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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Now displaying: July, 2018
Jul 31, 2018

EP138 - Amazon Q2 2018 Earnings Hot Take 

This episode is a hot take on Amazon Q2 2018 earnings

  • Amazon Q2 Earnings Highlights
    • $52.9B, which is a 39% y/y increase
    • $2.98B in operating income
    • $21.8B in Free cash flow, less $11.4B in capex, $6.2B in lease repayments = Net $4.1B Free Cash Flow
    • AWS had a material acceleration up 48% y/y constant currency and profits were $1.4b
  • Amazon Web Services – came in at $6.1b – 49% y/y growth (an acceleration from last quarters 48% growth)
  • North America – $32.2B up 44% Y/Y, operating income of $1.84B
  • International  – Revenue increased to $14.6B (+21% Y/Y) for a $0.494B loss
  • Marketplace
    • 53% 3P by Unit sales
    • 3P Growing at 55% (constant currency)
    • Wingo GMV estimate -> 1p – $37.6b/ 3p – $71b = $108.6b GMV
  • Amazon Ad Business – grew 129% y/y  to $2.19B
  • Increasing likely Amazon becomes first $1 trillion dollar company

Jason & Scot will at eTail East in Boston next week.

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

Episode 138 of the Jason & Scot show was recorded on Monday, July 30th 2018.

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

New beta feature – Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 138 being recorded on Monday July 30th 2018 I’m your host Jason retailgeek Goldberg and as usual I’m here with your Tahoe Scot Wingo.

[0:40] Hey Jason are welcome back Jason Scott show listeners well last week the big news in e-commerce was Amazon 2nd quarter results but we didn’t get a chance to cover it live because you were down under.

[0:55] That I was I was in the future in Australia.

[0:58] I know he’s not wild you you cross the time zone when you go there and then you lose a day when you come back so yeah it’s very strange.

[1:07] I assume I’m now even.

[1:09] Yeah if you if you keep going though One Direction you’ll either turn time backwards like Superman to or I don’t know if you’ll arrive younger than when you left.

[1:21] Yeah I can certainly use that but I’m not currently that’s not a nephew and I’m currently experiencing.

[1:27] Cool before we jumped into Amazon’s second quarter deep dive give us some highlights of what you saw in Australia and you know
since we’re theming on Amazon here let’s start there Amazon has launched in Australia and I imagine that the Aussies are really fired up about that.

[1:44] Should I feel like that is the big change last disruption in the local retail Market I would also I also feel like the.
The sort of recovery from the global financial crisis has changed circumstances in Australia a little bit but it said it’s an interesting Market.

[2:04] For me it felt a little bit like a Time Warp like I was going back in time a couple years in retail.
They’re they’re not as over stored as we are so malls are still like a pretty popular concept like they don’t have too many into the overwhelming majority of malls or sort of the equivalent of what we call in a mall here.
And that’s a a growing in popularity shopping concept there in fact like there’s a premise that the.
Traditional department stores in in Australia are suffering a little bit because people are choosing.
Two shot multiple manufacturer stores in the mall versus going to a department store but overall.
It’s a timer for two reasons number one is Scott and I think you already know it’s an odd Market in that a lot of international retailers.

[2:57] Didn’t protect their IP rights in the early days until entrepreneurs from Australia would travel abroad they would see some interesting retail concept.
And they would bring it an unlicensed version of it tossed really on their own so you’ll see lots of familiar brands for North American Choppers like Target and Kmart.
Woolworths but they’re they’re not and The Branding may even feel very similar to what you would expect in the US.
But they’re not in any way related to or associated with the North American companies and in some ways it’s a Bizarro world so.
Like you know Kmart is probably more vibrant in Australia than Target for example.

[3:40] Which feels a little bizarre for anyone that you used to North America where that’s that’s definitively not the case so
to the retail Brands it takes a little bit of time to get your head around because they’re familiar and yet for him and then
you know I think it’s dorkly the market just hasn’t had a lot of competition like most of the Australian retailers have had to compete with each other but there’s not a huge number of them so they.
They don’t have direct overlap like you don’t tend to have two or three brands with the same product assortment in the same price point so i q no U tend to have.

[4:13] A retailer in every price point or a category killer in the in the category so you have like an office works.
As the category killer for Office Products but they don’t have.
A direct competitor like like Office Depot OfficeMax have a Staples here for example and then until recently the the currency exchange rate really sucked in so you didn’t you also didn’t have Australian consumers.
Shopping internationally via e-commerce and so really those consumers were kind of locked in the to the local choice there’s no they’re not a lot of international retailers in Market there’s a lot of international Brands and Market but not a lot of.
Wholesalers of other people stuff inside so I would argue that the market just didn’t involve really fast and now you got Amazon coming in there
I’m which is a big disruption and you have much more favorable exchange rate so you have.
Australian consumer shopping tomorrow in Hong Kong and and shopping pesos in in the UK and doing cross-border Commerce and things like that so suddenly there’s a lot of competition suddenly they’re all getting much more heavily disrupted and they’re all trying to figure out a lot of the digital things and Omni Channel things
that retard you know we’re more likely to be struggling with you know 2 to 5 years ago here in North America so it’s it’s it’s going to be interesting.

[5:36] Yeah so Channel advisor full disclosure we have an office in Melbourne and it’s a good region for us
Amazon coming has been great for us the one thing we’ve seen a ton of is there’s a lot of Chinese Imports and Australia and it frustrates Australians because they have this weird kind of this is kind of topical because the news did this weird thing where you can sell anything and Australia for $1,000 and under and there’s no tariff
but then Aussies can’t sell the China without
Tara so there’s like this huge disadvantage and it really always frustrates the third-party sellers I know they’re that anything can come into the country for under $1,000 without any kind of a
there’s just some guy text benefit almost like they don’t pay Australian tax on it or something and but then they always had a hard time exporting out of Australia so
did you hear anything about that or.

[6:29] Yeah so I feel like there’s a number of those sorts of things and
and you know I was really really is part of Asia is it is you know there’s it’s very International population and so there there’s a lot of Asian expats in Australia and said there’s
there’s it you know it’s it’s not just proximity to the good deals like there’s a lot of Asian brands
did it appeal to a big chunk to the local market in Australia,
alright are multi-generations in Australia there is this strong sort of national pride thing so I always feel like.
They’re they’re very there they’re more opposed to Outsourcing jobs and their there more favorable to.
Meeting RC Brands and products then some other markets in all markets we see.
That that does kind of stated preferences you no go away when.
When there’s economic pressure so I’m not saying Australians won’t buy cheap goods from China but I’m just saying,
they maybe put a little more weight on the local stuff then do Americans for exam.

[7:44] Call the other thing I’ve noticed in Australia is pretty much everything will kill you did you run into that at all.

[7:49] I was aware of that but I did not run into that I did not see any vocals boxing with kangaroos.
They’re made they’re probably were venomous spiders but I’m happy to report I didn’t see them which is all I care about like I just want to die in my sleep and not be scared the bejesus beforehand.
And I was I was mostly in Melbourne and Sydney which are you know big Metropolitan City so I I imagine the density of things that can kill you is more skewed towards public transportation in Alaska Critters.

[8:23] House on the Gold Coast in like a I thought I’ll go to the beach for half an hour or something and it like every other sign was like no warning Riptides warning sharks warning
life threatening jellyfish poison manowar’s warning piranhas like
ever in Australia.

[8:43] No I think it I think it was Jim that fact that there are there are like more deadly species in Australia than anywhere else and I think that’s particularly like the snakes in the venomous spiders and then is you mentioned a lot of the The Aquatic Life.

[8:56] Yeah they couldn’t tell hundred percent if they’re yanking my chain but the folks in the office for telling me there’s a venomous spider that hangs out in toilets
and like all Australians when they go to the toilet they will actually do a visual inspection for this spider because it will actually bite you in the bum and it can kill you if which is like a terrible way to got.

[9:14] That’s why I don’t know the weather know this but either they were totally yanking your chain or my house were much more happy for me to die.
I was not worried about that although I did Quinton Henley I did look in every toilet because I was I was constantly making videos trying to get some that were flush and counterclockwise in it yeah.

[9:33] Nice but still have to put those on the action.

[9:38] Exactly yeah the toilet videos yeah I’m pretty sure it’s like cow tipping.

[9:43] Cool any other exciting Australia highlights.

[9:48] Nope I mean people are super nice I had a ton of great conversations with retailers and I do think they care a lot about the customer experience and they care about winning in this
certavite in competitive market that there now in butt
you know just circumstances they they haven’t had the impetus to change quite as quickly as as some other market so.

[10:11] Well let’s jump right into the big amazon news with the Q2 Deep dive.
Amazon news your margin is there.

[10:34] Also serves a lot to go through so we’re going to contact what I call a peel the onion approach and start at the macro-level and then look at the different lines of business with an Amazon
we’re going to look at the cloud segment the add business
and then the US and international retail businesses as well as the third party Marketplace that’s a lot to cover so let’s jump in
from a macro standpoint the big story of Q2 was the bottom line.
And in fact the top line was a little bit below and the analyst estimates and part of that was due to there’s a lot of rule changes going on in the world of accounting.
Which is causing every company a lot of Heartache intimate with this unfortunately there’s this new accounting principles 606 which is making a.
We visit how they look at their different things so Amazon had to move some stuff from 1 P to 3 p which creates a revenue headwind because in 3p they only count about 10% of the revenue because it’s their Commission
CNN 1p the count a hundred percent so in fact Amazon actually missed the top line so usually if that happens you see this whole you know crater going to stock
but then that didn’t happen here because what happened is operating income blueway expectations so it came in at.

