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

Join hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and 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.
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Apr 16, 2021

EP260 - March Retail Sales Data, Amazon Shareholder Letter 

March Retail Sales

March retail sales data from the US Department of Commerce is out.

March retail sales were $556,935B, up 26.9% from March of 2020. Year to date retail sales are $1,589,538B up 16.4% from Jan-Mar of 2020. Non-store sales were $93,111B, up 16.7% from March of 2020.

Bezos Shareholder Letter

Jeff Bezos published his final annual shareholder letter as CEO of Amazon. As always it’s a must read. Don’t forget to re-read the original 1997 one as well.

  • 200 million Prime members globally
  • 1.9 million 3P sellers
  • 100M smart devices connected to Alexa

Episode 260 of the Jason & Scot show was recorded live on Thursday April 15, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 260 being recorded on Thursday April 15th 2021
used to be tax day I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:42] Hey Jason and welcome back Jason Scott show listeners Jason I was having a good day until you mentioned the tax man.

[0:50] Yeah but I don’t think it I don’t think it was going to be taxed day anyway today and then it got extended so you’ve got all kinds of time.

[0:57] Yeah there’s some complications there but all I’ll save that for another shift.

[1:02] All right I look forward to hearing that podcast.

[1:04] So there are some new Echo earbuds are you going to try this.

[1:12] I don’t know I was actually on the fence I was not a I was excited about the first ones and then I was not that impressed and so I’m debating.
I’m assuming apples going to announce some new ones next week or at least there’s some some potential that they will and I kind of live in those Apple earpods so I don’t know if I’m gonna bother giving the new Echoes that try it kind of depends on if you get them.
If you try and for me I don’t need to try it.

[1:37] Yeah I’m in the sink I tried the first generation it was like putting a pineapple in your ear so I’m not I’m not going to take that risk again I’m a I’m very happy with my earpod so I’m not going to risk it.

[1:51] Yeah I guess we have the same opinion we’ll wait for someone else to fall in love with them first.

[1:56] Yeah read some reviews see how they go
cool today is a big day for you Jason because earlier this morning the Department of Commerce came out with their big data drop and I know that’s always a big day for you so you’ve probably been tabulating collating
API in data sciencing AI in machine learning
and doing all that retailgeek stuff so tonight we’re going to keep it pretty short because we really want to focus in on that data
and then it was a pretty active Newsweek so we’re just a couple highlights we want to hit there so why don’t you kick us into the data conversation Jason.

[2:35] Yeah yeah and to be clear I don’t care about the data at all I’m just super excited for an excuse to use my python script and the play in tableau.
Exactly so super quick refresher US Department of Commerce publish retail data every month they have two data sets the retail data set which is,
kind of two months in the arrear so today they published their official retail data from February and then the advanced retail data which is only 1 month old so they published,
the March Advanced retail data in the difference is.
The advanced retail data is based on about 5,000 surveys that different retailers filled out in the full month is based on,
something like 10 to 15,000 surveys and there’s a lot more math and are correction in it so it’s it’s slightly more reliable.

[3:33] To be honest for the most part we use the advanced retail data because it’s fresher.
So so in that data is there their view on how much played out and March is kind of an interesting month this year because.
March last year was the first covid affected month in in the United States and I would call it a partial month like mostly covid sort of.
You know started playing out in March so April would be the first full month and then this year.
You know the the current March numbers are likely heavily impacted by all the economic stimulus that went out in January and February.

[4:20] Um so so a lot going on to look at and the the top line is March this year was way up over Marge last year so,
we sold,
in this is retail only so I’m taking restaurants out of out of the US Department of Commerce data this is all categories of retail just not restaurants,
it’s we sold 500 56 billion dollars last month which is up almost 27 percent from March of last year and so you know that’s a that’s a huge.
Year-over-year growth,
partly explained by the fact that you know March was when retail started to have this huge dip last year and then we’ve got this extra bump from stimulus checks this year.

[5:07] So I saw a headline that said 9.8 I guess that includes restaurants is that why that was different than what you.

[5:13] That is month over month.

[5:15] Excuse me.

[5:17] Yeah every there’s yeah again I like encourage people not to pay attention to month-over-month for most for most retail purposes.
But that by tends to be the Top Line in the news so yeah we were up like 9 point something percent over last month,
um the even with restaurants the it was still a huge month of growth when you look at it you’re over year,
so if you want to kind of flatten out some of the special things that happen in March you we could then look at year-to-date this year versus last year so January through March this year versus January through March last year,
and that is also up healthy 16.4% so.
In general retail was you know growing less than 16 percent.

[6:07] Before this pandemic started so the fact that these these you know first three months of this year are up 16% over you know mostly in unaffected by the pandemic last year,
you know this this is setting us up for a pretty white if these kind of numbers continue which they likely won’t like this this is extraordinary growth.
And so then some specific things we like to pull out of those numbers.
One of the bombers about the advanced monthly data is there is not a true e-commerce number in there I wish there were but there is this thing called non store sales which is kind of a.

[6:47] A big lumpy superset of e-commerce and some catalog sales and some other things it’s the closest thing in this data to e-commerce,
and so that was up 16% over last year so also Healthy Growth that’s I would call that more typical growth,
and I try not to get too focused on that because it’s not a perfect match with e-commerce,
um so then in the categories this is the fun thing all these discrete categories that they break out we’re all,
over last year which has not been the case,
any any month for the last for the last twelve months of the pandemic right so apparel which has been absolutely blitzed by the pandemic.
Was up the most it’s up a hundred and one percent so that’s a combination of pent-up demand people starting to get shots and go out more and think about buying clothes and having you know some stimulus money burning a hole in their pockets but this.
Is a in encouraging sign because there were people in the apparel industry that we’re worried that like.
You know new habits that didn’t involve clothes stylish clothing had been formed during the pandemic.

[8:04] So everyone went on at least bought one fancy outfit apparently Sporting Goods were up 75 our percent Auto was up 71 percent and that’s interesting because Auto really wasn’t heavily impacted by the pandemic.
Behaved like we were worried it would but it ended up behaving about how we would have expected anyway so the fact that it’s up 71 percent is likely almost all stimulus money.
Furniture was up 47% restaurants which we’ll talk about in a minute first recovery they’ve had in a year we’re up 36% gas was up 35% which.
Arguably gasoline was the worst business to be in during the pandemic do-it-yourself was up 29% that’s was in Home Depot Electronics were up 28%,
and then you get into the stuff that was only mildly up which is general merchandise and health and those were the categories that most.
Benefited from the from covid last March right so so so even they were up but not wildly up and then only one category in the whole report was down,
um versus last March which was Grocery and that’s because of course we all rushed out and bought toilet paper at the grocery store in March of last year and.

[9:25] So
So that’s kind of the breakdown the one of the most important themes in these covid categories is the competition between restaurants and grocery stores and so,
if you kind of think pre covid restaurants and grocery stores had almost 50/50 split of dollars for four calories so we bought half of our calories from grocery stores have from restaurants.

[9:51] At the peak of covid in April grocery stores were getting seventy percent of the dollars restaurants were only getting 30%,
and then for most of covid it’s kind of been a 60-40 split so so that’s a you know that that’s a big enough shift that that’s a huge Boon for grocery stores and a disaster for restaurants,
so for the first time we started to see that Gap close a little bit as restaurants went down our grocery stores went down for the first time in a year and restaurants went up for the first time in a year so for the month we have this kind of,
fifty-four percent of calories going to grocery stores and 46 percent of calories going to restaurants oh that’s,
starting to show a little restaurant recovery which isn’t remotely surprising because I think you know everyone understands there’s a lot of pent-up demand to.
To get back to restaurants and so both you know whether and vaccines and fatigue all sort of.
Making it a little easier to get the few more meals from restaurants so those were my big takeaways any.
Anything surprise you out of any of that Scott.

[11:10] For an online perspective the cops are gonna get harder for the next 9 plus months right like we should go negative almost you would think.
Relatively flat I don’t know.

[11:21] In a lot of categories that they for sure have this first world problem of comping against there there pandemic out escalated numbers.
And so I’ve been joking around but you’re starting to see it in kind of,
the the analyst reports and what not it’s you know a lot of CEOs are trying to make this year over two years ago comparison so I’m calling it yeah.

[11:48] I like to I may start to use that.

[11:49] Yeah yeah and sometimes it’s valid sometimes it’s not but but yeah like you know the interesting phenomena about this whole thing now is going to be,
you know the people that got a temporary benefit from covid what can they do to hang on to some of that benefit right or lock in some of those new behaviors can you know if you.
Made more meals at home
like obviously restaurants are going to come back but is there some way in which you you keep people cooking at home one more night a week than they did before or you know working from home one more day a week than they did before all of those kinds of,

[12:30] Yeah I guess the one that surprises me is clothing I wonder if Within.
It just feels like athleisure is just going to it’s just massive share and people that I’m seeing in closed doors they’re not.
They’re not in the Macy’s they’re at the limit so I wonder if I wonder if that’s going to be more of a permanent thing inside of that clothing I don’t think anyone’s going out and buying a suit yet or anything like that.

[12:52] Not a lot I’m with you I am relatively bearish on the apparel industry like I mean I think it was really.
Starting to struggle before the pandemic and then the the pandemic just obliterated it the it’s been so down that it’s not surprising that there’s pent-up demand and that you know.
They’re starting to have a rebound some level of rebounds inevitable but per your point how much of that rebound was.
You know fresh sweats for working at home as opposed to an outfit to wear to the bar right.
Why you know there is some evidence that you know there were more shoe sales and things like that,
so so you know there was so much repressed demand that that some kind of rebound is inevitable but I still think a you know it’s still down for the year and you have a long way to go.

[13:59] How about the non-store do you think that if you ever looked at how close that comes up being to the e-commerce number or they publish it is it like plus or minus a couple of points or is it.

[14:07] No it’s bigger it’s like it’s about 75 about 75% of non-store is e-commerce.
But the deviation is there’s enough standard deviation that it just not perfectly consistent which is why I don’t get too excited about the non-store number.

[14:24] Yeah because it feels like so the non-store number was 16.7 right.
Feels light to me with the stimulus dollars because everyone on Twitter at least and obviously it’s a bias audience but you know the
the things I have visibility into and then what I can see on Twitter it does seem like there was a stimulus surge there in March that was printed material now maybe it was small in it that words end right.

[14:52] Yeah and so I like there is the Brandon on store not being a perfect surrogate for e-commerce but then also just e-commerce data just stinks as we’ve talked about a bunch of times right and the.
Um maybe we’ll break it out for the next one but I keep this running list of reported e-commerce growth right so.
E-commerce is not a gap number right so nobody’s obligated to report their e-commerce growth but since it’s the best number in your financial performance almost every retailer they can’t help themselves when they do their quarterly earnings that are like,
comps were down two percent but e-commerce grew by triple digits and it’s often growing from a you know a small base and all these other things,
but so I’ve been tracking every public company that reveals it and I have a pretty good list of public companies that have revealed their e-commerce growth for the last,
three quarters and the common denominator of all of them is not one of them is at or below the industry average.
So like that that just doesn’t pencil out right.
There aren’t enough other retailers with enough volume to make that work.

[16:07] Yeah that’s never made sense the what are any other takeaways from the data.

[16:15] No I just so a like stimulus works it goes,
it goes right in the people’s banks and right into the retail store so that’s a super benefit like,
I don’t think you’re going to see any more stimulus right I think there’s there’s politically I think there’s a lot of fatigue around stimulus and went as the health stuff becomes less dire which happily it’s going.
The there’s not going to be the political will for more stimulus and so you know I think that the.
This is going to be another part of the comps problem going forward.

[16:54] Cool nothing else on the data.

[16:57] Nope nope that seems like plenty.

[16:59] All right well let’s pivot to news it wouldn’t be a Jason’s got show without some.

[17:11] News your margin is their opportunity.

[17:19] Jason I hope you’re sitting down and you have a hanky there you know I know you keep a locking key in your in your pocket there.
Jeff Bezos put out the last his last shareholder letter today and it was actually Bittersweet for me I’m a,
you’re a retailgeek I’m an Amazon geek I guess and I hope you know a lot of people wait for the,
Buffett letter that come out and all that I wait for the Bezos letter so I really love his annual shareholder letter comes out when they do the annual report so that actually came out today,
and it’s really good so in there but it’s sad because it’s bittersweet because it’s his last one.
And you know as an entrepreneur and founder this one really was is kind of hit me in the feels I could talk about it for the whole hour but I won’t subject you to that,
so I split kind of my highlights into buckets one would be kind of takeaways for other people starting companies and then the other one would be,
just generally any one industry he released a couple of little news tidbits and in the letter and someone’s actually pretty,
a new disclosure that people have literally been waiting over 15 years for.

[18:30] So I’m the founder entrepreneur side you know he has created one point six trillion dollars of value for shareholders so that’s that’s pretty amazing,
Not many people can say that I do question the validity of saying you’re a day one when you’ve created one of the world’s largest companies feels like maybe it’s day one and a half I don’t know I know that Amazon onions get offended by saying they do so I won’t go there.

[18:56] I think it’s especially hard to say it’s day one when you’re founder retires after 26 years.

[19:06] Yeah that’s Alaska territory right there.

[19:09] Yeah I know encourage listeners to read this one it’s really good and one of the most fun things to do since we’re on this topic is go back and read the original you know what people call the 97 letter his first one it’s just amazing,
how he talked about.
So relevant today that it’s pretty amazing you know imagine trying to write something in 1997 and so much has been invented since then.
Let’s say that the smartphone social media and you know all these things.
It’s pretty amazing that he nailed then the trends that they would focus on for the next year’s.

[19:50] That being said I want to pull a couple of highlights he has a lot of the letter was really interesting because it did have this for the first time kind of like.
Coaching lessons for entrepreneurs and I picked out to the like there were many more in there so I’ll defer people can read that if they’re interesting.
But but the two lessons I thought were most interesting number one was create more than you consume and I’ll just read this little excerpt,
if you want to be successful in business and life actually you have to create more than you consume your goal should be to create value for everyone you interact with any business that doesn’t create value for those it touches even if appear successful on the surface isn’t long for this world it’s on the way out.
And you know I thought that was just a really nice way to summarize a philosophy of doing things he’s in the crosshairs a lot because he’s one of the world’s richest men not the ending on how you’re calculating.
Elon Musk and Bill Gates knowledge as and.
You know but he has given back a ton he speaks a lot at on true events and all his kind of thing so and he’s invested in a ton of startups as well which is which is interesting so.

[20:58] Including like Google by the way.

[21:01] Yeah a little a couple Stanford guys had the certain invested in.
But then what’s interesting he’s kind of goes and tries to make a does the math on the the annual impact and uses the last year 2020 as the.
The time frame and it goes through and I won’t bore you with this but it’s really interesting kind of talks about.
Yeah you know shareholders made effectively 21 billion employees 91 third-party sellers profited to the tune of 25 billion by calculation,
and then one thing he does that’s near and dear to my heart is he does this customer calculation and it’s really interesting uses kind of the the proxy for how much time they saved in aggregate shopping on Amazon.

[21:48] I spend almost all day talking about you know our.
Ja bitte my company does is saving people time on car care so it’s kind of interesting to see him walk that Math and how he approached it and he sums all that up and he comes to kind of 300 billion dollars was kind of the.
D some tangible some intangible value that that Amazon created in aggregate which is pretty interesting.
Then we live in such a skeptical time.
At the first pass I read that I was kind of like reading it and as like this kind of lesson foreigners and the second time I was like how much is he defending himself from Monopoly and that kind of stuff and there’s definitely Parts the letter that are a hundred percent offense against that but this one,
it felt like it came more from the heart I kind of landed on.

[22:34] The second lesson he talked about and I feel comfortable with a podcast host who calls himself retailgeek that you’re going to be squarely and on this one,
he talks about differentiation as survival and the universe wants you to be typical so you know this was a really interesting lesson of,
being different is okay and it’s good and it actually is is a way to survive and do better than the average by definition,
and then a little quote here we all know that distinctiveness originality is valuable we are all taught to quote unquote be yourself.
I’m really asking you to do is Embrace and be realistic about how much energy it takes to maintain that distinctiveness the world wants you to be typical in a thousand ways it pulls you at you to be typical don’t let that happen.
So I thought that was kind of interesting of you know the things he picks a talked about and you tell he puts a lot of thought into these topics I just thought those were two interesting ones.

[23:33] And then on the new side so that was some option or founder stuff I found kind of interesting and helpful.
And then the other bucket was some new stood that’s and I talked about the 25 billion dollars from third-party sellers that was kind of a new disclosure if you will,
but for the first time he effectively says that there’s over 200 million Prime members globally so that was interesting because there’s been some wide-ranging I think I’ve seen the range I would put on this.
A lot of Wall Street guys were kind of like in the 180-190 range so they’re kind of close to 200 but then there’s always that one that’s like wildly high and I think it’s it’s kind of up into the high 200s like 280 290.

[24:17] But in classic basil system he says over 200 million so.
We definitely know the 180-190 is wrong but 280 probably is Wrong Feels like the way it was as close as almost as if they had just crossed over but he doesn’t explicitly say that so you can’t count on.
That was a big disclosure that had a lot of people on the interwebs talking today they also disclosed when he was going through that math of the impact,
he had to have a number two x he kind of does the / seller impact and they had to have a number to multiply and he said greater than one point nine million
I kind of thought I remember this being disclosed as one and happens I wasn’t so surprised by that one and then another little tidbit is that they have over a hundred million smart devices that are connected to Alexa,
so that was a new disclosure as well so so those were my takeaways Jason what what did you enjoy from the letter.

[25:12] Yeah I would Echo all everything you you pointed out he like one of the things that hit home for me he talked about like,
you know everyone will give you advice to be yourself and the fairytale version of that is that just you know when you act like yourself everything will be great and easy and he’s like the reality is,
I like being different than the norm takes a huge amount of effort to end you know challenge to maintain and that that you know that,
you know part of the deals you have to keep putting that effort in it’s not easy and that’s that’s why you know people tend to regress to normalness.

[25:47] Which I like it’s obvious when he says it but I thought you know it was it was an interesting point and he whether it’s him or the massive team that writes this letter for him he’s super articulate I tend to believe it’s mostly him.
You know there’s some great metaphors and points in their the I took away the the same three big bullets you did 200 Prime member 200 million Prime members 1.9 million sellers,
and the hundred million devices and I would say a to me it is interesting it means that the the,
the estimators are really good right like a lot of people had them at 190 to 200 million Prime members so that was great,
Marketplace pulse adamant 1.5 million sellers so you know 1.9 was great and I kind of think the hundred million is a little bit of a throwaway number because,
you know we’re all curious how many Alexa’s are out there which he did not disclose and he said a hundred million smart devices are attached to Alexa but the.
The ratio is highly variable I have 82 smart devices in my house connected to Alexa.

[26:51] So like I know I know that I’m an outlier but I’m just saying like you start throwing a bunch of light bulbs and switches and stuff on there and it’s you know.

[27:02] Kind of a meaningless number but I thought all those things were good takeaways the the math on the,
Time Savings was awesome to me a fact he disclosed that was not public was that almost 30% of all Amazon transactions happen in under three minutes,
so total shopping time for twenty-eight percent of transactions is under 3 minutes and you know by comparison and average brick-and-mortar trip is 60 minutes so.
Huge huge Time Savings I you know he kind of did a more sophisticated model and came up with like the average customer Amazon Customer saves,
75 hours a year of shopping by shopping online and it’s a great argument for Amazon but it’s also just.
I got involved in a dispute online on LinkedIn recently about like what the definition of.
Customer services and customer satisfaction and everyone’s like well you know people in a retail store can always give better customer service than a robot online,
and I kind of took the argument well no that’s not true if customers decide that good customer service is fast easy shopping.

[28:15] Then Amazon gives better customer service then then Amazon then Nordstrom’s and like the customer SATs show stores kind of show that,
and it makes perfect sense when you think about three minutes versus 60 minutes for a shopping trip so I just thought all that stuff is super interesting,
and then the other thing is you know he’s not going away he’s still chairman,
you know curious what his Focus was going to be on and kind of the two things he talked about we’re number one that he thinks of himself first and foremost is an inventor he thinks that’s where he adds the most value at Amazon so that like on a go-forward basis he wants to invent stuff.
And the stuff he claims he’s going to focus on which is probably true but also has a kind of,
you know good good PR element to it is is he made a specific emphasis on adding a new goal for Amazon Amazon’s goal has always been to be the most the world’s most customer-centricity company,
and he’s added this new goal to be the world’s best in and safest employer and so his.
His promise in the shareholders letter is to you know help invent new,
products and processes to make Amazon the best employer in the in the world and the in the safest and so super.

[29:33] Yeah I’m eating I’m skeptical but it made its just right after the heels of that whole being and Jardin trucks thing and it just felt too.

[29:41] No party like clearly it.

[29:41] Last minute addition to talk about that.

[29:43] It’s in response to that and he vote overtly took on the you know they they massively won the super controversial union vote,
and and he kind of took that on he’s like in case you’re curious I’m not happy about the white Amazon one like they you know a bunch of people word really hard to Amazon to make sure that a union didn’t get formed and and the voters you know the employees,
why overwhelmingly voted against forming a union and you know Jeff which is the right spin regardless of how you feel Jeff you know in the shareholder meeting he’s like hey.
Nobody celebrating nobody’s happy that a union didn’t form like we clearly need to be do a better job with our employee like you know our employees and so here’s my go forward Focus so I think it’s a it’s a smart Spin and,
I do think you know just not going to write something in the shareholder letter that he doesn’t plan on delivering on so whether it’s it’s coming from.
A kick a place of convenience or altruism kind of doesn’t matter I’ll bet you I’ll bet you they spend some real Cycles,
figuring things out to improve the the allegedly already hide custom employee satisfaction and and for sure to overtly improve safety.

[31:00] Yet the one last thing on that math that was interesting is he does all that math of how much an average trip to a store cost everything,
and effectively and then he nuts out Prime cost and basically the calculus is by being a Prime member you save $630 just of your time,
and he builds everyone’s time at ten dollars an hour so that was I thought that was really you know.
There’s all these stories about when Prime was being invented that he is driving,
measure of it was it should be fiscally irresponsible not to be in Prime,
and this makes now and a lot of that was just the the savings of products and those kind of the convenience just overall convenience and this is kind of interesting that he’s put some hard dollar against out.
You’re effectively throwing away six hundred dollars if you don’t join Prime now there’s obviously a counter,
argument to that and everything but I thought it was really interesting how he framed that.

[31:58] Yeah no I agree so a ton of good stuff in the shareholder letter I saw people on the internet like alleging it was his best one ever and I still think the first one is the best but.

[32:08] It’s good looking so there’s a good good beginning and ending okay well you can put your hanky away hopefully if you’re okay over there.
One news that caught my item in this is kind of related to this we’ve been talking this year a lot about watching Shopify versus Amazon,
and then we did that very popular show about the changing privacy things coming out,
and one of the possible conclusions of that is Shopify could be under some some pressure from that.
And it was through interesting an article came out that about half the senior Executives at Shopify are leaving it’s hard to tell what’s going on here Toby had a really weird statement let me read it didn’t make sense to me did you read it.

[32:54] I’m not sure which I didn’t catch one that sounded.

[33:05] So he did the normal they’ve been spectacular and deserve the cabal then he this is the part that kind of had me a little befuddled each of them has their individual reasons but was unanimous with all three,
was it this was the best for them and the best for Shopify and then he says we have a deep bench and they will be they will step in to quickly fill these roles so I don’t know.
The weird thing,
I don’t know that it was unanimous that it was best for Shopify and it’s kind of it’s almost like there was some kind of a power player something or I don’t know I got like a weird vibe off of it.

[33:42] Yeah you almost would,
the conspiracy theorist in me like so this is three sea level people leaving a public company at the same time and by the way a fourth one left three months ago right so
it’s four of the eight,
and a couple of these the the chief product officer that left last November Craig Miller and then the the chief Talent officer that left this week like those were,
like amongst the 21st employees and I kind of think Anna,
a giant fast running public company you tell me but
in normal succession planning like even if a bunch of people want to go you know cash in their chips and live on a beach you would stagger out the departures more right if in a.
In a kind of if you were working things out synergistically so for all these people to leave at once,
it feels like there had to be some impetus that that were not fully cognizant of.

[34:50] Yeah one of the thing I’ve externally observed is,
they have a guy Harley is it Finkelstein and Finkel something like that we’ll call him Harley up,
and he was kind of you know a partnership guy and then he seems to becoming the face of the company and maybe I kind of wonder if there was you know some secession thing in there and he’s been some kind of he’s kind of been
he kind of won that battle there feels like something went on there the other thing I’ve noticed is there their social accounts they’ve gotten really super snarky so shop if I used to kind of I think,
be in this kind of what I would call this Canadian like you know we just want to help arm the rebels and grow customers and like most their social stuff was about
just kind of pounding that drama of you know look we took this,
this entrepreneur and we help them do this and they have a lot of good content around that but increasingly they’re Throwing Shade at Amazon which you know,
that’s punching up but then I’ve noticed they’ve actually been kind of I would say punch down there was a retailer who site was down and it was and they were on Commerce and you know the Shopify socials kind of
added them added that retailer and said hey sorry to hear you’re having so much trouble with your current provider we’re here to help and that that one kind of felt like.
Punching down and little little on the edge for what they’re doing so something something interesting is going on inside of there.

[36:17] Yeah it is a Jeff would be very happy because it’s a not normal culture.

[36:24] Yes.

[36:25] The yeah I will say for better worse like,
these three three folks announce that they’re leaving add in the fourth one last quarter and the stock still went up so,
so for whatever that’s worth like the market isn’t panicking the the one I hear the most about is the chief technology like if people are freaking out that someone’s leaving it’s this guy,
Jean Michael Lemieux who is the chief technology officer and he’d been in like six years and was credited for you know,
a lot of progress in the platform so people are somewhat concerned about his departure,
so we’ll see how that plays out like I think shopify’s an amazing company they do a bunch of stuff for right but I have to say a common problem for someone in shopify’s position and I think Shopify suffers from this in spades.
Because of their success and their rapid growth they have a ton of Technology debt.

[37:23] And you know there are a lot of chinks in their armor from a product standpoint like it’s not the the,
the fastest best performing most mobile friendly platform on the planet at this point and so I like I don’t know maybe the.
The change in leadership will make it easier like I know Toby is a developer and he has a personal affinity for their original stack that they’re still on which is,
Ruby on Rails but like maybe maybe a new technology officer will help them work down some of that technology debt.

[37:57] Or made an old guy said leave her behind leaving in that was like.

[38:00] Yeah yeah maybe that was it.

[38:02] Peace
peace bro and one calendar thing just to throw out there is Shopify announces their q1 results on April 28 and then the next day is Amazon so we will be having a show we’ll do it after the end of the longest one I’ve definitely,
that people enjoy our Recaps there we will wrap in some of the Shopify stuff and have our ears peeled for anything around this and obviously how Shopify did versus Amazon I think it’s gonna be interesting because I think
they may throw shade at each other in their calls Amazon won’t but Shopify May so I’ll be listening for that as well did you see any news that caught your eye this.

[38:39] Yeah there’s one more I want to bring up because I feel like it’s thematic with the other news Katrina the founder of Stitch fix has announced that she is stepping down as CEO,
moving into executive chairman role and that is interesting to me there have been a bunch of Articles you know kind of bemoaning that she’s one of the,
the the best female entrepreneurs out there and you know one of the few female CEOs of a successful public company,
and I have to be honest like all of those articles are slightly rubbing me the wrong way because whether it’s lost some people are not,
she’s one of the most successful entrepreneurs of Our Generation. Like it like there’s no gender qualifiers,
um she started a company that you know invented a new business model that’s been heavily knocked off,
she took them public but what’s unique and continue to operate them,
what’s unique about her versus almost any other CEO in this rat race is she retained the overwhelming majority of ownership of the company all the way through the IPO.
Which almost never happens.

[39:55] Yeah her um her episode on how I built this is really good I think she ended up retain law because they had a hard time raising Capital there was so many people that doubted the model whatever work.

[40:05] And ironic in the long.

[40:06] Part of it was wasn’t by design it was by necessity yeah yeah yeah I agree she’s awesome and did she I didn’t see that did she announce what she’s going to do I think she has young kids so it’s probably.

[40:17] She did she did not specifically announce it she she did tease at.
Kind of what the next chapter is at Stitch fix which people are kind of excited about because Stitch fix was already a pretty heavily data-centric company and both,
but I think this is partly true but I think they also leaned into this from a PR standpoint that they collect all this,
this unique attribute data about all the items that get sold then all the items that don’t get sold and you know that they have like very data-driven personalization and the implication.
Interweaving was that like the next phase and evolution from Stitch fix is to really weaponize that data at the next level and kind of there were a few things in there that a lot of us interpreted as,
they’re going to be pivoting and making a lot more of their own stuff they already do make some there a wholesaler but they do make some of their own stuff,
um and that the stuff they make is going to be heavily data-driven merchandising design and so that’s going to be interesting to watch,
there’s this woman Elizabeth Spalding who’s currently the president I think she’s been there like 6 years and so she’s going to be the new CEO,
and like most of these Founders she’s not she’s not going away she’s she’s stepping up to a chairman role which I assume will give her more bandwidth.
Other aspirations in her life and spend some of that good Equity money she earned.

[41:47] So Scott I think we miraculously did it we are we are well under the hour so we can we can give our listeners a little time back this week
and finish with a shorter show but if we got something wrong or spurred some,
some following conversation we’d love it if you’d hit us up on Twitter or Facebook.
And as always if this was helpful now you got 20 extra minutes that’s plenty of time to jump on iTunes and click that five star review for us.

[42:16] Thanks everyone we appreciate it and we got a lot coming up next week so hopefully some of you are going back to work and commuting or still have time because we’re going to be cranking out some content here as things heat up.

[42:30] Absolutely and some exact guess I’m excited for her as well so until next time happy Commercing.

Apr 9, 2021

EP259- Listener Questions


Amazon is building Micro Fulfillment Centers to deliver fast-moving grocery & convenience SKUs in under 45mins. Locations include Seattle, DC, Baltimore, Dallas, Nashville, Detroit, Chicago, San Diego, Phoenix launching this year.

Listener Questions

  • Ted: will headless commerce take off in 2021? why/why not?
  • RetailRazor: Amazon has been getting hit w/an endless series of media articles about their private label development at the expense of other merchants on the platform. But #retailers have been doing this since, well, forever. Ex. – Dept Stores private label apparel. Why is Amazon different?
  • Wanda Cadigan: We’re seeing a big increase in visual media use cases for e-com. It’s the new digital proxy for in-store experience. Curious on your thoughts around shoppable video trends and adoption esp. in Americas.
  • Darin Archer: When will we have a major paradigm shift from the online store? Category pages and PDP’s seem dated in the era of TikTok. Instagram shopping and all those other things are like pop-up shops. When will retailers make a big step change in the experience?
  • Brendan Witcher: When will the Jason And Scot Show T-shirts finally be made available and can I have mine signed before you send it? You guys rock! Thanks for helping to keep balance in the (retail) Force.
  • Kevin Cronin: Thoughts on e-com conversion tracking and how it has +/- impacted companies/industry.
  • BinhWinn: What do you think is keeping Amazon from entering the promising African market?
  • Kelly Goetsch:  Looking forward to the episode! I’m seeing all the CX-related vendors (Salesforce, SAP, Bloomreach, Acquia, etc) building or buying CDPs in the past ~12 months. I get the value of CDPs but why were all of these acquisitions done so rapidly? Is this related to 3rd party cookies?
  • tec_wiz: We have seen a significant “stimi” bounce on Amazon, do both of you feel the reopening exuberance will keep the sales acceleration going and if so for how long? Interested to see if you two are in the Jamie Dimon camp?
  • Trevor Sumner: There will be a multi-billion media shift to in-store.  Who controls the brand spend?  Will it be media folks?  Will shopper marketing and trade dollars increase?  How will brand orgs need to transform to take advantage of the digitized store?
  • Scott Silverman: What do you think will be the most surprising post-pandemic consumer behaviors that e-commerce retailers should prepare for?

Episode 259 of the Jason & Scot show was recorded live on Thursday April 8, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 259 being recorded on Thursday April 8 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason and Scot show listeners Jason how’s your spring going up there and sunny Chicago.

[0:47] It is going well but you you’ve already thrown me for a loop I don’t deal with change and you took the year out of our intro thing so I total I’m totally messed up now.

[1:01] It’s 20 21 so you’re back.

[1:04] Thanks thanks I appreciate you appreciate you saving me ya know spring is going good we had two lovely days of like,
like High 70 low 80 degree weather here and I got super excited and then as is often going to happen in Chicago it was all a mirage because today it’s like 16 raining.

[1:24] Want want want sorry to hear that here in North Carolina it’s funny because we’ve had,
Bob’s Ilion New people move to our state some of them from the Midwest a lot from California New York and when they move here we’re always like hey in February,
used to be get ready for pollen season it’s going to be like
unlike anything you’ve ever seen in their lap and like we have pain and San Francisco are you crazy and then are real pollen season hits which were in the thick of right now and they lose their minds because
you literally get a you know coating on your car where your car is essentially just looks like it’s been painted yellow so we are in heavy heavy pollen season right now,
I have seasonal allergies so I am you know pretty pretty loosey-goosey right now I think I’ve had like 16 Benadryl ‘s and 5’s vertex of so if I’m a little spacey it’s due to that.

[2:14] I love that yeah I was going to ask if you like develop a stronger immunity system because that would that would wreak havoc on me although it has to be good for the car wash industry.

[2:27] It is so that’s the computer that’s the Silver Lining so yes we we are very very busy right now so it’s good a good thing.

[2:35] Yeah where I grew up in Southern California we had a very similar issue the saltwater from the beach would make all the cars filthy.

[2:45] Good we will have to look at San Diego as a possible location.

[2:49] Yeah the beachfront homes in San Diego.

[2:53] So tonight we have a lot of good listener questions but before we get to that it wouldn’t be a Jason Scott show if we didn’t talk about a little breaking Amazon news.

[3:11] News your margin is their opportunity.

[3:20] Jason I was excited as our resident grocery Guru in the chief digital grocery retail.
Grocery grocery store officer I wanted to get your expert opinion I saw this on Twitter I guess there’s a magazine called hungry and it’s missing a bunch of vowels H NG Ry,
hindery and they had a scoop so they have confirmed that Amazon is building 11.
A hundred and forty thousand square foot micro fulfillment centers.
It’s kind of funny to talk about a hundred forty thousand square feet and taught micro but I guess you know when the alternative is a million it is small,
and they are designed to move a hundred thousand fast-moving Grocery and convenience cues in less than 45 minutes,
and the initial set of cities are Seattle Washington D.C Baltimore Dallas Nashville Detroit Chicago San Diego Phoenix and going to be launching them this year.
This is super interesting to me because we had we’ve had several amazonians on the show past amazonians,
and Amazon does these pretty big Cycles on an annual basis where they’re going to make big Investments and to me this was a really big signal that they’ve decided that this is an important category.
So I tweeted about this and then I had several.

[4:39] What I would call Amazon insiders not bullies but people that are maybe in orbit away from Amazon and know what’s kind of going on and the thing that surprised me is that there,
they were saying that go puff we’ve talked a little bit about on the show but I want to use this entree into that to get your thoughts on that too.
They are growing at a tremendous Pace I’ve heard several people say they have over a billion dollars in sales they are a retailer so it’s not a gmv Marketplace kind of thing so GM ve is real Revenue.
And then they didn’t acquisition of an alcohol company that was also about a billion dollars so now they’ve got kind of a two billion dollar company they’re going after some categories and areas Amazon is very keen to get to so the grocery and alcohol,
I looked him up in some of the databases that go plows raised over two billion dollars you know squarely in the,
if passed the Unicorn status which is over a billion dollar valuation I think they’re into the DECA unicorn kind of status
so really interesting moves here you’re kind of I guess a battle between these two folks breaking out into the open what do you think about all that.

[5:49] Yeah yeah there’s a lot of interesting stuff going on there the maybe I’ll start with BevMo and work backwards to Amazon Amazon or go puff and work backwards to Amazon.
The you know we talk a lot about covid accelerating trends that already existed this whole notion of.
Delivering alcoholic beverages was already really starting to pick up some steam we’ve had drizzly on the show before which was one is one of the dominant players in in alcohol delivery and most of them are via these.
These are complicated Marketplace models because you have to do the delivery from someone that has a liquor license.

[6:30] And so then the pandemic vastly accelerated liquor delivery because under normal circumstances the vast majority of alcohol is consumed.
What the industry calls on premises which means at a bar and so because you know Bars were closed or constrained so much,
we certainly were consuming way more alcohol at home which means we had to buy it or get it delivered,
we got a bunch of meals delivered from restaurants that weren’t allowed to bundle alcohol with them in many cases so all of these Trends made it really accelerated the alcohol delivery industry and.
I don’t you know we don’t there’s not great numbers but my sense is that no one benefited more than go puff and partly because they,
are closer to a first-party model so they did by a very significant alcohol chain on the west coast BevMo.
Um so they own a bunch of their own liquor licenses they own a lot of product that they deliver to people,
and they actually started out not delivering the liquor but delivering the snacks so go puff started out do everything you know Munchies presumably to people that were high.

[7:47] Um hence the go puff delivering snacks on college campuses and so.
Part of their model is they actually inventory their own snacks they have these micro fulfillment centers and so buying BevMo give them a bunch of liquor licenses and it also gave them a bunch of locations that they could stage.

[8:09] There there fast-moving food alcohol items and go puff is always focused on cold so they’re one of the best.
Nationwide cold chain one hour delivery services so if you need to store something cold and then deliver it.
They’re one of the few options out there so for all those reasons.
Go puff is booming then you know we throw in the trend we’ve talked about a lot on this show the retail media networks and all these sellers you know monetizing their business by selling ads,
so you know go puff has been able to successfully get a nice chunk of AD revenue from that,
and I have to believe Amazon sees that and says hey we need you know they obviously have a lot of their own plans and capabilities around to our delivery of those kind of items,
and I’ll bet you go puff is sort of accelerating Amazon’s aspirations.

[9:06] Another another Insider told me that go puff has an ad Network that’s kind of getting a fair amount of traction and that’s another thing that Amazon’s attention you know we’ve talked about on the show that they’re their ad Network.
It’s getting a lot of steam it’s kind of getting to be almost the scale of AWS and contributing quite a bit of profit
it’s in the kind of pesky other category so it has some other things mixed in there but from what we can tell it’s pretty pretty large and growing making Amazon the third largest ad Network behind Google and Facebook.
What do you think about does that make sense to you or you familiar with this go puff ad Network.

[9:46] Yeah a little bit It’s Tricky I do think they’re generating some significant Revenue.
The the wrinkle is.
Advertising for alcohol is dicey so you know so I think what go puff is generating the most is is right these ad revenue from the these like cpg snacks and things like that that are getting delivered,
with the alcohol like the you know the bummer is the alcohol people spend so much money on pram and with that clothes they would have shifted a bunch of money into these other channels but it’s.
It’s risky to do and and you know most of the big players aren’t willing to take those.
Those sort of risks with with the various compliance and to do so.
So that’s a little complicated and then I you know I would say they’re probably generating a bunch of Revenue but it’s not a very mature platform with a lot of tools yet and so I haven’t seen any.
Any sizing on it.

[10:46] So that is the news and now let’s go into.

[11:01] This question question question question question.

[11:08] All right our first listener question comes from Ted and he says and I’m going to shoot this one over to you Jason well headless Commerce take off in 2021 why or why not.

[11:23] Yeah,
talked about a lot we’ve covered it few times on this show just for people that may not be familiar it’s a it’s a method of.
Implementing an e-commerce site so instead of a piece of software that’s kind of a monolithic software that has all the check out functions and product catalog functions and all those sorts of things with the user interface.
Um it’s a it’s a system where,
where the software company provides a bunch of apis and you kind of build your own e-commerce experience leveraging those apis and it generally you build your own user interface so hence it’s headless,
um and it’s the definitely the most trendy architecture right now it’s talked about the most.

[12:16] The and it kind of is catching on but the reality is we’re just not really going to know because one of the problems with headless Comet or it’s a benefit of headless Commerce but it’s a problem when you’re tracking it is.
You can do it very piecemeal right so you could you could have mostly monolithic software and you could say oh you know what,
my checkout isn’t very good and I can’t take all the the alternative payment methods I’d like so I’m just gonna,
improve my checkout flow and so you could add a couple headless apis just for the checkout flow and it could be.
Four percent of your total e-commerce site but now you’re partly headless so you know so I would say.

[13:02] Most people that build something new are going to adopt a technology like that but it often is very incremental versus a big bang where you kind of rip out everything you had and put something else in so it’s it’s a little bit like the.
The so slowly increasing water temperature in the Frog like we’re all getting boiled by headless Commerce but like I don’t know when you’ll officially declare it like taking off versus not taking off.

[13:29] Yeah and so some of the big players so there’s Commerce tool or tools and then,
Faisal has a company called Fabric and we had some confusion over multiple Fabrics but he is one of the fabrics and then anyone else there’s because I’ve seen
I’ve seen some of the Shopify folks and sidebar it seems like they’ve hired everyone I know in e-commerce at Shopify those guys are hiring it’s like some kind of an incredible clip right now.
I see them all talking about how they effectively,
are at least framing Shopify as being a headless player which doesn’t make sense to me bless there’s like some study Pi is enough moveth so who are the players and is Shopify a player.

[14:10] Yeah so there’s kind of a couple categories of platforms that that offer headless Commerce and it’s such a buzzword I like a lot of other things I would argue people that like.
Are are not very truly headless Commerce.
Have an offering they would call head owes Commerce but so there’s a bunch of traditional platforms that were monoliths that saw this trend coming and kind of pivoted right so,
to me that would be someone like an Alaska path,
that that kind of had a turnkey platform and they really like focused on the Headless version of that platform and today I think.

[14:45] Any new customer is probably mostly headless the all of the the brand new platforms tend to be headless so certainly fabric.
There there’s a bunch of small players it’s pretty fragmented industry you mentioned Commerce tools which to my knowledge
was really the first platform out there that was headed west so there now they’ve been I want to say they’ve been doing headrests for like 10 years they were originally a spin-off of hybris before sap bottom.
And so those guys have been doing ahead of us for a long time and.
Traction but then there’s the the traditional SAS players and the two biggest examples would be Salesforce Commerce Cloud which formerly was demandware and Shopify in both of those are.
Monolith software that’s offered via SAS but both companies have recognized the Headless Trend and have launched.
Separate products which are an API SAS model so you can rent.
Salesforce Commerce apis and build your own head with solution that leverages the Salesforce infrastructure and similarly you can.
Via Shopify plus you can rent apis from Shopify and build a headless solution and Shopify plus so they they both are very legitimate.

[16:11] Head West Solutions but I would say you know as a percentage of their total user base it’s a small minority of their user base that have that headless configuration.
And then in the case of Salesforce one other note I would make is,
one of the problems with headless is okay so now you don’t have a user experience or a GUI and you have to build that yourself and there’s cost associated with that and you may or may not be good at that you may not follow all the,
the industry convention so there’s pros and cons to not getting a,
a store in a box and particularly as we talked about on this show a lot mobile is so complicated and evolving so fast that there was a company out there called MOBA 5 that had built a really good.
Mobile user interface that could leverage all of these these Head West Commerce tax and they were acquired last year by Salesforce because that’s.
There’s so much energy there so now somewhat ironically,
you can buy MOBA fi user interface and Salesforce Commerce cloud apis and put them together and I you know you’re technically headless on the one hand but on the other hand you got a complete TurnKey solution from Salesforce.

[17:30] Yeah it’s like when you were a kid remember those things that had like three little sections and you can change the purple head the body and the feet so sounds like that’s kind of where we’re going to.

[17:39] Yeah I mean that the simple metaphor for these platforms are like Legos right so you know you get a kid a little Legos and you can you can snap them together like the picture on the outside of the box or you can you know snap them together in an entirely different way if you.

[17:57] Um
so let’s go to the next question also from Twitter this is from retail razor and the question is
Amazon has been getting hit with an endless series of media articles about the private label development at the expense of other merchants on the platform,
but retailers have been doing this since well forever example department stores private label apparel why is Amazon different.

[18:25] Yeah and this is a while I’m an Amazon Guru I’m not a huge on politics but but this is a political kind of thing that’s going on here so
you know you’ve got so you got Jeff Bezos world’s richest man I think at this point yeah I think Elon is kind of
catching up to him at some point I think they crossed for a little bit one what does.

[18:50] They did but it shouldn’t even count because you know Jeff Bezos has like ex-wife that also has 40 billion dollars.

[18:57] True yeah but she’s not giving it away as quickly as you can so she may actually.

[19:02] She’s much more admirable than him that’s true.

[19:05] She may be the millionaire poor house and then,
you know another thing is he bought the Washington Post which is you know also seems to have caused a lot more political kind of Venom to come his way.
And you know Amazon itself is a big company and you know there’s they’re just easy to shoot at and so you’re hearing a lot of talk antitrust talk a lot of folks want to break them up,
the two most vocal that I see are Bernie Sanders and Elizabeth Warren yeah they very much want to break those guys up Bernie Sanders is always talking about how they pay more and you know.
If you look at the disparity between what Jeff Bezos makes and the $15 an hour employee that’s a big number.

[20:01] Let’s Elizabeth warrant then there’s Amazon doesn’t pay taxes because they take every penny they make in plow it back into growing and hiring more people and and buying where houses and building,
we just talked about they’re going to build you know what it was at Eleven Hundred and forty thousand square feet facility centers that’s not cheap I don’t know.
Each of those maybe 50 million bucks so that’s 6 billion dollars right there,
you know so so they don’t they take every penny of profit and they just see such a big opportunity they keep plowing it in and therefore they don’t make profit and you get taxed on profit so they don’t really pay taxes and then of course everything he does a lot of you know.
Corporate all legal but corporate setups so that they can avoid taxes like.
They’ll have their European group and some kind of a tax-free area and you know they will set up the structure of the companies to minimize taxes globally and then also the United States.

[21:02] So I think that’s why they’re under a Target and then you know there’s it’s also really easy to find third-party sellers that are brands that have sold on there and a private label came out of their stuff and it’s,
it’s kind of catnip for reporters to find a,
it’s very easy to find people that are very upset about Amazon I see it on Twitter all the time yeah there’s third-party sellers that are very unhappy about the way they’re treated and creates a lot of possible content.
So that’s that’s my take I think it is.
If this ever got into a court and you were looking at the facts I think retail razors right that there’s nothing new going on here and it’s kind of silly to argue this,
it’s even silly the argue the antitrust argument because you know I think it’s pretty fair to Define Amazon in the same context as Walmart right and.

[21:57] Walmart is as big or bigger so it’s not like Amazon is got some.
Position compared to like a Walmart targets really big there are other very big large retailers and there’s it’s also hard to point to note the consumer being harmed.
Poor consumers they’re getting cheaper stuff faster its there’s not a lot of,
it’s not like a monopoly where your price gouging or there’s no choice anything Amazon’s Lord prices and increased choice.
Now that being said if you look at Europe Dave kind of defined monopolies differently in there it doesn’t have to be a consumer damage so there’s a lot of talk about that kind of coming,
and then the Biden Administration hired someone that has that similar kind of a take on on antitrust that it’s really.
The size and not the the consumer.

[22:50] So those are my loose reading of some of the political winds you know what.
My take is companies move a thousand times faster than governments and they’ll be able to,
navigate whatever the government throws out them succeed if we all remember well you and I remember the Microsoft all the who are around antitrust,
Microsoft’s doing okay after that they’re they did find they had to just kind of do some,
little things around their browser they spend a bunch of money around it but at the end of the day it was effectively a slap on the wrist of anything so so I don’t think it’s just a lot of noise and I don’t really foresee there being anything that slows down Amazon from this.
How about you Jason.

[23:31] Yeah I mean there’s a lot there I won’t rehash it all but.

[23:39] I think you’re right like I think the biggest companies in capitalist economies are always,
targets for a lot of concern and they’re generally there are always some valid concerns and there’s always a lot of.
Scrutiny that isn’t necessarily valid right and certainly you know Walmart’s head is fair its fair share and before that Sears did and,
before that Montgomery Ward’s and Woolworths and A&P like you can go back as far as you want,
these big huge retailers like there have always been concerns about their size.
The bottom line is the you know us antitrust laws are not super strong and the way they’re in written and enforced today.
I just don’t think.
Amazon has very much risk so per your point they’re probably way more exposed in Europe where there’s a much broader perspective on,
but the the thing that a lot of these lawmakers are going after is just,
right / retail razors Point like is it kind of a misunderstanding like there’s this thing oh my gosh Amazon’s using.

[24:49] Sales data from their third-party sellers to design their first party products and when you say it like that it doesn’t sound very fair,
but the point is retailers have been doing that for the entire history of retail I mean you know Sears had a lot of Their Own Private Label products in the Sears catalog you know listeners may be familiar with Brands like Kenmore and crap.

[25:12] Craftsman and you know all these these various brands that Sears built right you know doing these exact same thing so,
that’s not new they’re some antitrust people would say oh but you know what’s different about Amazon is there also a platform in an ad Network and they get extra data from that,
that a traditional retailer wouldn’t get so they would say I don’t object to Amazon using the retail data to make their own products but I object to them using their,
their platform data and their their the ad spend data that they’re getting,
but even that to me is a thin argument because every other retailer have advertising programs and co-op programs and slotting fees and things like that so I just.
I think there’s some legitimate things to look at all these companies about but I think that particular one is a hard argument and and again the US antitrust laws are pretty heavily in Amazon’s favor
so I think we’re always going to hear about this stuff but I don’t think.
Amazon’s fundamentally different than than previous private-label efforts the one thing that is better about Amazon you know and therefore you know potentially more concerning is.

[26:32] Collects a lot more data about how you shop and what you don’t buy right so a traditional retailer doesn’t know very well.
What other products you considered on the way to buying the brand that you bought but Amazon you know because by virtue of them being online,
they collect much more data about your browsing behavior before you buy and so that’s not saying it’s it’s an antitrust violation to use that data but that is a new data set that you know Sears and Walmart,
didn’t necessarily have it at their disposal so yeah I think we’ll keep hearing about it the,
you kind of alluded to it but one funny thing that happened this week our Prime not funny dramas on,
the rumor is that Jeff was upset that Amazon Executives weren’t defending Amazon aggressively enough for all of this this noise,
and so it appears that a bunch of Amazon execs totally stepped up their social presence and started arguing.

[27:30] Up to and including arguing with like sitting Congress people on Twitter,
um a congressperson you know is complaining about labor standards in Amazon and made reference to Amazon employees having a pee and Bottles because they can’t take a break,
and a senior vice president Amazon like chimed in like that’s absurd I can’t believe you believe those rumors,
if that was really true do you think people would really want to work for us.
Um and then a week later Amazon had to print a retraction and say like it turns out a bunch of our employees do have to be in bottles.

[28:03] But so do UPS’s so that probably like when you have to issue that press release that’s not a good look.

[28:10] Yeah that’s a tough one and it is confusing because there’s the DSP program aren’t really Amazon employees but they’re just that I guess during a branded truck they get that kind of assumed.

[28:22] Yeah so again.

[28:23] This one is this next one is for you Jason and it comes from listener Wanda cadogan.

[28:47] Wanda hope you enjoyed that we know that’s your favorite song now to your question we are seeing a big increase in visual media use cases for e-commerce it’s the new digital proxy for in-store experience
I’m curious about your thoughts around Shopville video Trends in adoption especially in the Americas.
There’s a there was another question that will kind of group together here in this one came from Darren Archer when will we have a major paradigm shift from the online store
category pages and pdp’s seem dated in the era of tick tock Instagram shopping and all these other things that are like pop-up shops when will retailers big change step change in the experience.

[29:27] Yeah both good questions and I do I do agree they’re bundled and
side note I think I’m assuming daren’t an Archer is a former Adobe Alaska path and now at the Gap so so he,
has definitely been around a lot of the issues that were we’re talking about today.
So so yeah the.
Video Commerce and is often called live-streaming Commerce although a ton of it is not live streaming is huge right now it’s it’s even Huger in China where by some estimates,
eleven or twelve percent of all e-commerce is live streaming,
um more more consumers start their shopping trip on Ali Baba’s a live streaming site than they do on Team all right now,
so so this live streaming Commerce has totally exploded in China and there.
Appears to be appetite for it in the US as well and so you’re definitely seeing.
The platforms that that can support it so most notably Instagram and Tik Tok.
Um are we leaning heavily into it and we’ve seen Walmart due to two pilots where they had Commerce events on Tik-Tok now,

[30:54] The jury’s out on like social commerce in the in the west is way smaller than it is in China so it may be 12 percent of e-commerce and in China and it’s like 4% of e-commerce here so,
so it has a ways to go in the jury is out on whether Chinese consumers are different than Western consumers and it’s never going to catch on or whether they’re just ahead of Western consumers and they kind of WEP frog.
Um so we’ll have to see but I can tell you a ton of retailers and brands are super interested right now and the part of the reason is implied in Wanda’s question.
Um a sort of Inconvenient Truth about all of this e-commerce that we’ve invented is.
We’ve made it very easy to find products that you know you want and buy them and we’ve taken all the friction out of the buying process and so you know there’s a saying.
E-commerce solved buying but broke shopping,
right so you know it’s super easy to buy stuff you can go on Amazon there’s 800 million products you type it in the search engine a product pops up you click one button and it shows up two hours later you’re good.
Um weather is not is.

[32:09] Discovering products you never knew you wanted right like there’s never like creating demand for products a lot of the things that traditionally stores were good at and a lot of you know Discovery experiences that happen in stores.
E-commerce isn’t particularly good at and so the hypothesis is that this social commerce.
Has the potential to replace all those Discovery experiences and the way I think of it as kind of decoupling Commerce like the buying and browsing used to both happen in a store and that was kind of the monolithic solution.

[32:46] The digital disruption of Commerce means.
Buying and browsing now can be decoupled and browsing can happen in all these micro moments on Tick-Tock and Pinterest and and taobao,
and the buying can happen in another moment on Amazon or Walmart or or wherever else so,
I definitely think there,
it is we’re going to see it can continue to increase I don’t know whether we’ll catch up to China in the near future or not but they’re you know appears to be a lot of Headroom and therefore sure is a lot of interest.
Of in retailers and brands that want to experiment in the space and platforms that want to you know capitalize on those experiments so I have major,
social commerce initiatives with almost every client right now that are kind of you know mostly in the test and learn mode.

[33:43] Um couple things you didn’t mention Amazon’s poke around here they have Amazon live which is this video program that’s kind of running and it’s pretty terrible right now but you know I’ve seen some stuff start to get some traction there.
They have a couple of influencers that that hop on there and don’t forget that Amazon owns twitch so there’s,
there’s Twitches really started with video game streaming and there’s there’s a lot more that platform is widening there’s some interesting things we’ve had some Congress people get on there we’ve had,

[34:18] There’s a lot of interesting music content and then there’s a lot of innovative new social media companies like Clubhouse and some point maybe they’ll be some selling that happens to some of those channels.
The other one is I highly recommend everyone make sure you listen to our deep dive episode recently.
We talked about all the changing privacy rules I think that’s going to be another Catalyst for this because Facebook is in this kind of squeeze between Apple and Google in a way.
Facebook doesn’t have a platform like they do so,
Facebook could lose some ad revenue and they’re doing a lot to replace that through a variety of different experiments and I think we’ll see a Facebook doing a lot more in this this area,
and they on Instagrams and Instagram alive is getting a lot of Engagement as well so,
a lot of interesting platforms were this kind of live streaming and more social commerce could come from.

[35:16] Yeah hundred percent Amazon’s done a ton of experiments and and twitch is a very powerful platform so like I certainly.
I think Amazon is you know at the front of this trend along with several other Front Runners.

[35:32] This one this one this next question is it’s a it’s a tough one so I’m going to throw it at you here
comes from Brendan Witcher and I can’t hear his name without hearing the
toss a coin to hear what your song and anyway mr. whicher says when will the Jason and Scot show t-shirts finally be made available in can I have mine signed before you send it you guys rock thanks for helping to keep balance in the,
parentheses retail Force thanks Brendon Jason any your our chief swag officer Chief swag digital retail grocery officer what
what’s the take.

[36:08] Yeah great question Brandon appreciate it.
So we do have some swag and I’m sure I’m going to regret saying this but if you ping me on Twitter I will be happy to send any listeners some Jason and Scott.
Riri a pliable stickers for your laptops and and the your bedroom windows and all that good stuff.
We have not offered t-shirts I’m open to it I have to be honest got and you weigh in on this as well.
Rrr logo Works reasonably as podcast cover art,
but it’s kind of intricate for a t-shirt I just I’m not sure what looks cool like I feel like we need a more elegant logo.
For a T-shirt and then side note I would also point out like you and I have both lost some significant weight since the characters were done so I like part of me before we invested in a lot of apparel I’d want like skinny or characters.

[37:12] Yeah yeah we’ll have to maybe we’ll have a con reader contest readers can submit their their artwork let’s see you again from and then most of.

[37:22] Yeah and side note when he says bring balance to the force I assume we all knew that you’re the dark side of that.

[37:29] Okay ouch I’ll point out that your son is clearly on the dark side.

[37:36] Well but my son also likes you more than me so that’s further proof.

[37:40] I can’t no accounting for Taste okay back to real questions
so this one is from Kevin Cronin what are your thoughts on e-commerce conversion tracking and how it has positively and negatively impacted companies in the industry.

[37:59] Wow so I don’t know what your angle for asking this question is but it’s a great question in my mind I am anti e-commerce conversion so it’s a.

[38:10] Super important and useful metric
but for my entire career I’ve been walking into situations where people were using it as a kpi and for me it’s an incredibly stupid kpi because I can’t tell you how many times I’ve had clients a Json I want to hire you to improve my conversion,
and my answer is always the same that’s awesome I accept because,
I’m gonna do a white make your eCommerce site password only so that only good customers that I know have buying intent are going to come in and your conversion rates going to go through the roof,
you’re your revenue and traffic will go way down right because conversion is related to all these other things,
um and while it’s possible to do multi-session conversion the overwhelming majority of people when they talk about e-commerce conversion are talking about single session conversion,
and very often it’s not profitable the cell one thing one time.
And so again so for all of those reasons I think you need better kpis like for sure conversion is a metric that that should be included in your.
Your overall ecosystem but that’s not the thing that should be steering your business and and I don’t know if this is,
what you were implying in your question Kevin but like there’s a shockingly high amount of e-commerce operators that that give too much Credence to conversion.

[39:37] Interesting or you guys give products away if you really want to increase conversion.

[39:42] Yeah yeah I can sell dollar bills for for 98 cents and have a very high conversion rate I would throw.
I had something else I was going to add to the conversion conversation but I’ve totally lost my train of thought so I should have come to rehearsal.

[40:00] Are so all the tracking changes aren’t going to really change conversion while still no when people are on our side.

[40:09] On site conversion again if you’re doing more nuanced multi-touch attribution type conversions there some of the depreciation of the third party cookies and the in the mobile tracking is.
Going to make that more difficult so we’ll see how that that all.
Toys out oh I do remember my other point on conversion a fun fact about conversion average conversion rates on e-commerce sites today,
are almost identical to what they were in 2000 like the its chin mobile has changed a lot but.

[40:46] The the overall desktop conversion rate hasn’t changed very much like a cross,
there’s huge deviation but across a ton of sites it’s about 2% of Visitors by something as we’ve already talked about.
Stupid metric and a lot of those people didn’t come to the side to buy something maybe they wanted to check your store hours or your your your store address or all sorts of other things,
but what I always chuckle about that is there’s this whole industry of conversion rate optimization companies and what they do is they come in with this one tactic which is multivariate testing,
and they say like we’re going to improve your user experience and dramatically improve your conversion rate and there’s a bunch of companies that have been doing that for 20 years,
and yet the conversion rate in our experiences today is exactly the same as it was 20 years ago and so like we like to joke that like all conversion optimization regresses to the mean.
How’s that for a math joke.

[41:45] It is good if conversion isn’t a good kpi then what are Jason recommended gibbous.

[41:53] Yeah so go listen to.
Our customer lifetime value show with Dan McCarthy and and to me metrics around LTV or seal the are much more valuable,
then then just conversion rate even if you’re going to adopt a conversion rate I like to do some some more.
More derived conversion rates that I sometimes call the real conversion rate where I infer your mission from some of your on-site behavior and I only look at the conversion rate of people that actually had some buying intent right so,
so in that example you would,
you would take all the people that used your store locator or you know left on the rating and review page or something else or the warranty page
you wouldn’t count all of them in your conversion rate because they probably had some mission that they accomplished on your website that was other than buying something but for sure.
Having a multi-touch attribution system and ultimately getting to a COV or LTV as the way to go as far as I’m concerned.
So let’s move on to the next question bin win what do you guys think is keeping Amazon from entering the promising African Market.

[43:20] Yeah Amazon’s Geographic expansion has definitely slowed if you look at kind of the last markets they’ve opened up,
think they’re opening a Poland right now,
India has been a big one and they’ve just really that one seems to I’ll use this analogy of kind of the snake eating the pig right so so India seems they went storming in there and it seems to have been a handful for them
they really haven’t done a huge meaningful expansion since India my recollection I don’t think Poland would count as huge,
then there’s Brazil and Australia are kind of in that category of most recently geographies they’ve opened and I think what’s going on there is.
You know they have to evaluate every opportunity just like any other company even though they’re huge they have not endless resources so they’re always having to figure out where to apply them.
And you know I could say the same thing for South America South America.
Commerce is really complicated because you’ve got a big cluster of countries you’ve got different languages currencies shipping things,
now mercadolibre in South America has gone in there and figured all that out Africa is you take,
you take South America and I think Africa is like four times the complexity there inside of Africa you’ve got on the order of 50 countries.

[44:45] Lots of complexity and you know if your Amazon do you.
Go after that or can you go get that in 10 years let it mature and worry more about go puff taking you know a big grocery category United States,
so I think that’s really what it is it’s a prioritization exercise and for whatever reason Africa just has made it to that priority I guess you could say they’ve also expanded the Middle East through that acquisition they did,
of a big Marketplace there yeah haven’t really heard much about that I haven’t heard them adding 1 p 2 that or anything or
I only think they rebranded I think they wanted it as almost like Zappos as its own kind of little Standalone thing sounds kind of weird because in the past when they would go into a new geography by acquisition they would Rebrand it too
Amazon Japan it was on China this raw Acquisitions to my knowledge they haven’t rebranded suit could all and
kind of the brand their Stokes I think that’s what is required is a sure thing Jason Do you have a.

[45:51] Yeah well I’m not sure if you’re aware of this but strategy is actually one of the words in my title.

[45:58] And it’s a little known fact but in order to get a strategy certificate you have to have a great affinity for a 2 by 2 Matrix,
and I don’t know if you remember who did this I feel bad that I don’t but I used to attend the channel advisor conferences and they would always do this great.
Session on the latest trends and opportunities in global expansion and they always started with this 2 by 2 Matrix and,
one axis is complexity and the other axis is opportunity right and so you think complexity how hard is it to go into that,
Channel what you know what’s the regulatory environment what’s the currency environment what’s the language environment and Africa is actually High complexity because,
there really is no African continent from a Commerce standpoint,
there’s a bunch of countries there’s like 50 for different countries mostly with unique languages and unique regulations and unique currencies so the complexity is very high,
and the opportunity at the moment is pretty low penetration of e-commerce in Africa on a per capita basis is much lower in the spend is much lower than a lot of these more established market so I,
I’m sure there’s a long-term aspiration for Amazon to dominate the whole planet before they get to Mars but,
in the short run I just feel like that Africa hasn’t done as well on that on that two by two Matrix that I got from Channel advisor.

[47:26] Yeah and I’ve actually talked to a fair number of South Africans and they order a lot from Amazon and Amazon has some kind of a global cross-border trade thing where you can actually shop from Amazon and get it shipped to you in South African and not crazy amount of time
so there is an interesting not native Amazon shopping going on in certain areas of Africa that I’ve heard about.

[47:52] Yeah for sure and not saying there’s not an opportunity now I’m just saying if you’re if you have limited treasure that it may not you know you may get more value out of your India investment then you are Africa and the short run.

[48:04] Yeah and if you’re already like covering half of the opportunity through this cross-border trade solution than that even is better.
All right here’s one for you Jason this comes from Kelly gauche I think is how you’re going to feel so looking forward to that pisode I’m seeing all the CX related vendors Salesforce sap Bloom reach,
acquia Etc building or buying cdp’s in the past 12 months I get the value of cdp’s but why we’re all of these Acquisitions done so rapidly is this related to the third-party cookie changes coming.

[48:42] Good question so sidenote Kelly is the chief technology officer at Commerce tools who were talking about earlier and he’s also the author of.
I think at least two books that are published by Riley on headless Commerce so we probably should have forwarded the Headless Commerce question to Kelly.
With regards to his CDP question for listeners that may not be familiar CDP stands for customer data platform.
Um and so this is a tool that was primarily developed for advertising although it’s now used for some other things.
Where you build a database of unique customer IDs and what you know about those customers and you use it for marketing purposes and mostly for targeting ads win to win to show what adds to what customers.
Um and they are super trendy right now the.

[49:38] Has the acquisition spree been been accelerated by the Privacy changes that we talked about a couple weeks ago.
My short answer is probably but it’s interesting because those privacy changes both help and hurt cdp’s,
they make that first party data in a CDP more valuable,
um but they actually make it harder to collect that data and they make it harder to activate that data on not first-party data and so I in the aggregate.
I’m not sure.

[50:14] I sort of doubt that all these Acquisitions are because the cdp’s very clearly go up in value as a result of these privacy changes in some ways.

[50:26] More customers opting out and more attention to privacy means that cdp’s get smaller,
um and the the alternative versions of these things that don’t have uniquely identifiable data for an individual customer which are often called dmps.
Maybe get bigger so that’s my long answer to say I don’t think it’s purely related to the,
changes in privacy what I think is related to is,
the the whole category in notion of personalization is super hyped and popular right now we actually did a deep dive on personalization a year ago that frankly I still think stands up pretty well,
and in it I kind of highlight that at the moment a lot of this personalization is probably overhyped.

[51:17] You know in the last year there was a lot of investment dollars that were you know looking harder for a home,
you know there’s a lot of Buzz and hype around personalization and a lot of confusion about privacy and so I suspect that all of those factors.
Um contributed to the the shopping spree and cdp’s but in the long run and because of the privacy issues I think the way this all plays out is.
Um instead of it being super valuable for everyone to have a CDP that there’s going to be a small handful of cdp’s that are you know operated by people that have a ton of first-party data that are going to be most valuable.

[51:57] Yeah I’ll just throw in there as a guy that watches kind of the SAS space and startups you have this kind of interesting musical chairs / Supply Domino thing that goes on,
so you know one of the the big cloud players and I think the bigger ones would be like Salesforce sap Adobe then obviously.
You know you have a little bit IBM they’re not really as aggressive especially on the e-commerce side now maybe Oracle
but even they been quiet so those are the three really right now but you know what let’s say for some reason Salesforce buy something then the Corp Dev groups of other guys are out there looking and saying hmm.
If there’s 10 of these then then you don’t have to do anything but if there’s one more than your Adobe or sap you have to be kind of quick because.
These Cloud companies are really in an arms race against each other and.
They never want to have one of them with some advantage over the others so it’s such a big space the multiples that those companies enjoy are so big,
there’s a lot of Risk by not not having something so that could be one of the reasons you saw this kind of fast uptake by something was really more of,
competitive concerns and keeping up with the Joneses and then a lack of Supply I don’t are there tons of CDP companies or are they kind of rare.

[53:23] Um
There there’s a ton of CDP companies that it’s a long tale type thing where only only you know there’s a finite supply of ones that have significant customers in them so that you that me teacher
you think so I’m going to call that the domino theory of acquisition.
The ones that first first acquisition Domino Falls at triggers a bunch of other Acquisitions is nobody wants to be the loser in the musical chairs right.

[53:49] Yeah.

[53:51] So let’s move on to the next question this is from Tech whiz
we’ve seen a significant stimuli bounce on Amazon do both of you feel the reopening exuberance will keep the sales acceleration going and if so for how long interested to see if you two are in the Jamie dimon camp.

[54:13] Yeah and I love these economics questions because I always beat you on these Jason so,
it’s gonna be interesting so if you kind of so you got two things going on here number one in our world your of your comps are very important right so same-store sales and comps and stuff,
and that’s going to get it super easy right now because this March is obviously way better than last March and April it’s going to be way better
for a lot of people.
From a store perspective but then on the e-commerce side it’s going to be inverted so e-commerce is going to face really tough comps retail is going to look really good and then just so that’s going to be one aspect.
And then we talked last week about that channel advisor blog and a couple other folks that were talking about this kind of.
Material bump in sales from the stimulus checks kind of going out and you know so the.

[55:17] I think what’s going to happen is there tide is going to rise so.
Hard from the money being pumped into the system by not only stimulus checks but just.
You know we just had another two trillion dollars go out there’s talk of a four trillion dollar infrastructure,
some people are saying that should be five or six trillion we’ve never had so much money pumped into the system,
so I kind of in my mind the metaphor there is the tide is going to rise very quickly and e-commerce will benefit from that so if we had just the year-over-year affect Commerce would look like flat to down I think.
But because the tides going to be rising I think we’re going to have a really nice continued growth in e-commerce.

