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: August, 2018
Aug 28, 2018

EP142 - Industry News and Retail Earnings

Scot Wingo Tarheel of the week.

Amazon News

Walmart News

Target News


  • 4,379 closures / 2,239 opens = 2,100 net fewer stores  (net 2800 reduction in stores in 2017)
  • Loss of 35M ft sq of retail space (closed stores are typically smaller footprint than new store openings)
  • Industrial space is now MORE expensive than retail space


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Episode 142 of the Jason & Scot show was recorded on Thursday, August 23rd, 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.


[0:29] Welcome to the Jason and Scot show. This is episode 142 being recorded on Thursday August 20 3rd 2018. I’m your host Jason “Retailgeek” Goldberg,and as usual I’m here with your cohost and TarHeel of the week, Scot Wingo.

[0:47] Hey Jason and welcome back Jason escutcheon listeners.
Yes it’s true. Star High I guess I’m Tarheels this week.
So we have a newspaper here in Raleigh called The News and Observer. It’s been around forever. And they do this weekly thing where someone is the Tarheel of the week.
And that was me this week. I get I get a pen. Evidently I’m excited.

[1:11] I think that’s actually totally cool. At the risk of sounding corny I am sort of proud for you.

[1:18] Thanks man. The thing that is a little complicated.
Musher in this area you may not understand. And so our state is the Tar Heel state.
But you can see the Tarheels and immanence 8 person. So I’m really a wolf pack fan.
It’s all my Wolfpack fans have been me crap this week that I’m Tarheels the week because lot of them don’t understand it’s a state thing and not a season. So yeah. So it is friction between USC NC State Duke.

[1:44] Gaji so.

[1:50] There is so that’s been fun to do.

[1:51] Oh I could totally imagine I’ve just gone from being proud of you to thinking you should not accept.
Now it’s very cool. I do. I do get that conundrum though.

[2:04] Yeah. And you were at east up in Boston. How did that sugar.

[2:10] It went really well for those that have never had a chance to spend time in Boston.
It is very easy access to a Dunkin Donut from anywhere in downtown Boston.

[2:21] I have been to Boston and there are a fair number of Starbucks to see must of been a happy camper.

[2:25] Yes. Yes. As I may have joked with you in our our voluminous rehearsals that we do for these podcasts the the show Hotel is,
a nice Sheraton that has an adjacent Starbucks and a Shake Shack so that basically has all the amenities I need.

[2:44] And a none. There sure there’s your meals right there boom.

[2:47] Yeah yeah. I never got an opportunity to have any of the show food because I was I was you know always making the super healthy Dunkin Donuts Shake Shack runs.

[3:00] And the plan was we were both going to go but I couldn’t make it because I had to help my daughter move into college.
We got a last minute note that she could move in all early so we had to do that.
But you carried the Jason Scott banner up to Boston where your triangle had played flute and you laid down some good podcasts that we’re going to be rolling out here soon.

[3:20] Yeah I sure did. It’s a good event. You know it’s a little more intimate than some of the biggest events.
You get a chance to interact with more folks.
And I got to record three great shows so listeners have probably already heard her as who’s the web psychologist from quick tell on last week’s show and into upcoming shows will be talking about,
Dell and sort of their their evolution,
from a you know pure consumer B2C company to this big enterprise company today.
And we’ll also be talking to the two founders of Tommy John and,
they’re they’re great entrepreneurial Nergal story of sort of inventing a better T-shirt and turning it into a very successful business and you know kind of an early digitally native vertical brand that will get more and moreabout.

[4:13] Yeah it’s funny when I’m not listening to the Jason Scott show my favorite podcast.
I do listen to some other podcasts and you can’t really listen to anything without a tommy john added being on there.
If I listen to XM Radio they’re on there they’re on CNBC so they seem to have really embraced not only digital and that media but the analog media as well. I look forward to hearing their whole story.

[4:38] Yeah yeah I don’t want to spoil the surprise for you but I think it was a good show. They were super interesting so I will look forward to hearing your feedback.

[4:47] Cocq Well this week we are going to really focus in on some e-commerce news.
We’re recording this at the back half of August which is an interesting time because in the world of retail what happens is we we take a luxurious summer and then Labor Day hits and then everyone freaks out. It’s theholidays right around.
So this is when the news picks up. So we wanted to pick up some of what’s going on for everybody and and watch this highlights.
We’re going to start with.

[5:30] Yes. I think the first piece of Amazon news is exciting because it arguably makes you and I sound wise.
There was a news report that came out this week that Amazon is licensing a bunch of their technology including just walk out technology from the Amazon go store to Hyundai,
to be used in a number of retail stores in South Korea.
So you know Wisner’s of the Amazon go episode of our podcast will remember that we we talked a bit about the potential of Amazon licensing that technology and it appears we’ve we’ve seen the first version of that inthe wild.

[6:08] Yeah yeah. The you know I always you and I speak,
out in the world a lot about Amazon and one thing I like to tell a lot of people is the Amazon playbook and you know the playbook pretty simple now and they’ve repeated it hundreds of times but it’s dog food.
So dog food something out meaning use it internally.
And then every one of these steps there is a path off this ramp that is it doesn’t work until it likes the Fire phone for example it went down the kill path.
So dog food is step one step two is scale first party steps.
Step three is scale third party and then the next step is really kind of opening it up even outside of third party.
So you’ve seen like cloud computing with this FBA has gone through this and now I think this just walk out of Cassiel a store will walk through this as well.

[7:03] Yeah. So it’s going to be interesting to see how it all plays out.
As we’ve already talked about there’s a Amazon story that’s going to open soon here in Chicago so I’ll get a chance to see it in the live with much more regularity than periodic visits to Seattle.

[7:22] Have you. When does the campout start.

[7:24] I don’t think the publicly announced a date.
I have gone by the site and it is all sort of newspaper up all the windows and whatnot.
So like it appears work is happening.

[7:40] I am slightly less excited about this next piece of news but it may be interesting to listeners nonetheless.
Amazon has extended the Lexx voice shopping capability to all of the Whole Foods products so you can now place orders not just from,
the huge Amazon catalog but from all the the Whole Foods in-store products directly from your Amazon. Alexa.

[8:09] Yeah and I saw that also within the whole foods part of Amazon.
They now have you know they’re expanding the number of stores that have curbside pickup and they have 30 minute windows now.
And I think you were telling me that there’s a if you do an hour under there’s a fee but two hours is free. Is that right. With Prime.

[8:29] No. So you can order your food online and pick it up in an hour for free or you can pay a fee and I want to say it’s like seven dollars to pick it up 30 minutes after you order it.

[8:42] Have you. I looked at the list of stores in major metros of late with that.

[8:47] Yeah. Yeah I’ve tried it and it does work well.
The whole foods causes to mind supports it but it doesn’t feel like they did a major build out to support it.
I’ve seen photos of other Wholefoods where they clearly constructed some new infrastructure to support high volume curbside pickup.

[9:08] But you know to me this is a very thin Mandic for Amazon first of all I would just remind people that prior to the acquisition Wholefoods didn’t have a digital copy of their inventory online anywhere.
Like you couldn’t get a whole foods accom and even see what products Wholefoods had in their store much less. Order anything.
And now of course you can order anything from Whole Foods and have it delivered in an hour to your house or you can have it ready for pickup at a store in 30 minutes.
So I just think that’s super impressive and a much faster pace than most traditional retailers move.
And then I can also tell you that there’s a ton of grocers that are super excited about order online curbside pickup and they’re all debating the pros and cons of every nuance of their experience.
And they’re all thinking about this kind of like should we do same day pickup versus next day pick up.
And is it a four hour window after you order a six hour window.
And you know of course Amazon just comes in here and drops a bomb and says no the customer standard is going to be 30 minutes to an hour after you order you should be able to get your groceries.

[10:20] Yeah I was actually. So two interesting things here real quick.
The when we did our deep dive on the acquisition of Wholefoods you know one of the things that was kind of a question mark out there is to cart had you know a deal with Amazon.
And then you know I think it had been described as exclusive. But now we see Amazon doing curbside pickup which you would argue maybe it’s the same obviously as art which is still free but then Amazon is using flexto deliver things too.
So I think the insta cart integration is still alive so it’s really interesting you know it’s initially confusing to a consumer you know because you can go to Whole Foods directly and get it delivered or go through to card oryou can do the curbside.

[11:02] Yeah but I do think it is the case that in most markets it’s a much better deal to order from Whole Foods slash Amazon rather than to order Whole Foods through insta cart.
And the the Amazon experience is a superset of the product catalog it’s available on insta cards.
So the you know I sort of predicted when we did that that acquisition show that this was bad news for insta card and that they were going to get squeezed out.
Like I don’t think Wholefoods is still honoring the duration of that that contract.
But it certainly doesn’t seem like a good long term prognosis for insta with Wholefoods.
And you know in fairness I would point out there’s there’s one potential experience advantage that insta has that I’m not sure a ton of people take advantage of.
But in many markets it is possible to place a multi retailer order from inside a car.
So you know whole foods you know famously is missing a lot of unhealthy national brands that people still crave.
And so you know if you want some Captain Crunch cereal with your organic milk in some markets it’s possible to have a card.
You don’t go to Kroger and get the Captain Crunch and go to Whole Foods and get the organic milk and you obviously won’t be able to do that from the Whole Foods direct delivery.

[12:25] Yeah. And then the other one is I was tweeting with one of our listeners and,
you know what drives me crazy about most of the grocery experiences for pickup is you’ll go to this pretty laborious process you know can take up to 20 30 minutes to get through everything in your card and then theytell you you know it will be a Saturday morning.
I’m doing this and in the end it will say the first available window is Monday at 2:00 p.m. and you’re just like.
So it may be a chicken and egg thing where they can’t tell me upfront but they should be able to you know they they should know.
You know they should get a pattern for their border and realize it’s four bags of groceries and they can’t do it until next Monday.
So it’s terrible user experience because you go through all the investment upfront which may be what they’re after but then like that Hillary window is terrible. So hopefully Amazon can offer.

[13:15] Yep that’s a universally bad experience that you see all the time right.
Like I call it the when we get a problem and there’s lots of permeation where you go hey I’m ordering this thing online for you know my nephew’s birthday party or some upcoming event.
I only want to order it if I know I can get it by a certain date.
And very often you can’t find out what that date is until after you’ve offered up all your payment details and in some cases not even then.
So that’s that’s just always a bad experience and you’re right.
It’s a it’s a super common bad experience on grocery ordering.

[13:50] Protip i just throw an apple in there and start the checkout in the middle. Jeremy tell me what the window is and then there’s the ability that to either.

[13:55] Yeah but how ridiculous is it that you that you have to learn how to hack the system to do that and think of other analytics that are like why can’t we sell any apples our conversion rate on Apple is horrible or a cardabandonments superhigh.

[14:08] Now. Yeah. To me that’s a sign that that’s their punishment for for for not telling me of.

[14:14] Yet double protip next time you want to do that click on the Google product listing ad for the app or to test it in there so they have to pay for the quick to yeah I’m a bad person.

[14:23] Kate nice. So they’ll get your devious Saari like.

[14:29] And so there this this last piece of news which is going to be interesting I could see this going either way.
Party City has formed a partnership with Amazon where they are now selling their goods on Amazon right.
And you know when you first hear that you go home party sell city sells third party products that they don’t make.
Why would a retailer want to sell someone else’s stuff on Amazon when that you know someone else can also sell that stuff.
So it’s pretty hard to have a competitive advantage there and obviously you have to give away the the margin from Amazon’s take rate.
Party City does contract manufacture some of their own things and I think a lot of what we’re going to sell on Amazon are Halloween costumes.
So in some cases these are are things that are exclusive to party city.
But then you look out in the world and you go gosh most retailers are primarily focused on on owned brands or exclusive products primarily as a strategy to compete against Amazon.
So it’s interesting that cities creating some of their own desirable products and embracing Amazon as a platform to sell them.
So I just haven’t hadn’t seen that particular dynamic play out in this exact way before and I’m gonna be curious to watch how it plays out.

[15:48] Yeah you know that will be interesting. And it was a really weird week news wise because Amazon that’s kind of the of the Amazon news and usually we have like 50 things we can talk about talk about,
that that being said a lot of other retailers had pretty interesting news it’s kind of the time of year where we’re getting the same store sales and updates from YouTube.
So Wal-Mart had a lot to say this week. Watch to kick us off with some highlights from that.

[16:15] Yeah yeah. In general I think if you’re a fan of retail it was a pretty exciting earnings season this quarter.
So Wal-Mart came in with a 6 percent year over year growth in their same store sales which was a beat over there.
Their expectation in the U.S. It was a 4 percent year over year growth which is still beat the expectation.
That’s the highest growth in same store sales and Wal-Mart in ten years.
So that’s a huge win.
They also announced a 40 percent increase in their e-commerce growth.
And they they reaffirmed that their guidance for the whole year is that they’re going to grow Econ. by 40 percent.
Some listeners may remember last quarter they only grew by 33 percent and,
the market beat them up a little bit because the market was promised 40 percent for the whole year and they only turned 33 percent in that first quarter and Erwin’s like how are you going to make it so this quarter they hit40 percent so they still have some makeup to do.
But but trending in the right direction and 40 percent growth,
it at Wal-Mart is a big number I give you know you know anyone other than Amazon you know Wal-Mart e-commerce business is very big it’s north of 15 billion dollars so growing that by 40 percent is pretty darnimpressive.

[17:32] Yeah. And as a reminder the bay side of e-commerce growth is 15 percent so that’s you know a two to three acts based on.

[17:39] Yet. And we’re Pragyan to have to talk about that again later because that that 15 percent is feeling increasingly fishy as as we look at all the news here,
but one of the things that’s super interesting for a retailer is that traffic is actually up in the stores right.
So there’s things you can you can control by changing your experience in your pricing and all these sorts of things.
But like one of the you know the biggest needle’s most difficult to move is to get more people to show up in your store and do more shopping and at Wal-Mart in the U.S.
Foot traffic was up 2 percent in the stores. And the size of the average ticket was up 2 percent.
So those are two super favorable metrics that at Wal-Mart scale translate into a lot of gross margin dollars which is pretty exciting.
If you’re a Wal-Mart investor so super Rosy.

[18:34] I like to remind people a couple of the underlying reasons why some of those numbers particularly the e-commerce numbers were so good.
So in their earnings announcement they also said that they were now at 8500 locations where you could order groceries online and pick them up in the store.
And so it’s my contention that a big chunk of their 40 percent growth is that they keep adding more stores that offer curbside pickup right.
So normally when you talk about e-commerce you kind of think of it as this big homogeneous thing and oh we sold one billion dollars across the whole U.S. online last year and this year we sold one point five billiondollars. That’s great.

