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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Dec 8, 2020

EP249 - Holiday shipping data from ShipBob 

Casey Armstrong (@CaseyA) is CMO at ShipBob, a third party logistics provider that offers e-commerce fulfillment for thousands of brands. They are able to see the carrier shipping performance for all those clients and provide aggregate data that gives us insight into holiday shipping performance, also known as #shipageddon.

Episode 249 of the Jason & Scot show was recorded live on Monday, December 7th, 2020.

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


[0:24] Welcome to the Jason and Scot show this is episode 249 being recorded on Monday December 7th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:38] Hey Jason and welcome back Jason Scott show listeners.
Jason we are officially a week past Cyber Monday and reports of ship Augustine are pouring into the Jason and Scot show virtual mailbox our interns are working full time parsing through everything.
So we appreciate everyone feeling this in ship again is also picking up a lot of momentum with the Main Street Press we’ve seen Wall Street Journal Bloomberg New York Times,
women’s wear daily your favorite Jason payments and one of my personal favorites supply and demand chain executive magazine.
I’m going to put that one on the mantle so so a lot going on there and the Press,
sort of capture all these resources we’ve published a little document that kind of highlights all the different hits if you will that ship again is getting you can find that at Jason,
or Link in the show notes.
So today’s show we are going to get a strategic update on ship again and we are excited to have the CMO the chief marketing officer of shipbob Casey Armstrong on the show Welcome Casey.

[1:45] Hey guys thank you for having me.

[1:48] Oh my gosh Casey we are really grateful it’s super early in the morning where you are well we’re recording this so we appreciate that and if I’m not mistaken I think I hear the sounds of data being calculated behind you.

[2:02] It’s crunching in the background you know in the closets.

[2:06] I love it that’s what we call a teaser because we’re not going to get to what that is just yet but as longtime listeners of the show we’ll know we always like to start by getting a little bit of background about our guests and have a kind of
came to this awesome Commerce space so could you tell us a little bit about your background and how you came to shipbob.

[2:24] Yeah so I’m the CMOS you said over at shipbob
before shipbob I was actually the VP of marketing over at Bigcommerce who I’m sure your listeners are very familiar with and before that I helped run a company called watch master,
where we were a luxury watch brand primarily sold over in Europe and I’d say I’d say there is what really cemented,
my views of the pain of logistics and inventory management we were really good at we grew very quickly we got the tens of millions within our first year,
so we did a lot of things well shipping Logistics.
And inventory management were things that we didn’t necessarily do well and when your average order values you know five or six thousand Euros,
you need to do that while in so again really shed a light on that the Pains of logistics and was one of the many Catalyst to get me over to shipbob.

[3:21] Speaking of shipbob let’s dig into that so first of all explain to folks I think Jason I have a pretty good handle on what shipbob is but who’s this Bob guy and what is he ship.

[3:32] The bad guys remember when I was checking out ship I’m like who put that’s a pretty funny name over there,
um and actually if you hit any of our 404 pages to get really nerdy they it’s a nice play on Bob I should wear my Bob shirt right now so shipbob we bring you know Amazon level shipping and Logistics to,
small business you know e-commerce Brands we have 12 fulfillment centers around the world including one in Canada and one in Europe,
we can get into later the importance of having this this network of fulfillment centers and distributed inventory of helpful but long story short
it’s always nice to be closer to the end consumer because it’s faster for you it’s faster for them and it’s cheaper cheaper for both parties as well,
we’ll open up another three to five in q1 of next year as well.
We help support about 4,000 customers today and will ship well over 10 million orders this year.

[4:31] Colton the numb tell us what what’s your typical client you know Jason I spend a ton of time talking about digitally native vertical Brands direct to Consumer Brands so I imagine that’s a pretty good slice of what you do but
yep maybe there’s retailers maybe there’s other folks I haven’t thought about in there.

[4:46] Our focus is definitely direct-to-consumer and I think that’s that’s put us in a great position
as our company has a standalone company today and it’s also what’s really helped put our customers in a great position to you know navigate covid in 2020 and so it’s definitely a direct-to-consumer we are,
platform and channel agnostic so we have people selling across you know the shopify’s and Bigcommerce has and wix’s of the world you know even through Amazon and eBay and Facebook shop and everything.

[5:20] Yeah just to make sure everyone kind of is clear here because we’re going to talk about all these different legs of things so let’s say Jason and I there’s this huge demand for our tumblers,
we manufacture them somewhere we come up with a manufacturing partner in China then we have them shipped in bulk to you and then you,
I’m going to say this you tell me if I get anything wrong then let’s say we send them to I don’t know a California facility then you guys distribute them through your network and then as the consumer in
main orders a Tumblr they get the closest fulfillment center the consumer in Seattle orders one they get a closer fulfillment center but you guys do not do the last mile delivery right you’re using carrier so you’re that fulfillment center Network in the middle is that
is that the right characterization.

[6:06] Yes that’s a great characterization we don’t we’re not we’re not lost Mile right now for the most part for most of our customers they choose which fulfillment center they would like to utilize or fulfillment centers
and so before anybody starts with us you know we analyzed all of their shipping data
which of course learns over time as well but they can at the end of the day also just choose which fulfillment center they utilize,
you know we give them the data for the for a reason and then even within shipbob everyday can just in our analytics section you can just click a couple of buttons and and start seeing how much time and money you’d save by Distributing it to other select centers.

[6:45] Yeah one another I’ve been poking around your site a lot and I do like
I’m gonna give you the unofficial Jason Scott show most awesome 404 page because there’s also a Star Wars tie-in and I don’t.
Look for folks but if you can just go to any random page like you can just do Scott or Jason or something and then you’ll find I recommend checking out the for one page.

[7:06] I smell when I have to get a Jason and Scott page on there.

[7:10] I was going to say wait Jason is that 404 are I feel like everyone should have a Json page.

[7:14] When your shipbob you got to stick to the gotta stick to the bottom.

[7:20] Well let’s speaking of the Bob one of the things that is very handy from my perspective about your company is so obviously you guys ship via a lot of the common carriers and you publish
data about how those carriers are performing like how did that come about.

[7:41] So our CEO or I should say both of our Founders drips back saying then De Vega Lodi there they’re very open.
And just transparent with our new organization and I think that just really trickles down and some of that came with some of the carrier tracking data,
and so we were discussing this internally on our side and we get we were getting asked this all the time from different partners of ours and
and then one day Drew was like hey why don’t we just publish this,
which was honestly all the thumbs up that we needed you know it was a casual ask and it was a Friday I don’t know when this was probably sometime in early Q3,
and so a colleague of mine and I were like okay let’s jump all over this we pulled in somebody on the analytics team and later that day the V12 this was published and so we saw the.

[8:33] The thumbs up there and decided to get this out there and ever since we published it we knew that people would want to consume it but it’s just been great to see the reception of it how people are are often citing and referring to it,
it’s always interesting to see the people that sign up to get access to to our updates as well but in when we published I think it was,
like right when covid hit we published our Trends piece that Trends got which showed a breakdown of,
all the a lot of the main verticals and that did really well and starting getting shared a lot and so okay how can we continue to open up some of our data which of course we share with,
with our customers and with my fellow colleagues but just open this up for the masses.

[9:22] And so honestly I had some concern about what how would the carrier’s react and I don’t know maybe there’s some,
non-public conversations we can have about how they’ve reacted to some of the data we’ve put out there but you know we wanted to throw it out there and I really wanted to get some geodata live shortly as well it’s really cool to see like.
Which states and areas are order spiking especially as different covid news comes in and even,
you know which which states are spending the most on e-commerce and maybe the most per capita just just a lot of variation data out there.

[9:59] Cool so the just so for listeners I think you said it but I’ll just re say it in case it’s carriers with a
plural does shipbob calm is the page one thing I find distracting about the pages you have this cool truck animation and sometimes I just get stuck watching the track animation I’m just kind of like.
I don’t know there’s something about that that I don’t forget to scroll I just watching the little trucks racing each other the so first of all if we so you said 10 million orders and that was annually right.
So if we kind of like a million orders a month kind of on average I guess and it you know I imagine you guys are growing pretty rapidly so there’s kind of a tilt to that line up into the right hopefully and you know so.
Can you tell us like a pie chart like who are the biggest shippers that you guys have just we can start there.

[10:54] Yeah so it’s a lot of the the major carriers it’s FedEx USPS ups and DHL those are by far our top four we work with you know subsidiaries of those carriers and we also work with local carriers.
That’s something that we started in Q2 of this year or I should say accelerated especially with somebody just the carrier demands.
But those are by far our topic of strippers.

[11:21] Okay and when your clients come to you like let’s say the Jason and Scott Tumblr store when we come to you do we say hey we have a relationship with FedEx and we’re going to you know go with them or do you guys have,
because you skip so much volume you can probably get a better rate than us individually do put put people kind of on their own like a shipbob shipping program that has a certain flavor or is it a hybrid so some have direct relationships some are kind of,
where you’re in the middle.

[11:48] We’re always in the middle and so you’ll always use our account.
And so like you mentioned not only does that help you from like a pricing standpoint because obviously we’re shipping a lot more than.
Most people but also I mean there’s a lot of other benefits as well such as you know our negotiations on our behalf are also on your behalf and so great examples with as you guys keep sharing ship a get in.
And some of the carriers.
Limiting you know not just small businesses but you know I know there’s a big story in Wall Street Journal em ups limiting Nike Gap Macy’s.
Every single customer of ours would have to be negotiating their limits with the carrier or carriers of their choice.
And again so we’re doing that on their behalf and we have our Network to distribute and move these Goods around,
and so they get to take advantage of that as well and so that’s been that’s been I know another huge win that we don’t necessarily share with our customer base too much but you know that’s one of the things that people have been able to I’d say better navigate ship again over the last couple weeks.

[12:59] Yes it’s so by aggregating all these kind of individual small folks you’re bigger than Nike or somebody so therefore you have a little bit more heft when it comes to carriers by saying you can’t turn us off because
if I do the math on your shipping like 30,000 things a day which is pretty material right.

[13:17] Yeah and I mean in over the last couple weeks it’s a lot more than that and.

[13:23] Spikes up double triple.

[13:24] Yeah and you know of course so our leadership is talking to their leadership all the time and like you said with growing mean,
will double again next year and so they want to they want to continue to get that business and so that just I’d say put this in a favorable spot.

[13:42] Absolute Okay so
the reason we’re recording this Monday morning is you are giving our listeners a little bit of an early Taste of what’s coming out here so so walk us through what you’re going to be revealing here on December 7th with the data.

[13:58] Yeah so and and I appreciate your,
you guys want any to share this out there and how you guys love refreshing the carrier’s data like you and also like my six-year-old big fan of the the gift at the top as well,
remember he saw that he’s like I want that what are those cool trucks I want that thing.
And so yes I’m happy to share with the latest and greatest numbers are that we’re seeing this week I do want to give a caveat though something
the three of us briefly discussed before we jump up jumped on which I think is a pretty serious issue that not everybody is familiar with,
and that’s that’s on the carrier scans and so at each point within the supply chain,
your you know your supply chain vendors whether that’s your 3pl because we scan the orders throughout several points in the process on our end to when we put it let’s say into a gaylord to get picked up.

[15:00] And you can go Gaylords is this a know massive bucket if you will get picked up by the carriers.
Between the carriers pick it up from our facilities or supposed to scan it and as it goes through different sort facilities or I should say every single officer supposed to scan and then scan once it gets to your house,
and so something that a lot of people have seen and I’m sure a lot of everybody listening who were all consumers have seen as well as there’s no tracking on my order or hey my order hasn’t even been shipped yet that’s not necessarily the case,
and so again just one of the caveat some that there have been some you know the carrier’s can issues and Willie first scan,
the numbers there have dropped significantly since around Black Friday,
and so again we’re cleaning up some of the data on our end but it’s just been interesting to see that I know my wife was stressing out because she’s like I ordered your gift a while ago they haven’t even picked it yet and then the next day it was delivered.
And so she as well just they’re trying to move orders not necessarily scan all the time so that being said yeah I’m happy to walk through the data and tell you what we’re seeing this week.

[16:13] Yes it feel free to forget the sequence on the page but you know there’s like obviously I think the big for FedEx UPS US Postal Service and detail what where we see in for this last week.

[16:23] Yeah so we can start actually I’ll start start at the bottom and so start with USPS.
And we’re actually seeing them at around four point four point one five.
Days and that’s from order picked date to delivery date and that’s up from about 3.5 that is a 20% week over week jump,
and again this is I mentioned some of the carrier scan information.

[16:55] Um and so you know that’s that’s a pretty significant jump It’s a almost 65 percent above what their pre,
transit times were and again these are during aggregate like we mentioned you know will do.
You know we’re doing well over a million orders or the last you know Black Friday Cyber Monday weeks so this is some pretty strong volume that we’re basing this off of but this is across all different zones
so we could of course get more granular there but want to provide the aggregate data and so pretty significant jump,
I foresee that holding for at least probably another week just because a lot of these these carriers are are very stressed.
And stretched and so on DHL,
it actually did not jump as much as expected it actually just jumped from about 1% week over week.

[17:55] And which actually is pretty surprising to me which is still about 30 percent above the time in transit
DPS data we’re still cleaning up and so I can follow up with you guys shortly after that and I’d say the biggest jump in the most surprising and maybe this is because they’re often rather rather diligent on the scan tracking,
would be FedEx,
and so they they course-corrected very well after covid there was there about a three-month span where they were shipping well over there their pre covid levels and then it was really about August.

[18:30] Before they started getting back to.
The pre covid shipping the shipping times and then because they were hiring like crazy just like us just like Amazon just like Walmart,
they were actually able to get it.
Pretty significantly below their pre covid shipping levels and then this last week it just spiked like crazy and so went from less than the 3 Day average Transit time 23.6.
Which is which is a huge jump week over week,
and so I’d say FedEx definitely had the biggest jump you know I have a lot of confidence and how they execute and they’ll be able to get things back to normal but they definitely saw the biggest job.

[19:11] What percentage does that.

[19:13] I think that’s like a close to 25% week over week jump.

[19:16] 25% okay yeah yeah and then you know another thing that’s interesting is if you refuse packages that’s one way of.
Not that they are doing that for you but overall their Network that’s one way of mitigating this right is and that’s what we’re hearing about in The Press is you know so so that’s.
That’s going on somewhere which is interesting to think about as well have they haven’t refused any packages from you guys something.

[19:41] No we’ve been we’ve been pretty clear so far another thing that we have as well is in both the greater Chicago in Greater Dallas region we have multiple fulfillment centers.
So not only can we move inventory let’s say between.
You know Chicago and Dallas to help with Transit time but we can move them with in Chicago and with in Dallas just to take advantage of you know the different limits that we might have within specific facilities.

[20:12] Yeah so let me just replay that for Wisner so so a carrier makes a to you,
man we’re just maxed out in Chicago you say okay we’re going to run our own 18 wheelers between Chicago and Dallas and load balance kind of within your system to react to the externalities of the other systems is that
is that what you’re saying.

[20:32] Well I’m saying even more granular they might say that your building is maxed out and then you can move it from one Chicago building to another Chicago building.

[20:43] Wow that’s interesting doesn’t make a ton of sense but I guess in their world it does.
And you know yeah and for listeners that haven’t been in a big fulfillment center you know usually there’s just 18 wheelers parked outside so the big carriers will just park those right out there and then when they’re full they’ll drive off is that is that kind of what what’s going on here.

[21:03] Yeah we’ve got in most of our facilities I want to say 20 to 30 plus doctors and they just you know we’ve got dedicated lines on each of the major carriers and we’re just yeah film those things up all day every day.

[21:18] Cool and then within that FedEx 3.6 lot of people not may not know about FedEx is actually several systems that the two that are the probably most relevant are the air and the ground you guys break that out is this like mostly in ground.

[21:32] So this is all growz.

[21:34] That’s all ground okay.

[21:36] And that’s a big thing to love people don’t realize as well as are like well how can I offer to day fast shipping and they’ll often look at are.
Anybody can ship from one location,
you know two to three days or less via are it’s just exponentially more expensive and that’s why you know you want to get closer to the end consumer and and you offset that with are to the places you can’t get to Via ground and do as much ground as possible.

[22:01] Anything else on FedEx or should we jump to UPS.

[22:04] We can we can jump.

[22:07] Right hit us with UPS how are they doing.

[22:09] So the UPS one is the has lost one that all I can share with you guys after so still waiting on some of UPS data.

[22:17] Well the reason that one’s interesting is if I remember if I go to my and I try not to get stuck on the gift,
look at the last data you guys dropped they were feeling the pain right so they were at like four point five days and they had been.
Up and to the right on the delays do you need anything directional you think they’re got some relief or.

[22:39] I think they’ve got some relief I think they’ve been doing they’ve been doing a bit better.

[22:44] Yeah and you know my.
Again just watching the data here it feels like they’ve been the most aggressive it kind of saying hey we’re kind of maxed out don’t give us any more packages right now which could be that that’s how you get some relief on this as you.
You have to increase the number of deliveries and the throughput and stop taking in as much stuff to give the system time to catch up.

[23:06] That’s a great call out I’m glad you mentioned that because I think that’s where we’ve been fortunate and all our customers and our customers been fortunate is if we haven’t been hit by limits,
then they’re able to ship out you know more similarly than they did pre you know peak season.
Because they are limiting these these major brands are limiting Nike their limiting Gap delimiting Macy’s their lives their limiting small businesses that are shipping on their own.
All the time there’s just you know I feel for a lot of these brands are some pretty bad horror stories I know this.
Company house has been pretty public with it with their just getting slapped with limits of phenol 500 orders a day at the most
and if not you have to go take things too you know the post office yourself and so it’s it’s been tough for a lot of companies.

[24:04] And ultimately it’s a bad customer experience right so the shipper is get to say so let’s use the house example because they’ve been so public the shippers get to say well it wasn’t our fault we didn’t ruin Christmas but house still has upset customers right and
the customers expectation is I press the the checkout button and.
I don’t really care who’s problem it is your mr. brand it’s your job to get me my product and so it’s gonna be really frustrating these brands.
They to be DTC part of your DNA has to be super customer centricity and then to not be able to get your product to people is going to be just like you know wildly frustrating subside I feel that pain and.
I’m glad companies like you guys are able to have a solution for small Brands to solve this because,
sometimes you can use FBA for this kind of thing but Amazon hasn’t really done a ton around off Amazon FBA because they obviously pref.
Apply a preferential treatment to their in-network kind of stuff so,
I think it’s great that we’re seeing and you know to be clear there’s a lot of you guys have a lot of competitors out there I think it’s great we’re seeing these kind of independent fulfillment center networks that have an FBA kind of a flavor,
there is this whole 3pl thing but it’s generally not designed the way you guys are that’s friendly for smaller direct consumer type businesses so,
so I think I think it’s it’s going to be a really interesting Trend over time that businesses like yours are able to solve a pretty material problem out there.

[25:34] It’s you know you mentioned Amazon I’ll get back to them and one sack and also just like the customers and their empathy levels.
It’ll be interesting to see how that all plays out you know of course 2020 has been an interesting year to say the lease or is not a lot of empathy for,
I think different companies at the started covid then things kind of is like all right this is the new normal but just how people,
I’d say act around the holidays which is often just a stressful time in general and then you know for many out there Christmas is really the deadline of trying to get gifts or I should say maybe even Christmas Eve
to get things under the tree I ordered this was one was this I think this was Thursday or Friday,
I ordered the typical silver iPad as a gift for somebody.
And this is Apple I don’t know what they’re at right now 1.5 trillion dollar valuation or Mark Gap I should say and,
it told me that it wasn’t going to get here until January 5th this was just your run-of-the-mill silver iPad it was probably Scott to be one of their top five top ten most sold items and it was over a month,
before we going to get to my house.

[26:47] And so you know a lot of other people are feeling this strain and then even Amazon I mean Amazon’s incentivizing people with with slow shipping,
and even if you order some rather common goods you know even on Prime it’s still showing 5 6 day delivery speeds.

[27:07] I do want to differentiate a couple of things and I don’t know this to be the case but my suspicion is Apple’s biggest problem which we’ve heard from a number of people that like popular Apple products have.
Very long delivery times right now which are Beyond Christmas the likelihood is a significant portion of their their problem is,
inventory not just carrier capacity.

[27:32] I don’t doubt that it’s inventory but.
And who am I to give any suggestions to Apple and how they run their business but they don’t give you that there’s no there’s no I’d say,
transparency or communication back to the the customer that it might be an inventory issue I know some of our merchants.
That have I’d say dun dun best and there are obviously a lot smaller than Apple
but then I’ve done best you know this year you just been very transparent and what’s going on in their operations and those happening in their business or maybe things are sold out and they’re using that to their benefit,
but you know at least to the end consumer this not you know reading the general or I should say like the deeper news on Apple you know they didn’t mention anything like an inventory issue it’s like we’ve got this.
Order it now and then you pee and then it tells you.

[28:25] So a it clear best practice that I know you’d agree with is like surprises are absolutely the worst,
thing you can do to the customer right so you need you want to communicate this win up when will I get it information early in the shopping process not after they’ve entered a bunch of their payment information and then you go oh by the way when you click confirm
this isn’t going to get here in time for Christmas like that’s the absolute worst thing you can do,
and a lot of sellers we have a lot of opportunity on the table by not being transparent and not having good communication so pretty your point.
If for whatever good or bad reason apple has a bunch of 256 Meg or gig iPads in stock but not 512s in your ordering a 512 and it’s going to miss Christmas.
Early in that that shopping funnel you want to tell that customer by the way if you’re willing to accept a different memory configuration.
We can make it for Christmas right not just surprised them at the end of their cart.
By telling him you can’t I would say there are inventory issues this year like because of covid it disrupted a lot of Supply chains nine months ago that we pay the price for now.

[29:41] Brands got conservative about their cell through when they weren’t sure what covid-19 Ado demand and then their categories that Apple plays in a lot for example where.
There was just unanticipated demand like nobody forecasted in March that the majority of kids in America would be doing school from home and therefore need more technology at home right.
So all of those things play into it.

[30:10] And obviously the shipping is a very real problem but Casey I do want to talk for a minute about the.

Marker 03

[30:20] The shippers that are denying packages so let me tell you my understanding and see if this jives with yours a I feel like there’s two big buckets there are very big shippers.
For which this is not remotely a surprise like they they they had a conversation the carrier’s had a conversation with these very big shippers like Nike.
Back in.
June and said hey what kind of capacity are you guys looking to allocate for a holiday and they negotiated a capacity.
And the only thing that’s different about this year than previous years is in previous years what the carriers would say is and if you end up selling more and ship more than your negotiated capacity you’re going to pay a surcharge,
so those incremental shipping.
Parcels will be more expensive and this year they’re saying if you ship more than your allocated capacity we might not be able to accept the packages because we’re we’re worried about our overall capacity so so I just want to say for the Nikes and gaps of the world.
They knew exactly how many orders they could take and how many shipments they could they could make.
Maybe they hope the those those capacities wouldn’t be enforced but they they weren’t surprised at the last minute by UPS going by the way we’re not going to come by your office today.

[31:38] I would say they were probably pretty accurate in their assumptions.
How many things how many items were actually sold into they have Smart teams and smart data scientist doing the forecasting I know that we.
Pretty far exceeded our Progressive forecasts of shipments,
let’s say over the last two weeks and I wouldn’t be surprised to see you know the Nikes of the world you know Nike is continuing to massively accelerate their e-commerce growth but I wouldn’t be surprised if they underestimated.
And underestimated from different locations and then also there’s one thing to be told that hey we’re not going to pick things up,
and you’ve heard this before and they’ve always picked it up it’s another thing for them to like not actually come and pick it up,
and so I think that that’s something that a lot of these big Brands especially these big brands that are not used to being told no.
Are actually seeing.

[32:42] Yeah I would totally agree with that and then I wit you also alluded to one other thing which I think is a funny loophole in this whole thing the carriers are not in the business of denying packages,
so they don’t actually like that they don’t actually have a great infrastructure.
For enforcing these quotas so so for example if you’re a huge shipper and you deliver you know a container full of packages to a carrier Distribution Center.
They don’t scan every parcel on that truck before they unload the truck.

[33:13] They they unload the truck and then they disposition of those Parcels overtime right and so they actually don’t have my senses they don’t have software,
that says like oh deny that box don’t accept it,
what they do is they say oh you know what this shipper has exceeded their quota we’re not going to send a truck to that that fulfillment center to pick up their orders today,
and so that that’s their mechanism for denying it and so frankly a ton of big and small shippers I have heard of have bypassed this whole thing,
by dropping the packages off somewhere else in the in the carrier supply chain so per your point,
you get a pickup cancel that one fulfillment center you move the packages to the other fulfillment center or you drive the,
the package has two of FedEx distribution center and drop them off or even to a local FedEx office in some cases and drop them off and there’s there’s not someone in that store that like scans your shipper code and goes oh I can’t accept this package,
so that I think that is a funny way people are are bypassing some of these quotas for this year for For Better or Worse.

[34:24] And also trying to bypass because another thing that is completely maxed out or trucks like go try to rent a truck in any major city and you’re not going to be able to.
Um you know there have been pictures of Amazon employees just delivering stuff from their car but it’s just pretty fascinating the creativity that
different brands are employing and again that’s just another part of the supply chain like go try to run a big truck you can’t.

[34:52] Cool yeah we’ve we’ve been reporting on that on the ship again side and as a guy that has 200 trucks right now,
it’s a feels good that we have what we have,
that’s but that’s a podcast for Another Story Another Day so really appreciate you walking us through kind of the Tactical where we are right now I want to use our last kind of ten minutes here to to kind of go back up to 30,000 square feet and get out of,
kind of covid world and what we’re experiencing,
let’s talk about this this is probably a quick window so I think you have any perspective coming from Bigcommerce and then now being it shipbob shopify’s doing some things around fulfillment and whatnot.
I haven’t have to be honest have attracted a hundred percent my understanding is they may have one or two fulfillment centers and then kind of trying to Overlay something on top of stuff,
do you see a day where they’ll get more involved in either the Fulfillment center side or even last mile delivery.

[35:51] I mean they are involved in the Fulfillment center side,
Last Mile I’m not the right person to ask there I mean that’s like a whole nother Beast I mean Amazon’s been a logistics company forever and you know they started getting into Last Mile just a couple of years ago.
And so you know my guess is they’ll continue to try to understand the Fulfillment center side better and you know as they learn that more you know maybe continue to expand I think that they’re their CEO and,
leadership team definitely think a long-term so you know who knows what they’ll eventually roll out.

[36:27] It’s hard to be a you know high-margin software company and then say to Wall Street we’re going to open.
80 fulfillment centers it’s just it’s just a if you started fulfillment centers then that’s one thing and you kind of go from low margin high margin it’s very hard to go from high margin to the merchant,
companies have done it but this is a reason you haven’t seen Google or Ebay take that plunge as they’ve,
they’ve kind of got their business model pretty baked and it’s hard to mix in a lower margin asset heavy type thing into a asset light model so it’s gonna be interesting to see if they ultimately do that or not.

[37:04] Yeah I mean Google launched the perfect business model with insane margins so it’s tough for them to change that Amazon on the other hand you know going from Shipping books to AWS it’s a nice story to tell.

[37:17] To selling ads exactly.

[37:19] Yes to selling ads.

[37:21] Turns out the Google business model is better for everyone so I’m curious.
In the past there are a bunch of sellers that may be primarily relied on Amazon for demand
and so they primarily used Amazon for fulfillment and you alluded to you know in our current craziness even Amazon is having to make hard decisions about,
fulfillment priorities it seems like more than than there has been in recent times,
there’s a smart argument to having a diversification of your supply chain in your shipping options are you seeing a lot of new people come into your echo system and want to add you to their mix because they were,
single sourced on FBA and now realize that’s not the best place to.

[38:05] We definitely are and I think it’s also I think that’s going to take honestly several years to fully play out or longer because somebody who makes a you know,
who runs their business on Amazon versus somebody who you know runs their business on their own site or on their own site and then a Marketplace like Amazon is complimentary
it’s just a very different business and it’s different skills that you have to learn over time and so you know we are a complement to Amazon we are partnered with Amazon.

[38:37] Um but I think that some of the things that have happened this year such as Amazon limiting,
what you can what they will receive multiple times,
Amazon limiting what you can ship out a friend of mine he’s a 10 million dollar plus a year seller on Amazon he’s been selling on Amazon for well over a decade he was getting told.

[39:05] Fuse getting told that they can’t ship certain items of his this is like early covid,
they could ship like let’s just say widget a the black widget,
they could ship that but widget would it be which was just like the white color they couldn’t ship that out and you know it’s just like there was there was no Rhyme or Reason there was nobody to talk to on the other end it was just,
this is the law and so we’ve just seen that play out a few times again from the types of inventory that you can receive they’ve been Turning Away product,
at their fulfillment centers and then you know brands are just left scrambling with no idea what to do that supply chain experts and even,
you know they’ve always increase their warehousing cost during Q4 but just seeing these the surcharges and their rules and because they’re running such a massive supply chain and a massive organization
they have to make these changes and I know they’ve been hiring like crazy to not have to make things too difficult.
But just when they when they make a change that’s the rule and there’s you know there’s there’s no gray area there’s no wiggle room.

[40:10] Yet it’s a it’s interesting you say Amazon’s a partner I think a lot of people that aren’t as in the weeds as we are the three of us that kind of scratch their heads because.
You know they have this mental image of this kind of hierarchy of things and it’s actually more of kind of this overlapping graph right so,
so for example what I imagine you’re saying is if I’m a merchant and I have my product at shipbob you guys probably are able to have that
marked as prime using the program they’ve changed the name of this like a thousand times I call it Merchant fulfilled Prime sometimes they call it seller fulfilled Prime whichever one you want to call it,
is that you guys are you guys is that something that is part of what you do.

[40:51] So we do fulfillment by merchants or fbm.

[40:54] That’s the new name.

[40:56] Yeah how they’re going to.
It’s going to be interesting to see how Amazon takes seller fulfilled Prime over time because you know they’ve been somewhat opaque with this but you know reading between the lines I wouldn’t be surprised if that changes considerably in 2021.

[41:15] Yeah because it’s hard for everyone to live up to the prime promise right so what they’re doing is they’re kind of trying to extend the rings of the Prime promise and you guys can live up to that because you’re at a big scale,
which is a 12 or 14 fulfillment centers if I’m Joe Schmo and my garage is my fulfillment center,
it’s increasingly hard for me to live up to that Prime promise there’s this balance between flexibility out on the edge of the network but then living up to the prime promise.

[41:42] Exactly,
enemy and that’s what they’re known for Amazon Amazon Prime and you know they did an amazing job two day shipping is you know they’ve made a thing and then they were really pushing towards one day the beginning of the year.

[41:58] And in this fbm program that’s the one that set up for more like 3pls to offer prime prime eligible products has at Zara.

[42:08] Prime or non Prime but yes.

[42:09] Yeah okay so primer no problem so the user you can then your customer can say all right I want these skus to be marked as Prime within even going down to the Zone kind of thing but these I don’t really want to be prime is that how it works.

[42:24] Yeah that’s that’s a good summary right there.

[42:27] And then last question so so one Theory I have is Amazon’s kind of shown,
that you can go build a last mile delivery Network right and you know so what is it like 3 years old two and a half years old,
doesn’t feel like it’s that old to me so with their DSP program they’ve really scaled up this this very quickly do see is that something you guys would be interested in or do you see other people building a,
DSP like last mile delivery because that.
The one thing ship again has taught me is there there’s way more things that want to get to Consumers than there are trucks on the road right now.

[43:04] We currently don’t have plans to get into Last Mile again you know we’re thinking long-term as well and so,
things could change over time that’s not on the shipbob roadmap for 2021,
I don’t see that on the road map for 2022 but you know who knows for us it’s really like.
How do we democratize fulfillment for brands of all sizes and so you know going deeper into what we can ship to new fulfillment centers to kidding to be to be more International our app store.
But yeah last Mile and actually running like a carrier service that’s you know it’s quite a bit of a different business.

[43:48] Yeah one
One Stop Gap in there is we also over on the side we’ve developed you know all these interesting three-sided Marketplace has largely for delivering food or people
but those can also be used for delivering products so we’ve seen instacart for example known for groceries now working with I think it was Jason fact check me was at Sephora or Ulta one of those and a bunch of other.

[44:09] Sephora for sure but actually dozens of retailers they’re doing Last Mile for now.

[44:13] Yeah and you could you can see I’ve heard Uber and Lyft talk about this I was watching the door – IPO thing and they talked about you know they were pretty plainly saying food is just one of many if we can get ice cream to you we can get you anything,
do you see a world where maybe those guys slot in and they could be this last mile delivery Network.

[44:32] Hey could I think they need to figure out like the sortation or Distribution Center side of the business because let’s take you know those into the companies you mentioned or like uber.
A company like us we want to you know fill up an entire truck.
And then send the truck off and then have them you know back in another truck,
we don’t want a bunch of sedans coming in and picking up five boxes.
So it’s going to be a shame to see how they navigate that because I think that there’s a lot of opportunity there
but again they need to figure out how they are sorting these packages and tracking these packages
and then also doing it in a cost-effective manner as well because sometimes you know they’ll try to enter the market because on paper looks great,
and it works in their Excel models but then when they roll it out there’s just it can be a logistical nightmare at times and then also Blake its it can be cost prohibitive to them because it’s
it’s involving people and people are expensive and there’s a lot of room for error and then what they want to charge maybe a company like shipbob is.
Much more expensive.
Then what we can pay the regular carriers and it’s not necessarily even more effective or faster and so if it’s not faster and cheaper I’m yeah it’s not faster and cheaper than you know why would we evaluate it.

[45:53] That makes total sense Casey and that’s probably going to be a good place to leave it because
it has happened again we’ve used up all our allotted time for today’s show I really appreciate you taking time out early in the morning on what I know is a super busy day for you but if you like
Scot and I and our listeners benefited greatly from the chat so as usual if folks have any questions or comments feel free to hit us up on Twitter or Facebook page,
as always if you enjoyed the show we’d love it if you jump on iTunes and give us that five star review.

[46:26] Thanks Casey if folks want to find obviously we’ve talked about the carrier’s. Shipbob but do you pontificate out on the interwebs and if so where should folks go to read your pontiff occations.

[46:37] If you have any questions for me you can always hit me up see Armstrong at shipbob calm I’m on Twitter as well Casey a and like Jason and Scott mentioned go give them a five-star.

[46:49] Awesome really appreciate that and until next time happy Commerceing!

Dec 2, 2020

EP248 - Cyber 5 with Salesforce's Rob Garf 

Rob Garf (@retailrobgarf) the VP of Strategy and Insights, Retail and Consumer goods at Salesforce. Rob also earned a 10/10 from @ratemyskyperoom which makes me extremely jealous.

Cyber Week online sales unfolded in the pattern we expected after the first three quarters of the year. Digital sales surged an unprecedented 71% in Q2 globally and significantly grew 55% in Q3 globally. We forecast 30% growth for the entire holiday season, November 1 – December 26. For the largest two digital days of the season, specifically, Black Friday came in right on target with 30% growth and Cyber Monday grew at a lower rate of 18% year-over-year (YoY) globally.

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 248 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 248 being recorded on Tuesday December 20
twenty that’s December 1st I can’t believe it’s already December I’m your host Jason retailgeek Goldberg and as usual I’m here with your clothes Scot Wingo.

[0:42] Hey Jason and welcome back Jason Scott’s show listeners.
It’s the day after Cyber Monday Jason’s on his 10th venti latte so he’s a little jumpy he’s a little excited this is a big day for him this is where he really,
really earns this keep over at big company he works for earns every letter of that title that he has there.
Jason it is after Cyber Monday and we are here to help listeners dig into what happened with the Cyber five turkey five or it seems like the Hipster thing this year is be fcm not sure what that stands for but that’s what everyone is saying.
Join us on the show and walk us through what they saw and their data is Rob Garth he is the VP of strategy and insights of retail and consumer goods at a little software company called

[1:31] Hey Scott hey Jason such a pleasure to be here happy I guess cyber we khash sorta kinda happy holidays anyways.

[1:38] Happy giving Tuesday.

[1:40] There you go good call.

[1:44] Scot always has to take the high road doesn’t he.

[1:47] I know he’s so good he’s so good.

[1:48] It’s awesome to have you on the show Rob part of me I’m debating whether we should pretend that we haven’t been talking all day all ready or not.

[1:56] Yeah I don’t know how do you want to play that off but it’s good to talk to you as always and I still what we’re going to talk about today I wonder.

[2:04] Yeah I don’t know there’s anything going on in the industry but before we jump into it one of the things we always like to do on the show is give listeners a little bit of background about our guests so can you give us the
the recap about how you got into the digital Commerce Basin and what you do at Salesforce.

[2:21] Yeah sure absolutely it again,
thank you so much such a privilege to be on your show and certainly during this crazy time of the holidays to be able to share some data share some stories and get all of our,
perspective so as you mentioned I head up our strategy and insights team for retail and consumer goods I came to Salesforce by way of the,
demandware acquisition which is coming up on about five years but been in around retail for gosh quite some,
time including practitioner back in the day leading
e-commerce for Lids I then moved to the analyst world where LED retail for am our research which got acquired by Gartner and then prior to joining demandware I led retail strategy yet
IBM so kind of sat on,
all sides of the table and it’s kind of fun in my role now I kind of put all the hats on that I’ve learned throughout the 20 25 years and,
certainly I can get into that when it’s appropriate but I have one of the coolest jobs just behind Jason in the industry.

[3:31] I dispute that last point but I feel like you’ve forgotten your most important qualification you are also holder of a 10 out of 10 score on rate my room.

[3:43] Yeah you know that’s right and I take that with a lot of gratitude and humility because you know what – was struggling as a lot of us have been,
for last eight months to get the perfect rig and,
the perfect background and certainly outdone by the way by my 14 year old but I try to at least keep Pace as best as I can and pretty sight to not only get rated but did pretty darn well as well.

[4:12] Yeah congrats on that that’s that’s awesome the let’s dig into the data maybe we’ll start it kind of the days so this all kicks off with Thanksgiving and culminates and Cyber Monday what,
what did you guys see either absolute value wise or growth wise through the five days and how did that match up to kind of what you were thinking what happened.

[4:30] Yeah absolutely it’s probably worth setting the context about how we get the data because I think that’s an important way to substantiate what I’m going to talk about I’ll still make a lot of stuff up don’t get me wrong no took.
Can blind that’s Jason’s line I’m sorry I stole that from me.

[4:46] He was supposed to ask you that and he dropped the ball so he’s yeah he’s a hot mess over there.

[4:52] There you go but no but seriously so as I mention really cool job in terms of my team’s Charter for staying out in the industry and understanding where,
the market is going and we do that Based on data and much of that data actually comes from the Commerce cloud,
platform because we’re in the cloud.
We are able to aggregate all the data that’s flowing through the Platforms in which we manage across,
the world and we bubble that up.
We obviously strip out all the personally identifiable information but that that aggregate becomes the de facto standard of,
happening in retail it’s the amount of billions and billions of Shoppers every tap every swipe,
every click and we get to report on that based on same site sale so we look at it the same way that any retailer would look at,
their business and so we do this all through the year with our shopping index but of course it gets a lot of attention,
during the holiday so that’s that’s my long Preamble Scott to answer your question around what did we see,
over over side or 5 or actually we look at it slightly different so I’ll give you the growth which will be.

[6:14] Somewhat the same if you will apples-to-apples to the Cyber pie but we look at Cyber week so it’s the Tuesday before Thanksgiving all the way through Cyber Monday and what we saw was a really.
Healthy cyber week despite an earlier and earlier holiday season so globally we saw a 36 percent year-over-year growth in the US we saw,
a 29 percent year-over-year growth that’s actually pretty much in line with what we project for the entire,
holiday which people say gosh that seems or some people anyways my without any contacts say mmm,
you know given that we saw 55 percent year-over-year growth in Q3 and we saw 71 percent year-over-year growth in Q2,
that seems like it’s faded off or soften but that’s not that’s not the case I mean,
we were dealing with a really large Baseline and we’re dealing with growth that certainly we haven’t seen during the holidays since gosh.
You know for a long time let’s put it that way.

[7:28] Yeah I think it’s I don’t track the in the international side Internationals a big category but I’m most familiar with the Amazon data but they’ve shown International growing much less than the US what do you think is causing.
That kind of flipping your data.

[7:43] Yeah well it’s primarily due to two things one is.
We’re dealing with you no more than 40 countries across you know 10 or so different categories the way,
slice it so there are emerging countries in there that are still catching on I mean my conversations when it’s not dealing with how do we move from Scrappy to scale them it’s this pandemic
is around digital transformation and some are still believe it or not around the world questioning whether it is important to
go online and lean into that business so part of it is the emerging countries or at least the countries that,
are at a slower or lower base than the US the second piece is we actually you know.
Around the world have a lot of retailers in categories that haven’t been as aggressive online particularly you know the essential categories like gross.
Change rug that sort of thing and so we’re seeing growth globally in those types of segments as well.

[8:56] Frankel did how to so you kind of think it met your expectations basically that’s kind of in line with what you guys were thinking.

[9:03] Yeah so it did in cyber week we did see a softening in Cyber Monday we saw in the globally 18% year-over-year growth and in the u.s. 10%,
but I guess maybe I shouldn’t be or we shouldn’t be as surprised because.
The broader context of the holiday and I referenced it a little bit ago was we saw a pulling forward of demand that Smooths out sales not just earlier in the week.
But also earlier in the season you know our data shows based on our shopping index that for those retailers not named Amazon they saw a 66%.
Year-over-year growth on Prime day so those are a couple of sleepy die not so sleepy as the summer but certainly days in October that you wouldn’t see that search however there was,
halo effect and you know to accentuate that point.

[10:08] The week before cyber weeks or not last week but the week prior as a total we saw in Eighty percent year-over-year growth.
Highlighted by that Friday which saw a 95%.
Year of your growth so retailers have been trying to drum up Demand right since the beginning of October for various reasons.
And it’s working so we saw that manifest itself don’t get me wrong I mean Black Friday Cyber Monday are still.

[10:44] Along with Thanksgiving so let’s say those three are the three biggest.
Days for online but there’s certainly been a smoothing out which impacted Cyber Monday.

[10:56] Interesting and if I kind of parsing the tweets between you and your team I think if I look at it if I look at Black Friday in the US you guys are calling it as being bigger than Cyber Monday and that that’s going to be a first time that’s happened I would imagine right.

[11:10] That is a first-time good can look at you awesome I’m psyched that you’re tracking it that closely you’re exactly right so it’s the first time in the US but the fourth year in a row,
globally so there’s definitely a leveling off and you know we for this year in particular chalked it up to,
the slowing down the ratcheting back of traffic what did you say Jason earlier today around 50%.
Off of physical store traffic this year.

[11:44] Yeah yeah both Shopper track that tracks in you know foot falls in retail stores.
In Verizon that secretly spies on all the Verizon customers including Scott I.
With geolocation Services reported that they saw like about fifty percent of the traffic they saw last year in retail stores.

[12:05] Yeah so that’s certainly.
Contributed to the growth in the u.s. right I mean people aren’t lining up around the door for necessarily doorbusters,
this year and so people turned,
digital and that certainly played out over Black Friday just so you have the numbers globally we saw a 30% increase in the US we saw 23% this is Black Friday
and that equated to for Global twelve point eight billion of online sales and for the I’m sorry.
For Global it was 62.8 excuse me and for us it was 12.8.

[12:50] Wow one of the things that always surprises me is the Black Friday and Cyber Monday are a thing,
internationally you I given that they’re they’re sort of originally tied to a u.s. Centric holiday I feel like Amazon and others have done a really good job of exporting that.

[13:08] They have,
they have it’s starting to really condition the consumers you know it’s something we look at really closely I’ve been calling it discount chicken for quite some time even going back to my
analyst days the idea that retailers have a steady drumbeat try to lure the consumers to buy earlier in the season but,
you know we all have patience and we’re all conditioned to waiting for those deeper discounts on Black Friday,
or Cyber Monday,
and that has really conditioned particularly European consumers to wait and retailers have played into that so the dynamic.
Has been translating certainly internationally for quite some time.

[13:57] Yeah I fear that the promotion chicken is evolving into the boy who cried wolf because.
Uniquely this year we had some very systemic reasons that we would generally did want customers to buy early like most years we say we want customers to buy early because we’re trying to steal the sales from each other,
but / your point the discounts are going to keep getting deeper and deeper until we get to Cyber Monday.
This year we were desperately trying to avoid a spike on Cyber Monday because we’re worried about shipping capacity and inventory levels and things like that so we would generally are telling all the customers
hey this year you really should start your shopping early and put your point there was no reason consumers should believe us because we say that every year.

[14:44] Right right right you know you got to think well first of all you know Prime day because that to be marked the official start of.
The Holiday Inn created a buzz created this halo effect,
but also you know the pandemic right there are three key reasons why consumers were actually compelled unlike any time ever before to actually complete the purchase many would browse right like we see traffic,
increased significantly as we March through the first second and third week of November but the buy button really took hold.
During cyber week but what happened as I mentioned really three things converging right first of all.

[15:25] Consumers were feeling the strain of shipping issues in the spring and so they sensed there.
Will be an issue,
second they were worried about product availability I know about you but I was really psyched to get I guess Scott you’re not as worried about a North Carolina but Jason for you some patio heaters,
just at the end of the summer because none of them are available now and the third you know people are looking out for their health and safety so it took a pen down attic for consumers to actually.
Purchase early because you’re right Jason consumers are smart consumers are patient consumers recognize it is a bit of the boy who cried wolf and.
You know.
Retailers were kind of playing into that fear as well we saw for the month of November of the top retailers in the state 61 percent.

[16:21] I sent an email out that use the word shipping and had some sort of verbiage around delays or Byerly
and over cyber week we saw Justin that week 25% of the top retailers made it a key message in their email.

[16:40] Wow so my hypothesis is the Retailer’s talking about it alone would not have been enough to pull sales in but I my hypothesis is the reason sales got partly pulled in is because,
the media talked about it so much and I don’t know if this is well-known or not but you know Scott coin this phrase,
ship again and and the Today Show turns out to be huge Scot Wingo Fanboys so they were talking about it every morning on the show and I wonder if if that.
Those media messages reinforcing the retailer messages landed a little bit with consumers but.
A question I’d be curious about if you have an opinion.
So we have this unusual shape to the holiday this year right Prime day happens in October retailers are promoting earlier the media’s warning customer consumers that they should be shopping early,
and so all that seems to have worked,
we sold more digitally earlier in the holiday than we normally do and while we grew on the on the big Marquee days like the the rate of increase,
slow down so what happens next year right.
Does the shape go back to the traditional shape is that like permanent change a semi-permanent change do you have any if you had any bandwidth to think about what next year looks like.

[18:03] Yeah it’s a great question and it’s a question we’re getting a lot from our,
retail customers it’s like how do you predict the unpredictable you know,
what we’re going to see as we’re looking for it and we’re still crunching numbers and seeing how the holiday plays out you know the first thing to keep in mind is the pandemic,
didn’t really take hold and there wasn’t the Declaration of a pandemic by The Who until the second week of March so you know we’re going to anticipate January and February 1 year anniversary ring.
Online sales to still see that that’s like right it’s just math it’s going to work that way but you know what we see.
Every holiday and I know you can’t equate the pandemic to the holiday is.

[18:56] Q4 particularly November December huge spike in traffic huge spike in sales and it creates a whole new Baseline for digital shopping and it doesn’t.
when you get into January February and March to pre-holiday levels and so we don’t anticipate that when we get into March April and May,
of this year even with you know stores presumably fully being back.
Online and so are they going to grow at the 71% we saw in Q2 and the 55% we saw in Q3 likely know,
actually no but let me be declaring about that but we are going to continue to see
Healthy Growth and you know I see it coming from at least two different areas and Scott and Jason I’d be interested in your perspective on this one is.
Net new digital Shoppers right because that helped the growth over cyber week over cyber week we saw,
a 22 percent growth in unique Shoppers that came off of,
a growth of forty percent in q1 and Q2 so for the first half of the year
we saw a 40% increase in unique Shopper so these are people like my mother-in-law who would never buy groceries online because she’d want to go into the store touch the produce make sure it’s fresh.

[20:22] But because of her pre-existing long can it she’s not going back into the store just going to do it from the health and safety.
Or at least comfort and safety of her of her home right and so that’s not snapping back and that’s going to contribute,
to growth going into next year the second,
area is there’s a whole new set of categories that people wouldn’t have ordinarily bottom line and candidly retailers in those categories weren’t investing heavily in selling online grocery is a great example,
and you know this Jason we’ve talked about this a lot you know we saw it was.
Black Friday just to throw one day in one data point we saw a hundred and twelve percent increase year-over-year
of online sales for food and beverage I mean it didn’t even show up on the chart last year right and so it’s growing and that’s not going to go back and that’s not just gifting you know that’s not just
chocolates or fruit baskets these are,
you know the Staples that we ordinarily would go into the store but are not so I know that doesn’t give you a number and I know I’ve been asked for that a lot and we’re looking through it but overall from a macro perspective,
set a new Baseline knock and a snapback it’s still going to be aggressive throughout the next year.

[21:45] It’s great to hear that data on the unique Shoppers I think that definitely bodes well for the future of digital sets exciting.
There’s a there’s something I call zero friction addiction that until you have one of these zero friction experiences you don’t realize how addictive it is and then,
that going back just feels like you went back you know way way further than you actually really went forward if that makes sense.

[22:05] Yeah wait was that zero addiction friction.

[22:09] Zero friction zero friction addiction.

[22:11] Perfect okay I’m stealing that you better.

[22:14] It’s a ZF a rub if you need to reinforce it it’ll be all over the Today show tomorrow.

[22:19] Apparently yes Hoda already texted it I see it coming through right now.

[22:24] Oh hold on,
she was over for Thanksgiving anyway the it’s like Jason the first time he had the Starbucks mobile experience it was such a game changer for it now if it’s ever down a just
which is a total fit and starts throwing then tea mugs against the wall and he’s like I need my mobile app.

[22:40] Yeah well we should look at his Pantry I have you know I’m not a betting person but I’m guessing he has a stockpile.

[22:47] Let’s dig into some of the categories you saw were there any categories that stuck out is
winners we wouldn’t expect obviously you know we’re the pandemics kind of creeping up on us again and you probably seen some Essentials there but any interesting categories that were either
leaders are laggards.

[23:06] Yeah absolutely and by the way I’ll put a pitch for my colleague who’s the Mastermind behind much of this data Kayla Schwartz you can look up on Twitter she just posted a really cool.
Depiction of this so you can see what it looks like but as I mentioned food and beverage certainly.
And then you know outdoor I would say anything that dealt with health and fun is really the themes that we saw right so outdoor fared really well.
And health and beauty did pretty well also and you know that’s a little counterintuitive people are thinking oh people aren’t going out.
To business occasions or dinner or whatever else but you know where.
The blending of personal and professional lives come together at home and we’re working digitally people want to look half decent,
on their resumes and certainly are making purchases for themselves and Gifts in that category as well.

[24:13] Awesome Rob another.
Segment I guess that’s super interesting to me is mobile so I as you know talk a lot about the mobile Gap and you know Jen this General premise that,

Marker 01

[24:25] increasingly Shoppers are using mobile devices but the conversion rate on mobile devices is lower,
I’m curious if you guys looked at the mobile Gap around holiday and like did we continue to see mobile growing as a share of total traffic and his conversion getting any better.

[24:43] Yeah great question and it was interesting by the way for Thanksgiving.
First of all traffic was down overall quite a bit sales were,
reasonable for sure a little softer than we would have expected but,
actually desktop was quite a winner for traffic and for sales because,
people were looking to that form factor and likely not you know at their on some calls or parents house so they had the access
to their own computer but that was a little bit
of anomaly as we looked at across cyber week so what we found is that over cyber week again the way we look at as Tuesday through Cyber Monday
mobile comprised 71 percent of traffic and 55.
Percent of orders and when you look at desktop we saw 26 percent of traffic and 41,
percent of orders so mobile is holding certainly steady even increasing as a relates to traffic but you know the Stallworth of,
desktop is you know still still healthy again at 41 percent so it’s.

[26:09] Pretty interesting to see certainly as an industry we’ve gotten much better at here we go Scott ready
breaking down that friction so we get the zero friction Addiction on the mobile device I mean really,
we’re it was or has been a really clunky experience right to order stuff online for quite some time but it’s getting easier it’s getting easier because of artificial intelligence and retailers serving up,
the right products above the fall and it’s getting easier certainly because of the Advanced Mobile payment options,
for sure as well so that’s that’s contributing to it as well but what I will say on the conversion side I mean we’re still seeing essentially double,
the effectiveness of conversion meeting on desktop meeting desktop is converting at a two times higher rate than mobile so we still have a way to go.

[27:11] Wrinkle excellent use of zero friction addiction I appreciate that.
Um the the next one is going to be returned again so we’ll talk about that December 26th.
The you guys have any insights into how promotional things were our retailers having to give away the farm to get this growth or they keeping pretty good on on the margins.

[27:34] Yeah you know it’s interesting this was something we track and we have tracked year after year and this year we just saw a steady.
Drum beat it progressively increase the route cyber week but nothing nothing material.
You know and I credit that to and Jason you and I have talked about this before
we typically see an over reaction on Cyber Monday where that has the deepest discounts of not only the weak but of the season,
but we didn’t see that this or not at least dramatically this holiday and part of it was,
retailers were trying to preserve some margin as you reference Scott part of it was retailers saw a really healthy demand and.
Therefore were regulating product availability and didn’t feel as much pressure,
as they have in the past so you don’t get me wrong we’re seeing discount rates at the high 20s on average.
Throughout the year you know holiday season by it wasn’t as dramatic as we’ve seen in the run-up to Cyber Monday as we’ve seen in past years.

[28:57] What I will say though actually if I could add one thing quickly is the vehicle people are using.
For promotions is Shifting right so we saw a healthy.
Increase of email throughout cyber week but we saw Triple digit growth.
In SMS and push notifications which of course is a combination of promotion and then hopefully providing some transparency around,
product availability and shipping status and the other point I’ll make and then I’ll be quiet I promise is that.
Retailers are leaning into what we’re calling the edge or where consumers are shopping on the edge in these third party platforms like social messaging live-streaming even gaming.
And so seeing deals pushed through that means and.
In some cases even exclusive deals trying to create this exclusivity this scarcity trying to drum up demand where consumers are getting inspiration and hanging out with their friends and family.

[30:13] Ya Rabbi like are you guys seeing an actual uptick in the data in terms of like traffic coming from those those activities this year.

[30:23] We are we are seeing an uptick it’s not dramatic or at least dramatic as I would have expected or we’ve seen other parts but traffic and.
Orders around 10% are coming from social and it’s you know material but not.
Significant growth year over year but it’s something that you know I’m talking to retailers about a lot and really advising them not to sleep on it.
And again it’s really two angles here one is thinking about how to use these what I consider to be the next shopping malls where.
Inspiration happens and therefore monetization happens to really push people to their websites but also think about how they can push their brands to these properties so we’re not next year talking as much,
or at least next year talking equally as much about the traffic that’s being generated as.
The orders that are happening actually embedded on these third-party you know what essentially are emerging Commerce platforms.

[31:41] Yeah that’s super interesting because I would remind people like traditional Commerce experiences and you know e-commerce sites.
Really excel at that zero friction addiction right like making it easy to get stuff but where we’ve been struggling is in the whole product Discovery experiences and so.
You know that if live streaming and these you know newest generation of social commerce experiences,
you know if they really catch on there they’re sort of the the digital version of this product Discovery and,
you wouldn’t necessarily expect that to be dominant over holiday right like holiday people tend to know what they’re looking for and and they’re focused on the acquisition so it really the other times of the year when you might expect to see more heavy use of those Discovery tools.

[32:32] That’s a really good point right in the holiday time frame where a bit more surgical in terms of the gift-giving given a list we have in the people we have two by four so that certainly can contribute to that because we have seen sizable growth other times of the year.

[32:47] Yeah well wasn’t robbed that’s fascinating and that’s actually going to be a great place to leave it because we have once again slightly exceeded our allotted time for this special friction-free addiction.
Episode of the show.

[33:02] We appreciate you taking time out of your busy schedule if folks want to track your you and your team’s pontification zon on these topics where should they go.

[33:13] Yeah certainly so we spun out a holiday insights Hub so I encourage the listeners to search for that it is a real-time tracking of
holiday insights and it’s built by the way on Tableau so it’s,
very visual very intuitive during the other times a year I encourage you to check out our shopping index on, and then of course feel free to follow me always
tweeting the latest at retail Rob Garf sharing our insights our data and for what it’s worth my perspective.

[33:55] Awesome Rob I will put a link to the the holiday Hub in the show notes because it’s obviously the home screen for both Scott and I and until next time happy commencing!

Dec 2, 2020

EP247 - Cyber 5 with Adobe

Vivek Pandya is the  Senior Digital Insights Manager at Adobe.

Data from Adobe, which uses Adobe Analytics to analyze one trillion visits and 100 million SKUs from 80 of the 100 largest retailers in the U.S., found that consumers spent a whopping $34.4 billion during this year’s Cyber Week, which represents a 20.7 percent year-over-year (YoY) increase. Unsurprisingly, Thanksgiving, Black Friday and Cyber Monday represented the bulk of total spend over the five-day period.

Adobe Holiday Portal

Blog Post for Cyber Five

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 247 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 247 being recorded on Tuesday December 1st 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot & Vivek:
[0:40] Hey Jason and welcome back Jason Scott show listeners well this is itsgotime this is the most exciting time of the year for everyone in retail e-commerce digital retail payments Commerce whatever we call this.
We’re sitting here it’s Tuesday after Cyber Monday and as usual Jason and I are going to dig into what happened over the Cyber five.
Turkey 5 or the newest name I saw this year was BF CM which I think stands for Black Friday Cyber Monday.
To walk us through some data we are really excited to welcome to the show the vet pandya pandya he is from Adobe where he is the senior digital insights manager the VAC welcome to the show.
Thanks very much for having me.

[1:24] We are thrilled to have you the veck we’re excited to jump into adobe’s Data but before we do can we always like to get a brief.
Sort of a snapshot of our guests background can you give us a little bit of insight into how you came to Adobe and what you do for Adobe.

Scot & Vivek:
[1:43] Sure sure so I’m its.
Try to give you the Abridged version for sure I kind of started in this sort of online space in a sort of digital marketing capacity and I worked with startups and technology companies
especially to kind of manage their campaigns and drive
try momentum there and I think working in Tech sometimes it’s like it’s it’s time dilation I think working in Tech because you then find yourself wanting to kind of explore other Industries because you’re very
fixated on tech companies and then so I found myself all of a sudden working for Gallo in working in the wine space and it was great to be in the sort of cpg industry and it also allowed me to kind of,
move out to California and so that that was absolutely
incredible and then I’ve always been someone who’s kind of drifted from this sort of digital marketing space to more into the data science world because you kind of go from generating
demand and leads and things like that to try to understand how you can Target and ensure that you’re getting the most qualified.

[2:59] Audiences to do what the organization needs to have happened so
then when I got more into this data space I found myself really enjoying visualizing data providing insights and
that’s what brought me to Adobe with Adobe Digital insights we’re very focused on providing
insights that can kind of size out the holiday season like we’ll be talking about and and provide insights across a lot of different topics so that’s essentially how made it to Adobe and how I’m working in this space.

[3:30] Awesome we’re glad you did and then as a reminder for our listeners about the Adobe data set you you are one of the Premier analytics packages that’s used by eCommerce sites
and you get to aggregate all the data from all the clients that use that analytics package and summarize that is that do I have that right.

Scot & Vivek:
[3:52] That’s exactly right so yeah we have.
80 of the top hundred online us retailers we have a trillion visit a hundreds and millions of products use so when you bring that all together you’re able to get some really interesting cool,
aggregate insights about the data history and how it’s changing.

[4:13] Cool it’s lesser start at the top maybe take us through what you guys saw over the last five days.

[4:20] So what we saw was in some ways what we were expecting and in other ways it kind of very but we essentially saw about a hundred six billion dollars drive-through from,
season today essentially from November
to where we are you know just post Cyber Monday and I know you guys have been following this in terms of how these Trends this early pricing how all that would kind of come into play and for us that was also.
Very important to size out and understand the trends and also the election was also something that happened in case you forgot and so that was that was an area that we were curious to see how that would
sort of interact with retail spending.
And so as we got closer into Thanksgiving week we saw about thirty four billion dollars kind of get realized over,
both Thanksgiving Black Friday Cyber Monday and some of the days in between so we were able to kind of chart and see some of the early spending,
that was kind of being kicked up a post-election and then we saw a lot of early surging before we got into Thanksgiving week and then we saw these these largely dominant days continue to stay dominant.
And you know we had.
Ten point eight billion dollars come yesterday on Cyber Monday so it’s been very interesting for us to see what things sort of panned out and which ones deviated for what we expected.

[5:50] Yeah and if we kind of look at your over your Trends if you look at that kind of I don’t know when you start but let’s say November first just to before Thanksgiving.
Um maybe maybe we looked at how that grew versus last year and then look at Thanksgiving through Cyber Monday what what did that look like from a year of your shorts.
So looking at you know we we had a sort of prediction of 33% for the season.
We that sort of initial prediction with how the week is gone with,
we’ve adjusted it a little bit to 30% but when we look at how this this particular period grew from November 1st to start on Monday that was right around 27% 27.7 so that’s that’s again.
Large chunk of growth coming in into the earlier month but we still anticipate some growth that gets us to our prediction for the entire season.
Yeah it seems like you guys in a lot of other data providers kind of agree that Cyber Monday was was a little bit of a,
I guess I’ll let down in that it grew significantly slower than that kind of Benchmark 30% is that you guys saw.

[7:01] It’s interesting because like the the momentum of Cyber Monday and it,
being the biggest day of the year is notable and it can’t be lost on us that it was able to still surge at ten point eight billion dollars but we when we look at
Cyber Monday Thanksgiving and even Black Friday.
What we what we see is them coming down into the sort of lower range of our estimates and we tribute a bit of that to some of the early surging that happened.
The weekend before Thanksgiving week because I know
with early discounts there was a lot of question like how will things look pretty level all throughout all the weeks and and we’ll Cyber Monday and Black Friday or they just not a thing.

[7:48] And what we saw was about 5 to 10% discounts coming into the month and that was enough to
drive a little bit of interest in purchasing but there was still a bit of slower growth happening because of the election and,
and people waiting for an outcome in announcement from the election.
And then once it once we had that outcome it started kind of falling back in line with our predictions and then the weekend before Thanksgiving week we saw the discounts go from
five to ten percent to 22
25% so that sort of that sort of increase and then a little more room to get down to 20 to 30 percent happen once we got into the,
Black Friday and Cyber Monday the day so
you end up seeing this how the story emerge of how some of that volume got a bit more distributed across the rest of the days.

[8:41] Got it and I’m not sure if you’re aware but two very handsome podcasters came up with this ship again and phrase do you think,
and I know this hard in the data but have you seen anything that that lends that that is the thing or that that may be caused some of this earlier activity.
Yeah I’m familiar with the phrase for sure it’s a it’s one of those things where I know it was real concern it’s a real concern I think it continues to be a concern and you guys were right to kind of call out that the
potential impact as you were modeling it out but it’s it’s one of those things where,
different size retailers have experienced different surges coming into this period so I imagine that some of that early weekend spending before they got into Thanksgiving.
Wheat probably is what they had intended to sort of mitigate this volume and that’s probably helped them Bank in more days.
And kind of distribute it more and again we talked about clicking collects and backs an area that’s also helping.
Helping manage this shipping see potential situation and what we saw there with it being up 52 percent on Black Friday year-over-year.
All that is helping and combination I think to sort of manage that situation but I think it potentially has.

[10:00] Even more impact getting into December and potentially being more of an issue there when.
There’s just this desire I think with with everything that’s happening November it’s been pretty compressed.
There’s an understanding that this counts are going to continue so then the question is how much will things pick back up and
drive up to new levels of growth as we get closer to Christmas and that’s where I think it could continue to be an issue because I ultimately think that
but for now they’ve been somewhat successful in managing that the volumes and they’ve learnt a lot from the earlier months of the pandemic.
And so I would say that it’s not they’re not completely out of the woods yet in terms of it being a significant thing that they have to manage but I think having their discounts situated and driving them down further,
before we got even into Thanksgiving was the right move.

[10:59] Interesting so if you look at it on the whole obviously that these big five Marquis days kind of slightly underperformed or at least where the bottom end of the the forecast is your hypothesis.
There’s less demand than you thought and therefore it sounds like you did downgrade your forecast slightly or do you feel like.
Just some of those sales got pulled in earlier and therefore the kind of Peaks are are leveling out.

Scot & Vivek:
[11:31] You know I definitely think there was a decent amount level of front loading and pulling in some of these discounting ‘s
earlier because that’s where we start to see the sort of levels of surging we saw on Sunday that that kind of really took us by surprise and then it but then we really also had a sense that,
Black Friday Cyber Monday Thanksgiving these would continue to be big days because from we also you know have our own survey research that we were asking.
Consumers about these days and.
They very much feel that yes we know there are discounts happening throughout the season but we definitely feel that we’re going to get the best pricing and best deal
on Black Friday and Cyber Monday so that kept us very much conscious of the fact that those could still be pretty strong and they were so it’s all the say,
apart on the Retailer’s to drive and move some of that momentum earlier but also that sort of tug and pull of the consumers being like well we have a little bit of tradition and inertia,
and a perception of these days and we’re planning on spending on them too so that all got to manage during this period.

[12:45] Got it and then I imagine to some extent some of the deceleration on these biggest days has to also just be the law of large numbers right like it it it gets increasingly hard to grow as fast as the numbers get bigger and bigger.

Scot & Vivek:
[13:00] That’s right it’s where we’re coming off of these bigger bases and they are especially when there is this real concerted effort to
kind of manage and mitigate the volume that comes through those days you’re going to see a that that sort of
that drive to step to another level percentage-wise is going to be tougher,
and then with these tactics being employed it’s going to it’s going to dull some of these Peaks a little bit but again it’s still that the consumers are you know in the driver’s seat here and,
and on their schedule is when things are happening so it’s really going to its that’s really why we saw some these big days still continue to be super strong.

[13:43] Yep and just to put things in perspective a little bit if I’m going from memory so correct me if I have this wrong but Cyber Monday last year was about like nine point four billion right.

Scot & Vivek:
[13:53] That’s right yep 9.4.

[13:54] And so at that point that would have been the biggest single-day of e-commerce sales in the US ever and then this year
we surpass 9.4 on Friday so I Black Friday actually set the new record and then we surpassed it even further yesterday right so we two days this year surpassed any day in the entire history of e-commerce in the US.

Scot & Vivek:
[14:18] So Cybermen assignment one day definitely so we’re not Black Friday was close it just got it nine billion so it was just a bit under but it was it was it was pretty
pretty significant in terms of getting to that scale and becoming in that way the second largest day at that.
Yeah and if I if I’m reading the data right Black Friday increased about called 22% with rounding and Cyber Monday was 15 so.
If that keeps up the lines will cross eventually right it’s yeah it’s one of those one of those areas where it’s like it’s.
It’s that scale and those percentages that can kind of.
Mitigate and manage to move it to this overall season percentage that will aiming for.

[15:04] Interesting how about art let’s peel the onion a bit and go into categories any any categories over form the models any any kind of underperformers.
So with Black Friday we saw different categories surging so Electronics and appliances and toys and then when we

Marker 02

[15:27] went deeper we would see things like board games and video games things that
are keeping people occupied and then when we were coming into the week we saw groceries kind of reach early pandemic Global because
it was probably both stocking up again because the case is rising and then people trying to do Thanksgiving meals but try to see if they could avoid going to the grocery stores.

[15:50] Anderson how about,
I’ve noticed since weren’t categories the seems like the the top sellers are the new consoles but there’s not enough Supply out there so.
Does that show up in the data there’s that one of the things driving Electronics.
It’s definitely a type of high demand product that has these inflection periods and and they are continued,
they’re moving in waves in terms of supply and
too quick you know uptick in people purchasing them so that moves pretty quickly the more consistent
ones that stay up is the video games the accessories and just the larger category takes a boost as a result of these two major console releases happening within the course of a week.

[16:39] I imagine also one of the things that’s a challenge for me and looking at this year’s data is I think the food thing really complicates matters because.
Historically there was very little food e-commerce like not very much grocery was online and so obviously as a result of the pandemic tons of people learned how to shop for groceries online and.
Many of those people may have done their weekly grocery shop over the Cyber 5.
It wasn’t necessarily tied to any holiday spending but that was a baseline of digital spending that didn’t exist in previous years in does exist this year and then to be honest it’s exacerbated.
Because so many restaurants are closed grocery spending is at an all-time high because they have a higher percentage of calories are coming from grocery store so that feels like.
That’s that’s an extra little undercurrent pushing some of these numbers up this year.

Scot & Vivek:
[17:32] Yeah I would agree with that that that does you know that that does kind of add in a sort of additive level of it
and what I would say is that we saw that the grocery surges were happening a little more before Thanksgiving week so while the magnitude was pretty high then it’s sort of trended back down as we got into the major days so it’s,
it’s definitely a factor but it definitely got more limited as the week kind of War.

[18:00] Interesting,
and then let’s pivot to one of my favorite topics mobile so his one of the topics that we talk about a lot on the show is what I call the mobile Gap and it’s not specific to holiday but just this General premise that.
In increasingly high percentage of All Digital traffic is coming from mobile devices but in general the conversion rate on mobile devices is meaningfully less than it was on desktop devices and so you kind of have this Gap now
historically during holiday.
The conversion rate for mobile improved slightly and the percentage of traffic from mobile devices is even higher so with that background what did mobile look like for this holiday was there there any interesting Trends there.

Scot & Vivek:
[18:45] It really
lived up to our expectations because we had imagined about 37 to 40 percent of total e-commerce sales driving through smartphones.
And that’s exactly what happened when we saw about 41.1% drive-thru in in that period and
I would say it’s really kind of a testament to the retailers and what they’re trying to do in terms of frictionless payment and making
understanding that smartphones are the sort of dominant device even though people are in their home and you know you would imagine maybe laptop share would increase because
you know you can pull out your laptop and and really,
you know explore and have a larger navigation screen and things like that but it seems like the just a comfortability and the mobile first.
Kind of approach that consumers have taken really has soared through the year and continues to have an outsized impact when we look in the holiday season.
So pretty pretty staggering increase there for sure.

[19:53] Got it and it sounds like this mobile Gap I talk about still exists because you’re saying 41.1% of sales were mobile I’m assuming you’re going to tell me way more than half of all traffic was mobile.

Scot & Vivek:
[20:05] That’s right yes and what more visits I yeah and exactly some of these trends that you mentioning just these larger
order values for associated with laptops and desktops versus the small ones that I think those are just going to continue to incrementally we’re just going to have
have consumers just get more and more comfortable so they can continue to take up
versus just the sort of macro I’m ready to buy a massive you know High ticket item just quickly on the phone I think there’s a little more consideration there and some of those are still kind of being piped through on laptops.

[20:40] Interesting and then one thing that I’ve seen some conflicting data about I’d be curious if you have seen anything so traditionally there certain occasions that.
Increasingly be mobile right so the traffic you see the eCommerce sites on actual Thanksgiving on Thursday.
Tends to be disproportionately mobile and intuitively that makes sense right because people are at home with family and if they’re if they’re doing anything they’re jumping on their phone they’re not like excusing themselves from their guests and opening up a laptop.
But I’ve heard a hypothesis that this year because we’re all alone and we’re you know basically like the internet is our dominant form of entertainment that it actually.
Skewed things slightly more to desktop than we would ordinarily see and I’m curious if that if you guys see that Trend in the Adobe data set or.
Or have you can debunk that myth.