[56:04] I also when you one of my favorite.
But I’m a huge fan of Elon Musk and people eyes asking me on how how are you able to do these things that you do he always goes to core principles and His World core principles are physics you know Rocket Fuel Burns of this right in that custody.
In our world the core principles are consumer behaviors and I’m I’m convinced that.
You know go puff and instant card and all these things that that people have sampled through the pain Dynamic their addictive and I use that phrase zero friction addiction.
The pretty sticky because once you have that really super low friction great experience it amplifies the friction of the the higher friction experience.
So I think those things are going to stick it kind of a rate of 80% way more secure than a lot of people I think.

[56:57] I don’t know if that puts me the Jamie I’m in Camp but I.
I think those are the things so a negative is summarized a negative vizier of your comps are going to be hard on Commerce a positive is the.
Not only the stimulus checks but the macro stimulus going on and then the third one is,
I do think the zero friction addiction is going to also surprise people so I think that Nets out that we’re going to be surprised that we see the sales acceleration keep going and.
You know the thing that can this is probably a topic for another time but then the thing that concerns me is
we’ve never put this much money out there we’ve never printed so much money and at some point inflation is going to be a problem and we’re starting to see it in certain parts of the economy and food cost and Home Building
things are getting pretty hot already so that could be the thing that slows it down I think that’ll probably be a
early next year problem that will have to worry about what do you think Jason.

[58:01] Yeah it is I mean in general I think in aggregate if you look at all of these favorable and unfavorable Trends it’s,
the favorable are going to outweigh it so I think like industry averages for both retail and e-commerce will continue to go up.
But the real story is going to be the winners and losers right so there there are definitely categories of consumer spending,
that are likely to go backwards a little bit you know next year right like there’s huge pent-up demand for travel,
and so some of those dollars that people have been you know investing in their home this year,
are not going to get reinvested in their home next year they’re going to get invest in a new trip or more time in the bars and more restaurant food instead of grocery food,
so I do think.
There are going to be some people that are going to struggle to comp because they they were disproportionate beneficiaries this year and,
and there’s going to be a counter Trend next year.

[59:05] I also do think there is a little bit of a bifurcation there’s big chunks of the economy that are booming and you don’t have all this extra cash pouring in and the savings rate is going up and,
all of these good things,
, there’s a huge chunk of the economy that were low-wage workers many of which worked in the restaurant industry and half the restaurants aren’t going to reopen and it’s going to take five years for those jobs to come back.
And there’s going to be no more economic stimulus for the rest of this year next year because once the health problem goes away,
there’s going to be no appetite for passing it and so those people are going to have a really hard time in the industries that are,
tied to those people are going to be challenging so I think we’re going to see a both ways but on the aggregate there’s going to be more good economic news than not,
and I’m calling it right now you’re going to see it check me in a year I wish I could go back to the prediction show
the new catchphrase is yacht yeah which is year over two years ago and and I’m predicting that
when you do the word cloud of all the things CEOs say in their in their shareholder meetings for the next year that yeah is going to show up a little bit.

[1:00:15] Yeah
okay that’s weird prediction but if you say so so we are we have two questions left and we’re up against time so we’re going the lightning round Jason lightning round for you this comes from Trevor Sumner
there will be a multibillion-dollar media shift to in-store who controls the brand spin.
Will be media folks will Shopper marketing and trade dollars increase how will brand organizations need to transform to take advantage of the digitized store.
That’s an easy one to answer and Twitter a tweet length.

[1:00:50] Yeah it actually is easy to answer and lightning around like that whole industry in the siloed budgets get disrupted
in the long run and I don’t know how many years it’s going to take all those budgets get Consolidated in the silos breakdown right so there there’s going to be a marketing person a CMO that that
owns all of that spend and there’s not going to be a separate trade budget and all these separate retail budgets and they’re going to you know
consider the next best dollar for you know Super Bowl ads against ads on the Shelf at Walmart.

[1:01:24] I don’t have an opinion on that so we’ll go on to the next question and it comes from this was from Facebook Scott Silverman
what do you think will be the most surprising post pandemic consumer behaviors that e-commerce retailers should prepare for.

[1:01:41] Scot you want to go first Scot to Scott.

[1:01:45] Um sure I yeah I you know I think the things that we’ve already tried are sticky.
I’ll be controversial there’s a lot of Buzz that people are all going to work from home I think that’s over balloon I think,
90% plus the folks will go back to an office they’ll get pulled in they think they’re going to work remote and then
you know what’ll happen is another domino effect so sales teams are not efficient working from home so you’ll have a sales floor and then those folks would be like well why isn’t the marketing team here supporting
yes and in the marketing team will kind of come in and then
they’ll be like well why aren’t the accounting folks here you know we have all these questions and now I have to hop on a zoom decimal question and they’ll be like well let’s bring the engineering team in and suddenly the whole company will be back in an office so I think that’s one that’s not going to
that’s a lot of people are assuming it’s going to change that’s not it doesn’t really impact e-commerce per se but that’s one that I’ll be slightly controversial,
how about you Jason.

[1:02:49] Goodwin I’m so we don’t have time to get into it I don’t totally agree with you on that one so that’ll be fun will visit it again later I totally get where you’re coming from though,
the the short-term one that everyone talks about that I’m many on is peacocking right like that that you know we’ve all been wearing sweats sweatpants and,
and sitting in our homes for a year and so there’s going to be this counter-reaction where everyone’s going to want to wear you know you know stand out and go be very.
Um gregarious and outgoing like that’s kind of what happened in the Roaring 20s after the Spanish Flu in 1918.
Um so so there is some of that.
Um that we might see in the short term to me the big the big thing that’s happened that people aren’t talking about enough is consolidation right that the,
the pandemic dramatically and disproportionately benefited big chains over small Independence in every category but especially in retailgeek.
Um and so I’ll Paris publish a new version but.
Almost every public company that has reported their e-commerce growth Drew dramatically more than the industry average.

[1:04:00] And the reason that’s possible is because a ton of Mom and Pops shrunk and I think there’s all kinds of implications for that but you know,
Walmart Albertsons and Kroger were 40 percent of of a cpgs business before the pandemic and now they’re going to be 60% and that that’s going to be a,
shift in the balance of power and a shifting leverage and and they’re all these other implications around.
This enormous consolidation the chain restaurants are doing fine but all the independent restaurants are gone bars everything.
I think there’s all kinds of implications from that that we’re just starting to think about are you in on that one’s got.

[1:04:42] I disagree on some of that stuff but yeah well we’ll have to this is a good topic will have to revisit.

[1:04:49] Yeah I like it it’s a great question Scott always appreciate your participation and that is going to be a good place to leave it because we have used up our allotted time plus gods for bonus minutes,
so as always if we if you disagree with our answer or didn’t get to our reading get your question feel free to hit us up on Facebook or Twitter,
um and you know as always if you enjoyed the show please give us that five star review on iTunes.

[1:05:19] Thanks everyone and.

[1:05:20] Until next time happy commercing!

Mar 31, 2021

EP258 - Retailer Owned Brands and Other News 

CPG’s and other traditional houses of brands, have not had a lot of recent success launching new brands. Challenger brands get a lot of buzz, but they are struggling to scale. Meanwhile, retailers are quietly launching new “owned brands” every year that sell over $1B.

In this episode we cover the latest owned brand news from Amazon, Target, and Bed Bath & Beyond.

Episode 258 of the Jason & Scot show was recorded live on Monday March 29, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 258 being recorded on Monday March 29th 2021 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners Jason hope you're having a good week and you have no blockages like the Suez Canal.

[0:48] I know this was a bad week to plan a vacation in the canal.

[0:51] Do you do you often vacation in the count.

[0:56] I haven't yet but you know I was thinking about it there was a super funny tweet I saw on Twitter though that some some someone wrote everyone's anti Godzilla and told there's a twenty two hundred thousand ton boat that can't be moved.

[1:09] Yeah and then I saw I think they got it kind of dislodge today and then the wind blew it back into it's original position I
I can't tell what's the truth anymore like parody has become so close to reality but I saw that as if it was new so I think he is still jammed is that your understanding or do you think.

[1:27] I don't have an understanding but that would make sense because I would say that recent news reports were conflicting about whether it was still blocked or not so that maybe,
that's the story maybe it got unblocked and then re blocked,
it is I have clients that are pretty bummed though because it's a it's a pretty big deal our as you know our supply chain is super,
just in time and so when a major thoroughfare like that gets blocked like it has an impact on product availability over here.

[1:57] Yeah yeah it's yeah the the pictures that show the boats waiting it's just amazing how many how many cargo-carrying boats are just jammed up because of this one single point of failure worse popped.

[2:07] Yeah and the plan B is not ideal it's a so long way around.

[2:14] Yeah yeah it's amazing to then you can see a lot of the boats aren't doing that now because they kind of have to.

[2:19] Yeah I know you're a better investor than me but I've actually been buying into a lot of pirate stocks because I think this actually puts a lot of that cargo.
In Pirate territory yeah.

[2:31] I didn't know you could buy a pirate ATF that's so smart.

[2:35] I'm lying but I wish I was that cool.

[2:38] Cool well tonight's episode we wanted to keep it kind of light and fluffy and just catch everyone up on some news because it's been a while since we have done a news episode.
And of course it wouldn't be a Jason Scott show without some Amazon so here's some.

[2:59] News your margin is their opportunity.

[3:08] Jason I'm usually our Amazon Fanboy here but this one I really wanted to kick over to you for your perspective you've been tracking
the entrance of Walmart into the healthcare space and Amazon
his announced recently that they are going to expand the what they call quote-unquote Amazon care you know to not only all their employees but employees at other companies what do you make of that.

[3:34] Yeah it's it it's a pretty big expansion so.
For the very few people that haven't listened to every single episode The the Reader's Digest version of Amazon's Health they've leaned heavily in a pharmacy they bought pillpack they rolled out a national Pharmacy Amazon Pharmacy,
um they partnered with,
Goldman Sachs and Berkshire Hathaway on this health initiative called haven to kind of reinvent Healthcare and then they pulled out of Haven this year or late last year.
In the rumor was that it was because Haven was too slow and they felt they could go faster on their own and what they were going faster on is this thing that they call Amazon care so they piloted this in the Pacific Northwest with all their seattle-based employees,
and it's,
it's a telemedicine based Healthcare System where all Amazon employees can get a doctor on a video conference in under 60 seconds and kind of avoid a lot of in Office visits,
and so the big news is they've announced that they're expanding Amazon care to all 1.3 million of their employees so that's a.

[4:41] Very substantial expansion of the pilot and they're also offering the pilot to other companies I'm not sure if they've,
announced that they have any takers on that yet but but it seems like they're their efforts in healthcare rapidly expanding and you know they did invest in,
telemedicine and even buy some,
some companies in that space kind of before covid and then you know covid has really you know accelerated the adoption of telemedicine so it seems like annoyingly,
that's another good investment that seems like it's starting to pay off.

[5:17] Yeah and Josiah Cairn reminds me what as you're describing it reminds me of that made me a feature that candles used to come with her I don't know if they still do or not we get like just press a button and some would be like hi Jason are you having problem opening a book,
is that Zack kind of how it works.

[5:33] That's my understanding I say I don't think they still offer mayday,
I know kind of sad that for a while that was the differentiating feature on that platform but I think it went away but yeah I.
I haven't had a chance to kind of get a first-hand tour of have the Amazon health system works but.

[5:55] You know pre-pandemic there was a lot of.
Challenges around HIPAA laws and stuff and so people were really going slow and cautiously on telemedicine and there was generally a lot of friction.
Um and you know nobody wanted to like store anything information in their platform and all these things and,
um I would say a lot of healthcare providers like suddenly discovered out of necessity that there are plenty of HIPAA compliant ways to do telemedicine and Amazon has both.
That that sort of visual video interface and you know it's it's on on a HIPAA compliant version of AWS which they have a lot of HIPAA compliance services on AWS now.
But they also bought like an artificial intelligence symptom diagnostic tool so kind of like a,
machine Learning System for you know converting your WebMD queries into a diagnosis so,
um I think that's part of this system and yeah I don't know I'll be I'd love to hear from some Amazon employees that have tested.

[7:05] Yeah covid-19 really helpful here because there was all these rules around you had to be licensed in this state to do telemedicine in the state and they wave to those so it makes it a lot easier to do telemedicine when you don't have to,
have a doctor in the same state as Where You Are.
Which never made sense to me anyway I don't think medicines that difference between that hopefully it's not that different between North Carolina and Chicago.

[7:27] Yeah and then I mean we just have so much so many challenges on friction in the healthcare system that we should like we shouldn't be like fragmenting supply and demand with all these arbitrary virtual borders I guess.
Easy for me to say two e-commerce guys talking about health care what could go wrong.

[7:48] Add to cart that's not my own.

[7:51] Exact exactly just buy more Advil any other Amazon news you saw this week's hot.

[7:57] Yeah so Wells Fargo one of their analysts at was out and this was like a combo between their internet and their retail folks,
and they have officially proclaimed Amazon to be the largest seller of apparel.
And this one is fun because I think we actually cover this we've been at this podcasting gig for quite a while I think we've been at commerce cumulatively between the two of us for.
Akash 50-60 years there's one but we're even podcasting in 2016 and I remember one tarry longer than the CEO of Macy's said.
And I'm going to quote here the Amazon threat is overstated Macy's nearly 800 stores offer a huge advantage over Amazon.
Given how Shoppers tend to buy the same item in multiple sizes when they order online,
Macy's can use it stores to handle returns which lowers the shipping cost and offers a chance to win some sales while those customers are in there are stores.
So he kind of was pounding his chest and bring on Amazon this is there's no way they're going to catch up with the mighty Macy's,
and you know I have been at this long enough to know that the biggest career limiter is to say that you are safe from Amazon that did not end up being true for mr. Lundgren,
um he left me sees a while ago and they've had a series of other folks roll through their I don't think they have 800 stores anymore you where they down to like.

[9:22] Six hundred four hundred I don't have to let's have one of our research team looking into that,
so yeah so I thought that was really interesting that you know the a lot of people think they are not threatened by Amazon and they are and I've seen the drugstores kind of take a similar stance to Amazon coming into Healthcare and I think,
it would be wise to be careful there because Amazon is really good at taking care of your customers if you don't that's what they did to Macy's.

[9:54] For sure In fairness to tarry longer and I would say two things he said that he said he probably sounded way more distinguished when he said it then you did.

[10:03] That was my distinguished.

[10:05] I know that was your decision.

[10:06] He has way better hair than you and I together times a hundred he has good hair he's got CEO here.

[10:11] He definitely has CEO hair and then I feel like one of the fun things about doing this podcast for five years is in the e-commerce space if you can do it for five years you are going to get a lot of I told you so's.

[10:24] Yeah exactly.

[10:25] And so we definitely get one so I want to say that there are currently like 430 Mainline Macy's stores.

[10:36] I won't let that that's feels a lot smaller than 800.

[10:39] It probably feels that way because it is that way and for for sure Amazon.
Caught and dramatically surpassed them in a Peril I want to say from that Wells data,
Macy's was it like 16 billion in apparel sales and Amazon was estimated to be at 41 billion so almost 3x,
but / Wells Fargo TJ Maxx and Walmart also passed Macy's so there there was a point when most people felt like Macy's was the largest apparel retailer and,
in the US and now / this analysis their fourth.

[11:16] Yeah I think I think Amazon is three to four times the size of a season wow ouch,
wasn't there isn't this also a double win because didn't Scott Galloway kind of famously think that Macy's what is going to crush Amazon wasn't any kind of on that that,
that that should have been we should know it was over the second he said that because he's you've got a really bad Trekker.

[11:40] Exactly I feel like Everyone likes to make fun of his anti Tesla picks but to me by far his,
his my favorite thing was his his prediction that the future of Commerce isn't Amazon its Macy's and omni-channel,
and like there's if you if you look at the Macy's stock from the day he said that to today it's basically a straight line and you can imagine what direction it's going in.

[12:07] Wow ouch all right any other news you want to cover Jason.

[12:13] Yeah there's all kinds of stuff going on.
There was an article that made me think of you because we talked about this at least once a year New York Times ran a big piece about,
Google aims to be the anti Amazon of e-commerce it has a long way to go that was the subtitle of the article I kind of felt like you wrote the subtitle.

[12:36] That is a that is a journalist that has done some research.

[12:43] Yeah yeah and so I mean I don't think there wouldn't be anything.
New in the premise of this article to our listeners I mean the the just was you know they talked about Bill ready coming in to take over commerce for for Google and opening up,
um the Google shopping ads and making them free and you know essentially becoming a Marketplace offering this integration with Shopify to make it easy for Shopify sellers to,
to list their products on Google and Google is for all intensive purposes becomes a Marketplace what was.
Surprising to me and maybe it shouldn't have been was in the article they profile this this small business owner that I think sells roller skates,
and they talked about how she happened to be sitting on a lot of roller skates at the beginning of the pandemic which became a desirable item during the pandemic,
um and she started experimenting with with Google's kind of artificial intelligence ad format this it's called the smart shopping app and so essentially.
You don't have to pick your target or anything you just kind of give Google a budget in Google figures out the best place to put your ads so she put 1800 dollars into these Google smart shopping ads,
um and that generated 3.6 million impressions and what do a quarter of a million dollars in sales for her so.

[14:09] I'm not in the ad Biz like your it was that a good Roi.

[14:12] Yeah yeah except in the ad Biz we call it row as.

[14:15] Is that a good bro ass.

[14:16] That is a good row as the.
The the smart question to follow up to that would be how much of that was incremental how many of those roller skates were she going to sell without Google but we'll put that cynical question aside for a minute,
what was interesting to me in the article was after having that initial success.
Google flagged her account because they via some crawling bot that they had decided that she was listing her roller skates in the Google ads at a higher price than she was selling them Direct in,
Shopify which is apparently against the terms and conditions of these Google of these free Google shopping ads.

[15:03] Many marketplaces have that that Clause Amazon famously has that cause I wasn't aware.
It's not I'm not surprised but I wasn't aware that Google had that cause or that they were trying to enforce it so they essentially put her in the Penalty Box and don't allow her to whist.
Her Shopify products in Google,
and this is not going to come as a great surprise to you neither Shopify in or Google have remotely effective customer service to remediate this problem right so she's calling Shopify and they're saying hey talk to Google it's not our fault,
and you know there's no one to talk to a Google to get out of this Penalty Box and kind of have a fair dispute resolution so this woman had some initial success on the Google platform and then got locked out.

[15:48] Yeah that's a little scary because you know Google puts all these things these to have separate little centers for all these different products and now they've Consolidated all into one,
you're kind of part of their ad Centre or whatever they call it now and I imagine you can't just get locked out of one part of it I bet she's locked out of I bet she can't even buy keywords or anything now so that's.
That's pretty terrible.

[16:09] Yeah and I mean it's a big reminder like all these platforms have traffic that can be valuable for you and there's a lot of.
Like favorable Roi to some of the customer acquisition things but,
but you should remember like you don't own any of these platforms like no one should be building a business exclusively based on the customers they can rent from Google or Facebook or Amazon because.
You know there are going to be winners and losers in the ground is going to shift under UI in favor of those platforms.

[16:41] One of my favorite up into Google like 50 times and you're always sitting in the lobby of like a building whose name is something wacky like pie or moles constant or something or C the speed of light and you wait there for the person to come and get you,
and so I've probably collectively spent 40 hours in the lobbies of different Google things just waiting on people,
and invariably the phone is like ringing off the hook at these lobbies and it's someone like this poor lady trying to get a human and they somehow rattle into the building you know,
the the building Lobby and the people there are actually temps and you know you hear them this side of the conversation we like.
Man I don't I don't know how to get your listing into Google no ma'am I don't I don't know how to solve that,
have you tried our website this is like crazy sitting there listening to the conversations that go on.

[17:34] Yeah although I'm thinking you're doing it wrong because you're not supposed to be listening to the receptionist you're supposed to be eating all the delicious free snacks and all those lobbies.

[17:42] Where they don't put a lot of snacks in lobbies.

[17:45] You're going to some different buildings than me I only go to the snack friendly buildings.

[17:50] You have to get in the back room where all the good stuff is the snack snack stations.
Based on our episode last week where we dug deep into the IDF a and by the way I got a lot of good feedback on that apparently you're pretty good at explaining this stuff so so kudos to.
The I saw an article that face book shops announced they have over a million active Sellers and 250 million people interacting on,
the Facebook shop so you are my.
Theory I've seen a lot that I kind of buy into but I want to see it play out is Shopify could be in a crunch and I thought it was really interesting that Facebook was kind of,
pounding their chests about how many people are using their shops,
today I know they're they're not super useful it's just kind of a presence but I do think because Facebook is going to want more first-party data because the third-party stuff's going to get cut off,
be it on the app side or the cookie side / website I think they're going to pull in the checkout and the discoverability and it's going to be an interesting day when that happens.

[18:57] Yeah no I totally agree I think they're going to lean into that check out but I wouldn't be surprised we may never know.
It wouldn't surprise me if the cumulative gmv from all that Facebook stuff is already bigger than people imagine right because.
I don't think there's a lot of high-volume sellers that are hitting really big numbers yet but there is a very active long tail and I just think that's,
like unless Facebook chooses to disclose the DMV like it's harder to count like you know of those million active sellers if they're you know.
Why teach selling a hundred dollars that's a hundred million dollars in GMB.
The you know I don't know I don't think there's any billion-dollar sellers on that platform so we don't hear about it as much but I think like Shopify the bulk of it is this quite small volume High churn long tail seller.

[19:51] Yeah and then so you've got these little shops you've got Facebook groups that have kind of,
we've got these groups that are very active and some of them are around neighborhoods and categories and so there's a lot of activity there and then this interesting have you seen this one startup that's called.

[20:08] Comment counter something like that which is kind of amazing to me that it still exists but you know people,
people there's a lot of comment Commerce that goes on where where people will post a picture of something on either like Instagram or something and I know these guys have their own checkouts but there's still this weird thing where,
these people will run these little boutiques,
and then you can say something like you'll say bye to and then you'll do some other little code and then this bot will come in and send you a DM to check out.
I saw this startup in that space raised like considerable amount of money and a lot of gmv which I thought was really interesting because it's like.
Feels like 1985 that some check out bot is messaging you to enter your information but there's still a lot of Commerce that happens that way and then the Facebook Marketplace has a ton of Commerce and if if I'm Facebook you know they're thinking about how do you roll that up into one.
Kind of a it doesn't have to be a seamless experience but one Mega Commerce area that,
it kind of reminds me of Ali Baba where you have this family of pockets of Commerce going on and then you can provide some interesting gateways into that like
if you search for Star Wars you to see shops
groups and then the marketplace and you know is there an interesting way to coalesce those listings across those three properties and have an interesting experience.

[21:29] Yeah yeah no I think there's a lot of that going on it's funny in my I'm as old as dirt in this space I remember like one of the First Commerce activities on Twitter was like,
Pizza Hut wants to Pizza bot and you could basically send a tweet to the pizza bot to order a pizza and that was like.
The future of Commerce briefly and I want to say a year after that like Starbucks did a.
Tweet a coffee which was my favorite feature you know I'd like a moment of silence for the loss of that feature.

[22:00] Yeah a lot of other news though so I do want to move on I saw one that I thought was kind of funny because I know we talked a lot about omni-channel attribution,
so for those that don't know retail leases in malls are really complicated it's not as simple as.
You know you pay X dollars a square foot a lot of those those leases have all sorts of,
rev-share Clauses so you know depending on how much revenue they generate in the store they owe some Vig to the landlord they're all kinds of services that their stores have to buy from the landlord is all the all these sort of.
Different Clauses but with all these distress retailers there's a ton of renegotiation of Lisa's right now the retailers have a lot of Leverage because the mall owners don't want to move out,
and one of the ways that mall owners are trying to preserve some upside is they're doing drastic.
Rent reductions but they're asking for a bigger rev-share and what has emerged as the biggest point of contention is that the landlord's want their rev-share,
on all of the Retailer's Revenue whether it's in that store or online.

[23:19] Mmm Yeah like curbside you know the malls going to want a piece of that.

[23:25] Exactly and so the malls are arguing that like hey that store creates a bunch of visibility which is driving those online sales and so the landlord should be credited with those sales and so it's like if you look at it superficially.
It's it's pretty funny that the the old model is like asking for a commission on the model that's kind of replacing.

[23:49] It makes logical sense the store operators themselves one credit for that stuff too.

[23:55] But it just so you know no to retailers count that the same and so now you know it's coming up as a problem.
In in all of these kinds of leases because you know the you're asking for some Claws and a lease that isn't have that that brand does its accounting.

[24:12] Aren't the malls going to in all the stories anyway so I guess it's a mute point.

[24:15] Only the bad ones as they get done kid distressed in the malls have to have to buy them yeah,
um so jumping over the pond this is super interesting to me and I don't know how close you've been following pin duo duo but pin duo duo is a e-commerce site in China,
and they're heavily focused on gamification so I kind of think of them is the wish of China which is ironic because wishes.

[24:44] Wishes the wish Upton.

[24:45] Exactly,
um but soap into a Duo is like hey get a bunch of your friends to go in on this deal with you and it makes the deal well or if you get enough people to buy with you you get these special deals it's kind of gamification of deals and it's mostly.
Like inexpensive,
stuff but they they are a public company in China and they in their their earnings,
they announced that they had 780 8.4 million users at the end of 2020,
and the reason that that is interesting is because,
Ali Baba has 779 million which means pin duo duo has more users in China than Alibaba has in China.

[25:35] Everything in China is always like so big to which is fun.

[25:38] Yeah so.
Along those lines China has 983 million internet users this year and so they're likely going to pass a billion internet users next year's and all these numbers are huge,
I would note that aov on Alibaba is way higher than the arv on pin duo duo so they're gmv is going to be way higher.
It's interesting that these kind of you know inexpensive gamification sites are getting so much traction at all obviously wish has by all all apparent measures done pretty well here so.
Coming back to the US I get asked a ton right now about video Commerce and maybe we'll do a,
kind of an updated social commerce or video Commerce show in the future but a feature I thought was pretty interesting as Google kind of did there,
their new feature launched this month and one of the features they have is they're using computer vision to recognize products in YouTube videos,
and so they are now doing automated product ads,
besides these videos so it's kind of interesting that they're taking all this video that already exists and didn't have any metadata about products for sale and they're literally recognizing the products in the video and trying this out.

[27:08] Neat has maybe seen that workers it.

[27:11] I have and I mean I'm I'm curious how effective it is right now the the computer vision stuff is is pretty darn good but there,
so many like super similar variance of products that I would imagine it's still pretty imperfect but I'd love to be wrong.

[27:32] Feels like a would go through a tagging phase where I would say hey I think I see these things that you would pick it like a human would be in the middle somehow but we'll see.

[27:40] Yeah yeah so that's going to be fun to watch I did also see a super interesting article from Channel advisor and I was hoping you could explain it to me.

[27:51] Yeah yeah so the the topic they're so first of all Channel advisor,
it's a company I founded 2001 still on the board so this is all public information and
they have a ton of data and one of the things I miss most about not being the day-to-day operations is having my hands on that data because it was like seeing the future
but they were kind enough CEO Dave Spitz and head of marketing Mike shocker put together a really nice blog post.
And the topic was really kind of the two different stimulus bumps are stimuli bumps I don't know bumps from stimulus is,
bumps from stimuli I don't know the right conjugation of that.

[28:33] Stimulated bumps.

[28:34] Stimulated bumps thank you all right we just had to put the explicit on there alright and,
the so if you recall and Jason you're more political than I am there was like two thousand dollars sometime in 2022 April May,
and then we just recently had another little six hundred dollars and then a $1,400 so this tracks what a lot of people call stimmy 2.0,
which is the fourteen hundred dollars from the Biden Administration that came out in this March and it's really interesting to see,
what's happening there and,
you know I think the the way I would kind of summarize the broad Strokes here is the first stimulus was really towards like that critical stuff you know like.

[29:25] Food and toilet paper and then this set of stimulus was was a different set of items so one of the biggest differences was clothing shoes an apparel did really well in 2021,
versus 20/20 didn't see much bump at all joy and watches so people are buying a lot of you know,
more I guess not essential items with their stimulus dollars,
um Auto Parts people are keeping their cars longer there's a shortage of new cars due to a chip shortage and it's kind of funny people are calling it chip again what's that was was kind of hilarious given that we did ship again.

[30:06] I wonder how many of those chips are on boats in the Suez Canal.

[30:09] Yeah it's only going to get worse this is.

[30:11] The shipper chip again.

[30:13] Yeah and I was funny because spits was.
Hit our chatting about this data and he's like well the good news is you know we don't have a toilet paper shortage and then the next day I saw the Suez Canal its lock clogged and I was like I wonder how much toilet paper is on those then sure enough the article started to talk about we're gonna have another TP shortage of that doesn't come through.
Those are categories that over indexed they did better in the more recent stimulus checks than the previous the opposite side of that would be the.
Um the categories Health and Beauty so that had a really big bump and not so much now and then computers so I think everyone's kind of,
saturated with those items I guess in the new stimulus dollars didn't really win and then the third quadrant would be they got kind of assumed ulis bump in both time categories and that would be home and garden Business Industrial and pet supplies.
People just spend a lot of money on that I've also seen you know Wall Street seems to be doing really well and,
the cryptocurrencies and in FTS so it seems like people are a lot of those dollars are spilling into really interesting categories in the economy that I don't think we would call Essential like that first round of stimulus.

[31:26] Yeah I mean my biggest takeaway which I have very consistently seen from all of these stimulus things is,
that that money gets spent as soon as it hits bank accounts,
um and the I mean that was like clearly evident in the channel advisor data I you know I have tons of clients where you can literally see how fast the mail is delivered like in the,
in the metrics as you watch the spike like wave across the country,
and I point that out because there were a number of analysts that were like oh you know what savings rates are so high right now and Americans are so flushed that,
they're not going to spend this money that they're going to invest this money and like we like to make fun of Scott Galloway on the show,
he liked retweeted a study where like the the top line of the study was,
Millennials say they're going to invest the stimulus check on more than 50 percent of the Millennials say they're going to invest their stimulus check on Robin Hood.

[32:28] Which did not happen side note I dug it's-- got about this and he kind of acknowledge that but I dug into the study and it was a survey of,
Millennial Robin Hood customers and listen there was a survey of like 2,000 of them like 300 of which responded,
so I teased him I followed up by said in a fall on study teenager said they don't care about money in a survey of Bill Gates three kids one of which.
You thought that was funny.

[33:01] Yeah so but that was super interesting and then it is very interesting to see which categories are getting kind of sticky bumps versus got these,
tertiary bumps and a lot of the categories that really got creamed last year,
it does feel like they're making a partial come back if you look at them by historical levels they're still down but things like shoes and apparel and,
things that were way down are definitely starting to re-emerge in you know the leading products in each of those categories,
are starting to do pretty well.

[33:37] Freckle,
nothing I've been watching really close is the IPO Market is white hot if you haven't been tracking that so so see Joanne's went out a couple weeks ago so that was interesting,
that one had a mediocre reception by Wall Street I would say I think it had to price down from its expectations.
And I watch you and II think you've adopted this hobby of mine where you watch the roaches,
and that one was pretty under under the quality bar is pretty high on these things now they have a pretty high production value and that one was kind of a.
Guy calling in from a payphone got a kind of a thing so that one that one did not land very well,
the one that was really interesting was thredup so those guys went public this week and last year they did a hundred eighty-six million,
growing fourteen fifteen percent so you know pretty good but you know.

[34:36] Not a barn burner by any means and then their IPO has been on fire so they have a three billion dollar market cap so we look at last year's kind of Revenue because we don't know what this year's will be and they don't they don't when you're going public you don't put out a.
Projection until you have your first public quarter so you know let's say.
Let's say they grow twenty percent this year to be aggressive which may be are.
That was an acceleration year due to covid but anyway let's say they grow twenty percent so let's see that would be 636 Rosso call it to 20 this year just to kind of put a number out let's say 250 just to be super generous.
Devil three billion dollar market cap so that's you know you know way more than like 15 times,
most e-commerce companies are in the three to 125 time,
so you know they have got a real outsized performance from their IPO,
so it's been interesting to see you know how that stock performs it was just trading up another 50% which I did
got them that three billion dollar market cap down feels a little frothy to me but we did have the CEO on the show it's a great company and I think what they're doing is really interesting just interesting to see that you got such a strong,
yeah I think I think they're worth.

[35:57] So Joanne's has like two to three billion and they're worth and Joanne's is worth like 500.
Million so they're worth like six Joanne's but they're like you know a fraction of the size so just shows you what the market the market likes growth and more Pure Play e-commerce than the omni-channel stuff.

[36:16] Yeah yeah In fairness there model is slightly different than a wholesale retail or so their cost of goods is probably a lot lower because they are.

[36:25] Oh yeah they have way better margins and stuff.

[36:27] So it's not perfectly apples-to-apples but it's still awesome I would assume I haven't heard him say this out loud but I would assume Anthony Marino the,
the CEO thredup would would credit most of his IPO success to his appearance on episode 170 of the Jason and Scot show.

[36:44] Absolutely it's a seminal work and really really is if you look at the curve it's where the elbow is in the curve when they're on the show.

[36:52] Yeah I will just Echo another point you made it is shocking the variance in quality of those Road Show videos.
Wag their sometimes there's like a dude with a PowerPoint presentation and a bad one and other times there's like amazing production value and it's like it's there's drama and humor and entertainment it's a I don't know.
How the quality of that correlates to their IPO success but but.
It's very obvious like who's investing in those things and who is it.

[37:28] And then some of them goes over the top they're like a Silicon Valley skit where they're kind of like you know we're going to change the world with compression.

[37:37] Yeah I saw this was not one of those Road shows but there was a like,
in earnings call from Intel and you know Intel has had kind of a bad run lately in so that you know the CEOs kind of owning a lot of there.
They're missteps and talking about their turnaround plan and I was he's a super smart guy he was really articulate he had a lot of interesting points,
but his gestures we're like so aggressive and over-the-top for every single sentence he uttered like I couldn't even concentrate on his words.

[38:11] One of the favorite topics in the news these days is private labels and there's been some interesting news here and this is really under the microscope because
Amazon is doing their private labels the one that everyone knows is Amazon Basics and,
there's a lot of antitrust focus on this area and it's funny you and I laugh because you know if you read the headlines it makes it seem like Amazon invented this whole idea but it's been around,
I think I saw a Benedict even say it's been around since like the 18 hundreds or something like there's he found some retailer and London that it's been doing this for.
Since like 17,
25 or something anyway some interesting news there before we jump into that though maybe remind people you have a really kind of nice nuanced way of talking about this maybe walk people through that before we jump in.

[39:02] Yeah so there's a lot of freezes in in this space the most common one is called private labels,
and what was happening a lot right now is not what I would call private label there definitely is some private labeling,
but the bulk of the interesting stuff right now is what I'm calling owned Brands and there's no standard definitions here but my distinction between private label and owned brands,
is how those products are marketed in position,
so private label products tend to be knockoffs of popular National products.
And the so the value prop is exactly the same as the national brand and very often it literally says that on the box compare this while bupropion to Advil right and a hundred percent of the marketing for that wall be profilin is,
that it's on the Shelf next to Advil right like there's no Walgreens isn't running ads for wall bupropion they're not doing Billboards or TV commercials or you know there's no wall bupropion Twitter account or anything like that.

[40:11] The it's a private label product that's sitting on the shelf next to Advil.
A lot of the products that successful retailers are launching right now and that I'm particularly interested in and are you know they tend to be like.

[40:24] One of the three big strategies that almost every retailer has to compete with Amazon as to sell stuff that Amazon doesn't have in to invent these new owned brands.
To me the big distinction in the own Brands is they usually are not the same formulation as a national brand there they usually are a unique product that has some differentiated feature,
very often because the retailer used their customer data to identify a gap in the marketplace they might have used there,
there are no results found searches on target or you know non converting glances on product tiles and all these different things to kind of find a gap,
make a product where one didn't exist and then most of the retailers that are building these successful own brands are marketing the heck out of them so the extreme example that I always like to use is is you know the as I.

[41:20] Click mute the for saying this the Amazon Alexa is not a private label Sony Bluetooth speaker right it's a unique product that Amazon invented that has,
features that no products prior had in the market and by the way Amazon's hired Anthony Hopkins Ellen DeGeneres.
Harrison Ford and others to advertise this product on the Super Bowl so that's kind of what,
owned brands are and there was a lot of own Brands progress in the news this week.

[41:57] So Ross do there.

[42:00] Yeah so the two so I'll start with Target because I reference them and and Target really is to me,
um the most successful retailer in this space like arguably by Dollar volume you could talk about something like Kirkland and Costco is being even more successful,
but target has really leaned into this we're going to sell stuff that no one else has and we're going to Market those products,
for a long time and earlier this month they announced that a product they launched less than a year ago called All In Motion which is their athleisure brand that kind of competes with Lululemon,
um had surpassed a billion dollars in sales and the that's that's relevant for a bunch of reasons,
it's they watched an athleisure brand right before the pandemic kicked into full gear which is phenomenal timing that was the only apparel people were wearing,
um the it had inclusive sizes which historically will eliminate in particular was not good at you know they were an attractive Target price points,
and they target announce that this all In Motion billion-dollar brand was targets 10th.

[43:14] Owned brand to surpass a billion dollars of sales in one year and,
if you look at the list of all the digitally native vertical brands that have surpassed a billion dollars in a year the answer is none,
and if you look at all the cpgs that have launched new billion dollar brands,
um in the last five years the answer is none like only retailers are launching new products that sell a billion dollars a year and Target uniquely has launched.
10 of them so that's phenomenal success almost every retailer I work with is like looking jealously at Target and trying to figure out their version of that model.

[43:53] To double down on that Target launched a new brand in the Craft Space you've touched on this a couple times but crafts was one of the retail categories that blossomed in the pandemic and so they want,
Moto AMA which is like 400 skus of arts and crafts items to compete with Michaels and Jo-Ann's,
I just like any product with the llama in the name by the way.
And so that you know is going to be interesting to follow the more relevant to me they watched an indulgent dessert brand called favorite day,
and so I like to eat the the favorite day snacks on days that end in a why.
But you can make your own rules so that's another food brand targets had a lot of very good.

[44:41] We call that podcast research.

[44:43] Exactly exactly.

[44:44] Listeners appreciate.

[44:45] They're 700 excuse to try so a lot of good stuff there and then a close cousin of the owned brands are exclusive brand Partnerships,
and so target has his has been famous for these as well and they launched a new one this month with Levi's so they have,
unique Denim and again like Target leaned into these inclusive sizes which are doing really well despite the fact that a lot of the specialty retailers haven't done well with with inclusive sizing and kind of,
Levi's branded products with with cool unique denim designs at a surprising Target price point so,
so two new owned Brands and exclusive partnership on top of the 10 brands that have already sold a billion dollars in the last few years,
um and a lot of those Brands were the.

[45:40] The product of the former Chief Merchant at Target who is this guy Mark Triton,
and Mark is not at Target anymore because he was hired as the CEO at Bed Bath & Beyond to sort of try to turn around Bed Bath & Beyond,
um and so and shockingly and famously Bed Bath and Beyond was horrible at own Brands and private label and in fact like less than ten percent of their sales are our own brand or private label products,
so they bring in Mark Triton and they announced this quarter that they've launched their first exclusive products at Bed Bath & Beyond so they launched a new bed and bath line called Nest well,
they have a second spa bath line called haven and they're getting ready to launch their like,
entry price point items across all other categories that will be called simply Essentials so those of us in the industry are really curious to see if Mark can.

[46:40] Um kind of recreate the same magic that he had a Target at Bed Bath and Beyond those are his first three brands and then I also noticed this week that he was able to kind of,
cherry pick a couple senior execs from Wayfair and Walmart and the wafer exact is Jill Pavlich who was responsible for all the exclusive brands at Wayfarer so,
um they're they're building quite a high-powered own brand Team at Bed Bath & Beyond so that's going to be really interesting to follow.

[47:13] Now did they have a long history of of owned brands or these are brand-new to the.

[47:19] No these are almost all brand new there are very few own brands at Bed Bath and Beyond and I would argue that like where they were it doesn't even count like Furniture is kind of a weird category where.
They're just.
There are very few Brands the majority of furniture retailers are reselling these kind of pseudo private label Furniture products and so the the.
Most of the private label sales have been Bath & Beyond were in these Furniture categories where they were basically just doing what everyone else was doing.
So they really hadn't made a good effort in like trying to launch their own Brands and the old leadership team had kind of,
announce a couple of initiatives but none of them ever finished so you know we all assumed when they brought him our tried to in that that was going to become a much more.
Serious effort at Bed Bath and Beyond and now we're seeing the first indication that that's exactly what's happening there so it's.
I'm not sure I would call it a win yet and you know there's a lot of headwinds facing Bed Bath and Beyond but that's going to be interesting to follow and I certainly think.
They have some people there that you wouldn't necessarily bet against so it's gonna I hope their success.

[48:34] Yeah if I had a good Yoda voice I would send you a gun the private label Wars have.

[48:39] Yeah I mean the bigger picture and we could do a whole show on this is so that's a top-three strategy for every retailer is they're trying to become a brand,
and spoiler alert guess what every brand is doing in response to that they're all trying to learn how to become a retailer and meet their own customers and sell direct and collect their own data.
I call it the epic battle between Brands and retailers is they all try to gain each other skills.

[49:05] Yeah it's going to be really interesting to see how that plays out.

[49:09] Um but that's probably going to be a good place to leave it for today we have stayed within our allotted time which I want to take the win,
so if this was valuable to you I hope you'll jump on iTunes and finally give us that five star review,
if you have any questions or comments about any of the things we've discussed we love to hear from you on Twitter or Facebook page or I'll put Scott's personal cell phone in the show notes.

[49:34] Sounds good thanks everybody.

[49:36] Until next time happy e-commerce saying.

Mar 18, 2021

EP257 - Cookies, IDFA, and Commerce Deep Dive

Changes in mobile tracking (IDFA), and browser tracking (third party cookies) are likely to disrupt digital commerce. Here is everything you need to know.


Privacy Law Changes

  • California Consumer Privacy Act of 2020 (CPRA)
  • California Consumer Privacy Act of 2018 (CCPA)
  • EU General Data Protection Regulation (GDPR)

Third Party Cookies

  • Safari (19% share) 3P cookies blocked as of March 2020
  • Firefox (4% share) 3P blocked as of Sept 2019
  • Chrome (64% share) will block 3P January 2022

Mobile Tracking (Digital License Plates for Mobile Users)

  • Apple Identifier for Advertisers (IDFA) – Goes from Opt Out to Opt In  Q1 2021
  • Google Play Services ID for Android (GPS ADID) – Still Opt Out

Use Cases that are impacted by IDFA/3P changes

  • Audience Activation and Retargeting
  • Frequency Capping and Suppression
  • Media Attribution
  • Audience Insights and Segmentation
  • Personalization

Alternative Solutions

  • 1P Walled Gardens (Facebook, Google, Amazon)
  • Real ID Systems (Trade Desk, Liveramp, Epsilon)
  • Clean Rooms
  • Cohorts – Google Privacy Sandbox: FloC (Federated Learning of Cohorts)

Impacted Businesses

  • Google – Biggest winner, built a business based on relaxed privacy standards, now pulling the ladder up behind them
  • Apple – See Google, but with a smaller share of browser market
  • Facebook – Lose ground to Google/Apple but gain on everyone else
  • Amazon – Winner. Forcing more ad dollars to Amazon walled garden
  • Shopify – Loser. Forcing Facebook to capture more commerce instead of referring to Shopify sites.
  • Publishers – Loser. Harder to make ad model work
  • Other Retailers – Loser for customer acquisition, slight benefit for retail media networks


Advertising rates go down which depreciates ad based business models (content sites and games). More businesses pivot from ad based to paywalls. Greater focus on Customer Lifetime Value (via subscription and platform approaches), more cleanrooms. Much harder for new businesses to challenge incumbent walled gardens.

Episode 257 of the Jason & Scot show was recorded live on Wednesday March 17, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 257 being recorded on Wednesday March 17th 2021 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 back Jason Scott show listeners.
Jason has you know when we look at our analytics and based on feedback we get from listeners some of our most popular shows over the years are where we get super-dee-duper geeky and we go really deep on one topic.
We call those with what I think is a genius of marketing we call those deep Dives.

[1:05] Jason and Scot show Deep dive.

[1:18] So we have been I’ve been reading a ton about a big change coming to the overall ecosystem of advertising and it’s initiated by Apple and it’s called idfa.
And as you know I read a lot of Wall Street stuff and some of the Wall Street folks are freaking out because they’re basically saying this is going to be big and the world’s not paying enough attention.
And you know in my mind I’m kind of that sad world that doesn’t really impact e-commerce but then I started to see it getting really noisy around the impact to folks on the converse side too.
So I looked around and called everyone I know and none of them were experts on the so I last ditch effort I said maybe my podcast co-host knows a little bit about this,
seeing as he works for one of the world’s largest ad agencies and lo and behold I was right you do you are a Ninja on this.
So I know enough about this topic to have a lot of questions but I have no answers so,
we’re going to kind of flip it a little bit here and I’m going to interview you on this topic how does that feel how does it feel to be in the chair.

[2:28] I’m terrified I like being the one to ask the questions and know the questions in advance so I feel like that the I should have come to rehearsal.

[2:38] Yeah put some curveballs in here and we’ll see how it goes so.
Let’s start at the top the maybe a little bit of background on this issue kind of starts with cookies so if we if we
do the Wayback machine let’s start at cookies and I think a lot of us know the basics of cookies but just to kind of make sure,
because a lot of some people in e-commerce start really worried about this just because it works right you don’t really have to worry about it per se but you know,
I’m pretty familiar with first-party and third-party cookies but maybe maybe start at the beginning and why do cookies exist what’s the difference between first and third party cookies and then we’ll go from there.

[3:19] Yeah awesome and let me be one precursor I you’ve are vastly oversold me I definitely don’t want to claim to be an expert in this stuff the.

[3:30] You’re the chief digital retail cookie tracking idfa officer.

[3:37] You would so one would think therefore that I was at Tech Guru but let me just say this stuff is super complicated.
It’s an alphabet soup by the way anyone that’s an expert in the space is apparently not by contract not allowed to use any full words they can only use acronyms for everything which is super complicated.
And it’s been my experience like I’ve been in the room with CMOS that spend a fortune on all these digital ad products and programmatic products,
and the more you talk to them you start to realize oh my God they don’t understand these ad products either so I would just say like,
no one should feel bad that doesn’t completely grasp this topic because it is really complicated and you and I will do our best to simplify that and so what so great Point let’s start with cookies.

[4:28] I’ll also give you a pass because this thing the idfa we’re going to talk about isn’t even out yet so
so we’re anticipating a lot of stuff and it’s sure to be I think will be closed and there’s enough to know kind of the general topic but some of the specific details may change once it’s released.

[4:45] Yeah a lot of changes still in flight for sure.
So cookies cookies are just a simple little text file that sits on your computer that stores data from your browser and so the.
Kind of fundamental first use case is.
You like to read The Wall Street Journal every day and you have an account with the Wall Street Journal and you don’t have to type your username in every single time you go to the Wall Street Journal so you check that little boxing remember me.
Um so the way the Wall Street Journal remembers you is they get to write a little text file on on your hard drive,
that says I’m the Wall Street Journal cookie and username equals Scot Wingo,
um so it’s a way for websites to store data on your computer that they can use in future visits.

[5:34] Side note Wall Street Journal is the worst example because they apparently ignore my cookie but go ahead I know that’s the intent but they’re like the absolute worst.

[5:42] So so that I mean but the original intent of what are called first-party cookies is for a website to store data about their user that could be used to improve,
their experience in subsequent visits right and it was originally about user experiences but pretty quickly.
Evil advertisers figured out that it was a valuable tool to improve and Target advertising.
And to facilitate that the browsers were extended to support a new kind of cookie called a third-party cookie.
So a first-party cookie is the Wall Street Journal storing your username on the Wall Street Journal.
And and literally the I want to say the name of that cookie file on your computer is like is the Wall Street Journal URL,
and so that websites allowed to open that cookie,
what third party cookies are is a way for one website to write a piece of information that then can be read by another website.

[6:45] So by default the New York Times can’t read The Wall Street Journal cookie so it can’t like steal your username from The Wall Street Journal.
But now websites could write these third-party cookies that became really useful for advertising so for example.
You could be shopping for some skis on and they could write a third party cookie that says you have a ski,
in the cart that you didn’t buy and then when you go to read The Wall Street Journal,
you could see an ad for those skis because the Wall Street Journal is allowed to read Backcountry dot-coms third-party cookie and then run a retargeting ad for you.
So those third-party cookies are super useful for tracking you across the web and spamming you with ads from each others.
And that is one of the things that is being phased out in the Privacy world is the use of third-party cookies.

[7:53] Just getting one thing so a ton of people call this the Cookie list future and that’s kind of a misnomer because no one’s doing anything to first-party cookies like so there,
they’re not going away third party cookies have been turned off by two of the big browser so Safari are ready.
Has third party cookies off by default you can opt in the turn them back on and Facebook blocks third-party cookies and so that the only browser that still supports.
For third-party cookies is the browser that’s owned by the largest advertising Network in the world which is Google.
And they have now announced that they’re going to be eliminating third party cookies in early 2022.

[8:41] How about Microsoft with ie or Edge I think is the official new name of their browser are they have they already.

[8:49] Here’s what I’m getting into a slightly gray area there are two flavors of edge there’s kind of Microsoft’s old browsers and the modern versions of edge are based on chromium.
And I believe but I’m not certain that the that third-party cookies are not.
Have not been depreciated in any Chromium browser as of yet but I could be I could be mistaken.

[9:21] Okay and then give us an idea of the scale of this like if third party cookies all went away.
How many users are being tracked with them and you know what are some of the you mentioned what’s classically called retargeting that seems to be like squarely in the cross hairs here but what are some of the other things that would be
if I if I do a Google CPC at is that going to be impacted by this.

[9:47] Yeah so.

[9:50] So scale wise as we sit here today in this moves around a little bit but as far as about 19 percent of the worldwide browser share so third party cookies already don’t work there,
Firefox is like 4% third-party cookies don’t work and chrome is about 64 percent so it’s it’s.
Third party cookies have been going away for a couple of years I think this started in 2017 that Safari started turning off some third-party cookies and.
When Chrome turns them off like they will essentially be dead,
the turnoff has been very graceful so far because like Safari didn’t even just say all third-party cookies are off what they said is third party cookies are going to have a very short life span so maybe they used to live forever,
now they automatically get deleted every two weeks and then they automatically get deleted every week so we’ve kind of had this,
slow gradual erosion of third-party cookies but once Chrome turns them off.
The expectation is that nobody’s going to bother to use them because even if there’s some Niche browsers that still leave them on or a few people opt-in for them they’re just not going to be.

[10:58] Ubiquitous enough to be very useful for advertisers and so so yeah when you think about the use cases for those third-party cookies,
one very definite one is the retargeting add that we just talked about that you’ve got something in your cart and you didn’t buy and now I as a merchant can buy ads on other websites you go to to advertise that item right so that’s a highly personalized 121.

[11:22] The what you may not notice is there’s a much more mild version of that that’s happening to you a lot more right so.

[11:32] Lexus wants to sell sell you a car and so they want to show you Lexus car ads right well,
one of the best places Alexis could buy a car at would be on Car and Driver right because.
By default the majority of people on car are car enthusiasts there they’re more likely to be in market for a new vehicle and so you know the.
One of the most affected places I could place an a car ad would be on a car Enthusiast website.
That’s also the most expensive place to buy a car ad right and so maybe.
Dubai some car ads on that site or maybe I can’t afford any car ads on that site but I’d like to advertise to car enthusiasts even though I can’t afford the the car and driver ad rate right,
so what third party cookies let me do is say I would like to buy an add-on

[12:31] For people that have previously visited car and right so it’s not a personalized ad it’s not a unique add to Scot Wingo,
but it’s an add to a cohort of car Enthusiast and I probably don’t specifically say I want to buy,
visitors from Carmen I probably say I want to buy ads from anyone that has visited anyone of a bundle of car enthusiasts websites.
So so there’s a ton of ads you see on the the the web that are lightly targeted.
Based on your previous browsing Behavior.

[13:09] Right and the so they’re kind of like these real-time options right so someone’s going to see net and CNET says hey
I’ve got a pageview coming up here from this this cohort you know that we’re going to call car buyers who wants who wants to pay for this person and there’s like a little mini auction that goes on that’s kind of how the Ed ad networks work right.

[13:28] Exactly and so they’re highly efficient they get the maximum amount of money they can’t that the market will bear for all of those ads and by the way.
Well advertising people love these and AD Network to have sewing these ads like it’s it’s debatable how effective they are because in my hypothetical example you’re never going to buy a Lexus.
Like I like I know you’re a Tesla guy the fact that you go to turn car and driver doesn’t actually mean you have a greater affinity for buying a Lexus if you see a net.

[14:00] But that’s the supposition and in all of these ads so they’re more likely to be more more buyers in that pool so that they like their clearly has some efficacy but sometimes people go overboard and thinking about how effective they are.
Um but third-party cookies are useful for a couple other use cases as well,
um so so one that I suspect we’ll talk about a lot later is our friends at Facebook right and Facebook invented one of the most evilly genius things on the web,
they invented this like button and so you know when you’re on Facebook you see these these like buttons you can click for various content to say you like it and they’re a bunch of reasons that useful for Facebook.

[14:40] Facebook conda bunch of other websites in also having a like button on their website right and almost every time you see an article there’s probably a like button that you could click on that article.
And guess what that’s doing like that’s putting data in a third-party cookie that Facebook can read.
And so it actually gives Facebook a ton of insight about how Facebook users behave.
All across the web and so Facebook absorbs all that data and they can use it in two ways they can actually sell ads on.
Properties other than their own and both Facebook and Google do this so they sell ads off of their their endemic properties and Those ads are highly targeted just like on their endemic properties,
and they’re targeted using this third-party cookie metaphor.
But then also Facebook is collecting a bunch of data that they put into their machine learning models and learn more,
how customers behave and what their propensity to buy and do certain things is so one of Facebook’s most popular.
Add products is this thing called a look-alike audience and so essentially you go to Facebook and you say.
I’ve got a thousand customers it gets Biffy that are my most valuable customers.

[15:58] And I would like to buy ads that get shown to people that are exactly like those customers.
And Facebook says great give me their email addresses and they look at the you you hand them your email addresses for your thousand favorite customers and they use a.
Super secret Black Box algorithm of machine learning that they run that through they find those users which they likely already know those users to through all of these these various Network touch points.
And then they say what similarities do they have with the other billion users we have on Facebook and they.
They find you a gentleman we 50,000 more customers that are probably pretty similar to your thousand best customers and then they run a really expensive auction to get you to buy.
Ads targeting those those customers and so even if that ad shows up on Facebook and they didn’t need a third party ad to show that a third-party cookie to show that ad.
They relied on a lot of data they collected from third-party cookies in order to build that look-alike audience in the first place.

[17:05] Got it
so when I say give me a look like audience they’re not just saying okay it’s you know females that are 22 to 40 their the demographic they’re saying and they also go to these websites and they also you know,
login to so there that 3p data the third party cookie the first party stuff they know already like what you’re doing on Facebook but they’re also tracking all that off Facebook activity and that helps them build a better profile.

[17:32] Exactly so like like a dumb or programmatic at is to just Target the ad based on the demographic or psychographic I want to.
Buy ads for people that live within you know in a geography where gets biffy’s offered right I don’t want to waste money running ads and geographies in the few geographies where there’s not a good spiffy yet,
so that that makes sense as an ad that super simple it’s just a kind of a hard rule show that in these zip codes not in these zip codes,
um but maybe you know people in a certain age range or certain gender have a better propensity or or even a certain income bracket or something like that you know you can,
you can Target based on all these apps are Buttes and and most of these at networks offer hundreds of demographic and psychographic attributes,
but the look-alike audience is even fancier than that they they won’t tell you what goes into the look like audience.
It’s more likely to yield customers,
that behave the same way as the customers you give them then just a demographic or psychographic profile would get you.

[18:37] Got it.
Okay so that’s good setup so third-party cookies are under assault and we have you talked about idfa it so Along Comes This idfa and this is kind of like step I don’t know six to ten somewhere in there of a multi-step
Journey where you know more and more privacy issues or initiatives are limiting,
not only cookies but any tracking so maybe give us a little background on these these these other things that have kind of led to idfa.

[19:09] So so again I’m trying to avoid the acronym soup idfa is a.
Is an acronym from Apple and it’s called the Apple identifier for advertisers.
And the this is something that’s specific to mobile apps in the way to think of this is It’s a,
a unique serial number for every mobile device that has Apple.
Apple’s operating system so some people like to call this like a nice metaphor for this is It’s a digital license plate so that see you know people can identify.
Your car uniquely when it when it drives drives through the mobile echo system,
um the of course your device has a unique number on the modem called the MAC address which is the actual leg serial number of your modem and you have a unique number from the wireless carrier,
um so but those numbers it’s been illegal for for.
App developers to use for a while like the because of privacy concerns and so and so the idfa was invented so the Apple would have a unique number for every user the advertisers could use and marketers could use.
But that a user could change or delete or opt out of if they wanted to write like you can’t delete your your modem serial number which is why I advertised are not allowed to use that but you can and have been able to for a long time.

[20:37] Opt out of having your idfa be public so by default your idea phase public everyone can see it you can in fact opt-out and and,
allegedly about 30 percent of Apple users opt out of idfa so so today about 30% of users already have turned this off,
um but they had to know how to dig into the Apple settings and turn it off,
it said the big change that Apple’s talking about is instead of making idfa opt-out they’re going to make it opt-in which means everyone that wants to use the idfa in their mobile apps is going to have to,
explicitly as your permission before they do that and I know you have some questions but side note.
There’s a an exact equivalent that Google offers for the Android operating system.
And it’s called Google Play service ID for Android which you’ll hear This Acronym way last but it’s it’s GPS a d ID so.
Apple and Google each have a yeah digital license plate and Apple has some time last year Apple announced that,
sometime this year and probably March or April is the the latest date they’re going to Pivot to from opt out of that digital license plate to opt-in for that digital license plate.

[22:06] So that means on my so they recently did a change on my iPhone where you know I would,
the default was you would share your your your location for example the GPS and then it got like.
Now for example it will very occasionally pop up and say hey this apps tracking where you are do you want to allow that never
just while it’s running or always so is that going to be what the user experience is down the road I’m going to some I’ll be using an app and it will say hey this app is tracking you do you want to allow it or not is
is that kind of what.

[22:44] So if you were starting in in iOS from scratch you buy the new device you and you install that you know from scratch,
every time you installed an app that wanted access to your your digital license plate your idfa,
um a a requester would come up saying this app intends to do x y and z.
Do you allow tracking or not allow tracking and there’s some controversy over that language so we could talk about that later if you want,
um so that’s how it would work on a go-forward basis but as you pointed out,
you likely already have a phone that has hundreds of apps installed on it and you’re likely going to upgrade to this new variant of Apple’s IOS 14 when it comes out,
and and you have a bunch of apps where you by default already opted into idfa so the way Apple handles that is over some short grace period,
every time you try to use one of those apps,
it’s going to reconfirm that you’re still okay with idfa being turned on by popping up this requester and saying,
Facebook has been tracking you across all the mobile apps you use on the website do you want to continue to allow them to track or do you want to disallow it.

[23:59] Got it okay so just to reorient a lot of the cookie stuff is really kind of browser-based a lot of this this idfa and these
these little digital license plate you things they’re more app-based but they’re both under pressure and the idfa is essentially the same as getting rid of third-party cookies but.
Way abstract use that is that a.

[24:21] For iOS yes.

[24:22] Fireless got it and this is this is material because you know we see these stats all the time that you know over half of e-commerce you know
transactions now I guess our mobile and more than 60 70 percent of traffic is mobile and then you know iOS is something like
60 70 % of e-commerce for some reason it over index is even though you know there that’s about I think,
Android has higher market share iOS has higher e-commerce share is that.

[24:54] In general worldwide shares about 50/50,
between Android and Apple but Apple users 10 in a variety of ways to spend more money so from a consumer standpoint they’re more valuable.

[25:10] Got it and then I think you said it in there but this is going to come out in Spring of 2021 it’s going to be a part of a new 14 iOS 14 release,
I heard today someone say end of March so maybe that’s maybe it’s coming pretty soon.

[25:26] Yeah it’s the beta is out
so this Behavior like developers and even if you’re not a developer I think you can now install there’s an open version of this beta so it’s just a matter of when they push it and they haven’t announced the exact push date but it’s you know given that,
that it’s in open Beta right now it can’t it’s not going to be too long.

[25:48] Yes so our listeners are out there and hopefully they’ve stuck through this and so they’re kind of thinking what’s this mean for me.
So number one third party cookies a lot of them rely on that but then number two a lot of us in the e-commerce ecosystem and.
Full disclosure this is true it’s Biffy.
You know it seems like the Google type of AD spend will still work pretty well because you got your keyword and all that stuff’s pretty linear if you will.
But it seems like this could really break Facebook because Facebook so you know,
Facebook’s largest shares through the app there’s some bazillion people logged into that app all the time every day doing a lot of activity and when I say Facebook I’m including Instagram in the whole family there and you know so now.
Now either Facebook won’t be able to track,
totally or there they will be hobbled because they’re no longer able to use a bunch of other data so seems like this will decrease the efficacy of e-commerce people that are using Facebook as a channel is that,
is that kind of how it all ties together.

[26:56] Potentially I think it’s definitely fair to say that Facebook is kind of that odd man out in all these games right because essentially we haven’t really.
Explicitly said this but there’s there’s this interesting conflict between two popular Trends right right,
there’s a there’s a popular privacy Trend in the world where users are saying we should have more privacy and big corporations shouldn’t be allowed to do a bunch of stuff with our data and monetize us without our permission right so there’s kind of you know
a lot of laws that have been passed in California and Europe that you know kind of impact how we all do business on the web that are more privacy Centric and so you,
um and Google Apple and Facebook have all been sued,
um for violations of these privacy laws right and and some of the things they’ve explicitly been sued for are these mechanisms like third-party cookies and idfa advertising,
and so one way to avoid getting sued is to,
make these more privacy Centric changes right and so you know if you asked them if you ask Google and and apple why they’re making these changes it’s because.
Because users want privacy and we don’t think that you know these things are the right thing to do would be there kind of.
Like not completely credible self-serving.

[28:17] Yeah they want to know legislations coming and they’ve kind of want to get in front of it like you can either you can be legislated or you can solve.

[28:24] And that is for sure the talking point and that it has the added advantage of being at least partially true right,
but the the second huge Trend in the world the I know is your favorite topic of all times is antitrust right and,
like are there certain companies that have this monopolistic power and they’re so powerful that they can do things that aren’t in a,
in a consumers best interest and there are a lot of people that accuse.

[28:52] Apple and Google of using their their alleged Monopoly power,
in in this privacy dispute right right because for example,
Google the main Google ad product is buying ads that show up in search results on Google right and those are not impacted by any of the changes we just talked about right if you type Lexus into a search term,
Google can show you a Lexus ad and they make a fortune.

[29:24] Doing that right and so they’re they’re collecting unique information about Scott searches and.
Selling ads to advertisers based on your search Behavior,
um what they’re what they’re saying is other people shouldn’t be allowed to do that using web browsing behavior in the same way we do it for search Behavior right and,
um a lot of people would say Google built this huge business they that business enabled them to get a ton of traffic and now that they have a ton of traffic and users are locked into their echo system,
now they’re making it way harder for anyone else to come behind them and do what they did right.
Apple equally like one of the kind of Nefarious things and all this is Apple,
sells ads you can buy an ad in the App Store.
Shows up in search to try to entice users to install your mobile app that you then make money on right and,
the number one place you’re competing with for that ad is an ad on Facebook to get you to install an,
and so what is Apple doing they’re making it way harder for Facebook to sell an ad to get you to install an app but it’s exactly.

[30:39] Equal I mean it’s exactly as easy as it’s always been for Apple to sell you that ad and so,
the there’s this weird conflict between antitrust and privacy and apple and.
Google are both rapping their themselves in the flags of privacy and potentially getting a little more smelly an antitrust,
and Facebook is the odd man out here right because,
privacy is controlled by the echo system the browser echo system in the mobile app ecosystem right so Google is the big winner because they have a mobile app and a browser the biggest browser,
um Apple has the most valuable mobile ecosystem Facebook has neither right so they’ve been a huge beneficiary of,
of programmatic ads and tracking consumers to create better add products and monetizing their customer base and now they’re their Destiny is the least in their own hands because,
all of that data you know is is going through these these doors that are controlled by.
By their there sometimes Rivals Apple and Google and so you know one way I like to talk about this.
These companies built these huge businesses and they’re trying to make it harder for people to follow in their footsteps it’s kind of like they climbed up a really tall ladder and now that they’re the top of the hill they’re pulling up the ladder behind them so that no one can follow them.

[32:07] Yes so Apple and Google or winners in this because they just control so much and then Facebook is going to be under pressure but there.
Ginormous so they’ll be fine but it’s you know
there’s an argument to be made it will stifle innovation in this this whole world because you know it’s going to get it almost impossible for another ecosystem to be born at this point because the new rules favor the the existing folks.

[32:33] Yeah so the way they think of that is definitely Facebook is a loser compared to Apple and Google in these changes but the only compared to those two compared to anyone else,
Facebook has this huge Advantage because they have a ton of their own users and they still get to collect first-party data about their own users when they’re on.
Facebook great so so a way bigger loser would be Conde Nast like someone that produces content and tries to monetize that content through ads,
the doesn’t have near the user base that Facebook has right so all of these content publishers.
Get more hurt by this than Facebook does and who gets more hurt than any of them is,
some new startup content Venture that that you know is going to be born tomorrow and it’s going to be much harder for them to build their business than it was the incumbents.

[33:23] Because the Publishers are almost all getting the optimization of their ads through either an app kind of a thing like we’ve talked about or through third-party cookies so they’re getting kind of the effectively ad-supported content is going to be under a ton of pressure.

[33:38] Exactly and and that’s particularly where yeah the third party cookies come in is the.
A lot of the ads you see on all those Publishers are placed by Google or Facebook using these look like audiences and and the third party cookies so that’s one of the.
The services that gets be diminished,
as third party cookies are less popular and increasingly people are consuming a lot of content and news through mobile apps,
so they would use the idfa to do those same services and and so the all of those things are breaking if if you were a mobile app.
Um that that monetized yourself by selling ads in your mobile app as many games for example do.
It’s the ads you can sell are going to be way less valuable after idfa is opt-in than they are today and so like yeah.

[34:33] Yeah how about user behavior let’s say I’m Best Buy and I have an app out there and I’ve got all this cool tracking where you know.
Maybe log in and out who you are but maybe you don’t log in and I try to do some personalization or something or even I have a little ad Network inside of there what’s going to broke break in the Best Buy app if someone
this idfa thing goes into effect I get that question and the way they’re working the question it’s essentially like you know do you want to sell your soul to the devil yes or no so so I assume a lot of people are going to say no do you have a point of view on how many people will say yes or no.

[35:07] Yeah so it’s all speculation and in the beta the the language has changed a bunch of times and so how,
the language matters a lot in the likelihood of opting in,
um so for example like same question it’s the same idfa question if I say this website uses your behavior across the web to improve your customer experience can I continue,

[35:34] A lot of people will say sure but if the if the question says this website tracks you across a bunch of other websites and uses that to sell ads to you.
Um Can can they continue to track the way you’re going to say no it’s.
So so the vernacular matters a lot it started out in these betas more friendly and it’s getting more overt.
I don’t think that that we’ve landed on the final language I actually do believe that in the release the Publishers going to be able to make a case for why you should opt in so I think they’re going to be able to provide some of the language,
but the text on the button they don’t get to control and the text on the button right now is pretty negative it says.
Wow to track it doesn’t say like enable experience or anything like that it says like allowed attract and viscerally people don’t want to get trapped,
so today the estimates are that about seventy percent of people have idfa turned on because you,
it’s opt out you’d have to opt out to not do it the.

[36:49] The speculation is that only 10 or 15 percent of users will click allow to track now.
Some of that is Chicken Little saying the the sky is falling right like Facebook is saying no one’s going to opt into that,
because they’re arguing in favor of changing it and not doing it right and so they’re trying to paint the most dire version of this for now I don’t know if they really believe that diversion or not but that that that’s kind of the order of magnitude we could go from.
Fifteen percent of the mobile apps having users that are identified or 70% having apps that are identifiable to 10.

[37:28] Got it okay back to my Best by example sorry so so now I’m Best Buy I’ve spent billions of dollars in this awesome app and
yeah I pop up this thing that says hey we’re going to try to offer you a custom experience and then the button says allow tracking then you know most people say no
what’s going to happen to my Best Buy up like what’s you know what am I going to lose as the retailer.