[19:15] Your goods online are generally available anywhere in the country but curbside pickup groceries aren’t right.
You can only sell curbside pickup groceries in a zip code where you have a store that can fulfill those orders.
And so the fact that they only had 1000 stores last year that could fulfill those orders and they have 1300 stores now means they essentially doubled their capacity.
So it’s not surprising that there are e-commerce growth was so high as well.
And so I’ve actually talked to analysts like you you really need to think about digital grocery sales sort of as analogous to same store sales like you really want to see a number that says what was my e-commerce in theset of stores that I had last year.
And then what was my incremental growth from new stores that I opened this year.

[20:02] Yeah. So you can make the argument that they’re kind of like you know playing a shell game and moving stuff out of the store piano and into the e-commerce know what which sounds like there’s a little bit goingon,
but the fact that still you know same store sales were 6 percent indicates that you know they maybe there’s a fair amount of incrementally in there with the Grocery pickup that that there are not.
Does it seem to be cannibalizing the store side of the business. If if if it’s growing 6 percent.

[20:30] Yeah and there are a bunch of interesting dynamics. We’ll have the deep dive into another time.
But it’s funny the things you are willing to buy and that you do and don’t spend your money on when you walk through this door and put all your products in the cart tend to be different than the things you’re willing tobuy when they’re anonymously put in your trunk in the parking lot.
And so they’re they’re actually like there is some evidence now that consumers are willing to buy more unhealthy food for curbside pickup than they are in the store when all their neighbors are going to see them with thebig tub of ice cream in the cart,
for example. Which I find is interesting.
Wal-Mart in addition and this curbside pickup which I of course I’m very bullish on Wal-Mart is also playing a placing a big bet on home delivery of groceries from a store and they said that they’ll have,
coverage in 40 percent of the U.S.
Population by the end of this year so that that is scaling as well.
And I think they made some some announcements a little earlier in the month that they were exploring some interesting automation to help pick products to expedite those grocery deliveries in the curbside delivery.
So lot of investments in that space. It’s a hot space in grocery overall.

[21:42] And you know as the executives were talking about the climate that was driving this you know they were pretty clear.
They’re like hey the number one reason that we had such a good quarter is the consumer backdrop is so favorable.
And I think that’s a theme where we’re going to hit you know again later in the show.

[22:04] Yeah absolutely.
The there was some third party news where you can now so Olmert had a marketplace.
And now you can return those products and the story used to be if you bought a third party online you couldn’t return it to the store which was super confusing for people.
So consumers get confused by the whole third party thing.
So you know this is this is a huge win for the marketplace because now you have a similar experience to any Wal-Mart item you can buy it on line or turn it online or return the store.

[22:41] Yeah and I imagine that that’s a huge benefit to consumers and pretty annoying to a bunch of marketplace sellers that are now forced into more generous terms than potentially made economic sense for them.

[22:57] Call did you want to move on to target or any other Wal-Mart stuff you want.

[23:02] I guess one last Wal-Mart note Wal-Mart made another investment this quarter of 500 million dollars in a Chinese online grocery service during a grocery in China is huge. There are a bunch of big players.
Wal-Mart has stores in China. It’s one of the international markets that they continue to fight for.
And it’s interesting to see them still in growth in investment mode as people remember they made a big investment last quarter in Flipkart in in China which makes 500 million dollar investment almost seem like chumpchange.
But but very clearly you know that China is still a huge digital land grab and all the big global players want to want to have a strong presence there.

[23:47] Yeah. One other aquisition thing there. They did close out the acquisition of Flipkart.
When you when you do these big international deals governments get involved and you know there is risk in there that you know either India or someone in the U.S.
There’s this whole foreign investment board thing that can kick in and say you know we have a problem with this.
This acquisition and this example is you know a lot of that happens around China.
So because U.S. has a friendly relationship with India I wouldn’t see it go that way but it is very squirrelly about retailers out of the country coming in.
So it is good news that they were able to close that flip.

[24:26] Yeah I’m sure that that was a sigh of relief for all the folks in Bentonville.

[24:31] Yes. Literally the day after Wal-Mart this week then Target announced and it was kind of funny because there was a little bit of shade being thrown there.
So there same store sales were up six point five percent which is you know 500 basis points higher than Wal-Mart and it was the highest in 13 years.
So they know a lot of people listeners that show kind of noticed that target use a lot of the similar language but that had know slightly better results than Wal-Mart. That was kind of funny.
Their CEO. You know I think it was a little bit giddy with excitement.
So Brian Cornell he said quote I’ve been doing this for a long time.
I think this is the healthiest environment I’d ever seen. End quote.
So clearly the economy has you know kind of.
And if you look at a lot of the data I will belabor it but if you look at consumer price index,
unemployment is way down and then even now we’re starting to see wages go up across a lot of different bands not just college people but hourly employees.
So. So it feels like these guys are feeling it.
You and I have a little bit of another theory. We’ll talk about after this. But that’s benefiting the department stores.

[25:50] But what are. E-commerce was up 41 percent versus 36 percent last year.
And then they have same day delivery in 11 areas.
You and I have been talking on Twitter as I go through different targets.
So I was down in South Carolina at a target and I saw him installing the same day delivery the curbside pickup there and stopping at a lot of stores around here.
And there are currently 800 stores. And then you know they have been investing a ton and owned brands.
One of the most popular ones is cat Jack that has reached a two billion dollar run rate in a year which is just amazing.
And I can say as a guy that just took two kids to college you know more and more of the stuff you buy at Target especially if you get like dorm furniture and seasonal seasonals is is kind of brands.
They have one called Room Essentials and I think we personally. Yeah. The silver dollars on Room Essentials for college kids.

[26:50] Yeah I mean I think that’s a super common strategy that we’re seeing a lot of traction on his own brands.
But Kevin Jacques is particularly amazing.
I mean imagine any any company watching a new consumer brand and getting that two billion dollars in sales in one year.
That’s that’s pretty spectacular.

[27:08] Where did that go. So like what did they displaced think.

[27:13] Baby Gap. Now I’m being slightly sarcastic Baby Gap did have a gap had a bad quarter. But why.
Most beneficial Babies R Us is a big chunk of Toys R Us.
And so you know I think there’s an argument that that target was a good beneficiary of that.
Toys R Us closing their stores this quarter. Whether that was all. Kevin Jacques or not.
I’m less clear. But but they’re killing it.
But the eye popping number out of all that target news to me was that their store traffic climbed six point four percent.
So that’s a huge number that you’re not used to seeing in a well-established retailer.
And just to put that in perspective for people I want to see a target it has about 1100 stores so,
having their traffic increased by six point four percent is the equivalent of they magically had 110 more stores that just opened for free this quarter.
That’s amazing.

[28:20] Yeah and one of the. You know they don’t quantify it but they did have a lot of superlatives around what they called it.
They had a Prime Day sale both online and in-store if I recall they did call out on their conference call that that that had some you know some really good benefits for them. And Jim.

[28:36] Yeah. Yeah I think they definitely got the nice Amazon Prime Day kiss.

[28:42] Yeah thanks dimsum. So as we were going over this we thought it was kind of interesting because the economy is doing well.
But really look what’s changed in the last 30 days. And when you dig into that I think what’s happening here is Mollah again.
So so in an ironic twist of fate we want to update you guys on store closures but we think that this is having an impact on Wal-Mart and Target.
You know the simple example is Toys R Us closing has created you know a huge opportunity even party city we talked about before.
Everyone is adding toys Barnes Noble’s adding toys.
I think that’ll be you know they’ll be OK. But I think consumers are thinking about that.
Now when you think about toys you really have two choices Wal-Mart Target and Halloween. And back to school so so it can be interesting but we’re two thirds through the year and we thought it would be good to havea Maalik get an update.
So the way this plays out is so far this year. So again this is through mid August when this data is collected. We’ve had 4000 379 store closures and two thousand two hundred thirty nine opens.
I think it’s important look at this data because I see online a lot of times that there is no retail apocalypse. There’s you know for every store that closes there’s five that opened and they’ll talk about war or something likethat.

[30:07] That’s just flat wrong. So this is the real data. This is announced closure so it’s hard to know exactly when a retailer is opening a store or closing it.
So these are announced opens and announce closures.
So you net those two numbers out you get about 2000 fewer stores.

[30:23] Now looking back OK that’s that’s kind of where we are in 2018.
If you look back last year and again 2018 is two thirds of a year so we’ll probably have some more.
And in fact since the 15th when this data comes out there there have been more or I’ll give highlights on last year. There are 7000 closures.
So you know I don’t think we’ll get to 7000 this year. There have to be quite a lot.
And then there’s 3000 opens. So last year there was a net loss of 2800 stores.
So I do think we will probably replicate that you know. All we need is another 6 700 stores to be announced.
And I think we’ll get there. So we’ll see.
So for example Sears just announced today 46 more stores and then Lowe’s announced they’re going to close something called or worker.

[31:12] Orchard Supply Hardware.

[31:14] There you go. That’s news to me and that’s about 100 stories.
The other thing is that that kind of gets missed in a lot of these conversations is the square footage right.
So it’s easy to lose a Toys R Us and you gain a I don’t know a word.
You know a 2000 square foot Wabby showroom.
You know what. What’s the difference in the square footage.
So there are some Wall Street firms. Chris was really good data on this.
They’re projecting so. So they had they said 2017 was the worst year in since 2001 when we were in a recession then and it was a 100 million square feet that closed 110.

[31:58] They think this year will be about the same. So it’s I guess it’s good in that it’s not accelerating but we’re not losing a 100 million square feet of retail which can’t be good.
And then when you start to look at some of the stores that are closing we’ve talked about some of them but some of the ones that are opening for example Dollar General’s opening 900 stores Aldi 5 below is opening 125.
So I think what you’re seeing is this really interesting kind of to kind of speak to the bifurcation that Casey has introduced to us.
A lot of the show you’re seeing the value oriented retailers really opening a lot of stores.
But the convenience and and there are some of those things and there like a would be but we’re being open like you know 36 stores they’ve announced.

[32:45] Then you have like Inochi opening 18 there’s just no countering the the other side of that coin where you know 46 Sears I think of the size of those things that’s going to be worth,
you know 90 or 150 warbirds or something like that 50.

[33:00] So a lot of tests dealership’s Exactly.

[33:02] Yeah. Yeah so.
So it is interesting to kind of think through that. Now the other thing that’s really interesting is,
I know a lot of people in the real estate world and for the first time ever in just Aeriel the price of industrial space exceeds retail space.
Our mall space. So there’s a lot of mall space out there it’s heavily discounted.
You see things. Another big one that’s a problem is this Bonneton I’m not that familiar with these guys.
There are evidently in with a lot of these years that are closing in on these analysts also do this the math that says if you lose two anchors you’re pretty much toast.
So what’s Bonneton announced they are closing I think about 200 stores that put a big chunk of malls at risk.
Solok 100 store you know kind of half the band tines probably will make some malls fail.
So this put extreme pressure on the retail pricing in malls specifically. So now you are seeing industrial which is essentially like warehouse space.
The square footage there it’s in such supply Amazon and all these people are going up and buying all they can get.
They are now seeing that invert for the first time ever which is pretty interesting.

[34:10] Yeah it’s super fascinating and probably explains why Amazon opened the fulfillment center in an abandoned mall this year.

[34:17] Yeah yeah. Amazon just opened another famous here center here in the Triangle.
And they had to put it kind of a pretty good distance out because there’s just like you know and at the same time they’re they’re building million square foot fulfillment centers and 2 million. So.
So the amount of land they need is going up. So it’s pretty interesting.

[34:37] Yeah it’s it’s very fascinating to just put those the net store counts in some context.
I think it’s possible that the 2017 was the first year in like the history of tracking retail that we had net store closures.
So I bet that is not the normal trend like you know even in years like the 2008 when we were having a real challenge.
There were still more store openings than there were closing and so the fact that last year we actually lost net number of stores.
And we’re going to again this year and to your point like probably more severe when we look at square footage than store counts.
That is absolutely a disruptive new trend in the market.
And so like I’m perfectly fine jumping on the bandwagon with you and talking about Mawle again because you know I do think this this is an Armageddon for a lot of the malls in the U.S.
I’m less willing to talk about retail Armageddon because I do think.

[35:47] That there’s a lot of segments of retail outside the mall that have far fewer headwinds than the mall based retailers have.
And you know so I like retailers absolutely being disrupted but right now like digital is certainly one of the big factors I would argue there are other other factors that are contributing to it as well.
But as we’ve talked about on the show a lot the U.S. is uniquely over stored with 24 square feet of space per person versus like the UK where they have five square feet of space per person.
So even if retail was going to grow revenue and be healthy we still have way too many,
stores and so the fact that that we’re having a correction in that like to me alone isn’t isn’t super worrisome.
But but I think what we’re seeing is even when the economic factors are really good like they are this quarter and in Wal-Mart and Target are giddy.
It’s not. It’s affecting different retailers in different segments,
at dramatically different rates and so it’s that rising tide is not lifting all boats lifting a bunch of boats and it’s weaving a number of those boats boats in the malls in dry dock.

[37:04] Yes it’s a really interesting set up thinking about holiday 18 because we’ve got the economy really cooking.
You’ve got less competition because these stores are closing.
And then you’ve got Wal-Mart and Target kind of heading into September with what feels like a really robust tailwind.
So it’s going to be a pretty interesting holiday to see how things come out.
And then you kind of teased this earlier that the thing that continues to befuddle me is you know everyone talks about e-commerce growing 15 percent. I just checked the U.S. Commerce data.
They came out with Q2 it like 15 percent like fifteen point five percent e-commerce growth.
But here we have now we know Amazon reported you know kind of in the high 20s.
Wal-Mart and Target are in the 40s. Platforms like shopper fire in the 20 30 percent the only the only company I know of that’s below 15 percent is eBay. Kind of like six to nine percent.

[38:05] So it just really continues to not add up for me where if we take the biggest guys Amazon’s half of e-commerce Wal-Mart is is a big chunk.
A lot of times Apple gets counted in here. Apple had a great quarter.
I don’t understand there has to be like when you do the math there has to be like a slice of 10 percent that’s growing minus a thousand percent for e-commerce. Only growing 15 percent.
So I keep coming to this conclusion that I think e-commerce has got to be growing faster than the 15 percent it just kind of mathematically has to so well that someday,
we’re going to get to the bottom and build a table and really dig in on it but not today.

[38:47] No. Very true. It’s going to be interesting to see as it becomes a more important part like accurate data is going to become more important.
And like we we just don’t have numbers we can rely on right now for the actual size of e-commerce and the growth. So,
something we’ll probably talk about a lot more. But there are a number of other odds and ends in the news that I want to make sure we saved just a little bit of time to cover. So again I don’t want to brag.
Chicago feels like the the new retail e-commerce capital of the world like we get all the new stuff first.
And this this month Google announced that they’re going to open their first permanent store.
And of course they have chosen Chicago for that store so Google has done a bunch of pop ups.
I think we’ve talked about some of them on the podcast before.
They’ve done one in Tribeca the last couple of years selling all their their Google branded products.
But the first permanent Google store is going to open up here in Chicago and there really hasn’t been a lot of word about like,
what the goal of the store will be is it predominantly selling pixel phones in,
google home voice products you know or you know is it going to sell third party products and so it’s going to be interesting to see what that looks like and I will look forward to doing a trip report when this store open.

