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

Join hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Founder and Executive Chairman of Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Apr 30, 2019

EP172 - Amazon Shareholder Letter and Q1 Results

Amazon Annual Shareholder Letter

Jeff Bezos released the Amazon 2018 Annual Shareholder Letter, which this year was focused the the phenomenal success and growth of the Amazon Marketplace.  In the process, Amazon disclosed the breakdown of it's 1P and 3P revenue from 1999 - 2018, as well as giving us the "physical gross merchandise volume (physical GMV)" for the first time.  In 2018 1p = $117B, and 3P = $160B.  For a total GMV of $277B (which means US GMV is approx $161B).   Prior to this disclosure we've all had to guess as the the actual size of Amazon's retail business.  This makes Amazon the second largest retailer in the US, behind Walmarts $318B (excluding Sam's Club), and ahead of Krogers $116B.

The letter also talks about the importance of companies being allowed to experiment (wondering as Jeff calls it), even if many of those experiments ultimately fail.  No customer ever asked for AWS, but a few success like AWS can fun many failures.  Even failures can be valuable, such as the Fire phone, which ultimately led to the Amazon Alexa.  Jeff argues, that as the scale of a company grows, so much the scope of these failures.

The letter takes a victory lap for some of the improvements in employee pay and benefits that Amazon has put in place and a challenge to other retailers.  A challenge that other retailers like Walmart did not particular appreciate.

As always, the letter closes with a reminder that the 1997 shareholder letter still accurately reflects the guiding principals of the company.

It's very likely that this years letter, is in response to an increasing call from thought leaders and politicians to regulate and even break up large tech companies like Amazon.

Q1 Results

Revenue came in at $59.7B, 19% y/y growth ex-F) which was in-line with Wall Street consensus.  Overall operating margin was 7.4% compared to a 5.2% consensus, so that was a clear beat.  There is some concern about unit sales decelerating (a risk as Amazon saturates the market, and Prime membership plateau).

Surprisingly, ad sales growth also plateaued but that was explained as mostly an accounting change.

The big news from the Q1 earnings was that Amazon would be investing over $800M to move from free 2-day shipping for Prime members, to free 1-day shipping for Prime members.  With most retailers already struggling to match Amazon's 2-day delivery promise, this is a meaningful moving of the goalposts by Amazon. 

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

Episode 172 of the Jason & Scot show was recorded on Monday, April 29th, 2019.

Join your 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.


[0:24] Welcome to the Jason and Scott show this is episode 172 being recorded on Monday April 29th 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:38] Jason and welcome back Jason Scott show listeners so Jason did you survive the Epic geek week that we just went through with the featuring.
Avengers and Game of Thrones really big episode / movies come out.

[0:56] I did it was soup this is the first time in a I did not get to see Avengers yet so I have tickets for next week so so spoiler-free please and we won't do any Game of Thrones spoilers either
but I will say is the first time in a long time I was like desperately waiting for the weekend to be over.

[1:15] So that we can watch Game of Thrones so I got her the whole weekend I was just waiting for Sunday night and in that seems like counterintuitive.

[1:21] Yeah yeah me too it's pretty epic the amount of geekdom was was
was off the charts I ended up seeing an in-game twice with a complicated kid Arrangement so it was so I had like seven hours of of intense content.

[1:38] You're the only dude I know that gets to see the movie twice and win father of the year for doing it.

[1:44] Yeah we'll see if my wife agrees but yes I am not coming husband.

[1:50] I decided when everything come out.

[1:53] Mutually exclusive.

[1:54] Apparently so I will say on the a joke about desperately waiting for the weekend to be over with a young kid at home my brother who's in the same situation and I am taking the saying that like.
Sunday night is the new Friday night because I like entertaining your kid for to haul at the holidays is so much more exhausting than going to work.

[2:16] Yes it absolutely is.

[2:19] You could have warned me about that earlier.

[2:21] Sorry you didn't ask him.

[2:23] So in between all that supersetting get dumb and parental responsibilities I feel like it's pretty dense Amazon week as well.
Amazon news new your margin is there opportunity.

[2:47] It is so Amazon had there since we we we we were at Austin and lay down some shows that we've been putting out there so the lot of Amazon music come out so first mr. Bezos Jeff who's one of our top listeners
he releases annual shareholder letter which is one of my favorite days of the year and then they also had their first quarter results that came out last Thursday
so with all the Amazon news that is going to be our Focus For Today Show
so let's jump into the shareholder letter this being an Amazon geek I read these like.
Many many times I keep them all and I refer back to the 97 letter L
this is a really interesting shareholder letter first of all because a lot of time so like last year he talked about it always being day one.
I'm and you'll come
cultural stuff I would say about Amazon and this one was really so very internal thinking, sharing a little bit of how they think about things of Amazon with which I find intriguing the 2018 letter the one that was.

[4:00] Just came out recently it was really different because it was really external so the first thing was there is a really big surprise you and I have talked a ton about mini people
underestimate the size of Amazon because their revenue is a derivative of the GMB that goes the platform
so first-party sales 100% Revenue equals gmv
third party sales they only recognize their take rate of that GMP to Amazon's a lot bigger than you would think they are on the retail side
and this is been a puzzle that everyone's been trying to figure out literally for 20 years and just right there in his letter Jeff Bezos revealed
the the DMV for 2018 from third parties so let me pull that up here just kind of go through here
so we'll talk about why he did this but here's what he said third-party sales are grown from 3%.
The total of 58% to put it bluntly third-party sellers are kicking our first party but badly
and then he said just got a little long so I was up to it and it's High party because her first party. From 1.6 billion
1999 2A 117 billion this past year the compound annual growth rate for a first-party business in the same time. Is 25%
but at the same time they're pretty cells are grown from .1 billion to 160 billion.

[5:25] Compound annual growth rate of 52% so twice the rate so he's essentially saying 3ps going twice the rate at 1 P we talked about that on the show that's definitely a thing.
Write an external Benchmark eBay's GM be in St. Drew a compound rate of 20% from 2.8 billion to 95 billion
I want some pack there but he was he's essentially saying in 2018 first party was 117 third-party 160 you had those up you get 277 billion new surrounding you got about three hundred billion in GMP
so and then you'll see
yes I didn't do the revenues during that period were 232 billion so much have to take out AWS and advertising and then you're left with retail gross it back up to 277 Amazon's a lot bigger than people think so that was really interesting
and you're the real question is why why would Amazon do this do you have any speculation on them.

[6:29] And why they would they shared the the the gym being focused on the third-party sellers for the first time.

[6:36] Yes I do right now I think there's been a lot of news recently talking about folks that are interested in regulating Amazon and that you know you have all these.
Candidates for political office I frankly on both sides of the political Spectrum in Amazon has been a easy Target and you have people like a professor Galloway that talks a lot about splitting up all the big
Fan Company in Amazon gets included in that and it's a complicated issue.
And I feel like there there's a number of vectors where they like the the sort of simple.
Criticism of Amazon probably isn't accurate or fair but one of the the best offenses Amazon has that I think they're really trying to lean into is.

[7:29] We we are not some big company that has these huge revenues where a facilitator of all these small businesses that have these these revenues and you know if you were.
To try to split Amazon up based on antitrust allows you to have to establish that there are monopolies in one of their big defenses against being a monopoly is hey we don't have 277
billion dollars in sales our partners have.
This hundred and sixty billion dollars in sales those are even our sales so I think
emphasizing the their Marketplace roll.

[8:08] Is is one of their better defenses and I think you know there's a full-throated version of that in this the shareholder letter but I think there's some earlier efforts as well where they,
like they really started doing some advertising campaigns promoting the small businesses that sell on Amazon and in hitting those numbers and so to me.
That there was a huge nugget in that letter that it was the first time that he really shared enough data let us back into an accurate gmv and.
Amazon famous for not sharing information like that I think Jeff has a good quote we're in the information
Gathering business not the information sharing business so she had to have a good reason to share it and and in my mind the obvious good reason is it's it's one of the the pillars of of his defense against the
The Break-Up break us up argument.

[9:00] Yeah I'm playing up here he even specifically says you know where we're a very small percentage of overall retail even when you can add one Pea in 3p so so definitely you know kind of.
Trying to get in front of the spani trust talk that that's out there.

[9:17] Yeah they're making the anti-monopoly argument and I'm frankly based on the way the laws are written right now like I did think it actually is a good argument
the the the argument that comes up a lot.
Protecting Amazon the there's this related argument and and I think some of the the presidential candidates have gotten really vocal and this one is the whole like hay
they're using the marketplace data
as an unfair advantage to design their own products so they they look at what what those 3-piece sellers are selling and then they knock it off and sell it themselves and it's not fair for you to be
one of the teams in the baseball game and the Umpire to use a bad metaphor that Elizabeth Warren tried death
I tried to use at one point and so that's an argument that I also frankly think is wrong but that argument ironically
like probably get strengthened by buy this argument that the marketplace is the biggest part of our business.

[10:23] Yeah he doesn't really defend against that other one he kind of takes a little bit of a swing out is just reminding how many employees they have and which is
portents and then they have raised The Gauntlet and I think this is actually just came out around the time.
I think it was Bernie Sanders was talking about how they don't pay a living wage that they upped it to $15 an hour for all their full-time books.

[10:47] Yeah. So that way there's a few funny references right any any so that you mention that he he compare their there
third party DMV that eBay which eBay did not appreciate and and had some pretty prompt responses to online and then Walmart decided
the comments about hourly wage were targeted directly at Walmart despite the fact that Walmart was not named.
In the in the shareholder letter and I think maybe you guys should pay your taxes.
Which also is kind of a.
Amazon doesn't pay a lot of taxes and I think there's a legitimate criticism to make their from a from a social justice perspective but.
They do pay all the taxes they required to pay under the US tax code so it's it's maybe a little unfair to criticize them for.
Following the rules but it does are interested or interesting sort of public fuse I'm not sure.
That in past decades you saw this kind of like real-time tit-for-tat between
in a bitter Rivals I got I don't think the car manufacturers took those kinds of over shots at each other that we're now seeing eBay Walmart and.
And I Amazon shoot in that I think we're going to have more examples before the show's over.

[12:14] Yeah yeah the the Twitter battles between these guys is pretty fascinating
and then some other interesting thing was kind of everyone was able to now say okay here's a real datapoint let's go sharpen our pencils
now one of the things in the letter is it.
Because it's a letter and not really Financial document this is not what's called Gap measure meaning that it's subject to General accounting principles you know everyone Defiance GM be a little different so for example.

[12:47] EBay.

[12:49] They've gone back and forth I can't remember where they are right now of you have this concept of unpaid items so they're there are some items on eBay that go unpaid and then know should they count in GMT or not they went through a phase where it was in wasn't sometimes shipping is in
what are the sayings did Amazon did say was this was paid physical items so this would not be things like apps
any of the Kindle e content in the ebooks any of that kind of stuff music digital music digital movies any of those kinds of things were not included in here
so that being said one of the analysts that we put a lot on the show John Blackledge she's over at Kalen he had 2018 at 314 billion so
off by about 20% Which I feel like could be I'm pretty sure this number I called includes media and digital stuff so and I know he hasn't text me yet it have a chance to put for the show so pretty close
my model was a good bit higher
so the percentage wise you know was really capturing the 25 in the 50% growth rates as well so I'm going to go find my model never actually have a real datapoint
and then the real variable you say two points is.
What the average selling prices for 1 p.m. three piece suits this really gives us a pretty good way of backing into that now it should be helpful going for.

[14:18] Yeah I know I was like a day and a half of my life when that letter came out cuz I quickly started opening spreadsheets and building forecasting models and and trying to like.
Back into the physical DMV in North America and compare that with like Walmart's physical DMV in North America for example and there's all kinds of interesting ways to slice it and dice it now that we have.
Slightly less speculative data.

[14:47] Yo what you think about the rest of the letter.

[14:51] So I liked it you know he hit some
important points that he is he's talked about in the past as well the the main theme for the the back half of the letter after the gym V stuff.
The the notion of the importance of curiosity and what he called the power of wandering and this is a section of the letter where he talked about the.

[15:21] The company needing permission to.
Sort of stumble into new products and solutions and not necessarily take a straight line from each each product Innovation to the next and so.
You know he kind of talked a lot about how when you know you have a successful product in your iterating it that you know you want.
Can you achieve a certain scale and you can you can really focus on efficiencies and and try to take the shortest path from each version to the next version as you can.
But when you want to invent something new most often you can't do that by.
Knowing in advance what you're going to invent and that you can't necessarily ask your customers what they want and and you don't assume that you're going to get some.
Some you know game-changing new innovation out of a sort of feedback from your customers and so that the huge example for him of that was AWS and that like.

[16:23] You don't know customer ever came to Amazon and said hey we really need to rent server capacity from you you guys seem pretty good at doing it for your retail store you should sell it to the rest of us.
That that was a a a sort of risky bet that Amazon had to take that like if we offered this to people that they would accept it and.
And I could be a big business and it's become a huge business obviously and then you know in the letter and Jeff gives examples of.
Of dozens of soda products on top of AWS that got invented in much that same way that like.
No one was necessarily asking for machine learning models from Amazon but they built them and put them on top of AWS.
No one was asking for all these like specific database solutions that Amazon invented but you know many of them have been super successful.
And you know you kind of made the point that.

[17:19] You have to give people permission to sort of explore and fail and then he's easier to transition into talking about how important it is.
To have failures and he talked about the Fire Phone for example and that that was a you know a billion dollar fail for Amazon.
But you know his argument was that that failure enable the success.
With the the Amazon is I quickly hit mute with the Amazon Alexa and that those products only existed because.
A bunch of Engineers had permission to fail on the on the phone that was sort of the precursor to this product and he pointed out.
As a company gets bigger that their failures have to be bigger as well and so you know he's going to.
He talks about you know you should expect companies of Amazon size to have some pretty pretty big honkin of failures and that that's a sign of of Health then so.
I think that that's an interesting message you know like I'll be blunt like I walk into a lot of distressed.
Clients and they they talk about like only being able to make a limited number of a bats and I can't afford for any of those vents not to work.

[18:38] And I Michael those aren't Betts if you know if you have to know in advance that eat each one's going to pay off like there's they're like by definition you can't take any risk and they're not bets and and you know Jeff is talked before about.
Like if you have to know the outcome in advance is not an experiment in until I like this weather seems like a kind of articulation of that Philosophy from Jeff which which.
I do think makes a lot of sense.

