if you and Scott and have our are aligned on that vernacular or of or.

Scot & Andrea:
[21:05] I mean I think I think I think it's 3 PS1 of encompassing both Merchant sold as well as,
social Diana son so you know where Amazon a store in the inventory shipping on your behalf they are still there that's to pay the sizzle by Amazon program,
mn3 can include that but I usually it's referring to Merchants that ship out of their own warehouses.

[21:29] Got it so what do you call a vendor for field FBA.

Scot & Andrea:
[21:34] I would call that she pee.

[21:36] Gotta and Scott are you are you okay with that.

Scot & Andrea:
[21:40] I try to keep it simpler so I think that would maybe confuse people,
chicken official Amazon me cancers that just no actually never heard these turns until I left.
And they're sort of what a lot of my clients used to describe the different business models and with some of the folks in this kind of like ancillary Amazon industry send you so that's it those are the ones I've adopted but you know there's a really simple version is one piece retail,
is Amazon buying product from Brands and reselling it and then 3p is where,
the brand or the other retailers uses Amazon's platformer services.
Who is one thing I wanted to jump into before we get to nerdy on e-commerce side is is on your bio you are part of the Amazon or raise our program of study that a lot as a internet I'm kind of obsessed with Amazon's culture in and how they,
such a large company she needs Innovative and doesn't seem to have a lot of bureaucracy and it seems like the bar razor program is kind of,
last couple years decided as a really kind of key contributor that four letters that aren't following that is close to as I am maybe give us a quick background a bar razor and,
tell us about your experience being in that program.
Yeah absolutely I'm in if you really interested in Amazon's culture and how they say Innovative actually you love my next article I got one coming out another week that's just the really just phones and on that specific topic.

[23:13] I would love that actually if I could really use some other program,
and I think this is some Polish so I don't think there's anything like confidential here but it's essentially her Amazon where there's a set of interviewers that are meant to,
teach other interviewers how to interview so this is like so the more experienced said of interviewers go through specific training to teach others had a interview and then you know you need to have.
I need to have someone in this from this program at least you did when I was there on every interview Loop scissors or busy,
and you know that the idea is not that that's like the tough interview or whatever I think that's been written before actually not true it's it's the person that facilitates the conversation and really drive out all of the insights from the interview from all of the people who interviewed the candidate,
and really make sure that you're having a cohesive discussion and that you're applying kind of them.
Does cats a consistent set of principles to hiring decisions across the company and so it's not your consistency,
and for maintaining the culture not true,
being like a really particularly tough interviewer although probably some of them are really tough interviewers so I was in that program most of my time there I mean cuz I was,
I know I started there you know kind of it before they started some of their real significant growth.

[24:50] And I got into it early and I think by the time I left I have done almost a thousand interviews and you know,
mayilada hires connect during that time. Cool so you're in the interview and then you also delete a post interview kind of debrief is that I would have her.
Exactly exactly any ideas just really for consistency and for us I think the same is true in any organization where you've got some time so it's on interview Loops it University experience or.

[25:23] I'm in after struggling a little more to apply some of the principles,
you know the leadership principles are still learning the leadership principles and so is their kind of someone in the room that's got some experience with that and can help guide the conversation.
Clannad articles I've read say it,
cuz of this book number one usually by razor is in a different apartment and so you would be the Barbies are for like engineering or something and some other person would bar raise for fire,
a person like that I mean it's like I couldn't I couldn't facilitate a conversation about someone who's going to,
be on my team you know you want certain external perspective but I think that's just a general in your dream practice Amazon anyway regardless of whether it's a bar raise or not it's just a lot of perspectives on a Candida think the weirdest interview I've ever participated in was for it was,
like a mad scientist like an economist,
I remember prepping for That interview and just thinking like what am I going to ask him if I did try to get this person some Economist questions I would be hard-pressed to judge the quality of the answer and I remember though it's sitting in the defense I didn't know anything about the contents of this person's work but it was room market like the process of,
determining if they work a candidate was like,
damn I mean was really it really didn't change so do you have a go to question like why are manhole covers round how do you do the mountains.

[27:01] You know I think one of my favorite ones someone who asked I heard someone else asked in an interview as part of our thing is like you to train people you Shadow and you,
we go along and someone it's something that like your job is to lunch the houseplants categor live houseplants category on Amazon like what we did see how would you approach this,
is this at lunch or something and I remember just thinking like,
that's a tough one it's just kind of shocking anyway.

[27:30] I think that's where you go to selling seeds.

Scot & Andrea:
[27:33] Exactly exactly.

[27:37] A in it it occurs to me that like in addition that Consulting with brands on how to do a Amazon you could also do interview Consulting for a candidates have you helped anyone interview since you up.

Scot & Andrea:
[27:49] I'm in a little bit here and there I can do some projects on it and I had a Consulting project recently where there was a component of it where they were looking for some some guidance in their organizational structure,
and had it had a sort of resource this business and what skill sets and things like that are critical to a little bit but you know the core of it has been,
if people don't want people just tend to want to talk to me about her half and one piece EP 3 p and headed to go see it with Amazon Amino seem to be a bit,
the topics that are the biggest draw.

[28:28] I asked questions I always like to ask XM is zonians I've never work for Amazon but.
I have great admiration for the company in the caliber of former employees I've met all the reading I do it frankly comes off as a totally unappealing place to work.

[28:50] Talk to ex amazonians that sort of Concur and I talked to ones that wildly disagree and so I guess I'm just curious.

Scot & Andrea:
[28:57] Most of the ones that don't agree probably still work there no I thought it was an amazing,
inspiring place to work I mean I have.
I just had a really incredible experience there I feel really fortunate to have worked with the high-quality caliber of people that I was but I interacted with you know I wasn't working with more and more on Clans and other organizations and just realizing how remarkable that was,
I want a time I mean I feel like I had some pretty nice career trajectory there that you might not see it,
another types of organizations I mean I thought it was an amazing place I think you know when you think about like that,
I'm bossy Channel article of it was like,
it was right when I was leaving that that article was published about how terrible it is to work at the corporate headquarters and the people cry at their desks and you know that article everything except probably some of that I feel like some of the past employee like the people who'd been fired sort of testimonials sounded off like they didn't sound consistent with the company that I knew,
the rest of the day that was like pretty true I mean if I'm really hurt it's really hard hard to make history and you work you working with some of the smartest people,
I think around but the article was just really um.
And it will be amazing there any Amazon.

[30:28] Top 5 Business Schools all those people we have a choice we have to work there and they have lots of options there for a reason and it's because it's super inspiring and you can be Innovative and build your own business,
you should hire a nanny is taking a lot of responsibility,
I'm here if you have an idea and it's a good one and you can put together a good business case for it it still even though it's a big company now it's still the type of place where you can,
you can see that through and so I mean I think it's I think it's an incredible place or I didn't see it it's a it's a.
It's like running a marathon you know you can't do it has to look at has to stop at some point I think it's hard to it would be hard to work there your whole life.
There's no free snacks.

[31:19] Bananas free banana.

Scot & Andrea:
[31:20] There's no reason I give you the Sheep pens you know just don't know books are like that you know the $0.50 ones there's no there's no curse reality leadership principles you can use PowerPoint Jason I make a living on power,
Point sucks really dense white papers,
I think I think I got some of the best writing training.
Bear in just being a headache ran the most about and data into like the shortest way if you possible.

[31:58] Yeah so that brings up one of my biggest garage with X amazonians I'm I'm always super excited when I hired one because I'm thinking like I'm going to get these really insightful well-written long-form deliverables.
And then I keep getting these crappy power points from them.

Scot & Andrea:
[32:14] They're just so excited he's her.

[32:15] Exact exact.

Scot & Andrea:
[32:16] That's just for so many years and now all I can I cancel team does a star play for almost everything I'm one of those people I totally am.

[32:26] Yeah so that was a little bit disappointing for me I have to be honest.
You don't want of the categories that I am super interested in at the moment it's been a lot of time and is grocery in and you use us and gray.
Experience in the impression Amazon might my premise is in North America.

[32:48] Wholesale e-commerce like the battles basically already already been one right like you don't frequent frequent statement in my practices you're not going to Amazon Amazon and so you're looking for Winchester or you know.
Little place around the edges but like you nor anyone else is necessary going to just build.
400 million skier general merchandise catalog in and capture majority market share from Amazon but I do believe that grocery is a huge category potentially larger than general merchandise.
Did just now is coming into play for for digital Commerce City.

[33:30] We deliver that in so I do feel like it's a white space and I think we're seeing sort of Walmart Amazon and you know to a lesser extent the.
The pure plays in Kroger and stuff all all battling it out is that it are you following that category at all still in.

Scot & Andrea:
[33:48] Oh absolutely absolutely both Serta professionally and also personally my husband has a firm idea quickly build,
Play click and collect software so I follow it.
Religiously and he mentioned the consumables categories are there in Norma semi dwarf,
the other general merchandise categories but I think the beauty of them for e-commerce is that they uh they drive frequency in traffic,
and you know I think once,
once Amazon in one Southern retailers can I caught on to this they realized how important it is to make this work online because you know when you think about it like you only buy coffee maker like every couple of years I need a picture in TV is like those don't those types of products,
don't drive frequency and visit people like every week,
so you know these categories I mean this forever or the trip drivers and they called them truck drivers.
They got people in the store we sell them for their stuff I mean the same model those two Outta mind,
you got customers traffic through the consumable categories and then in a while they're there hopefully they buy other things.

[35:04] Yeah until 8 and I was here in Seattle so you get to see a lot of the first iteration of concepts of I assume you've walked by the ghost or if you haven't snuck in with an old age anything in.

[35:18] Don't get in trouble on the show don't get in trouble on the show.

Scot & Andrea:
[35:21] And we also because we can never even rolled out,
wake me to tell Gram here for a while where I think that was only in like two or three markets we're in this I think this is the precursor to Prime now where,
or they would deliver your stuff and like a bag on your porch with no over boxing or anything,
I mean I'm sure it was really expensive to get all the stuff that was pretty cool and you can sign up for like a tote day was like a regular schedule day so we get all kinds of Pilots here which is kind of funny to see experimentation with Amazon so yeah I've been by the ghost or I haven't gone in,
and I think it's really I think it's.
One of the more remarkable technology that Amazon has Philip Justin just walk out technology.

[36:12] #JY.