Scot & Vivek:
[21:37] Yeah I would say that we would we definitely saw that with Thanksgiving Day obviously experienced a lot of disruption in terms of this year and what what it could done but we still saw a strong level of volume and and mobile Commerce happening that that makes me think that
regardless of some of these Trends it’s just this bigger trend of.
People just being so comfortable with smartphones now that it’s not as as in
impervious or actually the opposite of impervious but it’s it’s not a it’s more resilient to some of these trends of we’re okay well now this is changed so now I’m going to go,
get a laptop or a desktop and get away from my phone I think we still saw a lot of momentum happening through smartphones on Thanksgiving day and it continued through Black Friday and Cyber Monday.

[22:30] Pickle the.
Do you guys have any so you mentioned that we kind of hit a promotional kind of peak around Black Friday and that got consumers really activated.
You guys track that in any kind of data oriented way that.
Another way of another thing I’m trying to get at is sometimes retailers will have a great sales Christmas but it will totally blow margin because to get the great sales Christmas they had to give away too much do you have any.
Any color on that.
I would say that for us you know we did we have this what we call our online pricing and decks that’s built into our larger digital economy initiative.
And so we’re tracking prices year-round we saw the big drops in apparel prices happen in in March and April and some of these things we can track in line with,
the CPI and at quite a frequent level of rapidity and then when we look at the holiday season prices,
we’re really tracking to see how much they’ll kind of stay down and again I mentioned this because we’ve been tracking them
all year round so we got to see what prices look like in October and I think there was this kind of rush to say okay.

[23:46] Prime days happening holiday season started right now and I would say that what we saw was certain retailers to draw you know saw a bit of a halo effect of.
Of prime Dade we saw prices come down within the range of five to ten percent but then they started to tick back up after we got out of the Prime day two days and then it kind of
against sort of slowly dropped.
And then as I mentioned on that Sunday coming into Thanksgiving week it just it took a much more significant drop and so,
when you think about it in those terms we imagine they’ll be
it’s sort of this weakening of the discounts kind of as the demand scales as we get closer to Christmas so it’s not to say oh it’s going to be this level of discounting.
All Season round so you know that the consumers have nothing to be concerned about in terms of pricing which is really important to them we essentially think that they were able this
kick into a different gear for discounts and it’ll start to scale up because ultimately they do want to preserve their margins and.
Long also providing good pricing and competitive options for consumers.

[25:03] Another topic that’s really interesting to me is the whole omni-channel aspect like we’ve talked a lot on the podcast about ship again and obviously and it seems it would seem to me one of the
the best ways to mitigate limited capacity from the shipping carriers is to sell the store inventory and have customers come and get it
via curbside pickup or click and collect or whatever the case is I know you guys are able to see the orders that are click and collect versus ship to home any industry interesting trends.
Around holiday utilization of curbside pickup.

Scot & Vivek:
[25:41] Absolutely so they are in a place where
test scaling this channel in a way where they’re able to even direct consumers we’re okay maybe but this may be the supply chain doesn’t support direct shipping so let’s let’s push them and think about curbside pickup quickly so we started to see.
Friday scale up bow piss or click and collect orders by 52 percent year-over-year it’s about 30% yesterday on Cyber Monday and what we expect is as.
The discounts weekend and we get closer into December and we’re we are in December sorry but as we get to Christmas.
There’s going to be this this focus on how do I get this product.
And get the best pricing and not get have my discounts completely nullified by my shipping costs so then they’ll be heavy utilization there so we we actually expect it to be the dominant,
mode of fulfillment about a week out from Christmas
so that it’s going to be a huge driver for these larger retailers as it has been this week in terms of helping them.
Absorb a lot of volume and say yes we have this product because and you just have to go pick it up.

[26:57] Cool one what kind of curveball here what what’s when you re looking at the data what just kind of jumped out at you as the biggest surprise.
I think what we were pretty struck by was just the level of.
The growth coming out of the main days while still maintaining a lot of volume coming out of the
earlier days because I think we were thinking about it in a little bit of binary terms which is its you know this all could be a little bit of you know.
Just just talk around okay it’s a it’s a cyber month
so you know everything you know I’ve seen black Fridays canceled its at certain places being written up and
what it was striking for us to see is know that they are they are holding holding their ground is as as tentpole days
but again on some of these other days the surging that was happening for for retailers who offer both Opus and,
who have who have made these inroads into early pricing and were able to deliver on some of that early pricing promise
they were able to scale on those days as well so you almost end up not with that sort of binary outcome but almost both Things become a little true so that was that was
it was it was really interesting for us to chart that.

[28:20] Very interesting you know one other question occurred to me.
Any insights about where what the big traffic sources were for for Holiday like I imagine there’s a lot more organic traffic on holiday than usual or a lot of traffic driven by email but I’m curious.
Like do we see a spike in Social we hear a lot about live streaming is that you know meaningful contributor what what’s bringing people to e-commerce websites for holiday.

Scot & Vivek:
[28:48] We’ve seen decent increases for social research for about a 17% increase for Cyber Monday and through Thanksgiving so
it’s one of those areas where it’s a category that we’ve seen traffic come through and we’ve always thought about how it operates as a channel for conversion versus awareness and then
fueling people to come through other modes so your
the organic search and paid search have definitely been drivers but then you the display efficiency right now is pretty staggering so that’s also been able to help,
I drive a lot of volume through for all these retailers.

[29:27] I’m glad to hear it.
We’ll listen to this has been a fascinating conversation but it has happened again we’ve run out of our allotted time for the special cyber five show I certainly appreciate you taking time out of what I know is one of your busiest days of the year to come talk with us.
As always if people have questions or comments they can feel free to leave us a note on Twitter or Facebook page.
And as always if you found value in the show we sure would love it if you jump on iTunes and give us that five star review.

Scot & Vivek:
[29:57] Thanks for your folks want to see your pontificate ins and data visualizations where should they go.
Absolutely thanks so much guys I really appreciate it and yeah I I’m pretty active on my LinkedIn
so if you just search Vivek pandya or Adobe on LinkedIn you should find me.

[30:21] We will put it in the show notes and thanks everyone for listening hope you had a wonderful holiday and until next time happy e-commercing.

Nov 20, 2020

EP246 - Q3 Results 

The US Census Bureau published its retail monthly data and quarterly e-commerce data this week. We also saw earnings reports from Target, Walmart, Lowes, Home Depot, Walgreens, and Kohls.

We also discuss Amazon’s entry into pharmacy

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

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

Episode 246 of the Jason & Scot show was recorded live on Thursday, November 20th 2020.


[0:24] Welcome to the Jason and Scott show this is episode 246 being recorded on Thursday November 19th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Jason it’s getting to be holiday and I don’t know about you but I am constantly being pummeled with.
Carrier pigeons direct messages tweets linkedin’s friend stirs just messages from every possible venue and guess what they’re asking.

[1:05] They are asking you to buy early from their store.

[1:10] I know that yes I am getting this but what I’m getting from our listeners are people saying Scott what can I get you guys have given us so much pleasure over the year through this podcast what can we do in return.
And my answer is all Jason I want for the holidays this year is your 5 star review.
So if you can hit pause real quick and this is best in your app that you’re using if you’re on the iPhone it’s pretty simple kind of need to do it in the podcast app,
believe that five-star review that would that would be really great and that would make our your for us here at the Jason’s got show we’d really appreciate that so whatever app you’re in go in there leave us that five star review that really helps us a lot.
Keeps us at the very tippy top of the e-commerce podcast realm so we would really appreciate that.

[2:04] So alright welcome back hopefully you did pause and leave us that five star review we appreciate it.
Jason we are T minus seven days until turkey day and this is the time of the year where we really start to feel it you know kind of that nervous energy.
Here in the Commerce retail e-commerce world,
everyone holds their breaths and they been working all year planning for this they’ve got all the server’s lined up all the clouds clouding,
and just hoping that the next 20 days are super awesome but they’re also scary for everybody so.
And then this year with covid everything is going to be cranked up to an 11 we’ve talked a lot about ship again we’re going to do an update on that so we thought the days show we would.
Kind of stay on news because there is a lot going on and first of all I thought we could hit some of the really interesting Amazon news.

[3:05] Amazon news new your margin is their opportunity.

[3:17] Jason you have I think you’ve been I can’t remember where it’s been all cheer now I can’t remember if you predicted this but you’ve been really
kind of keeping an eye on Amazon’s aspirations to get into the pharmacy world and if I remember they bought that pihl company was at pillpack and then there was some news this week update us on what happened and what you’re thinking what’s your
what’s your point of view is it time to stop going to Walgreens and CVS.

[3:46] Yeah so side note I was actually revisiting that prediction Show recently because I was trying to cheat and edit in that I predicted a global pandemic.

[3:57] No that’s not fair no cheating.

[3:58] No I would never cheat but if you happen to notice that there I must have in fact predicted it.
But yeah so we’ve talked a lot about this we’ve talked a lot about Amazon and Walmart’s General aspirations around Healthcare,
and for sure I think for the last several years I can’t even remember which year we first predicted it but like we predicted in the past that Amazon would get into Pharmacy.
And we we’ve seen sort of three previous Healthcare actions,
they actually applied for and received a number of their own Pharmacy licenses so you have to be a pharmacy you have to be licensed in every state they got licensed in a bunch of states for medical equipment so that’s not actually the,
the the medications that’s things like.

[4:48] Pulse ox monitors and glucose meters and and orthopedic equipment and prescribed equipment that customers might want to buy so so they kind of.

[4:59] Did their first step in getting some pharmacy license has a lot of us speculated that that could be a precursor to getting a medical dispensing pharmacy license.
So then they bought pill pack which is a pharmacist and online pharmacy that already had a bunch of Pharmacy licenses so they kind of got.
If memory serves something like half the country covered just by buying pillpack and for listeners that aren’t familiar pillpack has kind of a unique value proposition,
they’re a mail order pharmacy that mail your your prescriptions to you but instead of giving you all 60 of your doses of Lipitor in a bottle,
individually packaged your pills for each day so if you’re taking three conch medications you get a little plastic.
Vacuum-sealed bag with the three pills you need to take each day so make it make it super easy to take each day’s thing and so they bought pillpack they’ve been continuing to operate pillpack they’ve even done some pretty extensive,
marketing and advertising for pillpack.
And then right around the beginning of this year they bought a medical technology company that does like.
Telemedicine medical triage it’s kind of like artificial intelligence for what are your symptoms and I’ll tell you what likely is wrong with you kind of stuff.

[6:23] And then they’ve used a lot of those Technologies.
To roll out some for some health care clinics but the health care clinics are not for the general public at the moment there for Amazon employees in specific cities like.
They’ve opened a number of clinics near.
Near some of the FCS and they’ve opened a clinic near their corporate headquarters in Seattle and they I think they even develop their own covid testing.
Capability that they use in those clinics to test employees.

[6:51] Yeah when we went in our deep dive I remember them saying they were doing you know tens of thousands of daily testing so pretty pretty substantial just internal testing effort which was pretty interesting.

[7:03] So that’s all the history of Amazon and Healthcare and what we’ve been waiting for is when do they do something that strikes fear into Walgreens and CVS and the answer is probably this.

[7:16] Yeah saw the stock I’m not a big tracker of those stocks but I saw CVS was down from like the mid 70s and mid 60’s so kind of a 10% drop in I imagine Walgreens with similar.

[7:28] Yeah and I think they one or both of them had earnings calls recently and.
Somewhat counter-intuitively and maybe sometimes we get into this the those pharmacies are not.
Beneficiary major beneficiaries of covid in fact like their comps are down.
So so they are ready we’re kind of a little soft and then this Amazon announcement they all had an impact.
We’re still trying to figure all the details out but a so Amazon has announced that you can now there a nationwide Pharmacy and you can buy your your prescriptions from Amazon and you’re not.
My my understanding is you can now get like a normal person gription from Amazon it doesn’t have to be the pillpack configuration.
And it’s available Nationwide but what they really focused on they didn’t give a lot of details about that about how you would order your your traditional prescriptions,
if you had Insurance because what they really focused on is they had done a partnership.
With a I think the company is called The Insider RX to dispense prescriptions to people that don’t have insurance and give them the best possible price.

[8:50] So it feels like this first segment that they’re targeting for their kind of Nationwide Pharmacy offering are uninsured customers or underinsured customers,
and help them get affordable access to a prescription,
outside of the insurance system and there’s a variety of reasons that are probably doing that it turns out there’s.
A lot of exclusive deals in the insurance networks and so it’s probably really hard for Amazon to,
say hey Scott order your prescriptions from me and will submit it to whoever your insurance is and will get reimbursed.

[9:29] Do you think when I go to my doctor soon I’ll be you know they always say what’s your favorite drugstore I’ll be able to see Amazon Pharmacy and then that’ll connect those things are as that a naive the other.

[9:37] So that that is petition clear because here’s going to be the problem say you have some new medical problem and the doctor wants to prescribe some a one-time thing for you,
they’re going to they’re going to write the script and most insurance company your insurance company is going to pay no matter where you feel it so they your doctor can probably send that to Amazon and a big part of this on Amazon offering is 2-day delivery so if it’s.
If it’s something you need you know that you can start taking two days from now that could totally work.
Often when the doctor writes a prescription for some acute problem in the office you’re going to stop on your way home from the doctor’s office to fill that prescription.
And so Amazon’s not super competitive at that,
but in most cases that first prescription the most credible insurance companies are obligated to compensate the dispenser for that so there’s not a lot of controversy about that,
what gets controversial is,
if you have some chronic condition that means you’re going to take some medication for the rest of your life like the most popular which is like a Statin for high cholesterol.
Right so a lot of insurance companies now say.
Hey we don’t want you to buy that every 30 days from a retail pharmacy and pay the highest price we want you to use our Pharmacy and they’re going to send you a 90-day Supply and will only cover this under insurance if you get it from us.

[11:04] And so the NAT those mail-order pharmacies are often operated by Rite Aid and CVS and Walgreens so they all they all have you know CVS Caremark for example,
the do that mail order on behalf of insurance companies but there’s a lot of exclusives there and that’s the.
The part of the the pharmacy business that I don’t know for a fact but I would imagine is harder for Amazon to crack because they would literally have to go to these,
these insurers and get them to too.
Except Amazon is a dispensary and they have to negotiate pricing rates and they probably already have an exclusive deal with another for provider.

[11:46] So if your Amazon you’re trying to grill and Pharmacy you go oh the these ad hoc prescriptions is one place I could grow but really I need to do like one hour fulfillment for those which Amazon did not announce here.
And then the other category is a huge chunk of prescriptions are sold without insurance and so it seems like that’s where I Amazon’s really focusing and so that’s actually not the.
The bread and butter of Walgreens and CVS there are third parties that provide,
discounts and promotions to those retail pharmacies so these are companies you’ve now seen television ads for good RX and.
Shoot what’s the one with Martin Sheen something care.
It’ll it’ll come to me later but there’s a couple companies out there that are kind of in the business of,
aggregating coupons and letting customers get a cheaper price when they have to get a prescription from Walgreens without a,
a prescription and that is basically what Amazon is offering so the well Walgreens and Rite Aid like took a little bit of a value hit like who really took a value hit was good RX.
Because it seems like Amazon’s competing directly with them.

[13:07] Single care.

[13:08] Single Care thank you I knew it was something here.

[13:11] One of our one of our interns were handed over to you.

[13:13] Yeah so like the the kind of Market.
Whiplash action like really hit those guys and I’ve seen the number of analysts that follow the industry pretty close and they’re like you know what there’s a bunch of nuances,
Amazon is not going to be able to to kind of immediately impact those those businesses and the in the trade agreements are kind of complicated so,
my sense is that some of the stocks have already rebounded from this initial kind of.
you know every so I mean kind of we’re getting a little in the weeds but rolling all this up there’s there’s a theory why everyone shouldn’t be afraid of Amazon but of course you and I know as a general premise everyone,
should be afraid of Amazon so this first offering may not be you know the one that that,
dramatically impacts any of the existing players businesses but it certainly reaffirms Amazon’s interest and intent in disrupting this industry.

[14:17] Yeah and whatever you do if you’re an executive at one of these companies never ever say that you’re going to Canvas ons but or you’re not worried about them or they can’t do your your business.

[14:28] Yeah I the exact phrase you probably shouldn’t utter is Amazon’s great at selling X but our business is uniquely complicated and difficult.
Much different than all the businesses Amazon successful and therefore Amazon has no chance of succeeding.

[14:46] Another one you probably shouldn’t utter is we’re a hundred percent Amazon proof.

[14:52] Exactly we’re Amazon’s partner not there their competitor yeah so I feel like and besides Amazon’s never made a profit so there’s that.

[15:01] That is so true so true you and I have that till the cows come home.
Course that’s a little Amazon update and we’re going to keep an eye on this Pharmacy very closely because we do think it’s going to be this could be a billion dollar pillar if you know this is a nibble and you know this kind of the second Noble after pill pack I would kind of say,
but it’s clear Amazon has their sights set on this one just General Health Care and so does Walmart so it’s pretty interesting Battlefield coming up,
let’s pivot over to ship a getting one of our favorite topics so,
because you and I are the ship again guys we are getting hit with all the ship again news and in fact,
if folks have hair dryers they’re taking a while to get to them or let’s see iPads or anything you and I to know about it so that’s part of the fun of being the ship again guys.

[15:50] I like being the ship again and Guy exactly.

[15:52] I do too I’ve learned a ton so let’s go through what kind of do a lightning around here,
first thing I’ll apologize listeners I talked about putting a model out in the last show and my day job has been kind of busy so I have not had chance to work on that I’m hoping to work on that this weekend,
so stay tuned.
The speaking of Amazon they had an article today where they are telling folks and I think this is I mentioned at the top but you know we should say,
it does look like we’re having that that V or swishy shape at least from a covid perspective so cases are hitting all times Highs hospitalizations are at all-time highs,
so we’ve got kind of the second wave of the pandemic and I think what Amazon is saying is if they have to go back into kind of that March centrioles only mode.
If that climbs the holiday it could be kind of cataclysmic so so I would say,
you know if we were keeping track of some kind of a scorecard of ship again every week since we’ve introduced it I think the chance of it getting worse than you and I even predicted are increasing.
Let me pause there and see if you agree on that.

[17:04] Yeah no totally and I think to try to mitigate this a lot of people try to entice customers to shop early and I my sense is that that mostly hasn’t been successful so.

[17:17] So Amazon came out and said hey you know you got
really really seriously you need to shop early this year because even we won’t may not be able to get you what you need so that was pretty interesting for them to being there
of course people kind of are like sure they want to shop early so there’s it’s going to be saying there’s going to be a segment of consumers that
I kind of think it’s fake news if you will and they do not take advantage of this and you know the Doomsday scenario is Amazon gets
and you know swamped and has to move into Central kind of stuff stores go through shutdowns in certain areas I think California actually is doing it in Chicago or are your store shut down.

[18:00] Yeah so we’re on a advisory which is like the softer language of a shutdown and it basically meant stores.
That were previously allowed to be at 50% maximum occupancy or now a 25% so they haven’t closed them but they’ve more severely constrained the traffic that’s allowed in.

[18:19] Yes that’s one news item and then,
several folks have reported to us drop buying products directly from Apple that most of those products are showing a inability to get anything by Christmas and this is before Thanksgiving started so.
If anyone in your you know if any of your holiday gifts are going to be of the apple variety you need to really look at that closely and then,
um I’ve had I had this exact same situation and I found you can go to Best Buy and some of the other kind of apple Outlets if you will and they,
they have little bit more inventory than Apple interestingly enough.

[18:59] And then friend of the show Erik Heller he saw an Amazon van and this is kind of part of this DSP Network I don’t think Amazon directly to this but it was clearly a UPS van that had been painted with the Amazon Prime on it so,
so I think a very clever Amazon DSP partner,
you know there’s this problem that new Vans are just all spoken for for for six months and I know this from my day job,
and so people are going out and finding anything they can so there’s the used market for delivery vehicles these are things that are like.

[19:33] 10 to 20 years old at this point there are basically taking anything you know that runs imagine someday we’ll see,
some old yellow school buses painted with prime paint and stuff with packages and they’re putting them out into the fleet I’ve little Battlestar Galactica kind of a fleet that that’s going on out there.
And in addition to that I’m getting a lot of interesting pictures of what I would call Super janky vans that,
that are being used to deliver packages now so yeah I saw one that was looked like it had been maybe in Beirut and it had like as part of the FedEx ground which is a 1099 Network kind of like the DSP program,
and then add like the tiniest of FedEx stickers on it is really funny it was like a nine by nine square it was like FedEx Ground in this like sea of denser along the side of the packet the truck so.
That is the ship again news did you see anything else that was interesting.

[20:31] No I think you you covered most of it it just a reminder that,
this is by far the most acute version of the van problem member but they’re like a version of that plays out every holiday,
um you know FedEx and UPS maybe aren’t trying to acquire a ton of new Vans but they would like to have more Vans available so they go out and rent a bunch of vans.
And then we end up with this porch piracy problem.
People see like an unmarked rental van like pull up and some you know none uniform Guy come out with a bunch of packages and they often it’s a legit.
Delivery person and they get reported to the police as a potential porch pirate so I imagine all these Jinky Vans are going to make that even more cute.
And then I just want to plug this one side note in my market here in Chicago Amazon key for business has been going door-to-door to all the buildings,
and they’re offering to install like the secure access system so my I live in a little 12 unit Condo building and we just installed the Amazon key so now all the Amazon drivers.
Can open my front door without without having to call us on the call box and drop our packages off.

[21:45] The front door to your interior door or the building door.

[21:49] Building doors so they get in they can now get access to our mail room to drop off packages.
Which is interesting because Amazon can do it and it’s all Wireless and it’s it’s access controlled so they can only deliver.
You know during appropriate hours and and there’s a log but like FedEx and UPS can’t do that.

[22:18] Yeah and then I know you’re on pins and needles to jump into this there was a data drop that you want to tell listeners about.

[22:26] Yeah it’s a datapalooza week I’ve been super excited.
So this is a fun week for me on Tuesday of this week the US Department of Commerce the US Census Bureau.
Drops their monthly retail sales data so we got that data on Tuesday and then once a quarter every three months,
they drop this supplemental e-commerce report so on Thursday we got the Q3 supplemental e-commerce report.
So both of those.
Are kind of fun and in general and in particular in covid times when things are changing so much it’s super interesting to get fresh data about what’s going on in our Marketplace.

[23:11] Yeah and if listeners are interested we had a full show on this the episode
so number escapes me while you’re talking I’ll get one of the interns to work on it but but yeah so I always kind of because I don’t live in this data like you do I always have to go refresh myself but but walk us through
that data and what was exciting.

[23:31] Yep so first of all that was episode 239 which was back in the beginning of October that we had to Paul and Scott on from the US Census Bureau to talk about how they prepare this data and kind of,
talk about some best practices and how to use it,
um so the first data set to come out is the monthly data and in basically every retailer in America fills out the surveys.
And what they sold in a given month in the US Census Bureau Aggregates it all up and so you know about 19 days into November or 17 days in November we find out what sales were like in October.
So retail sales in October where up.
Eight point five percent year-over-year so that means.
October 20 20 in the middle of covid we sold 8.5% more stuff than we did October 2019 which is very healthy.
Like that cat.

[24:32] Pretty crazy like last year we were going like everyone was excited like 3% Yeehaw it’s crazy crazy Tom.

[24:40] Exactly and so we can get into in a second into why retail sales are so up there’s some good reasons for that covid is.
Stop spending in some non-retail categories and it’s actually shifted that spending into retail categories so,
you used to go to restaurants which are not retailgeek,
and instead you’re going to grocery stores now which is retail and you used to fly in airplanes and stay in hotels which is not retail and instead you’re buying stuff to fix up your house which is retailgeek.

[25:13] Some would say it if you charted it looks kind of like a v-shaped recovery.

[25:18] Yeah in West you look at all the categories in that V and those people would now say as a w-shaped recovery for the record because it’s.
Like probably because of covered right now it’s going the wrong way so we’re probably going to get two v’s right next to each other but that that aside the so eight point eight point five percent,
year of your growth is awesome again you could take categories out of that there’s a category in that that’s called non store sales which is kind of our proxy for e-commerce,
it was up 29% so almost thirty percent which is interesting,
if you pull some of the categories out that aren’t traditionally very e-commerce e like if you pull auto and gas out of the retail number then you’re over your sales were even up better they were up like 10.8%,
um so,
so Healthy Growth interestingly a lot of the reporting on the data was negative because what they mostly looked at is the change in sales from September to October,
and the growth from September to October was very modest it was 0.3%.

[26:34] And so a lot of people interpreted that as,
kind of the recovery petering out and Scott being wrong and it not being v-shaped but In fairness to Scott I’m going to say.
I don’t actually care about month-to-month growth because,
every month has a different set of shopping intense attached to it and it’s,
it’s just like the month-to-month changes just aren’t traditionally that linear and they change every year depending on the number of days,
um you know weekend days versus weekdays and all these other factors so I just in general I care a lot more about seeing Healthy year-over-year Growth than I do the month to month growth but the people that worked at the month-to-month growth were like oh,
things are slowing down.

[27:27] Got it yeah you’re over yours Waco.

[27:30] Yeah and so yeah and so in general if you then break it down into categories there were category like building materials is up 20 percent from the same month last year.
E-commerce I mentioned was up 29%.
What else is a big cars or up big like 11%.

[27:55] Yeah the Auto industry is on fire right now.

[27:59] Yeah well yeah dip their two sides of the audio and Industry that you would know better than me right like the guy selling vehicles are doing great the guy selling gas are not doing well.

[28:08] People are buying cars and then promptly not driving them which doesn’t make a ton of sense.

[28:13] Exactly.

[28:14] I need a new car that I’m not going to drive.

[28:16] Yeah and then grocery is up like 10% so those are the categories that had like like frankly like huge tail winds from,
from covid you didn’t go on a vacation and you got a stimulus check so you bought that new car and you’re thinking your your vacation this year is going to be a car trip right so you bought that new car,
you’re not going to restaurant so you’re buying more groceries you’re you know you’re not traveling as much so you improve your house right so those categories were the big head winds and then exactly as you would expect,
there’s a categories that were big losers gas is down 14% people aren’t driving to work right apparel is down thirteen percent you know people aren’t wearing as much clothes department stores are down 12%,
and restaurants are down 15% so,
that that’s kind of how the the monthly data played out and I would say these were all trends that we saw in September and they continued through to October and so I didn’t see any like.
Dramatic changes of Direction this was this is all pretty what we would expect at this.

[29:27] Yeah and what I peeked at the data one thing that jumped at me is it looked like,
you know the pork kind of fashion industry is just taking it on the chin and it seems like it’s getting worse is that is that your read on it like it’s decelerating even more.

[29:44] Well so yeah it depends on how you worked it got really decelerated early in covid when people weren’t going to stores and going to malls,
and then it started to recover a little bit like there is a hypothesis that like.
You might need some warmer clothes even if you’re not going anywhere and one more clothes are more expensive than summer clothes and so like,
in general you want you expect to see a little bit of a lift in Winter I don’t think we’ve seen a lot of that and it’s just this triple whammy like apparel had a bunch of head winds before covid-19,
there’s they have more head wins in covid and the majority of places where people buy clothes separately have a bunch of head winds from covid so it’s a.
Triple whammy against the apparel industry and and I would say just in general,
ten years ago you spent six percent of your income on close today you spend three percent of your income on clothes so it’s just like there’s no there’s no good news in the apparel space.

[30:47] Yeah so I’m an e-commerce guy and I like the simple version of this so this data said and Q2 Commerce group 45%,
this data drop isn’t the one that really pinpoints e-commerce right that’s the one.

[31:02] Two days later we had that one drop right so last quarter exactly you said 45% e-commerce growth and so this quarter was lower it was 36% e-commerce growth 36.7%.

[31:16] Okay so that has dropped okay yeah so the non-store being 29 isn’t just e-commerce they do this other drop that just e-commerce and that was higher than that 29.

[31:25] Exactly exactly and and the that 2019 was a monthly number the the 36.7 percent is a quarterly number.

[31:34] Okay good alright.
And then but that’s interesting because Amazon came in at 37% but that’s,
total Amazon North America was 39 and then if you took out physical stores which I think is the best comp they were at like 40 percent.

[31:57] Close to this 37% right like so they they tracked last quarter so Amazon last quarter was 43 percent and the industry average was for the quarter was 45%,
this quarter Amazon’s 39 percent in the US and the 44 your point if you want to take out the stores and the industry average is 37 so they’re there,
they’re right in line and not shockingly Amazon is a reasonable.
Surrogate for this quarterly data now another thing you get to see in the quarterly data is what percentage of all retail e-commerce is.
And so last quarter to two retail was like e-commerce was like sixteen percent of all retail including all the categories that.
The US Census Bureau includes in retail which does include like gas and restaurants,
I’m sorry not restaurants but it does include gas in cars so so last quarter was sixteen percent of all sales this quarter it’s dropped down to fourteen percent of all sales so what.
This is totally intuitive but what could have happened is for part of Q2 brick-and-mortar retail was closed or less accessible and so e-commerce was the only alternative right so as we moved into Q3.

[33:11] People are continuing to lean on e-commerce e-commerce is still super important it’s the fastest-growing way for people to shop and new people that learned how to shop that way are continuing to use it but.
People do have better access to brick-and-mortar stores in Q2 and so in Q3 than they did in Q2 and so the brick-and-mortar sales came back a little bit more which means the ratio of e-commerce to Brick and Mortar drop down a little bit.

[33:39] Does that make sense and that’s also frankly why I mean 29 percent is or I’m sorry 36 percent is still unprecedented growth white compared to a normal year.
Yeah but so the reason it didn’t grow quite as big as because you didn’t have this you know hey all the clothing stores are closed and I need socks.

[33:58] So one way to read this is if we kind of draw a line from Q2 at 45% and now we have Q3 at 36 percent you could say Q4 continue to decelerate be like you know low 30s right
or you know I guess what I’ve been thinking is we’re going to see a pickup again where it’s going to kind of.
I think the more likely scenario is it will stay at this elevated kind of high 30s and there’s a chance it could go up into the 40’s like we saw you too especially if we have this covid situation and I’m specifically talking e-commerce here.
Does that do you agree with that or did you come to a different conclusion now you’ve seen the data.

[34:38] It’s hard because I’ll call it like the five-factor model right like so if Q4 was just another quarter like you’d probably predict like a linear Trend here and so the rate of growth would probably slowed a little bit more,
um but Q4 isn’t a normal quarter it’s a quarter that has accelerated consumption overall and accelerated spending and so in a world win a disproportionately high percentage of that spending is online that should actually.
Accelerate the rate of e-commerce right so that’s that you know the second Factor the third factor is that the.
Fourth quarter like was already an uncharacteristically high quarter for e-commerce why people have already learned a shop online more for gifts than they do for their day-to-day needs,
so that would it’s hard to grow from the bigger number so the fact that Q4 is the biggest number of last year means the rate should slow down a little bit and then we have the ship again in factors like,
do retailers have enough inventory do they have enough shipping capacity so you kind of apply all,
you know some some estimate for all five of those things and like I think we’re going to end it a super healthy number I kind of put that 33% out there is like where we’ll probably land so that’s,
so I D celebration from this quarter but still you know very healthy by historic standards.

[36:01] Yeah cool and then there’s also so on top of this data there was a plethora of folks we covered Amazon and really dive here but we we’ve had a good more than a handful of retailers
push out their results what were some of the highlights you saw there.

[36:19] Yeah so yeah it was a good week for earnings so Cole’s announced this week in their comps are down,
it’s so funny how Wall Street works by the way right like so cold like Cole cells apparel apparel sucks their comps were down 13 percent but because the expectation was that they would do even worse that was actually favorable to their stock right,
e-commerce for Cole’s was up 25% which compared to all the other categories we’re talking about isn’t that healthy but for Cole’s where e-commerce has been a challenge for a variety of reasons like that’s pretty Healthy Growth,
it’s a dramatic deceleration like coals had 45% e-commerce growth in Q2 they’re having 25% e-commerce growth in in Q3,
and so that’s interesting right.
The next retailer that announce earnings this week was Walgreens and they announce earnings before this Amazon news by the way so I don’t think this Amazon news head.

[37:19] I mean I didn’t have any impact on their earnings so their us comps were up three percent I think they’re Global comps their their their parent company owns boots and UK
I think overall complement of actually been down so I’ll your flat but us comps were up three percent which is kind of traditional grown on covid growth,
e-commerce was up 39 percent and what’s interesting and Walgreens was a little bit of an outlier their e-commerce was up 39 percent in in Q3,
30 commerce was only up 23% in Q2 so they’re one of the few companies we’re going to be talking about today.
Who’s e-commerce is actually accelerating which of course bucks the industry trend.

[38:02] Yeah I wonder why.

[38:04] Yeah I don’t know the real answer part of it could be that none of these companies were.
Awesome and e-commerce before covid and so you could imagine that like hey as they suddenly had a lot more demand for e-commerce they scrambled.
Improve their e-commerce amenities and stabilize their site and do all these things and that they got better operationally in Q3 but I don’t know if that’s actually true.

[38:31] Yeah or they rolled out curbside and that gave him an attribution her.

[38:34] They for sure did roll out curbside in the middle of all this yes.

[38:37] Yeah yeah that helps yeah or speaking from anecdotal evidence they now have hand sanitizer so maybe that drove it.

[38:46] Anybody that has hand sanitizer you would totally want to to be betting on right now,
so that the next two people that do earnings where the do-it-yourself stores Lowe’s and Home Depot and reminder they’re one of the huge winners in covid people people are spending way more money on their home as a result of covid-19,
and solos comps were up 30 percent which is nosebleed like that’s amazing.
Why do you spend your whole career in retail and you never have a 30% like comp for the entire network that’s crazy their e-commerce was up a hundred and six percent.
E-commerce is very significant is the stores but as a percentage of total sales it tends to be kind of below because they sell a lot of items that aren’t that convenient to ship.
So as curbside picks up like e-commerce gets unlocked for a lot of these guys but hundred 6% is way above the industry average and then to compare that and cute,
to Lowe’s was 135 right so they had a huge e-commerce quarter last quarter and there.
They had another big one but their rate of acceleration has grown but man a lot of people walked in the store and spent a lot of money.

[40:04] And then Home Depot also like very impressive like just doesn’t smell quite as good as well as their us comps were up 24-point 16% which again is amazing,
unless your your direct competitors up 30 their e-commerce for the quarter was up 80%.
I’m trying to remember they were a hundred percent last quarter so same same kind of story they went down from a hundred percent Q2 e-commerce to 80 percent growth Q3 e-commerce,
and then they also announced which I like to keep keep an eye on 60% of other e-commerce got fulfilled from the store so either it was a store pickup or they ship the products direct from a store.

[40:47] So that’s the do-it-yourself guys and then the last guys are too big General Merchants Target and Walmart both announced this week,
and let’s do Walmart first Walmart had,
very good comps on a very big number right so there comes where 6.4 percent which doesn’t sound as impressive as the home-improvement companies.

[41:10] You know if you consider the Walmart is the largest retailer in the world like growing 6.4% is.
Ginormous we meaningful to Walmart,
their Q3 e-commerce was up 79 percent versus they were up 97 percent for Q2.
So so though that was widely considered like super solid numbers across the board and well above expectations for Walmart so they had a good.
Good earnings call Walmart owns a separate retailer Sam’s Club which also had good comps they were their comps were up 11.1%.
They’re the club e-commerce isn’t quite as big a deal so Club e-commerce for Sam’s was up 41%,
and Sam’s announced that they had 10% membership growth as these club guys are all membership-based so 10.4% membership growth so so both Walmart and Sam’s Clubs did well,
the what’s interesting though is.
Hard yet which is much more than Walmart but you know probably the most direct analogous competitor to Walmart,
and Target like in my mind may have the most phenomenal performance of all these companies so their comp growth was 20.7%.

[42:32] Which for a general Merchant with as big as they are that 20.7% is huge,
they’re they’re digital drums was a hundred and fifty five percent which is way down from last quarter’s a hundred and ninety-five percent right so so but unlike where we were talking about these big numbers in the Home Improvement guys,
Target is one of the biggest e-commerce sites in the US so the fact that they’re like growing at this pace is super impressive and of course.

[43:05] Target is excellent at Boba so they own the shipped vendor and they a lot of their e-commerce is,
same day at stores so they’re they’re same day delivery sales were up to hundred and Seventeen percent so people are,
totally taking advantage of those amenities,
and in to me this is an inside baseball step but it’s one of the most eye-popping things of all 95% of all of targets orders are fulfilled from stores so target has amazingly said,
we’re not going to build a network of fulfillment centers and have all this fragmented inventory and,
rely on FedEx to get our stuff to you we’re mostly going to sell our store assortment to people and make it really easy to come and get it or will drive it to your house as a last mile solution and that’s working phenomenally well for.

[44:10] Yeah you do like after this year probably want to retire those places because you probably don’t want to be comping against all this the I will also say just some interesting like inside stats and Target.

[44:23] I’ve seen similar stats in the past from Walmart but so targets ticket went up pretty considerably like the average orders up 15.6 percent.

[44:33] Which means that traffic was only up 4.5% right so,
like people are going to the store less and they’re buying more when they go to the store like Walmart version of that’s even more extreme like their traffic might actually be down in their average ticket might be even higher,
so Walmart and Target are beneficiaries of this right and for a variety of reasons,
um at the moment you want to be a retailer that sells a lot of different stuff because if consumers want to visit fewer stores they’re going to go to the stores that have all the stuff they want right so,
Target and Walmart win on assortment you for sure want to have essential good so that you’re not forced to close at any point when the covid spikes and Target and Walmart both.
Both meet that criteria and for a variety of reasons
you want to be a big company with a robust supply chain and leverage over vendors so that you can get products on your shelf to be able to sell,
and so covid is disproportionately benefiting big healthy chains over small independent retailers and Target and Walmart are both big healthy chains so,
that’s that’s basically what’s happening in unrelated news that I totally don’t understand but I’ll just mention it while we’re talking about Target Target also announced that they’re cancelling their subscription program which totally surprised me.

[45:55] Because like subscribe and save it at Amazon is a very successful very important program and it’s a bunch of vendors toy lean into it there’s a lot of reasons to say that consumers,
are really interested in these auto-replenishment Solutions like subscriptions,
and so you know you’re seeing a lot of retailers that don’t have robust subscription programs trying to add them,
Target canceled there’s and what they said was,
customers like our same-day pick up so much that what’s happening is they they don’t want to be on auto-replenishment they just want to know that like as soon as they realize they need something they can get in an hour with home delivery or store pickup.
And so.
I believe Target’s good at one-hour delivery through these same day Services I totally get that and I get like that therefore,
their utilization of subscription might be less than some other retailers but I just I would have imagined there was still a loyal cohort that preferred subscription,
and and didn’t you know it just surprised me that they had something they turned off I guess.

[47:04] Yeah well maybe yeah they listened to our customers got it.

[47:08] Yeah yeah I mean I trust that they know what they’re doing and their results kind of speak for themselves so that it I just found it interesting so that was kind of the,
the stick on earning so that was a ton of super exciting stuff I did see just a couple other little news news bits.

[47:27] It does always make me scratch my head though because you know all those were significantly greater well there’s this attribution problem but I think I think the attributions about the same if I remember,
the the guys so if all these guys were a hundred percent Amazon grew in line who grew is zero or negative I guess you have like JC pinions here’s like the.

[47:49] So you notice there were no in this hat week there happened to be no department stores that reported right and so all those department stores are going to be soft,
there was one apparel retailer it was Kohl’s and they were significantly negative right but if this had been an earnings week where we had 20 apparel retailers.
White might you know you you would have expected all or the vast majority of them to have negative comps right,
so we do have Gap I think is coming up next week like that will be an interesting one to watch from an apparel standpoint,
we also have a Best Buy and dicks and they’re going to be more interesting to me because I can like I’m sure the expectation is the gaps going to have pretty severe e- comps,
Best Buy and dicks are boat like so sporting good stores are kind of another beneficiary of covid so you’d expect them to have really good cop.
And slightly surprisingly.
Electronics has been mostly like a minor beneficiary of covid so it’s been a bump but not a very big one.

[48:57] Yeah so a couple of things so we’ve got some new iPhones so that could surprise us and then the gaming consoles I don’t know if you track this but the the new Xbox and the PlayStation are sold out everywhere and there’s a,
just unmitigated frenzy for those unlike I don’t think I can remember,
maybe when the we came out it was like this but I haven’t seen quite such a frenzy for those two units as we’re seeing right now so the problem is no one has them so so I don’t know if they’re going to be able to be in your your.

[49:28] Well that’s like I’m assuming they wouldn’t be in Q3 comps anyway I’m assuming like they’re like even if you did it took a pre-order in Q3 I don’t think you recognize the revenue until you can fulfill it.

[49:38] Yeah iPhone Pro was right 12 Pro 12 and.

[49:41] Some a subset of the Apple stuff started to be in Q3 but the bulk of its going to be in Q4,
the the video game platforms are going to be in Q4 I totally agree I like there’s a lot more Tailwind e stuff for consumer electronics and Q4 just like,
there was a lot of tail in windy stuff for electronics in the very beginning of Q2 like when you first went home.
Everybody upgraded their home office right so everyone bought a monitor and they bought a laptop for their kid to do school at home and you know so there was this covid Spike for electronics it just wasn’t sustained you didn’t you just
you didn’t keep buying new electronics over the last six months and for your point.
There’s going to be a lot of people like you know treating themselves Q4 and so you know I it won’t surprise me at all if,
if Best Buy has a good Q4 but I’m kind of not expecting them to have a very spectacular Q3 but I’m not a stock analyst so we’ll see.

[50:40] Yeah be interesting to keep an eye on it.

[50:44] Yeah and then any of that surprised you Scott or do you feel like.

[50:51] These numbers are just like so high it makes me a little suspicious like yeah I think so I think Walmart continues to benefit from grocery Target doesn’t sell that much grocery do they.

[51:03] They’re leaning pretty heavily in the grocery and so it’s they’re not as good at grocery as Walmart but it’s a much more meaningful part then it was even six months ago.

[51:12] Yeah I wish we could peer inside of there and like you know kind of like the department of the Census Bureau level of category data I think what we would find is it’s kind of interesting but.

[51:22] And so I should say one side no non-target well they are selling a lot of grocery and they’ve dramatically improved their merchandising and offering and grocery what they haven’t had until just now is,
e-commerce for grocery so all that curbside pickup and same-day stuff it has not has been for general merchandise not fresh,
and like I think only as of like four weeks ago or they now starting to really sell fresh through that stuff so I suspect that will be another,
another bump for them when they get that up to scale.

[51:54] Yeah it’s going to be interesting to watch The Apparel guys I think that’s where we’re going to see the big loss is coming from and you know I think they’re they’re suffering and we’ll see how that doesn’t further closings are not going to do well for me.

[52:07] No I agree I think the department store guys in the apparel guys it’s going to be pretty rough.
And then like just to slight news Tibbetts I’ll just throw out there for those of you that want to go read up on your own the I just thought interest were interesting one of the trends I talk a lot about is,
um Brands going direct so you know major well-known Brands going direct to Consumer we’ve talked about PepsiCo has a direct to Consumer site,
so fun fact there it seems like they’ve refreshed that site so,
seems like it has a lot of new content but the new one this week is Coors Molson,
launch the direct-to-consumer site and nobody would have had that on their bingo card right like delivering alcohol like a major Brewery delivering alcohol to home,
why is a pretty interesting pilot that I hadn’t heard a lot of people talking about now it’s in UK it’s called the Revel I don’t know a ton about it but that I just that was an interesting thing that I have on my.

[53:13] My notes to learn more about and then obviously I follow digital grocery a lot it’s super important Trend in this whole covid thing ahold,
just bought fresh direct which is a native digital Grocer in New York and it’s super interesting to me because,
Fresh Direct is a hold in very high regard their their small grocer that was born digital I would argue they have a much
more mature Richard digital grocery shopping experience than almost anyone in the u.s. because they’ve been doing it better and longer but they’re their promise scale like they,
don’t serve a lot of customers you know they’re in there in one geography,
a hold is a much larger Global grocer but has kind of a modest footprint of stores in the US until recently a whole don’t.

[54:05] Like the best fresh direct competitor which would have been Peapod here in Chicago and so what’s what’s odd to me is like the month before covid ahold got divested themselves shutdown Peapod.
Which was bad timing,
but and now you know fast forward six months they’re buying something that looks like a better version of Peapod although smaller Market,
in infrastructure so that’s super interesting,
the one thing I’d say is I think it was a real Miss from some of the bigger more traditional Grocers they should have bought fresh direct has an echo higher because they,
you know Kroger Walmart and Target all need to learn how to sell better better groceries online.
But so that that’s interesting little acquisition in the space.

[54:52] Yeah absolutely.

[54:54] And Scott I feel like we finished a little early so as a Thanksgiving treat I think this is the last show we’re going to record before Thanksgiving,
I thought as a Thanksgiving treat that we might finish up a little early and give our listeners back some some free time to plan their Thanksgiving meals.

[55:15] Yeah yeah Happy Thanksgiving everyone we are thankful for our listeners listening to the show and giving us all the feedback that we get and we really appreciate our little Community here on the Jason Scott show and hope everyone has a
safe restful and filling and filling Thanksgiving.

[55:33] Yeah I will Echo all those sentiments I hope everyone has an awesome Thanksgiving and stay safe and until next time happy commering.

Nov 14, 2020

EP245 - Shipageddon DeepDive

On October 3rd, we published episode 238 and coined the term “Shipageddon.” We were talking about the likely e-commerce peak we expected from the holiday, on top of the e-commerce peak we were already seeing do to Covid-19, and we felt like retailers were likely to run into shipping capacity issues. The term (and concept) have gained a lot of traction,  being featured print in the NY Times Brace for Holiday ‘Shipageddon’ Forbes, Bloomberg, and on the Today ShowNBC News, and many others.

In the subsequent 45 days, it’s become clear that we will have a last-mile capacity problem, with all major carriers implementing quotas, turning away new clients, and retailers struggling to entice earlier orders from consumers. Worse, we’re also seeing a lack of freight capacity to restock retailers with limited inventory, and a strong resurgence of Covid-19 threatens to generate even more e-commerce demand.

In this episode, we do a deep dive into the curate state of Shipageddon, the likely impact on holiday shopping, and best practices for brands and retailers to minimize the effect.

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

Episode 245 of the Jason & Scot show was recorded live on Thursday, Nobember 12th 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode a 245 being recorded on Thursday November 12th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners way back on October 3rd and episode 238 we introduce the world.
Galaxy to the potential coming perfect shipping storm that we coined shipageddon.
And since then a lot of our folks that that are really following this closely you may have noticed that shipageddon has gone mainstream.
It has been featured in print in full and Publications like the New York Times Bloomberg businessweek.
And and video on The Today Show as well as NBC Nightly News and much more.
That’s actually the term shipageddon the theme has really taken off so you know you can can’t really open a retail themed publication or tweet or anything like that without hearing about shipageddon.
So we’re 45 days after we made that call and we thought this would be a good time to do a deep dive on what we’re seeing because we’re right on the cusp of,
go time for Holiday 2020 also there’s a lot going on with the pandemic pandemic the damn pandemic that you know that that I think actually is going to be impactful.
Jason what are you thinking.

[1:58] Yeah you made me nostalgic right there I remember back in October 3rd that was a simpler easier time as far as I’m concerned.

[2:06] In pandemics days it feels actually like it was six months ago so there’s these pandemic time frame is very strange.

[2:12] Well yeah because I feel like it does both simultaneously like I feel like time is going really fast in one way and time is going really slow in another way someone’s going to best to me like this is the world’s worst version of Groundhog Day.

[2:26] Yeah absolutely yeah not a lot of getting out and doing different stuff so so yeah
so one of the things that has changed in the last 45 days and I’m curious to hear your take because you have access to all kinds of
scientist that I don’t have access to but you know the pandemic is kind of in a search mode right now we’re at near-record cases in hospitalizations there’s lots of areas talking about shutdowns I saw Chicago you’re not allowed to have Thanksgiving
so I’m sorry to hear that so if you want to fly North Carolina having Thanksgiving with us you’re welcome to but anyway you know if we do go into more lockdowns that’s going to cause more
online shipping which which could actually worse than the problem that you and I have been talking about.

[3:10] Yeah no the mayor I’m not even sure you’ve heard this yet but the mayor of Chicago just imposed a full lockdown on Chicago effective Monday.

[3:19] Okay I did not hear that I knew that they were guiding that you weren’t supposed to have Thanksgiving guests and stuff like that but it was a full lockdown.

[3:27] Yeah I think they’ve they’re coming out with an alternative phrase to lock down like advisory or something but it basically is the same thing yeah so it’s,
it’s very much a Debbie Downer and it’s funny because you know I’ve been doing a lot of briefings on covid now for a long time like literally over 300 briefings,
and early on we brought in this really smart epidemiologist to sort of advise us on.
The ways this could play out.

[3:58] His his name is Michael Oster home he he famously wrote a book kind of perfectly predicting covid in like 2017.
Which unfortunately has all come true and he’s been like.
As far as I’m concerned totally spot-on through this whole pandemic so far and as a result of him we’ve given some really good advice to clients that’s.
Worked out as well as it could so the reason I bring him up now is two interesting things have happened this week.
Joe Biden has appointed him to his covid task force so I lost my epidemiologist to the president-elect,
depending on how you count and,
then he made news like literally today because he Michael did a press conference and he said yeah I probably think we should have a national lock down for six weeks which.

[4:54] Like the rest of the Biden team quickly disavowed because you know nobody wants to be attached to that kind of extreme.
Extreme measure but it really struck me because dr. oh snowman home has been I would say very middle of the road like he’s definitely not a we should just focus on on.
Health and close everything down and not worry about the account why he’s very focused on.
The cost reward of every activity and he has like you know some really smart thinking about.
When you should close schools and when you should open them and he’s not a big like blanket.
Shut down kind of person and so for him to call for that despite the fact that it.
It didn’t have any good Optics is like frankly it’s a little concerning because he’s been pretty pretty accurate so far.

[5:48] Yeah yeah so so maybe this is good time folks are just learning about shipageddon to go through the setup if you want to kind of walk through the the premise of why we raised the alert way back in October 3rd and,
if anything I think you and I both agree that it’s even more likely to be a problem that we’re going to walk through some of the math on that.

[6:10] Nice I love it when you do math.

[6:12] Do you want to do the setup and then I’ll do the math.

[6:16] Sure so add its most simplistic because of covid people have been selling a lot more stuff online and so we’ve had this e-commerce Peak,
that started in March and for a lot of e-commerce sites they’ve been doing.
Cyber five level sales volumes every day since March so way you know higher volume than we would ordinarily have and now we’re coming into the actual cyber five which ordinarily has this very high peak,
and so the way to think about this is.
One would expect a pecan Peak for this holiday you know so unprecedented high levels of e-commerce sales.

[7:01] And that was really even before we had a full appreciation for how South the pandemic my turn right so now that the pandemic is really kind of re-emerging in a in a pretty severe way,
that would in theory Drive even more people the e-commerce oh so you know the the simple-minded.
Um model might be oh we’re going to sell a lot less stuff in store and we’re going to sell a lot more stuff online that we have to ship to home,
and the huge fallacy in that thinking is,
that there is an unlimited shipping capacity to ship stuff to people’s homes and as we frequently talked about on this show,
UPS and FedEx don’t have enough capacity to handle the organic growth that happens every year on holiday.
E-commerce tends to grow at like in Old Times like 15 to 20 percent holiday micro 25%.
And shipping capacity is Max shipping capacity is growing at like eight percent so we already have this misalignment.
Now in the covid year you’ve got this pecan Peak there’s just simply no way the US Post Office you at FedEx and UPS,
can ship all the additional packages that people would want so so we’ve called that problem shipageddon that there’s going to be a lot of demand for online sales and there’s not going to be the capacity to fill it.

[8:24] Yeah and if we you know if this is always hard on our podcast but if we can draw a chart in your mind you know normally so in Q 1 of this year e-commerce was chugging along at 15% which was great and then it accelerated to like 40
to 45%
now in Q3 we don’t have the gold standard data yet which is the Census Bureau who’s also been on the podcast puts that out,
and if I’m remembering that comes out next week right.

[8:52] It’s a week from today it’s there a next Thursday.

[8:54] Yes and Jason gets pretty giddy at this time of the quarter when the data comes out so you’ll have some sleepless nights between now and then and they don’t call him retailgeek for nothing,
and but we do have Amazon which which I kind of you as if those things aren’t lying than something’s wrong so Amazon came in at about 37 percent.
A little bit higher if you take out their offline component so so kind of
thirty-nine percent maybe even kind of low 40s so I think that exceeded I think a lot of people were expecting it to come down to more low 30s
but Amazon at least saw high 30s so there’s there’s a bracket there for Q3 where the your growth is somewhere between I’m guessing 30 to 40 percent.
And then the big question is what are we going to see in the 4th quarter well a lot of the models that we’ve talked about on the show like emarketer and,
a bunch of these they’re showing kind of.
You know loathe low to mid 30s so we could actually you know I think the data from Q3 May indicate that that’s conservative and then also
if the pandemic is resurgent that’s going to definitely prove those to be conservative so
you know so even that like even if it at 30 to 35 percent it was a problem and it’s going to become a much more severe peaky Peak Peak.
If we get kind of 35 to 40 percent bracket have you have you adjusted your thoughts for fourth quarter at all.

[10:24] Yeah so you know again it’s the you’ve hit two of the main factors there to other ones right so.
E-commerce demand is going to go up.
Overall consumer demand is likely to be pretty healthy it’s going to be in different categories than it ordinarily would so we’re going to sell less apparel,
um we’re going to sell less less luggage than we ordinarily would on a holiday but we’re going to sell way more groceries than we ordinarily would because people aren’t going to go to restaurants and we’re selling a lot more Home Goods,
then we usually do because people are spending their vacation money on improving their,
their homes and then we do have this once every three or four years cycle that’s happening this year with Sony and Microsoft post for Leasing.
Major Video Game platforms which is really going to give a goose to the to the sort of Digital entertainment category so consumer demand.
We’ve always said is going to be pretty healthy in spite of the pandemic that still seems like it’s holding.
You’ve got finite capacity to ship to them a lot of retailers have dramatically improved their ability to fulfill e-commerce orders from stores so that’s going to.
Help them but then the last problem is retailers also have.

[11:42] Less inventory than they would like they both their financially conservative and bought less and now where we have really constrained.
Capacity to ship stuff from China like all the ships and boats are full and you can’t book partial,
containers right now and when you do find a way to ship stuff it’s really expensive so a lot of retailers are just worried that they’re not going to have a big enough supply for demand which is going to.
Is another artificial constraint on what sales are so you you bundle all that up and it’s it’s there’s more uncertainty in this holiday period than we’ve ever had but I still think it’s going to net out to be a pretty healthy holiday.

[12:24] Okay so anything else on the set up or you ready.

[12:30] Think we’ve beaten it to death I want to hear the math.

[12:33] Well one other thing I did forget to mention there is Amazon very again this is if you haven’t tracked this so Amazon very cleverly,
I think it’s 18 months ago maybe two years now,
they realize this they could see the lines were going to cross right they could see that even they were set they were eating up enough capacity with mostly ups and USPS a little bit of FedEx that they were going to,
they were not gonna be able to ship packages because of that,
so they developed their own direct-to-consumer delivery mechanism through this DSP program which is delivery service provider so.
So if we kind of do the math on that Amazon can Flex that and in my day job I actually have some kind of insight into this where we are seeing dsps adding trucks at a tremendous pace,
even unbranded kind of wacky stuff like.
Just random minivans and anything that will hold a bunch of packages right now so Amazon controls their own destiny so I think they’re actually going to be the least impacted and then you and I differ a little bit on this so I’m curious where your where you are now that we’re 45 days into this.

[13:42] I kind of feel like the what I would call the larger direct folks so let’s let’s think of.
I don’t know what’s a good example Walmart you know forget the store part of Walmart for a second that will be a stopgap a release valve also but even they can go by capacity from I don’t know if they use FedEx or UPS.

[14:06] Yeah or chewy I just saw a FedEx truck full of chewy stuff the other day so they can do is they can kind of this is called a quota so they can just go and say I’m going to go pre buy a bunch of capacity from you.
And even though the rates have gone up.
So so I think they’ll be okay and then if you’re omni-channel you’ll be okay because you have stores so in my mind the ones the folks that are going to suffer the most from this are going to be the smaller Merchants they rely heavily on USPS because the USPS.
I don’t I don’t think they’re adding capacity at all if anything I would guess they’re losing capacity.
And you know so that in my mind is the eBay sellers the Etsy Sellers and the Shopify audience they largely do
they are the biggest users of USPS in the data I’ve seen and I think that they would be kind of most at risk because they don’t have the heft to go out and.
A USPS doesn’t have a quota like thing where you can go buy some capacity and then be they many times don’t really use FedEx or UPS so so I kind of think that’s the segment that’s going to be the hardest by shipageddon have you you changed your thoughts on
who’s going to have the most impact.

[15:11] Yeah so I sort of Saw differently than you and I still do although I feel like it’s it’s.
Dissipated slightly so the hundred percent agree with you the big shippers like all signed up for a quota right in the in FedEx went to Walmart and said hey,
here’s how much you shipped last year here’s how much we can offer you this year do you want to buy it right and of course Walmart and everyone said yes,
um but that that compat quota that they signed up for was essentially a peak it wasn’t a peak on a peek.
And so my hypothesis is Walmart is going to have much more demand than the quota they were able to buy and the Ant,
Walmart’s not going to get offered the ability to deliver more packages than that quota like FedEx is what are you going to say no.

[16:01] FedEx doesn’t want to be the Scrooge that misses Christmas for a bunch of these packages so my,
my original premise back in October was,
the big companies that have all the traffic the Amazons the Walmarts the targets they’re going to get first bite at all the consumers and they’re going to sell all they can but once they hit their quota and they have to start turning away customers,
that those customers are then going to turn to less traditional e-commerce providers that maybe haven’t consumed their entire quota so you might go to a,
an eBay or Bed Bath & Beyond or a Party City or some someone that maybe wouldn’t have been your first provider but you’re now looking for someone that has capacity after Walmart’s run out of capacity,
and so I thought it was actually going to favor them a little bit and once you get under a certain size.
FedEx doesn’t have the bandwidth to sell you a quota so the small shippers actually don’t have a quota and so I thought that would be an advantage and so when you think about.

[17:03] Non FBA sales on Amazon and you think about all sales on eBay.
It’s not a battleship of shipping it’s a bunch of little rowboats of shipping that each have their own you know amount of capacity and so I kind of thought that that was.
A nice redundancy that you know they would get a nice kiss from this but two things would happen the shippers are smarter than I thought and they’re constraining the small guys to number one,
back in like July they stop signing up accounts with small guys so if you didn’t have an account you couldn’t start a business and start shipping,
um they are limiting the amount of packages they take from those guys they are pushing their cut-offs for shipping way earlier on those guys and,
another big difference between the little guy and the big guy is a lot of the big guys are okay if historically been okay not.

[17:58] Making a huge profit on e-commerce yet right and so a lot of the big guys shipping is Express Ship 2-day delivery which is very expensive.
The smaller sellers all have to have better profitability in unit unit economics so they either use US Post Office like you mentioned or they use what I call in injection shipping method which is like a hybrid where,
um maybe it flies on a FedEx plane and then gets delivered by USPS driver.
And so those are the most economical shipping things they’re also the slowest and are going to be impacted by the earliest cut-offs so.

[18:39] Well I think for those systemic reasons the little guy isn’t going to get as much of a kiss as I originally thought so I feel like the pain is going to be more evenly distributed.

[18:50] It says it’s a really long way of saying that you’re wrong.

[18:53] I’m it was actually my long way of saying I’m less wrong than you but okay.

[18:56] If I was this all right we’ll see we’ll have to look at the the shipageddon wreckage and see what we can learn from it and do a post-mortem.

[19:09] There’s going to be a bunch of great artificial reefs as a result of shipageddon.

[19:12] Okay so one of the things that I’ve been working on and shout out to our friends at e marker specifically Andrew lips semen,
so the I think you can actually do a model of this and I’ve been working on this and will provide this to listeners through all the social media early next week.
So but I want to talk everyone through through my thinking here to just kind of put some numbers on this kind of conceptual thing we’ve been talking about.
And just to boil it down when I’ve modeled this the problem really comes down to the Cyber five and,
let me walk you through that so if we look at e marketers model they have over that five day period they’re projecting 39 billion and gmv and that’s about 40 percent year over year than last year.
Um so that’s that’s pretty good you could argue that it’s high but you know I think they have that actually you and I have looked in that pencils with a lot of other things that are out there.
The peak day is Cyber Monday still and it’s a big one and it’s you know you can kind of think of it as.
Amongst the Cyber five yet Black Friday having a pretty big blip and that’s going to be actually think they’re probably underestimating that because I think Black Friday will be bigger because all the stores are closing on Black Friday and then we have these lockdowns so I don’t know what that’s going to do but.

[20:34] So I think this could actually be worse but but bare with me we’ll just stick to their numbers and then you have Cyber Monday as they’re really big a kind of over 12 billion going out that day.
Okay so roll those up together you got about 40 billion just to use a loose number if we assume an average order value of,
you know how many how do we get from boxes from dollars to boxes or packages we use a range of 50 to a hundred dollars I think Dentistry standard 75 right at the midpoint but I kind of like to do a book and on these these models.

[21:05] So with those bookends you effectively from cyber five are going to have 392 780 million packages so think of that that’s our supply.
That we have to put through the supply chain to get out to customers now let’s look at this this pipe we’re putting things through or the capacity.
If you look at the reported capacity from UPS FedEx FedEx has to networks they have air and ground and then the USPS and then Amazon.
When I roll that up you have kind of standard capacity 44 million packages a day.
But then they all do go into a search mode for the holiday so that UPS CEO was on for example and she was on Mad Money it was actually a shipageddon type segment which was kind of interesting,
and you know she was talking about a bunch of new sortation machines trucks all this kind of stuff.
There is a surge Sousa Q3 is an affair comp so I’ve read a bunch of these reports and they all kind of mentioned it in their Q3 reports and I dug into their.
You want to do the math on that the best I can tell and I’m being super generous here is that you know on average they have a 44 million a day capacity and I think that surges up to 75 million so that would be a seventy percent surge,
I think that’s an aggressive number I’m not.

[22:24] You know I feel good about Amazon being able to do that I’m a little skeptical it’s hard for me to tell about USPS I think they could bring it down to more like 50% but will will be generous so so so there you go so keep that number in your head 75 million packages.
So we just do the simple math and we’ve got this bracket of the supply of 392 780 we’re dividing by 75.
You essentially can see the Cyber five in the best case scenario will take about six days to clear through the system.
Um in the worst case scenario I it’s not the worst worse but a near worst case scenario.
If it’s 780 million packages then that’s 10 days so there’s this kind of five to ten day.

[23:05] Now the now the the trick here is that’s the simple model I wanted to walk you through just kind of your head around it so but.
The reality is we’re going to start the Cyber five and the pipes already going to have some water in it right so if we use this kind of mental image of there’s this pipe out there and I’m trying to jam you know all these packages into their the pipe already has.
Limited capacity does not have a hundred percent capacity because there’s already packages that will be coming in it through the ordering that happens before Thanksgiving if.
You know it this is where I haven’t spent as much time modeling but if we’re kind of yeah my best guess is we’re going to be somewhere between 30 to 50 percent of that capacity will already be being kind of consumed so it just ends up pushing things out another three or four days.
So when I boil all that together I see a scenario where the Cyber five which ends on Cyber Monday the 30th it could take until December 5th to clear that out and that’s being I think pretty optimistic.
Take as long as December 10th clear all that out and even like December 12th so and then you know what makes this worse is.

[24:16] People aren’t going to stop ordering on Cyber Monday right there’s there’s going to be the next Tuesday and and whatnot in so,
the analogy I like to use in this is maybe something from the southeast is there’s this whole snake Kaneda Pig but it’s going to take it a while to digest it so,
so I’m really worried the Cyber fight when I’m bottle this out I’m worried the Cyber five puts jams into the supply chain this 10-day.
You know amount of volume that’s going to take a long time to get to the system and it’s just going to make it that much harder to clear out so.

[24:50] Yes so that’s I’m going to be putting out a more detailed model happy to share that and get the you know all the folks in the social media World kind of poking holes in this but that’s kind of where I’ve come out on the model.
What do you think about that does that pass the Jason sniff test.

[25:07] It does prove your point like there’s you know some of that capacity is going to be full before it starts and is going to continue to fill after ends and what’s interesting about that is if you play it out in your scenario
you you’ve worked through that that pig if you will like.
Around the week of the 10th through the 15th and guess what all the carrier’s cut-offs are for holiday this year.

[25:34] I’m going to guess the 10th to 15th.

[25:36] Exactly so you’re really flirting with like packages that come in at the back end of that that cyber five,
missing holiday and for sure you’re flirting with everything that gets you know ordered after that missing holiday.

[25:52] Yeah.
Yeah it’s going to be interesting and if we have a bunch of store closures where we have been kind of assuming there would be a stopgap there,
you know if we go back to the the worst part of the pandemic the only things that were really open where Walmart and Target right because if I recall
Best Buy was totally closed for a while so and it’s because they had grocery right so it’s all but grocery
yes so that could be if we get to that type of scenario even if it’s going to be kind of regionalized to like some major metros like like La San Francisco New York and Chicago
Zach be pretty cataclysmic because I’ve been kind of assuming by online both this and and curbside would,
would be a stopgap for this and if those things aren’t available that could play a pretty big role in this as well.

[26:45] Yeah although I will say even in the first shut down a lot of Opus was able to stay open so I Best Buy shut down but but curbside was still running.
Um during that shut down and it,
it does feel like even if things get really bad in the pandemic it it’s going to be a more surgical version of a shutdown that would play out this time so I like I do think a lot of that release valve is still going to exist.

[27:09] What other so you spend all your days hours and hours and sometimes way into the night with our friends in Australia and other countries talking about this what what are you hearing from the retail digerati out there.

[27:22] Yeah well retailers are super nervous they still are not you know comfortable that they have good visibility to have this as all going to play out like obviously,
and we’ve talked about this on past shows in many ways you know retailers have started promoting and trying to drive holiday,
um in October somewhat triggered by Prime day being in October and a very common theme we’re seeing is every retailer communicating some flavor of shipageddon to their customers,
and begging their customers to order early and while that.
Those messages are getting a lot of play and UI gets getting covered a lot on the major news programs and all these things,
um I would say that so far indications are that consumers are not buying it.
So we’re seeing some earlier ordering but we are not seeing enough earlier ordering that it’s going to dramatically change the shape of holiday so so you know this is.
It’s looking like it’s going to play out in a challenging situation like some some kind of random Trends stuff that we’ve we’ve been seeing is you know,
tons of retailers are communicating their cut-offs and they’re telling people that they’re going to have more.
Um that they’re going to need to order earlier this year and that they need to be you know order earlier they want to be safe I think one of the most extreme versions We saw was Abercrombie & Fitch put out December 4th as their holiday cut off.

[28:50] So that’s super early and way before the carriers have worked through their their cyber five,
surge in your model,
um we mentioned earlier you know that most of the carriers have a slightly earlier cut off this year than they have previous years so,
it does vary depending on shipping product and which carrier you’re talking about but in general you can think of ground shipping cut off as being about the 15th of December,
um if you are using one of those Hybrid models like sure post or you know when it’s a combination of air carrier and a grand carrier,
that cutoff date becomes like December 9th and those two products ground shipping and injection shipping are the cost effective ones,
if you’re using a 3pl to ship that 3pl wants,
a buffer before they get it to the carrier so most 3pls are telling their clients hey your cutoff for taking orders needs to be about the 6th,
and that’s where you get.

[29:53] Cut offs like the fourth the Abercrombie is is pitching and then there’s been a bunch of other industry interesting things that have happened,
um so FedEx has added an extra day to a lot of their ground service levels meaning it takes a day longer to deliver,
and that has a lot of ramifications one of which is it know a bunch of zones that you could ship FedEx and qualify for self-fulfilled prime.

[30:22] No longer qualify for self-fulfilled Prime so there’s a lot of Amazon Shoppers that try to use it.

[30:28] SFP and they may have relied on FedEx ground for these you know one and two Zone shipping,
um and now you know starting in November that that is no longer eligible for Prime so that’s a big deal,
um not only did the quote the shippers all go to the their customers and say hey you have a maximum quota you can ship they also said and we’re going to charge you more right so on average the average parcel is about two bucks more expensive to ship than it was before,
um so you know that puts a real strain on margins,
we talked about a lot about the shipping constraining stuff but the other thing here that’s that’s increasingly scary to me is the lean inventory levels that a bunch of retailers have had,
Doug McMillan’s done several interviews where he said there’s a bunch of categories were Walmarts not going to have the inventory that they’d like to have going in the holiday,
um Jeffrey’s one of the analysts that we follow pretty closely you know kind of.

[31:23] Issued a report and the title of the report was empty shelves and rated store rooms and they’re saying that you know it’s going to affect a lot more categories than just grocery over holiday,
the international shippers are all saying that like hey basically all the capacity from China is gone so that you know there no more boats there no more containers,
if you don’t have enough inventory on your shelves right now you’re not going to get restocked or replenish.
And then you’ve got you know the two biggest retailers out there Walmart and Amazon that are kind of uniquely position with some of their own capacity Amazon you know for their own home delivery,
and Walmart with their you know a large Fleet of stores they can deliver from.

[32:08] To put that in perspective one of the things Walmart announced this week was that they’re opening 42 more what they call pop-up fulfillment centers.
And the way they’re able to do this is Walmart has a lot of store fulfillment centers centers that are designed to ship pallets to stores,
and what they’ve done is they’ve written a bunch of software to put a bunch of new hardware and they’re converting a corner of a lot of those store fulfillment centers to be,
consumer fulfillment centers that ship each is instead of pallets so they’re dramatically bolstering their fulfillment capability in their ability to Leverage,
ground shipping and and u.s. Postal shipping and then you know you mentioned Amazon made a big investment.
Last year Amazon added 15% more capacity fulfillment center capacity than they did in 2018.
This year they’re adding 50% more fulfillment capacity so they’re doubling the size of their Network which was already vastly bigger than anyone else’s Network.
They spent nine billion dollars in capex just in Q2 on fulfillment and that’s all paying off now so,
we’re going into this holiday with Walmart and Amazon having a lot more capacity than everyone else so it’s you know there’s a lot going on right now it’s going to be really complicated holiday.

[33:27] Yeah yeah so so that’s the set up the model and what we’re seeing retailers do from a communication standpoint and then
because we originated this you in are getting a lot of questions of okay I’m a retailer how do I get this and you’ve hit on some of these but I think it
it kind of bears I always like to instead of just ringing the alarm Bell here I think.
It behooves us to give people some advice on how to handle this shipageddon situation so,
you know the Doomsday scenario is you have a bunch of people that order something on 1220 and this is that.
That’s this is the Hallmark gift for their kid or or whatnot and it doesn’t arrive right so that’s what you want too.
That that’s a very unhappy customer situation and should be avoided at all costs it’s much better.
To say I’m sorry you missed the shipping cut off then into you know over promise and under deliver so-so.

[34:35] But to your point Jason there’s not a lot of data on this so one of our commitments is we’re going to be keeping it pretty close eye on this.
Another two other things just to inject here before we go into mitigation strategies.
Would you have this virus coming out or vaccine for the virus not clear what supply chain it’s going through or if it’s going to be an impact a lot of people have raised that as a potential issue I don’t I kind of.
Handicap that pretty low so like sub 10% impact but one thing we are seeing is.
People aren’t going to be seeing as many relatives and going through their normal I’m gonna go see my aunts and uncles and all this kind of thing so there is going to be extra capacity in the system even above and beyond what we’re talking about from people shipping gifts around that.
Yeah you wouldn’t have before so that’s a wild card actually score that one pretty high it’s going to eat up some capacity I don’t think it’s gonna be like Cyber Monday levels or in it.
Without you know the the biggest ones that I’ve been telling folks is you know.