[19:04] Yeah I was good to you it's just easy to make billion dollar bets when you know why she doesn't care about you make me up your GPS and you have a cute voice.

[19:16] Yeah I mean I do think that there's an argument the date they have more leeway and until I do think a lot of companies to wear that are a little sort of jealous of that but.
You know the kind of argument would be the day earn some of that we way with their investors.

[19:34] Yeah they're they're pretty upfront about it with Wall Street will talk about it and q1 but you know if the know they basically say to Wall Street we're really focusing on growth and we think this is a big opportunity for that ride.

[19:48] And if you
it's for those that aren't super friendly are at the end of every single annual shareholder meeting Jeff references the original shareholder meeting letter he wrote in 1997 and includes a copy of it which is what you were talking about at the beginning of this segment
and it's in that shed all their letter that he sort of like.
Makes the the argument and announces to shareholder that hey what were long-term thinkers and where we're not going to necessarily focus on on short-term profits and if you invest in that you should be up for that.

[20:25] Yep yep and he's been amazingly consistent.

[20:29] Yeah yeah and so again like the when you write that in 1997 you might not have a lot of credibility but but today and in 2018 that the fact that he still gets to point to that letter and say hey we've been through that for
now more than 20 years like there's there's some good credibility there.
And as you mentioned he kind of closed out with this conversation talking about wages and I do think you know Amazon has made significant progress in.
In raising their wages I'm as have a lot of other retailer so I would say like sort of.

[21:02] Target Walmart Amazon have all announced major initiatives about raising wages and into Arch Dent have.
Follow through on those initiatives they all want to get as much Public Credit as they can for it and they all want to use as a foil for the attacks they get from the the Bernie Sanders of the world,
like there's also a very good practical capitalist reason that they're doing that that like their.
They're all desperately trying to grow and they need quality employees to grow and is a competing more customer experience then they're relying on these employees to deliver the customer experience.
And I think they're all just finding they have to pay more to.
When the recruiting battles and get the kind of employees that they need to keep feeding their businesses and so I.
I'm not so sure that these guys are all doing it out of the goodness of their heart I think this is a place where.
Where capitalism is kind of working and driving driving wages up a little bit which is certainly a good thing.

[22:01] So that was my take on the shareholder letter I did reference earlier like that you know.
The other attack is this whole notion of the the market put is unfair to be an Umpire and a player,
and that that was the baseball metaphor that Elizabeth Warren me like she's she's pretty smart woman I'm not sure she's an expert in baseball cuz I didn't love that metaphor because the umpires actually work for the owners.
And I think I can change the rules whenever they want like I'm not sure that wasn't exactly the the metaphor she was going for.

[22:37] I have heard this a lot like there lots of people that hark on the fact that like oh my gosh Amazon's totally leaning in a private label and they're launching all these products and their they're using the data from the marketplace.
To build these these products and we can't allow that if you're going to be the marketplace you can't also be a seller.
And we're hearing that argument more and more and.

[23:01] Yeah you can make that argument like that I mean there's an intellectual argument there that that a smart person could could certainly by into but what what miss me a little bit is people talk like Amazon's the first one to do it and it's a new idea.
And I would argue like that's a play that retailers have been running for 200 years and at the moment all of Walmart's competitors are much better that play than they are so I don't frankly with only a few exceptions.
Virtue of the Amazon.
Private label products are very successful and is as business does hit I think I think I may have hit this in the in the shareholder letter also or maybe it was in the.
Another document this week but like less than 1% of their sales are private label and you go look at a.
Walmart or Target or a Best Buy in your in the like 20 and 30% of sales are our products that.
That are owned by that retailer and so I like I do think we want to be careful about just saying hey retailer shouldn't be allowed to sell their own products in addition to other people's products because.
That that would like fundamentally break most retailers.

[24:11] Yeah yes communication to see how these things play out and you know what we'll see.

[24:18] So I know there's a super big transition that I was supposed to remember and I think it's to the the q1 sales results which came out last Thursday so Scott what what were your sort of take away highlights from from the q1 result.

[24:36] Yes it does the really big news that kind of swamped some of the Nuggets that we will cover here is it Amazon announce they're moving Prime to one day shipping
and they're going to become gradually doing this so
they're going to start with certain areas in the US and and then continue to ramp it up that's really kind of what they announced it didn't announce it in.
They also did announce that they're going to do to they're going to be interesting over $809 in this initiative so certainly not chump change by by any,
means on Wall Street is girding so Amazon is gone through this. Through to one of 19.
And harvesting a bunch of Investments and now they're really signaling both with this race Pacific number and then there for guidance
I'm a really good margins in q1 talk about their sibling you know don't get used to that investment cycle as we really invest in one day Prime,
so does speculation when you kind of read you know you and I get along this Wall Street reports Wall Street, read the tea leaves there is
no Prime now is in 50 to 75 US market so maybe in those metros by Prime day
at which will be dry just as shortly Benadryl I don't know what it'll be this year but I'm at
but then by holiday 19 will see a much bigger kind of coverage pays for the delivery.

[26:03] Reaction was really interesting on social media you and I had a lot of folks chatting to us about it while streets are really excited so I said said they were very
spaghetti with excitement and most of Wall Street I'm on the back so this announcement plus the results will go over a socially raised Amazon, 2002
2250 price Target
the wall Street's kind of analysis has this is going to weigh more than pay for itself because know what we seen is as Amazon turns the crank on getting stuff to you faster and faster your demand goes up so you just got someplace just it's not clear how much that's incremental but more of your everyday shopping kind of then
the time is over into the prime bucket as I can just get it next day then that's
in fact the shares of Wal-Mart and Target were worked something after they announced that
but then at the same time so that was the bush reaction to Bears reaction is there's a sea of people on on
Twitter that were saying that's kind of ridiculous because they're not living up to the two-day promise for me so it was interesting to see that there was more negativity that I've seen in a long time from anecdotal Ian I'm sure Amazon has all the student is exactly what's going on but.

[27:22] Army isn't rushing there was a pretty big outpouring a folk saying
what day what what happens if I don't get my stuff in two days so that was that was fun to watch most perplexing reaction was Walmart's Twitter where they said one day shipping without a subscription
interesting so that was funny
what time is the Wall Street guys that the headlines in the reports are kind of fun this was the winner from you is Scott Devitt of
I said Amazon is releasing the next day Prime that starts we work the Star Wars reference in there which is
always awesome Jason what did you think about Saint ounce what is this kind of the nail in the coffin for the Ollie's omni-channel guys that are kind of catching up the amazon or or do you think they're going to kind of be able to hang in there.

[28:11] Yeah you're always going to win the quitting contest with Scott if you include a Star Wars reference
I don't think this is the nail in the coffin I do think it's a big smart move from Amazon though and I do think it's a gut-punch to most other retailers so the.
You know no retailer has close to the investment in fulfillment that Amazon has and you know Amazon has all this.
These other aspects of their fulfillment network but if you just look at these big fulfillment centers they have like more than seventy-five of them in the US now and and dozens of other things that support them like sortation centers in and transportation hubs and all these other
but they have 75 of these big warehouses Walmart has been next most which is they have like 20 many of which are much smaller
and then you know after that most retailers are lucky they have like two or three and so no retailers made close to the the.

[29:17] Investment in fulfillment infrastructure that Amazon has made into most retailers are you know.

[29:25] Taking some sort of strategic approach to how they answer what Amazon was already doing like.
Oh man we don't have custody ability to deliver in 2 days at Amazon has what should we do should we invest billions of dollars to try to get closer to them by opening more fulfillment centers
should we use our stores more in leveraged or fulfillment like you know because Amazon doesn't have stores and we do and you know they're all these sort of.
Typical omni-channel plays that you would make
and those are all things to sort of close the gap than Amazon has between everyone else and so when Amazon it if you just came up with some strategy to.
Partly closed the Gap and you're making a a big painful Investments to partly close that Gap and then Amazon goes oh by the way we've got another gear and we're going to open up this Gap more
that's that's really demoralizing to to a lot of these other retailers and so I do think this is a big smart move I think it's it was a clever way to leverage that advantage in in fulfillment centers that they have over everyone else
and you know I think there's going to have to be a lot of soul-searching amongst all these other retailers about the how how to respond a little more detail in the Walmart response which I agree was totally wacky.
Like basically Walmart public relations made a tweet that said.

[30:51] Not sure that's revolutionary what would be revolutionary is one day shipping without a membership fee.
Stay tuned in the the implication was that Walmart's going to announce something in the future that they're not prepared to announce today
along the lines of free free one-day shipping in the
the reality is they just don't have enough of filament centers to do one day shipping to to the whole Us in so you don't frankly like either they're going to make an announcement to dig another hundred holes and build
you know you know 10 billion more square feet of a filament space or
it's going to be something like we're going to do one day shipping from our stores,
which is interesting and that could be a good customer experience in a bunch of retards are using that approach Walmart's one of the last ones.

[31:39] That really isn't shipping from their stores but I would remind people that those stores have like a hundred thousand skews in them and Amazon selling 800 million products so
you know really not Apples to Apples if that's the approach that any retailer takes two matching Amazon so you know
roll all that up and I think the Fulfillment centers are a huge competitive Advantage for Amazon and they keep investing more in it which is a total gut punch for retailers and in frankly they talked about you know this being an 800 billion dollar investment for Amazon
that's actually not that big of an investment right
it's all right you like you know I think going back to the the wandering and the size of your failures has to scale part of the letter like I actually don't think a hundred million dollars in fulfillment for Amazon at this point is even a huge bat and so you know that's
that's going to be problematic for retailers to match I think they're they're doubling down on their damages which is smarter.

[32:37] Yeah my um so I have two thoughts on this just got out of pylons what you're saying and you give a really good talk you have this kind of rare but occasionally to give a good talk in the winter.

[32:51] You know that I'm recording this right.

[32:54] What are the topics you talk about is that their work done out of Potomac capability among the big tree so UPS FedEx USPS right
I maxed out to as a reminder to listeners in October of last year Amazon
started this program that they've tried to go out this couple is first day they started this flexnetwork
I like uber for products that it works okay but it's not really at the NC that.
Volume that they're looking for and it's it's hard to control the quality of uv2 of that program of doing more salt delivery is they
they split up this program called delivery service partner program DSP
this is very much like FedEx Ground where they actually went to logistics companies and said look if you'll deliver packages for us we will give you some pants and in front of the state with her 20,000 Mercedes Sprinter is really nice delivery Vans let you know.
Orders more capacity than likely yes. If you think about it
I think we could take a six months of data under the hood and my bed is they now know exactly.

[34:13] What the cost is and how to take over enough of The Last Mile in certain markets to do the one day and don't think they could do it when they had they had FedEx.
I'm really ups and USPS a little bit of FedEx as The Last Mile I just want to date the cost was cost-prohibitive but now I think they have the economics for they say you know if we just spent $800 more we got you know
maybe that equates to you another 20,000 Spinners and then whatever it is to deliver their I think they now see that there had this last little push and they can get to that.
Buy one reading of the tea leaves is
you're right the filament centers are key to it but I don't think it was until they did The Last Mile that they realized this was Insight they could do it and then I think once you do next day then same day everywhere
Art's to become a pretty good reality so then you're kind of there's not that much more capacity I think you have
add for same-day so so I would say to retailers you're going to probably have a competitor that's able to do its own last mile delivery at about half price you pay a third party
and they're going to be moving to same day delivery so it could be interesting to watch this and see what happened.

[35:32] Yeah for sure in like I don't even think you have to guess that like. I live in Chicago which I sometimes described as living in Amazon's future because there's a lot of this this one film incapability they're talking about rolling out Nationwide is already here so
the majority of packages I ordered get delivered in one day
and they're very often is a same-day offer in this is totally distinct from Amazon Prime now so Amazon Prime now is this thing with smaller warehouses that have 60,000 accused and and can deliver in a couple hours
what I'm talking about is delivering from the the full Amazon assortment and when it says like order right now when when you get this product
if it's before noon very often it says I'll get the product by 9 p.m. today and almost always the like the
the promise is
that I can get it tomorrow and so you know frankly I think what they're with their talking about here is is building out the Chicago style fulfillment Network.
For the rest of the country in it like you know I think it does fundamentally change your shopping behavior when you win the
the lag between desire and fulfillment is is that much closer.

[36:47] Yes and one day Prime was the big kind of Earth shattering news out of the first quarter results what other financial highlights did you see Jason.

[36:55] Well they made some money so so revenue for the quarter was just a hair under 60 billion like 59.7 billion
which is 19% growth from from this quarter last year
which is basically in line with the the Wall Street estimates but what got people excited was the Mead more profit on that Revenue than then folks expected so I think.
The consensus goal for operating margin was like 5.2%.
And they actually announced that they made 7.4% so that's a very meaningful beat.
And you know it's super encouraging that that Amazon is continuing the ratchet up these sort of.
Record profits on their their sales and you know side note that makes it easier to make these billion dollar investments in new fulfillment capabilities.

[37:51] And yeah a little more detail on that North America is is about 60% of Amazon's revenue and that's the profitable market for Amazon so that.
Operating margins in North America were 6.4% and international was a loss International so far in their in their history is always been a loss.
But the the loss is getting smaller and smaller so the International Ice was like 6%.
Which which sort of demonstrates that they're getting close to break-even and eventually getting profitability on that that International Revenue in addition to this North American Revenue.
So that seem like a big deal in an encouraging sign and I think Amazon attributed a lot of that that incremental profit to.
Fulfillment efficiencies so essentially.
Getting a return on all this fulfillment investment that you were just talking about and all those fulfillment programs in the airplanes that are Leasing and things that they're essentially.
As they scaled they're able to to squeeze some some incremental profit out of the model which is unisuper encouraging to.
To Wall Street at the very least and then of course you know.

[39:07] Amazon web services is another big big chunk in revenue for that for the quarter was like 7.7 billion.
Which is still 42% year-over-year growth which is exciting cuz you you worry that eventually you're going to email when you
that gets a big that it's harder to keep growing at that pace I'm so I do think the pace of growth is slightly decelerating for Amazon web services but it's still very fast growth and,
just a quick reminder like an unlike the retail side of the business that 7.7 billion is considerably more profitable so that's a nice revenue or profit driver for long for Amazon as well.
Those are kind of some of the the financial highlights what what else would you take away from the the quarterly earnings.