[11:52] 2.98 billion so that’s the third quarter that operating income was over 2 billion and it was just too shy close at 3 billion you know what would that be 2 million short short of that.
That’s a 375% year-over-year increase in operating income and then every segment Amazon reports on improved their profitability as well and will cover that as we get in
that represents a 5.6% margin and expectations was for 1.7 billion so this was 77%
above expectations which of these numbers is you know 1.2 billion dollars more than while she was expecting in his truck that is meant.
Amazon is I kind of caught this stair step effect so Amazon will.

[12:39] You know don’t don’t climb the stair and profits will go down and what they’re doing is
this business is very capital expenditure heavy right so you have the big capex is fulfillment centers which are not cheap and data centers which are also not cheap so Amazon and Fortune asked both because
derp derp those are the two core pieces of what they’re building so you can imagine the phase where they’ll build like 24 filament centers in 20 distribution centers and
the look massively unprofitable but then as those come online and they optimize them and they get
capacity then Revenue starts to kind of the the capex stair goes sideways and profit starts to climb and then Amazon will kind of go through another phase of of harvesting.

[13:28] Prophets and then after that they’ll say oh we need more data centers and fulfillment centers and I’ll have to kind of keep chewing away at it so we’re one of those Cycles now
I’m that that we’re kind of harvesting investment and what’s interesting is as they’re climbing the stairs every time they take a breather
the possibility is going up pretty materially and they’re doing it again such a big number you had so you normally people would scoff at a 5.6% total margin but they’re doing it against a top-line that.

[13:56] Massively large so 3 billion dollars works out of the bottom of that equation which is which is pretty incredible so
so that was kind of everyone was pretty kitty about that to see if they know they haven’t level in a very long time.
And then there was there’s a nursing backdrop that happened you were not show you sounded like you picked up on this but there’s this this whole kind of thing that’s been out there called Fame
search Facebook Amazon Netflix and Google and Google had pretty good results
obviously Amazon did and then Netflix kind of had a little bit of a
bad results at there they miss their subscriber growth number and then Facebook had a really really
really bad week last week so they
they had that kind of guy on their conference call so their revenue and profits missed an egg on a conference call and it essentially said look we’re going to reset expectations of Skyway
on Washington caught kitchen sink order the stock was immediately down 20% and unfortunate that kind of held there so there was this whole thing coming in so it’s kind of interesting to see Amazon really kind of printer.
A quarter and blow errands expectations.

[15:11] Boxer to put the F into Fang if you will.

[15:14] Absolutely yes Google kind of mess it up cuz they change their name to alphabet but everyone still calls it thing but it’s it should be either fan or whatever.
Santa hat
the another kind of interesting tidbit here subscription Services which is where Prime lives are there’s a couple other subscriptions on there that you can buy but that is primarily Prime Revenue.
That accelerated to 55% year-over-year growth which was good and then longtime listeners the show will no operating income and revenue are the measuring sticks that most other companies use but Amazon really uses.
Cancel that is a lagging indicator and what they really focus on is as more of a Ford indicator and it kind of has to do with the stair step.
I love you and I’ll G I introduced that’s free cash flow and what free cash flow does is it it kind of is an earlier way.
To the counting rules to kind of predict where.

[16:12] Profitability is going to come in so let’s let me kind of walk you through that I’m going to try that this always gets a little confusing so I think I’ve tried to boil it down here so when you when you just take what I would call.

[16:23] You got to go to this waterfall right so the top of the waterfall you have just pure free cash flow and that was about 22 billion dollars massive amounts free cash flow.
Then they go and they invest more Catholics right because Amazon is Never Off This treadmill of investing in capax just the.
So this quarter they invested only 11.4 billion and capex just hilarious because that’s probably more than.
People are spending in like last 10 years for like most retailers but that’s that’s so is a light investment quarter.
Do only 11.4 billion that leaves you with kind of 10.4 billion in free cash flow after the capex Investments then they’ve gone out and they have
you know some of these things that they buy they buy outright and other ones they leased land and what not to try to smooth out.
Cash outlay for data centers in fulfillment centers along with more with Revenue comes in so they have 6.3 billion of that they paid back in the quarter so really when you get all that out the cord which is free cash flow without lease.
When you take out least principal repayments was 4.1 billion so those are kind of the end of the metrics Amazon spends a lot of time thinking about what you could argue is.
That biggest number I gave you that 21 billion is really what Amazon focuses on because you know if you kind of go to this.

[17:45] Take a region like the United States there there’s they’re getting to the point where they really don’t have to go that many more fulfillment centers in it and in fact the profitability of the North America really kind of
pop this quarter will talk about it because of this they’re essentially it saturation so when you get saturation with some of these things that free cash phone number.
The top of that waterfall becomes the number because you pay off the cappex
pay off at Lisa’s now you’ve got all these fulfillment centers they’re producing Pan the free cash flow flows all the way to the bottom line so over the long-term you should see that gap between about the three billion dollar operating income in the $22 free cash.
12 close as a market matures that’s what gets Wall Street so.

[18:28] Not terribly excited about Amazon is these free cash flow numbers are are pretty amazing
and Amazon while they’re investing yeah I started that 21.8 billion + free cash flow and ended up with 4 there’s a lot of investment in there like 17 billion dollars with an investment
when there’s a day where they’re not making those Investments this is just going to eat a massively
kind of cash generating business which was funny we talked about it a lot on the show there still this overwhelming belief out there.
That either a olive Amazon is a profitable or that be the retail business is sustained just by the cloud business none of that’s true the retail business on its own as profitable.
Especially in North America and international it’s still losing money but that’s because certain markets specifically India
Scot amount but I think it’s pretty safe to assume there’s markets like
the UK and Europe for their probably look a lot like the US they’re pretty mature but then there’s a lot of markets and I including Australia even yeah I bet Amazon isn’t profitable in Australia so.
Just want to make sure we just spelled the you know that that whole incorrect urban legend at Amazon or its retail business are not profit.

[19:40] Yeah for sure and Scott correct me if I’m wrong in this but.
Even if they wanted to keep investing at this same Pace like they’re there is a scale problem right like it is you keep growing that Top Line cash flow that fast like there comes a point when you just can’t make.
The capex Investments at that same.
At that same growth scale if you well some people would even say like the stair-step isn’t necessarily intentionally that they’re taking profits but just that it
it takes them more time to retool and and scale the Investments at the same Pace that they’re there their top line revenue is scaling.

[20:19] Absolutely
let me have some you know so the most exciting line-of-business we’ll talk about is ads and you and I both there are in this world the nice thing about ads is it it doesn’t require any cat that’s right so it’s.
It actually possibly could be the most profit line of business that Amazon has and I I think.
Even though Amazon is closing are showing Dollar business
I think there’s probably the could be a joined our business there that a lot of people haven’t woken up to because unlike all the Amazon other businesses it doesn’t need data centers that doesn’t need for Film It Centers and it rides on top of those so it gets this kind of triple flywheel effect.
I’m from those Investments That Amazon’s making.

[21:04] Death of though this last reporting. You probably didn’t want ads to be the the dominant source of income you had cuz that that probably dancer Facebook Super Bowl.

[21:14] Yen one one sidebar is a kind of thinking there’s been a lot of interesting writing about this if your Facebook and Twitter is also in the same bucket Netflix will go in and it sits on it
stop living subscribers I don’t think those big deal but but the Twitter and Facebook their core bottle is under attack right because you have this whole attention to swinging very far away very far towards privacy with gdpr the whole Cambridge analytica
and you know so they’re core model is kind of under attack were there since Lee saying give us your data for free and we’ll monetize it by selling it to other people which which sounds weird when I say it like that that’s perfect
what you been doing all this time and you know so you have to I have to imagine
somewhere in those boardrooms people like we really need to find an e-commerce leg you know kind of a of Revenue here so I wouldn’t be surprised if we saw Facebooking and
Twitter got a lot more serious about e-commerce Revenue because transactional review is way cleaner from political economy misgivings than than address.

[22:22] Yeah for sure and I mean a ton was written about Facebook but I don’t know if you follow John Oliver
he has the Last Week Tonight Show on HBO and he did a hysterical honest version of the Facebook app.
Can’t completely describe an RPG rated podcast but you can find it all over the internet and it’s it’s definitely worth the watch is pretty funny.
But the punchline of the lad is Facebook we own Who You Are.

[23:02] So at the very top line for Amazon the growth was pretty big RightSource 37% year-over-year growth.
On the revenue and you don’t remember
remedy for for for Amazon doesn’t exactly equate to e-commerce DMV because they they do have some other businesses and in the revenues a mix of one p m 3 p but 37% growth.
You know for a company they’re sized you know we always highlight on the show that that the Department of Commerce in comscore sort of estimate all e-commerce growth in North America at about.
A 15% growth rate so you you have
the the biggest company in the space that represents more than half of all the activity in the space and they’re still growing at more than twice the the average growth rate which is pretty scary.