[35:38] There’s this game of chicken with the consumer where we’ve trained them since Cyber Monday was coined that that’s going to be our best deal and we all hold that deal back for Cyber Monday and Black Friday somewhere in there.
Um so if you can and I know we’re up against limited time here but to the extent you can say to them this is going to be our best deal and be honest about that I think that helps,
I’m on the board of one company that’s tried this and they are having pretty good success with it they’ve had to kind of message it three times for it to land,
because again you know you build in these behaviors over years and it’s hard to dislodge them,
so that’s that’s one and then if you are using cyber five as your best deal I would communicate that again just so people don’t think,
okay and then any kind of you know Communications you can have that are very open and crystal clear with folks you don’t want to overdo it but,
you know if you do learn that that window is closing in the more Communications we’ve seen like the Abercrombie is a really nice Banner that that is pretty highlighted this doesn’t have to all be email marketing and that kind of thing.

[36:45] Another one is you know I order a ton online I just got like a new Wi-Fi router and it came in this giant box I was like what.
Did I order and open the box and you know it’s like 98 percent are two percent item,
so this is the time to get really smart about putting more stuff in your boxes.
Running any kind of promotion where you know if you if you don’t have a free shipping that makes this hard obviously but if you do charge for shipping,
some kind of a threshold get that average order value up get more stuff in the box that’s going to be a smart thing to do,
um I know a cello visor this is kind of like 10 years ago.
We started offering for our customers kind of this window or we could look in our software and we would actually see it wasn’t it wasn’t huge but it wasn’t also nonzero something like 5% if we kind of looked across a 24-hour window,
consumers would order multiple things and then but they put them in separate orders so if you could kind of do Consolidated shipping across a window,
and kind of see that and say hmmm Jason just ordered two things from me in the span of eight hours I’m going to put those into one box little stuff like that can can start to move the needle here.
What are what are the things that you are recommending out there Jason.

[38:02] Yeah well there’s a lot of tactics but I’m not throw one strategy out first which is hard for some people to hear,
In a previous year we acted as if we had unlimited capacity so you tried to collect as many orders as you can most retailers are going to max out their fulfillment capacity this holiday the big ones are for sure,
and so what that means is you should treat your sales wildly different like if you only have a finite number of slots,
you want to sell those slots to the customers that are most profitable right and so what that means is instead of offering everyone free shipping,
you only want to offer free shipping to the most profitable order so this is the one holiday where,
um you know you really.
I do want to think about things like raising your shipping cut-offs and like having a higher threshold for free shipping for sure.
The you want to be more careful about getting really marginal erosive with your promotions I could just doesn’t make sense to,
race to the bottom with a super low doorbuster deal just to get the order,
when you know you’re not going to be able to make that up later because you only have a finite number of slots so from a strategic standpoint I’d say,
like really think hard about your pricing and your promotion strategy.

[39:31] Under this new paradigm that you only that you are not going to sell as many items as you would you would like to ordinarily are going to be able to.

[39:40] Via these channels so that’s the strategy you you mentioned,
the the messaging and the most important thing here is not to surprise customers and so we want to be as consistent and transparent and overt as we can about the messaging so you mentioned banners you definitely want to have,
some persistent messaging on your website that you know it’s your version of the due to increased shipping demands delivery times are longer than expected please allow X number of days for delivery right like that,
that needs to be part of your user experience and it needs to show up.
Not just one place on your website because you have to remember not everyone starts at your home page a lot of people parachute into a product detail page from Google or a category page so this really needs to be ban or messaging that shows up.
Across all the different page Types on your site.

[40:35] Everybody’s doing early Black Friday to try to spread out that demand one frequent listener the show Andy a key smart like I got his,
email is probably one of 40 in my box right now that are running early Black Friday messages and I’ll just give you an idea of what the tone is.

[40:51] They’re you know they make this cool keychain product and they’ve sent an email hey we’re starting our early Black Friday sales now we’re expecting a huge surge in demand for Christmas,
and since a lot of physical retailers are closed and the postal system is really jammed up with e-commerce packages right now we want to make sure you have as much time as possible to shop and get your gifts so here’s our Black Friday deals,
on Tuesday November 10th right and so they’re they’re doing everything they can to pull in that,
there’s orders there cut their explicitly labeling It Black Friday deals and that’s to try to combat this psychology that if you just say it’s a sale then people still assume there’s going to be a better Black Friday sale,
later but if you call it your Black Friday sale now it helps land that message that this is your best deal.

[41:44] You know once you start getting into the order funnel,
it becomes super important to have custom messaging right so if they’re known customer and you know where your shipping,
you want to give them really accurate information about not when you’re going to ship it or what shipping method you’re going to use you want to give them really accurate information about when they’re going to get it if they complete this order today,
and so you know you start thinking about this whole discipline that we call delivery experience management,
and you know that it would really be huuu to have a subject an employee dedicated to crafting the delivery experience,
that you guys offer around holiday there are now a bunch of vendors that specialize in helping retailers with this so I think of companies like.

[42:33] Navarre as a delivery experience management platform or even a,
a more modern like cooler one would be like convey which is get these are companies that do have a couple of things,
they customize the messages that show up on site and in all your transactional emails to tell customers,
when they’re going to get things they help you pick.
All the different shipping methods and carriers to optimize them for each customer and then most importantly they use,
aggregate data from all their customers to predict when the carriers are going to deliver on time and when they’re not and they,
they can use that predictive model to pad the delivery and Chip have earlier cut-offs when that’s appropriate,
and when the products already been sold and they predict that stuff isn’t going to arrive on time,
they can message it for customers and so the what can happen there is you proactively tell a customer that something is going to arrive late but it’s still going to arrive before Christmas,
you can dramatically reduce what we call the Wim oh calls which is the where’s my order calls which are super expensive problem for customer service when stuff doesn’t show up when it ships.

[43:51] For sure you need to message all this on the checkout pages and the order confirmation page and then you need,
a ton of transactional emails that message all this right so you’re going to email a shipping confirmation when you ship it you you should if you’re not you should be thinking about emailing delivery confirmations when it gets delivered,
if there’s a lag between when they order it and when they’re going to get it you might think about some interim emails where you’re communicating the ownership experience to the customer so you’re telling you know you’re giving them some install instructions or some Pro tips or things,
find some other reason to communicate with him remind them when to expect the package this is the time to over communicate all this stuff,
you for sure want to think about offering helping customers sign up for the carrier’s shipping tracking services so they get you know this real granular data on shipping from the customers.
All of this stuff you really need to be thinking about to maximize.
Customer Comfort levels minimize surprises and really reduce return costs and customer service costs so.

[44:56] That’s for each individual order in terms of promoting products on your site you want to think about this kind of,
cascading fall back plan right like,
in November we can be offering free shipping and we know we can ship that stuff really cost-effectively a via ground or US Post Office,
once we start getting in early December we need to shift all our messaging to be promoting our express shipping options right because after that about December 10th,
the only way we’re going to get there on time is to day air shipping so our messages should change our pricing promotion should all change to reflect selling stuff that’s going to ship via express shipping.
Once we get close to that last week,
we want to shift to exclusively focus on promoting stuff that you can pick up in stores right so you know you want a bunch of promotional messages around Opus because you want to stop collecting orders that you’re going to put in USPS,
or in FedEx when you’re getting close to your shipping quota with FedEx and then,
you know for all those late gift-givers that are logging on on you know the Night Before Christmas hoping to get a package to someone,
what you need to have messaging there selling digital stuff selling like digital downloads gift card stuff like that that you can deliver digitally so you can still capitalize on.
On all that demand so those are some of the things I would be thinking about to mitigate shipageddon this year.

[46:21] Recoil I haven’t even heard of we know so I like it.

[46:26] Yeah it’s a you know customer service is super important and expensive service and everything’s constrain this year right so if you if you have been dramatically flexed your call center and you suddenly sell way more stuff via e-commerce.
E-commerce orders get more customer service calls right and when.
Shipping gets weight they get even more calls and so we need to mitigate all that stuff and we’re not even talking about the next front we’re going to have next month which is going to be the Returns on all this stuff.

[46:54] Coming soon returns yeah so you don’t want to have fomo with a WeMo so use your purpose did I use enough acronyms in that sense.

[47:04] Exactly and and if you can just get the world to buy Starbucks gift cards like Starbucks does that’s probably the best situation.

[47:11] Genius.

[47:12] Yeah it helps to have an addictive.

[47:15] Absolutely Wilco so hopefully you have found this deep dive on shipageddon helpful.

[47:23] Yeah it’s again this is going to be a really interesting holiday season to watch so we’ll certainly be talking about it again and I wish everyone every success,
um hopefully things end up being a little more moderate than we’re we’re predicting but better to prepare for the.
The the worst and exceed those expectations,
so thanks everyone for listening as always if you have any comments or questions we’d love it if you jump on Facebook or Twitter and give us your feedback,
and of course if one of these pieces of advice helps you survive the holiday the way you can pay us for that is to jump on iTunes and give us that five star review.

[48:04] Thanks everybody.

[48:06] And until next time happy commercing.

Nov 6, 2020

EP244 - Upfront Ventures Greg Bettinelli

Greg Bettinelli (@gregbettinelli) is a partner at Upfront Ventures. Greg was previously the CMO for LA-based HauteLook, a leading online flash-sale retailer (acquired by Nordstrom). Upfronts portfolio includes ThredUp, Parachute Home, Adore Me, Skylar, Verishop Goat, Happy Returns, Invia Robotics, ChowNow, Verishop and in transportation Fair, Bird, and SureSale.

We discuss DNVBs, Marketplaces, Shipageddon, and much more.

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

Episode 244 of the Jason & Scot show was recorded live on Thursday, October 28th 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 244 being recorded on Wednesday October 28th 2020 I’m your host Jason retailgeek Goldberg
and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott showed listeners we are recording this days before Halloween,
and also the release of the next season 2 of the Mandalorian so unfortunately on the podcast you can’t see it but Jason is wearing full Mandalorian gear for this episode so that’s exciting.
And since since it’s coming up on Halloween and we’re heading into the busy holiday season.
And before we get into that chaos we thought it would be good to go up to 30,000 feet for a little bit and look around and have someone here on the show help us think about some of the bigger trends,
around digital and e-commerce from the West Coast so we’re really excited to have on the show Greg bettinelli he is partner at upfront Ventures,
upfront portfolio includes this is just a small sampling,
some Brands I think you’ll recognize such as thredup parachute home Adore Me Skylar Vera shop goat happy returns in Via robotics Channel Vera shop,
I said that one twice so that that.

[1:45] You can tell which is Scott’s favorite.

[1:47] Yeah yeah shout out to Imran and then and then little gratuitous plug for some of the transportation Investments Fair bird and sure sale Greg welcome to the show.

[1:59] Hey guys great to be here appreciate the invite I sure hope the first 243 guests were average and I will come over the top and we’ll have a great discussion.

[2:08] Yeah we feel like those 243 rehearsals are going to pay off tonight.

[2:12] Exactly I’ve been practicing that listen to it a lot.

[2:15] Yeah well you know Greg one of the things we learned from those shows is the guest always like to be grounded a little bit in the background of our guests so can you introduce yourself and maybe talk to us about how you came into your current role.

[2:28] Yeah absolutely and Scott and I go way back from early days at eBay or was called mid-years at eBay but it’s really where I got my start in and around e-commerce and marketplaces I join.
EBay in early 2003 which is really the second wave of eBay when auctions were at its peak.

[2:51] And anyway I had some pretty exciting roles and it’s what I think is some interesting things and so back then we had a very robust category management team and the North America business.
And I was lucky enough to really the one of the first people at eBay to recognize.
A lot of interest in categories like ticketing I also ran the entertainment business eBay which back then we sold DVDs and textbooks and video games on top of entertainment memorabilia and things like that,
it also played a big role in what we did with sports whether it was on the collectible side on the,
the jersey and apparel side and so got to really work with some interesting businesses there but I was I was at eBay for 5 years and all everyone really knows me for is the guy who said we should buy StubHub.
And we bought StubHub for I think about 285 million dollars in 2007.
And as you both know eBay just sold that business for four billion dollars about a month before the pandemic which turned out to be the greatest transaction of all time,
because now I love that brand I’m not sure it’s a great time to be in the ticketing business but from there from eBay I spent some time in StubHub.

[4:06] And eventually moved down to Los Angeles I have been in the Bay area for a while and went to work for a company called Live Nation for period of time,
whereas on the executive team recruiter at eBay to kind of help build a competitor to Ticket Master of all things.
And if you go back into 2008 2009 the economy first in 2009 was not great and Ticketmaster and Live Nation ended up merging,
which was not a place I wanted to be having spent most of my career at eBay competing against Ticketmaster and and candidly receiving a lot of cease and desist letters from Ticketmaster,
for the work we were doing it either in StubHub it was not something for me so I ended up leaving and,
I went to a that point a very young company in Los Angeles called HauteLook,
which was a fashion e-commerce business more of an island online sample sale business at that time there was a couple companies similar to us Gil group Andrew Lala in particular and eventually Zulily which ended up being the best of the bunch.
But I was a chief marketing officer at HauteLook and was there for two years.
I’m actually before we sold the business to Nordstrom for about 300 million dollars.

[5:18] I like to call it a you know it’s a solid RBI double it was a great outcome in a short period of time and very good for me personally and professionally,
but also helped me you know I had a couple of years left of my best staying post that acquisition so I was able to spend a lot of time working with the Nordstrom team.
Thinking about what they were doing around e-commerce what they were doing on mobile in particular and what to do with kind of the full price and off-price brand so I was I was there through 2013 and then eventually left in 2013 and,
made my way into Venture Capital because everybody wants to be a venture capitalist because it’s super easy and so I hopped on board in 2013 if you go back,
there wasn’t a lot going on in Los Angeles at that time and K a little bit before and.
I knew there was you know huge opportunities having spent time in Silicon Valley,
but also making home Los Angeles it’s where the most creative people in the world live.

[6:17] We’re very powerful on things like Commerce and communication and content and Community you know companies now we think about like Snapchat which is now 40 billion dollar company,
companies like good RX which is a 20 billion dollar company companies like Riot games which is a leader that the maker of League of lemon Legion League of Legends,
a lot of super interesting things you know Tinder was invented in Los Angeles and I’ve always been Bullis almost Angeles and coin the phrase long Allah which is just a,
assign that you know there’s a lot of exciting things happening in Los Angeles and I really bet my career that I could be a part of that ecosystem helping to fund new companies so I joined,
from Ventures and for the past seven or so years I’ve been a series a investor and early-stage technology companies,
I work in businesses from direct to Consumer businesses to marketplaces in managed marketplaces businesses marketing Services business is I do work around what I call Commerce Innovation so,
identifying companies at the very earliest stage where they’re working to solve friction points that exist in Commerce.
And it’s really I do other things as well like consumer fintech and the like but I edited my core I’m a Commerce guy.

[7:36] And I’ve been doing that for a long time and enjoy it I have trade on certain instincts throughout consumer Behavior I recognized I think I can see around some corners and things that a lot of people in the marketplace can’t see,
and I think I’ve done pretty well I don’t we as a firm we do broader investing upfront Ventures will probably look at us as the,
the first or second check into a very early stage business that we do across a wide discipline of investment opportunities from software businesses to,
Healthcare technology to food Tech and AG Tech in digital media but I do really over index on the Commerce.
In consumer size of the investment opportunity.

[8:16] And it’s fair to say that Commerce is the coolest part of the portfolio anyway right.

[8:22] Yeah as far as you know I communicate to my partners for sure it’s definitely the thing that is easiest for coffee talk I’ve I’ve been very lucky,
I always seem to work for companies that people know and have experienced before and you know it’s something I really like I can’t even remember the earliest days of eBay,
where you would hear you know I could go to my Aunt Marilyn’s house for Thanksgiving and,
I tell them I work at eBay and everyone there knows what eBay was in this is in the early 2000s and there aren’t a lot of jobs like that so I’ve always liked kind of being around and something about working more consumer and commerce plays,
people have more understanding of what you do versus if you’re selling some enterprise software solution or something like that with you can’t explain to your Uncle George what it actually is.

[9:08] I think my wife happened to ask who the guest was tonight and I was pointing out all the products around our household that you guys were in right so you.

[9:18] Great anyone in any favorite any fan favorites or.

[9:21] She’s actually a big fan of these ritual vitamins I feel like might be her her go-to you may have exited from that already I can’t remember oh oh.

[9:29] No we haven’t but it’s part of.

[9:32] Yeah you have you just don’t know it yet I’m just.

[9:34] Yes yeah not that I am busy I know but that we were the first check into that business.
And I had worked for a long time and just identifying these d2c direct consumer opportunities,
which there was candidly no brand leadership with reoccurring purchasing characters.
I like the same smart but it’s not that sophisticated but in categories like vitamins if I were to ask you to name the leading vitamin manufacturer you wouldn’t be able to do so because no consumer actually can,
and at the same time there is replenishment and as you know with.
Replenishment I especially things that you can put in a small box like those are very attractive e-commerce business High margins reoccurring and no Grand leadership.
And so I’ve actually had a few of those and we as affirmative a few of those and it’s a simple strategy but I think it’s turned out to be pretty well.

[10:27] I also have always think the thought about attacking categories where there’s only one brand leader and so you talked about Adore Me,
you know they’re at the time that a dorm we started it was kind of Victoria’s Secret and that was it a door me does sells Intimates in in soft goods for women,
and it tends to be when you’re competing against those single Brands who are leaders think of luxottica and worry Parker,
you know they’re as vulnerable as most companies because they don’t think anyone’s coming up their heels and then a couple years later they wake up and you have a pretty big business in your hand so,
you know like I said I don’t like to overthink things but there are some pretty compelling opportunities that I think.

[11:06] Yeah yeah I think we also we do have some Adore Me products and parachute product there’s some bird scooters parked in front of my condo and I actually wanted to talk to you about that later but.
I’m just I’m teasing yeah so that’s awesome and because you challenge me the largest vitamin manufacturer in the u.s. is aligner Healthcare products and they make private label vitamins for Walmart and Walgreens.
Um yeah I’m the the one guy you probably don’t want to.
But that that is all awesome and then I happened and I mean timing is everything but you’ve worked for a bunch of companies that were great while you were there but we’re not covid-19 very friendly to I feel like,
the whole ticket and sporting goods and then it’s also not that fun to be selling apparel through a department store right about now.

[11:56] No and it’s weird unless you’re in the off-price side which.
Lisa has a now those stocks have you know if you look at TJX and Ross and Burlington.
Their stocks are really only off 20 maybe 20% from the peak pre covid Peaks which is amazing.
Considering they have zero e-commerce and I’m guessing they’re selling it 50 this 30 to 50 percent capacity freak event but I think there’s a big bet that the consumers are going to gravitate towards off price,
long-term and most likely most of the department stores that we grew up with are going to be at a business with the.

[12:33] Yeah yeah and there’s going to be a lot more inventory for those off price guys the you did mentioned how fabulous the StubHub timing was the opposite end of that might have been Burlington which decided to turn off its e-commerce site a month before covid-19.

[12:47] Yeah do you really think they would have been able to handle the demand had they been live.

[12:53] Hi Joe I mean it’s it just sounds funny and I do think it’s a mistake I think there’s a way to do digital for for off price and I think.
Did digital is an important shopping amenity for off price so I think there’s I hated to see them pull back but economically I doubt it hurt him I don’t think they would have liked.
Driven a lot of Revenue dollars and then in their space the unit economics of e-commerce are would be tricky.

[13:23] Yeah well if you talk to the leadership teams that Ross Burlington obviously in TJX TJ Maxx Advanced TJ Maxx and Marshalls they don’t think e-commerce moves the needle for the,
and they’ve already emphasized I think TJ Maxx is made Acquisitions they’ve hired good people who aren’t there anymore and their view is the return on capital is just better off.
Putting money into stores and continue to perfect the buying experience but I did have my one of my good covid experiences was I was I think I was pretty early and I went on like we all won the hand sanitizer see I’m Journeys.
And I pounded Dollar Tree online when they still had an online store and they had like a case of those two ounce bottles of hand sanitizer.
And three weeks later I received my hand sanitizer actually 15 business days which as you know sounds like two weeks but it’s really three
and that’s a marketing trick and yeah so that was my first and only time I’ve ever bought from a dollar store was in search of the hand sanitizer because I can find it anywhere else.

[14:30] Yeah Amazon Prime has a spoiled whenever something takes more than 4 days you’re like you assume it’s just been lost forever.

[14:36] Right exactly.

[14:38] Dia so on The Upfront side you said you guys are one of the first checks in is that kind of give us like the little kind of the VC spilled are you is that like seed series a and
in La vernacular and then like what’s kind of the average check size and where you guys how assets under management that kind of thing.

[14:57] Yeah so look at us as I would say late seed to series a so our typical average first check is about 4 million dollars.
And we are active lead investors so were most likely leading around,
I’m taking a board seat really helping to formulate a company and be a truly added value investor.
We will make out of a fund which right now we’re investing at about 400 million dollar fund it’s our sixth fund upfront 6,
but will make 30 to 35 what we call platform Investments so those are lead Investments and unlike a lot of from we reserved a significant amount of capital for follow-on investment so use that for million-dollar example,
if you do 4 times 30 that’s a hundred and twenty we have a 400 million-dollar fun so we’re clear reserving upwards of two thirds of our capital for follow-on and that’s both because look a lot of great companies take a long time to build.
And in addition in our world who wanted to play Capital against our best companies over a long period of time so we like those we say back up the truck against companies that,
do you need new capital for growth but we want to invest in those because they’re moving there’s an optimal time to wait for optimal opportunity for returns.
So we really play in that space of you know it’s really maybe you know the late seed series a stage.

[16:17] This is a little bit outside of our wheelhouse but I was kind of curious what you think so this may be a Silicon Valley thing so it was a big Trend in Silicon Valley to not go public for as long as possible going Publix evil and terrible and whatnot so so you had like uber and Airbnb these companies wait till they got to this really really big scale
but then it seems like the pendulum has swung swinging really hard the other way where now we have this hole
kind of spak craziness where a lot of the Silicon Valley guys are going out and getting these these vehicles that can take a company public through this kind of different way what’s your feeling about
that that turn.

[16:55] Yeah for sure especially like I think this pack is relevant to businesses by which there’s this perception that there’s this Robin Hood type of investor,
so any company that a Robin Hood Trader would have heard of should be public right so DraftKings really started it,
you know it’s Robin the technically hasn’t gone public yet but this so you’re seeing,
a lot of conversation about more consumer type of transactional businesses I think the reason why this happening is nobody went public for a long time and so there was really just
a dearth of opportunities to invest in fast-growing companies especially on the consumer side now the SAS businesses have been doing extremely well for a long period of time,
and the public markets and those there are SPAC opportunities there but those have been,
you know a lot of great performance right companies that have gone public over the past five years and candidly a tremendous amount of shareholder value created after their public just look at Shopify as like the great example right,
is I think that went public at.
$12 a share or something like that maybe we traded like 30 and now it’s over a thousand and that was only five years ago roughly so how many hundred you know a hundred plus billion dollars in value created as a public company.
And so yeah so there are so that’s example yeah and I think look the reality is.
The public markets are strong right now I think there was about a six-week period between March 12 in May first.

[18:23] Where people were nervous I was nervous everybody was nervous a lot of our companies made very hard choices.

[18:30] Around organizations around marketing spend and I think there was a sigh of relief I think it was prompted by the a lot of.
The checks went out that money wasn’t all spent on rent it was spent and compelled a lot especially in the consumer side.
I think it also enabled a recognition that software is eating the world as Marc Andreessen would say.
And just the gravitation to anything that was you know.

[18:58] Is code based or Commerce based that doesn’t doesn’t touch bricks and mortar or doesn’t touch Legacy businesses and I think the markets of just NASDAQ in particular just responded in the way and I think the public markets are now feeding that,
I’m frenzy personally I hope it lasts forever it probably won’t,
but I think you’re seeing that play out and even the companies that you know I think of like the Casper IPO as a use it example I think they even they are trading,
where they were about to say it wasn’t an overwhelming successful IPO but you know they’re about where they were pre Koga.
And so but there’s been a lot of you know I track all have although my on my iPhone all those companies from revolve to.
Real real and posture Mart or not Poshmark Stitch fix and others and they’ve all you know.
Bounce back 3 to 4X since even their lows which was usually no pain about April 1st or so but it’s been it’s been crazy for lack of a better term for sure.

[20:01] Yeah I think that’s a good backdrop so you know I think it’s really interesting because as a VC what a lot of people probably don’t realize you know I think most people kind of think of shark tank is kind of their their their perspective and maybe you know,
The Social Network kind of as how these work,
but you guys have to your kind of betting on a 10-year forward basis right and that seems like it’s going to be tricky so I thought we’d hit on some of the themes where you have some clustering in your portfolio,
one of the ones that you and I share is our love of marketplaces obviously you were at eBay and get to see the birth of one of the bigger Market places,
um and then in your portfolio one of the ones that we wanted to talk about was goat,
I am not a sneakerhead but but you know I love I love that category I think it’s really wild to watch what’s going on there so I wanted to get on that and then my favorite one that you have is some of my best investments have been Collectibles so,
so I’m a comic book guy and Star Wars guy and you know if I compare those to even things like the Google IPO,
the Collectibles Market has been just white-hot and its really accelerated during covid,
I love rally because it allows me to look at it as an investment class thing and invest in Collectibles I normally wouldn’t and even some that would be you know Out Of Reach like.
The first appearance of Spider-Man or something like that maybe maybe give listeners a rundown of rally with was that your investment apart.

[21:30] Yep yep all those are mine let me try and put them all together because I think there’s you made a couple of points in you first talked about kind of time Horizons.

[21:40] And like you know Venture Capital it takes a long time to build a great company.
The reality is you know sometimes you get Super Lucky Nick everything goes up into the right but the reality is building businesses is extremely challenging and one thing I’ve learned in as an investor,
it’s just the amount of work in,
pride in everything that goes into these teams were both of these companies and for example I’m goat I think I wasn’t even at upfront Ventures when they team invested,
in what the company that became goes I think we made our first investment in May of 2012 so we are now eight,
and a half years into that investment can get some perspective and goat is about a four year four and a half year old business now,
so they spent three and a half years Treading Water trying to find something that works,
it was originally an app that was trying to connect people with like interests in physical setting so if you and I all like comic books.
We would go and set up a dinner and we talked comic books and we didn’t know each other but we would build a community online Offline that we initiated online.
And the reality is you know people don’t like to meet people they don’t know so it was a tough business.

[23:02] Especially comic book collectors.

[23:03] Right exactly yeah a little bit of an introverted crowd and so when I got to when I got to the front.
That was kind of one of my first projects was hey we have this very talented team they just haven’t found product Market fit.
And the story of and it’s been written about it it’s been but Eddie and Dyson who are the founders daishon was a sneakerhead.
And when they were brainstorming ideas about what to do with the million dollars they have left in the bank.
And I asked them how come there’s not StubHub for sneakers.

[23:35] Because I as a consumer investor I spend time you know maybe not a covid world but Saturday mornings I have to go shopping and when there’s all these kids lined up outside a store on a Saturday morning.
I want to know what’s going on inside there because that’s not normal whenever you see a cue that’s a signal of either something is very good or something is very bad but in the Venture world that means something is happening they need to pay attention to,
and so from there was born goat which I didn’t even know what good stood for and when they said that’s what we’re naming the company,
and they took some of their money which wasn’t a lot they bought a bunch of sneakers on eBay and Flight Club and put it in seed in the marketplace and I remember the first month of goat they might have done.
You know thirty thousand dollars was the GM V and I you know I can’t say specifically but we’re doing north of a hundred million dollars a month in GMB now,
and that wasn’t that long ago and we’re selling sneakers or they’re selling sneakers right and I think what’s interesting about that category is they had identified.

[24:39] Two things one and this is an investment they might have is you look for areas where they’re very active communities,
passion LED communities where people spend a lot of time and a lot of money but you catch them right before they go mainstream.
And if you can catch especially the marketplace a a niche business like sneakers secondary Seekers but there’s a catalyst to it going mainstream and you become the market and for sneakers canele was,
the release of the easy the Kanye West easy from Adidas.

[25:10] Really Propel the secondary Market because they had an artificial shortage they purposely didn’t release a lot of sneakers and a lot of people wanted them and go was kind of the only place to go get it at the time other than eBay and as we’ve talked about our as I’ve talked about before,
and while love eBay and I know a lot my career is owed to eBay I’ll compete against than any day.
And that was just an example where this community was already existence and they were just looking for a well-lit playing field.
Which is an expression we used to use it eBay all the time and they were looking for that and it provided and it turned out that the key to that category was,
the perception of Fraud and that that type of customer or that kind of a buyer and seller didn’t trust each other,
and so goat came in and said we’re going to guarantee authenticity in fact you send them to us we’ll make sure they’re real and we’ll send them,
so this idea of a managed Marketplace and that was what responded but you know it kind of ties to Rally which is think of it as a stock market for Collectibles where,
you can actually trade individual shares of an asset but both of those businesses rely on scarcity,
scarcity is a very powerful thing consumers retirement respond as care consumers respond to scarcity businesses responded scarcity and if you have a space scarce asset,
whether it’s Talent or a tangible good.

[26:34] Markets go crazy and I think a lot of the great Marketplace businesses trade on scarcity and the commonality between tickets,
between sneakers between streetwear and now Collectibles as you point is white hot,
is there all scarce items again I’d not that smart but it’s obvious to me that when you have something that only there aren’t a lot of them and everybody wants them it’s a pretty good thing to trade,
and so they The Coincidence around what’s happening with collectibles,
is it was already happening pre covid but especially on the sports side there’s just a Nostalgia that developed in March,
where I’m sure you all odds un’s with people in high school they hadn’t talked before and you’re spending a lot more time with text groups with your sister and your brother and your mom and your dad I think we just came back to recognize that simple things matter and when it comes to collectibles
whether it’s comic books or baseball cards or.
You know video games that we just felt it was our comfort zone it was our safe space and it felt good to be able to talk and trade about things that made us comfortable.
And that was a key part of what happened.
With Collectibles But the irony or okay it’s coincidence is I originally thought sneakers were the baseball card of gen Z.

[27:52] And it turns out that baseball cards are relevant to gen Z and it’s actually basketball cards they’re not really into baseball cards but they’re definitely in the basketball cards and that has now created you know caught fire and it’s you know I think.

[28:05] My guess is you know.

[28:07] The collectible assets are training at two to three times what they were a year ago it’s now it’s now being determined as a you know an asset class and it suddenly becomes an asset class with rallies perspective.
Is you know you can be the market maker for things that historically were illiquid and again back to the marketplace theme if you can make it liquid markets liquid,
you can dramatically grow the addressable markets and if you can draw the addressable markets and you can get a piece of that growth from those markets and think of great Marketplace businesses,
like eBay like uber like Airbnb every investor who passed on it will say the Tans were too small the total addressable markets were too small,
eBay was how big is the pawnshop market right Airbnb is how big is the hotel Market boober was how big was the taxi murder.
The reality is they all created substantially greater addressable markets because the marketplace enabled it StubHub was the same way you know how big is that market and you don’t ask those questions anymore because the secondary Market,
has really become such a powerful thing in those markets and I think that’s what’s happened with sneakers and other categories.

[29:15] If listeners get one thing from this hole
244 episodes that we’ve done go to your closets find your Pokemon cards and then if you have any of the NBA cards I think the isn’t it LeBron rookie cards are going for like 8 million,
there’s a specific one yeah yeah.

[29:33] Now specifically if you have your 1999 Pokemon cards and specifically there is one card I think it’s the Charizard is a how you say I don’t know my Pokemon it’s the nine oh it’s number four.
But that card is I think just traded for a hundred and twenty thousand dollars yes but it is and don’t don’t touch the card though.
The biggest thing you you is.
Really learned I learned today that a majority of cards that are wrapped in packs have already not.
Rated to a 9 or 10 scale like they came up they come off the printing press as not.
And that’s you know just because there’s a lot of those a lot of interest in Cardin authenticators and Grading right now but it’s just crazy what’s happened with some of the end wasn’t didn’t Jake Paul or someone just by he bought that car done talking about.

[30:32] Yeah and LeBron said oh I’ve got like 10 of these.

[30:36] There’s a lot of talk about athletes who are now you know as part of their deals there they’re going to the card manufacturers and asking.
Well I want some of these two historically they would just sign things but now they only know part of their negotiation with those card companies is they want to be able to put those directly in their safes as well because why should someone else profit from,
from their likeness if they’re not going to so it’s super compelling.

[31:03] I feel like you you helped answer a question Scott’s wife had sent me a question asking if rally was just a scam to enable Scott to buy more Star Wars memorabilia but apparently it’s legit.

[31:15] Yeah and hopefully it’s up I’m guessing depending on we’ve done we’ve done I don’t have I don’t think we’ve done Star Wars we’ve done like Hulk we’ve done a lot of comic books.
And we did Teenage Mutant Ninja Turtles we did yeah.

[31:33] I do it to diversify like I would never own an exotic but I can get like a slice of some of that and the first one I played around and I made like 40% is like and it happened very quickly someone came in with a very high offer and I guess they liquidated.

[31:47] Yeah I know it’s great I’m I’m was I grew up in San Francisco or in the in a place called Petaluma which is north of San Francisco and I was safe to go Giants fan and one of the first,
rally started off doing cars it was called Rally Road and so collectible cars was really the first couple years of the business then we moved it more into broader Collectibles but there was a Willie Mays Jersey,
with this kind of tobacco stain on the front of it and it was a great it’s just a great looking Jersey it’s this kind of giants gray with the orange,
San Francisco ran across and that was you know
you know as I never really got to see maze play I’m too young for that but I would hear my dad and my grandpa talked about Willie Mays and so back to the the emotion parts of the Collectibles categories that was you know I own you know $80 worth of that Jersey,
but I tell you know it’s not the first time told the story and so you just get kind of the benefits of the way and it really enables a whole new,
type of investor customers to participate in markets that historically they couldn’t and I think those can make for exciting businesses for sure.

[32:47] Oh definitely one other small little fun fact about goat you mentioned that they authenticate all the the merchandise so there’s a role for authenticator and one of their primary tactics is,
they smell the shoe.
To identify the fake glues versus the authentic glue so I’m just I’m chuckling at these folks that got this good job and went home to tell their families that they’re now officially a sneaker sniffer.

[33:18] Yes yes and look these are you know let’s just say the original authenticators where do you think they came from they know these were these are kids who were working at Foot Locker.
Right over kids who were kind of trading Jordans and you know who knew that we could be no pay them no money we pay and look we weigh them,
we checked the colors we smell them,
you make sure there’s not two left’s two rights make sure there’s in a lot of different things and you can tell a lot about authentic identity of a shoe by how much it weighs and where there was manufactured and,
and things like that because you know again like we talked about.
Authenticity matters and if Marketplace as any hints of things not being authentic it won’t work and you know I think that was a big challenge that the eBay had in his and I think it’s a challenge to Canada and the Amazon has now.
That it’s very hard for that business to play at the high end.
Watches or handbags or pie in sneakers or golf clubs they don’t work very well on Amazon and I think the perception of a 3rd party seller could do.
A buyer is real and even Amazon worth when they were trillion plus dollars now hasn’t figured that part out.

[34:29] Yeah and I think we may get to that I do want to Pivot though to talk about another class of investment that I know you have some whole things in Andy Dunn’s digitally native vertical brands.
And just to set the table my my sense is sort of pre
it felt like the narrative was that hey you know considering how many of these there are out there that not a lot of them had had a particularly good exit or any exit at all and I had a lot of people in the media calling this a hay is
is D&B be dead I talked with a lot of clients about how much more successful
like Target was it launching Brands then DMV bees but,
now that you know everyone’s back into the the Commerce base as a result of covid I’m curious what was it ever true the DMV be was not a good investment and what’s the perspective now.

[35:28] Yeah like I think it’s hogwash right if you you can even argue like Dollar Shave Club which was the first one to exit I think did so at a billion dollars plus,
right I think.
You know there’s been a lot of worry Parker Hager haters over time but that business that business could be worth twenty billion dollars some day it may take a while but you had no I think companies like glossy a,
hymns Roman even pre covid that they were they were trapped away although clue they may be on the wrong side of the trend just want to travel like these companies were.
For on their way to doing some great things I think of like you know the all birds what’s Raffi’s was headed as a trend has been a myth momentum we talked about Casper.

[36:13] So maybe but I’m always been I think it’s been important I think what maybe gotta whack was valuations.
And this happened with a few companies like a stance or their others well these are very good brands but they were valued like software companies and they’re still at the end of the day there are consumer brands,
and so when those businesses Trade It,
5 to 10 times revenue and they stop growing or the burning a lot of money then there’s kind of investor sentiment is like,
I don’t think consumer sentiment ever goes that way because the consumer is not asking what your U-turn economics look like when they’re buying are engaging in your product your brand but investors were just kind of fluctuate in and out relative to the predictability.

[36:57] And scale related to software enterprise software businesses so I think that’s kind of interesting I think what’s also happened is a lot of businesses that really weren’t Tech businesses were,
you know like a lot of food businesses for example our drink beverage businesses which have done or jerky businesses like they’ve done great but those really aren’t traditional Venture businesses but then you had you know like Blue Bottle Coffee have a huge outcome than that the Nestle,
which is a venture back business so I don’t think they ever came out of favor I think what kind of what was out of favor and should have been as this that these companies were burning too much capital,
relative to their growth rates and eventually if you’re not increasing your margins,
while growing at rapid rates you’re just going to not be worth as much as I think some Venture Capital thought they could be and then that creates friction and the relationship and the eventual outcome of the business for sure.

[37:52] But you know I think that earlier is is I have a relatively simple view of direct to Consumer businesses is I just like things that have,
margin from high gross margin perspective I’m not afraid of retailgeek,
but I think you have to be to see first you have to have a team that has the DNA of going directly.
You have to be able to understand the importance of brand and brand development you want to have something that’s got some the community associated with it,
you looking for things that are you know candidly economically economical the ship if it’s digital he’s even better but if it is a product that it fits in a something the size of a shoebox like an even bigger than that gets a little tougher to be honest.
And you want something that you know,
either has natural reoccurring characteristic or such loyalty that people keep coming back to buy you talked about parachute home is example you know I started out really doing sheets and duvet covers,
and now you can get you know all sorts of products for altars of soft good products for the home and kitchen right and what people just fallen in love with that brand,
and they’ll buy anything from that brand that Services their home and so it you know you can’t release a hundred skus at once on day one but over time you build that loyalty and you extend your product reach into categories that you really your customers are,
are pushing you to go to and I think a lot of companies have had some success with that for sure.

[39:17] Very cool so we’ve covered marketplaces in DMV be another one that I’m tracking really closely and goat is kind of in here but we haven’t talked about thredup so so there are really good kind of poster child for this one is,
it’s this kind of Consignment and then a big Trend in fashion was this fast fashion kind of concept where you would buy lots of lower price Goods.
But then there’s been kind of backlash against that from the millennial the younger generation to the Zoomers or gen Z and millennials.
Because they’re really acutely aware of what’s going on with environment and whatnot in fast-fashion generates a lot of fast fast landfill I guess I would say so thread UPS really interesting it’s kind of part of this you know upcycling and.
Kind of.
Instead of wearing these things three or four times and throwing away how do we get more people to use these products is thread up one of your Investments and maybe give us an overview of how they’re doing.

[40:13] Yeah throw tips and threads think I invested in 2014 and they’ve done tremendously well great team and right as you know I grew up or grow up I spent a lot of time working in off price.
Right and recognize that consumers gravitate to brands at value and.
At the same time if you just open up your closet you know even if you trimmed it during covid there still 75% of stuff in your closet you’re never going to wear again.
Men and women threat of really focuses on women and kids but you know there is value in everyone’s closet and.
Really taken advantage of a lot of the stuff is good product now probably half the stuff that goes to thread up doesn’t end up in the marketplace because it’s just,
like a car house everyone thinks their products worth more than it might actually be but the reality is there is a market for that and importantly for threatens business there is an unlimited amount of supply.

[41:11] And so you know we are just begun to make a dent in the amount of inventory that consumers own and so threat it really takes you know I was built an incredibly robust.
Infrastructure and multiple warehouses in multiple cities where we ingest Millions upon millions of items.
Are able to recognize using technology.
Which ones are worth something which ones not and try and create an economic model that that pays the seller without having to bend to do anything other than put some stuff in a polka dot bag.
Growing again back to my eBay is the biggest problem was it was a pain in the ass to sell on eBay.
I’m so you really only wanted to sell the stuff that you knew was going to sell for something of Great Value and it wasn’t worth your time for something that was 15 bucks.
Or 10 bucks and thredup is kind of sibling will take it we may not pay you 15 what you’re going to get more than you would get if you wanted to just drop it off in the thrift shop and just will send you the bags put in there send it back to us and we’ll send you a check.

[42:18] It’s you know it’s kind of modified from there but this idea of these managed marketplaces and the and both similar is we use technology and we built a lot of infrastructure do the hard work.
And if we can do the hard work that make the value proposition very easy for Sellers and very valuable for buyers it can create a pretty powerful and really differentiated businesses scale.
And what’s interesting about threat up is you know there have more product on hangers than any company in the world,
so if you were to go to their distribution centers and like Harrisburg or Phoenix or Lanta they’re just running three four stories of Hangers On conveyor belt.
And that’s how they’re picking ingesting and then picking inventory we have millions upon millions of products on hangers.
And it would be almost impossible for anyone to build something at that scale in a short period.
Including you know someday the T.J.Maxx is in Ross’s are going to have to sell online.
And I have to think that they’re going to look at businesses like thredup assuming I wonder if we could put our new product in there.

[43:20] News product world and think of all the money and time we could save and I don’t know when that happens I’ve been waiting six years it hasn’t happened yet but I do think like you know for that happen to like.
I’ve done some everything I am not a big peer-to-peer Marketplace investor and again this is my eBay.
Kind of learning is I tend to gravitate more towards the managed marketplaces because there you can just buy or take rates.
The peer-to-peer marketplaces are much more competitive from a price perspective and can delete just not I don’t believe peer-to-peer works at eventually everything gravitates towards more of the power seller,
and so I kind of skip its data and look for those businesses where we jump right into some more of that powers our or just provide a great value where the the traditional,
the regular person just put the stuff in a bag and and business is taking.

[44:13] Here’s convenience factor on one side of the marketplace and a value on the other.

[44:15] Yeah exactly something it yes.

[44:17] I think it’s a I think I saw thredup is actually entered into some story relationships where their inventory will be at like I think there’s a Macy’s one and there was a JC Penney one when JC Penney was.

[44:28] Yeah and a lot of anaconda and a lot of Brands themselves who want to be talked about the social conscious or the eco-friendly nature,
I think brands are conscious conscious of the fact that that does matter to Consumers so by working with red up and creating a trade in trade up formula,
just creates another reason for a customer to be happy with a,
and if it dries a little bit more loyalty and more than pays for itself and from threats perspective we get access to Great customers and in great inventory.
Clearly certain brands will Lululemon sells better than Gap it’s just a matter of supply and demand.
And so you know from various perspectives are not just great marketing and Business Development opportunities but we do get access to inventory that work is likely to sell faster and higher prices on them.

[45:18] Yeah we actually had Anthony Marino on the show asked you’re like episode 170 I want to say and I was telling him if I chuckle because Allah
some of my clients are those discount apparel retailers that are not very bullish on e-commerce and,
one of the main reasons they say they’re not bullish as oh man our inventory is too thin and dynamic.
To work on e-commerce and I you know I always like to point out to those CEOs have you seen thread up and real real I mean.
They totally figured out how to do it,
I am concerned about time that I want to cover a couple other topics as you know one we’ve talked a lot about on the show recently is this idea of ship again and that that everyone’s counting on e-commerce to make up for all the
the diminished or traffic this holiday season but there really isn’t enough shipping capacity for e-commerce to save the day.
Is that a concern for your portfolio companies do you have a hypothesis for how holidays going to play out and I guess follow-up question.
Do you worry about that systemically Beyond this year like you worry about the fact that,
that e-commerce is just going to get artificially limited by these these constraining factors in the last mile.

[46:38] Am I allowed to swear on his podcast.

[46:40] You are I just have to check the right box when I upload the podcast but wet.

[46:43] Yeah no I think I think after the election.
Kind of coming around let’s assume everyone pushes their because of this they’re going to push their Thanksgiving Day promotions forward.
Earlier in the calendar to avoid you know so you think you’re going to see my instinct is once we get through election assuming everything’s regards to wins.
Yeah things are kind of back to normal covid-19 mall so let’s say November 15th.
Maybe right after Veterans Day it’s going to be you can see a lot of promo start them and it’s going to be a total shit show it’s going to show for probably six weeks and then it’s going to be reverse Logistics it show when everything comes back.
And the reality is what concerns me is the fact that.

[47:31] The shippers that UPS is and FedEx’s are going to these retailers or Commerce partner with quotas saying you can do as much as you did last year but if you expect your business to grow a hundred percent a year that’s not going to work.
So I’m worried more about I think they’ll deliver the probably they’re under promising but they’re going to justify a substantial surcharge on things above your quote-unquote quota.
And so I think it’s going to be very expensive I think,
again if you’re well that’s or Venture perspective you build a justify why your shipping expense in Q4 of 2020 was more than you expected,
I think that will be universally accepted I think you know if your more traditional public company under,
anticipating that it’s going to be you know not great because you’re going to see more expense and I think we’re going to have a lot of unhappy customers I think hopefully the customer will,
kind of you know a lot of impact the election were encouraged to send our ballots in early maybe we’ll shop earlier I think you know I would expect I don’t know if you seen my expect.

[48:32] 30 25 to 30 percent growth year over year in Q4.
And we’d been historically 12 to 15 in the last couple years I think that’s clearly going to double if not more,
and I think the Fed Ex is and UPS is USPS know what’s coming and they’ve done all they can for the past 6 months to get ready but we’re still going to get caught short handed.
I do think it catches up at the end because you just look at the stock price of FedEx and UPS its doubled like they’re going to figure out a way to add capacity they are smart people they’re both going to increase prices that are going to you know do all the things they do.
But I think it’ll work itself out I don’t think there’s enough slack from the startups I guess Amazon conceivably could take them as like but there isn’t any,
company that is has raised venture capital and suddenly going to make it dense and there’s they might put it in their pitch decks but the volumes of velocities that the big three plus Amazon carry it just dwarfs anything else that’s out there.
So I think it’s going to be a problem then we’ve talked about like I’m super excited about returns I’ve been bullish on returns as a business since I worked at.
And back to company that solely focuses on trying to figure out how to lower costs and create better experiences around returns a company called happy returns and I can’t wait to talk about that business in.
Like it’s going to be amazing.

[49:53] No I think you’re a hundred percent agree for all the Today Show producers that are listening to this podcast you know we’ve been talking about ship again in but arguably the bigger story is going to be returned to get in because
you know when you buy a pair of from a brick-and-mortar store you return it about ten percent of the time
when you buy it online returns are over thirty percent so you know this quarter where we are artificially selling everything online
if we follow past Trends there’s going to be an enormous amount of returns and reverse Logistics is way harder and has way more constrained capacity than,
outgoing Logistics and so I you know.

[50:35] Well look the with the bigger headache is two things one is in this is the big contrarian but I think people haven’t been spending money on soft goods meaning like clothes and apparel relative to other categories,
so there’s going to be a lot of gifting around things like that that aren’t you know comfy pants so sweaters and more traditional clothes so those are returned to higher rates right Christmas gifts and holiday gifts tend to be higher asps,
so hire a ESPYs is a correlation to returns and importantly the biggest friction with returns for consumers is how long it takes you to get your money back,
under the credit card or the order the gift card in return and so if there is a if right now it takes 5 business days or seven business days to get your credit back.
In a world of congestion you may not it may be a month or six weeks before you get your money back by the time all that stuff gets processed in warehouses better,
people are working half shifts because of covid and so I think it’s going to be as much people yelling,
not like where’s my money where’s my credit as much as it is just the time it takes to get the items back so I don’t think retailers are accomplished for even thinking about that yet but I guarantee you.

[51:45] No I agree and I specially like there could be a lot of stress in the subprime
portion of consumer credit come come January and so yeah that that’s a huge play one super funny premise I heard well maybe it’s true but in addition you know they’re all these arguments like hey winter people are going to need warm clothes even if they haven’t bought a lot of apparel
one funny one is almost no one that’s that’s sheltered in place has the same size they were at the beginning of the pandemic and so that could potentially Drive,
more apparel sales and more more returns.

[52:23] Now you either lost a bunch of weight or gained a bunch of weight right yeah.

[52:27] The covid-19 is this
yeah one quick one I wanted to hit on just because I like to talk about robots is you guys have invested in a robot
automation system called in Via inv I a reminiscent of Kiva and then Amazon bought Kiva and then obviously kind of
kept it to themselves the only other customer I think that had it was a pose and then they bought them to so
that’s a pretty interesting one is Imagine demand for that kind of a thing is skyrocketing with with covid obviously having less people running around warehouses good too.

[53:04] Yeah look I think there’s and there’s another was a Envy as number one competitor was a company called six river which was acquired by Shopify,
a few about probably about a year ago now so look I think the reality is that was original I’m going to get my numbers wrong but I think there’s 15 million people who work in Commerce fulfillment warehouses in the US.
And pre covid you know you couldn’t labor was exceptionally tight and they’re just you know,
it wasn’t about robots replacing jobs is about driving more efficiency and efficacy in a warehouse and you know these businesses like India are as much software as they are Hardware there really warehouse management systems,
that utilize Automation and robotic technology to really pick bins and bring the bins to the pickers who can because robots can’t really pick yet,
but they can deliver the bins and they can return the bins to the the staging location in Oakland replenish the bins and so like I think it’s a super interesting business that’s really trying to use.
The whole premise on that was candidly.

[54:11] Retailers need to get closer to their customer and in the old days you would park a million square foot Warehouse in Iowa.
For Kentucky because that way you could take advantage of the shipping rates across the zones 1 2 3 4,
and you can get to California or New York in three days turns out the Amazon figure it out that the closer you are to the customer the more the happier they are.
So now a Commerce provider has to have 10 100 square foot.
Facilities instead of 1 million square foot facility turns out you can’t spend as much money on Automation in 10 locations as you can in one is you have to spread your budgets out to be 1/10,
so you’re looking for more cost-effective automation Solutions and that’s really the thesis around,
via is that we can provide a relatively low cost variable cost automation system to help with the smaller warehouses that are more likely,
and to be used in certain local markets and clearly now post covid when you can have half as many people in a warehouse,
robots are good partners they don’t complain they don’t yell they don’t breathe they don’t cough they don’t sneeze all you got to do is they don’t pee I gotta do is change their batteries,
you know once every 12 hours.

[55:24] Back in time and wipe out the human race however.

[55:26] Yes yes,
these ones don’t talk,
but yeah so that’s a super like those are you know again a friction point the reality is you know even without code code would Converse online is going to grow 10 to 15% for at least the next 10 to 15 years,
and I don’t think we’re ever going to have more than 20 million people working in warehouses and you got to the only way that we’re going to be able to deliver all that product to meet the expectations of the consumer is we’re going to have Automation and.
It’s a little bit of I have no doubt it’s going to happen it’s going to be when it happens the scale that I hope for.
We’ll look back in 20 years and it’ll be a rounding error about what year this became mainstream but in 20 years there’s not going to be more people in warehouses that are on there are now and I would bet any amount of money on that and so,
I’m super excited about whatever is this thing goes well.

[56:18] Yeah there’s been a lot of talk about Amazon monitoring employee Communications for talk of unionization so robots also don’t form from unions which is
I guess the I wanted to I know we’re up against time I wanted to rap and just kind of talk about eBay so so you I met at eBay a lot of the there’s like this eBay Mafia folks like yourself that have gone on to do a bunch of stuff,
we run into them in the vehicle Auto segment all the time which is kind of interesting like wasn’t one of the fair guys an eBay person.
Turo is.

[56:50] Yeah there’s what it was Scott painter was fair and he was actually true car.

[56:54] Two car yet you get.

[56:55] No but the eBay Auto guy is the founder of happy returns is a former eBay Motors guy.
Rob Chesney who was the CEO of eBay Motors was the CEO of Trunk Club.
He’s now a venture capitalist in Chicago Simon Rothman I think was one of the first Tesla investors he went on to be an investor at Greylock.

[57:18] And then there’s a few there’s a lot of the eBay Motors guys know there’s a lot like eBay,
had a lot of tremendously smart people both in the operation side and the Really the finance side legal side and now like my old boss is now the CEO,
and so Jamie Ione worked side-by-side with him for a lot of years and you know I’ve talked to him a few times since he took his job we had a,
kind of had an eBay reunions right the day that he got announced to be CEO and we probably had 20 people
bunch of old category you know people like didn’t Ash and George Latimer and Todd let whack and those people that I know you knew really well and we were all given we’re pitching Jamie our ideas and all the things that have been screwed up with eBay for the past 10 years when all of us were gone.

[58:04] And I think you know he’s done.
You know they sold StubHub they sold the PayPal business they sold the class of a business so there’s really only two if Korea in the north of and the US.
And European Marketplace businesses and I think he’s getting back to the core and recognizing what eBay was good at,
which is search and discovery of unique items are great values and I think they’re spending a lot of resources protecting,
businesses that are doing very well like they’re collectibles businesses that’s the one category that hasn’t been disrupted on eBay and I think Jamie and Jordan.
Sweet man are recognized that I’m making Investments and doing things that we would never have done with Meg and John and regime or the boss when I was there 15 years ago.

[58:51] Yeah yeah I’m excited I think the world is a better place with a strong eBay so I’m hoping they can turn it around and definitely cheering from the sidelines over here so so hopefully I’m doing my part to drive gmv by buying some Collectibles during code.

[59:08] Awesome we’ll listen guys that is going to be a great place to leave it because once again we’ve used up all our allotted time
but if there was something we should have brought up and didn’t or you have a burning question feel free to hit us up on
Twitter or Facebook and we’re happy to continue the conversation as always if you enjoyed the show sure appreciate it if you could jump on iTunes and give us that five star review.

[59:31] Greg if folks want to find you online where are the best places to find you.

[59:35] Yeah easiest my emails is Greg at
50/50 I’ll get back to you but that’s it pretty simple you can go to LinkedIn as well,
I have a fancy little drawing of me as a picture and you want to send me a message that way and then at Twitter just at Greg bettinelli and my venmo is the same so if you want to send me money you can do that as well.
Greg bettinelli.

[1:00:00] I’m not sure you fully comprehend how the investment role is supposed to work.

[1:00:03] Oh right it goes the other way so you want to send me the Paypal invoice you can do that as well no yeah.

[1:00:09] Cool thanks Greg we really appreciate you taking time to share some of these macro themes that you’re looking at I think it’s super helpful as we head in the holiday to be thinking about the long-term before we get wrapped up into the short-term.

[1:00:23] Yeah great and you know congratulations on 244 and also hope you and the family are well and healthy I know this isn’t easy for anybody and at least this is add a little levity which I think you know hopefully will get back to normal someday and,
I know we will see better when but hopefully the two of you remain a good health in the same period fan.

[1:00:41] Thank you very much great again and right back at you and and to everyone listening until next time happy commercing.

Oct 30, 2020

EP243 - Amazon Q3 2020 Earnings Recap 

In this episode, we break down Amazon’s Q3 2020 earnings (PDF) results.

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

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

Episode 243 of the Jason & Scot show was recorded live on Thursday, October 29th 2020.


[0:24] Welcome to the Jason and Scott show this is episode 243 being recorded on Thursday October 29th 2020 I’m your host
Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott sure listeners.
In today’s episode we are going to go into what is one of our more popular series where we do a hot take on Amazon’s Q3 results,
I’ll give you one word to summarize them they were bonkers.

[1:05] Sun News new your margin is their opportunity.

[1:12] Before we dive in and take you through the highlights of the results let’s just set the stage a little bit so,
if I was there in front of you on the Whiteboard I would draw Q 1 Q 2 Q 3 q 4 in a row,
and because the pandemic and Q2 we saw a cross e-commerce super elevated growth rate of 45 percent.
Prior to that e-commerce was growing at about 15% so we have this step function from q1 2020 up to Q 2 of a 3 x acceleration of growth from 15 percent 45 percent.

[1:45] Kind of looking back to Q2 Amazon grew about 43 percent then so that was kind of the the day that we had in Q2 this kind of.
Yeah 45 percent growth rate Amazon was in line with that.

[1:59] Then we had a bunch of companies that grew faster or some degree a little bit slower but generally you know we had just this really tremendous quarter,
a lot of folks thought you know that’s unsustainable and Q3 it’s going to come down pretty dramatically.
And then just in the last week you heard it here first on the show as an exclusive we had emarketer released their fourth quarter holiday forecast for 2020.
And they’re forecasting 38% for the holiday period,
and then Salesforce just came out with theirs and they are looking at 34% and then Adobe just came out with theirs and they’re looking at 33%.
So we have this kind of interesting bracket if you will over on one side we have q to that was at 45% and then over on the other side we have Q4,
which you know if we look at kind of this range of 33 to 38 percent will call it 35 percent on average if we kind of triangulate on the three forecast there.
So what you’re seeing is the pontificate errs are kind of seeing that we’re going to drift from this high Watermark of 45% you to to 35% you for.
So that’s the stage that had me very interested to see where does Q3 come in because if we.
Maybe if we are below that 35 percent growth rate that’s that’s interesting and if we’re way above it maybe those holiday forecast are a little on the conservative side.

[3:24] So that that’s kind of the the macro stage coming into this quarterly release we did have a couple you just kind of the way the earnings results fall we had three folks.
In the in this kind of e-commerce cohort before Amazon did today so let’s see I think first we had eBay and they were at 26%.
So that would that would indicate you would just had that one data point you’d say oh wow we must have seen a really big acceleration eBay has been lagging the market already so that one’s not a huge surprise,
and in fact they their growth rate came down to points so they were at like 28 percent from revenue,
in the second quarter there your growth rate and then they ticked down slightly to 26 percent.

[4:07] Then we had let’s see I think next was at Sea and they came in at a hundred and twenty eight percent year-over-year and what’s really interesting about Etsy is they saw a huge lift and Q2 from mask.
But they had some pretty compelling evidence on their earnings call they can actually peel out the masks and their growth rate was still I think in the high 90s even excluding mask so they’ve seen this kind of cocooning and people getting really into crafting really,
and so that was interesting and they saw about an 8% decrease quarter-on-quarter so so there was a little bit of a step down.
Then we had I think yesterday morning or was this morning we had Shopify and they came in at 96 percent year-over-year growth.
And that was straight across from Q2 so that was the set up coming into Amazon’s Q3.
Jason anything you want to throw in there before we get into the results.

[5:04] No I think you covered it pretty well like just a couple things it said see it’s pretty interesting The Masks clearly were like a honey pot that was.
Driving incremental traffic and then it seems like there’s some evidence that there,
able to sell other stuff to those people which is awesome the traditional craft stores also are way up like Michaels and Hobby Lobby so it
it does make sense that people are using their quarantine time to get in the Hobbies more and I want to say I saw data point that Ed see has also added a ton of new Sellers as a result of covid so they
they really feel like one of the across-the-board beneficiaries and then I’m just going to admit the Shopify number impresses and surprises me I would not have expected,
them to stay up that high this quarter.

[5:51] Yeah and they don’t report same-store sales so there’s obviously there’s some churn and some ads and there and things of that nature but but even then you know it’s not like they’re adding someone that’s this this huge multibillion-dollar retailer there.

[6:06] And so so I think it’s pretty it’s probably actually pretty close to the same store sales I would imagine if I kind of think through the Dynamics there I would love for them to release some kind of a same store sales number but they don’t.
Okay so so then Amazon resulted after the Bell closed as we’re recording this here on Thursday the 29th.
And you know a lot of lot of earnings on Wall Street is around expectations so let me start with the expectations Wall Street was expecting and I’m going to use round numbers because it gets kind of I know it’s hard to listen to this when we go into multiple decimal points,
so Wall Street had pretty high expectations they were expecting a 93 billion dollar result which I believe equates to kind of a 35% growth rate,
so 93 billion dollars was what they expected Amazon came in at north of Slightly North of 96 billion dollars so they beat the top line by 3 billion,
not too shabby and so.
So that equates to a growth rate on the revenue side all in at Amazon of 37% and,
the Apples to Apples comparison is that that number was 40% in Q2 so a slight tick down so in Q2 they were at 40% and now they’ve down to 37%.
Because I haven’t done a total analysis this.

[7:27] Amazon at least was highly correlated in Q2 to the US Department of Commerce numbers that came out so so I think we can expect those to take down similarly into the high 30s.
About but I know where that’s gonna be really interesting to see that,
then as you dig into those revenues they give you a couple of different slices of that one of them is
bye what do they call it segment so the North America segment was up 39 percent at fifty nine point three billion,
and then International was up 33 percent on a constant currency basis to 25 billion so.
Part of this that’s really interesting to me was the international stuff had slowed down considerably more than the US which I thought was kind of interesting factoid there.

[8:16] And then let’s see that I cover everything then another thing is if you peel out physical stores which I want to go over to you in a second,
Amazon all in grew 40 percent year-over-year compared to Q2 s 44 percent so another indication that,
yeah that they take down a little bit they also had a very high percentage of orders that were third party that was 55% and then the first party Groove 38%.
So you always read these stories and there’s actually some antitrust stuff floating around if Amazon is harvesting 3 p 4 1 P they’re doing a terrible job at it because 3p is growing considerably faster than one piece,
Jason you had some interesting insights on the physical store numbers would you see there.

[9:04] Yeah so for the second quarter in a row their physical stores are down which for them physical stores is most from a financial standpoint is mostly Whole Foods.
They do have a small compliment of bookstores and go stores.
But so for the quarter physical stores was down 10% and superficially you go oh yeah that makes perfect sense people are going to the store to last and covid and buying more online so not surprising that Amazon’s,
e-commerce is growing and physical stores are shrinking but if you if you think about the fact that Amazon’s physical stores are mostly grocery stores,
no other grocery stores in America are shrinking like grocery stores were one of the biggest retail beneficiaries of covid and so you look at like a Walmart,
and they’re they’re up 15% so.
When you compare that and say oh my God Amazon’s grocery stores are down 10% while Walmart’s are up 15% that’s huge.

[10:03] But then you have as you unpack that you have to realize that the way that Amazon attributes its sales is different than almost any other retailer right so if
give a customer used to go into the Walmart store and buy groceries and now they’re buying grocery stores online which is like 25 percent above all grocery customers.
Pivoted online that still a grocery sale the Walmart however at Amazon.
The the all sales that happen online get attributed to Amazon versus whole food so when that customer moved from shopping themselves to to ordering online they suddenly became an Amazon Customer which is why the,
the physical number goes down so abruptly for them.

[10:49] Yeah pretty cool so it’s frustrating because this,
apples and oranges on how we measure e-commerce at these edges of bulbus and curbside is kind of I wish we had an industry standard or people would give us the segment so we could know a little bit better what’s going on.

[11:07] Yeah absolutely there’s a lot of interesting trends that are office gated and how they all collect and report this data differently unfortunately.

[11:17] What closer as we both know Jason Amazon doesn’t ever make profits so what kind of money losing proposition was this quarter form.

[11:27] Yeah well they continue their losing streak Wall Street had expected them to only earn four point eight billion dollars.
Which you know you could call that a loss I guess and instead they actually earned six point 1 billion dollars so I would like to be that big old loser,
but that represented like so on the net income that’s almost a 200% increase that’s 6.3 billion dollars of net income.
Um which if you’re an investor that earning per share comes in at like.
Twelve twelve dollars and 37 cents which is near double the consensus which was 741 so I think they call that a Beat.

[12:13] Yep yeah that that is a beat on the top and the bottom it’s a smash let’s see I mentioned another.

[12:21] Side note before you move on I heard a new phrase you may already know this one but I’m now hearing analysts call stocks checkmarks.
And you know what that is that’s the stock has recovered from the covid dip and now it’s back up above its previous level.

[12:40] Oh nice to kind of a Visa another way to say.

[12:43] Let’s say yeah that’s why I thought you would enjoy it so much because you’re such a big fan of this deep V.

[12:47] Yeah yeah I’m going to work that into my vocabulary here,
the another tidbit on third-party Marketplace which is my wheelhouse from a unit perspective ticked up nicely 53% of unit volume from third party and in Q2 that was 52% so
good little oh no we’re we’re 50 for this quarter and that’s a tick up from last quarter at 53 how about a,
there are other money-losing areas like AWS and dads.

[13:17] Yeah what so one other thing by the way you already talked about their International sales one interesting tidbit to me about International sales traditionally the story is.
They’re investing internationally and North America’s more mature and,
North America I want to say is like 61 percent of the revenue so they make money in North America they traditionally lose a lot more money internationally where there earlier and making bigger Investments,
but they actually we’re pretty profitable in international dish this quarter which was interesting.

[13:48] But so AWS which is you know rumored to be the only profitable part of Amazon for people that are wrong.
Was up 29 percent which is a which is very meaningful growth in almost any context it is a deceleration of growth for them and it’s the second straight quarter of that but when you think about it.
Kind of makes sense you know a ton of companies got,
conservative and implemented a bunch of austerity measures and so you know a lot of potential AWS clients probably slowed down some of their plans to move.
To the cloud or invest bigger in the cloud but I would still argue that that the long-term Prospect for the cloud was actually improved by covet like in the big picture it’s going to accelerate everyone’s.
Migration to digital and migration to the cloud so I suspect.
That will ultimately see AWS get a nice benefit from covid although it you know the big numbers it seems like it’s growth is slowing down a little bit.

[14:57] And then the the really interesting one to me is other which as we’ve talked about before on the show is almost exclusively ad Revenue,
um was up significantly it was up 49% so it was.
Other has been on a tear for a while last quarter was 41 percent,
before that I was 4441 4537 like it’s had these these very big bump UPS I was too foolish to put it in the notes but I from memory,
they’re just shy of 6 billion dollars in in ad revenue for the quarter,
um and so you know if you if you did some like simple math and annualize that they’re they’re probably over 220 billion dollar,
advertising run rate it makes them the clear third biggest ad Network in the US and thing to remember.

[15:55] Ad revenue is wildly more profitable than gmv right like you know you’re hoping the net I don’t know 10% 15%,
on your on your GM V sales but your.
Your netting like 95% on the ad Revenue because there’s you know just a small amount of fixed cost against this.
Big amount of Revenue so so that’s amazing that’s hugely profitable it’s contributing a ton to the bottom line.

[16:26] What it’s somewhat surprising because in general advertisers cut back on advertising and covid right like the first thing they did is they turned off a lot of their advertising,
but what this is clearly showing me is that advertisers cut,
back on their top of funnel ads like ads that ran in on television and ads that ran on Facebook and Google it was even complicated because there was kind of a advertising boycott on Facebook you know at the beginning of all this,
but they clearly advertisers kept spending on Amazon Amazon is becoming more of a real destination for ad dollars so,
um that that’s impressive and then of course,
because covid Force more people to shop online traffic goes way up on the Amazon properties and and AD Revenue digital ad revenue is kind of tied directly to the number of eyeballs you get on your site so.
So that helped them a lot but this is now a very material part of their business and,
you know you see every retailer in America is trying.

[17:31] On a much smaller scale get in on this act like it’s a huge initiative every big retailer their site monetization and trying to sell ads to compete with this.
This new profitability enhancer that Amazon has created.

[17:45] Bernsen and we I should
just point out we’ve been facetious about the money losing stuff and for a while so if you think about the four segments and there’s more we’ll talk about the four so you’ve got North America retail International retailgeek
AWS cloud computing and then other which is largely ads,
it’ll be less than ads up in cash flow positive for a long time the US business has been cash flow positive.
And then International has actually flipped back cash flow positive for the last Q2 quarter so,
every segment at Amazon is cash flow positive and generating towards income now it is true AWS I think contributes around half of the overall profit of Amazon,
but again you know a lot of people say none of Amazon’s Prophet except AWS all those things are false and wrong statements that,
that’s just simply not true it does kind of out punch its eyes but it’s just because it’s got such a high margin profile versus the retail segment.

[18:45] The other fun thing is ship again which we initiated here on the show and it’s got a little bit of a life of its own it’s been highlighted on in the New York Times Bloomberg and on The Today Show,
um what’s been really interesting is,
Jim Cramer on Mad Money he was kind of holding the UPS CEOs to the fire on this he didn’t call it ship again but everyone’s kind of woken up to this thing that you and I think I think will Pat ourselves on the back.
And I think we unanimously would vote that we were the first to identify this problem that you have,
already elevated e-commerce levels shipping isn’t growing nearly as fast and we’re have holiday kind of barreling at us,
so they address this one of the first questions Wall Street asked was are you guys ready for this this bump in shipping volume and the CFO said,
he didn’t use super Garden sadly but he said we know that third party shipping is going to be very tight this quarter we feel good that we have made our own Investments so there’s a little bit of a.
Subtweet I guess I would call it a little shade that he threw to the to the third parties and and you know Amazon looks like a genius here.
While she was not a huge fan of them going into this DSP program when they announced it and that they were going to build out their whole own direct consumer fulfillment it seemed.
Kind of a little crazy at the time but this was this was a genius the pandemic is made that just an obvious smart choice to have done.

[20:13] Oh yeah for sure.
And he did still put in a plug which every retailer is that like a even though we feel good about all the our own capacity to deliver still probably a good idea to order early if you’re a consumer,
so for sure for your Christmas presents I would recommend you you not wait till the last minute.
It is always an interesting line item the the biggest expense that always shows up on Amazon or fastest growing expense on Amazon’s income statement every quarter is there shipping costs,
and and they did go up by 57% again for the quarter so that’s a expensive part of doing business,
and this isn’t totally tied directly to their earnings but just to highlight you know they invested 30 billion dollars in capex last quarter that was mostly fulfillment centers.
And they basically for the year from the end of 2019 they were 283 million square feet of fulfillment center space and they’re expecting to have 294 million square feet of fulfillment Space by the end of this year so that’s.
They already had a insurmountable lead in fulfillment space and they’ve increased it by 60 percent.
Which is crazy so the.

[21:31] Yeah if getting product near consumers is is going to be a big win than its it already was game over and now it’s just like there’s no hope of anyone catching up to this.
Hopefully maybe Shopify will say there have to start building a lot of fulfillment centers.

[21:48] Yeah and yeah and there’s a lot of complications there but so then there’s my favorite part of the the whole learning segment which is their cue forward guidance and the reason is my favorite part is I feel like it’s the.
The widest guidance I’ve ever seen.

[22:04] Yeah yeah it’s uncertain times in the cone of uncertainty.

[22:07] Yeah well so most retailers have solved by just not offering guidance.

[22:11] Yeah I think Depo one of them.
It was several I think Microsoft several stocks were down not only due to Rising covid cases but for lack of giving guidance they’re starting to get punished so so the you know the
the corollary to that is all right we’ll give you guidance but we’re going to give you this this very wide bookends.

[22:33] Yeah so they they’re projecting between 28 and 38 percent growth for Q4 which is,
kind of in line with all those e-commerce estimates that we’ve seen and for them that would equate to 1 billion to 4.5 billion and income which.
Last quarter was 3.9 billion so they’re saying we could be you know Down 2 billion from last year or we could be up a half billion from last year.
Um a couple things to note like ordinarily Q4 is more promotional so income actually goes down and then this year.

[23:11] Remember Prime day is in Q4 right like that these Q3 numbers we’ve been talking about ended September 30th and Prime day was in early October,
so it’ll be interesting to see how that impacts their Q4 and then you know one thing that got a lot of analysts attention is they estimated that they have they’ll have four billion dollars in incremental covid costs.
Just for Q4,
and at first people thought that was hard costs and they’re like well wait what are you spending for billion dollars on and then what it turned out is if the bulk of that is an estimate of lost productivity as a result of covid so,
they have to social distance people in the Fulfillment centers which means they pick a little bit slower and so there’s,
there’s more in efficiencies they’ve had to hire a bunch more people and those people are slower to ramp up so there’s a bunch of beneficence he’s there so.
So that’s part of why the the despite the significant growth in income is still down as because they’re expecting their you have to spend a lot more on covid-19.