[39:53] Yeah there was a third-party side 53% of the units for third party that was a new high Wall Street was expecting the kind of you that has a missed their revenue that Amazon does report from third-party
services that was a little light another positive was subscription Services which grew 49%
and the CFO in his is kind of color commentary and answering some questions
I know at the 4th quarter report listeners remember we talked about Amazon said they had more Prime users added in the 4th quarter than ever before
so one street Wall Street analyst kind of said hey how are those new ads kind of converting is there is. There and they
it said that you know they saw a really good activations across all the different rhyme
capabilities suits what they mean there is no way they do it is in a Bezos says that you'd be
I want to make prime so good you'd be responsible not not sign up for it so so you've got. Obviously the fast free now going to one day normally two days you've got.

[41:05] You got all the Kindle stuff you got music you've got the video star.
I called the Alexa and puts in their busy even more in their exclusive products and all these things so one of the things that they kind of said body language was on the call was there fishing really good kind of.
Is increasing I kind of read it is increasing and this line item called subscription Services where that would show up that grew 49%
what kind of cars do you everything in the first quarter that was kind of the fastest-growing peace which I think it's well if if Prime is prime sign up for when your fastest growing things that that.

[41:43] What's the acceleration on the road as those people start ordering and taking advantage of their subscription
advertising one this was this is interesting so we talked a lot about this on the show it really slow down prematurely it's been growing kind of north of 50% I believe in this load to 34% year-over-year the
there was some talk
the system of all she has reported that there was an accounting change their that some of the third-party types of ads have now moved over into more this merchant services kind of line item and aren't showing up in advertising so I think they're kind of you know.
Are some apples and oranges there and then the CFO did say you know if you
adds grew faster than other so the other line with 34% so he was kind of trying to signal I think if accounting changes out there is still growing pretty rapidly
John Blackledge I referenced earlier you got to put sad visit 13 billion this year and she's at about 35 by.
What kind of the new multibillion-dollar line that Amazon is growing up a lot on the call about how.

[42:55] And I'll take this over to you cuz this is your bailiwick they're adding a lot more capabilities here for agency types of folks to have apis and ability to.
Run multiple accounts and I think they they realize that something that has large agencies need to include Amazon and a lot of ads and it sat out there.
The biggest concern from Wall Street is they have this metric called paid units.
That has slowed those 14% growth in Q4 at slowed to 10%.
Speed unit growth only go 10% yet will Revenue gross means the.

[43:39] The average order value is kind of doubled the only way to make that work in the retail world so there are some bears out there saying this feels like maybe Amazon starting to bump up against.
Challenges of scale in saturation there's a lot of reports that show that there at like 85% less of the.
High-end cameras out there are on Prime and those kinds of things so that's give me a metric I want to watch this really close when they did their forward-looking projections it does feel like a little bit of acceleration but it's not clear
is that coming from a TBI sads or the retail business are our what soaks I was kind of like the only little
kind of cloud on the horizon I would say is the speed unit growth really decelerate it pretty hard it's the lowest it's ever been
Child Say the bottom line on the first quarter is a really solid showing by Amazon the big surprise was the one day Prime that definitely kind of got everyone's attention and like I said before most of the Wall Street folks were pretty pleased and we saw a lot of
yeah raising of price targets to your kind of that north of a trillion-dollar territory up into the the $2,250 kind of ranch.

[44:58] That it's going to be interesting to watch that the advertising thing a lot of the new device are right after the announcement like people people miss that
certified accounting change and there was a little bit of a panic in the advertising world because there's been all this talk about oh my gosh Amazon's the fastest growing advertising platform and and you know number of the newest episode of forecasted at 2
do certain eventually be able to compete with a Google's and Facebook's of the world and so.

[45:30] At this point to already have decelerate in growth would have been a concern but obviously if that's.
I'm sure they explained Away by just went buckets Amazon puts the the revenue in then that's that's not as big a concern so it'll be interesting to see.
Like is that does that explain 100% of it or have they had a deceleration.
Well I am sort of bullish on on Amazon's prospects as an advertising platform,
I think you you hit one of the pain points that that's going to keep them from scaling is there there.
They're advertising tools and capabilities are are much more nascent than
say Google or Facebook in and you mentioned agencies don't like that and that's certainly true but like increasingly the the Google and Facebook tools are good enough that clients like to run their own campaigns on and that's
that's way less true on Amazon today so Amazon has a lot of.
Catch up to do on tools and you know you could see that like I'm sure they're they're investing a lot in the tools right now like we see a lot of new apis and capabilities coming out all the time
but but that could be a constraining factor on their advertising and another thing that I still speculate.
Is Eliza constraining factor in the short run is the budget that these advertising dollars are coming out of so.

[46:54] You know I still think the majority of advertising it happens on Amazon is advertising for a particular product that a brand is trying to sell on Amazon and Those ads usually come out of what's called a trade budget
and a lot of the dollars that gets spent on Google and Facebook come out of
a marketing awareness budget and I'm not sure Amazon his establish themselves as as a viable platform for those
those kind of top of the funnel advertising dollars in the same way that that Facebook has yet I think they're ever going to really scale they're going to have to demonstrate that they're good at that too and so I think.
Time is going to tell there but that's probably a good place to leave it's got unless you have any any closing remarks cuz we we've used up the are budgeted time for for the show.

[47:49] I think that's all the exciting news on the Amazon side will it's just kind of keep it there and we'll be back with more guests and more news and future episodes next for joints.

[47:59] Yep and if you didn't try this episode we sure would appreciate that five star review on iTunes as always if you have any comments or questions or we got anything wrong feel free to
the reach out to us on Twitter or leave us a note on her Facebook page we loved to have a dialogue with our listeners and until next time happy commercing.

Apr 24, 2019

EP171 - DTC brands physical experiences 

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

Episode 171 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

Join your 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.


[0:24] Welcome to the Jason and Scott show this episode is being recorded live from Austin Texas on Monday April 8th
2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:41] Hey Jason and welcome back Jason and Scott show listeners,
this is the first worst Jason not only are we in the same place together but we’re outside and I know listeners love your trip reports because you are the roving retail trip report.
Ninja but we are actually out at a shopping mall in Austin doing a live Jason and Scott show.

[1:03] Yeah this is awesome I feel like we are completely breaking all the usual conventions of podcasting because I am actually,
actively shopping with you here at the Domain at Northside in Austin while we’re doing a podcast I’m really excited to find out if this is going to work at all.

[1:21] Yeah yeah so I’m sure their listeners are already hearing some interesting sounds were,
kind of sandwich between a bar some construction and a lot of these noisy birds that live in Austin I’m not exactly sure what they are but hopefully that adds to your Ambiance as you’re listening out there.
So the how we get here so bad a year ago my wife and I went to Austin on a little trip and we discovered the small area,
I have been looking for one of those hot handbags are suitcases I should say called in a way and we were drawn here by the had an Auburn Pop Up and Away so we came out here,
and had the digital native brand experience it just really loved the small I think it’s one of my favorite,
malls in America if you will so we decided since you and I are here for channel advisor connect that we would do a live remote.

[2:10] Is an awesome idea.
So this isn’t one of these outdoor lifestyle mall so we’ve we’ve talked about those before like they tended that tends to be the format.
That is thriving more than some of the other formats it has a couple of traditional big anchor tenants like a Neiman Marcus I think the new Big anchor tenant is Nordstrom that might have opened here a couple years ago,
as you mentioned most of the digital native brands that that are in a brick-and-mortar business have a,
a location here so that’s interesting you can see the the Caspar Warby Parker been of us,
Etc all here and Scott what were your sort of initial Impressions the mall you mentioned it’s your favorite Mall why so.

[2:58] Gets a little another background thing this mall is owned and operated by Simon Property Group one of the larger Mall operators,
YouTube haven’t come here three or four times now what I was surprised with the day is there’s a lot of clothes stores I wouldn’t say.
I would kind of guessed 10% maybe a size 15 my little surprised by that because it does seem to be a pretty hot Mall area,
now most of them already have a coming soon so we’ve seen the ones that are close are already kind of being back filled so so that was a little bit of a surprise so I don’t think anyone is immune from all getting would be my first impression.

[3:34] Yeah and I are going to have to burst one of your bubbles not all signage is truthful.
So if you’re an operator and a tenant leaves the wallpaper you put over the front of that store says coming soon whether you have a tenant soon as a very flexible definition.

[3:52] Brands so I assumed that they were like.

[3:55] I think that’s actually the way you can tell into this mall feels like it has about a hundred 75 stores and that’s probably a fair estimate that like 15 of them are so seem like they’re vacant and at least half of those deer Point felt like.
They had a named tenant moving in and I would argue.
In the modern era that’s just the.
That’s the sign of a healthy mama like there’s some Concepts people open here that just didn’t work and stuff goes out of business and and stuff opens up we are here on a Monday afternoon in the middle of the workday,
and I would say traffic feels adequate like it definitely is not bustling but there’s a significant number.
A folks here shopping on a three on a Sunday afternoon or Monday afternoon and as with most of these lifestyle malls it is sort of a mixed-use.
Model so there’s a lot of retail here there’s a lot of dining here some of what you know it’s sort of higher in than a food court might be there’s a couple hotels on this property,
because we’re here for channel advisor we’re staying at much fancier hotels downtown but there are cool hotels here and there’s some entertainment venues as well so like some of that traffics probably retail but some of it maybe,
locals coming for lunch or something.

[5:21] Yara Uber driver live is live in Austin for about 40 years he kind of called it this domain area we’re in the little subsection called Northside he called it the new Main Street of Austin so it is definitely kind of,
not only a shopping destination but people are kind of moving here and living that go that the the busiest part of the mall today is definitely the food and and kind of services.

[5:43] Shout out to Velvet tacos that took care of us.

[5:45] Yes delicious.
So let’s do some sort reports to the first store we went into his beta and Jason if you have a superpower I haven’t witnessed it before but your superpower is getting store associates,
to spill their guts about what’s going on in the store so tell us what you learned about me.

[6:03] Yeah we talked about bananas on the show before one of the founders of FUBU his has been on an episode so just as a reminder for listeners that maybe didn’t hear that this is sort of a.
A retailer Services mall or another way to say it would be a physical Marketplace so this is a a store,
the brands can buy a shelf slot on and tell their story and so it tends to be,
young up-and-coming Brands and novel product that maybe don’t have huge awareness or distribution yet.
And or product they require like better demonstration or explanation to be,
to be sold and so they they would pay a beta to have a slot in the store data gets a commission on everything they sell and so it is very much is like beta is a Marketplace operator and their individual brand selling their products.

[6:55] In the store fun fact this is my second one I’ve been in this week cuz I was in the Santa Monica store in LA or earlier within the last week.
So the thesaurus get a lot of traffic one of the pros and cons of beta is it’s a great store for,
what I called Discovery like if you don’t know you’re looking for something you walk in your aunt you’re very likely to find something you didn’t know exist that you think is cool and you want to buy.
And so for example I think Scott and I both desperately want although I guess I’m guessing neither of us have it used for,
one of these Neo digital pins which is a physical pain that you write on paper,
and everything you you doodle or right or no to take are stored in the pen you can download them in real time or after the fact as PDF stand iPad.
And it just kind of cool thing that you maybe didn’t know existed before you walked in the store.

[7:51] Yeah they have a ton of that D on my first impression this paid I’ve been in the one in in Palo Alto,
first of all this felt like a Google take over so almost entire perimeter of the store was taken over by Google home kind of what I would call Little vignettes vignettes they had a device may be some Associated kind of,
Google device maybe maybe a phone or something but then also they were trying to walk you through some use cases for how to use the Google home devices so there was a recipe than yet,
there was a weather temperature vignette have an ending like a travel kind of a 1000 Rushing look like Google is spending pretty big bucks are there two.
The new used for superpower and got the store so she has to say some the top selling things and this particular beta are the key smart system.
And Shout out we know some of those hooks are listener so.

[8:42] Sometimes known as the smart key.

[8:45] Bone-conducting headphones are popular,
the Neo smartpen and then there’s a lot of really cool musical instrument stuff so jamstik so you could teach yourself how to play guitar,
is it my favorite thing was because we’re always have to do this company meetings and you always are shouting out in these Open Spaces had this really cool I’ll do it was $900 call the sound box Co KS,
I was just a ginormous Bluetooth speaker that you could either take take to the beaches like a mega Boombox or I would use it for like a PA system at a company meeting.

[9:20] And when you say ginormous you mean 30 lb.

[9:22] Yeah this guy has like a whole system for carrying it and what not but it looked quite robust like you could stand on it or whatever have some sand get on it and it wouldn’t wouldn’t get destroyed.

[9:32] So that again. I think this works great for that kind of thing that you discovered something you didn’t know existed. Point about Google
Google’s a perfect example they don’t have a network of their own stores and they have products that you may not know you need unless you see them used or demonstrated you may not understand,
some of the Google products and so they need physical brick-and-mortar demonstration Apple solve a problem for their products by opening hundreds of their own stores Google hasn’t done that yet and so it makes sense that they would invest in these,
opportunities to create a physical presence the downside of a store like this is you can’t rely on them having any particular product.
Before you walk in the door so it’s not a store you walk into with a mission like it’s unlikely you’d go I need new headphones I’m going to go to bed at like.
That headphones in particular it’s likely there’s going to be several different kinds of headphones in a beta store.
But they may not have the complete breath of Assortment or the brand you’re particularly in.

[10:32] They’re not going to have like a Bose QuietComfort they’re not have some any kind of pedestrian thing that that you would go to like a Best Buy for absolutely.

[10:38] Exactly so it’s interesting that we were talking to the guy,
and we’re talkin about some of the other good retailers in the in the mall and he mentioned Peloton and Casper and in his POV was that those guys would do great in a beta store.
And that you know that they all have like sort of physical elements that would resonate with a betta customer a we also talked about a way he felt like the away bags would do particularly well in the.
In a beta store and I was kind of.
Going down on that a little bit I actually don’t think a beta store can offer the immersive experience that a Casper store can offer so I would actually argue when you have the opportunity to have a Casper store in the mall.
That’s what you should do is have a Casper store not being beta but if betta is in a mall that Casper isn’t in you can imagine that that.
Peter could be a supplemental experience for sort of expanding the footprint for some of these other brands.