[23:57] Yeah a lot of people are starting to kind of wake up to this and you
you pricing all the headlines that you know Amazon what’s half of e-commerce and that kind of thing would which is true but if he Commerce is growing it fit.
15% and Amazon phone at 37% then you know
next stop 65% $0.75 85% 95% so we will later we’ll see
you know
eBay group pretty decently like eight 9% but then we’ll always here from Walmart and Target those kind of guys that they’re growing 30% shopify’s gmv is going 30%
and it always becomes this kind of question of who is who is growing at negative.
And e-commerce to kind of generate this 15% I always come back to that when I when I when I start to hear all these things come out of the quarterly reports I don’t have a great answer for that we’ve talked to folks.
Animal I believe the numbers are wrong out there and they don’t trust at 15% so we’ll leave that two listeners kind of decide.

[25:03] The glass little thing on the top level here is at Wall Street.

[25:11] You’re very quickly says wow that was great cue to tell me about Q3 so it’s very much a show me show me kind of a world there
I am the do that through guidance so Amazon’s guidance for Q3 was a little light on revenue and I think that this again was due to this kind of
Optical news from stuff from 1 P to 3 p but then the prophet guy that gave to Wall Street was wildly ahead of their estimates and this is why you see that
world of Wall Street you called us a beat and raised quarter that’s essentially what Amazon did is they not only did they being cute too but they all the analysts had to scramble and go out and say
the whole world of profitability Amazon has changed
what does that do for our bottles and minute is models are built off of operating income and free cash flow so you know I saw I saw price targets out there
2020 120 200 I think the highest I saw was 2300
I remember right around 2000 is when Amazon it’s $10 so yeah this is the kind of momentum here that that’s pretty interesting to see if this is what catapults Amazon there I don’t think I quite get there
but you know when Q3 comes out I think Amazon all indications are from third parties out there that they had a Blow Away Prime day.

[26:33] That could be if they were kind of being raised and 2/3 on top of this and especially on the bottom line then we could get that $20 by Lucy will have to July.
So probably be.
August 28th 23 or October 22-23 is probably when they’ll announce Q3 and I bet
that maybe when we kind of see the first trying to our company.

[27:01] Yeah and that’s a great reminder to me that we need to get started on the trillion-dollar sound effect that will need for the podcast from them.

[27:08] Yeah yeah I’ll have Jeff on he’ll be a big celebration party.

[27:12] Exactly I know he keeps asking but that maybe would be the occasion to finally let him on the show.
So one of the businesses in this number is of course the Amazon web services and
you know if e-commerce is doing pretty well against its competition amazon-web-services is doing even better right and is you is you mentioned you know one of the two common myths is that this is the only profitable part of Amazon that’s her to carries the retail part
as a reminder like this service want and really had like a 7-year Head Start before they developed any serious competition and today you have.
Microsoft and Google in particular you know fighting hard to catch up.
Spencer literally 7 years behind and I think there’s a Warren Buffett quote you know something to the effect of you really don’t want to spot Jeff Bezos so 7 years head start on anything.

[28:06] Yes all that was great.

[28:07] Which is a pretty good quote so you know again the circumstance going into this is.

[28:14] That Amazon web services is way larger than all of their competition combined and so normally you’d expect.
That’s great but it should probably be harder for them to keep growing at this pace and the bad news for the competitors is they did keep growing at that pace and in fact there
their rate of growth is still slightly accelerating so
so they had like 6.1 billion in in revenue for AWS that’s a 49% year-over-year growth.
Which is an acceleration of of 100 basis points from q1 and you know that puts them at like at 24 billion dollar.

[28:55] Run rate.
And the operating margins are getting better so so operating margins for the quarter went up like a hundred 20 basis points
you know so you got margins improving on a big growth when you’re already like the.
The huge market leader in so that’s that’s you know pretty impressive and for sure those profit margins.
Are much higher than you typically see you in any kind of retail and certainly higher than we see an e-commerce or or Amazon so you know they’ve there pretty consistently in the
20 to 25% operating margins for the for the last three years on on Amazon web services which is
much more healthy Marge and then you’re going to see you in a in a retail bit.

[29:45] Yeah as a is a super geeky a fellow Super Geek guy I saw one analyst it did this kind of cool kind of.
Thinking on this
Amazon discloses some of the work load data so work load and growing at 49% workloads I think we’re going at like 60 70%
so what’s happening is they are getting
better at optimizing the data centers and handling those workloads with less capex imagine some that’s Morris law that kind of kicks in their butt
yeah I’m sure there’s some technology to I’m sure they’re getting good at your how do you spread these things across the field
data centers you know how do you buy more commodity Hardware there’s a lot of rumors that they were going to compete with Cisco because they
build your own network they do software kind of networking Stratus
infrastructure instead of Hardware so they were so they they were able to handle a tremendous amount of workload growth convert that into Revenue but then
increase margins more efficient
inside of the data center layer there in end of cloud services they’re providing they’re also seeing really good you know there’s this whole family of things people can use an and you know on the conference call they talked about they don’t get specifics but they said they were very pleased which means.

[31:08] Yeah it kind of Amazon body language must have been more than 10% kind of a thing you know of cloud customers expanding into some of these new Services they have so they have a lot of new scheme was database Technologies bi.
Call center Technologies and machine learning and Ai and they still seeing a lot of customers expand into those things which is which is new needs more Revenue per customer as well.
I bet they don’t really totally disclose that.
On your Warren Buffett quote one analyst had a clever thing it’s not funny they run out of superlatives here so he essentially kind of said I mean dang they they added an Azure I would just Microsoft clouds and a Google Cloud platform just in the last year so they you know
they’re just like every quarter they had like four or five JCPenney’s on on the GMC side there they’re laughing those guys so bad that they’re
yep there you go over your number added kind of just you know the year of your growth exceeded the two top competitors which is crazy.

[32:12] Yeah yes it it’s pretty scary.
And I hesitate to even call it a stumble the one slight bit of negative PR I’ve seen lately has to do with one of those AI Services they have a facial recognition service and there was a little bit of a stir
somebody use the Amazon facial recognition search service and ran it against Congress and it said Miss identified like a hundred and fifty of the congressman as.
Criminals and like I’m not sure anyone did the fact-checking like it’s possible that that just true it sounds like to me but.

[32:49] I’m assuming from the articles that that was a mistake like that really has nothing to do with Amazon web services it’s kind of the state of the.
The technology in the databases that all these guys used to train facial recognition.
But I did see them get some slightly negative Buzz there and then of course it is interesting retailers the one segment where you would expect.
Ews to have a little bit of head winds because Amazon is such a successful retailer if you are another big retailer that’s fine cloud services.
It wouldn’t be surprising to see them you know Skip Amazon even though they are the dominant player and we are starting to see that a little bit like it was more of a press release than.
Then any actual activity but on Friday this year Walmart announced a big partnership with Microsoft Azure for data services and I you know I presume that was designed to.
Somehow take some of the steam out of prime day which.
Unite I would argue wasn’t wasn’t very successful and then I know Google Cloud platform Services just had their annual conference and one of the big announcement today or was that that apparently for some time Target has been.
One of the main tenants on Google Cloud platform services so so it is too we’re starting to see some of the big retailers adopt some of the other class but your point like.
And not in the overall economic picture it’s it’s not making you in that tiny little dent.

[34:18] So moving on to another business that’s not as big as Amazon web services but pretty interesting is the emerging advertising business on Amazon and so you know what is regular listener I don’t know there’s a bunch of different formats of
of marketing opportunities that sellers can buy on the Amazon platform to improve visibility for their product in so that that generates
advertising revenue for Amazon in
Scot keep me honest here but they they want that Revenue into a kind of miscellaneous bucket they call other revenue and I I think we’re all.
Largely assuming that the bulk of of quote-unquote other revenue is this ad business but it but there are some other pieces of.
Of Revenue in that bucket as well do I have that right.

[35:09] You do and it’s kind of confusing so they they give you some tidbits on revenue and break out ads inside of other and then like I mentioned subscription services but because those things aren’t going quote material part of Amazon’s business the SEC doesn’t require
to break him out
and that in their entirety so ads end up being in North American International but AWS is all the way out because it’s pulled out as its own kind of operating its own p&l if you also unlike line business ads
we only know the Top Line we don’t know the profitability I think we all assume it’s probably.

[35:43] It’s hard for it not to be very profitable yeah.

[35:46] What is the extent there is no expenses psych are there are you at the traffic in the it just kind of like almost pure profit I would imagine so so yeah you’re right.

[35:56] So that so the number for that other Revenue grew a hundred and 29% so so she use year-over-year growth and I think cow and came out and said that their estimate for the annual revenue from this advertising service is now
8.6 billion in for 2018 and you know when they start a forecast that out there there forecast says
forecasting that that could be a 37 billion dollar business by 2023 which is the acceleration over.
Over their previous estimate from just a couple months ago.