[40:09] You can only camp out for the Amazon go store in Chicago or the Google store which winning in a.

[40:15] I would do the Google story because I had been Amazon go store so it just you know for me it will be newer.
And I guess I’m I’m less certain what I’m going to see in it.

[40:27] I remember you gave a trip report to Google pop up store and you were not happy.
There was some V.R. thing that didn’t work and they didn’t understand a pixel question you had.
So I don’t know. We’ll see. I think the bar is going to be set high for them to do a major.

[40:44] Yeah. Right. Retail is very hard. And you know so some of these digital companies that that’s not their core business you know find it out the hard way when they first started trying to have these these directconsumer experiences.

[40:56] Yeah I saw two interesting digital native vertical brand news items.
So in the empty your movement watches and this is interesting because they kind of both fit in a theme I thought that was kind of interesting so I called the the analog dinosaur by as the digital diva.
So they sold their company for 100 million dollars cash upfront plus a hundred million dollar earn out to movado.
So a traditional watch company buying the direct consumer kind of digital native brand.
And then as part of announcement it was revealed that a company had 70 million dollars in revenue run rate which is,
you know so against 100 million that’s maybe like a little bit more than one times one and half times revenue which isn’t too exciting but if they can get their turnout at 200 million then you’re talking three times that.
That’s that’s pretty good when there was more secret.
So I don’t have any juicy numbers but it is in this theme is their traditional mattress company Surtur acquired tough to needle one of the many Casper like kind of mattress and box companies.

[42:00] And what’s interesting about that release was a couple of things.
Number one they specifically said the reason we bought this these guys is we’re going to have them build a whole platform for certain.
So I guess it of doesn’t really sell direct to consumer.
And this is probably driven by the chaos in the mattress world that the mattress firm announced that they’ll probably go into bankruptcy,
and sort of is owned by a private equity firm and there’s a lot of speculation that private equity firm kind of has to buy the Mattress Firm because there that’s like some ginormous chunk of their revenue.

[42:37] And then a lot of people have been wondering about Mattress Firms because there’s kind of a you can hardly drive a block you know in these strip malls without you know sometimes you see pictures on mine ofMattress Firms effectively next to each other.
And so there are there were clearly overbuilt on Mattress Firms.
Another little tidbit of that is they did say they believe sort of said they believe 30 percent of mattresses are now bought through e-commerce and this was kind of there.
You know it was fed to them saying hey this is pretty serious we need to get involved.

[43:14] Yeah that certainly seems like an industry that was disrupted like the traditional model is pure wholesale model and has come of the slimy version of a wholesale model like all these Matt mantra’s companies makeunique models of their mattress.
For every retailer so that the retailers can all offer price matching guarantees knowing that they’re the only ones in the world that carry that particular sort of mattress for example and so that the whole model is wholesaledistribution,
and you know of course they’ve been disrupted by all these direct to consumer matters companies Casper and Tupman needle and you know I think there’s a cohort of like six of them.
So yeah not not shocking that you’re seeing the old guards you know play defense by trying to acquire the new guard.

[44:05] I also you know there were a bunch of other retail earnings reports we’re not going to deep dive into all of them.
But T.J. Maxx which you know there they’ve been a very good position in the market place for a long time with the value oriented retailers.
They had another beat this year this quarter.
That’s them them having a quarter is impressive because they’re working against pretty aggressive comps so some of these retailers that have had you know sort of a lot of bad quarters,
you know announcing that your growth was good against those soft sales in the past isn’t as impressive as as it is for like a T.J.
Maxx Macy’s had a really good quarter. They had a beat.

[44:47] They also credited the sort of turnaround in the consumer environment as a major factor and they I think actually raised their guidance for the rest of the year.
So that that’s encouraging.
You know they’re they’re the big anchor left in most of those distressed malls so you know they’re going to be particularly interesting to watch,
Nordstrom had a beat you know Nordstrom is normally viewed as kind of the safest of the the the anchor stores and the department stores and so you know they’re working against decent comps and they were up 4percent same store sales.
Their economy was up 23 percent which sounds modest compared to some of the companies we talked about earlier.
But to your point that still dramatically above what allegedly is our industry average growth.
So you know doesn’t doesn’t seem to jibe.
And then one last piece of news that was interesting to me on this show talked a little bit about own brands and retailers investing in that strategy.
And you know I see it a lot that that’s one of retailers primary strategies for defending themselves against Amazon has sell stuff that Amazon can’t sell.

[46:06] Kroger has an own brand called simple truth which is actually the largest organic foods brand in the U.S.
And an interesting piece of news I noticed this month Kroger is now selling simple truth on teamo.
So this seems like a extra benefit of doing well in the own brand.
Most retailers really struggle to expand geographically and just because you’re a good grocer in the U.S.
Moving to China and trying to open grocery stores in China is really challenging and you know the most retailers don’t successfully expand internationally the way they’d like.
But when you build these own brands and then you can leverage existing marketplaces to expand those brands internationally.
That seems like a much lower risk higher likelihood of success waited to diversify their revenue into international expansion.
So I wouldn’t be surprised to see a lot more of those kind of plays and certainly we mentioned Captain Jack earlier that that seems like an obvious one to see some some international expansion on.

[47:17] So that is a lot of news. And I want to remind listeners that we’re coming up very soon.
Less than three weeks away is the annual shop dot org Summit in Las Vegas.
It’s the 12th through the 14th if you haven’t made your plans yet.
Go ahead and book that trip. I will be there and would love to catch up with any listeners that are going to be in Las Vegas this year.
And that is going to be where we’re going to have to see that because it’s happened again. We’ve used up our allotted time. As always if you have any questions or comments about the show please jump onto ourFacebook page and we’ll keep the dialogue going there.
And you know now would be a great time to finally thank us for this podcast by jumping on iTunes and giving us that five star review.
That’s really the best way for you to thank us if you are finding the show to be valuable.
And of course if you’re not finding the show valuable the best way is to call Scott on his personal number and talk to him about your Greven.

[48:22] Absolutely. I look forward to hearing this.

[48:24] And so until next time. Happy Commercing.


Aug 22, 2018

Liraz Margalit, PhD, is a Web Psychologist, a Keynote Speaker and Head of Behavioral Research at Clicktale. She integrates Cognitive Psychology and Behavioral Economic perspectives to analyzes online consumer behavior and delivers actionable insights for business stakeholders.

In this interview, we cover Liraz's background, digital body language, the mobile mindset, and the role of emotion in shopping.

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

Episode 141 of the Jason & Scot show was recorded on Tuesday, August 7th from the eTail East tradeshow in Boston.

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 episode is being recorded live at the e'tae least trade show in Sunny Boston on Tuesday August 7th
I'm your host Jason retailgeek Goldberg unfortunately Scott had a personal conflict and wasn't able to make this show so you guys are stuck with just me
but we have some great guess this week and first up we are excited to have dr. Laura's mark delete from cooked tail on the show or as is head of Behavioral research cook tail and she's going to share some fascinating
psychological research that that she's been conducting about online Shoppers and their behaviors welcome to the show with us.

[1:10] Thank you I'm very blessed to be here.

[1:12] The president Charlie R's one thing I was like to do to get things started on the show is just for a little bit of background about the guest so maybe you could take just a minute and tell us how you came into the
doesn't seem like online marketing is necessary the first place you think of her psychology.

[1:29] So interesting the fact that there is no such a degree in
web sites out or web psychology or digital say Call of Duty and people keep coming to me and ask,
how can I become a psychologist and there is no one answer so for me I have a PhD in Psychology.
Specialize in decision-making processes and cognition also Game Theory and over the past 5 years I've been utilizing model from cognitive psychology neuropsychology and behavioral economics how we can understand and identify customers behavior and did you deter work
because we know that there is a slight difference and you don't like it's not so slide,
there are differences between how people behave online and in the physical world and they are communicating frankly even their personality trait.
James like if someone is an extrovert become an introvert and vice versa so I think there is a huge need to understand how people behave
in those Windows media and those Arenas so a disability.

[2:37] That's very cool and I'm excited to dig into it before we go too deep maybe we should tell our listeners just a little bit about cooked tail for anyone that's not for me.

[2:45] Sure she looks so cute Bella is an experience analytics company so what we do is that we,
how to analyze and understand the customers Behavior the motivation for example what makes them motivate them to purchase certain products and why they would has it,
before clicking on a call to action their Journey at the differences we can have different Behavior patterns we're talking about,
thousands of visitors all together so we can take a view of individual visitor of thousands of visitors all together and this is how we can have heat inside
into what's going on in your mind before deciding to purchase or to leave website or what is there Experian.

[3:32] Wonderful in the way I sort of think of it there's lots of tools out there that I'll call Page analytics tools that sort of keep track of how I
consumer moves from page to page and what unique about could tell as in my mind you were one of the very first tools that were what I'll call on page Analytics
and you could actually see all the micro behaviors of the consumer
wow they're spending time on a page so are they you know are they scrolling are they hovering I mean not I know there's a small part of it but like.
Gray superficially I think people always think about the heat maps and understanding where like the real fold is on the page how far down is the consumer really going.

[4:10] Exactly so there is a common mistake that we are a heat map company goes much deeper than heatmap so if you think about it I can understand how you feel
I can understand what you are going to remember from The Experience only based on how you interacted with the different pages I can under,
if you're going through shift from positive to negative negative to positive and I can take,
into consideration all your behaviors and actually see who you are or your personality traits are you crying to mine said so there is a whole lot of things
we can detect only based on your micro-level behavior.

[4:49] I feel like I'm never going shopping again I love online shopping and now I'm terrified that all my deepest secrets are going to be revealed by my my my mouse behavior.

[4:58] It's so now it's all I have.

[4:59] Just made me very self-conscious.

[5:02] I have actually I can use it up for you because I don't care where you are I mean I care a lot about you.
Like from we can we are not going to save the information about you the gender only based on what you doing
what you did online so that's it and it means that I don't know who you are I can only see what you're doing online.

[5:26] And that is it that is another interesting thing like a lot of times when people think about personalization or even,
I I care more about relevancy necessary then personalization they think about like storing and collecting data and knowing who is user is individually and accumulating
more insight that you can somehow use to change the experience one of the things that's that's cool about this field is you can use kind of contextual signals in a single session so I can be
entirely Anonymous Shopper or shopper you've never before and you can instantly start getting some signals you can use to make the experience more relevant for her.

[6:03] Exactly exactly so is I look at it ice I've used the language model meaning that at the bottom of the mother we have the letters of course so these are like.
Peaks and espola to have hers and then you go one level up and then we can talk about words for example if you click and butt before you click to hezzy.
So I will call it hesitation are you at school really fast or really slow and then at the app we have the mindset for example if you are gorgeous.
So I would see a direct action and then click so meaning that you know exactly what you're looking for and how to accomplish.
On the website so I can actually understand your mindset if your focus if you're frustrated so this is like the the sentences in Thai language.

[6:51] Very cool and it's this is maybe a silly analogy but the the expanse I feel like Moe's online consumers have had that makes this sort of apparent is the the little button I am not a robot.
Right and everything goes well that's stupid like if I were a robot I would be able to quit that.
I am in what what you're not realizing is that that which it is watching how you move your mouse,
the button and the the unique way that a human being moves the mouse is different than the perfectly linear way and I'll order them is likely to do a.

[7:26] This is the magic word actually the house because actually my whole research is focus on the how customers behave and not what you're doing and also you know there are many many companies today.
Dad or like your your detect that you use bad.
I think that it doesn't matter because you know 70% of our day-to-day interactions are actually based on nonverbal signals meaning.
Hope you're saying to one another so I can ask you if you like to come over and you will say yes because you are being polite but from the way you say from
how you say I can infer that you really don't like to come over so it's about our body gestures and her facial expression when we're talking about the physical world but when were talking about the online
it is also about the how is that it as you described right now.

[8:14] Yeah it's super exciting let's jump right into it now you've done for the three big areas of research and I want at least be able to touch on all of the the first one is when we talk
turn it down on the show we talk about this thing we call the mobile Gap right and in general you got
all the traffic on the web is predominantly moving to mobile devices but if you're an e-commerce site people don't tend to shop as frequently and successfully on mobile devices that used to on desktop so you
so that's a scary Trend and we're always talking about how sides can do better what we can fix in the customer experience
and you know frankly you have a chance to settle up our way in on his dispute Scott and I always have without putting words in Scott's mouth while he's not here but he's not here so I might as well.
He thinks some of that Gap is in friends and that it just harder to shop on mobile devices in the screens last.

[9:08] I would like technical issues.

[9:10] Yeah not all of it I don't think you would say but I think he would you know just say hey it's West convenient and and I argue that a lot of it is
inferior experiences and execution that as we get better we can remediate and and that we should expect to see.
The mobile Gap certain Arab so I love to hear your perspective on that and tell us tell us a little bit about the study and what you learned.

[9:36] So yeah I'm sorry Scott but I will have to go with you or with your assumptions about it,
if I say we we are calling it The Mobile man mindset
meaning that I think exactly as you described we have a different mindset as we go on mobile
and if you think about it it is done unconsciously it start with her body posture meaning that when you when you browse.
Add to desktop when you add to your table to your straight up
so he's actually affect who you are what you think what you do and when we on our mobile device where usually on the go
and for us I would mobile we have an association between our Mobile in our social social life and we are.
Conscious about about what we do and that is why we like to buy more precious thing on the mobile and you know
our mobile is like an extension of our body so we treated completely differently you know.
I thought that was conducted about people how they treat their mobile they found it if I will give you my mobile
people we always start being jealous at you for touching my mobile if they make us feel more emotional about her mobile so also it from wanting that we have discovered is
the three of you in completely different types of corn.

[11:04] Lake Murray Sports Bar social media on our mobile Facebook and Instagram for for Generation Z and the desktop so.
Most of us will also feel most secure like to complete the purchase so like there is a processing cycle you start with your mobile your brows for things and you landed at your desk
but they also because we feel more emotional.
When we are holding our mobile so we will be more people's purchaser meaning
we we are not going to think about it too much we're not going to use a rational system because you know we have two different systems operating in or my system 1 system too so system to is the rational system.