[11:40] Yeah yeah I think they could be in or kind of a Thing versus just a you know you have to choose between 1.
So I can pay the we went we walked by Peloton they had kind of a class going on in there and,
yeah it looks like it looked to be quite busy they had many of their their signature devices that’s on the treadmills that’s their newest widget there’s a lot of Buzz out on Wall Street that this company is going to
dummy onesies that goes public as we speaking today lift has filed as done their IPO if someone,
this is been a little bit of a rocky start for tpd on what that was is good for the company not so good for the investors that that bought the IPO,
I’m and then Pinterest is actually starting the road show today so we’re starting to see this IPO Log Jam clear and a lot of chatter out there about Peloton being one,
and a big surprise about Peloton is it’s not really a hardware company it’s a subscription song.

[12:35] Yep exactly so it Center.
The hardware is a little bit of the razor in this model and then the the monthly subscription for content is the Razer Blade so you the original product was stationary bike,
with a big screen on it and they have a great group gamification model so you take live classes.
With other remote participants so you can get a very famous instructor if they were teaching at a spinning studio in New York they’d only be able to accommodate 30 bikes but now this instructor can have to get two thousand people in their class,
and you get the instructor on the video screen in front of you you’re competing against all other two thousand people you can see how many watts your making it hard you’re working,
against these other two thousand people and that access to.

[13:24] The the finite commodity of really good instructors and the in the sort of competitive gamification in the fact that.
There’s so many classes that you kind of have you can have a completely flexible schedule.
That those set of factors have caused Peloton to do really well and get a really zealous user base a lot of people think that they’ve taken a big chunk out of the the dedicated,
spinning businesses like SoulCycle in those guys,
so the newest thing for them they were a direct-to-consumer business they only sold the bikes online they did infomercials and so retail is a very new model for them that they’re rapidly opening stores,
probably because they captured all those early easy customers online and now to expand the footprint they’re having to have a brick-and-mortar present.

[14:14] Yara are class a mall in Durham has a Peloton pop up so it’s like the slow glass enclosure with two or three in there.
The last I heard I think there they’ve crossed over a million subscribers so you know starts to feel when I talk to a lot of people there, like it’s just like going to be almost like the next Netflix there’s nothing.
You know the that software you could have imagined it on tons of different devices and this whole in-home exercise area is hot with feces so some companies to kind of keep an eye on if this is interesting to you
others mirror and tonal who have all raised substantial Capital to go after this Market they all have different approaches.

[14:51] Yeah yeah and there’s you might expect a lot of sort of me choose even on the original equipment like that the cycling bike and Peloton is expanded now to treadmills,
so yeah it’s an interesting hot space and I think I may have mentioned in our seat yet show,
there’s a whole Exhibit Hall at CES dedicated to this sort of connected Fitness face and these guys all had a prominent presence there.

[15:14] Cool so then we we wanted around we walked by bonobo Sonora be no need to go in those those are well well treaded for us then we went to the bakery and sampled some some Bakery items and some.

[15:28] The seasonal oatmeal cookie really hit the spot.

[15:30] Yeah 10 minutes of Gone by since a latte so Jason was was he was she.

[15:34] Unless my wife is listening in which case I had the fruit parfait.

[15:38] Yes good job having just that one strawberry then we went into the Casper store and it was my first Casper so I’ve seen their little kind of in Target pop-up before but I never been in a Casper store how about you.

[15:50] I have been in a number of Casper stores in so this is on the smaller value side of Casper stores.
So they they do a good job and Merchandising their products so they have their primary product is a mattress that can be a direct home delivery that they they sort of.
I want say they invented the product-based they were the first runaway success in the.
Foam mattresses that you can press down small enough to UPS them home,
and so they have a lot of these these sweeping vignettes these little mini houses with their various mattresses in them,
that you can lay down and try and what will get back to the Deep Dives to God did in trying a mattress in a minute that they ought they expand until I bedding and they have a very cool like bedroom lighting system.

[16:39] Oh yeah that’s my favorite.

[16:41] Serta hypnotized asked for about 15 minutes and we were playing with that.
What’s different about this Casper store that’s kind of weird this Casper start-stop bigger Casper stores have sort of more of a social media component so they might have had like like.
Photography set where you can take a cool Instagram picture of you in a in a Casper vignette and in the Marquis thing that some of the big Casper’s have is this thing called the dreamery.
And the dreamer is kind of the wework of nap.
So you you make a reservation and you pay to go into this isolated soundproof pod with a Casper mattress and premium bedding and you literally can pay to just have an app for,
for half an hour and my understanding is that like you think sell out till like.
Team offsites and team building and things and it’s it’s kind of a cutaway they’re monetizing people trying their product which is pretty clever.

[17:38] Michael you should see the associates look on his face when Jason asked if he could take a nap.

[17:43] Side note if you’re going to do at a store visit it’s important to have a super cheesy annoying joke as an icebreaker for everyone so thanks man.

[17:52] Yes you’re really good at that your dad jokes are off the chart.

[17:57] I work hard on I’m so we didn’t mention this in data but I highly encourage our listeners whenever you walk in a beta store and someone comes up and asks you if you need help the first thing you should ask them is when they’re expecting to get out of beta.

[18:08] Yes the guy gave.

[18:10] He almost fell on the ground laughing.

[18:12] Epic Gyros and side eye.

[18:15] The @apple what you like to do is go stand by the laptops and when someone comes up and offers to help you which will no longer have an Apple store by the way but I pathetically if it did what you want to do is go yeah,
when did iPod start making computers they love that joke.

[18:32] Uncle Joe in Casper the little vignettes for funny Casper always has his good better best mattress system nice get the names they have like the wave and the This Not That,
I’m so you could try those in six or seven will vignettes and then they had to find one that has the,
the self lifting feet and head and like it’s got magic fingers so that what that was I I spent quite a bit on time on that one,
that was fun and all lights were cool so it’s kind of a lightly but next your bed you can just rotate the light it’s it’s a cordless so it sits on what looks like a what are those kind of chargers the conductive charger,
an induction induction charger I’m sitting kind of like turnitin dim series of lights or you just turn it upside down and it turns lights off so that was pretty cool device.

[19:17] Yeah I like the fact that the light seem like they’re Wi-Fi network so literally like it when you say turn you don’t mean to Nob you mean literally spin the lamp itself.
An atom’s but if you have you could have 10 lights in your room and they would all of them and you can flip the one lamp upside down and all the lights in your room go off and flipping it won’t come back on.

[19:36] Yet sad much it is a lot of effort compared to talk into Alexa them so I don’t know I don’t know how successful I was exhausted flipping the light two or three times.
Not sure not sure I needed that much of work out here today. I think we should talk about briefly is
one of our listeners is here in the area super listener I guess we should call him Ted and he was able to secure a demo for us and a tour of Brigham and Borrego has a robot coffee,
kind of a experience so imagine if you will a 8 by 5 by 6 7 ft,
a little a little Hut with a lot of touchscreens and stuff that has a little robot Barista inside of it,
sounds really cool to see I’ve seen it here in the Austin Airport and apparently it’s in other airports like DFW and I guess coming soon to maybe SFO so what did you think about that mr. espresso.

[20:35] For me it’s all the fundamental problem which is called 24/7 availability of expresso,
so do you know anything about staff coffee shops that they don’t tend to be staffed at 3 a.m. but with one of these automated systems you you can get a delicious iced latte anytime of the day or night.

[20:55] In that sense obviously I love it it’s interesting to me what the ideal use cases for that so this feels like.
Something that you’d want to put into a high-traffic public space I do a space that’s open a lot of the time or all the time like a bus terminal or some kind of public transit are the airport,
and you would put it in in lieu of a man Espresso Bar so it does it takes up less space than I am and expresso bar and it can make all the different drinks and stuff it does not seem like something you’d add to an existing.
Coffee place or something you know I think it’s meant to be sort of a stand-alone mini coffee shop in the moment it’s meant to be indoors which.
You can imagine a lot of the 24/7 use cases that would be interesting are,
I could potentially be outdoor installations I think we saw their business from model problem for him while we’re there I really think they should be partnering with the Tesla superchargers,
and you can actually order your coffee from your car and have your car waiting for you when you arrive to plug in and charge it.

[22:05] Yeah and I think they should be branded a human supercharger I met him at that my song.

[22:12] Nice that could be your eyes breaking joke whenever you you know anyone.

[22:16] All right I’ll tell you something delicious case I thought of and that it is popular is convention centers and I flash back to you and I have been to the NRF Big Show,
some ungodly number of years and even though there’s two Starbucks some unbranded espresso place and another place the line is always 2 hours long.
I’m sort of the cool features of this is if you download their app you can you can pre-order and the Machine will,
you can you can actually schedule when you want your coffee made and then you go it doesn’t just have to make the coffee and spit it out so you go to the it holds it for you for for up to two hours,
and then which finally makes sense with iced drinks anyway.
And then you go up when you enter either you swipe your card or enter code and it didn’t dispense is the drink so I was thinking you know and those times in RF where we’ve got,
1520 minutes between now be a perfect use case for it because there is so much of the Cyber Monday for coffee demand really far outstrips the supply and the lost opportunities.

[23:17] Yeah and I feel like it’s one of these categories almost every category that gets did we disrupted there’s like the the sort of,
traditional players that are like oh my gosh a big part of the espresso experiences talking to the Barista and everyone wants to interact with a human and that’s you know it’s the third place and in this sort of impersonal robot is never going to work,
but I would remind people that 20% of all Starbucks orders are now online order and pay and you essentially don’t,
ever interact with a human you you order the drink on the phone you walk in you hope that you get easy access to grab your drink and never see a person and walk out and so this kind of automation,
you can imagine really being a primary fulfillment vehicle for those kinds of experiences.

[24:01] Yeah one lens you can look through this is the the human in the equation actually adds a lot of cost and then also a lot of variability right so you know the one thing I think you would find from a robot coffee maker is going to be,
obviously a more consistent experience and they’ve done a lot around that that’s pretty wild,
another cool thing is we’re able to see their Network Operating Center so they could see all the machines was going on and you know she number six is a little low on its cinnamon and this machine is low on this size cup,
it’s a really cool demo and wanted to thank the guys for doing that especially shout out to Ted for inviting us on that.

[24:35] Yeah and get any top animated caffeinated today hopefully that will pay off when we give our presentation at Channel advisor later.

[24:42] Yeah I’m just hoping you don’t Peak too early so we got it we got a time this right.

[24:46] I’ll always a challenge so what was the last store we visited before we sat down at the podcast how was your I think your original impetus for coming to the mall the away store.

[24:57] Yeah we we popped into the waste or I tried to convince Jason and I had a robust argument in the middle of store around 2 vs 4 Wheels we will not bore you guys with that that argument,
but the staff I have a little problem with my suitcase and those that was actually quite helpful with that and,
yeah I love this store it’s a great suitcase it’s pretty cool how they can’t take in a suitcase and put a Lifestyle brand on it,
so why the packaging and all is really geared towards people that travel a lot and talks about Adventure and since the last time I was in the store they’ve added a lot of accessories and other little kind of travel do dads and gadgets the,
you know when you do travel those things I do to improve your life so I thought it was a great story if you have a chance to visit one of those used to definitely try it out.

[25:44] And I think I’ve mentioned this in a previous tour visit.
I have mixed feelings cuz I feel like it’s a way as a great brand new had a lot of success they obviously evangelized you and I think if you hear the founders speak,
Del Taco watt about it being a travel Lifestyle brand not a luggage brand right and so.
I had a chance to visit their first pop up before they open retail stores and I would have said their pop-up was brilliant I thought I was really well-executed and it perfectly matched,
that story about them being a lifestyle travel brand so the store was set up in vignettes and the vignettes pretended to be different aspirational travel destinations so you might have had like,
Lake Como in Bellagio Italy and you might have had I don’t I don’t know it just an Bull in turkey or something.

[26:33] Myrtle Beach South Carolina.

[26:34] And then obviously Myrtle Beach South Carolina for the golfers.
And yes I did have a vignette of each of those things and it was like yeah you needed a suitcase but what they’re really selling was this aspirational lifestyle of traveling and taking great vacations.
I know that Austin has very interesting bird life by the way for those that was not Scott,
so I feel like the store did a good job of creating that aspiration and kind of telling that travel story and they were almost selling the destination more than the products,
and then when they close this New York pop up and they open their permanent stores,
I feel like they’re way more water down it’s a lot more shelves with suitcases on them and it’s a lot more talkin about the,
the act of using the features in the benefits of the luggage and less about the lifestyle selling is a lot more subtle and I guess is what I’m saying that to me is mildly disappointing from.
Experiential retail price back.

[27:36] FairPoint yeah I did I get it I think they’re struggling with one of the knock knocks on these kind of show Rumi kind of places like,
when I talked to your average consumer about bonobos
they think it’s really weird you can’t go in there and buy stuff so I think away is trying to kind of say for that that person that does want to walk in and buy something it is a weird experience to say thanks for stopping by to this kiosk and will ship it to you in 3 days,
irr what not to so I do think that kind of you know that’s probably why it has that feel to to compare to what you had in the pop-up.

[28:10] Yeah I know and I I certainly am not going to argue against than having inventory in immediate gratification light,
yeah in general those are all good things I N D Dunn Mesa a reasonable argument why he doesn’t want it but there’s pros and cons but I will say that sort of highlights my key takeaway from this whole Mall,
is is.
An increasing percentage of this mall and other good malls are filled by these digitally native vertical brands that are expanding to brick-and-mortar so you know we talked about malagueta and then lots of stores closing,
you know it’s a big number right now it’s it’s over 5,000 stores that closed this year which is more than close the last year and there are.
Thousands of openings like two or three thousand but not as many as closings and the openings are all these digital native brand so I do feel like that’s the future of the mall are more of these brands that were born online and,
are now moving to Brick and Mortar but here’s my one knock on all those experiences.

[29:07] They do still feel like isolated brick-and-mortar experiences so none of those cool stores we talked about could you have started shopping online,
and resumed that that experience in-store none of them had,
digital tools that the salesperson was holding to know which size away bag you looked at online before you came in the store none of the Casper when you know employees knew whether you were a Casper,
customer or not already and what kind of relationship you had with Caspar I feel like it’s a lost opportunity,
that you know these are a lot of brands that people have discovered online and then they’re exploring further in store and I really feel like the the omni-channel experiences.
Continue to be lacking across the board.