[36:35] Yeah that’s a Facebook so this business will grow to be a Facebook by 2023 in 5 years and he had to nudge their numbers up because it’s outperforming what what they’re saying they’re so.

[36:46] Now we used to say.

[36:48] An Amazon fashion day could pull that in a year you know someone for years they could have added a Facebook.

[36:52] Yeah now generally when people tell that story they remind you that that that’s a 2017 or 2018 Facebook and the 2023 Facebook will probably also be a lot larger
but that’s may be less obvious this this week than it was last week so that is certainly interesting
not really related to their their announcement that there is other data out there to just sort of highlight.
What at what an interesting business this is you know if you’re doing a search on Amazon platform.
By definition you have really high purchase intent so the ads on that platform.
Are are likely to have a directors are much more likely to have a direct response then adds on almost any other other advertising vehicle.
And so you know Merkel consolidate the data from other clients.
Every quarter and they publish this this great compendium of a marketing stats and they would they were talking a little bit about the efficacy of like one of those signature ad formats on Amazon which is the Amazon headline search ads there’s an ad.
It shows up at the top of a search and they’re saying that like comparing that to a Google pla which is one of the the most Commerce friendly.
Appointments on Google that Amazon headline search get 42% more clicks and convert 3 1/2 times better than Google play so that’s.

[38:18] You know partly a definition of the of the shopping traffic than Amazon gets versus the more you know browsing and in general information traffic that the Google gets butt.
You know if if their revenue gets anywhere like Amazon or Facebook’s advertising Revenue it’s.
Its Revenue that has a much clearer Roi for the ad purchaser.
Then some of that that the ads that are purchased on the other platforms where you have to believe that influences eventually going to translate to purchases.
So I think that’s that’s super interesting,
and then you know somewhat in line with the other digital ad platforms like Google and Facebook is becoming increasingly clear that Amazon’s very interested in fostering a direct relationship with the big ass fenders and they’re really trying to bypass
the traditional agencies so you know I work for one of those agencies like that’s you know definitely not good news for that sort of old app Revenue stream
for the big big digital agencies as it increasingly seems obvious that you know if there’s only a handful of these big digital advertising platforms they make themselves really friendly today advertisers that you know they can make it difficult for the
for middleman to add much value.

[39:38] Free Colts those are the that’s the cloud in the ad highlights Witcher are in a driving substantial
beats here and then let’s dig in the retail side 2 on the third-party side
revenue from third-party seller Services grew 36% year-over-year which is down slightly from which it was about 40% of year ago so you know just kind of scale kind of slowing down I think
but again you have third parties are growing 36% year-over-year is not too shabby in a world of 15% and in fact when you think about it if third
prettiest girl.

[40:15] That fast then overall online sales for Amazon were about 18% first party is growing for a bit slower so the third party part of Amazon is growing substantially
Amazon does report the unit volume mix and the unit volume mix hit a new high water mark and Q2 of 53%
it was interesting it it kind of when you look at it overtime at q117 and it kind of this equilibrium of 50% and it stayed in that range all the way through 2017 and then here and
2018 it’s really kind of started to ramp up I think some of that was a couple things so I think
Amazon always loves for 3p to go through FBA if possible cuz that’s the best user experience and it
so I think Amazon and in 17 had vastly underestimated the the popularity of FBA with third parties
so they built a lot of fulfillment centers globally in Parsippany us to kind of catch up so it feels to me
it didn’t seem time they had some policies to kind of help drain some of the slower moving stuff out of a PA so I feel like the kind of used 2017 as a catch-up to get.

[41:27] APA right sized again counties in that stair step method ology profits took a hit from that and now we’re really seeing
creepy ramp up because I think there’s a lot more room in that PA to drive things
I do my own proprietary analysis of this and one I kind of peel apart the quarter
I end up with first party at 37.6 billion 71 billion for third-party so third-party is getting to be almost as twice as big as first party
so it’s your time looking at.
6030 Castle Cliff there I mean 6535 and I have three pgmp growing at 27% and 1p growing at 12% so this move between one p3p delete this a little bit
but adding those together to get 108 billion dollars of gmv for the quarter
which I think is the right way to think of Amazon and that puts them at a you know north of a 400 billion gmv run rate.
Which is essentially the size of Walmart we can compare Amazon’s GMB to Walmart retail sales which I think is the right comparison there.
On the US side to side Jason or you want me to jump into that.

[42:43] Sure I’ll hit the top on and you can add any any color but
North American revenues continue to be really strong so that there were 32.2 billion for the quarter that’s a 44% year-over-year increase and I I think that basically hit the Wall Street expectation
but they you know again you don’t improve the operating margin I think they beat their.
Their consensus estimates for the operating margin so again
fast expected grossing growth in North America and North America has been properly 17 consecutive quarters or.

[43:31] Yeah but I’ve lost track to being sweet.

[43:34] Yes but so it’s something something in that range.
Where you at we’re going to call it a 12 consecutive quarters of profitable growth in North America so going back to
positive profit in North America so that’s you know going back to the
the sort of old wives tale that they’re not profitable the retail business in North America on its own is a profitable business it’s growing robustly it’s not super high margin as.
You know most most retail is not super high margin but there’s not very many retards in North America
that it wouldn’t take the last the last 11 quarters for for Amazon’s business so North America is a very robust retail business.

[44:28] Yeah and if you look at the operating margin for that segment again operating margin is really a
trailing indicator free free cash flow would be better but they don’t break it out by a segment cuz you’re not required to file SEC but it improved from 3.7% bottom line profitability 5.7
in Washi parlance that’s a 200 basis point increase which is pretty material on a quarter to quarter so you’re really starting to see them.
Squeeze some some benefit there. Some of that is coming from the ad Revenue so that again the ad revenue does getting mixed into this North America piano
AWS isn’t cuz it said separate Simon so it is in their hind it’s helping
but it’s maybe a third of the profit comes from that business.
But I don’t think it’s fair to separate that because those two things are very much more intimately connected than AWS is essentially.

[45:24] Yeah and that I mean reminder that the ad business wouldn’t exist if they weren’t retailer driving a bunch of traffic to that site to shop for Stuff.

[45:35] You want to do International.

[45:37] No I’m going to toss it to you for the cool accent.

[45:41] Yeah yeah thanks crikey so.
On the international side if there’s any kind of blemish on this quarter it was International and then maybe the Top Line kind of being a little light but I think people kind of get the Top Line being of 1 Peter 3 p move and it is.
Truck drives Rockville police they’re okay with it so he International Group 21% year-over-year was largely due.

[46:08] A launch last year sometime that there anyways I’m so they had a tough comp in in a Wall Street.
ABS line but so is a little bit of white on the top line from what people were expecting it again on the bottom line it was good it was pretty strong so International has a loss so it is
she won the last was 4.2%
and then this quarter it was 3.4% so again kind of a really nice quarter-on-quarter Improvement but this is clearly a part of Amazon that’s losing money and
yeah for those folks that really want to find a piece of you found it so the international business of Amazon’s losing money right now it is improving its profitability pretty dramatically quarter-on-quarter so and Q4 it was down 5% in a lost 5% and then
yeah back in the 2017 it lost as much as 7% so it’s really kind of cut the losses and half in less than a year and you know I think we’ll see this at this kind of pace you could see International get profitable.
If you stretch get there in 18 but maybe by mid 1990 you know if Amazon opens up
Brazil in a more serious way there’s a lot of countries that are not in and or they do some Acquisitions so they’ve added some things like sukur that.
Could make it kind of go negative again they they will do that because I see it is as such a big opportunity.

[47:30] Yeah and I would just remind people of your thinking about this in terms of a traditional retailer very few
retailers that are wholesalers of other people’s stuff that sell third-party product had been very successful at expanding internationally so lots of retailers have success in their home Market
they say hey what time you getting getting saturation here we should expand in some other markets to grow our our total addressable market and they start opening stores in other markets and more often than not they fail utterly
or at the very least aren’t profitable and so like I would argue if you pull
Brandon manufactures out that sell their own stuff the the majority of retailers International operations are unprofitable and some much more wildly so than Amazon right I think an Amazon case what we’re still seeing is
is an investment that hasn’t paid off yet but there’s you know every reason to believe that it could just be early in the investment cycle and I
I think that compares favorably to a lot of traditional retail competitors.

[48:35] Yeah and the last thing here you know what Amazon is really good at is seeing something work in one market and rolling it out rap play the others I don’t know I haven’t tracked person where they are on the ad but I’m sure like in Australia they don’t have the ad platform active yet because they’re trying to get third parties ramped up
but you know what you can Dad is there seeing the ad platform work really well in North America I’m pretty sure it’s it’s.
Parody Future parody in England but I don’t think the rest of Europe is really been aggressively sold that
and then countries like India you know where the the type of a model this kind of hybrid ad and Marketplace model is is much more prevalent in Asian Alibaba really kind of
I read this whole concept you can see you know you can see International almost getting prop on the back of
rolling that ad platform out in a in an aggressive way and getting it into all these countries where it’s not and then getting it penetrated more intended the countries where it already is an English and whatnot so that’ll be interesting to watch.
It could even further because they don’t kind of tell us the breakdown of of that other line you’re my bet
be it’s probably 80 or 90% North America and very small International and I would imagine the international side to be as big as a North America side
just kind of just naturally so that ad business we could be vastly under sizing that add business even that kind of like that’s Facebook scale that the people are saying.