[11:50] And 61 is the emotional it is more at o matic so it is based on war base you don't.
Too much so this is exactly how you behave on your mobile you don't,
too much you play out of habit so this is a habit forming most of the mobile website or the mobile apps these are habit-forming apps and
when you are like you lost yourself you don't think too much so that is why we will buy more I will be engaging more impulse purchase and for the desktop we are more self-aware and we are price-conscious
and the reason address,
because you have this big screen so so are exactly is called said so because you have this big screen this is an illusion that you can see clearly you can see all the details so I'll for some people
most for the elderly guys out if they feel like they feel more safe to purchase order this.

[12:48] Very cool and so and I imagine it's all somewhat relative like so for example I always talk about how in ux design Everyone likes to,
to act very rational right and you know my promise is the overwhelming majority of all purchase decisions are made with that fast system they're made with the irrationals not that I work the subconscious portion of our brain
and and so what you're saying is on the mobile device it's even more so.
Into one of my takeaways from that is what you there's been this big Trend and they slightly misused word but we'll talk responsive-design like one one experience and it's just kind of fluid in a liquid so it can,
Flex to fit a big desktop screen or small Mobile screen and well that's certainly better than have any experience that doesn't fit the screen it's probably not the optimal experience because your point,
there there could be more emotional triggers that I want to deliver to someone on that mobile device and there might be more.
Rational objective information that I want to deliver to that.

[13:56] Yeah definitely that's what I keep saying to our client it's not about the designer design shouldn't be different what you'd be different is the content.
Contact because on the mobile we are on the ghost so mostly we are not,
to be interested in all the details and information we want to to see images we want to be to have an access to the information and we want the more emotional con.
like for example if you're talking about our social media so we want to be connected to our social media we want to know what my friend bought before me but
on the desktop this is completely different on the desktop you want to review all the details,
very carefully we want to have access to two Idol reviews so yeah it's not about the design it's about the content to be completely different and it should feed our minds at her mobile or desktop.

[14:49] Yeah that's pretty cool until I think of that is sort of like on the desktop I might want a deep dive into all the reviews in the numerical rating.
On the mobile I want to see a picture of the person from my social network that I know that that bought this product and had a good outcome
yeah that's that's super interesting and exciting part of me it's sad because I feel like most designers work on these super expensive giant monitors and if anything
they they did say their best most emotional visual experience is.
For the big screen and then when they say hey what's the mobile experience they're like oh it's much smaller I'm just going to give him a thumbnail and give him.
Attacks and and what you're funny cuz that's exactly opposite of the.
Contacts to the user very interesting I can talk about mobile with you all day but I'm super interested to Diamond to the the next two studies and the next one that we were talking about
is this. I think it's a huge opportunity for people to improve their customer experience it's shopping stress.

[15:56] Exactly so you know there are different tips to the shopping stress there different finding so first we know that for some of us,
is like an addiction it's like you like to go shopping the same as you like to smoke it's relaxing and fun and you get to forget about yourself and just be like.
When you play a mobile repair like mobile game so for some people it is exactly the same mostly women but.

[16:25] I also some men that like to shop ever.
Although we know that is supposed to be fun and enjoyable it can be all so it can also be stressful especially when we're talking about the checkout process and especially for men because
what we have found that you that we can we have.

[16:44] Different mindset for men and for women I think the differences between how men shop and how woman chokes is extremely important here.
Because we said that men they want to find what they want to go shopping they know what they want.
Ahead of time and they want to find it as quickly as possible looking for similarly related items and they are
a price conscious and it's not about the fun it's not about the pleasure fat woman it's not about the end result
so we found it sometime woman will enjoy the process itself they derive pleasure from The Experience they say calf and sensory stimulation
when they are shopping so it's all about applying the associative thinking so they can start with I don't know why I baby back in skin care and they will find out go find himself they're going shopping for bags for example,
so it's all about the pleasure in the fan and the association so you can see why it is less stressful for women if you are going to focus on the experience itself but for men
if you are looking for something and you cannot find it especially
play in the holiday season or if you really need something so then it become pretty stressful.

[18:00] And it is interesting to me I often feel like the best opportunities to improve experiences and in increase conversion is shockingly sometimes it lasts about.
More tools for task completion in more about this stress avoidance that like the low-hanging fruit is usually what can I take.
Out of the experience that's causing the stressors and releasing like all those hormones into the bot like it's it's a.

[18:30] Espressos yeah exactly because what we see is the people the designer for example
about the customer State of Mind
what do you need like what would I need to find out they don't think about the actual experience so let me give you one example we found that the most stressful thing for some people is that they are entering a voucher
or there is a voucher and they don't have it so they keep comparing himself to the other people because we are all engaging social comparison so oh my God.
I could have this item in the lower price and I can't have it even if it is even if it is not
so we need to think about this ecology over customers because those types of things they are what make them stressed.

[19:22] Yes and that that particular use cases a huge pet peeve because not only is it it hideous it's at the exact wrong point it's at the very end of that purchase.
They're 99% of the way through and you just said a new anchor change their pricing perception and made them feel like they're stupid if they make this purchase.
Without a and none of us none of us like to feel that way another one that I talk a lot about is
just the underlying Speed and Performance of the the site and it's shocking to me how much stress it induces just when the page loads slow or a button someone clicks.

[20:01] Because you feel wasn't what went wrong and oh my God what about my money because whenever it comes to your money because if you think about it.
Long I mean
of course we have the internet for many years now but still like the money is going somewhere we cannot see it's not like we can feel the actual money so everything about what's going on with the transaction can make a
really really stressful even if you just like a slight error and everything because and then even if it was a slight error and everything comes back to normal afterwards we will still.
Have a negative feeling about experience this is the.

[20:42] Yeah that memory effect from that so there's a steady out and I'm terrified some was going to do bunk this study because it's one of my favorite studies in the space but they weren't they were studying,
the the level of stress induced meant from different experiences and the Baseline was watching a horror movie and and they actually found that like,
the average subject was releasing more cortisol and having you no more of a stress reaction to a slow mobile page.
And watching a horror movie and I think that's hysterical like the most talented creative people in the world that are intentionally trying to stress you out.
Just having a slow web page can accomplish the same experience on the part of the user.

[21:28] Exactly and you know what's the interest another interesting finding was that when I talkin about the holiday season so when you need.
To buy to buy something you will feel much more stressful and then we can see more at disoriented behavior and because when we shop about
a stand when any told about the van and we don't have a certain purpose
purchasing then it could be relaxing and fun and we can avoid everything else in the neighborhood but when we need to do something it becomes press for,
and we need to pay it.

[22:00] And again like when you're getting practical advice to people and you're saying like so maybe that that best experience during a particularly task-oriented
season like like a holiday season or your big annual sale needs to be different than the browsing experience that.
Yeah any other like cheap pieces of advice that you give clients based on the emotion research.

[22:24] Yeah based on day is stress research so we know that we were actually analyze how men and women shop and we found that
men that don't like the broad selection and Foot Woman if they don't have the road selection it's like they did in the if for example I'm going to buy seven jeans and I find exactly what I wanted like the exact same size as the exact course I will feel a frustrated because.
It so if it's all about the shopping I like to have a road selection it's part of the fun to try it out in the brake and rotors service also when I talkin about the online experiences we need
to have the accessories and we need to have a broad selection and we need something that fits the hours to see a patient so are we really need to create a different experience for men.

[23:14] That that's super interesting and like so there's this a book in a principle that's out there in that a lot of women are familiar with the Paradox of choice right I think Dan ariely.
Yeah and.
Really smart guy lots of super interesting insides I feel like that particular inside is now.
It has been difficult to repeat like that the whole notion that that the original test for westerners it maybe don't know is you bring a shopper to a Shelf with a bunch of jellies on it and if there's more.

[23:52] 54 vs 6
the word to two flavors are like they were trying to have the septic station of gems so in the grocery store that was at 21st flavors of jam and only six
people of course came to the 24 but when I talking about how many purchase.
Purchase three times more only six flavors.

[24:18] Which is fascinating right inside the original inside there was.

[24:22] But this is Walden Diner really this is what she not anger but yeah he's talking about yourself.

[24:27] Yeah he is talking about her study and he made it very popular by writing a consumer book and any is very approachable and joy is his reading quite a bit but.
The takeaway from there was like oh my gosh Apple they have 47 different kinds of laptops and when Steve Jobs made them normalize it down to three laptops
it reduce a lot of shopping stress and did all these things and and they sold a lot more and so they were suddenly this huge Trend towards curation.
And I think what we've seen in further studies is there are context in which,
that that affect is very real. Your point you know from the differences between men and women.

[25:08] Exactly depends but not for everyone.

[25:10] Text where it's actually a mistake to assume that curation is.

[25:15] So it's all about Sigmund Tatian is all about I mean when I talk about personalization
what is prisonization it's actually the realization that we have different types of customers so we have to provide them with different types of experiences and you know the two words that I hate the most in all these,
online arena is.
What are best practices we have a common basis for everyone we don't
we don't we need to treat everyone as an individual and on state taste
and this is the opposite of press.

[25:54] Yeah but the actual technical definition of best practices is whatever I say.
I'm totally teasing yeah but you're course right right in and it's
I mean that's a cognitive bias to write like the clients are overwhelmed with all these decisions that they have to make and sometimes it just easier to Advocate some of these decisions and say hey what have people done before.
And had a good outcome and what they don't understand is there's an unlimited number of variables that affected that outcome that are not the same.

[26:27] Sometimes you're not aware of all these variables.

[26:29] Can't be in many cases it's it's it's fascinating but still for my clients just feel free to just take my advice.
And is my clients hopefully no I don't recommend that either right like it's interesting to have hypothesis is but like it's it's really good to test those and pierpoint the old model of
something and then you know that's why I like frankly we had all this a b testing and multivariate testing in the world for a long time and there's this interesting phenomenon.
Conversions no better than it was 10 years ago everything regresses to the mean in mini case.
And part of it's because the the experience that succeeded for Shopper age does not succeed for sure.

[27:16] And it's not only that because if you actually mentioned maybe says there is not a problem with a B test because when I talk to designers or two product analyst and they're trying out some tests they don't really have the notion.
Maybe like the evidence we should maybe three work maybe it's not but it's not based on a committee the Samsung it's not based on psychological research and at the end of the day we are dealing with human being so it's not about okay so I have an idea let's try that
it's about how people will behave in about reading the secret vehicle research and I know that you don't have time for this but it will at the end of the day of the long run
we save you so much.

[27:56] Yeah and it and then side note because most people are using his test to validate a preference rather than actually learn permit test like they're all so they're there
generally the math is horribly flawed and people don't don't use proper sample sizes in the Simpson but we don't have time to talk about that
you have a third study which I've only recently just wondering about an emotion so tell us about that.

[28:22] Right so we know that
for example in the reported first a reason to release day Road brands that want to break away from the pack should focus on emotions,
and you know what the part is I like the most is how an experience makes customer feel is a big influence on the loyalty to abandon Effectiveness series of using nearly every industry.
And you know what we know it's not only Foster over the past five years we have been hearing about the significant fall off emotions and driving engagement and experience and brand awareness organization.
No one really knows and no one really tells you how what is the mechanism behind it you know what's the relationship between emotions and experiences and how emotions can be utilized to drive digital experiences so this is exactly what we said
to do and what you need to ask is how our brain,
memorizes daily experiences and what do we need to be discussing his emotion emotion as a gateway to our memory.

[29:23] Let me check with you
a personal storage is to demonstrate it so it was a few minutes ago we were sitting in your family after Friday family dinner we were sitting in the living room and then my oldest daughter she turns to me and asked how we met her daddy
so I told her the story I told her that I went because of my friends to a dance club and as we entered the club I saw him standing there the battery cover.
And he was so good looking and then we went to the dance floor started dancing and after a few flat it looks he came over cancel my friend and ask if he can see me away from them.

[29:57] And this is how we talk again and he is there sitting there listening to me telling the story and says oh my God liraz it was nothing like.

[30:05] And for a minute there I was doing.
But you wasn't eating and you know today after starting the dynamic nature of our memory I know that you wasn't kidding because our memory is greatly influenced by.
Our recurrent mindset and our private stations in our emotions of course and that is why and this is very important lesson it doesn't matter what we need happened to the digital experience
what matters is what we're going to remember from The Experience right so in order to study emotions in the digital world we have developed this mother According to which the emotions evoked are the result of our private stations
and a recurrent mindset.

[30:48] And by private spectation I mean the actual wrong. Interacting with digital work we have developmental model that guide our XP
patient is to what to expect from different online experiences and what do I mean by mental model for example you are going to rest.

[31:05] You know how to behave you know this need to wait for the hostess first date you know how to behave so we have mental after interacting with him so he's the actual interaction
play online interactions meets our expectation it is considered to be an an event and no emotions are involved
so for example if I want to buy a certain the product this is what I expected,
and that's it but if the actual interaction
at least below our expectation meaning that is -2 what we expected then the experience would be associated with a negative emotion however if their experience rises above our expectations then we can do,
talk about Peak experiences and delight and then the experience will be associated with a positive emotion
so it is extremely important to understand our products spectation in just to give you an example,
there's something that we need to understand about our brain a brain did not develop as fast as our technology,
in one of the basic human needs is the traffic control and the response to the loss of control is the same and it doesn't matter.

[32:20] If you find the jungle fighting for a life if we are trying to possibly the street or if we are on stage in front of a big crowd so recently we have one of our clients music station
do analyze the customers behavior on the pages and they were trying to push video content by having them load automatically.

[32:36] On your pages so what me so when we observe the behavior is it whenever the customer and to the website and counted the video immediately clicked on the pause button.

[32:46] 85% of the customers
think I called you the video and click on the start button because clicking on the pulse by then put the control back into their own hands so it's not about the video was click
and well-designed it's not about the video it's about our private station and our emotion and you know different emotions affect.
Whole different functions today influence information processing in-memory in different ways and it is extremely important to understand it.

[33:16] Andrew thinks of that autoplay video took the control away from me my expectation was birth control so there was this negative Delta of the experience versus my expectation and the.
The further the Delta is from the the expectation positive or negative the more likely that emotion is to be preserved in our memory.

[33:42] I need it depends because if you think about it from ever and evolutionary.
Negative experiences are quicker and more likely to form long lasting memories because.
It is much more valuable to hold on to those negative experiences and there is something that we need to know about our brains memory system Brands memory system work something like a pen in and out.
So for a brief time before the ink dries it's possible to smell what's written.
Did the memories Consolidated it changes very little so you need to be self-aware about the emotions that are revoked in your websites and products.

[34:21] Yeah and that's exactly what happened to you and your husband at your meeting right is you you both had this expectation and smudge the memory.
The time and now they're heavily imprinted years later and I'm sure your memory was the accurate one by the.
The another thing that's odd about that emotional memory that I've heard and tell me if I have this wrong but I've heard that sequence can also have some impact so we've always had this
this piece of common advice that like the first and last experience in a a path are more likely to be imprinted in that memory than some of the inner.
Yeah okay.