[37:51] Yeah so the in the app a couple of things like you.
You there maybe retargeting app ads in some mobile apps right so maybe you read The Wall Street Journal in a mobile app.
Maybe you read it through Apple news feed or you read it through Google news or some other app,
um their best by may have popped up a retargeting add-on that in that mobile app when it sees that you had a Sony PlayStation 5 in your box and they finally got them back in stock.
Hypothetical because I know they don’t have any the.
So the their ability to do those retargeting ads in other apps goes away the,
but the bigger deal I would argue for retailers and their mobile apps is,
the the amount of insight they get about their users goes away right so at the moment when your opted in and you’ve installed the Best Buy app on your phone Best Buy can use that idfa to see what other apps you run,
and so they can build.

[39:04] Profiles of you that they put in their customer database what they would call their CDP their customer data profile,
that you know say hey Scott is a Best Buy Rewards member he has the Best Buy Mobile app installed and we also know that he spends an awful lot of time in Pokemon.

[39:23] And so that they may find other hypothetically speaking of course,
and so they may find that like oh there are other other people in Scotts age bracket that are also rewards members and and spend a lot of time in Pokemon do this and so.
They could use that in a whole variety of ways so it gives them,
less visibility about their users I would argue that the third-party cookie changes more material for a wholesale retailer like Best Buy than the idfa changes because just to be honest.
Outside of a few retailers it’s a very small percentage of a Retailer’s traffic comes through a mobile app retailers haven’t been super successful at getting.
Getting their mobile app used but if you’re a publisher and particularly if you’re a gain in the game industry,
um the or if you’re in advertising and particularly if you’re advertising for installation and mobile apps those are all the.
The segments that are likely to get most wall up by idfa.

[40:29] Cool that is a good segue because it wouldn’t be a Jason Scott show if we didn’t talk about Amazon.
So Amazon is the one retailer you know you and I are we get a lot of the data and when you look at the comps core data
their app is kind of in the pole position it’s always the highest use retail app they’ve said,
think publicly that you know over half of their volume comes from the Apple app or the Amazon App what’s the impact to Amazon on both the app side and then also if they lose this third-party cookie thing what happens to Amazon.

[41:06] So there are negatives for Amazon in both,
so again because they have way more mobile app users then than others they get to they’ll lose some insight that they’re gaining right now about a big chunk of their customer base,
um they do run a bunch of ads all over the Internet and so they’ll have a little less visibility about how those customers are behaving on on third-party sites but,
all of that is outweighed by the fact that.
It actually makes buying an ad from Amazon way more valuable right so when when.
The idfa and the third party cookies are really about.
Um using behavior on one property to Target a user on another property,
and fundamentally when that practice goes away then the best advertisers are going to be the ones that have the most eyeballs on their own properties,
and the the cust the companies that know the most about those users about those eyeballs right and so you think about.

[42:22] And they have ads inside their property to it.

[42:24] Exactly and exactly so those those are called first-party ads and like they’re not affected by any of these changes so Amazon can still use.
Every browsing behavior and purchase Behavior you’ve ever done in the Amazon Echo System on their website or their app too.

[42:43] Run their own ads to you when you’re on an Amazon property or run any other advertiser’s ads for you while they’re on their own property right and so what happens is,
when the the open internet becomes harder to advertise on because of all these changes.
Um you’re more likely to want to buy ads in a Walled Garden where the ad network has a bunch of data about their users so you’re more likely to buy an ad that shows up on Facebook.
For Facebook users you’re more likely to buy a search ad on Google in their first party echo system and you’re way more likely to buy an ad on Amazon,
because you’re your ability to do cross-site advertising on Conde Nast content sites gets diminished so.
I would I would argue that well there’s some I’m sure there’s some negatives for an Amazon and some annoyances net-net,
it’s going to dry consolidate more advertising on to Amazon and and help them more to a lesser extent,
it actually makes it more appealing for other very large retailers to lean into their own advertising networks for that same reason so I would also argue,
Walmart for example is a beneficiary,
of this trend and you and we’ve seen them in the last year making huge investments in selling selling their ads they’re not as successful as Amazon.

[44:07] Their upside is actually as big or bigger than Amazon because they can also sell ads and now do,
two customers that walk in a Walmart store they show ads on the self-service checkout and they show ads on the TV wall and you can buy programmatic ads and all of those things through Walmart connect which is kind of their version of,
Amazon marketing.

[44:31] Publisher thing was interesting because it almost made me think well if I’m Amazon I go to Conde Nast and say Let me let me host your content and I can actually,
monetize it for you and you know I know Google and you know to some extent Facebook do that through that that accelerator you thing what does that three letter acronym for it where they do it because they claim it’s faster right.
But I wonder if you think you think that’s going to be part of what this does is it starts.

[45:00] It does it gives them leverage to keep more users on their echo system and it potentially Force other people to,
Syndicate experiences and content to them that otherwise might not want to do that right and so,
for sure like Amazon is a significant Publishers you know like they have their own you know the wildly popular TV channel and am in Prime video,
and now they’re doing live streaming video and they’re doing all these these and twitch that they already are a publisher so it’s it’ll be Supernatural for them too,
to leverage this endemic Advantage the another Super interesting impact along those same lines is,
today Facebook was perfectly happy to run an ad on its Network and then send you to a Shopify site to buy something.

[45:51] Right because they using third-party cookies they could actually know that you bought that thing on on the Shopify site and tell that Advertiser that they had worked,
um and and they had a nice little Echo System well with third-party cookies going away it’s actually way better for Facebook to say you know what we should be selling stuff on Facebook and so in in my mind.
Increases the priority on Facebook to capture the Commerce activity,
on their platform because otherwise they look at Amazon catch nipping at their heels and saying oh my God
Amazon’s running a lot more about their their consumers in their Walled Garden and we are in our Walled Garden and we’re going to keep leaking advertisers from Facebook to Amazon and so I think.
Facebook had already figured this out but I think this like really accelerates Facebook’s need to win endemic Commerce and I would argue in the long run,
that’s that’s not super favorable to Shopify because there’s a ton of the D to see companies that,
that have been most successful on Shopify like their primary source of traffic is buying ads on Facebook and increasingly Facebook is going to want to say hey let’s close those sales on Facebook.

[47:04] Yes one of the reasons I really want to talk about this because I started to read some articles that are.
And I can’t tell how Chicken Little they are but they’re essentially saying you know look a big chunk of the Shopify world is going to
be the attacked so supervised getting attacked from Amazon we’ve talked generally you know we’ve talked about this and you and I have different opinions of how,
how that’s going to happen but I think I think we all agree that Amazon has Shopify in their sights but now you have effectively Facebook’s been a good partner for Shopify,
but this change caused by Apple has a domino effect that if I’m now Facebook I want to cut Shopify out of that because I want to own the checkout so that’s another side and then
you know.
Some large percentage of Shopify sales are driven through these DMV bees and these brands that are by influencers that are really living off of either the third-party cookie to track that stuff,
or the you know the idfa changes it’s an app it’s going to change pretty dramatically is there a way to.
First of all do you agree with that and then second you know is this a 2% thing is this like half of half of Shopify I know they don’t disclose it but I’m just kind of wondering.

[48:21] Yeah I don’t think there’s any way.

[48:22] Scale of them packed.

[48:23] For really know and and again like this I think the.
The force behavioral changes are going to be pretty significant,
whether that Force Behavior change like really Wallop Shopify or not I think is even harder to predict and like again at the moment like everybody’s crying pop or right and it’s a little bit like,
everybody who’s under antitrust investigation you know says oh my gosh if we’re forced to split up like it’s going to be the worst outcome for consumers ever,
um and internally they may or may not really believe that but they want to paint the most dire picture so that you know they can mitigate what happens to them,
a lot of that’s happening right now right so I you know Facebook is saying hey an individual advertisers ad Effectiveness might go down by 50% because of this change.

[49:16] But it’s Amplified because they’re trying to make the same worsens.

[49:19] Yeah but they’re they are painting the worst-case pit picture and what they really mean is,
a Facebook ad that’s not on Facebook right which is like seven percent of Facebook sad so,
so seven percent of their ads might go down by 50% and but the as they’re on Facebook might be a little less effective because Facebook gets a little less data but it’s probably not as bad so.
I think it’s hard.
Um quantify these things but I do think it’s it’s potentially in a hate to use this word but like I think it potentially is a paradigm shift for some of these things and just just.

[49:57] A paradigm shift we need an audio for paradigm shift.

[50:00] Yeah we’ll have to get one of those but I do I think fundamentally like you have this open web and there’s this like notion of,
of interoperability between multiple sites and experiences across multiple sites and and as these privacy changes get locked down essentially what it does is it says.
The best most effective experiences are going to be,
for users inside of a Walled Garden and an inside of a large well-established wild garden the got built before these changes were implemented so it’s really favorable to the incumbents,
it’s really favorable to the the kind of fang.
Um guys of you will and I and you know they were already winning but I do think this this makes it harder to imagine.
You know some some new version of Instagram emerging and growing really big really fast or Tick Tock you know or you know monetizing as quickly or any of those kinds of things so.

[51:00] Do you think it’ll be like a severe enough that like it’s interesting you mentioned Fang because the in and Fang is Netflix and you know they have a massive amount of first-party data right so you know are they going to add like some publisher e kinds of things because they have all this data.

[51:15] I bet you they are all all of the good walled Gardens are right now saying hey some of that money that’s getting broken that was out in the rest of the internet like how do I get you know it’s more than my fair share of that.

[51:27] Right so we got some good stock picks from Jason straight away here.

[51:33] Yeah yeah side side out yeah I’m the world’s worst stock picker.

[51:39] Don’t take Financial advice from a chief digital retail idfa officer.

[51:44] Yeah you probably shouldn’t even take like digital Commerce advice from you for sure should not take stock advice.

[51:50] But here you are listening this show okay.

[51:52] I put all my money and get spiffy franchises.

[51:55] Awesome summer okay where do we go from here so I think that’s all interesting but let’s project forward a little bit you know cookies they’re kind of on their deathbed mobile app tracking is all this.
Open internet going to more clothes internet what were some of the Alternatives that are people and then I saw Google also just announced not only at the Chrome level but just generally they’re going to get rid of.
Tracking old school tracking.
But then they talked about this new thing which is kind of like some machine learning thing will just kind of assign you it was even keep your like because the machine will just decide.

[52:28] Yeah it has an awesome acronym but I’ll wait to unveil it for a.

[52:31] Okay alright where do we go from here and be sure to highlight all the awesome acronyms.

[52:36] Yeah so there’s a couple of alternatives to cookies right like so what.
The fundamentally the cookie got processed in a server and so what Google is saying is we think I’m more privacy Centric way is,
to keep all the personal data on the on the browser and never send it to the server so so a lot of these ships are too kind of move from server based solutions to browser-based Solutions,
the and I’ll come back to Google specific alternative in a minute as we already talked about like what this does a ton is push people onto walled Gardens for all of these highly targeted advertising networks because they get to all.
Um work with their first party data and nothing really changes.

[53:21] There are a bunch of third parties that have what I like to call real ID systems and so.
Side note cookies always suck they were they were highly imperfect we treated them like they were a person but they weren’t they were a,
a specific browser and a lot of people ran three browsers on their laptop and then they also had a different browser on their mobile device,
and oh by the way they may have set cookies to get deleted every two weeks or whatever like so cookies were pretty broken before and could only track you on the web,
so the big evil marketing Geniuses would say,
hey let’s make our own serial number for Scot wingo and let’s collect a ton of data about him,
um across all of his devices and let’s by data from the Publishers about how he behaves on the publisher site and let’s buy data from the credit card companies about how he spends money and we can build this huge.
Um database about Scot Wingo not some random cookie but about Scot wingo and then we can use that data to Target Scott so,
said the big evil ad tech companies have have these real ID systems and so.

[54:33] There’s a company called trade desk that has the unified ID they’re partnering with Walmart now live ramp is a big data provider and they have this authenticated traffic solution,
and my evil corporate overlords own a huge data provider called Epsilon and we have a product called core ID so so a lot of us are saying hey we have a better idea system then,
then idfa or third-party cookies anyway and and side note Google,
published a letter last week saying we think like we’re not going to ban those approaches but we don’t think those approaches are very customer privacy Centric and we don’t like them,
so there now is a dispute about the future of those but that you can buy those services from from any of these marketing agencies.
In the short run they’re certainly going to benefit from the these more popular options going away.

[55:31] A lot of people used to do what’s called browser fingerprinting which is they used a lot of signals from your browser to identify you without your cookies that’s mostly been banned by privacy laws so we won’t see a lot of that.
Um there’s increasingly this thing called clean rooms where a publisher and an advertising Network might bring their their uniquely personally identifiable data together too,
too kind of a,
a safe room that’s not on the internet and temporarily merge their data to build a targeting cohort or to build some some cross-channel analytics take the insight and then both take their data and leave so that they never kind of.
Give the other party a chance to see your steal their data but they get to marry their data temporarily so so there’s a lot of products kind of,
that are leveraging these clean rooms to do kind of batch processing now that we can’t do this real-time third party cookies and then the.
The the Google approach is to do what we what I would generally call cohorts so instead of saying hey we’re going to advertise uniquely to Scot Wingo because we know he’s a car Enthusiast and we’re going to show him Alexis.

[56:42] Google is going to build a cohort of people that it thinks are in the cars.
And it’s not gonna put that cohort on a server it’s going to put a store your membership in that cohort on your browser,
so an ad can pop up for Scott that’s a car ad in the car company can buy an ad for just people that have a high affinity for cars.

[57:05] The.
No personally identifiable information about Scott ever get sent to a server only Scott’s browser knows to show him that ad and so Google calls this kind of browser-based cohort,
a Federated learning of cohorts and they’re using machine learning to build them and so that the that F loc is an acronym flock f f loc and so Google’s,
official replacement for third-party cookies is the advertisers can buy,
ads based on on these these machine learning Black Box generated machine learning cohorts called flock.

[57:50] Okay Federated learning of coal that just rolls right up I like Flock better than Federated learning of many.

[57:58] The idea is just that like hey there’s going to be some taxonomy on your browser and there’s going to be a checkbox next to things that your browser thinks you’re interested in,
and then those are the things that you know they’re going to be like ads that only trigger when when your browser has one of those boxes.

[58:17] Got it okay awesome,
so as is our custom at the Jason Scott show we’re kind of getting past time but and you’ve talked about a lot of implications but it’s probably a good
kind of summary to kind of walk through all right you know so listeners out there they are they’re loving the Deep dive
what’s this mean for e-commerce world and then also the larger add world and the internet.

[58:42] Well so I think it is likely that a lot of digital ads a lot of programmatic digital ads are likely to be.
Either a little or a lot less effective than they were before and so the net impact of that is the amount that an Advertiser should be willing to pay for one of those ads should go down so the.
So CPM rates for advertisers will go down and in general what that means is if you built your business based on selling ads you gave away your game for free but you show Dads in the,
in that game you gave away your content for free on your new site but you sold ads in that content.

[59:21] That ad based business model is less attractive than it used to be so I suspect,
that one impact we’re going to see is a lot of people are going to Pivot from ad based business models to Alternatives right so that meat might mean.

[59:36] Some newspapers that were on the fence about ad-based or pay walls are more likely to move to pay walls because,
the ad model Works glass it means a lot of people that use Dad’s to find you and sell you one thing I’m more likely to focus on.
Customer lifetime value they’re more likely to want to sell you a subscription they’re more likely to want to lock you into a platform because all of these kind of,
one-time ad-based sales are just more expensive less effective than they used to be so I think those are kind of some of the,
the key changes I do think this cleanroom thing you know continues to grow and overall the big winners are the people that have the most first-party data have the most traffic to their own property so the walled Gardens the the big retailers,
ten to win.
You know I think this privacy versus antitrust thing is gonna you know get really ugly and play out in terms in all kinds of governmental actions and legislative actions and things and who knows how any of that,
that plays out.
And I doubt Facebook gets creamed by any of this but they you know they do probably slightly lose to Apple and Google and all these changes.

[1:00:56] Well it is happened again we’ve used up all our allotted time
for listeners that are with us and and enjoying these deep Dives we would love to get your review,
you know the the best place to review this is over on iOS in the Apple podcast listener so even if you listen somewhere else head over there leave us a review we would really appreciate that if you like this kind of content
that’s what keeps us going Jason appreciate having you on the show
this week if people want to track you on the internet or learn more about this this idfa topic work in the where would you send them.

[1:01:34] Yeah well they should listen to the Jason and Scott Show podcast first and foremost but you know you can also always find me on Twitter under under retailgeek and,
just a quick disclaimer the Jason Scott showed doesn’t track you or know you in any way and never will so.
Exactly so we but we sure do appreciate you listening and until next time happy Commercing.

Mar 4, 2021

EP256 - Colin Bryar former Amazon Chief of Staff and author of Working Backwards

Happy episode 256, our penultimate 8-bit episode! (we’re going to have to migrate to 16-bit for next week).

Colin Bryar is author of “Working Backwards: Insights, Stories, and Secrets from Inside Amazon” (affiliate link). This is the definitive book about the unique processes, programs, and culture implemented at Amazon which have enabled its remarkable track record of speed and innovation. Colin had a 12 year career at Amazon and served as Jeff Bezos technical advisor (chief of staff) shadowing Jeff in all meetings for a year. His co-author, Bill Carr ran Amazon Prime Video and sat on Amazon’s S-Team. These two had a front row seat to many of the most seminal moments in Amazon’s history.

If you work with Amazon, need to compete against them, or just want to duplicate their success in another field, you owe it to yourself to listen to the episode and then read Colins book.

Episode 256 of the Jason & Scot show was recorded live on Wednesday February 24, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 256 being recorded on Wednesday February 24th 2021.
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:41] Hey Jason and welcome back Jason and Scot show listeners
Jason as you know one of our favorite topics here on the Jason Scott show is Amazon their culture and different business strategies tonight on the show we are really thrilled and excited to welcome Colin Breyer he’s an ex Amazonian and co-author of the brand spanking new book working backwards
welcome to the show call.

[1:03] Thanks for having me on the show happy to be here.

[1:07] We’re excited to have you Scott in particular as a huge Amazon Fanboy so this is a he’s trying to be cool but this is a thrill for him.
And so Colin Scot introduced you as an ex Amazonian but maybe you could tell us a little bit about your background and how you came to Amazon and what you did there and then you know what you’re doing now.

[1:29] Sure I moved out to Seattle and 1990 and worked at Oracle for about five years I was
so consultant red wire and after 5 years I realized I didn’t even know what Seattle look like so I left Seattle and started a company with.
With two other folks Charlie Bell and Kevin Millar and what we were doing at the time so this is in 95 were helping companies
take all of their internal data and help them expose it on what was then the nascent world wide web and most companies you know
we’re struggling to do that and we worked with a bunch of larger companies out here in Seattle Microsoft Boeing and then some companies are like tear W outside of Seattle.
And one of the small companies we work with was called
and we realized that there was a really special place so from the moment we stepped in through the door and so we decided to join Amazon and that was so I joined Amazon in March of 1998
and Amazon was only a Bookseller
just based in the US and there were probably about a hundred people in the corporate department and 500 people and total and customer service in the Fulfillment centers
so it was a.

[2:51] You know very special place in you could tell that something something was going on and it wasn’t sure if it was going to work yet but things are moving fast and customers were validating what we were doing and
the press and pundits sometimes agreed and a lot of times they didn’t but it was fun to see Emma’s on transform from they did.
147 million dollars in Revenue when I started to and now this last quarter was a hundred and twenty five billion dollars in Revenue so it’s been fun to be part of that transformation.

[3:21] Yeah they’ve had to stretch the the cells on the Excel spreadsheet a little bit since you started and a hundred employees so I’m trying to think would you have gotten a desk that was made out of a door or or did you have actual furniture by then.

[3:35] No I had a door desk and you know he’s still get to our desks and I was lucky enough to my the email address was just Callin to so it was a pretty small place then.

[3:46] That’s that’s very cool and then.
You did a couple different roles in Amazon but one of them in particular is a pretty cool role and you might have if I am going to pretend like I didn’t read your book but I did you were the second person in the in that role right.

[4:03] Yes so I started out in the software group and worked there for about five years and then I was Jeff Bezos is
the internally the roll is called the Shadow or technical assistant and externally it’s more akin to a chief of staff and so I got to spit was very very fortunate to spend.
10 hours a day with with Jeff participating in the meetings and you know seeing how.
He thought in and was planning on on building a very large organization to be what he termed Earth’s most customer Centric company.
And it wasn’t just technical issues I got to experience everything from the Fulfillment centers legal PR
the commercial group the retail groups and also she has some pretty deep dive technical issues too.
So I was very fortunate to have done that and then I spent after that I went to IMDb The Internet Movie Database is their CEO which is a wholly owned subsidiary of Amazon.

[5:02] Yeah and as I understand it the the the technical adviser primarily entails training up Jeff in tennis to get him ready for celebrity tennis tournaments is that.

[5:13] No that was a very small part of my job was less than a day yeah.
So yeah that that was an interesting Adventure but really that what the job entailed was two things you know when Jeff he asked if I wanted to be this next technical advisor and
you know I did rather than jump at the opportunity I said can I take the weekend to think about it but first can you please tell me what
um success looks like in this role because it’s too important of a role and I’m to take if I don’t think I can be successful in this role and he said well the first thing is you know just to help.
Jeff Lewis helped him be a better CEO and you’re making sure that the right issues and teams get in front of Jeff and.
And I could go places in the company that he couldn’t but then the second part is the way he put it is a we want to be able to model how each of us think.
So after this role ends when you go somewhere else in the company
that’s going to have a pretty good idea of his vision and your core tenants and Leadership principles and be able to move into the company so it is a rotating role and I was in that role for about two years.

[6:27] That that’s amazing and the present your predecessor in that role was Andy Jesse wasn’t it.

[6:32] Yes Andy was the first technical advisor and you know relied on his advice and counsel do you do too
tell me what I was getting into and you can see the phenomenal job and he’s done since then you know there aren’t too many people who get a chance to
to do this role so I realized I am very lucky to have been one of those people and you know one of the reasons bill and I decided to write this book was to talk about some of the principles and processes
that really are you know that secret sauce of what makes Amazon work.

[7:10] Cool let’s let’s dig into the book The the book is split into kind of two parts you have
the first section which is being Amazonian and then the second one which is kind of case studies of applying that called invention machine at work
in the Bing Amazonian section you guys go into a lot of my favorite topics and sadly we only have you for an hour I feel like I could
essentially just talk about this forever but you talked about the Amazon leadership principles the six-page note that is the
kind of the Keystone of every meeting the bar raiser program
left I thought it would be appropriate maybe just started the title concept which is working backwards give an overview of what that means and you know maybe an example
don’t use AWS causal ask about that later but as an example maybe a of how that gets used inside of Amazon.

[8:07] Sure so working backwards it’s a very specific process used at Amazon
to look at ideas to vet them and decide whether to bring them to Market be it a feature of opening up a new business
and if you have to remember one thing about the working backwards process it’s this it’s that you start with the desired customer experience and then you work backwards from that.
It sounds simple it’s actually pretty hard to do and it’s different from how a lot of organizations make decisions a lot of organizations use What’s called the skills forward approach they look at things and ask questions such as
what are our core competencies we know what are we good at what are our competitors doing.
And how can we nudge into this adjacent Market if we get 10 percent market share what’s that going to look like and you know a SWOT analysis the strengths weaknesses opportunities and threats is a typical analysis that.

[9:01] Companies use to decide what to do next but often a word that doesn’t get mentioned in that analysis at least up front is the word customer.
So Amazon decided to invert that and and say we want to make sure that the customer is front-and-center from the very germ of an idea.
And so Amazon developed this working backwards process.
And the primary tool that Amazon uses for the working backwards process is the pressure release and frequently asked questions document so it’s a type of narrative called the pr FAQ document.

[9:37] So that if anyone has an idea and again this works for something as small as a new feature on the IOS app or if Amazon is deciding to get into a whole new line of business or move into a brand-new geography
the first thing that a the person who has the idea or the team that has the idea does is they write a one-page press release so it has to be one page or less.
If which forces you to really crisply Define the idea and the press release has a couple different components one is a clearly defined what is the customer problem you are trying to solve.
And you know and that also it can take a couple of iterations that in the next part is you have to explain to the customer.
Why they might be interested in using the feature or buying the the product.
And then you go on in that press release you typically you can use a quote from a customer or if it’s a something for a partner the partner talks about why how this actually solve their problem.
And if you and so this is an iterative process once you write your press release.
You read the press release and if you don’t want to go out and buy that product or use that feature the service you stop and you rewrite the press release until you get it right.

[10:52] And then the the next step in the process is the FAQ process and you can break that up into two primary components and external FAQ and an internal FAQ.
And that external FAQ are think questions that you ask an answer that would typically go to customers or if the Press.
How much is this product going to cost.
Why should I use this product versus what’s out there on the market why should I change my behavior and what’s in it for me if I’m going to go through some extra steps to go use this product or service.

[11:25] The internal FAQ is a series of questions and answers about.
What are the tough problems that the company is going to have to solve in and how are they going to organize.

[11:36] To actually get together and solve these problems to bring this idea to Market so if some examples there could be.
Kim can’t how and can we build this product with the bill of materials that’s less than 200 dollars to get out to the market at the desired price.
Taking me technical issues what are some unknown technical problems that we need to solve.
And how are we going to organize and approach and solve these problems Legal Financial issues or
privacy issues or if it’s a sales B2B this requires your Salesforce do we use a direct sales force or we’re going to partner with someone.
And there is this is all an iterative process and a lot of ideas don’t actually make it through the end of the working backwards process.

[12:21] And the ones that do have gone through many many iterations of meetings where people weigh in you’re missing a key.
Fack you know so let’s go ask an answer that and come back next time.
And if this is by Design By the way because it’s meant to one ensure that the customer is not forgotten
but do it saves time because it saves you from moving in the wrong direction you know people talk about speed a lot is important
but velocity I think is is important in velocity is the vector a and the vector of speed and direction so this helps you make sure that you’re moving in the right direction at the beginning and conserving what’s typically
companies bottleneck resources which are Technical Resources.

[13:09] The so it seems so then you’ve got this idea Factory right and everyone’s creating these things.
And I imagine they’re all pretty good then at some point someone’s gonna have to decide like there seems like there’s always going to be an abundance of them even the ones that you know even given that some don’t make it through.
So then does does Bezos just essentially say all right here’s the top 100 we’re going to draw here like who’s sorts these things in part eyes as I’m how does that work.

[13:37] Looked it’s typically it goes to who’s ever controlling the the set of resources that need.
You know that are needed in order to get this done and for a very large.
Initiative or what Amazon calls a one-way door once you do it you know it’s very expensive and difficult to roll back that will float up much higher in the organization but it could be you know as simple as we want three people to go work on this new feature on the website so whoever controls those whatever the
appropriate management level is that controls those resources that’s where it gets done and you’re right in that very
most people have good ideas it’s just is this idea we’re doing is it big enough and is it in is it worth doing now those are the the types of questions that you have to ask
given the resources and constraints that the company has so for low very large projects that goes up to the.
Esteem The Witches Jeff’s you know.
Direct reports the management team but most of them are smaller than that because Amazon usually works Inseparable teams and so who’s ever controlling those single-threaded separate both teams typically makes that decision.

[14:53] Yeah let’s so
Let’s do an example a simple one in this is Jason’s favorite let’s say house plants he always used to use this one to something that Amazon I guess wouldn’t do and now they do so so I have the idea to do houseplants I write a press release
Amazon now ships houseplants and I talked about how we have.
They arrive at your door fresh and you know a selection of thousands and you know but then do I have to tell you like how do you sighs that opportunity versus I don’t know.
You know B2B cogs are widgets and cogs.

[15:33] Yeah so
that you first of all have to one of the questions is in the fact you have to address what’s the town that the total addressable market so how big is this idea you know some typical questions would be.
We don’t have life things in our fulfillment center right now how do we handle you know how do we handle that and you know what how long can they stay in the Fulfillment center before they need attention you know Electronics depreciate you know
some of them appreciate 10% a month plants die if you don’t water them I would so you know you’d have to address issues like that how are we going to keep our inventory alive before we get it out to customers and then
but in terms of it’s a great question about how do you balance that with a B to be completely unrelated project and.

[16:24] That that prioritization is really tricky and It’s Tricky for a couple of reasons because.

[16:30] Even out the the pr FAQ stage you don’t know
really how big of an idea this is because you don’t know customer adoption that’s very tricky to predict even if you have a great idea and you don’t know how long it’s going to take to build and deploy the
the technology or that you know the heavy lifting infrastructure to handle plants in this example and so Amazon
a lot of times what they do instead of made it making that prioritization decision they take a step back and make a resource allocation decision for given areas and for this one that would probably have been done in a yearly planning cycle
to say we are going to devote for our B2B efforts we’re going to devote this many people are you know these many organizations or groups are going to
very large now but are going to focus on B2B issues and here’s the
you know new category expansion for the the retail business and if you do that up front and then you have your the teams are at that point separated
then you don’t have to it’s hard to prioritize between apples and oranges
and so Amazon doesn’t want didn’t want to make that prioritization decision because you often get that wrong and so just taking a step back and use a different decision making tool which is resource allocation and you do that you don’t have to do that every project
you can do that once a year or once a quarter and then balance resources as more data comes in.

[17:59] Yeah and then and then what’s the so alright I’m in the B2B group and I’ve got my you know is it,
what’s the unit of allocation for resources at people hours is it dollars is it gummy bears you have seen people do all these really weird things where they’re kind of like you know you get this mini you know
seats on a train if it’s engineering how does is there such a thing at Amazon like that.

[18:23] Well there are you know there are some constraints and you know setting hard constraints at the beginning of a planning process actually
it typically saves iteration you know if you say hey send me all the any ideas you want your ask is going to be much bigger than you could ever do
and so setting some constraints about here’s the
free cash flow that we anticipate we’re going to have to invest back in the business some of it are just you may want to do something but
you may not be able to hire a hundred software engineers in the in the time you need to hire those people so you could say here’s our staffing and here’s our hiring rate for the year so.
We have what we have at this point in terms of Technical Resources
but it’s a combination of what it’s resource constraints and in some cases it could be dollars and some cases it could be bottleneck resources like software Engineers or data scientists
or it could be you know fulfillment center capacity so you have to know what your bottleneck constraints are and now that would be how you make those types of decisions.

[19:28] So in my plan example I’m going to say I need you know I need the retail team to kick in and create a category for me and I’m going to need three developers to add all the attributes for houseplants and I’m going to need
a photographer to take pictures of them and I’m going to need a greenhouse outside every fulfillment center and I’m going to need a I don’t know
what is a.
Plant person to you know an expert is it kind of like that like some of them I’m drawing resources from other teams and others I’m hiring or how does that get expressed in those that process you’re talking about.

[20:03] So for for some of them will touch other other teens and
Phantom Zone we talked about Loosely coupled teams not completely separate and independent so there are some shared resources and you know especially for smaller organizations you’re not going to have.
Illegal rep you know that for each of the small groups you’ll kind of share those
those resources across there but you would need to identify here are all the things that we need to get done and you know in terms of Transportation Logistics design and and for this those shared the pools of resources that you are going to have to
get some of those allocated for that period of time but that having been said if the issue if the the idea is big enough
you know you you can justify getting those resources on your own and one of the things that when a great frequently Asked question is that’s been asked several times at Amazon is
what things are outside of your control.
Do you wish that you had under your control and how are you going to organize and how would you organize to to bring those things under your control and that’s a continuous process you know if it’s your always short design resources for instance
and you work too.

[21:24] Get design resources on your own team somehow if that’s the right answer or if that Central group you needs to grow or double in size you know there’s not there’s often not one.
Universally right answer for every company but knowing what things that you’re it’s.
Amazon wants people to be control in control of Their Own Destiny and so asking
what things are outside of your control that and because it’s hard to ask people to be accountable when you don’t give them resources to get things done so Amazon tries to make sure that that happens.

[22:01] Awesome and calling you’re being like really polite by humoring Scott but the reality is his one-pager would never get off the ground because if the
if the one pager was Amazon now ships plants that’s not very exciting the one-pager should be Amazon just shipped its billionth plan.

[22:17] Yes yeah you have to attack it does have to be a big idea to work you know.

[22:23] Ink I think that’s increasingly true right as Amazon becomes a bigger Enterprise those those new Ventures have to have to be bigger to be relevant.

[22:35] They do have to be bigger to be relevant one thing Amazon is is unique is their patient you can plant seeds so some of these things take years to grow
into something big and you have to.
Yeah Jeff put this in one of his shareholders that you have to have the institutional memory to know what it’s like to go from you know a 1 million
Dollar business to 10 million dollars to fifty million over relatively short period of time that’s not going to move the needle in a hundred and twenty five billion dollar quarterly business but.
Given enough time and if the total addressable Market is big enough.
Then it is worth doing and you do need to be excited about those types of things and pay attention and to them and you know cult
I guess the seed analogy is apparently a proposed since we’re talking about house plants but Amazon is patient and if it’s big enough they’ll wait and work to get it done.

[23:39] The so I want to Pivot a little bit the if we didn’t spell it out up front the the book is really a tool to give some insight.
Into how Amazon organizes.

[23:56] It steams and runs its business and and the structures and Frameworks that Amazon has in place to be shockingly Innovative in spite of their.
Now tremendous size and success and you present it in a way to try to help others.
Decide if and how they would Implement some are all of these things in their own organization so it’s sort of a business manual if you will.
And you you kind of go through a bunch of stuff though wieder ship principles which I think there’s 14 leadership principles now the bar razor program Which Scott and I have had several of our razors on the show is guess.
Um which is Amazon’s hiring
process but one of the things that comes up a lot in the book and that you’ve referenced a couple of times already tonight is this concept of single-threaded separable teams and sometimes referred to as though I to Pizza teams for example.
I’m wondering if you could talk a little bit because I think you were there while that sort of before that that philosophy was fully embraced and as it was implemented can you talk a little bit about.
Um how that came to be and how that has served as a Advantage for Amazon.

[25:12] Yeah sure sure I can do that and you know the the areas that you mentioned that one of the reasons we wrote the book was because a lot of this work is you know it’s under the tip of the iceberg it’s things that people don’t see but in people ask always ask how many
Echo devices are sold this quarter or how many Prime members are there going to be and.
Well that may be interesting it’s not that helpful to most organizations and we felt that Amazon had made some significant advances in the field of management science.

[25:44] And that’s why we tried to put all of these Concepts together to say here’s how
you can take a small organization and use some of these principles some of them were inspired and you know stood on the shoulders of other companies before us
but so we tried to organize them in a way that’s useful and helpful for the reader and in terms of separable single-threaded leadership
that one was a journey
you know for instance writing narratives you can just say we’re going to switch from slides to narratives and make that change which is what Amazon did you may stumble a little bit and it takes a while to write great narratives
but that’s an easy change figuring out how to get to this single separable single-threaded leaders
was a multi-year journey and you know when I started at Amazon you know I’ve started in the software group and and
Amazon was growing so fast but it was already so large that there weren’t any there were very few commercial software applications that you could buy
to help solve the problems that we are trying to solve we are already well beyond the tolerances of most commercial software so we had to
build and build fast just in order to keep the lights on and this is in addition to opening up a new geographies or internationalizing the code base and.

[27:09] Moving into these different categories which you know they have different attributes so you got it
you have to change how its search looks like with the order pipeline looks like if you want to do a Peril you need to have size variations like size and color you know books don’t have variation so it was very easy but we realized that we’re adding a whole bunch of people
and we weren’t moving all that much faster and even worse we are spending more time coordinating than
actually doing and you know so that ratio is was getting out of sync and one of the things that Jeff is
appraisals is particularly good about is you can take a look at a trend in then project it out when what is this going to look like five years from now is he 7 years from now and
the prognosis was not good we had a tangled.
Code base and you know it was all one executable even at one point for the website was called overdose.
But and so that meant you had a you know.

[28:09] Couple hundred software Engineers working and stepping on each other’s toes someone would change something that you didn’t even know and it would break your stuff for or vice versa and then if you wanted to get something done
you often would have to control another group to say hey can you work on this you on this library and so how can you change some of these things
and we realized that what so we had a huge technical problem
we also had an organizational problem you know those same the same dependencies existed on the organizational side you’d have to go ask for resources from the design team or from the Fulfillment center team and to figure out how to
to get things done and a lot of companies what they would do is they would build.

[28:53] Better processes and we build solutions for collaborating and communicating and Jeff
did said just the opposite he said I would like to have an environment at Amazon where we don’t have to collaborate and communicate.
And we have small separable teams and we started off with the idea of a two Pizza team
and and the reason it was called to Pizza teams as because two pizzas should be to be able to feed the entire team so you couldn’t really have a team more.

[29:24] Scot and I would have to be individual teams that.

[29:26] Yes.
Yeah that was that exercise those left to the team owner but how much PC would allocate but Engineers don’t like to go on hungry stomachs so and so we tried separating these teams and.
But in order to do that you’ve got to change your technical architecture and you also have to teach people how to be autonomous because in this prior environment you know.
You couldn’t do anything really on your own you had to go ask so many people that it was more top-down here’s the next thing we’re doing and you know so next quarter you’re going to be working on an initiative that you didn’t even know about the quarter before it was kind of disheartening.
And so we had to untangle and the code base build What’s called the services based architecture
a lot of people do that now and you know it sounds easy didn’t really exist at the time so we’re it also inventing a lot on our own on how to build this type of architecture
and then we had to separate the decision-making process for the or two.

[30:28] So some roles in organizations like a chief product officer kind of go away
because you want those product decisions to push them down to these small separable teams you don’t want to have one person or group make all of the
product decisions and you know same thing with that engineering decision so we had to decouple and distribute that
and you know white where said it was a journey that stuff was hard to do we also had these things called Fitness functions which were basically a composite metrics that would a single metric.

[31:01] Which is a composite of individual ones that would measure the progress of a team and we realized we were spending
whole bunch time arguing over you know should it be twenty percent speed of the service and 60 percent revenue and you know and you know 20% something else and it just was a waste of time and we so we
we stopped doing that in the fitness functions and it turned out what was the.

[31:24] I would say the high order bit that made them work as their separable teams but a single-threaded leader
and the best example I can give the this at Amazon is there was a project called
self-service order fulfillment and we don’t have exciting names for some of these internal projects but what that meant is we we knew that we wanted to expose some of our functionality in the warehouse the logistics centers
to third parties and so we wanted to make it self serve where people could fulfill orders and it
was it good idea but it never got done and when I was working with Jeff as as technical advisor we would do we would go in for an update on it
and it would be yeah we have to talk these eight other teams and we’re making some progress the next update six weeks later there’d be a different
person giving the update and your different leader and it was kind of this rotating thing and so finally Jeff said Bezos said to Jeff Wilke who was running the opposite group at the time said you need to assign a senior leader
can’t you do to make this happen and I want that person to work on self service order fulfillment and nothing else but self-service order fulfillment and so Jeff Wilkie chose Tom Taylor who is a VP in the group
Tom had a big job at that time and you know Jeff Wilke went in and said your big job is no longer you’re worried you’re going to work on a project that
is risky it doesn’t generate any revenue and it’s and you’ve got to go figure out how to do this but.

[32:53] I’m woke up every day figuring out how to organize and get this thing done and not you know is it year year-and-a-half later
it launched into what was now called fulfillment by Amazon so very big business and I’m not sure if that would have gotten done it certainly would have gotten done at the time you know.
The time it took to build something that big without Tom and a single-threaded leader so Amazon took that and use that as a model to for how to get other things done.
And Dave Lim who is the senior vice president of devices now at Amazon has a great quote
and he says that the best way to fail at inventing something is by making it someone’s part time job.
So that that is an example of where your Amazon just took a slightly different approach on how to organize around.
Really working on the things that matter and that will drive the needle.

[33:43] That I love that and it one of the things that’s fascinating to me about it is it seems like it’s worked bofur.
Technical as a technical solve like it like you guys organized software that way and apis and and the sort of space architecture and all that and you’re organizing.
The human resources that way as well and it seems to apply equally to both I do have one question though.
From what I hear the one thing that doesn’t seem like a jives perfectly with that is it seems like you hear a lot of people talk about the s team and and you know the biggest decisions in the company getting elevated to the s team
in a way that s team sounds like kind of the antithesis of.
Single-threaded readers if there’s you know like at the s team it sounds like the finance guy can critique the software approach or vice versa or those thing am I misunderstanding.
How the s team works.

[34:35] The way that that the the operating Cadence at Amazon is there’s a yearly planning cycle where you have some tent poles.

[34:44] About just what are the constraints that the organization has to face.
And you know each team then or group comes in with their it’s called the operating plan one their op1 plan.
About what can they do and they come in with the resource ask and at some point you do have to rationalize.
If the ask is bigger than the individual resources you do have to figure out how you’re going to take a fixed pool.
Of capital so I think you know a comment we get a lot is
well Amazon has unlimited capital and unlimited software Engineers that can just appear magically whenever you need them at the door whenever you need them that’s not the case there and it was actually it was very difficult to get resources allocated to
a project that you are working on so there was some friction there but it was by Design.
But what did not happen is there wasn’t a lot of thrash after that after you make that allocation so here’s our yearly plan and rather than say what the team needs to do and how they’re going to go do that the team would commit
given this set of resources that I now have for the upcoming year.
Here’s what I’m here’s what I’m going to commit to and here are the set of initiatives that I think are going to get me to you know to achieve these goals so you do what what I’ve seen.
Some people go overboard with these separable teams at and just make them totally autonomous
and and I think that you need to come back.

[36:14] You know once a year sometimes even once a quarter just to check to make sure you’re moving in the right direction the right direction and staying true to what you you know sanity check on are we making progress on the goals the company goals that we want.
So there is a true true up. But it’s on a yearly basis for the most part in the operating Cadence of Amazon.

[36:37] Well that’s interesting you run on these annual Cycles but let’s say.
I don’t know some earth-shattering new thing happens in the middle of that cycle what’s the process for kind of is there a like in scrum or agile software there’s a way of kind of just saying.
Scrap everything we’re going to reorient it is is that a thing at Amazon or know you stick to these annual cycles and don’t deviate.

[37:00] You need to take a look at the data that comes comes in and adjust and in so I.
Don’t know if I’ve ever seen a yearly plan executed a hundred percent exactly if you were good to go back year that everything
happened the way that we thought it would you have to move fast you have to move with
less information than you would like you know about 70 80 percent of the information you have to end to make the decision so you also need to pay attention to what’s going on and to be able to adapt quickly you know there are some times where.
You’re like Amazon Prime for instance is a good example where.
There are exceptions to the rule hey we’re going to go launch Amazon Prime Jeff said this and it would there’s an October and we’re going to launch it by the end of the year it was a
you’re not the biggest project Amazon did that year but it was it was a substantial one and it was a fairly short period of time so there are exceptions to that rule and you do need to
you know to be agile
the group do that has committed to achieving certain goals that STM doesn’t really tell them how they’re going to go with cheve those gold so if something changes the group you know the group.

[38:16] And question adapts and they can say hey I’m no longer going to work on Project a because Project B or does new project that I didn’t even think of you know back in op1 comes in the fall
is now worth doing so I’m going to set these other things aside and you make that exception the planning tools to help you make the right decisions but if more information comes in over the year
to tell you that hey if you stick with this thing you’re going to make the wrong decision you know you change the plan.

[38:47] Got it and then says that’s been super helpful to walk us through those different
principles and then second half of the book you kind of think of them as case studies and that’s the invention machine at work.
I was going to ask you about AWS but then it occurred to me I’ll make it your choice so anything you want to talk about what would be a good example for listeners of you know
in your in your memory of how Amazon applied some of these things and any fun stories in there always always welcome.

[39:18] Yeah we’re going I’m going to talk about AWS and and so you know Kudos huge kudos to Andy jasion and his team for inventing cloud computing but
a couple things that are I think know too little about the evolution of AWS so Andy you know there were signs before well before
S3 and ec2 and the
queuing service were the first three AWS services that came out well before that there were signs that either something going on here with web services it’s just a better way to build software
and our internal software and you know Engineers were using it we were using it with third-party Sellers and with affiliate program and Andy had put this plan together.
It’s been said you know there may be something that here and we should adopt this you know model and go try it.
And any could have had any job that he wanted.
At the company at this point he had just spent I think it was a year and a half working as Jeff’s technical advisor and he chose to go to a non-existent business that had a.
High level of risk
we also didn’t know where other companies were on the path of inventing cloud computing we were looking at the same data that people.
Microsoft Oracle IBM Google we’re looking at boot go to some developer conferences and see the same Usual Suspects there.

[40:47] So we had no idea what they were doing so what I think one notable thing is that it’s okay at Amazon to go take a risk it’s not a career.
Breaker to go from a big business to a small business or from you know.
Job where you have a lot of head count to go start to build the new idea and invent something and that’s one thing and then two is that.

[41:10] We talked about the working backwards process
especially for something caught the term cloud computing didn’t even exist then and the initial ideas that we had about web services is what we call them in the beginning
we didn’t know what the fundamental units were and you know so ec2 is the elastic compute cloud and that’s
your computer you buy compute units of compute power in the beginning we thought that was really going to be
provisioning which was a problem that we had internally a teams would write their software and then
they wait six weeks for the hardware to arrive and for people to provision the hardware and then push it out there it was also hard to also get the right software on each of the computers that you needed and then if the I didn’t.

[41:57] If the idea didn’t take off reclaiming that Hardware so you could send it to someone else was another big heavy lifting project but so we thought it was going to be provisioning
but there is a journey that we went through and for AWS we basically wrote documents for about a year and a half
and reviewed them it was you know Andy and whoever the if it was the compute team or the the storage team
and Jeff and I would be in a room and we’ll be reviewing documents sometimes we wouldn’t get past the first page because we realize hey there’s an issue here that we don’t really understand or we haven’t gotten to the
you know really to the core of the issue or defined what it is for the customer
and you know they’re in some metaphors just popped up during this time where one very powerful one is that we want to provide the same world-class Computing infrastructure to a college student in a dorm room
then someone who works at a company like Amazon and and that really clarified things and you know the other thing with S3 is,
you how does three fail you know you can either have it fail for an hour a year which is bad if you have.
Hundreds of thousands of businesses relying on it or if it does have to fail you can have it fail gracefully.

[43:14] But just and you know one transaction every you know
couple million transactions a oh go try it again that’s it those are two different failure modes and you have to build something very different.
And we also knew that outgoing once this thing got out the door it was going to be hard it had to get better as it got bigger
so you couldn’t throw this thing over the fence and then decide what to fix because so many people would be relying on it’s a much different relationship that you’d have.
So just the I think in the notable thing about AWS is it was an experiment.
And we felt weird in a land rush we wanted to get out there first it would by no means ensure success but it sure would help.

[43:57] But we stuck true to what we don’t haven’t really defined you know you were using this working backwards process we haven’t really defined what,
what we’re trying to solve and and really identified that the core technical issues and then you know there was also some astounding engineering
work and it advances that the web services team did that went along in the background because we knew sometimes what we wanted to do but we hadn’t figured out how to do it.

[44:23] So just the Journey of getting a brand new idea and you know for a company to be able to say this is not our Core Business.
But it is something that we have we think we can do as good as anyone else on the planet and it’s worth worth trying
there are some Skeptics inside Amazon and even at the board level about you know why
why are you doing this when you’re still trying to get your retail business working and improving on the retail business you know prime it just lunged at that time so be willing to be misunderstood.
For a long period of time if you go back and look at some of the quarterly announcements Jeff would say well we’re working on it was web services and digital and and.
Said that for many many quarters and those turned out to be two very large pillars of the company but they were started out from you know.
Risky ideas most companies had made the transition from physical delivery of goods to be a pure digital player in terms of movies
Books and Music also so that was just another transformation that happened.

[45:32] Happy to go into more detail on it on any of that but I think the notable things are what Andy did and then also just sticking to the working backwards process because ultimately you want to solve customer problems and if you’re in and if you solve customer problems
it will work out in the long run so Jeff firmly believes in he
you know told us all that in in the in the long term the interest of customers are perfectly aligned with the interests of shareholders
and so if you do what’s right for your customer it will work out in the long term and you’ll build a company that he can be proud to tell your grandkids about.

[46:07] Got it when did maybe you you left before then or got moved to something else but like when did when did you know or Amazon know that the cloud thing was going to be pretty big.

[46:23] We had you know we had a suspicion that it was going to be big and and.

[46:31] I think that it wouldn’t it wasn’t really proven until you when S3 first launched it was.
It wasn’t an overnight success.
But once another service ec2 came with it where you know you weren’t you didn’t use a storage service and then have to move over to your own data centers to handle something
once ec2 and S3 started working in conjunction it was a lot easier to build some pretty cool applications and you know that was another
tenant that we developed during this working backwards process.
Present a single service in itself is it going to be all that useful you need to have you know a critical mass of services that work together in the cloud
in order to really make larger organizations you know to jump on the bandwagon and start using it.
So I would say you know after ec2 and launched and then you’ve got to see what people did with the ec2 and S3.
We knew that that rocket ship was going to take off.

[47:34] Yeah this is where the Tam things tricky right because I’m sure the original paper the tan was pretty small and you know now it’s probably like thousands of times bigger than that original tan anticipated.

[47:47] You know for success is this large you know you can think big but that’s total addressable Market we did know that there’s going to be a new paradigm on how to build and deploy software.
And if we could do it it’s basically the business-to-business software Market you know that that’s huge.
And answer so we knew that it was a large number you know virtually.
Unconstrained if you want to think of it that way in terms of if you can get it right there’s a lot of work and you know even right now you take a look at the total compute.
Our you know that that’s going on are the software development it’s still there still a lot of Runway ahead of AWS.

[48:31] Yeah and another thing I don’t know where this lands in the principles but then there’s this very unique to Amazon think other people are copying it now but this whole idea of you know Walmart would have taken that.
That infrastructure and they would have viewed it as this super proprietary kind of a thing that they would use internally right where does that culture of opening it up.
To external users where does that come from.

[48:58] I would say the root of it comes from customer Obsession and I’ll give you an early example of something like this which is where Amazon wasn’t you know owned all of its inventory.
And and so when you went to a detail page a product page on Amazon there was only one seller it was Amazon there’s only one seller on the platform.
And it was a controversial issue to say should we open it up to on the on that product page to third-party sellers we had tried in auctions.

[49:27] Product on a separate tab at the time and if you remember those then there was something called Z shops and turns.
Known went over to that neighborhood because all the cool kids were over on the product page of detail pages of Amazon and in you know the for instance you.
The head of the retail group or the head of the electronics category would say are you kidding me
I’ve done all this work to get my scarce allocation from these vendors you know try to get sharp prices on them and try to keep them in stock and now you’re and and I’ve created this great detail page for this electronica
item and now you’re going to let any third party cell right inside my store now you know how is this does this make my job easier and and how is this good for Amazon
and once you know and it was Jeff who said looked at it and said well
where how big amazon gets it’s still going to be a small part you know percentage of overall retail and and ultimately we’re in the business of allowing customers to make purchase decisions so if we don’t have the product in stock.

[50:38] We want to eat we want that we still want the customer to be able to buy that Earth we don’t have the lowest price we still want them to be able to come to that detail page and conduct a transaction to find out more about this product.
And buy it and if you want to make that product page to be the best place on the web for that particular item you have to have multiple sellers you have to have the best item Authority information about that and yeah by the way you now
is the general manager of the electronics group your job is a little harder but you know it’s it.
Making these things making your job easy isn’t what Amazon is all about you know we’re trying to solve customer problems and this is the best way to solve the customer problem so that you know I think if you look at it from that point of view
then you say oh yeah we have to open up our product pages and create this Marketplace
initiative which is now you know now outsells the owned inventory business on Amazon is as you guys will know.

[51:37] Yeah yeah it’s crazy it’s annoying how many stories like that Amazon has of these.
Things that in hindsight are enormous successes like the marketplace but at the time like had to be hugely controversial difficult decisions.
One you know as I was reading the book one of the things that kind of recurring theme was a lot of these business structures and processes.
I feel like they were really invented to help Amazon scale Beyond Jeff right like.
You know to maintain Jeff high standards once he couldn’t meet every employee personally we need a bar razor program for hiring and we need the business principles to sort of indoctrinate everyone in the company.
The big news this quarter is all the Jeff’s are leaving Amazon and so I’m sort of curious like.
Do you believe that all of all of this infrastructure and culture that that you guys all put in place.
Are going to enable Amazon to sort of keep clicking at the same level you know when when Jeff was like a little more involved.
As he sort of disengages and spends more time on Rockets or something or or do you think that’s gonna be an inflection point for Amazon it’s hard to in my mind it’s hard to still be.
Day one company when your your founder retires after 27 years.

[53:00] So you know Jeff has he had spent since the time I was working on he devoted a whole lot of time.

[53:08] To try to instrument the company and encode some of the knowledge has and principles that he you know where he wanted to take Amazon
in and make them repeatable processes you’ll it for there’s no one at Amazon who could say let’s turn around and be competitor Focus rather than customer-focused it’s just it’s in Amazon’s DNA
so first of all I think Andy he’s young he’s the right guy for the job if I had to write the Amazon CEO job description it would be someone who is steeped in Amazon’s culture
able to build
you know large multi-billion dollar businesses and work with small teams you know and jump in between the two and bonus points if you built.
Business from zero to ten billion dollars faster than Amazon did and he did all of those you AWS got four to ten billion dollars faster than
you know Amazon the company and so I you know I think it’s the Amazon is in good hands with with Andy but I think if you look at the legacy of.
I’ve what Amazon is in Jeff is going to leave
you’re at the end of the day these hockey pucks and cylinders we have in our kitchen or the two-day and delivery is going to seem laughably primitive
sometime in one day delivery will seem laughing laughs Ali primitive sometime in the near future but what is a lasting thing is really this in the ninja machine and it’s Jeff’s term.

[54:31] That he created at Amazon
and he was always very upfront about it and he would talk about some of these things about long-term thinking about you know you read the shareholder letters about separable teams and you know he’s been up front about the working backwards process so I think that it’s
these are processes where you don’t.
Have to use the stick to get people to use them it is more carrot approach because once you start using them you realize this is just a better way of building a bit and operating a business,
you know you don’t have to Once people start writing narratives if you were to tell them to stop that go dumb it down and use slides to you know
convey a complex idea you they look at you like a deer in headlights no matter who that person was so I think that there’s still a lot of innovation to come from Amazon and
you know whatever company or initiative Jeff Bezos is working on it will be very fortunate to have them but you know there’s there’s.
There’s a lot of people at Amazon who will continue to operate and tweak and improve this invention machine.

[55:35] Yeah one of my favorite lines from your book Colin was.
You talk about how many people say oh sure Amazon is successful but you have unlimited resources and Jeff Bezos and and you and Bill pointed out like.
Hey for most of the time we are there we are heavily resource-constrained that’s not not true at all and you know all of these processes can absolutely work without Jeff.
Although if Jeff’s available the work on your project we would both highly recommend him.

[56:02] Yeah and that still holds true.

[56:07] When the one thing that’s been interesting Colin and you’ve been writing a book so maybe haven’t seen this but Shopify is really kind of ascending and getting a lot of play as kind of a
you know an alternative to Amazon and they talked about arming the rebels and this kind of thing and then there’s also a wedge in there in that
Brands don’t love Amazon because Amazon.
They love they want the brands there but they want to control the price and there’s kind of I’ve had brand say to me it’s a love hate hate hate relationship kind of thing
so it’s going to be this really interesting battle we talked about this on our show a lot and then recently it was in the press that Bezos was getting more involved in the business
to kind of formulate a Shopify strategy that was right before he kicked himself upstairs what you know.
But in listening to you think about the customer it almost seems backwards for someone at Amazon to have an initiative that’s kind of like you know what are we gonna do about this competitor Shopify how would you kind of project what do you think they would do and with.
What’s going on there.

[57:08] Well I don’t have any first-hand data or information.
Give you here just to be very clear and if it does get back to really.

[57:20] If something’s worth doing you first of all have to identify the customer problem that you are solving and the customer problem isn’t to go
take over Shopify and you know so it’s it’s how can we serve our customers better be they third-party sellers be they bite you no buyers on the site you know and and and what could how can we organize to solve those problems and so you know
that that’s just the way.
Ideas are developed you know I will say Amazon does occupy a different place in society than it did you know five ten years ago and you know some of these things
are going to be worth putting in the public dialogue and you know that that’s part of being a company that’s you know
at a half a trillion dollars in yearly Revenue but you know I can’t predict what’s going to go on there but but
Amazon whenever there’s tough decisions what people at Amazon do is they fall back onto these 14 principal leadership principles because that’s what they’re there for its they’re there to make the tough calls.

[58:32] And and so while I don’t know what that what Amazon will do I know that after they do it if you read these leadership principles and then you listen you know
listen to yourself to say in the back of your mind that the long-term interests of.
Customers and shareholders are completely aligned it probably will make sense.

[58:55] You know we are running up on time but I do have sort of one last last thread for you I know
that the book is obviously intended to help help folks adopt some of these best practices from the Amazon and if I have a right I think you and Bill.
Also consult with some companies and and sort of help them adopt some of these processes.
I’m curious how successful or difficult outside entities fine some of these things I got I’ll give you a personal antidote.
I’ve hired a lot of X amazonians in my life.
And I’m always super excited that I’m going to get these people that you know come in and write these like you know super detailed six-page narratives and stuff and and what ends up happening is no they all do I really crappy PowerPoint because they’re all.
Like tired of reading the neck so I like part of me wonders like is there some Secret Sauce in Amazon like you know obviously we all believe some of these things can be useful in many other companies but.
Is there an endemic in managing Amazon and.
Cohesively doing all of these things together that make them work better than than individual bits and bytes do outside of the Amazon that’s fear.

[1:00:13] Well I would say that the first two that you’d have to do if you don’t have them and you know some smaller organizations don’t is defining who you are and the leadership principles you know so the idea is not to copy Amazons and.
You need to come up with your own about who you are and then the second part is that bar razor process the hiring process
is how do you vet new people coming into your organization because you want to use the new people you want coming in you want them to reinforce your culture and if you’re not deliberate about what your culture is and how you decide
is this person going to reinforce my culture or change it
if your culture will change because you’re going to get a culture as your company grows it just is your choice if it’s whether the one you want it to be or whether it will become bait you know whatever will become based on the new people who are coming in if you go from 5 to 20 people and you don’t have a deliberate hiring process with the leadership principles that’s how you get people who say it’s just not like it used to be last year so those two things I would say you have to do when you’re and.

[1:01:17] You know in order to stay true to your roots the other ones you can you I would not recommend doing them all at once I think some of them are easy but sometimes our Journeys so no you don’t have to do them all at once but where we’ve seen
it work in organizations and what I guess will receive a not work as if.
That the head of the organization you know the CEO or if it’s a large company if it’s a you know Division if they’re not on board it’s probably not going to work
you know if someone says hey I’m going to write narratives for the group and then the the.

[1:01:52] PPR the CEO says yeah that’s great but just give me a PowerPoint when when you’re done with your narratives did then we’ll make the decision you know that’s it’s probably not going to work so I think you have to buy into some of these and
principles and processes and they give them a chance to work at the right level.

[1:02:11] That makes total sense Colin and that’s going to be a great place to leave it because it’s happened again we’ve used up all our allotted time.
As always if folks have comments or questions they are welcome to follow up with us on our Facebook page or on Twitter.
And as always if you enjoyed this episode we sure would appreciate it if you jump on the iTunes and give us that five star review.

[1:02:34] Can we really appreciate you taking time out of your busy schedule to walk us through the book we strongly encourage readers to go not only by the book but read it like Jason I have we both thoroughly enjoyed it you got four thumbs up from us.
Obviously you know Amazon carries the book so that’s the logical place to look and then if folks want to find you online do you pontificate about things or are you big on Twitter or SnapChat or inserting.

[1:03:02] We have website working so I’ll one word and you know that’s a good place to go to print out from there.

[1:03:10] Awesome we really appreciate having having you on the show.

[1:03:14] Thanks again for having me.

[1:03:16] We really enjoyed it and until next time happy commercing.

Mar 1, 2021

Announcement: Live Clubhouse Chat: Shopify vs Amazon

Wednesday night March 3rd, 9:30pm ET we'll have a live chat on Clubhouse discussing the epic battle between Amazon and Shopify.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. 

Feb 25, 2021

EP255 - Instacart Chief Revenue Officer Seth Dallaire

Seth Dallaire is the Chief Revenue Officer at Instacart. In this interview, we cover his experience at Amazon, the challenges of operating Instacart’s 4-sided marketplace, key trends in the digital grocery space, and Instacarts evolution as a retail media network.

Episode 255 of the Jason & Scot show was recorded live on Wednesday, February 10th, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scot show
this is episode 254 being recorded on Wednesday February 10th 2021 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Two of our topics we have really been Drilling in onto the last year our digital Grocery and the impact of covid on overall digital adoption.
One company sits squarely at the intersection of both of those Trends and we are really excited to have them on today’s show.
That company is instacart and we’re real thrilled to have on the show their Chief Revenue officer Seth Del are welcome to the show Seth.

[1:09] Hey thanks for having me nice to be here.

[1:12] Seth we’re thrilled to have you and as you may know from listening to the show we always like to start by giving the audience just a little bit of background about our guests and and you of course have a,
a very interesting e-commerce background so can you share it with our audience.

[1:30] Sure and again thanks for having me on the show so current title is Chief Revenue officer here at instacart and
really what I’m focused on and have been working on for the past
16 months since I joined the company is creating an advertising business and I come
at this opportunity after having spent just about eight years at Amazon.
Where I was in various leadership positions in the advertising sales and marketing teams over there,
I joined in February 2012 and prior to that I was at Yahoo prior to that.
At Microsoft and prior to that Amazon so the bulk of my business career has been in digital media both in terms of sales and buying,
and really the emphasis for the past.
Ten years at least has been on e-commerce and Retail so it’s really exciting to be here at instacart particularly in this moment when,
a consumer behavior is is tipping into.
Grocery shopping online and I’m able to use a lot of the experiences that I’ve had in my career too.
To help make it making ads business happen over here.

[2:56] That’s awesome and that the timing for having you on this show is terrific Scott obviously mentioned.
Covid in the intersection of digital and Grocery and I know instacart it’s even bigger than grocery so we’ll eventually talk about that,
um but a close second to digital and grocery that we’ve been talking about lately are all these retail media networks and you’re obviously squarely there as well,
so our last episode of the podcast we actually recovering Amazon’s earnings,
and to me one of the the standout features of their to as earnings was this that they’ve now surpassed 20 billion dollars in ad Revenue over the last 12 months.
I know you you were heavily involved in building that business,
I mean a is there any part of you that’s proud or sad to see the success now that you’re not there,
not implying it success because you’re not there,
but the related question I was interested to ask is in my mind it’s entirely possible that at 20 billion dollars in ad Revenue that the ad revenue is more profitable for Amazon and AWS is,
and I feel like that doesn’t get talked about a lot.

[4:15] Yeah so to answer the first part of the question definitely proud the experience that I have there
was a lot of fun it was a great learning experience and I was able to work with some very talented people and there aren’t many opportunities where you get
work on an entrepreneurial project,
within the safety or that has the resourcing of a large successful company and that was really what the experience was like for me.

[4:52] Getting in there in 2012 and really.
Helping build the business from a sales and marketing side for sure but then working shoulder-to-shoulder with some pretty talented people on the product side,
and watching that business move from what I would argue was an experiment,
into something that is a material contributor,
to the business and so those those earnings reports when they come out I actually I get excited about them for that team that’s still over there I think,
I think it’s pretty great what they’re able to do or have been able to do.
Even if I’m not there anymore and the reason why I say that 2 is not.
Because I enjoyed my time at at Amazon but the success that Amazon has in terms of creating.

[5:50] Any Commerce advertising capability or marketing discipline if you will is important for the industry in that it allows other,
businesses to to do something similar and you mentioned there’s a whole bunch of different retailgeek.
Ad networks that are starting up or or media networks whatever the term was that you over you referred to them but the reason why they’re popping up is because,
they’re durable pieces of business and the if I reflect back to.

[6:26] Early 2012 when I had arrived at Amazon to help set up the North American.
Ad sales team there was a lot of waiting around in the lobby at the agency a lot of explanations as to why Amazon even a dad’s like
why don’t you know why does why do they need to have advertising like where are the ads on Amazon you know just give us your data that’s what we want and.
That that was a difficult mentality to change and really we were successful in creating a.
And understanding that e-commerce as a marketing discipline is similar to the same sort of trajectory or life cycle if you will of paid search or social media that both of those.

[7:24] Practices if you will started because and they were new they started from scratch they required a lot of Education to the industry,
a lot of risk taking on both the publisher side and on the advertiser side the marketer side to to invest in those areas and.
Ultimately they became things that were overtime well understood and really performing,
pieces of advertising and marketing and.
I see a lot of those similar traits over here and instacart and,
while instacart is e-commerce
singularly focused on Grocery and.

[8:19] The opportunity in the grocery space is super compelling just because you have a couple things one
on The Advertiser side of the business you have not a lot of insight there’s a lot a lot of capacity in terms of what’s happening in the online grocery space,
and there are many in the grocery industry is still Regional in many cases it’s a one trillion dollar a year business in the United States alone that maybe has somewhere between 5 and 10%.

[8:52] Of an absolute dollars of that that business is being conducted online and
that looks different from Mass merchandiser general merchandise environments like an Amazon a Best Buy Walmart where they’re selling
you know all sorts of things hard Goods as well as as food,
but what’s exciting to me is that we’re able to work with brands that maybe haven’t been able to participate in e-commerce as much as they would like to because the transactional component just didn’t exist
our measurement of the transactional component was difficult to do and instacart sits in a unique place where we’re working with,
almost 600 different grocery banners now and have significant reach where we can help marketers understand how consumers are interacting with their brands and,
how much they’re buying online relative,
the behaviors that there they’ve been demonstrating historically through physical retail so,
that gets me super excited because those that grocery piece of the business even two years ago was,
it was very nascent now it still is today but as a result of covid it’s been an accelerant in terms of pushing consumers.

[10:16] Into trial of online grocery shopping and what we found is a lot of that,
trial is durable Behavior Analysis we’re continuing to wind our way through covid but it’s also.
Created a ton of opportunity for for for marketers as well.

[10:37] Maybe let’s let’s start at the top so I think everyone knows what instacart is but just in case like when you’re when you’re at a cocktail party describing instacart to someone that doesn’t know how do you describe it.

[10:50] I describe it as a so we are an online grocery delivery service and we.
Work with.
Over 600 Grocers nationally in the in the US and well in North America really but.

[11:12] You know we allow consumers to shop for the fruit the food that they love.
And do it at the stores that they love.

[11:22] And get a whole bunch of time back that they can use to spend enjoying that food with their family and loved ones and.
That in very high level is how I describe instacart you know it in a more tactical level and certainly in these times.
We we talk more in focus more on the convenience and the safety,
of the service and that were allowing people to shelter in place to to have contact list delivery of the grocery items and help solve for trip occasions that normally they would be doing in person but
you know for for their own health or safety reasons they’ve elected to to find a way to have someone else do that for them.
And we do that really well and.
We’ve been delighting consumers with that service and and then we’re also you know offering retailers the opportunity to,
meet that consumer expectation that they can shop for groceries online and that’s another critical part of our.
Marketplaces the relationships that we have with retailers so you know we help retailers.
Offer online grocery shopping and delivery or pickup as well so.

[12:46] It’s a you know we’re not just about grocery delivery you know we also as a business you know solve.
Some provide opportunity for for retailers as well as well as consumer Solutions.

[13:02] Awesome and then I kind of think in the bombers world of it as a three-sided Marketplace I don’t know if you guys use that language or not so on one side you’ve got this grocery store component and you said,
over 600 and then you have to call them instacart errs or Shoppers or what do you call.
Shoppers okay and then then over on the other side you’ve got consumers do you guys talk about any scale of the Shoppers and consumer legs of that imagine thousands of Shoppers and millions of consumers.

[13:32] Yeah we that’s exactly right so you know millions of consumers hundreds of thousands of Shoppers and then the the other sort of component of that Marketplace a Time,
responsible for is the The Advertiser marketer component as well so they’re a new element to our Marketplace but we’re also working with those Brands to make sure that
they have an opportunity to promote their products to those consumers,
when they’re coming through the store to build a basket and shop and consumers have the expectation that they’ll be able to find products in our store fronts,
in our Marketplace that they would find if they were shopping at their favorite local grocery store so that’s the another component to our Marketplace that,
is newer but one we’re investing in heavily.

[14:27] Yeah I’m a full disclosure I’m a big instacart user and have been for.
Feels like three or four years so that early days and it’s been really impressive as a entrepreneur to watch you guys build it out and the early days you know it had all these it was hard to find things that are in stock and,
and then the experience just got better and better and better over time and then,
it’s been really impressive to watch you guys deal with the surge of covid I imagine that’s been pretty pretty crazy scale that you guys have had to work through as that’s it.

[15:00] Yeah first of all thank you for your business and glad that that’s the experience that you’ve had covid has been transformational in many ways for,
or business you know it’s forever changed the consumer shopping experience for sure it’s been an accelerant for online grocery shopping and and really led to.
A ton of trial in the beginning and you know when we were sort of in the the marsh last few weeks of March first few weeks of April where we saw the.
A wave of consumer demand come through that was unlike anything that we had really seen before and.
You know as the pandemic is we’re coming up on a year now.