[29:52] Yeah yes all the reason I like this mall is you know where I am it’s very vanilla in the Southeast your your malls have,
your standard Sears JCPenney Macy’s kind of an and that that’s maybe get a belts as an anchor in there so we don’t get almost any original stores at all so even Apple Stores we got like four of those,
I’m too I think Center see about it is it is one of the few places you can go and find these kinds of stores that you just can’t find anywhere else,
I’m going on vacation to New York in a couple weeks and I’m going to stop stop by Hudson yards they don’t know whatever you do don’t call them all but they’re,
the collection of stores at Hudson yard I’ve heard native New Yorkers don’t like it but I’ve heard that it’s a fun destination because a lot of really unique things there so I look forward to seeing how that compares to this mall.

[30:42] Yeah I’m going to eagerly await your trip report cuz I’m somewhat humiliated that I feel like you’re going to beat me to Hudson yard I I got to visit it before it opened but I haven’t been there since the grand opening.

[30:52] Yeah I feel as Chief strategy retail digital e-commerce officer at Publicis pretty bad that you’ve let a landlubber like me get to get to the store before you so I hope none of your bosses are listening.

[31:05] Well you know it would not be a Jason and Scott show without mocking Jason’s title and that’s probably going to be a great place to leave it because we’ve used up our a lot of time for this very first,
Jason and Scott mobile podcast I hope the wisner’s enjoyed it and would love to get some feedback if if,
ask schlepping on the podcast gear on our backs and walking through a mall in the blistering heat Scott wearing like a giant flannel jacket.

[31:34] I’m being attacked by bear loud birds.

[31:36] Baibars exactly if that’s the thing to put you over the edge really well to show we sure would appreciate that five star review.

[31:44] Thanks everyone and if you are interested in learning more you could either Google or come visit at next time you’re in Austin this location is called domain Northside that stewards domain Northside and that is by Simon Property Group.

[31:57] And so until next time happy comercing.

Apr 9, 2019

EP170 - ThredUp President Anthony Marino 

Anthony Marino (@amarino) is the President of thredUp (@thredup), the nation's leading online marketplace for women's and kids'​ like-new apparel. Over 25,000 brands, ranging from Gap to Gucci, are listed on at prices up to 90 percent off retail. 

In this interview, we cover the basic thredUp value proposition, challenges and opportunities for the re-commerce business model, the dynamics of operating a two-sided marketplace, customer acquisition, reverse logistics, and the dynamics for brands in the re-commerce space.

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

Episode 170 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

Join your 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.


[0:24] Welcome to the Jason and Scott show this episode is being recorded on Friday February 22nd 2019 live from the etail West Trade Show here in,
somewhat Sunny Palm Desert.
I'm your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott couldn't be here today so you're getting twice the Jason for half the usual cost,
Kira detail one of the big topics of conversation has been new retail Concepts that are blowing up and so we thought.
What better guess to have on the show then one of those Concepts so today we have the president of thredup,
Anthony Marino on the show welcome to the show Anthony.

[1:08] Thank you Jason great to be here.

[1:09] We are thrilled to have you long time listener that the show will know we always like to start by getting a little bit of background about the gas so I can you tell us how you you came into your role.

[1:18] Sure so I've been at thredup about 6 years.
And I came to thredup it's it is actually an interesting story I came home from work one day six seven years ago and my wife had a big green polka dot box on our kitchen table.
And that was a threat of box,
and she reached into the box Sycamore have to show you something and she reached into the box and Sheepshead of unfurled this very good-looking cashmere sweater.
And she said I bought this for a box and I was like okay and she said this is a $500 cashmere sweater and I was like.
Okay and she said and it's used and I was like what and so she then told me the thread up story where she had sent in a bunch of our kids and her clothes to thredup. Credit.
The shop on the site from sending in her stuff.
She could have cashed that money out but she kept it on thredup the shop and she bought this amazing sweater that was used a great deal and she said to me you need to go work for this company.
And then about six months later we moved to California I was renting a house in the East Bay my kids were crying cuz they missed all the friends in New York and a big adventure in an e-commerce marketplaces in retail and second hand started for me.

[2:37] Wow so decide note I'd be really focused on your wife's new interest in shopping habits if they're going to that directly affect your career.

[2:45] Yeah she's she's she's a smart smart person so I listen to her advice at least that's what I say publicly.

[2:49] I feel like we exactly we all benefit from marrying up so used to it but let's jump into the threat of story little bit like down and give us the the rundown on the value prop.

[3:03] Yeah well that the the founding story precedes me by a couple years are founder and CEO James Rinehart look into his closet and just saw a closet full of clothing that eat that he didn't want to wear,
but all the clothing was in was in fantastic shape and I think if you.
A few fast forward to today where Marie kondo is encouraging people to the spark Joy by removing things from their homes that they don't use or don't love anymore,
his inside in his closet and on that one day many years ago and in Cambridge Massachusetts turned out to be something that millions and millions of people were experiencing as if they bought a lot of things that they weren't wearing or enjoying the fact those things,
making them feel guilty or unhappy because they were taking up space and they were reminders of mistakes from purchases past and he said I want to figure out a way to,
I make it easy for people to easily get rid of these things know that they're not going to be wasting their for destroying the Earth and getting into the hands.
And and that was really the birth of thredup it was how to help people,
clean out and make amazing you so the things are no longer wearing a particular women's and kid's clothes and then provide amazing deals for the people on the other side of that equation for whom those fought those were amazing finds there are Treasures.

[4:17] That's awesome so if I like to read repeat to see if I get it right basically you're a sort of a two-sided Marketplace for Consignment so,
people that have stuff in their closet that they come to regret or in end of usefulness for them they send those to you,
you go through a process on board those keep the ones that are resellable and wisto's on a e-commerce site that consumers can then shop for
like a high-value products at meaningful prices.

[4:48] That that's right about there's about twenty-five to thirty five thousand Brands listing on thredup at any given moment there's 2 million plus items on the site.
And they're up to 70 80 90% off retail and there in like new condition so it's the things that America has in its closets are.
Beautiful but for the most part of what the vast majority are and we take those things that come to us and we we price them and attribute them and photograph and put them online so it's super easy with a person who wants to clean out,
and then for the person on the other side who wants to buy great brands at great prices is just as easy as shopping do you want any other e-commerce site.

[5:25] Awesome and I have no trouble imagine that there's a super valuable merchandise and all of our closets that we don't use I imagine not everything in our closet is super valuable and I feel like there's some
remorse about what happens to that like I'm guessing you're going to tell me you have a good story for how you disposition the stuff that maybe isn't as hell.

[5:46] Yeah where are our goal and our commitment is that you know we have a 100% reuse goal and commitment for the items we receive so there's a couple things we can do.
With items that people send to us that aren't high enough quality to be listed on our site or in one of our stores or with one of our Retail Partners so what will we can send those things back to them we can say hey,
after the animatronics app you can you can pay a little bit and shipping and will send them back to you by the way most people.
Do you know they do that only wants they that they don't want to see it come back again or like wait how'd that happen why did I do that and then there are some things that we can.
I'll distribute through our partners who can sell those at consignment stores that don't have the quality standards that we have,
some of those things can be recycled into carpets and and if you've ever gone to the car wash those those Rags that they use to dry your car off those fibers can be recycled into into other future fight future Fabrics,
and I'm so yeah that's that's how we do it.

[6:47] Got you and what are things that seems cool about your model to me.
2 fundamental problems you have with a lot of marketplace models are that you have trouble guaranteeing a service-level so I went eBay matches a buyer to a seller,
they can't necessarily guarantee how fast that sellers going to ship the goods to the buyer,
and they're also can be a trust problem the eBay can't necessarily guarantee the web the sellers selling is authentic in in the condition that the,
the seller promised it's in so you can send it to me you feel like a two-sided Marketplace except
you handle all the logistics and fulfillment so you basically can guarantee a service level and you also act as a sort of independent trust verifier that gets to see all that merchandise before the consumer buys.

[7:31] That's exactly right we are the we are the seller of record you know so we take possession of the goods we have for distribution centers throughout the us and we're increasing our volume of those,
are those items are upcycled did an incredible incredible volume I mean we will,
up until today have a vial cycled over the past couple years over 60 million items this year alone will do another 30 million so.
Yes we take possession of the goods we make sure there in like new condition we photograph them and put them on a hanger and then we can ship them in a beautiful box wrapped in tissue paper and and send them out to our buyers and they are.
Generally Blown Away by the quality of the product.

[8:10] And so does all that merchandise that you've received an unloaded within a single fulfillment center somewhere in the US or out of the Majestics work.

[8:17] It lives in in for facilities in a distributed across the u.s.
And we do all kinds of interesting things TARTA route inventory and product to different centers depending on supply and demand and how the overall market place is performing but yeah those those four facilities process all those items,
for sale online and offline.

[8:38] Got it and is everything in the Fulfillment center available for sale right now or do you try to I can almost imagine you get a lot of new merchandise from Spring cleanings and there could be a lot of fall merchandise in or winter merchandise in that
and in that stops or try to sit on any of that or how does that work.

[8:55] You mean how do I optimize for seasonality.

[8:57] That's a way more elegant way.

[8:58] So so so it's a great question because it's a really tricky math problem because think about it from from the consumer's perspective,
they don't necessarily want to go into the closet to be like is this fall is this spring is this winter all they see is too much stuff.
And they want open up a bag or open up a box and put it all in it and and move it out so.

[9:23] All of that said you know we've been at this a while and we have millions of Sellers and when a seller sends you a box of stuff there's an incredible amount of data that you know about that seller their sizes their brands.
What they're what the what the what the what brand items are moving into versus clearing out of as you get multiple bags over time so we found that there are ways.
To influence what the what the seller will put in their clean-out bag to thredup and it has a can have a significant impact so,
we are we are we work with wood sellers in a way that's this pretty light touch but the people generally want to do the right thing if they feel like,
they can put a few extra more seasonal things in a bag and maybe learn a little bit more because we'll see faster cell to run an item that's it's perfectly in season we want to share those economics and incentives with sellers we're not heavy-handed about it,
we try to use our data and what we can do on the types of people who you request bags from that helps us,
can we just want to make it as easy as possible for sellers but yes we are everyday getting more and more seasonally relevant I think it'll actually be.

[10:35] Don't forget I think if I think ahead and 6-12 months I think you'll see the the seasonal element of our site really really kick out cuz we're.
We have so many billions of data points on this now that we're actually starting to figure it out.

[10:48] That's awesome and I can come and there's this healthy tension on the one hand
you really like to sanitize that person to only send stuff to you that you know you're going to be able to sail and is highly monetizable and like frankly that's going to let you come back to that cellar with the best news hey we got you a bunch of money
I can imagine there's a subset of your sellers that like.
Appreciate the money but there's some catharsis bike again for your earlier Point their Marie kondo followers or whatever in there that you aren't a,
new better way to get everything out of my closet than the Salvation Army was last season or something like that and.
In a way you don't necessarily want to discourage those people because 10% of what they send you is going to be exactly what you want you're just going to,
after project lights out in general do you try to get people to just any of the 10% that you're going to resell or are you happy to take everything because it makes you more seller friendly.

[11:47] This is something that how we treat.
Salaries in how we think about their experience and why they they decide to order a front of clean-out bag has been.
Something that we've always wanted to be very very clear about from the beginning cuz you're exactly right do you want them to only put.
Perfect things in the bag or do you want to shove everything in there and there's real trade-offs you know them or prescriptive to get with people the more they'll be like to know what this is a little bit too hard but if you just let him do put anything in there then it then it becomes hard for us and I think what we.
Decided in general is that we want to make it really easy for consumers and let us as a as a business that is built on,
reverse Logistics and data let us figure out and become the most amazing company at figuring out how to make the best use of those goods and monetize them in a way that's great for suppliers great for our consumers and great for the environment,
so I think that has been our our our challenge you know but I think we've come a very long way and look there's always.
There's incredible benefits over the long term for making things easy for consumers and if we're the company they can figure out how to crack those problems.
Then I put you in a very powerful position to build quite a moat around that that volume the quality of the supply that customers are going to send you.

[13:07] That's awesome let's talk about that reverse logistics for just a sec because it is funny in apparel.
I've been in this industry long enough to remember when it was like oh no one will ever buy clothes online like they need to fit everything and feel everything and obviously that.
Could have been disproven but it is the case that the economics of e-commerce prepare alarm or challenged in some other categories largely because
there is such a high return rate right and you could talk to most retailers and it's like me and the return rates are tripling and those returns are so expensive though it just takes of getting that stuff back and then how that retailer.
Dispositions that can they resell it is new what do they do all of those problems most retailers would say we're not very good at it and it's a core fundamental challenge with our economic model and I'm looking you and it's like,
that's your business is convincing people
to send stuff to you so I'm curious like a view if you found a Magic Bullet like what what is the experience and how do you how do you tackle that that sticky reverse Logistics challenge.

[14:12] We found the Magic Bullet is to be extremely transparent with your customers so we love to say to our customers when they call customer service or when they write in.
That there's no such thing as free returns you're paying for it somewhere you're paying for it in the product or paying for it in your membership fee you're paying for it somewhere it will be like to see the customers is our goal was a business,
is to be able to list online.
The greatest volume of high-quality second-hand apparel at the lowest possible prices and we will be explicit with you this is what it cost for us,
to take that item if you send it back to us and put it back online whatever cost $0.50 or $0.99 whatever it is and so if you send those items back to us.

[14:58] It's going to cost you this but we also say to our customers hey if you are shopping with us and you don't seem to return a lot.
When it will never charge you a return fee if we then we bought but by equal measure will say to customers who buy 10 things and return 9,
hey we we see you but you been doing this,
we love you but you're killing us and so what we're going to do is we're going to give you a one more free V but if you keep returning 90% things you buy we're going to have to start the charge you a dollar 99 per item to restock it so,
we just want to be really upfront with people about the reality of the business and.
Is yours a good news about returns they affect everybody equally they're equally miserable for every e-commerce company so what this forces us to do is just have the best possible product you keep the core proposition
it's got to be in a bang on as far as the brands we are for the quality of the product the selection daily freshness and pricing so forgetting all that right.
Then we should be able to sustain returns if you can't then you got to figure out a different business model.

[16:03] Got it better in general it sounds like you almost have a dynamic pricing model based on customer Behavior but you're super transparent about it.