[24:11] Yeah the last thing I would highlight in this this hot take is I was like to pick through the press release and see what they’re talking about,
you know it’s been funny watching Amazon for 20 years because the press releases are is getting really long because the bullets of everything they’ve done in the quarter there just like so many more bullets Who stuff they’re doing,
so it’s always like you know we introduced 800 Echo devices and we did this and that and it’s just it’s amazing how much this one point seven trillion dollar company is banging out on a quarterly basis,
but a couple tidbits I thought listeners may be interested in and you you were very early on kind of catching on that Amazon may have some aspirations around Healthcare,
they did call out that they are I think they said by mid-november they will be testing doing 50,000 covid test a day across 650 sites,
so that’s kind of interesting you know there’s there’s almost like a little clinic inside of the Amazon Fulfillment centers I imagine it’s what they’re talking about to make sure that they’re catching all the stuff early.

[25:11] And then another area I always keep a close eye on is this this fulfillment program that they call the delivery service providers or dsps,
in there they talked about they now have 1700 dsps and the dsps are the small businesses that they 1099 with that have multiple many many trucks per partner,
so they have 1700 partners and then within that that ecosystem they created over a hundred thousand jobs delivered 2.2 billion packages and paid,
five billion dollars to small businesses which they by that they mean those 1700 dsps have earned that much.
The way it works is they get paid a little bit per package just like a FedEx or UPS what so I thought that was interesting call out I hadn’t seen that that specific before.

[25:59] And then you know to your point while she was just blown away by how much fulfillment capacity has been added and and,
you know I think over a million jobs have been added into the the Fulfillment Network which is which is pretty crazy.
So that’s the details Jason must pop back up to 30,000 square feet now that we kind of know,
the how the 800-pound gorilla did in Q3 does that change your overall view of what the holiday is going to be like do you think you do buy into that 30 that 35% kind of Zone.

[26:31] I still do and here’s why if you think of like so if you think of all of retail.
E-commerce has is a smaller so ever it’s like 15% of the the five trillion dollars in consumer spending.
Traditionally Q4 disproportionately skews e-commerce right so you would you would normally expect a much richer mix for e-commerce and Q4 because there’s a lot of people that don’t use.
E-commerce for their day-to-day purchases but they do use them for their their incremental holiday spending and so the.
Q3 was super interesting to me because obviously Q2 everyone panicked and had to do e-commerce a we saw that huge Spike from the traditional 15% growth to 45 percent growth.
Q3 was going to be really interesting because you might have expected that to settle down more right and now like it’s still early in the Q3 earnings season but our first indications are that they maintain that that level of growth,
I see that doesn’t make me scared that the ha like for sure for Holiday we’re going to have a peak on a peak or what we call a super Pikachu.

[27:43] I still would expect it to settle down a little bit because.
There already is more e-commerce you know cooked into the last year’s number 4 for Holiday quarter versus Q3 so,
to me that that 33 to 38 percent still seems viable,
you know every CEO talks about how much uncertainty there is every forecaster talks about how there’s a much bigger deviation and of course.
A bunch of people are interested in know if there’s going to be any stimulus like there is a theory that after the election next week whoever wins like you you know you could imagine Congress having more impetus to,
get some stimulus out there which.
Could be a game-changer and then you know at the moment there’s a lot of people that feel like covid is going in the wrong direction and that could have a derogatory effect so,
so a lot of uncertainty but
but to me I guess if I had to wager my own money I still feel like that high 30s is a is a reasonable place for e-commerce and next next quarter what do you think.

[28:55] I do I kind of feels like we’re settling in there I do you know.
I think I think we still have a pretty big ship again problem at 35% and I think there’s because of this cone of uncertainty you know let’s say we come up,
would bump up to 40% or kind of the high end of that range and we’re kind of up in the 38 to 40 percent I think it’s going to make it worse and.
You know one of the things I’ll tease is I’ve been working on a model one of my concerns is
we get into the Cyber five and that creates enough of a glutton the system that it doesn’t ever really recover so so because I think it’s going to be hyper compressed this year around there because
everyone’s motivated to get you to shop early so we could have this kind of
you know what we would say here in the Southeast is the the snake be eating a pretty big pig that it’s not able to digest and you know that that could cause that could.
But really accelerate this ship again problem so that’s what I’m going to be keeping it pretty close Island.

[29:57] Yeah no I think that’s a legitimate concern I had foolishly been expecting the Cyber five to be somewhat diminished this year because,
because it is exactly because of the problem you mentioned a lot of retailers would have a vested interest to to flatten it out but like frankly all the forecasters.

[30:16] Disagree with me and they think it’s going to be a monster cyber 5 and that you’re exactly right that’s gonna really gum up the works
we of course you know talked a lot about the big shippers I’ll have a quota so they simply aren’t going to be able to put more packages in a FedEx then they’ve already agreed to
what’s now happened as FedEx and UPS have stopped opening new account so if you’re a small shipper you know that are a small small retailer that was.
Going to send me try to adopt them e-commerce that’s not an option to you so that’s going to be a hiccup if there’s a Saving Grace for retail it’s going to be,
that a lot of retailers are going to lean heavily on curbside pickup and store fulfillment of their e-commerce orders so you know people like Target and Best Buy already very good at that Walmart’s moving in that direction in a big way,
so I you know I think if that cyber five is Big that people are going to compensate by really.
Focusing on promoting items that they can fulfill from stores and then you know as you get closer to the holiday like it is possible that this could be like a disproportionately large ear for gift cards because,
you know you could you can find that people just aren’t able to get the gifts they want and unable to get them where they want them in time and so we shift to these.

[31:37] Kind of digital currencies and then I guess the one other thing I’ll throw out there that’s another problem besides ship again and is.
Inventory is thin you know a lot of Supply chains were disrupted a lot of retailers were super conservative.
And so like I think it’s also true that we’re just going to run out of popular stuff for weight in the.

[31:59] Yeah it’s going to be interesting to watch a couple other little tidbits here at the end for those of you that made it this far,
the someone was telling you and I on Twitter that they’re not taking new accounts at I think they mentioned both FedEx and UPS so that’s I think that’s unprecedented I don’t I don’t remember ever.
Seeing either of those those companies kind of say hey we’re going to pause new accounts starting late October that’s kind of crazy crazy town.
And then it looks like it’s really getting backed up I’m not an expert on this but someone was emailing me these rates for cargo containers that come on this ships and,
they’ve seen these spot prices just like escalate and week on week like 40 50 60 percent and and the last couple of weeks so,
that’s an indication that gets an auction type system,
it’s an indication that that room on those the ships just coming here is very tight and the economics are very tight on that part of supply chain so so it feels like things are going to be backing up here,
the e-commerce and Retail Plumbing is going to be really interesting to watch in Q4 and.
As usual Jason I will be here reporting on it and let you know what we what we see think of us as your eCommerce plumber friends.

[33:15] Except that our pants go all the way up.

[33:17] Absolutely yeah none of that stuff here on the Jason’s gotcha.

[33:20] No
if it’s got that’s going to be a good place to wrap it up because we’ve used up all the time we have allotted for this quick hit show it’s the second one this week so we don’t want to overload our listeners,
as always if you want to continue the dialogue please hit us up on Twitter or Facebook especially if you disagree we love to hear other perspectives,
if this show is it all helpful for you we sure would appreciate it if you jump on iTunes and give us that five star review.

[33:48] Thanks everyone for joining us and.

[33:50] Until next time happy Commercing.

Oct 28, 2020

EP242 - Salsify Co-Founder and CMO Rob Gonzalez 

Rob Gonzales is the Co-Founder and CMO of Salsify an e-commerce enablement SaaS company that has raised over $250m and focuses on helping brands sell online. Rob is also co-founder of the Digital Shelf Institute.

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

Episode 242 of the Jason & Scot show was recorded live on Wednesday, October 21st 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 242 being recorded on Wednesday October 21st 2020
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Well when we’re not talking about ship a garden one of our other favorite topics here on the Jason Scott show is
what we call branded remanufacturers going direct or direct to Consumer brands or just simply direct-to-consumer,
and this is a big topic and we’re really excited to have a guest here that is going to be able to really help us dive in on this and shed a lot of light on the trend,
so we are excited to Welcome to the Jason Scott show Rob Gonzales he is the co-founder and CMO a chief marketing officer which is one word short of Jason’s title I’ll just point that out of salsify,
salsify is an e-commerce enablement software-as-a-service company that has raised over 250 million I’ll do a dramatic pause there,
and focuses on helping Brands sell online Rob welcome to the show.

[1:34] Thanks for having me glad to be here.

[1:36] Yeah we know if listeners know this but we record late at night and you’re an early morning person so we really appreciate you staying up into the wee hours to do this with us.

[1:45] Thank you yeah you guys are the party animals with e-commerce quit these hours.

[1:49] That’s yeah that’s what we’re commonly referred to as the party animals of e-commerce.

[1:55] You talk about sad states of Affair like what a lame industry this is if Scott and I are the party animals,
Rob it’s awesome to have you on the show excited to dive into the latest stuff but before we do we always like to get a little bit of a feel for the guests can you tell us how you,
got started and how you came to the e-commerce industry.

[2:20] Yeah in 2006 I was working in an IBM research group and right across the street,
was in Deka Technologies one of my best friend’s Jeremy is also by co-founder at salsify.

[2:34] Got a job in Deca and loved it and convinced me to come over and in Deca Technologies for those who don’t know invented search navigation merchandising for e-commerce so if you were,
building an Enterprise e-commerce site in the 2000s you weren’t just buying a single platform like you are today you’re not just buying Salesforce Commerce cloud and it sort of does everything,
what you would do is you would buy a mix of different pieces of technology and Stitch them together to provide your whole Commerce platform so the search engine the navigation system all that stuff was typically bought separate from the core Commerce.
And in Deco is the leader in that space you think about like in that period, most of the big e-commerce players about 60% of the internet retailer top,
using Deca for their search navigation and Merchandising Amazon actually tried to acquire them at one point in the 2000s to to be what would have what would become the A9 algorithm,
so really really great technology I was acquired by Oracle for a little over a billion dollars in 2011 and I like that number because,
I mean in 2011 e-commerce is basically nothing so to be a billion-dollar really e-commerce search company that time really shows that the impact that in deck had that that’s when I got into it.

[3:53] Very cool the deck is interesting I keep I always bump up against folks that have gone on to do other things from a deck and you probably keep better track of this than I do,
and any Commerce we always talk about the PayPal Mafia that is out there and I say Mafia in the most glowing of terms meaning people that got their start at a company have gone on to better and better things in kind of a you know
an unusually large percentage of folks,
so you guys it salsify kind of come from there I believe some of the folks at toast there’s company jellyfish you know I think I think there’s like 10 or 20 e-commerce companies that got kind of born out of inductive is that is that kind of your take as well.

[4:33] Yeah there’s a whole set of them and they’re across lots of Industries and in other places so in health care you’ve got a company called kairis,
in restaurant Services Toast of course raised a monster round at the start of 2020 at something like a 4.5 billion dollar valuation Sprout social went IPO this year they were founded by in Deca alumni,
you mentioned jellyfish is a relatively new company that’s doing really really well engineering Analytics,
so Steve Papa that a Founder CEO of and deca has been doing a play called parallel Wireless Next Generation Wireless Technologies,
and so yeah there’s just an absolute ton of companies that came out of that that group of folks and then other individuals like the chief scientific deca,
Daniel tunkel language the chief data scientist at LinkedIn after in deca,
one of the Andreessen Horowitz partner Julie you is is in deck alumni so they’re just all over the place it was a it was a heck of a company in terms of the talent that they were able to bring in.

[5:33] Was there something about the culture that kind of was it like a entrepreneurial kind of culture like what was there something special about it that you think has caused so many alumni to go on to bigger and better things.

[5:46] You know.
Jeremy Jason and I talked about that it’s really hard to pin down I mean I think the central thing is in Deca was known at that time for having an absolutely,
kickass engineering team with the best in Boston at and a lot of people believe that and.
Whether or not it’s true you know it at least had that reputation being in the top view so people that were really smart and ambitious in the Boston area.
Always had it on their list and in deck is interview process was really geared more towards hiring for just raw intelligence and ambition,
versus a particular skill set in any of the particular any of the markets I mean they just I mean they hired me as a product manager and I was.
Research software engineer at IBM I didn’t really even know how to spell product management before they hired me as one,
and that was pretty typical of a lot of The Hires that they had so it made for this really intense,
high-energy very smart culture but that also felt pretty chaotic a lot of the time to these you had a lot of smart people that were in there with their own ideas and their own Ambitions and trying to build their own things,
but yeah I think if anything I would pin it to that but it’s hard to say exactly what at that time Drew so many good people in one place.

[7:09] On top of that it was all so very much the Rolls-Royce,
top of the the hill product in the space like for a long time,
Commerce platforms didn’t even bother building search into their platform because it was sort of a given that you were you were going to use in Deca or certainly if you were an enterprise-class customer you were going to use in deca,
and they held that position for a long time even after Oracle acquired mmm.
One of the things that’s interesting Mia that’s kind of one of those stories what what in my mind what really finally knock them off the hill was they ran up against a good open source competitors.

[7:52] Yeah I completely agree with that solar elasticsearch they change the game from below the puts what made solar Nath elasticsearch even competitive was,
I’m compute capacity got a lot cheaper and,
like from it for the in decades and that guy had a couple dozen patents on their core engine was called the MDX engine the multi-room,
multi-dimensional index and the core thing that index allowed you to do was to navigate with you know sub hundred millisecond response times huge sets of data with high dimensionality and what that means is like if you go to or you go to
Where they’re selling these days tens of millions or hundreds of millions of products,
and you look at that left hand navigation once you once you do a search so let’s say you go in there and you search for t-shirts and then the left hand navigation their selections such as brand color size price ratings,
Prime enabled all that type of stuff so clicking on any of those options reduces the space of,
things that match the original search of t-shirt that you are going after and it does so very very quickly.
The ability for a computer system to have a large amount of data and a large amount of those navigable.
I think about like a Walmart or Home Depot with literally thousands of product categories each with their own navigation structure so thousands of options to click from to navigate through the set computers.

[9:19] There weren’t systems that could do that back in two thousand one two three four five six seven bi Cube if you’re using business objects or cognos or something like that these systems,
would allow you to have a few dozen Dimensions at most right and then they’d sort of scale out so in Decca had this Secret Sauce of.
This index that could return search results in sub hundred millisecond time for large data.
And nobody else had that so so yeah this the open-source guys came along and they’ve got amazing products.
But but those products are not competitive except for the fact that computing power has actually gotten significantly.
Better and cheaper also in the intervening 10 years.

[10:00] Pretty cool so that’s a good segue I’m the I’m the entrepreneur in this Partnership of Jason and Scott here and I always like to hear kind of the founding story,
you guys were at in Deca guys got bought by Oracle and then kind of walk us through to the the founding idea of salsify hopefully there’s a napkin diagram in there somewhere.

[10:18] Well.
Becoming first of all e-commerce is awesome it’s the coolest if the coolest face to work in because it’s so dynamic in and it’s not just dynamic as a space,
the practitioners of e-commerce whether you’re in a manufacturer whether you’re in a distributor whether you’re a retailer the people that are that are in the weeds every day,
are just trying to new things out all the time it’s kind of cowboys wild west it’s Dynamic it’s just the greatest space to be in,
so after in Deca we really wanted to do another e-commerce.

[10:50] And the big the big challenge like going back to and Decca you look at the search and navigation think about the search experience on Amazon right or the search experience on Wayfarer or the search experience on Home Depot.
These are companies that have very large product assortments and a consumer often times when they go to the site isn’t quite sure what they’re looking for,
so you know you use a generic search term you searched for you know blue t-shirt or polo shirt are you search for running shoes or you know you search for like some of these generic generic phrases and then you start looking around for what’s available right.
And when you start looking around for what’s available often times,
first of all the content is terrible on a lot of these product detail Pages even today but second of all when you click on the navigation options a lot of products don’t show up I remember we did we did,
one of our early customers as a company called Drive medical which is there the largest manufacturer of durable medical equipment think like Walkers role laters neck braces things like that.
If you go to and they’ve got dozens and dozens of Walkers and roll laters on Walmart had a filter called senior right so just show me products for seniors.
You clicked at that time is eight years ago on the senior filter.

[12:05] You’d see one Rollator like the role leaders of the you know the things that old people will use to assist them in walking and.
Like literally every Rollator should be marked as senior right like there’s not there’s not like a junior Rollator that’s not a role later for somebody who’s middle-aged like me it’s they’re all senior product,
and so that’s a failure of the data tag,
now we found it in Deca that navigation if you had really good search really good navigation really good content we could quantify the conversion rate Improvement and the lift,
you could also quantify things like the house how big the cart was going to be by improving those things and and we’re talking you know dozens of points of conversion Improvement I mean huge huge impact.
And the biggest challenge that a Home Depot or a Walmart or Target or any of these companies had in delivering these experiences that converted at a high rate was acquiring content that could actually see.

[13:03] Search and navigation and Merchandising strategies so our view at salsify and the founding pieces,
was a brand manufacturer you know the Coca-Cola is Legos Levi’s Bosch’s 3 M’s of the world,
should really really care about their products being optimized for search and navigation,
where retailers go where where consumers go to find the product so they’ve if you go to if you go to you go to you go to,
you want to be able to your product to show up first regardless of what the search is and you want your product to show up.
For the correct navigation filters when people are searching my navigation and our experience was.
Retailers got bad bad content and Brands really did a poor job servicing this type of content and we felt that there was a immediate opening in the market there,
for somebody to help a brand manufacturer optimized for search and conversion across all of the digital retail touchpoints that consumers might be looking for their products so that that was the origin story.
I’ll layer onto that that our view of,
the system as we were thinking about it before founding the company was that well if you start really optimizing on the search and navigation and you really start optimizing for the experience management to help to help Drive conversions,
on these retailers sites.

[14:25] You know really this is the first step towards building a multi-channel Commerce platform you know empowering not just the experience on all these different multiple channels but also the transactions on sometime,
so our view was let’s start with a multi-channel experience management system that helps people optimize search and navigation.
And then live will air on the Commerce capabilities because ultimately everything’s going to have a Bible.
So that was that was the founding pieces and idea and we got after it starting in September 2012.

[14:56] So is it fair to say that and Decca you kind of learned that you know the the front and can experience can only be as good as the data in right so it’s classic garbage in garbage out thing so
so to really solve the discovery and customer experience you have to kind of go back a step to the brand because
they’re sending the retailer a bunch of junk data there’s only so much you can do to improve that right.

[15:18] Yeah yeah in what makes it insidiously difficult is if you look at which in decal is powering I think still is actually powering but.
Home Depot has a very broad product assortment.
And things like the depth of the bathtub to finish of the faucet the lumens of the light bulb you know all of those filters matter their material,
buying information that you want to be able to search and filter and make decisions based on right so.
Those dip those filters on are controlled by site merchants in the site Merchants are constantly a/b testing.
Tip optimize the site experience so you know for faucets for example let’s say that you’ve got to finish that’s Chrome and a finish that’s like burnished metal and.
The site Merchant gets this idea you know what people don’t know what these things are I’m going to call them silver let me run a site test to see whether silver converts at a higher rate than Chrome.

[16:19] So they’ll run the test and the test will determine how actually calling things silver is a really really good idea we should start collecting silver as an option for the finish of the faucet so then what happens is,
the the set of options that you can pick from a drop-down to set up a faucet on now includes a new option which is silver.
And Home Depot was making changes to that site site search structure,
on the regular like every single day literally as they’re optimizing their site Amazon same thing at Walmart same thing these guys they’re constantly looking at the numbers and constantly trying to squeeze out a little bit more conversion rate,
so the site data strategy isn’t constant it’s in constant flux,
so if you’re a manufacturer and you solve faucets and you’re setting an item up on Home Depot today and you fill out like it’s Chrome and then tomorrow you could go fill out you know the next version of that item and chrome is no longer an option has been replaced by silver,
like that type of little.
Change X however many hundreds of retailers you work with is the is a problem with for the manufacturer so manufacturers weren’t,
weren’t we’re just not provided the content they were also bombarded with this cacophony of changes that were really quite difficult to keep up.

[17:42] Yeah and I it’s funny I’m trying to get in my my time machine and go back to 2012 backpack then say you were a cpg company your Mondo he’s selling Oreos right the.
The person that was responsible at Mondelez for was either the intern or it was like a.
You know 1% side job for the account team that sold to the Walmart stores and in Bentonville and so.
When they sold those Oreos in the store.
Walmart needed to know like eight attributes about the pack of Oreos but when they started trying to merchandise Oreos online the online teams like oh we want 30 60 80 attributes about the product and that poor intern,
had no juice or way to get any of that digital shelf content so I see like there’s a lot of like sales team recreating their own product content in Microsoft Excel and like manually uploading it to websites back then.

[18:43] Yeah absolutely I mean and it’s just a hundred percent agree with that and it’s sort of it reflects exactly the priority of.
E-commerce and digital strategy in general and cpg in 2012,
I mean it just it was not it was on nobody’s radar right it was it was it was a maybe a fast-growing tiny little segment that almost nobody cared about.
Just about every segment so the you know the Mondelez example,
Not only was it some interns job to fill out the content but Mondelez also didn’t really have an e-commerce strategy from a product portfolio,
so it back in 2012 in order to even make make positive margin on a sale on Amazon Mondelez I don’t know if you remember this they’d be selling like the.
The three pack of the large packs.
Probably 25 bucks so you couldn’t just buy a small amount of Oreos you had to buy like a tremendous amount of Oreos on Amazon if you’re if you’re buying them and so they were yeah they were it was back then it was really everything was manual.

[19:44] Oh yeah for the record I never noticed that because I just wanted to buy that many Oreos so.

[19:48] Yeah what’s wrong what’s wrong with buying a three pack of Oreos Corner up.

[19:52] I got to tell you that you know the birthday cake Oreos.

[19:55] Hm

[19:56] Say the greatest things imaginable.

[19:58] I do my five-year-old is a big fan although we’re on Halloween Oreos right now.

[20:03] Oh yeah.

[20:05] So then we get in that time machine we fast forward back to 2020 you guys have done a couple of rounds of fundraising along the way but,
very recently you announced a big rise of like a hundred fifty five million dollars which is,
super impressive congratulations / now I’m nervous for you.
And it seems like a bunch of other vendors in the in the Commerce base of also done really well with investors lately I think I want to say Miracle had to raise the same week you did fabric had to raise this week obviously there’s been some,
some successful IPOs from the platform guys do you like,
is covid sort of heating up the space like what do you think is driving investor interest in the space right now.

[20:52] Yeah I think covid is heating up interest in certain parts of the space.
So you look at the Commerce platforms like Shopify obviously is worth a gajillion dollars right now in market cap Bigcommerce IPO Dan had just a stellar Stellar IPO,
same sort of thing the multiples in that space or just really really high right now in the public markets.
For for us the.

[21:22] In general covid is accelerates Digital Trends and you know you could say that’s a positive thing for us but the,
range of companies that we sell to is you know there’s a whole markets that we generally sell to you that have been absolutely crushed so apparel for example apparel still hasn’t gotten off the floor this year right you know Footwear is not gotten off the floor this year,
and so for you know for us it’s been you know we’ve done we’ve done well during this period because it’s digital,
but but in Broad Strokes I don’t think it’s particularly different from from what we were you know going to do anyway.
With General rise with a company like a miracle,
miracle for those who don’t know they provide Marketplace as a service effectively so you know how Amazon you could you could buy one product from Amazon that are that are sold by Amazon and you could buy products.
On Amazon that are sold by third-party sellers Miracle is basically enabling any retailer to sell third party products on
And that strategy is a strategy is very attractive to retailers that are trying to keep up with Amazon,
they look at Amazon’s 3p margins,
and they just it’s looks like almost free money right and they say well jeez you know if we could get if we can get some of that that’s good that’s helpful to us and that also enables us to have larger assortments to compete with Amazon an assortment,
and these days when all of a sudden just about every ever purchased one online.

[22:51] For retailers to have a strategy to increase assortment in a dramatic way and increased margin that a bunch of sales that’s a hugely attractive thing so you see sectors like grocery for example I think Albertsons has a,
has purchased Miracle recently right Kroger I think is purchased miracle miracle recently so these big Grocers who generally had I would say like.
An online strategy that lied you know Amazon Walmart Target for example there are standing up these marketplaces now with hey so I think,
covid for miracle has been a huge accelerator in this in the space that they’re in,
so it sort of depends I guess on this date on where were you fit in the e-commerce supply chain as to whether it’s been like hugely positive you know a little bit positive neutral right and I think you’re just seeing the fundraising reflecting that.

[23:45] Very cool we know the guys that Miracle congrats to them and to you on the big races the so
so that’s really good kind of I think that helps listeners kind of understand so you’ve spent the last 8 years like really entrenched in working with brands of all different categories
helping them get their products out to Market and you know the thing we talk a lot about is this direct-to-consumer kind of pivot that most brands are making
you know would love to hear what’s it been like watching that over the last eight years and and where do you think we are on that that Spectrum right now.

[24:19] Man yeah we’re in like the first early Innings on that Spectrum so we hit I remember we went to if you remember a couple companies that have been acquired since then clavis which is now part of a central one click retail which is part of essential content 26,
there was a bunch of us that were playing in the Amazon content and conversion optimization space and 2015 16 17 which was,
yeah it’s got It’s funny to look back and say that that those were early days on Amazon but for a lot of manufacturers in particular that were.

[24:52] White learning about e-commerce at that point those were early days on Amazon and we had a one-click retailgeek has hosted a hackathon.
And I want to say to end of 2016 out in Seattle,
it was Amazon hackathon we had VP of e-commerce from like a hundred companies and the set of us were just hosting.
Sessions on particular win on Amazon topic.
And back then everyone was talking about how the future of selling on Amazon would be hybrid cell.
So if you’re a manufacturer what that means is that you’re selling some product direct to Amazon that Amazon is then owns and sells to consumer,
and you’re selling some product as a 3rd party seller on Amazon.
And what you sold is the first party on Amazon versus what you sold as a third-party of Amazon there’s a hole deep discussion on that that strategy which is change over time.
Whether you’ve got a 33 p backstop,
for if Amazon goes out of stock on one piece sales and whether you tell Amazon about it is a whole other topic and so people were discussing that the future the best-in-class operations for Amazon required,
that a brand manufacturer have the ability to pick pack and ship and each to a consumer for the purposes of this hybrid selling.
And so I thought honestly at that time given the focus on the topic that we’re now four years in.

[26:20] Just about everyone would be doing it or would have figured it out right we would have.
In the supply chain in particular the demand forecasting models the the,
Office of the CFO has to deal with updating the way that they think about p&l for the space and like you would think that they would have done those changes to make it possible to sell direct to consumer,
You know we’re four years later I think the majority of brand manufacturers don’t don’t have the capability to sell direct consumer a lot of them are struggling to set it up right now in haste and covid-19.

[26:54] You know they didn’t have it coming into this year and so I think that space is really in its in its early Innings with the way the way that I think how it’s going to evolve.
And this might be.
I don’t know if I’m the only one who thinks this might be a controversial point the way I think this is going to be evolved is that the brand dot-coms are going to be the least important of the direct route to the,
so if you’re if you’re a manufacturer and you’ve got a and it’s got a shopping cart on and it’s powered by Shopify or Bigcommerce or Salesforce Commerce cloud or Dobie Commerce or whatever,
and you know people go to and they transact and then you ship them the.
I think that if you if you consider that one mode of direct-to-consumer another mode of direct consumer is selling as a three-piece seller on the marketplace.
Right you’re just basically using someone else’s website except instead of your website the power of the shopping cart another mode of direct consumer is the new by buttons that exists exists places like Instagram or Google shopping actions,
and you take the whole mix of those those things like by buttons everywhere as direct-to-consumer where you’re doing the merchandising and you’re doing the filling,
I think that we’re in the very early days of companies wrapping their heads around that I think we’re in the very early days of companies even investing in the capabilities to manage that and I think we’re also,
in a space where the at the end of the day the might be the least important of all those options.

[28:20] Which further complicates how they’re thinking about direct-to-consumer as a category so that that’s my general view on it’s I mean it’s I was I would have expected more change in the last four years but you know with covid I think we should expect.
Faster acceleration of this stuff in the next.

[28:36] Interesting I do I love this stuff I want to unpack just a little bit of that so the.
Your perspective about is interesting I feel like I agree depending on the category right so,
in consumer packaged Goods or food or items where the unit economics aren’t super favorable the selling at from,
hundred percent agree right like like they should for many reason still have a but it’s not a very important touch point so it’s probably never going to be a big touch point for.
Doritos or whatever right even though I know they just.

[29:14] Dot-com yeah.

[29:15] Yeah yeah however I actually think for or
The there is a concerted effort to make that like the primary destination and they in certain brands can make that work right when they have the right product in the right unit economics.

[29:35] Yeah it’s actually it’s interesting there’s examples you pick up there’s a whole other thread here which is like in a world.
In the world of e-commerce where anybody can compete with you you know on the on the physical shell if you’re dealing with.
You know just a handful of other products in your category because there’s limited shelf space in the store on the digital shelf you could be dealing you know competing with dozens of different products in your category so the competition is significantly more Fierce and generally speaking,
there’s less market share for the leaders,
I’m online than there has been in store historically so people that are used to a certain amount of market share generally lose it as the dollars Move online.
And I think the solution to this in Broad Strokes is for a brand to be like a must-have brand right for a brand to be truly differentiated,
and Nike and apple are two Brands to your point that are truly differentiated and they built they built.

[30:27] Real loyal followings and so people will go to they will go to and they will transact direct and I see that as a result of.
Just just outstanding brand execution over a long period of time,
there’s there’s other examples that are in that same vein like I know you know you’ve got a little kid I’ve got a little kids like we got a lot of Legos we go to as the primary place to transact for Legos,
but Lego again is one of those absolutely iconic Brands Keurig.
Just as another one Keurig does a lot of volume on the they’ve got the subscriptions on replenishment they.
A lot of offices will purchase from Korea got calm and bold things like that right and so I yeah you’re right that I think that I don’t know that it’s a category thing I think it’s a brand.
That we’re the ones that are really iconic brands are the ones that are going to have stronger contribution from their brand.

[31:25] Yep yeah no that’s fair I think you do have to be that iconic brand I just meant like even if you’re that iconic brand if you’re in a category that doesn’t have super appealing unit economics.
Like that that alone could have wrote you can be the best fabric care product people probably don’t want to buy Tide from Procter & Gamble like they probably want to get it with all their other groceries.

[31:50] It’s going to be interesting to see how that evolves I remember actually thinking this exact question I went.
P and p and g and spent a bunch of time on their direct to Consumer because they can you can buy anything from P&G.
Directing and Zoomer and so I ended up subscribing to the mach3 razor blades for from Procter & Gamble’s Gillette.
As you know and they’ve got like a subscription service for it and it’s great and then I went to tied,
and looked around and tie the interesting thing about the tide direct-to-consumer site is there are way more tied options available on the direct consumer site then you’re going to get in any store that’s around you,
and some of the options are really interesting compelling value oriented options for consumers when I see value-oriented I mean like.
Consumers that have a moral perspective on ingredients and things like that,
you know that they generally won’t find in whatever a Target or Kroger so there you know I don’t know it’s interesting to say how much that’s going to matter tide is also put a tremendous amount of investment in,
e-commerce packaging so if you buy Tide on Amazon you don’t get like the heavy plastic container you get these I don’t know what you call Mike these little plastic.

[33:03] Yeah the frustration free and then you get the oh gosh yet the names skipping me but.

[33:11] It bag basically it’s like it’s like a plastic bag with like a little thing that it’s meant to those like almost a refill more than the in The Jug that you normally Buy,
and so they’ve done that to make it more profitable to ship it basically and so the,
it’s just interesting to I think over time there’s no category that can’t find a way to be profitable,
from the margin and chipping perspective we look we fit We Fear had a profitable quarter Wayfarer people that company that a lot of people never thought would ever make money ever there’s no way they’re ever going to make money and they had they were profitable,
and they sell furniture and so I don’t know I think it’s all possible to make to do a direct-to-consumer it’s just a matter of changing maybe changing a bunch about how you do it.

[33:52] Yeah fair enough and for sure don’t misconstrue anything I’m saying as you shouldn’t be trying to do that there’s a bunch of benefits,
in addition to the the gross margin dollar so.
But I did a couple other things came up that that are I’ll call him semi controversial so I do a ton of these direct to Consumer engagements with brands.
And I frequently talk about like the 12 flavors of direct-to-consumer right because everyone everyone immediately goes to and my hypothesis is for a bunch of brands,
prove your point that’s that’s the least important right so there are all these other things a hundred percent agree with you I Instagram check out or or,
collectivize on Google are these sorts of things and included in my list is 3 p selling right would you you clearly defined as a flavor of direct to consumer
but in my mind when I’m telling that to a brand quiet I actually feel like I’m lying because I think there’s a way in which,
3p selling our for sure 3-piece selling on Amazon is exactly the opposite of d2c because you never meet the consumer like you never have any act like you’re totally disintermediated from the consumer.

[35:05] I mean not that fully though because you can I don’t know how many 3p products.
That you purchased on Amazon but if you get it from a small seller what will typically happen is they’ll be a card in the box,
so the small seller will ship you the box and the Box arrives and you open the box and there’s a note to you right and then note will often have a discount code for,
for a further purchase and it’ll say look if you have any trouble please just you know don’t don’t do the one star review call me I’ll fix your problem.
It does all that type of stuff so so I think there is that opportunity I’ll tell you a great story there.

[35:46] This is going back maybe five six years ago Bob land is the head of digital and customer experience at Darrell juvenile group in North America.

[35:58] And tv ads were getting pretty expensive for them,
and so what he decided to do was to take all of his TV ad budget and put it into post-purchase experience and the thesis was that in the particular for the for the car seats that Darrell was manufacturing they make something on the order of eight million car seats a year,
the idea was that if they did that they could get repeat by and they’d get word of mouth and you get good reviews and all this sort of stuff so what ended up what he did was he invested in call center based in America,
where when you get your car seat you know I remember when you installed your first car seat it’s like,
absolutely impossible to know how to do it and you’re terrified that you’re going to install it wrong and your kids going to get hurt and it’s just you know the instructions are you know totally obscure like installing a car seat is miserable,
and so with Darrell did was you know you got a you got a car seat and it would have a little unexpected gift as part of the packaging that you would unwrap it that you weren’t expecting and it would have a note that says look if you have any trouble at all,
call this number and we’ll get you on a video and we will walk you through any any question that you’ve got.
And so they invested in a call center the invested in the video and they did that so and that resulted in a tremendous consumer satisfaction great reviews and I was a good investment.

[37:19] And so I think if you look at the 3p selling you you you are having ways their of investing in the direct consumer relationship,

[37:30] Are not intermediated by Amazon in the same way that Amazon shipping that same product is right you can get creative with these approaches and start building relationship building Rapport building building consumer loyalty,
so yeah I agree I mean your point is well taken that you can’t do as much with Amazon as a 3p as you can selling on your own but I still think that there of a theme.

[37:54] Yeah fair enough and I will say part of the reason you you mainly get that experience with small Brands versus large Brands is because.
You’re really skirting with the terms and conditions on Amazon Amazon to be a 3-piece hour and if you’re a small Cellar that risk calculation is worth it if you’re a big seller you can’t risk getting kicked off the platform so you,
have to be a little more careful.

[38:17] Yeah some of those things like don’t give me a one star review or definitely in the dark gray dark gray Zone.

[38:24] Yeah well the discount code in the box is really dark okay.

[38:27] Yeah the dark razor.

[38:29] Or the even better the you know gift card if you leave a five star review if that’s a that’s classic the so Rob,
you know I don’t know salsify is different customer categories but you’ve talked to the fair amount about like cpg you mentioned fashion
do you see each of these there’s kind of different category adoption going on because like obviously Electronics were pretty early on
toys of had to get some religion around direct-to-consumer because once T are you went out of business they were kind of left without a lot of options is there a spectrum across categories of behaviors you see in any interesting things there that you can share with listeners.

[39:10] Yeah it’s been the categories go undergo their own evolution.

[39:16] With regards to that essentially how much sales are happening online so when we when we got started I remember we.
Spent the first like this is.
2013 and I every two weeks we would call into a different category to try to get a sense of whether they were interested in the product that we were solving and the most miserable two weeks was we called into dental equipment manufacturers for like a whole two weeks,
the see if they are interested in solving these digital experience problems and that went nowhere,
but you know the early traction for online is if you look at Beauty and personal care the cat at the percentage of sales that were online we’re pretty high early,
so a lot of the early companies that we worked with like the Johnson and Johnson’s and Reckitt benckiser and whatnot had already seen some of the some of the growth online and we’re already making some investment in the online experiences.
But you know other companies you look back in 2013 14 15.
But the other categories that absolutely were nowhere online our alcohol for example again there’s rules and regs about purchasing alcohol online drizzly wasn’t a thing yet and so on and so forth,
and so alcohol was nowhere and nobody was.
And you fast forward to the last two years and especially with covid covid has really made alcohol invest in e-commerce in a way that absolutely they.

[40:41] Step function different compared to what it was before but even so the last two years because of the rise of drizzly and others alcohol is come into The Fray and so now there are people with the title of BPD Commerce at Major alcohol manufacturers,
that have clout and that have that have budget that have investment and.
So yeah category by category when a category picks up online I think just sort of follows.

[41:08] A market being available in sales going.
I mean other ones that I’m kind of looking at in the future that word there’s really no online activity right now or like automotive automotive aftermarket pharmaceutical industrial supply distribution like electrical supply distribution plumbing supply,
there’s a there’s a there’s a bunch of those categories that I think are you know on some kind of.
Early part of the adopter curve right now that could accelerate pretty quickly with companies like you know Amazon business coming in and really putting pressure on Distributors so so yeah I think category by category has been pretty interesting at this point most consumer categories of,
I’ve got some some amount of ability to really execute and B2B I think is going to be the next next big wave over the next decade.

[41:57] Yeah it’s exciting there’s so much opportunity I feel like there’s a bunch of categories that have barely been touched so they there’s a ton of white space there,
you hide it highlighted alcohol which is super interesting and I might even argue a lot of alcohol is a subset of grocery in a feels like.
Groceries another category that that hugely got accelerated because of covid like I’m not,
I’m not sure that many Grocers could spell digital a year ago and now it’s their number one priority our it seems like you guys are really well well,
situated for that are you seeing that as well.

[42:34] Yeah absolutely yeah that the Grocer’s were basically you know year ago it was sufficient for them to maybe list products on and,
and they would use their planogram images effectively as their images and there was a really much of a site experience to speak of,
and over the last year I’ll hold Albertsons a bunch of a bunch of these folks have made really significant online experience Investments I mean Albertsons you saw the two hundred and seventy percent growth or something like that,
they put out on digital the numbers are just super compelling there other.

[43:10] Yeah they actually just had another earnings call this week and had another great quarter.

[43:14] Another great quarter yeah they’re just they’re just absolutely crushing it Kroger I think was always a little bit ahead of the game from from a digital perspective and which it’s tough for a lot of these retailers is simply,
the cost to invest in making you know click and collect buy online pick up in store the.
Digital delivery to actually get these things to work and be profitable is just an absolutely massive capital expenditure,
and Kroger’s been spending a lot of money on it over a bunch of years and what you know covid has basically allowed them to do is to just sort of.
Go next level on it right actually actually really invest in you’re getting closer to Amazon like aggression and the way that they’re able to go after it so yeah grocery really came online you know it’s funny that you mentioned is alcohol is part of groceries,
the longer that I’ve been in this game the more the more I think about,
I sub sections of the grocery store is almost being totally different universes so like alcohols its own Universe Fresh Foods its own Universe Center aisles its own universe and so on and so forth.
In a way that I don’t think I appreciate it at all 10 years ago.
And each of those has had its own motion with regard to digital maturity and digital execution and all that type of stuff.

[44:30] For sure and Frozen again would be a different one.

[44:33] Frozen yeah.

[44:34] Yeah the only reason I’m at the moment kind of bundling alcohol in a covid way in the short-term artificially,
like the thing you have to remember is seventy percent of alcohol spending pretty covid with on-prem like bars and restaurants and so now you know 90% of it is
off Prim so it’s sold through some retailer and at the same time because of,
everyone’s consolidating trip so where you might have gone BevMo for your booze and Whole Foods for your fresh and Kroger for your shelf-stable stuff,
now Kroger’s winning that whole trip because you can get booze fresh and shelf-stable there so at the,
like I don’t think this will last forever but at the moment alcohol sales at that grocery store as part of that Consolidated trip our way up.

[45:21] Oh Dancing Yeah I hadn’t thought about it that way but yeah that’s that doesn’t surprise me this this stat that surprised me the most on alcohol and this is this is changed since then but.
Back in I think sometime in mid July I was talking to one of the heads of e-commerce of a major alcohol manufacturer and they were saying that.
With every restaurant in America being closed with every bar being closed with every Casino being closed with every cruise ship being close we’ve every Beach being closed and so on and so forth.
You would think that alcohol consumption.
And you know you think that the manufacturers there for their bottom line would be you think that Malcolm with something would be down and people they’re just selling less booze because all the places that sell booze are closed and what what I was told.
Who is that in Q2 actually sales for the manufacturers were basically flat so the in-store Kroger.
Bulk booze purchase and the ad home boozing.
Was more than sufficient to make up for every bar restaurant casino cruise ship Beach and so on being closed for the whole period.

[46:39] Yeah no it it is crazy and benefited per your original point it was super hard to sell booze they’re all these regulations and God forbid you try to sell booze online it’s even worse and,
as a result of covid a lot of distribution laws got temporarily loosened and so like a interesting sub theme in all this is going to be if.
If legislators are going to try to re impose those restrictions or if we’re now in a digital delivery world for.
For Booze.

[47:13] Do you have a take there what do you what do you think that those laws are going to be pulled back.

[47:17] I think yeah I think they’re going to partially go back but I don’t think they’re going to go back to where they were I think just like prohibition you know once people get used to this stuff it’s pretty hard to take it away.
And so I don’t know you know what we’ll have to see,
I did want to ask you one more general question on grocery because obviously you guys you know really focus on the digital shelf I want a lot about the digital stuff from you guys,
um despite the fact that groceries booming and we’re selling stuff digitally I still feel like it’s the first inning right if I go to the most successful digital grocers in the US.
It still feels like a t-shirt product detail page with some some produce information filled into it right,
and I like to do this joke I have a bunch of big digital grocer clients and I always show them an audit of their product detail page,
and I have this funny image which is a true image for one of the very large Grocers of their kale product detail page and it’s like a forward description,
like organic Italian kale and then there’s a 256 word disclaimer saying that the information might be wrong.

[48:29] Fabulous.

[48:32] Um and so I do think like as consumers really adopt digital like I imagine the digital shelf in the future like you think about all the things you’d want to know about,
your your fresh produce before you buy it and you go to China and you look at all the content that the Imam or seven fresh give you,
and it just feels like man we’re so we’re still so early and all this grocery stuff do you see any hope that we’re gonna improve now that everyone is paying attention to it.

[49:03] Yeah I mean like if we want to just pull back some of the biggest advertisers in the world are companies that sell.
Products cpg products into the grocery stores right and.
Groceries the biggest retail sector in the United States and and I think that if you look at.

[49:26] Things like television viewership and where where where the percentage of households that actually have a cable subscription just keep plummeting there’s more and more people going to Netflix means that basically people aren’t seeing television commercials.
I think the a lot of the brand dollars that are traditionally spent through a television through newspapers through other means like that.
Are going to need to be redeployed elsewhere to make a brand case and if you start from where the consumer is and work your way backwards consumers attention.
Is digital these days right and all of their shopping patterns I mean right now all of their shopping patterns are.
Online for the most part but you know increasingly in the future more and more will be and so if you’re a brand.
Yeah and you’re looking to make the case for your brand and make the and and really.
Not just sell product but you know build an emotional connection with the consumer and they’ll the heart of branding here.
Those product detail pages are the heart of your,
like more people will see the product detail page for your product on Amazon then we’ll see your TV commercial right more people will see the product detail page on Kroger then we’ll see your TV commercial,
and so I as more purchased behavior and as more traffic and consume fundamentally consumer attention goes to those pages.

[50:48] People will have to fix that problem of the Italian kale that you talked about like who’s ever selling that kale,
should talk about just like you going to Whole Foods right they don’t just sell the kale there’s like a tag that tells about the local Farm That Grew this kale and like all this stuff that’s what you that’s what you need to do it people don’t just buy a product they buy a story they buy values,
and so these product detail pages are going to evolve from,
being you know just a picture of the thing and a title to being full brand experiences and that’s what that’s what I think resonates with people,
and I think this is a broad statement about I mean this is this is a fundamental thing that I believe about most of Commerce like you look at Nike,
what are the greatest brands in the world we were already talking about then you go to a or or a lot of other sites that still sell Nikes and the Nike,
photos are like the top of the shoe the bottom of the shoe side of the shoe you know the shoelaces.
There’s no there’s no lifestyle shots there’s no let’s do it there’s no embedded video about Nike there’s no nothing right and like that’s where Nike should just be reinforcing the case of the amazing brand that it is,
and and so I yeah in grocery were really I mean we’re really early days there,
but yeah I think it’s inevitable that people are going to focus on improving those experiences as the dollars and the consumer attention moves there.

[52:08] Very cool if we if we project a little bit one of the things that I’m always kind of fascinated to hear people’s opinion on is if every brand is kind of going Direct,
and I know you’re not really a big believer in the but let’s say they’re all out there doing that and then obviously you know Mall type retailers that have multiple brands or closing at an increasing rate.
What’s the world look like when all these brands are going direct is there is there some new aggregation point or what does it look like how do we how do we discover brands in the next three to five years.

[52:44] Man I mean that’s that’s a tough question there was a.
Shopify was running an experiment in in a location in Manhattan where they were.
Highlighting a handful of Shopify sites within like a mall like environment and.
They were also running other types of in-store experiments like that where they were saying okay well let’s let’s do like an interesting.
Um I don’t know about like that particular approach because to me it feels like the Amazon for starts towards like what reason do you have to go in there it’s like a bunch of random stuff you know they can’t go in there with a shopping list because you literally don’t know what’s going to be in there.

[53:29] Gift for your aunt that’s the main the main mission.

[53:33] It’s like yeah exactly like a gift store so I really don’t know I think people are going to experiment because really I mean commercial real estate is going to be pretty cheap.
After this whole covid thing and I’ll just go there’s a lot of retailer closures and most faces you know there’s a lot of love anchors like JC Penney went bankrupt and a lot of those doors are gonna close and and so I think there’s going to be a lot of cheap ways for,
people to experiment to try to answer that question I don’t actually know I mean I think,
increasingly in the world that we’re in we’re going to see more fragmentation of ideas and interests we’re going to see a lot more kind of Niche down interests of.
Smaller sets of consumers paying attention to smaller sets of things there’s less of a mass-market and more of this whole set of small markets of.
And each of those small markets of Interest have ways of perpetuating like new product Discovery across the individuals that are within the.
And so it’s possible that the way that Discovery happens in my view in the future is.
Isn’t like that mall in store browsing experiences at the past but rather,
small sets of people that have a shared interest like you know whether it’s the adult fans of Lego or.

[54:57] Whether it’s fans of the Premier League and soccer in Europe and whatever it is,
it’s these small groups of folks that have distinct places that they go and congregate where they’re going to share ideas of new things and there’s there’s a piece of me which thinks that.
People that figure out a way to unlock those types of communities and those types of engagements from a branding perspective or the ones that are going to succeed on a go-forward basis,
so that’s.
I know that’s not like a great answer to the question I could it’s a really hard question to answer but it’s where my kind of gut inclination is.

[55:38] Yeah I don’t know I would give it a good answer I feel like that was very insightful II totally agree on sort of the fragmentation of markets and.
I sort of think a lot of these moments of Discovery are also going to therefore get more distributed to a wider variety of different touch points right so,
you know maybe for shoes it’s Instagram maybe it’s a recipe site for new food products things like that you know I think we’re going to see a lot more micro moments,
happening in a much wider variety of touch points which is I sort of think part of the vision you have for your company right is being the engine behind all those micro touch points.

[56:18] Yeah that’s I mean that’s exactly right it’s my.
I believe I believe in that type of thesis and future and it makes it hard for a company to execute like one of the thought experiments I would like to have is.
If you were trying to build Procter & Gamble from scratch today does it look like you know several dozen brand,
giant like it is right now or does it look like a 2000 brand giant or 3000 brand giant where each of the brands is a little bit smaller and more targeted you know,
and I kind of think that there’s there’s something to that so like if I look at a couple products that I bought in like recently they’re related to the CrossFit community,
there’s a up-and-coming brand called Noble and OBU LL out of Boston,
that sells pretty excellent workout gear and it’s really the target the CrossFit Community right and they’ve got a lot of loyal followers in that Community I look at row get the fitness equipment manufacturer we are they.
David you’re killing it and covid are making it an absolute ton of money in covid as a lot of home fitnesses and the community that they’ve got is the.
CrossFit Community as well so these are folks that don’t have to advertise what don’t they don’t have to be in in for example Dick’s Sporting Goods they don’t have to be playing the Amazon game.
They’ve got a built-in brand with a built-in following into the building community and they’ve been able to do well based on that so.

[57:47] So yeah I think I think this whole micro moment small community touch,
engagement problem I think is a is a pretty important problem for lots of people to wrap their heads around and figure out how they’re how their company can or should or or won’t participate in that move.

[58:05] Yeah for sure good good call out on no bull by the way and just for listeners know even if you’re super unfit like for example me the their kicks are still super cool.

[58:17] They’re so cool.

[58:18] I’m a fan too I do want to,
I am a hundred percent agree I think categories like apparel it’s playing out the most right like in the old world Paris fashion show the new trend skinny jean everyone in the whole world by skinny jeans at the same time I feel like that,
that model is just gone there’s thousands of micro trends for different communities all at the same time.

[58:42] Thank God because skinny jeans were so I or me and.

[58:46] The CrossFit guy they probably worked out better for you than they did for me but still.
I do want to Pivot because we’re running out of time do you obviously we’re coming up on holiday like depending on how you count it already started do you have any opinion or thoughts about what this crazy covid influence holidays going to look like.

[59:07] Man I’ve been trying to think about this so my in my family my mom notoriously shops for.
Four five six months in advance right so it’s like with my brother and me and our kids will get an email from from her in August saying hey what’s where’s your kids Christmas list you know it’s like it’s August.
And so this year we got the Christmas list and it made me take a step back and think huh this is interesting because.

[59:41] They live in Florida we live in Boston we’re not going to see them for Christmas like we’re not when I would because it covid-19 traveling.
I think that’s true for a lot of people and what does that mean for the gifts that they’re going to buy and give them normally they shower our kids with a bajillion toys,
and like what are they going to do like ship a bajillion toys to where we’re living and have the kids open up a bill Jillian toys when you know they don’t get to see the kids open up the toys and.
And so I was trying to play this through in my mind exactly what what the impact on our own shopping would be and.
There’s not there’s not there’s not easy decisions on how do you actually make the grandparents and then they grandkids have a great connection across the country in this weird time that we ran,
and so I don’t know man I think it’s going to be absolutely bizarre holiday season just like in the early days I would never have predicted that,
flower of all things with sound with the sourdough Trend was going to blow up,
I’ve been making sourdough for years before it was cool you know and all of a sudden they couldn’t find flower anywhere because it was out of stock I don’t think anyone could have predicted that all of a sudden everyone is a home Baker,
and doing sourdough but that’s what happened and so for this holiday season.

[1:01:01] I think there’s a little bit of trepidation that I’ve got trying to predict anything it’s just everyone’s going to be trying to figure out how to do a remote Christmas with their families sending gifts all over the damn place,
and and so I’d so yeah it maybe maybe it means smaller gifts maybe it means fewer gifts maybe it means more of a focus on,
putting you know like checks for your college savings fund maybe it means you know all a mix of all of the above but it I the only thing that I feel like is for sure is that the.
The purchasing habits are going to look a little different than they did last year and for all the travel and get together and constraints that with us.

[1:01:42] Pretty cool we won’t hold your feet to the fire on on holiday stuff one last one and this was just I was kind of in researching the show one of our many research assistants,
pointed out that you guys have at salsify have won several,
not only kind of local local best place to work Awards but some national ones so tell us about that and you know as a fellow founder.
That’s always one of the things I’m most proud about is if you can create a place that’s great to come to work that’s that’s kind of part of the fun of being a Founder I’d love to hear what is it about your culture that is caused all these Awards.

[1:02:19] Yeah well I mean oh thanks for thanks for bringing up the I’m very proud of it.
Just like you said in terms of one of having great people and having a great culture as one of the great Perks of Being of coming to work,
one of the things that all three of the founders set in the early days is if you don’t if you’re not building a company that you love going to what’s the point now life is too short,
so first and foremost if we’re going to do anything let’s have this be a place that we just love to work and for us just based on our own personalities the type of jobs that we like.
Our jobs that were fast-paced that were intense but where people were,
supporting each other you know there’s there wasn’t backstabbing or anything like that people understood where you’re where you’re going and there’s Clarity on direction there’s Clarity on your role,
and where each individual had enough space and autonomy to really do their job without being micromanage right where people felt like they could have impact and control and contribution.
And so from the earliest days we focus on.
This concept we called empowerment it’s I know that’s a loaded word but this idea that people were really have an ownership mentality of the company and their role and position in it.
And we tried to keep that as true as we can all the way all the way through scale and so I think I think that’s largely what’s reflected there.

[1:03:45] The types of people that are attracted to that type of environment where you’ve got a lot of individual accountability and responsibility and it’s fast-paced absolutely love working working at in this type of place they tend to stick around a long time.
We also one thing that we did really well as a while back we got a chief people officer Colleen who’s just been absolutely outstanding helping us really codify the culture and.
Make it stick as the company scales you know when you’re when you’re a hundred people are you 50 people or 20 people,
especially because we have three founders we can be a lot of places and everybody can know us and we can perpetuate a lot of the ideas that we want and we get to this 400-person Plus,
range especially with covid and we’re remote we’ve got a European headquarters and we got office in Chicago and my people are all over the place most most of the people don’t know me personally I don’t know Jason person I know Jeremy person.
And and how do we set the culture up to perpetuate so Colleen has been really effective at working through the process of,
taking a lot of the early ideas and things that we cared about and keeping them true as we’ve gotten bigger,
so I think that’s what I would say is that the San Marino having a strong idea of the type of company we wanted to have what’s the core ideal we wanted people to stay true to overtime and having an operator really work with us to make it.
Make it scale.

[1:05:09] It’s always weird when you you know you cross this Chasm of not knowing like two or three people that you’re walking by but they know you and you’re just kind of like this is really strange,
that’s when culture got to rely on the culture to really kind of get there you can’t you can’t do one-on-one when you have 400 folks in the company.

[1:05:27] I do all these I’ve done all these like YouTube videos like whiteboard videos and things like that and the P that people team.
Has incorporated a bunch of them in the early trainings I didn’t know that they were doing this so for me it’s like I got this problem is compounded when people will come up and say like I saw all your YouTube videos and I don’t know there’s just something that’s.
Cool but it’s also it’s also like a little awkward for me you know what I mean.

[1:05:58] Poor baby you rock stars yeah poor baby that you guys are all so popular.
But Rob hopefully like 12 years from now a bunch of those more Junior employees will be on podcast talking about the salsify mafia and all the successful companies that spun out of out of you guys just like we,
we started out with in deca.

[1:06:20] Absolutely nothing would make me happier.

[1:06:22] And that is going to be a great place to leave it because we have slightly exceeded our allotted time,
but really enjoyed the conversation Rob as always if folks have questions or comments,
we encourage you to hit us up on Twitter or leave us a question on our Facebook page and will continue the dialogue if you got something out of this show I hope you’ll jump on iTunes and finally give us that five star review.

[1:06:46] Thanks for all the folks want to find you online what’s the best place to get to you or are you a tweeter or a LinkedIn person or both or.

[1:06:55] Is these days I’m more of a LinkedIn person so if you search for Rob Gonzalez on LinkedIn on the bald guy.
I also would encourage people to go to digital shelf I read on the blog there quite a bit and we’ve got two we’ve got our own podcast where if you like my geeking out and nerding on technology you can get you can get more and more of that there.

[1:07:18] There’s some very sketchy guests that have been on that podcast I will say.

[1:07:22] Totally sketchy guess.

[1:07:24] Speaking for myself awesome Rob thanks again and until next time happy Commercing.

Oct 21, 2020

EP241 - Holiday Preview with eMarketer's Andrew Lipsman 

Andrew Lipsman (@alipsman) is the Principal Analyst for retail and e-commerce for eMarketer. In this episode, Andrew gives listeners an advanced preview of eMarketer’s holiday forecast, and we do a deep dive into all the factors that will play into this holiday season. This holiday season may have more uncertainty for brands and retailers than any other holiday season in our lifetime, so it’s well worth the listen.

This is an exclusive preview of one of the most anticipated holiday forecasts in the industry.

Key Topics:

  • Vectors that influence holiday forecasts
  • The forecast
  • Shipageddon
  • Can retailers pull holiday in early?
  • How will the cyber-5 play out
  • Returnageddon
  • Category winners and losers
  • Retail winners and losers
  • How to follow the season

eMarketer Holiday 2020 Forecast

  • Total retail +0.9% to $1.013 trillion
  • Ecommerce +35.8% growth to $190B (+ $50B in ecommerce sales vs. last year)
  • Brick-and-mortar -4.7% to $823B

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

Episode 241 of the Jason & Scot show was recorded live on Tuesday, October 21, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 241 being recorded on Tuesday October 20th 2020 that’s a lot of 20s,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners we are 20 days into the fourth quarter and 11 a day 11 days away from Halloween,
retailers would say we’re squarely in Holiday mode consumers would say it’s not Thanksgiving yet so we’re about 30 days out.
Regardless of which side of the fence you’re on their most of you are probably on the retail side,
we want to use this episode to do a really deep dive into what we can expect this holiday 2020 we’ve already previewed some of this with our thoughts around ship And Gettin and whatnot and some of the numbers that are out there,
we’re going to go deep and go deep we thought we would bring out the king of e-commerce and Retail data Andrew lipsman,
Andrew has been at three of the top retail data companies in PD comscore and most recently he is at emarketer’s as a principal analyst.
Also we are excited to have him give us a sneak.
Exclusive to Jason Scott show listeners with the first view of this public holiday forecast from emarketer’s.
Andrew welcome to show and thanks for giving our listeners a sneak peek.

[1:51] Hey thanks for having me.

[1:53] We are thrilled to have you on the show Andrew and it’s super exciting that you’re helping keeping our audience at the very bleeding edge of insight and predictions,
but before we jump into all that we always like to start by getting to know a little bit about our guests
so you know Scott kind of mention the highlights but can you give us a little bit of detail about how you got into the the analyst world and and what you’re doing now at emarketer’s.

[2:21] Yeah so I’ve been in market research operating much my whole career
as Scott mentioned NPD working on cpg clients for a few years and then I jump to comscore in November of 2005 and actually I walked into that company
the same week that Cyber Monday became a thing so that was kind of my initiation into the world of e-commerce I really knew nothing about it
coming in and learned very quickly drinking from the fire hose over the next 12 years I led the marketing insights group at comscore had a chance to cover all things digital.
With e-commerce you know kind of being a key tentpole for me every year but all the different Digital Trends from digital video to advertising Social Mobile Etc and then,
coming up on three years now I’ve been at emarketer’s.

[3:16] That’s awesome and I heard you just started doing this new thing called for forecasting the holiday right is this going to be your first year where you forecast holiday.

[3:27] I know I’ve been at it for a while so I’ve actually been working on holiday forecasts back since 2006 my sight
in Uruguay comscore now I would say I am not the quantitative folks who are doing the heavy duty Excel work behind the forecast but I am providing qualitative input
and so in 15 years I’d say I’ve gotten pretty comfortable with
understanding the key variables that go into holiday e-commerce and many years I’d say it’s almost gotten kind of easy,
but this year I think is going to be very very different and one of the
actually will probably be the hardest to predict there’s only one other season that really Compares anywhere close to this one.

[4:14] Awesome well before we jump into the exclusive for Jason Scott show listener sneak peek of your forecast let’s start at 30,000 foot view plus I love to build the suspense
Jason’s like about the fall off his chair right now I can tell so let’s make him wait so I would love to hear as a data guy,
you know you’ve been at this a while and I’m sure you’ve refined how you come at it
I would love to kind of start there and say well what are the inputs you look at and maybe more importantly what are some of the inputs you don’t look at and maybe if you know how are you applying that to Holiday 2020.

[4:51] Yeah so in a normal year
the recipe really starts and this is for e-commerce specifically really looking closely at August data that back-to-school season ends up being very predictive for the growth rate for the holiday season so I
start with your thinking that August is kind of that the fundamentals heading into the season that’s your Baseline and then there’s just a couple of.

[5:15] Key variables that we looked at after that any shifts in key macroeconomic factors unemployment obviously if that’s changing and people
or losing jobs then,
you have to calibrate for that because that’s less disposable income consumer confidence how they feel about extending their credit into the season and then gas prices is one of those things that can just put more money in people’s pockets or take money out
pretty simple and then the key piece and one that I don’t think folks often look to very much but actually can end up making
you know percentage pointer to difference every year is just how the holiday calendar Falls so when you have those years with the really compressed holiday season
with only 27 or even 26 days between Thanksgiving and Christmas that does tend to squeeze spending people may prioritize gifts and still get all those purchases done
but they may spend a little bit less on themselves so it can dampen the growth rate sometimes you have those extended Seasons that are 32 days
and that can maybe boost it by a pointer to so those are in a normal year kind of the key factors.

[6:25] So you’ve qualified like four times in there a normal year so what so then you have all that and then now we’ve got this raging pandemic what have you done to kind of tweak the model based on kind of unique circumstances of the 2020 offers.

[6:40] Yeah well first off I will say that almost all of those factors have been completely overwhelmed by pandemic conditions but I’ll start by taking you back to 2008 which was the hardest
forecast that we ever had to predict if you could remember how the financial crisis happened
August wouldn’t be very predictive because things still looked okay in August of that year and then September and October
things dropped very quickly and we were starting to get readings e-commerce at the time was growing about
17 or 18 percent I think and all the sudden we were seeing that number drop into negative territory almost overnight.
That year we went out on a limb with our prediction and saying that we were expecting flat growth for the season 0% and other analysts were still predicting.

[7:32] Double digit growth you know low double digits there may be taking their initial estimates down from 17 or 18 percent to 11 or 12 but they still thought e-commerce was going to grow and,
we said 0% it ended up being negative 3 for the year I liken it to trying to catch a falling knife that year,
what was interesting about that year is that there was really only one vector,
that was changing the forecast in that was consumer demand you know e-commerce is really kind of discretionary consumer demand and it felt very quickly but that was the one thing that we needed to,
figure out this year I think is much more complex because one you have,
the consumer demand Vector but even within that it’s not just as simple as everything getting affected the same way you have unbelievable unbelievable variance,
across categories because of how the pandemic is changing consumer needs whether it’s no need for apparel or you know a lot of Need for Consumer Electronics around back to school or work from home.
The other key Vector that is of course Channel shifting and people you know continue to.
Toggle back and forth between when they’re comfortable only shopping online versus shopping in stores so trying to take those two very orthogonal vectors and make sense of it has been especially difficult.

[9:00] Orthogonal vectors that’s that’s good stuff you’re speaking my language now the it’s always good for your vectors have orthogonaility,
so I have a thousand questions I’ll try not to spend too much time on the background but I think this is helpful so it feels like somewhere in there you’re going to have to assume,
what the pandemic does right because if we’re going to have a,
terrible w-shaped situation like Jason predicts all gloom and groom and Grinchy then that’s going to have a different impact than a sharp V recovery like I predict did is there an underlying pandemic prediction inside of here.

[9:37] Yeah and I think the key thing is we expect pandemic conditions to last through the year you know our forecast back in the spring was very different in terms of what we expected by the second half and the holiday season
we’ve obviously had to change that I will say though
I kind of look at it through the lens of the bifurcated economy where you do still have a lot of struggling folks in the lower middle income segments and some of those stimulus funds now have run out so they may be running on fumes
but you know in the more affluent,
incomes I think you are sitting in a pretty good position people are confident the stock market is is up,
and and then also if you know people are not vacationing so you have all these buckets of discretionary spending or going to restaurants that’s now getting funneled into retail so I think that’s going to prop it up and overall Things Are,
healthier than I would have expected.

[10:36] Yeah and for listeners that are playing Jason and Scott Bingo you can check bifurcation off and then we also have orthogonal vectors so so that’s good your,
your ping and right through there okay last question on this so the way you’ve described as kind of like what I would call more of a bottoms-up you’re kind of saying,
all right I looked at back-to-school and all these factors that’s more of a top down,
do you do a bottoms-up where you then kind of say let me also look at a bunch of categories and it seems like you would need to for the pandemic you mentioned you know with in there you’re going to score down fashion let’s say and up,
Holman and some of the trends we’ve seen is there a bottoms-up and a top-down approach and you like triangulate or how does how does all that come together and in the final,

[11:20] Yep absolutely and then it’s not just categories that we’re doing detailed analysis and all the categories as well and top retailers so you put all those pieces together you start to get a pretty well-rounded picture.

[11:33] Who says somewhere in there you’ve got a Amazon Walmart Target kind of forecast as well.

[11:38] Yeah and you know we do a top 10 e-commerce forecast that most folks are familiar with we do a few more retailers beyond that once you account for
those retailers you’re already talking about 65 or 70 percent of the e-commerce Market.

[11:55] Yeah and then this is so that I said the last one was last one at this is really last one the so we had the,
you know the Census Data guys on and it was really interesting because it’s really hard to think about like boat this in curbside pickup right like is that e-commerce or not where do you fall on that is that
if there was a buy online pick up in store kind of situation is that going to be in your eCommerce site or is that you’re going to be on your retail side.

[12:22] That is e-commerce it counts towards those numbers I would say though is you think out about our numbers into the future
understanding that behavior you have to understand it as sort of a component of retail
because really that is symptomatic I think of a lot of temporary Channel shifting they’re certainly certainly an emerging Behavior with clicking collect a lot of that is people who want to buy it the big box retailers
but they prefer not to go into the store right now in the future they’ll go back.

[12:54] I’m surprised Andrew there’s a couple of vectors that you always hear about that you didn’t mention in a normal year tons of people publish all these stated preference surveys and they’re like to plan,
give more gifts or less gifts spend more this year West this year it sounds like you don’t use any of that kind of.
Qualitative stated preference data in your in your forecast do I have that right.

[13:19] I look really strongly at behavioral data I think those are the strongest signals you know if I see huge variance in survey data and stated preferences
that might get taken into account but in general what people say they’re going to do and what they actually do can often be very different.

[13:36] That was a total trick question because I’m super cynical about stated preference data especially around holiday I feel like there’s never been a correlation between what people say they’re going to spend on gifts and what they actually spend.

[13:48] The Perils of survey data.

[13:50] Yeah but another one that comes up that I’m on I’ll confess I’m also cynical on is in a normal year a big Vector everyone always talks about is the weather.

[13:59] So I love knocking down a lot of these things so I think the whole weather thing,
is while it can have an impact on an individual day or an individual geography that is totally overstated it really I think comes from retail CEOs liking to have the act of God excuse,
stand there’s also a very strong media bias whenever there’s a snowstorm in New York right this becomes an excuse for what’s going to happen to e-commerce,
it just it never falls out that way we’ve actually tried to test this over the years and the most we could ever find in some of the biggest storms were like the smallest smallest differences.

[14:38] Yeah I I tend to feel like it’s also self normalizing like if you have a really harsh winter.
You sell a lot more winter apparel and you sell a lot more heavy coats and things like that.
If it’s a mild winter somewhere like people are out and about more and go to stores more often so it’s almost like.
A little self normalizing to the extent that it does have any impact and then.
This is obviously an extraordinary year new mentioned a lot of the vectors that are difficult to predict this year I’m assuming a lot of them or also contradictory right like I think of for example I’ve seen some data,
they like savings rates are uncharacteristically high and yet consumer confidence is understandably pretty low right so you got to kind of.
Figure out how all those things play against each other.

[15:27] Exactly there’s a much more predictable amount of disposable income that people will spend in a normal year if people have a stable job,
and they’re all of a sudden not spending huge portions of their discretionary budget,
how much of that ends up then going back into retail spending.
I don’t know there’s a lot more variance around that number you know from consumer to Consumer so that’s where I think a lot of the variance comes in this season.

[15:56] Awesome well given all of that uncertainty let’s jump into it what is going to happen this holiday.

[16:03] So I’ll begin with the total retail number we are surprisingly expecting growth of 0.9% so very marginal growth
to just over one trillion dollars for the season it would be the second straight season Breaking that trillion dollar threshold for November and December.

[16:25] If you had asked me back in April or even met if we would see positive growth in the holiday season I would have said no way,
so to me that’s kind of a silver lining even though it’s obviously a bit lower than we’ve seen the last few years I think the big headline is that e-commerce is projected to grow 35.8%.
290 billion that’s an incremental fifty billion dollars in spending on e-commerce versus last year’s holiday season.
And then brick and mortar is going to decline 4.7 percent to eight hundred and twenty-three billion so basically this brigant brick-and-mortar hole is going to be completely filled and then some by e-commerce.

[17:10] I’m going to call that good news and a couple of sort of qualifying questions they’re like so e-commerce growth of 35 percent versus last holiday or 35.8 what is a typical year of e-commerce growth like what was last year.

[17:24] So
you can go back a lot of years and it’s kind of 15% plus or minus a few percentage points is e-commerce has started to mature we’ve seen that number may be in the 13 percent range the last few years so that’s pretty typical so.

[17:40] Yeah so so we’re talking more than double the typical e-commerce growth rate.

[17:45] Easily more than double yeah.

[17:46] Yeah and then brick and mortar or maybe even so total retail I know there’s some more variance here but like a typical year is like three and a half or four percent growth.

[17:57] That’s right yeah when that when the economy is fairly healthy yep.

[18:00] Yeah and so we’re looking at just under 1% versus 4% so definitely well not a negative year a down year and then one last question.
Is I know you are super aware everyone has a different definition of retail so what is in that number is does that include,
automobile doesn’t include grocery Does it include restaurant what.

[18:24] It’s not restaurants But it includes gas and auto so that’s a key part of it that inflates the number,
overall now it’s also why our e-commerce penetration definition,
is lower on average so we’re expecting this holiday season to reach 18.8% e-commerce penetration
by that definition that includes gas and auto so it’s actually a really high number that that number is typically and you know low double digits.
That said if you take out gas not oh you’re talking about a number that’s about six percentage points higher so essentially 25% of e-commerce will or of retail this holiday season will happen online.

[19:09] Wow and it’s funny I tease one of your former employees comscore because they use a really narrow definition I mean they they stayed all of them but they use a really narrow definition of retail like they pull,
grocery out they they pull like Health Services out and so they always report a very high percentage penetration.

[19:29] And I was part of that decision back in the day and I will say that at the time in which that decision was made,
grocery online was so negligible
that I think it could be justified at this point and we’ve had these discussions at emarketer’s,
online and even higher if you expand the definition Beyond food and beverage so it just doesn’t make sense at this point to exclude that from the denominator.

[20:01] No and I think that is the funny thing right is there there was a time when if you were talking about e-commerce you’d say well those categories aren’t eligible for e-commerce no one’s buying bananas or cars online.
Like arguably now all of it is right like certainly grocery got a huge kiss from covid but so did automobile surprise you know I should maybe not say surprisingly.

[20:25] Carvanha.