[15:51] Sheltering in place and sort of how we’ve modified our own behaviors you know.
A lot of these these trials or things that consumers were trying certainly Within instacart.
Had become habitual their habit forming and because they’re their habit for me and providing value and convenience and utility or durable and that’s what we’re seeing across the business so we did,
learn a ton in terms of how to execute.
Against a huge wave of consumer demand and that’s really made us better prepared for.
The in the event that we see another sort of search like that we will we will be able to deliver the same level of efficiency and meet the same sort of standards that that you just mentioned.
For your own experiences and instacart consumer in the future so we’re really excited about that it was it was challenging for sure a lot of a lot of hard work went into execution not only from The Shopper side and.
And making sure that.
All the consumer demand was being met but then just the stress on the technical ends of the business and the technology and making sure that you know that we were able to.

[17:17] Function and and under all of that demand.
In provide the consumer experience of people were expecting was.

[17:28] It was remarkable and and it took quite a bit of time and energy from the teams here from partner teams with whom I work with every day so it was a great learning experience for us as a business and its really.
But it’s in a pretty good place for for how we scale going forward into the future.

[17:47] That’s awesome Seth and you you hit on a topic that comes up a lot in my work life I’m curious to hear your perspective at the beginning of covid-19.
Everyone’s talking about oh my gosh this is going to accelerate digital shopping immensely and you know Mackenzie famous we write came up with this.
Ten years of digital adoption in 10 minutes and they predicted that like 35 percent of all sales would be online and that didn’t really happen right for general merchandise.
E-commerce Grew From like 13% It price spiked it 19 and came back down to 16 which is,
still a significant acceleration and meaningful but it’s not it’s not 10 years of progress but,
I do think in grocery we may have experienced like 5 or 10 years worth of progress specifically because of covid and I know there’s a lot of different data sets out there but the the data set I use.
We were at like three percent digital grocery penetration before covid so I three out of every hundred dollars was spent online,
and now we’re probably sitting somewhere Slightly North of ten percent so that’s that’s enormous and you know whenever I talk about without a client with a client their first question is.
Is that permanent is some of that going to go back when people can go back to restaurants like what you know how do you see it playing out in the long run.

[19:14] Pretty simple so we’re looking at the same data sets that you just cited or or similar so you know the.

[19:22] Nice we’re wrong together at least.

[19:24] Well no the 10% that number is basically what we’re seeing and you know I guess like wrong in the best way and that everything I mean I’ll talk to my own personal experience about why,
in one of the decision criteria for me coming over to instacart to begin with what’s that I just I believed that over time.

[19:44] Consumers would become comfortable with shopping for groceries online that this is one of the last behaviors to tip into e-commerce.
With any scale and in fact everything that I thought would happen over three years happened over three weeks between the last the last week of March and the first two weeks of April and you know the estimates that we were using,
as a business for forecasting this point last year look more similar to probably the 3/2,
5% or it’s a wow that would be great if just that much consumer Behavior came into this gigantic us grocery market and in fact now those third parties are saying that it’s probably somewhere at 10% and,
you know that’s that’s a dramatic move and,
what were you know we can’t can’t cite specific numbers but what we have seen as much of the behavior both from a customer acquisition standpoint,
people who we acquired who are new to instacart,
but then also from a frequency standpoint so people who once acquired like are they ordering a second time the third time and using that as a measure of the durability.

[20:58] Those numbers are are I’ll just.
It’s a very positive without sharing any specific details so this is something that you know that we’re expecting to continue we aren’t,
there may be of course at some point like some variants and.
In consumer behavior that is a result of things you know hopefully going back to quote unquote normal that may impact the whole host of different,
behaviors that we had historically been measuring in some way in a pretty static form but from a grocery standpoint.

[21:40] Getting your food delivered.
Or being having the ability to solve for a trip occasion that was related to food when you can’t go out for dinner or you don’t have as many options to go out for dinner or you don’t feel safe shopping,
or you’ve been told to shelter in place like it had a dramatic impact on our business and industry.
It’s not just I mean instacart or other online grocery folks you know my former employer,
being one of them where you know they’re they’re seeing big grocery numbers as well so it’s that to me is just another sign of how durable this behavior is.

[22:20] Yeah no I would tend to agree you know your old boss used to talk about one way doors versus two-way doors,
and it sort of feels like you know when you get all these these items showing up at your house and you don’t have to do any work that that kind of feels like a one-way door that you’re not likely to walk back through.
Um the I do have a question though Scott and I are super old you’re a little more youthful.
But so we are around in the beginning of e-commerce and there’s kind of this common way in every category when it got disrupted by digital,
um the Legacy players weren’t very good at digital and there there was some third party that could really accelerate their digital capability right so,
um early on of course Target and Toys R Us famous we Outsource e-commerce to this startup called Amazon and that.
Like arguably was a smart decision for them to you know dip their toes in digital eventually they wanted to bring that in-house a lot of retailers Outsource their digital to this.
This digital facilitator back then called GSI Commerce.
Which in many ways I think of is kind of a an analogous company to to instacart.

[23:38] And and just like commerce was enormously successful the founder of GSI Commerce now is Mark Rubin and he owns the 76ers.
The but I am curious like is there a risk like yours you’re sort of an intermediary that helps all these retailers get really good at digital grocery really fast and solve a bunch of really complicated Harry problems.
But in the long run if digital grocery becomes 10% or more of all grocery sales do Grocers need to develop.
Native digital chops and does that make that it,
rescue likely that they would continue to stick with you Ike what do you think the the long-term ramifications are like you know does does instacart it’s roll need to evolve or you know can you kind of play this this intermediary role forever.

[24:26] Well we emphasize our Partnerships with retailers because we helped enable them like we don’t compete with them and.
That I think is one major distinction between the analogs that you drew with Amazon and.
And Target and Toys R Us and that in each of those cases.
Amazon was maybe not only helping Target or Toys R Us,
execute against an e-commerce strategy but they are also competing with them in some cases you know in the same sort of environment or using the same.

[25:08] You know are trying to attract the same audiences if you will and you know we are working with retailers.
Helping them.
Deliver a technology solution to Consumers who have an expectation that they can shop their neighborhood grocer or their National grocer.
Online and if the retailer is prefers to work with us because our technology is great and the service levels that we provide are great and the consumers love using.
The service then we think that’s that’s a great place to be
we’ve been very clear publicly about our position and enabling our Retail Partners and really servicing them
so we spend a ton of time and attention working with them every day to develop capability and improve
the capabilities that we provide them with and.

[26:13] So what we aren’t doing is competing with them or running our own grocery store you know right next door to their storefront which is more analogous I think to,
to what the situation you described what the Amazon was in the way back so I just see them as being totally different and.
Yeah there I’m certain that there will be some grocery stores or or retailers that decide to.
You know go it alone and at some point and that you know.

[26:49] But certainly their decision to make right now you know we’re focused on helping as many grocery stores as we can.

[26:57] Figure out how to help consumers shop online for groceries.

[27:03] Yeah and Jason could go as listeners know he could go another eight hours digging into the grocery industry but I am curious about your main role there you are selling you know ads and.
As an instant Curry user I’m guessing so occasionally you know I’ll have a brand it seems to be brands that will pop in there and say.
Hey you’ve got some granola bars in your cart would you like some Quaker Oats Oatmeal kind of thing and is that kind of the ad network is it is it mostly Brands you’re selling to maybe walk us through.
Who’s in this ad Network and what kind of AD units are you guys offering to him.

[27:46] Right now we are just selling ads within our owned and operated,
platform so we are not sort of working with what I would consider non-endemic partners,
you know all of the advertisers and we’re addressing have their products on the Shelf the grocery store
so that’s the presently that’s the addressable market for us so you know that is largely the domain of big cpg companies medium-sized cpg companies food a lot of food,
and household goods and things that you might find where you walk in the aisles of your brick-and-mortar grocery store and what we do is,
we help those Brands get in front of consumers when they’re coming in and shopping and the shopping behaviors that are consumers.

[28:43] Perform our take a couple different.
Forms of first one is that we may have someone come into the store and start using the search bar to build a basket very directed
self-selected search behaviors where they’re looking for a particular brand or they may be looking for a particular,
a commodity term for a type of product like milk for instance in which case we’ll,
we’ll work with Brands to to provide them some counsel on how to get their products up to the top of the Shelf if we if you will or the best placement on the Shelf which is are.

[29:19] What we call our featured product placements and those are paid paid search placements within within that type of,
consumer shopping experience then you know we have.
Other browse behaviors that consumers May perform or they come in and they start looking or shopping and browsing through a specific category or I’ll.

[29:42] We have standards that are graphical display units there that will allow Brands to create awareness about products or,
advertise specials
to could do consumers who are who are shopping and building their business or building their baskets that way and then we have a number of products that are
temporary price reduction tpr types of products so coupons for individual upc’s and products that might give,
a consumer some incentive to try a product or what we call delivery promotions which are,
incentives Brands may use to help a consumer build a basket and they may take the form of save five dollars when you buy $25 worth of product,
for a free delivery so in that’s really what we’re focused on right now is making sure that.

[30:39] The brands understand how to engage with consumers when they’re coming into our market place to shop,
and that the opportunities the advertising that we’re putting in front of the consumers is accretive to the shopping experience so we’re not doing things that are you know interruptive,
you know we’re and we’re also not running sort of non-endemic advertising in those placements we’re really focused on,
working with with those Brands and manufacturers whose products are on the Shelf at the grocery store.

[31:18] And it seems like in traditional grocery the Brand’s there’s like,
all these slotting fees there’s like getting in the end cap there’s couponing there’s the circular are you guys,
is that where the dollars are coming from are you guys pulling from like the digital side like the maybe Google AdWords or something like that.

[31:41] It’s situation dependent and it’s all over the place so we aren’t,
not right now focused on any one particular team within any one particular.
Enterprise or manufacturer we’re really focused on telling a story and a narrative we’re trying to educate.

[32:01] People within these big with any type of cpg manufacturer the medium size small startup e type of company or it could be a large
established manufacturer
they they all have similar learning agendas for online grocery shopping because the behavior is so new so while there are some manufacturers who are really good and very
evolved in terms of their e-commerce strategies for.
Does let’s call them like general merchandise retail experiences when you’re talking about,
being able to Market Frozen Goods or non shelf stable,
items that’s a totally different type of behavior and marketing behavior and then a totally different type of data set that we’re working with that,
it just hasn’t existed before so it’s existed in a brick-and-mortar environment not an online and so we can show up and and talk,
about the performance of a particular investment that you’re making so if you’re buying paid search.
We can tell you.

[33:18] The the return on that ad spend if you will and those are the table Stakes that’s the beginning of the conversation it’s like okay how many sales.
Did you Jen did did I generate by giving you this dollar for promotion and we have a closed loop attribution those are first that’s first-party data that we’re observing so we’re not inferring what’s happening we’re actually seeing the transaction happen and then.

[33:43] Once in the irony here is that that sort of the table Stakes that today Annie calm yourself as know this,
it’s just ironic to me that’s the least interesting part of the conversation right now because everyone expects of course you’re going to give me that,
in you know 2012-2013 when when I was at Amazon and we were really working to bring e-commerce advertising to the industry that was not a well understood.
Output or measurement for for advertising and it took us a while to,
to talk about that and get engagement and acceptance from the industry for that particular.

[34:27] Metric and here we have it and it’s like okay great of course you’re going to give me that,
what I want to know in addition to that are any types of signals that you may see that are adjacent to that particular Behavior so yes I got,
you know six dollars back for every dollar in sales for every dollar that I gave you in in advertising.
But can you help me understand of those people who bought the products like is their behavior purchase frequency different than someone who came through an organic listing and didn’t click on an ad
is there something about that this particular cohort of
consumer that their basket composition for instance that might be different like is that I could say okay this is a trip occasion that is different from.
Something else or that another consumer may be performing the oftentimes when we show up we have.
Representatives from the digital investment team from the or ecomp team.

[35:31] We have some brand marketers we have the chief commercial officers in the sale side,
we we have really and the Shopper marketing teams to come in and with their pencils sharpened ready to talk about results and,
so the fun part about this is that we have an instacart has visibility and all sorts of different data signals that can help,
these manufacturers get smarter about promoting their products and how to speak to consumers in this in this new shopping environment,
the another part of the fun challenge here is that there are other,
e-commerce platforms out there that are doing a good job of providing that data and have been for years so that the sophistication of the people with whom we’re talking is quite high so we don’t have to do a lot of the work about this is,
let me talk with you about your return on ad spend or row as they’re already there they want to go to okay let’s
what’s the lifetime value of the customer can we look at basket decomposition can I define different consumer cohorts in ways that map back to things that I might be doing in other parts of the business,
so we’re aspiring to help the brands with whom we work with understand that.

[36:55] Yeah you know it’s funny like you guys have are tackling a really complicated space,
and so it makes all of these conversations more difficult than they are in some other categories but like one of the things I’m always curious about is
because as you and Scott mentioned the funding for an ad may be coming from the brand marketing department may be coming from a brand retail trade,
team or a shopper marketing team historically at a brand those kinds of teams had different success criterias right like that
The Shopper marketers might have been looking at actual cell through a product and those brand marketers might have been looking at.
At Impressions or brand recall or things like that so you’re you’re potentially getting funded by both and your the super complicated I would even argue four-sided Marketplace because you’ve got,
consumers Shoppers retailers and brands.

[37:56] Right are you able to have that kind of detailed.
Cohort analysis incrementality conversation with with all of your brand advertisers because part of me would be worried.
As a brand I might not even see myself through on instacart because,
it’s not actually my inventory and you’re not wholesaling my products right like your I sold the product to a retailer and then
the the consumer bought the product through you from that retailer so it seems complicated to track.

[38:29] Well the everyone wants to
everyone understands that there are new signals here from in all of the sides of the marketplace that you just described and we do see ourselves as a four sided marketplace with each of the constituents that you identified.
Each one of those has some type of data signal that would be helpful to the brand Advertiser and and so when we show up to talk about our offer.
We’re talking about tactically like here’s here’s where you can place your ads or your promotions and here is the,
Receipt if you will that will give you an exchange for that investment that talks about the things that are causal to that investment.

[39:22] It’s often the more sophisticated questions are coming in the things that are adjacent to and maybe not a direct cause of the ad spend so.
You know consumer behaviors it could be how often was a particular item that was added to the basket not found in the store for like out of stock it could be.
Something along the lines of,
you know content like and data feeds and the quality of the content that the the brand sees in in our Marketplace and like how they tune that up or put their best foot forward.

[40:14] There’s no lack of interest in what we’re trying to do and so I see that as a great learning opportunity for our business if we can understand how.
The brand or if we can end this applies not to every side of our Marketplace understand the brand understand the Shopper understand the consumer understand the retailer and if we can do that.
And then help each one of those people you know improve It Whatever the result that they’ve decided it’s important.
Part of it is the determinant of success if we can help them improve then.

[40:49] Then we will we will not have a lack of requests for meetings.

[40:54] Yep yeah no I get it and I know you get this but just just for our listeners like I would argue,
um the digital advertising in this category is even way more important than a lot of other categories because in a,
a traditional in store grocery shopping visit that shopper
makes a lot of unplanned purchases like they serendipitous we discover a lot of products they walked by a lot of products and they put a lot of products in their bag that were not on their shopping list and so when they they shop digitally
some of those opportunities are much more challenging right people I imagine tend to shop off of their list a lot more and so,
um brands have to work harder and and leverage tools like you’re providing to help introduce new products and sell new things to kind of break onto that list.

[41:46] Yeah and that’s a great challenge for us as a as a Marketplace like we we want to be able to.
Create those serendipitous moments in the decision journey and you know because consumers love that stuff.
You know they’re there they wouldn’t they’re not being forced to add a bag of Milano cookies to their basket when they’re walking through,
you know the physical grocery store because it’s in the end cap they’re doing it because they’re reminded like I love those cookies I’m going to buy them.
And those same types of behaviors happen within our Marketplace,
and what we’re seeing is that trip occasions may be different so we may be a consumer may be coming into our Marketplace and,
has a very specific trip occasion where this is a stock up or this is my sort of junk food run or whatever and so what we’re trying to do is help.

[42:48] Bring those data points and signals back to brands in a way that helps them get smarter about how consumers are shopping.
And then anything that we can do from a an ad product perspective that will make that.
Trip through our store that basket building experience accretive and more fun and and more convenient and more efficient we’re going to do that.
We’re just getting started there really so that that’s the fun part and I agree with you there.
There are many behaviors that happen in the brick and mortar store that would lend themselves to e-commerce then there’s a whole host of different things that are exclusively the domain of e-commerce that can be transformative for a business,
and then we’re just getting we’re just scratching the surface there.

[43:39] And to be clear those Milano cookies are on my shopping list I didn’t want to imply.
They weren’t but I do take your point and and speaking of cookies I wonder if that’s another thing
that’s maybe driving advertisers in here arms a little bit more right now like as as the third party cookies are getting depreciated and the mobile tracking you know dispute between Apple and Facebook
I could imagine that for a lot of these cpg Brands the,
their ability to Target and effectively advertise on their traditional digital media networks are
are eroding a little bit and so it is that another Trend that maybe you no favors people putting more dollars into the into retail media like instacart.

[44:23] I mean it could in certainly the landscape is is changing and everyone needs to be aware of the compliance obligations that we have so we’re taking a.

[44:36] We’re very cognizant of that and the fun part about being here it instacart,
right now or really for the past you know 16 months is that you know we’re building this from the ground up so we can in some ways try to anticipate some of those changes in the industry because things are happening right now,
that without the burden of a legacy of or technology or Tech debt that would put us in a much more precarious position,
so so yeah we’re like.
But I’m certain that over the course of time that you know the we will also have to be,
cognizant of those changes and you know it’s not something that we go out and you know I’m not talking about that it’s not a selling point.
Necessarily when we’re talking with sophisticated.
Programmatic advertisers you know what we are talking about and what we’re trying to focus on at this stage is just on the.
Amount of concern consumer adoption just the surge in online grocery shopping Behavior that’s sort of tipped into this everyday behavior for.

[45:52] It sort of gigantic you know part of part of the.
The grocery industry and focusing their first on the size of the opportunity in the size of the prize has the right place before.

[46:06] We’re start getting into some of the more Technical and legal components here like where.
That’s just that hasn’t that it hasn’t been our focus and you know most of our products are all within our owned and operated,
you know site right now too so we’ve we’ve,
I’ve been watching that and we’re paying attention to it for sure but it’s not a selling point that we’re pushing in the marketplace right now or in the industry.

[46:37] Yeah it’s gonna be interesting to see how that impacts folks that are crossing sites and with how they react to it.
The one and this is kind of a total newbie question of my side you guys are the ad Geniuses here I’m just a e-commerce guy trying to find my way in the world the where are you guys on,
you know like self-service tools so if I am starting Scott’s coconut water can I just go somewhere and run my own little search ad or are you not quite at that kind of.
Google / Amazon self-service Point yet.

[47:10] Well we launched a self-service offering and platform last year.
So we’re getting started there the and continuing to push more capability through that platform so we have a number of.
Of advertisers that are in agents who are using those self-service tools.
And you know we’re working with apis as well with some of those Partners too and some of them are big.
Companies some of them are small it’s really you know we’re going to map to however the advertiser wants to work with us self-service as one of those options so and it will I think continue to take on.
An increasing amount of importance for us as as the Brand’s get more comfortable with with buying their ads that by 2.

[48:01] Yet another thing I’ve seen I was kind of curious how this works so I’ve been on Brands sites like.
And I would call him bram’s that kind of usually go into something like a like a chicken or,
condiment or something like that and I’ve seen these recipes and you know the recipe you’ll have all the stuff and you can usually there’s a button and you can either you can kind of add it to your instacart.
Is that an ad unit or is that just you guys having some apis so that they can put those things into the cart on behalf of the consumer.

[48:30] Well the adding things to your basket across the site is.
We have many different ways that you can do that so there’s no single point of Ingress but we are you know we are looking to enable both the,
sort of adding just an ingredient for instance like very easy like making that super convenient and simple adding an entire recipe to your basket,
as well,
or allowing for promotion for the case of like a commodity item or if the recipe has branded ingredients allowing Brands to promote those items so it’s we’re coming at it in a whole host of different ways.

[49:16] Yeah and then I did notice you guys had started pronounce more traditional retailers I think it was fora and maybe Staples.
Is that and we’ve talked a lot about ship again and we actually coined that on the show here I don’t know if you know that and you know it’s kind of interesting because you could you could think of that as a release valve for you know.
The existing networks of e-commerce that are the last mile got really jammed up due to covid plus the holiday,
um is that how those retailers are utilizing you guys or is that different in some way.

[49:53] They’re so you’re right we have started working with some retailers that are not in grocery I will I will state though the grocery remains,
our foundation and focus for the company there’s so much opportunity for us there.
That that’s continues to be where we’re placing our emphasis but there are.
Instances and companies like some of whom you just cited who have very successfully calm businesses.
But would benefit from having instacart as a service to solve for that more immediate or urgent triplication.

[50:38] So the tziporah who you mentioned you know you could have a beauty occasion or emergency where.
You know we’re solving or bringing Cosmetics or beauty products to a consumer an hour or less would be.

[50:56] An awesome convenient service offering it’s really more about
awareness for our consumers when they coming into instacart are they aware that they can shop those those marketplaces or those storefronts with in our Marketplace and we’re just getting started there so it’s a great experiment for us.
But the
and while we’re focused on grocery right now you could see where there would be other retail experiences for things that aren’t food that would benefit from our service the the example that
that I tend to site is as my 17 year old son so he has some expectation that he can find anything on his phone any type of content video content music content
podcast a book report instantaneously if he doesn’t he gets super frustrated
you can order a burrito online you know over his phone in an app you can get a Teriyaki Bowl you can order a ride somewhere all these things
show up in 30 minutes or less or an hour or less and the irony is that the Slowpoke and his.
Consumer experience are the companies that deliver things in two days and in his.

[52:23] Experience as he ages into a consumer who will be shopping for Home Goods or groceries I just don’t see his expectation for convenience lessening over time.

[52:37] And.
Right now instacart is great at groceries we have a ton of room to run in the grocery space but you could see where a company you know like Sephora would be like right we did you know having that,
Last Mile hour or less delivery with instacart bringing those products to the consumers doorstep or the trunk of the car,
for a pickup would be.
But hugely helpful and and may be expected in the future so this is a great opportunity for us to learn about the sum of the expectations for those retailers in and also from the consumer demand for them.

[53:19] Seth I don’t know if you realize this but you totally hit it on the head it’s a little known fact but Scott and I used to have so many 1 hour Beauty emergencies,
that’s actually why we decided to start a podcast.

[53:31] There you go.

[53:32] Yeah it’s just it’s it’s a lot easier than starting a YouTube channel so so I totally totally get that listen we are coming up on time so I do I do want to squeeze one last question in,
we talk so much about acceleration in this cone crazy covid year has made things go so fast,
if I jump back in the hot tub time machine and kind of jump forward a few more years in the future.
Do you have a vision for for how instacart has changed or evolved or there are there like.
Particular types of categories that you your interest that you think you guys might expand into or new types of products or services that you think you might offer anything you can reveal.

[54:17] No major reveals but if I’m looking into my crystal ball and thinking really about the ambition of what we’re doing.
I’m making a bet I’ve made this bet by coming here that in the next five years if that’s the time Horizon for the future,
that as much as 20 or 25% of all grocery shopping will be occurring online.

[54:44] And if that’s the case that’s a massive amount of consumer Behavior a massive amount of consumers,
looking for that are expecting a very specific type of shopping and delivery experience or pick up experience and,
all all of that are much of that from an advertising perspective is yet to be learned.
And we’re learning it right now so from a from an AB product perspective.
What we will deliver to the industry will be products that make the consumer shopping experience accretive for sure but then also are able to help.
The manufacturers get smarter about how the products are being purchased what what types of products are desired and.
I just see that as so much open territory for us and really for the industry to run it and.
That that is where my head is Alec where I’m focused for the next five years and I think a lot of those things.
Progressor e which you can argue as one of the most complex retail experiences to solve for because of the perishable nature of much of the product.
Many of those successes that will we have will lend themselves to other retail categories so I’m super excited about that.

[56:08] Yeah I I tend to agree I think it’s a super fun space to be in because it is.
So important and evolving so quickly but Seth that’s going to be a great place to leave it because it has happened again we’ve used up all our allotted time as always if you have any comments or questions about this episode feel free to
hit us up on our Facebook page or send us a question on Twitter.
Seth really enjoyed talking to you and thank you very much for sharing the instacart story with our listeners.

[56:39] Well thank you very much for having me I appreciate it stay safe.

[56:43] Until next time happy commercing.

Feb 19, 2021

Episode 254 is a breakdown of Walmart and Shopify Q4 2020 earnings reports, a recap of 2020 sales data from the US Dept Commerce, and Amazon News.

2020 Sales Data

US Dept of Commerce released it’s retail data for December, which gives us a full picture of 2020, as well as the Q4 e-commerce data.

  • Retail sales in 2020 were $5.6T, representing 27% of the U.S. GDP
  • Retail as a whole experienced healthy growth of 3.4% versus 3.5% in 2019
  • E-commerce grew 32% to $792B in sales, vs 15% growth in 2019
  • E-commerce was 14% of all retail sales (vs 11% in 2019)
  • Jason wrote a detailed recap of 2020 in Forbes:
    2020: Not Quite Retail Apocalypse, But Great For E-Commerce

Walmart Earnings

  • US Q4 comp sales grew 8.6% eCommerce sales grew 69%
  • FY revenue was $559.2 billion, comp sales increased 8.6%, E-Commerce sales grew 79%

Shopify Earnings

Amazon news:

Episode 254 of the Jason & Scot show was recorded live on Thursday, February 19th, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 254 being recorded on Thursday February 18th 2021
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:40] Hey Jason and welcome back Jason Scott sir listeners will Jason today is a big day for science nerds we saw the perseverance Rover landed on Mars with an interplanetary helicopter how cool is that.

[0:55] That is the coolest part I was super excited I actually put a note on my calendar and stop working and watch The Landing it’s pretty amazing.

[1:04] Yeah I didn’t watch it how much could you see.

[1:07] Um well they had like a pretty detailed animation for the whole thing like like you you know they don’t have cameras of the Rover in the air but they but they,
they show like a 3D animation of it you know as a checks through all these detailed milestones and then pretty quickly after they confirmed it had touchdown you got the first.
Actual photo from from the Rover and there was still like dust everywhere from The Landing so it’s.
It’s pretty amazing to think that like we can launch shoot a drone 250 million miles away and landed on a planet that’s like yeah.

[1:45] Yes soon elon’s can be landing people there.

[1:48] Yeah yeah I know he’s close on their heels my favorite part though was the news guy like after they did their whole recap he’s like um and I feel compelled to remind people this actually is rocket science.

[2:01] Nice.

[2:04] Yeah yeah so it’s very cool I feel like I remember some of our very first podcast we’re like early in you know as SpaceX was knocking off all these milestones and we were we were talking about those a lot at the beginning of podcasts and.
Five years later we’re still doing it.

[2:20] Yeah now every other day they’re shooting off a mission it’s it SpaceX is pretty pretty amazing.

[2:25] Yeah yeah that’s that’s become totally routine I don’t know you watch Westworld right.
There’s actually scenes in Westworld we’re like just in the background they have SpaceX Style Rocket so I glanced because it’s so rude to you know they Envision it being so routine this cute.

[2:43] Yeah very cool but even bigger than that I know one of your favorite days of the year is when the US Department data of Commerce data comes out so yesterday I’m sure you were,
up and ready and you had all your Tableau and your data scientist lined up walk us through some of the data that came out yesterday.

[3:02] Yeah you I wish I could deny it but I kind of am super excited to get up on the mornings when this data comes out because I as you’re as you’re mocking me I did set up a bunch of automation over.
Over the winter break and now I get to use it and knock on wood two months in a row it hasn’t broken.

[3:20] You wouldn’t be retailgeek if you didn’t you can’t be a science geek can’t be space Kiki and me tell you you gotta gotta pick a lane.

[3:26] I have to keep my creds so what came out yesterday is a reminder for our listeners.
The January Advanced monthly sales data so this is a.
A simpler set snapshot of what happened in January and then we got the full data set for December and so the reason that that’s particularly exciting is that now let’s us roll up.
The complete 20 20 year and kind of work back to the whole year so so we got our first advance to look at what January is going to look like,
we got a detailed look at at December in the whole year for 2020 and then there is another data product that comes out quarterly that’s the e-commerce specific slice
and that actually comes out tomorrow morning but based on all the data we already have I’m pretty confident I already know what it’s going to say so we’ll talk a little bit about it.
Um but so let’s start with January.
And it’s interesting because my take on January was different than a lot of the media coverage in January so so Top Line.
Year over year this January sales were up 10.8% versus last year so that’s a that’s very healthy increase.

[4:48] The the one of the sectors in that data is non-store data which is kind of a.
The closest thing in the Advanced Data we have to 2,
e-commerce and that was up 28.7% so so if you look at this January versus last January very robust again last January wasn’t impacted by covid and anyway so we’re comparing a.
You know post covid with pretty covid.

[5:17] But what what got a lot of media attention was the that the January sales were 5.1% bigger than December so not year-over-year month over month,
and the reason people are excited about that is because.

[5:34] December sales were lower than November’s and November’s were lower than October so you kind of had two months of negative growth looking on a month-by-month basis and so this this 5.1%,
increase kind of reverse that monthly Trend and a lot of the analysts had predicted that we might grow 1.2% and so.
5.1% was a pretty big beat.
And so people were kind of giddy about that like oh it looks like we’re we’re coming out of the doldrums a little bit,
and you know one of the big reasons is there were some economic stimulus that went out early in January and almost all the retailers I work with like.
You can see to the day when customers start getting that that stimulus it’s a very obvious Spike and so that helped help January for a bunch of retailers but I would also point out this month over month data.

[6:30] Is not that important or valid and there’s a bunch of systemic reasons why months aren’t the same and Retail has a bunch of tent poles so I generally am a lot more interested from a trend standpoint in the year over year and,
year of a year it was a January with a stellar month but I will say there were a couple outliers in this January data,
department stores were up 23.5 percent from December so month-over-month,
department stores had their first increase in about 15 years and clothing which would has been decimated the last year was up five percent,
um but again to me.

[7:14] Month-over-month trans aren’t very relevant and especially in the middle of a holiday period and.
If you if you look at the year-over-year trends both those categories were still down from last January so department stores are down three percent from last January,
and clothing was down 11% from from last January both of those are,
slower rates of decline than we saw for most of last year so it’s it is a silver lining but you still wouldn’t want to be in either of those categories.

[7:45] If we just forget retail sales you know the headlines I saw on the financial sites were you know stunning retail sales 5.1 percent versus 1.2 estimate like why was why was that estimate so off.

[7:59] Yeah so I don’t I don’t know what goes into to the.

[8:03] Who made this the Department of Commerce doesn’t make it.

[8:06] No it’s not and and further it’s not like as rigorous as like stock public company earning CPS estimates for example like I don’t think there’s a.
Like an industry-standard estimate what what you do have you know again think about this December had a weird or shape than ever before it was way more e-commerce n trick.
December and all of those sales were front-loaded in the first half of the month because of ship again and the second half of the month so you so December was,
in you know large part was half a month and so January was a full month with economic stimulus,
dollars versus December and you also had all these like you know covid reasons that sales were slow and December right.
The cases were peeking people weren’t traveling with their family etc etc so for all of those reasons it’s not surprising to me at all that,
January was way better than December but to me a more valid you know perspective is what was this January versus last January because that’s more apples to apples.

[9:17] Um but I’ll be honest I’m was more interested in in looking at the 2020 data in aggregate because you know this was a.
A very unique year and it’s interesting to see how it played out you and I had all these debates early in the year,
is it a v-shaped recovery you know what would happen all these things you know people in April were writing these doomsday predictions about how far down retail was going to be in 2020 and,
and things like that so it’s interesting to see the real data,
so for all of 20 20 retail sold five point six trillion dollars in sales which is an all-time record by the way like that’s the the,
the highest retail sales in the US have ever been that’s twenty-seven percent of the GDP which is a little bigger share than it normally is it normally is around 25 percent of GDP is retailgeek,
so that’s huge GDP to go down this year I think people expected that because of covid.

[10:15] So that growth rate is three point four percent so retail grew at 3.4 percent.
And you could say hey Jason is 3.14 percent good,
well 2019 retailgeek rude 3.5% so it’s pretty typical it’s right like we normally years we expect to be in that three to four percent range when we fall below 3 we call it a down here and,
you know we haven’t seen very many years in recent history that were above for so.
So it’s right in The Sweet Spot of typical growth that you would expect if there was no covid-19.
Which is super interesting to me so you know but there’s a bunch of micro Trends in that Top Line and in the biggest trend is,
that a way bigger chunk of those sales were e-commerce than usual so so e-commerce Guru 25.3% for the year.
Which a normal year for e-commerce like 2019 we grew 12.9% so so almost yeah so it’s basically two years of growth in a year some.

[11:25] Wait I thought it was five years of growth in a week 10 knots to noon.

[11:27] Mackenzie said 10 yeah yeah they lied.

[11:32] Well why don’t you sidebar this so that everyone is on the same page so what what happened with that so I know Mackenzie put it out and it’s somehow wrong.

[11:41] Yeah well and I.

[11:42] Did they did they blow the year-over-year aspect or what where did they.

[11:46] So they did a couple a like they were roll up of a bunch of other data sources right so they took the same US Department of Commerce data we’re talking about,
but then they took some estimates from Bank of America and and a different definition of retail from Forrester and then they they did this thing that we used to do in e-commerce all the time they said hey let’s not talk about all of retailgeek,
because nobody buys food online so grocery in restaurants shouldn’t shouldn’t be in that number,
and nobody buys cars online so let’s take cars out and let’s invent this artificial definition of core retail and call it you know growth of core retail,
So so a there’s no way to check that because there are no actual numbers for that that arbitrary definition but I’m sure I’m sure if someone from Mackenzie won on the show right now they’d be saying hey Jason it was higher than your.
Your 25%.
But I would also point out that the biggest growth in e-commerce were all those things that they took out right like tons of people were buying buying food online tons of people were buying cars online so I feel like those old.
Those old things of saying like hey there’s some categories of retail that don’t qualify for e-commerce has is no longer valid.

[13:05] But if we use this nice normalized data from US Department of Commerce we grew 25% normally years thirteen percent so that.
Is is awesome.
If you if you kind of think about the shape of the year last year 12.9% April peaked at 18.4% and then we finished the year at 15.7% right so.
But in terms of what percentage of retail the.
Is e-commerce so it never spiked up to the 33% that Mackenzie predicted in there 10 years of progress,
but there are certain categories which probably did have have five or ten years grocery probably it you know did hit our five-year forecast.
Overall e-commerce hit like our two-year forecast so it was a doubling not a 10 Xing.

[14:00] And for sure in that those retail sales you had clear winners and losers we’ve talked about this on a bunch of shows but.
The you know if you were a grocery store or a sporting good store or home hardware store you had a great year because of covid and if you were department store or an apparel store or gas station,
you had a really crappy your,
because of covid and one of the biggest Trends is this whole shift from services to products right so nobody spent money on travel and instead they bought.
Furniture and stuff for their house and mostly nobody went to restaurants and instead they bought more food from grocery stores and so those that Trend had the effect of pouring extra dollars.
Into retail and for sure it goosed e-commerce in those categories.
If you if you think specifically around food 2019 food was a 50/50 split between restaurants and grocery stores,
at the peak of covid it was like 70/30 that we were spending on on Grocery and ended up about 60/40.
So that’s an extra 200 billion dollars hundred ninety billion dollars in grocery store sales as a result of people going to restaurants OS.

[15:21] Restaurant as a whole industry were way down we’ve talked about that a lot but.
Full service restaurants in particular we’re totally creamed they were down like 92% so the whole end restaurant industry was down 15% because,
you know the Pizza Hut’s of the world and the the McDonald’s of the world like could actually do pretty well with drive-through and home delivery,
um but the full-service sit-down restaurants just got obliterated.

[15:48] And then the last thing that I will tell you I still haven’t totally figured out in surprise me is if you said hey Jason based on all those trends.
Would home furnishing stores be winners or losers and covid I would have said oh man there are a winner because instead of going on vacation I remodeled my house and I bought new dishes and new sheets and I did all these things from,
from William Sonoma and you know Lamps Plus and all those stores and I would have also said that because we were stuck at home and there was a new video game launched that electronic stores would have been way up.
And two categories that were down for the year we’re home furnishings and electronics which is interesting to me in a little surprising.

[16:32] Risk is a Wayfarer has really picked up nicely.

[16:36] Yeah there are there by in Best Buy would say they were up right so so where’s the electronics that’s down to offset best by being up,
and William Sonoma was up so what’s the home furnishings that’s down to offset that I,
it’s a little confusing to me in the overall scheme of things these are not categories that are huge numbers so you know.
There you know it would it’s totally possible for those numbers to be skewed or maybe even like not have a huge sample size in the US Department of Commerce survey data.

[17:13] And there could be Folks at only have physical stores that you know were not essential that haven’t opened yet solar something that don’t have e-commerce.

[17:20] Yeah yeah I’m certain that that is a big big part of it is they were more disrupted.

[17:26] Person will call anything else so a second I tie that back to the Amazon numbers but were there any how do we so if we think about that.
You know that I guess it was 25% so the growth the e-commerce growth ends up being what again.

[17:43] 25.3%.

[17:45] That’s the grass okay yeah so I think that is a new Baseline Amazon grew like 40 and change right like 46 47 oh that’s just cute for number your that’s a 25 as an annual number it.

[17:57] Yeah but if you if you think Amazon grew 43-39 40 so you could you know call it 40 41 percent.

[18:07] Yep so they over indexed eBay was a little bit under and then we’ll talk about Shopify a little bit but they were way over that.
Do if Walmart was over so it’s one of these things where everyone was over except eBay again how is that possible.

[18:26] Yeah the math generally doesn’t work out right like I so the answer is I don’t know like for the last two quarters Q2 and Q3,
Amazon was about exactly the same as the industry average so they they mirror this Department of Commerce data really closely cute,
Q2 Department of Commerce grew 4045 percent Amazon 43 Q3 Department of Commerce group 37 Amazon group 39 so that that.

[18:54] Correlation actually gives me confidence in the numbers to be honest.
The but almost everyone else put your point wildly outperform those you know William Sonoma was up 50%,
you know Walmart was up by Katie to a hundred percent Home Depot was up eighty to a hundred percent Target was up like a hundred and two hundred hundred fifty to two hundred percent.
BJ’s Albertsons Best Buy were well over two hundred percent so you look at all those big big companies that are up way more than the industry average in your like man a bunch of small companies.
Must have really gotten cream for this to be true,
um and I do think that is partially true I think covid-19 disproportionately hurt hurt smaller retailers,
um but it also underscores that there is not a terrific measurement methodology for this e-commerce data and the US Department of Commerce guys worked really hard to get this number accurate but there,
they’re dependent on the accuracy of these surveys that retailers fill out and send to them and I just I don’t have great confidence that retailers fill them out with,
with ultra care.

[20:06] Very cool did your automated cloud system survive all this thinking.

[20:14] It did it did it worked really well I found it really useful and I generated a bunch of what I think are reasonably attractive visualizations and so I’ll put a link in the show notes,
but I’ll publish a Forbes article tomorrow recapping all this data with some charts in case anyone wants to see him.

[20:31] Brickell cannot wait now I’m going to be all getting tomorrow waiting for that to show well Jason it would not be a Jason and Scot show without some Amazon news.

[20:55] This was a this was a weird week in that there was not very much Amazon news and in fact.
This one was really interesting so I think what happened here is there’s a start-up in Australia that has a Shopify competitor that companies called cells SEL Z.
And I I first heard about this because.
I saw conversation after I saw this one of the socials and people are like hey did Amazon by cells and what started this is the founder just kind of put a or someone put a nonchalant kind of like post.
I can remember is like on their blog or their about me page but it basically said hey we’re going to be shutting down soon or Amazon has bought us we’re not accepting new customers I think that’s what it said.
So it was really weird because it was super under the radar and then.
I posted it because I thought it was interesting I thought the conversation will have in a second list was the interesting part of it and then Del Rey Jason Del Rey Chase it down and gut verification from Amazon that it was true that they have acquired the company.
There’s a big online kerfuffle around you know some folks are saying oh it’s just a choir thing what is it.
And what I think is interesting is you know so we thought the news probably like what was it two months ago that Bezos was really engaged in Amazon and spend a lot of time thinking about what they do about Shopify.

[22:24] So but then now he’s effectively kind of kicked himself upstairs well that you know a lot of people are kind of like oh that must mean it’s not a priority but.
I don’t think that’s right.
Amazon’s watching these guys are really closely and they want to take our legs out and you know the interesting thing it’s a fun thought experiment for me to thank all right if you had Amazon’s resources and that’s the fun part of it right.
Sir so you know some someone.

[22:51] I would watch a space program oh wait.

[22:53] Amazon hires Jason Scott and they gave us a mission of like you know how do we take out you know or how do we slow the growth of Shopify or.
Um let’s say they’ve identified them as a threat which I think is a valid assumption what do you do there and so it’s really interesting and you know I think,
I think they’re going to take this pretty seriously and I think they’re going to go buy a bunch of things one school of thought would be you could.
You know you and I have talked about on the show a big Trend kind of a lot of people think the next generation of these platforms is going to be more headless so so microservices right.
So microservices would be a nice offering inside of AWS if you look at AWS they’ve got offerings for all kinds of crazy stuff from game development tons of machine learning.
Everything you can imagine now so imagine they could build a whole e-commerce stack inside of AWS that would be these microservices as an offering.
I think that’s going to be part of the strategy I think the cells company the cells company was known for making it very easy for people that had.
Started their e-commerce Adventures on marketplaces to then open a store.
And I think that’s really interesting to me because that would be another hook right so if you think about it Amazon need to disclose this down don’t they have like two million sellers is that a number I was at four and get two million us for globally.

[24:19] I think you’re that’s the order magnitude.

[24:21] Yes that’s I don’t know if that’s the exact right number and then Shopify is it like 300,000 that’s where they’re sorry yeah okay so.
So then you know.
There’s more there’s more people that could set up stores on Shopify than have and one strategy would be.
So if you have if you worked at Amazon and you had unlimited resources basically.
You don’t have to choose your strategy can just choose them all right so normally in business I’ve had to like really choose a strategy with a competitor and really go at it so
see typically you know kind of an a military strategy lingo you like go ahead on Adam like battle them feature for feature punch each other in the face kind of thing,
or you can try to outflank them and start to nibble away at the edges well if I’m if I’m in my thought experiment if I’m Amazon I do both right,
so I think this is a flanking maneuver this is kind of the all right let’s.
Let’s roll out a feature or set that says hey if you have a if you’re on the Amazon Marketplace we’re going to make it really easy for you to open a store I feel like that’s where this is going to go.
But then at the same time I think you would go right at with the microservices strategy so and I don’t think this is part of that but I think it’s you know I think at some point that’s going to be another shoe to drop in this because it just feels like
little bit obvious to me that they would do that so that was a really long intro I really wanted to hear your take on what you thought about.

[25:50] Yeah I think you’re wildly wrong and thinking about it wrong no.

[25:55] Okay that’s fair enough.

[25:56] Yeah so I think Amazon is taking Shopify super seriously I think Amazon’s a you know apex predator that that.
Doesn’t like to have any competition and I think they look really long term so I for sure think they’re they see the growth at the shopify’s of the world and say we don’t like that and need to have a response so I have.
No problem imagining that Jeff Bezos is like you know the first person in the conference room for the project Santos meetings to figure out what Amazon’s response to Shopify is and I think,
him as executive chairman not embroiled in day-to-day operations actually.
Makes it easier for him to focus on those kinds of projects so I’m toy down with all that I could easily see AWS base microservices and and super easy,
web store sales you know tied to the Amazon Marketplace being part of that answer and in fact in my annual.

[26:56] Annual predictions I think I predicted that they would have some kind of use fulfillment by Amazon 444,
you know owned web store sales as as part of the response to Shopify what I don’t think happened though is I don’t think Amazon bought seltzer.
Um for anything to do with project Santos or to have some Global answer to,
to Shopify Celta is a 35% company in Australia,
and my experience with Amazon is there one of one of the biggest not invented here egocentric technology companies around like they believe they can build.
Everything and they dissolved a Healthcare Partnership with Goldman Sachs and Berkshire Hathaway,
because those two companies were too slow so I sort of don’t think that Amazon says hey we need to compete with Shopify the way to do it is to buy the IP from these these 35 guys in Australia,
um it just it just doesn’t pencil out for me they like Jeff Bezos would put you know to Pizza team of super smart guys and they would knock it out themselves and probably are doing that right right now as we speak there’s probably a bunch of two Pizza teams working on it.

[28:11] I think the reason about cells is because Amazon’s a newer entrant into Australia,
and they’re finding that they’re not getting adoption as quickly as they have in some more mature markets and that they need,
to Goose their third their Australian third-party Sellers and I think they acquired cells because cells had a bunch of.
Australian third-party sellers so I think it was a local customer acquisition strategy in a emerging market for Amazon not part of some Global strategy and I it wouldn’t shock me at all if,
Jeff Bezos and Andy jassy and Company like weren’t involved in this acquisition at all.

[28:57] That okay we will see.

[28:59] Yeah I’m and side note I’m usually wrong.

[29:03] I don’t think it’s the foundation of their strategy I think it’s one of a hundred things they’re going to do and it’s going to be a.

[29:08] Yeah I mean if they’re you know it’d be more interesting if they had some unique IP or something like that but I just it doesn’t seem likely that they did.

[29:16] Yeah well let’s then answer this question so your Amazon how do you either stop or or hobble Shopify.

[29:25] Well you you leverage your platform advantage to say it’s way better to get my webstore platform from Amazon than it is anywhere else and the way you do that is you say,
hey if you guys want to use FBA and have Consolidated inventory between your webstore and Amazon,
then the way to do that is to use the,
you know Amazon Web Store 2.0 based on microservices hosted on the the greatest web service platform in the world,
um and that if you you want your web store on Shopify you’re going to have to figure out fulfillment yourself or you’re going to have to send some of your your.

[30:05] Your inventory to the the new Shopify fulfillment Network and you’re still going to want to leave some some of your inventory and our fulfillment Network because we have way more customers than you do,
and they’re just going to leverage their their network advantage to walk customers in,
two years ago I think they would have said oh man sellers should know they don’t need their own website they can just sell on our thing but I think they’ve lost that battle in the the,
Flagship example for me is Anchor like to me anchor is one of the greatest success stories,
that was sort of you know born because of Amazon right like their product company they exclusively sold through Amazon you couldn’t buy direct from anchor you couldn’t buy ink or anywhere else you could only buy it as a,
3p seller on on Amazon and and anchor went public last year for a with a ten billion dollar market cap,
based on that business but guess what anchor has today they have a direct website so if anchor has decided that,
hey you know what we need to own our own website in addition to selling on Amazon then it’s really hard for Amazon to credibly argue that no one else should be doing that and to me that means,
they have to get back in the web store business but like I bet you they do it organically.

[31:22] The the other interesting thing I thought about is and we’re going to go through Shopify earnings in a little bit so Shopify is fascinating because they actually don’t make,
that much money off of their their software as a service Revenue right so what they do is they basically
they almost give away the software and then the GMB flows through and then they skim off the GMB so they’re essentially you know they skim off the payments they skim off the shipping and handling they skim off
like a firm that’s part of payments you know so that so that’s
that’s interesting because it does make it hard for Amazon price against it right you can’t
you could offer a free offering but it’s almost free as it is you know it’s so so then how do you go at the gmv flow could you offer the Shopify Merchants a,
one and a half Point payment plan or something like that or you know could you because one way to look at it is,
shopify’s getting a lot of economic value off that gmv and not passing it on to the sellers could you build about business model this is what
Mark Lori did with jet this was kind of clever thing he did there is he kind of said well I’m going to take some of this and give it back to his example the buyers but here you give it back to the sellers I wonder if Amazon kind of come up with a different economic model that would
unwind shopify’s model.

[32:43] Yeah I mean I for sure,
it’s not fun and not a super appealing business to be the a longtail webstore SAS company right like Amazon was one right there was one before Amazon
it was John who web stores right and
Amazon launched Amazon web stores and took all the customers and I think what they discovered is that it’s a sucky business it’s not fun like you know collecting 30 bucks a month from these small businesses you know with 50% charm because they go out of business
and every one of them having.

[33:16] Different needs and desires and different things they want to see on your road map right so I think in 2015 Amazon just said the juice isn’t worth the squeeze here,
like we’re not getting any benefit from this let’s just get out of this space,
and per your point Shopify figure it out the the equation to make money it’s not to charge more for the web store because small businesses can’t afford it,
and it’s not make the unit economics you know super lucrative for charging a little for that web store it’s,
you know get a nice piece of all the gmv that flows through that web sort through this whole assortment of services,
and side note that’s Amazon’s main model for profitability to write like like Amazon’s Maine,
profit driver is not consumers buying from Amazon,
it’s third-party sellers selling on Amazon right and they sell 20 billion dollars worth of ads to those third-party Sellers and they sell,
you know I don’t know how many billions of dollars of FBA services and credit card processing services and sales tax calculation services so Amazon’s right in the middle of that that gmv stream,
and that’s the reason I think they,
they decide to get back in the web store business is that they can monetize it now with all those those incremental seller service revenue streams that they didn’t have in 2015.

[34:43] Yeah yeah let’s um I guess that’s a good place to pause and then let’s pick it back up and Shopify because then that’ll give us some numbers to do it before we do that let’s have a little appetizer of Walmart earnings.

[34:57] So they release their earnings this morning and it was interesting I read the top line numbers and I’m like man had a good quarter and a good year right,
and the market did not agree with me so so from an investor standpoint it was a Miss there their earnings per share came in at one point three nine,
they had a big adjustment in there they had a bunch of write-offs and stuff too but the
the Gap earnings per share was 1.39 and consistent consensus estimates was 1.51 so they.
Um and then compounding that miss their guidance for 2021 was not very optimistic and that this is a trend I think we’re going to see across every retailer,
is everybody is going to say,
20/20 was an exceptional year because of covid and we’re not going to come up very well against it right and so you know we have more covid costs and we’re going to probably see slowing,
consumer sentiment in 2020 so combination of the Miss and the low guidance Walmart stock took a pretty good hit I think they closed down 6.5 percent today.

[36:06] So if you’re an investor that was an interesting story that I didn’t toy so you coming,
um but if you just look at it from how did they do as a retailer their Q4 comps were up 8.6% so Amazon’s the lard or Walmart’s the largest retailer in the world,
and they grew 8.6 percent which is like more than double what you would ordinarily expect,
them to do right so that’s a fabulous quarter and then e-commerce growth was sixty-nine percent,
so again that’s a huge number if the,
industry average is 40 percent if if you consider Amazon the industry average or 25% if you look at the US Department of Commerce,
sixty-nine percent growth for the quarter is in e-commerce is great.

[36:58] What wasn’t so great in Q4 is their profitability they you know as Walmart’s mix shifts to e-commerce like they have challenging unit economics and profitability goes down,
they had some they raise their,
their labor rates last year and paid can their Associates more they paid hazardous hazardous duty pay and all these other,
other unique covid fees and so so fair enough profitability was was definitely a soft spot but from a customer demand standpoint.
I thought they had a great quarter they also announced that 20:21 was going to be a huge capex year for them they’re expecting to spend 14 billion in a.

[37:42] Normal big year for them is like 10 billion and by the way like those 10 billion dollar years were.
We’re like from the days when they were building out a lot of Supercenters and so to spend 14 billion in a year when you’re not going to do a lot of new store growth.
Um is a remarkable commitment to investment and what they said is a bunch of that Investments going to be in fulfillment and automated fulfillment and particularly,
grocery store micro fulfillment which should scare Scott because that was one of my predictions,
in our January show they’re making a big investment in health care and and services that go around retail in addition to retail which might sound familiar if you follow the the Amazon Playbook at all.
They also did announce that they’re going to increase their average wage to $15 an hour,
um average being an operative word their target and Amazon raised their minimum wage their starting salary to $15 an hour Walmart still not committing to that,
but they are committing to have an average wage of $15 an hour and I want to see which is a raise for like half a million folks and.

[38:56] The I want to say they’re starting salary is still like 11 11 bucks an hour so that’s going to be a big expense,
so and again this was Walmart’s last quarter of the year so you can now see their full year and so their full year they ended up with five hundred sixty billion dollars in Revenue,
which was up 7.7 percent on a constant currency basis,
u.s. comp sales were up 8.6 percent which is a phenomenal year e-commerce for the year grew 68 69 percent or I’m sorry seventy-nine percent eighty percent so that’s that’s,
very fast growth for the second largest e-commerce site in the United States and then kind of an interesting one,
in 2019 e-commerce was 2.5% of Walmart sales now e-commerce is 6.2 percent of their sales so it’s become digital is becoming real at Walmart.

[39:51] Brickell awesome and then anything else there.

[39:57] I know that you know it’s going again this is why you should take retail advice and not stock investment advice from Jason.

[40:07] It’s all about expectations yep speaking of expectations let’s talk about Shopify earnings like that transition.
They are they actually smashed expectations so Wall Street Hanna met a buck Twenty Eight on the EPS side and it came in a buck fifty eight so be by 30 cents.
But the stock went down and I think what you had there was.
You know a lot of runaway expectations so there’s there’s printed expectations which is kind of analysts consensus and then there’s kind of like quote-unquote whisper number and my sense is whisper number on Shopify everyone was kind of like Mmm Yeah.
Amazon came in pretty good and Saudi Bay and you know will they be able to continue this over a hundred percent growth in the answer was no so they Top Line grew at 94% which.
Is just amazing right for the fourth quarter but I think people had let their expectations run away that it could be higher because Q3 there were at a hundred nine percent and then back into to a hundred nineteen percent.
So it was a pretty good step down from from those growth trajectories.

[41:13] That’s a first world problem when your growth deceleration slows down a 94%.

[41:19] It is but hey it’s Wall Street they’re hard to please what have you done for me lately.
And then we’ll talk about in a second but I think also so Wall Street you kind of look at the print and then the forward-looking stuff so,
so so you know beat be current but then we’ll talk about the four projections,
for the year that puts them at 99% I know that was pretty frustrating to them I hate it when numbers do that to me can’t you just get that one more percent there to make it triple digits.
The revenue grew for 2020 full year 86% and the gmv grew 96%,
and then gmv for the fourth quarter was over 41 billion that puts them at a hundred twenty billion for 2020.
So if you line that up against Amazon’s third-party gmv that’s about,
40% and I think there are there are bigger than eBay Now by a good margin that number I think last I looked if you take Autos out of eBay I think there’s sub a hundred billion still.

[42:18] I’ll have to have one of the interns fact check me on that and then as we mentioned it’s really interesting if you take that slice of Revenue that they have there.
The subscribers subscription Services which is the soccer as a service Revenue the software licensing Revenue that was 280 million,
but then merchant services was 700 million,
so you can get the mix there that you know I think it’s 4060 so 40 percent of the revenue comes from software revenue and then 60 comes from quote-unquote merchant services and this is where they’re essentially,
you know,
charging a merchant two and a half points for payment and then you know passing through two and making a half point on that gmv that flows through there,
then they make laugh Point here so they effectively have at a crate like a Marketplace would but it’s against all the services and aggregate that there are consumers that there.
Their business customers are using and then yep,
so that Merchants Solutions actually grew a hundred sixteen percent so when,
you know which grew faster than govt which means they’re take rate went up effectively so there,
you know the their Merchants merchant service Revenue grew faster than gmv and overall Revenue so it took share from the software side of the business.
And then the take rate is going up so there you know whatever mix or things are happening there.

[43:47] Um so one of the things that I think shocked Wall Street a little bit is that they effectively said that they’re going to get very serious about the Us distribution Network and,
storing and shipping things I think they had one fulfillment center up in Canada where they’ve experimented with this and it sounds like they’re going to lean into it so that’s going to be interesting.
And then another thing that was announced around their earnings was that they are going to put their payment system on Facebook check out so I thought that was a little tidbit that I wanted as the payments guy wanted to get your feedback.

[44:18] Um so yeah so so if we if we tie that back to that Amazon acquisition you know.
This is definitely going to be on you know Amazon’s radar so they’re DMVs heading to 1/2.
It one way to look at is you all are selling things into this pool of people selling online now they’re going to be building their own F be a competitor,
so it’s going to get really interesting to see what’s going to happen here and then Ivan IV,
I thought it’s funny the Shopify and I don’t know if this is a corporate policy but there,
there are social media people there like poking the bear at at Amazon so when Bezos left they did a kind of an odd goodbye kind of a thing that I thought was kind of it was funny but.
It was definitely you know not I’m a pretty risky
kind of guy that was just kind of like I was just like oh my God I if I was to see a that’s that was a little bit of a step too far so so there’s there’s definitely going to be a really interesting story this year watching these two battle it out and I’m excited to watch it.
Watch the blows land.

[45:28] Yeah I’m hoping to launch a new television service which is going to be Toby and Jeff Bezos playing Starcraft so we’ll see you that.
Comes to fruition but seems my money would be on Toby actually in Starcraft but.

[45:44] Who has the coolest hat would be even better.

[45:46] Good point yeah they both have discovered some interesting foil later in life but yeah I mean.
It’s funny because I do I think shopify’s a phenomenal story that growth is Monumental in the fact that their 40 percent of Amazon’s third-party Marketplace like.
That that is serious right and they’re competing for the same wallet and so they’re absolutely competing for dollars,
and they’re both well resource to escalate the fight so it’s going to be exciting to watch,
the thing I like I try to remind people of is that they don’t actually have huge overlap in services today right like what Amazon does better than anything else is they acquire eyeballs,
and then they they rent those eyeballs to sellers through all of these services.
Shopify does exactly the opposite the one thing they don’t do is bring any eyeballs to to your product they exclusively sell you a bunch of services for you to monetize the eyeballs you already have and so,
for sure they’re gonna grow an overlap each other and you know we’re starting to see that with a fulfillment networks and and various things but they’re not starting from a.

[47:01] They’re competing for the same dollars but they’re competing from two opposite ends of the service spectrum and so it’s you know they’re going to meet in the middle somewhere,
and it’s going to be interesting to watch but like you know my big takeaway from your numbers are,
um not only is the is that g that Revenue that’s tied to gmv is much bigger than the revenue that’s tied to subscriptions it’s growing,
twice as fast right so it’s both,
they win when one of their existing customer sells more they win when they sign up a new customer they win when they find more services to sell to that same customer they win so that that is a nice Network,
um and you know let you let you see what investors are seeing in this in the Shopify model and you know I in the back of my mind I’m hearing that soundtrack,
you know your margin is my opportunity you know I have a feeling that that Jeff and project Santos are,
not gonna sit back idly while that happens.

[48:03] Yeah absolutely another thing that’s interesting got.

[48:08] Just on the shop pay thing them being on Facebook isn’t that interesting to me but it what it signals is right so.
It’s highly unlikely,
that there are new buyers that are going to go to look at the new Air Jordan shoe on Instagram and buy it because they can now pay with shop pay right like I you know I doubt there was anyone that said like who I really want that shoe I’m gonna buy it through Instagram check out.
But I’m not going to use PayPal only do they accept my shop pic,
um so I don’t think it brings any new eyeballs to the those products on Instagram like I don’t think it’s a big draw but,
if you already decide you want those shoes and you find out that checking out is going to be easier and lower friction because your payment information is already stored because they’ll accept your shop pay I do think it can improve conversion,
for the people that are already discovering that product so to me it’s.

[49:06] There’s it’s a smart play fun shopify’s part and Facebook’s part to offer it it’s probably not game-changing or super,
um at the moment but what’s super interesting about it to me is as far as I know it’s the first example of shop pay being accepted outside of the Shopify echo system,
um in this is another interesting you know potential Battleground you know the one of the biggest pieces of that of that gmv Revenue stream for Shopify is because you know they used to,
to Outsource credit card processing to stripe and others and now they’re doing it on themselves,
and if Shopify is going to become a legitimate digital wallet and offer their payment you know method available you know far and wide that that is kind of interesting,
Amazon is tried to do that and hasn’t had very much success because.
The Amazon brand is in direct competition with every other retailer the Shopify brand really isn’t right and so it is interesting.
If this first move to Facebook signifies you know Shopify deciding that one of their growth opportunities is,
is digital wallet that is an area where I think they’re strong and have a competitive advantage over Amazon so that that.

[50:26] Yeah and then
then there’s been a lot of speculation so then there’s a recruiter for Shopify that’s very he hangs out in the Twitter circles you and I frequent like the DTC and kind of area and the retail e-commerce group and then he put a.
Really interesting listing out there essentially saying we’re building a high growth team you need to be on the west coast and we’re looking for a lot of talent and kind of from the D in the,
DTC world so that and a lot of other hints have me thinking I think it was this one of my prediction said they’re going to build a Marketplace so so I feel like I feel like they’re going to go at the eyeball part of Amazon and it’s gonna be interesting to see how that goes for.

[51:10] They could like I think I’m less optimistic that they will then you and others are,
they totally could and you could interpret that job listing as,
as you know a Skunk Works to hire people to build that Marketplace but to be honest I give you look at through a different lens that same job listing could be for a team to help,
Sell Shop paid tune on Shopify Merchants right like so you know it could be other things it could be selling those fulfillment services to other Merchants it could it could be lots of things.

[51:43] Yeah but it’s DTC no those are all B2B this is a consumer team.

[51:48] Yeah yeah well we’ll have to see again A lot of people are speculating that they’re going to do it and they have the resources to try and I’m not even saying that they will fail but what I will say is.
They don’t have any proof points that they can attract eyeballs and attracting eyeballs is super hard and so just because they’ve been successful in these other businesses.
Um does not mean that they’re going to be able to create you know the hundreds of millions of consumers brand Affinity that that they would need to to compete with an Amazon.
That’s super hard to do it would be an impressive story if they they launching can do that and and the day they do that a bunch of the things that people like about them suddenly breaks,
so you know a lot of the reasons you do business with them is because they,
they don’t compete with you and they don’t compete for eyeballs and they don’t claim ownership of your customer in the same way Amazon does so as soon as you become a Marketplace,
you’re gonna start struggling threading the needle with all of those things so you know you can imagine ways to part we do it but but it it could get messy.

[53:04] All right so it’s going to be a really interesting 2021 with this battle of these two Tech Titans and it’s gonna be interesting to see how it plays out.

[53:12] Yeah I admire the heck out of both companies I’m glad they’re both there and I hope I hope they do compete in a bunch of services and make him all better for all of us so.
I think you know as non financially in observers I think it’s going to be super interesting to watch.
And Scott that’s probably a good place to leave it because we’ve
taken a short Newsweek and turned it into our full hour-long show as always if you have any thoughts or questions about any of the topics we discussed today you can totally hit us up on Facebook
or Twitter,
and if you found this valuable you know if it got you excited about what’s going to happen in 2021 a great way to start off the year on the right foot is to jump onto iTunes and leave us that five star review.

[54:01] Thanks everyone for taking the time to leave that review and.

[54:05] Until next time happy commercing!

Feb 3, 2021

EP253 - Amazon Q4 2020 Earnings

Amazon Earnings

  • Amazon reported in Q4 2020 earnings on Tuesday Feb 2.
  • Jeff Bezos is stepping down as CEO and moving into an executive chairman role. Read his letter to employees here.
  • We deep dive into the Q4 and full year 2020 results.
  • Sales, profit, and free cash flow were all above expectations. US product sales had a robust 44% YoY increase. 3P continues to grow as a share of sales (now 55% of sales mix). AWS continued to grow.
  • Other income (which is largely ad sales) was up 66% representing $21.477B of revenue in 2020, well above expectations.

In other news:

Episode 253 of the Jason & Scot show was recorded live on Tuesday, February 2nd, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scot show this is episode 253 being recorded on Tuesday February 2nd 2021 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:41] Hey Jason and welcome back Jason Scott show listeners,
Jason get him any more bummed out today I was all excited to get the Amazon news
Q4 we’re going to see finally how holiday 2020 went this is like one of the first companies reporting this cycle so I was all excited for that
and then I got my legs taken out Jeff Bezos is announced that he is going to move from CEO he’s no longer be CEO of Amazon he’s moving to executive director so I’m a little sad about that we’ve seen,
a 27-year run he’s one of our biggest fans of the podcast so he’s probably listening right now so Jeff great 27 years is good run and sorry to see you go so I’m going to do I’m going to miss hearing him.
Talk about,
day one and all is management principles and all that stuff so but I’m sure he’ll go do some cool new stuff how are you feeling about it Jason.

[1:39] Yeah well at first I was excited because I was hoping I wouldn’t get all those like detailed notes that he sends after each episode about what he agreed and disagreed with
but then I was informed that he’s mostly stepping out of the the CEO Row in order to have more time to focus on our podcast so.
So I’m not sure how that’s going to play out but in all seriousness.

[1:59] Maybe we could co-host the Jason Scott and Jeff show.

[2:03] He keeps asking to come on we’re eventually going to have to relent and let him.
In all seriousness though I actually didn’t view this as very big news.
In my mind I feel like he had largely already stepped out of the operational CEO role.
Late last year early this year and then my understanding is he kind of became much more active and got re-engaged specifically because of covid and so I feel like.
He you know kind of sucked him back in and now that he feels like he’s worked through the at least the.
The big first wave he’s looking to take a step back again so I kind of view it as him kind of following in your footsteps and building a good company and then you know turning turning over the keys to other operators and.
I I think I mean he’s still going to own a bunch of stock he’s still gonna be involved in their strategic decisions I sort of don’t think he was getting.
The customer feedback the same way he was earlier in his career even before this so I’m not sure it’s a huge difference.

[3:17] Yeah
cool well couple highlights from the letter he sent out I won’t read the whole thing although it’s it’s a good read I definitely recommend everyone look at it so we’re just pick out a couple things here first paragraph I’m excited to announce that this Q3 all transition so he’s so this will happen in
third quarter to Executive chair of the Amazon board and Andy Jesse will become CEO that’s interesting because Jeff will key was for long long thought to be
The Heir Apparent and then he left recently so there’s seems like there may have been some kind of a.
Bit of a struggle secession battle behind the scenes I don’t know what drama there was there but Andy runs the AWS part which has been.
Wildly successful but he has he didn’t just come up through cloud computing he has done a little bit of everything at Amazon.

[4:06] It continues in the exact chair roll I intend to focus my energies intention on new products and early initiatives that’s interesting because it does leave the door you know we’ve had a lot of these articles about
I’m thinking a lot about Shopify so that kind of like leaves the door open there a little bit Andy is well known inside the company and has been an Amazon almost as long as I have he will be an outstanding leader blah blah
and then kind of skipping to the end he kind of talks about.
Yeah the last 27 years for the first five of the biggest question you got was what’s the internet that was kind of funny and then in conclusion he says as exact chair I will stay engaged and important Amazon dishes but also have the time energy I need to focus on the day One Fund
that’s his largely I think it’s focus on homelessness the Bezos Earth fund that’s ones obviously for,
climate change kind of stuff and blue origin that’s obviously going to space and the Washington Post which is his little
news letter that he has there and my other passions I’ve never had more energy and this isn’t about retiring I’m super passionate about the impact I think these organizations can have so you know I guess the the
the bittersweet Part of this is is sad to see believe Amazon but maybe he’ll kick into kind of like an eel on second gear here you know and.
Do some other really cool stuff so we’ll see blue origin is moderately interesting I feel like it’s so far behind SpaceX at this point that I don’t know it’s not I don’t follow it as closely as SpaceX.
So if anyone wants to read the letter will put a link to it in the show notes.

[5:35] Awesome yeah and it is a really well-written letter he’s a good communicator so I enjoyed the wetter and there were some funny parts but Scott I think we should put our emotions
back under the desk and we should jump into the Q4 results.

[5:53] Yep we don’t get to 253 episodes without being consummate professionals so I’m okay let’s go let’s do this thing.

[6:02] Good deal so let’s set the stage a little bit first of all if we think about the shape of the last year you know of course we get the the.
Data from the Department of Commerce on on e-commerce growth and so if we look at the last quarters of growth for the entire industry q1 e-commerce was growing at almost 15% 14.8%.
Amazon in q1 was growing much faster than that like 27% Q2
which was the main covid impacted quarter where a lot of retail was forced to close e-commerce jump from 14.8% to 44.5%
so you know one of the hugest growth in recent history and Amazon almost exactly mirrored that they jump from 27 percent growth.
To 41 percent growth Q3 the growth settled down a little bit still
twice its historical run rate but Q3 e-commerce industry grew at 37.7% Amazon grew exactly the same at 37%
so we don’t have the industry data from Q4 yet that actually,
um will get the raw version of that the monthly version on the 17th and then we’ll get the quarterly e-commerce roll up on the 19th so look for a show in the middle of the month from us to kind of recap what happened to the whole industry.