[50:04] Yeah and I I mean I would argue that the ad business is as robust as it’s getting it’s still pretty immature even in North America so there’s there’s certainly lots of room there
but you know this this whole metaphor of a flywheel like the one downside of a flywheel is it’s hard to start pedaling in the beginning until you get the momentum right and.
Why can’t a lot of these markets they’re still doing that initial pedaling like in Australia they really just want Prime so you know
a lot of the synergies that that all of these different systems than Amazon launches that ultimately turn into this you know Juggernaut platform ekosistem.
You know aren’t in play as much in some of these new international countries as have already played out in North America and so like overtime.

[50:50] They look those things could get fired up you know they can pour gas on Prime sign ups and in Australia for example.
Scot it’s going to shock you but it does happen again and we have used up all of our allotted time we are at minute 50 of our 30-minute highlight show if you want to continue but it was all valuable stuff and I know all the Whismur stuck with us
so if you want to continue the conversation or do you want to know what Scott would have talked about it I gave him 10 more minutes
you can jump over to Facebook and drop us a question and we’re happy to have a dialogue there as always Aviv that this episode was helpful to you we sure would appreciate it if you jump on iTunes and give us that 5-star review.

[51:35] Next to join us are one we are going to be at Etail and Boston ETL East sews drop us a message to Vitas Facebook as whatever your preferred method of communioncation isn’t would love to meet up with some are there.

[51:49] That would be awesome and until next time happy commercing.

Jul 20, 2018

Industry News

Amazon Prime Day

Listener Questions

Joan Abrams asks: How important are progressive web apps going to be for retailers? Any retailers doing this really well yet?

Julie Acosta asks: Any updates on multi-touch attribution models/partners - who’s doing online/offline (brick & mortar) right?

Upcoming Events

  • Jason is doing retail visits in Australia July 21 - 29.  Ping him on twitter if you’re there.
  • Jason and Scot will be doing shows from eTail East (8/6 - 8/9 in Boston)

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

Episode 137 of the Jason & Scot show was recorded on Thursday, July 19th 2018.

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


[0:25] Welcome to the Jason and Scott show this is episode 137 being recorded on Thursday July 19th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners Jason how is your summer going.

[0:48] It is going traffic I am just starting sort of a.
A heavy travel session for me so I just got back from San Francisco and I leave on another trip tomorrow but I I feel like the big news this week is I read that spiffy got some new fun thing so congratulations.

[1:08] Thanks yeah so for listeners that may not know so I started Channel advisor 2001 move to exact chairman in 2015 moved over 250 full-time I kind of,
experiment with it in 2014 and overlap there and yeah it's been fun so we are on demand Car Care started with car wash with added oil change and now even have some products on the market so we have a cool iot device called spiffy blue that you
plug into your vehicle and there's a companion app that tells you all that's going on with your car.
A passionate about
Digital Services I think that's kind of where the future is going so decided to put my money in time where my mouth is and we just raised our second round this week so it's good to get that behind us so we can keep servicing customers.

[2:03] That's awesome and you keep expanding in the cities to right right right you where are you now.

[2:09] Get 1/5 we're holding firm at 5 right now cuz we have this explosion of Fleet business so e
we started out really with optispark with consumers at office parks and Residences and then we added oil change it unlocked Fleet so we we've been
kind of adjusting as much Fleet as we get on our plate and it will be adding more City suit store in Raleigh Charlotte
Dallas Atlanta and Los Angeles now.

[2:35] Awesome I'm kind of sad because I am assuming that the climate in Chicago means I'm not going to be next on your list.

[2:42] Yeah we've identified our first 50 cities and unfortunately Chicago is not in the first 25 but will eventually get to you.

[2:51] Not I will be waiting or I'll just move I'll just get so frustrated at my lack of spiffy then I'll move.

[2:56] Yeah yeah there's stairs five markets for you to retire to that maybe we'll get you there.

[3:02] Nice I like the thought of retirement.

[3:06] Couldn't you just in San Francisco at the NRF retail Tech any interesting things you want to give us a trip report on there.

[3:14] Yeah you'd be happy too so there's an interesting show interruptus had this show for a number of years and it's mainly been focused on the CIO and CTO.
So they sort of had a private party for a number of years I think for a long time it was.
Permanently located in Half Moon Bay then it may have moved around a little bit so it may have gone to Laguna Niguel one year and San Diego last year.
But there was also a digital merchandising show that that that put on,
MN that shows been retired and see what they kind of done with interests Tech is they've expanded the temp to include all the,
the digital Business Leaders and have more more overlapping content for cio's and business leader so I would,
I'm not sure if that interests agrees with this definition exactly that I would characterize this is sort of the second year.

[4:10] Where this the show has a broader scope in and I think it was interesting content and I think I think all of us that attended.
Got a lot out of it so it was two and a half days.
In San Francisco of pretty jam-packed content and it's a you know it's a smaller venue with smaller group so it's much more intimate like you basically have an opportunity and network with everyone else that attends and.
You know it's it's it's more what I would call a a conference then like a big exhibition show it.

[4:47] What were some of the key takeaways.

[4:49] Yeah it's a different number different topics that they're too many speakers to go over everyone one that I was practically looking forward to is Katie Finnegan,
so she runs a store 8 for Walmart which is Walmart's incubation lab and.
She I think she she was the founder of the couple startups that Walmart Acquired and she kind of laid out their methodology and it's it's interesting to me because they're there been a bunch of retailers that I've had internally incubation labs in.
I think it's fair to say on the aggregate that they haven't actually been that successful.
And the Walmart one you know is is these are wholly-owned LLC so if you Walmart is essentially going to acquire you and then incubate you and sit in there all kinds of.
You know questions that come out you know what is the exit look like for the the founders in the management team and you know how to define answers work and what are the success criteria and all those sorts of things so it's kinda interesting.
I think Katie is like pretty realistic about the track record of retail incubation Labs insert you know she she was pretty candid about.

[6:06] Where where they felt like they had the problem solved and where they thought like you know they're still open questions to be answered and she she kind of painted this maturity model and you know she highlighted several several.
Companies that are in the story labs and where they are in that maturity model and so the.

[6:27] If they're six stages of maturity you know,
the most mature thing they have is this jet black which is kind of at the third stage of maturity.
Which is this kind of um concierge personal shopping service and delivery service in New York City and some most of what they have is even earlier than that.
So that was interesting was interesting to hear her thoughts about incubation in general and then some of the specific initiatives Walmart had.
You know a bunch of gas from the show we're speaking they're so so Billy May who's the the CEOs or the table was on.
A panel talking about.
How how to prioritize technical initiatives within the company Rob Schmaltz who's been on the show from Talbots did a did a couple of channels.

[7:25] The John Nord Mark has been on the show for his iterate.
Incubation lab he brought in a couple of the companies in in his lab to kind of talk about new.
New companies and there was also some the VCU that had some of their companies and so.
There is kind of some interesting startups that we got to hear from and chat box there's a company called Shadow research.
And there's a ton of newer Marketplace aggregator called hinge to which you may be more familiar with I wasn't super familiar with them.

[8:09] As you well know you know tons of interest in traction in the in the marketplace space going on.
And in the very last speaker sound pretty interesting and.
I think I think we need to get him on the show so it's a it's a guy named Peter Schwartz who's a futurist.
And I think he's got like a boondoggle job for so he's the head futurist for

[8:40] The listeners may be more familiar with Peter Schwartz his work he's the main character that the Matthew Broderick character was based on in the movie War Games.
So he was like literally a young hacker that broke into some government databases and he was a consultant on the movie War games and several years later he as a futurist he partnered with Steven Spielberg to do.
Paint a picture of what the future would look like for the movie Minority Report so all those famous scenes of.
You know facial recognition triggering customer have ads inside the Gap in The Minority Report where ideas that that he put together.
It's got a ton of fascinating stories he said when we were brainstorming Minority Report we thought we were,
we are thinking about what the future would look like in 2040 or 2050,
and he's like basically everything that we had in that movie like is now here and it's 2018 so he's like you know we may have gotten some of the ideas right but we were way wrong on the.
On the timer iser.

[9:48] I love those two movies Joshua spoiler.

[9:54] Exactly exactly so he was interesting and it was silly but he's like.
He's an older gentleman and he's like I'm 72 years old on the oldest employee at Salesforce and the irony is not lost on me that the oldest guy tells horses responsible for the future.

[10:12] What did he predict.

[10:18] Yes so he we talked about a bunch of things.
We talked about Ai and that's an interesting one because I feel like there's kind of two camps I think there's people and maybe Elon Musk is in this Camp to think.
The AI is super dangerous and that the Killer Robots are coming and Peter Schwartz was like that's not what's happening with the AI that we have now and heat you know he made his Arguments for why.
We we like we really aren't making very fast progress on General AI that has sort of generalized intelligence that could become sentient.