Scot & Andrea:
[36:14] Is she literally just walked out of the store was actually sounds kind of awful if I'm shopping with my kids but I'm sure Amazon for your at the above.

[36:23] As we pointed out early on when they want that concept that they're claiming it's his big new revolutionary thing and myself and one of my peers we're using that technology in high school so.

[36:34] Not sure it's quite as impressive if you got a chance to go by the the fresh pickup location yet.

Scot & Andrea:
[36:43] No I haven't but that's the second lunch of those in Seattle we had another pilot years ago to pick up points so CA,
I'm seeing the model and I know where the spot is in fact I was thinking maybe next week I don't think it's up and running yet but I was going to go do a drive by and just check it out to pick up stations in Seattle I mean like it it looks like I'm driving through it looks like a drive-in burger joint with like all the ankle parking,
pretty is pretty cool and then another just bring it all out and put it in your in your car but I mean this figuring out pickup,
I mean it's super expensive to ship dog food to customers dog food to Prime customer and you're totally upside down economics,
and you know in order to be competitive and figure out how to make money in the space you have to figure out how to get people to come to you and sell them a bunch of stuff at once.

[37:41] Yeah for sure and it I do think that's going to be the dominant model for grocery like I think you know it and you use only strings this with.
Fresh but like you know most of the Amazon Goods get delivered on a route and you can bundle a bunch of deliveries and I can be really efficient but when you deliver fresh in the person has to be home to receive it because they have to put it in the refrigerator,
settling you're not doing routes accepting in a few really high Denso occasions you're doing individual deliveries and that,
that's super expensive in for most of the country the economics just don't work and so it seems like saving all that shopping time and having that pick up.
I it was my. That's going to be the the mainstream digital grocery experience and I have literally nothing.
Thousands of consumer interviews where they just talk about it being life-changing when they start using that that feature from whomever they use it from.

Scot & Andrea:
[38:35] Witches,
which is really funny because like this isn't a new feature like I used to when I was a kid we used to call the grocery store and we tell him what we wanted and we drive by and pick it up there's not a new model,
scale is probably a new model I mean I just grew up in a small town but I think what's really interesting is the whole evolution of this thing like I remember going to trade shows and like 2006 going to like that candy and confectionery and.
And talking with Brands and saying, sell on Amazon and they were like that's crazy like why would you sell food on Amazon and then there was like they all signed up.
NN and now it's like a race It Was a Race for a long time you know who would get there first two and half capture all the market share who can work most strategically with Amazon and other in Walmart and can whomever else and then everyone knows everyone knows grocery had a great day,
now it's like it's kale and now he's calories are in a small anymore for these retailers and now they're just like a.
I'm probably suck and so how do you figure out how to make it work and that's I mean that's where I think a lot of experimentation comes into play through a lot of these players it was trying models to see what might work,
you know in Seattle we have fresh we have Prime now we have pickup points we have a,
Amazon go store anything for a different model for the Amazons experimenting with an S with Amazon and then you're seeing really the rise of cook and cut which I totally agree with you I think I can collect is the next,
that's the next thing because I'm already fatiguing I mean I've been shopping for my groceries online since you lunch freshman 2007 here and I'm sitting at the pricing you know it's just it's just cheaper like you just it is because the economics are different and they don't have to ship it to me and another driver.

[40:21] And I'm sure Amazon's figured out you know how to make all that stuff work,
and the reality is it's just worse than even the prime now and even instacart and I were to and you like all the different models and even has to offer higher prices on some of it in store specials online and so I mean as a consumer and fatiguing,
of the pricing I'm Slicker she's just as much like and it's tempting to go back to the store and horrible so I see.

[40:53] Scot would be horrified if you did that.

Scot & Andrea:
[40:55] You're so right for the next model,
and I believe it's click and collect and I believe in you profitable and I believe whatever groceries get on board with this the fastest are the ones that are going to,
you know they really going to kill all the share.

[41:11] Yeah I think that Title Wave is is coming it's going to be fun to watch you're certainly right it's not a new model there used to be this thing in the world called the milkman.

Scot & Andrea:
[41:20] Totally we actually the mailbox I mean we know when delivered anything to it but it still existed in her house.

[41:27] Yeah absolutely so at the end of the day do you think there's a chance that someone other than Amazon wins that space so I could you foresee a Walmart or a Kroger someone else.

Scot & Andrea:
[41:40] Will depend on how fast we can both I mean that's really what it comes down to it's not a complicated model you ordered online you know you pick it out your stores and you know you let customers come pick it up we've got it here at Fred Meyer local in Seattle,
I'm so it's not I don't think it's a challenging model that I think a lot of these larger groceries or kind of,
I don't want to say freaking out but their head of flummoxed by the concept of like setting up a retailer website what does that mean how do you up so customers how you do it right how do you let Brandon getting on it because you're basically recreating like an Amazon,
.com grocery store online and let you know that feels really overwhelming,
and so I don't think they're moving real fast and I think it's just going to be like humuhumu fast but I do think it will be hard to compete with Amazon's Automation and personalization as it relates to marketing.
They're just they're just so good at it and so far you don't haven't seen any other retailers that have even touched it and that's either really where you get like that,
if you're able to drive customers to larger basket sizes online and help them discover products and be productive about like when they're about to run out of things and that kind of thing.
It's funny I said the big fan of this show Silicon Valley and that this is not a spoiler but in last week's episode they,
the two the characters went to the grocery store and they were the only non tasker's in the grocery store there's like 80 people in the grocery store.

[43:11] That is a great point like I the one you're at your hair percent right about the price fatigue the one loophole is it can be really cheap to deliver groceries to your home when you get a venture capitalist to pay the delivery fee.

Scot & Andrea:
[43:22] For Google.

[43:25] I feel like at the moment there's this the short window of opportunity I encourage everyone to use all that good Andreessen Horowitz money to deliver their groceries.

Scot & Andrea:
[43:37] I'm just change topics little bit so then your Consulting gig you can spend a lot of time with Brands you talked about the things they want to talk about which is crap and pricing going to go see a Ting one piece of p3p.
What are some of the pitfalls you see them falling into an ear do they they come to you and they say oh my gosh I've got,
does problem with her your what are some of the pitfalls that you wish things would have oil for they come to.
What are the three things like people they were staying for a bit but a consistent being that I'm seeing is that a lot of them in the CPC space are only thinking like one or two years ahead and it's kind of a reactive model,
a reaction way of thinking to Amazon's kind of,
anyways have a crap program but I think they're getting a little stricter about it and kind of the last one to two years and so a lot of his friends are going items crapped out,
they're trying to keep up with like how to,
how to leverage Amazon's new marketing platforms and they're just really focused on the here and now and not I don't think thinking too much about where's the where's this thing go into yours me Amazon's never going to make money shipping dog food and cat litter across the United States alike what is the future of this look like and I don't think a lot of them are spending.
Enough time thinking about that because this is when you want to plant your seeds for that so you know if it's the next big model is me nice I might.
My opinion is on Amazon they're really going to figure out the pantry program I mean the way to economically ship products to customers.
You know that that is secreted that is.

[45:07] Freshly unprofitable in a direct-to-customer at least should be model is to put in a box of the whole bunch of other stuff so it perfectly fits and charge the customer like a nominal fee that they're not going to really.
And I worry too much about and then ship them a whole bunch of stuff at once and that's basically what the pantry program is and that program seems to be doing pretty well for them.
Really fast cording to some of the brands that I work with that are participating in it so I mean I think you thinking about like where the future is and Pantry still kinda challenging it's hard to hear item set up an assault like an automated thing yet,
and so in thinking about like where where is the next gen of this thing going,
because I mean in the writing on the wall is it like Amazon is not going to keep seeing all these products to lose money in this in the consumable space or they're just going to get really refined assortment.
And so programs like Pantry Paramus Lake you know Prime now or the pickup points or whatever those are the Amazon ones but then like what we're talking about click and collect like.
I think that you know expanding their,
nearest Thinking Outside those kind of the current challenges you're having with your Amazon retail businesses is critical and the brands that are doing that are the ones they're going to be set up for Success because they planted seeds and cut it started that smell,
this is nursing one side so let's step outside consumables and take out a category that's like maybe more mature like up.

[46:39] Electronics repair or something the one that I keep hearing is when the Randall say when I think 5 or 10 years down the line.
Amazon tonight exclusive retailer and that scares me because it's a race to zero so that's why a lot of brands are on the doubt that's that's one of the reasons you did they have map pricing in controlling the 3p Marketplace,
do you think that's that you know you're obviously have drunk a little bit of Amazon Kool-Aid over the last 10 years but no.
Is that what we're going to be facing his is this kind of you know it brings have a logical argument to not be on Amazon because they're kind of feeding their own destruction.
But I don't think I mean it would be difficult to not be on the phone because of the opportunity that presents to Branzino just from League of Revenue prospective,
and sometimes from profit perspective too but I think it's I don't think it's a wise choice,
anti depends on a lot of factors but it's not a wise choice to like think of Amazon is your exclusive e-commerce player me the brands that I see that have healthier businesses.
With Amazon are ones that sell to multiple e-commerce players and are investing in other ones not investing like investors but you know investing time and energy into getting their business up and running and marketing and things like that on some of the other players and so that's where,
I think that some of your business model is feeling more Diversified but if you thinking that you're going to be exclusive on Amazon I mean they change the game there every 6 months,
and you know it only takes kind of like one change that's in congress with your business model to be out.

[48:17] And here maybe that's private label or meet you maybe they want your private label of your product or maybe they either come to you with terms like negotiation terms that are unacceptable to you or that you can't you can't actually if you can accommodate,
can I still run a business and if they're your only Taylor you're kind of in a really tough spot,
yeah I don't think they're setting up Amazon to be exclusive I think they see Amazon becoming a de-facto exclusive because when they look at the online players,
Amazon so much bigger than everyone else to.
That it's hard to build that diversity that you're talking about that that's not what they worry about that kind of say my brain is priced wrong is right now so maybe there is a strategy right now.
I don't help Amazon be the the 800-pound gorilla well and I think that's where it's important,
that's what's important to look on Amazon at some of your third party Partners I need your address with Amazon you've presumably all are presumably also selling to other people that are reselling on Amazon it is important to look at their ass and selling across multiple platforms,
and so you know they're giving you any not might be still small but they're giving you some distribution also they're also giving you an alternative if you don't want to sell directly to Amazon anymore but you still and have a presence there and have a good brand experience and help you have sales,
Anthem anything that's kind of like a another diversification strategy you look so,
so is private label it was kind of jump into that a little bit what are you tell Brands when they say hey I'm really concerned that you know Amazon just opened up a private label in my category.