[7:31] Part of the reason I’ve been excited for Amazon’s earnings is they do mirror the industry so much that that it’s going to give us a pretty good hint of where.
Where the whole industry should come in at their guidance so what they told the Mark had to expect was around 38% so you know that would be similar to their Q3 growth.
And so that’s that’s kind of.
Where we were going in and then once the markets closed today they made their announcement and Q4 net sales growth was drumroll 44 percent so.
An acceleration above that guidance so I assume that makes,
the investors happy and interesting after the slight deceleration and Q3 that we saw tree accelerating Q4.
There would have been an argument that because Q4 is normally a heavy e-commerce quarter it’s harder to hit these really big growth numbers so that was impressive,
the number by the way was a hundred twenty five point six billion in sales which
versus 87 billion last year but what’s cool about that that is I believe that’s Amazon’s first hundred billion dollar quarter so that’s that’s pretty exciting.

[8:50] Yeah for the longest time,
we you and I would co-present this yeah Walmart was a quote unquote 400 billion dollar company and it really hasn’t I don’t know if it’s changed that much is it still kind of that 400 billion right it hasn’t cracked.
So a hundred billion quarter is kind of like how big you have to be to get to Walmart now you and I would make the argument that with third-party gmv they passed a hundred billion a long time ago from a GMB perspective so it’s this is like just pure Revenue which is,
pretty amazing so by gmv I have to do the numbers they’re pretty pretty honking big.

[9:25] Yeah I’m going to I’m looking forward to that and now I says it’s also interesting to me because of these rq-4 numbers you can now get like the snapshot for the whole year and so from from Amazon’s perspective for the year net sales grew 38%
so you know again we care more about gmv but but net sales were 386 billion for the year vs. 280 billion last year so that’s
thirty-eight percent growth or 37 percent growth under constant currency so not
not a bad year.

[10:02] Yeah and then that’s the top line so that’s what I would call a beat and then on the top line and then operating profit was expected to be 4.4 billion by Wall Street and came in at 6.8 billion so that’s you know.
A paltry 2.2 billion more than Wall Street,
I was expecting but remember Jason Amazon is not a profitable company so so in Wall Street parlance that was a top and bottom line Beat which is always good
free cash flow increased to 30 1 billion for the trailing 12 months compared to 25 for the previous period so that’s 20 percent increase in free cash flow this is all after you know they spent I didn’t see them call this out
but they had forecasted that they would spend like four billion on covid,
stuff you know various like testing and then also social distancing and partitions and I’m sure mask and all this kind of stuff so.
If they had done this without covid there would be another four billion dollars down here on the bottom line I I imagine which would have just been.

[11:09] Yeah although they also got a lot of extra demand from covid so it may be may be harder to.

[11:13] It was a fair trade yes fair trade.
And then if we look at that for the year net income increased to 21 billion compared to 11 from last year so in 83 percent,
your increase of net income and you know when just kind of your basic math is if you know
revenues increasing 30 or 40 percent or whatever it is and and your net income is increasing faster you’re getting more profitable so that’s pretty impressive to see an acceleration in your business and you’re increasing the.
Profitability of the business so lots of lots of,
the thesis for this for literally 27 years is at some point those things can get so big they just can’t spend enough money and the scale will kick in,
with things like hundreds of fulfillment centers and all this stuff and that’s turns out a hundred billion dollars is a quarter is really a big scale that you get a lot of efficiencies in a business like this.

[12:09] Yeah.

[12:12] And then looking at the consolidated
you know what this means is looking at the segments inside so North America grew 40 percent and all this is without the impact of
constant currency so it’s X FX as they say and then International grew 50% and I have to go we have to the intern interns are off tonight
but I am pretty sure we haven’t seen International growth since like maybe 2017 when they started to really juice India,
so International usually is lagging the North America by.
Five percentage are some points or so so this is really interesting and will dig into a little bit more I need to kind of parse through the the
K in the queue when they come out they do have a little bit more country data inside of those than they have at this point but I’ll save that for a future show I’m intellectually curious like what’s going on in international cause that you know was it,
the covid bump was delayed internationally compared to the US or you know I don’t know why I’m really curious to dig into that international number.

[13:23] And then sets the quarterly View and then we look at the annual view Consolidated as you mentioned your your Amazon grew 38% North America was at 38% and that surge at the end
made International 40% just a hair more than then North America.

[13:45] Yeah and it’s interesting because you know North America is quite a bit larger than International still so you you’d almost expect International to be growing.
Faster so it’s going to be interesting to see if they provide any more detail like did covid have a bigger impact.
On Cue for internationally for some reason or or is it just you know that they open up more markets I don’t know.
But one of the interesting things is to kind of look how the revenue breaks down so if if you look at that net sales growth by segment
forty-six percent growth in online retail so that’s.
For them that’s one piece sales they do break down physical stores separately which only I’m interested in and continuing a trend physical stores is the only thing in history to ever go down for Amazon,
and it went down 8% which is pretty material right it’s mostly Whole Foods and 8% is a pretty big drop especially in grocery which.
You like on average went up 20% thanks to covid but what I think is happening here is for any other grocer.
Their sales went way up but it disproportionately skewed to e-commerce and Amazon when you order something online and it’s delivered from a whole food sale it.

[15:12] Shifts from being a store a physical store sale to a digital sale so I think.
Um that that that is kind of gumming up the works when you look at this negative eight number.
Third party sales you know we’re growing even faster which has been the trend lately so they’re growing at 57% subscriptions which is like Amazon Prime,
grew at 35 percent AWS is maybe the first business at Amazon that seems like it might.
Start to have some impact of large numbers because while it’s still growing very healthily it’s its rate of growth is slowing so it was at 28 percent and then to me,
the most surprising number and we’ll unpack this a little bit later but the.
The the biggest surprise in all this was what Amazon calls other which which we believe is mostly advertising revenue and it was the biggest growth of all it was 66 percent so that’s pretty remarkable and,
we’ll talk about that a little bit more later when you look at that mix it’s about 61 percent to North America 27% International and 12% AWS is kind of hot,
the revenue breaks down but don’t spend too much time thinking about that because if you if you refactor did it Jim via it would look a little different.

[16:38] Yeah
and then speaking my favorite topic third-party marketplaces that that growth of 57% made the unit mix of marketplace has hit a new high Watermark of 55% that’s the first time we’ve seen it
hit 55% it does typically tick up into the you know
high level in the fourth quarter because Amazon leans on its Army of entrepreneurs to help satisfy all that holiday demand so that’s as a third-party Marketplace guy.
I can remember when we were at like 33 percent and it’s pretty amazing to see it gets 55 I always felt like Amazon would balance it more at 50 so it’s interesting to see it kind of cross over there I wonder you know.
My bet is they have some data that makes them more comfortable increasing their sales from a customer experience standpoint like maybe the early days,
third-party sellers weren’t quite there as you know obviously have FBA but even then like maybe self-fulfilled Prime and that kind of stuff is is helping nudge that number because Amazon feels good about the customer experience.

[17:45] Yeah I think you know one of the the trends themes in Jeff’s letter was this thing that like when you invent something crazy new it seems.
Completely implausible at first and then if it’s a wild success it one day it seems routine and that’s the biggest compliment you can never get and I feel like third-party Marketplace is the perfect example of that that it was like hugely controversial and somewhat unlikely
when it was launched and now it’s just like oh ho hum it’s 55 percent of our sales.

[18:16] Yeah absolutely
so that’s kind of some of the highlights of the quarter will kind of from the marketplace retail side and then we’ll cover some of the other categories but it’s also interesting to look at the guidance so this is where Amazon tells Wall Street here’s kind of what we’re expecting for q1 of 2021
so I was this is always interesting because.
Yet factors in it at this point they’ve obviously seen most of January’s results internally so they have a third of the quarter kind of like under their belt and they can
make some predictions there so they said net sales are expected to be between a hundred and 106 billion which is
booked in growth of 33 to 40 percent so 36 at the midpoint so definitely a step down from that kind of 44 percent that they saw but they always they always kind of do this route this would be called quote conservative guidance.

[19:06] Or sandbagging.

[19:07] May possibly one of the things that is challenging I can speak from experience has you know everyone’s feels like,
we’re going to get a break in this whole covid thing but no one knows when it’s going to come you know you read some things that say maybe this summer and then you see other things this a we’re not going to return to normal ever so that makes it very hard to forecast.

[19:31] What to do a whole show on where you and I follow that
so before this announcement Wall Street was thinking q1 would be more like ninety to a hundred billion so they kind of have this is called raised beat so they beat the current quarter and then they raise the future quarter so this nudges the future quarter which is q1 2021,
to well beyond that,
previous Wall Street range so it’s going to be interesting there’s a lot of focus on the stock market with all the craziness going on with read it.
People in GameStop and all so you know the aside from that,
Amazon you’ve got you know this really smashing beat and raise kind of thing going on but then Jeff kind of quote unquote leaving so it’ll be interesting to see what the stock does I looked after market in there wasn’t really it was kind of flat which,
it’s interesting because I would have expected they beat expectations so I would have expected kind of like,
5% bump but so I think the headwind of of Jeff moving is put a wet blanket on that
looking at the forecast for the bottom line operating income is expected to be between three and six point five billion huge range there again kind of probably that covid uncertainty.
Um and then Wall Street had that at 5.4 so that one I would say is in line if does feel this one feels pretty thin baggy so I.

[20:54] Pretty easily beat that one and then they said approximately they’re forecasting about 2 billion of cost related to covid which is which is down and I think.
The part of that is some of these things you know are have to be replenished like testing where you’re constantly doing it but other things like any.
Changes they’ve made to the workstations at fulfillment centers or the driver schedules or any of those things are largely in the rearview and already Investments they have made.

[21:22] One other Tibbett I thought interesting is because sometimes we struggle you know at
my various companies to hire like five or ten people Amazon hired a hundred and seventy-five people in the quarter a hundred seventy five thousand people in the quarter.
So you know they have well over a million people right now and then that hundred and seventy-five thousand people that hired in Q4 is three times what they hired in the same period of 2019 so.
Just like just like imagine the infrastructure you’d have to have to hire a hundred and seventy-five thousand I can’t even.
Look how many recruiters do you have to have and you know HR sign up people.
They just must have these wildly it must be the recruiters must just be robots or something because I just don’t know how you scale something like that that’s just mind-boggling to me.
They do not break out how many of those are kind of more kind of corporate type folks versus Warehouse folks I do imagine a big chunk is warehouse but you know they are hiring corporate,
people at just a crazy clip as well so there’s there’s there’s nothing a mix of that in there also.
How about I know one of your favorite categories to look at is the ads / other business would you see there.

[22:38] Yeah so we talked about that it was up unexpectedly 66 I mean we all expected to grow but 66% certainly exceeded my expectations that means if you add up,
the ads tend to be sort of seasonal people spend more money on advertising and Q4 than other other quarters
but if you add up the last four quarters of Amazon’s other it was 21 and a half billion dollars and I can tell you that that is,
wildly above anyone’s aggressive estimates for Amazon’s advertising business in 2020 so it’s,
it’s really impressive you know we’ve already talked about the fact that they were the,
the third largest digital advertising Network behind Facebook and Google they are.

[23:30] Facebook also had a pretty good quarter but Amazon is doing remarkable to put it in perspective that’s about seven times like Twitter’s advertising Revenue.
And one of the things that’s interesting to me here is,
that there are actually some good Tailwinds for this business to grow even more for Amazon in the advertising industry one of the biggest news things and it’s getting a lot of ink right now is.
Apple is changing the way that that third parties can track mobile app a mobile user IDs in the apps,
they have to be more overt about it and a lot of a lot of apps are choosing not to do that a lot of the browsers are turning off this tracking mechanism that’s called third-party cookies,
in the cumulative effect of those two changes third party cookies and app mobile app IDs,
are that a lot of the advertising vehicles that that brands use to Target their ads and particularly those like retargeting ads are going away.
So if you were Procter & Gamble and you are used to being it being able to buy a highly targeted audience.
You have less tools to do that and one of the best workarounds is to have someone else run the ad for you.
Does have a bunch of first-party customer data and knows a lot of consumers and it turns out.

[24:56] Who would who would that be.

[24:57] That would be Amazon and so.
So increasingly that and I’ll bet you a big chunk of that 21 billion is not ads that show up on Amazon I’ll bet you a bunch of that is,
ads the Amazon places on places I Google using its first party data to Target on behalf of people that have bought ads from them.
And you know that that trend is not lost on other retailers one of the most common things we see in the world right now is retailers are launching their own media networks and so I mean Ulta,
has launched one CBS has launched one and the probably the biggest one besides Amazon is Walmart they rebranded there’s this week they it’s now called Walmart.

[25:43] They had already kind of brought it in house and put a lot of effort behind it.
The big thing they added this week is they did a partnership with a company called trading desk that.
Buys a lot of off-site media so now Walmart is trying to leverage that same Trend that I just mentioned with Amazon where.
You can buy you can pay amp Walmart to use their first party data which they have even more customers than Amazon.
And they’ll run those ads for you and in Walmart’s case in addition to off-site ads and ads on there now also selling through the same network ads,
on all the TVs in the Walmart store and all the self-checkout terminals so.
So the retail media Space is really heating up and Amazon is certainly.
The leader and poised to continue to be so.

[26:37] Sue AWS did you want to go there.

[26:42] Yeah oh and one other side note you know if you remember way back to episode 251 when we did our predictions one of my predictions was that that ad space would totally heat up so I’m feeling good about that prediction so in the first two weeks.

[26:56] Still too early to call.

[26:57] Yeah absolutely.

[26:58] It could totally slow down for the next 11 months.

[27:01] Exactly yeah it could turn out digital ads are a fad.
AWS Wall Street was expecting just under 13 billion twelve point eight billion and it came in I think right right at twelve point eight billion
we talked about that that 28 percent top-line growth the.
Annualize that means AWS is growing at about thirty percent which you know again it’s a
very profitable business and that’s growing really quickly I do believe that there big competitors Google Cloud platform and Microsoft are probably
um at or better than that growth rate although there they’re both considerably smaller than AWS so so maybe they’re starting to make up a little bit of ground.

[27:52] Cool and then so before we we wanted to spend a little bit of time on some other news that came out but before we do,
I felt like so this is gonna be interesting so we have this first data point kind of in the mid-40s you know historically you have this,
chart you have been publishing the kind of shows Amazon’s actually the middle of the pack right so we’re seeing like.
Historically Shopify has printed higher and even like BJ’s and Costco and so a lot of the omni-channel guys are seeing just this disorder to magnitude higher digital growth and Amazon because a lot of it is,
movement of analog to digital we’re what was your kind of gut reaction to the quarter that Amazon put up here.

[28:38] Yeah so it’s interesting like they’ve made impressive performance start to feel somewhat boring to me so they’re a little north of where I expected I was I guess I was expecting high 30s and so like for you know
44 seems pretty impressive but,
I don’t know in some ways I always expect there to be some some extra Easter eggs or some fun surprises and in,
Amazon earnings and they just they just made it look too easy.

[29:11] Let’s I’ll put elastics on there this International my spidey sense is tingling International I want to figure out what’s going on in there something’s up.

[29:18] One one thing I will say that just interesting to me Amazon has always been this company that defied the law of large numbers that despite the fact that they’re by far the largest e-commerce player.
They generally content we’re continuing to grow faster than most everyone else.
And that was certainly true even in q1 of this year like you know e-commerce group 15% and they grew at like twenty seven percent but covid seems to have.
Helped everyone else’s e-commerce you know.
Mildly catch up with Amazon right so Amazon still has had impressive growth but they’ve kind of Fallen to the industry average and a lot of these other big players are growing way faster than the industry average so you know Walmart which is the second biggest e-commerce site in the US,
drew it like a hundred percent and targeted at 170 to 200 percent and you mentioned like BJ’s at three hundred percent.
It’s going to be interesting to me is that a.
A spike because of covid and you know the fact that these guys are growing from much smaller numbers than Amazon and.
You know as the health concerns around covid abates do we,
do we see Amazon kind of move back to the front of the pack in terms of growth rates or is this the new normal that that you know they’re going to be the biggest but their Challengers are going to be growing a little faster than them it’s going to be interesting to watch.

[30:47] Yeah I agree there’s a case to be made that maybe their gains are going to be stickier because the omni-channel guys will just shift back to the store at some point or will that maybe they’ll stick to like you know there’s a lot of talk about Walmart’s Grocery and all that all that just so.

[31:02] One thing that I will say is all these other retailers that are now selling a bunch of stuff e-commerce are having the same profitability problems that earlier Amazon had right so one thing that these other retailers are not getting is the,
the unit economics of scale that Amazon has.

[31:18] Yes they’re they’re kind of on the other side of the mountain and kind of on the down slope of profitability in everyone else is like holy cow this is hard and there’s a there’s a big mountain in front of us to make this work.

[31:30] Exactly any other closing thoughts on Amazon anything that jumped surprised you or that you were particular excited to read.

[31:38] Not I know we’ve had some news out of one of the companies that was on the show so I want to hear your take on that.

[31:46] So two other kind of news tidbits I just wanted to mention first of all just because we were just talking about me dominating the predictions and retailers are struggling for e-commerce profitability
one interesting bit of news last week was that Walmart announced that they were going all in on these what are called micro fulfillment centers or what
Walmart calls lfccs local fulfillment centers so this is kind of putting.
Automated picking in a store,
to make that that online grocery pickup or that curbside pickup more cost-effective for the retailer and Grocers have all been
piloting these things but Walmart’s announced that they now have plans to deploy dozens of them this year and they actually said they’re partnering with three different technology providers so,
alert Innovations is who’s been doing Walmart Micro fulfillment up to now and then you know two other good industry competitors de Mantic and fabric,
are both apparently getting some of the Walmart business as well so that,
that is like one of the things you would do to improve the unit economics of digital Grocery and so it’s interesting to see Walmart being a leader there and it’s especially interesting because that was yet another of my annual prediction so I’m feeling good about two of my,
my prediction so far.

[33:12] Pin here CEST with the predictions this year how about is fabric is that fossils new company so the same fabric rather two Fabrics.

[33:20] No so I think you’re thinking of fabric as an Israeli Fulfillment company in fassl’s is an e-commerce platform.

[33:34] There are both called fabric rent.

[33:37] And then the other bit of news that you you referenced is previous guest on the show drizzly just got acquired by Uber
so that was a 1.1 billion dollar acquisition for four
folks that haven’t heard every episode of the show drizzly is the market leader in alcohol home delivery Last Mile for alcohol.
And that has been a.
A little micro segment that has totally exploded thanks to covid before covid the overwhelming majority of all alcohol was sold at.
now of course we’re all buying booze to drink it home and a lot of us want that delivered so so drizzly has been kind of a Marketplace that delivered alcohol orders on behalf of clients.
And now they’re getting rolled up to be part of buber,
you’ll remember Uber bought Postmates for like 2.6 billion last year so they seem to be taking some of the.

[34:38] That good Uber equity and trying to convert it into other interesting businesses.
And the alcohol one is interesting to me because it’s.
It grew at unlike 80 percent this year home delivery of alcohol grew like 80% it’s Fork it was literally only one percent of alcohol sales before covid it’s forecasted to be like eight percent of alcohol sales on there’s a couple of years so it.
It seems like it’s on a great trajectory in and would be a good investment,
the challenges that there’s a bunch of Regulation around alcohol distribution and a lot of the regulation got kind of loosened during covid and it’s an open question whether.
It’s going to take him back up at some point or whether it won’t and there’s also some speculation that some of these small start-up companies weren’t perfectly compliant with all the alcohol distribution laws but as they get bigger.
The the risk and cost of not being compliant is going to get higher so so I would say there’s some,
there’s some Regulatory and compliance risk about these businesses scaling so it’s going to be super interesting to watch.

[35:49] So will there be a day when you get an Uber and they offer you beer and wine is that what’s going to happen here.

[35:55] I think this is more of the ubereats division than the Uber but who knows.

[36:01] Uber select Uber mobile bar.

[36:07] Exactly when they merge with Airbnb it’ll they’ll be restocking all those mini bars that they put in people’s houses.

[36:14] Perfect I like where you’re going with this vertical integration around alcohol.

[36:20] Yeah,
well look I know we wanted to get this show out quick because people are eager to hear our thoughts about that big Amazon earnings and
shout out to Jeff that was that 27 years was a good run and we’re excited to see now that you’re up to speed what you can really accomplish.

[36:40] Yeah thanks everyone and if you enjoyed.
This episode or any episode of our 253 we would love a five star review you do have to kind of go into your favorite podcast app if you’re using iTunes that’s probably the most helpful for us but if you’re on Spotify or any of those other
awesome recording our podcast listening Technologies we really appreciate a review you could be one of our first reviews of 2021 how about that.

[37:09] That is super exciting and until next time happy commercing!

Jan 28, 2021

EP252 - Amazon FBA Roll-ups w Chris Bell CEO of Perch 

[NOTE: The audio quality of this episode is not up to our usual standards due to some internet challenges. But we felt the content was valuable enough to publish the episode anyway.]

A number of firms are acquiring, or some would say rolling up, brands that primarily distribute their products on Amazon using Fulfillment by Amazon. By some accounts, these firms have cumulatively raised over $1B in capitol, and are rapidly acquiring brands.

This week we explore this trend, with the founder of one of these firms, Chris Bell, CEO of Perch. Chris sees Perch as a next generation CPG conglomerate leveraging the Amazon marketplace. While traditional CPGs may review their pricing quarterly, and set marketing strategies annual, Perch adjusts pricing strategy hourly, and advertising strategies daily.

“Amazon marketplace is 2x any CPG and growing faster.”


In this interview we cover:

  • Overall trend, and how Chris sees the marketplace
  • Perch criteria for acquisitions
  • Synergies for brands in the roll-up model
  • Off Amazon strategy
  • Potential risks of this model, including from Amazon
  • What the potential future of this market looks like

If you’re interested in selling your FBA business to Perch, you can reach them at

Episode 252 of the Jason & Scot show was recorded live on Wednesday, January 27th, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 252 being recorded on Wednesday January 27th,
20:21 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 back Jason Scott show listeners.
In this week’s episode we are going to do a deep dive into a trend that I’ve been really fascinated by and we’ve touched on it on the show a little bit last year.
That trend is that there are a number of firms that are acquiring or some would say rolling up Amazon FBA based businesses.
Sometimes I’ve heard these called Amazon Roll-Ups FBA roll-ups,
what have you and cumulatively if I’m doing my math right these firms have raised about a billion dollars now with this strategy,
globally there are several in the US and there’s some rowing across Europe and other areas so it’s really interesting and I can get a lot of questions
because one of the founders of Channel advisor I get a lot of questions from Amazon FBA Sellers hey
Scot what you think about this and how do I sell my business for a crazy high valuation so we’re going to dig into that in this week’s episode and to walk
just do it we’re really excited to have one of the CEOs of one of these companies we have Chris Bell and he is the CEO of perch Chris welcome to the show.

[1:49] Scot nice be here.

[1:52] Chris we are thrilled to have you here because one of Scott’s favorite topics is to talk about Amazon so if we don’t have enough Amazon shows he starts to get antsy so I totally appreciate you.
Accommodating us but before we jump in the Amazon we always like to get a little bit of background about our guests and you you came to purchasing a pretty cool e-commerce e way so can you tell us a little bit about.
What you did prior to perch.

[2:17] Definitely yeah so I started my career early on I was a computer engineer actually and I my first job was at General Electric Milwaukee designing and implementing software.
I did that for a bit and then actually went into sales I wanted to go get a bit more touch with the customer so I’ve told viewers and software for a couple of years which wouldn’t.
But eventually wanted to do something a little bit more thought provoking so when the business school at Carnegie Mellon after that I went to Bain & Company which the bomb brought me to Boston about 11 years ago,
was that being for six and a half years,
and will it be nice spent about a third of my time in the private Equity Group or I worked on over 40 transactions that leading private Equity institutions probably and then the other two-thirds of the time I work.
So mostly helping them understand their customers and then I’m doing whatever we could to drive.

[3:16] Salesforce Effectiveness pricing products for fitting customer service.
And then after six and a half years of being I wanted to go build something and point I was looking at.
You can wait there along and asked me to come and build their North American supply chain which was really amusing but also enticing it was amusing because those Supply chains.
And I actually tried to back out of the interview process I just thought they had the wrong guy who must be,
and they convinced me and it has all my work previous I’ve been in sales and work mostly on organic growth customer like growth called it in,
and all I talked about was the customer and they said exactly you know for e-commerce supply chain is the key to the customer,
if you think about why people buy they showed me some NPS data which is a festival measure.

[4:15] Process and fifty percent of all of their comments positive or negative related to the supply chain that show up on time was it broken even more soberly pair because heavy bulky things people are entering your house.
Speaker in your living room where the best of the bed in your bedroom and so I got really excited about about this customer vision and just honestly Wayfarer and the team there was amazing so I joined Wayfarer in 2016.
And three and a half years we open 50 buildings across North America 42 final mile Center is deep sort centers whose an absolutely.
Crazy amazing time when I left was but a 3 billion dollar supply chain my favorite factoids,
is when I joined Wayfair on average it took 27 days from click to deliver for a heavy bulky items if you are infrequent but Kevin Conway Fair 27 days later it would be in your living room,
and when I left we were doing 2-day delivery of couches hot tub profanity and so we were kind of Amazon priming that evolved into Bates.
All of the conversion left and customer satisfaction lift and repeat lift that you might expect.
Then you’re given that time we hear is great company I really enjoyed the time I learned a lot and a lot of fun getting in the supply chain and building that but I really wanted to go build something and I started looking around talking a lot of entrepreneurs in the Boston area,
and you know honestly I fell into this space and I really enthralled.

[5:40] I’m here back then you’re rolling up Amazon businesses but it’s not really that big of a thing there’s really only one other person that I do have doing it.
And as I thought about both the opportunity and just you know you guys know this but from the outside we look at Amazon.
You hear it’s big but you just don’t realize how gargantuan this this thing is and you start getting into it and I started I went to a conference in New York and talked to some entrepreneurs that we’re doing this.
One I just thought they were awesome right just really true entrepreneurs we strap their company but their own money into it and had built something really interesting,
and differentiated and then to it felt like a perfect Mint or Matt from my background I’ve done a lot of them a lot of experience in e-commerce a lot of experience and I change which is a common endpoint.
Many small product companies and so I jumped in start.

[6:35] That’s awesome Chris two quick things for our listeners for our Millennial listeners and our gen z westeners a copy machine is back in the day.
People used to record ideas on dead trees and sometimes you need a copy of the dead tree so you could actually make a machine that duplicated the dead tree.

[6:54] That’s right that’s you that’s a great summer I thank you for that.

[6:57] Yeah I’m totally here for you,
and then obviously Scott kind of spilled the beans about what perch is about but maybe they just get a little bit more clarification.
When you say FBA sellers you are talking about,
businesses that focus on selling on the Amazon Marketplace and generally use FBA for fulfillment.

[7:26] That’s correct yeah we are today focused on Amazon third-party Marketplace Sellers and you’re right they generally use FPA and you’re probably for you and your listeners you understand the difference between FDA and Marketplace and not Omar.
Find more broadly that difference is lost on full two great people but my incorrectly called an FBA sellers for common understanding but we think I go ahead.

[7:54] No I was just curious in general do you care if they’re using,
FBA white so in general you have to use FBA to be particularly successful on the Amazon Marketplace so I imagine you’re mostly interested in successful Sellers and that and FBA is kind of a,
a tactic that correlates strongly with successful sellers but like do you actually care like if there was a good business that that had a good run rate and,
you know doing their own fulfillment and like somehow miraculously was winning even without FBA like do you,
is there some Secret Sauce to FBA as far as you’re concerned.

[8:35] No not at all we generally you’re right most people who have what we call winning products which is what we look for in diligence.
Are in FBA but they’re not all in FBA and like you said the oftentimes you get a bit of a thumb on the scale but we have looked at solar people Prime products we’ve looked at companies,
that’s just to start going without sewing fulfilled Prime especially in the heavy bulky space,
and again you can win there because Amazon doesn’t give you as much of the thumb on the scale for the heavy bulky stuff they don’t really want that in the Fulfillment centers,
so in general we’re looking for great companies with great products that are winning within their Niche and ninety percent of the time they’re in FDA but it’s not.

[9:20] Yeah and I imagine when you do look at a vendor that specializes in big and bulky it starts bringing back all of your your Wayfarer vibes.

[9:28] Yeah absolutely I actually I love the big bulky space and I think it’s an interesting,
spot for two reasons one you know you can have an opportunity to differentiate yourself a little bit more in the film inside give an Amazon doesn’t play as well in that space.
Then too we actually find those spaces to be less competitive just because of the working capital requirements you know you can sell $10 widgets with pretty low working capital and so we generally find those remote quantitative.
Sales niches and if you get into a 200 dollar kayak.
There’s just less people who want to sell that thing and therefore you get the mildly positive space we would love to do more.

[10:11] Yeah I mean I always like to say well if it was easy eBay would be doing it so.
No I’m telling my friends at eBay I’m just kidding I’m rooting for you the the.
It’s funny I used to like people used to always ask like what’s the,
the category the Amazon isn’t winning at that you could kind of compete where there’s a white space and every time I think of one
it eventually gets eliminated right so originally it was big and bulky items,
and then it was like live plants and as you may know they have a pretty robust wide plant business now
and so I was for a while saying like personalized products and now they’re they’re launching made-to-order apparel so it’s like you can’t win it’s just a matter of when they,
they get around to focusing on the particular problem that you’re good at solving
I do want to dive in a little bit more on your criteria for a company that might fit in your portfolio but before I do we did
hit on wafer a little bit like is there it seems like they’ve had a really good run as a result of covid is there any you still have a lot of friends there is there any remorse about not being in that space at the moment.

[11:22] I do have a lot of friends there and I think they’re doing some amazing things but no remorse at all I mean if perch maybe a perch wasn’t going as well as it is I might be looking back and wondering but this has been an absolutely amazing time and.
We are growing really quickly and we’ve been lucky enough to attract an amazing team and so and having the time of my life so no regrets at all.

[11:48] Very cool and then let me make sure I understand the founding story so you were did you get recruited by a VC or this was like your your kind of had this idea and you went out and and got funding and launched.

[12:02] Yeah much more the latter I had spent some time talking with a whole bunch of entrepreneurs around Boston and I met a couple of folks who were not in this exact space but kind of in the Amazon space more broadly and so kind.
Your Edge my way into it that way and then yeah kind of circled on the idea ended up talking to a bunch of friends and.
And co-workers talked to like neeraj the CEO and founder of Wayfarer about it I’m talking to you game Theo bleep are there about it.
And you know in a circle around different ways like you can see the problem which is.
Consumer products eventually is a game of scale right Procter & Gamble Unilever all these companies,
they are huge and they are highly acquisitive because scale matters you can get,
Austin damage on the supply chain you can access to Capital Access to Talent access other channels part of the reason why all these entrepreneurs are on Amazon,
because Amazon’s done such an amazing job of lowering the barriers to entry the so many other channels have such high barriers to entry in other markets the oh 75% of the companies we’ve acquired only sell in the US,
because one the working capital putting inventory into places the to honestly.
It’s just a big pain to register the fell in the UK it took us four months to get our vat numbers so.

[13:22] And a brexit brexit doubled the work so brexit is good for you.

[13:24] Oh my gosh it’s such the as this we’re still talking to UPS about shipping things from the eve of the UK and they still aren’t.
We could have done quite yet.
And so so we saw the problem and I so I luckily because I’ve been in Boston for 11 years being at vain,
and being being around this space I have a lot of friends in DC and private equity and also just in the space like I know a couple people who have software companies in the space,
so I just went around and told them hey know what do you think a lot of people say hey build song right that’s what everybody should do is you go build some key to be SAS software,
and like try to compete with teca metrics or poor tile or not even compete with them right but try to solve these problems suits off world it just kept coming around to.

[14:11] The real thing we’re trying to build a scale the only way to build scale is to build scale like real scale,
if you are buying a billion dollars of raw materials a year and we’re not there yet but that’s what we’re getting to and you can’t do that you can’t fake that.
You actually have to be buying a lot of textiles and a lot of plastic and that’s when you get their bill scaling so,
back to this and then it’s also the other part of the story that I find interesting is as you guys alluded to this is a super popular space you know,
Billion Dollar Plus raise,
you know I saw something as a dirty reporting entrance when I launched perch I probably had 250 investor conversations in 49 of them were like yeah kind of a weird idea but you know you probably make some money but not for us and luckily Alex afar.
Site rages you got it and he was super excited and be really quickly from meeting terms.

[15:08] It’s not easy it was really like it was a really not easy path to raise money for this a year and a half ago and now it seems like everybody.
Glad with what we did because we got a head start and we’re pretty clearly ahead of everybody in this space but one we’re enjoying and we worked on the man that lead but it’s it’s it’s just funny how quickly things yes.

[15:33] Yeah I feel your pain when I had a SAS company we were like one of the first three and everyone said it was crazy and would never work and then I should do e-commerce and then,
now I’m doing an on-demand Services never thinks I should have B2B SAS time I’m like a cycle off it feels
feel feels like but that’s that’s what we call Innovation Chris works right out on the edge there so if I look at crunchbase which is often wrong it says you guys have raised north of a hundred million is that kind of directionally right.
Yeah and then one other quick
question so so you know so let’s say I’m an Amazon Seller and I’ve been selling you know excess inventory of shoes that’s not really what you’re going for right you’re looking at more kind of,
nascent Brands so so have a direct consumer brand meaning their manufacturing it and,
come up with a product not re selling other people’s products is that is that fair.

[16:30] That’s correct yeah as we as I alluded to earlier we are looking for winning products and Brands as we could find them a little bit more about what that means to us.
But we want something that we think is defensible for the medium term,
and I don’t believe that competing for the buy box in a reseller Arrangement is defensible and even if you have an exclusive reseller arrangement,
still that comes up for Renewal right I don’t know if it’s annually every three years but if we’re paying a multiple of earnings we want to believe if we pay three times annual,
sde sorry.
We want to believe that we can get at least six years if not more out of that and so the way that we think that is most likely is you have a trademark you have a brand you have bran.
Let’s get brand registry with Amazon and then on top of that you are winning within your Niche so you have your top of organic search you have great ratings and reviews a low return rate profitable unit economics consistently right we realize sometimes you have to do,
Lightning Deals or other such things to drive some volumes recontact I think that if you are running 25% tacos a generalist.

[17:44] We want to see stronger gaming performance.
And I really you know the rating review moat and the return rate that’s action and MCX that it’s really really important to us because that shows.
The customers are speaking right there telling you and everybody else because of the quality product,
and they’re willing to share that with their with their quote are quote friends with others by writing a review for you.

[18:12] Got it and I realize you’re talking I failed to ask if there’s a geographic Focus like we joked a little bit about brexit are you everywhere Amazon is are you primarily in Europe in the US or what’s the.

[18:26] Yeah today we do North America so we do um.
As you guys know mostly 95% or plus us and then we do panting you and UK in terms of selling Gio’s we purchased businesses from sellers.
Pretty globally maybe 40 or 50 percent in the US.
Yo 40% in Western Europe and then you know 20% interest in Europe and so then it doesn’t matter where the seller is it matters that they have a great product and have the attributes that we.
But even though it’s been mildly amusing that it’s you know even the sellers and Eastern Europe often times they’re only selling in the US that’s.
I’m not the one to go.

[19:22] And then any so I imagined when I look at,
these kind of nascent Brands they do tend to Cluster and like cpg so like Health and Beauty supplements is that are those kind of the category hunting grounds that you you tend to focus on.

[19:40] We have a little bit of a broader Focus but you’re right that that’s where a lot of Sellers and so because of another part of our of our company thesis is that,
the barriers to entry are come way down if you Google,
launching a product on Amazon you’ll find videos that say make sure you have at least one thousand dollars in the time to launch a new product on Amazon which is amazing for all the bad rap that Amazon gets they have been one of the largest drivers of Entrepreneurship ever,
maybe millions of opportunities for previously didn’t have opportunities 10 years ago if you wanted to launch a new consumer product in health and beauty or housewares,
you probably needed 50 to a hundred to two hundred thousand dollars you probably have to buy a full container load from an Asian manufacturer you have to find some.

[20:29] Peter Griffin give them all sorts of your margin and so it’s been it’s really amazing what they’ve been able to do,
but we we despite the fact that the barriers to entry or come down which is enabling always with launch products it’s still really hard to launch a great product,
we you know we found some research Procter & Gamble still has a 97 percent fail rate on new product launches,
the entrepreneurs we talked to also have a 95 to 99% kill rate of product launches you will launch 20 products and one will be 95 percent of their revenue,
and so in general a big part of what we think is that it’s really hard to want to do products and cross the chasm to be a winning product winning your in your Niche having.
You have to be the number one market share BFW being market share Michigan.
And it’s a couple with that is we stay away from launching meaningful brand extensions if you products right so we look for people for cross,
as of it have that product Market fit and I really with their customers and that’s that’s an important part of our youth.

[21:37] And then so a company I started is called Channel buzzer in our theory is if you can do
X on Amazon you can do Y where Y is about the size of X off Amazon is there do you actually help these Brands so so so Amazon’s kind of like are you proving yourself you’ve,
just product-market fit you’re getting good reviews is there a strategy to also start selling off Amazon.

[22:03] Yeah there is yeah we’re starting to experiment with a couple of other channels Walmart being the top of lips we don’t have.
Anything that we think would be a perfect fit for ways are yet but obviously Wayfarer is near and dear to my heart,
so any other Marketplace Channel as you as you just said why is never as big as X and so we’re trying to figure out the right resourcing actually believe that the way.
We want to which is a big part of what we’re building is a technology platform that we can run these products across platforms,
and across keogh’s without a ton of humans,
and so we can hear you guys may know you can control almost everything about Amazon great guys you can control your your photography you’re a good Merchant copy or price for ads can,
you can download a bunch of data and you can get your visibility without even log in to sort them for so.

[23:06] But we’re building that we built a lot of those pieces for Amazon to build those things same things for example for Walmart.
Cost about the same from a technology investment perspective and your parent for that investment isn’t quite as high so what we’re doing now is a little bit more.
I’d call it skunkworks you were Walmart actually been coming after us and they’re obviously investing in the marketplace so they’re working with us and giving us some.
Was it some on the scale but they’re kind of helping us with some lunch Cadence and some advertising and some support to get us the list somewhere.
Place and so we’re taking them up on that and we’re going to see how it goes right if that ends up being smaller than expected then then we’ll focus where the money is going better than expected.
But those things we’re doing is we’re getting some of these brands have chasing boil tea customer or less,
so we’re working to monetize those right and how do we leverage social and leverage female Drive traffic either back to Amazon right to drive that organic ranking then move the sales or to their own sites and,
save a little bit on the on the sale speed when you drive it to your own site but then you deal with.
You know so many returns and all you know what the intermitting state sales tax and all that kind.

[24:30] I’m depending on the size of that business brand Stephen looking at multiple channels.
As well as good group that means it’s tough you know it’s easy to hate on Amazon but it’s also where all the dollars are so we’re trying to balance your thoughtful multi-channel strategy with also focusing Road payments.

[24:53] Yeah no that makes total sense you you alluded to some of the the tools and automation that you guys have put in place I imagine that is,
one of the synergies that you get by acquiring multiple of these companies like are there other other synergies are advantages you you perceive that you’re getting by aggregating a bunch of these guys or is it,
is it really just a smart Investment Portfolio strategy.

[25:22] Yeah there absolutely are we I think you’re right that.
If possible perhaps to do a smart investment strategy group here.
Are I really don’t focus on building but I think could be.
You’re better Department Gamble and you love her and others in the future and I think we can do micrograms are taking share pretty meaningfully from large brands,
and they’re doing that despite all of these challenges that we talked about earlier great despite not having access to Capital despite not being in other markets another channels.
Amazon third-party Marketplace is twice as big as the biggest CPT code paying the world and it’s growing more than twice as fast but the fastest growing which is not the biggest,
and so Michael brands are taking all this share despite their handicaps and we want to accelerate that.
And build a really amazing operating company that is helping these great amazing products of the next level.
Yeah so some of the examples today are on the manufacturing side working with manufacturers both on cost and terms,
and that is every manufacturer is different and what we can get there is different with every with every relationship but the capability of being able to do that well it’s common across same thing with inbound your,
from our Wayfarer relationships we actually have a great relationship.

[26:48] Since broker so we’re helping Salah dating all of our inbound on the full containers we’re getting meaningful reductions by driving volume through a single source and luckily.
Yeah I’d say 75 ish percent of our stuff all comes through Shenzhen and so that it was a not necessarily on purpose but it’s been a nice tail went to that ability to consolidate those with ears.
And then yeah like we talked about on the top-line side as we are building,
our approach to add optimization pricing optimization we don’t price advertised every brand the same but you create the archetypes and we have different product archetype.
And we treat those archetypes like for example you can imagine there are really competitive,
where the key there is to monitor your competitors prices in real time and reactive real time so that you’re always one of the best price items there and then drive as much process by changing and keep your margin,
and there’s other items which is actually probably,
you I’d say 70-plus percent of our portfolio are items we call aspirational where we’re priced maybe 15 or 30% more than most of our competitors but we have a review mode,
and you have a great photography and great merchandising and there is more about understanding what drives people to buy are we holding share there we go there we can invest more in.

[28:14] In sem and kind of ads PPC ads because we find that when you’re more expensive that branding you seeing your image on that first page several times actually batters the best moment they perceive quality when they see.
Over and over again and so what we manage that without cannibalizing too many of our organic sales and so a lot of those.

[28:37] Is the technology but also approaches and thought processes are common and then as I mentioned earlier most of these brands are not in more than one geography and so we have a team that’s solely focus on,
translating easons get it you know the copy,
you’re getting as you guys talked about putting things into Europe and now into the UK is its own Challenge and so getting it over there getting it listed going through launch Cadence getting them ranked driving,
sales is is not the same for every product but is similar right it’s a similar watch Cadence and an approach process,
in general a lot of focus on how do we make these the best brands of the best product and how do we grow them like wildfire.

[29:25] I love it I’m curious is there a
a common pattern like like when you do Acquisitions do most of them tend to be have the same strengths and weaknesses or or is it all across the board like do you acquire one company that’s,
that’s great a tad optimization and maybe you know could use some help with price optimization and then the next acquisition is,
the the reciprocal of that or do you know do most of the entrepreneurs on Amazon tend to have the same strengths and weaknesses.

[29:56] It is all over the board it’s actually it’s I think I’m going to do it one of my favorite parts of this job is meeting these entrepreneurs and hearing their stories but then also getting into their business with them and seeing what they’ve built we find.
It’s great I feel like every business we learn something we’re always open to the idea that we don’t do it best be aware learning and not even even if we were the best today everything’s changing so quickly Amazon’s to thing,
he’s got these millions of entrepreneurs are innovating so quickly that even if we were somehow the best for one day,
next day some think of something brought up so we’re always talking to them always trying to learn so I would say every acquisition learn something,
and every acquisition there’s a number of things where we feel like we have a better model Renegade varies a lot really interesting some people,
I super cost of course really tight supply chain and cost profile and either good margin or they price their driving a lot of sales through.

[30:57] Chris point,
and others are a hundred percent focused we’ve acquired a couple of companies that were just amazing at Social and engaging customers and I think all sorts of off the platform for ganic traffic on the Amazon.
And and using that to drive both sales but also the as you guys probably done that.
Your halo effect Amazon really likes external traffic coming on and finding your product and buying it and so that was a really neat one to one.

[31:28] Coordinated all of that and they all these people do this in amazingly Scrappy ways you know nobody’s paying somebody 25 Grand a month to go and create a social campaign they you know they figure out ways to.
Part-time VA offshore and I’m ways to recycle content or great new content and cheaper ways and so it’s really interesting it’s a lot of fun to see all these things and corporate.

[31:55] Yeah on the back on the Synergy side it seems like a lot of examples are Supply Chain management like what I would call back end kind of stuff maybe a little bit front end with like Amazon optimization
but do you envision a day where where you guys will either.
Have some cross-selling amongst your brands or even like a front door where you know people can come in and shop at the perch collection for lack of a better.

[32:20] Yeah absolutely it’s something we talked about and think about quite a bit,
we today for the most part today most of our brands are,
Brands and products and they are found they’re discovered on Amazon through keyword searches and we are able to drive,
usually upside post acquisition on that side of just,
optimizing your keeper try to G and getting more ranking on more keywords and also globally across the envelope it is,
but we are talking about how we won leverage already engaged customers so email us that we acquire the social engagement that we acquire,
and then eventually how do we start driving customers to we started outline view of what we’re calling Master Brands and so I don’t know this is all in development you guys getting a peek behind the curtain here so we haven’t figured all this out,

[33:16] We like to call that at Jason and Scott exclusive.

[33:18] There you go yeah you’re getting the scoop.
So my current hypothesis is I don’t think that perch is going to be a super consumer-facing brand I had to sell,
because the collection of things we have underneath it,
is so broad today I’m you asked earlier about where we’re focused and we’re focused where the big bucks are but in general it’s pretty spread out we have apparel Brands we have Sports and Outdoor Brands we have,
the house where Beauty Brands and and we’ve been I don’t know if there’s a cohesive customer story about all of those and so we’re we’re Landing instantly creating past two brands,
Polio I buy a product or category and so we’ll have a question and we believe if we have amazing.
You know facial products and skin care products and hair care products and other things in general if you buy one of our things,
the odds that we can email you or connect with you on social and suggest another one and it’s similar adjacent space like that.
The odds that you’ll be interested engaged and maybe convert hi if you purchase skin care products and we then email you about soccer balls for you know punching bag or something.

[34:37] Read it feels a little bit disconnected and so for we’re still we’re still iterating on it but we’re we’ve started.
This idea of Master Brands by product category and driving.
The idea is to keep the sub Rams so the way I’ve described it to a few people is and if you guys have ever been in this fora,
but Sephora has a brand that people know Sephora it’s a store you want to store but if you ever been in one is actually a collection of microgram.
They have the section over here that’s the woman Brooklyn makes her own eyeshadow the section over here are the makeups lipstick from a woman,
there were Brazil and so that’s the idea is to really keep the brand identity because there’s a lot of value and what these entrepreneurs have built and but the build on it and create this trusted Rella where people know that all of the brands within this umbrella,
our quality and have been vetted also that we stand behind them right we’ll have great customer service and a good return policy.

[35:40] Yeah I’ve seen some of our customers almost like self form around Persona stew so they’ll be like you know the busy traveler and.
One seller will pick up a bunch of Travelers and then they’ll be kind of a theme across that or you know like you know busy moms and,
then you can actually get broader category expansion because it could be stuff for the car or stuff kids,
some beauty stuff so it’ll be interesting to see how you how you figure out those cross-pollination opportunities the
one I know we’re going to get this question so I’ll go ahead and ask it as quickly as I can hear if someone is interested in talking to you about selling their Amazon business
you know can we have your home phone number or I guess I should say what is the best path is there like can you go to perch your website and just kind of like apply or do you guys kind of have to seek folks out.

[36:35] No absolutely we love we get.
I actually pulled this up we have not had a single day in the last 90 days were haven’t gotten one in town who we haven’t gotten at least one inbound dressed so we didn’t had a zero early today on our website so our website is perch,
so you’re welcome to go there and you can fill out our form it comes out I reach out to you or you or just to get another Jason Scott exclusive I’ll give you my email address and if people just want to email me directly I’m happy,
to direct you to the right folks and that’s just the Press at perch,
and anybody who likes can email me and I will connect you with the right person on their team to have an initial conversation and in general we love.
Talking to entrepreneurs in this case without talk to you about the process and so I would encourage anybody even if you’re only mildly curious if you if you don’t have time for a 30 minute phone call that’s fine hello are on our website and we’ll add you to our mailing list and will send to you,
what we hope is a.
Helpful monthly newsletter that has thoughts on sale process and Amazon broadly but if you’re also if you want to talk to somebody just get a sense of what is the process feel like.
How do we value companies and things like that to me know and I’ll connect you with our head of MMA and where we gladly jump on the phone for 30 minutes.
What we’re looking for and it’s not a match today great will stay in touch.

[38:01] Nice and I’ll just try to save you a little bit of email traffic if if you are focused on that busy traveler Persona that Scott mentioned probably don’t bother to email.
I’m just I’m kidding but it’s not maybe the best time for the busy Traveler
I am curious we talked a little bit about your fundraising do you share anything publicly about like your your your overall scales or sales velocity or anything like that to kind of,
give us an idea of your order of magnitude.

[38:33] And we have not shared anything about our revenue and locally we did share in December that we had acquired or 20th brand and we have since then wired handful more and so we’re.
Moving quickly.

[38:49] Got it and so would you say maybe then like five Pharma packs is that where your Noms teasing sorry.

[38:55] It’s tuned and it may be give us 6 months.

[39:01] Cool and then on the competitive set so the ones in the u.s. I’m tracking is and I may get these names wrong if I don’t care about apologize if they’re listening there’s Gojo or go yeah I guess and I think they’re in Austin
and then thracia or thrashy oh how do you guys think you differ and I’m kind of curious,
have you seen any bidding wars break out there seems to be enough people kind of poking around here that maybe there’s been some some auctions going on with some of the bigger brands.

[39:32] Yeah sure it is it is very clearly getting a little bit more competitive over the last six or so months I’d say when we first started.
We were mostly competing against SBA buyers so people who get an SBA loan and go and try to buy one of these businesses and run as a lifestyle business was the most common profile we’re up against.
And now we do run up against actually I don’t think I’ve seen.
Go to at least not my name against us but we do see I actually don’t know if you pronounce of grass to regress show but we do see them.
I work frequently and we see a kind of a smattering of other folks and it is it’s getting a little bit more competitive I think as you get some of these new entrants a lot of them are hungry to make their first deal.
Or a few deals and so they’re willing to strap a little bit but we’re focused on.

[40:30] Doing what we do best which is finding great entrepreneurs.
And treating them well work at being fair and transparent and the whole we know what we’re doing we’ve done this a lot we have a really good track record in the Brand’s we’ve acquired performing really well.
And it’s a 300 billion dollar market place and so we are focused on building like I said a great lasting company.
How we differ I mean in the eyes of the entrepreneurs at the end of the day.
I think the most important thing we can do is treat them and this is what I tell Nate who’s our head of m&a constantly that they are.
Break beat them with respect to do some typically really amazing.
And being fair and transparent and full with them and taking good care of their brand.
We’ll go a really long way we still get a lot of our deals referrals from prior sellers,
besides you know who maybe don’t know about these competitors or don’t have it have had the same experience with them but had such a great experience with us they tell people they can’t follow us,
if they’re thinking about selling their business and we think that referral base and the word of us I’m being good at what we do around the country as well and then on the I also think.

[41:46] As I mentioned earlier that we don’t view ourselves as investors we’re not trying to take a private Equity approach and just collect a bunch of assets we’re trying to build a real amazing technology focused e-commerce company,
and with the best products in the world and we hope we can make a bunch of these household brand names but I think over the medium term that will prove out and we’ll have we’ll have those brand names and the goal there is then,
get analogy I use is your most tech entrepreneurs want to sell through Google right that’s just it’s that you get to tell your friends Google bought my company,
and you know you built something amazing or something like Google is going to pay to buy your company and I think if we build the right operating company then that’s what we can get to we are the brands that we own will be,
Global names and will be really well known and will be known that they’re part of our portfolio and in the immediate term as you said it’s a little bit.

[42:45] Yeah I think in a few years,
the it’s all going to come out in the wash and I with the team were building and the track work they were building I expect will be will be there and then it’s no longer you know they’re saying this and works in the proof will be in the pudding,
and that’ll one make it easy rest for it to continue by Brands will we can show that we can double and triple in 10x then what we’re time.
And to hopefully he’ll make us a buyer of choice because it’s not just about the dollars people actually care about the brand and want their brand to be in the hands of the company that’s going.
The most successful it can be.

[43:23] You know it’s funny as you’re talking I’m I can’t help thinking there’s a sound byte we play a lot on the show from Amazon your margin is our opportunity.
The end,
like I totally agree with you that Amazon has been an amazing incubator for entrepreneurship and growth and I you know it’s a lot easier to write the negative stories than the positive stories
but that being said like is there a risk like that you.
Get to successful that this model Bears out and then Amazon decides they want to play more directly in that model or maybe even for some unrelated reason,
they change the search algorithm or or FBA or something else in a way that derogatory affects your portfolio like is there a concern about kind of Amazon as a single point of failure.

[44:17] Um yes absolutely there is right it’s something that I think about a lot I think so I mean there’s a few things that what you said in there,
better probably worth addressing the first one is is Amazon going to try to take more of this crop the pool yes absolutely right there definitely Google’s doing it,
great five years ago you maybe had two sponsored spots of reporting people search now it’s half or two-thirds of the page is all sponsored and they have.

[44:46] Skulls and all sorts of Amazon has and will continue to do the same thing,
and that’s where that’s that will be something that is a challenge for us but back to your complaints I think it will be less of a challenge for us than for the entrepreneur,
right if we have the right scale we can pull cost other supply chain to expand our margin we have the best engine that optimizing that’s good.
We are driving traffic off Amazon,
these customers off Amazon in a way that just frankly almost impossible to do if you’re writing five million dollar Revenue business then it will hit all of us but I expect will be best position to.
To cope with it and to continue to grow and be successful in it and then to your other question I know.
Do we have actual examples I’m going to turn your evil eye on us and smite us.
You know you know we could be a ten billion dollar company and they probably wouldn’t notice right it’s a printer billion dollar market place I mean you probably noticed like you’re not.

[45:53] Any means but if we went have Indigo shooting her with them right we would still be just a tiny drop in their master.
And so I think the odds that they us as a threat anytime soon and try to mitigate us at a specific.
Or last year ago dare anybody like that I think it’s just pretty small and a bunch of ways we’re trying to help Amazon and accelerate the Playbook be we are.
Trying to buy great products we’re trying to keep them in stock we’re trying to drive cost out and give that contact to the customer,
it’s the customers telling us they won’t they’re calling us they want higher quality higher priced products we also lose if we follow the data but in general we’re trying to be a high-quality seller stand behind our products you know we give.
Here we go full refunds if there’s an issue for example right you know a lot of people don’t or make Amazon deal with that we really are trying to build.
Great company of great Brands and products into the in general as we’ve never been Amazon.

[46:53] They are seeking out good sellers they’ve created a little bit of a problem for themselves with all of their.
For creating direct from China especially manufacturers and that has been some good out of that for sure and that’s lower cost.

[47:09] But they’ve also created a lot of bad sellers,
that is one of the top priorities is I understand it within the marketplace ecosystem today is weeding out and getting rid of bad sellers who are selling company that items and so we are the antithesis of that,
I’m hoping they should embrace that.
And then if we keep doing that and we’re good seller and we diversify our Channel over time and we’re not all on Amazon and I think one hopefully we can find a way to get into a good.

[47:40] Your balance with Amazon and be valued part in the time and they’re a good channel for us and then to becomes less important over time as we.
Yeah it’s a risk and it’s something we think about,
it’s hard to imagine that they they do something to us and it was a one last point on that is they’ve also you brought you guys probably know about this,
a I being such a boon for entrepreneurs they have also created a bit of a political liability you know is those got called in front of Congress there’s antitrust legislation brewing and the EU,
trying to push Amazon to separate their first party in third-party business because the EU is saying you’re competing with these entrepreneurs,
and you can’t be and all this you know stuff about them stealing data and so I actually think they and trying to do much aggressive here,
is heart I think it’s getting harder there by as you said earlier every everywhere they were these opportunity there’s sucking it up which is great there also quickly becoming,
big tax and people are getting afraid of except the politicians are getting pretty big Tech so I think they’re going to try to lately in the space for a while.

[48:50] Where do you it’s kind of fun to kind of play forward
do you think that I know it’s an e-commerce it’s hard but that’s the fun part of this Jason I do an annual prediction show and it’s a it’s always a very humbling to especially this year for me to see how that turns out so if we kind of fast forward three to five years
you guys are
acquiring like sounds like about 20-ish Brands a year maybe you can crank that up so you’ve got hundreds of Brands what what do you,
what’s the endgame you just keep rolling or do you start.
Like offering the your own fulfillment offerings or something or like start kind of you know productizing almost like Amazon does some of the things you build or where do you see things going.

[49:37] Yeah we are aiming for.
Being a consumer Products company that owns at least a handful of household names and so what I think that looks like and.
Don’t know if that’s five years away or a little bit longer but what I think that looks like is we are selling multi-channel as we’re selling we also have our site.
We’re selling through any other Marketplace that is big enough to be meaningful and maybe Walmart will be there you know Google is,
I’m actually feels like a drug only but get things off the ground we’ll figure it out.
Facebook and Instagram get stores off the ground will be selling their but well whoever is Meaningful in the space plus direct consumer.
We’ll be doing that will likely be in brick-and-mortar in some way and selling some of these products.
That’s still even though we’re going to make now that will pop back to being 50 people spending at least a year new most likely and.
And with all of that right so we’ll have we’ll be using FBA most likely but we’ll also have our own fulfillment for our multi-channel will also have likely a physical distribution so that we can replenish the stores because that’s the different working capital and inventory.

[50:53] Will be likely more Global than just north of North America and the UK so pushing into South America Eastern Europe Maybe,
some more Asian countries that will have to see the products don’t translate quite as well over there.

[51:10] Yeah that’s the idea is we’re kind of we’re a multibillion-dollar company that obviously isn’t that the scale of somebody like parking gamble yet,
but is looking like they’re on a path,
to having these household names and the big difference being key for e-commerce and like I said we’ll have a brick-and-mortar shred you will be doing that but you’re one of the things I talked about quite a lot that’s good thing about Justin traditional sleepy,
this traditional cpg sets bracing annually maybe quarterly if they’re feeling really happy but we set pricing sometimes hourly,
we end and same thing with ads and things like that and so we’re building a really different Tech platform and a really different process and approach to managing these brands,
but I think and accelerates the share game that there already are already experiencing and if we can take that Global and take that across channels.
I think it can be a really powerful story and I hope I hope we have people we have you are were publicly traded company and and some can continue to grow and.

[52:15] Maybe with a SPAC we can pull that into.

[52:17] There you go yes.
It’s becoming I don’t know if you guys have heard this I’ve heard several investors say SPAC that it’s like it’s becoming a verb.

[52:26] Yeah wow.

[52:27] You could spec that and then you could hope that a bunch of hedge funds short you so that you could get run up by the the Robin Hood hours.

[52:34] There you go I like it.

[52:36] I feel like we’ve mapped out your whole your whole growth strategy there I like it.

[52:39] I think a notes.

[52:41] Chris I love that vision for the future I look forward to having you back on the show when you’ve achieved all of that,
but that’s probably going to be a good place to leave it for today because it’s happen again we’ve used up all of our allotted time as always if listeners have a comment or question there welcome to hit us up on our Facebook page or Twitter
I will certainly include your contact info in the show notes and as always if folks enjoyed this episode we sure would appreciate it if you jump on iTunes and right us that,
that five star review before you sell your business to Chris.

[53:18] Great thanks guys really appreciate it at this is little fun.

[53:22] Thanks Chris we really appreciate it this has been a Hot Topic and he did a great job of walking us through it we truly appreciate.

[53:29] Awesome looking for the talking again soon.

[53:31] Until next time Happy Commercing!

Jan 22, 2021

EP251 - 2021 Annual Predictions

2020 Recap – Predictions made on episode 204

2020 Predictions Recap


  1. Shopify wilts a bit – new competition comes out with different angles (marketcap stays static) – No
  2. Fedex does something drastic – buy eBay? Merge with Alibaba? No (but shoprunner for 0.5)
  3. The year of returns – “happy returns” – a startup raises $100M+ in space. No (but 0.5 for year of returns)
  4. Mallageddon continues At least another 8k stores Yes 8721 stores +1
  5. Google gets aggressive in ecommerce Yes +1 (Bill Ready, etc…)

Score 3/5


  1. Walmart – growth slows due to completion of grocery build out. Marc Lore leaves Walmart. No on growth, yes on Marc Lore (0.5)
  2. Amazon – Opens affordable grocery concept. Digital grocery wars heat up. Yes
  3. Owned brands continue to grow. 5% of retail in 2019, could be 8-10% in 2020 (as measured by IRI, for CPG private label). Yes
  4. Installment Payments heat up – At least one company is acquired (Affirm, Afterpay, Klarna, QuadPay, Sizzle) Yes (IPO’s)
  5. Digital in-store heats up, QR codes make a comeback Yes

Score 4.5/5

2021 Predictions


  1. Made to Order apparel business > 9 figures
  2. Retailer offers viable health alt insurance option to consumers
  3. Grocery E-Com > 10%  someone deploys(not pilots) MFC
  4. Amazon Shopify Competitor (shipping solution)
  5. Retail Media > $20B

Bonus – More store closures in 2021 than 2020.


  1. Amazon move to same day prime by opening a huge wave of neighborhood DCs (near DSPs)
  2. Shipping (Shopify) – launch own DSP
  3. Shopify marketplace 
  4. ‘zero friction addiction’ sticks – I’ve seen 30-40% repeated a lot, I think it’s 60-80%. commerce penetration says at 16% or better in 2021.
  5. spac/ipo? Dnvb wave

Bonus: post-covid anti-consumerism/materialism wave

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

Episode 251 of the Jason & Scot show was recorded on Thursday, January 21st, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 251 being recorded on Thursday January 21st
2021 that’s a lot of twenty ones I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:42] Hey Jason and welcome back Jason Scott show listeners.
It’s our annual tradition here at the Jason Scott show put out some predictions it’s a little bit of a Jason versus Scott competition to see which of us is best at predicting the trends,
and the future of retail e-commerce and payments.

[1:01] If you’ve been following us for a while way back in episode 204 that’s when we made our predictions for 2020 we did that in I believe January of 2020 just like we’re doing here in 2021.
And way back then we combined an annual recap and then we did our predictions and that show was six hours,
so being why is podcasters we decided that’s a lot of Jason Scott to just in one sitting so,
good news we have split it up this year so last week we did the annual recap and then this year that frees us up to do the predictions.
So what we like to do here is go through our predictions and score how we did so that’ll be the first half of this episode,
and then to make it fun we like to read each other’s predictions and see how the other person did and then try to do a,
yeah a negotiation I guess I would call it yeah so we try to come to terms with some kind of a scoring it’s always hard is.
Use a bit Jason so bad try to try to sandbag a little bit so we’ll see if that works out this year.
Jason anything you want to add before we jump into it.

[2:18] No I want this to be one of my favorite shows of the year but as you alluded to I generally get shellacked so bad that it starts out fun for me and by the end I’m just totally depressed.

[2:31] Yeah well we’ll see we’ll see how it goes free this year.

[2:34] Yeah it’s a new year so I’m optimistic it’s like the San Diego chart or La chargers at the beginning of the Season before they have to pay anyone.

[2:44] I will say when we first started podcasting you said Scott I’ve read all these articles in the biggest thing is being consistent and that was in 2015,
so dang if we haven’t been consistent so we started in November of 2015 so then we did 16 17 18 19,
20 so this will be our sixth year of making these predictions if I’m doing my math right.

[3:08] That I don’t think you are right.

[3:11] I may have an N plus 1 from this is either our fifth or sixth year of doing these predictions.

[3:18] We’ll get the intern on that but let’s let’s jump into them so I have your 2020 predictions in front of me,
and your first one was kind of Doom and Gloom you is I’m recalling in January of 2020 Shopify was very hot and Buzzy and
I believe your prediction was that they would Wilt a little bit and that new competition would come on in with more Innovative angles and that they would have a decline.

[3:48] Yeah I kind of blame you for this when you get me so sold on headless Commerce I probably jumped the gun a little bit also again we made these predictions in January and I don’t think we had even heard of coronavirus at that point.
I don’t know do you remember.

[4:04] It was not common because I had a trip coming up at the time to China I had actually like they were starting to like,
mildly talk about it in January then but definitely yeah these predictions were not influenced by any Corona awareness.

[4:24] So this was a total zero.

[4:27] Yeah I want to say their stock was at 450 when you made that prediction and you can get it for the budget price of 1193 right now.

[4:35] Yeah it was super overpriced and then covid hit and then the revenue surged from like 50 percent growth to a hundred percent growth and then the stock followed and yeah so that was a bad one so that that one was a zero it was a dud.

[4:49] It’s good it’s good to get one of those under your belt though,
um so then your second prediction was that FedEx would do something dramatic like by eBay or merge with Ali Baba.

[5:06] Yeah the driver on this one is you know the the Amazon is exerting pressure across multiple ecosystems simultaneously and one of them is shipping,
and I do feel like UPS and FedEx are feeling that pressure again the pandemic just kind of change this one so everyone I think.
Yep stopped worrying about oh my gosh what’s going to happen with the Amazon to how do we ship so many packages and so this was a Miss 2,
I will throw myself to the the jury though there was the shop Runner acquisition which I think is massively.
This effectively gives FedEx a complete Prime competitor so they’re going they’ve won up to Amazon.
Shop owners better than Prime 10 times as many subscribers I.

[5:57] I believe.

[5:58] Well I have to have someone fact.

[5:59] Amazon might actually be getting out of the Prime business because they just they don’t want to compete with the the FedEx shop Runner duopoly.

[6:08] Could happen.

[6:09] Yeah I totally see the spirit of this prediction there was a lot of financial stress on FedEx and yeah I could you could imagine something,
big happening I think this illustrates to me like one of my biggest learnings from having done a bunch of these prediction shows which is.
Having a good idea of what might happen isn’t even as useful as,
getting lucky on the time Horizon because I feel like you and I have both made predictions that.
But we’re just too early right or or something like that so still wouldn’t surprise me to see,
some dramatic evolution of those those carriers I’ll give you half a point for shop running because I’m a generous guy,
I believe in the earnings call someone asked if chaperone was going to have an impact on their financials and they said not that it wasn’t a material acquisition but.
I kind of suspect sharpener was a little bit of a sort of a budget exit for for shop Runner.

[7:18] That’s corporate speak for this is the future of our company.

[7:22] Who knows maybe maybe it will be I hope it is for them so I’ll give you I’m giving you zero on Shopify I’ll give you half a point for for shop Runner I believe they also bought a cardboard box company that you failed to mention.
I’m joking.

[7:37] Okay number three.

[7:41] Yeah so number three this will be the year of returns and you predicted that happy returns which is one of the the vendors that facilitates e-commerce returns,
would make a huge cash raised in the in the space you said they’d raise a hundred million dollars.

[8:03] In this one I failed to learn from many of your failures which are being too specific so I was super specific here I tried to capture it by making your returns,
I will again throw myself to the jury that we did have returned again so the,
other side of the ship again coin is we are now swimming in returns you know could be,
super specific and say that really didn’t happen in the year it did happen in the bookends of our episodes though so I don’t know,
I’ll be generous to you on that one for one of your predictions of you be generous to me so I do feel like it is a big return to your and there were several articles written about the you know this,
there’s one did you see it where it should look UPS facility and people like literally swimming in packages,
so you know I do think it was a year of returns where there was a much brighter light.
Shine on that but happy returns did not raise their hundred million bummer for those guys,
there was so I did look and there was a fair amount of funding activity so happy return this has raised 25 return logic to,
Loop returns 15 million so it is a hot category I get a lot of calls from VC’s poking around this category so.
So I don’t actually know how to score this one so I’ll defer to you.

[9:25] Yeah I’ll give you half a point because I agree it was just a poorly worded prediction I think the spirit of your predictions that it would be a significant year for returns is fair.
As it happens like it’s going to be 20 21 is going to be the big return year and while there was a lot of returns the first half of January a lot of that still,
going to be in progress and we certainly haven’t seen any of the numbers yet but I would certainly concur that there’s going to be a lot of.
Interesting things going on in returns this year in response to,
do you know the huge spike in e-commerce sales we saw we saw last year so I’ll give you half a point.

[10:09] So generous.

[10:11] Yeah well you know it’s the I feel like when you when you lose by a lot like there’s no point in playing really tight defense.
And I feel like this next one is not going to be very controversial on the scoring.
Mulligan and continues in 2020 and I thank you you couldn’t have known what a disaster 2020 is going to be from malls or would be come from Al’s.
Foot traffic in the malls is probably down fifty percent for the year,
sales for the anchor stores is down more than 30 percent for the year so is a disaster again you are pretty specific on your prediction you you said that at least 8,000 stores would close and,
I believe that the source that you and I must use for that had the number at 8720 one so you you cleared it by 10%.

[11:10] Yeah this is where oddly enough to pandemic Health my prediction.
I don’t know I feel like I feel like there’s some be another feel like the big wave is actually coming this year have you seen any predictions on that are you going to punch suffocate on that.

[11:25] So I do have a mild prediction in the space like the the public prediction that comes up most often is,
it is a huge amount of stores closing but over a five-year period so not necessarily all this year or next year
but like 25 percent of retail stores closing over the next five years is the is the number and a thousand Mall’s closing over the next five years are the are the,
kind of often reported public ones.

[11:56] Yeah I could see it I’m I’m for newer listeners I’m down in North Carolina and,
we have I’m in the Raleigh-Durham area there’s a little town called Carrie and it has kind of like a beam all and it just go by by epic games and they’re going to turn it into a headquarters I’ve been doing some little road trips around like going to the mountains recently,
and the malls up there are literally maybe like 10% of the stores are open it’s like the weirdest thing in these small Southern malls that used to have,
if they’d have a belk a Sears a JC Penney and Macy’s.
Generally two of those anchors are gone and sometimes they’ll be 1 acre left sometimes maybe none so you’ll be in the mall and like the whole anchor is just like cordoned off with effectively duct tape or sometimes they’ll put some really weird stuff in there like,
little tables of these people selling random tchotchkes like almost like a bizarre but I think it’s really really very odd and then there’s all these other weird dead parts of the mall where they’ll put in,
you know like they’ll have like Thursday night Magic the Gathering night no.
But it’s like 8,000 square feet used one night for some you know game event for something so it’s really strange going into some of these malls that are on their last leg.