[34:57] So for example if you go on vacation so when let's say that you are visiting to different states so the shift.
Between when you move from one state to another then you're going to print it as well.
And I you know the continent has a really great analogy about emotion he says that in one of his letter in the Q&A session there was a man
and the man says that he has been listening to Symphony and it was absolutely a glorious music
I need the very end of the recording there was a dreadful stretching song,
and any of the really quite emotionally it's ruined all experience for me I think about it it hasn't had to experience it had 20 minutes of Glorious music.
Accounted for nothing because he was left with a memory the memory was ruined and the memory was hold your garden.

[35:49] Yep and so I think there's even things like I have a three-year-old at home and you know going to the doctor or stressful and they give you all these immunization shots and now they like they give you a dose of sugar.
At the end of the shots and I I presume that part of that is so that like the last.

[36:07] Find Alex.

[36:08] Final experience that kid has is like a nice nice dose of Sugar Rush which I feel like every time I go shopping if someone would just give me a hit of caffeine at the end I feel like that would be a really smart.
That's why I think it's interesting cuz I talked with plants a lot about.
The the role of brand and Tumi brand works both ways there's a psychologist at Stanford Professor Samsung that does.
Is a principle called the absolute value and essentially it's
hey brand has often been a surrogate for Quality when we can't judge the quality of products we associate quality with the familiar brand but they didn't the modern world it's much easier to judge,
the true quality of products we have access to all this information at our fingertips and in an environment where it's easy to get objective information.
Brand becomes less important as a surrogate for Quality Inn.

[37:06] Yeah I think that it's not about the fact that Brands become less important it's about that people.
Meaning of the growing flag of information goods and services the emerging middle in our memory and we cannot separate one brand from another and that is why,
when our brain needs to choose a product for my multi to the product that are more that's the same characteristics the deciding factor will always be the emotions that are,
so deciding to buy a certain brand has nothing to do with the features of and benefit of that product,
think about your own smartphone how many of you can celebrate yours on the differences between your smartphone to the competition maybe if you like,
most of us choose based on emotions that are attached to that bread so if there is an association between dead product in a positive emotion you think about the benefit you.
You feel and you know Gladwell wrote in his book playing about the emotional shortcut hero they're the only way that you meant being could have ever survived the species for as long as we have,
is that we have developed another kind of decision-making apparatus that is capable of making very quick judgment based on very little information,
so if you have these emotional shortcut you don't need to think you just need to feel.

[38:25] Yeah exactly and that's always liked it when I do that to Value thing to a very famous brand they're always just hard in like oh my my friends is valuable in and then that's my
Counterpoint no brand still has super important roles it's it's a it's a shortcut to these emotions.

[38:42] Play The Association.

[38:44] I can be permanently associated with these emotions now the one downside of that is the relative to expectations.
The expectations.
Go up with that brand and then it it becomes increasingly difficult for Apple which is already beloved if they make a product that like disappoints customers in anyway it's a negative association versus.
Yeah Samsung where we're at.

[39:12] Yeah I wouldn't expect too much and yeah and it is very easy to disappoint our customers I think this is the most easiest thing in the world.

[39:21] And in you mention that like you know most of us like pick our phone and couldn't,
describe why we we pick it up I would even argue it's worst most people will try to describe it the rationalize it.
And not even realize that actually those rational reasons you just ate it had nothing to do.
With why you until I always like on the internet where this big Echo chamber and you know you follow my Twitter feed and you'll see thousands of studies and all these studies are like
surveys of stated preferences and I hate those two studies because again those are consumers that are rationalizing why they did something instead of
observed study.

[39:59] Yeah we keep seeing these in psychological studies there is a God.
People weekly inhabited really feel and you know what it's not because you're lying to you. Not lying it's because we just don't have it
true regarding what motivates our behavior and there is a great experiment that was recently conducted the demonstrated so customers brainware scan using fmri device.
And this technique measure changes in blood flow to correspond to increase and decrease in mental activity and the interesting finding all that customers were showing different products is part of the go-to-market strategy of these brother
and interesting be if
customer declares that is going to purchase a certain product but it was not an increase in the emotional brain Terraria those products usually felt,
so it's not about asking people it's about trying to find out a different measurement to understand how they felt.

[40:52] Very cool and that's actually going to be a great place to leave it because it's happening again we've used up all our a lot of time.
And I know it it it goes too fast and I could deep-diving a bunch of these topics with you would be
be fascinating but it wouldn't want to continue the conversation or they have further questions we have a Facebook page they're welcome to go to Facebook and post questions and I'll be happy to forward them to you.

[41:16] Always would be great.

[41:17] We we can continue.
The Dying Light there is listeners want to get in touch with you directly are you like is there a you have a preferred like you are you active on Twitter or do you.

[41:28] Sure on Twitter on LinkedIn and of course if they are going to post question to the Facebook I will be more than happy to address the person.

[41:37] We we sure appreciate it I will put your links and our show notes and as always if you enjoyed Today Show we sure would appreciate it if you jump on the iTunes and give us that 5-star review there still rational listeners that want to read those.
Does does reviews to pick a pod
and you know you can imagine Scott and Jason's great looking pictures if you if you want to go with it emotional reason to listen to our podcast but thank you guys very much in until next time,
happy commercing.

Aug 10, 2018

EP140 - Stripe Head of Stripe Issuing, Lachy Groom

Lachy Groom is the head of issuing at Stripe.

Stripe is a payment processor that provides a set of tools to help businesses accept payment online.  Their clients include Warby Parker, Wish, and Target.  Lachy was the 30th employee at Stripe, he leads Stripe Issuing which is an end-to-end platform for quickly creating, distributing, and managing physical and virtual cards.

In this interview, we cover Lachy's background, the range of Stripes services, the state of online payments, mobile payment best practices, digital wallets, and marketplaces.

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

Episode 140 of the Jason & Scot show was recorded on Friday, August 3, 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.


[0:29] Welcome to the jason and scott show. This is episode one, forty, being recorded on friday, august third, two thousand eighteen. I'm your host, jason retail, g, goldberg. And, as usual, i'm here with your co host, scottwingo.

[0:43] Hey, jason, and welcome back, jason's got show listeners. Well, jason, one of our favorite topics on the show, and certainly something near and dear to your heart, is payments on dhere in two thousand eighteen.
You cannot think about payments without thinking about one of the top payment companies out there.
Stripe we're very excited tohave on the show, laki groom, who is the head of Stripe, issuing here with us today, he is employee number thirty, and we're excited to have you lucky. Welcome to the jason scott show.

[1:15] Thanks very much for having me.

[1:18] We're super excited, and i'm eager to jump into payments. But before we do, one of things we always like to do on the show is, have our guests give a little bit of a background of their career and sort of how theycame to the role.
And particularly in your case, it seems like Stripe was still a very small, entrepreneurial company. When you came to them. So could you. Could you give us the kind of ah, the version of your career project progression?

[1:43] Sure so i i started seven in online development startups things of that nature pretty young my my granddad actually taught me html when i was a kid,
which got me pretty fascinated with the internet and from there i had a,
i started a business creating websites for friends and family and that sort of just,
just grew into servicing clients around the world on di i got started in and sort of something tangentially related to payments when i started a company called card nap which is a was a gift card marketplace,
on dh ii build this side out in australia it looked pretty similar to a company called plastic jungle here in the u s,
and it was just a nightmare to set up setting up this marketplace where i had to accept payments and pay people out manage inventory in and verifications and and so i ended up pivoting that business to be something elsethat it didn't really have a lot of those complexities.

[2:41] Ah and and from there that that really just kicked off my fascination with with startups and tech and so i knew i wanted to move out toe,
san francisco and had had a few friends that walked it Stripe didn't really understand this whole,
developer tools thing until they explained it to me and explained how starting my business back in australia could mean so much simpler if something like Stripe have existed ah and that that began my my joanie it'sStripe as one of the,
first few business high as high, initially focused on on one of our products, a product called check out. Then i moved in tow.
International expansion, where i helped Stripe launch, and singapore, australia and new zealand, hong kong, on bit of the rest of europe. And from there, i i worked on partnerships and,
our co payments product, walking with all the different credit card networks, building our copayment acceptance infrastructure.
And after doing that for a few years, i got fascinated with the whole other side of of payment acceptance and the credit card networks.
Which is, is sort of where i've landed today, issuing cods. And instead of making in payments, rather than focusing just on accepting them.

[3:47] Very cool on dare you talking to us today from san francisco from the bay area.

[3:52] I am, yeah. We just moved into it new office here and talking to you from from san francisco.

[3:59] Well, congratulations on dh for listeners that aren't super familiar with Stripe, can you give us, ah, kind of the the high level overview of aa. What you guys doing where you sit in the eco system?

[4:10] Sure, so fundamentally, we're a global technology company. We build,
economic infrastructure for the internet, so we work with businesses of all sizes from from brand new startups to public companies like sales force and facebook who all you Stripe teo to power some,
some part of their economic infrastructure,
and accepting online payments, managing their businesses online,
you've got millions of customers and over one hundred hundred or so different countries that used Stripe to start, run and scale their business,
on one thing that we've really being focused on is just reducing the barriers to entry for starting a business and then subsequently growing it in scaling it especially internationally.
Andi, we fundamentally believe that we're still in the early days of the internet's potential on we're seeing people you Stripe to build the kinds of companies that couldn't exist ten years ago.
New models like online crowdfunding or undermanned aps e commerce marketplaces really high growth companies with a broad appeal on dh. We build that the tools that allow them tio stop those kinds of businessesand scaled them out.

[5:16] Very cool. Let's was kind of jump into some payments. Just topics that that we've covered on the show would love to hear what you guys are seeing out there.
There's been a lot of innovation around, you know, touchless payments. So, you know, google pay, apple pay and those kinds of things. If my memory serves me right, you guys were like one of the first folks to reallykind of support.
You know, those platforms, how are they doing? And he thought, son, on where that's going?

[5:43] Yeah, i'm i'm a huge fan of these kinds of payment methods, i think it is if you've got an iphone and you're paying with apple pay it's almost the perfect payment experience,
you know, there's been some, i think some hitches with the new face i'd method, but when it was touch idea and you just press that one button to pay, i thought that was, you know, it's almost perfect.
You don't even need to think about the payment experience, which is is our real aspiration to make payments fade into the background.
It shouldn't need to be this this thing that consumers think about on dso for may, apple pez i think it's had an even bigger impact on purchases online than purchases offline,
we we work with with a bunch of companies that have the apple pay flow is a core part of their e commas floor, their mobile check outflow,
and i want one of those companies insta cot, which is a a marketplace here in san francisco and throughout the rest of the u s for purchasing groceries, they see their customers check out,
i think it's around fifty eight percent foster with apple pay on so it's just the these kinds of methods really simplify the payment flow, so it's something that we're, we're really bullish on the trend that we're seeing.

[6:53] Yeah, that's. Awesome on dh. I have seen some similar stets, stan.
Ah, there definitely is. Ah, sort of universal, axum, that if you have a lower friction, check out option b it apple pay or samsung pay, or even the payment ap.
I built into the ah, the many of the web browsers now, which i know you also support that.
Not only do people check out faster, but just conversions higher. They have much of us abandonment, and so they literally make more money.

[7:23] Yeah, we receive that across a bunch of different uses where they're seeing typically double the conversion rates with when, when a consumer uses a method like apple pay, they don't need to go fetch that creditcard number.
It's. Just ultimately, great for businesses and that's, an area that we try and focuses. How come we reduced the friction to improve the the conversion rate?

[7:45] Yep, and so at the risk of alienating the apple pay team, which in all seriousness, i know our listeners of the show apple pay is awesome.
The traditional knock on apple pay is, obviously the whole world doesn't use or have access to apple pay right like that, you know, ah, a minority of users are carrying an apple device and, you know as good as apple.
Is it an upgrading everyone there's still a lot of deployed apple devices that aren't apple pay compatible and so it's like the traditional knock wass it's, a great conversion tool for this very affluent, high spending,
ah, subset of the market but it's now feeling like even if it's not apple pay, but samson payer our microsoft pay or google pay or pin and a p i,
you know, we're trying to get to a critical mass where the overwhelming majority of shoppers have access to one of those easier payment things, that's becoming much more you.

[8:42] Yeah, absolutely. And as you mentioned with the payment request a p i it's now really coming to browse isas well, with quick ways of checking out on dh.
So now that i think pretty much every major phone manufacturer has, one of these methods were seeing it at least come to ubiquity in terms of the gaps that are adopting it. And now, it's, really just driving the consumeradoption and getting those cards into those wallets?

[9:05] Yeah, and tell me about had this right like a if i built an e commerce experience and i used ah ah, an older school, more traditional payment gateway, i program my own check out flow.
You know, i'm i'm doing some sort of interface to that. That payment gateway and then some new technology comes to the market like, ah, the payment, a p i ah, my developers have to go in and update my checkoutflow.
And so, you know, that's got to get in the road map and it's competing with a bunch of other priorities, and it might take a while before i support it, but one of the benefits ah, to Stripe clients is,
that they're they're actually using a Stripe check out follow.
So when some new payment system becomes available and you guys jump on supporting it quickly,
that propagates toe to a large part or all of your your users basically instantly do what do i have that right? Or am i over selling you?

[10:05] Yeah, you were gonna hire you on our honor and our team to describe it to our customers, so we have a bunch of tools and what we focus on his building tools to make it quick for much ensign developers to reactto these kinds of trends.
Before apple pay existed, people didn't really imagine apple pay what would have existed, and so it wasn't is easy thing for them to comprehend, adding, and so what?
Well, we're focused on building is things that they can effectively drag and drop in.
One thing that we find is that margins are businesses they really liked to control their checkout experience, it's something they generally feel, ah, just a lot of protectiveness over, and so what we give them is the ability toadd that,
really, seamlessly, there are options where they can they can effectively outsource that checkout experience to us, and we'll continuously update it with the with the latest payment methods that we see here if they'reexpanding the new countries payment methods of different countries.
So we kind of have two pots, one is where you just want to drop in something like apple pay and then not need to do any other work beyond that, that little update and the other where will continuously update thecheckout experience.

[11:11] Got it. And is it fair to say, like, in my mind, sort of the original market positioning, whether this was, ah, accidental or intentional, is, you've always been the really developer friendly option.
And so it feels like, like you guys turned up in a lot of experiences because the product manager left it to the developer, toe comp something up.
And you guys had this, you know, you know, great fbi examples on your website, and the developer would grab your sample code and get it implemented quickly. And and that that was probably, you know, sort of one ofyour original conquest strategies for getting a lot of customers.