[49:50] How do you explain that I mean I think they should be concerned but it's not.
Eminem retailer tender copying top selling products it's not too similar differences you know how they're able to manipulate the digital shelf to be able to savor products.
Over others,
and you know we don't have any like confirmation that they're doing that but it sure seems like they are when you look at the site and I know you're searching for backpacks and you know the one that looks just like the other one,
private label comes up before it in the search results really totally it's something really scared about for sure but if you're also kind of going back to the concept of diversification if you've been,
yeah totally.
If your business is so driven by one or two skews you know you're a right candidate for it for Amazon taking on serve a private label.
Copy had approached and so you know figure out how to grow other sections of your business so that you're not completely dependent on laptops Q,
because Amazon Michael private label it I think it's probably a good idea and it you know I've seen them give like favoring some of the marketing and and obviously all the marketing is free for them so there,
those are going to be really high origin ID on this but they look like they're just going after pretty much every category now which means I mean that makes sense for them to do.

[51:26] I think you may have inadvertently given this the secret sauce away earlier I just get into the live plants category.

Scot & Andrea:
[51:33] Really difficult for Amazon to copy must be because they kept asking it as an interview question and they never launched it so there you go.

[51:41] Exactly which is odd because I feel like that's one of the first categories than invented cologne.

Scot & Andrea:
[51:46] Actually I think that I actually might be irony I'm not sure.

[51:52] Yes Neil thank you for that.

[51:57] So I know you're going to be at IRC in a couple weeks and I understand it right that topic is tips for negotiating with Amazon can you totally ruin the irce panel.
Giving our listener some of the high-level pitfalls and tips.

Scot & Andrea:
[52:14] Yeah yeah.
Blue am so I mean the presentations really just going to talk about it I think it's another one of those areas where a little bit of Education will really help Brands be successful in their negotiations and the biggest.
And the bastard of a feeling or pitfalls that I saw when I was out in the sun because she with friends is just friends not preparing for the negotiation not coming with with data me with questions you know not being prepared,
I'm not really thinking through,
the Amazons perspective and being kind of blindsided by some of the ass and granite Amazon desert huge so it makes sense to be helpless by the numbers,
and so I will talk a little bit about that in the presentation will talk about how to prepare,
you know what information to request from Amazon if you have an opportunity to do so I mean I think,
an important thing is he knows the lot of times,
especially some of the mid-tier the smaller hands are not actually negotiate with a live person and so how do you navigate that right like you probably negotiate with a robot doesn't look like a robot in the email comes to you but looks like a.
Can a person that it's you know it's definitely an automated it's going automated process so we'll talk about how to.
How to prepare am had to actually execute and then you know what kind of go through some of the typical ass from Amazon and and talk about like when he's made me sense for you like.

[53:47] Who who who doesn't make sense for it to think about like the cross. Program or when would it make sense for you to invest in some of the,
the larger marketing programs or or Crap allow answer you know we'll kind of talk a little bit about that.
One of the things you introduce me to his this house get this wrong but like driving the car really fast with your.
Foot on the gas your hands off the wheel tell tell us more about that Provisions growing quickly and scaling and it's really critical more and more automated.
And so you know I'm seeing with my clients and also one of the forums like the Lincoln Group and things like that that a lot of brands are just really at the end.
At the receiving end of more automation than ever before and they're hearing from their buyers you know how critical it is that they continue automated and you know not Place manual.
Borders and let the system do its thing can have their hands off the wheel that's the hands off the wheel concept so you know and that's definitely you always been kind of a push it Amazon but I feel like it's getting,
my friends are seeing more of it and I'm in recent here.
An interest Amazon's interesting automation when you negotiate with the with that machine doesn't sound like Alexa.
I mean if you get on the phone you're talking to a real person.

[55:20] For now for now.

Scot & Andrea:
[55:21] I'm sorry Jason we're going to cut your crap allowance.

[55:26] Here's the tip you're not talking to a real person when it's Sign May Day that's always.

Scot & Andrea:
[55:31] Chicken area.

[55:34] Come on you guys don't get Amazon Fire jokes.

Scot & Andrea:
[55:36] No I guess I totally get it.

[55:40] Scot snoody the lack of systems we have to go somewhere for him although annoyingly Scott's car can drive really fast with a hands off the wheel which I'm a little jealous.

Scot & Andrea:
[55:51] Do you have a self-driving car have a tablet doesn't have that that future though I got I was too early in the doctor its equivalent of having an iPhone 1 right now.

[56:04] You can still drive really fast with your hands off the wheel once.

Scot & Andrea:
[56:07] Yeah just let me know.

[56:11] Exactly and any big mistakes you see people making in negotiations.

Scot & Andrea:
[56:18] Yeah I mean I think this one is just giving like a specially for the platform or have experience I have significant growth and so it's like one of the first time actually talking to someone like a live person they just give too much away in the first year,
that you know they don't hold back enough funding for themselves,
Cindy has Amazon ever use an annual negotiation process that you every year and they're going to want more and you know you don't want to give it all away,
in the in there for a couple years of Amazon you've got a kind of pre the reserves at or or just kind of the other it's just kind of,
signing up for the most you can possibly do for that year from a from a Amazon funding perspective and that doesn't give you any kind of slush fund for the stuff they're going to come to you with.
Fourth root beer like participation in certain marketing programs that you know they didn't know about the weekend because you know they're.
A plan a little bit more in a three to six months in advance or are you know price-matching error or some chargeback store.
I don't want to be in a position all year we're all of those little things are extraordinary painful cuz you already gave them like the most you could give them that you're so I always recommend a can of creating a reserved sign for yourself,
you know don't like some leftover money is there be no room in your budget to pay for some of the things throughout the year.

[57:43] That Prime days only two months away don't don't touch.

Scot & Andrea:
[57:49] So I never been a Brandon or works for me but I meant it would be really weird because there's probably this old school believing believe that you reformulation ships and I know I've been a bit more couple times and.
You just see the brand raps just kind of going through there and you know it's almost like the airports Gear Drive for them there's a whole infrastructure and there's this whole,
pilgrimage to Walmart meet that guy try to build a relationship drugs drinks the Dan Draper Martini lunch and all that stuff and then you probably do all that then you try to.
If I go try to beats when Amazon that I won't meet with you unless you're like.
Super Dee duper Top Gear brand so then now you're kind of talking to this AI machine and these brands that kind of holiday how they feel.
Yeah yeah especially some of the larger more established ones that are really accustomed to working with brick-and-mortar there they believe that they will be able to see crater 6s on Amazon to forming a relationship with their buyers,
and I will tell you like the last thing those buyers wanted to do it for him,
bladder relationships because it's extremely time-consuming it doesn't help them execute on their initiatives might get them like that anymore Co-op,
they can also get that by sending out like a hundred automated emails and so you know I still remember kind of,
the concept of like Thursday Amazon buying team they're in their jeans and occasionally flip flops,
I'm at the brand comes to visit and they're all wearing their suits and they want to do a line review and like that concept it's just totally lost.

[59:30] Play baby and they're not going to make it they're not going to make selection choices they're going to list everything on the side so it doesn't.
The best interest to learn a whole lot about the products and which ones are different from one another.
So yeah I mean I definitely see a lot of her and still trying to formulation ships but I'm also seeing a lot of emerges getting like Savvy about that,
he has already had a couple of turnovers and their Vendor Manager and they're realizing that like actually the best thing they can do is educate them so.
About the,
Phat Farm and how it works because of no sex that's really understand how the form works that I work with it and keep keep up with the changes to it I think it you know,
the Amazon I think just there was a Jeff quote once and he said we're not in the business of selling things were in the business of helping people buy things and they just,
Amazon believes they are a platform for selling things they don't believe they're retailer wish I think kind of speaks to you know why they don't think the relationship development super important.
That's an important Point Jason spends more time with the offline guys than I do but up but I'm always.
Stricken by there's the still believe there's still this belief and I'm a computer engineering guy but there's just believe that there's this Merchant King,
Merchant Prince water be called Jason and you know they can predict what people are going to do and they go and they buy that hot thing in the ghetto,
the create fashion themselves and that I'm console surprised how much that still exists and I think you know this this Amazon model of.

[1:01:02] Why should she choose like put everything up and let the customer he just seems so obvious to me.
But it really is so counter to hell all these other companies are built that that.
It's the step to get even closer to that existential dilemma than they are right now which is hard to believe but just console amazing to me in the retail world that that no one else really gets that.
Universal some elements of that and that's really like in my opinion when I was a fire that was like the most exciting thing about being a buyer what if you find the next big thing,
like what is it what if you're the one that brought it on the side and I'm ever going to trade shows in finding like weird and scary products reticulate like the Expos and,
Ambien like maybe this is like the new coconut water like we don't know what is going to be so I think there's still some elements of that but I mean definitely a lot less than than traditional retailers,
stop and come from a line review I guess.

[1:01:59] Well it has happened again we've used up our allotted hour Andrea thank you very much for us spending time in the educating all of us and especially for educating Scot.

Scot & Andrea:
[1:02:13] But thank you for having me on the show and it was really great to be here.
Yeah right I said at the top of you everytime I talk to you I learned a hundred things I think I have checks at least that many boxes that is good take me awhile to counter but we're in that that neighborhood,
it is reminder to listener see if you enjoyed Andrews view on Amazon brand strategy and then and other topics she's one of the speakers at internet retailer conference in exhibitions Amazon and me Workshop,
which is right around the corner it'll be June 6th in Chicago,
and Andrea is folks want to follow you your writing online you mentioned you got some articles coming out where's the best place that can find is that a Twitter handle or a,
that chatter where where do you hang out online I am mostly on LinkedIn so you can find me on LinkedIn and it's Andrea Leigh Leigh.

[1:03:05] Possible thanks again really appreciate it.

[1:03:07] Yeah and we'll make sure to get that in the show now so until next time happy commercing.