[13:11] Yeah.
Excuse me the that the top malls are still doing pretty well although they were even negatively affected by by covid but yeah you know covid-19,
apparel is already in trouble and covid-19 you / rough on apparel and of course.
You know as apparel goes department stores go and his department store just go malls go so you basically had covid knocking down this,
series of,
of dominoes and yeah it’s it’s going to be pretty rough couple of years for you know I personally doubt that we’re ever going to see.
Department stores or apparel stores or malls get back to kind of pretty pandemic levels.

[14:03] I know this one took shop so let’s move on.

[14:05] Yeah exactly figuratively and literally and so then your fifth prediction in this one’s going to be yeah I’m going to be curious to hear you you talk to this one Google gets aggressive in e-commerce.

[14:19] Yeah and
this one I was careful to not say that it would work and so what they did if we kind of recap the highlights of 2020 from Google what they’ve done is they hired a guy Bill ready from PayPal so they went out and found someone that,
you know has e-commerce chops to bring into the company,
he immediately kind of opened up Headey throttled Google shopping so let every Merchant kind of come in there then they’ve invested a lot on,
this program is really weird because it has like 16 different names I like by on Google but they don’t really call it that they call it Google shopping actions I think it’s at the latest name.

[14:58] I think you are correct yes.

[15:00] Yeah which doesn’t really make any sense to me so again I didn’t say they’d be effective on these things it’s just say that,
aggressive so then they that sir I think of that as their Marketplace I don’t think they like to call it that but to me it’s a Marketplace because you buy on Google and just like buy on Amazon and then they were out the order to you versus sending people to your website your,
your responsive website so they took away all the missions for that so that advertisers would would utilize it more and and I guess they must have gotten,
push back and then so and then they’ve been they also change the commission’s on Google shopping they.
I remember they changed economics I couldn’t find an article to find the time on that but I remember that happening there too so yeah and then you know the,
those are the things that say they got a little bit of aggressive there.

[15:57] Yeah well so I think with your caveat I’ll totally agree and give you a point I think they did.
Do do a lot and I’m not even going to say that they have won’t work but they haven’t yielded.
Significant results yet but but certainly like we’ve seen a lot of activity there so I’ll give you the point,
so you get Molly get in in Google full points so that’s two I gave you half for FedEx and happy returns so that’s three out of five for your 2020.

[16:30] Awesome 60% predicting that’s a it’s actually pretty good,
one thing I would comment on here that’s interesting is there was a report out by Cowan John Blackledge and,
I tweeted on this and I sent it to you Jason not know if you had time to read it but they went out and did a survey and I’ll let you opine on surveys but it was a lot of folks like you so as a lot of these super fancy Executives at Ad Agency type places.

[16:58] Most of them had shorter titles than me.

[17:00] That have long titles except longest titles where yours is longest and effectively said you know what are you seeing with Amazon ads and I thought it was really fascinating,
the I don’t want to spend our whole show on it but one of the ones that really got my attention was you know,
there was the usual do you see people spending more or less on Amazon ads and Evans like more and then the most interesting one was amongst your client base where are the dollars coming from,
and one way they asked the question it was like largely TV but then another way they asked the question it was kind of like,
within your maybe they think the question had a digital framing so it was kind of like within your,
customers digital budget where the dollars coming from and it was like 80 percent Google,
number one was Facebook so it was like really taking sheer from Facebook but then also from Google Now they didn’t I wish the had gotten a little bit nuanced there because you and I know,
critical Google includes a fair amount of double-click kind of banner ad type stuff display.

[18:14] They didn’t explicitly say Google search so it would have been nice to see in that broken out because it could be what the the digital strategic,
senior VP directors were saying was you know it’s Google display not Google search but in any case,
the message to me was Amazon’s number three,
pretty far behind the duopoly of Facebook and Google but you know they the other chart those interesting was the asking you know what do you say what are your clients say has the highest return on ad spend and Amazon was like Head and Shoulders above,
so it’s really fascinating reading all the survey results directionally said to me.

[19:00] You know if I’m Google and Facebook I need to be paying a lot more attention to what’s going on in Amazon and figure out how to try to stop them,
so that was the reason I made this prediction and I think anything I would,
I haven’t done this but I do think you’re going to see the rest of the ad world really Step Up,
and then the thing this new is the increased pressure so they got Amazon one front they’ve got kind of privacy concerns on the other,
and then like iOS is coming you know more about this than I do but iOS is coming out with this thing that’s just kind of like really kill a lot of their tracking,
and then then you got the government coming after them on the other side so so it’s gonna be really interesting to see you know Facebook Google and how they navigate this this three-way encroachment that’s happening on.

[19:50] Yeah yeah there’s a lot of market dynamics going on it’s super interesting and you know I think you summarized it pretty well I would just for listeners that don’t follow adtech that much.

[20:02] 2021 is a weird year a lot of traditional television you know goes on new programming a lot of which didn’t come out this year and on Live Events a lot of which didn’t happen this year so you know it was super easy for marketers to shift,
a lot of those event television dollars to other channels so digital got a lot of those dollars but then there was a lot of.
Politics and controversy going on in the world and there was a lot of concern around brand protection when you just you know bottle out of digital ads on Facebook would they show up next to,
you know inappropriate negative news and all sorts of other things and so one way in which Amazon,
benefits is it’s a very brand safe place like there’s no negative editorial on Amazon it’s very brand safe place to put your money in a storm and I would basically agree with the sentiment of the Cowan survey,
amongst all my clients Amazon has the most mindshare as a,
a new advertising vehicle I would I would almost argue they have too much mindshare like people people are irrationally focused on them,
and I you know I’m not sure they always measure their ads in the best way so I would I would always be curious to talk with someone about what their success criteria are when they think that Amazon has the highest row ads but,
um but that’s maybe for another show.

[21:31] Yeah we’ll do a am Jason debunks your Amazon row s shop that’ll be a barrel of monkeys.

[21:36] Exactly not saying it’s a it’s I mean it’s a good vehicle there’s good eyeballs to be had there but it definitely needs to be part of a portfolio and you strategically.

[21:45] Okay I’m just giving you a hard time well ads Chief row as bubble popper to your title okay let’s jump into your predictions.

[21:57] Yeah I know the audience is super excited for these.

[22:00] I’ll create a dramatic pause here.
Number one Walmart this one you are very explicit you said Walmart’s growth is going to slow way way down,
because they’re gonna lap their Grocery and people are just so tired of curbside grocery just.
Done with it it’s just so boring and then you said,
and and I’ll put a huge emphasis on the ant here and Mark Lori leaves Walmart so as you and I know with logic gonna have both sides of that and this is clearly not a norm.
So first I thought you were going to win this one with that first with the mark Laurie thing so this is a bit of news Mark Laurie hat is leaving Walmart it was announced.
This week last week.

[22:52] You asked for it yet.

[22:53] Last week.
He’s going to build the city of the future how exciting is that you did not have that in your prediction so I think that’s a Miss if you could if you had had Mark Lori Leafs Walmart to them say future I would have just like,
drop the mic and giving you a thousand points and walked off at this point in the show,
so in all seriousness the growth did not slow the pandemic cut against you on this one you know Walmart’s been growing at a tremendous Pace due to endemic and they were the only store open,
so that has really helped them immensely during during these times,
so since you were generous with generous with me I will be generous with you and that’s definitely a half point because of the Lori part but the first part is kind of smelly so,
I think I’m just being so so generous here.

[23:42] Yeah I’m not sure it’s any more smelly than the Shopify will crater,
so I feel like we have parity there the differences I gave you half a well not you only had the Shopify prediction I feel like it’s pretty clear this I have Point prediction my I feel like my logic behind Walmart was sound and
thrilled to be wrong sorry sorry for why I’m wrong but obviously grocery to dramatically accelerated so I couldn’t I couldn’t have been more wrong on that half,
but almost certainly the first place anyone heard that Mark Glory might be leaving Walmart was was on our show a year ago so.
I’ll take that.

[24:23] And then yeah so good work on that one but you missed the city of the future thing.
And I’m going to be excited you know hopefully Mark if you’re listening we would love to be the podcasters for the city of the future I think I think we would be doing a good job there Jason wants to be would you say you want to be the Marshal or the sheriff or something you want to ride on that.

[24:40] That would be even cooler especially if I get to wear like Mandalorian armor but I was I was hoping for deputy mayor.

[24:49] Okay Deputy Mayor do you get to ride horses deputy mayor or no.

[24:53] I feel like if your Deputy Mayor you get to decide what you write.

[24:58] You guys have that sense of cowboy up there in Chicago you could you could borrow his horse.

[25:02] Yeah I’m hoping the story city of the future is somewhere tropical but I’m kind of worried that Manhattan is so affordable right now that he might buy that and turn it into a city of the future.

[25:13] Brooklyn strict strikethrough city of the future.
Um okay you’re number two was related to Amazon and you did a little clever hedging here you said they’re going to open an affordable grocery Concept in the digital grocery Wars will heat up,
you are really right on the digital grocery were part of that that one how do you score yourself on the opening up an affordable grocery.

[25:41] I scare myself a hundred percent they we now have five Amazon Fresh stores in California and two in Chicago.

[25:52] And then what’s the that’s the big one that has them – cart thing right.

[25:57] Yeah yeah so it’s – card it’s like a 20,000 square foot grocery store and it’s it’s you know very competitive prices on Main Line groceries as opposed to the,
that expensive premium brands that are exclusively carried at Whole Foods.

[26:14] Whole paycheck.

[26:15] Exactly the hey.

[26:15] Um Okay cool so that that’s a plus one.

[26:19] Yeah and grocery words heated up more than I could have ever known thanks to covid-19.

[26:24] Yeah yeah that was a nail down.
Um number three owned Brands continue to grow five percent of retail and to five percent of retail in 2019 could be eight to ten percent in 2020 as measured by RI for CPT private label.
I don’t know what the back into that means but yeah how did Dad Edge do.

[26:48] I got it I’ll be on it so iri is a data reporting company that tracks,
sales by product category in,
the grocery and mass base and they they have a data set for private label.
In hindsight I inadvertently sandbagged this a little bit I think the spirit of what I intended was that.
Private label would rapidly grow in 2020 in that that has absolutely been true it’s growing it like four times the,
pace of national Brands the penetration according to iri is actually a little higher than I wrote here so they’re fifteen percent right now.
So I feel like I hit both the spirit and I inadvertently wept the number more than I meant to.

[27:44] Wow now do they break out private late what you call you have a.

[27:50] No I do differentiate exclusive Brands versus private label and they don’t to them it’s all private label.
They do Break It Out by subcategories like fresh Frozen Frozen shelf-stable stuff like that the,
it was a big year for private label Target launched at the very beginning of the year a significant new brand that they expect good and gather they expect,
it to eventually be a 20 billion dollar your brand and it sold more than two billion dollars in the first year so,
those brands are selling really well like every digitally native brand we’ve ever talked about that gets all this Buzz not one of them has sold two billion dollars in a year so.
Yeah yeah absolutely but so I’m taking that one.

[28:39] Okay that’s fair enough so that puts you two and a half so within Striking Distance of me so hopefully your next to or total misses,
number four for you was installment payments heat up at least one company is acquired and you listed a firm after pay dalarna I like to say that one quad pay and sizzle.

[28:59] I made this prediction exclusively so you could say karna.

[29:03] Sizzle karna learn.
So this one was a win so a firm went public after pay is public know they did a spec what happened they expect it up.
Let me see I can’t remember after the note they went they did a public offering.
In Australia that’s why it was weird yeah I remember it was like kind of a little unusual it wasn’t listed in the u.s. so they did an IPO not you know,
if I were going to be nitpicky I would say neither of them was acquired which is your prediction but it did heat up,
it’s funny I’ve been meaning to send you some screenshots I was buying a couple things and literally four of these would be on the,
the checkout and it was really weird because they would have their almost competing at the checkout with like different offers so some of them would say,
two payments of 59 and no-one would say six payments of 4 and I was like sitting there like,
oh my God like his average consumer the calculus on this thing is kind of wacky of how to figure out which of these 12 offers is going to be best.

[30:13] Yeah yeah the cognitive load can get pretty high when they start NASCAR racing up the checkout with multiple buy now pay later options.

[30:20] Yeah and there’s some point it seems like it would hurt conversions because there’s like the what’s that thing about choice you guys talk about all the time.

[30:27] Yeah Paradox of choice is what you’re thinking of but yeah they’re just a lot more friction yeah.

[30:32] Once you got four of them you’re going to be like yeah I’m not gonna buy this thing so so that puts you over the top at three and a half right there.

[30:42] You can hear the music and In fairness I like if you were going to be a really strict greater I actually don’t think any of these got acquired like prove your point the,
partly because it heated up faster than I expected and their valuations are too high to get acquired now like for the most part,
The Firm did their IPO ass week and I think it went up 90% after the so they underpriced it.

[31:07] Yeah it’s now a bad IPO if you don’t more than double them first.

[31:10] Gotcha.

[31:11] We’ll have to do a whole show on that and then your last one I feel.
You know even though I’m losing I feel good for you because you’ve been talking about this for literally since the first day I met you you’re probably like the first day I met you or probably like,
let’s talk about Hugh are codes and how excited I am about him so this is like me claiming you know making my annual prediction that Amazon’s going to be with FedEx,
I know it’s going to happen it’s just whenever I’ve given up on it at this point so you predicting QR codes you get the persistent award you’ve been saying it for years
you know every time I go to one of the restaurants here in North Carolina that’s open I think of you because I have to scan a QR code to get my menu and then I do this cool little scan of a
another the little receipt to pay and
you know QR codes are definitely back you totally called this one the pandemic you got the pandemic assist so that was a solid one,
any other interesting use cases you’ve seen.

[32:14] Yeah no so pretty Point like obviously I did not foresee the covid use cases but all these contact us things you know certainly came up the thing we talked about just a second ago the bill me now pay me later pay later services,
have introduced a lot more QR codes because they you know they started out offering their service online and not in stores and then as they got bigger they all wanted in-store Solutions and those are mostly activated,
via an in-store QR code so like I want to say,
after pay you can now use it like CVS drugstore with the QR code,
um PayPal rolled out in store payments with a QR code and then of course thanks to covid,
Starbucks Mobile payment just completely exploded and so they’ve they say now that over 25% of all their sales are via QR code so,
so lots of different use cases and then a few stores are starting to roll them out on shelf Edge as well for product information so,
some some Walmart prototype stores and a few other stores letting you scan QR codes,
to get product information in the store the Nike House of Innovations.

[33:35] Well congratulations you cleaned my clock this year so 4.5 versus three so that was a 90% prediction rate very very impressive my friend.

[33:45] Even a broken clock is right twice a year or twice a day but yeah.
I ruined that one.

[33:54] That’s ironic.

[33:55] Yeah I will say I’m super grateful because I feel like you and I have both had this thing where we predicted something that didn’t happen and then we skipped a year and it happened.
Like oxa earbuds for example or something you know and so I.

[34:13] Yeah that was when I made for a while and then it finally happened the year I didn’t.

[34:16] Exactly exactly so I’m grateful that I didn’t miss the QR year.

[34:21] Well a blind squirrel finds a broken clock at least twice a year so as you as everyone knows.

[34:25] Yeah yeah I’m I’m clearly not the sharpest bulb in the drawer.

[34:29] Okay hopefully that flows into your predictions let’s see it’s you are the winner in the champion of 2020 what do you have in store for listeners for 2021 predictions.

[34:44] Yeah yeah well I’m excited about these for now we’ll see what happens a year from now,
but so prediction number one made-to-order apparel business achieves nine figures in Revenue so that’s a hundred million dollars if I did my math right,
um I’m super bullish on these on made-to-order taking a significant chunk out of the apparel business as people may know,
um Amazon launched made-to-order t-shirt M Taylor Nike a lot a lot of folks doing pilots and kind of,
dipping their toe asked year and so I’m going to go out on a limb and say at least one of these catches some scale and 2021.

[35:30] What are some examples of some of them these this does not have to be part of your prediction I’m not kneeling you down because specific but I want to make sure I understand.

[35:35] Yeah yeah so so Amazon made for me Product would be 1M Taylor in ticino Nike ID proper cloth.

[35:50] Doesn’t it Jesus have one week like print the souls or something.

[35:53] Yeah they’re so there’s a ton in Footwear that’s kind of cosmetic personalization so Vans Converse David us Adidas had custom sweater pilot,
there’s a small direct-to-consumer apparel brand called Ministry of Supply that has some interesting like,
in-store weaving machine so there’s,
there’s a number of things it’s mostly been a novelty up till now so I feel like this is a stretch prediction to get 200 million in Revenue.

[36:30] We will see in your shirt Nike ID already isn’t there.

[36:36] So that’s going to be a tricky one because to me.

[36:38] I’m wise to your sandbagging.

[36:39] They don’t break out the revenue for that so I like I doubt I’ll be able to use that one as a win.

[36:45] Okay alright I’m going to have to come back and listen to this if next year you use it as when all right.

[36:49] Yeah I can Bank on you not remembering it or not be willing not be willing to remember re-listen to the show.

[36:57] I just set a calendar appointment for for January 21 2022 so I’m on I’m headed.

[37:04] Yeah so prediction number to a retailer will offer a viable health insurance alternative to Consumers so,
the spirit of this retailers are totally leaning into Healthcare initiatives Amazon of course went all in with a pharmacy they offer some healthcare options for employees at this point so that could become,
consumer-facing Walmart has opened a handful of healthcare clinics Walgreens just announced a significant new division with 200 employees focused on delivering Healthcare so,
my I am predicting that one of these gets to scale and offers a viable Nationwide Healthcare alternative that does not require traditional insurance.

[37:57] Okay and so this is pretty brave given Amazon just and wound their their initiative with was it JP Morgan and yeah.

[38:05] But I am I’m banking on the fact that they Unwound that because they think they have a better solution on their own we’ll see.

[38:16] So then number three we talked about the grocery war is heating up last year and then of course thanks to covid a heated up a lot more than expected,
um so I think that the interesting one this year is I am predicting that they are going to stay at these very high levels,
our friend Sue charita from Forrester just wrote a grocery article yesterday and she talked about how it was a huge year for digital grocery but they in 2021 all the restaurants are going to open back up,
and that she expected digital grocery to shrink back down maybe not to pre-pandemic levels but to go down a lot,
um I actually don’t think that’s going to happen I think that a ton of people have formed a new digital grocery habit I’m not saying they’re going to do all their grocery shopping online,
but I think on a go-forward basis a big chunk of people are going to do a significant piece of their grocery shopping online and so I think,
um next year that for 2021 10% of all groceries will be sold online,
and I think as a result of that retailers are going to have to invest in operationalizing those those services and making them more profitable so I think it’s pretty likely that a,
a least one retailer will roll out these these micro fulfillment centers on a broader basis than just a pilot.

[39:43] Cool and specifically for grocery though because they are envisioning they would need to be refrigerated or.

[39:50] Yeah most of them are at least two climate zones many are three climate zones so frequently they have like ambient refrigerated and Frozen.

[39:59] Three climate zones nice is Rainforest in Ops.

[40:01] Yeah I don’t I don’t know if it’s an option it doesn’t seem like a practical option.
Maybe if you’re selling like fish or plants in your in your extra fulfillment center.

[40:14] Bananas you want to keep your bananas fresh up on the on the on the coconut trees.

[40:20] All right not sure that’s how that works but okay so the number four and this is why I’m glad I’m going first because I feared that I would be stealing a prediction from you,
so the.
There was a lot of Buzz last year that Jeff Bezos Scott was getting personally involved in a Shopify competitor.
And so so my prediction is that Amazon will watch a Shopify combat,
which doesn’t seem that bold given that it was it was
strongly rumored last year but my specific prediction is I think I have an idea of what it will be and I don’t think it’s what most people are expecting I think most people are.
Expecting them to launch some kind of web store that competes with Shopify,
and I think what Amazon is going to do to compete with Shopify is they’re going to open up their fulfillment Network to,
for for third for sellers to fulfill their orders from their own websites and on a limited basis Amazon has,
done this in the past and even does a little bit of this now but I think they’re really going to productize and make a lot more competitive,
and offering where you put your inventory in the Amazon with just X Network and when you collect orders on your own website Amazon will cost effectively deliver them using their own delivery Fleet.

[41:47] So they’ll make FBA kind of like more of a generic shipping solution kind of like almost like meaningless shit.

[41:54] Exactly exactly a standalone offer that doesn’t require the Amazon Marketplace exactly.

[41:59] Anderson all right.

[42:03] And then I have a.

[42:05] So no front-end SMB e-commerce thing is part of that.

[42:18] You’re keeping it generic so you can catch a lot of possible.

[42:22] Trying to keep it reasonable exactly.
The the so my V prediction goes back to a trend that you were talking about the the Amazon media and I do think Amazon media is going to continue to be the,
by far the biggest player of the Retailer’s but there’s a ton of,
effort going on behind other retailers to get in on that action as well so,
Walmart has you know launched a major media initiative the Walmart Media Group target has an initiative called Target Rundell Kroger has an initiative called Kroger Precision marketing,
and perhaps the fastest-growing of all these growing faster even than Amazon is,
instacart who is like one of the biggest beneficiaries of covid is now selling a ton of media so I think in aggregate all of these retailers selling ads are going to exceed 20 billion dollars in ad sales in.

[43:21] Brickell they’ll be an arson to do have a way of tracking that.

[43:25] We do not up perfect way but a number of the the stock analysts report on that emarketer has done,
estimates on them in the past and some pieces of it we have actual data for.

[43:44] Cool and then one of the things one of the behind the scenes things listeners may not know is we always do six predictions in case some of our Collide and I don’t think we had collisions can you want to reveal your six this kind of a bonus.

[43:58] Yeah you you correctly predicted that over 8,000 stores would close last year
and a lot of people feel like 20/20 was the peak covid year and they’re all these you know extra things,
I actually think 2021 is going to be worse for store closures than 2020 so I’m predicting that will have more this year than we did last year.

[44:21] So over a thousand seven hundred.

[44:23] 31

[44:24] What if 31 all right that’s a very specific prediction I like it.

[44:29] When I wrote it it wasn’t that specific but then you had.

[44:33] I’ll put it in the show notes.

[44:36] So so Scott what do you what do you what do you think’s going to happen this year.

[44:40] Yeah so you know this one’s tough because I definitely feel the pain this year I think,
I think I’ve had three or four years of pretty well walloping you so it felt really weird to not win this year so,
dug deep on these and hopefully I’ll reverse it for next year.
So number one it wouldn’t be a Jason Scott show without talking about Amazon a little bit more so I do have an Amazon predictions,
I do think that they are going to use so they used covid to really scale up this DSP program and as you and I have talked about ship again they were somewhat immune from ship again as they control their own destiny,
I think they’re going to really Flex on that and I think,
I think covid has the Silver Lining to Amazon of covid around shipping is I think it’s given them the path to get to same day Prime,
for you know a lot more places in a lot more skews so I think we’re going to see them really crank up one day shipping so that’s my prediction.

[45:43] Okay and where do you how do you envision that gets Quantified like what is cranked up mean like it gets used a lot more or they offer it a lot more places or.

[45:54] I think they’ll be an announcement now that I would imagine it’ll come and kind of Q3 where Amazon is going to announce for the holidays you know a.
Millions of items available for same-day delivery through the holiday period something like that I think it’ll be a pretty material.

[46:10] Okay I like it.

[46:11] Change and I think they’re going to execute it and then,
actually had written this down in there was an article that came out that talked about how they’re going to use these little micro DC’s there’s an article I think it was,
squarely in the speculation do you remember who is it that is this guy’s in Seattle that come out with the stuff but,
anyway they were speculating that Amazon is going to open up mm kind of micro DC’s so I don’t know about a specific number like that but it was interesting that I think I think a lot of people are seeing that this this could be the direction they go.
Number two I do think so my train of thought here is,
you know if your quote-unquote arming the rebels in your Shopify and and I was reluctant to make another Shopify protection but but here we go so then I did too so in this one I’m thinking if you’re arming the rebels you know what.

[47:05] With ship again what the rebels need the rebels being smaller kind of retailers they need a lot of help with shipping right so FedEx and UPS are not adding enough capacity they’re really expensive first while guys,
so then using USPS they were total epic fail during holiday 2020,
so and then Shopify is already kind of got one little toe in this water with their fulfillment by Shopify every what they call it that’s what I call it so,
you know if you’re them and you’re sitting on this massive hoard of cash and market cap and you want to help your,
300,000 if you get the number but this very large number of smaller businesses the,
imagine having Shopify trucks just kind of driving around you know I think that would be really interesting and,
it kind of ties with one of my other predictions but I think I think Amazon has proven to folks you can build last-mile fulfillment.
With a lot less than you would think I think a lot of folks looked and said well I’ll have to build FedEx that is you know fifty billion dollars,
but I think all in Amazon DSP program was was relatively like under four or five billion dollars from them to build out and.

[48:23] What they did is they essentially use kind of almost a franchise model where all these local entrepreneurs fair amount of the risk and do a fair amount of execution and then Amazon can,
work the incentives in the system so so I think what’s going to happen is Shopify we’ll look at that decode it and it makes a ton of sense for someone else to do it,
sometimes I bounce between maybe like a one of the ship Bob’s or some of those guys doing it but I just don’t think anyone else has the resources I don’t think Google would do it I just don’t think they would,
they would do this I don’t think Walmart would do it so I think someone’s going to do it in my best guess is it’s going to be Shopify.

[49:00] Interesting one bit of Commerce news I’ll throw in that maybe supports that is,
is listeners will know that the traditional carriers often have these um surge prices over holiday and now they’ve announced that they’re just going to keep the surge prices on.
So it’s just it’s getting it’s getting more expensive and it’s it’s you know challenges the unit economics for a lot of product category so having some Alternatives could be interesting.

[49:28] Yeah yeah and then my third prediction is also Shopify so so you know since that worked out so well for me last time,
and then here again if I’m arming the rebels and I keep saying that because that’s kind of like their little catch phrase now you know one of the things that’s risky for Shopify is,
I would bet that their stores in aggregate get sixty percent plus of their traffic from Facebook and social,
um Facebook and other social folks which are largely Facebook’s of the.

[50:07] The giant 800-pound gorilla here is there on Instagram,
you know they have their own check out they’re starting to promote and Shopify as an option and whatnot but at some point the,
you know so I mentioned this earlier these guys are under pressure the sad models under pressure from the privacy and the government and Amazon and everyone else,
they’re increasing their work on Marketplace and other Commerce initiatives and then at some point do they say,
we want a power that check out now and capture some comics from that because if you look at it Shopify almost,
you know a very large portion of shopify’s Revenue comes from monetizing the shopping cart,
so things like affirm things like PayPal things like their own payment system,
etcetera so someone is going to get greedy on that and Facebook has kind of a pole position so if your Shopify,
you need a hedge for that where you say if the amount of traffic going to our aggregate stores goes down we need to be able to drive them traffic and,
Shopify has been kind of creeping up on this this is where you kind of have disagreed.
They had this happen always forget what it used to be called it’s now called the shop app and it’s really just basically tracking your package and you know that kind of thing but that could become a front door so.

[51:29] I think Shopify will have some option where you will be able to either get free traffic or by traffic from some app that’s installed on millions of phones that has some kind of a front door shopping experience.
I don’t think it’s going to be like.
You know I think it’s going to be more at the store level not the item level so meaning you could say I’m looking for stores that have really cool,
dutch ovens and it will show you those kind of things but I don’t think you’ll be able to say you know,
Star Wars Mandalorian six inch figure and get a result across all the Shopify stores.

[52:05] Interesting all right.

[52:07] You need that make you throw up in your mouth.

[52:09] No like a lot of smart people think that that’s going to be a play like it.
And I’m not convinced it won’t be my point is just like everyone’s like oh my gosh shopify’s winning and all these things they’re clearly going to do that and my point is just.
Generating traffic and marketing yourselves to Consumers to get consumer eyeballs is a wildly different skill than anything shopify’s demonstrated so none of their previous success to me other than their access to Capital,
really makes them more likely to succeed in,
generating a lot of consumer traffic so I just think it’s it has some risk and then it has some complication,
um in some ways that that new service would compete with the rebels right so that’s you know always one of the,
the conflicts of having a Marketplace and fulfilling you know,
providing services to people that want to sell direct so,
we will see on that one I do like to point out everyone they keep liking use that metaphor of arming the rebels but if my Star Wars wars correct,
the rebels eventually took all those arms and they blew up an under-construction death star with like a million enslaved construction workers on it so I’m not sure that that’s always a good thing.

[53:32] Yeah yes it’s always a different perspective of who the rebels are right.

[53:36] Exactly.

[53:37] Um and then okay so then my next one so this is number four this is code related and I keep reading these articles about you know here in 2021,
and you and I have had vastly different views of when covid-19,
you know but but you know what I’ve been reading is a lot of people are predicting that these new habits we form will go away and we’ll go kind of back to the old way of the old ways covid ways and I’m specifically saying you know,
we the digital adoption,
I’ve seen I’ve seen a lot of surveys that say people are gonna kind of have thirty percent of this kind of new digital lifestyle stick,
I think that’s actually the opposite I think 70% is going to stick,
and the reason why is I like this phrase zero friction addiction what once you’ve gotten used to this kind of digital lifestyle of stuff showing up at your house,
you know the digital Grocery and all the things that are going on,
it amplifies the friction of that experience in a weird way that messes with your mind that that is hard to explain to people,
and there’s some interesting studies about this but I think,
I think we’re going to stay at this elevated adoption rate of digital will come down some but I think it’s going to stay a lot hotter than people think it will.

[55:01] Yeah I certainly agree with the sentiment of that prediction I talked a lot about,
these behaviors being One Way doors and two-way doors there some of the things people walk through it’s easy for them to walk back through a tar and other things once you go through that door it’s kind of a,
permanent decision and I think a lot of these new behaviors are one-way door so I generally agree you’re going to this will be an interesting one with the judges next year because I’m not sure exactly how to quantify it but.

[55:31] Yeah let me say can we use percentage of sales that are retailgeek.

[55:37] Sure that our digital you mean okay what kind of percentage do are you expecting.

[55:44] Well the trick is that the were numbers not out so I don’t know where we landed last year.

[55:48] So we’re so,
we can’t January of twenty twenty thirteen percent of all retail so the broadest definition of retail straight from the US Commerce 13 percent penetration the peak of,
nineteen percent penetration in April and pretty consistently for the last four months of the year sixteen percent so we kind of jump from 13 to 16.

[56:16] I’ve seen a chart that shows.

[56:18] 34 yeah that’s that’s my friends and Mackenzie that smoked something and made a prediction that never came to fruition.
They did also they were defining a narrower definition of retail they were taking a bunch of things out of retail they said can’t it doesn’t include cars because people don’t buy cars online it doesn’t include food because people don’t buy food online,
and of course the both of those hypotheses are totally wrong and covid because people bought a lot of cars and food online.

[56:50] Yeah if this Mackenzie company had achieved digital research retail officer then they would not have missed that one so.

[56:58] Pretty confident Mackenzie has people with longer titles than me but yeah.

[57:02] Okay so I will take so all right so you think it’s settled down in Q3 you 16% so he said.
Yeah so I think it’s going to come off 30% off high so so I’ll say we stick it.
Well if I see 14 necessarily not more than January is.

[57:24] It’s one more than January.

[57:26] Yeah thanks I’ll say we stay at 16.

[57:29] Okay Bolt.

[57:31] Okay you’re right now alright prediction and were five,
this has been a nursing so there’s a lot of really weird things going in the financial markets we don’t have time to go into them but one of the ones that’s fascinating is I mentioned earlier IPOs are doubling,
um yeah so and then just this just recently we had Poshmark go public and do quite well,
so I think we’re going to see is,
you know and then there’s this weird thing there’s a space vehicle called a spec which is a special purpose acquisition company where you create this shell of a company it has a you raise Capital into it an optional capital and then you say,
this thing is a vehicle for going in and buying a company that will effectively go public,
so it’s this very kind of weird way to go public through a back door way it used to be very kids today would call its us which is short for suspicious,
now it’s become kind of a thing,
um so I think they’re going to chew through a lot of the companies like open door that are kind of unicorny and have a lot of Buzz and then I think it’s going to become it’s going to start looking for a new space and I think,
you know there’s a lot of Buzz around these DMV bees so I think some of these DMV bees will kind of go public through this mechanism,
um so some of them would be like keeps hims hers that the right one and then.

[58:54] There’s a bunch in kind of like that category there’s a bunch of beauty I could see glossy a they’ll probably go the traditional route.

[59:04] What’s like a tear to too glossy a Kylie’s are they adhere to.

[59:09] I don’t think they would call themselves tier 2 but there I mean there’s a million South Korean health and beauty.

[59:17] Yeah and maybe even like.
This could be an exit Vin one of the trends that I’ve been fascinated by but I did make this shot is this there’s these companies buying up,
kind of micro brands that are born on Amazon and aggregating them together and forming companies were actually have one on the show soon this could be an interesting exit vehicle for them,
so so I think we’re going to see a wave of that e-commerce in 2021 is my.

[59:44] Got it so someone buys up all the foam mattress companies and specs them up got it.

[59:48] Yeah yes pack them up.

[59:50] I like it is that gonna is there any reason that they would clamp down on this backs it feels like they’re they’re like super peeking is that an abuse in some way.

[1:00:01] You’re more government regulation guy that I am I’m sure they’ll think of some reason.

[1:00:09] Gotcha ya know but I mean it doesn’t like just when you sit to a Layman it sounds kind of sketchy right.

[1:00:16] It is a so it’s a way for for more risky companies to make it into the public markets now there’s a school of thought that says there is an investor that you know,
that wants more exposure of those things right because you know it would have been great.

[1:00:33] Products cavea.

[1:00:35] Give me a more wide range but then there’s another side of that argument that is you know these these poor kids are on Robin Hood and they saw a firm because they’ve seen it in a check out and they just put you know $500 in there and,
if you’re good because it doubled and if some of these.
Hot IPOs are specs you know if the crater then that’s going to be a problem there are several there are some so there’s one,
Nicola there’s some of the electric car category that have no revenue and just pure speculative and and Dave,
they flopped over that could create a wave of Regulation that says.
Kind of depends on why we these are going public are they are they going public because they’re sturdy and financially viable and vetted or is it,
that they have agreed that they will share their information publicly and it’s up to the investor to take decide what risk them.

[1:01:27] Got it okay and then I think that was five so do you have a bonus.

[1:01:31] I do I think you know I see a lot I watch a lot of CNBC and there’s a fair number of Talking Heads that kind of say,
you know once covid zof caught covid on covid off you know once covid off we’re going to see an explosion of people going out and buying new outfits and stuff like that and I don’t think that’s going to happen I think we’re going to see the,
the I think we’re going to see this kind of actual,
anti-consumerism materialism wave there’s been a little bit of that generational but I think it’s going to be bigger and I think it’s going to be people wanting you know part of its just going to be people spending money on doing stuff there’s so much pent-up demand go to,
concerts vacations Leisure stuff whatever whatever whatever that is,
but then I think there’s going to be this weird kind of,
you know anti-consumerism wave if you will and I think that’s going to really Advantage companies like the real real thread up,
a lot of those companies that are in kind of that would you call it second hand or Consignment I don’t know the right.

[1:02:33] Previously owned yeah.

[1:02:34] Previously on gently gently on so I think we’re going to see you know.
I don’t think we’re going to see people run out and buy yep six suits so this is,
conversely this is bad for the Macy’s the Nordstrom’s and those kind of folks I just don’t think there’s this huge pent-up demand to buy you know fancy cocktail dresses and stuff.

[1:02:59] Don’t know how to measure this one that’s why it’s in the bonus category.

[1:03:01] That totally totally fair I am it’s funny you like in briefings I do on covid I do talk a lot about a forthcoming,
Roaring 20s that is kind of a backlash too,
to the pandemic but I’m with you I think most of that is,
spending on services and experiences not Material Goods,
so that’s people like you know craving eat out more and go to more wive concerts and events and things like that,
then it is you know filling up their closets with clothes so I think you’re right there I for a variety of reasons,
the clothes thing is going to going to be,
not we’re not going to see a ton of growth in a parallel regardless except for the made-to-order that I predicted.

[1:03:57] And athleisure seems to be resilient.

[1:03:59] So that’ll be that’ll be good in,
I think we’ve concluded our predictions but I did get a note from the intern while you were sharing yours that you were exactly right our first prediction show was,
January 7th 2016 so this is our sixth sixth prediction show which is.
But more fun he sent me your 2016 predictions and one of them you used again this year.

[1:04:31] Really which one.

[1:04:32] So you’re six predictions 2016 will be the year chat Commerce know Amazon will make some big moves in logistics yes jet will get acquired yes,
um Google will make a bold move in e-commerce that surprises everyone.

[1:04:50] I didn’t even know it was a retread man.

[1:04:53] I like it and then Ali Baba singles day won’t work in the u.s. yes so you did really well for our inaugural show,
and the one that you might not have gone right I didn’t check with how we scored it the what you probably got four out of five and the one you didn’t get right you’re still you’re still Reviving for this year so I love.

[1:05:12] I’m persistent I’ve learned from your persistence on QR codes did you predict QR codes.
Okay alright.

[1:05:23] Yeah well Scott it will surprise no one that is happen again and we have blown through our allotted time we thought this would be a shorter show because we didn’t have the the,
the year recap in it but we managed to stretch it out to an hour anyway but hopefully it was fun to listen to as much fun as it was for us to make and if you enjoyed it we it’ll of that five star review,
especially shout out to all us nerds who have listened to all six versions of the prediction show we’re certainly grateful for your,
your support and your continued Allegiance.

[1:06:00] Thanks everyone feel free to let us know your predictions on Twitter I’m Scot Wingo with one t Jason is retailgeek with
two e’s in geek and over on LinkedIn we have a page and then on Facebook we look forward to hearing what you think will happen in 2021.

[1:06:19] Until next time happy Commercing.

Jan 8, 2021

EP250- Holiday 2020 Recap

This week we recap the commerce results for Holiday 2020 (including the data sources you can use to get a read for yourself), give an update on #shipageddon, and cover some industry news.

  2019 2020 YoY %Ch
Stores $864.69 $822.79 -4.8%
Online $140.28 $190.47 35.8%
Total $1004.97 $1013.26 0.8%
Nov-Dec Sales estimates from e-marketer $B

Shipageddon Recap:

Episode 250 of the Jason & Scot show was recorded live on Thursday, January 7th, 2021.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:40] Hey Jason and welcome back Jason's got.

[0:42] Jason's got show listeners happy New Year Jason it's a new year and you actually said.

[0:47] Said the wrong year in the intro so we need to we need to jolt your brain bring it back back into 2021 here get you out of the.

[0:54] 2020 one here get you out of the.

[0:56] Time traveling hot tub.

[1:05] The grace period ended on the 7th at about 9 p.m. so.
What did you have a it's been been a long time already so.

[1:24] The 250 episodes we do about 50 a year so that feels like we've been at this about five years of.

[1:42] Yeah I think have outlasted.

[1:42] Have outlasted your wife at this point we're pretty close if I recall sticks.

[2:01] Yeah if you can survive covid then you can survive anything the also you get to.

[2:05] The also you get to update your slide and say if you enjoy this talk there's 250 hours.

[2:09] 250 hours of me out on the internet.

[2:17] It's a chuckle errands like did you have a good holiday.

[2:54] Cool and I saw you updated your profile picture everywhere that got a lot of lot of chatter out on the interwebs so that was good you you're actually smiling in your new.

[3:01] Actually smiling in your new profile picture that's.

[3:30] The good news is you haven't changed your Zoom Avatar so I'm sitting here looking at Good Ol.

[3:36] 2020 scally Jason or just the one I've.

[3:36] Sally Jason would just the one I've known for five years so I'm going to stick with.

[3:56] The one of the character chur kind of things.

[4:29] That's very cool did you get any fun.

[4:31] Any fun gadgets.

[4:33] To report on for for the listeners.

[4:50] Yes.

[5:58] So it's true.

[5:59] Transparent so you're looking through the.

[6:00] You're looking through the camera and the camera can't see it.

[6:26] Brickell.

[7:36] Zell.

[7:39] Oh oh am I rlu.

[7:40] Mayer L you and I okay cool awesome to some good new stuff there.

[7:59] To a beachy destination sir.

[8:00] A beachy destinations that was good got a little we're here in the.

[8:04] The very cold North.

[8:05] Carolina so we're get down before T so we had to escape that warm weather which was good and.
There yeah we are we are pretty 10 and then on the gadget side I am I'm like eight steps below you I finally get it.
Kind of more modern dlsr without a mirror that I can do better streaming with so I've been having fun trying to get the firmware update on that that's been an adventure.

[8:35] A lot of Mandalorian stuff including a baby Yoda you want to say.

[8:38] That's amazing.

[8:51] My name is Greg ooh so that was good.

[8:54] That was good yeah so it was it was great.

[8:57] And then.

[8:59] PS 5 and I.

[8:59] S5 and I got an Xbox x so we're caught up on the consoles which is good I always like to keep those current and so that's been left on.

[9:19] They did a really good job on that with the industrial design and the online components and all that jazz so that is actually getting more play than the Xbox right now.
Then there was a.

[9:31] There was a software guy who was really fascinating to watch this.

[9:33] It was really fascinating to watch this cyberpunk debacle have you tracked this you probably did yeah so they they release this game there was all this.

[9:40] Release this game there was all this.

[9:42] And then it was so buggy that Sony actually if anyone bought it through the online portal or through the Sony Channel if you will they refunded everybody even kind of.

[9:54] Unbeknownst to the game.

[9:55] Developer and that caused a whole Rift between them and the game developers working hard the.

[10:02] It's a classic.

[10:02] Example of better sometimes we fall into this go fast and break.

[10:06] Sometimes we fall into this go fast and Break Stuff mindset but this was one of those.

[10:09] But this was one of those times when that did not work.

[10:22] But there are some fun YouTube.

[10:24] There's a lot to learn about this just Google cyberpunk bugs and you'll be.

[10:27] Bugs and you'll be driving your little car around.

[10:30] And you'll end up inside of a building all kinds of.

[10:32] All kinds of all kinds of very strange glitches.

[10:40] Well it's January and you know what that means it is a vent time.

[10:43] It is event time and you are you always speak it a lot of these January events walk us through what.

[10:47] These generally events walk us through what you have coming.

[12:56] Yeah I'm going to miss standing outside the Javits Center and freezing pelting rain and sleet trying to get a cabin and is available and rolling a suitcase through all that misery.

[13:28] The thing I'd never gotten about in RF and I do love it.

[13:31] It because you and I get to go see all our buddies.

[13:33] Buddy's it's over the weekend and like some of the best contents on like Saturday and Sunday and.

[13:36] And then like some of the best contents on like Saturday and Sunday and it's just like come on guys.
I know that does that but they're kind of like we're retail we're going to have a weekend meeting just like.

[14:36] I think they all attack the opposite side of that argument.

[14:37] All attack the opposite side of that argument is your not often do and I think they would show that.

[14:42] Retail is flexible and able to change with the times.

[14:43] Bull and able to change with the Times by getting rid of the weekend hours.
Covid come game no choice.

[15:05] Yeah usually we try to.

[15:06] We try to wrap it up we do a recap and predictions in one show at all.

[15:10] And show it always is.

[15:11] Is an hour and a half which is a little long so this.

[15:15] This time we're going to split it up.

[15:16] We're going to cover a bit of a recap and some news here today and kind of put a bow on 20/20 and then next week we'll put our big prediction show.

[15:30] Bomb this is a.

[15:32] To remind folks that we love 5 star ratings so.

[15:37] Go to your favorite podcast listener and leave us sir.

[15:37] Favorite podcast listener and leave us some ratings that would be great.

[15:43] So Jason let's kick.

[15:44] Off the recap of the year with our favorite topic ship again what has what's your conclusion for how that went I saw Amazon.

[15:52] I saw Amazon's some stuff out there what did we learn.

[15:54] Without their what did we learn from them.

[17:13] The it is I wish there was more public data out there.

[17:17] There was more public data out there.
Feels like what happened is FedEx and UPS by being really stringent on what they took they were able to get most of their deliveries done you know so there are some some cases where they.

[17:32] So there are some some cases where they miss some things but what I think that happened is because she.

[17:37] Happened is because shippers.

[17:41] Get as much through those two channels they really flooded.

[17:42] They really flooded USPS so you know.

[17:45] There's no unfortunately no the USPS.

[17:47] No the USPS doesn't kind of generate a report that says hey look how many.

[17:49] Says hey look how many packages we missed but since you and I were really well known for.

[17:53] I were really well known for ship again and we got a lot of reports that there were some things that got there really.

[17:58] No individually we had some stuff ordered in early December that didn't.

[17:58] Really we had some stuff ordered in early December that didn't show up until literally.
A timeframe I had done a calculation that would be somewhere between 8 to 12 million packages with my guess that ended up late they're the folks that ship.
We had them on and they talked about their their tracker so if you go look at that they still have it up you can see that the the.

[18:26] Days to ship got up as high as.

[18:27] Is kind of mid 627 so six and a half days.

[18:33] That's I think that's actually short because.

[18:36] Is when you look at the time it was taking you know days to just.

[18:40] Days to just get the tracking numbers entered in the system.

[18:43] System on the front end of the whole process and even a lot of times on the back end as well so we would we'd have a package delivered and then three days later I get.

[18:46] You know on the back end as well so we would we'd have a package delivered and then three days later I'll get a notification from the USPS.

[18:53] It had been delivered so it seems like their infrastructure not only their their Hardware infrastructure with trucks and whatnot was.

[18:56] That not only their their Hardware infrastructure with trucks and whatnot was maxed out but but off definitely the.

[19:02] The software side as.

[19:06] That was interesting.

[19:07] Is interesting and then that teases up for return again.

[19:10] In which I guess we'll talk.

[19:11] Talk about on the next show possibly if that's one of our predictions maybe it is maybe it isn't anything else you saw on ship again.

[22:00] Yeah.

[22:00] It's super frustrating if something is late and it's just.

[22:01] Being if something is late and it's just kind of like the.

[22:05] The shipper has not uploaded the information nearest like what you have.

[22:06] Uploaded the information nearest like what you haven't your go-to as consumer is told me this thing shipped but I'm going to the tracking and it's not looking like.

[22:10] Is consumer is told me this thing shipped but I'm going to the tracking and it's not looking like anything's.

[22:19] Of course sweetie you have been updating clients on kind of the year-end summary walk.

[22:20] So we you have been updating clients on kind of the year-end summary walk us through some of the highlights.

[29:52] One thing I would add is and you may be going there the the shape of the holiday so if we kind of kick off Thanksgiving.
Normally have.

[30:02] Have this kind of.

[30:03] This kind of.

[30:05] You know V shape so you have this.

[30:07] Like at the beginning then you have this kind of lull around the 12th to 15th.

[30:08] Then you have this kind of lull around the 12th to 15th of December and then you have like what I.

[30:13] The Precast procrastinator pop this year it was.

[30:15] Pop this year it was like a down sloping line so we didn't have that.

[30:19] That kind of shape to the v in the e-commerce side of things and I think that was.

[30:23] And I think that was I think you I played a role in that because we educated people on ship again we saved Christmas jacent.

[30:27] People on ship again we saved Christmas jacent.

[30:35] Gradually since you so we.

[30:36] We think hopefully we know in all seriousness hopefully we did help out by alerting people.

[30:41] By alerting people to shop early.

[30:42] Earlier because.

[30:45] I think we ended up at last count I think.

[30:48] We end up with like 30 or 40 public.

[30:49] Applications really in these are pretty material ones like today today's show and stuff.

[30:54] Picked up ship again so hopefully it did play a role.

[30:55] So hopefully it did play a role in not causing that that back-end surge to really.

[31:11] Amongst us the two of us here.

[36:42] Yeah and I'll be watching for when Amazon.

[36:43] Be watching for when Amazon announces Q4 so if the master.

[36:47] Hugh for so if the MasterCard data's right and Amazon grew that fast that could be pretty surprising I think to everybody so that's going.

[36:53] Pretty surprising I think to everybody so that's going to be interesting to see.

[36:57] They benefited from it and you know where Etsy and zup and Shopify so we'll be reporting on all that as it comes out.

[37:40] Did I see you too.

[37:41] Tweet over the holiday that you wrote some code to.

[37:42] They that you wrote some code to pull this.

[37:46] Good news.

[37:47] Cloud Jason.

[40:08] You'll have this running on your watch you can press a button on your watch and tell us how the how the Department of Commerce day.

[40:21] Okay that'll be your.

[40:21] Okay that'll be your 2022.

[40:45] Anything.

[41:24] Yeah it's going to be a fascinating Year from that perspective.

[41:27] Let's jump into some news it wouldn't be the Jason Scott show without someone.

[41:30] The Jason Scott show without some.

[41:45] Natsu in true fashioned we in the.

[41:45] In true fashion we in the chip Again part of the show we.

[41:49] We did talk a little bit about some of the news.

[41:52] News out of Amazon.

[41:53] On but there's been a lot more.

[41:56] The ones I saw that I wanted to get your hot take on.

[41:57] So that I wanted to get your hot take on I think it was.

[42:00] I think it was two or three years ago Amazon partnered with let's see Berkshire.

[42:01] Is on partnered with let's see Berkshire Hathaway and was at JP Morgan and they were going to do this kind of Trifecta go solve Health Care thing and it was called even and I know.

[42:08] Trifecta go solve Health Care thing and it was called even and I noticed as a scene BC junkie the big news I think it is.

[42:14] The big news I think it was last week was that they have Unwound that effort and then you've been talking about.

[42:23] And you've been talking about how Walmart is kind of got its eyes.

[42:25] Art is kind of got its eyes on this the same kind of area what's your take on that.

[44:51] Did you see any other interesting Amazon news.

[45:59] Wow.

[46:02] There was a lot of noise about.

[46:03] There was a lot of noise about Shopify and Amazon working on a kind of a inside effort to counteract their thing in fact someone said you know besos is highly engaged.

[46:11] Inside effort to counteract their thing in fact someone said you know besos is highly engaged and digging into that did you read that.

[46:20] And what you make of it.

[47:19] Design Web Store it was confusing because everyone everyone called it a dip us.

[47:19] It was confusing because everyone everyone called it if us.

[48:17] It's tricky because yeah maybe.

[48:20] Yeah maybe we'll talk about this let's save it for the picture.

[48:22] Diction check well well pile on the teases yet.

[55:33] Then sort of these t-shirts meant to be like undershirts or.

[55:34] Is t-shirts meant to be like undershirts or.

[55:37] We'll get something printed on them or how to.

[55:38] Printed on them or how does that work.

[56:10] Awesome and then.

[56:12] Lidar on the iPhone is on the back of the phone.

[56:13] Are on the iPhone is on the back of the phone so are you having to kind of like.

[56:18] Mounted on a tripod and stand in front of it while someone lines it up early.

[56:19] In stand in front of it while someone lines it up / like how did you.

[56:23] All that off because you can't really do a.

[57:58] So not only does Jeff have your picture.

[57:59] So not only does Jeff have your picture he.

[58:27] Yeah.

[58:28] That's crazy oh sidebar it is a very sad day for Jeff he is no longer the richest man.

[58:44] It is yeah if I had to go if I had to take one of my favorite.

[58:45] Had to go if I had to take one of my favorite Billionaire's to a deserted island though it probably be long so I'm excited.

[58:49] Alonzo I'm excited for.

[58:57] Yeah Jeff is comes across as kind of Will Graham.

[59:05] Any other Amazon news before we.

[59:08] News before we head to some other news.

[1:00:02] Yeah we're converting.

[1:00:03] Hurting malls in to.

[1:00:04] Vomits understood it's like this huge shift of things happening in.

[1:00:08] All these.

[1:01:12] Good did you did you put him in the little cart and does it.

[1:01:13] Did you put him in the little cart and does it like ring him up it's like you just bought.

[1:01:17] Son you bought a child.

[1:01:53] Rick.

[1:05:21] They're probably running it.

[1:05:22] In the background and they'll do that that's good because they can check it against the cart.

[1:06:48] You know when you do these machine learning algorithms to so what.

[1:06:49] These machine learning algorithms to so what they're probably doing is recording from the.

[1:06:53] And then they have the cart is the source of Truth and then they can go run you know 8,000 simulations of the sea.

[1:06:59] Actions over the ceiling data and and it will learn the.

[1:07:01] Learn the machine learning algorithm will use the cart data as the thing to learn.
Why they need that that one piece of data and they don't need it for very long either they could still have some Target of 99.9% accuracy or.

[1:07:10] Piece of data and they don't need it for very long either they could still have some Target of 99.9% accuracy or whatever it is and so you could see.
Maybe a thousand carts that have enough data that they didn't take the cart part out and then trust the.

[1:07:43] Having gone on one of these visits I'd bet they did.

[1:07:43] On one of these visits I'd bet they didn't climb up into the shelves and pull off the digital fact aguirre's and figure out.

[1:07:50] Out where they went and all the all the things that retailgeek.

[1:08:23] Our cameras.
Uh cool coming out of Amazon news one of my weird Hobbies.

[1:08:32] Is not keyboarding.

[1:08:34] Love to watch read s ones and follow the road.

[1:08:35] Watch read s ones and follow the road shows for folks that have so to roadshows are live a lot of people aren't aware that when you go public when you start your Roadshow.

[1:08:43] Aren't aware that when you go public when you start your Roadshow which is usually closed outside of covid imagine this is all being done by Zoom.

[1:08:52] But you actually put it up on this public website.

[1:08:54] Retail Roadshow in right now.

[1:08:56] Now there's two that I think listeners would find interesting there's Poshmark and back.

[1:08:58] Find interesting there's Poshmark and Petco so those are really good to watch and strongly recommend them so the only be up there are typically four seven to 10 days so.

[1:09:02] To watch and strongly recommend them so the only be up there are typically four seven to 10 days so this one.

[1:09:12] Sid strongly recommend checking that out.

[1:09:15] Um as an entrepreneur I love watching these because they're kind of the ultimate pitches if you will.

[1:09:22] These are companies that are obviously pretty large they're either.

[1:09:25] There are hundreds of millions if not billions.

[1:09:26] Is not billions of dollars in size.

[1:09:29] Always learn something about how they pitch their company how they talk about it how they.

[1:09:32] About it how they frame things so I like it from a nacho real perspective.

[1:09:36] Factor but then I always.

[1:09:37] Learn something about cohorts or new category.

[1:09:43] How they talk about subscriptions there's always a ton to learn.

[1:09:45] Learn from this I strongly recommend.

[1:09:47] Listeners and then you send me a really cool deck tell me about this consumer Trends deck that you.

[1:11:56] VC now so maybe maybe she'll add some more content liven it up Shake It Up especially when she hears that.

[1:12:02] Show you when she hears that you switched a farmer.

[1:12:05] That's going to be a shot across the bow for.

[1:12:42] Yeah and 250 episodes we really appreciate everyone's support we wouldn't be doing this if.

[1:12:45] Everyone's support we wouldn't be doing this if we didn't have really engaged listeners we love all the feedback we get from you guys and really appreciate it and looking forward to another great year of.

[1:12:49] The engage listeners we love all the feedback we get from you guys and really appreciate it and looking forward to another great year of Commerce.

Happy Commercing!

Dec 8, 2020

EP249 - Holiday shipping data from ShipBob 

Casey Armstrong (@CaseyA) is CMO at ShipBob, a third party logistics provider that offers e-commerce fulfillment for thousands of brands. They are able to see the carrier shipping performance for all those clients and provide aggregate data that gives us insight into holiday shipping performance, also known as #shipageddon.

Episode 249 of the Jason & Scot show was recorded live on Monday, December 7th, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scot show this is episode 249 being recorded on Monday December 7th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:38] Hey Jason and welcome back Jason Scott show listeners.
Jason we are officially a week past Cyber Monday and reports of ship Augustine are pouring into the Jason and Scot show virtual mailbox our interns are working full time parsing through everything.
So we appreciate everyone feeling this in ship again is also picking up a lot of momentum with the Main Street Press we’ve seen Wall Street Journal Bloomberg New York Times,
women’s wear daily your favorite Jason payments and one of my personal favorites supply and demand chain executive magazine.
I’m going to put that one on the mantle so so a lot going on there and the Press,
sort of capture all these resources we’ve published a little document that kind of highlights all the different hits if you will that ship again is getting you can find that at Jason,
or Link in the show notes.
So today’s show we are going to get a strategic update on ship again and we are excited to have the CMO the chief marketing officer of shipbob Casey Armstrong on the show Welcome Casey.

[1:45] Hey guys thank you for having me.

[1:48] Oh my gosh Casey we are really grateful it’s super early in the morning where you are well we’re recording this so we appreciate that and if I’m not mistaken I think I hear the sounds of data being calculated behind you.

[2:02] It’s crunching in the background you know in the closets.

[2:06] I love it that’s what we call a teaser because we’re not going to get to what that is just yet but as longtime listeners of the show we’ll know we always like to start by getting a little bit of background about our guests and have a kind of
came to this awesome Commerce space so could you tell us a little bit about your background and how you came to shipbob.

[2:24] Yeah so I’m the CMOS you said over at shipbob
before shipbob I was actually the VP of marketing over at Bigcommerce who I’m sure your listeners are very familiar with and before that I helped run a company called watch master,
where we were a luxury watch brand primarily sold over in Europe and I’d say I’d say there is what really cemented,
my views of the pain of logistics and inventory management we were really good at we grew very quickly we got the tens of millions within our first year,
so we did a lot of things well shipping Logistics.
And inventory management were things that we didn’t necessarily do well and when your average order values you know five or six thousand Euros,
you need to do that while in so again really shed a light on that the Pains of logistics and was one of the many Catalyst to get me over to shipbob.

[3:21] Speaking of shipbob let’s dig into that so first of all explain to folks I think Jason I have a pretty good handle on what shipbob is but who’s this Bob guy and what is he ship.

[3:32] The bad guys remember when I was checking out ship I’m like who put that’s a pretty funny name over there,
um and actually if you hit any of our 404 pages to get really nerdy they it’s a nice play on Bob I should wear my Bob shirt right now so shipbob we bring you know Amazon level shipping and Logistics to,
small business you know e-commerce Brands we have 12 fulfillment centers around the world including one in Canada and one in Europe,
we can get into later the importance of having this this network of fulfillment centers and distributed inventory of helpful but long story short
it’s always nice to be closer to the end consumer because it’s faster for you it’s faster for them and it’s cheaper cheaper for both parties as well,
we’ll open up another three to five in q1 of next year as well.
We help support about 4,000 customers today and will ship well over 10 million orders this year.

[4:31] Colton the numb tell us what what’s your typical client you know Jason I spend a ton of time talking about digitally native vertical Brands direct to Consumer Brands so I imagine that’s a pretty good slice of what you do but
yep maybe there’s retailers maybe there’s other folks I haven’t thought about in there.

[4:46] Our focus is definitely direct-to-consumer and I think that’s that’s put us in a great position
as our company has a standalone company today and it’s also what’s really helped put our customers in a great position to you know navigate covid in 2020 and so it’s definitely a direct-to-consumer we are,
platform and channel agnostic so we have people selling across you know the shopify’s and Bigcommerce has and wix’s of the world you know even through Amazon and eBay and Facebook shop and everything.

[5:20] Yeah just to make sure everyone kind of is clear here because we’re going to talk about all these different legs of things so let’s say Jason and I there’s this huge demand for our tumblers,
we manufacture them somewhere we come up with a manufacturing partner in China then we have them shipped in bulk to you and then you,
I’m going to say this you tell me if I get anything wrong then let’s say we send them to I don’t know a California facility then you guys distribute them through your network and then as the consumer in
main orders a Tumblr they get the closest fulfillment center the consumer in Seattle orders one they get a closer fulfillment center but you guys do not do the last mile delivery right you’re using carrier so you’re that fulfillment center Network in the middle is that
is that the right characterization.

[6:06] Yes that’s a great characterization we don’t we’re not we’re not lost Mile right now for the most part for most of our customers they choose which fulfillment center they would like to utilize or fulfillment centers
and so before anybody starts with us you know we analyzed all of their shipping data
which of course learns over time as well but they can at the end of the day also just choose which fulfillment center they utilize,
you know we give them the data for the for a reason and then even within shipbob everyday can just in our analytics section you can just click a couple of buttons and and start seeing how much time and money you’d save by Distributing it to other select centers.

[6:45] Yeah one another I’ve been poking around your site a lot and I do like
I’m gonna give you the unofficial Jason Scott show most awesome 404 page because there’s also a Star Wars tie-in and I don’t.
Look for folks but if you can just go to any random page like you can just do Scott or Jason or something and then you’ll find I recommend checking out the for one page.

[7:06] I smell when I have to get a Jason and Scott page on there.

[7:10] I was going to say wait Jason is that 404 are I feel like everyone should have a Json page.

[7:14] When your shipbob you got to stick to the gotta stick to the bottom.

[7:20] Well let’s speaking of the Bob one of the things that is very handy from my perspective about your company is so obviously you guys ship via a lot of the common carriers and you publish
data about how those carriers are performing like how did that come about.

[7:41] So our CEO or I should say both of our Founders drips back saying then De Vega Lodi there they’re very open.
And just transparent with our new organization and I think that just really trickles down and some of that came with some of the carrier tracking data,
and so we were discussing this internally on our side and we get we were getting asked this all the time from different partners of ours and
and then one day Drew was like hey why don’t we just publish this,
which was honestly all the thumbs up that we needed you know it was a casual ask and it was a Friday I don’t know when this was probably sometime in early Q3,
and so a colleague of mine and I were like okay let’s jump all over this we pulled in somebody on the analytics team and later that day the V12 this was published and so we saw the.

[8:33] The thumbs up there and decided to get this out there and ever since we published it we knew that people would want to consume it but it’s just been great to see the reception of it how people are are often citing and referring to it,
it’s always interesting to see the people that sign up to get access to to our updates as well but in when we published I think it was,
like right when covid hit we published our Trends piece that Trends got which showed a breakdown of,
all the a lot of the main verticals and that did really well and starting getting shared a lot and so okay how can we continue to open up some of our data which of course we share with,
with our customers and with my fellow colleagues but just open this up for the masses.

[9:22] And so honestly I had some concern about what how would the carrier’s react and I don’t know maybe there’s some,
non-public conversations we can have about how they’ve reacted to some of the data we’ve put out there but you know we wanted to throw it out there and I really wanted to get some geodata live shortly as well it’s really cool to see like.
Which states and areas are order spiking especially as different covid news comes in and even,
you know which which states are spending the most on e-commerce and maybe the most per capita just just a lot of variation data out there.

[9:59] Cool so the just so for listeners I think you said it but I’ll just re say it in case it’s carriers with a
plural does shipbob calm is the page one thing I find distracting about the pages you have this cool truck animation and sometimes I just get stuck watching the track animation I’m just kind of like.
I don’t know there’s something about that that I don’t forget to scroll I just watching the little trucks racing each other the so first of all if we so you said 10 million orders and that was annually right.
So if we kind of like a million orders a month kind of on average I guess and it you know I imagine you guys are growing pretty rapidly so there’s kind of a tilt to that line up into the right hopefully and you know so.
Can you tell us like a pie chart like who are the biggest shippers that you guys have just we can start there.

[10:54] Yeah so it’s a lot of the the major carriers it’s FedEx USPS ups and DHL those are by far our top four we work with you know subsidiaries of those carriers and we also work with local carriers.
That’s something that we started in Q2 of this year or I should say accelerated especially with somebody just the carrier demands.
But those are by far our topic of strippers.

[11:21] Okay and when your clients come to you like let’s say the Jason and Scott Tumblr store when we come to you do we say hey we have a relationship with FedEx and we’re going to you know go with them or do you guys have,
because you skip so much volume you can probably get a better rate than us individually do put put people kind of on their own like a shipbob shipping program that has a certain flavor or is it a hybrid so some have direct relationships some are kind of,
where you’re in the middle.

[11:48] We’re always in the middle and so you’ll always use our account.
And so like you mentioned not only does that help you from like a pricing standpoint because obviously we’re shipping a lot more than.
Most people but also I mean there’s a lot of other benefits as well such as you know our negotiations on our behalf are also on your behalf and so great examples with as you guys keep sharing ship a get in.
And some of the carriers.
Limiting you know not just small businesses but you know I know there’s a big story in Wall Street Journal em ups limiting Nike Gap Macy’s.
Every single customer of ours would have to be negotiating their limits with the carrier or carriers of their choice.
And again so we’re doing that on their behalf and we have our Network to distribute and move these Goods around,
and so they get to take advantage of that as well and so that’s been that’s been I know another huge win that we don’t necessarily share with our customer base too much but you know that’s one of the things that people have been able to I’d say better navigate ship again over the last couple weeks.

[12:59] Yes it’s so by aggregating all these kind of individual small folks you’re bigger than Nike or somebody so therefore you have a little bit more heft when it comes to carriers by saying you can’t turn us off because
if I do the math on your shipping like 30,000 things a day which is pretty material right.

[13:17] Yeah and I mean in over the last couple weeks it’s a lot more than that and.

[13:23] Spikes up double triple.

[13:24] Yeah and you know of course so our leadership is talking to their leadership all the time and like you said with growing mean,
will double again next year and so they want to they want to continue to get that business and so that just I’d say put this in a favorable spot.

[13:42] Absolute Okay so
the reason we’re recording this Monday morning is you are giving our listeners a little bit of an early Taste of what’s coming out here so so walk us through what you’re going to be revealing here on December 7th with the data.

[13:58] Yeah so and and I appreciate your,
you guys want any to share this out there and how you guys love refreshing the carrier’s data like you and also like my six-year-old big fan of the the gift at the top as well,
remember he saw that he’s like I want that what are those cool trucks I want that thing.
And so yes I’m happy to share with the latest and greatest numbers are that we’re seeing this week I do want to give a caveat though something
the three of us briefly discussed before we jump up jumped on which I think is a pretty serious issue that not everybody is familiar with,
and that’s that’s on the carrier scans and so at each point within the supply chain,
your you know your supply chain vendors whether that’s your 3pl because we scan the orders throughout several points in the process on our end to when we put it let’s say into a gaylord to get picked up.

[15:00] And you can go Gaylords is this a know massive bucket if you will get picked up by the carriers.
Between the carriers pick it up from our facilities or supposed to scan it and as it goes through different sort facilities or I should say every single officer supposed to scan and then scan once it gets to your house,
and so something that a lot of people have seen and I’m sure a lot of everybody listening who were all consumers have seen as well as there’s no tracking on my order or hey my order hasn’t even been shipped yet that’s not necessarily the case,
and so again just one of the caveat some that there have been some you know the carrier’s can issues and Willie first scan,
the numbers there have dropped significantly since around Black Friday,
and so again we’re cleaning up some of the data on our end but it’s just been interesting to see that I know my wife was stressing out because she’s like I ordered your gift a while ago they haven’t even picked it yet and then the next day it was delivered.
And so she as well just they’re trying to move orders not necessarily scan all the time so that being said yeah I’m happy to walk through the data and tell you what we’re seeing this week.

[16:13] Yes it feel free to forget the sequence on the page but you know there’s like obviously I think the big for FedEx UPS US Postal Service and detail what where we see in for this last week.

[16:23] Yeah so we can start actually I’ll start start at the bottom and so start with USPS.
And we’re actually seeing them at around four point four point one five.
Days and that’s from order picked date to delivery date and that’s up from about 3.5 that is a 20% week over week jump,
and again this is I mentioned some of the carrier scan information.

[16:55] Um and so you know that’s that’s a pretty significant jump It’s a almost 65 percent above what their pre,
transit times were and again these are during aggregate like we mentioned you know will do.
You know we’re doing well over a million orders or the last you know Black Friday Cyber Monday weeks so this is some pretty strong volume that we’re basing this off of but this is across all different zones
so we could of course get more granular there but want to provide the aggregate data and so pretty significant jump,
I foresee that holding for at least probably another week just because a lot of these these carriers are are very stressed.
And stretched and so on DHL,
it actually did not jump as much as expected it actually just jumped from about 1% week over week.

[17:55] And which actually is pretty surprising to me which is still about 30 percent above the time in transit
DPS data we’re still cleaning up and so I can follow up with you guys shortly after that and I’d say the biggest jump in the most surprising and maybe this is because they’re often rather rather diligent on the scan tracking,
would be FedEx,
and so they they course-corrected very well after covid there was there about a three-month span where they were shipping well over there their pre covid levels and then it was really about August.

[18:30] Before they started getting back to.
The pre covid shipping the shipping times and then because they were hiring like crazy just like us just like Amazon just like Walmart,
they were actually able to get it.
Pretty significantly below their pre covid shipping levels and then this last week it just spiked like crazy and so went from less than the 3 Day average Transit time 23.6.
Which is which is a huge jump week over week,
and so I’d say FedEx definitely had the biggest jump you know I have a lot of confidence and how they execute and they’ll be able to get things back to normal but they definitely saw the biggest job.