[10:52] But he did talk about a bunch of the risks with the kind of AI that is emerging and he talked about like,
you know in the near future when all these AI,
algorithms are deciding like what medicine what Medical Treatments we qualify for and whether or not we get credit and all these things you know will there be.
Transparency about all those decisions and what rights are we having and things like that so is his POV on on.
Hey I was a little less like.
Daunting and then some folks and we talked about the future of work you had a lot of folks that think that like all the jobs are going to get eliminated by all this Automation and that you know we're all going to be sitting around without anything to do and again he kind of felt like that.
That wasn't likely to be the case cuz he kind of talked about how hey you may not have a lot of people sitting in truck driving trucks around that he envisions is future we're just like we have all the Air Force drone pilot sitting in Las Vegas.

[11:53] Fly the planes over Afghanistan and then go home to their families in Las Vegas that you could have a ton of.
Truck drivers that are moving trucks on it you know through the commercial residential streets and then getting them on the highway where they drive autonomous way and you know it.
Some some data points to support his his hypothesis is that.
Lots of New Jersey jobs emerge to replace the jobs that tend to go away.

[12:20] Nursing school any other highlights.

[12:24] Those were some of the stuff that they jumped out to me there are a lot of like sort of topic-specific stuff so you know topics about Big Data topics about how.
To hire how to structure Innovation and companies you know so there there was a little something for everyone in their butt butt.
I feel like those are those are some good highlights and I was a little distracted through the whole thing because I feel like there's some other e-commerce stuff going on at the same time.

[12:57] Yeah it's been a busy week in the world of e-commerce and and since we're coming off Prime Day 2018 we thought we'd jump in the news and start off with.

[13:25] Yes let's start off with the prime day got off to a rough start with I know you were tracking that and I saw you at least quoted two or three times out there in the Press what what did you make of that.

[13:36] Yeah so I mean I'll start out by saying I was completely surprised and caught off guard I feel like
Amazon has had a shockingly good record of reliability on all these peak days and so if you would have asked me up front to like make a bed on,
on which retailers were likely to suffer an outage during up a peak event I would not have picked Amazon so I was,
someone surprised that they had this outage right off the bat while to talk about like what the impacted the outage was and forms of hurting,
the revenue hurting their Prime subscriber is hurting sales of there their first party products.

Marker 01

[14:16] Yeah what when does Herzing is it on Twitter

Marker 02

[14:21] people discovered that if you use the smile you no interface where you anything you buy donates money to a charity and I had previously set that up and I was able to go through smile I was are down for
are the first four hour but I was able to go to smiling and get it to work which
to be made it feel more like a networking thing I never know what happened but it was unusual to me that there were were little slices that were working.

Marker 04

[14:46] Yeah for listeners that haven't been responsible for sort of peekaboo ability like I'll highlights.
Prime day is is perfectly designed to be the worst case scenario for a i t system standpoint right like you're number one we have,
all of this traffic coming at the same hour right like so you had this huge Peak which if you're really worried about up time you would try to do something to spread out that demand more but even worse.
With all of these short-lasting deals and all the personalization on the Amazon site very little of the of the Amazon Prime day experience can be cashed,
so you know they're all these things that you like where you would kind of compromise the customer experience.
To make it easier to load on the servers if you were really worried about availability and and Prime day is a perfect storm of like all the all the best customer experience practices that are you know.
Extra challenging for the it guys and so so obviously you know it it did come to bite them somehow this year.

[15:54] Yeah well we'll see if they'll get better that's the thing you weren't about Amazon this when they take on the stuff that they learn a lot and then they they get better.

[16:02] So I'm one thing that I'll be curious about him hopefully some of some of our friends that are.
Marketplace hours on the site maintenance may be able to share some insight here but if you were a prime deal that had one of those early slots and you were disrupted.
Like I'll be curious to see if Amazon does any kind of make good for for those vendors or they just missed their window or or how they're handling that.

[16:27] I tried it with three or four people not specifically about this outage thing and they had deals going at that time and they said that there are deals sold out in,
but even faster than I thought they would so so it's weird it does seem to be and I saw a heat map that showed there was only certain cities were impacted so it's it's kind of an anomaly to me,
to my knowledge AWS itself wasn't down so,
yeah it's definitely specific to Amazon's phone usage of their infrastructure which kind of points do your data thing or some kind of an internal just their Network
just there their slice of the whole AWS Network it is kind of a mystery.

[17:07] It'll be interesting to see if any more info weeks.
A side note I think we're also some reports from Amazon Flex drivers that the flex app was down which I like also sort of boron my my theory that maybe there is some product data problem.

[17:25] So despite all that they estimates are out that they did about 3.5 billion
and I believe that's up from 2.4 last year Amazon doesn't release date the Allies frustratingly give you like little clues of how the day went,
I'll talk in terms of
growth in unit numbers ish kind of things so those are all estimates of how big it was it was 6 hour
first longer this year social apples and oranges and that comparison and then you and I were kind of talking in the
pre-show in The Green Room the virtual Green Room that it's in more countries this year for sure Australia is its first year at Prime day so hopefully they had an exciting time down under you can go so I report cuz you're going to Australia soon settle be exciting you can kind of
tell us how they felt about prime day.

[18:14] Exactly just to answer your question I booked a trip tomorrow.

[18:18] Good good thinking my advice is to make sure you download a lot of movies.
And then yeah did you happen I know you like live on top of a Whole Foods or something like that did you happen to go into a whole foods during the prime day excitement I know a lot of people were
we're trying to take advantage of some deals are there something where you could on Prime day you got $10 off in the store and online if you wanted that day.

[18:44] Yeah yeah so I did not get to take advantage of myself I do live in very close proximity to A Whole Foods but I was of course down in.
In San Francisco so I didn't get to experience it first-hand but all the reports that I've seen is,
it probably was very favorable in the whole foods that like you know the the month leading up to it that they had really like done a good job is starting to roll out Prime benefits and so they kind of trained a bunch of the.
The whole food choppers that would also Prime members till I get the Whole Foods app for Eddie and you know
arguably some of the best financial deals that they offered work you know you you if you gamified everything at Whole Foods you essentially could get $30 in extra.
Extra cash which is you know on I'm not significant amount of purchase it so that you know that that was pretty substantial.

[19:35] It's like 2% off my average Whole Foods check out.
A couple of observations from my side on Prime day.
You know that the sales every noise focuses on the sales but I've kind of come to believe that that yeah that's part of what Amazon is going for there but they're real benefit you know they're probably out ways so it say it is three and a half billion
the real benefit comes from the the juice that flows into the ecosystem elements that Amazon has because of.

[20:08] Prime day so it's the first of all you have a bunch of prime sign up so they don't reveal that obviously but they in the past they said things like you know
tens of millions of sign-ups for Prime day in those kinds of kinds of numbers this year there, as you point out leveraging that Whole Foods intersection so so if she reports that say prior to that position there's only 40% overlap there between Whole Food Shoppers and Prime
members so that that's like a huge audience that they can get over in the prime they're obviously focused on that
I also saw a report that they they announced a million connected home devices were sold on the show here a week then I would.

[20:47] Pat ourselves on the back with an early on this that we felt like,
Echo and all of its Associated devices Alexa power devices that were really big opportunity for Amazon and now they're selling a million units in one day
36 hours is pretty amazing another one that we've been pretty early on it is talking about the ads that that we think,
Amazon ads are going to be pretty big and we're seeing you have cpgs and Brands really spend a lot of money there everyone I talk to at a brand head
really dialed up their ad spend during Prime day so so that's a really,
kind of cool Catalyst that Amazon has for getting people to really come on to that platform experience it on a day that's pretty crazy and hopefully you know from the Amazon site at least get addicted
kind of tangentially do that before Prime day one of the when I think the smartest Wall Street guys on this is John Blackledge accountant he has raised his ad number for Amazon just add number 236 billion in Revenue over the next five years.

[21:53] So that that's almost like the quote on Facebook
I am a size scale business that he believes Amazon will be building over the next five years obviously that's Facebook today in 5 years Facebook will be bigger but just trying to get a little scale to it
because that's a just kind of insanely big number.

[22:11] There is some last couple things kind of around this idea of the ecosystem the benefits and aside from the sales third-party sales were reported to grow 89% this from cnbc's numbers and orders were up 69% so
how it was you know it in some years we seen Amazon,
Prime day the traffic gets absorbed by kind of the Amazon first party and owns products and private labels and that kind of stuff this year they did a really good job of splashing it all through the marketplace so
so we saw anecdotally talk to a fair number third-party sellers that just had a very robust Prime day and there's that CNBC data
and then singing Brands it was interesting to see the brands that participated so you had by participating.

[23:00] Spotlight on that home page of deals so you saw a lot of this around
why is offline so it was Under Armour Wrangler Champion Columbia Calvin Klein Adidas and Reebok and then interesting Lee it's also who didn't,
play so Nike to my knowledge I never saw them and I've read a lot of the the reports of folks that track
this pretty closely they did not participate in Prime day in a meaningful way Skechers Haynes Converse and Ralph Lauren so
so those are some other interesting kind of aspects of prime day to think about is yeah the sales are good and you can't sneeze it over 3 billion dollars
but I think they're real benefit it was probably another 5 or 6 billion comes from these ecosystem impacts.