Apr 30, 2017

EP082 - Amazon Earnings, Walmart and Other News

Amazon News

  • Amazon earnings call was a clean "beat and raise" exceeding analyst estimates for revenue and earned income.  That drove the stock up 4% (approx 960), putting Amazon in striking distance of the $1000 price (which would also make Jeff Bezos the most wealthy man in the world.
  • Jeff Bezos comments were primarily focused on progress in India.
  • Jeff Bezos 2016 Shareholder letter is another can't miss (and don't forget to reread the 1997 letter posted at the end if you haven't seen it before)
  • Amazon has been profitable for 8 consecutive quarter
  • 3P Marketplace is over 50% of Amazon sales, putting total GMV for the Quarter around $60B
  • AWS continues to grow (47% this quarter) but rate of growth has continued to slow as they get larger
  • Prime estimates are now as high as 80M members
  • Amazon launched the new Echo Look device

Walmart News

  • Walmart has a new startup incubator "store 8" and Rent the Runway Founder Jenny Fleiss is the first project with a new personalized shopping concept
  • Walmart is offer new "Jet Style" discounts when you buy online and ship to store (vs. ship to home)
  • Walmart acquired url for $9M
  • Rumors that Walmart is in talks to acquire Bonobos 

Petsmart buys for $3.35M (largest e-commerce acquisition ever)

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

Episode 82 of the Jason & Scot show was recorded on Thursday April 6, 2017.

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

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 82 being recorded on Thursday April 6th 2017 I'm your host Jason "Retailgeek" Goldberg and as usual I'm here Scot Wingo.

[0:40] Hey Jason and hey Jason Scott show listeners Jason think it's been about 2 weeks since we set down to record a podcast and you've been.
I've been to Orlando and you've been to Paris New York in Las Vegas Indian nursing the retail visits you can report on or trade shows.

[0:59] Treasures of first I'd like to highlight I got to see both Eiffel towers and both empire state buildings so I feel like that I should get some sort of special badge on Swarm if nothing else for that.

[1:11] Appointment by Venice in between there.

[1:14] I avoided Menace in this particular Las Vegas trip I was over the end of the strip at Mandalay Bay.

[1:21] So that that was this weekend that was for oracles modern user experience conference so I got a chance to,
to do a keynote for their Commerce track there and that was fun I got to see a lot of colleagues and talk to some customers and see some of the new.
New Direction that the Oracle Commerce Tech is going in which is interesting.

[1:45] I think the week before that I was in Paris with and clients and we did some store visits.
Maybe not the kind of stores that most of the e-commerce folks are interested in we went to a bunch of unique specialty stores in Paris and so.
Drive for example El Royale which is like the the world's most famous Taxidermy store and got to check out some of the unique merchandising and unique Merchant.
Dice it was available we didn't mention shopping in the Paris Flea Market which is kind of a.
When the longer running flea markets are out there and some school stuff so that was fun but maybe not super e-commerce related.

[2:29] And then I did not see any new stores in New York although I feel like they're a few under construction that I'm I'm here to check out when they open.

[2:40] Abbott used cobbler in Orlando for something much more fun.

[2:46] Yeah this was a spring break and,
regular listeners will know I'm a big Star Wars fan so I drugged one of my children to a Star Wars celebration which is the 40th Year big anniversary did lucasfilm put on down in Orlando,
it's good to be with $70,000 Starburst answer there's a lot of Star Wars and going on I got my fill for the year.

[3:08] Nice and what percentage of the time when you say you were in costume.

[3:11] I am not a cosplayer but no fair large percent of people are so it's always fun to see all the different costumes things people get pretty into it as you can imagine.

[3:22] Oh yeah I'll bet it's annoying at the airport when everyone tries to go through security in the Stormtrooper outfits.

[3:28] The bestest one year they had they always do like a stormtrooper March and they had that someone was doing like a marathon and they cross each other it was really funny watching the runners like run by a big blind of Stormtroopers.

[3:44] Nice and the the daughter that went with you was she the winter or the loser in the Family Pool.

[3:50] Other she's young enough to believe she was the winner so it was it was good.

[3:54] I just wish she was the winner too but I think what we've been talking about all these trips as an Amazon been reporting earnings today.

[4:04] Yeah just came out tonight so this is hot off the presses so.
One pro tip for everyone to is 2 Pro tips every year a must-read for any retailer or person even.
Remotely near industry is the Jeff Bezos shareholder letter I don't want to spoil that at all but I will put a link to it in the show notes to go look at that,
the one of my favorite thing is to read as you go back to the 97 letter right one Amazon with public which they're celebrating 20 years of going public this year.

[4:38] I include this in every years letter so chances are you probably seen this before but it's another thing to go read and it's pretty amazing cuz in that letter.
Basically says we believe these three things aren't going to change control of low prices.
Fast free shipping in selection and that's were going to focus on for the future it's pretty amazing though.

[5:05] Italy nail all that 20 years later that that's a reading it it's almost as if it could be written today so I definitely meant that and then and this year shareholder letter.
Luther departure some advice for auctioneers and things that I found really just really.
Awesome so that's one pro tip partagas two and then the third would be when Amazon does there police they.
I was clueless quote and I was looking to that because that I think you a pretty clear signal what's really important to them.
Also there they have highlights there's 90 bullets these days cuz he does something effectively at least two Presley's a day at the space but that.
What is always interesting and I'll just give you a little bit of it.
R&D team is moving fast and delivering for customers and sellers the teams increase Prime selection by 70 / 75% since launching the program 9 months ago,
increase lung capacity resellers by 26% already just this year announced 18 original TV series in India and last week introduced a Fire TV stick.
I'm such a Jeff Bezos quote and then he finishes by saying Amazon. It's still day one for e-commerce today and I assure you they will keep investing in technology infrastructure,
set that's so you know that.
It's reassuring to me that they chose to really focus on India in the Presley's given all the exciting things that going on so that was interesting.

[6:34] Yeah and I India's a hot e-commerce Topic at the moment,
I think in the last night you know traditionally there been those kind to indigenous player Snapdeal and flip card and then of course the Amazon has been trying enter the market and even others have had some presents.

[6:54] That's I think and last month eBay which she had previously invested in Snapdeal.
Sold eBay. I am to Flipkart and made a big investment in Flipkart and I think the Google and maybe Alibaba had already invested in Flipkart so it,
it's really starting to feel like,
all the Indian players that aren't Amazon or trying to consolidate in the Flipkart and I think there's even rumors that foot card and snap the all-night emerge at some point in the idea being to create a super competitor to try to,
fight Amazon for the Indian market so that that really seems like the the epicenter of the e-commerce Battleground in the world right now.

[7:36] So the flip cart razor earlier in April was a 1.4 billion which is not chump change and then,
Amazon up to two billion dollars in India and I think he knows we're looking for fullment Center build-out.
You're probably already there so this feels like a.
Teenage commitment that this is a super important region to them that they want I want to win and to get enough tools reactionary to that.
That raise that just came out kind of given the timing and things that it's was hard to tell but they're really big on India which was is coming interesting thing from this earning release.

[8:12] Yep in a super high level that's.
White second most populous country in the world next to China they may be a little further along in education of the citizens and better internet access than China in so it's a huge e-commerce market and of course Amazon.
Like basically this point already lost China so it's the largest market in the world it's that sort of open to competition.

[8:38] Yeah I agree and I think Dave Dave yeah there's a lot of lessons to be learned from China of not going aggressive enough there and really kind of.
Getting in front of the the local competitor so that they seem to be all in on India so if we if we kind of pill the.
Onion on the quarter it it when you wake up measured against Wall Street expectations it's what you would call a beat and Rays quarter so exceeded expectations on the top and bottom line and then leave.
Forecast for 2 2 came out slightly ahead of Wall Street consensus so that's kind of where that raise and be kind of nerve being raised.
Language comes from that 35.7 billion and revenue for the quarter after hours the stock is a.
Pretty substantially if so about 5% which ramazan it is a very large cap stocks and that moved it from the effective Lee like.
910 bucks to 954 n last time on the show we talked about.
Jeff Bezos became number two richest person after a big move in this. If it gets around $1,000 by my napkin math that would put him over the top which is which is interesting it just,
another interesting data point is it looks like it if these numbers hold,
it looks like Amazon will have a market cap of about 450 billion and Google will be at 610 so there is this interesting talk about.
Facebook salsa in the conversation will one of these tech companies get to other be the first trillion dollar market cap stock so that's kind of where we are positioning Google's a fair amount ahead by 50% ahead.

[10:17] Abdul also announced of a pretty strong quarter what do you dig in.

[10:24] Every component of Amazon beat Wall Street expectations to the retail business which is their traditional.
Retail business which includes the marketplace this new line on them they just recently broke out called retail subs and we will dig into that Amazon web services which is cloud computing and then the other category Now isn't just the ad.
Business it did very well at all so it was kind of a little bit.
Yep not exceed expectations was International growth a lot of that was due to pre substantial currency.
Teachers going on and we take those out and look at a constant currency International itself did pretty well.
So with us International through 24% in his Baseline and I was like to remind listeners e-commerce is growing at 15%.
To hear you have the largest e-commerce player growing it out easily.
Not quite double at this point but you can certainly faster than the Baseline those they're taking sure I had a pretty tremendous clip so it's 9% higher and.

[11:24] Equate 20 x the 35 billion no that's like 4 billion that just got sucked out of the other pockets of anyone selling online just in one quarter is one way to think of.
So Sienna when is I used to like to look.
And I stress treats people that Amazon doesn't get really clear category data but they.
Always gave media an egm in EDM is electronics Jerome or should I stop doing that this year they provided a bunch of new disclosures annually and then,
going forward it looks like they've stopped with media and AGM set to a bit of a bummer before Shelly I know enough to back into that so I was like to do that because it actually makes the number speaker,
Amazon grew 24% looks like media grew at 7% media's books music video video games any digital books those kinds of things an egm is.
Inside your obvious Electronics but any general merchandise so Sporting Goods cpg all that stuff has lumped into that category and it grew 26% so getting.
Broccoli close to that 30% doubling of e-commerce unit growth was 24%.

[12:35] And what reason is the stock is up is why she was expecting a book 13 earnings per share and it came in at a buck 48 so literally 33%.
Beats by my math coupler components I like to look at Marketplace this is obviously a big thing I follow the number the.

[12:53] Amazon reports is the percent of units that come from third-party and then tipped a little bit it always been taking up literally.
Prime last 20 quarters I think and then I'll ask you for a last quarter it went from 50 to 49% units from third-party.
Wizard we never seen it take down this quarter stick back up to 50% so that was good to see imagine going forward that will see it take up,
car seems to be how it's going inside my bed is too you'll see 51 and then we get up kind of 253 ocean and q42,
just the first part of business really get on fire during that timeframe.