[16:11] Very transferred there's no mystery maybe call him we call you use your level return policy and.
Looking to maybe some customers who we say you know what you eat we see you're returning a lot if you want to pay 999 a month.
And you can return as much as you want then then we'll offer that to you so I think you I think we just got to think about and see where you're going to meet them where they're at and left with them about what it takes for us to stay in business if they love the product to be like you know what I get it,
it's like I don't know actually returning nine things back to you until we actually created a product called a buying bundle,
we're and we found a lot of customers were buying lots of things and they were paying shipping from you know from us to get the stuff sent to them and then returning stuff in the way back,
we gave them its ability to,
can I purchase things we didn't ship it to we have critical mass of their items on the site and then they would they would avoid the the shipping fee until there's things you can do when you understand a job your customers trying to do,
then you can start to say okay I see what you're trying to do here is what it what it looks like on our end and hear some here's some options on ways we can,
we can make it work for you and Mike brought work for us we're big fans of that we we love experimenting with things like that we think it's the way he Commerce has to work.
And yeah there's no such thing as free returns.

[17:31] So one of the fundamental challenges usually have with a two-sided marketplaces is you have to win at two things you have to convince a bunch of people to be sellers on your platform and you have to come in too much of people that want to buy goods from your platform on most resided marketplaces
the strategy is usually to be great at one of those which,
facilitates the other if you get a ton of buyers it's easier to get sellers if you get a ton of great merchandise it's easier to get buyers like in your case have you found that there's one side that you absolutely have to win at or what what is the strategy around customer acquisition.

[18:02] There are really two so that the needs and the in the complexities of the marketplace of significant they're very different on both sides and so so what start with with suppliers generally speaking.
Are our core supplier the value proposition is the clean out the closet in a really simple way and to feel good about it and so we've invested a lot of time and effort,
and delivering on that value and so suppliers come to us in droves we we do not have a difficult time attracting suppliers to thredup in one thing I think,
people are often surprised to hear about our businesses are like well okay so they come once you know when do they come back like in 2 years I'm like no they come back in like 3 months,
because they go out and they keep on things so it's not it's not as if they clean out their closet and their I'm good you know they're good like until the next season rolls around so.
So that side of the business is very viral and it drives itself.

[19:03] And for us we spent a lot of time and effort understanding at the really at the at the at the user level you know how to get the best Supply I had to get it at the right rate how to manage that with the with the overall growth and scale of our Marketplace,
on the demand side little bit different there's lots of places in the universe for people to buy inexpensive clothing.
If you are looking to buy a $8 dress you can go to Walmart if if you're looking to buy an $8 J.Crew dress little bit harder so we we've learned a couple different things on the demand side which is the,
are Brands matter customers love.

[19:40] Defined the brands they love and trust and who's quality they believe in at great prices and the fact that it's second hand is almost incidental to them,
if we can maintain the quality part of the equation that they don't even I think they actually probably forget that they're shopping second-hand I think another thing we found,
that app that that our customers love on the demand side which is a key part of the value problem I'll come back to you that your acquisition point in a second,
is they love to see new things.
Every day we have customers would love to see new things on thredup every hour and they come back that that much they're hitting refresh if they're going to their app that much because not unlike their Instagram feed,
we're all day long we're listening 60 70 80 thousand fresh items every day so if they didn't see that dvf wrap dress,
or that Banana Republic jean jacket,
that they were looking for right away if they come back in an hour at the rate which were processing Goods to our system but there's probably something there that's if not V things are looking for it's pretty darn close so that's a very
powerful part of the demand side proposition that makes it look a little bit different from being just you know hey I'm looking for a great value on clothing and I think the final thing is.
One thing about Millennials and and younger Shoppers these days is that they never want to be seen on Instagram wearing the same thing twice.

[21:01] But at the same time they they don't want to be conspicuous consumers they don't want to feel wait so about what they're doing and thredup is is an interesting solution to that problem because they can.
They can scratch their x444 wardrobe that can move at the speed of their feed,
but at the same time they can take those things put them in a bag send them back to us and feel like they're part of the solution and not part of the problem.

[21:26] That's why I make sense you you hit something in the in the course of that explanation that it just occurred to me,
another word justice problem you have that maybe more cute than a traditional retailer is your onboarding a heck of a lot of new SKU so like I'm pick and and you're not in most cases getting content from the manufacturer,
The Whispers queues so I'm picturing you up to have like,
high-volume photo studio and people riding a lot of like attributes for product listings is that.

[21:58] Yes and went when when a bag or a box of nice a box because.
You can do the way that to send items that start out as you can go to our website a request to clean out back and he's someone to you for free it's a recyclable bag about the size of a camper and a big green polka dots on it and it's,
I'm very cool or you can just print a label because we know that people have boxes from all their other e-commerce shipment sitting in the doorway of their house and we like to get up the opportunity to have a slightly smaller compact soap.

[22:27] Yes people send these stuff to us our customers suppliers send these items of clothing toss and he's bags and boxes and when they come out of a bad they don't announce themselves they don't have a barcode they don't have asked you it's literally a pile of clothing and so what we have built,
over the past several years through through tens of millions of transactions is the ability to take you know his ability to take those items and begin to attribute them their brand or size their measurements and do some of this with software and we do some of this with people,
because it's it can be hard to teach,
a computer what an acceptable level of fading is on a black shirt you know so there's only certain things that humans at least right now and can.

[23:10] Certain things are computers going to leave Divine so well so people still have to do it but yeah we've built a system where we can take all these items to come out of the bag on an ounce of with no information.
And attribute them as we attribute them those items magically transform from being stuff in a bag that was essentially
value less are worthless to the person who wanted it shipped out of their house to becoming an item that,
with every attribute that we had brand size increases in price from 51020 to $30 is now its 8 now it's a fully formed living fresh item of clothing again to someone in the universe,
and so.
That's how we do it we don't get data from anyone we we we built all those systems in house and we are able to do characterized and categorize and photograph you're right we have we we probably take more,
photographs on a on a daily or weekly basis than any retailer on the planet and that's how we do it.

[24:06] It's a going back to the customer acquisition for buyers I think of you as a digital native company you you've been around for awhile now you have six years of history and I see this,
kind of consistent progression that every new digital company launches and based on their value proposition that there's some amount of organic traffic
that they can acquire super easily and in fact there's this Pitfall in the first year you see this nice hockey stick of growth and you think it's going to keep happening for the next six years and unfortunately for most digital companies
it doesn't like they grow fast to a certain point and then they start to plateau and depending on their value prop that Plateau could be
60 million dollars in sales that could be a billion dollars in sales it almost doesn't matter but what happens after that.
It certainly requires a lot more effective marketing to acquire new customers and so I'm curious six years and I'm kind of assuming you're either at that point or you've already surpassed that point and what are you doing now to acquire customers and how's that working.

[25:07] So your ear right I mean that we've been through those Cycles I mean I remember the days of 00 those days of yore when you know spending money on Facebook or Google,
was was easy and satisfying but,
you're right you get to a certain scale and those auctions get more more competitive,
and you need to start to do two things you need to diversify,
the way in which you reach customers because on up if you're trying to build a predictable business.
Were you can where you can grow smartly quarter-over-quarter you can't just keep turning up the Facebook and Google dial and assume that the Matrix are all just going to continue to work so you've got to figure out a way to to grow efficiently by doing different things,
in addition to doing the old things better and better and then the second thing you need to do is,
and you just have to run a better business I mean if you would have that you're putting more product online or renovating,
the types of products are the types of solutions you deliver to customers based on what they're looking for or it's whether it's their margins Mansion to you you in the early days it's easy to be you know when twin growth,
is is easy it's very satisfying to investors in to employees it feels really good but as you as you get to the further down that funnel.
Need to think more holistically about the business to figure out how to grow I mean I think I think for us we feel that.

[26:36] A real change has happened you know since we started the business six years ago and how we how we think about.
Second hand clothing and resale and how frankly how the hole.
Retail of retailers are thinking about it I brand you think about the beginning our vision was hate me know we're always going to take.
The items that we that we the supplier sent to us in front of them were going to sell them on turn up., exclusively and what we started to see.

[27:03] Is that customers are saying to us look at you you know 1020 30% of my closet.
Is second hand clothing so it's 8 you note ever going to be a hundred percent but this is how I shop now I buy some things new,
I buy something second hand and I want to be able to find this product in more places it you know it's and it's sort of,
it was it was it was a very exciting part of learning for us to your customers start to say that.
Because it was clear that we had moved from oh yeah there's only this certain type of customer that buy second-hand to being actually.
Over 10% of our customers are millionaires so there's a broad range of people demographically psychographic Lee that just wants a great deal and I want Brandon it doesn't matter if they.
I need to based on their budgets or not they want to because it feels like a smart thing to do and they're saving money and they're getting the product they want so on the customer acquisition point.

[27:56] We're finding that you're so we open for of our own stores,
and we're working and running some tests with some department store is where we have stores in stores where customers are actually,
thrilled to find second-hand product that's that says that has the quality in the freshness and the brands that we have in places where they shop every day and it's it's it has the potential to drive younger Shoppers into these,
offline physical stores that want these younger Shoppers you want these Brands and want this type of experience I want this type of content and it gives you the ability for us,
2801 Des dollars in in in point of distribution that I thought that isn't just Facebook or Google or TV or instagrammer all the other well-known Performance Marketing,
channels that we love but that as we try to try to expand in a T Bar vision.
Inspiring a new generation of Shoppers to think second and first you have to be where they are and they're not exclusively on on Facebook.

[28:56] Sure and I want to drill into that brick and mortar tactic for just a second do you tend to think of those stores as a.
The separate Channel or separate p&l in that like hey I'm going to invest a certain amount of it fixed inventory that's going to sit in that one location and I'm going to measure how how much money is made off of it or,
do you think of it as a true marketing customer acquisition expense that causes you know a lot more eyeballs to become aware of thredup and then,
you know maybe buy from you across any channel down the road.

[29:27] I think over the over the long term.
You need to make the case that these are powerful marketing vehicles and that they're really accretive to your overall.
Acquisition in Gross that you need a lot of them so you know if you have for like we do it's it's still early days for us there but I think in the end you know until you have a critical mass,
you can make the case in Excel you know any of us could do that but you know any early days I think our view is that the stores have to perform.
And they have to perform on their own without having to factor in the unreasonable.
Gino synergies you know that everyone who walks by is a vis a Steno it's worth $100 CPM he does so so I think for us it's a it's a blend and it's a matter of you know the time frame.

[30:19] But I think it's pretty phenomenal if you can have your own stores,
and the stories can stand on their own financially and you can put the right product in them at the right price and draw you customers into the store and some returning customers and if customers can bring a thredup clean-out bag into the store and drop it off or pick one up.
So there's that there's a number of service functions that we can perform in that store that.
Are really accretive to the business but the early days look make make those things make those things work,
and then I think yes overtime I didn't mind he would be then you could start to lean into out what and what an amazing Symphony you have between your online marketing spending your and your retail visibility.

[31:00] Yeah that makes total sense that just triggered a follow-up question are you.
Like you have any Partnerships around drop off locations like I could imagine,
you know like we were coming or places like that where you you could imagine hey there's a bunch of Millennials that are working here let's make it super convenient for them and drop off his back.

[31:20] Yes State stay tuned so those are things that are that work we're getting a lot of inbound interest from Brands and retailers where they want to work with us to essentially.
Sanda a threat of turku branded thredup and we're doing this with Reformation now where where you can wear their customers can get their hands on a Reformation clean out bag and then Reformation customers can put,
a bunch of the clothing they're not wearing from their closets in that bag that bad comes to us but then the customer gets shopping dollars to shop on Reformation.
So what's up so it's a really really nice way,
to make a Reformation front of mind for customers when they're cleaning out the closets and then they're not only front of my man customers are cleaning out their closet thredup has been putting Reformation dollars into the customer's pocket to go and spend the Reformation so it's a,
it's a really powerful way for a retailer brand to get rate right up front and center when a customer is empty no shelves in their closet and you know the next thing they're going to do is,
stack them up again with new things.

[32:20] Yeah I said that's interesting cuz you can imagine the first time a retailer sees the thredup,
e-commerce site it could be competitive in it feel like that's a clever pet pivot to make them you feel like any incremental partner instead of a direct competitor,
how did the brand feel about you I do they hate the fact that you're you're you have ads on the internet for their stuff at a lower price point than they like or do they like that it makes their customers feel better.

[32:46] It's it's it's evolved dramatically so when when we got going on this when I started at thredup.
18 on the early day 6 years ago.

[32:57] Retailers Workwear little bit puzzled and and you know they didn't they didn't pass their brand didn't pay it much mind because where we know where we were teeny and I think with the change that's happened.
Is that these brands have seen that this is going on anyway so if you go to Facebook and you go to a a Facebook buy sell trade group and you can find.
1500 moms in Wisconsin who all they do is trade Children's Place dresses
you can find thousands and thousands of those you could go to eBay you could type in pick your favorite brand you'll see tens of thousands of items they can come to thredup and you'll see tens of thousands of items so the,
their resale economy is happening and it's growing it's growing faster than retail in a couple weeks we're going to.
Release our annual resale report what we put in all the stats around how the industry changing and I'm so we can I can send that to you.
So the point is it's happening in the difference between the early days when retailers and Brands were like huh and now is that the retailers are brands are starting to come to us and say okay.
It's happening is there a way we can work with thredup to participate and.
It's a win-win and I'll go back to the Reformation partnership we have where.
They they they put a clean-out bag in their customers hands or they getting their customer can print out a label.

[34:24] They clean out the closet and they get credit the shop so it's great for us because we get terrific Supply from those Reformation customers it's great for for RAF because they get Revenue what we're finding is that.
If a customer gets $100 from their their bag that they sent to thredup they spend far more on reformation and that hundred dollars right they they they think of that hundred they got for the clothing they didn't they were no longer wearing is almost free money.
So and then it's great it's great for the customer because they the cleaned-out closet they feel like they're interacting with Brands who are doing the right thing so it's it's a it's a win-win-win and.
We expect over the next two five ten years to see hundreds and Brands doing this many retailers doing this because consumers are saying second hands are part of my life.
It went and Marie kondo has been a great push to remind people that hey you don't have to buy something and hold onto it forever you're not buying it for ownership you're really buying it.
For use and I'm in so we we think we're one part of that story and we think we think smart retailers and brands are going to want to be part of it too.