[23:48] Yeah for sure and I don't know if you saw it I thought it was actually from the Amazon press release but one of the things that they did claim is that it was the biggest day,
single day ever for Prime signups so they added more people on Prime day than they ever had before which isn't surprising.

[24:06] Yeah so your guess the last highest was last Prime day.

[24:09] Oh I think they did say that again that last year so I think they they exceeded last year's already good numbers on Prime signups just sort of highlight in your point.
Another thing that they put in the press release it's also kind of fun is they like,
the Highlight the best selling on Amazon products and every country which hours I think it's always interesting to just look at the trends there,
so I think I'm almost across the board in every country that the prime products the Amazon products are the best seller or so the fire in the.
The echo stuff but not on Amazon stuff in the US and Canada the instapot is the the best selling item,
and there's a bunch of other countries where,
the best selling item is kind of high ticket consumer good so you know there's some countries were TV sold particularly well the video game platforms were really good sellers in a bunch of countries.

[25:13] Yes I'm like.
Expensive SD memory cards were big sellers in a bunch of countries but then what's interesting is there's another whole set of countries,
that have like 3 different shopping behaviors and you see like.
Everyday essential consumer consumer packaged Goods being the big sellers right so so like you know some some food item or something like cleaning soap or something like that right and so you know there is
kind of bifurcation of the countries where where I feel like you know their grocery shopping is still predominantly.
Brick-and-mortar and they use e-commerce for all these these high-ticket items and then there's you know countries where all the shopping is it shifted to e-commerce until you see things like laundry detergent being the,
the best prime day item in Japan for.

[26:09] Yeah they sold over 300,000 of those were they called cooking pots that's crazy.

[26:14] Yeah the instapot is a crazy phenomenon in and of itself online and offline but but yeah it's up it's a fast mover on Amazon.

[26:24] It was also interesting to see what other retailers John Prime day there I think it's kind of funny Amazon has them kind of Anna
a check kind of a medium Checkmate kind of position do they ignore it or do they participate do they mention Amazon what what did you see there.

[26:40] So tender retailers have sales and to me it's a no-brainer that you should have a sale on Prime day like I think it's it's so in the ethos of e-commerce Shoppers now that it's a shopping day
that you really missed out if you didn't have some promotions to push people over the edge and I would argue especially since that first hour had this outage if you went to Amazon and you had a glitch,
you're one click away from buying something somewhere else and so you know I think other retailers could definitely,
not to the same level as Amazon but you know there definitely is a halo effect for the whole whole e-commerce industry and you know without naming any names I can tell you,
I had probably half a dozen clients that had their their top sales day of the year on Prime day and so.
It is absolutely a big shopping day that has a broader effect than just Amazon I think the interesting strategy is.
Do you call the back to school sale do you call it you know Cyber Monday into like you know do you just have it be a promotional day or do you overtly.
Yum Soda counter program.
The Amazon and call it Prime day like you know that potentially could help you from an SEO standpoint but you know you're also sort of.

[28:03] Promoting your competitor and acknowledging their success in and you know psychologically you're celebrating their birthday ironically enough.
So I think we saw some retail delivery over it we had prime Day sales and some details though it'll more more subtle about it.
And then when the outage happened I think you know what's going around on Twitter that like Office Depot sent out sort of.
A smart aleck email you to telling Shoppers that is.
They're tired of looking at pictures of dogs that they could come shop on on Office Depot and I have to be honest that just feels like tempting fate and in sort of kicking a monster that you don't want to kick.

[28:47] Yeah yeah it's like doing live demos it just Murphy's Law is just begging begging for attention when you do that.
Call any other Amazon things you want to cover before I move on.

[29:02] No I think those were all the sort of big things that jumped out at me.

[29:11] Cool so it was a couple of weeks dominated by Amazon but in the anonymous on side you know one thing I wanted to talk about is kind of the biggest news and marketplaces that's really gone unnoticed
we talked about a little bit on the show but I wanted to try to Circle back is in
you know some confusing marketing but the Google within the Google Express system they have
this new offering called a c I forget about it shopping action and it's essentially where you can buy things so to mobile kind of AD unit.

[29:46] We're supposed to be at Marketplace we can check out right on the Google page so so that's interesting and you know they are adding a ton of retailers to the program and I guess it's a little self-promotional but but
side of the channel visors are partner of theirs and a large number of those folks are coming through our connections into that new market place so
I know Google is Steve always been flirting with the marketplaces and she feels like they've got a little more religion on it this time I kind of feel it this is the time of year one
everyone's really kind of ramping into you know
Q3 obviously but then you know here as we get into the end of Q3 will be Full Throttle talk about holiday so that's going to be I think one of them interesting things to watch this holiday is how serious does Google get about this
plus we seen some retailers like Urban Outfitter has launched the marketplace you know there's there's a bunch of other things that are going on out there so
why really interesting things going on under the radar in the rotor marketplaces that I think they're just getting
hot not not like covered or talked about because of all the exciting stuff Amazon's doing with things I promise.

[31:00] Yeah yeah for sure and I do think the Google offerings are
there still is a little confusion out there because there are kind of a couple different Commerce statuses that you can have with Google so so obviously you know Google still has this Google Express system where they at where you get they'll accept orders from.
A bunch of retailers and then like a Google employee will actually pick up that order from that retailer and deliver it to you and I think as you pointed out there's been some recent traction with new retailers joining ecosystem.
Like separate from that other they can they can be married together is this Google shopping actions which is like.
The most low-friction way Google has ever had to actually buy a product out of a Google promotional spot right and so you know I think.
Originally launched as a pilot and and you know it was kind of hard to get in the program now they've opened it up.
And I think we're seeing lots of people for certain types of products.
Take advantage of those Google shopping actions I still feel like the industry needs a little more expertise around that.
Offering um I'm always surprised how unfamiliar people are with it and then there's this even weirder status there are.

[32:21] Unique Partnerships from retailers with Google to be able to sell products through the Google home device and so Walmart and Target for example,
are not in Google Express at the moment but they are selling their products through the Google home Echo System until.
You know between all that your you know I think there's more Commerce activity in the Google echo system than we've ever seen before.

[32:47] Yeah yeah it's largely not getting talk about Skylanders I guess in some ways it actually gives Google some space to go and experimenting and I have like a thousand spotlights on them
well well all this Amazon stuff happening so we had what we have been
I had a very busy summer so we are a little delinquent and getting to some listener questions so we have a little bit of time here on the podcast and want to jump into a couple of them that have been lingering out there and
Jason I get to kick back and relax on these cuz they're both for you
so first we have Joan Abrams and Joan ask how important are progressive web apps going to be for retailers are there any retailers doing this really well yet so maybe,
let's make sure we started the Top Gear what's the progressive web app how does that differ from a native web app or a responsive site and all that kind of stuff and then you can jump into the importance and then any retailers that they are doing a great job.

[33:47] So great question so Progressive web app is a slightly unfortunate name cuz it makes it sound like.
This is an alternative to a traditional Native app.
And well it potentially can be that I would argue that it's much more than that essentially it's a set of standards for a way to build a mobile web experience that runs natively through the web browser.

[34:14] And they been supported by by Google Chrome which is very important mobile browser for some time.
But they were very poorly supported or not at all supported in Mobile Safari which is the next usually important mobile browser,
and so what exciting is as of the last iOS released there's now. Port for Progressive web apps in both Chrome and Safari,
which is essentially the bulk of Shoppers on mobile and so there's a bunch of.
Tools that you can use to build a website and then there's this feature called remote workers which essentially gives you,
the capability to add.
Native app like functionality to the web experience and have it even function offline so have it work even if you don't have,
I'm connectivity so for example.

[35:19] Google can have a Google Maps or Gmail experience that lets you,
you know. Calculate directions in in Google Maps or or you know reading compose emails even if you're in airplane mode,
by leveraging use these remote workers and what's super important and unique about Progressive web apps is,
did the really designed to be performance efficient and so by following the the the the pwa standards you end up with a mobile web experience,
it's much faster and much more responsive than.

[36:04] Traditional responsive mobile web designs were into the site performs much faster and it can have a richer future set it can essentially have,
almost all the features that you can have in a native app and so one thing you could do with it is build a native app that didn't require the App Store and that.
That is a huge thing because a lot of customers don't know how to download apps from the app store or they have app fatigue and if your retailer and your bill all these cool functions in your amp,
Nobody ends up using them because apps have such a small reach but you have you put the same features in your mobile web experience using pwa,
you know anyone that goes to your url like instantly has access to all those things and so it's a great alternative to spending a fortune on building a native app,
but it's also just the best way to build a mobile web experience and because the performance is so much better.
We're seeing that the early retailers that have adopted Progressive web apps are are really killing at their their mobile site so much faster they're getting much higher conversion rates.

[37:13] And so it's I would highly encourage any retailer to put on the road map right now that they should be.
Redoing their mobile experience as a progressive web app and I have to be honest because most is building a proper response to.
Mobile site and they feel like they did a bunch of work and they want to feel like they're done now and not too many of them are thrilled to hear that they need to start a new project to build it over using a new set of Technologies,
but the but the retailer the early retailers that are,
are are getting really good results and so you know it it really should be kind of high on your on your your roadmap particularly as all your customers are shifting the mobile.