[13:35] We think we talk show if you tore Amazon deep dive there's this this kind of Amazons.
Total sales revenue of 35.7 billion actually mask quite a bit of what's going on in there and what you have to do is take out the Amazon web services and ads and you're left with 24 billion thank you to the first party business,
you would think well okay if 50% is units then it will be another 24 for third-party.
Actually it's a little bit more because average order value of third-party is substantially higher than first party and.
So when you kind of look at gmv versus units by Maya Matthew get about 36 billion for third-party when you had those up Amazon.
About twice as big as it seems to be 60 billion for this quarter so you know that that's kind of clothes going on a 250 billion dollar run rate for DMV across 1p and 2p with witches pretty interesting if they,
give him a solid Q4 you may start to that I don't think they could crush 304 the year but you will Q4 would be the first hundred billion dollar quarter I think they could do that this year pretty easily unless things really slow down.

[14:51] And but you definitely think of their annual DMV is bigger than than the 60 times for right cuz the Q4 would be so much bigger.

[14:57] Absolute other kind of 260 is coming out pencil and if you just kind of assumed the same mix as last year.

[15:11] Which is a pretty big retailer.

[15:13] Yes that's a very large retailer that's a global number I always get asked that AWS cloud computing grew 47%,
I was she was actually expecting a lot bigger so down there's a lot of pricing battles going on here between Google Microsoft and Amazon so that was good and margins held up nicely and that was one of the big treaters to.
Earnings beat people expecting the cloud computing margins to be under pressure the biggest surprise in the quarter is.
Amazon in their annual report started to break out the revenue from Prime,
no some other stuff in there so it's a bit of a noisy number but essentially you can kind of make some assumptions and get close to a nun Amazon prime number so the big surprise they call that retail subscription.
And I did that run you jumped 52% year over year,
now what's interesting is about a year ago is when they introduce the ability to buy Prime on a monthly basis and then a little bit later they broke out the video so you can just do a video subscription,
So currently with this report.
Just yesterday consumer intelligence which is the surveying company and you and I are a little skeptical on surveys I think this is directionally interesting they estimated there's no 80 million Prime users and that that number,
is up to ex from 2 years ago which would imply 2015 was 40 million and a lot of washing hands when they pick the.
Pick through this retail subscription or they get to about the same numbers and it's about 60% us 40% International so that would imply about 45 million homes in the US which is.

[16:52] Pretty darn impressive other things that this report highlighted was that they sales that they.
Amazon gets from a non Prime user is about $700 a year and Prime user spend about twice that it 14 or 1300 year also interesting Lee the survey picked up that now about 25% of users.
I use that new monthly program which is 1099 and I think most of those we knew because if you were in the annual you probably wouldn't downgrade to the monthly useful to Auto renew setting Prime by the fire is.
Prime has surged by.
Coming out this monthly program generating at least half of that 55% growth I imagine his come from you folks that are joining the program and gets washed you excited is there was some concern that.
The way the Census Bureau breaks up.
Household incomes you're the stop here that's over a hundred and twenty K and it would have felt like that was it like 80 or 90% saturation so I think what gets people excited is this 1099 monthly plans seems to,
pulling people down kind of more towards that Walmart consumer which I think is more of a 67 TK kind of household income so that was pretty interesting.

[18:04] Yeah it's it's fascinating the.
I think I was another report earlier in the month that was kind of interesting that was looking at the habits of Prime members and I think there been this assumption,
the Prime members were super loyal in the ones you got locked into that $99 that you wanted to get as much value from it as you could so you.
Aggregated all your shopping on on Amazon and what this study showed was.
They know that Prime customers are more voracious e-commerce Shoppers overall and that well they have a much bigger spin on on Amazon the nun Prime members.
They still use multiple other retailers and spend more money over all men so I don't know if that's how accurate that is again like.
You know somebody surveys are not very big numbers of consumers that they're making big inferences from.
But if that's true that's pretty interesting cuz I feel like a lot of people have felt like the prime is a true walking program.

[19:09] You'll just have to take my word for it or read the show notes yeah the.
So Scott like one of the things whenever we talk about Amazon picture go to a retailer they like you see their eyes roll in the back of their head and they go yeah yeah yeah but you know Amazon doesn't have to be profitable so it's not fair for us to compete with them because we do.

[19:31] Yeah.

[19:34] You and I both work hard to dispel this one so so just kind of put it to bed that's truly faults to Amazon's been profitable,
as an entity for the last quarter so that's two years and that you would for Amazon is a preconcerted number,
kick some ass kind of conservative accounting treatment that you look at and actually at Amazon if if you start 3D space your letters we don't have time to go into it that's right and what they really look at is free cash flow generated by the business.
So another thing that they break apart is this is kind of unique it's their own measure.

[20:12] Tom is call CSI and its operating income for a business you could essentially so.
So it's call Consolidated segment operating income and she's actually where they say it looked the retail business did this and the non-retail visited that so it's wait for them to come out with a little.
Give you some idea of what component is your profit so.
You're a lot of folks say well okay yeah sure their probable but it must be Amazon web services this doing it all eight eight of us is quite probable.
But the North America retail businesses profitable to it.
The generated 1.84 billion in cash this quarter just can't put a number on it now the one thing you can't peel apart from there as the marketplace so you could argue with the marketplaces hearing all that profit I would probably actually,
but I don't think it's.

[21:04] You can't unfollow the marketplace in retail at this point just say well what's the 1p business making but you know that already we get it its profit the retail part of Amazon's business is Prague.

[21:17] Cloud computing possible and you get free cash flow.
On a trailing 12-month basis which is what they like to look at they generated 10 billion dollars in free cash flow so so I think these numbers are at a scale that.
It's hard Reef you that Amazon's prov1 and doing quite well on the bottom line.

[21:37] Yeah which is crazy of one of the things on the earnings that is that they're there shipping cost went up by a billion dollars so they spent 4.7 billion Justin shipping and to think like.
There their profitable and potentially getting more profitable with that come investment is amazing.

[21:56] Yeah and then um.
Returning service internet number and with that number you saw is like just the cause it doesn't have the offsetting revenue from Prime that goes against.
Set an and fees from sellers actually knocked down by about how this is the actual true net cost.

[22:17] Interesting okay the other thing I heard a lot of a sort of squawking about it.
How well a wso doing versus its competitors so obviously it is the 800-pound gorilla in cloud and certainly.
Oracle and Google and Microsoft have an IBM of really.
Shirt of targeted they're much smaller but at the moment they're growing faster than AWS is because there's so much smaller and I I know.
Earlier in the month the Oracle team was like kind of taking some shots at 8 of us and talking about how much it was.
It was its growth was slowing down.
And I wire you know they thought that they had a better cheaper solution than Amazon and then that I noticed the Amazon sort of took the bait and refuted a lot of that in the.
This weekend I think I saw the president of AWS coming out with some quotes talking about how.
The the old Oracle model of walking you in the mediocre Services doesn't work anymore and that you talking about enough.
An unhappy a lot of Oracle customers probably where that they were locked into this database for all this sort of time.
So I always have a good trash talk but it is interesting it does feel like.

[23:42] Not only is Amazon winning at 8 of us but they're starting to add more Enterprise type software and kind of higher higher level software to the stack that feels like it's.
It's more writing oracles kitchen so let you know they have a very credible database offering news that could help you avoid you having to pay Oracle for a database for example.

[24:01] Yeah one of the things that makes a whole apples and oranges is I know Microsoft.
They switched everyone in office over to that Office 365 and they count that is cloud Revenue so it's kind of a little apples oranges where Amazon's cloud is really.
The pieces of.
Buy at the Lego blocks of cloud in other people putting applications in the bucket so either way so just put a number on it came in 6 billion I'm 16 billion,
in a world of software that is a big business and as we mentioned his growing in north of 40% which is not too shabby and it has.

[24:45] Amazing margins which is nice.

[24:48] Yeah it's a it's a certainly impressive to have these two huge huge growth engines in one company makes you wonder what which which one of those the investors are investing in.

[25:04] People ask me if I think they'll split it out in and I really don't because eight of us is the operating system Amazon runs on and a lot of.
Cool new features they're coming out with have been.
Computer Bates internally through it for for Amazon's retail business and they would have come up with those ideas if there were two separate companies so I actually am concerned on that part I think they love having other because,
the surgery would not having separate.
Other big Amazon used iPad I'd ask you about is the echo look so I want to just grab that for folks that may have missed announced it and I'm curious to hear your thoughts on them.

[25:45] Yeah yeah today announced a new piece of Hardware today which is called the echo book and then start the next Generation Echo it's it's $200 that has all the features of the traditional Echo but it also has a camera in it,
inside the the use case that they're touting is that you would put this in your closet or in your bedroom or wherever you get dressed and in addition all the traditional Echo features,
you can instructed to take a picture or a video of you and so what this would let you do as I get dressed in the morning try on an outfit.
I have Echo take a picture of you and then you can leverage this other service that Amazon launched about a month ago that I think we briefly talked about on the show called style check which is.
Where you upload a picture to Amazon and a human stylus that works for Amazon looks it.
That picture and give you advice about like give you sent pictures of two outfits will tell you which outfit they think looks better though give you fashion advice like human curated fashion advice and so you know now it seems like,
they're making it much easier to use this style check by by putting this camera in your in your closet or in your bedroom.
I personally think this is a super interesting Trojan Horse so.

[27:07] The more information you have about consumers fashion habits and what they actually use versus Buy,
the better recommendations you can make for a close in the better close you can actually design for those customers you know fashion is such a trend based business and so many apparel companies have lived or died by missing trends.
If you're a fashion company which Amazon aspires to be and you have a camera in the closet of potentially millions of consumers.

[27:39] You're guaranteed to be the the most on Trend you're guaranteed to spot the changes and behaviors and more exciting.
You're not getting the stated behaviour you're not getting these like.
Like a sort of artificial new trends that that the designers make when they when they go to Fashion Week every year,
you're you're seeing the actual clothes that consumers where and that's a big deal because a lot of consumers buy clothes put in their closet and never where I'm so knowing what the real preferences are.
A potentially give you a huge leg up in selling and designing fashion and frankly it also potentially has some really utility for consumers to help steer them two words.
The gaps in their wardrobe or the things that they gravitate to and you know maybe I buy a lot of colorful shirts that I never wear them in and so you know Amazon could potentially.
Remind me of the shirts that I'm more likely to really wear for example so it's it's potentially very interesting and it potentially is a super valuable new data source for Amazon if they get a lot of people that use this.