[19:11] What percentage does that.

[19:13] I think that’s like a close to 25% week over week jump.

[19:16] 25% okay yeah yeah and then you know another thing that’s interesting is if you refuse packages that’s one way of.
Not that they are doing that for you but overall their Network that’s one way of mitigating this right is and that’s what we’re hearing about in The Press is you know so so that’s.
That’s going on somewhere which is interesting to think about as well have they haven’t refused any packages from you guys something.

[19:41] No we’ve been we’ve been pretty clear so far another thing that we have as well is in both the greater Chicago in Greater Dallas region we have multiple fulfillment centers.
So not only can we move inventory let’s say between.
You know Chicago and Dallas to help with Transit time but we can move them with in Chicago and with in Dallas just to take advantage of you know the different limits that we might have within specific facilities.

[20:12] Yeah so let me just replay that for Wisner so so a carrier makes a to you,
man we’re just maxed out in Chicago you say okay we’re going to run our own 18 wheelers between Chicago and Dallas and load balance kind of within your system to react to the externalities of the other systems is that
is that what you’re saying.

[20:32] Well I’m saying even more granular they might say that your building is maxed out and then you can move it from one Chicago building to another Chicago building.

[20:43] Wow that’s interesting doesn’t make a ton of sense but I guess in their world it does.
And you know yeah and for listeners that haven’t been in a big fulfillment center you know usually there’s just 18 wheelers parked outside so the big carriers will just park those right out there and then when they’re full they’ll drive off is that is that kind of what what’s going on here.

[21:03] Yeah we’ve got in most of our facilities I want to say 20 to 30 plus doctors and they just you know we’ve got dedicated lines on each of the major carriers and we’re just yeah film those things up all day every day.

[21:18] Cool and then within that FedEx 3.6 lot of people not may not know about FedEx is actually several systems that the two that are the probably most relevant are the air and the ground you guys break that out is this like mostly in ground.

[21:32] So this is all growz.

[21:34] That’s all ground okay.

[21:36] And that’s a big thing to love people don’t realize as well as are like well how can I offer to day fast shipping and they’ll often look at are.
Anybody can ship from one location,
you know two to three days or less via are it’s just exponentially more expensive and that’s why you know you want to get closer to the end consumer and and you offset that with are to the places you can’t get to Via ground and do as much ground as possible.

[22:01] Anything else on FedEx or should we jump to UPS.

[22:04] We can we can jump.

[22:07] Right hit us with UPS how are they doing.

[22:09] So the UPS one is the has lost one that all I can share with you guys after so still waiting on some of UPS data.

[22:17] Well the reason that one’s interesting is if I remember if I go to my and I try not to get stuck on the gift,
look at the last data you guys dropped they were feeling the pain right so they were at like four point five days and they had been.
Up and to the right on the delays do you need anything directional you think they’re got some relief or.

[22:39] I think they’ve got some relief I think they’ve been doing they’ve been doing a bit better.

[22:44] Yeah and you know my.
Again just watching the data here it feels like they’ve been the most aggressive it kind of saying hey we’re kind of maxed out don’t give us any more packages right now which could be that that’s how you get some relief on this as you.
You have to increase the number of deliveries and the throughput and stop taking in as much stuff to give the system time to catch up.

[23:06] That’s a great call out I’m glad you mentioned that because I think that’s where we’ve been fortunate and all our customers and our customers been fortunate is if we haven’t been hit by limits,
then they’re able to ship out you know more similarly than they did pre you know peak season.
Because they are limiting these these major brands are limiting Nike their limiting Gap delimiting Macy’s their lives their limiting small businesses that are shipping on their own.
All the time there’s just you know I feel for a lot of these brands are some pretty bad horror stories I know this.
Company house has been pretty public with it with their just getting slapped with limits of phenol 500 orders a day at the most
and if not you have to go take things too you know the post office yourself and so it’s it’s been tough for a lot of companies.

[24:04] And ultimately it’s a bad customer experience right so the shipper is get to say so let’s use the house example because they’ve been so public the shippers get to say well it wasn’t our fault we didn’t ruin Christmas but house still has upset customers right and
the customers expectation is I press the the checkout button and.
I don’t really care who’s problem it is your mr. brand it’s your job to get me my product and so it’s gonna be really frustrating these brands.
They to be DTC part of your DNA has to be super customer centricity and then to not be able to get your product to people is going to be just like you know wildly frustrating subside I feel that pain and.
I’m glad companies like you guys are able to have a solution for small Brands to solve this because,
sometimes you can use FBA for this kind of thing but Amazon hasn’t really done a ton around off Amazon FBA because they obviously pref.
Apply a preferential treatment to their in-network kind of stuff so,
I think it’s great that we’re seeing and you know to be clear there’s a lot of you guys have a lot of competitors out there I think it’s great we’re seeing these kind of independent fulfillment center networks that have an FBA kind of a flavor,
there is this whole 3pl thing but it’s generally not designed the way you guys are that’s friendly for smaller direct consumer type businesses so,
so I think I think it’s it’s going to be a really interesting Trend over time that businesses like yours are able to solve a pretty material problem out there.

[25:34] It’s you know you mentioned Amazon I’ll get back to them and one sack and also just like the customers and their empathy levels.
It’ll be interesting to see how that all plays out you know of course 2020 has been an interesting year to say the lease or is not a lot of empathy for,
I think different companies at the started covid then things kind of is like all right this is the new normal but just how people,
I’d say act around the holidays which is often just a stressful time in general and then you know for many out there Christmas is really the deadline of trying to get gifts or I should say maybe even Christmas Eve
to get things under the tree I ordered this was one was this I think this was Thursday or Friday,
I ordered the typical silver iPad as a gift for somebody.
And this is Apple I don’t know what they’re at right now 1.5 trillion dollar valuation or Mark Gap I should say and,
it told me that it wasn’t going to get here until January 5th this was just your run-of-the-mill silver iPad it was probably Scott to be one of their top five top ten most sold items and it was over a month,
before we going to get to my house.

[26:47] And so you know a lot of other people are feeling this strain and then even Amazon I mean Amazon’s incentivizing people with with slow shipping,
and even if you order some rather common goods you know even on Prime it’s still showing 5 6 day delivery speeds.

[27:07] I do want to differentiate a couple of things and I don’t know this to be the case but my suspicion is Apple’s biggest problem which we’ve heard from a number of people that like popular Apple products have.
Very long delivery times right now which are Beyond Christmas the likelihood is a significant portion of their their problem is,
inventory not just carrier capacity.

[27:32] I don’t doubt that it’s inventory but.
And who am I to give any suggestions to Apple and how they run their business but they don’t give you that there’s no there’s no I’d say,
transparency or communication back to the the customer that it might be an inventory issue I know some of our merchants.
That have I’d say dun dun best and there are obviously a lot smaller than Apple
but then I’ve done best you know this year you just been very transparent and what’s going on in their operations and those happening in their business or maybe things are sold out and they’re using that to their benefit,
but you know at least to the end consumer this not you know reading the general or I should say like the deeper news on Apple you know they didn’t mention anything like an inventory issue it’s like we’ve got this.
Order it now and then you pee and then it tells you.

[28:25] So a it clear best practice that I know you’d agree with is like surprises are absolutely the worst,
thing you can do to the customer right so you need you want to communicate this win up when will I get it information early in the shopping process not after they’ve entered a bunch of their payment information and then you go oh by the way when you click confirm
this isn’t going to get here in time for Christmas like that’s the absolute worst thing you can do,
and a lot of sellers we have a lot of opportunity on the table by not being transparent and not having good communication so pretty your point.
If for whatever good or bad reason apple has a bunch of 256 Meg or gig iPads in stock but not 512s in your ordering a 512 and it’s going to miss Christmas.
Early in that that shopping funnel you want to tell that customer by the way if you’re willing to accept a different memory configuration.
We can make it for Christmas right not just surprised them at the end of their cart.
By telling him you can’t I would say there are inventory issues this year like because of covid it disrupted a lot of Supply chains nine months ago that we pay the price for now.

[29:41] Brands got conservative about their cell through when they weren’t sure what covid-19 Ado demand and then their categories that Apple plays in a lot for example where.
There was just unanticipated demand like nobody forecasted in March that the majority of kids in America would be doing school from home and therefore need more technology at home right.
So all of those things play into it.

[30:10] And obviously the shipping is a very real problem but Casey I do want to talk for a minute about the.

Marker 03

[30:20] The shippers that are denying packages so let me tell you my understanding and see if this jives with yours a I feel like there’s two big buckets there are very big shippers.
For which this is not remotely a surprise like they they they had a conversation the carrier’s had a conversation with these very big shippers like Nike.
Back in.
June and said hey what kind of capacity are you guys looking to allocate for a holiday and they negotiated a capacity.
And the only thing that’s different about this year than previous years is in previous years what the carriers would say is and if you end up selling more and ship more than your negotiated capacity you’re going to pay a surcharge,
so those incremental shipping.
Parcels will be more expensive and this year they’re saying if you ship more than your allocated capacity we might not be able to accept the packages because we’re we’re worried about our overall capacity so so I just want to say for the Nikes and gaps of the world.
They knew exactly how many orders they could take and how many shipments they could they could make.
Maybe they hope the those those capacities wouldn’t be enforced but they they weren’t surprised at the last minute by UPS going by the way we’re not going to come by your office today.

[31:38] I would say they were probably pretty accurate in their assumptions.
How many things how many items were actually sold into they have Smart teams and smart data scientist doing the forecasting I know that we.
Pretty far exceeded our Progressive forecasts of shipments,
let’s say over the last two weeks and I wouldn’t be surprised to see you know the Nikes of the world you know Nike is continuing to massively accelerate their e-commerce growth but I wouldn’t be surprised if they underestimated.
And underestimated from different locations and then also there’s one thing to be told that hey we’re not going to pick things up,
and you’ve heard this before and they’ve always picked it up it’s another thing for them to like not actually come and pick it up,
and so I think that that’s something that a lot of these big Brands especially these big brands that are not used to being told no.
Are actually seeing.

[32:42] Yeah I would totally agree with that and then I wit you also alluded to one other thing which I think is a funny loophole in this whole thing the carriers are not in the business of denying packages,
so they don’t actually like that they don’t actually have a great infrastructure.
For enforcing these quotas so so for example if you’re a huge shipper and you deliver you know a container full of packages to a carrier Distribution Center.
They don’t scan every parcel on that truck before they unload the truck.

[33:13] They they unload the truck and then they disposition of those Parcels overtime right and so they actually don’t have my senses they don’t have software,
that says like oh deny that box don’t accept it,
what they do is they say oh you know what this shipper has exceeded their quota we’re not going to send a truck to that that fulfillment center to pick up their orders today,
and so that that’s their mechanism for denying it and so frankly a ton of big and small shippers I have heard of have bypassed this whole thing,
by dropping the packages off somewhere else in the in the carrier supply chain so per your point,
you get a pickup cancel that one fulfillment center you move the packages to the other fulfillment center or you drive the,
the package has two of FedEx distribution center and drop them off or even to a local FedEx office in some cases and drop them off and there’s there’s not someone in that store that like scans your shipper code and goes oh I can’t accept this package,
so that I think that is a funny way people are are bypassing some of these quotas for this year for For Better or Worse.

[34:24] And also trying to bypass because another thing that is completely maxed out or trucks like go try to rent a truck in any major city and you’re not going to be able to.
Um you know there have been pictures of Amazon employees just delivering stuff from their car but it’s just pretty fascinating the creativity that
different brands are employing and again that’s just another part of the supply chain like go try to run a big truck you can’t.

[34:52] Cool yeah we’ve we’ve been reporting on that on the ship again side and as a guy that has 200 trucks right now,
it’s a feels good that we have what we have,
that’s but that’s a podcast for Another Story Another Day so really appreciate you walking us through kind of the Tactical where we are right now I want to use our last kind of ten minutes here to to kind of go back up to 30,000 square feet and get out of,
kind of covid world and what we’re experiencing,
let’s talk about this this is probably a quick window so I think you have any perspective coming from Bigcommerce and then now being it shipbob shopify’s doing some things around fulfillment and whatnot.
I haven’t have to be honest have attracted a hundred percent my understanding is they may have one or two fulfillment centers and then kind of trying to Overlay something on top of stuff,
do you see a day where they’ll get more involved in either the Fulfillment center side or even last mile delivery.

[35:51] I mean they are involved in the Fulfillment center side,
Last Mile I’m not the right person to ask there I mean that’s like a whole nother Beast I mean Amazon’s been a logistics company forever and you know they started getting into Last Mile just a couple of years ago.
And so you know my guess is they’ll continue to try to understand the Fulfillment center side better and you know as they learn that more you know maybe continue to expand I think that they’re their CEO and,
leadership team definitely think a long-term so you know who knows what they’ll eventually roll out.

[36:27] It’s hard to be a you know high-margin software company and then say to Wall Street we’re going to open.
80 fulfillment centers it’s just it’s just a if you started fulfillment centers then that’s one thing and you kind of go from low margin high margin it’s very hard to go from high margin to the merchant,
companies have done it but this is a reason you haven’t seen Google or Ebay take that plunge as they’ve,
they’ve kind of got their business model pretty baked and it’s hard to mix in a lower margin asset heavy type thing into a asset light model so it’s gonna be interesting to see if they ultimately do that or not.

[37:04] Yeah I mean Google launched the perfect business model with insane margins so it’s tough for them to change that Amazon on the other hand you know going from Shipping books to AWS it’s a nice story to tell.

[37:17] To selling ads exactly.

[37:19] Yes to selling ads.

[37:21] Turns out the Google business model is better for everyone so I’m curious.
In the past there are a bunch of sellers that may be primarily relied on Amazon for demand
and so they primarily used Amazon for fulfillment and you alluded to you know in our current craziness even Amazon is having to make hard decisions about,
fulfillment priorities it seems like more than than there has been in recent times,
there’s a smart argument to having a diversification of your supply chain in your shipping options are you seeing a lot of new people come into your echo system and want to add you to their mix because they were,
single sourced on FBA and now realize that’s not the best place to.

[38:05] We definitely are and I think it’s also I think that’s going to take honestly several years to fully play out or longer because somebody who makes a you know,
who runs their business on Amazon versus somebody who you know runs their business on their own site or on their own site and then a Marketplace like Amazon is complimentary
it’s just a very different business and it’s different skills that you have to learn over time and so you know we are a complement to Amazon we are partnered with Amazon.

[38:37] Um but I think that some of the things that have happened this year such as Amazon limiting,
what you can what they will receive multiple times,
Amazon limiting what you can ship out a friend of mine he’s a 10 million dollar plus a year seller on Amazon he’s been selling on Amazon for well over a decade he was getting told.

[39:05] Fuse getting told that they can’t ship certain items of his this is like early covid,
they could ship like let’s just say widget a the black widget,
they could ship that but widget would it be which was just like the white color they couldn’t ship that out and you know it’s just like there was there was no Rhyme or Reason there was nobody to talk to on the other end it was just,
this is the law and so we’ve just seen that play out a few times again from the types of inventory that you can receive they’ve been Turning Away product,
at their fulfillment centers and then you know brands are just left scrambling with no idea what to do that supply chain experts and even,
you know they’ve always increase their warehousing cost during Q4 but just seeing these the surcharges and their rules and because they’re running such a massive supply chain and a massive organization
they have to make these changes and I know they’ve been hiring like crazy to not have to make things too difficult.
But just when they when they make a change that’s the rule and there’s you know there’s there’s no gray area there’s no wiggle room.

[40:10] Yet it’s a it’s interesting you say Amazon’s a partner I think a lot of people that aren’t as in the weeds as we are the three of us that kind of scratch their heads because.
You know they have this mental image of this kind of hierarchy of things and it’s actually more of kind of this overlapping graph right so,
so for example what I imagine you’re saying is if I’m a merchant and I have my product at shipbob you guys probably are able to have that
marked as prime using the program they’ve changed the name of this like a thousand times I call it Merchant fulfilled Prime sometimes they call it seller fulfilled Prime whichever one you want to call it,
is that you guys are you guys is that something that is part of what you do.

[40:51] So we do fulfillment by merchants or fbm.

[40:54] That’s the new name.

[40:56] Yeah how they’re going to.
It’s going to be interesting to see how Amazon takes seller fulfilled Prime over time because you know they’ve been somewhat opaque with this but you know reading between the lines I wouldn’t be surprised if that changes considerably in 2021.

[41:15] Yeah because it’s hard for everyone to live up to the prime promise right so what they’re doing is they’re kind of trying to extend the rings of the Prime promise and you guys can live up to that because you’re at a big scale,
which is a 12 or 14 fulfillment centers if I’m Joe Schmo and my garage is my fulfillment center,
it’s increasingly hard for me to live up to that Prime promise there’s this balance between flexibility out on the edge of the network but then living up to the prime promise.

[41:42] Exactly,
enemy and that’s what they’re known for Amazon Amazon Prime and you know they did an amazing job two day shipping is you know they’ve made a thing and then they were really pushing towards one day the beginning of the year.

[41:58] And in this fbm program that’s the one that set up for more like 3pls to offer prime prime eligible products has at Zara.

[42:08] Prime or non Prime but yes.

[42:09] Yeah okay so primer no problem so the user you can then your customer can say all right I want these skus to be marked as Prime within even going down to the Zone kind of thing but these I don’t really want to be prime is that how it works.

[42:24] Yeah that’s that’s a good summary right there.

[42:27] And then last question so so one Theory I have is Amazon’s kind of shown,
that you can go build a last mile delivery Network right and you know so what is it like 3 years old two and a half years old,
doesn’t feel like it’s that old to me so with their DSP program they’ve really scaled up this this very quickly do see is that something you guys would be interested in or do you see other people building a,
DSP like last mile delivery because that.
The one thing ship again has taught me is there there’s way more things that want to get to Consumers than there are trucks on the road right now.

[43:04] We currently don’t have plans to get into Last Mile again you know we’re thinking long-term as well and so,
things could change over time that’s not on the shipbob roadmap for 2021,
I don’t see that on the road map for 2022 but you know who knows for us it’s really like.
How do we democratize fulfillment for brands of all sizes and so you know going deeper into what we can ship to new fulfillment centers to kidding to be to be more International our app store.
But yeah last Mile and actually running like a carrier service that’s you know it’s quite a bit of a different business.

[43:48] Yeah one
One Stop Gap in there is we also over on the side we’ve developed you know all these interesting three-sided Marketplace has largely for delivering food or people
but those can also be used for delivering products so we’ve seen instacart for example known for groceries now working with I think it was Jason fact check me was at Sephora or Ulta one of those and a bunch of other.

[44:09] Sephora for sure but actually dozens of retailers they’re doing Last Mile for now.

[44:13] Yeah and you could you can see I’ve heard Uber and Lyft talk about this I was watching the door – IPO thing and they talked about you know they were pretty plainly saying food is just one of many if we can get ice cream to you we can get you anything,
do you see a world where maybe those guys slot in and they could be this last mile delivery Network.

[44:32] Hey could I think they need to figure out like the sortation or Distribution Center side of the business because let’s take you know those into the companies you mentioned or like uber.
A company like us we want to you know fill up an entire truck.
And then send the truck off and then have them you know back in another truck,
we don’t want a bunch of sedans coming in and picking up five boxes.
So it’s going to be a shame to see how they navigate that because I think that there’s a lot of opportunity there
but again they need to figure out how they are sorting these packages and tracking these packages
and then also doing it in a cost-effective manner as well because sometimes you know they’ll try to enter the market because on paper looks great,
and it works in their Excel models but then when they roll it out there’s just it can be a logistical nightmare at times and then also Blake its it can be cost prohibitive to them because it’s
it’s involving people and people are expensive and there’s a lot of room for error and then what they want to charge maybe a company like shipbob is.
Much more expensive.
Then what we can pay the regular carriers and it’s not necessarily even more effective or faster and so if it’s not faster and cheaper I’m yeah it’s not faster and cheaper than you know why would we evaluate it.

[45:53] That makes total sense Casey and that’s probably going to be a good place to leave it because
it has happened again we’ve used up all our allotted time for today’s show I really appreciate you taking time out early in the morning on what I know is a super busy day for you but if you like
Scot and I and our listeners benefited greatly from the chat so as usual if folks have any questions or comments feel free to hit us up on Twitter or Facebook page,
as always if you enjoyed the show we’d love it if you jump on iTunes and give us that five star review.

[46:26] Thanks Casey if folks want to find obviously we’ve talked about the carrier’s. Shipbob but do you pontificate out on the interwebs and if so where should folks go to read your pontiff occations.

[46:37] If you have any questions for me you can always hit me up see Armstrong at shipbob calm I’m on Twitter as well Casey a and like Jason and Scott mentioned go give them a five-star.

[46:49] Awesome really appreciate that and until next time happy Commerceing!

Dec 2, 2020

EP248 - Cyber 5 with Salesforce's Rob Garf 

Rob Garf (@retailrobgarf) the VP of Strategy and Insights, Retail and Consumer goods at Salesforce. Rob also earned a 10/10 from @ratemyskyperoom which makes me extremely jealous.

Cyber Week online sales unfolded in the pattern we expected after the first three quarters of the year. Digital sales surged an unprecedented 71% in Q2 globally and significantly grew 55% in Q3 globally. We forecast 30% growth for the entire holiday season, November 1 – December 26. For the largest two digital days of the season, specifically, Black Friday came in right on target with 30% growth and Cyber Monday grew at a lower rate of 18% year-over-year (YoY) globally.

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 248 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 248 being recorded on Tuesday December 20
twenty that’s December 1st I can’t believe it’s already December I’m your host Jason retailgeek Goldberg and as usual I’m here with your clothes Scot Wingo.

[0:42] Hey Jason and welcome back Jason Scott’s show listeners.
It’s the day after Cyber Monday Jason’s on his 10th venti latte so he’s a little jumpy he’s a little excited this is a big day for him this is where he really,
really earns this keep over at big company he works for earns every letter of that title that he has there.
Jason it is after Cyber Monday and we are here to help listeners dig into what happened with the Cyber five turkey five or it seems like the Hipster thing this year is be fcm not sure what that stands for but that’s what everyone is saying.
Join us on the show and walk us through what they saw and their data is Rob Garth he is the VP of strategy and insights of retail and consumer goods at a little software company called

[1:31] Hey Scott hey Jason such a pleasure to be here happy I guess cyber we khash sorta kinda happy holidays anyways.

[1:38] Happy giving Tuesday.

[1:40] There you go good call.

[1:44] Scot always has to take the high road doesn’t he.

[1:47] I know he’s so good he’s so good.

[1:48] It’s awesome to have you on the show Rob part of me I’m debating whether we should pretend that we haven’t been talking all day all ready or not.

[1:56] Yeah I don’t know how do you want to play that off but it’s good to talk to you as always and I still what we’re going to talk about today I wonder.

[2:04] Yeah I don’t know there’s anything going on in the industry but before we jump into it one of the things we always like to do on the show is give listeners a little bit of background about our guests so can you give us the
the recap about how you got into the digital Commerce Basin and what you do at Salesforce.

[2:21] Yeah sure absolutely it again,
thank you so much such a privilege to be on your show and certainly during this crazy time of the holidays to be able to share some data share some stories and get all of our,
perspective so as you mentioned I head up our strategy and insights team for retail and consumer goods I came to Salesforce by way of the,
demandware acquisition which is coming up on about five years but been in around retail for gosh quite some,
time including practitioner back in the day leading
e-commerce for Lids I then moved to the analyst world where LED retail for am our research which got acquired by Gartner and then prior to joining demandware I led retail strategy yet
IBM so kind of sat on,
all sides of the table and it’s kind of fun in my role now I kind of put all the hats on that I’ve learned throughout the 20 25 years and,
certainly I can get into that when it’s appropriate but I have one of the coolest jobs just behind Jason in the industry.

[3:31] I dispute that last point but I feel like you’ve forgotten your most important qualification you are also holder of a 10 out of 10 score on rate my room.

[3:43] Yeah you know that’s right and I take that with a lot of gratitude and humility because you know what – was struggling as a lot of us have been,
for last eight months to get the perfect rig and,
the perfect background and certainly outdone by the way by my 14 year old but I try to at least keep Pace as best as I can and pretty sight to not only get rated but did pretty darn well as well.

[4:12] Yeah congrats on that that’s that’s awesome the let’s dig into the data maybe we’ll start it kind of the days so this all kicks off with Thanksgiving and culminates and Cyber Monday what,
what did you guys see either absolute value wise or growth wise through the five days and how did that match up to kind of what you were thinking what happened.

[4:30] Yeah absolutely it’s probably worth setting the context about how we get the data because I think that’s an important way to substantiate what I’m going to talk about I’ll still make a lot of stuff up don’t get me wrong no took.
Can blind that’s Jason’s line I’m sorry I stole that from me.

[4:46] He was supposed to ask you that and he dropped the ball so he’s yeah he’s a hot mess over there.

[4:52] There you go but no but seriously so as I mention really cool job in terms of my team’s Charter for staying out in the industry and understanding where,
the market is going and we do that Based on data and much of that data actually comes from the Commerce cloud,
platform because we’re in the cloud.
We are able to aggregate all the data that’s flowing through the Platforms in which we manage across,
the world and we bubble that up.
We obviously strip out all the personally identifiable information but that that aggregate becomes the de facto standard of,
happening in retail it’s the amount of billions and billions of Shoppers every tap every swipe,
every click and we get to report on that based on same site sale so we look at it the same way that any retailer would look at,
their business and so we do this all through the year with our shopping index but of course it gets a lot of attention,
during the holiday so that’s that’s my long Preamble Scott to answer your question around what did we see,
over over side or 5 or actually we look at it slightly different so I’ll give you the growth which will be.

[6:14] Somewhat the same if you will apples-to-apples to the Cyber pie but we look at Cyber week so it’s the Tuesday before Thanksgiving all the way through Cyber Monday and what we saw was a really.
Healthy cyber week despite an earlier and earlier holiday season so globally we saw a 36 percent year-over-year growth in the US we saw,
a 29 percent year-over-year growth that’s actually pretty much in line with what we project for the entire,
holiday which people say gosh that seems or some people anyways my without any contacts say mmm,
you know given that we saw 55 percent year-over-year growth in Q3 and we saw 71 percent year-over-year growth in Q2,
that seems like it’s faded off or soften but that’s not that’s not the case I mean,
we were dealing with a really large Baseline and we’re dealing with growth that certainly we haven’t seen during the holidays since gosh.
You know for a long time let’s put it that way.

[7:28] Yeah I think it’s I don’t track the in the international side Internationals a big category but I’m most familiar with the Amazon data but they’ve shown International growing much less than the US what do you think is causing.
That kind of flipping your data.

[7:43] Yeah well it’s primarily due to two things one is.
We’re dealing with you no more than 40 countries across you know 10 or so different categories the way,
slice it so there are emerging countries in there that are still catching on I mean my conversations when it’s not dealing with how do we move from Scrappy to scale them it’s this pandemic
is around digital transformation and some are still believe it or not around the world questioning whether it is important to
go online and lean into that business so part of it is the emerging countries or at least the countries that,
are at a slower or lower base than the US the second piece is we actually you know.
Around the world have a lot of retailers in categories that haven’t been as aggressive online particularly you know the essential categories like gross.
Change rug that sort of thing and so we’re seeing growth globally in those types of segments as well.

[8:56] Frankel did how to so you kind of think it met your expectations basically that’s kind of in line with what you guys were thinking.

[9:03] Yeah so it did in cyber week we did see a softening in Cyber Monday we saw in the globally 18% year-over-year growth and in the u.s. 10%,
but I guess maybe I shouldn’t be or we shouldn’t be as surprised because.
The broader context of the holiday and I referenced it a little bit ago was we saw a pulling forward of demand that Smooths out sales not just earlier in the week.
But also earlier in the season you know our data shows based on our shopping index that for those retailers not named Amazon they saw a 66%.
Year-over-year growth on Prime day so those are a couple of sleepy die not so sleepy as the summer but certainly days in October that you wouldn’t see that search however there was,
halo effect and you know to accentuate that point.

[10:08] The week before cyber weeks or not last week but the week prior as a total we saw in Eighty percent year-over-year growth.
Highlighted by that Friday which saw a 95%.
Year of your growth so retailers have been trying to drum up Demand right since the beginning of October for various reasons.
And it’s working so we saw that manifest itself don’t get me wrong I mean Black Friday Cyber Monday are still.

[10:44] Along with Thanksgiving so let’s say those three are the three biggest.
Days for online but there’s certainly been a smoothing out which impacted Cyber Monday.

[10:56] Interesting and if I kind of parsing the tweets between you and your team I think if I look at it if I look at Black Friday in the US you guys are calling it as being bigger than Cyber Monday and that that’s going to be a first time that’s happened I would imagine right.

[11:10] That is a first-time good can look at you awesome I’m psyched that you’re tracking it that closely you’re exactly right so it’s the first time in the US but the fourth year in a row,
globally so there’s definitely a leveling off and you know we for this year in particular chalked it up to,
the slowing down the ratcheting back of traffic what did you say Jason earlier today around 50%.
Off of physical store traffic this year.

[11:44] Yeah yeah both Shopper track that tracks in you know foot falls in retail stores.
In Verizon that secretly spies on all the Verizon customers including Scott I.
With geolocation Services reported that they saw like about fifty percent of the traffic they saw last year in retail stores.

[12:05] Yeah so that’s certainly.
Contributed to the growth in the u.s. right I mean people aren’t lining up around the door for necessarily doorbusters,
this year and so people turned,
digital and that certainly played out over Black Friday just so you have the numbers globally we saw a 30% increase in the US we saw 23% this is Black Friday
and that equated to for Global twelve point eight billion of online sales and for the I’m sorry.
For Global it was 62.8 excuse me and for us it was 12.8.

[12:50] Wow one of the things that always surprises me is the Black Friday and Cyber Monday are a thing,
internationally you I given that they’re they’re sort of originally tied to a u.s. Centric holiday I feel like Amazon and others have done a really good job of exporting that.

[13:08] They have,
they have it’s starting to really condition the consumers you know it’s something we look at really closely I’ve been calling it discount chicken for quite some time even going back to my
analyst days the idea that retailers have a steady drumbeat try to lure the consumers to buy earlier in the season but,
you know we all have patience and we’re all conditioned to waiting for those deeper discounts on Black Friday,
or Cyber Monday,
and that has really conditioned particularly European consumers to wait and retailers have played into that so the dynamic.
Has been translating certainly internationally for quite some time.

[13:57] Yeah I fear that the promotion chicken is evolving into the boy who cried wolf because.
Uniquely this year we had some very systemic reasons that we would generally did want customers to buy early like most years we say we want customers to buy early because we’re trying to steal the sales from each other,
but / your point the discounts are going to keep getting deeper and deeper until we get to Cyber Monday.
This year we were desperately trying to avoid a spike on Cyber Monday because we’re worried about shipping capacity and inventory levels and things like that so we would generally are telling all the customers
hey this year you really should start your shopping early and put your point there was no reason consumers should believe us because we say that every year.

[14:44] Right right right you know you got to think well first of all you know Prime day because that to be marked the official start of.
The Holiday Inn created a buzz created this halo effect,
but also you know the pandemic right there are three key reasons why consumers were actually compelled unlike any time ever before to actually complete the purchase many would browse right like we see traffic,
increased significantly as we March through the first second and third week of November but the buy button really took hold.
During cyber week but what happened as I mentioned really three things converging right first of all.

[15:25] Consumers were feeling the strain of shipping issues in the spring and so they sensed there.
Will be an issue,
second they were worried about product availability I know about you but I was really psyched to get I guess Scott you’re not as worried about a North Carolina but Jason for you some patio heaters,
just at the end of the summer because none of them are available now and the third you know people are looking out for their health and safety so it took a pen down attic for consumers to actually.
Purchase early because you’re right Jason consumers are smart consumers are patient consumers recognize it is a bit of the boy who cried wolf and.
You know.
Retailers were kind of playing into that fear as well we saw for the month of November of the top retailers in the state 61 percent.

[16:21] I sent an email out that use the word shipping and had some sort of verbiage around delays or Byerly
and over cyber week we saw Justin that week 25% of the top retailers made it a key message in their email.

[16:40] Wow so my hypothesis is the Retailer’s talking about it alone would not have been enough to pull sales in but I my hypothesis is the reason sales got partly pulled in is because,
the media talked about it so much and I don’t know if this is well-known or not but you know Scott coin this phrase,
ship again and and the Today Show turns out to be huge Scot Wingo Fanboys so they were talking about it every morning on the show and I wonder if if that.
Those media messages reinforcing the retailer messages landed a little bit with consumers but.
A question I’d be curious about if you have an opinion.
So we have this unusual shape to the holiday this year right Prime day happens in October retailers are promoting earlier the media’s warning customer consumers that they should be shopping early,
and so all that seems to have worked,
we sold more digitally earlier in the holiday than we normally do and while we grew on the on the big Marquee days like the the rate of increase,
slow down so what happens next year right.
Does the shape go back to the traditional shape is that like permanent change a semi-permanent change do you have any if you had any bandwidth to think about what next year looks like.

[18:03] Yeah it’s a great question and it’s a question we’re getting a lot from our,
retail customers it’s like how do you predict the unpredictable you know,
what we’re going to see as we’re looking for it and we’re still crunching numbers and seeing how the holiday plays out you know the first thing to keep in mind is the pandemic,
didn’t really take hold and there wasn’t the Declaration of a pandemic by The Who until the second week of March so you know we’re going to anticipate January and February 1 year anniversary ring.
Online sales to still see that that’s like right it’s just math it’s going to work that way but you know what we see.
Every holiday and I know you can’t equate the pandemic to the holiday is.

[18:56] Q4 particularly November December huge spike in traffic huge spike in sales and it creates a whole new Baseline for digital shopping and it doesn’t.
when you get into January February and March to pre-holiday levels and so we don’t anticipate that when we get into March April and May,
of this year even with you know stores presumably fully being back.
Online and so are they going to grow at the 71% we saw in Q2 and the 55% we saw in Q3 likely know,
actually no but let me be declaring about that but we are going to continue to see
Healthy Growth and you know I see it coming from at least two different areas and Scott and Jason I’d be interested in your perspective on this one is.
Net new digital Shoppers right because that helped the growth over cyber week over cyber week we saw,
a 22 percent growth in unique Shoppers that came off of,
a growth of forty percent in q1 and Q2 so for the first half of the year
we saw a 40% increase in unique Shopper so these are people like my mother-in-law who would never buy groceries online because she’d want to go into the store touch the produce make sure it’s fresh.

[20:22] But because of her pre-existing long can it she’s not going back into the store just going to do it from the health and safety.
Or at least comfort and safety of her of her home right and so that’s not snapping back and that’s going to contribute,
to growth going into next year the second,
area is there’s a whole new set of categories that people wouldn’t have ordinarily bottom line and candidly retailers in those categories weren’t investing heavily in selling online grocery is a great example,
and you know this Jason we’ve talked about this a lot you know we saw it was.
Black Friday just to throw one day in one data point we saw a hundred and twelve percent increase year-over-year
of online sales for food and beverage I mean it didn’t even show up on the chart last year right and so it’s growing and that’s not going to go back and that’s not just gifting you know that’s not just
chocolates or fruit baskets these are,
you know the Staples that we ordinarily would go into the store but are not so I know that doesn’t give you a number and I know I’ve been asked for that a lot and we’re looking through it but overall from a macro perspective,
set a new Baseline knock and a snapback it’s still going to be aggressive throughout the next year.

[21:45] It’s great to hear that data on the unique Shoppers I think that definitely bodes well for the future of digital sets exciting.
There’s a there’s something I call zero friction addiction that until you have one of these zero friction experiences you don’t realize how addictive it is and then,
that going back just feels like you went back you know way way further than you actually really went forward if that makes sense.

[22:05] Yeah wait was that zero addiction friction.

[22:09] Zero friction zero friction addiction.

[22:11] Perfect okay I’m stealing that you better.

[22:14] It’s a ZF a rub if you need to reinforce it it’ll be all over the Today show tomorrow.

[22:19] Apparently yes Hoda already texted it I see it coming through right now.

[22:24] Oh hold on,
she was over for Thanksgiving anyway the it’s like Jason the first time he had the Starbucks mobile experience it was such a game changer for it now if it’s ever down a just
which is a total fit and starts throwing then tea mugs against the wall and he’s like I need my mobile app.

[22:40] Yeah well we should look at his Pantry I have you know I’m not a betting person but I’m guessing he has a stockpile.

[22:47] Let’s dig into some of the categories you saw were there any categories that stuck out is
winners we wouldn’t expect obviously you know we’re the pandemics kind of creeping up on us again and you probably seen some Essentials there but any interesting categories that were either
leaders are laggards.

[23:06] Yeah absolutely and by the way I’ll put a pitch for my colleague who’s the Mastermind behind much of this data Kayla Schwartz you can look up on Twitter she just posted a really cool.
Depiction of this so you can see what it looks like but as I mentioned food and beverage certainly.
And then you know outdoor I would say anything that dealt with health and fun is really the themes that we saw right so outdoor fared really well.
And health and beauty did pretty well also and you know that’s a little counterintuitive people are thinking oh people aren’t going out.
To business occasions or dinner or whatever else but you know where.
The blending of personal and professional lives come together at home and we’re working digitally people want to look half decent,
on their resumes and certainly are making purchases for themselves and Gifts in that category as well.

[24:13] Awesome Rob another.
Segment I guess that’s super interesting to me is mobile so I as you know talk a lot about the mobile Gap and you know Jen this General premise that,

Marker 01

[24:25] increasingly Shoppers are using mobile devices but the conversion rate on mobile devices is lower,
I’m curious if you guys looked at the mobile Gap around holiday and like did we continue to see mobile growing as a share of total traffic and his conversion getting any better.

[24:43] Yeah great question and it was interesting by the way for Thanksgiving.
First of all traffic was down overall quite a bit sales were,
reasonable for sure a little softer than we would have expected but,
actually desktop was quite a winner for traffic and for sales because,
people were looking to that form factor and likely not you know at their on some calls or parents house so they had the access
to their own computer but that was a little bit
of anomaly as we looked at across cyber week so what we found is that over cyber week again the way we look at as Tuesday through Cyber Monday
mobile comprised 71 percent of traffic and 55.
Percent of orders and when you look at desktop we saw 26 percent of traffic and 41,
percent of orders so mobile is holding certainly steady even increasing as a relates to traffic but you know the Stallworth of,
desktop is you know still still healthy again at 41 percent so it’s.

[26:09] Pretty interesting to see certainly as an industry we’ve gotten much better at here we go Scott ready
breaking down that friction so we get the zero friction Addiction on the mobile device I mean really,
we’re it was or has been a really clunky experience right to order stuff online for quite some time but it’s getting easier it’s getting easier because of artificial intelligence and retailers serving up,
the right products above the fall and it’s getting easier certainly because of the Advanced Mobile payment options,
for sure as well so that’s that’s contributing to it as well but what I will say on the conversion side I mean we’re still seeing essentially double,
the effectiveness of conversion meeting on desktop meeting desktop is converting at a two times higher rate than mobile so we still have a way to go.

[27:11] Wrinkle excellent use of zero friction addiction I appreciate that.
Um the the next one is going to be returned again so we’ll talk about that December 26th.
The you guys have any insights into how promotional things were our retailers having to give away the farm to get this growth or they keeping pretty good on on the margins.

[27:34] Yeah you know it’s interesting this was something we track and we have tracked year after year and this year we just saw a steady.
Drum beat it progressively increase the route cyber week but nothing nothing material.
You know and I credit that to and Jason you and I have talked about this before
we typically see an over reaction on Cyber Monday where that has the deepest discounts of not only the weak but of the season,
but we didn’t see that this or not at least dramatically this holiday and part of it was,
retailers were trying to preserve some margin as you reference Scott part of it was retailers saw a really healthy demand and.
Therefore were regulating product availability and didn’t feel as much pressure,
as they have in the past so you don’t get me wrong we’re seeing discount rates at the high 20s on average.
Throughout the year you know holiday season by it wasn’t as dramatic as we’ve seen in the run-up to Cyber Monday as we’ve seen in past years.

[28:57] What I will say though actually if I could add one thing quickly is the vehicle people are using.
For promotions is Shifting right so we saw a healthy.
Increase of email throughout cyber week but we saw Triple digit growth.
In SMS and push notifications which of course is a combination of promotion and then hopefully providing some transparency around,
product availability and shipping status and the other point I’ll make and then I’ll be quiet I promise is that.
Retailers are leaning into what we’re calling the edge or where consumers are shopping on the edge in these third party platforms like social messaging live-streaming even gaming.
And so seeing deals pushed through that means and.
In some cases even exclusive deals trying to create this exclusivity this scarcity trying to drum up demand where consumers are getting inspiration and hanging out with their friends and family.

[30:13] Ya Rabbi like are you guys seeing an actual uptick in the data in terms of like traffic coming from those those activities this year.

[30:23] We are we are seeing an uptick it’s not dramatic or at least dramatic as I would have expected or we’ve seen other parts but traffic and.
Orders around 10% are coming from social and it’s you know material but not.
Significant growth year over year but it’s something that you know I’m talking to retailers about a lot and really advising them not to sleep on it.
And again it’s really two angles here one is thinking about how to use these what I consider to be the next shopping malls where.
Inspiration happens and therefore monetization happens to really push people to their websites but also think about how they can push their brands to these properties so we’re not next year talking as much,
or at least next year talking equally as much about the traffic that’s being generated as.
The orders that are happening actually embedded on these third-party you know what essentially are emerging Commerce platforms.

[31:41] Yeah that’s super interesting because I would remind people like traditional Commerce experiences and you know e-commerce sites.
Really excel at that zero friction addiction right like making it easy to get stuff but where we’ve been struggling is in the whole product Discovery experiences and so.
You know that if live streaming and these you know newest generation of social commerce experiences,
you know if they really catch on there they’re sort of the the digital version of this product Discovery and,
you wouldn’t necessarily expect that to be dominant over holiday right like holiday people tend to know what they’re looking for and and they’re focused on the acquisition so it really the other times of the year when you might expect to see more heavy use of those Discovery tools.

[32:32] That’s a really good point right in the holiday time frame where a bit more surgical in terms of the gift-giving given a list we have in the people we have two by four so that certainly can contribute to that because we have seen sizable growth other times of the year.

[32:47] Yeah well wasn’t robbed that’s fascinating and that’s actually going to be a great place to leave it because we have once again slightly exceeded our allotted time for this special friction-free addiction.
Episode of the show.

[33:02] We appreciate you taking time out of your busy schedule if folks want to track your you and your team’s pontification zon on these topics where should they go.

[33:13] Yeah certainly so we spun out a holiday insights Hub so I encourage the listeners to search for that it is a real-time tracking of
holiday insights and it’s built by the way on Tableau so it’s,
very visual very intuitive during the other times a year I encourage you to check out our shopping index on, and then of course feel free to follow me always
tweeting the latest at retail Rob Garf sharing our insights our data and for what it’s worth my perspective.

[33:55] Awesome Rob I will put a link to the the holiday Hub in the show notes because it’s obviously the home screen for both Scott and I and until next time happy commencing!

Dec 2, 2020

EP247 - Cyber 5 with Adobe

Vivek Pandya is the  Senior Digital Insights Manager at Adobe.

Data from Adobe, which uses Adobe Analytics to analyze one trillion visits and 100 million SKUs from 80 of the 100 largest retailers in the U.S., found that consumers spent a whopping $34.4 billion during this year’s Cyber Week, which represents a 20.7 percent year-over-year (YoY) increase. Unsurprisingly, Thanksgiving, Black Friday and Cyber Monday represented the bulk of total spend over the five-day period.

Adobe Holiday Portal

Blog Post for Cyber Five

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 247 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 247 being recorded on Tuesday December 1st 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot & Vivek:
[0:40] Hey Jason and welcome back Jason Scott show listeners well this is itsgotime this is the most exciting time of the year for everyone in retail e-commerce digital retail payments Commerce whatever we call this.
We’re sitting here it’s Tuesday after Cyber Monday and as usual Jason and I are going to dig into what happened over the Cyber five.
Turkey 5 or the newest name I saw this year was BF CM which I think stands for Black Friday Cyber Monday.
To walk us through some data we are really excited to welcome to the show the vet pandya pandya he is from Adobe where he is the senior digital insights manager the VAC welcome to the show.
Thanks very much for having me.

[1:24] We are thrilled to have you the veck we’re excited to jump into adobe’s Data but before we do can we always like to get a brief.
Sort of a snapshot of our guests background can you give us a little bit of insight into how you came to Adobe and what you do for Adobe.

Scot & Vivek:
[1:43] Sure sure so I’m its.
Try to give you the Abridged version for sure I kind of started in this sort of online space in a sort of digital marketing capacity and I worked with startups and technology companies
especially to kind of manage their campaigns and drive
try momentum there and I think working in Tech sometimes it’s like it’s it’s time dilation I think working in Tech because you then find yourself wanting to kind of explore other Industries because you’re very
fixated on tech companies and then so I found myself all of a sudden working for Gallo in working in the wine space and it was great to be in the sort of cpg industry and it also allowed me to kind of,
move out to California and so that that was absolutely
incredible and then I’ve always been someone who’s kind of drifted from this sort of digital marketing space to more into the data science world because you kind of go from generating
demand and leads and things like that to try to understand how you can Target and ensure that you’re getting the most qualified.

[2:59] Audiences to do what the organization needs to have happened so
then when I got more into this data space I found myself really enjoying visualizing data providing insights and
that’s what brought me to Adobe with Adobe Digital insights we’re very focused on providing
insights that can kind of size out the holiday season like we’ll be talking about and and provide insights across a lot of different topics so that’s essentially how made it to Adobe and how I’m working in this space.

[3:30] Awesome we’re glad you did and then as a reminder for our listeners about the Adobe data set you you are one of the Premier analytics packages that’s used by eCommerce sites
and you get to aggregate all the data from all the clients that use that analytics package and summarize that is that do I have that right.

Scot & Vivek:
[3:52] That’s exactly right so yeah we have.
80 of the top hundred online us retailers we have a trillion visit a hundreds and millions of products use so when you bring that all together you’re able to get some really interesting cool,
aggregate insights about the data history and how it’s changing.

[4:13] Cool it’s lesser start at the top maybe take us through what you guys saw over the last five days.

[4:20] So what we saw was in some ways what we were expecting and in other ways it kind of very but we essentially saw about a hundred six billion dollars drive-through from,
season today essentially from November
to where we are you know just post Cyber Monday and I know you guys have been following this in terms of how these Trends this early pricing how all that would kind of come into play and for us that was also.
Very important to size out and understand the trends and also the election was also something that happened in case you forgot and so that was that was an area that we were curious to see how that would
sort of interact with retail spending.
And so as we got closer into Thanksgiving week we saw about thirty four billion dollars kind of get realized over,
both Thanksgiving Black Friday Cyber Monday and some of the days in between so we were able to kind of chart and see some of the early spending,
that was kind of being kicked up a post-election and then we saw a lot of early surging before we got into Thanksgiving week and then we saw these these largely dominant days continue to stay dominant.
And you know we had.
Ten point eight billion dollars come yesterday on Cyber Monday so it’s been very interesting for us to see what things sort of panned out and which ones deviated for what we expected.

[5:50] Yeah and if we kind of look at your over your Trends if you look at that kind of I don’t know when you start but let’s say November first just to before Thanksgiving.
Um maybe maybe we looked at how that grew versus last year and then look at Thanksgiving through Cyber Monday what what did that look like from a year of your shorts.
So looking at you know we we had a sort of prediction of 33% for the season.
We that sort of initial prediction with how the week is gone with,
we’ve adjusted it a little bit to 30% but when we look at how this this particular period grew from November 1st to start on Monday that was right around 27% 27.7 so that’s that’s again.
Large chunk of growth coming in into the earlier month but we still anticipate some growth that gets us to our prediction for the entire season.
Yeah it seems like you guys in a lot of other data providers kind of agree that Cyber Monday was was a little bit of a,
I guess I’ll let down in that it grew significantly slower than that kind of Benchmark 30% is that you guys saw.

[7:01] It’s interesting because like the the momentum of Cyber Monday and it,
being the biggest day of the year is notable and it can’t be lost on us that it was able to still surge at ten point eight billion dollars but we when we look at
Cyber Monday Thanksgiving and even Black Friday.
What we what we see is them coming down into the sort of lower range of our estimates and we tribute a bit of that to some of the early surging that happened.
The weekend before Thanksgiving week because I know
with early discounts there was a lot of question like how will things look pretty level all throughout all the weeks and and we’ll Cyber Monday and Black Friday or they just not a thing.

[7:48] And what we saw was about 5 to 10% discounts coming into the month and that was enough to
drive a little bit of interest in purchasing but there was still a bit of slower growth happening because of the election and,
and people waiting for an outcome in announcement from the election.
And then once it once we had that outcome it started kind of falling back in line with our predictions and then the weekend before Thanksgiving week we saw the discounts go from
five to ten percent to 22
25% so that sort of that sort of increase and then a little more room to get down to 20 to 30 percent happen once we got into the,
Black Friday and Cyber Monday the day so
you end up seeing this how the story emerge of how some of that volume got a bit more distributed across the rest of the days.

[8:41] Got it and I’m not sure if you’re aware but two very handsome podcasters came up with this ship again and phrase do you think,
and I know this hard in the data but have you seen anything that that lends that that is the thing or that that may be caused some of this earlier activity.
Yeah I’m familiar with the phrase for sure it’s a it’s one of those things where I know it was real concern it’s a real concern I think it continues to be a concern and you guys were right to kind of call out that the
potential impact as you were modeling it out but it’s it’s one of those things where,
different size retailers have experienced different surges coming into this period so I imagine that some of that early weekend spending before they got into Thanksgiving.
Wheat probably is what they had intended to sort of mitigate this volume and that’s probably helped them Bank in more days.
And kind of distribute it more and again we talked about clicking collects and backs an area that’s also helping.
Helping manage this shipping see potential situation and what we saw there with it being up 52 percent on Black Friday year-over-year.
All that is helping and combination I think to sort of manage that situation but I think it potentially has.

[10:00] Even more impact getting into December and potentially being more of an issue there when.
There’s just this desire I think with with everything that’s happening November it’s been pretty compressed.
There’s an understanding that this counts are going to continue so then the question is how much will things pick back up and
drive up to new levels of growth as we get closer to Christmas and that’s where I think it could continue to be an issue because I ultimately think that
but for now they’ve been somewhat successful in managing that the volumes and they’ve learnt a lot from the earlier months of the pandemic.
And so I would say that it’s not they’re not completely out of the woods yet in terms of it being a significant thing that they have to manage but I think having their discounts situated and driving them down further,
before we got even into Thanksgiving was the right move.

[10:59] Interesting so if you look at it on the whole obviously that these big five Marquis days kind of slightly underperformed or at least where the bottom end of the the forecast is your hypothesis.
There’s less demand than you thought and therefore it sounds like you did downgrade your forecast slightly or do you feel like.
Just some of those sales got pulled in earlier and therefore the kind of Peaks are are leveling out.

Scot & Vivek:
[11:31] You know I definitely think there was a decent amount level of front loading and pulling in some of these discounting ‘s
earlier because that’s where we start to see the sort of levels of surging we saw on Sunday that that kind of really took us by surprise and then it but then we really also had a sense that,
Black Friday Cyber Monday Thanksgiving these would continue to be big days because from we also you know have our own survey research that we were asking.
Consumers about these days and.
They very much feel that yes we know there are discounts happening throughout the season but we definitely feel that we’re going to get the best pricing and best deal
on Black Friday and Cyber Monday so that kept us very much conscious of the fact that those could still be pretty strong and they were so it’s all the say,
apart on the Retailer’s to drive and move some of that momentum earlier but also that sort of tug and pull of the consumers being like well we have a little bit of tradition and inertia,
and a perception of these days and we’re planning on spending on them too so that all got to manage during this period.

[12:45] Got it and then I imagine to some extent some of the deceleration on these biggest days has to also just be the law of large numbers right like it it it gets increasingly hard to grow as fast as the numbers get bigger and bigger.

Scot & Vivek:
[13:00] That’s right it’s where we’re coming off of these bigger bases and they are especially when there is this real concerted effort to
kind of manage and mitigate the volume that comes through those days you’re going to see a that that sort of
that drive to step to another level percentage-wise is going to be tougher,
and then with these tactics being employed it’s going to it’s going to dull some of these Peaks a little bit but again it’s still that the consumers are you know in the driver’s seat here and,
and on their schedule is when things are happening so it’s really going to its that’s really why we saw some these big days still continue to be super strong.

[13:43] Yep and just to put things in perspective a little bit if I’m going from memory so correct me if I have this wrong but Cyber Monday last year was about like nine point four billion right.

Scot & Vivek:
[13:53] That’s right yep 9.4.

[13:54] And so at that point that would have been the biggest single-day of e-commerce sales in the US ever and then this year
we surpass 9.4 on Friday so I Black Friday actually set the new record and then we surpassed it even further yesterday right so we two days this year surpassed any day in the entire history of e-commerce in the US.

Scot & Vivek:
[14:18] So Cybermen assignment one day definitely so we’re not Black Friday was close it just got it nine billion so it was just a bit under but it was it was it was pretty
pretty significant in terms of getting to that scale and becoming in that way the second largest day at that.
Yeah and if I if I’m reading the data right Black Friday increased about called 22% with rounding and Cyber Monday was 15 so.
If that keeps up the lines will cross eventually right it’s yeah it’s one of those one of those areas where it’s like it’s.
It’s that scale and those percentages that can kind of.
Mitigate and manage to move it to this overall season percentage that will aiming for.

[15:04] Interesting how about art let’s peel the onion a bit and go into categories any any categories over form the models any any kind of underperformers.
So with Black Friday we saw different categories surging so Electronics and appliances and toys and then when we

Marker 02

[15:27] went deeper we would see things like board games and video games things that
are keeping people occupied and then when we were coming into the week we saw groceries kind of reach early pandemic Global because
it was probably both stocking up again because the case is rising and then people trying to do Thanksgiving meals but try to see if they could avoid going to the grocery stores.

[15:50] Anderson how about,
I’ve noticed since weren’t categories the seems like the the top sellers are the new consoles but there’s not enough Supply out there so.
Does that show up in the data there’s that one of the things driving Electronics.
It’s definitely a type of high demand product that has these inflection periods and and they are continued,
they’re moving in waves in terms of supply and
too quick you know uptick in people purchasing them so that moves pretty quickly the more consistent
ones that stay up is the video games the accessories and just the larger category takes a boost as a result of these two major console releases happening within the course of a week.

[16:39] I imagine also one of the things that’s a challenge for me and looking at this year’s data is I think the food thing really complicates matters because.
Historically there was very little food e-commerce like not very much grocery was online and so obviously as a result of the pandemic tons of people learned how to shop for groceries online and.
Many of those people may have done their weekly grocery shop over the Cyber 5.
It wasn’t necessarily tied to any holiday spending but that was a baseline of digital spending that didn’t exist in previous years in does exist this year and then to be honest it’s exacerbated.
Because so many restaurants are closed grocery spending is at an all-time high because they have a higher percentage of calories are coming from grocery store so that feels like.
That’s that’s an extra little undercurrent pushing some of these numbers up this year.

Scot & Vivek:
[17:32] Yeah I would agree with that that that does you know that that does kind of add in a sort of additive level of it
and what I would say is that we saw that the grocery surges were happening a little more before Thanksgiving week so while the magnitude was pretty high then it’s sort of trended back down as we got into the major days so it’s,
it’s definitely a factor but it definitely got more limited as the week kind of War.

[18:00] Interesting,
and then let’s pivot to one of my favorite topics mobile so his one of the topics that we talk about a lot on the show is what I call the mobile Gap and it’s not specific to holiday but just this General premise that.
In increasingly high percentage of All Digital traffic is coming from mobile devices but in general the conversion rate on mobile devices is meaningfully less than it was on desktop devices and so you kind of have this Gap now
historically during holiday.
The conversion rate for mobile improved slightly and the percentage of traffic from mobile devices is even higher so with that background what did mobile look like for this holiday was there there any interesting Trends there.

Scot & Vivek:
[18:45] It really
lived up to our expectations because we had imagined about 37 to 40 percent of total e-commerce sales driving through smartphones.
And that’s exactly what happened when we saw about 41.1% drive-thru in in that period and
I would say it’s really kind of a testament to the retailers and what they’re trying to do in terms of frictionless payment and making
understanding that smartphones are the sort of dominant device even though people are in their home and you know you would imagine maybe laptop share would increase because
you know you can pull out your laptop and and really,
you know explore and have a larger navigation screen and things like that but it seems like the just a comfortability and the mobile first.
Kind of approach that consumers have taken really has soared through the year and continues to have an outsized impact when we look in the holiday season.
So pretty pretty staggering increase there for sure.

[19:53] Got it and it sounds like this mobile Gap I talk about still exists because you’re saying 41.1% of sales were mobile I’m assuming you’re going to tell me way more than half of all traffic was mobile.

Scot & Vivek:
[20:05] That’s right yes and what more visits I yeah and exactly some of these trends that you mentioning just these larger
order values for associated with laptops and desktops versus the small ones that I think those are just going to continue to incrementally we’re just going to have
have consumers just get more and more comfortable so they can continue to take up
versus just the sort of macro I’m ready to buy a massive you know High ticket item just quickly on the phone I think there’s a little more consideration there and some of those are still kind of being piped through on laptops.

[20:40] Interesting and then one thing that I’ve seen some conflicting data about I’d be curious if you have seen anything so traditionally there certain occasions that.
Increasingly be mobile right so the traffic you see the eCommerce sites on actual Thanksgiving on Thursday.
Tends to be disproportionately mobile and intuitively that makes sense right because people are at home with family and if they’re if they’re doing anything they’re jumping on their phone they’re not like excusing themselves from their guests and opening up a laptop.
But I’ve heard a hypothesis that this year because we’re all alone and we’re you know basically like the internet is our dominant form of entertainment that it actually.
Skewed things slightly more to desktop than we would ordinarily see and I’m curious if that if you guys see that Trend in the Adobe data set or.
Or have you can debunk that myth.

Scot & Vivek:
[21:37] Yeah I would say that we would we definitely saw that with Thanksgiving Day obviously experienced a lot of disruption in terms of this year and what what it could done but we still saw a strong level of volume and and mobile Commerce happening that that makes me think that
regardless of some of these Trends it’s just this bigger trend of.
People just being so comfortable with smartphones now that it’s not as as in
impervious or actually the opposite of impervious but it’s it’s not a it’s more resilient to some of these trends of we’re okay well now this is changed so now I’m going to go,
get a laptop or a desktop and get away from my phone I think we still saw a lot of momentum happening through smartphones on Thanksgiving day and it continued through Black Friday and Cyber Monday.

[22:30] Pickle the.
Do you guys have any so you mentioned that we kind of hit a promotional kind of peak around Black Friday and that got consumers really activated.
You guys track that in any kind of data oriented way that.
Another way of another thing I’m trying to get at is sometimes retailers will have a great sales Christmas but it will totally blow margin because to get the great sales Christmas they had to give away too much do you have any.
Any color on that.
I would say that for us you know we did we have this what we call our online pricing and decks that’s built into our larger digital economy initiative.
And so we’re tracking prices year-round we saw the big drops in apparel prices happen in in March and April and some of these things we can track in line with,
the CPI and at quite a frequent level of rapidity and then when we look at the holiday season prices,
we’re really tracking to see how much they’ll kind of stay down and again I mentioned this because we’ve been tracking them
all year round so we got to see what prices look like in October and I think there was this kind of rush to say okay.

[23:46] Prime days happening holiday season started right now and I would say that what we saw was certain retailers to draw you know saw a bit of a halo effect of.
Of prime Dade we saw prices come down within the range of five to ten percent but then they started to tick back up after we got out of the Prime day two days and then it kind of
against sort of slowly dropped.
And then as I mentioned on that Sunday coming into Thanksgiving week it just it took a much more significant drop and so,
when you think about it in those terms we imagine they’ll be
it’s sort of this weakening of the discounts kind of as the demand scales as we get closer to Christmas so it’s not to say oh it’s going to be this level of discounting.
All Season round so you know that the consumers have nothing to be concerned about in terms of pricing which is really important to them we essentially think that they were able this
kick into a different gear for discounts and it’ll start to scale up because ultimately they do want to preserve their margins and.
Long also providing good pricing and competitive options for consumers.

[25:03] Another topic that’s really interesting to me is the whole omni-channel aspect like we’ve talked a lot on the podcast about ship again and obviously and it seems it would seem to me one of the
the best ways to mitigate limited capacity from the shipping carriers is to sell the store inventory and have customers come and get it
via curbside pickup or click and collect or whatever the case is I know you guys are able to see the orders that are click and collect versus ship to home any industry interesting trends.
Around holiday utilization of curbside pickup.

Scot & Vivek:
[25:41] Absolutely so they are in a place where
test scaling this channel in a way where they’re able to even direct consumers we’re okay maybe but this may be the supply chain doesn’t support direct shipping so let’s let’s push them and think about curbside pickup quickly so we started to see.
Friday scale up bow piss or click and collect orders by 52 percent year-over-year it’s about 30% yesterday on Cyber Monday and what we expect is as.
The discounts weekend and we get closer into December and we’re we are in December sorry but as we get to Christmas.
There’s going to be this this focus on how do I get this product.
And get the best pricing and not get have my discounts completely nullified by my shipping costs so then they’ll be heavy utilization there so we we actually expect it to be the dominant,
mode of fulfillment about a week out from Christmas
so that it’s going to be a huge driver for these larger retailers as it has been this week in terms of helping them.
Absorb a lot of volume and say yes we have this product because and you just have to go pick it up.

[26:57] Cool one what kind of curveball here what what’s when you re looking at the data what just kind of jumped out at you as the biggest surprise.
I think what we were pretty struck by was just the level of.
The growth coming out of the main days while still maintaining a lot of volume coming out of the
earlier days because I think we were thinking about it in a little bit of binary terms which is its you know this all could be a little bit of you know.
Just just talk around okay it’s a it’s a cyber month
so you know everything you know I’ve seen black Fridays canceled its at certain places being written up and
what it was striking for us to see is know that they are they are holding holding their ground is as as tentpole days
but again on some of these other days the surging that was happening for for retailers who offer both Opus and,
who have who have made these inroads into early pricing and were able to deliver on some of that early pricing promise
they were able to scale on those days as well so you almost end up not with that sort of binary outcome but almost both Things become a little true so that was that was
it was it was really interesting for us to chart that.

[28:20] Very interesting you know one other question occurred to me.
Any insights about where what the big traffic sources were for for Holiday like I imagine there’s a lot more organic traffic on holiday than usual or a lot of traffic driven by email but I’m curious.
Like do we see a spike in Social we hear a lot about live streaming is that you know meaningful contributor what what’s bringing people to e-commerce websites for holiday.

Scot & Vivek:
[28:48] We’ve seen decent increases for social research for about a 17% increase for Cyber Monday and through Thanksgiving so
it’s one of those areas where it’s a category that we’ve seen traffic come through and we’ve always thought about how it operates as a channel for conversion versus awareness and then
fueling people to come through other modes so your
the organic search and paid search have definitely been drivers but then you the display efficiency right now is pretty staggering so that’s also been able to help,
I drive a lot of volume through for all these retailers.

[29:27] I’m glad to hear it.
We’ll listen to this has been a fascinating conversation but it has happened again we’ve run out of our allotted time for the special cyber five show I certainly appreciate you taking time out of what I know is one of your busiest days of the year to come talk with us.
As always if people have questions or comments they can feel free to leave us a note on Twitter or Facebook page.
And as always if you found value in the show we sure would love it if you jump on iTunes and give us that five star review.

Scot & Vivek:
[29:57] Thanks for your folks want to see your pontificate ins and data visualizations where should they go.
Absolutely thanks so much guys I really appreciate it and yeah I I’m pretty active on my LinkedIn
so if you just search Vivek pandya or Adobe on LinkedIn you should find me.

[30:21] We will put it in the show notes and thanks everyone for listening hope you had a wonderful holiday and until next time happy e-commercing.

Nov 20, 2020

EP246 - Q3 Results 

The US Census Bureau published its retail monthly data and quarterly e-commerce data this week. We also saw earnings reports from Target, Walmart, Lowes, Home Depot, Walgreens, and Kohls.

We also discuss Amazon’s entry into pharmacy

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

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Episode 246 of the Jason & Scot show was recorded live on Thursday, November 20th 2020.


[0:24] Welcome to the Jason and Scott show this is episode 246 being recorded on Thursday November 19th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Jason it’s getting to be holiday and I don’t know about you but I am constantly being pummeled with.
Carrier pigeons direct messages tweets linkedin’s friend stirs just messages from every possible venue and guess what they’re asking.

[1:05] They are asking you to buy early from their store.

[1:10] I know that yes I am getting this but what I’m getting from our listeners are people saying Scott what can I get you guys have given us so much pleasure over the year through this podcast what can we do in return.
And my answer is all Jason I want for the holidays this year is your 5 star review.
So if you can hit pause real quick and this is best in your app that you’re using if you’re on the iPhone it’s pretty simple kind of need to do it in the podcast app,
believe that five-star review that would that would be really great and that would make our your for us here at the Jason’s got show we’d really appreciate that so whatever app you’re in go in there leave us that five star review that really helps us a lot.
Keeps us at the very tippy top of the e-commerce podcast realm so we would really appreciate that.

[2:04] So alright welcome back hopefully you did pause and leave us that five star review we appreciate it.
Jason we are T minus seven days until turkey day and this is the time of the year where we really start to feel it you know kind of that nervous energy.
Here in the Commerce retail e-commerce world,
everyone holds their breaths and they been working all year planning for this they’ve got all the server’s lined up all the clouds clouding,
and just hoping that the next 20 days are super awesome but they’re also scary for everybody so.
And then this year with covid everything is going to be cranked up to an 11 we’ve talked a lot about ship again we’re going to do an update on that so we thought the days show we would.
Kind of stay on news because there is a lot going on and first of all I thought we could hit some of the really interesting Amazon news.

[3:05] Amazon news new your margin is their opportunity.

[3:17] Jason you have I think you’ve been I can’t remember where it’s been all cheer now I can’t remember if you predicted this but you’ve been really
kind of keeping an eye on Amazon’s aspirations to get into the pharmacy world and if I remember they bought that pihl company was at pillpack and then there was some news this week update us on what happened and what you’re thinking what’s your
what’s your point of view is it time to stop going to Walgreens and CVS.

[3:46] Yeah so side note I was actually revisiting that prediction Show recently because I was trying to cheat and edit in that I predicted a global pandemic.

[3:57] No that’s not fair no cheating.

[3:58] No I would never cheat but if you happen to notice that there I must have in fact predicted it.
But yeah so we’ve talked a lot about this we’ve talked a lot about Amazon and Walmart’s General aspirations around Healthcare,
and for sure I think for the last several years I can’t even remember which year we first predicted it but like we predicted in the past that Amazon would get into Pharmacy.
And we we’ve seen sort of three previous Healthcare actions,
they actually applied for and received a number of their own Pharmacy licenses so you have to be a pharmacy you have to be licensed in every state they got licensed in a bunch of states for medical equipment so that’s not actually the,
the the medications that’s things like.

[4:48] Pulse ox monitors and glucose meters and and orthopedic equipment and prescribed equipment that customers might want to buy so so they kind of.

[4:59] Did their first step in getting some pharmacy license has a lot of us speculated that that could be a precursor to getting a medical dispensing pharmacy license.
So then they bought pill pack which is a pharmacist and online pharmacy that already had a bunch of Pharmacy licenses so they kind of got.
If memory serves something like half the country covered just by buying pillpack and for listeners that aren’t familiar pillpack has kind of a unique value proposition,
they’re a mail order pharmacy that mail your your prescriptions to you but instead of giving you all 60 of your doses of Lipitor in a bottle,
individually packaged your pills for each day so if you’re taking three conch medications you get a little plastic.
Vacuum-sealed bag with the three pills you need to take each day so make it make it super easy to take each day’s thing and so they bought pillpack they’ve been continuing to operate pillpack they’ve even done some pretty extensive,
marketing and advertising for pillpack.
And then right around the beginning of this year they bought a medical technology company that does like.
Telemedicine medical triage it’s kind of like artificial intelligence for what are your symptoms and I’ll tell you what likely is wrong with you kind of stuff.

[6:23] And then they’ve used a lot of those Technologies.
To roll out some for some health care clinics but the health care clinics are not for the general public at the moment there for Amazon employees in specific cities like.
They’ve opened a number of clinics near.
Near some of the FCS and they’ve opened a clinic near their corporate headquarters in Seattle and they I think they even develop their own covid testing.
Capability that they use in those clinics to test employees.

[6:51] Yeah when we went in our deep dive I remember them saying they were doing you know tens of thousands of daily testing so pretty pretty substantial just internal testing effort which was pretty interesting.

[7:03] So that’s all the history of Amazon and Healthcare and what we’ve been waiting for is when do they do something that strikes fear into Walgreens and CVS and the answer is probably this.

[7:16] Yeah saw the stock I’m not a big tracker of those stocks but I saw CVS was down from like the mid 70s and mid 60’s so kind of a 10% drop in I imagine Walgreens with similar.