[35:27] Interesting so it's funny I have the saying that a lot of readers don't love hearing but my premise is,
but it's getting harder and harder to make a living selling other people's stuff and I would argue in a way that you're more insulated than most from that because.
Well you're selling other brands products the version of that you're selling I would argue is partly is yours at that point because it's no longer,
you know once you that a manufacturer made 30,000 of it's a unique skill of one task you have one with a unique value proposition and a bunch of unique attributes.
But that aside the way this plays out in general is most of the big retailers that used to be 90% wholesale,
are increasingly making their own product and leveraging their customer intimacy to make products that the manufacturer didn't see until like 8,
apparel space I think of like a cat and Jack from Target is being a phenomenal success
probably super early days but I read that you guys are starting to use some of the data you have from your customer base to venture into product manufacturing as well is that do I have that right.

[36:36] You do we we we tested something and we continue to test it called remade and it's essentially a its new product.

[36:46] I think you can buy on thredup app but it comes with essentially a buyback guarantee so you you purchase it on thredup.
And we say look if you were trying to toss in good shape will give you 40% of your money back.
And so you may wonder why did we why don't we make new stuff if if second-hand is.
Is our bread and butter and I think what we wanted to understand and we're still understanding it is is there a group of customers out there their segment of consumers who were like hey I like I like this whole second hand thing.
And and I and I and I need to to buy something you but.
I get it is this an easy way for me to try it out you know can I buy something new that comes with this buyback guarantee.
And it said if I can Ava way to onboard a new type of customer who may not otherwise want to just come to the site and buy something,
they may want to buy it new and then so and I think it's it's been pretty remarkable to see how we can use the data we have on what selling what's trending,
and then come up with you know I A A handful of items and it's not really a line there's a wrap dress in there and there's a floral top and there's some there's some pretty specific.
Items can we can we take that data create the right things and then attract a customer who otherwise may not have purchased on thredup.

[38:10] And I think we're still evolving it and we're still learning but you're right the whole move towards private label is massive amongst retail and for us we're just trying to get as many people thinking.
Second hand first and we're always experimenting with new ways to do that.

[38:28] That's interesting I haven't thought about that as a sort of trial customer acquisition tactic that's clever and I also,
there's a few brands that are like using customer data to invent products and I think I have a stitch fix is an example of a company that lets weaning into that.
So when I read that you're doing it on like oh yeah that's cover they're selling some stuff they know the address to the stuff they're selling they see what the browsing behavior is they can leverage that data to make some products,
during our conversation that occurred to me you actually have a ton more data about those Sellers and like.
Everything that's in their closet and what they kept and so it is interesting it's a pretty,
potentially valuable data set in the long-run so I'll be looking forward to seeing how that all plays out I want to wrap up with one question cuz we're running time on time,
we are here to Big e-commerce show and you you were talking on a panel about the next big things and Retail Concepts that are taking off
do you have a sort of view for the future if we come back to the show and five years like what is that you Commerce industrie going to look like then.

[39:31] I think what we'll see at least it as far as the the thredup growth plan and the trajectory we're on is I just think you'll see amazing second hand Prada.
Everywhere you'll see it in more places you'll see it across more brand you'll see a more integrated into the ecosystem I also I also think you'll see more rental product I think you'll see.

[39:54] Packages are our poor offerings like Stitch fix you don't continue to like where your way into America's closet so I think.
If you think of the closet of the future which we do a lot and if in the past that was up there was a massive chunk for department stores and then a bunch of little specialty stores I think those chunks the Departments are junk is shrinking a lot.
And off price has grown a lot TJ Maxx and Ross another to give brands at great prices and daily prices and then I think you'll see folks like us,
who do resale you'll see folks who do rental you'll see I think you'll see all these different modalities or shopping start to expand their share of that closet,
and like our hope and our mission is that it should be great for consumers it should be great for the environment,
we're a very mission-driven company and where we never forget the fact that the clothing industry is second only to the petroleum industry and being a polluter,
and sell it we we we we love at least the idea that we can try to be on the right side of history on this and the more of those brands in those concept expand their way into closets to make.
To make us all live a little bit better as it could be a very satisfying world to be in.

[41:07] That is awesome and that's going to be a great place to leave it because it's happen again we've used up all our a lot of time as always a folks have questions for Anthony or want to keep the conversation going and could you to jump on her,
page and we'll be happy to respond to you there if you enjoy the show this is a great time to jump on the iTunes and give us that five star review,
but Anthony of Whispers want to reach out to you or get involved in thredup in some way like what's the best way to reach you guys social media or LinkedIn.

[41:35] But yeah we're in all those places on on Facebook or on Twitter or on on social on LinkedIn yet reach out with we'd love to hear from you.

[41:44] Awesome we'll put some of the songs in the show notes and thanks very much for your time Anthony was real pleasure to chat with you.

[41:49] Great Juicy J.

[41:50] Until next time happy commercing.

Apr 4, 2019

EP169 - GGV Capital Principal Robin Li 

Robin Li is a principal at GVV Capital, a global venture capital firm that focuses on seed-to-growth stage investments across Consumer/New Retail, Social/Digital & Internet, Enterprise/Cloud and Frontier Tech sectors. The firm was founded in 2000 and manages $6.2 billion in capital across 13 funds. Past and present portfolio companies include Affirm, Airbnb, Alibaba,  Peloton, Poshmark, Slack, Square, Wish, and many others.

In this interview, we cover a wide range of topics around the hot trends in retail and consumer in North America, and we deep dive in what’s going on with retail, social and e-commerce in China well.

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

Episode 169 of the Jason & Scot show was recorded on Wednesday, February 20, 2019 from the eTail West tradeshow in Palm Desert, CA.

Join your 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.


[0:24] Welcome to the Jason and Scott show this episode is being recorded on Wednesday February 20th 2019 live from the etail West Trade Show here in relatively Sunny Palm Desert,
I'm your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott couldn't be here for this show so we'll have to try to Soldier on without him.

[0:46] His longtime listeners will know two of the most common questions we get on the Jason and Scott show are what are the hottest Trends in
consumer retail companies and what's going on with retail social and e-commerce in China so we're really excited to have on the show one of only a handful of people that can answer both of those questions
please welcome to this week's show Robin Lee Robbins a principal at ggv Capital welcome to the show Robin.

[1:12] Thank you so much for happy having me.

[1:14] We are thrilled to have you running really like to start the show by running a little bit about the background of our guests can you tell us a little bit about how you came to the PC World.

[1:25] Yeah sure so before I was Adventure I was actually an educator so I spent three years and Teach for America teaching special education at Middle School pretty much all subjects,
then I went on to go into business school I really didn't have a hundred percent Clear Vision of what I wanted to do,
but I did a lot of volunteer work in the local Chicago Community especially at startup accelerators and Teach for America is entrepreneur program which is why I really learned a lot more around,
answer when I was in business business school I took a chance and apply to this job opportunity to intern at shemane which turned out to be a top PC found in China,
and I actually never lived in China I was born in Hong Kong but I was like hey this is awesome and I'm very curious to learn so I ended up.
Applying and that's up to me and that's where I'm at hahnstown managing partner now at UCB Capital little that I know.
He was actually on the Forbes Midas list as one of the top PCS in the entire world and so after meeting Hans might not work really crew he's an amazing mentor,
I was briefly have Flex has a venture capitalist but then after I finished business school I returned ggv capital and I've been here since ever since it's been almost five years.

[2:37] That's awesome so you are basically followed like Jack Ma's career trajectory sort of starting as a teacher and then going on a diamond 80.

[2:44] He is definitely my role model.

[2:45] I think he's a lot of my real mom so that is awesome and I love the Chicago connection I'm also a chicagoan and until recently I I work right next to 1871 everyday so.

[2:57] Well and that is what I want to do.

[2:59] Yeah perfect so you probably walked by my office at razorfish all the time.
Back in the day so let's dig into ggv just a little bit can you tell us a little bit about the firm.

[3:11] Of course I'm ggv capital is 6.2 billion dollar of global Venture Capital firm I mean Bastin entrepreneurs globally in the US and Asia and other emerging economies,
it's always actually been doing this for the past 18 years we have offices across Silicon Valley which is Menlo Park in San Francisco,
we have Beijing Shanghai most recently Singapore and I am based in New York as a team we live by a few Simple Rules great impact the local and then global.
So in terms of stages we're actually stage agnostic and so we can do anything from investing in a c Stage Company to very late Stage pre-ipo Company so that means we can buy checks as small as a hundred K to 11:50 million dollars,
I would say that we are very sector-specific we focus on four main particles consumer internet and Arbonne Tech which is what I cover,
Enterprise SAS and detect and so we.
Adventure capitalist we are believers behind the Billy verse we look for a very globally-minded entrepreneurs and Founders that are changing the world that we live in.

[4:16] That's awesome and you were smart enough to pick the best of the sectors that GB covers to sew.

[4:21] That is very exciting and very relatable.

[4:23] I like it and I know it's a famous whistle I already know the answer to the question I'm going to ask but can you share a couple of the companies that you guys either LED or been involved with.

[4:36] Yeah of course in so I mean given that we already tell whether I'm going to focus on some of our e-commerce before you we love and nothing in the sector and e-commerce ecosystem and so we're actually early investors in Alibaba back in 2003,
which really helped to shape our Global Commerce strategy,
and if you ask me back a lot of companies in Market places such as wish house Poshmark offer up,
do even direct to Consumer Brands like Peloton Lively when key locks function of beauty and even each other's like boxed wholesale and yammy buy and sell.
We invest a lot in e-commerce enablers and so you could think of these as,
Payment Solutions such a square and a firm to Bigcommerce to power a lot of the merchant shop.

[5:22] That is totally awesome and congratulations on all that success I'm going to assume there were some that weren't as successful that we didn't answer.

[5:34] Thank you we try.

[5:36] Yeah and I hope we will get a chance to dive into a few of those but you were here in detail West to talk about a pant to participate in a panel about what's hot in,
internet in retail so I want to steal all the Thunder from that panel what what are some of the things that you're you're singing excited about.

[5:57] So in terms of what we're excited about we we look a lot into these e-commerce enabler is an ecosystem partners,
and so for us we could we could be in a box brands and at Marketplace is and what not but we we do see that there's been an emerging Global trend,
and so whether it's next-gen retail
across the world or enabling Global Commerce Solutions weather on the payment side or actually on the cross-border shipping Logistics I that's something that we're diving deep into.

[6:28] And it is interesting cuz you guys have a big International footprint and obviously a lot of successful North American brands as well.
And you're one of the three conversations we have here is.
Like us there things that seem like they're wildly successful for like particular in China like social commerce Arch at Commerce or different things that we.
Maybe haven't quite gotten his quick adoption in the US when you take a global investment strategy I could imagine that's even harder because you're investing in a company that may excel in one market and and.
I have a more difficult time getting Traction in the in some other mark.

[7:09] Yeah that's right I'm but we actually looked at both markets for a lot of inspiration I mean,
you know before China Look to You a signed copy. A lot of the models they're right but now the US looks to China and so we actually take a lot of lessons learned and help each size scale,
we also see this happen a lot in Emerging Markets which actually look very similar to China on so we recently made some investments in Latin America as well as Southeast Asia.

[7:37] Nice.
I sometimes have an iPod hypothesis that there are experiences and consumer value products that get launched in China sooner.
Eventually get Traction in the Uso it's white and sometimes sometimes I feel like you can use China as a little bit of a time machine sometime to predict things that may may come to pass year if you like are you able to do that at all or.

[8:04] Yeah for sure and so we we see a lot of Trends in China particularly because China have leapfrogged and many different Industries and so you could say you know what,
China has LeapFrog in the mobile side of leapfrogging a payment side and so that's really exciting for us to take a while to look into and next-generation Retail from offline to all mine is a,
very fake friend in China that we take a lot of inspiration from.

[8:32] Yeah for sure and it's like.
The thing that comes up by for me obviously there's great Mobile payment Solutions in China and I feel like that's a foundational thing that enables a bunch of great customer experience as they are,
in people go ho maybe American consumers don't want to do social commerce or something like that and my premises that they probably do we just don't have the great Universal.
Digital wallets to enable those transactions like we like they do in China and so in my mind,
we may see more of those does Asian experiences come here once some of the enabling foundational things like like mobile payments are in place.

[9:13] Yeah actually you know Instagram has doing a lot of these interesting selling features and it hides a lot into social commerce in the lessons that we see,
I in China and so this has been like a huge area and opportunity for us and we started investing in this in this a couple years back,
we made an investment call Little Red Book or red for sure,
it was founded in late 2013 now it's growing to about a hundred sixty million users in China and is the number one lifestyle sharing community in China,
and if you want to think about read it a try to like an Instagram memes Pinterest me to Amazon,
nothing is that users there are on the platform are young predominantly female Urban I'm very trendy and so they not work with each other through a lot of this content on the platform.

[10:01] And so we see this as,
a chance that are in China right and they shape a lot of the Next Generation consumption behaviors and what we call like social commerce and so what they do is they buy something whether it's in China or overseas come back post about it,
how do you know if your show off to your friends but also collect items right and see what's trending in a which category and so,
I'm making a career trip next week I want to know what's the best selling beauty products,
what are the top snacks in Japan that I should bring home and so they actually have about a hundred thousand years are generated content post per day amassing billions,
Impressions I so given that they know a shiny at any given time,
they actually can Source by while I'm building Marketplace and this is exactly what they've done so they now have this incredible e-commerce business and a Marketplace on that platform,
how to cut a tire back to the us a few months ago they even started helping Brands like kkw Kim Kardashian's Beauty brand launch in China.
And so we definitely see that you don't answer damn is definitely Berry global,
and are starting to take a lot of lessons and enables social commerce to work and I'm very excited to see what what what.

[11:15] That for sure in so going back earlier Point could you see that becoming popular in the US as well like,
obviously you know you mentioned the Instagram's new shopping features I feel like a lot of their predecessors have tried shopping features and didn't get good adoption until you could go.
You know poo poo that but you against your for your point you got to China and like man the level of Engagement with,
the social Platforms in WeChat and pick a dude in red and all these platforms you go man if if so many consumers are doing that there it's hard to imagine that they don't want to do that here as well.

[11:51] Yeah I definitely think that you know if anyone can make it work it's probably going to be Instagram I think it's a little too late for for Pinterest to make that type of pivot but,
yeah I definitely think that especially with Logistics getting easier or payments becoming faster and I'm working at 4.
Consumers estate it's definitely possible.