[28:44] Yes reaction to it is really fascinating because every dude I know.
Doesn't get it off then like I thought it was April Fool joke this is crazy why would a man uses every woman.
Pirate in women I chatted with about it they're like that's pretty out that work what kind of recommendations would they make you know that's handy I don't have a full length mirror.
The factor could do a video of you turning around and see that outfit kind of a let you know the 360 view of Elf it kind of reminds me,
when I watch the little promotional video reminds me the magic mirrors you talk a lot about you know where you know they're more touch screens and things with the gym I do the magic mirror is to.

[29:29] You see how an outfit looks and then say Oh I drive another top and then your interactive leave by that actually even better in some ways cuz you get the stylus component and the Machine.

[29:40] Absolutely in the magic mirror like that's a really expensive technology and you put it in this dressing room in in a fashion apparel store and it's.
It's a real challenge because.
You know of a hundred people that walk in that store only 25 of them are going to walk in the dressing room and only five of those are going to actually use the magic mirror so you bought this really expensive piece of Capital Equipment that only touches a small percentage of the consumers in your store whereas,
this Amazon solution is 200 bucks in it potentially touches that customer 365 times a year so.
Like I think it's it's a similar use case but dramatically more valuable than the in-store stuff that you see people experimenting with.
It's funny you mention that the gender divide like you know certainly when you see this you think about things like Stitch fix which is largely focused on women and and you know,
that they've always doubted that they have this Advantage from seeing all these women's preferences and their reaction to the outfits that the stylist curate in that they use that data to design their new clothes,
well like this is sort of that model on steroids so you know you could have Amazon collecting much more data,
I was a much better bigger data science team leveraging that day though so that's super interesting.
An agenda divider was funny I think I had a debate on Twitter with our mutual friend David and he was taking the under on this he's not super excited but you heard it here first I've already you know.

[31:15] Put in my request to be.
To be able to buy one and you know if I do buy one will see if a year from now if if I'm more fashionable than David cuz right now I feel like he has a pretty commanding lead over me.

[31:28] Is going to race to the bottom there I don't know.

[31:31] Yeah it's it's important if it's a reasonable goal post.

[31:36] When I when I first saw just the device and before I saw the video I thought wow that could be really dope.

[31:44] I thought it'd be more like a Dropcam competitor are they called the nest camera now because,
are the nest cameras nice and I used one but then the thing it's a consoling you learning it I like,
some ocean looking like a tree wiggle and is totally useless to the image recognition and the Machine morning on its not very good so when I saw it I thought it came with a voice interface and the motion-capture to be really amazing so I actually have multiple uses for the thing because having it is kind of a monitoring camera,
it's also like an actual to me.

[32:18] Yeah and another use case we've heard a lot of talk and chatter about is a.
Speaker phone or video conferencing phone so you know this this Hardware you could certainly do either those purposes so you can imagine.
You get that same Hardware can be used for a bunch of different uses use cases and they could just add new skills and add new features,
to Hardware all the time as as they already do when the echo one thing it was interesting to me about the hardware.
And they say has the same feature set as the echo,
you know our listeners will remember there's at least there's there's more than two but there to sort of ac-powered Echoes there's the Echo and the echo dot in the big difference between those two is the,
the high-fidelity speaker in the Echo and I think the echo was a hundred and eighty bucks when it first launched as that.
Am I am I remembering right now.

[33:12] It's still one of the other goes 199 and bumped.

[33:15] Solange the 200 is done a 180 so this device if it has the same audio in it that the echo has in it then they squeeze the camera in there are basically the same price.
So I'll be curious if they.
If they did any concert options to the audio to help before the camera or or how that all that all worked out what is of Interest.

[33:39] Did you see they did a over the air update for Taps and now you don't have to,
press the button for to work so they will somehow saw the battery problem that originally,
originally the use case was you'd hold down this button and you had to do that because it was battery operated and because it's listening to the lot of battery that that's kind of what that would do this,
weaker so they run out an update to that to be a basic enhance that device so that that's no longer necessary about that was pretty nursing at its Eli news about that.

[34:13] No I didn't hear a lot about it and what was passing it means there's a.
That is played out in the phone world right and in so they're there are on it it does take a lot of battery to listen all the time and so for example that the Apple iPhone you can activate Siri without pushing a button that only when you're plugged into AC.

[34:34] So like when you're in your doc at night for example there are some Android phones that listen all the time and take up very little battery but the way they do that is they actually have a dedicated ship that's a.
In a single purpose chip is designed to be very little power and listen for that activation work and so you go I thought makes perfect sense that they could build a new that I can.

[34:59] Can listen all the time because I had a new chip in it but the fact that they were able to add that feature just in software is pretty interesting.

[35:08] Exactly and then the other thing and that you know haven't talked about how long they been working on this or any of those things but the one thing that done on me.
Almost every apparel manufacturer I've ever worked with we've talked about closet closet analytics and we talked about the benefits of putting a camera in the closet and understanding more about half consumers are using the product in you talk to him about.
Like having those devices for focus groups and test markets and panels and things are making it,
a widely available consumer product and I probably didn't talking about that idea with a pro manufacturers for 3 or 4 years and it's,
it's frankly probably on a lot of the pro manufacturers road maps but I'm guessing that the Amazon decided this was a good idea.
In a much shorter cycle and while everyone else just talked about it and kind of put it on the back burner,
these guys very quickly just did it and they're putting it out in the market and you know maybe it'll be successful and it'll be a big story we're talking about any year maybe it won't be so it'll be the next fire phone and David will be right and now they'll quickly learn from it and.
Did it before they wasted too much money.
A sport that's kind of the theme of Jeff Bezos shareholder letter but I do think the fact that they just put something out like this when so many other people have thought about it and talked about and not taking action is,
one of the you need to find any characteristics of Amazon to me.

[36:33] No use case I wanted to ask you out cuz I don't know a lot about it is fitment because it seems like if you've got a camera there you should be able to do some body measurements and say to someone,
you know since imagine this thing's been watching you try on 10 outfits and then now you say hey order me a small t-shirt that says,
hey you know just so you're aware I check the measurements and I don't think this is going to fit you don't you think that they could get smart enough to do measurements.

[36:59] Absolutely interpointe like that apparel returns are very high and returns are super expensive returns are super expensive even for Amazon so anything you can do to,
reduce returns by getting that are fitment is is hugely valuable there a couple of vendors out there the try to do fitment with a 2d camera and you know that they can do it but I expect that it's.
Pretty and perfect there's really interesting fitment you can do with a 3D cameras and,
from and we don't know yet what's really in this this new Echo device but it sounds like it's halfway between a 2D and 3D camera so what it sounds like is it only has a single in single camera but then it has a separate infrared.
Rangefinder so that it can measure the distance you are from the camera and that that allows it to get more accurate sizing information about you.

[37:58] I'm so potentially it it it absolutely could have a use case in fitment.

[38:02] Yes winterson to see what direction to take this thing.

[38:05] Yep again you know that was a super interesting product.
You know I don't think much of people are using it as a high-volume e-commerce ordering machine and so you don't have anything you don't look at that and say hey is,
are these kind of cancer my tracks going to be a third a third big business for Amazon in the long run but when they start moving those those things from your kitchen,
to your closet that they may have found some real use cases where where this kind of artificial intelligence can really even potentially Drive.
Actual e-commerce revenue for Amazon then I think a couple other little news things in the Amazon world.
I was actually just sit in a bee last this week in Las Vegas and Amazon had a huge booth at NAB.
And the enemy is the National Association of broadcasters so big video production show all the news guys and it reminded me that Amazon had bought this video Processing Company called Elemental in Portland Oregon.
I'm inside the booth at NAB is a Elemental AWS and they essentially have him put this this Elemental service on AWS and I sell at the broadcasters to to storm process all their video.
And so to me that was just another interesting example of kind of you know Amazon AWS moving from Pure infrastructure to applications or services.

[39:39] They also released the The Lex api's this month which are like all the underlying speech and natural language processing.
Libraries from the echo or from Alexa you can now use in an Amazon in your own applications.

[40:00] And that directly has been competing with like IBM bluemix with the Watson api's and M2 new api's that Google has as well so that was super fascinating.
I think we saw this new subscription service from Amazon probably confused most of us subscribe with Amazon it's the.

[40:24] Did you read about that at all.

[40:25] Yeah I was I thought it was going to be famous on has subscribe and save wear for loosely,
symbols you can buy A110 or need shower you could subscribe and get it coming on a regular basis parties of wanted to be involved in that for a long time so,
you say I'm I don't know I'm a,
biscuits I want a third-party way of doing that that's not available so I thought that's what it would be but it ended up being really more of an app store kind of things so the bility to manage subscription apps to come like Dropbox or Evernote things that nature so it was underwhelming It's All Digital subscriptions not physical and they're opening up.

[41:09] Accident that's that's potentially a competitor to PayPal I'm in part of.
The pay with Amazon Echo System because it turns out one of The Unsung used cases of PayPal is that in our new digital lives we all have these,
these digital subscriptions and recurring costs and you know there's a fair amount of what we call breakage in their search subscriptions we subscribe to something forget you subscribe to it and they just keep charging your credit card.
On end when consumers to discover that that's super annoying and that you know that they want to save money and be able to manage what they're paying for so what a lot of people do as they use PayPal for all those,
does recurring costs so they can go to One dashboard and PayPal and see all the services that they permission for recurring charges,
which is something PayPal let you do credit cards don't let you do and then from PayPal you can turn on or off those various subscriptions and so that this this new service from Amazon feels like,
a direct competitor with with that PayPal service it feels like it's sort of a centralized portal,
for managing all your returning digital subscriptions will hate that's why you have me man.

[42:26] I think it was also a new Amazon patent which is pretty interesting and particularly in light of The Deco style we're talking about earlier,
are the echo look we're talking about earlier rather they have a new patent on for on demand apparel Manufacturing and.
You know that's a technology that the apparel manufacturers are all super interested in Adidas has some pop-up stores where they make your sweater in the store there's a,
a store in Boston called Supply Depot that make the light high-performance will Blazers on the man in the store with ease.
Today on demand weaving machines and now you know it looks like Amazon is investing some IP in being a leader in that space as well so it just seems like.
Another Vector where Amazon is very clearly investing in fashion before the private labels in the Echo look in the photo studios that they've been building and and Union hours to see some interesting patterns in the space as well.