[20:27] Exactly tons of dealers are now selling cars are like so the manufacturer in most cases can’t sell direct but but a ton of dealers even small dealers are now doing a significant volume of automobile e-commerce so it’s interesting,
but I digress so 18.8% penetration and.
Free covid what like what would like by that definition of retail what would you what was typical penetration.

[20:56] Well it’s always a bit higher in the holiday season so I think are in our prior forecast pre covid we are expecting it to be somewhere in the Fourteen percent range for the holiday season so a pretty big boost.

[21:09] And then a super common talking point is covid propelled SX years in the future in five minutes so pre covid you remember like what year you would have predicted in nineteen percent penetration.

[21:23] So some of our forecasting analysts have calculated this and they said it’s basically pushed us two to three years into the future.

[21:31] Yeah and I would argue like overall that makes that that seems totally viable and it’s wide variance based on categories right like there were categories that were already heavily digitally penetrated and they may be.

Marker 01

[21:44] We’re a little more linear where there are categories that weren’t very digitally penetrated and they’re probably more.

[21:49] Grocery you could be four or five years into the future absolutely now one of the interesting points I’ve started to get some pushback on,
is that you know as we get out into 20 21.
There’s I think there’s this assumption out there that once we reach this new penetration level that that is The New Normal,
I don’t think that’s entirely the case I think we’re going to have to kind of give back some of those gains as some behaviors normalize its you know it’s driven both by the,
numerator of e-commerce and the denominator which is largely driven by Brick and Mortar so as brick and mortar recovers and expands that numbers going to sort of calm down all else equal,
e-commerce will still continue to grow faster but I think people should sort of reset their expectations that we’re not going to continue to see this kind of exponential trajectory and that thing’s kind of have to flatten out for a year or two so the growth can catch up with itself.

[22:45] Yeah so let’s dive into that just a little bit more so the in my mind there are categories where the.
The the transition to digital is likely to be more permanent like if,
if Walmart had 25 million mobile app users on their grocery app before covid and now they have 50 million one can presume they’ll continue to use that mobile app for some of the time right so so that.
Digital transition could be more sticky if they’re simply not going to the store for safety reasons and they’re in they’re eager to go back to Restoration Hardware as soon as they can then that transition to online furniture probably.
Isn’t as sticky the the thing that I have heard a lot of interesting speculation around is.

[23:39] There’s a ton of variance in data but a lot of people are saying that traffic in general foot traffic in stores is down about 25% and so then a couple magic questions come up.
Is that traffic ever going to come back and I’ve actually heard people speculate that it’s not and at the moment.
Common behavior is consolidation of trip so I traffic’s way down at Walmart like.
Revenue is actually up because people are making fewer trips but they’re spending a lot more in the trips they do make like are you thinking at all about any of those Trends and you have a position about like which of those might be.
Permanent Trends versus tertiary.

[24:21] Yeah so I think,
for most established behaviors they will kind of regress towards the trajectory that they were on before in the direction.
Grocery is a category that I think is permanently changed and the reason is you have a lot of
new first-time online grocer users who were compelled to do this and otherwise wouldn’t have done it people like my parents you also have people maybe like me who was a,
a couple times a year online grocery Shopper usually just when I wanted the convenience because I was coming back from vacation to an empty fridge beyond that I didn’t do it if I go from
two times a year to maybe six or eight times a year in the future which is totally feasible you know I have some sort of habit formation around it that’s a big difference,
in Behavior so I think that has permanently shifted if I think about a category like apparel.

[25:18] People were already mixing between online and.
Brick and mortar and they had different times or different use cases and when they wanted to go into the store and touch and feel and all those things that you go to Brick and Mortar for,
and other times where e-commerce just provided convenience.
So I don’t see I see that category kind of normalizing over time I think most categories will probably normalize but we will see some patterns that get baked in a bit more to your question about consolidating trips,
I do think to the extent that we are doing a lot more pre-shopping and trip planning some of that will probably,
get pulled into the future so while I don’t think you’re going to continue to see Walmart’s you know average basket size Jump by 27% as I think it did last quarter I wouldn’t be surprised to see it
you know increase a bit more than it otherwise would have.

[26:14] Yeah to me that’s going to be one of them I have no idea what’s really going to happen but it’s going to be one of the most interesting things right I give there were a bunch of retailers that one in this trip consolidation,
and they tended to be ones with bigger assortments,
it’s going to be really interesting to see if those retailers can hang on to those customers or if the specialty retailers get those visits back the.
Sort of pivoting a little bit.
Do you have a perspective about how Prime day being in October impacts holiday like is are they is that successfully gonna,
pull holiday earlier I know you had a prime day forecast and I do want to talk to you a little bit about that but in general do you think.
We’re going to see more holiday sales in October and therefore the the turkey five could be a little lighter than usual or how do you see that playing out.

[27:11] Well I’m going to say yes and no and I’ll tell you what I mean here so first off another one of my favorite narratives when you cover retail every year you hear the same narratives that you know.
Retailers try and pull holiday shopping earlier and earlier and I think a lot of the Genesis of that is that you see the.
The holiday promotions in stores beginning in October.
I don’t know how responsive consumers are to that Jason you would know better than I do at Brick and Mortar but certainly an e-commerce that’s never been the case consumers really tend to start their shopping around the Cyber 5. At least in earnest.
But the reason that happens is because there’s coordination on behalf of both retailers and their promotions and consumers,
wanting to kick off their shopping at that point,
to me why shopping actually will get pulled forward this year is because Prime day has created a new tent pole close enough to the season that you have this coordination among consumers and retailers,
so and more importantly I think it’s gotten consumers thinking about these purchases earlier in the season so now they’re really primed.

[28:18] For the next six weeks I think before the Cyber 5.
That they’re going to be much more open and receptive to messages even if there’s probably going to be something of a lull here before activity starts to really pick up again we also by the way have you know
an important presidential election will probably provide a bit of a early November distraction.

[28:42] Yeah yeah
it’s interesting because in a normal year I mean retailers all he’s want to pull in sales early right like that’s not a new phenomenon mostly because they want to
get to that consumers wallet before that consumer has a chance to spend that wallet anywhere else,
this year I do we generally think I could tell you I have a ton of clients,
that are really concerned about a bunch of factors later and holiday ship again in being one and inventory levels being another,
and so that they very legitimately,
are urging customers to shop early but the irony is they have a complete credibility gap right so they’re they’re all putting messages in Market about how you should shop early and we’re not going to have better deals later in the season,
but of course I don’t think consumers are buying it at all I think if they see a deal now they’re going to expect to see a bigger deal on Black Friday.

[29:34] Yeah consumers may not believe it but I think they’ll be driven by their own impulse which is to Consumers I think are actually concerned about
deliveries getting to them on time they’re concerned about product scarcity in a way that they haven’t been in other season so,
and by the way their home and doing a lot of online shopping anyway so I do think we will see a real pull forward effect this year.

[29:59] So I had mentioned Prime day forecast your forecast was around was just under 10 billion is that right was it.

[30:06] Yeah we projected forty-three percent growth 29.91 billion.

[30:11] God you and how and do you have a position on how how it played out.

[30:16] So the data so I first I’ve seen some reports that I think we’re not
great that little conspiratorial because Amazon,
didn’t tell other numbers and were just pushing the third party sales numbers I take that as you know just wanting to kind of message things in favor of smbs given everything else that’s going on.

[30:40] That’s the antitrust message.

[30:41] Yes so.
And there were some traffic data that was reported that said you know flat growth I don’t think that was a great Third Party Source for this specific data Edison Trends was the one that I looked at most closely because it’s based on actual
sales data and that’s a thirty-six percent growth which kind of felt right to me but then you know the numbers that we do know,
our Amazon said sixty percent growth and third-party sales to three-and-a-half billion so that’s real numbers.
But then we also saw Marketplace pulse report that said that two-thirds of sales that they were seeing were we’re first party,
so if you just do the quick math on that that actually gets you to the number of about 10 billion or even a little bit more than 10 billion so I think,
directionally our forecast is probably fairly well in the ballpark.

[31:36] That’s that’s just the Amazon any thoughts on knock-on effects so the Salesforce folks were out there reporting to their data that they were seeing pretty big spike sitting on Amazon retailers.

[31:49] Yeah I mean I think we seen everyone benefit Amazon you know definitely take share on these days that everyone can get into the ACT,
I think it’s increasingly important for them not to concede mindshare
damn is on especially on the cusp of the holiday season so I think they did well to run those promotions generate some a bump in sales and you know get consumers not locked in exclusively to Amazon going into the season.

[32:19] Brickell so seems like so we haven’t jumped into it one of my favorite topics is ship again do you think,
do you factor that in your forecast is there some expectation that
as we get to the Cyber 5 we’ll talk about what you think some of those days look like but you know I’m thinking Cyber Monday could just really Jim the whole system up for a couple weeks there could be so many packages
are you thinking that plays a factor or what is your thinking on ship again.

[32:48] I think it’s going to factor into thinking from consumers it I think it can hit
sales growth on the margins especially later in the season but a lot of those sales that might have gotten clipped from e-commerce in the past I’m talking about let’s say past the December 14th and when free shipping day is.
This year a lot of them are going to stay within the channel because they’re just going to migrate to click and collect purchases.
So so I think you’ll see you know that point in the season Amazon lose some relative share and that share go right into the pockets of,
The Big Box retailers for example but broadly speaking I don’t think that that’s going to have a huge impact on the overall growth rate for e-commerce.

[33:36] Got it and then how about is this holiday a shorter or longer.

[33:42] So we’re on the short end.
This holiday season last year was the shortest possible at 26 days so then it usually kind of gets one day longer every year because of the leap year we actually get two extra days
one benefit there is it gives you kind of a better cop when you had that two-day adjustment but 28 days is still kind of on the shorter end of holiday seasons.

[34:08] 20/20 it’s been so long I forgot it was a leap year feels like a decade ago.

[34:14] It’s the biggest leap you’re ever they added 5 years to this year so mixed results on pulling holiday in early when I asked you if cyber 5 was going to be maybe a little lighter I think I got a no can you talk a little bit more about that.

[34:28] Yeah I mean so the whole pie is getting so much bigger for e-commerce eCommerce this holiday season and what’s gonna end up happening is it’s just going to concentrate more around the tent poles,
every single year cyber five gets more and more important Thanksgiving Black Friday Cyber Monday every single year they grow,
at a faster rate than the Benchmark so we expect that to continue I think,
Thanksgiving is going to be especially interesting this year it’s now the third biggest e-commerce shopping day of the Season we expect it to jump forty nine and a half percent to six point one eight billion,
and the reason for the huge growth rate is so many retailers are closing their doors that day and you know this is really the first year also that,
retailers are closing their doors when mobile Commerce has been the thing so I think of Thanksgiving is the ultimate day for couch Commerce Black Friday is going to be our first ever 10 billion dollar day it’s going to jump,
just under forty percent to ten point two billion,
but then that will be quickly surpassed by Cyber Monday which will jump 38% to twelve point eight nine billion and be the heaviest spending day in history.

[35:43] Got you and,
so some of Cybermen likes our Cyber Monday was originally structural right like you had your vacation and you went home you had way better internet at home you may not even have a computer at home,
and so obviously you stole all your bosses infrastructure to shop on Monday that’s of course not true anymore everybody’s digital everyone has access,
but now people aren’t even going to work on Monday right so I assume the main reason that Monday is still such a big pillar is because it’s now a habit and it and in general.
Digital tends to be more promotional on that day is that do I have that right.

[36:23] It’s expectations and the coordination between retailer and consumer so in the same way that you know we saw this sort of.
Growth rate on Prime Day this year although we don’t know for certain let’s assume that that Edison forecast is or.
Report is in the ballpark yet so that points you to these growth rates you know well into the 30s maybe 40% range so I see no reason not to expect that that will happen for Cyber Monday this year.

[36:53] Dude I’m curious of you been watching digital at all for the weekend weekday Trent so I can interesting thing in brick-and-mortar ordinarily.
The brick-and-mortar does much better on the weekend.
Particularly grocery people don’t have time to shop for groceries during the week so Saturday and Sunday are the biggest days one of the impacts of the pandemic is,
that the sales have leveled out across all the days because people can shop on a Tuesday just as easily as they can shop on a Sunday.
I’m curious if you’ve seen any any change in the digital behavior in terms of the weekly Cadence at all.

[37:30] Yeah I think there’s some of that effect what’s interesting though is that the weekends in recent years pre-pandemic we’re actually growing at a much faster rate so already there is some normalization and leveling out there was,
it’s kind of organically happening is people started their shopping online so I don’t think the effects are going to be quite as pronounced but you’ll certainly see some of that.

[37:56] Yeah and then another super funny friend in e-commerce is I have a bunch of clients that see a spike at 2 a.m. on weekends like after people get home from the bars and I’m I’m curious what’s going to happen this year when people aren’t allowed to go to the bars.

[38:11] I don’t think people have stopped drinking at home so I think you know.

[38:14] Yeah but I just just like the weekend weekday thing they’re drinking all the time now right there spreading it out a lot more.

[38:20] But they’re drinking a lot more and with access to a computer so there’s much more potential for drunk shopping.

[38:26] That could be worth the Five Points were of what we’re already seeing yeah.

[38:31] It does Bode poorly for returns by the way but yeah.

[38:34] Let’s run a panel with a breathalyzer duck mixed with them let’s dig into some categories what are you what are some winners and losers that you’re thinking for Holiday 2020.

[38:46] Yeah so I start with consumer electronics huge category
that you know in the last couple of years I’ve been impressed with just the diversification the category there are so many interesting new smart home electronics it all sorts of different price points so you’ve got that as a Baseline.
But then you have the gaming console Wars coming in this year,
and then an iPhone super cycle there’s just so much there that I think will drive that category to be the biggest winner of the season.

[39:18] So you’re a believer that we’re in an iPhone super cycle.

[39:22] I think so even if it doesn’t live up to expectations it just it seems like people are ready for the next one.

[39:29] Cool we need to like a audio clip Jason like super cycle or something like that next time.

[39:36] I’ll look into getting that added.

[39:38] Okay have the audio team work on it.

[39:46] Okay sorry I interrupted you keep going with other categories or exciting.

[39:51] So toys and hobbies and in that we actually include fitness equipment so there’s a lot of the digital Fitness Trend and then obviously toys I think have just been,
generally elevated throughout the pandemic so that we should do well home decor I was actually surprised about this category because I always think of this as the second most discretionary category after apparel.
And I initially thought with the recessionary had winds is category would not do well and it’s done very well so in especially,
with the winter coming people are just going to be nesting I Thinkin.

[40:29] You know a significant way so that category should do well food and beverage you know this is sort of an extension of the grocery Trend but we’ll just leaned more into Specialty Foods and alcohol things of that nature,
as far as struggling categories really the only one that I can Spotlight is being in a tough spot as apparel So Many Factors there.
Obviously no demand for Workwear event where at the moment you know athleisure that pocket will do fine obviously,
but then you know I think margins also can really get hit this season,
and there are almost competing with themselves in a way because they’re going to have to unload a lot of inventory at discounts and so even their higher-margin goods you know might be competing with.
Their own good so I just think those margins are really going to be compressed I wouldn’t be surprised by the way if you had stronger sales just because there’s so much stuff at a great price but I can’t see where the prophets really come from.

[41:34] You have any thoughts on what the hot toys going to be.

[41:38] I wish I knew that I’ve got young kids I should know this stuff better but I really don’t know what the hot toy for the season is actually I just got my Amazon catalog and I just started leafing through in the mail but I did not look did you get a peek.

[41:53] I did yeah I got the Amazon catalog the I can’t find any prices in it though it’s so confusing.

[41:59] It’s your supposed to use the augmented reality on the Amazon app or scan the QR code Scott.

[42:04] I don’t believe in QR codes that’s a.

[42:07] One has Dynamic pricing so they can’t print a catalog with pricing because they change it all the time.

[42:12] I know I’m just teasing you up for your your QR code.
I don’t know I’m gonna go Mandalorian baby Yoda so that also helps with the bingo so they can check the Star Wars square off of the bingo card.

[42:30] Yeah I have a feeling Star Wars merchandise will do well for sure but you know what’s one the last couple holidays and I feel like there’s a bunch of new versions of it are all these watery toys like these surprise toys.
Where you you buy it and have to open it to discover what you got.

[42:47] Yeah the law and all that kind of stuff.

[42:49] Yeah so that was last year’s big and I’m not sure it’ll be the same one this year but they’re everyone’s leaning into that Trend so there are these like Mattel has a bunch of dolls that.
The attributes of the doll our office skated in paint and you have to dip it in water to reveal.
Like what color hair you got and stuff like that so I have a feeling,
some of these surprise toys will be high on the list but we’ll see Andrew you reminded me and one thing I wanted to slightly Backtrack on a factor we didn’t talk about that I suspect May contribute in some way,
to the growth this year is there are several significant categories of spending that are down and the revenue from those categories is likely to move into retail right so you mentioned.
Home is looking like it’s going to be really big this year partly that is likely because people aren’t going to be traveling as much so instead of a vacation you improve your.
Your home and for sure you know restaurants used to get forty percent of your calories and restaurants aren’t getting that right now and so Grocery and specialty food is,
getting all those dollars that weren’t in your old definition of retail but are in in your definition of retail so it kind of grows the whole pie if you will.

[44:15] Exactly and you also have people canceling their gym memberships and that’s
going right into fitness equipment and the new Peloton if you can’t take your family on vacation you may see more jewelry gifting is you want to
treat your spouse so there’s all sorts of these little pockets of consumer spending that are just getting redirected.

[44:40] Yeah the one thing I think the jury people are worried about is if guys aren’t out and about and misbehaving is much they’re not going to have as many reasons to buy more jewelry.
But welcome that maybe a specialty one will see so what about you so you kind of hit on some of the categories,
let’s talk about like other particular retailers that you think are going to be winners or losers and who should we be investing in.

[45:06] I don’t give investment advice but Amazon’s are pretty safe bad I think they’re going to have really they’ve had you know and
epic second quarter and I think the fourth quarter is going to be historic both the prime day and everything it’s situated very nicely for them for
the holiday season then I look at the high performers from The Big Box retailers Walmart Target Best Buy Home Depot all them have been growing their e-commerce business at you know
a hundred percent in some cases or at least north of 70%,
and there are also well-positioned for clicking collect they will win those less frequent trips
to Brick and Mortar so extremely well positioned so basically the rich are going to get richer and then you know I look at some other brands that have just performed I think exceptionally well
in the pandemic Peloton I think that’s obvious and they’ve expanded their product line considerably and for lower price points so I think that should open them up
to a much broader consumer base
Lululemon and Nike have made the transition to DDC so strong I think that’s a much more profitable.

[46:18] Way to take their business and they’ve done surprisingly well it brick and mortar too so I call it that whole segment,
and then one other one that I think it could do really well as Etsy
and what’s interesting here is everybody kind of flooded onto Etsy for $5 masks and they got this big mask bump in the second quarter,
but I think it introduced the platform to a lot of new.
Consumers and you know it’s always done particularly well in the holiday season or its kind of best oriented to holiday gift-giving so I’m very curious to see what happens when you mix those two things together I think they could have a really strong Q4.

[47:00] That’s that’s totally interesting,
I hadn’t thought about that like I was worried as he was going to struggle to comp against their Mass quarter but you’re right like they on-boarded a bunch of new customers and people stored payment and,
yeah that that makes total sense that’s a good Insight in your,
written report you picked one other winner that I was somewhat surprised by you know I’m talking about.

[47:26] Which was that.

[47:28] Someone in the travel industry yeah in my mind like they could be the.
Relatively good performer but it just seems like luggage has to be a category that’s getting creamed right now.

[47:41] But is so this is relative so given that they got dealt maybe the worst hand of the pandemic or among the worst hands of the pandemic.

[47:49] Yeah right behind.

[47:51] Right I’m you know I think they’re doing some interesting things and they’re expanding their product line and and they’re generating some excitement so with a lot of these d2c Brands I think,
to prove themselves my question for them is what’s your next ACT I think away is finding its way into its next ACT and they’ve,
had some kind of innovative products at lower price points that have worked well I’ll be curious to see what their marketing messaging is because what I would start to do is Mark it to 2021 right like when we’re out of this pandemic,
you’re going to want to take those vacations you’re going to want to go to those events whatever the case may be I think there’s an opportunity to start marketing a bit to the Future so while I think they still have,
a tough hand to play this season I think you’ll see some bright spots from them.

[48:41] What not one fun fact I watch this daily we’re recording this on the 20th on the 18th we surpassed a million Travelers for the first time since the pandemic and through airports.
That’s down from 2.6 million year prior but that’s the highest level we’ve seen since like March tenth or something like that.

[49:01] Yeah you’ll have to decide who you think has is more prescient and and has a less of a.
A bias reason but so the CEO of United came out very strongly the zoom totally sucks and business travel is for sure going to return to a hundred percent of its pre-pandemic level and then Bill Gates came out and said.
There’s no way business travel is ever coming back.
And so maybe they both have self-serving reasons it just occurred to me because Microsoft assume he still has a lot of Microsoft stock teams is a big player in the.
In the virtual meeting so who knows who do you think are going to be the losers in the pandemic from a retail standpoint.

[49:41] So I think it’s really just it’s the stores that have the most Mall exposure so that really begins with department stores.
And obviously this is a secular decline that’s been happening but so driven by apparel
it’s not as easy for them to do click and collect I just think they’re in you know a tougher than normal spot and then one other retailer.
I said in past years you know I thought was struggling with competition was Victoria’s Secret.
You know they had kind of the rise of the d2c brands obviously some self-inflicted wounds with their own brand.
But then this season you know one other thing that stacked against down aside from having hi Mal exposure is that they have a high dependence on their d2c business but low aovs,
average order value so.
What ends up happening is that you know that just totally eats away at whatever margin you had so I think they’re just feeling it from from every direction this season.

[50:50] Yeah no I that certainly makes sense I have a.
Hypothesis that depend emic more so than creating new trends that never exist in the world it’s dramatically accelerating a lot of Trends we were already seeing and this is a perfect example of peril,
in department stores already had had winds and those got accelerated Victoria Secret had,
more headwinds than most in apparel and those it feels like also probably got exacerbated but one question I get asked a lot and I don’t I don’t have a super insightful answer so I’m seeing if I can steal one from you.
Is there of the department stores I get that the whole category is not looking awesome is there a department store that you think outperforms the rest of the market like whose best position of the department stores.

[51:35] Nordstrom consistently I’m always impressed with the store experience I feel,
good when I go into Nordstrom I think they did a really nice job so even with so many factors stacked against them I think they find a way to sort of keep their head above water
I don’t think this is going to be an easy season for them but I would expect them to outperform their competitors.

[52:00] Yep that’s usually my go-to answer but in the back of my mind I’m nervous amongst other things they closed a bunch of Mainline stores and so from a comp standpoint it’s going to be tricky for them.

[52:14] Yeah they’ll be able to bounce back eventually but they’ll have to get through this cycle.

[52:19] Cool any other surprises are Tippets you want to share before we wrap up.

[52:26] No I just think this is going to be a really really interesting season as an analyst I kind of love,
pouring through all these,
variables and trying to make sense of these orthogonal vectors right it’s they’re colliding in ways that are very difficult to predict so I say very confidently that this forecast is probably going to be the most off,
any forecast that I’ve been a part of in the past and yet I still feel good about the
the logic and sort of the directionality behind my thinking so I hope that’s a listeners takeaway is to understand sort of the Y rather than expecting me to nail that number on the nose.

[53:10] You let me let me put it that just a tad so so in the second quarter we saw e-commerce grow 45% do you agree with that.

[53:20] Yes I are numbers very close to that yet.

[53:22] Yeah so then Q3 it’s until I see the Amazon numbers and I don’t think the Census Bureau has opined on all of Q3 yet it feels like a ticked down a little bit what did have you guys said what you thought Q3 was.

[53:36] I’d have to look back at that that I it’s the relative low point in percentage but I want to say it’s still low 30s.

[53:43] Low 30s right so then you’re kind of saying and we’ll kind of so now we’re down in the low to mid-30s and you’re saying holiday will go up a little bit,
what if holidays up like 45% does that would that surprise you with what’s the cone of uncertainty do you think this is a plus or minus,
two points kind of thing here or could it go up as high as 45 percent from compared to your 35% forecast.

[54:08] So 45 seems a little bit High just because.
That was what we saw in Q2 which I really do think was the peak in terms and also it’s just always harder to grow at a more aggressive rate on a bigger base in the holidays that said I definitely think we could see a number in the 40s.
Not out of the question and if that happens I think it will be due to the fact that consumers actually did pull their spending forward and they were kind of consistently spending.
During that you know middle part of November when I kind of expect that growth rate to dip for a while.

[54:46] Question for you if we have a big number like that traditionally e-commerce has much higher return rate than then brick and mortar and since we’re shifting so much sales to e-commerce do you anticipate its.
That we’re going to have a rough in of holiday in terms of returns.

[55:04] Return a get in yes I think that’s very likely.

[55:07] Returning it.

[55:09] Especially with with you know listen I think the volume of apparel sales will be strong I don’t think the prophets will be there but you will have a high volume and if what are the it’s like 5 to 10% of apparel
sales in Store return but it’s like 30 or 40 percent online so yes this can be a,
reverse Logistics nightmare come January.

[55:32] And if you if you think capacity is limited for shipping all this stuff reverse Logistics capacity is even more constrained so that’s going to be a mess.

[55:39] Yeah it’s good for calls Maybe.

[55:41] Yeah yeah last question so we have these forecasts like there’s more uncertainty this holiday season than there’s ever been before do you have any tips or tricks like what would you be watching,
as we progress through the holiday I do you look for earnings announcements from Individual retailers that are sort of Keystone’s,
you know there’s some vendors that have pretty big customer bases that report some Digital Data on their customer base has like Salesforce or adobe or people like that like is there are there any favorite things you look for to tell you whether your.
You’re over underperforming your forecast.

[56:20] Salesforce and Adobe are going to be your fastest best
Reed’s early in the season because they’ll get reporting it pretty quickly and they’ll update it those are very good temperature checks you’ll see some Divergence you know there are some large retailers that may not be in their footprint but they both had big Footprints so as long as you can
calibrate your thinking to understand you know where some of those biases might present they’re going to
be your best temperature checks to kind of follow what’s happening throughout the season.

[56:51] Cool and when Jason said his last question this is kind of not a question but where can people find you online I guess it is question.

[56:58] On Twitter I’m more of a consumer than a tweeter at a lipsman or you can find me on LinkedIn.

[57:06] Yep and then obviously emarketer’s.

[57:09] And emarketer’s.
Now part of Insider intelligence.

[57:16] Yeah and I feel rumors about morning Brew.

[57:19] Rumors are swirling I’m reading them just like everybody else and I know nothing.

[57:25] Feels like you guys are making moves though I saw some new job listings come out this week in your organization as well.

[57:31] Yes and we just brought Zia wig Darren to oversee our content team so that’s also exciting especially given her retail background from shop talk.

[57:43] Yeah side note pet peeve on that before she left shoptalk she could jeweled me into being a,
in expert in this like shoptalk meet up that’s happening as we’re recording this over the next three days and so she booked me for like 36 meetings with random people over the next three days and then she left.

[58:03] Same I’m enduring that as well.

[58:05] All of us okay I did for today I’ve got six tomorrow and I think six the next day so yeah it’s.

[58:13] She got us all yeah congratulations does he oh well played.

[58:18] Boom throw Grenade on the way up.

[58:20] That is actually going to be a great place to leave it because we have once again used up our allotted time,
as always if you enjoyed this show we sure would appreciate it if you jump on iTunes and give us that five star review if you have any questions or comments you can hit us up on Twitter or Facebook,
we will put links to some of Andrews research in the show notes the big research that he’s talking about won’t be published or slightly after this podcast so we may have to append it to the show notes later,
but Andrew really enjoyed catching up with you and really appreciate you sharing all this great Insight with our listeners.

[58:58] Thanks for having me on guys.

[59:01] Until next time happy Commercing!

Oct 18, 2020

EP240 - Amazon Prime Day Recap

Episode 240 is a recap of Amazon Prime Day 2020, and a review of the US Census Advanced Monthly Retail Sales data for September.

Amazon Prime Day

Advanced Retail Sales Data for September

US Census Advanced Monthly Retail Sales for September

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

Episode 240 of the Jason & Scot show was recorded live on Friday, October 16th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 240 being recorded on Friday October 16th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners.
Well it has been a very busy week of e-commerce news we had prime day this week earlier Tuesday and Wednesday that was exciting and then also one of your favorite days Jason the US Census Data dropped so,
and we talked about that just way back in episode 239,
so we thought we would put a short show out there really just kind of review the news and make sure everyone was up-to-date because we’re heading into the holiday period.

[1:10] That’s awesome and it feels special for me because we’re recording this show on a rarity for us you and I are spending Friday night together so I feel like I’m usually only good enough for a week night with you so I feel special that I got a weekend.

[1:24] Yeah I’m going clubbing later so I had time to squeeze you in.

[1:27] Nice I appreciate it well before we jump into all the awesome content for this show,
I wanted to remind listeners that if you’ve been enjoying the podcast the best way to reward us for all the hard work we put into it is to jump onto iTunes and give us that five star review,
it’s annoyingly difficult you you actually have to go into the podcast app,
is the only place to write reviews and you can write a review or you can just click on the five-star and be done with it,
but that really helps us with discoverability on the on the various platforms and help us find new listeners so if everyone would take a moment to do that we’d greatly appreciate it.

[2:08] Yeah and then also today was kind of exciting you and I were both quoted in the New York Times.

[2:16] Yeah yeah I know I feel like we finally made it.

[2:19] Yeah we can did your mom see what did you tell your mom what’s that.

[2:24] Yeah yeah I did share it with some family but more fun my social network just has a lot of people that read the New York Times regularly and even,
number of people apparently there’s this till this thing where they,
they take all the Articles from the website and they somehow recreate them on Papyrus and I guess mail them to people,
so apparently there’s some kind of physical thing called The New York Times that you can read and I actually had several family members that read the Papyrus reach out and say
I have no idea what you do you seem like a total fraud but you’re in the New York time so you’re legit now.

[3:05] Wow good I’m glad that that strengthen your relationship with your family.

[3:10] Yeah well they still don’t like me but they were impressed by that one moment I think they all correctly assumed I was riding on your coattails.

[3:17] Yeah they’re they’re tiny so it’s good that you can fit on there the.
The will put a link to the article in the show notes but it was really about ship again so,
the this is a Weekly Newsletter our weekday newsletter that they published called on Tech and they were highlighting some of the things we talked a lot about about on the show so we’re excited to be in there.

[3:41] Yeah for sure.

[3:42] And then speaking of ship again kind of semi-related I guess so Amazon held their Prime day and this was interesting because it’s the first time we’ve had a,
October Prime day they shifted it to the pandemic.
And then Amazon did have a pressure release in a typical Amazon fashion they gave us some tidbits but then left us wanting more.
So what they announced is the first of all the announcement was really interesting and that.
Unlike previous years where they kind of pound their chest and say this was the biggest Prime day ever they did not say that so a lot of people implied from that that it was a terrible day,
but then I think the right read on that came from a lot of Wall Street analysts who said they just really don’t want to be pounding their chest because they’re under scrutiny,
around a lot of Monopoly talk so,
they just really wanted to highlight third parties so that was the Press so they essentially said that sales grew sixty percent year-over-year for third parties and this is when they line up Prime days from last year’s June to this year’s October so it’s not just like,
these random days and October group sixty percent year-over-year and then they said this is the part that was interesting is they said that third party sales drove 3.5 billion in gmv.

[4:58] So that was good and then then this is interesting because some Wall Street folks kind of implied okay,
well typically half the units Amazon reports this on a quarterly basis about half the units come from first party have from third,
therefore if you did three and a half over on the third producer party side you probably did three and a half on the first party therefore it was a 7 billion dollar Prime day.
But then other folks said well if we kind of dig into the numbers a little bit.
The first party just because it’s 50% across a quarter doesn’t mean it was over Prime day,
and then you and I know that the top sellers are always Amazon’s own devices and they ran some ridiculous deals online,
there’s an echo dot for I think the lowest it’s ever been and a couple other things on there and then when you look at the best sellers they typically had something like 18 of the top 20 slots,
so then folks can look at that and say well what if.
What if that’s that three and a half billion from third-party actually is on the maybe that’s about 1/3 so then you get this bracket of on the low-end about 7 billion in GMB for the prime day-to-day events,
and then on the high end around 10 billion do you have a pinion of where that landed.

[6:13] Yeah I imagine that it was on the lower end.
Part II think all the regulation aside if it if it was.
A huge blowout day I still think they would have trumpeted that more and the fact that they were focusing on on the three-piece hours and emphasizing the small business is I’m sure it was a huge day but I just find the
the kind of seven billion numbers are probably more credible.

[6:49] Cope and then.
Couple other interesting things I think the theme of this one so there were some of the third-party data providers out there one of them were active ones on Twitter was this lady called kala Schwartz.
I think she’s relatively new at Salesforce they’ve been hiring a lot of people in there their retail strategy group.
And she was really reporting I live data and so so my understanding of this data and we should have her on the show so this is this is my unofficial understanding of this data,
is essentially the demandware data and maybe some other stuff in there but largely the old platform known as demand where which is now,
Salesforce retail cloud or something so it doesn’t include Amazon,
which is which is interesting so what they saw is in that data set they saw over fifty percent increase in traffic to non Amazon stores on the first day and then,
that continued so they saw a pretty robust I think overall they saw 71 percent more,
compared to when it was in the June July timeframe.
So so I think the theory there is more and more retailers glommed onto Prime day and benefited from it so it feels like.
The non Amazon folks were probably the winner this Prime day which is kind of an interesting turn of events.

[8:13] Yeah for sure and I think you’re right I think the the web.
Traffic data from Salesforce comes from Salesforce Commerce Cloud which is formally demandware but they actually do have another cool data set that she also used in that article they also have exact target right so they have a bunch of people
that do outbound marketing and she was actually able to do some analytics on other retailers,
and found in found that like on average retailer sent 20% more emails on Prime day,
then they typically do in that day and that a significant portion of them I want to say eighteen percent of all the emails that got sent out on Tuesday and Wednesday reference the word prime or holiday in them.

[9:04] So
right you know her premise from that was that a ton of other retailers are were promoting sale either holiday sales or you know specific counter Prime,
programming in their outbound email and then just sort of reinforce that another cool report that I’ll put a link to in the show notes,
came from one of the Forester analyst so she took the top 50 e-commerce sites in the US and visited them all on Prime day and screenshot of them all so she put together this,
the school PDF showing you know what everyone’s primary messaging was on Prime day and.
You’re you’ll see a theme like almost everybody had a holiday sale running on on October 10th which is you know much earlier than you would ordinarily expect to see.

[10:00] Any other interesting things you saw in Prime day.

[10:03] Um I think you you hit on all the big ones there I always just get a chuckle so.
Amazon a they did say that it was the largest to sales days ever for third-party sales.
Which is which is interesting you know even though a lot of people estimate that third-party sales were much more part of the mix on Prime day than.
They usually are but Amazon always tells us what the top-selling products are and every market and and from past years we know those are predominantly,
Alexa products this year they didn’t,
include that on any of their list so it’s all the non Amazon products and it just occurred to me that when covid over and we can take a vacation
I feel like the people in Netherlands turn out to be much more fun than the people in Spain because the best selling product and the Netherlands was a Lego Star Wars stormtrooper helmet.
Which I feel like you and I could both relate to and the best-selling product in Spain was like a dish detergent.

[11:06] Come on Spaniards got it up your Prime Day game.

[11:09] Their rap is like totally cool and hip but apparently they’re not as in the Star Wars Legos is than as the the Dutch would that be.

[11:21] There there Maslow’s pyramid is inverted got have Star Wars at the top versus cleanliness.

[11:26] Yeah or maybe the Spanish are just so hip that everyone already have a Lego Star Wars stormtrooper helmet and therefore they didn’t need one for Prime day.

[11:33] Could be could be we’ll have to have someone on the show to to dig into this Burning issue.

[11:39] Yeah.

[11:39] Cope well let’s I know you love to talk data let’s dig into the retail sales that came up I’m still
I’m still kind of in the Fanboy glow from having the guys on the show so it was exciting to see the data come out days after we had talked to them.

[11:56] Yeah so we talked to him last week that was last week’s episode they sort of explained how they did all this data and they reference in the show that on the 16th we get next month’s Advance retail data so I came out first thing this morning
and kind of the very top line was retail sales were up 1.9 percent from last month.
So that’s encouraging like there’s some argument that there’s been a Resurgence of covid so there might have been some fear that there was less spending so two percent is,
is Meaningful growth and and they’re like top-line everything they measure was up 5.4% from.

[12:40] September of 2019 so as we talked about in last week’s show.
I’m not very interested in a month over month eight I don’t think it’s all that relevant for retail so I quickly stripped out the,
then the kind of non-retail e category so I took out Autos which side note for people in the Auto industry like you new and used auto sales are actually significantly up.
But I also took out gas which gas sales are significantly down,
and so I and then I compared it to last year’s number not seasonally adjusted because we’re comparing the same month from two years,
and so court so I’ll call that core retail core retail was up 7.5 percent from last year,
so when you know further Evidence when we talk about that that V shape.
Recovery in general it’s absolutely true that that the overall industry is comping significantly above last year which is remarkable given what we’ve been through.

[13:44] But I did then break down the individual categories and what’s what’s really happening here is there are two big pools of money that consumers traditionally spend money on that is not retailgeek.
And covid is as cause people to not spend money on those categories and instead that money is flowing into retailgeek,
so basically you have about 8 billion dollars in spending a month that used to go to restaurants and and is now going to grocery stores instead because restaurant sales are so diminished.
And then you have about eight billion dollars in spending that used to go on vacations,
that’s now going into people improving their homes and items for their home so so you’ve got kind of Sixteen billion dollars in incremental spending that flows into retail from that,
and then we saw the non-store sales.
Category which we talked about in detail in the show asked last week but basically that’s mostly e-commerce will call that 75% e-commerce and then some catalogs,
and that’s the fastest growing category of all that 17 billion in spending so,
you add that 17 billion to the other two eight billion numbers and that basically was accounts for the entire 7.5 percent growth.

[15:06] Wrinkle so at a 30,000 foot level in Q2 we saw e-commerce grow at 45%
that makes sense to me because the Census Data really lines up with Amazon which feels right and then what this is telling us is we’ve come down to sub 30 percent growth in Q3.

[15:26] First September yeah this is not yet yeah so we don’t we don’t know Q3 and,
and a reminder we get this monthly data which is the least perfect measurement of e-commerce it’s this non-store number and there’s a bunch of challenges
there’s a better e-commerce number that comes out once a quarter and so there we will get a better Q3 number,
but it’s going to be interesting that like from from the September data you would infer that it’s going to be down from the what was it last quarter like 44 and a half percent or something from memory.

[15:56] Yeah and even like a Forester had and Goldman had 30% and maybe emarketer so so that would be you know during the course of the quarter maybe it slipped yeah.

[16:07] I failed to mention it but the actual official increase was 27% for non store sales so 20 you know.
There are there are several other indexes out there of e-commerce like Adobe and Salesforce and I won’t be surprised at all if they report a bigger number than 2727 sounds feels light to me.
Um if that is.
Completely accurate then what that would mean was that e-commerce was about twenty percent of retail sales in September.

[16:39] Yeah so that would be down to because we’re usually at this 30 we caught search that thirty percent right.

[16:45] Yeah I love how you call it usually but yeah at the moment we’ve been we’ve been trending in the high 20s or low 30s pre covid we were in the teens so so yeah possible that that,
you know as retailers opening up a little bit people were starting to move more back to stores but I have to tell you all of the the.
Databases that track store traffic are also I would
characterize them as wildly imperfect and not agreeing with each other so take them with a grain of salt but most of the best store traffic data still says that we’re down about 25% overall in terms of foot traffic.

[17:26] Yeah.

[17:27] So like yeah you would assume then that that that should drive a bigger e-commerce number even than 27 percent.

[17:35] Yeah well Amazon announces Q3 on October 29th I had erroneously thought it was going to be next week,
but it’s the week after so we’ll be doing a show on that and it’s going to be interesting to see how that compares do you know when the quarterly data will come out will that be before or after the 28th.

[17:54] That is a great question and it is knowable so we just have to stall while we’re talking the e-commerce quarterly data is going to come out on November 19th.

[18:05] Okay so we’ll get Amazon first and then the data so that’ll be interesting we can kind of see how those line up.

[18:10] Yeah I will say though so the on November 17th so two days before that we’ll get the the September or I’m sorry the October Advance sales and.
Expect that e-commerce number to be ginormous because there is all this Prime day activity and every competitor digital activity so I would expect the growth in e-commerce and in,
October to be wildly larger than it was in September.

[18:40] Yeah I know we’re jumping around here but I’ll connect these dots the one of the theories from the Salesforce folks was that this is going to Prime day in October is going to shave a pretty material amount off of,
what I call the Cyber five do you share that or you think that there’s enough Gap in there that it’ll it’ll be different.

[18:59] It’s Tricky so I in general I do share that I think.
If you look at the turkey five and you’ll get total retail sales for those five days brick and mortar and e-commerce,
it’s going to be for sure,
right year because retailers are desperate to pull sales in earlier their everybody’s worried about their inventory so they’re worried about running out of product because the supply chains were disrupted,
and you know per our discussion about ship again and they’re really worried about getting a bunch of orders right so retailers are desperate,
to not have all the sales happen on that turkey 5 and then,
nobody wants Black Friday to be a big in person day right like they don’t want the big crowds because it’s not very covid friendly and they have limited capacity so.

[19:48] Paradoxically retailers are hoping that the Cyber five is a lighter now because they’re discouraging people from going in the stores that’s going to shift more sales from those five days online so so you’re going to you know have kind of.
The whole tie the lowering and then a little wave raising for e-commerce but I have a feeling net-net that that.
Retards are going to successfully pull some November sales into October and therefore the November sales will look a little more modest but I also suspect,
the consumers don’t totally trust retailers when they say the best deals are now and so I don’t think retailers are going to pull as much sales into October as they’re hoping to.

[20:32] Okay.

[20:33] Well Scott I feel like in a huge Rarity we have succeeded in producing a short show,
so I’m calling that a win,
again if you enjoyed this show and you thought you were going to get a really long workout and instead you just got a really short workout you’re welcome,
and we totally appreciate everyone listening and look forward to talking to you next week we got a bunch of exciting shows and guess on tap.

[21:03] Yeah after you leave that awesome five star review over on your favorite podcast listening technology head on over to Facebook and like us over there we also have a LinkedIn group
then you can follow us on Twitter I’m Scot Wingo with one t and Jason is retailgeek with 1K.
Correct well there’s a tea.

[21:28] Oh jeez the recycle yeah the world’s worst Power I feel like that’s how you know my tweets are authentic and then I’m not paying someone to write them is although spelling errors, and I on that note I am going to wish everyone a great and happy weekend and until next time happy Commercing!

Oct 9, 2020

EP239 - Retail Sales Data with US Census Bureau 

Paul Bucchioni is Branch Chief and Scott Scheleur is a Supervisory Survey Statistician, both with the Retail Indicator Branch, Economic Indicators Division of the U.S. Census Bureau. In this interview, Paul and Scott walk us through the real sales data products that the US Census publishes and gives us advance about how to interpret the data.

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

Episode 239 of the Jason & Scot show was recorded live on Wednesday, October 7th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 239 being recorded on Wednesday October 7th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-hosts Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners,
Jason if there’s one thing we agree on it’s our love of data and one of our favorite data sets is the e-commerce data published by the US Census Bureau.
Both of us get a lot of questions about this data we talked about it a lot I think it was episode 233 we spent a fair amount of time kind of just talking about the data and what was going on there that we saw and,
so we get all these questions and we thought what better way to understand this data then to hear the details right from the horse’s mouth.
So on tonight’s show we were really excited to have and we just learned that they listen to the podcast that’s even more exciting Paul book kyani and Scott Sheeler on the show from the US Census Bureau welcome to the show guys.

[1:28] We are doing terrific and Paul I know you guys listen to the show so you know exactly how we always start we like to let the guests
introduced themselves a little bit to the audience so maybe we could start with you can you tell us a little bit about yourself how you came to the field and in your current role at the US Census Bureau.

[1:47] Sure so I started my career at the Census Bureau about 16 years ago and the entire time that I’ve been there I have been working in the monthly retailgeek,
I’ll Branch so I’ve always always been working with retail and one way or another my background is in finance and economics,
I dealt a little bit with Finance in the in the stockbroker type field before I came to the bureau but since I’ve been at the bureau I’ve been in the monthly retail started as an analyst I’ve worked on all industries that has to do with monthly Retail Sales inventory,
e-commerce and I’ve been I’ve been in here ever since and working as a manager now I’m the branch chief of the of the retail branch and
yeah that’s pretty much what I’ve been doing the last 16 years.

[2:31] That is awesome I’m always terrified to talk data and economics with people that actually know the fields like we have these phrases at work there are people that are data fluent and there are people
that our data literate and I’m like barely data literate.
Thrilled thrilled to have some data fluent people on the show and Scott can you introduce yourself.

Scott S:
[2:56] Sure thanks Jason Scott Schiller I’ve been at the bureau will just say longer than Paul and.
You know I’ve been involved in basically retail wholesale and services my whole career currently both Paul and I are in the economic indicators division.
Where we are kind of responsible for measuring a lot of the economy from the trade balances to the manufacturer shipments inventories orders data to the quarterly Services data to monthly wholesale and of course to retailgeek.
So we have a we cover most most of the economy in our division and our specific areas responsible for what,
fancy title is consumption and wholesale indicators which basically means we can cover consumer spending,
retail and services as well as the wholesale piece of the economy so that’s what we’re currently doing prior to the bureau I actually started your right out of college.

[4:05] That that is certainly impressive and,
I just want to clarify because some before we even get going people talk about us Department of Commerce data and they talk about Census Data you guys both worked for the US Census and this,
is in fact US Census Data right so I’m assuming for the most part people are confused when they give other departments credit.

[4:29] Yeah so you’re correct I mean like the US Census Bureau is part of the Department of Commerce so you know and it’s it’s always been one of those things where every time a release comes out you’ll notice when you look on the news or something it says the US Department of Commerce released today,
three tail numbers right but it’s comes from the US Census Bureau.

[4:47] Got it and then this is for sure the coolest part of the US Census Bureau is that also true.

[4:54] Well absolutely of course.
There’s no doubt about that everyone just thinks that you know you know I’ve always said oh is that the clarifying Scott probably has to do the same thing whenever we’re somewhere and someone says hey what do you do for a living and because I work at the US Census Bureau what do you think they say oh so you can’t people right so it’s not
nope there’s there’s more to it than that so.

[5:12] Yeah I was going to say like I assume everyone’s first reaction is wait you only have to do anything like every ten.

[5:17] Every 10 years right what do you do the rest of the time yeah I have to come up with some so many answer but it’s not hard.

[5:22] Yeah I like to even reduce that you’re from the bureau it makes you sound like the FBI I bet you at cocktail parties are like we’re from the bureau.

[5:27] Yes we’re from the bureau you just slam it down yeah.

[5:34] Let’s start it at kind of the the super 30,000 foot level you guys put out a bunch of I guess you call them products so there’s like the advanced the monthly the quarterly,
maybe talk listeners through those products and then you know how do you get this data and roll it up into the products.

[5:54] Sure I’ll take that I’ll start with that so
right so you really can’t talk about all the monthly retail programs without kind of seeing like where it starts from its senses and so you know but besides that our monthly surveys we have an economic census and then we have also an annual retail trade survey so
you know the economic census is basically the foundation of the retail programs it’s collected every five years,
and it’s similar to like what we were just talking about that the 10-year population counterpart that the senio what it does is it collects information for all retail stores in the US including sales by product business,
characteristics employment and payroll and then there’s the annual survey which comes out every year and that’s roughly about 20,000 companies,
okay and that collects more than just sales and inventory it also collects things like purchases and accounts receivable and things along those lines and then you get to the stuff that we do in our branch,
so the monthly retail trade survey and the advanced month of retail trade survey which I know can sometimes give people a little hard to understand,
the the monthly retail trade survey is roughly about 13,000,
sample size okay and what we do there is that collects that actually collects sales data inventory data and e-commerce data,
and it comes out approximately six weeks after the close of the reference month it’s been around since 1951,
um and about eight you know week it’s we’ll talk about the data in a little bit about like at the types of data that’s easily adjusted seasonally adjusted.

[7:23] And then the advanced one which is the advanced monthly retail trade survey which I believe is the one that most people use in the one that everybody gets excited about on release day on CNN and Wall Street that is a sample size of approximately 5,500 companies,
it’s a subsample of that monthly retail trade survey just like the monthly retail trade survey is a subsample of the annual survey that has been in existence since 1953.
And it goes it basically what the only the only.

[7:57] Did data that we collect on that survey is sales data because it’s such a quick turnaround because it’s a it’s basically it’s released approximately two weeks after the close of the reference month so as Jason probably knows,
it will be the D September data will be released next Friday,
on October 16th and that will release the September data and that will also then release the monthly retail trade the preliminary data for August,
so and then in addition to that one last piece is the is the quarterly retail e-commerce product which as you can imagine comes out quarterly and that collects just the e-commerce data so it takes data from,
just the just the e-commerce forms the data that has already been collected on the monthly retail trade survey but it’s broken down into just e-commerce,
and then we also have a supplemental product that came out last year which gives you even more granular data and takes that Top Line e-commerce number and breaks it out into
internet’s codes which will get into different Industries so you can kind of see more and more of the granularity which people have been asking for for some time though so.
That’s kind of like the quick overview without spending too much time on that I hope that hope that hit and what you.

[9:09] Yeah it’s super helpful can you give us a sneak preview of the data I’m just kidding.
when you said some of these things go back to the 50s that immediately popped in my head was someone had to go you know I’m envisioning that being on like some kind of a punch card and then like having to convert it into some format that you can work with now is how does that data like.
How did you guys have to go convert that data back to something you can you can now make more.

[9:39] So
that’s very great very very good question so when I first started here a long time ago one of my first tasks was to we had all these on paper.
And so we scan them in basically there and some of them because you can imagine we’re quite discolored
but we had them and so what we did is we stand them and we were able to put them on the web as PDF documents and they are on their from so if you actually go to our website which we will talk about later
census dot-gov backslash retail I’ll try to plug that as much as I can you will see on there we have all of our historic data for releases so users can go in and then they can actually pull up like the May 1964 release and see what the sales were back then
it’s pretty cool.

[10:23] Very cool wow.

Scott S:
[10:24] Believe it or not I you know what Paul got here I gave him that assignment and somehow somehow he still stuck around he didn’t like go running for the Hills.

[10:32] That’s The Hazing the new guy.

Scott S:
[10:34] It was like the hazing.

[10:35] Yeah I got a first project for you what do you know about.

Scott S:
[10:38] It’s right here.

[10:38] I’m still with him yeah I was a little worried I said is this is this what I’m going to be doing for when I got here like.

[10:47] If scanning off.

[10:49] Yeah right right.

[10:50] The so there every five year you when you said all retail stores so that’s so like what how many retail stores are there’s are like 50 thousand a hundred thousand like I have no idea.

Scott S:
[11:02] So I thought like this one so so basically the economic census does,
basically a collection of all firms with employees so so that’s roughly you know I don’t know what the latest number is maybe the million range of locations retail locations of course there’s not that many.
Retailers because there’s Raquel from multiple locations but we.
You know we do ask retailers that have a number of stores to provide information for each of their individual stores so it is a massive operation,
you know not quite to the scale of the 10-year population census but it’s a.
It’s a pretty big operation where we do reset kind of like all of the information we have about businesses we have methods to do that in the interim between the five years there’s there’s ways we get structural changes and we get updates from,
other administrative sources but that’s a big kind of once every five years begin to reset do an actual physical kind of like basic like a physical count.

[11:59] Wow you guys like Dread that year like wins then went to the next one I don’t know where we are in the cycle.

Scott S:
[12:03] So it’s not every year in the Years ending in 2 and 7 so the next one 2022 and Paul and I defer to our colleagues on that one we let them handle that one we got our hands full with the month.

[12:12] Yes there’s a there’s another another area that takes care of that just like there’s another area that takes care of the annual break them all up so.

Scott S:
[12:21] But we work we work very closely with them as you can.

[12:24] Yes you guys spend the bulk of your time on the monthly and quarterly just making sure all that that that’s enough Cadence that it’s a full-time gig.

[12:30] That takes up all of our time it’s a challenge enough to get that data out as quick as we do with with with.
As reliable as we’d like it to be is collecting all the data that we do so yes it keeps us very busy and then we have other things that we do which we’ll get into later like when we actually you know,
Benchmark to the annual survey every year so we have different things that we do besides that that keeps us busy.

[12:55] Awesome so I want to double click in the some of this but a couple of quick questions first so 13,000,
businesses fill out the the monthly retail trade survey and five point five and a half thousand
businesses fill out the advanced monthly is it the same 13 + 5 .5 every month or does it cycle or.

[13:19] Great question so what we do
it is the same every month for a certain period of time so we do a what we call a business sample revision we do that roughly every five years for the monthly retail trade surgery and about every two and a half years for the advance monthly retail trade survey
that way it gives its it give it puts less burden on respondents out there
you know so that someone’s not reporting to the survey for you know which 40 years straight or something like that and now obviously depending on the type of company some people there are companies that stay on the survey for a longer period of time
but but it is the same ones each month and the 5500 that are on the March sample side are just a subsample from that 13,000 in the month of retail trade survey.

[14:05] Got it so on that cycle you pick your 13,000 respondents in your 5.5 and then it’s actually the law that they have to fill out that survey right like.

[14:16] So it is the law for them to fill out the annual but the but the monthly retail trade and the advanced retail is not mandatory it is voluntary but we do stress the importance,
to the responders from when the when we mail them and talk to them.

[14:32] Gotcha and then so then we ask for these 13 and then presumably you very reliably get some subset of that and some subset you don’t get like if you if it’s voluntary and some people don’t,
provide do you just use like some statistical means to sort of level it up or or.

[14:55] So
Yeah so we there’s lots of documentation on our website as well since it’s not gov backslash retail that has sections about like how data is collected how the survey works,
and so you know we talked about ways and they’re how we how we handle and how we take care of companies that did not report in time and and Scott can even give you a little bit more information on this as well.

Scott S:
[15:21] Yeah basically if the company doesn’t report then yes there you know as part of the monthly retail trade survey we will.
We will develop an estimate for them based on either the reporting history of the company or how the companies the other companies in the same industry are performing for that month.
So we do come up with a replacement value for companies if they don’t report.

[15:46] Got it okay and fun fact I was actually just on the in RF digital council meeting this week
and the the in RFC Chief Economist was you know talking about some stuff and he you know not surprisingly who averaged a bunch of your data and
people are asking all kinds of questions about your data and like you know these are all the vp’s of e-commerce and a as a joke and this will make more sense later they all called themselves the chief non stores officers that’s the.
The Unofficial title that they all gave themselves and they were all talking about how when they were earlier in their career they used to be their job to fill out the census.

Scott S:
[16:28] Interesting.

[16:29] Yeah so there are several people that are like oh man I used to have to do that every month,
so so that’s that it just kind of fun to think about so we’re all.
Super short attention spans of course and so everyone pays attention in my world to the advanced monthly because we want to talk about last month as soon as possible right and so two weeks after the month clothes you give us this cool Advanced Data.
A month later you get a bigger sample does,
so I’m assuming if I wanted to look at like a three-year Trend or something I’m probably smarter to use the monthly survey monthly product versus the advanced monthly product because I’m only losing,
one one month of data and I’m getting a bigger sample size.

[17:19] So yes you’re correct so the advanced one like you said is the one that everybody looks for right it’s that first indication of how the how the economy is doing in the number that,
that that people see and then what happens is you have time then so you know there’s real if a company cannot report in time to that advanced survey then,
can report in time for the possibly for the monthly okay so so you’re going to get more you’re going to get more data in the monthly series then you do in the
in the advanced because there’s because over time you’re going to add to it because you can revive at any moment in time you can revise the prior month so like when we put out data next next,
Friday for the September March will also be putting out the,
August preliminary now that just came out last month so there should be more data that comes in you’ll get a more updated number which is when they start to talk about what are revisions are out there,
um so yes if you’re going to develop any type of Time series that would be what people would use and then even more so than that what happens every year as we will in the in the April time frame as we will put out our annual revision
our Benchmark report to the annual and could and opens up for us to add even more data at that point so that’s how that would work does that make sense.

[18:33] It makes total sense and then one more question because Scott’s chomping at the bit to jump in the.
When you get that more data like do you actually publish a revision for example to the advanced product or or does it just show up in the the monthly product.

[18:52] So it’ll show up in the advanced product as the prior month but it will also show up in the monthly product so because only the prior month is getting revised so that’s where you will that’s where you’ll see it,
we do not go back and like recreate the report again if that’s what you’re.

[19:08] Yeah I know but but so to be clear like on October 16th you’re going to publish an advanced monthly product that has the September data in it you’ll publish the monthly product that had or no.
That has the August data in it.
That right yeah August and we also publish a revision to the August Advanced Data or no.

[19:32] No there will not be a revision to the August Advance there will be there will be a revision to the August preliminary but you’ll see that in the September advance in the columns where we show the revisions to the August that will be there and you’ll also even at that point in the August,
a full report that comes out you’ll also see the final revision that you can make for July so you can still actually correct that as well.
And so that’s that’s how that works.

Scott S:
[19:59] The other thing to add there is when we release the monthly retail trade survey so like in the example we’re using.
When we release the August you know next week when we also released the September Advance the August will also include a bunch of additional detailed levels because the advance is so quick and sample size is smaller,
you know the so you know the industries are sub-sectors we come sub-sectors that under retail that we are able to publish you know are somewhat Limited.
You know so we are able to expand that and publish a lot more detail.
When we do that when we do the larger monthly survey ferns for example like in clothing stores like in the advanced will publish clothing stores butt in when we get to the,
monthly were able to break it down in the women’s clothing stores or Family Clothing Stores or shoe stores or,
Alex cetera so that’s that’s the advantage of having the larger sample and having a little more time to get it done is that we are able to dive into the data a little deeper.

[20:55] Brickell I don’t know why I never connected these dots but just does all this roll up into GDP.

[21:02] Great question again so yes so the the it’s about a third of the retail that is about a third of the personal consumption expenditure component of GDP so and the other two-thirds is made up of services so that’s how,
Retail Partners.

[21:18] Yeah I have a started a new company that’s Digital Services so I have this whole Spiel where I talk about GDP breaks down you know consumer services are much larger than super good so you guys create GDP that’s crazy you measure you measure GDP.

[21:32] Yeah we actually were and we work with we work with PE a a lot who creates GDP so they’re actually you know when we were in the building they’re in the building were into so it’s a little easier.

[21:42] Trust me out I don’t know why.

Scott S:
[21:44] Yeah there are Sister Sister agency of us under Department of Commerce.

[21:48] Very cool okay I never I never connected that I don’t maybe I’m the only ones but who knows.
The sudden let’s go let’s go back to the data so Jason kind of tease this a non-store definition give us on the e-commerce guy on the show so how does e-commerce come out in these reports
store non-store what are the definitions of all those things.

[22:13] So I’ll give you the high level,
it in the in the monthly report so in the advanced report but we have an on store number that comes out at a very high level and I’ve heard Jason hit on this before in previous episodes it includes more than just e-commerce so it’s going to include things like
Fuel and like direct Sellers and catalogs for those that are still around things like that so and then once you get to the monthly retail trade survey the the larger one where there’s a little bit more detail There’s an actual e-commerce line there,
and so in that line now it’s you’re taking out the fuel and the direct seller so you just have the e-commerce but you’re only have the e-commerce for,
companies that,
that do not set that do not fulfill from their store so they have a sense they’re big enough that they have a separate Warehouse that they fulfill from and that’s what goes into that number
I’ll let Scott now talk a little bit about what goes in if you’re into of what goes into the quarterly e-commerce report and how that breaks it down even a little further.

Scott S:
[23:10] Yeah so so so on the cool you know so on on the monthly you know we have that line that says electronic shopping and mail order houses you know so keep in the mail order houses in there.
Switch back to what it used to what it started as basically,
you know but it but it includes you know anything a company that would be classified as one of those things wouldn’t would have so if it’s all sales whether it’s online whether it’s whether they actually still have some mail order operations if they take a phone call.
You don’t process an order that way all of that data would be included so it’s not a hundred percent e-commerce.
And it’s not all of the e-commerce so what we try to do in the quarterly basis is we produce two things one is just a high-level report.
That basically takes sums up for all of retail and this will be excluding Food Services because technically that’s not retailgeek.
What’s the total e-commerce number that’s the number that you know comes out once a quarter.
You know that gets quoted and and you know what we released the second quarter e-commerce data like on a seed like Dustin basis and I know we’ll probably talk about seat adjustment later that was roughly about 60% of.
Retail sales for the second quarter so that’s so that was the original report that reports been around since the fourth quarter of 99 we started doing that back then.

[24:25] Of course in recent years and you guys have touched on this in you and some of your podcasts.
You know it’s a little grayer what companies are now doing with their online fulfillment.
And as a result we’ve tried to adapt what we’re able to provide to the users specifically you know that’s Paul said.
The goal behind the non-store is that that’s really a non store operation well now you have all these things like you know fulfill from store ship the store.
Pompous you know you have all these different components which graze the.

[24:58] You know what are people doing how are they breaking it out how are how are people reporting the data and you know at the end of the day we’re at the mercy of the retailers to basically.
Report the data as they see it and Argo and and because like like Paul indicated,
you know we’re relying on the businesses to produce the survey we try to align when we asked them with what they have,
you know we don’t want to give them all these elaborate instructions that basically maybe at the end of the day would basically label us to put it in all the right buckets.
They can’t give it to us and then we just lose the response and that would be worse so what we tried to do is we tried to say okay you know recognizing that there might be some inconsistency and you know how a company either you know ships to your house or you buy online pick up in store and how that’s fulfilled might be different.
We basically produced an experimental product about a year ago and actually I think Jason reference this in a podcast not too long ago that.

[25:55] You know where we kind of tried to combine it and say okay you know what regardless of whether a store tells us they fulfill it from their store or they fulfill it from a warehouse you know if the store is say you know clothing store.
Let’s just some all that data together so if they fill it for filling from their store for Phillip from Warehouse no matter what the.
You know what the origination is you know let’s call that like a digital transaction online transaction everyone call it and let’s kind of group those together so that you could kind of see how things are.
You know how that performances you know across the various Industries and how it compares to one another so so that was a big that was a big achievement we were able to do that with the data we already have some companies which was nice we didn’t have to reach out and burn the company’s again.
And and it did provide some granularity and of course with with the the data that’s been coming out of the past.
You know five or six months I mean it’s really provided some insight into what’s been going on.

[26:50] Trickle the this is a question to feel free not to answer this so you know so it’s neon e-commerce guy I immediately kind of think well you can’t measure your Commerce without measuring Amazon is there do you capture Amazon in this at all or are and it’s fine if you can’t say.

Scott S:
[27:06] We can’t we can’t.

[27:06] We can’t say you’re correct we cannot say.

Scott S:
[27:09] Yeah I mean I’ll retell all retailers are eligible to be selected for the sample but we can’t talk about any specific ones.

[27:16] Got it okay I have had a feeling that maybe since about that’s fine,
um nothing that’s really interesting though is so like Amazon is there’s Amazon themselves and then there’s like all these third-party sellers so it seems like you know and then you know the company I started previously we had thousands of these little sellers so.
The interesting.
To you know 13,000 could be a bunch of small ones you could have big ones do sir how do you get the mix for that to try to look like the u.s. mix sir is there some specific stats magic you do there.

Scott S:
[27:48] Yeah so basically and that’s kind of where the economic census comes in is that by having all that information on all of the businesses in the United States were able.
Stratify the sample so that we can you know.
Um produce estimates at the levels we want to and make sure we have a good mix of the large businesses small businesses Etc,
and we stratified based on size and size of the business and you know and then we can use the economic Census Data as kind of a you know the target population make sure it’s representative.

[28:17] Got it that makes sense yeah so that gives you you know you have this five-year check in to kind of understand what the what what the statistical relevance of everything is.

[28:29] Awesome so just a couple more qualifications on the e-commerce and we’ll move on obviously like this is what we get the most questions about so-so
a white just to re-emphasize what you’ve already said every every retailer accounts differently in some some Count Their e-commerce separate some don’t some
call it e-commerce if they take the money online some call it e-commerce of the products deliver to the hat like there’s a ton of different definitions and you’re trying to ask questions that the retailer is likely to know verses.

Scott S:
[29:01] Exactly.

[29:02] So super hard.

[29:04] It’s a challenge.

[29:05] It’s a challenge for sure I can absolutely appreciate that so in the abstract perfect world if,
Scot Star Wars and I don’t have any stores I’m only online I should be reporting a hundred percent of my Revenue as e-commerce and so on the
Advanced monthly it’s going to be bundled into the non-store and in the monthly it’s going to say e-commerce right.

[29:31] That is correct you would you would be what the industry calls a pure play so you would be your entire your entire business,
live solely online you would fill that out right and did exactly what you said you would be in the non-store category in the advance and then you would be in the,
you would be in the electronic e-commerce portion of the monthly and then you would also be in the quarterly report.

[29:54] Yeah and then if I later opened a store and I sold half of my stuff out of the store and the other half I shipped to customers homes from my fulfillment center,
in an Ideal World I should be reporting half of my sales as store sales which would then show up in the
in the appropriate category which I assume Star Wars memorabilia is essential Goods is probably the category that.

[30:20] Mmm Yeah.

Scott S:
[30:21] Obviously.

[30:23] And then the other half of my sales I would report as e-commerce is that am I thinking about.

[30:30] That is correct right and if you were so nice as to break that out for us and give us that data like that then yes it would that’s how we would capture correct.

[30:36] But it’s entirely possible that someone filling out the survey is just going to say we’re predominantly stores or were predominantly e-commerce and therefore we’re going to put all the numbers in.

[30:46] And this is kind of like what Scott had hit up before you know where we’re always going to be at the mercy of the retailer right as to how they deem what they what they think the definition to them
is e-commerce or retail rates oh
no matter how we tweak our definition or try to learn more about the definition from doing research and talking to people you know we know what we want and we know what we deem to be what e-commerce is it’s just getting everyone’s opinion to buy in on that as is that as I said before is always good is always going to be the challenge but we’re always we’re always trying to reach out and talk to different
agencies and and and establishments to see you know what others are thinking as well and we’ve gotten some good good feedback from people.

Scott S:
[31:26] Yeah we spent weeks spend time working with like a lot of the trade associations you mentioned National Retail Federation earlier we you know we work with them you know and and try to you know and others to make sure that we.
That our definitions represent kind of how the industry views,
you know the definitions the e-commerce of course is changing so fast so rapidly that that’s a hard one.

[31:51] Are the challenges it’s a moving Target.

Scott S:
[31:52] That’s a moving Target.

[31:54] You’re talking about and I know you can’t talk about specific retards but if you were talking about Target five years ago they had a bunch of e-commerce and they shipped it all from a fulfillment center today they fulfill 80% of their e-commerce from stores so
like whatever was right five years ago for them would not be right today.

Scott S:
[32:12] Exactly one other one other clarification is that you know what we do for e-commerce in terms of companies that have like a separate e-commerce division,
versus their brick-and-mortar stores either whether they started as brick and mortar and went to e-commerce or vice versa it’s so early what we would do for any part of retail so if a company operates furniture stores and they operate clothing stores.
You know that’s two different Industries and so we would ask them to split out that data separately and for the most part companies will split the date out,
and similarly with the e-commerce move we get good cooperation the companies will split out the data so that we can put them into the different Industries and measure how furniture stores are doing and clothing separately so that we don’t like.
Put the furniture Trend in the clothing in the clothing stores industry so,
so that’s it’s similar to how we do it for all the industries with you know we would so a complex company that operates four different types of stores you know Grocery and furniture and clothing and department stores or something could be in for could get for different.
Request from us to fill out.

[33:14] Got it and then one more thing I need Commerce and then I’m going to move on I promise,
the a cool thing about the new e-commerce products is so if you’re just looking at the monthly data the monthly product you’re going to see,
e-commerce aggregated so you’re going to see a total number for e-commerce but you’re not going to know how much of that was a parallel versus home goods for example
and so so one of the cool things about the quarterly product is you you then try to categorize,
or disaggregate the e-commerce into those categories do I have that right.

[33:50] You do that has been something that has been asked of us for a
pretty pretty long time and as you can imagine to get a new product up and running takes it takes years and years of research and talking to people and Smee and Scott were involved with that as well as other as well as some of our other colleagues meeting with different organizations and stuff and so to get that put out for that granularity for people you know,
it was a huge success I think people would gotten some some very good feedback on it because and especially like if you look at the if you look at like the most recent report you know in a time like now we’re a lot more a lot more activity is happening online
right you wouldn’t you wouldn’t know from the quarterly table that we put out before when it was just the Top Line number that something like,
food and beverage stores were up a hundred and one percent from the previous quarter from second quarter to the first quarter and that
and that from the prior year quarter is up 220 percent I mean,
that’s that’s huge and we would have never got that before without us having it that supplemental table you want to just got a large e-commerce number and I think a lot of people would have just been like oh yeah we know e-commerce is large right now because everybody’s buying online writing is all this new stuff like buy online pick up in store
so to get that granularity with and get to see a lot of these different Industries and what they’re doing you over years I think is a definite value for people.

[35:08] Awesome so now I want to transition so you mentioned your url forward slash retail you’ll be happy to know that’s the third favorite on my favorites bar.

[35:22] That makes me happy probably makes God happy too so.

Scott S:
[35:24] Wait what what I want what are number one.

[35:27] Yeah don’t be too mad it’s Gmail and like my my work login.

Scott S:
[35:34] LOL that yeah that’s good.

[35:37] So you’re right up there I’m not saying I organized it by frequency or anything.

[35:43] You are where you are so but on the morning of August October 16.
I and a lot of other people in the industry we’ll get up and we’ll I’ll admit I get up to eight to actually wait for the data it’s already waiting for me,
I’ll get up that that data is available I’ll do you know look at see what happened and I will start throwing out some tweets about like what I found interesting about the data and so will a bunch of other people and,
to my annoyance none of us will say the same thing or quote the same data so I.
Three people will all say oh the the US Department of Commerce or I will say the US Census Bureau.
Released this data and x and it was by 5.2 percent or whatever right and then someone else will say
a different thing and it’ll be four point three percent and another and so I want to kind of and I think I know why that’s happening and I know you guys know why that’s happening but I want to our listeners to understand
um what’s happening there’s a bunch of different cuts of the data in different ways to look at it in different ways to talk about it and unfortunately most of us.

[37:07] Good you don’t.

[37:08] So so the first thing that that,
like so they’re like I want to unpack that a little bit there’s a couple of parts of that but the first thing is you do,
you have like top lines but then you have a bunch of categories and,
most of us are interested in a particular subset of categories
and if unless I’m mistaken you do us a couple of subtotals right so if we just wanted to talk about Automotive
there’s an automotive line if we just wanted to talk about the top line there’s a top line but for example the top line is going to include
new car sales it’s going to include fuel sales and it’s going to include restaurants which you guys call Food Services is that.

[38:00] That is correct yep I was going to I was if your I was going to tell you like the different breakouts we have if that’s what.

[38:08] Yeah yeah yeah.

[38:09] Sure so we are we so like on the advanced report for example will have the retail and Food Services total that’s everything with retail and like you just said the right the food service is right you what we will what we will provide and publish is a not seasonally adjusted number
and a seasonally adjusted number so and then we’ll you’ll have the level and then you’ll also have the percent change from the prior month.
And the percent change from the prior year right and then you also have like the rolling quarter,
so like what you were just saying is you will get a lot of different the matter with depending on where you go you might see one that says retail sales are up like you know to tensor and another one says retail sales are up 5/10 right they one could be looking at
I had not seen easily adjusted other one could be looking at seasonally adjusted one could be looking at year-over-year what we tend to focus on and what a lot of people mostly quote is the seasonally adjusted month to month,
Trend and then whatever the revision was along with that total like you were just saying we also then provide a total that excludes,
motor vehicle and parts dealers because that is a category that a lot of people like to see they want to know but since Otto is so big and make such a large portion roughly like twenty percent of the retail total people want to see what would it be.