[11:46] Yeah, that's, that's absolutely right. When when Stripe got started, there was no easy way to accept payments online. And it would be a developer that starting this company and they would be the one that pickedthe payment solution. And they would want the easiest one to get up and running.
But increasingly, we're seeing larger companies come to us for the same.
Where there, glad your company's heir increasingly recognizing the developer leverage that that they have the scarcity of engineering resource is and the importance to pick the solution that will allow them to move thequickest and react to trends like apple pay.
And i think apple really is a great example that where if you're running on a legacy, stack may take months and months to get this this into the market.
Where is that nimble start up competitor? Or, you know, even even a larger company that has ah, better engineering tools or developer tools can get it out in the market in time for launch.

[12:39] Yeah, absolutely. And i'll fully say, i am, ah, still super disappointed in the percentage of e commerce sites that don't support the payment. Ap. Which, to me, seems like a big myth, sort of.
But going your point about, you know how resource constrained for developers. So many of these sites are.

[12:58] Yeah, it just doesn't make any sense that that there, they're not adding these things. It's leaving conversions on the table. Top line revenue on so it's.
It really holds customer companies back, not having.
I think the best developer tools out there. It's, it's, similar trend with eight of us, where companies have gone from,
on premise, hosting or building their own data centers, recognizing that if you have a provider like kws, he'll just be able to move so much foster it puts you on on equal footing.

[13:27] Yeah, for sure and it's funny like at the moment. So we talked a lot about mobile e commerce on this show on dh.
For years, we've been talking about this thing called the mobile gap, which still exists, which is essentially,
ah hey, way more users are shifting from desktop browsers to mobile browsers, it's the majority of traffic on most big sites now, but the conversion rate on those mobile devices is is poor compared tto desktop.
Maybe it used to be a third and now it's approaching ah half and like i look at that ah, apple pay, but certainly the payment fbi as ah as well hanging fruit.
Ah, to improve that mobile gap and then i you don't now have this macro thing, which is admittedly more work and not necessarily ah exclusively, you guys.
But progressive web aps is another huge tool in that arsenal, and a very small number of e commerce sites have successfully got in that stuff done yet, like, do you guys see those kind of mobile trends?
And are there any other mobile trends that.

[14:30] Yep, we see the same thing.
We we we continuously review the largest e comma sites on.
We did a recent review of the top hundred commerce sites globally, and seventy two of them had greater than three, errors in there. Check out flows, things that could really easily be improved, to reduce friction for theirconsumers to pay them.
And a lot of those areas were mobile related. One fifth of those sites made mobile check out significantly hotter by not having a numerical keypad for entering credit card numbers.
Almost half of them didn't have order phil correctly. Setup it's little things like that, where you just you just give up, you try and you know, you decide. You'll wait until you're back on desktop, and then the punch is neverreally ends up happening.

[15:16] Yeah, and it's and i have to admit, like being a practitioner in the space. It is like a huge pet peeve of mine. It's like nails on a chalkboard when, like developers, don't get their input masquerade and you get thewrong wrong wrong keyboard for input.
I'm a big fan of them. Ah, predictive type ahead for address entry and stuff like that, and you know you still, ah, don't see that. Enough. So it's it's crazy, but it's. Ah, not surprising that you're you're seeing similar similar.

[15:46] These things, really on hard to build it's just it's, kind of crazy that everyone has to do it themselves, and so on.
Area, we've focused, is how do we build the tools such that everyone is on equal footing.
Everyone gets the lessons of the best practices and were positioned really well to know what converts well, what,
what consumers like, and so that that's that's been a big area of focus for us in the past few years is,
how do we take all the learnings we have developed from, from servicing millions of bill's businesses around the world and applying those toe aah, letting businesses have the right defaults from the get go.

[16:23] I recall one thing i wanted to talk a little bit more about. I'm the marketplace guy on the show and there's been an explosion of marketplaces on and started with products.
And now we're seeing a lot around what i would call on demand services. And i know that's an area where you guys do a ton, tell us about some of the things Stripe does around marketplaces.

[16:43] Yeah, we got we got started with marketplaces and number of a number of years ago ah and then,
the way it happened is pretty interesting because before that Stripe was if you're accepting payments from customers on we didn't really focus on what you would then do with those funds,
on we started to get some pretty interesting requests and one of them was from from lift its must've been five or so years ago,
where they had this request to add multiple bank accounts to their Stripe account,
and we're scratching our heads wondering what they were looking to do that we found out that they had this process of cutting checks to pay their drivers and they were wondering why khan strategist automate that potlike they do with with our our daily payout,
on that seem to be a pretty common problem amongst a number of thie marketplaces that used Stripe at that point in time they had all these back office operations and they're all doing the exact same thing and it seemedlike a real opportunity for us tow,
really simplify that providing a pea eye for it and.

[17:42] Fundamentally automate it on so that was something we began doing about five years ago wade called that product Stripe connect and we internally we call that the payments platform for platforms it z,
marketplaces and platforms you Stripe connect to accept money and then pay out to third parties and we provide everything in the middle.
To do that compliant, lena. Handle the tax, reporting the identity, verification and onboard and compliance with the different regulatory laws.
And ah, pretty much everything you need to do to manage a marketplace online as it relates to the movement of money.

[18:22] Wrinkle. And then i couldn't help but notice your title now has card issuing in there. And, you know, one of the challenges you have in these kind of digital and physical marketplaces is if i send you mentionedinsta card earlier.
If i send ah ten ninety nine shopper to go buy some groceries for a customer, i'm going to need to pay the grocery store. And you know that that quote, unquote, shopper is going to want to come out of pocket for that.
Is that kind of what's going on with the card is sure thing.

[18:52] Yes, that's, exactly right there's a there's a bunch of different use cases that that Stripe issuing consult and fundamentally, it is infrastructure, like the rest of stripes products on its infrastructure that relates to money,movement, and so instant cult.
To use that example, they have that store of funds that they have taken from from customers that they need to move to ah, grocery retailer that they don't necessarily have a contractual relationship with and and the bestway of doing that is with the credit card.
And so what we're providing to companies like this is an a p i to issue cod's both physical and virtual, and then dynamically control the span.
So, for example, insta kat would know exactly when a sort of a shopping session is taking place, and they would only want to authorize transactions in that window.
They would know exactly which store it's happening out, and they're on.
Lee wants approved transactions at that store, and so we give you or the customer complete flexibility on on how they use those cards and what what transactions can go through them, but again, fundamentally it'sinfrastructure and that's one use case of,
of many that we could support.

[19:59] That's. Awesome. And it feels like, ah, marketplaces air, really expanding, like, certainly internationally. But even here in the u s, we're getting more marketplaces and a wider set of use cases from marketplacesalmost every week.
Are there any surprising trends or particular learnings that you would want to share with new entrepreneurs that are getting into the marketplace model?

[20:21] Yeah, there's, you know, obviously two sides to a market place, you've got your your bias and your cell is on.
We focus on both sides on the on the bias building tools, tow service.
Those customers, things like apple pay make the transaction experience incredibly easy on then on the cellars with that Stripe connect product is talking about but one one interesting thing way we've discovered recentlyfrom our data.
We have thousands of market places that use us and, you know, obviously not all marketplaces grow at the same pace.
We found that market places with higher seller retention rates generate much greater revenue than the others. This may sound obvious, but it's, in contrast, to buy our attention higher. Bio retention isn't really associate idfrom from our data with significant revenue increases.
Way saw that increasing seller attention by one percentage point predicts ten x more revenue than the same one percentage point increase.
Ah, in buyer attention, i thought this was a pretty fascinating stat.

[21:21] Yeah, that's. Always a challenge for entrepreneurs. Is, is.
How do you grow these marketplaces? And you put all your resource is on the the seller side or the the buyer side? Or ah, scott likes to advise, like you couldn't need to balance it, right?

[21:38] Right, right. But it's it's really highlights you need think about how you retain sellas and you know what, what to sell is care about.
One thing that we've found they really care about is the speed of their payment, so they're they're delivering value on a marketplace and then they need to get paid on dso one one area we've focused there is, how can wereduce that payout cycle?
No, i get paid every two weeks, but as a competitive advantage on one of these marketplace marketplaces, how can you bring that down?
And so, with a partner like lift, we built a product called instant payouts on so they can get paid out right after they complete ah, right.
And now, over fifty percent of of lifts drivers take advantage of that instant payout functionality on dh so that veterinary where we liked folks, is well, where the one of the ways in which we can help platformsdifferentiate,
toe better service, they're they're cell is not just the bias.

[22:32] Very cool, sir. Pivoting off marketplace is a little bit.
You talk to the very early part about international on dh.
You have, ah, cool international accent. So this ties in with your accent against what are some interesting international payment trends.
You guys, we're seeing you read all about it, ali, pay and and what's going on there. And, you know, china has a lot of really interesting things, curious to see some of the the trends you're seeing internationally.

[22:57] I think one of the most interesting things just a top level is how hard it is for market places to expand internationally,
there is there is a whole different regulatory environment different payment methods is your highlighting both on the acceptance side and on the pay outside on so it's,
it's i honestly find a pretty impressive any market place that has managed to build infrastructure to take them from one country to many just because of all of the complexity involved in that expansion and i i think that's,
that's just so hard to understate the power of that,
on so it's it's you know it i love it is a consumer of something like uber where i can use it in the u s and then go to a different country and it just works out of the box the same app and so it's really impressive theinfrastructure that built,
in the in the background but in terms of payment methods you know money is money is oddly cultural on dso we're seeing in every country we go too and we expand into,
is an entirely new set of payment methods that we have tto have to deal with and soon in the us obviously everyone uses credit cards on dh in france it's the same over eighty percent of online purchases are credit cardsbut for,
neighboring germany it's less than twenty five percent and they use something called sepa which is effectively just a bank transfer.
So if each of these new countries, marketplaces or retailers have to think about how they accept money from their consumers, and and we can just take this. U s centric view of credit cards and debit cards dominate.

[24:26] Very cool. A lot of companies, yourselves included, sort of started on the digital realm accepting payments online. But we've seen a number of them sort of extend to physical payments and sort of omni channeluse cases. Is that something you guys are doing as well?

[24:41] Yeah, and, you know, i think there's there's more than just a sort of the point of sale devices there we see a lot of,
like when you think of something like lift, fundamentally, you're you're operating with a real world service, you're you're getting into a car, and so what is ah, on online payment, what is an offline payment anymore?
And they've solved that by the having the payment experience just happened in the background.
You don't even think about transacting there's no, no riel time exchange of information with each ride that takes place or transaction on so that's an area where we really try to push the businesses that air.
Welcome with Stripe think about how to make payments fade into the background, but obviously with with retail transactions, and we work with companies like shopify and we'll be parka who have ah, store they'rethey're they're merchants have storefronts, and so,
we power point of sale systems for them as well, but fundamentally it's about unifying those systems and so it's a single system with stripes, they can look at customers online looking customers offline ah, and make it asseamless as possible.

[25:45] One thing that's kind of nursing as a sow, one of one of the atmosphere on fire and one of my companies was was kind of a platform play, if you will, are tools for developers,
sometimes it's, hard to kind of, you know, ask you figure out when to stop, have you guys so, like on the marketplace example,
you could go into helping marketplaces recruit sellers, you could go into you kind of hint, you know, said that you do a little bit of verification,
you could even go into, like, background checking of drivers or something like that.
How do you guys think about how deep you want to go? And then, like, no, we stop here, and this is kind of where this is the platform. Anything above it is not us. How do you guys think about that?

[26:23] It's a really good question on dh you know, i wish i had some framework i could just give it to you, but fundamentally we talk to our uses, what water, the common themes of problems that they're all having on,and,
then we do our best to solve them.
We generally don't go into super niche use cases on sort of solved just for one vertical.
We like to look at the problems that pretty much all marketplaces were having or in the case of subscription business is pretty much all subscription businesses are having and then build software toe,
to the extent that is useful for sort of the eighty percent and then where those nuances come in for maybe a very vertical ized business,
they build that lost twenty percent that's really specific to their business or the needs of those customers.
And this is where we try through the ap eyes that we build to make it generic enoughto handle that wide variety of use cases, and just really folks on the infrastructure is maybe that's.
One way of thinking about what is infrastructural thus is sort of what sits on top of the infrastructure.

[27:24] Cool one topic that's in the news.
A lot lately is. Security is kind of interesting as an e commerce guy, i think it's interesting that, you know, the variety of hacks read about now are kind of happening out on the physical point of sale system.
It seems like, but i know a full disclosure at my current companies. Fifty we use Stripe and one of the reasons we love it is on my previous company. We went out, we had to build out that whole pc. I stack ourselves.
Andi, i i love that we could just use Stripe and, you know, we don't even see the credit cards. You guys take care of all that, and we just kind of, you know, we get pc i compliance, quote unquote, for free.
What, you give us a little a little blurb about security in today's world, and you know how Stripe looks at that and any trends you're seeing there.

[28:10] Yeah i mean you've kind of set it all we really try and make security cool feature of the Stripe offering that again something folks don't need to think about it's just a strong default,
on and there's all this talk of token ization in the payment schemes are the payments walled these days but it's something that Stripe did from the get go,
i think a lot of people think about Stripe score innovation as developer tools i think of it,
one of the really important ones that got us to where we are today is that that pc i shielding that you're highlighting there we had the concept of a token since,
the beginning of Stripe where we would we would store there's card details and and the merchant or business owner wouldn't have tio,
and that was that was about eight years ago that we started doing that and so security is court of the dna off Stripe it's something that we think about in each new product that we launch because it is your highlighting itsomething that distracts from delivering a product to your customers,
building that pc i vote that isn't necessarily directly beneficial and if someone else khun solve that problem even better you can focus on unsolved ing the problem that they came.

[29:20] I think very broadly hackers will often talked at the weakest link in a chain stitch together many providers in in a long chain so there's many weak links that you can possibly target on dso.
We're focused on when folks use us, you've gotten and twin solution for, for all things security. You send the card numbers directly to Stripe.
We only provide one time use tokens to ma agents, and i think that really reduces the surface area, especially in an online payments.

[29:48] Yeah, it's. Funny. I talk a lot about trust and, like there's, a lot of evidence that consumers still have a huge trust. Graff gap with, with online experiences, even from very well established businesses.
And it's. Always ironic to me that fewer customers trust typing that payment information into the token eyes encrypted browser than they do, handing it to the minimum wage clerk at the store that has a skimmerunderneath her death.

[30:16] Yeah, i mean, for good reason to a lot of folks not trust the retail is that they're paying not because of any bad intent, just because it could be so easy to to breach these legacy systems.
As we saw, with many of the breaches that have come to light recently on so that's an area, well, we really just try and focus and make sure that their aunt ways of ah breaching Stripe much is by providing them the besttools possible.
But it's it's, obviously so hot. And i think one of the really mind boggling things is.
How can these small businesses have the kind of security that these large mega cops have?
Ah, and even these large mega collapse air getting breached. And so the more we can do to democratize security tools are best practices. I think it's, a really worthwhile place for us to continue to focus.