[7:28] Yeah and I think they one or both of them had earnings calls recently and.
Somewhat counter-intuitively and maybe sometimes we get into this the those pharmacies are not.
Beneficiary major beneficiaries of covid in fact like their comps are down.
So so they are ready we’re kind of a little soft and then this Amazon announcement they all had an impact.
We’re still trying to figure all the details out but a so Amazon has announced that you can now there a nationwide Pharmacy and you can buy your your prescriptions from Amazon and you’re not.
My my understanding is you can now get like a normal person gription from Amazon it doesn’t have to be the pillpack configuration.
And it’s available Nationwide but what they really focused on they didn’t give a lot of details about that about how you would order your your traditional prescriptions,
if you had Insurance because what they really focused on is they had done a partnership.
With a I think the company is called The Insider RX to dispense prescriptions to people that don’t have insurance and give them the best possible price.

[8:50] So it feels like this first segment that they’re targeting for their kind of Nationwide Pharmacy offering are uninsured customers or underinsured customers,
and help them get affordable access to a prescription,
outside of the insurance system and there’s a variety of reasons that are probably doing that it turns out there’s.
A lot of exclusive deals in the insurance networks and so it’s probably really hard for Amazon to,
say hey Scott order your prescriptions from me and will submit it to whoever your insurance is and will get reimbursed.

[9:29] Do you think when I go to my doctor soon I’ll be you know they always say what’s your favorite drugstore I’ll be able to see Amazon Pharmacy and then that’ll connect those things are as that a naive the other.

[9:37] So that that is petition clear because here’s going to be the problem say you have some new medical problem and the doctor wants to prescribe some a one-time thing for you,
they’re going to they’re going to write the script and most insurance company your insurance company is going to pay no matter where you feel it so they your doctor can probably send that to Amazon and a big part of this on Amazon offering is 2-day delivery so if it’s.
If it’s something you need you know that you can start taking two days from now that could totally work.
Often when the doctor writes a prescription for some acute problem in the office you’re going to stop on your way home from the doctor’s office to fill that prescription.
And so Amazon’s not super competitive at that,
but in most cases that first prescription the most credible insurance companies are obligated to compensate the dispenser for that so there’s not a lot of controversy about that,
what gets controversial is,
if you have some chronic condition that means you’re going to take some medication for the rest of your life like the most popular which is like a Statin for high cholesterol.
Right so a lot of insurance companies now say.
Hey we don’t want you to buy that every 30 days from a retail pharmacy and pay the highest price we want you to use our Pharmacy and they’re going to send you a 90-day Supply and will only cover this under insurance if you get it from us.

[11:04] And so the NAT those mail-order pharmacies are often operated by Rite Aid and CVS and Walgreens so they all they all have you know CVS Caremark for example,
the do that mail order on behalf of insurance companies but there’s a lot of exclusives there and that’s the.
The part of the the pharmacy business that I don’t know for a fact but I would imagine is harder for Amazon to crack because they would literally have to go to these,
these insurers and get them to too.
Except Amazon is a dispensary and they have to negotiate pricing rates and they probably already have an exclusive deal with another for provider.

[11:46] So if your Amazon you’re trying to grill and Pharmacy you go oh the these ad hoc prescriptions is one place I could grow but really I need to do like one hour fulfillment for those which Amazon did not announce here.
And then the other category is a huge chunk of prescriptions are sold without insurance and so it seems like that’s where I Amazon’s really focusing and so that’s actually not the.
The bread and butter of Walgreens and CVS there are third parties that provide,
discounts and promotions to those retail pharmacies so these are companies you’ve now seen television ads for good RX and.
Shoot what’s the one with Martin Sheen something care.
It’ll it’ll come to me later but there’s a couple companies out there that are kind of in the business of,
aggregating coupons and letting customers get a cheaper price when they have to get a prescription from Walgreens without a,
a prescription and that is basically what Amazon is offering so the well Walgreens and Rite Aid like took a little bit of a value hit like who really took a value hit was good RX.
Because it seems like Amazon’s competing directly with them.

[13:07] Single care.

[13:08] Single Care thank you I knew it was something here.

[13:11] One of our one of our interns were handed over to you.

[13:13] Yeah so like the the kind of Market.
Whiplash action like really hit those guys and I’ve seen the number of analysts that follow the industry pretty close and they’re like you know what there’s a bunch of nuances,
Amazon is not going to be able to to kind of immediately impact those those businesses and the in the trade agreements are kind of complicated so,
my sense is that some of the stocks have already rebounded from this initial kind of.
you know every so I mean kind of we’re getting a little in the weeds but rolling all this up there’s there’s a theory why everyone shouldn’t be afraid of Amazon but of course you and I know as a general premise everyone,
should be afraid of Amazon so this first offering may not be you know the one that that,
dramatically impacts any of the existing players businesses but it certainly reaffirms Amazon’s interest and intent in disrupting this industry.

[14:17] Yeah and whatever you do if you’re an executive at one of these companies never ever say that you’re going to Canvas ons but or you’re not worried about them or they can’t do your your business.

[14:28] Yeah I the exact phrase you probably shouldn’t utter is Amazon’s great at selling X but our business is uniquely complicated and difficult.
Much different than all the businesses Amazon successful and therefore Amazon has no chance of succeeding.

[14:46] Another one you probably shouldn’t utter is we’re a hundred percent Amazon proof.

[14:52] Exactly we’re Amazon’s partner not there their competitor yeah so I feel like and besides Amazon’s never made a profit so there’s that.

[15:01] That is so true so true you and I have that till the cows come home.
Course that’s a little Amazon update and we’re going to keep an eye on this Pharmacy very closely because we do think it’s going to be this could be a billion dollar pillar if you know this is a nibble and you know this kind of the second Noble after pill pack I would kind of say,
but it’s clear Amazon has their sights set on this one just General Health Care and so does Walmart so it’s pretty interesting Battlefield coming up,
let’s pivot over to ship a getting one of our favorite topics so,
because you and I are the ship again guys we are getting hit with all the ship again news and in fact,
if folks have hair dryers they’re taking a while to get to them or let’s see iPads or anything you and I to know about it so that’s part of the fun of being the ship again guys.

[15:50] I like being the ship again and Guy exactly.

[15:52] I do too I’ve learned a ton so let’s go through what kind of do a lightning around here,
first thing I’ll apologize listeners I talked about putting a model out in the last show and my day job has been kind of busy so I have not had chance to work on that I’m hoping to work on that this weekend,
so stay tuned.
The speaking of Amazon they had an article today where they are telling folks and I think this is I mentioned at the top but you know we should say,
it does look like we’re having that that V or swishy shape at least from a covid perspective so cases are hitting all times Highs hospitalizations are at all-time highs,
so we’ve got kind of the second wave of the pandemic and I think what Amazon is saying is if they have to go back into kind of that March centrioles only mode.
If that climbs the holiday it could be kind of cataclysmic so so I would say,
you know if we were keeping track of some kind of a scorecard of ship again every week since we’ve introduced it I think the chance of it getting worse than you and I even predicted are increasing.
Let me pause there and see if you agree on that.

[17:04] Yeah no totally and I think to try to mitigate this a lot of people try to entice customers to shop early and I my sense is that that mostly hasn’t been successful so.

[17:17] So Amazon came out and said hey you know you got
really really seriously you need to shop early this year because even we won’t may not be able to get you what you need so that was pretty interesting for them to being there
of course people kind of are like sure they want to shop early so there’s it’s going to be saying there’s going to be a segment of consumers that
I kind of think it’s fake news if you will and they do not take advantage of this and you know the Doomsday scenario is Amazon gets
and you know swamped and has to move into Central kind of stuff stores go through shutdowns in certain areas I think California actually is doing it in Chicago or are your store shut down.

[18:00] Yeah so we’re on a advisory which is like the softer language of a shutdown and it basically meant stores.
That were previously allowed to be at 50% maximum occupancy or now a 25% so they haven’t closed them but they’ve more severely constrained the traffic that’s allowed in.

[18:19] Yes that’s one news item and then,
several folks have reported to us drop buying products directly from Apple that most of those products are showing a inability to get anything by Christmas and this is before Thanksgiving started so.
If anyone in your you know if any of your holiday gifts are going to be of the apple variety you need to really look at that closely and then,
um I’ve had I had this exact same situation and I found you can go to Best Buy and some of the other kind of apple Outlets if you will and they,
they have little bit more inventory than Apple interestingly enough.

[18:59] And then friend of the show Erik Heller he saw an Amazon van and this is kind of part of this DSP Network I don’t think Amazon directly to this but it was clearly a UPS van that had been painted with the Amazon Prime on it so,
so I think a very clever Amazon DSP partner,
you know there’s this problem that new Vans are just all spoken for for for six months and I know this from my day job,
and so people are going out and finding anything they can so there’s the used market for delivery vehicles these are things that are like.

[19:33] 10 to 20 years old at this point there are basically taking anything you know that runs imagine someday we’ll see,
some old yellow school buses painted with prime paint and stuff with packages and they’re putting them out into the fleet I’ve little Battlestar Galactica kind of a fleet that that’s going on out there.
And in addition to that I’m getting a lot of interesting pictures of what I would call Super janky vans that,
that are being used to deliver packages now so yeah I saw one that was looked like it had been maybe in Beirut and it had like as part of the FedEx ground which is a 1099 Network kind of like the DSP program,
and then add like the tiniest of FedEx stickers on it is really funny it was like a nine by nine square it was like FedEx Ground in this like sea of denser along the side of the packet the truck so.
That is the ship again news did you see anything else that was interesting.

[20:31] No I think you you covered most of it it just a reminder that,
this is by far the most acute version of the van problem member but they’re like a version of that plays out every holiday,
um you know FedEx and UPS maybe aren’t trying to acquire a ton of new Vans but they would like to have more Vans available so they go out and rent a bunch of vans.
And then we end up with this porch piracy problem.
People see like an unmarked rental van like pull up and some you know none uniform Guy come out with a bunch of packages and they often it’s a legit.
Delivery person and they get reported to the police as a potential porch pirate so I imagine all these Jinky Vans are going to make that even more cute.
And then I just want to plug this one side note in my market here in Chicago Amazon key for business has been going door-to-door to all the buildings,
and they’re offering to install like the secure access system so my I live in a little 12 unit Condo building and we just installed the Amazon key so now all the Amazon drivers.
Can open my front door without without having to call us on the call box and drop our packages off.

[21:45] The front door to your interior door or the building door.

[21:49] Building doors so they get in they can now get access to our mail room to drop off packages.
Which is interesting because Amazon can do it and it’s all Wireless and it’s it’s access controlled so they can only deliver.
You know during appropriate hours and and there’s a log but like FedEx and UPS can’t do that.

[22:18] Yeah and then I know you’re on pins and needles to jump into this there was a data drop that you want to tell listeners about.

[22:26] Yeah it’s a datapalooza week I’ve been super excited.
So this is a fun week for me on Tuesday of this week the US Department of Commerce the US Census Bureau.
Drops their monthly retail sales data so we got that data on Tuesday and then once a quarter every three months,
they drop this supplemental e-commerce report so on Thursday we got the Q3 supplemental e-commerce report.
So both of those.
Are kind of fun and in general and in particular in covid times when things are changing so much it’s super interesting to get fresh data about what’s going on in our Marketplace.

[23:11] Yeah and if listeners are interested we had a full show on this the episode
so number escapes me while you’re talking I’ll get one of the interns to work on it but but yeah so I always kind of because I don’t live in this data like you do I always have to go refresh myself but but walk us through
that data and what was exciting.

[23:31] Yep so first of all that was episode 239 which was back in the beginning of October that we had to Paul and Scott on from the US Census Bureau to talk about how they prepare this data and kind of,
talk about some best practices and how to use it,
um so the first data set to come out is the monthly data and in basically every retailer in America fills out the surveys.
And what they sold in a given month in the US Census Bureau Aggregates it all up and so you know about 19 days into November or 17 days in November we find out what sales were like in October.
So retail sales in October where up.
Eight point five percent year-over-year so that means.
October 20 20 in the middle of covid we sold 8.5% more stuff than we did October 2019 which is very healthy.
Like that cat.

[24:32] Pretty crazy like last year we were going like everyone was excited like 3% Yeehaw it’s crazy crazy Tom.

[24:40] Exactly and so we can get into in a second into why retail sales are so up there’s some good reasons for that covid is.
Stop spending in some non-retail categories and it’s actually shifted that spending into retail categories so,
you used to go to restaurants which are not retailgeek,
and instead you’re going to grocery stores now which is retail and you used to fly in airplanes and stay in hotels which is not retail and instead you’re buying stuff to fix up your house which is retailgeek.

[25:13] Some would say it if you charted it looks kind of like a v-shaped recovery.

[25:18] Yeah in West you look at all the categories in that V and those people would now say as a w-shaped recovery for the record because it’s.
Like probably because of covered right now it’s going the wrong way so we’re probably going to get two v’s right next to each other but that that aside the so eight point eight point five percent,
year of your growth is awesome again you could take categories out of that there’s a category in that that’s called non store sales which is kind of our proxy for e-commerce,
it was up 29% so almost thirty percent which is interesting,
if you pull some of the categories out that aren’t traditionally very e-commerce e like if you pull auto and gas out of the retail number then you’re over your sales were even up better they were up like 10.8%,
um so,
so Healthy Growth interestingly a lot of the reporting on the data was negative because what they mostly looked at is the change in sales from September to October,
and the growth from September to October was very modest it was 0.3%.

[26:34] And so a lot of people interpreted that as,
kind of the recovery petering out and Scott being wrong and it not being v-shaped but In fairness to Scott I’m going to say.
I don’t actually care about month-to-month growth because,
every month has a different set of shopping intense attached to it and it’s,
it’s just like the month-to-month changes just aren’t traditionally that linear and they change every year depending on the number of days,
um you know weekend days versus weekdays and all these other factors so I just in general I care a lot more about seeing Healthy year-over-year Growth than I do the month to month growth but the people that worked at the month-to-month growth were like oh,
things are slowing down.

[27:27] Got it yeah you’re over yours Waco.

[27:30] Yeah and so yeah and so in general if you then break it down into categories there were category like building materials is up 20 percent from the same month last year.
E-commerce I mentioned was up 29%.
What else is a big cars or up big like 11%.

[27:55] Yeah the Auto industry is on fire right now.

[27:59] Yeah well yeah dip their two sides of the audio and Industry that you would know better than me right like the guy selling vehicles are doing great the guy selling gas are not doing well.

[28:08] People are buying cars and then promptly not driving them which doesn’t make a ton of sense.

[28:13] Exactly.

[28:14] I need a new car that I’m not going to drive.

[28:16] Yeah and then grocery is up like 10% so those are the categories that had like like frankly like huge tail winds from,
from covid you didn’t go on a vacation and you got a stimulus check so you bought that new car and you’re thinking your your vacation this year is going to be a car trip right so you bought that new car,
you’re not going to restaurant so you’re buying more groceries you’re you know you’re not traveling as much so you improve your house right so those categories were the big head winds and then exactly as you would expect,
there’s a categories that were big losers gas is down 14% people aren’t driving to work right apparel is down thirteen percent you know people aren’t wearing as much clothes department stores are down 12%,
and restaurants are down 15% so,
that that’s kind of how the the monthly data played out and I would say these were all trends that we saw in September and they continued through to October and so I didn’t see any like.
Dramatic changes of Direction this was this is all pretty what we would expect at this.

[29:27] Yeah and what I peeked at the data one thing that jumped at me is it looked like,
you know the pork kind of fashion industry is just taking it on the chin and it seems like it’s getting worse is that is that your read on it like it’s decelerating even more.

[29:44] Well so yeah it depends on how you worked it got really decelerated early in covid when people weren’t going to stores and going to malls,
and then it started to recover a little bit like there is a hypothesis that like.
You might need some warmer clothes even if you’re not going anywhere and one more clothes are more expensive than summer clothes and so like,
in general you want you expect to see a little bit of a lift in Winter I don’t think we’ve seen a lot of that and it’s just this triple whammy like apparel had a bunch of head winds before covid-19,
there’s they have more head wins in covid and the majority of places where people buy clothes separately have a bunch of head winds from covid so it’s a.
Triple whammy against the apparel industry and and I would say just in general,
ten years ago you spent six percent of your income on close today you spend three percent of your income on clothes so it’s just like there’s no there’s no good news in the apparel space.

[30:47] Yeah so I’m an e-commerce guy and I like the simple version of this so this data said and Q2 Commerce group 45%,
this data drop isn’t the one that really pinpoints e-commerce right that’s the one.

[31:02] Two days later we had that one drop right so last quarter exactly you said 45% e-commerce growth and so this quarter was lower it was 36% e-commerce growth 36.7%.

[31:16] Okay so that has dropped okay yeah so the non-store being 29 isn’t just e-commerce they do this other drop that just e-commerce and that was higher than that 29.

[31:25] Exactly exactly and and the that 2019 was a monthly number the the 36.7 percent is a quarterly number.

[31:34] Okay good alright.
And then but that’s interesting because Amazon came in at 37% but that’s,
total Amazon North America was 39 and then if you took out physical stores which I think is the best comp they were at like 40 percent.

[31:57] Close to this 37% right like so they they tracked last quarter so Amazon last quarter was 43 percent and the industry average was for the quarter was 45%,
this quarter Amazon’s 39 percent in the US and the 44 your point if you want to take out the stores and the industry average is 37 so they’re there,
they’re right in line and not shockingly Amazon is a reasonable.
Surrogate for this quarterly data now another thing you get to see in the quarterly data is what percentage of all retail e-commerce is.
And so last quarter to two retail was like e-commerce was like sixteen percent of all retail including all the categories that.
The US Census Bureau includes in retail which does include like gas and restaurants,
I’m sorry not restaurants but it does include gas in cars so so last quarter was sixteen percent of all sales this quarter it’s dropped down to fourteen percent of all sales so what.
This is totally intuitive but what could have happened is for part of Q2 brick-and-mortar retail was closed or less accessible and so e-commerce was the only alternative right so as we moved into Q3.

[33:11] People are continuing to lean on e-commerce e-commerce is still super important it’s the fastest-growing way for people to shop and new people that learned how to shop that way are continuing to use it but.
People do have better access to brick-and-mortar stores in Q2 and so in Q3 than they did in Q2 and so the brick-and-mortar sales came back a little bit more which means the ratio of e-commerce to Brick and Mortar drop down a little bit.

[33:39] Does that make sense and that’s also frankly why I mean 29 percent is or I’m sorry 36 percent is still unprecedented growth white compared to a normal year.
Yeah but so the reason it didn’t grow quite as big as because you didn’t have this you know hey all the clothing stores are closed and I need socks.

[33:58] So one way to read this is if we kind of draw a line from Q2 at 45% and now we have Q3 at 36 percent you could say Q4 continue to decelerate be like you know low 30s right
or you know I guess what I’ve been thinking is we’re going to see a pickup again where it’s going to kind of.
I think the more likely scenario is it will stay at this elevated kind of high 30s and there’s a chance it could go up into the 40’s like we saw you too especially if we have this covid situation and I’m specifically talking e-commerce here.
Does that do you agree with that or did you come to a different conclusion now you’ve seen the data.

[34:38] It’s hard because I’ll call it like the five-factor model right like so if Q4 was just another quarter like you’d probably predict like a linear Trend here and so the rate of growth would probably slowed a little bit more,
um but Q4 isn’t a normal quarter it’s a quarter that has accelerated consumption overall and accelerated spending and so in a world win a disproportionately high percentage of that spending is online that should actually.
Accelerate the rate of e-commerce right so that’s that you know the second Factor the third factor is that the.
Fourth quarter like was already an uncharacteristically high quarter for e-commerce why people have already learned a shop online more for gifts than they do for their day-to-day needs,
so that would it’s hard to grow from the bigger number so the fact that Q4 is the biggest number of last year means the rate should slow down a little bit and then we have the ship again in factors like,
do retailers have enough inventory do they have enough shipping capacity so you kind of apply all,
you know some some estimate for all five of those things and like I think we’re going to end it a super healthy number I kind of put that 33% out there is like where we’ll probably land so that’s,
so I D celebration from this quarter but still you know very healthy by historic standards.

[36:01] Yeah cool and then there’s also so on top of this data there was a plethora of folks we covered Amazon and really dive here but we we’ve had a good more than a handful of retailers
push out their results what were some of the highlights you saw there.

[36:19] Yeah so yeah it was a good week for earnings so Cole’s announced this week in their comps are down,
it’s so funny how Wall Street works by the way right like so cold like Cole cells apparel apparel sucks their comps were down 13 percent but because the expectation was that they would do even worse that was actually favorable to their stock right,
e-commerce for Cole’s was up 25% which compared to all the other categories we’re talking about isn’t that healthy but for Cole’s where e-commerce has been a challenge for a variety of reasons like that’s pretty Healthy Growth,
it’s a dramatic deceleration like coals had 45% e-commerce growth in Q2 they’re having 25% e-commerce growth in in Q3,
and so that’s interesting right.
The next retailer that announce earnings this week was Walgreens and they announce earnings before this Amazon news by the way so I don’t think this Amazon news head.

[37:19] I mean I didn’t have any impact on their earnings so their us comps were up three percent I think they’re Global comps their their their parent company owns boots and UK
I think overall complement of actually been down so I’ll your flat but us comps were up three percent which is kind of traditional grown on covid growth,
e-commerce was up 39 percent and what’s interesting and Walgreens was a little bit of an outlier their e-commerce was up 39 percent in in Q3,
30 commerce was only up 23% in Q2 so they’re one of the few companies we’re going to be talking about today.
Who’s e-commerce is actually accelerating which of course bucks the industry trend.

[38:02] Yeah I wonder why.

[38:04] Yeah I don’t know the real answer part of it could be that none of these companies were.
Awesome and e-commerce before covid and so you could imagine that like hey as they suddenly had a lot more demand for e-commerce they scrambled.
Improve their e-commerce amenities and stabilize their site and do all these things and that they got better operationally in Q3 but I don’t know if that’s actually true.

[38:31] Yeah or they rolled out curbside and that gave him an attribution her.

[38:34] They for sure did roll out curbside in the middle of all this yes.

[38:37] Yeah yeah that helps yeah or speaking from anecdotal evidence they now have hand sanitizer so maybe that drove it.

[38:46] Anybody that has hand sanitizer you would totally want to to be betting on right now,
so that the next two people that do earnings where the do-it-yourself stores Lowe’s and Home Depot and reminder they’re one of the huge winners in covid people people are spending way more money on their home as a result of covid-19,
and solos comps were up 30 percent which is nosebleed like that’s amazing.
Why do you spend your whole career in retail and you never have a 30% like comp for the entire network that’s crazy their e-commerce was up a hundred and six percent.
E-commerce is very significant is the stores but as a percentage of total sales it tends to be kind of below because they sell a lot of items that aren’t that convenient to ship.
So as curbside picks up like e-commerce gets unlocked for a lot of these guys but hundred 6% is way above the industry average and then to compare that and cute,
to Lowe’s was 135 right so they had a huge e-commerce quarter last quarter and there.
They had another big one but their rate of acceleration has grown but man a lot of people walked in the store and spent a lot of money.

[40:04] And then Home Depot also like very impressive like just doesn’t smell quite as good as well as their us comps were up 24-point 16% which again is amazing,
unless your your direct competitors up 30 their e-commerce for the quarter was up 80%.
I’m trying to remember they were a hundred percent last quarter so same same kind of story they went down from a hundred percent Q2 e-commerce to 80 percent growth Q3 e-commerce,
and then they also announced which I like to keep keep an eye on 60% of other e-commerce got fulfilled from the store so either it was a store pickup or they ship the products direct from a store.

[40:47] So that’s the do-it-yourself guys and then the last guys are too big General Merchants Target and Walmart both announced this week,
and let’s do Walmart first Walmart had,
very good comps on a very big number right so there comes where 6.4 percent which doesn’t sound as impressive as the home-improvement companies.

[41:10] You know if you consider the Walmart is the largest retailer in the world like growing 6.4% is.
Ginormous we meaningful to Walmart,
their Q3 e-commerce was up 79 percent versus they were up 97 percent for Q2.
So so though that was widely considered like super solid numbers across the board and well above expectations for Walmart so they had a good.
Good earnings call Walmart owns a separate retailer Sam’s Club which also had good comps they were their comps were up 11.1%.
They’re the club e-commerce isn’t quite as big a deal so Club e-commerce for Sam’s was up 41%,
and Sam’s announced that they had 10% membership growth as these club guys are all membership-based so 10.4% membership growth so so both Walmart and Sam’s Clubs did well,
the what’s interesting though is.
Hard yet which is much more than Walmart but you know probably the most direct analogous competitor to Walmart,
and Target like in my mind may have the most phenomenal performance of all these companies so their comp growth was 20.7%.

[42:32] Which for a general Merchant with as big as they are that 20.7% is huge,
they’re they’re digital drums was a hundred and fifty five percent which is way down from last quarter’s a hundred and ninety-five percent right so so but unlike where we were talking about these big numbers in the Home Improvement guys,
Target is one of the biggest e-commerce sites in the US so the fact that they’re like growing at this pace is super impressive and of course.

[43:05] Target is excellent at Boba so they own the shipped vendor and they a lot of their e-commerce is,
same day at stores so they’re they’re same day delivery sales were up to hundred and Seventeen percent so people are,
totally taking advantage of those amenities,
and in to me this is an inside baseball step but it’s one of the most eye-popping things of all 95% of all of targets orders are fulfilled from stores so target has amazingly said,
we’re not going to build a network of fulfillment centers and have all this fragmented inventory and,
rely on FedEx to get our stuff to you we’re mostly going to sell our store assortment to people and make it really easy to come and get it or will drive it to your house as a last mile solution and that’s working phenomenally well for.

[44:10] Yeah you do like after this year probably want to retire those places because you probably don’t want to be comping against all this the I will also say just some interesting like inside stats and Target.

[44:23] I’ve seen similar stats in the past from Walmart but so targets ticket went up pretty considerably like the average orders up 15.6 percent.

[44:33] Which means that traffic was only up 4.5% right so,
like people are going to the store less and they’re buying more when they go to the store like Walmart version of that’s even more extreme like their traffic might actually be down in their average ticket might be even higher,
so Walmart and Target are beneficiaries of this right and for a variety of reasons,
um at the moment you want to be a retailer that sells a lot of different stuff because if consumers want to visit fewer stores they’re going to go to the stores that have all the stuff they want right so,
Target and Walmart win on assortment you for sure want to have essential good so that you’re not forced to close at any point when the covid spikes and Target and Walmart both.
Both meet that criteria and for a variety of reasons
you want to be a big company with a robust supply chain and leverage over vendors so that you can get products on your shelf to be able to sell,
and so covid is disproportionately benefiting big healthy chains over small independent retailers and Target and Walmart are both big healthy chains so,
that’s that’s basically what’s happening in unrelated news that I totally don’t understand but I’ll just mention it while we’re talking about Target Target also announced that they’re cancelling their subscription program which totally surprised me.

[45:55] Because like subscribe and save it at Amazon is a very successful very important program and it’s a bunch of vendors toy lean into it there’s a lot of reasons to say that consumers,
are really interested in these auto-replenishment Solutions like subscriptions,
and so you know you’re seeing a lot of retailers that don’t have robust subscription programs trying to add them,
Target canceled there’s and what they said was,
customers like our same-day pick up so much that what’s happening is they they don’t want to be on auto-replenishment they just want to know that like as soon as they realize they need something they can get in an hour with home delivery or store pickup.
And so.
I believe Target’s good at one-hour delivery through these same day Services I totally get that and I get like that therefore,
their utilization of subscription might be less than some other retailers but I just I would have imagined there was still a loyal cohort that preferred subscription,
and and didn’t you know it just surprised me that they had something they turned off I guess.

[47:04] Yeah well maybe yeah they listened to our customers got it.

[47:08] Yeah yeah I mean I trust that they know what they’re doing and their results kind of speak for themselves so that it I just found it interesting so that was kind of the,
the stick on earning so that was a ton of super exciting stuff I did see just a couple other little news news bits.

[47:27] It does always make me scratch my head though because you know all those were significantly greater well there’s this attribution problem but I think I think the attributions about the same if I remember,
the the guys so if all these guys were a hundred percent Amazon grew in line who grew is zero or negative I guess you have like JC pinions here’s like the.

[47:49] So you notice there were no in this hat week there happened to be no department stores that reported right and so all those department stores are going to be soft,
there was one apparel retailer it was Kohl’s and they were significantly negative right but if this had been an earnings week where we had 20 apparel retailers.
White might you know you you would have expected all or the vast majority of them to have negative comps right,
so we do have Gap I think is coming up next week like that will be an interesting one to watch from an apparel standpoint,
we also have a Best Buy and dicks and they’re going to be more interesting to me because I can like I’m sure the expectation is the gaps going to have pretty severe e- comps,
Best Buy and dicks are boat like so sporting good stores are kind of another beneficiary of covid so you’d expect them to have really good cop.
And slightly surprisingly.
Electronics has been mostly like a minor beneficiary of covid so it’s been a bump but not a very big one.

[48:57] Yeah so a couple of things so we’ve got some new iPhones so that could surprise us and then the gaming consoles I don’t know if you track this but the the new Xbox and the PlayStation are sold out everywhere and there’s a,
just unmitigated frenzy for those unlike I don’t think I can remember,
maybe when the we came out it was like this but I haven’t seen quite such a frenzy for those two units as we’re seeing right now so the problem is no one has them so so I don’t know if they’re going to be able to be in your your.

[49:28] Well that’s like I’m assuming they wouldn’t be in Q3 comps anyway I’m assuming like they’re like even if you did it took a pre-order in Q3 I don’t think you recognize the revenue until you can fulfill it.

[49:38] Yeah iPhone Pro was right 12 Pro 12 and.

[49:41] Some a subset of the Apple stuff started to be in Q3 but the bulk of its going to be in Q4,
the the video game platforms are going to be in Q4 I totally agree I like there’s a lot more Tailwind e stuff for consumer electronics and Q4 just like,
there was a lot of tail in windy stuff for electronics in the very beginning of Q2 like when you first went home.
Everybody upgraded their home office right so everyone bought a monitor and they bought a laptop for their kid to do school at home and you know so there was this covid Spike for electronics it just wasn’t sustained you didn’t you just
you didn’t keep buying new electronics over the last six months and for your point.
There’s going to be a lot of people like you know treating themselves Q4 and so you know I it won’t surprise me at all if,
if Best Buy has a good Q4 but I’m kind of not expecting them to have a very spectacular Q3 but I’m not a stock analyst so we’ll see.

[50:40] Yeah be interesting to keep an eye on it.

[50:44] Yeah and then any of that surprised you Scott or do you feel like.

[50:51] These numbers are just like so high it makes me a little suspicious like yeah I think so I think Walmart continues to benefit from grocery Target doesn’t sell that much grocery do they.

[51:03] They’re leaning pretty heavily in the grocery and so it’s they’re not as good at grocery as Walmart but it’s a much more meaningful part then it was even six months ago.

[51:12] Yeah I wish we could peer inside of there and like you know kind of like the department of the Census Bureau level of category data I think what we would find is it’s kind of interesting but.

[51:22] And so I should say one side no non-target well they are selling a lot of grocery and they’ve dramatically improved their merchandising and offering and grocery what they haven’t had until just now is,
e-commerce for grocery so all that curbside pickup and same-day stuff it has not has been for general merchandise not fresh,
and like I think only as of like four weeks ago or they now starting to really sell fresh through that stuff so I suspect that will be another,
another bump for them when they get that up to scale.

[51:54] Yeah it’s going to be interesting to watch The Apparel guys I think that’s where we’re going to see the big loss is coming from and you know I think they’re they’re suffering and we’ll see how that doesn’t further closings are not going to do well for me.

[52:07] No I agree I think the department store guys in the apparel guys it’s going to be pretty rough.
And then like just to slight news Tibbetts I’ll just throw out there for those of you that want to go read up on your own the I just thought interest were interesting one of the trends I talk a lot about is,
um Brands going direct so you know major well-known Brands going direct to Consumer we’ve talked about PepsiCo has a direct to Consumer site,
so fun fact there it seems like they’ve refreshed that site so,
seems like it has a lot of new content but the new one this week is Coors Molson,
launch the direct-to-consumer site and nobody would have had that on their bingo card right like delivering alcohol like a major Brewery delivering alcohol to home,
why is a pretty interesting pilot that I hadn’t heard a lot of people talking about now it’s in UK it’s called the Revel I don’t know a ton about it but that I just that was an interesting thing that I have on my.

[53:13] My notes to learn more about and then obviously I follow digital grocery a lot it’s super important Trend in this whole covid thing ahold,
just bought fresh direct which is a native digital Grocer in New York and it’s super interesting to me because,
Fresh Direct is a hold in very high regard their their small grocer that was born digital I would argue they have a much
more mature Richard digital grocery shopping experience than almost anyone in the u.s. because they’ve been doing it better and longer but they’re their promise scale like they,
don’t serve a lot of customers you know they’re in there in one geography,
a hold is a much larger Global grocer but has kind of a modest footprint of stores in the US until recently a whole don’t.

[54:05] Like the best fresh direct competitor which would have been Peapod here in Chicago and so what’s what’s odd to me is like the month before covid ahold got divested themselves shutdown Peapod.
Which was bad timing,
but and now you know fast forward six months they’re buying something that looks like a better version of Peapod although smaller Market,
in infrastructure so that’s super interesting,
the one thing I’d say is I think it was a real Miss from some of the bigger more traditional Grocers they should have bought fresh direct has an echo higher because they,
you know Kroger Walmart and Target all need to learn how to sell better better groceries online.
But so that that’s interesting little acquisition in the space.

[54:52] Yeah absolutely.

[54:54] And Scott I feel like we finished a little early so as a Thanksgiving treat I think this is the last show we’re going to record before Thanksgiving,
I thought as a Thanksgiving treat that we might finish up a little early and give our listeners back some some free time to plan their Thanksgiving meals.

[55:15] Yeah yeah Happy Thanksgiving everyone we are thankful for our listeners listening to the show and giving us all the feedback that we get and we really appreciate our little Community here on the Jason Scott show and hope everyone has a
safe restful and filling and filling Thanksgiving.

[55:33] Yeah I will Echo all those sentiments I hope everyone has an awesome Thanksgiving and stay safe and until next time happy commering.

Nov 14, 2020

EP245 - Shipageddon DeepDive

On October 3rd, we published episode 238 and coined the term “Shipageddon.” We were talking about the likely e-commerce peak we expected from the holiday, on top of the e-commerce peak we were already seeing do to Covid-19, and we felt like retailers were likely to run into shipping capacity issues. The term (and concept) have gained a lot of traction,  being featured print in the NY Times Brace for Holiday ‘Shipageddon’ Forbes, Bloomberg, and on the Today ShowNBC News, and many others.

In the subsequent 45 days, it’s become clear that we will have a last-mile capacity problem, with all major carriers implementing quotas, turning away new clients, and retailers struggling to entice earlier orders from consumers. Worse, we’re also seeing a lack of freight capacity to restock retailers with limited inventory, and a strong resurgence of Covid-19 threatens to generate even more e-commerce demand.

In this episode, we do a deep dive into the curate state of Shipageddon, the likely impact on holiday shopping, and best practices for brands and retailers to minimize the effect.

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

Episode 245 of the Jason & Scot show was recorded live on Thursday, Nobember 12th 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode a 245 being recorded on Thursday November 12th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners way back on October 3rd and episode 238 we introduce the world.
Galaxy to the potential coming perfect shipping storm that we coined shipageddon.
And since then a lot of our folks that that are really following this closely you may have noticed that shipageddon has gone mainstream.
It has been featured in print in full and Publications like the New York Times Bloomberg businessweek.
And and video on The Today Show as well as NBC Nightly News and much more.
That’s actually the term shipageddon the theme has really taken off so you know you can can’t really open a retail themed publication or tweet or anything like that without hearing about shipageddon.
So we’re 45 days after we made that call and we thought this would be a good time to do a deep dive on what we’re seeing because we’re right on the cusp of,
go time for Holiday 2020 also there’s a lot going on with the pandemic pandemic the damn pandemic that you know that that I think actually is going to be impactful.
Jason what are you thinking.

[1:58] Yeah you made me nostalgic right there I remember back in October 3rd that was a simpler easier time as far as I’m concerned.

[2:06] In pandemics days it feels actually like it was six months ago so there’s these pandemic time frame is very strange.

[2:12] Well yeah because I feel like it does both simultaneously like I feel like time is going really fast in one way and time is going really slow in another way someone’s going to best to me like this is the world’s worst version of Groundhog Day.

[2:26] Yeah absolutely yeah not a lot of getting out and doing different stuff so so yeah
so one of the things that has changed in the last 45 days and I’m curious to hear your take because you have access to all kinds of
scientist that I don’t have access to but you know the pandemic is kind of in a search mode right now we’re at near-record cases in hospitalizations there’s lots of areas talking about shutdowns I saw Chicago you’re not allowed to have Thanksgiving
so I’m sorry to hear that so if you want to fly North Carolina having Thanksgiving with us you’re welcome to but anyway you know if we do go into more lockdowns that’s going to cause more
online shipping which which could actually worse than the problem that you and I have been talking about.

[3:10] Yeah no the mayor I’m not even sure you’ve heard this yet but the mayor of Chicago just imposed a full lockdown on Chicago effective Monday.

[3:19] Okay I did not hear that I knew that they were guiding that you weren’t supposed to have Thanksgiving guests and stuff like that but it was a full lockdown.

[3:27] Yeah I think they’ve they’re coming out with an alternative phrase to lock down like advisory or something but it basically is the same thing yeah so it’s,
it’s very much a Debbie Downer and it’s funny because you know I’ve been doing a lot of briefings on covid now for a long time like literally over 300 briefings,
and early on we brought in this really smart epidemiologist to sort of advise us on.
The ways this could play out.

[3:58] His his name is Michael Oster home he he famously wrote a book kind of perfectly predicting covid in like 2017.
Which unfortunately has all come true and he’s been like.
As far as I’m concerned totally spot-on through this whole pandemic so far and as a result of him we’ve given some really good advice to clients that’s.
Worked out as well as it could so the reason I bring him up now is two interesting things have happened this week.
Joe Biden has appointed him to his covid task force so I lost my epidemiologist to the president-elect,
depending on how you count and,
then he made news like literally today because he Michael did a press conference and he said yeah I probably think we should have a national lock down for six weeks which.

[4:54] Like the rest of the Biden team quickly disavowed because you know nobody wants to be attached to that kind of extreme.
Extreme measure but it really struck me because dr. oh snowman home has been I would say very middle of the road like he’s definitely not a we should just focus on on.
Health and close everything down and not worry about the account why he’s very focused on.
The cost reward of every activity and he has like you know some really smart thinking about.
When you should close schools and when you should open them and he’s not a big like blanket.
Shut down kind of person and so for him to call for that despite the fact that it.
It didn’t have any good Optics is like frankly it’s a little concerning because he’s been pretty pretty accurate so far.

[5:48] Yeah yeah so so maybe this is good time folks are just learning about shipageddon to go through the setup if you want to kind of walk through the the premise of why we raised the alert way back in October 3rd and,
if anything I think you and I both agree that it’s even more likely to be a problem that we’re going to walk through some of the math on that.

[6:10] Nice I love it when you do math.

[6:12] Do you want to do the setup and then I’ll do the math.

[6:16] Sure so add its most simplistic because of covid people have been selling a lot more stuff online and so we’ve had this e-commerce Peak,
that started in March and for a lot of e-commerce sites they’ve been doing.
Cyber five level sales volumes every day since March so way you know higher volume than we would ordinarily have and now we’re coming into the actual cyber five which ordinarily has this very high peak,
and so the way to think about this is.
One would expect a pecan Peak for this holiday you know so unprecedented high levels of e-commerce sales.

[7:01] And that was really even before we had a full appreciation for how South the pandemic my turn right so now that the pandemic is really kind of re-emerging in a in a pretty severe way,
that would in theory Drive even more people the e-commerce oh so you know the the simple-minded.
Um model might be oh we’re going to sell a lot less stuff in store and we’re going to sell a lot more stuff online that we have to ship to home,
and the huge fallacy in that thinking is,
that there is an unlimited shipping capacity to ship stuff to people’s homes and as we frequently talked about on this show,
UPS and FedEx don’t have enough capacity to handle the organic growth that happens every year on holiday.
E-commerce tends to grow at like in Old Times like 15 to 20 percent holiday micro 25%.
And shipping capacity is Max shipping capacity is growing at like eight percent so we already have this misalignment.
Now in the covid year you’ve got this pecan Peak there’s just simply no way the US Post Office you at FedEx and UPS,
can ship all the additional packages that people would want so so we’ve called that problem shipageddon that there’s going to be a lot of demand for online sales and there’s not going to be the capacity to fill it.

[8:24] Yeah and if we you know if this is always hard on our podcast but if we can draw a chart in your mind you know normally so in Q 1 of this year e-commerce was chugging along at 15% which was great and then it accelerated to like 40
to 45%
now in Q3 we don’t have the gold standard data yet which is the Census Bureau who’s also been on the podcast puts that out,
and if I’m remembering that comes out next week right.

[8:52] It’s a week from today it’s there a next Thursday.

[8:54] Yes and Jason gets pretty giddy at this time of the quarter when the data comes out so you’ll have some sleepless nights between now and then and they don’t call him retailgeek for nothing,
and but we do have Amazon which which I kind of you as if those things aren’t lying than something’s wrong so Amazon came in at about 37 percent.
A little bit higher if you take out their offline component so so kind of
thirty-nine percent maybe even kind of low 40s so I think that exceeded I think a lot of people were expecting it to come down to more low 30s
but Amazon at least saw high 30s so there’s there’s a bracket there for Q3 where the your growth is somewhere between I’m guessing 30 to 40 percent.
And then the big question is what are we going to see in the 4th quarter well a lot of the models that we’ve talked about on the show like emarketer and,
a bunch of these they’re showing kind of.
You know loathe low to mid 30s so we could actually you know I think the data from Q3 May indicate that that’s conservative and then also
if the pandemic is resurgent that’s going to definitely prove those to be conservative so
you know so even that like even if it at 30 to 35 percent it was a problem and it’s going to become a much more severe peaky Peak Peak.
If we get kind of 35 to 40 percent bracket have you have you adjusted your thoughts for fourth quarter at all.

[10:24] Yeah so you know again it’s the you’ve hit two of the main factors there to other ones right so.
E-commerce demand is going to go up.
Overall consumer demand is likely to be pretty healthy it’s going to be in different categories than it ordinarily would so we’re going to sell less apparel,
um we’re going to sell less less luggage than we ordinarily would on a holiday but we’re going to sell way more groceries than we ordinarily would because people aren’t going to go to restaurants and we’re selling a lot more Home Goods,
then we usually do because people are spending their vacation money on improving their,
their homes and then we do have this once every three or four years cycle that’s happening this year with Sony and Microsoft post for Leasing.
Major Video Game platforms which is really going to give a goose to the to the sort of Digital entertainment category so consumer demand.
We’ve always said is going to be pretty healthy in spite of the pandemic that still seems like it’s holding.
You’ve got finite capacity to ship to them a lot of retailers have dramatically improved their ability to fulfill e-commerce orders from stores so that’s going to.
Help them but then the last problem is retailers also have.

[11:42] Less inventory than they would like they both their financially conservative and bought less and now where we have really constrained.
Capacity to ship stuff from China like all the ships and boats are full and you can’t book partial,
containers right now and when you do find a way to ship stuff it’s really expensive so a lot of retailers are just worried that they’re not going to have a big enough supply for demand which is going to.
Is another artificial constraint on what sales are so you you bundle all that up and it’s it’s there’s more uncertainty in this holiday period than we’ve ever had but I still think it’s going to net out to be a pretty healthy holiday.

[12:24] Okay so anything else on the set up or you ready.

[12:30] Think we’ve beaten it to death I want to hear the math.

[12:33] Well one other thing I did forget to mention there is Amazon very again this is if you haven’t tracked this so Amazon very cleverly,
I think it’s 18 months ago maybe two years now,
they realize this they could see the lines were going to cross right they could see that even they were set they were eating up enough capacity with mostly ups and USPS a little bit of FedEx that they were going to,
they were not gonna be able to ship packages because of that,
so they developed their own direct-to-consumer delivery mechanism through this DSP program which is delivery service provider so.
So if we kind of do the math on that Amazon can Flex that and in my day job I actually have some kind of insight into this where we are seeing dsps adding trucks at a tremendous pace,
even unbranded kind of wacky stuff like.
Just random minivans and anything that will hold a bunch of packages right now so Amazon controls their own destiny so I think they’re actually going to be the least impacted and then you and I differ a little bit on this so I’m curious where your where you are now that we’re 45 days into this.

[13:42] I kind of feel like the what I would call the larger direct folks so let’s let’s think of.
I don’t know what’s a good example Walmart you know forget the store part of Walmart for a second that will be a stopgap a release valve also but even they can go by capacity from I don’t know if they use FedEx or UPS.

[14:06] Yeah or chewy I just saw a FedEx truck full of chewy stuff the other day so they can do is they can kind of this is called a quota so they can just go and say I’m going to go pre buy a bunch of capacity from you.
And even though the rates have gone up.
So so I think they’ll be okay and then if you’re omni-channel you’ll be okay because you have stores so in my mind the ones the folks that are going to suffer the most from this are going to be the smaller Merchants they rely heavily on USPS because the USPS.
I don’t I don’t think they’re adding capacity at all if anything I would guess they’re losing capacity.
And you know so that in my mind is the eBay sellers the Etsy Sellers and the Shopify audience they largely do
they are the biggest users of USPS in the data I’ve seen and I think that they would be kind of most at risk because they don’t have the heft to go out and.
A USPS doesn’t have a quota like thing where you can go buy some capacity and then be they many times don’t really use FedEx or UPS so so I kind of think that’s the segment that’s going to be the hardest by shipageddon have you you changed your thoughts on
who’s going to have the most impact.

[15:11] Yeah so I sort of Saw differently than you and I still do although I feel like it’s it’s.
Dissipated slightly so the hundred percent agree with you the big shippers like all signed up for a quota right in the in FedEx went to Walmart and said hey,
here’s how much you shipped last year here’s how much we can offer you this year do you want to buy it right and of course Walmart and everyone said yes,
um but that that compat quota that they signed up for was essentially a peak it wasn’t a peak on a peek.
And so my hypothesis is Walmart is going to have much more demand than the quota they were able to buy and the Ant,
Walmart’s not going to get offered the ability to deliver more packages than that quota like FedEx is what are you going to say no.

[16:01] FedEx doesn’t want to be the Scrooge that misses Christmas for a bunch of these packages so my,
my original premise back in October was,
the big companies that have all the traffic the Amazons the Walmarts the targets they’re going to get first bite at all the consumers and they’re going to sell all they can but once they hit their quota and they have to start turning away customers,
that those customers are then going to turn to less traditional e-commerce providers that maybe haven’t consumed their entire quota so you might go to a,
an eBay or Bed Bath & Beyond or a Party City or some someone that maybe wouldn’t have been your first provider but you’re now looking for someone that has capacity after Walmart’s run out of capacity,
and so I thought it was actually going to favor them a little bit and once you get under a certain size.
FedEx doesn’t have the bandwidth to sell you a quota so the small shippers actually don’t have a quota and so I thought that would be an advantage and so when you think about.

[17:03] Non FBA sales on Amazon and you think about all sales on eBay.
It’s not a battleship of shipping it’s a bunch of little rowboats of shipping that each have their own you know amount of capacity and so I kind of thought that that was.
A nice redundancy that you know they would get a nice kiss from this but two things would happen the shippers are smarter than I thought and they’re constraining the small guys to number one,
back in like July they stop signing up accounts with small guys so if you didn’t have an account you couldn’t start a business and start shipping,
um they are limiting the amount of packages they take from those guys they are pushing their cut-offs for shipping way earlier on those guys and,
another big difference between the little guy and the big guy is a lot of the big guys are okay if historically been okay not.

[17:58] Making a huge profit on e-commerce yet right and so a lot of the big guys shipping is Express Ship 2-day delivery which is very expensive.
The smaller sellers all have to have better profitability in unit unit economics so they either use US Post Office like you mentioned or they use what I call in injection shipping method which is like a hybrid where,
um maybe it flies on a FedEx plane and then gets delivered by USPS driver.
And so those are the most economical shipping things they’re also the slowest and are going to be impacted by the earliest cut-offs so.

[18:39] Well I think for those systemic reasons the little guy isn’t going to get as much of a kiss as I originally thought so I feel like the pain is going to be more evenly distributed.

[18:50] It says it’s a really long way of saying that you’re wrong.

[18:53] I’m it was actually my long way of saying I’m less wrong than you but okay.

[18:56] If I was this all right we’ll see we’ll have to look at the the shipageddon wreckage and see what we can learn from it and do a post-mortem.

[19:09] There’s going to be a bunch of great artificial reefs as a result of shipageddon.

[19:12] Okay so one of the things that I’ve been working on and shout out to our friends at e marker specifically Andrew lips semen,
so the I think you can actually do a model of this and I’ve been working on this and will provide this to listeners through all the social media early next week.
So but I want to talk everyone through through my thinking here to just kind of put some numbers on this kind of conceptual thing we’ve been talking about.
And just to boil it down when I’ve modeled this the problem really comes down to the Cyber five and,
let me walk you through that so if we look at e marketers model they have over that five day period they’re projecting 39 billion and gmv and that’s about 40 percent year over year than last year.
Um so that’s that’s pretty good you could argue that it’s high but you know I think they have that actually you and I have looked in that pencils with a lot of other things that are out there.
The peak day is Cyber Monday still and it’s a big one and it’s you know you can kind of think of it as.
Amongst the Cyber five yet Black Friday having a pretty big blip and that’s going to be actually think they’re probably underestimating that because I think Black Friday will be bigger because all the stores are closing on Black Friday and then we have these lockdowns so I don’t know what that’s going to do but.

[20:34] So I think this could actually be worse but but bare with me we’ll just stick to their numbers and then you have Cyber Monday as they’re really big a kind of over 12 billion going out that day.
Okay so roll those up together you got about 40 billion just to use a loose number if we assume an average order value of,
you know how many how do we get from boxes from dollars to boxes or packages we use a range of 50 to a hundred dollars I think Dentistry standard 75 right at the midpoint but I kind of like to do a book and on these these models.

[21:05] So with those bookends you effectively from cyber five are going to have 392 780 million packages so think of that that’s our supply.
That we have to put through the supply chain to get out to customers now let’s look at this this pipe we’re putting things through or the capacity.
If you look at the reported capacity from UPS FedEx FedEx has to networks they have air and ground and then the USPS and then Amazon.
When I roll that up you have kind of standard capacity 44 million packages a day.
But then they all do go into a search mode for the holiday so that UPS CEO was on for example and she was on Mad Money it was actually a shipageddon type segment which was kind of interesting,
and you know she was talking about a bunch of new sortation machines trucks all this kind of stuff.
There is a surge Sousa Q3 is an affair comp so I’ve read a bunch of these reports and they all kind of mentioned it in their Q3 reports and I dug into their.
You want to do the math on that the best I can tell and I’m being super generous here is that you know on average they have a 44 million a day capacity and I think that surges up to 75 million so that would be a seventy percent surge,
I think that’s an aggressive number I’m not.

[22:24] You know I feel good about Amazon being able to do that I’m a little skeptical it’s hard for me to tell about USPS I think they could bring it down to more like 50% but will will be generous so so so there you go so keep that number in your head 75 million packages.
So we just do the simple math and we’ve got this bracket of the supply of 392 780 we’re dividing by 75.
You essentially can see the Cyber five in the best case scenario will take about six days to clear through the system.
Um in the worst case scenario I it’s not the worst worse but a near worst case scenario.
If it’s 780 million packages then that’s 10 days so there’s this kind of five to ten day.

[23:05] Now the now the the trick here is that’s the simple model I wanted to walk you through just kind of your head around it so but.
The reality is we’re going to start the Cyber five and the pipes already going to have some water in it right so if we use this kind of mental image of there’s this pipe out there and I’m trying to jam you know all these packages into their the pipe already has.
Limited capacity does not have a hundred percent capacity because there’s already packages that will be coming in it through the ordering that happens before Thanksgiving if.
You know it this is where I haven’t spent as much time modeling but if we’re kind of yeah my best guess is we’re going to be somewhere between 30 to 50 percent of that capacity will already be being kind of consumed so it just ends up pushing things out another three or four days.
So when I boil all that together I see a scenario where the Cyber five which ends on Cyber Monday the 30th it could take until December 5th to clear that out and that’s being I think pretty optimistic.
Take as long as December 10th clear all that out and even like December 12th so and then you know what makes this worse is.

[24:16] People aren’t going to stop ordering on Cyber Monday right there’s there’s going to be the next Tuesday and and whatnot in so,
the analogy I like to use in this is maybe something from the southeast is there’s this whole snake Kaneda Pig but it’s going to take it a while to digest it so,
so I’m really worried the Cyber fight when I’m bottle this out I’m worried the Cyber five puts jams into the supply chain this 10-day.
You know amount of volume that’s going to take a long time to get to the system and it’s just going to make it that much harder to clear out so.

[24:50] Yes so that’s I’m going to be putting out a more detailed model happy to share that and get the you know all the folks in the social media World kind of poking holes in this but that’s kind of where I’ve come out on the model.
What do you think about that does that pass the Jason sniff test.

[25:07] It does prove your point like there’s you know some of that capacity is going to be full before it starts and is going to continue to fill after ends and what’s interesting about that is if you play it out in your scenario
you you’ve worked through that that pig if you will like.
Around the week of the 10th through the 15th and guess what all the carrier’s cut-offs are for holiday this year.

[25:34] I’m going to guess the 10th to 15th.

[25:36] Exactly so you’re really flirting with like packages that come in at the back end of that that cyber five,
missing holiday and for sure you’re flirting with everything that gets you know ordered after that missing holiday.

[25:52] Yeah.
Yeah it’s going to be interesting and if we have a bunch of store closures where we have been kind of assuming there would be a stopgap there,
you know if we go back to the the worst part of the pandemic the only things that were really open where Walmart and Target right because if I recall
Best Buy was totally closed for a while so and it’s because they had grocery right so it’s all but grocery
yes so that could be if we get to that type of scenario even if it’s going to be kind of regionalized to like some major metros like like La San Francisco New York and Chicago
Zach be pretty cataclysmic because I’ve been kind of assuming by online both this and and curbside would,
would be a stopgap for this and if those things aren’t available that could play a pretty big role in this as well.

[26:45] Yeah although I will say even in the first shut down a lot of Opus was able to stay open so I Best Buy shut down but but curbside was still running.
Um during that shut down and it,
it does feel like even if things get really bad in the pandemic it it’s going to be a more surgical version of a shutdown that would play out this time so I like I do think a lot of that release valve is still going to exist.

[27:09] What other so you spend all your days hours and hours and sometimes way into the night with our friends in Australia and other countries talking about this what what are you hearing from the retail digerati out there.

[27:22] Yeah well retailers are super nervous they still are not you know comfortable that they have good visibility to have this as all going to play out like obviously,
and we’ve talked about this on past shows in many ways you know retailers have started promoting and trying to drive holiday,
um in October somewhat triggered by Prime day being in October and a very common theme we’re seeing is every retailer communicating some flavor of shipageddon to their customers,
and begging their customers to order early and while that.
Those messages are getting a lot of play and UI gets getting covered a lot on the major news programs and all these things,
um I would say that so far indications are that consumers are not buying it.
So we’re seeing some earlier ordering but we are not seeing enough earlier ordering that it’s going to dramatically change the shape of holiday so so you know this is.
It’s looking like it’s going to play out in a challenging situation like some some kind of random Trends stuff that we’ve we’ve been seeing is you know,
tons of retailers are communicating their cut-offs and they’re telling people that they’re going to have more.
Um that they’re going to need to order earlier this year and that they need to be you know order earlier they want to be safe I think one of the most extreme versions We saw was Abercrombie & Fitch put out December 4th as their holiday cut off.

[28:50] So that’s super early and way before the carriers have worked through their their cyber five,
surge in your model,
um we mentioned earlier you know that most of the carriers have a slightly earlier cut off this year than they have previous years so,
it does vary depending on shipping product and which carrier you’re talking about but in general you can think of ground shipping cut off as being about the 15th of December,
um if you are using one of those Hybrid models like sure post or you know when it’s a combination of air carrier and a grand carrier,
that cutoff date becomes like December 9th and those two products ground shipping and injection shipping are the cost effective ones,
if you’re using a 3pl to ship that 3pl wants,
a buffer before they get it to the carrier so most 3pls are telling their clients hey your cutoff for taking orders needs to be about the 6th,
and that’s where you get.

[29:53] Cut offs like the fourth the Abercrombie is is pitching and then there’s been a bunch of other industry interesting things that have happened,
um so FedEx has added an extra day to a lot of their ground service levels meaning it takes a day longer to deliver,
and that has a lot of ramifications one of which is it know a bunch of zones that you could ship FedEx and qualify for self-fulfilled prime.

[30:22] No longer qualify for self-fulfilled Prime so there’s a lot of Amazon Shoppers that try to use it.

[30:28] SFP and they may have relied on FedEx ground for these you know one and two Zone shipping,
um and now you know starting in November that that is no longer eligible for Prime so that’s a big deal,
um not only did the quote the shippers all go to the their customers and say hey you have a maximum quota you can ship they also said and we’re going to charge you more right so on average the average parcel is about two bucks more expensive to ship than it was before,
um so you know that puts a real strain on margins,
we talked about a lot about the shipping constraining stuff but the other thing here that’s that’s increasingly scary to me is the lean inventory levels that a bunch of retailers have had,
Doug McMillan’s done several interviews where he said there’s a bunch of categories were Walmarts not going to have the inventory that they’d like to have going in the holiday,
um Jeffrey’s one of the analysts that we follow pretty closely you know kind of.

[31:23] Issued a report and the title of the report was empty shelves and rated store rooms and they’re saying that you know it’s going to affect a lot more categories than just grocery over holiday,
the international shippers are all saying that like hey basically all the capacity from China is gone so that you know there no more boats there no more containers,
if you don’t have enough inventory on your shelves right now you’re not going to get restocked or replenish.
And then you’ve got you know the two biggest retailers out there Walmart and Amazon that are kind of uniquely position with some of their own capacity Amazon you know for their own home delivery,
and Walmart with their you know a large Fleet of stores they can deliver from.

[32:08] To put that in perspective one of the things Walmart announced this week was that they’re opening 42 more what they call pop-up fulfillment centers.
And the way they’re able to do this is Walmart has a lot of store fulfillment centers centers that are designed to ship pallets to stores,
and what they’ve done is they’ve written a bunch of software to put a bunch of new hardware and they’re converting a corner of a lot of those store fulfillment centers to be,
consumer fulfillment centers that ship each is instead of pallets so they’re dramatically bolstering their fulfillment capability in their ability to Leverage,
ground shipping and and u.s. Postal shipping and then you know you mentioned Amazon made a big investment.
Last year Amazon added 15% more capacity fulfillment center capacity than they did in 2018.
This year they’re adding 50% more fulfillment capacity so they’re doubling the size of their Network which was already vastly bigger than anyone else’s Network.
They spent nine billion dollars in capex just in Q2 on fulfillment and that’s all paying off now so,
we’re going into this holiday with Walmart and Amazon having a lot more capacity than everyone else so it’s you know there’s a lot going on right now it’s going to be really complicated holiday.

[33:27] Yeah yeah so so that’s the set up the model and what we’re seeing retailers do from a communication standpoint and then
because we originated this you in are getting a lot of questions of okay I’m a retailer how do I get this and you’ve hit on some of these but I think it
it kind of bears I always like to instead of just ringing the alarm Bell here I think.
It behooves us to give people some advice on how to handle this shipageddon situation so,
you know the Doomsday scenario is you have a bunch of people that order something on 1220 and this is that.
That’s this is the Hallmark gift for their kid or or whatnot and it doesn’t arrive right so that’s what you want too.
That that’s a very unhappy customer situation and should be avoided at all costs it’s much better.
To say I’m sorry you missed the shipping cut off then into you know over promise and under deliver so-so.

[34:35] But to your point Jason there’s not a lot of data on this so one of our commitments is we’re going to be keeping it pretty close eye on this.
Another two other things just to inject here before we go into mitigation strategies.
Would you have this virus coming out or vaccine for the virus not clear what supply chain it’s going through or if it’s going to be an impact a lot of people have raised that as a potential issue I don’t I kind of.
Handicap that pretty low so like sub 10% impact but one thing we are seeing is.
People aren’t going to be seeing as many relatives and going through their normal I’m gonna go see my aunts and uncles and all this kind of thing so there is going to be extra capacity in the system even above and beyond what we’re talking about from people shipping gifts around that.
Yeah you wouldn’t have before so that’s a wild card actually score that one pretty high it’s going to eat up some capacity I don’t think it’s gonna be like Cyber Monday levels or in it.
Without you know the the biggest ones that I’ve been telling folks is you know.

[35:38] There’s this game of chicken with the consumer where we’ve trained them since Cyber Monday was coined that that’s going to be our best deal and we all hold that deal back for Cyber Monday and Black Friday somewhere in there.
Um so if you can and I know we’re up against limited time here but to the extent you can say to them this is going to be our best deal and be honest about that I think that helps,
I’m on the board of one company that’s tried this and they are having pretty good success with it they’ve had to kind of message it three times for it to land,
because again you know you build in these behaviors over years and it’s hard to dislodge them,
so that’s that’s one and then if you are using cyber five as your best deal I would communicate that again just so people don’t think,
okay and then any kind of you know Communications you can have that are very open and crystal clear with folks you don’t want to overdo it but,
you know if you do learn that that window is closing in the more Communications we’ve seen like the Abercrombie is a really nice Banner that that is pretty highlighted this doesn’t have to all be email marketing and that kind of thing.

[36:45] Another one is you know I order a ton online I just got like a new Wi-Fi router and it came in this giant box I was like what.
Did I order and open the box and you know it’s like 98 percent are two percent item,
so this is the time to get really smart about putting more stuff in your boxes.
Running any kind of promotion where you know if you if you don’t have a free shipping that makes this hard obviously but if you do charge for shipping,
some kind of a threshold get that average order value up get more stuff in the box that’s going to be a smart thing to do,
um I know a cello visor this is kind of like 10 years ago.
We started offering for our customers kind of this window or we could look in our software and we would actually see it wasn’t it wasn’t huge but it wasn’t also nonzero something like 5% if we kind of looked across a 24-hour window,
consumers would order multiple things and then but they put them in separate orders so if you could kind of do Consolidated shipping across a window,
and kind of see that and say hmmm Jason just ordered two things from me in the span of eight hours I’m going to put those into one box little stuff like that can can start to move the needle here.
What are what are the things that you are recommending out there Jason.

[38:02] Yeah well there’s a lot of tactics but I’m not throw one strategy out first which is hard for some people to hear,
In a previous year we acted as if we had unlimited capacity so you tried to collect as many orders as you can most retailers are going to max out their fulfillment capacity this holiday the big ones are for sure,
and so what that means is you should treat your sales wildly different like if you only have a finite number of slots,
you want to sell those slots to the customers that are most profitable right and so what that means is instead of offering everyone free shipping,
you only want to offer free shipping to the most profitable order so this is the one holiday where,
um you know you really.
I do want to think about things like raising your shipping cut-offs and like having a higher threshold for free shipping for sure.
The you want to be more careful about getting really marginal erosive with your promotions I could just doesn’t make sense to,
race to the bottom with a super low doorbuster deal just to get the order,
when you know you’re not going to be able to make that up later because you only have a finite number of slots so from a strategic standpoint I’d say,
like really think hard about your pricing and your promotion strategy.

[39:31] Under this new paradigm that you only that you are not going to sell as many items as you would you would like to ordinarily are going to be able to.

[39:40] Via these channels so that’s the strategy you you mentioned,
the the messaging and the most important thing here is not to surprise customers and so we want to be as consistent and transparent and overt as we can about the messaging so you mentioned banners you definitely want to have,
some persistent messaging on your website that you know it’s your version of the due to increased shipping demands delivery times are longer than expected please allow X number of days for delivery right like that,
that needs to be part of your user experience and it needs to show up.
Not just one place on your website because you have to remember not everyone starts at your home page a lot of people parachute into a product detail page from Google or a category page so this really needs to be ban or messaging that shows up.
Across all the different page Types on your site.

[40:35] Everybody’s doing early Black Friday to try to spread out that demand one frequent listener the show Andy a key smart like I got his,
email is probably one of 40 in my box right now that are running early Black Friday messages and I’ll just give you an idea of what the tone is.

[40:51] They’re you know they make this cool keychain product and they’ve sent an email hey we’re starting our early Black Friday sales now we’re expecting a huge surge in demand for Christmas,
and since a lot of physical retailers are closed and the postal system is really jammed up with e-commerce packages right now we want to make sure you have as much time as possible to shop and get your gifts so here’s our Black Friday deals,
on Tuesday November 10th right and so they’re they’re doing everything they can to pull in that,
there’s orders there cut their explicitly labeling It Black Friday deals and that’s to try to combat this psychology that if you just say it’s a sale then people still assume there’s going to be a better Black Friday sale,
later but if you call it your Black Friday sale now it helps land that message that this is your best deal.

[41:44] You know once you start getting into the order funnel,
it becomes super important to have custom messaging right so if they’re known customer and you know where your shipping,
you want to give them really accurate information about not when you’re going to ship it or what shipping method you’re going to use you want to give them really accurate information about when they’re going to get it if they complete this order today,
and so you know you start thinking about this whole discipline that we call delivery experience management,
and you know that it would really be huuu to have a subject an employee dedicated to crafting the delivery experience,
that you guys offer around holiday there are now a bunch of vendors that specialize in helping retailers with this so I think of companies like.

[42:33] Navarre as a delivery experience management platform or even a,
a more modern like cooler one would be like convey which is get these are companies that do have a couple of things,
they customize the messages that show up on site and in all your transactional emails to tell customers,
when they’re going to get things they help you pick.
All the different shipping methods and carriers to optimize them for each customer and then most importantly they use,
aggregate data from all their customers to predict when the carriers are going to deliver on time and when they’re not and they,
they can use that predictive model to pad the delivery and Chip have earlier cut-offs when that’s appropriate,
and when the products already been sold and they predict that stuff isn’t going to arrive on time,
they can message it for customers and so the what can happen there is you proactively tell a customer that something is going to arrive late but it’s still going to arrive before Christmas,
you can dramatically reduce what we call the Wim oh calls which is the where’s my order calls which are super expensive problem for customer service when stuff doesn’t show up when it ships.

[43:51] For sure you need to message all this on the checkout pages and the order confirmation page and then you need,
a ton of transactional emails that message all this right so you’re going to email a shipping confirmation when you ship it you you should if you’re not you should be thinking about emailing delivery confirmations when it gets delivered,
if there’s a lag between when they order it and when they’re going to get it you might think about some interim emails where you’re communicating the ownership experience to the customer so you’re telling you know you’re giving them some install instructions or some Pro tips or things,
find some other reason to communicate with him remind them when to expect the package this is the time to over communicate all this stuff,
you for sure want to think about offering helping customers sign up for the carrier’s shipping tracking services so they get you know this real granular data on shipping from the customers.
All of this stuff you really need to be thinking about to maximize.
Customer Comfort levels minimize surprises and really reduce return costs and customer service costs so.

[44:56] That’s for each individual order in terms of promoting products on your site you want to think about this kind of,
cascading fall back plan right like,
in November we can be offering free shipping and we know we can ship that stuff really cost-effectively a via ground or US Post Office,
once we start getting in early December we need to shift all our messaging to be promoting our express shipping options right because after that about December 10th,
the only way we’re going to get there on time is to day air shipping so our messages should change our pricing promotion should all change to reflect selling stuff that’s going to ship via express shipping.
Once we get close to that last week,
we want to shift to exclusively focus on promoting stuff that you can pick up in stores right so you know you want a bunch of promotional messages around Opus because you want to stop collecting orders that you’re going to put in USPS,
or in FedEx when you’re getting close to your shipping quota with FedEx and then,
you know for all those late gift-givers that are logging on on you know the Night Before Christmas hoping to get a package to someone,
what you need to have messaging there selling digital stuff selling like digital downloads gift card stuff like that that you can deliver digitally so you can still capitalize on.
On all that demand so those are some of the things I would be thinking about to mitigate shipageddon this year.

[46:21] Recoil I haven’t even heard of we know so I like it.

[46:26] Yeah it’s a you know customer service is super important and expensive service and everything’s constrain this year right so if you if you have been dramatically flexed your call center and you suddenly sell way more stuff via e-commerce.
E-commerce orders get more customer service calls right and when.
Shipping gets weight they get even more calls and so we need to mitigate all that stuff and we’re not even talking about the next front we’re going to have next month which is going to be the Returns on all this stuff.

[46:54] Coming soon returns yeah so you don’t want to have fomo with a WeMo so use your purpose did I use enough acronyms in that sense.

[47:04] Exactly and and if you can just get the world to buy Starbucks gift cards like Starbucks does that’s probably the best situation.

[47:11] Genius.

[47:12] Yeah it helps to have an addictive.

[47:15] Absolutely Wilco so hopefully you have found this deep dive on shipageddon helpful.