[43:30] The song Come Along the seam I saw that there's rumors that they're going to be coming out with an office competitor so, hosted,
young sweet, thing I don't have any idea if that's real or not but sorry about that thinking that was pretty nice it would sit on top of AWS,
it's interesting in that. Could you maybe I could so down that.
Microsoft cloud growth in your Google's invested really heavily in their their G Suites so maybe it's a meter guy shoot a shot at the by there and then the last piece of Amazon news that is interesting is.
Channel measures had an office in Australia for a really long time very active e-commerce Market there there's really no competitor to eBay so you Bay pops up in in Australia they do really well there,
and I just rumors that Amazon is going to be there for 3 years,
and it looks like it's official there was a newspaper interview with an Amazon head of Australia and he said yeah we're going to become,
coming out in the summer so that's exciting for the people down under that they're looking to get involved in the Amazon ecosystem imagine they'll be a third-party offering and that kind of thing so competitive waves going to hit their pretty hard.

[44:45] Yeah it happens that may be a great opportunity for the channel advisor to host a Jason and Scott show in Australia.

[44:54] Yet you say that I've been there and that flight is really really really long so I'm not any love to fly but that wouldn't break you I don't know if it's like a 24-hour flight it's it's brutal.

[45:05] At those lights are the only reason I ever get to the bottom of my inbox.

[45:09] Yeah it's different in boxing her flight and then if you've watched every movie you haven't seen in the last 3 years and then you walked up and down the aisle 80 times and you're looking you're still got another 10 hours.

[45:20] Yeah usually causes Strife with my wife as well because it's all and never to be forced to watch some movies that we had intended to watch together.

[45:29] Yes.

[45:39] So some other exciting news and e-commerce outside of the Amazon Echo System there was an enormous acquisition this month than I think in fact is the largest acquisition ever in the e-commerce space.

[45:54] You can have in the theme of jet Walmart and where.

[45:58] Where the incumbents are saying hey we got to acquire something was really going to get dramatic change in the pet category PetSmart acquired,
that's not shoebacca it's more a chewy for 3.35 billion dollars making it the largest e-commerce acquisition today,
interesting there is a lot of these e-commerce Acquisitions of gone for kind of 1 x Revenue so the rumors are that she was closing in on a billion-dollar and rate it so this would put it in over three,
Exxon Road him so this is a really good outcome for the industry to have,
AOA really quality exit equality buyer and hopefully denigration will work in and this could I'm not familiar with the know what's going on with the pet guys as far as their e-commerce things but it is friends easily zombie Channel guys have been struggling so for this whole your help,
the accelerator e-commerce efforts as well.

[46:57] Yeah and you know that we've talked on the show before about this this theoretical Tipping Point in every category where when you get to about,
20% of category sales being on e-commerce that it becomes hugely disruptive to the the Legacy businesses and I haven't seen recent data on the pet category but I have a suspicion that might be one of those categories that the,
you know has recently crossed over that 20% threshold in so that,
you know that may have made it more of an imperative for one of the big brick-and-mortar players touch to invest in a solid e-commerce offering you know even fact.
That that category is really getting disrupted by e-commerce.

[47:40] How about them so we talked a lot about Walmart on the last show they have gone on a kind of acquisition spree any other Walmart news you want you've noticed.

[47:51] Yeah so I think the Acquisitions have continued or at least potentially are continuing the they purchased at URL they purchase,
and I don't as I sit here I don't remember what the price was I think it was a couple million bucks was it three million bucks so that.

[48:10] I will put it in the show notes I apologize for,
for not having on the top of my head but that was a pure URL that they purchased and you know one of the first Acquisitions they made in Marco where is here it was this shoe company shoe by and so they they bought and they redirect it all the traffic to shoot by,
so you know that that was the only true acquisition we've seen,
other than we did read on recode a rumor that they are looking at both of us as well and so that that would be a super interesting acquisition of that proves to be true.

[48:48] Yeah be a great brand kind of have an exclusive on and so a lot of interesting things there we have the side benefit of housing Nordstrom doesn't Nordstrom carry bonobos.

[48:59] They do I think it could be one of those good news-bad news things for Nordstrom I believe Nordstrom is a significant investor in bonobos.

[49:07] So if the valuation was good you know nor some can make some cash out that acquisition on the one hand and potentially lose the product line on the other hand but not necessarily right like.
I don't know what Walmart with Julie about going to go see if they would let Nordstrom keep keep selling it or not yeah.
Into speaking Walmart or a couple other interesting things going on at Walmart.
Walmart launched this new innovation incubator that they call story which was kind of the original test or for Walmart that Sam Walton ran,
what store number 8 in San in San Bruno they're open this new lab and they've called it story.
And the big news was that they got a Jenny Flies who was the founder of Rent the Runway to be the 1st.
New startup in the incubator and it sounds like she's developing some New Concept around personalized shopping and doing it for Walmart.

[50:10] And then that's what it is it's a Super C.

[50:14] Only the very kind of something focused on personalized shopping in announced a ton of detail about exactly how the incubator will work so is,
is it an incubator that Walmart is investing in and they own a piece of the startups and the startups aren't.
Exclusive Walmart so it was Walmart just investing in this and,
James lunch and company that might not sell through Walmart or is it Building Technology exclusively for Walmart unite I don't think we got we have that level of detail but I will say.
It's just kind of an interesting diversion at the moment you see Walmart investing in new innovation capabilities and doing things like,
like the store and you know frankly getting a big-name entrepreneur like Jenny involved I'm is all pretty credible and at the same time,
you know we're reading about a lot of other retailers and most notably Target like walking away from a lot of their Innovation investments in a day,
they have these Concepts stores that they cancelled they had this project goldfish that we were super excited to figure out what that was and that you know they cancelled that and let the.
The The Innovation fellow that the that was involved in that project leave and then I think this week we read that,
OKC car all who was their Chief Innovation officer is leaving,
so you know on the one hand you have had some retailers that are struggling and look like they're really you're tailing their Investments and Innovation and on the other hand it seems like Walmart's really Double Down.

[51:42] Other interesting Walmart stories was just had Mark Lori written all over it that if you for select items if you.
Order them online and have them delivered to the store for pickup you actually say if you know somewhere between 5 and $20 so that makes a ton of sense as it's cheaper for them they save on the shipping cost so they should pass that on to the consumer that was one of the Hallmarks of the jet system sale,
that'll be interesting doing that's a little weird about it is if the.
Is the imagery you're buying online is also in the store then you don't get a disc if it's already in the store that you don't get a discount so that they just feel weird.
Is consumer to kind of be like well why are you just coming the stuff that's not in the store at United just to see how it plays out.
We'll see how that goes.

[52:31] Yeah I am in very mixed emotions about that offering which I'll get to in a minute but I was also just sort of interested in the industry reaction to this announcement so it was sort of very binary I saw a bunch of Articles from people that are like man this is super smart and Walmart celebrity you know they're there advantages to try to compete with Amazon and and Mark Glory super smart and this is a good aggressive move and then I saw a bunch of other articles that are like,
you know this this is rearranging chairs on the deck of the Titanic and you know this is a silly thing that isn't going to move the needle,
and you don't why it why are they doing things like this when they need to reinvent the customer experience to compete with Amazon did you,
do you like you come down on one side of that other.

[53:19] I can come back to the user experience in just kind of you know how do you explain to people that you're going to save money on this thing cuz it's not in the store but this one it's in the store you're not going to see me on I'm really curious to see how they figure it out.

[53:34] Is it from consumer protective it's not too.

[53:36] That's exactly my problem right like you're balancing two things customers want to save money for sure and you want to,
it if there are efficiencies in encouraging the customer to one Behavior versus another you you certainly want to encourage them to the more efficient behavior and pass the savings onto that customer right like so I certainly agree with that sentiment and I think that's the,
the underlying principle behind jet and I agree with the sentiment on jet as well but the,
the user experience that gets manifested as a result of this is.
Complicated and I think another big Trend in adoption is consumers are looking for simpler lower friction interfaces,
and you know a bunch of the most successful products on the market right now we're out our successful.
Largely just because they were a better simpler interface for a service that consumers were already used to so it like I would argue that,
you know Hoover's Prime right now he probably the taxi was it's a better user experience for the same same sort of service in lower friction and Shear point.
When in every product you put in your shopping cart has a different value prop and a different in a preferred delivery mechanism based on the cost to Walmart and whether or not it happens to be on the Shelf in which,
which up for filming Center in happens to be in an all those sorts of things like I think exposing all that complication to The Shopper is potentially problematic and I would argue it was problematic on jet as well and so.

[55:09] You know the magic question is.
Is there a way to to greatly simplify that not expose all that complication and supply chain ugliness to The Shopper but still like in Courage The Shopper to do what's in the best interest and save money.

[55:28] And so I guess time time will tell on that one I think that they had exactly I sent them it but I think there's enough potential to improve the user experience to do it.

[55:42] Good deal and Scott with that it is happen again we've we've wasted a perfectly good hour of our listeners time,
so I want to thank everyone for tuning in it's been great to catch up with you after a couple weeks and I'll remind everyone to.
Subscribe and write a review on iTunes.

[56:04] Yep that's one person that's all the news we have this week.

[56:07] Until next time happy commercing.


Apr 25, 2017

EP081 - Retail veteran, and O Alliance Founder Andrea Weiss

Andrea Weiss has a storied career that has included operating stints at Disney, Ann Taylor, Guess, L brands, and Delia’s. She’s served on many boards including GSI Commerce, and Pep Boys and is currently on the board of Cracker Barrel, Nutrisystem and Chico’s. She also started The O Alliance and sits on the SAP NA advisory board.

We spoke with Andrea a variety of topics, including Cracker Barrel secret biscuit recipe, the current retail climate, retail concession model, and Amazon.

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

Episode 81 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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

Apr 20, 2017

EP080 - Accel Partners Brian O’Malley

Brian O'Malley, is a partner at Accel Partners.   Accel is one of the top tier Venture Capital firms with offices in the Bay Area, London and Banglore. Some of the companies they have backed include Facebook, Dropbox,, slack, flipkart and Spotify.  Brian has been at Accel for over 3 years and focuses on marketplaces and next-generation consumer-oriented companies.  He has led investments in Dollar Shave Club, Hotel Tonight, Bazaarvoice, and Skullcandy.