[31:06] Yeah, that is ah, on awesome area of opportunity and that's going to be a great place to leave it. Because it's happened again, we've used up all our allotted time.
S o. We certainly appreciate having you on the show if listeners have any questions there, encouraged to go to our facebook page and posting comments there, and we can continue the dialogue, as always.
If you enjoyed today's show, we sure would appreciate that. Five star review on itunes.
Gosh, really appreciated you being on the show today. If wisner's wantto contact you directly, can they find you on twitter? Or lengthen or what's your preferred method of contact?

[31:46] Yeah, i'm pretty active on twitter it's, twitter, dot com slash laki groom on it's. My.

[31:53] Perfect, and we'll put that in the show. Notes. Ah, and so, until next time, happy commercing.

Aug 7, 2018

EP139 - B8ta founder and CEO Vibhu Norby 

Vibhu Norby is the founder and CEO of b8ta.  b8ta is a software-powered brick and mortar retailer designed to improve the customer and maker experience. They help people discover, try, and learn about new tech products while empowering makers with a simple retail-as-a-service model that puts them in control.

In this interview, we cover Vibhu's background, how he came to the idea for B8ta, b8ta's retail partnerships (including Lowe's and Macy's), their unique marketplace dynamic, their experiential retail as a service offering, their recent fundraising success, and Vibhu's vision for the future of retail.

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

Episode 139 of the Jason & Scot show was recorded on Wednesday, August 1, 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.



[0:26] Welcome to the Jason and Scott show. This is episode 139 being recorded on Wednesday August 1st 2018.
I'm your host Jason retail geek Goldberg. And as usual I'm here with your cohost Scott Winslow.

Scot & Vibhu:
[0:42] Jason and welcome back Jason's Ghosheh listeners. Jason I don't know about you but I've been on pins and needles this week no we have a special guest tonight.
You and I are both probably the biggest gadget geek ever and we have a new favorite store and it's pretty exciting to have someone from that store on the podcast.
There's a company that we have talked a lot about on the podcast so I'm hoping longtime listeners can kind of guess what we're talking about here.
The company is beta and that's B the number T.A.
Beta is such a unique company. I don't want to get in the middle of describing it to everybody.
I want to kind of leave that for our guest who is the CEO and founder of b8ta, Vibhu Norby.
Thanks for having me. I'm so excited I've been listening since the first episode.

[1:37] We are we're thrilled to have you.
And I do think Scott and I are the target market for your concepts. We'll get to that in a moment.
But before we do normally we'd like to start interviews is get a little rundown from our guests on their career progression and what led them to their current role. And in your case.
Beta is not your first cool gig. So definitely want to share that with the audience.

Scot & Vibhu:
[2:10] Yes so I I grew up programming,
and fell in love with computers and software when I was an early teenager and sort of joined a series of startups and then end up leaving to do one of my own.
And we got funded by Y Combinator and then raised a couple of million dollars from,
some investors and that we were making a social network for the phone and back in 2011 when snap chat and a bunch of these guys got started and we didn't make snap chat.
So the company didn't totally work and we we found a home at Nest a few years ago.

[2:53] At the time when they had one product and were just starting to think about launching multiple products and so there I joined as an engineer and brought my whole team and company over.
It was sort of an acquisition. And that was where I got introduced to retail for the first time really from the brand side.
Nest was a really pioneering company. A lot of ways we were were really introducing the idea of smart home to the consumer not just the Nest Learning Thermostat and doing that was complicated. It was a complicatedproduct.
We also really love retail because a lot of the team had come from Apple and understood the value of retail beyond sort of sales.
And so we used we used retail as a as a place to store and make people aware of the product and get them hands on and that was what the genesis but actually I want to talk about the first time I talked to you Jasonbecause,
it's kind of you know four years ago I actually didn't know very much about retail and so when I was trying to learn about the first thing I did was like you know basically typing like who who to follow about you knowin retail,
and your name came up and I ended up falling on Twitter for a bit.
And at a point when I wasn't sure if I should we should actually do beta.
I called him LSU and is like hey can we get a call I want tell you the idea that working on and just get your feedback and so we got on the phone. Do you remember this.

[4:20] I totally remember this. I wasn't sure you wanted to disclose it.

Scot & Vibhu:
[4:25] Yeah. So we we got on the call and I was like hey you know this is what we're thinking about doing.
We don't know much about retail what we understand the problem.
And I think you said you know this is like been done a lot,
or it might work but you'd be much better off if you could solve this other problem that I have which is that people are not buying chewing gum anymore because they're looking at their phone and they're checking out atthe supermarket.
And I was like oh that's that's interesting like I me think about they actually spent way too much time thinking about how to get people to buy chewing gum after that conversation.
But I'm very thankful that we decided to move forward with this. Remember that.

[5:05] Yeah I totally do. I might slightly I don't.
I'm not sure I necessarily tried to completely pivot you. But I'm also glad you stuck to your guns.

Scot & Vibhu:
[5:17] If you ever saw the chewing gum problem I'm not sure what.

[5:20] No no. I feel like there still is an opportunity as the world moves to auto replenishment for for you know all of those consumable items like you know impulse purchases are likely to go away.
So if there's any entrepreneurs out there with a clever idea you know we've got to we've got to figure out how how we're going to do impulse purchases in all digital purchases path.

Scot & Vibhu:
[5:45] So spoiler alert but I think we should put a gum station in every beta Boom problem solved.

[5:51] Yeah that that's one way to go. The part in conversation I remember us talking about though which I think we should come back to later is the role of other retailers in your concept.

Scot & Vibhu:
[6:09] Yeah. I mean you have I think if I remember you had suggested that we should talk to some other retailers who were pretty focused on building something for ourselves on the software side.
But that opinion obviously change in the last 2 1/2 years.

[6:25] Yeah I was gonna I mean that you probably got the sequence right.
But I think I feel like I mentioned that,
there would be potential interest in some established retailers and partnering with you or potentially funding the idea you had and at that time,
as any entrepreneur you were you were laser focused on crushing all the traditional retailers and doing it all yourself.
And so I think that's that's how you started that.
You may have progressed since then. So one other thing before we jump into beta hardcore though is you were at Neste pre Google right so you were actually acquired by Google is that do have the timing right.

Scot & Vibhu:
[7:08] That's right. Yeah. Very shortly after I joined,
and it was you know the acquisition was I think we learned about it like January 11 2015 14 and then it closed in February and I had joined just four months or five months prior to that.
But it was the company was at an inflection point when I had joined and it made a lot of sense.

[7:33] Yeah for sure. I feel like a super friendly product to everyone now but,
if you go back to that Genesis you original concept was sort of,
what with a smart thermostat look like if Apple were to design one and when you guys want that first product it was one of the original digitally native vertical brands right.
Like you you made this product that you were predominant you were selling direct and partnering with retailers on it required a bunch of education because no consumer knew they needed it.
And so I feel like there was a big retail education play in it which is of course interesting.

Scot & Vibhu:
[8:15] As funny. I mean we didn't see it that way at the time.
And even it took even after we started the company I didn't realize that but every single Early Stage Harbor company was a DnD VB as you noticed,
because they were selling the product direct and and that and the advantage that a lot of Harbor companies have relative to other types of,
DNA BS is that they always have the users contact information because most of them have an account sign up as part of the onboarding process.
And so it sort of they're sort of natively by default dnt Bebe's.

[8:59] Absolutely.

Scot & Vibhu:
[9:02] Yes. Let's let's jump into beta so let's start at kind of the the origin story.
Anything kind of tell us how you got that idea and maybe kind of tell folks what how you describe it today.

[9:21] Sure. So I don't think any good idea is sort of,
a singular eureka moment maybe it is but for us it was a lot of different kind of influences came together to create this.
The the biggest the biggest thing for me was working at NASA and,
understood and sort of seeing this disconnect between how we as a brand and as a supplier to stores thought about are the value of our presence in their stores versus the value that a retailer saw.
And the presence in their stores and that disconnect is is incredibly fundamental and incredibly hard to fix.
And so you know as a brand we wanted stores to be education point for customers.
We needed a scalable way to get our product Nest thermostat in the hands of customers.
And and we felt that you know when we came into a store we wanted to present the product in a beautiful manner kind of let it let it live like a hero product there.
We never came into a store without uncap or display or you know something that was sort of taking the product out of the box.

[10:45] And and in order to do that you know we end up spending a lot of capital a lot of time you know deploying a lot of people into the field to sort of ensure that like every time we had our product out there that cost.
And when a customer saw that it was presented beautifully and and frankly retailers back then and it wasn't that long ago. But you know how fast things have changed in this industry.

[11:10] This was not a totally common idea for them I think they had an Apple shop and shop and maybe a few of their large brand partners but to allow of any new company to come in and build a cool experience wasn'tnative to their business.
And you know they their business model of retail is really set up to to be the end of the supply chain the store right.
They've got a buyer they figured out that this is a product they want to bring in. This is how many units they want to get.
They think they can sell and the store is sort of like this the warehouse with a pretty face as a retailer wants described to me and you know for us it was the start of the consumer journey. And so.

[11:54] This basically what happened is I learned about this because I had asked our Head of Retail who's now my co-founder Philip RHA UB and he had a retail analyst.
I asked him why we weren't in more stores. You know we were in Target. Apple Best Buy Home Depot Lowe's.
And I was looking at our sales force.
One of the bucket in sales force and I just noticed like hundreds of retailers from you know globally who are asking to get its products in their stores.
And I was like This is a you know an amazing opportunity.
And he said well because we don't see retail as a surprising pivot you want to make sure the products are presented well and so we just can't,
give away it to anyone who asks and that was like you know that that gave me this aha moment that maybe there was,
a way to fix that.
At the fundamental level for a retailer.

[12:53] But but you know we.
You know I sort of sat on that kind of learning for a while and then I got more involved the retail team at NASA when they asked me to build a training system for associates inside of other people's stores.
And you know when I started working with the customer support team on trying to figure out how to,
address you know sort of this you know when a customer buys a product at a store but then they call,
our support center and then you know where we said that customers should they return the product and I realize that like a retailer like a brand like Nasz never wants the customer to go back to the store.
There's all these kind of weird things that I was finding out and I wondered if you know if we were having these issues that probably means that every other supplier in Best Buy.
That is like us like GoPro for example or Fitbit at a similar stage was probably having a similar similar fundamental issues.
And and you know if we were building sort of code bases and processes to solve this and they were as well that that's a very inefficient use of all of our resources.
So beta was this idea to create a retail platform from the ground up that supported a customer experience as the primary use case for the store.

[14:20] And supply chain as a secondary or test Cherry use case.
And then we I mean it is really that simple honestly we just want to we didn't you know the business model kind of came around later.
You know if you're if you're going to separate yourself from the supply chain use case of a store then you can't buy the product and so it kind of made sense to rent space to companies.
But yeah the disconnect was the genesis.
And as it turns out like you know now nowadays anytime we find a disconnect between,
two parties that are doing business you know a customer brand or a brand and a retailer or a retailer and a customer we think there's an opportunity to deploy business new business models or software to fix it.
There's but anyway that's that's a bit about the company but we can talk more. Yeah. So.

[15:19] Maybe this is a good place to start. How big is speed of just kind of from a store footprint perspective.

[15:27] So we have eighty two stores that we managed today and own operate 70 of those are inside of LOEs so we have a quite large partnership with them around smartphones.
We've got a store with Macy's inside of their flagship store and we've got,
13 actually I think 12 owned like kind of flagship in line stores or kiosks inside of malls.
And in terms of the scale of people we about 350 people that work inside of these stores and we're at our per post office call so I've been in Palo Alto is kind of what you would think of as the flagship store,
flagship for us we have.
We have a number of flagship. So we just we just mean any kind of any store that has our flag our logo on it that it was our first store.
That's actually a very unique store none of our stores look like that today it was it was built on a budget in a woodworking shop.
Beautifully done. But but definitely a one off. So the newer ones are fancier who's that Congressman.

[16:42] Yeah we spend a lot more time in designing them. It's the series a store the Series B stores are much nicer.
The Up series is this the series a sort of the best and then you start to realize that you've got to build a business and that every single thing that you see in the store has to be cut from a tree. Yeah.

[17:02] Yet it's all the timbre turns in all the hardwood turns into a particleboard is basically what happens in other curves.

Scot & Vibhu:
[17:09] 100 percent is exactly exactly right cool.
The way I've described it is it's kind of a you know Apple Store like kind of feel with seems like about 2000 square feet there.
And but you know literally hundreds of different kinds of products you can interact with mostly in the kind of gadget electronic category.
It's not fun because you come to the folks that work there are super helpful so if you had an idea of what you wanted they were ready to leave bailable.
But I thought my experience was just kind of spinning like two or three hours and they're just kind of touching everything and trying it out and learning about it.
Is that kind of how you think about the old experience at this point is that a decent description.
Yeah. So each store is about 25 100 square feet features that are 120 different brands.
You know maybe 130 different products.
Every price out of the box and it's a real live working demo.
Like we when we get a new product in a store we actually take like the first one out of the shipment and just take it out and set it up like we were a customer.

[18:20] There's a lot of space between the products. It looks like an Apple store although that wasn't the intention it was really designed around actually or analytics system and how overhead cameras capture information.
But you can definitely spend two to three hours in there because everything that you're seeing is kind of a one of a kind.
Interesting thing that you probably haven't seen before and these are complet.
You know the price to carry the tech products are complex and and they were hard time to understand.
And so you know having really good staff is super important to us.
I think two to three hours is definitely way above the average visit which is about 15 minutes.
But the average customer only usually look at about a third of the assortment on a given at a given time.
So but we have a tremendous amount of customers who kind of see it like a museum they come and they look at everything one by one and want to make sure they don't miss something.

[19:25] And it's funny because in one way I would argue you're sort of the the opposite of an Apple store in that,
there's not a lot of surprise and delight moments in an Apple store anymore.
They actually used to carry more third party products than there was a little more variety but my sense today is you know exactly every single product you're going to discover in the Apple store before you walk in there.Right.
So it's it's most people that walk into an Apple store are walking in with some kind of mission in mind.
Like they're either coming for service on an existing product or they're coming to buy a product that they already know about and know that Apple has there or maybe they want to see it and make a final determination inin a big way.
I would I sort of feel like your story is the opposite.
I'm not likely to know. I know the kind of products you're going to have in your store but I'm not likely to know exactly what you have and I'm almost certain to discover some products I didn't know about.
And so to me it feels much more like a sort of serendipitous discovery moment for the shopper versus a specific mission in mind a moment like I might have at Apple is that.

Scot & Vibhu:
[20:37] Yeah. So the data proves that out for sure. So 70 percent of the products at a average customer season are store they're discovering for the very first time.
So and actually on the other side of that and Apple and Apple stores about 70 percent Apple products.