[38:05] How do you,
so I know we obviously write a lot of this stuff at spiffy so we have you know you have Swift and Objective C for a native app and then there's a lot of interesting JavaScript,
turn based libraries for writing kind of a responsive sites that were even app so I react in those kinds of things what what do you write a progressive web app.

[38:31] Yeah. So it is a JavaScript like framework,
much more constrained and specific set of libraries so so often when you're
you're jumping JavaScript you can you can pick you know all these different development Library sets and only you know small subset that have been Highway optimized not allowed to be used in npwa is but it's it's mostly sort of JavaScript style development environments.

[39:03] Are there any retailers doing a really awesome job at it that you want to highlight.

[39:09] So there are they like again,
it it hasn't for the most part been the huge retailers that have completely embraced.
The pwa jet like there have been some retailers that have done a pwa,
like as a separate stand-alone site in a in a
replace an app in addition to a mobile website but says some of the retailers that have gone full pwa and got some really good results one of the biggest retailers out there to my knowledge this done it is is West Elm
and then there's some in a smaller specialty retailers I think Tommy Bahama I think Snapdeal is full Progressive web app now,
I think Payless has a progressive web app some of these are fixed it Sweet Frog so they never had a good mobile site before and this is the first one Willie Pulitzer Lancome,
some some folks like that and so if anyone any of the listeners have a favorite Progressive web app retail site I would love to hear about it as well.

[40:17] Yeah so what's up pic on West Arm so just to be clear you don't just download their app right you just go to their website and you're going to have a much more responses or how much more
mobile friendly experience then then if you there previously shipped is at.

[40:35] Exactly you go to right interview go to West Elm,
dot-com on a desktop browser you're getting a desktop experience if you go to that same URL in the mobile site you're getting a mobile version of that experience in the mobile version you'll get from West Allen is a progressive web app and I,
I'm compelled since you're calling me out on it to highlight that.
The West Elm one may not be in full deployment yet so I think there's some may be testing going on so if you go to you may or may not get the progressive web app version.
There's a different URL you can do to guarantee that you get the the West on the pwa version which is I'll put the link in the show notes but it's.
Mobile - beta. and that kind of bypasses the testing guarantee you get the pwa version but they shared some some public data from there,
they're beta version that that's in this A B test and the.
That the folks getting the pwa version of The Experience are spending 15% more time on the site and there are spending 9% more Revenue than them folks that are.
On the traditional responsive-design version of the site so so pretty meaningful.

[41:53] Non retail sites there's a ton of of big sites that have moved to Progressive web app,
and across-the-board the performance metrics though the page weight and the load times and the time the interaction are wildly better for Progressive web apps and whenever we see those performance numbers go up,
bounce rate goes way down and engagement goes way up so you know I think there's both.
A big lesson about performance from the General market and I think you know we're now starting to see some some pretty tangible retail results.

[42:27] Colt Express or some super-secret Insider information there what do you when you go to a Retailer's site on mobile is there some kind of way that you're seeing its Progressive web app is there is there some tell her or are you just speak he's going to have to know.

[42:41] Not a very convenient one like I mean the old but you literally have to either go view the source and you could there some Telltale headers that would tell you that it's a progressive web app.
Or there are now a set of tools on their companies like ghostery and built with their frankly not that convenient to use on mobile that they're much more convenient on desktop Adele sort of,
scan the site you're on and give you a report of the the underlying technologies that are being used for that side and they'll both tell you if you're if you're on a pwa site like the only the big user experience tell,
is if you're not in an app and your your get your given like a full interactive site even without,
activity then it's a pretty safe bet that you're that you're benefiting from the pwa site.

[43:35] Coop's so last question in this comes from.
Julie Acosta and the question is a two-parter any updates on multi-touch attribution model Sim partners and who's doing online offline right.
Gold attribution question.

[43:53] Yeah I do love a good attribution conversation so so pretty like there are you know and ever increasing number of,
specialized tools that that do multi-touch attribution models,
but what has me most excited is much better tools for doing multi-touch attribution are,
starting to evolve in our standard analytics packages so I to my mind I apologize to my friends that I've met him in a w I feel like the,
Google analytics implementation of multi-touch attribution is maybe a little further ahead but,
IBM Adobe and Google all have multi attribution models built in in Google's case that used to only be available in their expensive premium paid product and now it's,
it's made its way down to the free version and the big evolution in these multi-touch attribution models is,
you used to have to come to pick a model so you can say.

[44:55] Hey I'm interested in a weighted model and this is how it works or I'm interested in first touch or I'm interested in last touch or I'm interested in that decay model where every subsequent touch gets less weight.
And you had to kind of manually specify model and then you could use the Analytics tool to look through the data with that lens now multi-touch has become sort of machine learning enabled,
into a century the two will tell you which multi-touch model from which amongst the the.

[45:30] The pool of multi-touch models the name given to a support,
best fits the data set that you have so you can actually use machine learning to sort of refine the multi touch model that you use for your particular data,
and you know you can you can Embrace that for your Enterprise and so that's pretty cool.

[45:51] Multi-touch is a slightly complicated word because I would argue there's kind of three versions there's there's online to offline which is.
You know hey I saw some digital ads on Facebook and Google and then I walked into a store and bought something so how do I you know attribute that in-store purchase to those those digital touch,
I'll call that multichannel,
there's multi-touch like a I saw an ad in Facebook and then I saw an ad in Google and then I saw add-on,
Abercrombie & Fitch and then I bought the shirt like how you know which which of those three marketing Vehicles gets all the credit or most of the Creditor how do you do that that's kind of.
The most traditional version of a multi-touch that the tools are designed to support.
And then there's Multi-Device like hey I started on a tablet and then I moved to a phone and then I will definitely made the purchase on a laptop.
How do I do a tribution across those devices and So my answer before it was mostly based on.

[46:55] Digital multi-touch for multi device we're starting to see some interesting Solutions.
Adobe in particular has this interesting Co-op model where they they're building a shared database amongst all the people that use Google Analytics.
Of all the device ID that they ever see and when you have a user on a particular device you can go to The Coop and say what other devices does that same user use and so you can use this kind of share.
To identify the same user across multiple devices historically only the.
The digital tools that are most likely to have the user authenticated can kind of recognize the same user across devices and so Google and Facebook have a huge advantage over the rest of the world.
In Multi-Device attribution.
And then online offline we're also starting to see so much better tools interesting Lee both Facebook and Google that want to you to spend more money on digital advertising.

[47:56] It's very important to them that you be able to understand online and offline attribution because,
a lot of the purchases that you make after seeing or digital ads are in a store and so they've actually built some pretty good tools that you can upload your offline data into,
and then do online offline attribution so we're starting to see that a lot more commonly but when you ask which retailers are.
Are the kind of best-in-class doing it right it's the retailers with an unfair advantage.
And so it's REI that has 95% of their purchases coming from Members so they have.
Capture of that that email address of that member number every time you do a transaction online or,
in-store it's Sephora where 95% of their customers are in that customer Affinity program,
and they're able to do very effective online and offline attribution it Starbucks where we high percentage of the transactions are being done with their Mobile payment at go system,
they're doing the best job of online to offline,
and you know that the more traditional retailers wear a lot of the in-store purchases are not Animas you know that they're all getting better at doing online offline attribution but they're only able to do it for a much smaller set of their data.

[49:11] Well thanks to John and Julie for asking those questions I think we're caught up on listener questions we we regularly post he's over on our Facebook page so just go to Facebook and search for Jason and Scott show or go to Jason and Scott. Calm and you'll see a direct over to there

[49:30] Awesome I got before we sign I did want to highlight a couple upcoming opportunities to meet some listeners.
So we we looted to it earlier in the show but I am leaving Saturday for a week of retail visits in Australia.
So I have a bunch of meetings booked with retailers in Sydney and Melbourne but if you're a listener that happens me in Australia be sure to ping me on Twitter sometime in the next weekend if it's schedules permit I would.
Love to meet up but I'm I'm really looking forward to learning a lot more about that market and sharing some of.
The warnings that we've had in some some more mature Amazon markets that maybe we can share with.
With Australia which is the newest Amazon market so I'm looking forward to that trip that's going to be fun and I know my family is looking even more forward to having me be gone for a week.
And then early next month August 6th through the 9th you and I are going to be live and in person together at the eat a least show in Boston.

[50:40] Yeah it's going to be a lot of fun we will go and I plan on wearing since we'll be in the the the Founding Father home well I'm going to wear a white wig for that one side of the exhaust.

[50:52] Yeah and it's and it's made me a person knows I just wear a white wig anyway so that'll be the normal for me.

[50:56] Look for the two founding father type of sport or triangle hats to.

[51:03] Exactly and with that it's it's happen again we've used up our a lot of time,
but if you have any further questions or we got something wrong on this week show we'd love to hear about it so,
let's keep the conversation going on Facebook or Twitter and as always if you got any value out of this show and you want to reward us the best thing you can do is go to iTunes and give us that 5-star review,
if you really didn't enjoy the show the best way to do that is visit Scott in person at his home and give him your feedback that's appreciated as well.

[51:36] Yeah absolutely will thanks for joining star Buy.

[51:39] Until next time happy commercing.