[39:20] Without,
without auto brightness so we provide that number and then we provide a number that excludes guests just gasoline since that’s a big number and you know with everything that’s been going on that goes on with gas and how that’s so price driven,
people want to see what retail would be like without that number and then we have a total excluding motor vehicle
and parts and gasoline so it excludes bolted oh so you could just get the number
retail without those in it and then there’s the retail number so that number is retail excluding Food Services if you do not want to see Food Service it’ll still have the motor vehicle and parts in gasoline in there but it will remove the,
the food services and then one last one that you’ll see and it does not come from us but a lot of people in what you might hear something to the effect of the be a control group,
and so what that is is that’s retail and food services and they take out Otto,
building gas and food services so that’s a number that sometimes you’ll see quoted in various news outlets but it does not come from us we did we don’t have that control group that we use.
That kind of clarify some of the categories and the different okay good.

[40:27] Yeah so the first thing is like a bunch of us could be taking a different segment that we’re looking at and it could be one that you gave or it could be one on calculated myself right guy
I can aggregate it up a bunch of the categories and just get gas for example if I want it right and side note.

[40:46] Part of the reason people would take categories out is particularly if you’re interested in e-commerce historically there’s some categories that weren’t very e-commerce friendly like almost no gas is sold via e-commerce so I today there are some,
some edge cases where maybe it is but for the most part you know gas wouldn’t be eligible to be,
any Commerce sale in the old days a lot of people don’t consider restaurants part of retail I disagree but I get it and in the old days there was no e-commerce for restaurants now there’s a lot of e-commerce for restaurants with door – and whatnot
in the old days nobody ever bought groceries via e-commerce,
now a bunch of people are buying groceries versus e-commerce so in the old days if you wanted to say like the core categories that were,
common for e-commerce you might have take it pulled grocery out and food services and gas in Auto right
but today you know Tesla sells online you know grocery is like 12% e-commerce right now or something like that
four for each of those things that the definition than a that someone like me might use
like to be fair like Hat Wag we have to put more of those categories back in because they are increasingly falling into the e-commerce bucket.
But so besides that you hit on some other things that we all tend to use differently you give two sets of numbers seasonally adjusted and non seasonally adjusted numbers.

Scott S:
[42:13] Yes so I’ll try to tackle this one.
This is this is a popular question as you can imagine so so generally speaking you know the data we get and we aggregate up goes into producing we call are not seal adjusted number.
With a couple of caveats one you know the industry much of the retail sector follows like the.
The retail reporting calendar right they opt they don’t operate on a calendar month they try to keep four and five week periods together to maintain the times of years and the kind of comparable basis year-over-year so they so they report,
you know not for the month we’re measuring so for September or something I think the.

[42:55] You know they’ll report appeared at the moment either going to return home and he’d acre for September was but if sometime in early October right so it’s it was a period that ended in early October wasn’t really September first,
So we have to adjust that to put that on the same basis because not everybody follows that we asked them for their September sales and you know something like the Auto industry doesn’t typically follow the Reach Out calendar the grocery industry has their own calendar,
in many cases so so we put all of that on the same basis well once you once you do that and whether you have to do it or not,
there’s differences of course in months there’s differences in numbers of days you know from the extreme of 28 February so for this year when it’s leap year the 31 in a number of months,
you know if we just kept the data Nazis they just at you would have increases just based on the different number of days in a month.
It also have differences in the month or increases or decreases based on the fact of what those days are in the month you know if you have a month that has five Saturdays in it that can be a huge.
Increase in certain things like you know just think of a grocery store on a Saturday versus like a Tuesday so if you had a.
You know if you had 5 Saturdays in a month it could overly inflate those numbers so that they may not be comprable you know to what you’re comparing it to last month or when you’re even comparing it to last year because the calendar can shift a little bit.
So we do we do make an adjustment for assent to that trading day difference we do have some adjustments for things we call like moving holidays this.

[44:22] Both the most obvious example of this is like Easter and the change in spending patterns around the Easter so when it’s in March,
the spending is going to fall more in March when it’s in April the spending is going to fall more,
an April depending on the timing when it’s in the middle kind of overlaps two months so we make an adjustment for that then of course we also make an adjustment for really what the what we call it which is seasonals the seasonality of the industries this is the fact that you know.
In the springtime people are planning a bunch of flowers so they’re going to a lot of lawn and a lot of nurseries and you know so so will we have to do a seasonal adjustment to account for the seasonality,
um so so we do all three of those things we do a seasonal adjustment,
we do a holiday adjustment were appropriate not every month of course and we do a training day Jasmine so they basically you could put all of the months on the same basis any Theory you can compare any any period you want across the whole time series you can do a month the month a year to year,
um you know you can take any quarter and compared to any quarter and a prior year the goal of that is to basically remove.
Remove the extraneous factors that might cause the data to be different to hopefully.
You know uncover the actual underlying you know growth or decline that might be going on in retail.

[45:36] Yeah okay
and then you also highlighted one other variable that comes up a lot like people will quote a percentage and it’s super important to know whether they mean percentage change from last month or
change from the same month last year.

Scott S:
[45:54] Yes that’s and you know and I know a lot of the industry follows you know year-over-year as the metric that is tracked and of course A lot of it is same store your every year we don’t do same store we do.
Whole store so basically if you if you had 500 stores last year and you have 400 stores this year you’re going to show a drop you’re not going to show a sing store for just a 400 you have,
if you and vice versa if you have 600 instead of 500 you’re now going to show an increase,
you know rather than just the performance of those 500 stores one important thing to clarify actually that I meant to mention earlier was,
we don’t press the dust this data so it is nominal and nature so things like gasoline where it which can be volatile for prices you know that can be,
and that’s one of the reasons like people try to exclude gas sometimes because it may be a little misleading,
because there is there is no price adjusted done our friends at me yeah they do that when they put it in the GDP they do a price adjustment.

[46:51] Yeah and I was going to say less frequently but occasionally you will see some US Census retail data that’s,
attributed as inflation-adjusted and my assumption is that something that someone did with the data themselves after they got it from you you got you guys don’t,
don’t do that right now.

[47:14] Right we don’t do that it’s just that’s other people you know this thing as you can imagine it’s probably just there’s a lot of people sitting there waiting for the data on that day right and so they get
data set they downloaded into whatever program they want to use and they run their own regressions or models and apply things and they come up with their own
and you know they might fail to say and whatever article whatever that you see are their tweet or something they might put something there that is of like fact that it came from us but that’s not the truth.

[47:37] Yeah totally got that okay and then now I’m going to throw out my premise for which data I prefer to use you can react if you want right,
so in general if I’m talking about.
In absolute number for a particular month so the dollar value of last month’s sales in a particular category or whatever I’m going to use the not seasonally adjusted number,
because that’s that’s the actual number that happened in that given month,
but as soon as I start talking about Trends over time or comparing two different times I’m going to
quickly switch to seasonally adjusted numbers because it’s going to be more accurately reflect.
The true true changes from between those two months.

Scott S:
[48:31] I think that’s I would probably agree.

[48:33] Yeah I was going to say the same thing I think would you say makes complete sense using over the time for the season just to take out as everything Scott was just talking about,
like the moving holidays and seasonal seasonality of stuff you want to see what the true Trend would be I think that makes sense but from a one-month perspective if you want to see what they’re real,
data is and you want to look at the Nazis Lee Johnston I think that makes sense as well.

[48:54] Yep,
and then in terms of year-over-year or month over month I’m for retail and there’s look all this data is there because there’s a legitimate reason you’d want all of it I’m a big fan of year-over-year
data because they’re like you know even with the seasonal adjustments the.
There are too many things that are just intrinsically different from from month to month in in retail or in most categories of retail so it just it feels to me more apples to apples,
to say you know what happened versus the same period of time the previous year.

[49:36] So what you say makes sense and I think you’re a lot as Scott would probably agree with a lot of a lot of out what you will see from
from news outlets out there and and companies and research firms they usually report year-over-year and even when we’re looking at like when we look at our data and we compared it to outside things like what we receive from like black box intelligence for like for Food Services or for things like that a lot of those,
places and a lot of those organizations will quote year to year so,
yeah I mean it definitely makes sense I think we’re we definitely show that’s why we show both I mean and what we focus in on is I think people want to see on the day of is always they want to see like what happened from last month but I guess you know it’s whatever serves your purpose.

Scott S:
[50:19] And I think and I think they’re in the current time if they deal with the with the pandemic in the past few months I think the.
You know it’s important to use the month the month and the year to year in conjunction with each other right because some of the trends are so extreme.
Bennett kind of it’s easy to get lost in like the size of the numbers going down and coming up.
So using it you know in conjunction with the year-over-year gives kind of a checkpoint against Okay so.
This is saying for this month it’s up or down X but like what does that mean like where we at compared to pre-pandemic levels or or you know where we at compared to where we were last year and I think I think it’s important to be able to use both.
And I think one of the event is one of the you know advantage of having seasonally adjusted data is in theory you could compare you know August of this year to February even though maybe that’s a not comparison you normally would do,
you could do it because you know if you wanted to kind of see you know a before-and-after kind of perspective.

[51:17] And that’s why in our report we’ll all we will supply the month or month and the year to year and then that’s easy Johnson this easily Justin and we’ll put out tweets because like a sky was just alluding to
you know you see something interesting like like from last month in August like food services and drinking places were up like four point seven percent
from July server was like okay that’s been up like three months in a row now but it’s still down 15.4 percent from last year and throughout the whole year,
it’s down when you look through the first eight months of the year so when you look at a lot of these different categories they look good on a month-to-month basis not so good on a year-over-year basis but then some of it is the other way around,
where things look great on a year-to-year basis like what we’ve seen with non-store retailers through the through the last 6 months or building materials right or Grocery and I think when people see that.
In those categories that makes a lot of sense.

[52:06] Yeah and so then two other little things just popped up I forgot to mention earlier but but when your,
thinking about what categories you want to look at when one kind of gotcha to know is there are two categories that have the word food in them right like theirs
Food Service which is a restaurant and and then there’s there’s food retail which might be like a grocery store.
Do I have that right.

[52:31] Yeah so the Naik the industry 445 that is food and beverage stores
so that’s going to be your grocery stores your liquor stores your your all those types of all the other grocery stores they’re not restaurants so what’s in the 722 industry which is Food Services,
and restaurants is exactly what it is you get things,
like all your takeouts and your food your restaurants and your fine dining your limited all anything that has to do with that it’s not a not a grocery store so sometimes people get that a little a little confused.

[53:03] Yep know exactly and then you just reference something that I’m ashamed to say I didn’t know but it suddenly occurred to me of course you do you guys Tweet stuff yourself like is there a Twitter account we should be following.

[53:14] We do so we actually have a Twitter account and an Instagram and a Facebook it’s just that US Census Bureau
and actually on the so if you follow that on the day of the release we haven’t we call up with our tweets they get reviewed and then they are released on the day that we
we put out our report will put out a number of different things will show a different flavor of like our month you know a month-to-month trends that look interesting year over year Trend so we’ll put anywhere but sometimes between eight
eight sometimes 10 will do it on our quarterly reports also and we’re going to start to try to get into the business now of,
you know not necessarily just on the day of the release but if we have some interesting things that not to overload everybody all at one time to maybe like later in the week or sometimes throughout the month is just to also put on some interesting facts.

[53:55] Nice and I’m assuming it’s super easy for just anyone in your office to just send out tweets under the government accounts.

[54:04] It’s the easiest thing you’ve ever seen I mean we can do it so we never get any backlash or anything it’s love you me and Scott do it or sub knocking yeah.
As you can imagine yes is it is difficult but it’s something that we’ve been you know it’s gotten a lot of good feedback you know our department the area that runs that it’s nice to see like when we’re like we’re actually think one month we’re actually trending and there was like some some cool stuff going on there and that it’s really it’s really neat to see that stuff.

[54:31] The so I know where you guys were
we’re recording this at kind of a late time so we’ll go through these quickly you kind of talked about how you look at some other third party data do you guys kind of triangulate on that at all or our feed it in so we have people on the show that can
they look at credit card debt there’s tons of data out there do you guys look at that at all.

Scott S:
[54:54] So yes we’ve actually well first of all we use a lot of third-party data just in the normal analysis and validation as we you know like a sanity check against what we’re saying,
but then we also in recent years have been working with a number of companies to try to kind of blend the data between like the third-party data survey data other administrative data that we might have internal to the bureau,
to try to produce some some estimates and actually just last week we released a new product that is actually it’s another one of these experimental products that we did for the.
For the e-commerce breakouts but it actually is breaking out our monthly data by state.
So we’re doing modeled estimates where we are blending data from a third party Source from survey data and from internal administrative data and producing from January 2019 to the present.
Um monthly data by State for the non non non store the non e-commerce basically the brick-and-mortar component of.

[55:56] Because allocating the revenue to the e-commerce component that we’re still working out of figure out that methodology so.
But and and you know and so we partner with some third-party companies investigate how we could do this the accuracy of their data and we’ve been working on it for a couple years and we were able to produce something and we’re always looking to like,
see what other data is out there there’s data is much more available than it’s ever been before and you know we.
We’re trying to say when we can leverage without having the burden the retailers which already have enough on their plates.

[56:31] Cool random question to does is the services that’s not you guys but our do they have Geographic breakout Gina.

Scott S:
[56:38] Services does not does not get servers with the services data is on a quarterly basis and of course it covers mean it’s like you mentioned earlier it’s a huge part of the economy so it’s very Broad in nature but no we do not have,
Jagger got Geographic Baker breakouts yet but we do that is on our list.

[56:59] Tell me you know a guy that would love Geographic break out of auto services data.

Scott S:
[57:04] I will make sure I went and when when we need it when we need somebody to support us I will come back to you in a little while and you can give a good statement.

[57:12] So a you need to commit to fill out some good surveys.

[57:15] I will I’ll be happy.

[57:15] Yes yes yes.

Scott S:
[57:16] That’s right we expect your cooperation if course we couldn’t tell anybody if you were we’re not on the same.

[57:24] Absolutely and I wouldn’t divulge that either.

[57:26] Would be it would be totally obvious because Scott is actually the biggest part of the service economy so if it’s a big number you know he’s in there.
So in one one side note on the third party data there are ton of other people that like have their own panels or surveys or things and they publish data,
what listener should know is almost all of those companies index their data to your data.

[57:54] Yeah so you know if they’re hearing from 10,000 people and they want to scale it up to.
They do a correlation and say hey how does our estimates map with the the US Census Data and it follows a closely then they feel like it’s it’s it’s credible.
So so when you’re looking at almost any data set in our space there’s a good chance it’s at least influenced by this US Census census,
so it’s very fundamental I do want to wrap up we’re almost out of time but just briefly talking about tools we’ve talked about your website a couple of times and I would just plug on your website,
that it’s surprisingly functional
so listeners should know you can download Excel data you can download a PDF and you know you can load that Excel stuff into
or a CSV into whatever Analytics tool you want but you also have like a.
Pretty functional kind of click and an answer query engine so you can pick which of these categories you want and what date range and whether you want to adjust it or,
or not and you can grab almost any data set that you might want pretty easily straight from the the website.

[59:09] That being said there are other tools that are pretty integrated with your data.
So I I know Google has some experimental tools with their bigquery where they have some of your data although I don’t think they grab it right away.
Is it the st. Louis whose.

[59:28] St. Louis fed Fred yeah.

[59:31] Fred so that’s st. Louis fed and they have some really cool
tools that are pre-loaded with your data I’m lazy and I sometimes use a commercial tool that you do have to pay for called wide charts that has a bunch of your data in it are there,
are those the like I’m assuming you guys primarily like use the raw data like are there any tools I don’t know about or that are,
personal favorites of yours.

[59:57] I think you’ve hit on the on the ones that pretty much are they you know we’ve worked with Fred before and so we’re familiar out of familiarity with them
yeah the ycharts I know I’ve used them for Scott Scott uses a you know
we’re always looking at different things I mean you know where data guys also obviously so we’re always looking at all types of stuff but yes we do use a lot of our lot of our own data and I’m very happy to hear you say that the website is is functional because it wouldn’t be good at people
we’re having issues like finding things on there you know we’re always looking at ways to improve that to I mean we’re actually probably going to be going through a transformation at that website at some point soon to make it even a little bit easier but,
so that’s always good to hear Scott I don’t know if there’s anything else that you might use.

Scott S:
[1:00:39] No I mean we work closely with the folks at the st. Louis fed and and to make sure their data is there I mean you didn’t mention but our data is available in API so anybody who wants to pull the data,
can pull that data pretty quickly you know and so people people are able to do that we.
You know so I mean and you know you meant to Google you mentioned ycharts there’s a lot of people who aggregate our data and,
and and sell it and one thing we want to remind people is that you know the data we produce is you know like you said it maybe maybe some people manipulate a little bit,
you know make it a little bit easier to have function to work within the way you you need it but all that day is available free on our website,
and that people do repackage it and there are there’s value-adds what they do and they cases but it is all available free and you know.
That’s Paul I would say there’s ever anything when you go in there you’re confused you can’t figure it out you know reach out to either one of us will make sure we’ll make sure our contacts informations and,
show notes to and feel free to reach out to us with any questions or help for navigation or Insight or whatever and we’ll help anybody weekend.

[1:01:50] You may regret that offer but that’s awesome.

[1:01:52] No that’s why you have you have our email now you have our email and phone number so we can’t hide.

[1:01:58] The in one one minor last question I mentioned so October 16th is the next drop I never get up early enough to know the answer to this so like is there a particular time of day that it officially goes live.

[1:02:11] 8:30 a.m. on the dot every yeah so the so the 8:30 is from time as always when,
the when the advanced report comes out and that of course you’ll get the the full report from the prior month and then our e-commerce report so the third quarter will be coming out on November 19th that report comes out of ten o’clock and you’ll get the supplemental to data along with that.

[1:02:34] Gotcha and are you guys up super late on the 15th finishing this or did you finish it at a reasonable time and.

[1:02:40] So it all depends it writes it all it all depends it I would say most of the time were up decently late,
you know we love it though we’re into the day that we want to make sure we have everything you know that we’re comfortable with and so yes we’re usually because we do all our all of our own dissemination in the office as well,
and then we’re you know then we’re coming up with the tweets and then we have to clear our data with our in-house folks and then we even do a briefing downtown what we did with when we were in the office with the undersecretary so it’s a lot.

[1:03:11] I don’t want to get put a call at all but but I would highly advise you to not go downtown right now.

[1:03:16] Yes I know.

[1:03:17] So we’re really grateful for all you do this is super super important part of our industry and it’s really helpful that is going to be a great place to leave it for this show because I’m slightly exceeded our allotted time as always if people have specific questions you’re welcome they hit us up on Twitter or Facebook I will put links to the
the Census Bureau website Scott and pause
contact info and some of the tools we mentioned in the show notes but guys this was a real pleasure I really and I learned a lot so I really appreciate your time.

[1:03:51] I’m glad I had a good time thanks for having us.

Scott S:
[1:03:54] Yeah we really appreciate the opportunity of fun.

[1:03:56] Thanks for joining us Paul and Scott we really appreciate not only coming on the show but you guys are you know the data you put together is amazing and we really appreciate it and you know position awareness is really important in you guys give that and we really appreciate it.

[1:04:10] And until next time… happy commencing!

Oct 4, 2020

EP238- Holiday Shipageddon

This holiday season will be a mixed bag for retailers. Health concerns are likely to drive many more consumers online, but can retailers and shippers, who are already experiencing Cyber-Monday levels of e-commerce handle the increased volume?

Scott Silverman (@scottsilverman) of CommerceNext and Ken Cassar (@kcassar) of CassarCo join us to discuss the holiday season, including a CommerceNext survey of 1,000+ consumers, and 60+ digital retail executives to understand how aware they may be of shipping delays, trade-offs they'd be willing to make in order to get free shipping, etc.

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

Episode 238 of the Jason & Scot show was recorded live on Thursday, October 1st, 2020.

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


[0:27] Welcome to the Jason and Scott show this is episode 238 being recorded on Thursday October 1st 2025
man this year is going fast I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot W:
[0:45] Hey Jason and welcome back Jason Scott show listeners.
Welcome to the first day of Q4 2020 hopefully your q3s were all ahead of plan and your seems to our sales were decent given that we're in a pandemic.

[0:59] Jason back way way back I don't know if you can remember back this far back in episode 235 we talked about some of the factors that could impact holiday.
And surfaced this kind of concern that we may be running out of shipping capacity before we really get too deep into the holiday.
I have coined that shipaggedon.
So that is really interesting and we've got a lot of Twitter and and listener trap in questions about this so it seems to be top of mind with everyone.
So we decided here in episode 238 to do a bit of a deep dive on this,
and we decided you know that you and I know enough about shipping to get trouble but we needed to bring some more folks into the conversation so we're really excited to have on this episode.
Two experts and they're also regular listeners of the show Scott Silverman who Probably sounds familiar to a lot of you and then Ken kassar.
They have both been watching this closely and they just did a consumer survey of over a thousand people to understand the consumer side of this how they're thinking about.
I'm shipping delays shopping earlier late that kind of thing,
but then they also did a survey on the digital executive side to understand how our merchants and retailers and Brands thinking about this.
So excited to have you guys on the show Welcome Scott and Kim.

Scott S:
[2:21] Thanks for having us.

[2:23] Glad to be here.

[2:24] We are thrilled that I have you guys and we're excited to jump into it
but as you know we like to always start by giving the listener a little bit of background about the guests so Scott I'd love to start with you your name will be familiar to listeners because you were a guest
way back in episode 66.
So quite some time ago and then you have you made cameos on a number of shows since then some listener questions shows and others
um would you mind reminding the the listeners a little bit about your background and e-commerce and what you're doing today.

Scott S:
[2:59] Sure well super excited to be back on the Jason and Scot show I have been in the e-commerce digital retail industry for over 20 years,
describe myself now is a digital retail connector I spent about 10 years Running Shop dot-org which was the previous,
online group of the national retail Federation I did that until,
2010 and since then I've been doing things on my own that are related to,
bringing e-commerce leaders together for information sharing learning shit and
networking including putting together a conference called Commerce next which focuses on customer acquisition and growth,
and and that's been I've been spending quite a bit of my time on that and that's really where this survey came from and we'll get into that a little bit more in a bit.

[4:00] Very cool and always apropos to talk to you around holiday e-commerce because amongst your mini claims to fame you actually coined the term Cyber Monday did you not.

Scott S:
[4:14] I was the co-inventor with Ellen Davis from NRF and that I was the inventor of Cyber which is a fundraising affiliate site.

[4:27] Yeah there was actually run by shop dot-org and later interrupt that raised a ton of money for scholarships for kids in the digital space.

Scott S:
[4:36] Yeah absolutely.

[4:37] So some very cool stuff so I was great to have you back on the show Scott and then Ken this is your first time on the show but your analysis has been on the show a number of times because you
have been one of my secret weapons can you introduce yourself to the audience.

[4:52] Yes I am Ken cassar I
have been in the retail industry for 25 or so years but made the jump to e-commerce and 1998.
At the time I was working for BMG Direct that's 11 CDs for the price of one
decided that Direct Mail probably wasn't going to have the promise that e-commerce had and jumped over to a strategic advisory company called Jupiter research at the time in the subsequent 25 years I've spent
most of my time in sort of this weird intersection of data analytics and strategic.
Opportunities and strategic threats that come out of that focused on the retail industry working with both Brands and retailers spent 10 years with Nielsen five years with Racket and intelligence
and now I have my own Consulting shop called cassar Co
and we work with retailers Brands and the vendors that support them helping them understand what is happening in the retail industry again with a focus on e-commerce with a focus on that
intersection of data and strategy.

[6:05] Awesome and we are excited to jump into some of the original research you have but I do want to frame up the topic just a little bit to make sure all our listeners are catched up in the highly unlikely event.
That some of them haven't listened to every episode sequentially so.
About a month ago FedEx had their their quarterly earnings call and they tweeted some interesting growth data about their company and.
They were showing some pretty impressive growth in 2018 they added 5.7 percent additional parcel capacity for the year,
in 2019 they added 7.8% additional personal capacity and then they were talking about for 2020 with this unprecedented e-commerce demand because of covid that they were actually adding.
11.4% additional personal capacity so significantly more capacity than they add in a normal year which is all good news.

[7:07] I pointed out to Scott on Twitter that well that's great news.
That's way less capacity than e-commerce is growing right so while FedEx was adding 5 to 8% a year e-commerce was growing.
Thirteen to fifteen percent a year and this year the most conservative estimates are for 18% growth.
You know the last couple quarters we've seen.
Depending on how you want to count between 45 and 80% growth and so my my hypothesis was.
Man if there's more e-commerce demand in Q4 than there was in Q3.
There's going to be a significant comeuppance because the none of the carriers are going to be able to flex to have the capacity to fill all the extra e-commerce orders.
And so the sort of test that hypothesis a little bit,
I actually reached out to another vendor in our space ship Matrix and ship Matrix is a software tool that a lot of e-commerce sites use to manage their shipments so they see a big chunk of all the,
the parcel capacity that gets sent out to FedEx UPS USPS and Eamon Amazon.
And they they track on Time Performance so they told me that in 2019.

[8:25] FedEx ups and the post office all kind of hover around this 95 to 98% on time rate and that for the last six months of the pandemic.
They've been averaging more like 92% so down.
Cut three to five percent worse performance than they normally have so the The covid increased demand has already hurt there on time performance.
Their data actually shows the Amazon struggling even more that Amazon normally has a 95% on Time Performance for their two-day deliveries and that they're now running at 85% so they're down like.
10% so to kind of wrap that up.
Covid is forced a bunch of people to shop online we've been trying to ship a lot more packages.
The none of the carriers have the ability to flex.
As quickly as the e-commerce demand does and so there's there's great concern about what that means
for holiday and that's what prompted us to do this show today talking about the holiday 2020 and the impending shipping nightmare.

Scot W:
[9:37] Yeah this good framing Jason and you know if things are buckling and Q 3 and Q 2 what's going to happen in q 4 if we usually that incrementally drives on top of what you're seeing in the earlier quarter so.
That's a good time to kick it over to Scott Silverman maybe maybe start us off with how how you guys came up with the idea for the survey and what the impetus was.

Scott S:
[10:02] So we've been leaning into research through the entire pandemic with Commerce neck so
I think we had some of the earliest data available at the end of March in terms of hearing what retailers were experiencing from the pandemic and we've been doing check-ins
between you know that period and now.
But in the middle of August we were talking to one particular retailer who was hearing from a lot of other colleagues that,
they were expecting some kind of shipping capacity,
announcement or policy from UPS and and or FedEx there were a lot of rumors that it might be around 30%.

[10:50] Then this is on you know there's a lot of things to unpack here there's the surcharges the increase demand that's going to come from shipping and just generally there's just more.
Shopping that's going online during the pandemic is as we all know.
And so we thought we really needed to be helpful to our community get and try to provide some,
some data for them and we thought we could do something where we would look at both consumers so we have a partnership with bizrate insights and they did a survey
for us with over a thousand consumers and then
tapped into our community and had 63 retail Executives and a variety of different categories they generally were skewing on the larger side like a
a hundred million or higher in terms of annual revenue and that allowed us to get a pretty good picture of what everyone was experiencing at the same time,
you know I've known Ken cassar you know probably that you know over 20 years,
and he you know I learned that he was spinning up cassar,
and we thought maybe we could work with Ken to have him do some of the analysis on the data so we ended up working with Kanna I'll let Ken kind of walk through some of the,
the high points of what we learned.

[12:17] Well thank you and and and Scott when you hit first reached out as like Scott's so he's in heat the guy that invented Monday but Cyber Monday which is which is a much much better thing than than my.

[12:28] Let the record show I like the guy that invented Saturday a lot more than Scott.

[12:32] Indeed but the but yeah now I was really excited to be able to dig into this stuff and the what was interesting here is we were able to field kind of simultaneous studies with that looked at
how consumers were feeling and how Merchants were failing at the at the same time with specific regard to the shipping issue
and and the and you know and I think you know probably the most interesting finding at least the best place to launch from is when we asked.

[13:05] Merchants about their biggest consumer related concerns and we also asked about logistics which we'll get to but we asked about their biggest consumer related concerns for the 2020 holiday season
the top of the left the top of the list was
their concern about consumers expectation of fast free delivery coupled with
shipper related issues 63% of the retailers that we surveyed had cited that and kind of double clicking in when we asked about concerns that Merchants had around fulfillment specific delivery specific issues
the the biggest.

[13:48] Challenges or concerns came back to shipper related issues the first 60 percent of merchants said that they were concerned that shippers make app deliveries during Peak demand
and and number two short a very very closely behind they worry about shipper surcharges straining profitability
when we click over to the consumer data
we see good reason for retailers to be worried about this because when consumers are asked about their expectations the promotions that are going to move them in this year they're the things that will motivate them are certainly free shipping
followed by a whole bunch of other issues but the but the but they want to make sure that they're getting free shipping
and in with the elevation in e-commerce demand that we've seen and I think everybody has kind of different numbers but what's pretty clear is that after a period of dramatic elevation things have come down a little bit but we're moving into holiday that is historically the
most significant crunch on the e-commerce out of the business so I think everybody from both the merchant side as well as the consumer side are concerned about what this holiday season is going to look like.

Scott S:
[15:04] If I could just jump in just like adding to the consumer side one of the questions we asked was if you're planning to spend time with fewer loved ones over the holiday season is in you could expect,
that was a pretty high number almost half of the people said that that was the case which,
means that there's going to be a lot of people buying gifts remotely instead of buying gifts in a store and then you know.
Taking them to you know Grandma's house where you're having Christmas dinner or whatever you're going to do and exchanging gifts so I that seems to be placing even more pressure on this current situation.

[15:45] Yeah and I think you asked a terrifying follow-up question which was hey if you're not going to be visiting family in person do you do you plan to give as many gifts as usual or fewer.

[16:00] We did ask about holiday budgets and and the and amongst our survey respondents,
it was mid 30s percent call the number of dump my head but the but mid 30s or so had said that they intended to spend less on gifts this holiday season.
The having.
Been tracking this sort of behavior for quite a while consumers consistently say that they intend to spend less during the holidays
then they actually then they actual earlier than previously but the but this year is so different that I'm more inclined
to believe it this year than any other year and I'm pretty.
Believing of the forecast that I've seen that show a relatively soft overall holiday season unless you're an online retailer and then it seems that it's going to be a very very different story this.

[16:57] Yeah and can debunk this if I'm wrong but my hypothesis so always take consumer surveys about how they're going to behave with a huge grain of salt of course the in general I would say,
consumers dramatically underestimate how much they're going to spend on themselves for holiday so they always say they're going to spend less,
and then they end up buying more items for themselves.
But they overestimate how much they're going to spend on other and so my my fear is if you're not going to be looking your aunt and uncle and cousins in the face across the table.
And in your survey they're already saying they're planning on gifting less than they probably really are going to be gifting less.

Scott S:
[17:47] Well I mean one counter to that is I heard this today an interesting thought is that.
All of the money that people would be spending traveling to you know on airfare and hotels and such and such could.
Could potentially be.
You know rerouted no pun intended into gift purchases so maybe that would give some more Credence to people spending a little bit more money because they're going to have a little bit more money having traveled less.

[18:20] Yeah no I think that's valid and super interesting.
To me that that goes into this bucket that that you guys call that in your report and of course Deloitte and others have talked about I think Cowan brought up this year as well a super common description of this holiday is bifurcation.
And one of the ways that's described is hey there are a bunch of consumers that had probably planned an expensive vacation they're not going to take and so they may have more discretionary.
Spending to invest that they might be more inclined to improve their home or.
You know buy more toys or invest in the new video game platforms that are coming out this year like there's this these this whole host of categories that could benefit from this.
Affluent consumer with extra cash and and like without doing a deep dive in the macroeconomic situation.

[19:15] Savings rate are uncharacteristically high so there.
There's a premise that there are savings dollars to invest in Holiday of consumers choose to do that right so that could be the upside of the bifurcation is,
affluent consumers could spend more and they're certain categories like toys Electronics.
Home Improvement food that could all benefit from that the downside of the bifurcation is.
The bottom 25% of all wage earners still have a 16% unemployment a million people just applied for unemployment this week for the first time.
The enhanced benefits are expiring there's a hundred thousand Disney and Airline workers about to get laid off.
And all of those consumers are likely burning through that high savings rate and they could shift into.
Real recession mode and you know feel a lot of economic insecurity in there for.
Legitimately spin spin the last for a holiday and then of course there's holiday categories like fashion.

[20:26] You know probably are going to be hurt by the fact that there's not going to be a lot of parties to go to this year all the Halloween people are probably going to be hurt by the fact that the CDC.
Says you shouldn't go trick or treating.
And side note the CDC came out this week and said going to a retail store to Thanksgiving shop the week of Thanksgiving is a high-risk activity that should be avoided.
So lots of weird Trends driving more spending and less spending so how do you how do you figure out how all those are going to net out I guess is the magic question.

[21:02] Bi and you know the I had done some analysis of credit card data from a partner of mine Affinity Solutions a few months ago and
we were looking at the the changes in spending over time at looking at different income groups
in this this was March through April through May through June and July and it was absolutely incredible to me how much more volatile the spending was Andrew and apparently responsive to government stimulus lower-income groups were and and they are absolutely the folks that are the most at risk at this point
in the economy and and so we need to watch that really close.

[21:44] Polly and the unemployment rate I think more than anything else is the number that we ought to be paying attention to right now when I look at the overall Census Bureau spending numbers
they can lull one into complacency the while
April and May were dramatically below the previous year by June and July we were up by August we were flat and
remember during August we started to see some of the government benefits being curtailed
the I think we want to keep a really really close eye on some of the numbers that are coming out,
and I think that at least for a few months it seems highly unlikely to me that there's going to be a political solution
that is that is going to help kind of pad what could be a difficult time and and so I generally worry more than I am optimistic with conflicting signals.

Scot W:
[22:39] Yeah yeah that's good to keep an eye on everything let's jump into the survey you when you kind of went to the highlights there I thought was interesting where.
You know consumers we have this friction consumers want fast free shipping and they don't and they want it all the way through the 24th right and then retailers are worried about being able to provide that.
Where are we you know where is consumer expectation Amazon raise the bar of this year from two days for Prime to one day it's not on every skewb they're kind of constantly trying to implement that and then the pandemic shifted a bunch of that around.
Um and then converts it on the other side of the coin where are the bulk of the Retailer's from your perspective Landing.

Scott S:
[23:24] Yeah I can jump in on that I mean you can Sky you can probably you know let us know you know like how much of the.
Shipping infrastructure that Amazon owns itself but I think it's safe to say that they'll be less affected,
by this then all the other retailers but what we're hearing from the Retailer's,
and a lot of you know some of this is in the survey some of this is just anecdotal and from conversations is there's a number of things that are trying to do I mean I think everyone,
you know once to manage expectations I was talking to someone from Land's End and they were talking about adding additional Communications,
from when the order was placed to when the order gets delivered to keep consumers aware of where the package is,
we're hearing about retailers that I think would like.
Get shot people to buy earlier I don't know,
I think that's a you know a mixed one whether that can be accomplished or not because I think consumers have some pretty.
Deep habits there especially around the holiday they're always expecting really good deals around.

[24:40] You know Black Friday Cyber Monday or as you get later into December I heard one example from B&H Photo that,
they talked about do offering a guaranteed best price which I thought was pretty creative so to you know make customers feel a little more comfortable that,
they're not going to see a lower price later in the holiday season but there's always that cat and mouse game going on between customers and retailers and the customers waiting until the end thinking that they're going to get a really good price and on top of being
and you know and we can kind of go did you know into all of these but I think they're also looking at you know backup carriers alternative carriers certainly,
I think as you were mentioning earlier and if that was Jason or Scott about,
the curbside and buy online pick up in the store being a little bit of an outlet where you're less dependent on the carrier's things like lockers I don't know,
how prevalent that's getting we didn't ask that I wish we would have it would have been interesting to see if any of the retailers are actually going to you know you know be able to use lockers to alleviate a little bit of the pressure.
So yeah those are some of the things that we're hearing about.

Scot W:
[26:04] Yeah it's two follow-ups there so Amazon's at about sixty percent sixty six percent of their own packages now,
but my senses and there's been some blog posts in their never super specific I think they're pouring on as much on to that as they can at these at the individual they're adding dsps and they're adding capacity at the ESPYs.
So I think of the ones Jason went through they'll have the most ability to add delivery capacity I don't know if it'll keep up with the demand though.
I think I saw this week this is kind of irrelevant news items that Lowe's announce they're going to try to put Lockers in a lot of stores and.
The school they looked they looked a lot like Amazon lockers I don't know what vendor they're using or if they kind of built their own Jason do you did you see that.

[26:47] No you busted me I actually did not see that.

Scot W:
[26:50] Maybe I imagined it who knows.

[26:53] I didn't catch that one either the I did actually try to measure that back in my racket on days and and so this was two years ago.
And we're just looking at Amazon and it was a surprisingly small percent of Amazon orders were going through lockers
but but fast forward a couple of years with more availability and with retailers that have more prevalent brick-and-mortar locations it could be a could be a different story
you know one of the one of the things that had really kind of struck me from the research that we did we the consumer side we asked consumers
about we stated
many retailers are going to be facing issues this year with shipping capacity and costs what
trade-offs would you be willing to make in order to be able to get free shipping and 38 percent
of the consumers that we surveyed said that they'd be willing to go to a local store to pick up an order 31 percent said that they would be willing to wait longer for an order to ship and I think for a lot of retailers not sent not named Amazon that is going to be the key to the holiday season.

[28:07] Trying to press consumers toward lower cost lower pressure options that will that will that will hopefully make the whole Enterprise
operate more effectively but we'll see to Scotts Point earlier will see how well they're able to get consumers to budge from their past habits
historically have been skeptical that consumers will change their their past behaviors in any dramatic way however in a year where
when I go to the grocery store they tell me which way to walk down particular aisles and I'm compelled to buy brands of toilet paper that I've never heard of before the it may be it may be a different story than in the past.

[28:53] Yeah so let's poke on some of those those ways returns are going to try to change and how successful they're likely to be but before I do that the,
the our show intern chimed in while you're answering that last question and annoyingly pointed out that Scott was right that that was announced last week plans to add lockers and 1700 stores,
and apparently as part of that announcement they disclosed that 60% of all their own online orders are Bulbasaur are fulfilled by store so makes makes total sense for them.
Um so so going back to ways retailers would like to change shopping behavior for the pandemic you guys alluded a little bit to retailers would like Shoppers to start.
Shopping earlier and I feel like we've already seen a ton of efforts on the part of retailers to make that happen right so.
Amazon is announced Prime day which is the 14th and 15th of October so for Amazon for all intensive purposes.

[29:55] Thanksgiving huh promotions of already started because they have pre-primed a sales running right now they're going to run into this big to two-day Prime thing and I assume they'll roll right in a holiday.
Walmart and Target have both counter-program sales the day before Prime day or a couple days before Prime day.
Um Target Home Depot and a bunch of other retailers have announced they're not going to have one day giant doorbuster sales for Black Friday because.
None of the Retailer's wanna encourage a giant line outside their stores and a lot of their stores are unrestricted capacity so they can't let a ton customers in the store anyway and so instead of one day doorbusters on Black Friday.
They're doing two months of sales starting in October so so there's tons of promotional activity to try to entice the The Shopper to buy early the retailer wants that Chopper to buy early because that means there's.
More days and more shipping capacity to fulfill that order there's a whole variety of things that that are safer for the retail or if they can get him to shop early.
Um the magic question though is our consumers going to believe the retailer like when a consumer sees a deal now or they going to say hey there's going to be an even better deal on.
On Black Friday or later and and therefore don't stop start early or can this promotional activity.

[31:18] Change that behavior like do you have a sense for what's what's really likely to happen Ken in terms of of holiday shopping shifting earlier.

[31:28] Yeah it's a you know I I've got to say that like when.
When I think back to analyses that I've done where I've looked at holiday spending on a day-to-day basis
year over year where you anchor on Cyber Monday it
amazes me how consistent that curve has been I spent
five years when I was at Racket and trying to find interesting things to say about the fact that patterns were as consistent as they were either over here
and and so it is an uphill battle I believe that the unofficial beginning of the holiday shopping season this year is
Prime day or prime days however when I think about it and and that all retailers need to kind of Orient themselves around that I do not believe that necessarily means that retailers need to
explicitly counter program against
Amazon and Amazon's promotions but they need to realize that that is the beginning and collectively spreading demand out as much.

[32:40] It is critical the I think that this year more than any other there is going to need to be a Harmony between marketers and,
infrastructure folks or operation folks like we've never seen before the marketing folks have got a not be myopically focused on driving sales they need to think about when those sales that are occurring and and and they've got a,
bring to bear all of the powers of this persuasion that they've developed not to get people to buy but to get people to buy
at an appropriate time.
And they have all the headwinds of the habits that they've developed over the course of years where consumers have justifiably come to expect the best deals to come later in the season it is a it is no small challenge.

Scott S:
[33:28] What we had a webinar on this topic where we shared this data and one of the panelists was the CMO from B&H Photo Jeff gerstel.
And he made a really thoughtful comment related to this and he's the CMO.
But he said really you should be asking yourselves a year from now you know what did you do to satisfy your customers most and if you're in a
you see that at the maybe there's a small percent of orders that are high risk for being fulfilled you walk away from those and let someone else take those and potentially fail,
but really focus you know on the orders that you feel most confident you're going to be able to do an amazing job with and think long-term the about,
how you're going to build your brand over time and how people are going to remember you and and don't,
take on too much this particular holiday I mean it I think it's.
You know foreign for just about every marketer out there to not,
really you know put their foot on the gas during the holiday season but this might be the one year where you want to back off a little bit and lay off the gas.

[34:45] No that's a great Point Scott and I actually think that that is I mean that's excellent advice and I do get a sense that that's the way the majority of.
Retailers are leaning I've spoken to a lot of retailers that are anticipating having earlier cut off days than usual so.
Um the last day though except in order and still promise delivery for Christmas.
People are just assuming like you know the service levels from the post office are going to be really unpredictable.
The you know the capacity from the other carriers as we've already discussed and so they're they're trying to be conservative because they would rather sell less stuff than,
be the the retailer that ruined Christmas by taking a bunch of orders and not delivering and I think the carriers are thinking the same thing I think.
FedEx and UPS are being really aggressive with their clients and saying hey you have to sign up for a quota of how many packages you can ship you're not going to be allowed to ship more packages than your quota.
Like they don't appear to be looking to grab every order they possibly can they appear to be being really conservative to make sure that they can deliver all the orders they grab so I feel like.
That that might be the way that folks are leaning in general this year.

Scott S:
[36:02] And then there's going to be some products in categories where there's still going to be an inventory problem and I mean we've had,
you know folks you know from a guitar manufacturer talked about you know the shortage is that they've had we've all heard about bicycles and I don't know if bicycles are you know the.
You know factories have been able to kind of get back and begin to bring more into the market but,
you know I think some retailers are going to be thinking about well,
maybe this is an opportunity to sell more you know be more exclusive sell things that full price not be as aggressive on discounting there's so many different things going on this holiday season it's going to be really interesting to watch.

[36:46] Yeah in one one data point that that I do want to share from our Merchant survey,
we had asked retailers where they intended to cut off non expedited shipping because of course.
Expedited shipping for many retailers is available up until two or three days before Christmas but you're going to pay through the teeth for it but non expedited shipping is really I think where the rubber hits the road.
Fifty-two percent of the merchants that we surveyed plan to cut off.
Or set their non expedited cut offs between December 14th and 17th and then another 25% between December 18th and 21st so those are the folks that are kind of living out on the edge.

[37:33] This year more commonly the 14th to 17th is the is where those cut offs
seemed to be coming kind of related to that is shipping speed and and here we asked merchants and that same survey
how what their standard non expedited shipping commitment was
and sixty-three percent of the merchants that we surveyed had that shipping commitment at four days or more
and and so the so unfortunately I don't have a comparison relative to last year but to me this feels consistent with last year where we had historically been seeing some pressure to get faster and faster so I'm feeling conservatives amongst retailers.

Scot W:
[38:23] Very interesting that's a symbol of our listeners are obviously on the retailer brand direct to Consumer side seems like we're all four of us are in agreement that this can be a particularly rough year for this this ship again.
Some best practices we've surfaced are moving up your last delivery date sounds like the consensus from the survey was December 14 to 17.
We've talked about improved Communications.
The you know being really clear about what's expedited and and not expedited both piss curbside ship from store,
what are some other things that you guys are either hearing from the survey or anecdotally that folks can do to help.
Get out of the freight train that's kind of coming out of here.

Scott S:
[39:09] I mean I just you know old-fashioned you know contingency planning you know being flexible and where your,
moving your resources if you need folks to go into your fulfillment centers and you know pack more,
boxes or things like that which I don't even know how that's going to work with covid but yeah I mean I think that's we're hearing quite a bit of that as is just,
being prepared for a lot of different scenarios and be flexible with your team be able to do as much as you can it's.
Sounds cliche cliche ish but I think that's also a big part of it.

[39:56] Yeah the and I think a lot of I think a lot of the pressure that
had been a lot of the e-commerce related pressure that had been sitting on the e-commerce fulfillment centers and the past.
Are going to are going to shift this year to the store because of curbside and Papas and then also when we ask Merchants whether those with stores with their they plan to ship
significantly differently items from stores relative to passed to last year 41 percent said that they were significantly increasing the throughput of shipments from their stores and and so you know I think for retailers
it's more than ever the focus for e-commerce is going to come back to the store and and retailers have got to get
training employees early they've got to cross train employees they've got to be prepared for a whole mess of different unpredictable scenarios and if I were running a large retail chain I would I would start my hiring a couple weeks early to make sure that people were ready
to deal with situations that they've never dealt with before and to be as adaptable as possible.

Scot W:
[41:13] Yeah it's interesting we've had this.
Kind of debate for a long time that the you know the omni-channel are harmonized retailers whatever you want to call them they had this a set of stores that they were under utilizing this the pandemic kind of a weird.
Unintended consequence I guess of the pandemic could be that they're finally going to lean on those stores another interesting kind of option that we saw in the news this week was Sephora announced a partnership with instacart.
So a lot of people are kind of saying alright we've got both purpose and,
curbside but that still you know requires people to come to like a mall like setting where the parking you know during holiday it's always really particular tricky and then,
a challenge with Opus is the you're going in waiting in line to get in the store because the reduce capacity.

[41:59] So the instacart thing is interesting because there's these last mile networks that have been built up for either grocery delivery in the in the example of instacart,
or than there you have shipped and others Postmates kind of straddles both then you have all the food delivery companies.
And and then you have Uber of course and and even maybe lift down the road you could see all those guys kind of playing a role in last-mile just kind of interesting the.
The other side of the story there though is one of the fastest growing from a GMB perspective in the pandemic has been Shopify and their merchants.
So I wonder if they'll be under the most stress the pure play a kind of SMB,
you know they really have no they're not like Amazon and they can build their own thing Shopify is kind of.
Helping a little bit they have their own fulfillment centers but they're there are all those guys are going to be relying on USPS FedEx and UPS.
And they not going to be able to go out and buy the big what do you call it Jason where you pre buy it the.
Whatever that is they're not going to be able to go kind of pre biocapacity like the other guys do you guys agree that that's going to be the most Under Pressure quadrant here.

[43:12] It's an under-pressure quadrant.
If you decide strategically that you want it to be if you want to try to compete with when I saw that Sephora news I was thinking what do they really want to be competing with Amazon in
on that level of service or do they want to compete on their product
and the availability of product and their ability to help consumers understand and and I think there are a lot of retailers out there that could potentially be over investing in getting products to Consumers quickly
where they perhaps ought to be investing a little bit differently in the consumer experience and
and and I certainly believe that there is a segment where immediacy matters a lot but,
just my probing through consumer surveys leads made over the years with some kind of you know
longitudinal view of it feel like there's latitude now like there hasn't been before and consumers are going to have a tolerance for a slow boat and and and and retailers really ought to take
advantage of it unless they happen to be competing very very directly with Amazon and they're only two guys that I can think of that fall within that bucket.

Scott S:
[44:27] There's you know the other way of looking at the the instacart deal is.
You know it's an outlet for you know when you know your most dependable.
Carriers are going to be stretched then and you're looking for a series of outlets to kind of flatten it out a little bit and put less pressure on the existing carriers.
And I haven't looked closely at that particular partnership I don't know if the if it is going to be like the same fast delivery time or you know would instacart be able to.
You know take all day to get something to somebody or even the next day or something like that.

[45:15] Yeah no Scott I actually think you're right in this case that obviously there are lots of.
Last mile delivery service is that historically have hung their hat on you can get the stuff fast as with by us that we can get it to an hour after you order it or whatever but I think for this holiday what we're seeing a lot is.
Retailers that just need to find a safe way to sell more of their store inventory so the thing people forget about sometimes I know you guys understand this but if you have a fulfillment center and a thousand stores and you have.
10,000 Jason and Scot show mugs to sell.
You're going to have 5,000 of those spread out across those stores and you're going to have five thousand of them in the Fulfillment center so getting.
Ten ten thousand orders at the Fulfillment center doesn't help you have half your inventories in the stores or vice versa like you have to match that Supply to demand so.
Like retailers can't win by just having all their no man shift online they would have a bunch of inventory tied up in stores.
That they then wouldn't be able to sell and so curbside pickup Barb opus.
Are super appealing because they give you that e-commerce experience and they're still selling the store inventory and I think some retailers are just concerned.

[46:34] Consumers aren't going to want to do.
Boba's are curbside because of safety issues or inconvenience issues with driving in the mall over holiday and so to me I think a bunch of these retailers that have added.
Last Mile home delivery for this holiday,
are really just trying to make sure that more of their inventories of liquid and that they can sell it so if Sephora can get instacart to drive stuff home for people that let them sell more of their inventory I know Bed Bath & Beyond is,
also did a deal with instacart and shipped I.
And we actually had a vendor on the show a year ago episode 166 called ship see in this is that's exactly what they do they're like an aggregator,
that that you know pull together like 60 of these Regional companies that can drive that stuff to you and.
Fulfill those orders to you so I think the service level might not be same day it might just be.

[47:29] Relatively cheap easy way to deliver store inventory.
But I want to Pivot for a second because earlier in the conversation you brought up what to me is another interesting point that we haven't talked a lot about yet which is inventory issues so.
Pandemic hits in March people aren't sure you know how this is going to be impacted like one of the early predictions was.
Oh man these doors are closed for two months they're not selling any of their inventory holiday we're going to be flooded with inventory and it's all going to be super cheap because everyone's going to have clothes from the wrong season that they're trying to sell.
And what it looks like to me is happened is a bunch of retailers.
Got really cautious early in the pandemic and dramatically curtailed their holiday orders and so I actually think we're staring at the opposite problem I think.
A bunch of retailers are really lean on inventory this holiday and and we potentially in the latter half of holiday might start running into.
Availability and supply chain problems do you guys get any sense about inventory issues and did that come up in the survey of the the digital execs at all.

[48:44] Yeah you know it's funny the concerns about in stock on key items.
We're highlighted both from our Merchant and consumer surveys the it wasn't
necessarily at the top of the list but it's pretty close to the top of the list it was number two on both
and and so yeah that is absolutely a big issue the my advice to retailer is this year is,
identify your key inventory items and I mean maybe it's the top hundred maybe it's a top thousand items but the but those where you believe you've got any risk of being out of stock you've got to think like neck like Netflix and Netflix when you type in a movie
The Big Lebowski and they don't have that movie they've got
hundred other suggestions movies like The Big Lebowski retailers have got to be armed with alternate suggestions for out of stock items I think in order to be successful because I I agree that out of stock issues are going to be rampant
this year.

Scott S:
[49:46] I don't envy the position the retailers are in I mean it obviously it's super challenging,
you know in a variety of different ways but on the inventory issue.
Like we're seeing a lot of news you know of this second wave of covid happening and what if that really gets bad and there's like another full-blown lockdown in December
then you know what happens what if they have to shut down fulfillment centers are in now they're over inventory,
there's so many different you know scenarios that could happen right now it's it's a really challenging time.

Scot W:
[50:27] Cool it wouldn't be a Jason Scott show if we didn't talk a little bit about Amazon and I know the prime day announcement probably came after you did your survey but wondering if you guys have a point of view of.
This new kind of October ish Prime day.

Scott S:
[50:44] Well what we did here the retail mean when we ask the retailers.
They didn't have the exact date I think they knew it was going to be in early as October but we ask them if they are going to participate with their own sales or they're going to sit on the sidelines and the majority
said they were going to sit on the sidelines so,
I thought that was interesting we'll see if it actually happens there there were a number of people that said they were undecided so there you know now that they have the specific date
we may see a lot of those undecided you know decide that they're gonna actually going to participate especially if they feel like,
this really is the beginning of the holiday shopping season and it's a way to,
get some of those orders in get people shopping earlier to spread things out have,
you no longer period to get products out to them so I don't can do you have anything more you want to add based on what we saw in the research.

[51:45] Yeah I do
in it just an addition to what to what you're saying it's got the you know this Prime day is a I do think it's going to be a significant sales day I just actually saw the emarketer
forecast for Prime day and and they're they're anticipating a pretty significant increase and
and and you know and I think that that it's easy to dismiss that as well that's before the holiday season but,
but it's not it that is I believe going to chip in to holiday sales for those that are prepared I think consumers are going to be prepared this year and and yeah that I think that is going to
again Amazon is almost starting the holiday season with
a 10-yard advantage on the on the rest of its competitors because of the traction that they've had with prime day in the and the past.
And so as everybody else really does have a bit of an uphill battle out of the out of the gates.

[52:44] And gotcha now can I'm not sure Sports metaphors work when covid has ruined all the professional sports leagues but.

[52:51] And when you mix your metaphors all over the place.

[52:54] Just using so that dovetails perfectly to our last question and I'm going to have to make it a lightning round question because we're getting close on time but I do want to get just kind of the 32nd overview from each of you.
We've been talking a lot about this increased e-commerce demand for Holiday from the very beginning of covid there's been a huge increase e-commerce demand and the most common way I hear retailers describe it is.
Every day has been Cyber Monday right so you know Salesforce talked about that across their whole platform Shopify,
you know said that they're running it higher than then Cyber Monday rates Amazon traditionally says that Prime day is a bigger Peak than Cyber Monday so,
in this world when we're all on a tidal wave that's already bigger than Cyber Monday and Cyber Monday is coming up.
Like what's gonna happen right like it are we going to have a peak on top of peak and if so will retailers be able to execute or.
Like is is all that demand already cooked in and we're just going to see you know the the very high level we already have sustained through holiday so maybe I'll start with you Scott do you have a.
A guess on how that's going to play out.

Scott S:
[54:11] I mean I do think there's going to be a peak on a peek I think the retailers are planning for this.
They're doing you know trying to get capacity trying to do these all these other things get people to shop earlier,
I think it might be an opportunity to not be as aggressive on discounts to,
you know sell closer to full price and and you know maybe more profitable potentially you know helping,
you know to subsidize a little bit of the profitability that's not going to happen from stores so I think that's a you know an interesting scenario I'm calling it interesting scenario because I don't have like a,
I don't want to be that confident to say that I think that's actually going to happen for sure.

[55:02] No I wrote it down that's your prediction can what about you what do you thinks gonna happen.

[55:08] Yeah I mean I think I think the pressure on e-commerce operations I think it's got to be relentless this year
the in for bigger for bigger retailers that have larger operations where they can absorb e-commerce pressure into broader store operations those are folks that have a lot of work to do but they're fortunate
and for other retailers I think it's going to be a combination of working overtime being Scrappy trying to figure out how to do this and to Scott Silverman's point trying to throttle demand at times in order to in order to make sure that it doesn't
that it doesn't bring the walls of the Fulfillment center is collapsing down.

[55:47] Yeah I I tend to agree I think there's going to be a peak on a peak there's going to be a little bit of a bifurcation the.
The retailers that invested in elastic capacity and move to the cloud are probably way better situated than the retailers that are running their e-commerce site on their own Iron right now so that that's going to be interesting and of course.
Nobody nobody has done holiday Readiness like load testing with these kinds of loads so it's this is going to be a very Live Test.
But I think that's going to be a great place to leave it because we have once again used up our allotted time.
Scott can really enjoyed having you on the show and talking about this super important issue we're going to have to stay close to it for the rest of holiday.
As always have listeners have any questions or comments about the stuff we talked about today we'd love it if you'd hit us up on Twitter or our Facebook page and will continue the conversation,
and as always if you enjoyed the show please jump on the iTunes and give us that five star review that's the holiday presents cotton I most want and it doesn't require any shipping whatsoever.

Scot W:
[56:57] Ken has got really appreciate it where can folks find you online if they want to follow your thought leadership.

Scott S:
[57:05] Well let's see I'm on Twitter but don't post a whole lot.
I mean I think you know the the we can give you a link for your show notes where people can download the study
that we've been referencing quite a bit but Commerce is where you know you can see a lot of the other research that we've been doing and the
webinars that are rooted in research and so on I would say yeah Commerce next would be the best place to find all that information.

Scot W:
[57:36] Okay again.

[57:37] And you're always welcome to go to cassar co Cas SAR where when I remembered to I post all thought leadership that I had that I create.

[57:50] That's awesome I will put both of those links in the show notes and until next time Happy Commercing!

Sep 25, 2020

EP237 - Always Day One author Alex Kantrowitz

Alex Kantrowitzer (@Kantrowitz) is the author of “Always Day One: How the Tech Titans Plan to Stay on Top Forever.” He is an on-air contributor at CNBC and host of the Big Technology podcast.

In this broad-ranging interview, we discuss the unique management styles at Apple, Google, and Facebook, as well as doing a deep dive into what makes the Amazon culture unique.

Disclosure: links to Amazon are affiliate links.

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

Episode 237 of the Jason & Scot show was recorded live on Thursday, September 24th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 237 being recorded on Thursday September 24th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:40] Hey Jason and welcome back Jason Scott showed listeners tonight on the show we are really excited to have the author of the book released,
this April always day one so if you’re familiar with Amazon that maybe a hint of what we’re going to talk about tonight and he’s also the host of the big technology podcast.
Alex kantrowitz welcome to the Jason Scott show.

[1:05] We are three of the have you Alex I’m not remotely implying that this is why you wrote the book but Scott is a sucker for anything Amazon so it’s the fastest way to get on our podcast is to write an Amazon book.

[1:17] Well you don’t even need to imply it I mean it was absolutely the goal and I’ve waited a long time but I’m glad to finally fulfill it here with you guys tonight.

[1:25] Yeah well very well played also for for folks that have already read the book or are going to read the book as a result of this interview,
so as not to trick you the book is actually about more than Amazon but you wisely chose to elevate the Amazon portion to the title of the book which totally worked with Scott.

[1:42] Wait wait the whole books not about answer.

[1:45] Scott’s pretending like he hasn’t read the book but obviously being the consummate professional he is he’s read everything you’ve ever written.
Before we jump into the book Alex the first thing we always like to do on the show is get a little background I got about the guests and kind of find out how how you came to your current role so could you tell us a little bit about yourselves.

[2:05] Definitely so I started my career buying digital ads right at the moment where Facebook was surpassing Myspace in the social media Arena,
and just watched it happen as a practitioner bought those ads and I spent about a year selling ad Tech,
in New York and just it was writing about it on the side and a certain point realized that this world was changing so fast that I’d much rather write about it professionally,
then do what I was doing it might have been just a function of the companies I was at but for me I saw there were so many stories that the media were was either getting half right or missing completely and,
you know I love doing the work and
you’re digging up what was going on and finding a way to tell it to an audience and just kind of made the leap so I covered the advertising industry in particular at first working for ad age
then went to BuzzFeed to cover like Facebook and Google and Snapchat and Twitter,
and while I was there just decided to go ahead and write this book always day one which looks really at the different Tech Giant work cultures that,
exists out there and the whole point of the book is these companies are moving to where the future of work is is going and we have two options one is we can like sit and fear them or two as we can call up their work.

[3:27] Their work systems and actually give them a run for their money and,
thrive in the workplace that they’re dominating and for me the idea was basically get the word out there and get the information out there and that was sort of the inspiration.

[3:40] Behind always day one is and then just as the book released I quit BuzzFeed,
I started my own publication called Big technology I what you call it in the intro its Weekly Newsletter and podcast that covers the tech Giants and it’s sort of.
Building on my work on Amazon and the other Tech Giants.

[3:56] Very cool and how are you finding being a podcast hosted.

[4:01] I mean I love it I just think there’s something special about being able to connect with people in a podcast I mean you guys know because you’ve been doing it for,
more than three years but the relationship you have with people who are putting on your show and giving you a chance you have to give almost your undivided attention,
you know when you have a show on in your in your headphones and your on a run or driving or you know going for a walk I think it’s just an amazing way to communicate with people and allows for
the Nuance that I think tap it topics in the world that we’re living in today deserve so
I don’t know I mean I couldn’t be more thrilled with getting into the podcast world.

[4:41] Nice well speaking for ourselves.
It’s way better for lazy people because you know you just hit record your ramble for a bit and you have a show like you don’t have to write all those words and you know get judged by an editor and,
you know and it’s frankly harder for the audience to give you feedback so you don’t even have to hear how much the audience hated it.

[5:03] Let’s see if you can work out an arrangement like that and any form of content production you got to make that happen.

[5:10] Yeah I like it the just be careful about the audio Engineers they tend to be prima donnas that’s my big advice to you having done this for a while.

[5:18] That’s right yeah got to make sure that you don’t have anything clicking in the background.

[5:22] Yes yes drives them crazy.

[5:24] Scot hasn’t stopped fidgeting for the four years that we’ve done the show I’m just saying right,
we’ve tried to buy him quieter chairs you name it we’ve tried it I apologize to all the listeners that have to do with it.

[5:37] Fidgety guy.

[5:38] Yeah so before we jump in the book I did,
the book starts out like even in the preface you’re having this this big interview moment with Mark Zuckerberg,
you you actually got it seems like really good access to a lot of the leaders in their senior management team that you wrote about.
Did was there some trick to that like was that just from your what Your journalist career up to that point and and your reputation or I mean like frankly I feel like there’s a lot of other,
journalists that have written books and didn’t have that kind of access you were able to secure for yourself.

[6:15] Yeah I mean I wasn’t as easy as it comes across in the final Edition I can tell you guys the story quickly if you want to hear how it all came together.
So I was covering Facebook for years here in San Francisco
or what you know I mean I’m not in San Francisco right now but it’s where I live and,
and so I told them I want to write this book based off of this interaction I had with Mark Zuckerberg and they said okay we’d be in Google said they can be in because I’ve been covering them for even longer
and then the ones I didn’t have were Amazon Microsoft and Apple.
And for me Amazon was going to be the key because I thought that you know if I’m writing a book about work culture Amazon has a pretty distinct in fascinating culture and for me nailing that that section of the book was going to be.

[7:05] Super important so even before we actually sold the book I booked a ticket to Seattle.
One way and I agreed to cats it for my friend’s moms cat lady the cat.
And basically said like all right if I sell the book hopefully I’ll get access but one way or the other I’m in Seattle until I’m out with the story.
And you know then we sold the book the day that I landed,
and I met with Amazon PR few days later basically said look like this is going to happen.
And Facebook is on board Google is on board and I’m not leaving Seattle until I’m done what do you think.
What’s let you know help me make help me tell like the most complete the most accurate story and let me actually get some people on record.
And they hadn’t participated in a book since the everything store which is Broad Stones book that came out I think in late 2013.
For 2014 so I didn’t have high expectations but I guess they figured hey we have this reporter that’s roaming around Seattle,
he’s already got these other two companies on board maybe he’s going to get you know some of the other fourth and the fifth so we might as well you know.

[8:17] Get out there and tell our story you know for ourselves and you know see if he’ll incorporate some of it and honestly like you know more I the overwhelming majority of the interviews that I did for the Amazon chapter.

[8:32] We’re with people who are not sanctioned through the company’s PR organization so I feel like people get the real story and,
this chapter it’s not just like a sugar coated repackaging of a press release but that said,
the people they did let me speak with we’re pretty invaluable I got a chance to speak with Jeff Wilkie who’s leaving but he’s their CEO of what consumer and then it from very interesting Lee Ralph her brick who was their head of,
machine learning who helped bring about this like pretty fascinating automation program in the headquarters that took a lot of the work that there are people in their retail organization we’re doing,
and automated it and it was great to have a conversation with him talking about how that project originated I had done some reporting outside but he was the guy that ran,
and so it was great to like bring the stories I had heard and sort of get his perspective on it and then I was able to visit a couple of fulfillment centers as well,
so you know I think as a reporter for me I’m always trying to tell the most complete story I think you’re missing out if you do only interviews you know outside the company,
I think you’re missing out if you only take access interviews and so I think always day one is a you know if I have to say it like it’s a pretty good blend of both,
I think it’s the first book ever that Amazon Microsoft Google and Facebook have participated in together an apple.

[9:56] Scott Galloway is really pissed about that by the way.

[9:59] I think Scott Scott’s doing fine and he blurb the book so yeah so yeah but but yeah Scott’s Kia Scott and I like I think there’s like great Synergy between the four,
and the thing that I wrote I mean I his book almost inspired me right his is all about the strategy.
You know what are they doing and always day one is more about how are they doing it look at the inside the work systems in the culture,
but have led to produce what these companies are you know are building so yeah and I mean like lastly Apple you know as per tradition didn’t participate but I got a chance to sit down with Steve Wozniak,
in a barbecue joint right outside of Cupertino and sort of.
Very end of my reporting on Apple share what I have learned from him learned and and get his perspective on it so apples out but wozniak’s and I’ll take it.

[10:54] Very cool the I definitely want to dig into the Amazon stuff but before we do I wanted to Fanboy a little bit on CNBC I’m a huge CNBC junkie the are you in the Silicon Valley office there with like John 14 those guys.

[11:07] So I’m a contributor I’ve been appearing on CNBC as a guest for about four years and then when I left BuzzFeed you know I had an opportunity to go out and be a free agent and,
work with anybody that I wanted to and CNBC and I got to talking and,
we started be a pretty great connection for between the two of us were you know again like I’ve been doing all this reporting on the tech Giant’s if you look at the S&P 500 they make up 25%,
of the of that index and supposed to be something that’s fairly well distributed across the economy and you have five companies taking up a quarter of it right so,
obviously it underscores how important these companies are you know to overall health of business in the US and the US economy which is what cnbc’s known for us the leader in covering so,
for me it was a great opportunity to go up there and be able to you know drop in when they need meat and and give my thoughts and share some of my reporting.
And it’s been great so far we were a couple of months in but it’s just been a real awesome experience to be able to appear on their shows from time to time.

[12:19] Yeah yeah they do a really good job I like the Silicon alley and that’s probably where you do most of your appearance on mentioned because that’s when they talk mostly Tech right.

[12:26] Yeah I mean I’m still working my way into meeting everybody but honestly the number one show that I’ve been on a Squawk Box by a long shot,
so you know Ike I love doing squat Buck show I feel like those host won’t let you get away with anything and there have been times where Kieran and Andrew Ross Sorkin of,
called me on certain statements and we’ve had to have little discussions on are about it and honestly if you’re going to do live TV those that’s the way to do it right like.
Let’s have let’s have some fun let’s you know not allow people to get away with statements without really thinking deeply about them and thinking about the repercussions and you know I feel like I learn every day I learn something every time I’m with them and,
and I don’t know it’s just I walk away from each appearance saying man that was fun let’s do it again.

[13:14] Yeah very cool so I could talk about that for the whole show but I don’t want to
Bernard Bernard time let’s take an Amazon what were as you as you kind of dug in there’s been some writing about day one and Bezos have been pretty open about it in his shareholder letters,
what were some of the surprises that you as you dug into the Amazon culture then also there was the you know there was that kind of famous New York Times article I think that,
2015 about in a kind of headline from that one was people crying at their desk and.
Amazon was very unhappy with that you know what were some of the surprises that you got from your Amazon interviews.

[13:51] Yeah I mean man that New York Times story we should come back to that because I think it’s pretty fascinating
look I think we talked a little bit about the day one thing obviously it’s the title of my book Let’s just you know touch on it super quickly write the idea inside Amazon with day one isn’t
you know work morning evening and night
you know keep your foot on the gas pedal even though many people there do but day one really means like think like a start-up right don’t be burdened by Legacy keep Reinventing,
and whatever Amazon does today if you have an idea of something you know to do it better just just talk about it and do it because,
the companies literally operating
it’s as if like it is one of those companies on its first day without the burden of we have to support our existing businesses or this is just the way
we do things around here okay so you said that now here’s the question how do you do that right so it’s one thing you know all these companies have like
your missions and visions of they put like some Backwater in their internet and never talk about it ever
but Amazon’s really been able to live this always day one mentality and I think they like the rest of the tech Giants have been able to do it in two ways one.

[15:02] Because they rethought the way that we do work and this modern era,
so throughout our history throughout the history of the Work World almost all work has been done to support existing products I mean think of the factory right,
you would have one guy come up with an idea like let’s make screwdrivers,
and then everybody in every employee that he would hire because almost always a he right would be making in the factory making screwdrivers and if you say hey let’s make hammers they laugh at you because employee ideas,
we’re just not a thing that they would pay attention to and that age then in like the 70s we moved to the knowledge economy were all of a sudden we say,
all right workers are supposed to come up with ideas or we’re relying on their knowledge,
but even still almost everything that people in the office do is just supporting existing products you know you might be moving numbers around in a spreadsheet but you’re not coming up with new inventions.
By and large in today’s knowledge economy I think what Amazon and the tech Giants have done is sort of flipped the whole equation on their head they’ve used,
technology to minimize that work supporting existing products which I call execution work and maximize the amount of time their employees have.

[16:15] For inventing for coming up with new ideas,
and bringing them to life and so they first reimagined work and once you re imagine working create that room,
for your employees to come up with ideas you need to actually innovate on the channels that bring ideas to decision makers.
I think Amazon has done a terrific job with that as well they’re famous for the vi pager process were instead of PowerPoints you know people right.

[16:42] Ideas for new products down in a six-page document as a narrative single-spaced often
11 Point font calibri you know style and
then they just share it through out and of course it’s good for crystallizing your thinking and catching up Executives you know really quickly
on projects that you are proposing as opposed to like going through a game of telephone but what that I do what the whole concept of writing things up.
Doesn’t Amazon is it just make sure that that ideas can get from.
Employees to decision makers in as quick a time as possible so that’s sort of like the trifecta you know in the always day one equation right it’s think like you’re a startup don’t worry about Legacy.
Use technology to minimize execution work make room for ideal work and then create channels to bring ideas from employees to decision-makers in as quick a time as you can.

[17:37] So I started a company that interacts a lot with Amazon and Google and eBay and Facebook and whatnot,
and it’s really interesting just from the partnership perspective to interact with all those companies because the thing that’s really amazing at Amazon is you’ll have a discussion with someone relatively senior there,
and they know the details of everything and that you’ll do a similar discussion with another company and they’ll have to kind of start looping in more and more people from the from various teams you know so if you have a shipping question they’ll be well let me get Larry the shipping guy in and Sally the,
payments lady in.
But you’d have that same discussion with an Amazon executive and they just know the business so deeply it’s it’s a little scary sometimes and then then you’ll go you’ll think oh that’s an aberration it’s just it’s just this guy and then you’ll go,
you know eight other people and they all know it just as well as the original person did you find that as you met various people.