[12:12] A bunch of the companies in your portfolio are direct to Consumer Brands and we've been spending a ton of time talking about sort of the evolution of the market and it's interesting.
I frequently point out to my like water just have us retail clients that there.
They're really only has been one new wholesaler launched in the last 10 years and nobody can name them by the way they're your company it's boxed but in general like all the new companies aren't.
Traditional wholesale retailers there direct to Consumer brands that make their own stuff.
The challenge has been it seems like they all get to some threshold level of sales and then like seemingly plateau and so you know once you hit that plateau.
We see them sell themselves to bigger establish brands or making huge investments in customer acquisition that maybe,
seem crazy and unsustainable and I'm thinking about Jad or blue apron or some of those those bad examples examples.
Or they start to look at other channels to grow like partnering with traditional wholesale retailers are opening their own stores are those kinds of things is is that just growing pains of the Sea Market and are you confident that these Adidas e companies.
Are are going to be able to like hit the kind of scales that give you a good return on investment or is that a challenge in that space.

[13:40] Yeah I mean that as you can imagine this is a Hot Topic Mojave sees the decency and Landscape is changing faster than ever and I think that.
What we seen is that there's just been honest and amazing increasing amount of new players launching pretty much every day
I want these Innovative strategies that can reach customers that have never been,
been able to be done before writing and in the US and this has really been powered by Facebook and Instagram has made it possible it and in China like you said it's really WeChat WeChat mini programs right,
just to give some perspective we've now seen 820,000 merchants on Shopify alone that sell pretty much decency.
Most of which aren't even venture-backed but have built huge businesses,
Amazon has 136 private label Brands and Amazon's pretty much start to Consumer and these are what to taking over what traditional.
Department stores and grocery stores have done 383 exclusive Ranch House on the Amazon platform alone and I think that
you know if he's he's going to play in the space I think we have to take a look at hey
it's been so easy to start these Brands what is it that I can really distinguish up from the other is it a very unique supply chain we look for a Founder that has an incredible story ambition and and something that can give them a very tough and competitive.
Definitely somebody who wants to go global.

[15:08] Because I think today if you only create a brand just for certain group of audience you actually missing out on billions of other smartphone users around the world and we're very bullish on cross-border e-commerce.

[15:19] Yeah and that that feels like another interesting evolution of me is like you go back in time traditionally brick-and-mortar retail has not.
Expanded geographically very well like there's a few examples but like you look at some of the most successful retailers in the world and they kill it in their home market and they really struggle to get.
Global adoption in other markets in this this new DLC model.
You know seems like it thrives globally and jumps borders much much easier in with lower risk frankly.
Without all those costs I'mma start a big believer in the DTC Market to talk a lot about how like I feel like the future is.
You know one or more big aggregator marketplaces in every market and then every other retailer will essentially be d2c and the.
All those retailers in the middle that are mainly trying to sell other people's stuff are the ones that are most at risk and what's interesting is people. We've met so you think Walmart and Target are going away because they're wholesalers.
And what's interesting is there.
They're becoming DTC companies too and you look at Target in Hugo man they've launched five new brands like things I can and Jack.
Are selling two billion dollars a year in some ways those are the most successful new consumer brands that have been launched in the mark.

[16:40] I mean Walmart and Target have always had private label right and it's only been kind of resurfaced lately and I would packaged in a different way.

[16:48] Yeah and I think I think the difference is now they're treating it like a brand instead of a.
A cheaper value proposition to a national thing they're putting marketing behind it and said to me that.
A hugely interesting trend is like Kroger has this wildly successful private label brand called Simple Truth.
They're selling simple truth on tmall in China by Kroger is in a retailer in China.
And I feel like that that's an interesting Trend that you guys are sort of on the,
the right side of it the moment Scott would be very angry at me and I didn't ask about on demand Services as you may know he he's started up another one of those as we speak.
So he's obviously bullish that is that like you see a good future for the on-demand type Services as well.

[17:37] Oh yeah this is a segment that we love to invest in especially because it is a crossover between both e-commerce and orbitec and so you know we we actually started to see this take off and then you ask me for China,
but what China is done is another Emerging Markets is is that it's taken off because it's driven off by them by micro Mobility I saw when you look at on demand services in the US you can always remember.
All the different silos that is touch like GrubHub doordash ubereats really just go after food.

[18:10] And then you have instacart going at the grocery and your Postmates going on these various goods and,
and then you have some very select on demand for massages or what not.
But I think that you know that the issue or kind of the challenges that this can provide is that.
You have to acquire users again and again and it say it gets really expensive and maintaining even operational fleets on your own is something that requires a lot of capital and it's very very intense of an illusion all four,
Founders as of what we've seen in China emerge I need mega platforms are so-called super apps so very sample maid swan.

[18:50] It's a rising super app in China it's kind of like an Amazon for services,
that's all you have fresh. Reviews Yelp delivery local Services booking,
movie tickets groceries even you can't even book travel and vacations on there and let alone ride-hailing and I'm bike sharing is so it's pretty much everything,
and they leverage the micro Mobility solutions that they have to power all the deliveries and every category that you can find an you know that actually last year they are. And it's now 40 billion dollar market cap company,
we actually,
take this lesson from China we don't think that is exactly representative what can happen in the us but we see it in happening in Emerging Markets like southeast Asia and in Latin America particularly Brazil Mexico and what not and so.

[19:40] Even the new Emerging Markets are improving upon that model which is so exciting and they're adding like Payment Solutions on top of it,
and so we are very bullish on On Demand.

[19:51] Very cool and then the other one,
has a lot of Buzz lately is that last Mile and like new innovative solutions for retailers and Brands to do the delivery is that a space that you think also has legs or is that played like.

[20:06] Yeah I I think it's still very much TV.
Does does a retail Outsource a ride or do you do it in-house I think Walmart has try to do it in-house where they they make their own employees going to take something home along the way but obviously house callable but you know
you know I should you be wavy we've invested in a lot of these last-mile Solutions and so you you don't like
Didi in China hello bike which is number one bike sharing in China in from just having,
you know on your own the Lorraine on your own kind of using the service as a as a bike sharing but actually
leveraging get to become the delivery and that becoming a vehicle right we have five in Southeast Asia with lime and that you asked for scooter sharing bike sharing and even yellow who now recently merged with rain to become grow in Latin America.

[20:59] Yeah it I mean obviously the direct the home delivery gets like a lot of the buzz and that's what people think about in last-mile you early on you a little to the Soto experience are you out of working grocery space and I I really feel like.
Pick up is going to be the high volume last Last Mile there and you you will get you know things like I think they just change their name at what used to be all about him and now I think it's.
Blue hippo maybe is that.

[21:27] That's just the English translation.

[21:29] Titian but yeah I know but it feels like they've officially shifted to the English like I think they're putting hippo on the side.

[21:37] Actually seen them I recently had enough and the Big Show.

[21:41] Yeah which is interesting that they're exhibiting at us trade shows I think the US retailers are having a lot of success with that to like Walmart with online grocery pick-up and,
and that is interesting that feels like there's even a bunch of new startups in The Last Mile space that are focusing on helping retailers with that.
Pick up experience as well so that's going to be interesting when we get asked about a lot is voice comers what is that like a fat or do you think Boy Scout.
A big opportunity.

[22:13] I think it's still a little bit too early to tell me and you have these huge numbers around 86 million units shipped worldwide last year and and 60 million households around the world have these devices but you're acting like,
literally consumer consumption Behavior to change and like how do you actually educate a customer to do that and having,
having even enough accountant and Payment Solutions and stuff like that enabled and I think it's still a few years away.

[22:42] Yeah.
I think their categories where it could really work but I'm not sure people are going to order things with a lot of complicated attributes in Brands specific language for the first time the invoice Commerce.

[22:57] People are so sensitive right everybody wants a good deal.

[23:00] Yeah for sure that's always at the top of the decision tree no matter what else happens is.
I always always is a big factor so we talked a little bit about some of the successes and unique companies in China but like are there any Big Mac Road friends that you're saying in China that that wasn't should know about.

[23:19] Yeah I think,
you know we talked a lot about the continuity of social commerce right the influential live streaming as is huge industry and producing a lot of e-commerce growth in China and so that will actually you know Legion,
maybe 4 billion in Revenue this year and just sit with influencers live streaming to almost like 450 million viewers,
which of the lot at 9 so I think that that's really exciting to watch you still haven't seen that take off here yet,
new search engines are in China and so instead of like the Google in the by do,
a model by you people are actually now searching directly on the super apps and WeChat mini programs and so instead of starting off I'm just,
figuring out what you want you're actually inside a platform that your messaging or your transaction or transacting already and spending a lot of your time.
Alaska think you know Chinese platforms are starting to go Global we just talked about Alibaba all right,
but that's how much does one part of what they have in you have fight dance in Tik Tok and,
some of these digital platforms are just just massive and then lastly alipay and WeChat pay will continue to expand across borders.

[24:30] Yeah it's funny when I get a tourist destination now it feels like the one that's had the most Traction in the u.s. is Ali pay for Chinese tourist so like you can use all your pay that to pay for your taxi in Las Vegas now all right like beginning makes perfect sense.

[24:44] Oh yeah I think that you know you definitely see Ali Baba and other players,
really focusing on the China outbound market right it is a very valuable demographic you have only pay has 600 million active users in China they have you know,
but they have a lot of focus on these outbound outbound Travelers last year there was about 130 million outbound trips just out of town all alone and so 25% of that was actually to North America,
and so in order to service them who kind of,
use alipay at home every day and they're spending like $4,005 in dollars per trip abroad how could you not.
You know Market to that consumer base and so I think that you know that's definitely something that you'll see more and more of in terms of Partnerships around the world.

[25:36] Yeah I know that makes perfect sense we talked a little bit about Alibaba one thing I'm curious about is.
Is China a winner-take-all model like it feels like Alibaba is so huge and is,
doing so well and everything in all their categories and obviously we chat seems like they're huge and yet there are still new Mega platforms it's seemed like they emerge and it seems like they're getting traction like that.

[26:00] Yeah and I think our accounts you just the percentage of
e-commerce as a percentage of retail Ryan and sell in the US has 10% and in China that's what money per side so it's still a lot of room to grow
that said Ali Baba still accounts for 60 to 70% of that market and in terms of volume and so I think that they are incredibly smart and very strategic,
so instead of just looking at you know influence our side and partnering with red.for example on fasting and in these cases they actually have time now which is it is amazing with just a,
not working very efficient wealth domestically and operationally international as well,
I am so impressed by that platform at this this Consortium just to get some background.

[26:48] Play Alibaba committed to the smart China Logistics Network to provide had a 24-hour delivery of any product anywhere in China.
And I actually spent about 43 billion dollars she just even kick start this project and so they,
they want to do this in terms of like shipping domestically in China and even 72 hours globally,
I am so as taobao in China has transformed in entire generation shopping Behavior I think that time now from Alibaba can actually transform the traditional Logistics ecosystem,
and so they have this incredible brain behind data intelligence domestic fulfillment cross-border Network,
Urban Last Mile and even tapping into the rural Villages of China which tons of opportunity may think we we care a lot about you know Beijing and Shanghai all the time but you know the real opportunity in I'm just dumb,
the bulk of the people are actually living in your 2 tier 3 tier 4 City and so.
I think that like it's it's very smart that you know Alibaba is investing heavily in the logistic space,
I'm just as Amazon is doing so here in the US and globally as well.

[27:58] That's funny I I've been any Commerce long enough to remember when people used to think e-commerce was going to be a capital light like the numbers that they're throwing out in terms of infrastructure Investments are like hard to get your brain around.

[28:12] Oh yeah and I mean I think that you know when you think about shipping that's a necessary necessity for any reason we are a merchant not just shipping to the consumer but even like,
how do you handle returns I had an end kind of how do you make a faster but also more cost-effective and I think that sucker is still.
Still early,
Amazon is as pushing the envelope right into the bar is that a higher and higher for the customer everyday and so you actually see we see this a lot of startups popping up
in very specific Niche Solutions right or just one product Solutions hey shipping labels
or where how they ignore talk stores are handling returns and I think that it's definitely a very promising and as Avicii where it were looking a lot into the space cuz I think the last few years,
we talked about TTC it's a lot of investment and how do you how do you prove to find an experience and now you know,
baby toddlers And and companies are really investing into retail automation back and how do you improve the inefficient sees that you have and that's something that they're learning a lot from overseas as well because China really leads and logistic.

[29:23] For sure and it you know you mentioned the reverse Logistics that feels like.
There's so much room still to improve that and it's so important for the economic the unit economics by.
In us the apparel industry you know he's usually moving e-commerce but returns are like an enormous piece and cost of that thing that seems like it's not sustainable.

[29:45] Oh yeah and a lot of times you could be even 40 to 70% are recharged much higher than what you would see offline.

[29:52] So you can imagine there's some small vendor here that you and I haven't met yet that is figured out at help mitigate that returns problem for retailers and that could be a great,
Great Neck story for for growth and then e-commerce face.
So I know we're running out of time I'd love to get your perspective about where you think all this is going like you know if we jump in that time machine and go forward 5 or 10 years how do you see the the markets of.

[30:18] What I definitely look alive for to Global platforms I'm being with a shop a very easily all across the world,
what no matter where you are in the US and China what not then second and is I look a lot into a eye and intelligence,
so how do you make a more efficient last waste Mendes trickles into other categories not just an apparel or Commerce right but you have,
you know from anybody from univ restaurants to coffee shops and and whatnot and lastly.
Sustainability and kind of CSR right and I think that,
you know what I shop a lot on mind mapping Chopper have a box that coming almost every day but it appeases me to think about how many trees that like I'm actually cutting down and and even though we recycle,
how much of that really gets reused a memory package and it's a really looking forward to somebody solving the sustainability problem for sure.

[31:18] Got no I got those are going to be interesting I'm looking for to find them as well and that's going to be a great place to leave it because it's happen again we've used up all our allotted time,
as always if folks have a comment or question feel free to jump on Facebook and will,
continue the dialogue there if you enjoyed this episode we love that five star review on iTunes but Robin if listeners want to learn more about ggv or they've got the next grade,
Innovation and I need your help finding it like what's the best way to get in touch with you.

[31:48] Find me a LinkedIn I leave my email there and you can message me at anytime.

[31:53] That's awesome we will put that in the show note so no need to try to write it down while you're driving or anything with that Robin is it's been a real pleasure to chat with you and thanks very much for being on the show.

[32:04] Thank you it was a lot of fun.

[32:05] Until next time happy commercing.