[20:55] Oh you're probably 70 percent Sandras seeing something that you you definitely saw before.
But we have two types of shoppers in our store. There is there is the shopper who kind of wanders into just be surprised and be delighted by everything that people are making in the world.
But we definitely serve a use case for a lot of our brands of high quality demonstration.
So a lot of the company and you can if you if you like google some of the companies that we have in our store you can see when you go to their website they have a store finder and the store finder is just pointingcustomers to us you know saying hey if you want to check this thing out in person.
This is the place for you to do that and we love those kind of visitors because they come in for one thing and we give them that amazing demonstration experience that you know no one else could give except for beta.
But of course while they're there they'll find a bunch of other things that maybe,
they didn't know about and that's that in terms of a percentage of traffic about 40 percent of our traffic is driven by the brands that individually use case but in a mature store for us that that that tends to go up and up.
So basically like if you lived in Palo Alto once you've been to the store once and you've seen everything are a couple times the next time you come,
back is because you saw like a prophet on the Internet that you were interested in trying out first and then you'll come in for that specific thing and try it out.

[22:21] Yes. That makes perfect sense. It's funny because I imagine as people get more familiar with this door that you definitely could have some sort of mission shoppers and it it sounds like one way,
they might find you is through the product manufacturer's website.
But you do now have your own Web site as well. And that's another discussion you and I had when you first launched you didn't have your inventory online.
And I mentioned that like in the long run customers that became familiar with your store would want to be able to see what kind of products you were carrying before they made a visit.
So now that you apparently took that advice and so now I'm going to ask a terrifying question.
Has that had any value or are you finding that that you do have perhaps a subset of your shoppers that that shop your website and then decide oh cool you've got a new a new kind of product in stock that I want to go see.

Scot & Vibhu:
[23:18] Yes so funnily enough we I mean I think we specifically avoided doing an e-commerce site for a while because we wanted to stay focused on on stories which was our kind of unique value prop for brands.
And we also didn't want to do e-commerce that we didn't have something to offer that was special and we act.
We launched e-commerce in August officially last year.
So it's been one year to date in that time period.
It's gone from obviously zero percent of our sales volume of products to almost 20 percent today.

[23:55] So we've had a lot of growth there. I think you know what we learned more than anything was that our associates in the store needed a place to,
can point shoppers to who maybe wanted to do more consideration or you know had some kind of education like they were traveling and you know the product shipped somewhere you know.
And and so it serves an essential function.
Are our sales associates. I would say more so than customers.
We don't like buying from beta dot com is not better than buying from Amazon.
If you're a Prime member for example so we're not trying to compete for every single sale but it's been an effective tool on the store side of the business.
I would say we built the entire platform in-house for a reason which is that we have a lot of really cool things coming down the pipe that,
will give us at least some advantages over maybe shopping on Amazon or from the brand's website that we can uniquely do because we have a lot of stores.

[25:04] Nice. And just a clarification.
I like that to me is exactly why I was suggesting you have the inventory online was sort of as an adjunct to your sales process.
Not so much that you'd capture a ton of sales via e-commerce but that people would wanna know what you had in stock before they visited the store or or people would want to do that final consideration after the store.
So I'm glad to hear that. That's providing some benefit to you.
I get that you're you know nobody wants to our Amazon Amazon so it probably doesn't make sense to just try to compete with their exact customer experience.
But one of the things that I perceive is also true and I'd be curious to hear from you is I do think it's possible for you to be selling products before they're likely to show up on Amazon.
So I do think there's some early stage new new products that you know where manufacturers reach out to you as early experience and they may not be distributing through Amazon yet.
Is that true or does everyone go to Amazon Day one these days.

Scot & Vibhu:
[26:16] No that's totally true. And in fact it's not just that they come to us.
You know before Amazon but they also come to us after Amazon a lot of brands that we work with.
They start selling there and they don't necessarily get what they want out of that experience and it was a bit more control they want more data and they'll come back and you know will be sort of be one of the onlymultibrand experiences that can carry it.
We also have a lot of international companies that don't have a,
local distributor or as a Web site where you can you can buy from here and so there are a lot of cases where we are the only place you could buy that wasn't necessarily our strategy initially but,
you know more and more I think that will be a focus for us.
The other interesting thing is I think you know.

[27:07] When you sign up with beta as a brand,
your entire experience of managing your stores with us and deploying content and training and materials is all through our dashboard.
And so we've found that companies don't want to have to sort of manage all these different silos of of you know information and marketing information.
And so our our our system allows a company to sort of make a change once in it and that content reflects everywhere in-store online,
in our accounting backend in our checkout you know everything all at the same time and that's for the right type of company at an early stage that's actually better than even selling on their own website.

[27:52] Yeah. And I think that teases something that's unique about your model that we haven't totally covered yet which is you are not a pure traditional wholesaler where you just,
go discover some product you want to sell the people you buy a thousand of them at a wholesale price you mark them up to retail and sell them to someone else.
You're actually closer to Scott Wingels favorite thing a market marketplace right where you're essentially providing a platform and you're letting manufacturers,
leverage your platform your drive you're generating traffic and then you're letting them sell to do that traffic through your platform. Do I have that right.

Scot & Vibhu:
[28:37] Yeah we're actually a two sided marketplace and it's it's hard to see from the outside because we look like a kind of technology store brand.
But on the inside you know brands are subscribing to space in a store.
But we also work really closely with landlords and on that side they're competing through lower rents or things like you know funding for store build outs or you know marketing.
They're actually competing for these brands dollars and our store is sort of the glue that that brings those two together.
And so you know across our every store of ours is different because companies that sign up with us they can choose where they want to be and they don't have to be in every everywhere if they don't want to.
And they can also in every store sort of price differently and so you'll oftentimes you know you might see a company that is you know maybe moving from store to store or trying to figure out the right markets for themto be in.
And what really makes their decision is how good the data is in that in that spot and what and what the economics look like and that's driven by the landlord in our case that you know we didn't.
Again a lot of the stuff we didn't really see going into it we were just like we wanted to solve this really central problem that brands had.

[30:00] But it's evolved to look more like a marketplace on the business model side than any other type of retailer today.
And I think that you know just I can anticipate your next question but I think that's where we started getting interested in working with other retailers because you know there are effectively some of the largest landlordsin the country.
And and I think as we export our model further we knew that square.
Good square footage was going to be the thing that the supply side that sort of drove a lot of the demand.

[30:37] Yeah and I want to come back to that in a bit. It's even it's good square footage with high buying content which is even more exciting.

Scot & Vibhu:
[30:44] Of yes. Yeah.

[30:45] But the so one of the things that I'm always curious about.
So a brand has to want to work with you. The economics have to work. They have to see the benefit. You know they likely they have to have a product that requires some storytelling or some demand.
And so there's a bunch of factors that would make a brand want to work with you.
But it probably wouldn't work for you to just accept any brand that wanted to work with you. Right.
So you know you wouldn't want to end up with a bunch of brands that just were struggling to sell their crap.
And so therefore were were willing to you know be a tenant in your store and sell their stuff.
It does feel like you have a curated assortment of cool gadgets that people like Jason and Scott Wingo would like to buy.
So like I guess I'm I'm curious how you work that curation in a in like a traditional retail model of curation is easy the merchant decides what they're going to carry and what they're not going to carry.
It feels like your emergence if you even have a of merchant sort of has a harder job because they have to both decide what they want and then it has to be an appealing model for that stuff.

Scot & Vibhu:
[31:58] So we actually philosophically are anti-corruption.
We think that a lot of the problems that brought that retailers have encountered over time is is because of their you know quote unquote curation process on the buying side.
The way curation works. And the reason that that the products in the store are actually you know out to be really good is that their business model we chose.

[32:29] Weeds out bad products extremely quickly in the same way that maybe you know an advertiser in an auction system like Google AdWords weeds out bad ads as well.
Basically when you have a product that doesn't resonate with customers they don't want to spend money and so they leave.
And when it comes when a product is resonate with the customers they never want to leave because they're making money.
And in fact they start to expand with us and take over more space and more and more stores.
And we've seen this effect really dramatically in three years of running this model where you know we've built up you know for every 10 companies and maybe you know two or three of those company turns out to begood.
And we've built up a roster of you know the best brands in the world who again have great economics and would never want to go.
But it's important for us to compete you need to bring in new things,
because you know and we don't want to make the choice upfront all the time as to whether that product you know would sell because that you know frankly like you know maybe buyers have some some algorithmic helpand you know spreadsheets all kinds of stuff.
But like you know a lot of decisions are made at the gut level and I can tell you from our kind of internal game of trying to guess what their product going to do well with us.
We just get it wrong so often that it's not even worth trying to be honest with you.

[33:55] I think where we have a couple of of sort of post launch with beta curation moments for example with a product return block and we have an algorithm for that.

[34:06] We take it out. You know if the if the product doesn't have a you know a return policy that jives with ours.
We oftentimes won't accept it but we're pretty open.
I mean we I think to be honest that's what makes us really unique and.
And the other thing is like I think for customers retail can be a decision making tool and sometimes that decision is a negative decision.
This learning that that you don't want this product.
Maybe you saw this thing in mind but you know after seeing it in person it's not for you.
Disserve that kind of function you have to take things to that are kind of on the edge.
So I don't know if you expected the answer but I we we we take this. I mean we've really thought a lot about this and it's it's a big part of our business.
Yeah. I'm intrigued on the marketplace side of building a two sided marketplace.
Seems easy but it's hard because I always tell folks that are starting on it is kind of like rowing if you row on one side of a canoe or a kayak or something like that too much then you just go in circles ChAFTA.
There's a there's a balance you have to fall and there has been harder building this on the supply side which I think you call makers or on the demand side or tussle bit about it.
Any interesting stories there. I'd love to.
I think other marketplace people would love to hear.
Yes the supply side for us is there a state side. On the demand side as the Brandts.

[35:30] So it has been hard. And one of the reasons it's been hard is that we we have grown significantly faster than the category itself.
And so you know we ended up finding a lot of opportunities on the supply side.
You know really early on and so we've we've had to actually really control how many locations were launching every year and keep in lockstep with our best companies.
But the thing is like there's enough there's enough brands out there that are launching every day every week that we've been able to.
We've been able to open stores that are added and grow at a pretty good rate.

[36:16] You know the I think there I think there will be a point in the future that where it's not clear that you know opening another store is best for all of the brands.
But you know so far so far it's been working and it hasn't been as much of an issue as maybe you would think.

[36:39] Another interesting challenges like where do you stop. We all kind of like as a soccer guy your practice.
You know you like to solve customer problems.
I have this problem of where stuff.
So I imagine it's kind of interesting. So on the brand side you guys have done a really cool job of you know I can be in five stores in California and then I can kind of like you give me this life cycle that I can use right allthe way to.
You know I think you call it store open concept flagship when I looked to your site you have this kind of like model that I could even see on the soccer side.
You know if someone wanted to start selling on on Amazon there's no reason you couldn't like you know launch them there you know.
So. So that's interesting and then you know maybe you can almost become their PM.
You know there's there's because like you said earlier you've got their product data.
They've started with You Can you be you know is that an interesting place to go or do you start there and then on the landlord side.
I imagine you guys are you know generations ahead of a lot of these landlords on now to think about Dhara why are these things what's resonating with their customer.
So I can see you going deep there too. How do you think about those aspects.

[37:49] Yeah we we actually I mean we've we've talked about projects like that a lot.
But we've I think the opportunity that we have stumbled upon is really in physical retail becoming.

[38:07] Experiential rather than supply chain focused.
And I often started to to think that you know experience for retail is a third channel.
It's a new channel you know compared to maybe wholesale is the first one and an online as a second because it doesn't cannibalize your,
or other channels you're the focus is different you're capturing customers at maybe a different part of the of their lifecycle.

[38:40] And so.
For us we think about growth really on three vectors I would say.
One is on the contacts where one might find products.
So today we have like you said we have owned stores and they come in different flavors. We have that flagship in line.
We have the open air format and then we have this full store as a service product that we launched called built by beta.
And then you know in other contexts there's Lowe's. We just added Macy's as a big partner for us. And maybe you can imagine others as well coming down the pipe.
There's environments so these are the different ways that a brand might want to represent themselves in the physical world.
So you know we started with a two foot display that was the only option that companies had.
And then we we started adding more options you could take forefeet you could take a table you could take a room you could take half of the store you could take a TV,
you know create a whole store and and then on the on the third vector you have,
product categories and we've been really focused on tech for a long time but I think if you watch us closely especially if you watch our product assortment over time we started to to bring in other things like apparel andcosmetics and and so on.

[40:04] I think those each of those three vectors is is is growing for us and we're we're exploring them as far as we can take it.
But we've I mean I think you can. I think one day we we've imagined sort of building that that software distributions system that you're talking about,
but the online experiential retail opportunities is such a fast growing category that,
we'd be remiss not to to see how far we can take this. There.

[40:38] Very cool. And you you mentioned something in that answer I want to drill into a little bit more of the built by beta program.
Real quick you guys have like I mentioned that right from my perspective you guys have built a platform you engineered a lot of the pieces yourself like as opposed to a lot of retailers go out and buy,
a POS from company eBay and they buy you know gondolas from Company B.
You guys built the digital signage system for the stores and a content management system that the that the brands have access to to publish content to those digital signs you you build your POS you alluded earlier to thefact that you have.

Scot & Vibhu:
[41:18] Training system.

[41:19] Yeah. Training for the sales staff. You alluded to that,
detail the in-store analytics package that's not just purchase analytics but actual browse analytics so you're you're watching shoppers flow through the store.
So you're using that in your own stores and obviously in your shop in shops in Macy's and was,
built by beta is you selling that whole platform of tools to another brand that wants to have their own branded store is that right.

Scot & Vibhu:
[41:56] Yes so as I mentioned like experiential retail is a different channel and what we realize what we noticed you know in sort of trying to find the right tools to build the business.
We notice that everything has been subtly architected around the store as a sales channel as a place to get a box out the door.
And and and you know as it is as one example a lot of the companies that we work with don't see the first purchase from a customer as the as the last time they're going to make money from that customer.
Right. They are thinking about it as a customer acquisition cost but they maybe have a subscription package or accessories other things that they are or are you know consumables that they think are going to drive longterm value from a customer.
And the typical In fact every single point of sale system in the world today,
does not support a customer or checking out and adding on a cloud subscription or does not support a customer or checking out and adding on accessories or or other sort of options like that.
And so we we you know in order to serve the brands that we work with the best we had to we had to think about those challenges.
And we ended up just sort of building a lot of the pieces ourselves.

[43:17] But that that kind of example I mean that's just one of many many things where like the existing tools out there are just not good enough for this new channel thats being created.
And so when we you know I think as Scott was mentioning before like this this continuum of like you know a company is the way we are.
The ideal path for a brand with us is that they sta