[18:32] Oh yeah I mean think about the amount of knowledge that’s contained in one of those six page documents and then how many conversations you would have to have to replicate that.
And it’s totally unbelievable how well I just think about the way meetings working Amazon.
In most companies would have meetings look like right you end up sitting down with a bunch of people you probably spend ninety percent of the time.
Thinking about what you’ve done up until that point and 10% of the time.
You know actually digging into the business and making decisions at Amazon you read that 6 pager and then that whole 90% you know figuring out what we’re doing is done by the time someone says a single word.
So of course they’re going to be you know well-versed on what the business is doing just because like that’s just the way Amazon operates so,
yeah I would say that the people that I spoke with had just this deep domain knowledge it was almost as if they’re all you know CEO level expertise and Amazon in a way that you don’t find elsewhere.

[19:39] Yeah do you do you think that basis will let’s say he leaves do you think this culture will be so calcified in there that it will keep going or do you think eventually they’ll stagnant.

[19:54] Yeah I think look the culture at the end of the day is going to come from whoever the leader is I do think like you know I do think CEOs have an outsized influence in the way the culture,
operates inside a company that’s why when CEOs were like oh I wasn’t aware of how this toxic bubble happened or this toxic Behavior happened I always laugh a little bit because it’s like.
Yeah okay maybe you weren’t there day-to-day but you certainly set the tone that allowed this stuff to happen.
So Bezos I mean first of all I don’t think Bezos is going to leave anytime soon you know I when I was in Seattle reporting this book and in the time I’ve spoken with Amazon employees since my impression was always that Jeff Wilkie,
would be the guy to take over if pesos left and milky leaving to me is sort of a clear indication that Bezos has no plan.
To go anywhere anytime soon so I expect Bezos to leave that company for a long time,
to come you know as for whether the culture will change here’s my prediction if it’s somebody internal it won’t change very much because they’ve seen,
how that culture has been so effective in getting Amazon to where it is but like if Mark Zuckerberg took over Amazon after Bezos left you better believe it’s going to be a different company with him running the show.

[21:09] Oh yeah sorry that was that was hard to imagine for a second there.

[21:14] Never Say Never because actually Zuckerberg and I
write about this little bit in the book but zeca Berg ask Bezos to go and Shadow him for a couple of days you know Zuckerberg had this thing and it happens common in Silicon Valley where CEOs will ask other CEOs to spend a couple of days just watching how they work.
And and so Zuckerberg had Shadow Don Graham the CEO of the Washington Post and Don said you know Mark you’re not going to learn anything from me but end up being pretty
you know impactful in terms of Zuckerberg ability to lead Facebook and then
Don Graham eventually sells the Washington Post to Bezos but Zuckerberg knew we had a relationship even before hand and he said Dom Don you know can you introduce me to Jeff and he said sure.
So Graham asked Bezos stiff Zuckerberg can Shadow him and done Graham was you know
pretty involved with Facebook you as a board member and so just said okay let me make this asked and Bezos calls him up and says hey Don look it’s a great idea
but the only thing more distracting than having Mark Zuckerberg follow me around all day would be having Angelina Jolie in the office,
and so unfortunately we’re going to have to pass on this idea and why when I brought it up to Zuckerberg he seemed like absolutely dejected he’s like yeah you didn’t let me in I was so funny.
So anyway I don’t think it’s such a random idea you know maybe Zuckerberg snake doc next ACT is doing some sort of e-commerce business.

[22:41] No I’ve not maybe at that level of CEO but there have been a couple like pretty public examples of these CEO swaps we’re not just shadowing each other but where they trade jobs for a week which is pretty funny and Illuminating.

[22:55] Yeah that’s a fun hypothetical what happens to Facebook if Zuckerberg if Bezos runs it for a week what happens to Amazon if Zuckerberg gets his hands on the thing for for a week or two that might be interesting.

[23:07] Yeah I have a hypothesis but I maybe I’ll save it for later in the conversation I do want to unpack a couple things so first of all you do right.
A lot about the engineers mind and it’s kind of a thread throughout like a number of the.
The Deep Dives and I certainly think of Jeff as a,
as an engineer although he’s not a formal engineer but as having an engineer’s mind and so I always wondered why he doesn’t call it Day Zero instead of day one that’s has always bugged me.

[23:40] Well that’s right I mean yeah we got to take points away from besos.

[23:44] All the coders are pissed because day.

[23:45] Believe yeah he is a trained engineer though he just hasn’t worked in it for a while.

[23:50] Fair enough.

[23:51] Education is in engineering yeah.

[23:53] Yeah so.
One of the things that’s been fascinating to me and maybe we have to jump into another part of the Amazon story that you wrote about and hands off the wheel but but hold just a sec on that right like you talked
in the beginning and this to me is like one of the fascinating insights from the book that you know just this whole evolution of,
hey in the industrial revolution it was all about execution and you could add the most value by being good at execution and ideas were like almost.
Not useful and then you know ideas where a small percentage and and you know today we’re in this culture where ideas are the most difficult thing to replicate and we can.
You know frankly execution is easier it’s easier to Outsource and increasingly you can automate it and throw a i at it.
And so.
In the context of the Amazon story you you sort of have the example of a program than Amazon run called ran called hands off the wheel and when I let you explain it and then I’ll pick back up.

[24:56] Yeah and you guys asked up the top like what the most interesting thing I found in the book was and hands off the wheel no doubt was it so I heard some Rumblings that Amazon was automating.
White-collar work and its retail organization and I thought okay well this is something to investigate,
and it turns out that they’ve been running this program called hands off the wheel it was originally called project Yoda by some people and they’re saying basically instead of having Amazon’s retail employees the vendor managers.
You know do things like order products and figure out their pricing and do inventory management and even negotiate with vendors,
we can hand that all off to machine learning based off of all the data that they had.
So they started it around 2012 where they said hey like we have almost two decades of data at our disposal.
Can we figure out the way to do this work that our vendor managers would with technology instead.
And it took a little bit of time but eventually they are predictions got pretty good and so those predictions started to end up in the retail employees software tools were instead of them like typing in,
you know where they wanted to,
you know put certain units of product the a I would suggest it and they could either say yes or override it.

[26:22] And then at a certain point right around 2015-2016 Amazon’s executive said hey these predictions are pretty good,
and instead of giving our employees a chance to override them in the system’s why don’t we let them make the actual calls and then see what happens and allow them to learn,
they can adjust the machine learning tools and so they said essentially take your hands off the wheel.
And they gave them pretty high goals some employees told me as much as eighty percent of all the work that they used to do was now handed off to machines and basically what they would do.
Is audit and just say okay did you get it right and you know are there trends that we that the machines don’t know that we should try to account for like for instance you could have 30 years of historical,
knowledge but not retail knowledge but when something like a fidget spinner becomes hot how do you then,
let the algorithm know that it should start ordering some fidget Spinners because it’s not going to know but on its own it does nothing to work with.
So Youmans actually became more Auditors and doers and eventually their work became much less important inside Amazon.

[27:30] And so typically when you hear stories like this you’re just like oh those people are gone owners like obviously the company fires them but the amazing thing about this story inside Amazon is instead of firing these employees.
Amazon just made you know many of them product managers and program managers basically professional inventors inside the company.
Where they said okay well your jobs automated but we still need you to build new things and it’s this prototypical example of a company using technology to minimize execution work right because like,
you’re buying stuff but you know doing inventory management inside Amazon was basically supporting an existing product that could run on autopilot you know anyway.
And it gave them time to come up with new ideas so it maximized idea work and allowed for reinvention
and that’s sort of been to me one of the main secrets to Amazon success over the years and your listeners will know it’s not the only thing but I think it’s certainly one of the big headlines,
that’s enabled Amazon to stay on top for so long.

[28:29] I know for sure I mean I basically my career is helping people compete with Amazon right and most of the unsuccessfully and I totally agree with the the fundamental premise of your book.
You know clients are always asking me like what what Amazon’s fundamental advantages and they’re like is it you know the massive fulfillment capability they have or the huge product category catalog they have or the,
you know the flywheel and Prime and now you know those are all super valuable things,
but but my firm belief is that their biggest fundamental Advantage is their corporate agility and their ability to just.
Evolve and react faster than other companies and it’s largely because of a lot of the principles that you captured in the book.
Um but what I’m not convinced about I’ll just be honest is the hole.
Repurposing of these employees so I so I had an interesting view to hands off the wheel my many of my clients were the brands that sell on Amazon and they hated hands off the wheel right because.
If you think about it if you’re a consumer packaged good company you sell the Walmart and Target and Amazon and the way you are good at your job is,
you you got those buyers to come to lunch with you and you built personal relationships and you you know you hope that you influence them to buy a little bit more of your product instead of the other guys.

[29:53] And so as Hands on the Wheel started getting implemented those those vendors.
Lost a human to talk to and to smoother than to wine and dine and it became this ridiculous thing like,
haha my competitor lost their Vendor Manager but we’re so big we still have one,
and I always had to break the news to you yeah you have one but they they don’t do anything they just go to lunch with you and then the hands off the wheel algorithm still decides how much of your stuff to buy.
So it’s.
I’m curious Amazon’s famously good at hiring people and they have super high standards they have this whole bar razor program which I’m sure you ran into so so they they used all that to hire the best vendor managers they could hire.
And then they obsoleted that job which was totally to their credit.
Presumably the people that they hired as the best vendor managers are not the best inventors or idea people and so it.
Like I haven’t seen evidence that it’s not working for them obviously but it just like him like in my mind fundamentally it seems like.
Huh hiring a bunch of people is buyers and then turning them into program managers and product managers because you obsoleted their job doesn’t on its face sound like a recipe for Success like it seems like you could hire better program managers.

[31:15] Yeah well let me yeah let me give the counter-argument here right.
I fully agree with you that this experience has been frustrating for first party vendors with Amazon no doubt about it.
But it also happened in a broader context where Amazon was saying okay we’ve we’ve rode the first party Marketplace to a certain point,
for us to be able to expand to the next point we’re going to need to really foreground the third-party Marketplace and our fulfillment and Logistics services,
so it changed the business definitely changed right but this is again the whole idea that you think about when it comes to all these day one is are you going to hang on to your asset.
Milk it for all it’s worth or are you going to build for the future may Microsoft’s a good example Microsoft’s number one asset was Windows for a long time.

[32:04] And it became the number one desktop operating
system company in the world and remained so long after desktop operating systems were an important anymore because mobile operating systems became the most important operating systems in the world
and only after realized to let go of its asset then it sort of was able to reinvent himself as a cloud services provider.
And became what it is today as opposed to what it was just a few years ago,
laughing stock so yeah Amazon did definitely meet transform itself in that way and those Transformations are in Easy they’re painful,
I mean think about how terrible people in the windows division felt inside Microsoft after they were like the kings of the castle for you know their whole lives and then they realized that they were just kind of,
on the outside looking in.

[32:51] And so yeah from a from a first party vendor situation it’s painful and doesn’t doesn’t feel right and might look like Amazon is
blowing its lead but it was also this part of this necessary transformation that happened you know maybe before it needed to but kept Amazon,
you know moving forward in a way that’s helped it.
Maintain its dominance today to Second point of your question I’m going to give a broader answer and then a more specific answer the broader answer is,
I think in today’s economy we have to stop looking at people as like you know folks who do one thing and of course yes specialization is important and it takes time to learn,
to learn you know sector specific skills but on the other hand
all of our economy is becoming more abstract you know you have to be able to be nimble and think about things differently and you know maybe move to a couple of different jobs throughout your career I remember Basil’s was sitting with.
Walt Mossberg at the recode conference or maybe it was all things D at that point and you know.

[34:02] Basis was talking about her work at Amazon you need to be open to change and if you’re not interested in change.
Of course you should find a more stable career.
I mean the joke is that there are no more stable careers like that like one of the things he said is go you know become an insurance adjuster and Walt Mossberg said well they use iPads now and basil said Insurance soon enough they’ll be using machine learning and it’s true,
right now insurance is the field where.

[34:30] The Drone flies over the hurricane area and writes all the adjustments now like a hundred percent.

[34:36] Yeah I know I know I’m you know rambling on a bit but I do really think that so so yes if you are a you know.
Fire that’s that’s the type of career that you want to have you’re going to have some trouble but if you thinking more broadly about being an adult being the person who could succeed in this economy,
it’s not about job functions it’s about skills and thought process which Amazon certainly teaches then you can Thrive okay here’s the more specific example.
Dilip Kumar who was the head of pricing and promotions inside Amazon went on to become bezos’s technical advisor Shadow him for a couple of years.
And by the time that student was up his old you know domain was on its way to getting automated through it was then project Yoda and eventually hands off the wheel.
And so we had an option here could go there and sort of see his job become obsolete or he could try to invent something new and he ended up leading or being one of the members that led the team that built Amazon go which is Amazon’s check out free.
Convenience store and soon-to-be Supermarket I believe that sort of came out of this idea can we eliminate the most annoying part of shopping in real life and that’s checkout,
and and they didn’t I mean you guys I’m sure I’ve been inside of the ghost tours they’re freaking magic and they you feel like you’re stealing every time you go in.

[36:01] And turns out that,
you know that that turned out to be one of the next big moves that Amazon’s making every time you hear Bezos talk about it you hear how it’s the future for the company so I don’t necessarily buy the idea that if you,
do a retail core retail function you can’t be an inventor I think Kumar is a good counter example for that.

[36:23] For sure.

[36:24] And yeah I just think that this is sort of the way that we’re heading and the.

[36:28] No no and that’s fair enough and I’m sure Amazon would would rightly point out and I think Google and others are even more on this way of like a lot of that bar razor is less about job-specific skills and more about,
cognitive ability and problem-solving and things like that that would apply to multiple job so I’m sure a portion of that is totally fair,
um I do there’s one other theme in here that’s kind of fascinating to me like if you think about hands off the wheel and you you kind of described it really well I can’t remember is in your book
we haven’t mentioned it yet but you also wrote a great hbr article specifically about the hands off the wheel component of Amazon,
the first phase of hands out the wheel was tools for the merchant right so you know originally the merchant has black magic and only he can figure out because back then it was always a he,
how many how many widgets to buy from a vendor and put on the website right and so then,
we get this AI algorithm that suggest how many he or she should order.
But it still was ultimately up to the the human and human could override that system and I think you wrote that they discovered that the human overrode the system way too often and So eventually.
They got to the point where it was a hundred percent the the system and they you know ultimately were able to solve for all four most are all edge cases.
Um the in analogy to that also in the Commerce industry do you follow Stitch fix at all.

[37:56] I dabble.

[37:57] Yeah so Stitch fix is you know in a parallel retailer but kind of their part of their magic is personal stylist for every customer that gets to know that customer and make custom recommendations and early on they hired the the,
Intelligence officer from Netflix that had written the Netflix product recommendation engine and invested heavily in a i for Stitch fix and so they have,
you know this this Tier 1 machine learning product recommendation engine that takes all these attributes from the customer and recommends,
fixes or products for them but but Katrina the CEO at Stitch fix hit has been adamant.
The customer wants to deal with a human so we’re never going to just send the recommendations from the algorithm we’re always going to have a stylus that.
Presents those recommendations and has a chance to sort of override or curate those recommendations so and in a way that’s what like that interim version of hands off the wheel felt like to a lot of my my clients right like,
they gave my clients a human being to make my client feel better but in reality the work was being done by the algorithm and I’m curious if you think.
Over time are we all going to learn that the algorithms are better like well will there come a point at Stitch fix when they’d be better off to say,
we have world-class math picking your products instead of you know a moderately paid employee.

[39:26] Right for a high dollar product like that you probably want a blend of both so you want the AI to be so good that the stylist doesn’t have to go back a thousand times to get you something that you like,
because each one of those moments is an opportunity to that you know to lose money for Stitch fix and to annoy the customer,
and so you get the AI really good and then yeah you work in conjunction as a person and the human being becomes this concierge you know on top of the AI That’s using that to end up,
making the recommendation of the client and I do think that model you know this idea that.
That you know everything’s going to be automated and all the humans will go away,
no I’m not I’m not ascribe to that I think we’re still going to have very important job for humans but it might be something that’s more interesting right,
that is something like you know be the stylist or be the concierge from Stitch fix that speaking to you know speaking of the customer,
that sounds like a much more interesting job than like being the person that runs into the back and,
you know keeps getting different things for people to try on and be the person that puts the order in to bring it from the warehouse.

[40:38] Or that re folds the clothes to put them back on the Shelf after they leave.

[40:42] Because if the AI can minimize the amount of times the stylist in the person needs to go back to try to find the right fit then is doing its job perfectly.

[40:49] Freckles that’s a we want to leave some for people to buy the book so that’s good
good overview of the Amazon you also cover Microsoft Facebook and apple what interesting kind of cultural conclusions we’ve got kind of anchor of Amazon now did you draw from
those conversations.

[41:07] Yeah well I think the main thing that I learned was the leaders of these companies operate a little differently.
Then I imagined you know the world-class CEOs operating I mean maybe I came to Silicon Valley with this idea that.
Everyone was going to be Steve Jobs and sort of you know not give a shit about what anyone thinks and sort of stand up on the table in the middle of the campus with the megaphone,
Park a bunch of orders and demand people,
follow their Vision but I think that that would be a misconception because you having spent time with people like Zuckerberg and been in and around the offices of Google and Microsoft and.
You know touched on Amazon of course and apple to some extent like what I found is that these leaders are really terrific at eliciting feedback and it starts with the very first story in the book where I go in.
Sit down with Mark Zuckerberg and typically your,
you know your average conversation with the CEO as a reporter is you know you sit down they lecture you for about 25 minutes and the pr person in the room monitors your facial expressions and,
you know if you look concerned they say thanks for coming we’ll see you again sometime soon and you know if you look at some what engaged they might give you a time for a question or two.
But when I came in to meet Zuckerberg he immediately starts asking for feedback.

[42:25] And I was like what’s going on like this is is this a weird way of trying to sell a song you know what he’s trying to say.
And then I ended up just going and speaking of Facebook employees as we tend to do in this line of work and found that feedback is just built into everything that Facebook does so.
There are posters on the walls in the office you know back when that was a thing that’s a feedback is a gift and.
Once a two-day trainings for employees to learn how to give and receive feedback major meetings ends with a request for it and I think this is important because it means that.

[43:00] When you’re so comfortable sharing ideas with your colleagues are sharing Thoughts with your colleagues.
You’re not going to hold ideas for good products back and I certainly found inside Facebook and elsewhere in the tech Giants that when that sort of behavior is enabled people aren’t shy they actually believe what you say,
and they feel hurt and they’re going to come out and tell you things that you know might save your business one day and it certainly has happened for Facebook a couple of times.

[43:27] What you think about the Facebook go fast and break stuff and they have the of the hacker mindset and all this kind of hacker kind of stuff on all around.

[43:36] Yeah so ice actually spoke to Zuckerberg about this.
He maintains that move fast and break things is not like actually like break Society it was more just like you know push code as fast as you can to the site.
And I mean speed building the speed has always been important for Facebook and why is that important for Facebook I think it’s because social media is the most fickle of all,
product categories product categories in the world.
You know we’ve gone through so many different social media apps with Facebook itself is losing interest with teen users pretty fast and one social media networks are social media platforms start to shrink it’s very difficult for them,
to build back in fact I think Twitter is really the only one that sort of lost users and then,
brought them back and you know I mean who knows what the data says that Donald Trump isn’t necessarily responsible for it but,
you know I don’t think it’s one account I think its new environment around his presidency that certainly helped you know Twitter revive you know so that said like.

[44:41] Facebook needs to invent fast because if it doesn’t do that it’s going to it will really be dead and it has reinvented itself numerous times throughout its history from an online directory to sort of this broadcast platform where you write something on your wall,
and everybody you’ve ever met in your life and their friend see it and now it’s transforming again to a series of smaller more intimate networks with groups and the messaging.
So you know when it comes to like Zuckerberg move fast and break things like you know you might call it the unfortunate you know phrase that sort of you know stuck with Facebook as it has gone and broken stuff in a big way.
But it really captures both sides right they build fast they release products before they’re ready.
And oftentimes when they do that it has negative repercussions on society no do I think that they’re working to fix that I think there’s at least an effort inside Facebook,
I’d like to see it expanded but I don’t think they’re as unconcerned with what happens to society afterwards as they had been in the past.

[45:42] Very cool at that point in your book I so you cover it Amazon you covered those other companies and then the book takes what I’m going to jokingly call a dark turn.
And that’s because you write a chapter about Black Mirror which is a very
dark dark show but the premise about why you bring that up is,
you introduced the hypothesis that science fiction writers are probably better at predicting the future
then corporate employees and I was wondering if you could tell the audience a little bit more about about that hypothesis.

[46:20] Yeah so
definitely so first of all like I’m a big fan of the show Black Mirror obviously have watched it predict lots of different things that happened,
and will probably continue to be prescient in terms of what’s going to happen in our world but look I’m writing this book always day one from like a standpoint of these are work systems that.
I’ve helped the tech Giants in a big way and we ought to know about them and Co-op them so we’re able to be competitive in their world,
and I’m bullish on the systems but the other side of that is that like everyone who goes out and approaches Tech in a way saying this is positive and only positive has been wrong because there’s always downsides to it.
And so what I decided to do was to bring in a science fiction writer and while go Nim who helped start the Arab Spring,
and who now has some reservations about the impact of social media on the world even though he used Facebook largely to help stoke.
The revolution in Egypt and said let’s look at some of the uses of technology in the book and see where they could go wrong and I think just to push it home.

[47:32] Inside Amazon they write these narratives the six pagers that we’ve talked about and that your listeners I’m sure extremely familiar with.
And one Amazon employed ex-employee told me it was like,
it was like writing science fiction when you wrote these things because it was a story of something that’s going to happen that doesn’t exist yet and that’s largely what you do in the tech world is you dream something up that doesn’t exist then you go and build it.
But the thing about the tech industry stories as they always end happily and you have to do that for a reason right you’re in a company you’re tasked with building stuff.
You want to think about the successful case in build towards that but often that makes you blind to the negative.

[48:09] And the amazing thing is once you put a couple science fiction writers actual science fiction writers on the problem people who are used to thinking dark and dark ways,
you’re going to be a thousand times more likely to catch the liabilities in your products,
then you would otherwise and so I found it to be an incredibly useful and interesting exercise at the end of the book when I was done with my reporting to bring these folks in.
And for me you know I’m just like you know an author of a book doing one dinner with these folks so imagine how,
amazing their perspective would be inside a tech company that’s actually actively building the future every day.
And I do believe that we need many more science fiction writers working inside Tech doing exactly this thing like looking for liabilities looking where things could go desperately wrong in the future and then helping these companies look out for the problems before they happen.

[49:06] Well that’s a good jumping-off point so if we if you kind of take what you’ve learned and projected out
maybe it’s three five ten years do you know do you think it’s like 95% probability these dark mirror scenarios come true where you know we’re being surveilled all the time and Alexa devices are recording our every word or do you think that,
there’s at least some probability that that we have a more utopian future.

[49:31] Yeah well we are being surveilled all the time and Alexa devices are recording or every word they’re just I guess deleting them after 10 seconds.
But you know I think that at the end of the day in a capitalist Society.
The tech Giant’s right now are good example that they will push the limit to about the edge but they won’t go over it because they know there’s just going to be a backlash among the customers like.
Ultimately you know if your Amazon’s number one leadership Principle as you guys know customer Obsession right.
And you know you’re obviously obsessed with giving customers a good experience low prices wide selection and fast delivery,
and so like the data that Amazon collects is used in service of that I don’t think Jeff Bezos like sits on his iPad at the end of the night or is like you know there’s one remaining Kindle Fire and.
Decides to you know figure out which Amazon user he’s going to spy on.
Just for kicks in fact now he knows what it’s like to be spied on after his photos were stolen off of his phone,
or off of his his girlfriend’s phone in some way anyway look I think that like we that detect Giants need some form of data collection in order to exist every every company today,
really need some form of data collection to exist I mean I run a newsletter business and I have to collect emails you know that’s Pi I so.

[50:58] So it’s important part of the way our economy works today on the other hand like I don’t I don’t expect.
You know this widespread nefarious use of data to become.
And you know we’re definitely going to need a strong press to watch some of the ways things go wrong like I do have some concerns about.
The way that Amazon handles the data that comes off of their ring doorbells for instance but ultimately like.
These companies are here to serve consumers and,
you know if consumers know that you know there are echoes show is I don’t know if that’s still what it’s called her,
but whatever the Echo Show is spying on them in their bedroom and like Amazon employees are you know watching me sleep,
they’re going to go to Google so ultimately I think that’s the thing that keeps this baby more than anything else.

[51:53] You know coincidentally Amazon had a big product announcement today they launched a bunch of their newest Echo products and they an ring products and they had a lot of new software features and a lot of the software features.
We’re mostly around cleaning up a lot of that privacy stuff so for example.
You The Echoes all have better more powerful chips in them now so they can do more of the speech recognition.
In the devices so they send less actual data over the network than they used to,
but they built in these cool new features like you can say Alexa forget everything I’ve ever said or forget everything I said in the last hour or things like that that.
You know they didn’t used to have and they done full in and encryption on drink so I will give them credit for,
first starting to address some of those and it occurred to me as you were you were talking you know there are a couple of these big tech companies that have hired science fiction writer so I think like.
Ray Kurzweil famously works for Google and I met this guy Peter Schwartz who’s,
I wasn’t familiar with them but he’s a cool futurist that like.

[53:06] Invented a lot of the experiences in Minority Report like including the you know though II scanning in the Gap store and all that stuff and he’s a full-time futurist for Salesforce.
So I think it is your hypothesis may already be true I think they may already be starting to sort of a dad that thought process to there.
Corporate knowledge base.

[53:28] Yeah that’s great I applaud anyone that does that and it’s a two-parter right the first thing that is you hire the science fiction writers are the dark thinkers and the second part is you listen to them.
And so we just got to make sure that these companies if they telling us they’re hiring science fiction writers at their coming through on the second half of that equation as well.

[53:47] Hundred percent and I’m sure we’ll see some where they only do the first half.

[53:52] It’s a nice press release.

[53:53] Yeah and that’s a great point and that’s actually going to be a great place to leave it because it’s happen again we’ve used up all our allotted time,
but Alex we certainly enjoyed chatting with you if listeners have any further questions or comments about the show
we sure would appreciate a comment on our Facebook page or hit us up on Twitter and as always if you enjoyed this episode we’d love it if you jump on iTunes and finally give us that five star review.

[54:20] Alex thanks for joining us if folks want to follow you online what we’re what are your best places that you publish content.

[54:28] Yeah thanks so much this was a great conversation really appreciate the opportunity to be on I would say I would recommend folks go to the big technology podcast it’s big technology podcast you can get it in any
podcast app and I have a different interview up there every week everyone from
you know VC’s to timbre the VC who that sorry the Amazon VP left over its treatment of whistleblowers journalists,
and Founders so the whole crew comes on it’s been super fun so far as we talked about in the beginning so I’d love to see you there and if you’re interested in the book
it’s always day one and you can find it at any Bookseller you could just type it into Google or Bing if that’s what you’re interested or DuckDuckGo if you don’t like being tracked as we talked about in this last segment and you’ll be able to find it and,
yeah I’d love to hear your thoughts.

[55:22] That’s terrific will definitely put a link to the podcast in the show notes and until next time happy commercing.

Sep 18, 2020

EP236 - DNVBs w/ Nate Poulin

Episode 236 is an interview with Nate Poulin aka @digitallynativ about Digitally Native Verticle Brands (DNVBs)..

Upcoming Events

  1. Digital Day North America Jason & Scot Keynote September 23 8:40-9:25am CT
  2. Channel Advisor Connect – Jason & Scot October 7th
  3. Texas A&M Retail Summit Jason October 9th  9:50am CT
  4. ShopTalk Meetup – Jason October 20-22
    Measuring Ecommerce Success Against Fast-Changing Benchmarks.     


Nate Poulin (@digitalnativ) cut his teeth with DNVBs including Bonobos and Outdoor Voices and is currently the Chief Merchant for Monica + Andy. In this episode, we discuss a range of topics around the current state and future of digitally native brands.

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

Episode 236 of the Jason & Scot show was recorded live on Monday, September 14th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 2 36 being recorded on Monday September 14th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason and Scot show listeners
today on the show we are going to do a deep dive into one of our favorite topics in retail and e-commerce Brands going direct to help us navigate through this we have a really exciting guest on the show he goes by digitally native without Annie and we’re going to have to get the story on that so digitally Naik negative
on Twitter and then outside of the twittersphere he goes by Nate Poulin Nate is based out of Austin and he cut his digitally native vertical brand T that Brands such as bonobos outdoor voices and more he’s also the founder of digitally native Consulting Nate welcome to the show.

[1:21] Hey guys thanks for having me excited.

[1:23] We are excited to chat with you Nate and I know you’ve listened to the show we always like to start things off by kind of getting a little bit of background about how you came to the industry so can you tell us how you found yourself in the,
the digitally native Commerce base.

[1:40] Totally so I spent the last 15 years and retailgeek,
I started the early part of my career working for startups and this really sort of predated the proper e-commerce era.
And worked my way through retailers work for FAO Schwarz and Toys R Us and ultimately landed,
about 11 years ago in the brand sphere specifically in apparel so I work for Michael Kors for four years through their IPO and then I was sort of in my late 20s in New York City.

[2:10] Andy and the team had bonobos had been at it since 2007 this was 2009 and I decided to join bonobos
and really take a stab at this sort of whole building brands on the internet phase I felt like that was a future that and I still feel that way,
and so I spent four years of but no of us and also two years at outdoor voices and then most recently a stint at the black tux,
and then between some of those students also consulted with a number of direct consumer and digitally native Brands and really.
Through that whole journey just got exposed to the business the customer centricity,
and you know the opportunity that exists and really quite frankly have just kind of nerd it out,
um on the business and it’s something that I’m passionate about both in terms of what you know my day-to-day is,
but also you know when I click When I close the books each day I’m still thinking about it so crunching on these issues and still very much sort of part of the community so it’s been a big part of the last I would say decade of my life.

[3:13] That’s awesome we’re eager to dive into a bunch of those topics but I have to tell you I feel like we’ve already been duped I feel like you you started your retail career pre-digital and yet you call yourself digitally native.

[3:26] I know it’s it’s a little bit of a misnomer,
and that’s kind of my secret weapon I think that I actually have a pretty rich background in wholesale and Retail and so you know a lot of what I serve published from a Content perspective also folds in some of that perspective but.
You know my true love is is e-commerce and direct-to-consumer for sure.

[3:48] I’m excited to learn you get your start and toys and I’ll try not to derail the whole show talking about Star Wars choices Jason knows that I like to do.

[3:56] Well it’s so funny that you mentioned that Jason because I when I first went to New York City I grew up in Maine originally and I made a trip to New York City and one of the stops this was like sort of a 8th grade trip one of the stops was FAO Schwarz,
and they were they had built an entire floor of Star Wars toys and Lego because it was I think it was around the time of yes was episode 4.
And it was just the coolest thing that I’ve ever seen in my entire life and so I ended up working at FAO because of was my dream job I was like I need to come back here,
you know 10 years later 15 years later and work for this brand and his business so I have I do have sort of a Star Wars origin story there.

[4:37] Very cool awesome and me are you a Star Wars fan or you just just like the display.

[4:42] You know what I’m a fan of the original series.
I sort of to be honest I stopped I think on episode 5 I haven’t seen the most recent ones but I do have a 5 and a half year old son,
and so I feel like we’re going to go back through the entire involve the entire film series and I’m excited about that for him.

[5:03] Awesome yeah we can talk about the right order later in the show Jason just went through this so we have a lot of experience I’ve been Uncle Scott Uncle Star Wars Scott has been trying to help with this whole thing.

[5:16] Yes God has been a big help the only problem is my son now likes got way better than me.

[5:20] All right let’s jump into Brands so.
One of the things I wanted to talk about at the top is Jason and I have present about these topics all the time and we’ve kind of because we do it
we present together most times we kind of use a common vocabulary
that I noticed you and web have kind of a different vocabulary so we were talking about it on Twitter and I honestly forget the Genesis of this but you started this really cool you just kind of started saying well let’s build a little taxonomy so you started this taxonomy project which I have found super helpful and then we a couple other people glommed on and had some interesting insights
talk us through that and what kind of inspired.

[6:06] Yeah I mean I’ve actually sort of been in the on the back burner trying to sort of like,
organizing notes and really create some sort of knowledge base around direct-to-consumer and it really started with the desire of writing a book but then it quickly dismissed that sort of concept just because,
this industry is moving so fast that a book quickly becomes at least in my opinion becomes sort of like an artifact and not a resource.
And so I was looking for ways to kind of like.

[6:35] Build out this you know whatever note or whatnot and I stumbled upon our own research which I think is actually another one of those Twitter Darlings but it’s really just sort of a networks note-taking tool and I started to build out you know kind of my own knowledge base,
and when I pick up on some of these types of conversations whether it be Twitter or sort of back channels or what not.
It’s it’s sort of like drives me to like get to the bottom of how would we actually organize this I built another,
similar sort of exercise but crowdsourced like a library of you know but what would what would your UTC library and look like.
And so each time I go through this I’m gathering information from people who are really much smarter than I am.
And trying to like harmonize it into a way that’s actually meaningful and useful.
Since I’ve been doing this now for about 90 days and you know I I sort of think about the future and how long and the runway for this industry and I just think,
creating that value like incrementally every single day at some point will either be very valuable to me or valuable in general and so that’s sort of the Genesis of that that idea and I’ve also sort of like subscribe.

[7:46] The concept of digitally guard digital gardening and you know building a second brain and so I sort of dubbed this thing that I’m creating d2c brain,
and it’s you know like I said it’s pretty robust it’s wonderful for me because I you know I’m immersed in this every single day and the way in which we can sort of like harmonize this information is nonlinear it’s networked and so I can add
little bits to little parts of this broader network of information each day,
and sort of come back to it and reference it so that’s sort of the Genesis of the project and I think the convention I’m just going to continue to do it and hopefully in the case,
taxonomy of Brands they had some degree of value to someone out there who’s interested in this kind of stuff outside of just myself which I do find it valuable.

[8:34] Yeah I thought it would be helpful to talk through it and I don’t know who wants a tech I’m happy to take a shot at it or Jason if you want to ornate if you want to so well,
anyone want to take a shot at just kind of describing this taxonomy.

[8:50] I don’t have it up on my screen so if you guys have reference to it then I’m happy to let you guys drive.

[8:55] Yeah just you want to or.

[8:58] Sure I’ve memorized it so I’m happy.

[9:01] All right Jason you run out of it.

[9:02] Yeah so the.
It’s a taxonomy or a sort of a hierarchy in the the notion is that the highest level.
Um in the taxonomy is the primary distribution method so do you own your own distribution do you rely on third parties to distribute your product.
Um underneath the own distribution there’s a couple of different models there’s d2c brand so Marky example of that would be like Casper.
There’s private label brands that would be like while bupropion from Walgreens,
and there’s owned Brands which would be you know an exclusive brand that a retailer owns that’s differentiated and not commodity like the private label so that would be like,
cat and Jack are all as well home or something like that.
So you’ve got you own the distribution you’re either a deed to see a private label or a known brand and then under D to see there would be a couple of other potential attributes.
You could be a vertically integrated brand which I think gets you all the way too.

[10:19] You know you you menu design and manufacture your own product that you sell through your own distribution,
but this first version of vertical brand is I’ll call it old school vertical brand so it would be like the gaps and Abercrombie and Fitch has and sort of,

[10:39] Vertical fully integrated Brands the next category would be the indeed unofficial digital native vertical Brands so I,
I think when you wrote the taxonomy use glossy a as a an example I feel like you have to use bonobos since it’s Andy.
The the next category was linear brands,
and this was sort of audience first.
Based Commerce and so I feel like I’ll be totally candid I didn’t completely get this one I think this was a.
An argument from will he was using Barstool Sports as an example in.

[11:27] Yeah I think this one was like sort of the intersection between between media and commerce and that sort of.
Media brands with a Holter ultimately going to become e-commerce Brands and e-commerce Brands would become media Brands over the course of time and so that.
The future sort of looks like that Barstool model where they build like a very light.
Passionate and loyal audience and then they just speak for whatever different ways they can monetize that audience audience over time and one of the certainly one of those ways is to sell them physical products.

[12:00] Cool that toy makes sense and it’s better when you explained it right and then a specific subset of the linear brand would be the celebrity brand and like.

[12:09] Kylie Jenner Cosmetics would come to mind is that example so then if you jump over to the third party distribution you have,
big first big category is your sort of Legacy brand that’s the you know traditional brand that’s manufacturing products that they sell through wholesale that would be like Ralph Lauren,
and you’ve got kind of two distinct versions of that you’ve got a brand that was born wholesale and still is wholesale like,
Coca-Cola for example and then you have brands that were born wholesale and have made a pretty extreme pivot.
2D to see and I feel like the poster child there is Nike but there are others the Under Armour is like significantly moved to D to C VF Brands which is like North Face and vans has moved significantly to do the C so that’s a,
a subset of the.

[13:04] Of the sort of hybrid Legacy Brands and then you have these Marketplace native Brands so these are guys that were,
born assuming they would use a third-party distribution but the primary third-party distribution they had in mind was a Marketplace like Amazon or Ali Baba,
a great example there is an anchor the cables and charging accessory company that’s done so well on Amazon and.
So well in terms of my personal wallet share for some reason I have some weird fetish with anchor cables.

[13:40] And so if I’m remembering right because obviously I don’t have this in front of me as a reference that I think those those that’s the main taxonomy.

[13:51] Yeah so I think they like the impetus behind this front of taxonomy it really explores the tension between distribution obviously like owned and third-party and the relationship with the customer,
so if we think about in the purest sense you’ve got a digitally native vertical brand that’s both producing you know all the way Upstream from a supply chain perspective.
All and then delivering you know through their own Channel all the way down stream to the consumer and in my opinion that’s sort of like that that happiest path for,
you know bro long-term gross margin creation.
Because you own all those sort of like elements and you control the elements of production and distribution and you also own the first party data with your customer.
So I think I think of like the industry as swinging towards this model and the what’s hitting us and then what sort of like.

[14:44] Taking oxygen out of the bubble where out of the room is you know all of the like all of the costs of doing business with respect to e-commerce.
Instead you’ve got you know customer acquisition cost which you guys have talked at length about you’ve got variable cost of fulfillment you’ve got subscription cost of Technology.
And you’ve got this sort of like horde of data that you have to sift through to be able to make good decisions where as you know the Legacy brand model was.
Produced an overseas move it through a facility out two points of distribution and sell it to the customer and we don’t we’re agnostic to who that customer is that we just want them to walk by our store and come in and purchase something.
And so that’s just you know that’s sort of the distance that the industry is traveled.
And I think exploring each one of those sort of like elements underneath the distribution channels.

[15:35] Starts to give us like a more robust you of like how brands are competing and what the options are that exists because these brands are rational and they’re going to find that oxygen they’re going to find the happy path relative to their business.
And so breaking these big pieces down into this this sort of like component parts is so valuable because I think a lot of the.
Serve a lot of the tension that’s drawn in a lot of maybe The Angst around you to see or the forecasting around me to see,
is the conversation is really guided as though these all of these things are one big,
moving object but the reality is there’s a tremendous amount of nuance in each one of these models in each one of these businesses and so to understand them we actually have to get to that level of detail so at least that for me that’s part of that what we’re trying to connect,
tease out when we’re talking about this taxonomy and talking about different ways that Brands can grow.

[16:28] Yeah and it’s helpful to have a common vocabulary because Jason I use own brand a lot and then people like you mean private label and we’re like no it’s a little different in that you know this isn’t the Old Roy dog food we’re talking about here these are
these are Brands and to themselves like like Echo is a Kendall or like owned Brands right so
those are not the same thing as I’m going to knock off some dog food or or you know a can of beans or something like that.

[16:55] Side note for our most advanced Wesner listeners scotches dropped and awesome Legacy Walmart reference right there.
That was Sam Walton’s dog.

[17:04] Yeah yeah well Roy cool and then Chase anything else on the taxonomy.

[17:13] No I again I think it’s super useful to think about the structure and it got kind of crowdsourced and there were some good like dialogue about like you know what.
What’s the order of Precedence like what what is you know what are more important and should be higher on the on the hierarchy and I thought like that was it was a helpful exercise for my own thinking
one thing that did occur to me and I don’t feel like it should change the taxonomy in any way but Justin.
To me an interesting observation this is mostly focused on.
The primary business model that the these various entities would use to make money.
But the I feel like it is true that there are a bunch of.
Um primarily third party distribution companies I’ll pick Legacy brands for a second that are.
Doing d2c right now but probably not for the purpose of.

[18:16] Take governing significant share or making money they’re probably doing it for a test and learn customer intimacy data collection project so I like for example,
PepsiCo has launched a few direct-to-consumer sites for like and Shop
Like I don’t think they’ll ever have meaningful share of the individual bags of Frito-Lay chips on that site they probably launched it as some kind of learning environment and conversely.
I would argue Casper has dabbled in some.
Retail distribution deals but usually not with the intent of wholesaling their product or having a traditional wholesale relationship but you know more as a marketing vehicle for their D to C so it is.

[19:04] Yeah I would totally agree with that and I think when you had reference glossy a versus bonobos that’s sort of where my mind went was even in the early days of bonobos we went offline you know I think in
maybe 2009 so it’s pretty early in the whole d2c Evolution and we went offline with Nordstrom as a partner and that was a really fruitful relationship
but I always in terms of classification of these Brands and I totally agree it’s like really a spectrum that moves but I typically Define these Brands by their dominant sales Channel,
so they’re dominant sales channel is pure play direct consumer even if they have a wholesale distribution business or you know they’re selling through Affiliates or whatever they’re sort of secondary tertiary model is,
I think that that tells us something about the business but doesn’t necessarily mean we have to shift their classification because otherwise there would be a gazillion of these right.

[20:04] Yeah and I like the path to the consumer as the defining Factor because it’s kind of the most interesting part of the discussion right so where you Source your stuff is as you know,
it’s it’s a factor but it’s not as important in my mind as your path of the customer.

[20:22] Totally I totally agree I mean I think it’s that conversation that like level of Sir conversation meeting with the customer.
The way that you service the demand and what the way you service the customers needs is it is it such a big differentiator and I think in doing that well that the best of the DMV BRD to see brands,
have carved out sort of better.
You know path for growth than what we’ve seen traditionally because in doing that and doing that well you get to uphold all of the values of your brand and all the tents of your brand,
as soon as you turn even if you’re a personal you have a personal brand if you start to turn over elements of your personal brand to somebody else,
you’re immediately losing control of that element you know and you can trust someone to do something or or execute something to the highest degree but it’s never really going to quite meet your own standards and I think a lot of ways,
and so and I won’t feel as authentic and that is coming from a first party,
and so I think that’s also something like hitting on that point of the relationship and path to the customer that’s just become so important in this business.

[21:29] Yeah and then as a software guy I noticed I wasn’t involved in this one but you put together a little bit of a tech stack and you called it DT C 3.0 Tech stack so you know what,
what are some of the elements so here we are it’s 2020 and let’s pretend I guess you are starting your own dnvbs
modern marketers going to need in that text act that you think about.

[21:57] Totally it’s become sort of acronym soup.
Still I’m going to try to not step on that too many times but you know really when building a brand you know whether it’s from 0 to 10 or 10 to 20 or Beyond,
I think it’s helpful to like identify and organize around the heart of your business so depending on how you’re going to compete,
or go to market you know you’re going to want to
set the roots of your text a core the core of your Tech stock around a specific Solution that’s going to be you know able to scale for years and years and it’s going to help you out compete
you know the Challengers that are out there and so whether that’s you know typically for young brand that’s either,
an Erp system obviously there’s a platform conversation around Shopify or Bigcommerce or if you’re going to build your own there’s a CRM customer resource.
Management system and there’s these pieces can be oriented in a number of different ways and also have you know
other Tech opportunities to sort of like plug into and so there’s just this almost an unlimited number of configurations that a brand can elect.
In 2020 and I think it’s interesting to dig into these different nuances and it’s interesting to understand.

[23:22] Um how about brand selects their Tech stack says a lot about how they intend on competing and creating value and orienting their value chain,
and so there’s no there’s no right answer and I think it’s another one of those cases that’s just a very nuanced discussion but one that’s changing you know and evolving quickly.

[23:41] Yeah didn’t know bonobos seamlessly weren’t a Magento and I fell over on them is it and I remember that right.

[23:47] That is exactly right so the year before I started I think it was 2010 the bonobos crashed on Black Friday and Cyber Monday and I think that’s a great example,
of you know how far we’ve come
right like bonobos had two distinct offices so have one office in New York and one office in Palo Alto so there’s an entire tech office that was building
proprietary front end technology for bonobos and some other data science projects and then you get an entire organization built around building a retail brand.
And you know those were that’s how we sort of like built a Brandon’s in 2007 through 13 and ultimately.
Bonobos even their solution Beyond Magento was to build on a spree Commerce.
And so in Shopify existed during that timeframe but there was a sort of notion that if you wanted to build an Enterprise scale you know massive brand that ultimately Shopify wasn’t going to be able to scale with those brands,
and of course now we look at that and say that was terrible decision and Consul these Brands a lot of money and a lot of time and resources but that’s,
that’s the distance that we traveled in terms of Technology one thing I will say you know now that we’ve outsourced all of this technology and where there’s all these plug-and-play Solutions but.

[25:07] You’re still spending a lot on technology is their options are great but I think that in the industry there’s they’re sort of like.
We need the fog of War a sort of like meeting all of the best pieces to wear into Tech stack but ultimately Brands would probably be better served you know just focusing again on what they need to do to compete uniquely in the world.

[25:28] Yeah so I want to jump in on a couple questions here but before I do one of the things you call that in the text a queue called a PLM and Scott and I were debating a little bit what you meant by that.

[25:43] For at least in my terms that’s product life cycle management.

[25:47] Okay we were both wrong for the record.

[25:49] Everything that had brand develops and creates a designs he sort of would go into the PLM system in that helps link
your vendors to your sort of like main staff here at Erp and one inspect the conduit of information and capturing all of that creativity and putting it into a system.
I’m curious to know what you guys thought of that.

[26:12] Well Scott assumed you made a typo and meant product information management him because you you have an icon for each thing and it was like three
three t-shirts for the the product life cycle cycle management and I was guessing potentially you meant product listing management so I could pin that could send the cake content to multiple.
Destinations or marketplaces.

[26:36] No that was the sort of like Upstream orientation there and then I did have the product information management system which I didn’t originally but someone brought it up to me so glad that was added for sure.

[26:47] So
It’s funny because you at you you kind of highlighted that hey even though there are a lot of.
More accessible plug-and-play pools in all of these categories today you you know you you go out and acquire and Implement a full stack of these things and,
there’s a lot of complication there frankly are a lot of potential data silos and integration projects and,
and pretty quickly you you rack up pretty high cost of ownership and Technical debt the the,
the in the Enterprise world the debate we used to always have was Best in Class versus pre-integrated sweet right and it feels like that’s still playing out for these relatively young companies.
I mean do you go out and buy the trendy version of each one of these points Solutions and then you have to
hire a technical team to integrate all of them or can you live with the OMS that Shopify gives you or the payment that Shopify gives you or,
you know you know there are some other like pretty heavily integrated Stacks like netsuite or something like that.

[28:00] Totally I think it’s like I mentioned it it’s sort of is
it’s a decision that’s based on where you where you’re at and where you want to go in terms of the scale of the business but I have been seeing more and more that you know Brands can travel a lot further than they used to on a much lighter
Tech stack and a lot of these other elements don’t necessarily need to be integrated in so much further down the line but again it’s it’s such a difficult,
needle to thread because.
Like we just spent a good amount of time talking about how important the path to the customer is and owning that first party data and being able to synthesize it and owning it in really capturing Rich data throughout
you’re the tech stack exist to sort of organize and be a tool to harmonize all of that data and actually operationalize it and you know.
When you start to say well we’re not going to do this or not going to do that it’s a conscious decision that you’re not going to have that functionality and someone,
another brand or another business may have that may have better visibility into what is happening in their business and that’s just you know challenge that brand brands have to live with,
Doesn’t matter who you are you’re operating on a salary cap not a salary cap but like a spend cap a budget and you know you have to make those trade-offs and decisions because money runs out before opportunity does.

[29:21] The others are probably a life cycle here where you kind of have you know you’re born and you’re kind of in that
yeah that infant kind under 5 million run rate and then you know there’s a certain Tech stack and then you get to 10 to 20 and then you have to add some other stuff and then you know hundred 200 400 there’s there’s a lot more.
Part 2 the stack you have to kind of throw in there.

[29:43] Yeah there’s a I think there’s a couple of like critical elements before brand start to like it too heavy weight with technology and what one of those being foundations of data so structured data and making sure you know you have an understanding of how,
your data is coming together and then two is really a lot of these companies are so figuring out how they’re going to build their business and figuring out what channels to play in how they’re you know what products to build etcetera
and you know as that Journey from adolescence and to score like teenager and adult stage happens
you really have to nail down the process of how you operate your business end-to-end and I think.
Too often Brands don’t have those two boxes check before they you know start to like invest in some of this heavier weight technology and I think you guys are probably seen it if you try to stand some of those things up on really shoddy data is just,
it’s not a successful cocktail that you’re building so it’s definitely one where.
The onus should really be on strong foundations before Brands gets you over their heads I would say.

[30:52] Yeah and let me ask the converse so you’ve been at tons of these Brands and and advised a bunch what what’s what do people get wrong is it that
they don’t get attribution they’re not,
they don’t have Rich enough product data is it customer data is it mobile was wrong where do you where do you find people kind of miss the mark as they’re building these brands.

[31:15] I think the biggest you know evolution in the industry and the biggest opportunity has been linking
customer like actual property like order level Transaction what are we actually selling and who are we selling it to you it sounds really simple but
in a lot of ways you know at some of these Brands practice has been has been more Silo than it needs to so a lot of what I’ve sort of like worked on is how do we bridge the gap between marketing creative,
merchandising supply chain operations like how do we bring that group together operate in a way that you know.
Doesn’t levies that this data sort of like operate in silos or accumulate in silos we need to be able to like.
Build the view of the entire customer journey and then and the product that supports it so I think that’s sort of been the biggest you know
opportunity for direct to Consumer Brands is really tightening that link between marketing and operations /

[32:18] Product and I drop on like back in the Michael Kors days when you were in a legacy brand the
to Mark the marketing team in the merchandising team we’re on different floors of the building and you know rarely interacted at sort of anything below a leadership level and so it’s
really that’s a fundamental swing that we’ve seen in the retail business is that you bring those Bridging the Gap between those two functions.

[32:49] That that totally makes sense I wanted to Pivot off of the tech stack a little bit right.
Obviously you’re a good advocate for for sort of digitally native Brands and you’ve worked for a number of them it feels like the,
the public narrative on them has shifted a lot lately like it used to be like oh they’re the future they’re the up-and-comers like this is you know the next wave of everything and more recently if you know you’re starting to hear like.
Yeah you know maybe that trend has kind of petered out like maybe it’s run its course and so I’m I I don’t know like I have on the mixed feelings but like where do you stand do you feel like.
Dnvbs is mostly played out and you know just wasn’t able to achieve scale and and you know was interesting but but not a game-changer or is it still early Innings and there’s a,
a significant chance for dnvbs to change the world.

[33:52] I think we’re still very much in the early innings,
I think the like I mentioned before I think brands are seeking gross margin and seeking oxygen to continue to grow,
and I think there’s from a pure play perspective it’s challenging it’s a challenging environment for digitally native Brands but I do think that,
the shift in consumer Behavior towards e-commerce is is loosening some of that and creating some you know competitive advantages for brands that are that are really communicating digitally as their main platform with customers,
so I think you know and then you also have technology like Shopify and some other elements that are enabling these businesses to start up with a lot less capital and really like reach a certain level of success,
taking less investment so I think we’re still in the early Innings and I also think that there’s going to be continued innovation in the way in which you know Brands reach customers like right now.
We’ve got a couple of very congested channels those being Facebook Instagram.
In terms of like creating that spark and that you know interest in the awareness of a brand and discovery of a product
and I do foresee there’s just by force of like the size of the digital prize I think some of those things are going to become unstuck for a direct to Consumer Brands and then I also think that you know.

[35:20] Branding is going to evolve or is evolving creative is evolving,
and product will continue to elevate and iterate in physical product I mean and innovate,
and I think if we can bring those elements together dnvbs d-des he’s going to have a really great future
um in what I love about it is you know everyone’s trying to move to this mom like not everyone but the large share of brands are at least interested or testing like we talked about earlier
and so there’s there’s definitely smoke there we just have to figure out the right formula bring it together and bring it together in a way that.
Is efficient and allows these Branch to thrive and continue to grow profitably and reach a certain scale.

[36:04] Hmm yeah I could totally see that do you happen to be familiar there’s a construct that Gardner invented called the Gartner hype cycle.

[36:12] I’m not familiar.

[36:13] Yeah so it’s really cool and it’s shocking how many things tend to fit this curve but essentially,
what what Gardner hypothesized by mainly around technology Innovations a long time ago was new stuff is always getting invented.
And when it’s new it almost always gets overhyped and the like the utility of it.
That is Promised wildly exceeds what it could actually deliver.
And so gardeners premise was eventually every new trend or technology reaches what they call.
Peak of inflated expectations so they draw this curve and it has this initial like huge Spike and at the top of it you’re at the peak of inflated expectations.
Part of the reason I like the Gartner hype cycle is because of these funny names so then what happens is.

[37:04] The technology you know it becomes apparent the technology isn’t going to deliver.

[37:09] The those over those inflated expectations and so the technology starts to drop down the slope and they call this downslope the trough of disillusionment.

[37:21] And so you know sent you know so pick anything artificial intelligence right like I would argue it’s probably right at the peak of inflated expectations right now and.
Two years from like there was a time when QR codes were super overhyped and everyone’s talking about them and like they’re going to cure cancer,
so then QR codes fall into the trough of disillusionment hey they didn’t cure cancer people were totally wrong they were overhyped this is lame,
but eventually these products mature and they climb out of the trough of disillusionment into this area that.
Gardner and calls the slope of Enlightenment where they eventually achieve this plateau of productivity where they kind of.
Deliver commensurate value for what they are and so Gardner pick all these different categories and they map all the trends in this category on the on these hype Cycles,
um and when you see some of them like it totally makes sense like you know QR codes got wildly overhype they dropped in the trough of disillusionment guess what’s happening right now
like QR codes are you know reasonably productive for a variety of use cases,
and that was maybe way too much work to explain it but to me dnvbs like are perfectly following the hype cycle as well like.

[38:41] There was.
Peak when they were over-promising and they may be starting to drop into a trough of disillusionment but that by no means means that there’s not a plateau of productivity in their future.

[38:53] Yeah I mean I think that’s totally right I think when we look back at some of the brands that maybe have driven some of the like the collective disillusionment and dnvbs one,
we’re judging a brand that’s still very young right and we look at a Michael Kors I’ll drop him now and again you know they we went through the IPO and 2011.

[39:15] Of course was bankrupt you know in the in the 80s and had this tremendous run of success.
And there’s other stories that are out there right as like businesses and types of business models that have gone through you know,
gross and contraction etcetera and so we’re one we’re judging the business the opportunity that exists in the NAD,
in a very early inning of its development not the terminal point and to you know there’s just a tremendous amount of learning and being on the Leading Edge that has happened over the last,
years or so with respect to you how to you know how to do this you know how to build the railroads and infrastructure and all this kind of stuff to access customers to be able to.
Grow and scale and I think particularly on that end.
On the side of Technology on the side of supply chain on the side of infrastructure we’re still in it on the side of Technology we’re still very very young and those those types of,
you know Innovation with that in terms of,
picks and shovels Etc is really going to drive electric Menace amount of growth and opportunity for digitally native Brands and on a much more efficient scale so I think that’s absolutely right.

[40:31] Yeah this is a good time to make a big announcement Jason because he’s a big believer in in where we are on the hype cycle he is going to release a mattress and it’s going to be the retail retailgeek dnvbs because we don’t have enough dnvbs companies right Jason.

[40:49] Absolutely and what’s going to be unique about this mattress is actually going to fit in a box and I can ship it right to your house.

[40:55] But what if you don’t like it can you return it.

[40:57] You totally can there’s a no-questions-asked 30-second guarantee money-back guarantee.

[41:03] Awesome you’re innovating again.
The I work with a lot of startups and one of the things that comes up a lot is what’s the address bull market of all these Brands going Direct,
and I went through this with cello visor where you know the early days people would say well what’s the addressable Market I was like
retail and then would laugh at me the so then I had to kind of like show well here’s this
magazine called internet retailer and they have the IR 500 then they did the hire 1,000 and there’s a thousand companies and here’s their sales and and you know then we can extrapolate from there this many number of companies Etc
have you ever thought like what is the addressable Market of all these these brands that are coming up.

[41:49] Yeah I mean I think.
I think emarketer put out a survey or study this year that was suggested that direct to Consumer Brands we’re going to do about 18 billion in Revenue now this was released early in the year so my assumption is that that’s going to get
except Blown Away
in terms of the the expectations for the industry this year and then we think about as you mentioned total retail for exclude automotive and we exclude restaurants that’s about 3.8 billion,
and so direct-to-consumer right now as a penetration to retail is less than half a percent percentage point and.

[42:23] Three point eight trillion.

[42:25] Three point eight trillion science thank you for crafting and so when I think about the opportunity.
Over the next ten years I don’t think it’s unreasonable to expect that we get to 10% direct-to-consumer.
And you know I 10% obviously you’re doing for you know 400 billion dollars in Revenue
and I think you know the path to get there is everything that I just mentioned around unlocking the efficiencies at scale,
and I think the only guard rail that I would meaningfully put against the ultimate growth of direct consumer as share of Market is just the the fundamental economics of selling e-commerce when you
include cost of goods sold and you include all of the variable costs of doing business and fulfilling each order you know it gets you squeeze out a lot of the prophet and opportunity,
and so I have started this thesis around you know.
Average order value and how that impacts the viability of pure play e-commerce obviously the higher you go the respect to average order value the more margin you’re creating even if the rate is lower,
and so I think there’s going to be a tension or a ceiling with low aov products
metal that will continue to be dominated by that the Amazons and the Walmarts of the world that really have already built a lot of this efficiency that I’m that I’m talking about that’s really inaccessible for,
each individual brand as we think about that brand growing in some business.

[43:52] Okay yep so.
So how about this thought experiment so so if we were on a whiteboard I draw a big circle that that would be retail and that’s three point eight trillion and then I would draw a circle inside of there and that’s that’s
DTC today and I put it inside because
everything sold at retail is effectively what we’re calling a brand and I should have said this at the top of show we we Loosely used the word brand to being you know a manufacturer of goods sometimes people get confused like in our Twitter conversation someone’s like well where does Macy’s fit in this and we’re like well that’s that’s a retailer not a Brandon
they didn’t kind of get the manufacturer versus retailer kind of differential there maybe hopefully people were falling along with that,
do you agree with that and in that bubble inside is going to get bigger and hit some terminal velocity to your point is that kind of how you think about it.

[44:42] Yeah absolutely and that’s totally right I think there’s it’s easy to get tripped up on that terminology but I think that divided between retailer and marketplaces is accurate,
and I just think you know at some point when you think about the.
Most efficient Avenue for growth for some Brands it’s going to be scaling offline versus continuing to scale online,
and that we’ve already seen that right we’ve seen it with Harry’s going to Target and many many others bonobos going to Nordstrom back in the day and so we’ll continue to see that you know just as
oxygen air gets a little bit thin as you continue to grow
and you find a password that you can find more oxygen and more scale more distribution brands will continue to do that and the question becomes one do we do we still call them direct to Consumer as we talked about but that’s where I see that the ceiling and the cutoff taking place,
but I think if you’re if you’re selling over a certain price point let’s just call it $75,
from a Navy perspective I do think that there’s a lot of Runway
with pure play e-commerce and continuing to scale Brands and it’s good again I do believe just based on where the world is going and where Commerce is going I it should get easier rather than more difficult.
You know but that’s sort of where we’re at where I see things many out over time.

[46:06] That and that makes sense side note on the the emarketer stat you you quoted I’m sensitive to this because I’m way over published on the internet.
That that emarketer report on d2c will always stand out to me because there’s a paragraph in it about what a failure Peloton is.

[46:27] So to say that.

[46:32] That hasn’t aged particularly well,
but I’m curious though to talk about the the complete other end of the brand life cycle for a minute because it’s made the news a lot,
there are a bunch of brands that were story Brands you know had huge consumer adoption made made people a ton of money and in recent times.
Have like lost customer interest gone bankrupt and in most cases been acquired by Simon Malls and I’m curious if you’re following that Trend and if you think there’s.
You know anything interesting like do those brands have a second life with Simon or did Simon reconstitute them and spin them off or is that just you know where where you know former glorious Brands go to die.

[47:19] Totally I I’ve been really like sort of digging in on this particular topic because as you mentioned these are you know these are brands that I grew up with you know part of my sort of Journey and story so just I have like an affinity to these
these brands are very curious as to where their final destination will be and so,
you basically and I don’t have any you know knowledge other than what I’ve gathered so this is really more of my perspective on it as an outsider but.
You’ve got authentic Brands Group which has been working with Simon and most cases and sometimes they’ve been working independently,
to roll up these brands in these properties and as you mentioned a lot of them like Aeropostale Nautica Brooks Brothers Forever 21,
Sports Illustrated these are Brands like Brooks Brothers was founded in 1818,
Sports Illustrated has been around since 1954 so these are brands that are have a richness in terms of you know our culture American culture richness in terms of their history and of origin story,
and I think what we’ve seen in kind of ties in with the direct consumer and digitally native movement is that,
it takes a long time to build a meaningful brand you know it really is a Brick by Brick process of building that brand so you don’t knock all those bricks down in one day you sure the business can suffer and in some cases they can go through a bankruptcy and come out on the other side but.
My view of this is that you know Simon and authentic spring break group are buying these properties for.

[48:49] You know seems to some people as like okay you’re just throwing money away but I look at it as in many cases of tremendous value especially if we can gather enough of them you within sort of our brand portfolio.
And then you know you’ve got them all order the largest bottle opener in the country operating a hundred eight malls and 67 Outlets.
And so you’ve got a distribution Network for all that product and so we just kind of went through the taxonomy of Brands and talked about distribution own versus.
Third party and now this isn’t going to be own cuz obviously there’s you know there’s a there’s a relationship here and there’s rent to be paid Etc.

[49:24] And when you look at it at a very high level across those businesses their cert vertical izing and rolling up all of these Brands and what they’re seeking I think is.
You know if we can move some of these Brands through some of our channels we can collectively you know revive these brands,
we can invest in these Brands we can you know generate more revenue and margin off of these Brands and they’re you know they’re fine with I would say I would guess they’re fine with Transit like the,
actual volume that the breads are going to do lowering because you know again they have that sort of like networked relationship where they’re really focused around.
How do we make these the pieces fit and then you know they’re also acquiring if they bought Sports Illustrated as a mention and so they have the license there and they’ve got a media property to distribute some of these contact some of the content and some of these Brands so I think it’s you know.
There’s a lot of talk about malls and being over retailed and over you know square foot and the United States which I don’t disagree with but I do think you know.
Sometimes the opportunity swimming in the other direction is easier to get to then you know going the direct consumer path so certainly at the scale that they’re trying to do it it seems like there’s a big opportunity there.

[50:42] Yeah I hope that a number of these brands do earn a second another act I mean I think we’re all desperate for Toys R Us to come back.

[50:50] Absolutely.

[50:51] Seems super strong at the moment one fun irony though I feel like if Simon acquiring a bunch of these Brands is you know in all the antitrust talks and hearings one of the things that always comes up is
Amazon is the is playing the game and they’re the referee.
And I feel like it’s going to be funny to see the shocked look on a bunch of senators faces when they find out that the Brooks Brothers suit that they’re wearing is also the referee and playing the game at the mall.

[51:20] Absolutely it’s definitely going to be interesting to see how this sort of plays out and it’s you know as someone who’s just you know passionate.
Follower of the retail industry and someone who’s been in the industry for a while these are the types of things that are just so interesting to me because it’s really unique set of circumstances in one I don’t think we necessarily seen at this scale before and so,
how this plays out I actually think it’s going to have a meaningful you know impact on physical retail and Brands opening stores and malls.
So there’s quite a bit at stake for the American Consumer here and for these Brands and Retail in general.

[51:59] Yeah that that’s the kind of brings me to the end game so that you guys have a mall there Jason remember the name of it it’s almost like DTC mom.

[52:07] In Austin yeah.

[52:10] Remain yeah yeah and so we actually went to a show and walk through there and we did a whole episode just kind of walking through.
And you know that’s a really cool experience you get these really deep brand experiences but then online you know if I kind of think through the endgame here,
it’s a really weird customer experience to do we just go to social media and Google and we search for Brands and find them and then we have.
The Casper experience the bonobos experience or do you think at some point there’s an aggregation of these things online that you know makes them have a better,
Discovery mechanism unified check out and that kind of thing and you know we’re do you see that going down the road.

[52:55] Yeah I think it’s it’s a really good question when I spent a lot of time sort of trying to unpack.
I think the challenge with like a roll-up or a Marketplace of direct to Consumer Brands is we start to mute what makes them great,
in a lot of cases which is you know like the origin story,
the authentic Mission the purpose you know the energy and the creativity of the brand and the product
and so if you start to build a marketplace around that then inherently the marketplace becomes the conversation and not necessarily the uniqueness of the story of a specific brand and so what I would expect.

[53:34] Is an inventory on the flip side of that you’ve got,
certain the strength in numbers conversation in the economies of scale of actually rolling up some of these Brands if you actually did do that on the certainly on the back end of the operation.
And so I would expect we see sort of like,
smaller either holding companies or smaller conglomerations or smaller Acquisitions that you create these little PODS of direct to Consumer and digitally native brands that are anchored,
around an individual around a customer and they’re sort of a niche their preference that,
and I think we’re starting to see some of that already that were brands are starting to,
buddy up or even you know move together partner together cross-pollinate Etc,
around these particular Lifestyles or preferences I just don’t see like,
unless you know I actually was sort of trumpeting that Shopify should do something like this a while ago but that doesn’t seem to be their game I feel like they’re probably the one that could be that become the DTC Mall,
but they haven’t shown their cards yet with respect to any intent to do that.

[54:43] Yeah the Jason what do you think.

[54:46] So you’re saying this shop app is not a turnkey de Simo.

[54:51] No it is very good at telling me when my packages are going to arrive though so I appreciate that.

[54:56] Yeah and the answer this year by the way is your weight,
is when your bases are going to arrive because it covid ya ya know it I mean who knows how it’s all going to end the.
I don’t personally see that being the in-game for Shopify to become that that much I just think it’s Shopify is amazing at a bunch of things and.
I just think building D to see traffic is not something that they’ve.
Done it all or have any endemic advantage in doing and that’s what you would really like that that’s the hardest thing to get to build a deed to see Bray Mall it’s not the the sellers it’s the consumers.

[55:45] Yep.

[55:47] I don’t know.

[55:48] Yeah as a consumer I want a discovery vehicle because I didn’t know about that italic one until I just kind of saw people talking about it on Twitter.
And you know it.
It feels like there’s this huge opportunity to be the discovery engine for people interested in this category and right now people just kind of it’s just Word of Mouth you just really or you know a store or something you don’t it’s really hard to discover these things.

[56:13] Yeah there’s a been at there’s been a couple that have popped up I mean very shop I think is trying to make a move into this sort of space of being like a trusted
you know source for recommendations and then on the characterize it probably unfairly on the more like Consumer Reports
sign of things may be dating myself with that reference but you know you’ve got thing testing
which is really been done a great job of digging into DTC Brands and really doing like unboxing and product reviews and all that kind of stuff so those are those are some of the resources that we’re starting to see
I think it’s just you know it’s still,
the search for breaking up the duopoly or the you know the ownership that Facebook Instagram and Google have over attention and eyeballs you until we get you know meaningful crack in that armor
it’s still going to be really difficult to make.
Direct-to-consumer discoverable outside of those channels and that’s where I think physical retail and that’s where I think you know wholesale and all those other channels
come into play because
there’s still a large portion of individuals like lives you know assuming that we get back to some degree of normalcy where we’re doing things and you know in three dimensions we’re doing things in public we’re doing things socially and you know so I think,
a lot there’s a lot of tension with how we’re going to make direct consumer more discoverable and get in front of more people.

[57:40] Yeah I got to be honest I am sure something is going to come along to disrupt it like I think it’s less likely to look like a.
DDC version of a search engine or a catalog or you know sort of a traditional mall like I you know I don’t think it’s going to
I’m not a big fan of like the neighborhood Goods of the world and the,
those kind of d2c aggregators or Tim Armstrong’s DDX and all those sorts of things
I think it’s going to be something that’s more out-of-the-box right so if I had to bet I have no idea what it’ll be but if I had to BET right now I would be more likely to put money on something like.
Live streaming.
And maybe it’s tick tock that you know probably not Oracle Tick-Tock but but some future iteration of tick-tock that that’s more likely to disrupt Amazon as the sort of.
D2c Discovery vehicle.

[58:34] I will hardly agree there I mean I think if you look at the legacy of QVC and HSN,
these are massive businesses that could drive tremendous amount of you know attention and revenue and and you know I think that’s absolutely a place that’s ripe it’s just yeah,
how do you get enough.
Energy and get enough movement behind it to get onto the platform I think that’s the hardest part is just you know acquiring and building enough of a network effect to make that valuable for consumers.
And for brands.

[59:08] Yeah it’s hard to say and even harder to do so I think you’re right but now I think that’s going to be a great place for us to leave it because it’s happen again we’ve used up all our allotted time
as always if you enjoyed this episode we sure would appreciate that five star review on Amazon.

[59:27] Nate thanks for joining us we really appreciate this is a great conversation we could have gone another hour but I know people need to go to sleep and stuff
if folks want to learn more about your thought leadership you put out there and what not work what are some of the best places for them to find you.

[59:43] Yeah really the only sort of social Channel I have is on Twitter you can follow me at at digitally native with no e on the end and thanks guys I appreciate this has been really fun.

[59:55] Yo I know he just run out of characters.

[59:58] No actually there is a digitally native with an E who has no followers and has never tweeted.
And so I’m patiently waiting for Twitter to clean that out and hopefully be able to take over that territory.

[1:00:13] Jack if you’re listening help us out here.

[1:00:16] You say that like there’s a chance he’s not listening.

[1:00:20] Well you know he’s busy could be in Africa are working on Square tonight or something.

[1:00:25] Yeah when I heard he has a couple gigs so good point really enjoyed the conversation thanks very much for the time Nate and until next time happy Commercing.

Sep 14, 2020

EP235 - Amazon Grocery, Walmart+, Holiday Preview

This episode covers the latest Amazon Grocery news, the launch of Walmart+, and our first look at holiday 2020.

Upcoming Events

  1. CommerceLive – Jason September 15, Noon ET.       
    Panel: Retailer Search Strategies — What’s Working and What’s Worth It?
  2. Publicis Livestream – Jason & Scot –     Thursday, September 17 11:00AM ET
    Covid, Holiday 2020, and 2021
  3. Digital Day North America Jason & Scot Keynote September 23 8:40-9:25am CT
  4. Channel Advisor Connect – Jason & Scot October 7th
  5. Texas A&M Retail Summit Jason October 9th  9:50am CT
  6. ShopTalk Meetup – Jason October 20-22
    Measuring Ecommerce Success Against Fast-Changing Benchmarks.     


  1. Amazon Grocery
  • Amazon Fresh – 40K “Non-Whole Foods” grocery concept. Dash Carts (Scan & Go). Microfullfilment? Woodland Hills open, two more free-standing coming to LA, one freestanding coming to Chicago, and a shop in shop with Kohls in LA.
  • Amazon Go Grocery – 10K store with just-walk-out technology. A second location opens in Redmond. One coming to Washington DC.
  • Wholefoods Digital Only – Darkstore opens in Brooklyn.
  1. JCP acquired from bankruptcy by Simon Property Group (NYSE: SPG) and Brookfield Property Partners.
  1. Walmart+ launch (and drone test)
  1. Holiday Preview

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

Episode 235 of the Jason & Scot show was recorded live on Thursday, September 10th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 235 being recorded on Thursday September 10th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott sure listeners Jason you and I have been at this retail thing long enough to know that once Labor Day it,
it’s it means we focus all our attention and energy into holiday
so because of that we have we’re going to talk about that a little bit on this show but we also have a bunch of news to cover but before we dig into that let’s talk about some events we have coming up.