We spoke with Brian about his background, his portfolio at Accel, how Brian looks at the commerce landscape from a VC perspective, the current climate for commerce investments, and the technologies that have him excited. 

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

Episode 80 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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

Apr 15, 2017

EP079 - Modcloth CEO, Matt Kaness

Matt Kaness is the CEO of Modcloth a digitally native vertically integrated apparel brand, that was recently acquired by Walmart.  Our conversation covers Matt's background, the Modcloth business, their brick and mortar FitShop concept, the future of commerce, and the Walmart acquisition.

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

Episode 79 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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

Apr 12, 2017

EP078 - Amazon News

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

In Episode 78, we catch up on a lot of the new Amazon news including:

  • Amazon Bookstore opens in Chicago (very near Jason's home)
  • A number of analyst raise their guidance on Amazon stock, which is now almost double Walmart's market cap
  • Amazon hosting a summit to help brands sell direct
  • Amazon Private Label update
  • Amazon Go store delayed
  • Amazon gets NFL Thursday night football
  • Amazon hiring work from home customer service people
  • New Product - Amazon Connect, AWS cloud SaaS callcenter application
  • New Product - Amazon Chime, AWS cloud SaaS video conferencing application 
  • Amazon Opening 1m sq-ft FC facility in VA
  • Amazon acquired - middle east marketplace - Dubai, Abu Dabi, UAE, Egypt, Saudi Arabia, Kuwait, Bahrain 
  • Amazon shuts down Quidsi

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

Episode 79 of the Jason & Scot show was recorded on Thursday April 6, 2017.

New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scot show this is episode 78 being recorded on Thursday April 6th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Scot Wingo.

[0:40] Hey Jason and hey Jason Scot show listeners Jason was looking at our logs out on iTunes and we've been so busy interviewing retail luminaries that we you and I have a report on since early March so I have a ton to catch people up on.

[0:56] That I told you I'm super excited and I'm equally excited to be talking to you with my full voice.

[1:05] Yeah yeah it's good to have normal Jason back and put froggy Jason kind of into the,
into the catalog there on time hopefully listeners went to put off by it I hear that Mr lister's listen to a set 2X anyway so you were still at Chipmunks on I'm sure it's fine.

[1:22] Just kick off you I have been quite the world traveler I haven't done anything since shop talks up and kind of boring but tells about you any interesting World travels through portal.

[1:33] I have been on the road quite a bit since shop talk mostly customer visits but I did get to do an event I like to do every year in New York City.
Did may not be super for me or do a lot of our listeners so it's called the path to purchase Institute and they put on this annual show called The Shopper marketing Summit and it has stork Lee is not been a very digital Summit it's a long time event,
targeted at Shopper marketers that focus on on marketing inside of brick-and-mortar retailers in what was in.

[2:06] Circulars or like a circular makers work.

[2:10] Other.
There's a little bit of that it yeah but it's a it's a lot more like product displays like temporary point-of-purchase materials like promotions and in-store promotions products samples.
I'm all all the sort of the traditional tools are retail or would use to promote products and more so Brands than retail or so the show is really focused on.
Like what it what is the best tactics for Mondelez are Procter & Gamble to use to help their their product get disproportionate attention on the Shelf.

[2:49] Yes I would I just found interesting is you know that,
how much digital had permeated the conversation there so they were first they asked me to speak so we actually did,
I was on my co-workers from this we did for our workshop on digital disruption and talking about all the ways that the.
The we filled the whole discipline a shopper marketing has been fun and I disrupted by by digital and then you don't evolve impact of purchase,
but they were a lot of other another you like speakers from Kimberly-Clark talking about digital merchandising and then frankly a lot more presentations that you would have extradition Alee expected to see at Academy show your now starting to see if some of these traditional shows in their ways to go though.
If you like the sessions that were most popular with the audience where we would probably be pretty rudimentary touch are average listener but it is interesting that these traditional disciplines are now you know really starting to focus on our space.

[3:52] Digital is eating World As We predicted.

[3:55] It is indeed in while I was there are our friends at Amazon open the new book store 2 blocks from my house.

[4:21] As I said Amazon open their Chicago bookstore and I presume because Jeff is such a loyal listener that he carefully selected a location only a few blocks from my house.

[4:32] Tell Sam to you've been just to refresh listeners in case they shame on them missed the episode when last you were travelling Amazon book stores you went to the Seattle and right.

[4:43] Yeah yeah we've been in Seattle want a couple times now but I was there.

[4:47] The New York.

[4:48] Recently didn't I don't think the New York one is open yet.

[4:52] I think that one Telus about Chicago and I'll do some research.

[5:00] Yes I have been the two personally I've been in the Seattle won in the San Diego one which are very similar and they have evolved over the times I visited them until then,
looking at Chicago Chicago is a little different than the last two in a couple of regards the most notable difference is that it has a coffee shop at.
So he has an expresso bar they're serving Stumptown Coffee which is a favorite.
Coffee brewer from my old Hometown to Portland Oregon.

[5:31] Omen none of the other Amazon site been to have a cafe or any food I'm so so you know.
That was certainly an interesting evolution.

[5:43] Also had a few new categories in it so one of the things that I hadn't seen before is there was a popular kitchen accessories Gondola in the store.

[5:57] And that is a little interesting like traditionally another merchandise books in the store physical books and.
Quick refresher for pubs that will talk to you before then listen to some the other shows it's not.

[6:11] Designed a traditional bookstore would be design right see a couple thousand square feet you want to get as many books as you can into that that's 2000 square feet so normally most of the books are.
Merchandise down their spine and only a few promotional books are merchandise facing you this Amazon store has very few books in it because all the books on merchandise facing you so that it's a much more attractive presentation the print.
Paper price tags next to every book in that price tag.
Orwell fact tag has the reviews from Amazon on its what has the star rating in in a couple select customer reviews reviews play an important part in merchandise in the store and no actually have gondolas.
For merchandising books by rating like these are all books that are rated over 4.8 stars who are the top rated books for the city of Chicago things like that that you know it's a real clever social merchandising,
pricing is really weird any stores they charge list price if you're not an Amazon Prime member.
I'm in if you are an Amazon Prime member you get the online price,
but because as we all know the online price changes so often they don't print the online price in the store so you literally have to use the Amazon app on your phone to scan the fact tags,
to see what the current prices of the book you're going to buy or use one of the scanners that they have built into the store.

[7:34] Cool so you were right I was wrong I think this is a Jason and Scot first the that have not opened the first location in your cat's Columbus Circle and its opening in the spring so I think they have like.
William another month here and then the second one they announce is going to be across from Empire State Building so they announced to open none in New York but opening one soon.
So Columbus Circle will be first and empire state will be second tell me more about the the kitchen section of the store.

[8:04] Yep so as I was saying like you know you have that kind of book presentation and then the book of all the Amazon stores is really that Amazon branded.
Electronics rights of the stores really about Kindle and Echo and you know I would call it a consumer electronics store dressed as a bookstore.
And so on certain they're happy to sell books in that store but it really feels like the job of the stores to educate customers about the the candles and The Echoes In The Fire tablets.

[8:34] And so the center of the store is around that they have their sort of equivalent of a Genius Bar where you can get Live help they do you know scheduled live demos and tutorials a lot of those kinds of things and so you know traditionally.
Those are the two kinds of things that are in the store that Electronics including accessories and third-party products that work in the.
In the Amazon Alexa echo system in the inbox inside this Chicago store with the first story I have seen that had other,
hard Goods in addition to Amazon products and the books and so they would have had a gondola that's like best selling kitchen appliances on Amazon and it's showing things like.
Immersion blender smoothie machines KitchenAid mixers think things like that and so they would really like.
The bed you know 10 of the best selling products in another category and put them in the front of the store.

[9:31] Did you see I'm a some tweets that and I visited the Amazon store and December of 62,
been a while Minnesota and the baby with the tweets of Sean a lot more of the Amazon basic showing up in the store did you see evidence of some of the private label stuff kind of creeping.

[9:50] Yes in categories that are related to electronics right so that they get a lot of the Amazon basic bike cables and batteries are our merchandise but they're really merchandise as accessories for.
The fire tablets and things like that.
There's not a display that's like I sorted based on being Amazon basics for sample there just interspersed on the on the displays where they would be most appropriate.

[10:16] Yeah we're going to talk about a little bit later but they've got enough private label and apparel I wonder in those New York stories if we can't magically see a little infection section open up and be kind of nurse in to see how that progresses.

[10:27] Yeah it it's only well-liked into Italy the stores they design so far are lacking some amenities you'd normally expect in a Apparel Store like dressing rooms and things like that but like.
Could easily be retrofitted or or more to your point like the next door could easily Adam.

[10:43] Anything else from from the roof.

[10:46] Nope I think given all the other exciting stuff we have to talk about that it should probably cover it on the Jason trip reports for this week.

[10:55] Cooper Center in the Amazon new section I wanted to go back to shop talk and that was kind of late March.
They had Amazon had two speakers at shoptalk this year which is interesting bit been notoriously shy about going to conferences but,
they were pretty bold today had Stephanie Landry in this was her second year at shot talk and she talked about prime now I didn't really get much knew from that other than that continues the area where they are aggressively expanding,
I'm in one of the things I like two references you know they sent really once they decided to put.
Pedal to the metal on Prime now they opened up in 4245 markets in the span of two two and a half years so a lot of people,
talk about these experiments are doing in the coffin so it's just an experiment but I always caution people that,
Amazon decides this out of the experiment they can scale it really quickly so it was good reminder,
program and what they can do and you're one of the guy thats decided to build a consumer-oriented business one of the most interesting quotes from that was it when someone looks good.
Question from the audience about,
the profitability of it and she said well it Amazon know we really focus on the customer first and then we can we saw for profit II,
and that in the cooler that was the interesting part and she said,
it's much harder to sell the customer problem then a customer experience problem kind of meeting you this whatever they're building isn't lighting customers versus a profit problem.

[12:31] That's really kind of an interesting talks about putting the customer first but Amazon really really does it and,
the donut since day one when they could afford to now they obviously have the luxury of being able to do that but you know they really don't care about the probability this thing they want to really don't know that customer experience and then they'll kind of get there on the profit side and that's how it started when Prime launch never thought they were crazy and it could never,