[1:05] Yeah Scott I feel like you and I are wildly Overexposed over the next two months.

[1:10] Well the Kardashians show was canceled so I think this is our opportunity to really push and fill that slot.

[1:16] Yeah if you like there’s a dearth of content out there and you and I are rising to the occasion.

[1:22] Absolutely we’re here for you America.

[1:24] So with that in mind I am doing six public events in the next two months so the first one is coming up next week is on Tuesday September 15th.
It’s Commerce alive which is a virtual conference that profiteering launched right after we all started getting.
Locked in for covid so this is the third installment and they’ve been super popular so I’m looking forward to.
To doing this one next week I’ll be moderating a panel on retail our search strategies and we’ll be talking about like what what things have worked and what things have changed as a result of the pandemic so that should be interesting and that’s free too,
anyone that wants to attend I’ll put a link in the show notes but then Thursday of next week September 17.
You and I are doing a show together that’s going to be a free LiveStream on LinkedIn that’s hosted by my employer publicist.

[2:22] Yeah do I have to know French for this one.

[2:24] You do not have to know French but you do have to know that you’ll likely have the potential to get me fired.

[2:30] Who.

[2:31] Yeah I don’t know if that’s a plus or a minus for you but you know if you haven’t thought it through I’m probably living with you if I do get fired.

[2:40] If I wear a beret and talk about French fries is that is that enough to get you fired.

[2:45] Freedom fries yeah that would be really.

[2:47] I just see all bonjour a lot all right I’ll try not to do those things I’ll try not to be fired and I can’t have that pressure on me and I you’re a great,
podcast podcast co-host but not sure having you live here as a long-term solution.

[3:06] Yeah I agree with that and I also feel like wow a lot of things could go wrong exposing you to all my colleagues my work colleagues and customers the one thing that I’m pretty confident isn’t going to happen is when they fire me they’re not going to come looking for you to replace me.
So that that’s next Thursday that’s will put a link in there to you guys are all welcome to jump in on that and that’s going to be live streamed on LinkedIn,
and then the following week Wednesday September 23rd you and I are getting the band back together again we are,
doing a keynote together at digital day North America which is a the North American event that retail Global puts on.
And for folks that follow the event Market carefully you basically single-handedly started this event as I understand.

[4:00] No there’s a guy in Australia that started this and I’ve been actually went to Australia and spoke out at once and it’s a lot of fun so it’s going to be.
It’s always good to get outside of the US and see what’s going on in your Commerce and this has got a global feel to it as in the name so
it’s gonna be interesting and a lot of the other speakers are near and dear to my heart in the marketplace world so we’ll be talking a little bit more about marketplaces than we normally do if that’s at all possible.

[4:30] Nice nice I’ll be relying on you for that content I just meant Phil the founder of the show I didn’t mean to imply you were the founder but I feel like he has told the story that you were one of the first.
Excellent pieces of content in that show that really helped him build the audience.

[4:46] Yeah happy to help.

[4:49] And so then I will be reciprocating I should have mentioned this when I when I mention that you could get me fired at publicist,
because on Wednesday October 7th so a month from now,
you and I will be doing a joint keynote at the channel advisor connects show so if you embarrass me badly in front of my co-workers I’ll be able to reciprocate.

[5:14] Yeah yeah so we have mutually assured destruction which I think is the best path forward.

[5:21] But I’m looking forward to that I’ve been going to that event for a number of years and that has always been awesome so sad that we won’t see each other in person and get to eat some barbecue or anything but.
I’m sure it’s going to be a good event and then.
It would be hard to do as good a job without you but then I have a couple more events in October on my own so Texas A&M has a retail degree program and they’re hosting a retail Summit.
On October 8th and 9th so this will be right after the channel advisor event and I’m doing the keynote on the second morning on October 9th.

[5:59] Pro tip what they love there is when you start out and you’ll hook them and you do your horns they love it there.

[6:04] Yeah I have I have several clients that would love that but I don’t think that’s the right mascot for Texas A&M.

[6:13] Give it a shot unless you have ins report back.

[6:15] Next you are you are always looking out for my best interest I super appreciate that,
and then our friends at shoptalk are trying a new format event one of the best parts of shop talk has always been the sort of networking and the the peer interactions,
and so on October 20th through the 22nd shoptalk is going to be hosting this interesting new Meetup format where they sort of match.
Subject matter experts together with practitioners and like have a bunch of conversations in,
on specific topic so I’ll be one of the experts that you can match with so.
Please don’t make me feel like the last girl at the dance like sign up for that free shop talk Meetup thing and pick me.

[7:01] Awesome wow Clayton Clayton request.

[7:06] Yeah I’m begging and so that’s that’s a lot of events that’s a lot of chances to hear you and I and just in the interest of getting full sympathy from her audience like everyone should know that for every one of these public events we do.
Um you and I have a lot of private corporate events as well so so a lot of a lot of content a lot of stuff to talk about in the next two months.

[7:26] Yes we’ll have six you’ll between two of us I guess we’ll have six public events then we’ll have some podcasts in there in the next two months so there’s probably literally,
20 hours of Jason and 15 of meat that you can enjoy over the next two months.

[7:43] Which is about the right ratio.

[7:45] Yes absolutely the any other events.

[7:52] No no that feels like quite quite enough in fact I was going to ask is that the end of the podcast did we just do an event podcast.

[8:00] Well another one I’ll throw on there because it wouldn’t be a Jason Scott show if we didn’t talk a little Star Wars is Mandalorian season 2 is coming out October 30th.
So I think I propose we do a binge podcast sigh milosh with every with all three people that would be into that.
Including your son so that.

[8:24] I was going to say I feel like I’m the second most excited person in my house about this I feel like my 5 year old toddler is like completely signed up for it.

[8:34] Okay well I’ll put it out there and we’ll we’ll see who waves a flag on them.

[8:39] Awesome one follow-up question there it’s not going to be bendable right like they’re they’re Disney’s not going to release them all at once that’s going to be a weekly thing right.

[8:48] I don’t know I think they did that the first time to milk sign ups but they’ve done a bunch of other stuff,
they’ve done I think as come out simultaneously so I don’t know that’s a good question I actually have not seen anyone comment on that.
Well maybe we’ll just binge the first ship is it a binge watch one should probably not well do a talk commentary on the first show.
So some of the big news this week I wanted to get your hot take on is there’s been a lot going on around Amazon and groceries,
one of the more interesting ones was there was this larger format store called Fresh and
yeah if listeners already call one of the cool differential differentiators is the – cart
so there is actually one of these is opened with limited availability and a reporter got in there and had a really interesting report nervous we’re talking about it on Twitter but I wanted your
you’re taking here and then also what else you’re hearing around Amazon grocery.

[9:48] Yeah yeah so I mean covid has been a big Boon to digital grocery in general like that,
depending on how you count there was a three percent of grocery was via e-commerce pretty covid and at the moment it’s tracking at about twelve percent and even Amazon which was obviously the most digital of the Grocer’s.
Pre covid has said that they’re their digital grocery business has tripled since covid so not surprising that there are a lot of,
new Concepts emerging in the in the omni-channel and digital grocery space most of these were in progress already at Amazon but it it’s no coincidence that they’re all getting.
Brought to fruition now so as you mentioned.
The biggest news is a new grocery concept so this is Amazon Fresh So it’s a completely separate concept from Whole Foods the it’s a 35,000 square foot store in.
A suburb of Los Angeles.

[10:50] 35,000 square feet is considerably larger than any of the Amazon branded stores that have opened in the past I go or or four star.
And the price point of the food items is going to be lower than whole food so Whole Foods tends to only carry.
Premium and healthy products that so this Amazon grocery store will carry all the main consumer product so Campbell’s craft Coca-Cola.
Carry stuff at lower prices it will still have the the formerly Whole Foods private label brand 365 so first thing is it’s a.
More affordable grocery concept from Amazon so that alone would be interesting.
It does not have the Go technology so you can’t just load up your cart and walk out but what it has is scanning go so,
the cards have scanners built into them you can scan each item as you put it into the cart and then you don’t have to go to a checkout at the end you can just walk walk right out of the store with all the items that you have scanned,
that’s a more traditional flavor of self-checkout than the fancy go stores.

[12:01] But in Amazon’s case it’s built into the cart which is kind of cool so you don’t have to use your phone there’s there’s a fancier camera built built right into the Amazon Dash car,
as you pointed out to me on Twitter there’s no paper price tags in the store they’re all digital fact tags,
for pricing and product information and live ratings and reviews part of the reason that they’re using digital there’s Amazon changes prices so much and they want to have the same price online that they have in store so they had to use the digital tags.
And so in the aggregate it’s all kind of interesting there’s been some controversy over you know how popular the – cards will be there not huge,
so you you know you they’re not as big as a traditional Kroger car that could carry five or six bags worth of groceries they can only carry like two bags of groceries so.
Some people were sort of surprised at that and the thing that no one has talked about and again we haven’t got a chance to go visit the store ourselves yet.
In looking at the floor plans for this store it looked like the back of the store was reserved for an automated picking system for deliveries so what we would call a micro fulfillment center I’m pretty bullish on these things I think they’re important part of making digital grocery profitable.

[13:14] And so I was curious to see how Amazon would integrate one of these in their first store and nobody is talked about the experience of that yet so I don’t I don’t know if they actually have it or don’t have it,
you certainly can see that products are inventoried on traditional shelves in the store so if they have a micro fulfillment center it means they have cans of soup.
In the Fulfillment center and on the Shelf so they have them into inventory locations which be a little bit surprising so I’ll look forward to.
To getting more first-hand reports from that store.

[13:47] Yeah I think the
dinner the Amazons response on the cart was that this whole store is designed for kind of an urban setting kind of a bodega kind of a thing where you go shopping more frequently and thus you need less bags was kind of their response which was
which is interesting.

[14:05] Yeah and I believe they probably did do some research in January that said for this store in this demographic that that you know the average shop is this big,
um it’s interesting the store is not super adapted to covid right so,
in covid people are shopping less and buying a lot more and buying a lot bigger sizes so that January research that they use to design the store may not be.
The most current so that will be a little interesting,
they have a lot of like Self Service amenities that retailers are mostly moving away from at the moment like salad bars so they went live with a salad bar section and and it’s closed because covid.
You know people were freaking out about the size of the card and oh it’s going to fail because the cards too small you know I think the current might end up being too small but I think that’s an easy thing to fix.
And you know that standard deviation of shop sizes is very large like there will be people that are walking there and buy four items and there will be people that try to buy a hundred and twenty items and will push two carts around.

[15:06] Yeah as a software guy like the cart because it’s got this cool you know it’s good,
either a barcode scanner an image processor or both and then it’s got a scale,
so you know as you’re adding things to the cart in one of these two bags it’s got a little LCD display on there that’s calculating what’s in your literal cart and then you
you can just essentially pay their it looks like in walk out so that’s kind of a clever idea and so I’m intrigued to see what technologies the cart has what it’s loaded with and
you know the pictures we’ve seen show that it has this really big under cart area that’s boxed off so I’m kind of curious what’s inside of there,
that’s a battery it has like a massive battery kind of component to it that seems like overkill for what we can see is in there so
so I’m excited to one day get hands on it and kind of understand more about what’s going on inside there.

[16:00] Yeah and just I mean I don’t we maybe he’s been our too much time on it but scan and goes not a new idea at grocery lots of retailers offer it you can you can go scan and go at Sam’s Club right now but if.
Traditionally use your phone and,
problematic it like the camera isn’t totally optimized for taking pictures of barcodes but also your only likely to look at that phone screen every time you put something in your cart and try to scan it right so,
the cool thing about having the scanning go built into the dash cart is there’s a screen that’s in front of you the whole time and what that lets Amazon do is say,
you’re in the ice cream I’ll I see that you have chocolate fudge and sprinkles in your cart already I can offer you a special promotion for the ice cream I want to sell you or whatever not that anyone needs to promote ice cream but,
but you get the idea they can use that screen to do suggestive selling and make offers and things and and it likely will be much more.
Compelling then it would be to make those same offers on your phone that you’re only going to glance at occasionally so,
the fact that it probably scans better the fact that it can weigh in the fact that it has this marketing screen on it is interesting and then you and I both know.
They haven’t promoted this but it’s collect I guarantee you it’s collecting a heck of a lot of data about how people are shopping and what what they looked at and didn’t buy and all those sorts of things that Amazon will.
Will will monetize at some.

[17:29] The cart path.

[17:30] Exactly so just to kind of close the loop on this Amazon Fresh concept which is super interesting,
this is the first store that opened in La Woodland Hills two more stores in La coming Irvine and North Hollywood so there’s going to be three of these 35,000 square-foot stores in LA.
They also are opening one right now in Chicago in a suburb near me called Schaumburg and that’s going to be a little bigger store that’s a 43k store so that’s,
a good-sized grocery store,
there are get to visit in person you know even though I can’t get on a plane interestingly the original plans for this store called for a dining restaurant inside of the store so.
Restaurants are somewhat problematic in covid it’ll be interesting like if it opens in the next month or two maybe it opens without the restaurant will have to wait and see.

[18:20] So then so the so we’ve got three stores freestanding stores in La one freestanding store in Chicago V store is maybe the most interesting,
another store in La in Laverne Hills California is going to be co-located with a cold store,
so this is a 88,000 square foot cold store and 38,000 of those square feet will be dedicated to an Amazon fresh grocery store.
That basically will be like sharing a wall and a door with Cole’s so this is Cole’s downsizing from an 80,000 square foot store just for coals to a 50,000 square feet for coals,
and having a new Amazon grocery store inside of the coals which.
You know potentially drives a lot more traffic because you you know you might shop at Kohl’s.
You know three to eight times a year but you go grocery shopping 52 times a.

[19:16] Yeah you get some carrots and blue jeans.

[19:18] Exactly so so that will certainly be interesting and then there’s some other grocery stuff going on,
Amazon has had these go stores which are convenience stores or I would even say they’re kind of grab and go restaurants for a number of years now those stores tend to be really small like.
The smallest one I think is like 500 square feet but they’re normally like 1,300 square feet two thousand square feet or 2,300 square feet,
so they they’ve opened a grocery store that does use go so this is a Amazon grocery go,
and it’s in Capitol Hill which is near Amazon’s corporate headquarters it’s a 13,000 square foot store or 10,000 square foot store so it’s the biggest go implementation out there and it’s been open for a while.
They just this week opened a second go grocery store in Redmond which funnily enough is Microsoft’s backyard,
so potentially a bunch of Microsoft employees will now be shopping at this just walk out technology,
13,000 square foot grocery store so these stores are creeping up there still way smaller than the,
Amazon Fresh concept that that doesn’t have go but you know we’re starting to see go in bigger use cases with more skews which is interesting and they have announced.
That they’re going to open a go grocery store in Washington DC as well.

[20:43] So that a second new grocery store concept from from Amazon and then a third concept open last week.
Under the Whole Foods brand they opened a Whole Foods online only store in Brooklyn.
So there’s a whole food store that you can’t go in and Shop you can only order for curbside pickup or home delivery of your Whole Foods if you live in Brooklyn.

[21:09] So this was funny when they made this announcement I saw someone on Twitter that’s like wait a grocery store you can’t go into so Amazon’s opening a website.
Which I thought was pretty funny but at the rest of the world would call this a dark store and so it’ll be interesting to see if that’s a,
a trend that that Whole Foods does more of his well that’s so that’s a lot of grocery stuff happening in Amazon,
and you know their competitors aren’t sitting still either so this is a hot space to watch it’s a hot space to get in if you’re if you’re thinking about your next career in digital Commerce.

[21:44] Yeah I forget who said it but they kind of characterize this all this is Amazon thrashing around Grocery and not really getting traction,
and my point was this is how I am as on invent stuff right you and I both have a Amazon fire phone and you know they they will,
keep trying at something until they get it right I guess the phone they stopped it at V1 they realized that that was that wasn’t going to work but then that’s what became if they hadn’t done that they would have had echo which was essentially the two of the whole idea so.
I feel like Dave,
they’ve put a really big Target on this and there or a bull’s-eye I guess I should say and they’re really focused on figuring out grocery and it’s it must be super strategic because they’re investing a ton here.

[22:30] No I hundred percent agree like wagons interesting that they haven’t won and and super succeeded are ready,
but they’re you know they’re certainly in the fight their competitors are well armed as well so that’s part of why it’s fun like some of these other fights you know when you’ve got.
You know a billion square feet of fulfillment space more than everyone else it’s almost not that interesting of a competition.
You know this groceries kind of a Level Playing Field and so it’s fun to see what like Kroger Walmart and Amazon are all doing to figure it out.

[23:01] Yeah and we’re definitely going to talk a little bit about Walmart but before we go a saw today
that JC P JC Penny finally found a home and the I was watching the stock market perspective Wall Street was not happy because I guess whatever price they sold out
did not result in any shareholders getting anything at all went to debt so what’s your take on that.

[23:26] Yeah so the the eventual buyer there were a lot of rumors there are a lot of silly rumors I thought were stupid that Amazon would buy them for the property.
The buyer ended up being to mall operator Simon Property Group and Brookfield property partners.
So you know the mall operators Bob JCPenney there’s a play we’ve seen several times lately.
You know one of the the vested interest them all operators have is that if these guys liquidate then the malls lose.
A ping tenant,
which would be a bummer but even worse if it’s an anchor tenant like a JC Penney typically is that triggers a lot of code tenancy Clauses and so suddenly there’d be a lot of other retailers in those malls that would be entitled to,
renegotiate or even get out of their leases and the mall operators really don’t want that so they had a,
I’m sure they’d like the economics of buying JCPenney and hope to make it profitable but on top of all that they had this these.
Additional incentives to.
To not let JC Penney fall into liquidation and and so I like what’s been interesting to me is I feel like the internet is lost its mind over this like they’re all talking about how like.
Wait is this you know if the mall operator owns all the retailers is that fair competition in the mall and what is this you know what you know what is this mean for for monopolies and malls and all the you know and it’s it’s a.

[24:53] I’d I mean I don’t think it’s that big a deal.
I don’t you know again we’ve seen this with a bunch of apparel retailers this is the biggest retailer that these guys are.
Are biting off but I it doesn’t feel like a game changer to me I’m grateful that all those employees at JCPenney you know their jobs are safe for at least for a little while.

[25:24] No no it I mean it’s over a billion dollar deal the thing that makes this appeal like.
These are real value Acquisitions for Simon right like so I don’t know if JCPenney pencil that exactly like this but all the other acquisitions.
Simon and and their Partners In this case Brookfield sometimes it’s been authentic brand sometimes it’s been all three of them in the fake case of Forever 21 the price they paid for this retailer was less than the value of the inventory that they acquired.
Right so in a way it’s a no-lose I give you if you know you can liquidate the inventory for the value you paid.
Then everything on top of that gravy the rent you save if you know if you are able to save the retailer and get them back to profitability like those are all gravies but the downside is pretty low if you know you could liquidate the inventory and get your money back.

[26:15] Yeah and then pivoting back to grocery Walmart announced walmart+ what was your take on that.

[26:23] The jury’s out you know people have been talking about this forever Jason Del Rey like broke a story that this was coming along time ago and then every month he had to write how it got delayed,
and so I’m sure he was grateful that it finally went live so there’s a membership program from Walmart Janey White.
Janie said who is our guest on episode 200 who’s the chief customer officer there this is in horror portfolio so she’s done a bunch of interviews about this
and she starts out every interview saying like this is not prime like you don’t need to compare it to a prime we’re not trying to compete with.
But of course anyone that looks at this is instantly going to.

[27:04] Compare it to Prime right and that’s the way all the journalists are talking about it so it’s basically a hundred dollars a year membership 98 dollars a year or 13 bucks a month,
and you get unlimited free deliveries,
you get a couple other benefits you get fuel discounts a bunch of Walmart stores have gas stations in depending on the configuration you get up to five percent off on your gas,
and then they’re activating some unique in-store tools for you that aren’t available to the general shopping public and so the first tool,
that they’re enabling is scan and go in Walmart so what this means is if you’re walmart+ customer,
you can walk in with Walmart fire up the Walmart app on your phone you can scan a couple items and walk out of the store without having to get in line or go through checkout so very similar to what we just talked about with the – cart only you do it on your phone.

[27:56] Interesting fact here,
Walmart piloted this before in Walmart for the general Shopper and then they turned it off and so we don’t know why they turned it off now they’re just making it available to walmart+ users.
This amenity is already mentioned is available in all the Sam’s Club stores to any Sam’s Club member so so three benefits but it’s not,
at the moment the benefits aren’t a heck of a lot different from an earlier sort of shipping program that Walmart had so it feels very incremental and I’m saying the jury is out,
like in the long term.

[28:35] What are the exact delivery benefits you get how many products are available for delivery how fast are they available for delivery like that’s the great unknown with Walmart’s delivery service,
how meaning for the fuel discounts and what you know tools do you get in the Walmart store and have and how valuable are are those to you.
To me it’s neither a game changer at the moment or or Dead on Arrival it is.
The future of retail is you know creating this this sticky recurring revenue and kind of transitioning from being a retailer to a platform so it certainly makes sense to me that Walmart’s trying it,
you know we’ll see how much adoption they get but to me this is mostly about.
Keeping the Walmart customer in protecting the wallet share of the best customers more so than it is Conquest in new customers to.

[29:27] Yeah I’ll through a shout out to the fuel discount we.
So I have an electric cars to this doesn’t apply to me but to my wife and the rest of the family the Wii shop it Harris Teeter which is a Kroger brand and
they have a fuel point system there and you know you can save 32 cents 50 cents a gallon
and can either go to their branded gas or their partner with some BP’s and other stations and there’s there’s this
it actually works really well I mean it’s built you know loyalty kind of a thing there that I was a little surprised about the people love to save money on gas.

[30:04] For sure I would say they disproportionately seek seek deals on gas and it’s not going to surprise anyone Walmart’s a super competitive gas retailer anyway and so this discount like is pretty meaningful to people that want that deal,
as we’re recording the show it’s the first NFL game of the year and Walmart’s running a big ad during the game promoting walmart+ so that’s kind of interesting.

[30:27] I’m keeping you from your your Walmart at.

[30:29] I’m okay I’ve seen it and then the you know small but exciting news is that Walmart is now delivering e-commerce orders via drones and I feel like,
your backyard is their first test Market do I have that right Scott.

[30:46] Yeah they’re in a little city here called Fayetteville I don’t know why they would have chosen that one but yeah and they’re using an Israeli drone
format which is called the fly tracks and it goes six miles and can carry six point six pounds unfortunately that is outside of my range that’s it he’s about 45 minute drive so maybe you miles away from here.
So unfortunately I’m not gonna be able to test that for listeners right now but I’ll have to dream up a trip to Fayetteville to an address where I can receive a drone delivery and see how it works.

[31:21] Yeah well I just remind you a lot of Walmart’s have a McDonald’s in them and 6.6 pounds would be about eight Big Macs so just.

[31:32] Bring my son he likes looks couple big mix.

[31:35] There you go.

[31:37] Cool one of the news items that I was excited to see and I’ll kind of bucket this into a,
eBay CEO starting to have a new impact and just as backstory first of all I’ve been a huge fan of eBay for a long time I’m a big collector and love The Collector origins of eBay,
it’s been a little sad to see the stewardship of eBay and it’s gone sideways you know over the last.
Certainly in the last leadership and then at the end of the last leaders tenure there was a lot of controversy and,
we’ve talked about a little bit on the show some really weird stuff went on there but you know so Jamie is the new CEOs name I would say his last name but I’m going to butcher it so I’ll just call him Jamie,
he was an eBay for eight years kind of early in his career and then left and then went Barnes and Noble and then had a long career at Walmart where he started out in Sam’s worked his way up bleeding Sam’s so you’ve probably met him in that context I would imagine you know.

[32:36] Jamie in a way.

[32:37] Okay there you go I knew you’d know better than I would I always want to say one at the end in that message me.
Then he got promoted from the Sam’s Focus to be CEO for all of e-commerce and then he joined got recruited by eBay to be the new CEO in April of this year,
so we’re just starting to.
You know he’s kind of got his sea legs and starting to make some changes first of all they’ve been running a Content campaign that’s been really good kind of back to the roots kind of thing.
And then one of the things that’s been a little sad to see is some of these niche market places picking off areas of eBay that was there they’re kind of bread and butter one of those was collectible luxury goods like,
Louis Vuitton bags not my personal category but definitely there’s a lot of collectors that love that stuff.
And the real real came out and really kind of among some other players but I think real real is by far the biggest one there now public.

[33:36] Took that category away from eBay and and kind of wrapped it in authenticity and more guarantees and a more high-touch guaranteed model which obviously resonated with the luxury space.
So this week eBay announced an authenticity guarantee program not a lot of details out yet but essentially I kind of took it as a net positive that they’re you know they’re kind of waking up and saying hey,
this was ours to lose we lost it now how are we going to kind of either stop the bleeding and or get back some of this.
Product that has leaked to a competitor at this point so.
So I’m watching eBay closely I think it’s going to take a while but I really like what I’m seeing from from Janie’s Jamie’s tenure so far.

[34:18] Nice nice yeah that’s going to be interesting to watch I feel like the
the transition to digital because of covid is God you know some renewed attention on eBay as well so they you know are probably in a good Scituate good position to launch some new services.

[34:36] And then we wanted to use the last little bit of the show talk a little bit about holiday and what we’re kind of.
What we’re feeling and hearing out there we don’t have any of the formal forecast out yet so those tend to come more towards the Halloween side of things,
correct me if I’m wrong in RF kicks it off and then you have like a comscore Forester and a bunch of others kind of coming out it’s gonna this is gonna be the hardest year to call
so part of it ties into this discussion that we won’t get back into is the shape of the covid recovery right so that’s obviously the overlying kind of factor
but what have you what are your either personal thoughts or what are you hearing about holiday externally.

[35:21] So very frequent conversation amongst my retail clients everyone is on,
I would characterize it as everyone is on pins and needles like there’s there’s a lot of hypothesis has that it could be.
E decent holiday.
There you know there’s some some reasons for optimism’s but there’s also some reasons for concern and it’s less predictable holiday season than,
we’ve ever had in my lifetime so so folks her are really nervous,
and the sort of unofficial beginning of the holiday season is this back to school season that we’re in right now and I can tell you that the early indications from back-to-school are not super encouraging so a lot of the retailers that,
traditionally have a big back-to-school,
have said that things have been a little slow so far I’m not sure that that’s indicative of how people are going to spend for True holiday because there’s a variety of reasons back to school is different than say Christmas,
obviously a lot of schools didn’t open this year apparel is a big chunk of back to school sales and apparel is,
particularly impacted by covid so the back-to-school feedback is a bummer but I don’t think it’s conclusive.

[36:38] What is going to be interesting to me is the normal Cadence of Hollywood of Hollywood of holiday is likely to be disrupted like normally we have this big in person Day on on Black Friday which is.

[36:52] If you don’t care about channels and you just look at total sales we sell the most stuff on Friday and then we sell the most stuff online that following Monday,
and you know we sell twenty percent of the stuff we sell for the whole year over these two months,
but those you know there’s two days or I think you were one of the first people that kind of coin the Cyber five talking about that Thursday through Monday period,
you know that that used to be a huge spike in sales,
and this year I don’t think it’s going to be quite as prominent because a few things have changed number one a bunch of retards have decided to close on Thanksgiving so,
in my you know opinion sort of bravely announced that they would close on Thanksgiving let all their employees stay home with their families and then a bunch of other big retailers immediately followed suit so Target Best Buy,
Dick’s calls all announced they had closed before this year there was kind of an arms race the other way like everyone would announce their opening an hour earlier and they kept you know,
they crept from Friday to Thursday and there they were opening more stores earlier making more employees work over over Thanksgiving,
so this is a nice Trend ordinarily that would mean that Friday sales would be even bigger because you’d be shifting all these Thursday sales to Friday.

[38:15] The traditional sales we have on Friday I don’t think are going to happen this year like normally you have all these doorbusters in your what you’re trying to do is get a bunch of people to stand in line and st. Stampede their way into the store,
as soon as it opens Friday morning this year those stores are only allowed 25% of the occupancy,
that they’ve had in past years and so there’s very little incentive to have crazy deals to get people queued up to have to wait to get in the store all day some of my clients have said like probably don’t need to water the grass if it’s raining,
and so I don’t think we’re going to see these big doorbuster deals I think that’s going to slow down Friday sales,
Home Depot is actually making an ad campaign around it and so they’ve announced black Friday’s canceled and what they mean by that is they’re not having a bunch of sales on that specific day and they’re going to spread their holiday promotions out over two months,
starting in October Target is also starting its promotions in October,
Prime day which is normally a summer holiday is pushed to sometime in October and so that’s probably going to start the holiday promotion season for Amazon,
and so I just feel like the combination of all these things there,
there’s good Arguments for and against how much total spending will have over a holiday but I have a feeling it’s going to be spread out a lot more evenly around this whole two-month period than it is those five days what do you.

[39:36] Yes so I’m on record that we’re having this v-shaped recovery I think it’s going to line up to be,
in the holiday I do think stores will have limited capacity everyone’s already pre announced they’ll close Black Friday.
I think it’s going to push it all online and the retailer is going to try to spread it out but it’s probably not going to work because Human Nature.
And then I think it’s going to coalesce around Cyber Monday because so I think I think.
Yeah the store days of Thanksgiving and Black Friday which have had increased online sales but but pale in comparison to Cyber Monday I think.
I think they’re going to go online and be way way up online but then Cyber Monday is just going to be,
yes huge day because it’s going to effectively replace the Black Friday excitement that we have I think they’re going to hold their promotions for that day they’re really juicy ones and consumers there’s going to be this game of chicken between consumers and retailers,
and the consumers are going to win and and they’re going to try to start early,
you know we’ve even seen I think it was Costco that’s famously already got Christmas out right after Labor Day,
that’s not going to work but I think you know the that Cyber Monday is going to be really really big.

[40:55] So

[40:56] And I think I think we’ll see a lot of sites go down because I don’t think they’re going to be ready for all that to we always do but I think it’s going to be like orders you know I think we’re gonna see like a really big problem there.

[41:06] Yeah I mean one of the things people are legitimately concerned about is the traffic we’re seeing every day right now is very similar to what we normally would see on Cyber Monday so the magic question is if Cyber Monday is.
Incrementally as much larger from the Baseline this year as typical then nobody site has ever prepared for that before and the holiday Readiness prep that people did last February,
to get ready for this is not going to be adequate and so you for sure a bunch of sites would fold.
I don’t know what’s going to happen I think there’s enough uncertainty that you know it would be dangerous to assume that anyone knows but the.
I would argue it was already a trend that a lot of cyber monday sales was shifting earlier in that week why you know as mobile became a thing,
people were shopping online on Thanksgiving their shopping over the weekend and this year when weigh less people are going to get on a plane and be spending Thanksgiving with their extended family,
I think a lot of online shopping is going to start even earlier and with stores not open and people not going for doorbusters,
I just think a lot of the traditional Monday spike is going to get pulled back and prove your point the only thing that would really change that is if.
Retailers are way more promotional on Monday than they are on Friday for example so that’s going to be interesting I mean it is like.

[42:33] There are new products coming out so you know as you well know that the video game platforms have a new format where this year so you’ve got this Sony PS5 and the Microsoft Xbox series X,
um so you know in some ways like that could Goose holiday that iPhone you know is going to get released late and there’s some you know it’s the 5G version so.
You could see way more of a super cycle of those sales which could be interesting,
I will tell you retailers are nervous a lot of the sort of covid subsidy dollars are wearing off you know the doesn’t look like there’s going to be a second stimulus check,
the a lot of unemployment benefits could actually expire for a lot of people in a lot of states and so there’s there’s some,
anxiety over what the consumers status and you know will be for Holiday Inn at the moment while spending is high consumer confidence is not high so,
it’s anybody’s guess what happens in terms of you know how that that confidence impacts holiday spending so it’s,
it’s a very uncertain it’s we’re gonna have to watch it closely and I’m going to be way more interested in the,
the sort of interim data sources we get like when Adobe starts reporting actual sales that they see on websites more so than the than the surveys that like in RF and comscore are going to put out.

[44:03] Yeah and then an upgrade cycle I don’t think you mentioned that that we’re excited about is the iPhone 12 so I’ve been reading on our reports about this,
and I know you’re less excited about the functionality but I’m super excited about it and,
the analyst reports have been reading they’ll do this really interesting analysis of existing installed base and you can look at different traffic and see what who has,
I don’t know what’s the oldest living iPhone I think it’s a for I think there’s still some fours out there.

[44:36] So their analysis is there’s more old iPhones than ever before and use and then we have covid so you know a lot of people are spending more time on their phone,
and then the other one is there’s these carrier Cycles where,
you know if you aren’t on the fancy iPhone upgrade program like you are where you get a new one every year,
you’re on more of a two-year cycle with your your carrier and then they look at that and there’s a big alignment that happens here where you’ve got covid somewhere usage more people probably interested in upgrading their phone,
largest old.
The oldest iPhone base ever and then some alignment of the carrier upgrade cycle and they’re calling it an iPhone 12 supercycle so,
September 15th is the day they’re going to allegedly roll out the phones and then they’ve also announced that or it’s leaked that,
unlike previous years where you could kind of order and get them very quickly due to covid the supply chain did delay when they’re gonna be available so that’s going to push them into the October time frame so a lot of stuff going to be going on around holiday this year.

[45:44] Yeah yeah it’s totally going to be interesting I’ve also heard interesting things about you mentioned the supply chain for Apple all the supply chain issues are going to be interesting to write so there’s one school of thought,
oh man there’s a bunch of inventory that we didn’t get to sell all year there’s a bunch of unsold apparel it’s going to be the mother of all clearance sales TJ Max is gonna have to you know open tents for all the cheap clothes that’s going to be heavily discounted,
but I’ve also heard from a lot of retailers that know the supply chain guys,
reacted super quick and cut off their supply chains to try to protect themselves and so there’s going to be constrained inventory in there there might not you know be enough product to meet demand and a lot of categories and so I like.
Hard to say how all that Nets out.

[46:29] Yeah yeah so then what’s your bottom line is it going to be.
Overall retail down compared to last year flat do you agree e-commerce will be a pretty big surge it’ll be think we’ll that 45% kind of trend that that we’ve been seeing.

[46:47] I do I so I think when you look at the will call it q 4 or the holiday quarter,
the I think that the top line numbers are going to be pretty good like I think overall spending on holiday will be pretty good I’d it’ll shift heavily to digital,
so you’re you know I think you it’s totally reasonable to expect another 45% e-commerce year-over-year growth,
for the whole industry but I think that Top Line number is going to mask the fact that there are just going to be a clear bifurcation of winners and losers and and,
you know I think games and electronics and home is going to do really well I think apparel and department stores,
are really gonna gonna struggle so well you know I I think.
Net net good holiday but that man you know I think they’re going to be some categories where it’s going to be really tough what about you.

[47:48] I’m going to say.
E-commerce accelerates from the 45% so I think we get up to the 60s because a lot of that brick and mortars just got to come online if the stores are going to be closed during the ski days.
Don’t think they’re going to get people in the stores to get excited if they don’t have some promotional stuff and it’s going to back it up to you Cyber Monday so yeah.

[48:17] Totally reasonable guess you are putting a lot of faith in the it guys to keep their systems running to get get 65 percent year-over-year growth but I hope it happens.

[48:25] Yeah thinking this for the cloud.

[48:27] Exactly and Scott that’s going to be a good place to leave it because we’ve used up a lot of time as always we’d sure appreciate it if you’d finally jump over to iTunes and give us that five star review we’ve been begging for.
We’re looking forward to seeing the bunch of you live on all these events coming up this month until next time happy commercing.

Aug 27, 2020

EP234 - Listener Questions Live 

Episode 234 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live.


  • Jason wrote an article in Forbes, "It’s Time For E-Commerce Marketplace Reform", Scot found it controversial!
  • California’s proposed AB 3262, related to product liabilities for marketplaces.
  • Amazon's stance on hybrid sellers (both selling wholesale to Amazon, and direct on the marketplace)
  • SEO in the Covid era
  • What's the next big thing?
  • How are retailers addressing digital impulse?
  • Why do retailers have separate systems for e-commerce and POS?

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

Episode 234 of the Jason & Scot show was recorded live on Thursday, August 27th, 2020. J

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

Aug 25, 2020

EP234 Preview - Listener Question Show Coming Soon

Hi Listeners. We'll be recording a live listener questions podcast on Wednesday August 26th at 7pm PT / 10pm ET.

Send questions in advance to Facebook Or @scotwingo on twitter Zoom details to join the live call: Join from a PC, Mac, iPad, iPhone or Android device: Please click this URL to join. Passcode: 262640

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

Aug 20, 2020

EP233 - Q2 2020 Retail Earnings and News 

US Census Data

Retail Earnings Updates

  • Walmart Comp sales up 9.3% E-commerce up 97%. Transactions down 14%, basket up 27%
  • Target SSS up 10.9%, E-Commerce up 195%. 75% e-commerce fulfilled from stores.
  • Home Depot SSS up 25%, e-commerce up 100% (60% BOPIS)
  • Lowes US Comp sales up 35.1%,  E-commerce up 135% 
  • Kohls – net sales decrease (22.9%)
  • TJX – Net sales came in at $6.67b v $9.78 billion YoY ($214M Loss)

2020 Q2 E-Commerce Scoreboard

  • Target 195% (same day 300%)
  • Etsy 147%
  • Lowes 135%
  • HomeDepot 100%
  • Walmart 97%
  • Shopify 97%
  • E-commerce overall (US census): 44.5%
  • Amazon: 41% overall, 44% US, 3PM grew 53%
  • eBay 26%

Other News

  • Simon (SPARC) buys Brooks Brothers, (Aéropostale, Forever 21, Lucky Brand)
  • JCP suitors – Amazon and Simon
  • Shipping sur-charges

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

Episode 233 of the Jason & Scot show was recorded live on Wednesday, August 19th, 2020.

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


[0:24] Welcome to the Jason and Scott show this is episode 233 being recorded on Wednesday August 20th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host
Scot Wingo.

[0:40] Hey Jason and welcome back Jason Scott show listeners.
Today on the show we’re going to take a break from the summer of Blue Chip guest and we are going to catch you up on the news,
we did have our hot take on Amazon’s results so that was one of the big news items that we covered about three episodes ago now.
And today we had the US Census Bureau they put out their quarterly e-commerce data so that’s exciting and Jason I’m excited to learn from you because this data always is super confusing to me.
And in fact there’s been a lot of,
you know some people have said online that this data proves that we’re not seeing this 10-year acceleration and oh my God the economy is doing terrible or we’re in a V shape so everyone’s kind of.
Able to look at this data and draw wacky conclusions.
Well it’s start with a primer I know you kind of have a really good grasp of this data and I just kind of see it scroll by so.
Primer asan this or a segment I like to call Jason explains the US Census Data so that even Scott can understand it.

[1:48] Oh God I didn’t realize the bar was that high.

[1:51] It is US Census Data for dummies I’ll go ahead and put that out there and I’m the dumb.

[1:56] All right I accept the challenge.
If you can’t understand it for the record the US Census Bureau is probably doing something wrong which could be the case but yeah so to me.
This is a really exciting data set and ever it comes out monthly or much of it comes out monthly and I am always eagerly anticipating it.
But then right after it comes out I’m always disappointed because everyone on Earth quotes it.
And it’s so easy to misunderstand and misquote and people aren’t careful about how they attribute what the reporting that per your point every month you see you like.

[2:33] Two people alleging they’re using the same data and coming up with wildly different conclusions so,
in a nutshell the US Census Bureau does a monthly survey of retailers and they asked those retailers to report their sales and.

[2:52] Legal obligation to comply with a portion of the census and I may have this wrong but I want to say.
They’re legally obligated to report their sales on a quarterly basis to the US Census Bureau and then the US Census Bureau.
Asks them to report a subset of their sales on a monthly basis which is voluntary.
And so basically they use that voluntary data to come out with sort of a monthly hot take and so this is this has higher standard deviation it has a higher likelihood of error.
But this is the freshest data and so it comes out about 15 days after the close of a month you get the July data usually on like August 14th so that’s exactly when we got the monthly data this.
Month and so that product is called the advanced monthly retail trade report and it’s sometimes called Mart’s which is monthly Advanced retail trade report.
Then separately the parse out that quarterly data into monthly data and it’s more accurate but it’s slower so usually the same time they report the advance monthly retail report for say.
July they’ll report the monthly report which is more reliable but the freshest data in it is likely to be June so it’s usually like 45 days behind.

[4:17] People although if you really cared and if you were talking about like years worth of performance you should totally be looking at the monthly report not the advanced monthly report in our industry.
People almost exclusively look at the advanced monthly report because they like that freshness.
And then there’s a third product so both of these products the advanced monthly report in the monthly report,
break the data down into a bunch of segments so you can see just a parallel or just department stores or just Sporting Goods for example,
and one of the segments is called non store sales and the biggest piece of non store sales is e-commerce sales.
But there are other things that are in on store sales if there any catalogers with they would be in on store sales that’s what this category was originally for was for people that did mail catalogs auction houses are still in the non store sales.
And the way that e-commerce is counted in on store sales is kind kind of imperfect so there’s some definite wiggle room when an omni-channel retailer like like Walmart or even more.

[5:31] If Target was perfectly responding to the census survey the e-commerce sales that they collected and fulfilled from the Fulfillment center which is only about 25% of targets e-commerce sales.
Would be non store sales and the sales that they fulfilled from a store which would be a 75% of all of their e-commerce would actually look like retail sales and not e-commerce sales.
And so.
The non-star sales number is a very imperfect surrogate for True what you and I would think of as e-commerce like because we would probably Define it as anybody that paid their money online.

[6:08] So that those are those are these monthly data sets there’s the advanced one and there’s the monthly one,
and then that the data is broken out into a bunch of things there’s the categories,
and the categories are frankly imperfect so for example there’s a category for automotive and automotive parts for a variety of reasons you and I might want to take.
Car Sales out of an out of the number but we probably would prefer not to take car parts sales out of the number but we can’t break those two out in their category so people kind of imperfectly mess around with a categories.
They also have three versions of the data they have unadjusted data which is the raw monthly data they have what they call seasonally adjusted data where they try to normalize the data for the,
the traditional holiday spikes that we have in retailgeek.
And so when they with seasonally adjusted data the number that they give for March isn’t the actual number they got for Marge it’s adjusted by some normalization Factor so that it could be compared with December and that same year
and then there are some people than adjust the numbers for inflation,
so there’s inflation-adjusted numbers so when someone says Hey the US Census Bureau came out with data last month and retail sales were up.
Six percent.

[7:29] There’s a bunch of things you need to know you need to know is that a seasonally adjusted number that’s up six percent is that a adjusted for inflation number that’s up 6%.
Which retail number is it is it.

[7:42] The retail trade Class A lot of the retail definitions include restaurants for example or is it retail without restaurants is it retail without Automotive which is another category that they have
so you need to know when they say retail what they mean you need to know if it has one of these adjustment factors,
and you need to know whether it was the regular monthly data or the advanced monthly data and so for all of that those varieties.
Three people will all you know go to the US Census Bureau on Wednesday morning when the data comes out they’ll pull a different number and they’ll quoted and on Twitter you’ll go huh there’s three.
Different numbers for the same thing and it’s because none of those three people explained all the details behind which number they chose to.

[8:27] Is the monthly Advanced report does that mean Advanced as in more detail or advanced in years.

[8:33] Sooner it’s a pretty it’s a less accurate pre view of the data will have next month.

[8:40] Right and if they ever revealed what in is like how many businesses are they talking to is this like for and in Tuscaloosa or is this.

[8:48] Yes so for the actual census data that businesses are legally obligated to comply with they do disclose exactly how many,
businesses are in that number I don’t know what it is out of the top of my head,
the advanced one is more variable from month to month so they generally don’t do that but what they do if you’re a statistician is they have an uncertainty factor that they,
show you for each number so you can kind of like you can see when the uncertainty factors are high because they have a smaller sample set that month for example.

[9:23] Is it always the same stores or is it very.

[9:26] No it could like so you know a store again could just like the guy responsible for filling out the survey could just miss a month.

[9:35] Does Jeff Bezos fill out the survey for Amazon.

[9:38] Yeah and that’s a so you could imagine and the US Census people are trying really hard to get they worked really hard and this is a super valuable service that they provide say for free we all pay for it through a tax as,
the you can imagine that who feels responsible for filling out this survey.
While the impact how they interpret the questions and respond to them right and even though like some of these are like legal requirements.
You can imagine that people imperfectly respond and if you’re a small business and you imperfectly respond you can imagine that no one’s going to get around to enforcing that right and then so to make the data more accurate they sometimes.
Proactively fill in data when they don’t get data right so if Walmart doesn’t report they might go ask Walmart for the data but if you know Joe’s Star Wars memorabilia doesn’t report they’re obviously not gonna.

[10:35] Proactively go get that so they do their best to make it accurate they have very valid mathematical model that they’re pretty transparent about if you’re into that sort of thing but my big plea is.
Understand what you’re looking at the advanced look the monthly look there’s another called the quarterly that we’ll talk about in a second understand whether it’s seasonally adjusted for inflation sometimes the inflation adjustment they call the real.
Retail sales which is annoying,
and then if it’s you’re going to see it in one of two ways it’s either going to be a percent or it’s going to be dollars if it’s dollars it’s the sales they think that happened that month.
If it’s a percent it’s that’s the percent change and then the next thing you have to know is are they talking about month-over-month change or year-over-year change right so.
We just got the July data in the advanced report.
Is that percent from June to July or is that percent from July 2019 to July 20 20 and side note.
The month-over-month is almost never useful or relevant in retail.

[11:45] Yeah yeah I gotta look at your.

[11:46] So lots of people report month-over-month I could care lest its really hard to accurately seasonally adjust for a single month.
Like you can seasonally adjusted over the course of a year but you could make the numbers really say whatever you want if you start messing around with trying to compare month-over-month and Retail so way more valid number is that.
That year-over-year number and it also someone posted an awesome graphic that I’ll try to put in the show notes this is.
A version of this comes up in covid right now right and so you know people will publish like month-over-month testing to show or month-over-month negatives to show how well we’re doing.
And so someone took a baseball box score and posted it inning over inuk and.

[12:29] One team won the game 10 to nothing but in the inning over inning stats it looked like a tie right because they each had one good inning but the,
the one good ending for the one team was wildly different than for the other team I’m not explaining that very well but anyway all of this data is free it’s all available on the US Census website I’ll put a link to it in the show notes
so you can download it you can read a PDF where they try to analyze it for you and they do a pretty good job,
you can download an Excel file if you want all of these slices you’ll have to download a bunch of files they have an API you can exercise if you want to,
pull the data yourself and they do even have like a pretty good interactive charting tool so you can kind of.
Click the options you want pull a data set and then graph it visually all.

[13:17] On the free website so I’ll put a link to that.
There are other tools you can use to pull the data there is a the st. Louis fed has have this really good website that they call Fred and Fred is an acronym for something,
but they pull a bunch of public data sources one of which is this US Census Bureau
so they have like a free reporting tool that uses that API and it lets you slice and dice the data.
I use a commercial tool called ycharts which is you have to pay for it but it lets you slice and dice the data pretty quickly and easily and then Google has a really advanced,
data visualization tool and they will the data in the Google which is cool,
the one bomber is the Google tool is not real time so if you want to slice and dice it the morning the data comes out.
Like it’s probably going to be a week or two before the data makes it to Google and I don’t know why that is it seems like Google should be able to get real-time data from the API.
So lots of ways to slice and dice the data the data is super useful I promise I’m going to shut up in just a second and talk about what the data is telling us right now which is super fascinating but there’s one other US Census report that people should know about,
so I mentioned that that non-store sales in these monthly products is not a very good surrogate for e-commerce even though a lot of people.
We’ll wrongly just call it an e-commerce number and.

[14:41] It’s a separate category so they’re showing non-store sales is a different category than department stores is a different category from sporting goods and you may say but Jason,
there’s e-commerce sales in sporting goods and department stores and I would say gosh you’re right Scott it would be great if they if they pivoted the data and showed the e-commerce data for each category.
And so the good news is about a year ago the US Census Bureau started trying to do that they said in addition to these two monthly reports.
On a quarterly basis we’re going to try to more accurately report just e-commerce sales without the auctions and these other things in them and we’re going to try to report it on a.

[15:23] E-commerce on a category by category basis and we’re going to try to include,
the sales fulfilled from stores and the sales fulfilled from a fulfillment center so we have imperfect data the law doesn’t require people to report everything we need to report that but we’re going to do our best to
do this experimental quarterly e-commerce report and so we now have received four of those,
quarterly e-commerce reports the most recent one of which came out yesterday,
so it’ll be three months before the next one and so in addition to this monthly data we also get this quarterly e-commerce report and,
you know somewhat annoyingly you can’t compare the monthly non-store sales number to the quarterly e-commerce number because they’re both a different time period and a different measurement methodology of that make sense.

[16:15] So now you know about all the products and you know about some tools you could use to get them right so.
Here’s why I’ve been excited about the data it you know it’s one of our best real-time reads on how covid is affecting,
the retail economy you’ll recall we did a show a couple months ago,
and we had a spirited debate about what shape the recovery would take you were an optimist and said it would be v-shaped and I think I said it would be kind of check mark shaped or swoosh shape,
that would dip very bad and then it would take a more gradual time to recover.

[16:49] Five years I think you said 2030.

[16:50] Yeah yeah I’m not sure I put a Time Horizon on it but I said it would not be symmetric,
to be honest people have been misusing this monthly data to sort of make both cases and so it’s been so I the the monthly data for June the advanced monthly data for July came out late last week,
I pulled it off and tried to do some processing and so by processing what I mean is there are certain categories that we don’t think are.
normally associated with retail so I took automobiles out I took restaurants and bars out which are in a lot of the,
the US Census bureau’s definitions of retail they often call it retail and food service for example and it’s not going to shock you but like.

[17:38] Automobile sales were one of the most impacted by covid at least for a short period of time and restaurants and bars have been the most impacted by covid for a very long period of time so when you look at the numbers with those in.
It looks like covid had a very severe effect on on retail in fact it makes it look like we had the deepest dip we’ve ever had and that it’s lasting a fairly long time because.
We still have a big huge dip in restaurants and bars for example but so when I pull all of that out and I just look at what I’m going to call Core retail so us,
Commerce is definition of retail – Automotive gas,
and restaurants and bars but other but including other food like grocery the numbers are way better than your hearing from a lot of sources and they frankly like.
To me demonstrate pretty clearly that retail has had a very v-shaped recovery.
Which is annoying because it means that you were right but like most people I’m thrilled that you were right since you were the The Optimist.

[18:49] I’m grinning ear-to-ear I’ve got my Cheshire Cat grin on right now if you can’t see me.

[18:53] Yeah but so on this core number which again is adjacent calculated number it doesn’t the u.s. you can’t just download this,
there was only one month where year-over-year sales were negative in April year-over-year sales were down six points,
12% which is the deepest decline since they started recording this so that’s a very deep recession but the month before that,
sales were up,
6.75% and the month after that sales were up 3.1 7% and to put things in perspective the historical average over the last 30 years is that the sales tend to be up between three and a half and four percent every month.
The year-over-year data on average retail grows at about three and a half or 3.75 percent
the month before April the March number was abnormally large number and the main number was back to normal and then June and July have been way above normal they meant eight percent in June and,
eight point six percent in July so we had a historic low but it was only for one month,
and I said well gosh we talked a lot about the 2008 recession what did that look like.
Then Peak was almost exactly the same we were down 6.02 percent so we bear covid barely beat the 2008 recession but for all intensive purposes.
We’ll call them the same depth but in 2008 we were negative for 15 straight months.

[20:20] Covid unless we have a new a new industry emergence we were only down for one month so this is a wildly.
Fast recovery / v-shaped recovery for retail which is.
Generally great news we’re going to talk about that through another lens of all these earning reports in a minute like that being said there are clear winners and losers and there are categories that have been absolutely blitzed.
By this and and haven’t quickly quickly recovered right and so you know people still aren’t buying gas people you know still aren’t going to bars and restaurants department stores are still down 13% like people haven’t they peaked it down 50%
and they’re still at- 13 percent right so there are some clear losers in here but
you know when you roll it all up and you kind of create the synthesized core retail number it’s actually a much better story than what I think you’re generally Hearing in the mainstream sort of retail press.
Does that surprise you Scott or is that.

[21:25] It doesn’t I has got it predicted I’m excited that the data shows what what it kind of felt like from the the cheap seats.

[21:34] So one last thing then so then this quarterly e-commerce number it came out yesterday and the key thing to take away from that is in Q2 so.
April May June of 2020,
e-commerce sales as counted by the US Department of Commerce the US Census Bureau was up 44.4% year-over-year so cue to 2019 of Q2 2020.
44.5% so.
A historically High increase in e-commerce which should shock no one a bunch of stores were closed and out of convenience a bunch of people.
People extra people wanted to flock to e-commerce so it’s not shocking that it’s a huge number.

[22:21] Prior to that we were kind of at a there at like a 12 to 15 kind of like comscore and all those other guys is that is that right.

[22:27] Yeah so close call yeah so generally call it like 15 percent so very healthy quarter for comparison using the same data set at the same time retail was down 3.4% for that quarter.
So that’s where the peak of that dip happened and so you know at a time when retail lost ground e-commerce tripled down.
And based on the u.s. departments definition of retail which does include things like Automobiles and gas.
That the e-commerce sales represented 15.1 percent of all retail so.
Dramatically like I think q1 might have been like 12 percent if memory serves so 15% e-commerce penetration is good but a lot of people quickly look at that 15% and say,
huh I feel like I’ve seen a McKinsey report that said 36 percent of all retail sales were e-commerce during covid-19.
What the heck like why is this number so much you love her and a bunch of contrarians like use this data to say like oh all the people saying that like e-commerce you know got jump-started by 10 years from covid are full of it.
You know fifteen percent is kind of a nothing Burger.

[23:48] And and so again the devil is in the details it’s it all depends on your definition of retail so we just talked about like gases in that number which there’s very little e-commerce sales for gas there’s a little bit,
if you go back to Jason spreadsheet for core retail then about 20 we peaked at about 26 percent of core retail was e-commerce during covid so.

[24:12] More healthy and if you use Foresters definition of retail and their data which is what this this popular Mackenzie chart used.
Forester has the most digitally friendly definition of retail so they include things like.
Pay-per-view video ticket and event sales which I know those are not very much right now but normally they’re you know meaningful number and all the apps purchased from the App Store and you know tickets,
video downloads and apps are a hundred percent e-commerce right so,
when you add three healthy size categories that are a hundred percent e-commerce it’s going to juice that number right so the,
so Jason’s core number of 25 to 26 percent,
using that Forester methodology starts to feel like 31 to 35 percent they’re actually all based on the same data it just matters what your including or excluding from your.
Your definition of retail and I would highly encourage everyone to remember that these are all wildly imperfect numbers with wildly imperfect methodologies for collecting them so they’re interesting from a directional standpoint but I.
I certainly wouldn’t take any of these numbers to the bank which is why in some cases I’m talking about ranges.

[25:28] Cool thanks for a I got in a Twitter battle with someone in that makes sense now.

[25:33] Awesome yeah so we’ll post some of this hopefully that clarifies it a little bit I know it’s kind of hard to follow on a podcast sometimes,
but when you understand that it’s super interesting and so my big takeaway
man retails doing better than we feared and there is like pretty valid evidence that not like not shocking but e-commerce was the huge star that that you know contributed meaningfully to that,
that recovery.

[26:00] Again it’s helpful to kind of so we’ve been talking about earnings and we’re going to cover a bunch here in a minute and it’s kind of.
It’s helpful to have this this Baseline so the you know the way I think about it is the.
The water level is 44.4% and you’re if you’re above that in your taking share of online and if you’re below that then you’re losing share right so,
so it may have felt good to have a 30% growth in your e-commerce business but actually that was not good enough to effectively lost share if you may be in Prior quarters you were losing share but if you were,
you know that felt good coming off maybe 15 but you actually if you weren’t north of 44 you actually lost share which is which is interesting.

[26:42] Yeah and even more nefarious there’s a bunch of small specialty retailers that normally grew their e-commerce by like 10% quarter,
and this quarter they grew it by 30% and so what they reported is we tripled our e-commerce growth we’re killing it.
We went from 10 to 30 percent but prettier point the whole Market went 44 percent so you actually like gate wash are and underperformed the market.
But it doesn’t sound like that when you say you tripled your e-commerce growth.

[27:16] Cool let’s jump into so that’s a good macro review let’s jump into some earnings the two big ones are Walmart and Target and I know those are near and dear to your heart so why don’t you walk us through what they reveal.

[27:28] Yeah I will spoiler alert it it was the greatest quarter in the history of Walmart and Target so it was pretty phenomenal so at what.

[27:39] Turns out when the government shuts down your competitors and keeps you open it’s good.

[27:44] Yeah and when they send a bunch of money at all your customers it’s,
it’s super helpful so sin all your customers a big check scare the bejesus out of everyone that they’re you know that everything’s going to shut down and they’re not going to be able to buy food next month and then close all your competitors,
life can be good and it was so so Revenue at Walmart for the quarter was up 7.6%.
Way more importantly so that’s like sort of comp sales was up 7.6% normally you know Walmart’s been performing really well and it’s like 4% or something so so 7.6 is a big number,
super interestingly and importantly gross profit was meaningfully up at both so sort of gross profit hit like about 25% for Walmart which was.
Like a 63 basis points so that’s like it’s hard to move the profitability number and we’ll talk more about that in a minute,
in the u.s. comp sales which is Walmart’s most robust Market come sales were up 9.3% and e-commerce was up 97% so per our test before,
the market was up 50 porpoise 4% Walmart’s e-commerce was up 97% and Walmart’s been outperforming the market for.

[29:02] I think now like 9 or 10 consecutive quarters and this is obviously by far the biggest number.
So so that’s a monster quarter across the board in that profitability is particularly important because.

[29:15] Historically and it was certainly too in q1 of this year a bunch of sales transition from the stores to e-commerce
and the story on e-commerce was that it was wildly less profitable than stores and so the gross profit goes down when the mix shifts to e-commerce,
and gross profit also goes down when the myth shifts to these essential food items that people tended to by the beginning of covid so in cute,
to for-profit to go up at the same time the e-commerce went up so much is really indicative of Walmart and others.
Being able to operationalize their e-commerce scale and get profitable thing in e-commerce which is something a lot of people speculated they would never be able to do and they kind of demonstrated it,
this quarter now part of that is.

[30:07] Fewer people bought stuff there were less transactions transactions at Walmart in-store and online were down 14 percent.
But basket size was up 27% and so what’s going on there is,
when every visit to the store feels like a health risk and could potentially get you sick you want to make as few visits as possible so you consolidate trips you go less often and you buy more stuff.

[30:32] And that behavior contributed to all these good results but it also significantly contributed to the profitability if that becomes a permanent Behavior,
that’s a very favorable trend for Walmart the,
Debbie Downer on Walmart stock after like just reporting and all these were way wildly above expectations the analyst totally missed how good a quarter retail was going to have by the way,
so so huge beat huge his numbers of all time at Walmart it’s all green lights except,
the Walmart get you know is giving no guidance for the future and they’re saying like we’re really concerned about the near future we don’t know what’s going to happen we’re particularly concerned about Q4,
and we feel like a lot of our results were the beneficiary of a lot of government subsidies that have now ended and it’s not clear whether they’re going.
To resume or not and so they’re the kind of story here is retail had a v-shaped recovery but Walmart and other retailers are very worried that the consumer has not had a v-shaped recovery,
and that could impact Walmart in the form of a very soft holiday and we’re already in the,
the very first throws of holiday in this back-to-school period in the early indications are that people are being conservative and not spending and and Walmart talked about the fact that.

[31:52] You know when parents aren’t sure if their kids are going back to school in person or not they were much more conservative with their spending so that’s the one Debbie Downer and all this is the sort of concern for the future.

[32:03] Did they opine on back to school or even start reading the tea leaves on holiday.

[32:07] They did so they like said that it’s been a very unusual back to school and that that spending has been slower for back-to-school and they explicitly said that they’re worried about holiday.
And they mostly like just joked that they don’t know and can’t predict like an analyst ask them a question,
and Doug mcmillon answered like we’re laughing because we’re looking at each other and we were hoping you could tell us what’s going to happen and Q4 because we have no idea.
So the you know they’re not giving guidance they don’t know but they are worried that they’d been the beneficiary of a bunch of you know consumers that were artificially bolstered by federal programs,
and that that gravy train is potentially not going to continue and so their word what that could mean in terms of tightening of belts of their core consumer and the story Target was pretty similar also,
their best quarter ever their Q2 comps were up 24.3% same-store sales were up 10.9%,
and their e-commerce crushed it even more e-commerce was up a hundred and ninety-five percent and one thing I always like to remind people about with targets e-commerce and this was more acutely true this time.

[33:21] The overwhelming majority of all Targets e-commerce orders get fulfilled from their stores so they do ship from stores they have a system to ship products from every store,
they do a lot of curbside pickup via they’re shipped acquisition and they do a lot of home delivery from the stores which is all e-commerce,
via ship and so this quarter they said hey 75% of all our e-commerce was fulfilled from the stores,
and so just a thing to think about this wildly different between Walmart and Target,
Walmart is trying to be an everything store in so you know 40 million items mostly ship from fulfillment centers and from their Marketplace Partners which is increasingly important part of their business,
Target is mostly trying to sell the stuff that they have on the shelves in the store and so they’re very different approaches.

[34:08] The target approach helps profitability a lot Target was a classic example of they had great sales in q1 but poor profitability and so in Q2
again their profitability was way up,
thirty percent for the quarter year over year and there what was particularly fast runner was same day services so ordering stuff online and either picking it up that day or having it delivered that day,
so same day services at Target were up two hundred and seventy three percent,
which debunks a lot of people that are like customers don’t really want stuff that fast and then one other Jewel that came out of targets earnings was that,
a new brand that we’ve talked about a store brand and I frequently talk about Target being one of the best product brand builders in all of retailgeek,
they wants a new food brand in September of 2019 called good and gather and they announced that the last quarter it that brand surpassed a billion dollars in sales.

[35:05] So that’s phenomenal to be able to launch a new brand and sell a billion dollars in the in the first nine months and I pointed out on Twitter and maybe even started a little Twitter feud.
That you know no cpg or D2 C has been able to duplicate that kind of success in that.
Spurred all kinds of good dialogue and a couple of sort of personal attacks but it is what it is.

[35:27] Yell at people get really hung up on definitions around these thinks it’s kind of funny.

[35:33] Yeah yeah I mean that like any of these models can be successful in their examples of success at all of them they can also fail like.
People look you know looked at my good and gather number and they’re like oh well yeah it’s easy for a retailer like they have all this traffic and all this audience built right in and I’m like yeah but you don’t say that when they’re that the store brand of shoes way underperforms Nike or when,
the Best Buy brand of cables doesn’t sell as well as Monster Cables or you know stuff like,
Brands beat store brands all the time so it’s not a given that a store can launch a brand,
and frankly there’s a bunch of stores out there that are desperately trying to launch Brands and not having any success so I feel like you got to give your props to Target that’s that has a very consistent track record of doing it really well.

[36:18] Yeah and then you know the thing I know you hit on this but I just want to put a kind of fine point on this is,
so these guys so so the brick-and-mortar guys that have online that had this weird thing whereas as e-commerce has increased its hurt their profitability.
We didn’t see that this time do you have a theory on why that is.

[36:39] Yeah it’s so it’s a combination the the I think there is proof in these numbers that they are able to leverage volume to be more efficient so when they get more orders as these numbers grow,
they are being able to be more efficient which improves profitability they also the the.
The shift the reduction in transition in the increase in basket size is very favorable to eat to profitability right so you put,
you know you ship fewer boxes and put more stuff in each box and e-commerce that’s cheaper like you you pick more items per order and and have fewer you know separate picking sessions.
That’s cheaper and then particularly in the case of Target when you’re mostly fulfilling this stuff same day.

[37:28] That’s actually cheaper a Target charges money for that so they make money on it,
but then be there they’re not paying shipping costs on all this stuff and they’re not paying separate Warehouse cost sent like these are all like items that are sitting on the target shelf and they’re selling the someone the e-commerce but they’re fulfilling it
you know much like they would in the store so a combination of all those things I think are helping profitability but my big takeaway from those two retailers is,
that there is a future where a very significant portion of their sales are digital and they are able to be profitable there and I actually think that’s bad news,
for a bunch of slightly smaller retailers that have not proven they can be able to be profitable because if these guys give a few big players get over the hump and get profitable in the rest of the industry doesn’t,
it’s just another differentiator that causes the the rich to get richer and sort of opens up a bigger gap on the competition.

[38:25] Yet it could also.
Yesterday you can see these guys going to investors and saying hey we’ve proven we can get this profitable now we’re going to go through a an investment phase
and really start to kind of shoot it Amazon they’re so far away they would never get there but you know you could see this emboldening kind of Target and Walmart specifically.
To really kind of double down on this and kind of know the model now and take a much bigger swing it catching up with Amazon it’ll be interesting to see if that’s kind of a 2021 theme that we see.

[38:57] For sure and one area where it’s totally clear that’s going to happen is grocery because that is a place where they can catch Amazon right like Amazon’s arguably already behind Walmart and grocery Target,
has aspirations and grocery but hasn’t been super strong but that’s an area where like for sure you’ll see them invest because that that is a white space that you know Amazon still struggling to win as well.

[39:19] Did you sew so previously you had kind of suggested that Walmart was kind of making a lot of their bombers numbers by rolling out grocery and more places specifically the curbside pickup,
is there any breakdown you’ve seen of was that.

[39:35] They did and it was unhelpful because it was all so awesome so so historically like a lot of e-commerce growth has come from grocery
it appears this quarter like the e-commerce gross growth was was distributed much broader across all categories so grocery was up and you know up significantly
but general merchandise was also up more significantly and so the the mix had shifted to a more
profitable broader basket of,
e-commerce sales and even apparel which is like the big dog and all of this like and by dog I mean the worst-performing category even apparel was up at Walmart and Target which was not the case in q1.

[40:20] It’s all of us that have gained our covid-19 pounds needing some sweatpants.

[40:24] Exactly you need sweatpants either way but yeah for sure like a few people are writing the Peloton everyday and need a smaller sweatpants and a bunch of people are enjoying more cheesecake and need bigger sweatpants.

[40:36] Yeah and curbside groceries boom put that cheesecake right in my trunk.

[40:41] Yeah so another category of retail that seems like they’re doing really well and covid is the Home Improvement guys.

[40:48] Yeah yeah let’s so Home Depot also announced their revenue total revenue was up 23% same store sales 25%.
And not to be outdone their e-commerce was up a hundred percent and they announced 60 percent buy online pick up in store,
so these guys have really gotten some religion around this and and you know you’re seeing really material but this numbers which is interesting.
All solos and another macro trend is one of the guests we’ve had on the show calls it hooning were since we’ve all been in our homes here for so long due to covid-19.
A lot of people are kind of looking around and saying you know it’s time for me to patch that hole in my wall that I had there for six months in my office and I wasn’t spending time in my office and I’m actually looking at a hole that needs to be patched.
So I think that’s part of this cyclical thing in addition to covid is for our because they’re spending so much time at home they’re investing in Home Improvement.
So not impaired loans also came out Lowe’s Home Improvement and their their sales were up 35 percent overall and their e-commerce was a hundred thirty five percent.
So just some amazing numbers coming out of those retailers as well.

[42:02] Yeah yeah good time to be in those categories and they tend to be both pissed because a lot of their products are harder to ship and so again like Target they tend to mostly sell the store inventory.

[42:11] Yeah that is a feast or famine so that was the feast and what was over on the famine side.

[42:18] So I mentioned apparel right so that’s been the tough category,
Cole’s this is interesting right Cole’s had a net sales decrease now they were there non-essential and they were forced to close for for portion of the quarter.
So their net sales were down almost 23% 22.9% which was actually better than the analysts estimated right so the analysts were expecting really gloomy Corridor and.
Cause cause we lost money but they was less than analysts were expecting
and then they came out and said but we’re not even going to tell you what our same-store sales are was because it’s so messed up from covid and all these store closings which that was a big red flag to analysts and their their stock
really took a dive and then next to them was TJ Maxx reporting and TJ Maxx is interesting because while all of apparel is struggling.
TJ Maxx is one of the retailers that you generally talked about as being better situated because they’re so value-oriented they,
you know in theory of consumers are more concerned about the economy and they’re spending less than you know more of their wallet should go to TJ Maxx and in the past they’ve been more resilient to dips in the apparel Market than other retailers.
They came in at 6.67 billion for the quarter versus like almost 10 billion last quarter so they they lost two hundred million dollars on the quarter and.

[43:46] A couple of interesting things there they said by the way same-store sales are going to drop 10 to 20% next quarter,
and one of the things we’ve seen is briefly when the store is reopened we had a big spike and people a bunch of pundits were talking about this that that you know
as soon as T.J.Maxx open they filled back up so you know all this is coming back quickly for example and you know I think you shared some viral pictures of it
full TJ Maxx they kind of said that like we’ve really seen our traffic Wayne after you know a sorts a short surge after they open and so.
I think if the strong apparel retailers are issuing warnings like that and having performance like that it really bodes poorly,
for the entire apparel category in the fact that,
Target and Walmart we’re kind of up and apparel people are consolidating trips like being a specialty apparel retailer just really sucks right now and the worst thing in the world is to be a specialty apparel retailer in a mall.

[44:45] Yeah the one exception that was Lululemon I don’t have their quarterly numbers handy but you know I think people are kind of like if I’m going to be stuck at home I might as well get me some yoga pants so I know you.

[44:54] They also just happen to have some weird gravity-defying magic juice.
Um which yeah more props to them I don’t I don’t remember their numbers off hand but they’re yeah they’re total outlier and you know I had to go to a mall last weekend and get my phone fixed my iPhone I unfortunately drop,
and yeah most of the stores are closed stores there were clothes had no one in them and then there’s a line of 20 people waiting to get into the Lululemon and the Apple Store.

[45:21] Are Apple stores aren’t even open set.

[45:22] Ah yeah that would have been a bummer with my broken phone.

[45:26] Yeah he would have had a week cook well this is a so now we’re kind of at this part in the quarterly reporting where we can put together a sort of a leaderboard,
so let me start at the bottom here so
eBay had a really good showing at 26% prior to that they were they were significantly below e-commerce so e-commerce was at 15% preak Ovid and eBay was kind of one or two points on their GMB growth.
I’m so here now again we have this this Watermark of 44 and a half percent so eBay didn’t quite get there but definitely you know surprised a lot of folks with how well they did.
And then if we take Amazon I would say Amazon was in line so Amazon grew 41 percent overall but chapter remember a good forty to fifty percent of their business is international if we just look at the u.s. it was 44 percent which.

[46:17] To me gives Credence to the US Census number if Amazon was way out of bounds with that because they are such a large part of prestige of e-commerce,
it would make you can’t scratch your head and go what was that and then inside of Amazon the third party which I care the most about group 53 percent so,
a little bit faster than e-commerce.
The walking up that that tree the next one is a big step up so now we have 44 and a half which is kind of the where the tide is.
And then effectively double their rate you have Shopify and Walmart tied at 97% e-commerce growth.
And then just above that Home Depot at a hundred percent and then we get into the rarefied air so we now have lows at a hundred and thirty-five percent.

[47:04] So we’re fat of if we’re at a base of 44 and they did 135 that’s a easily a 3X,
and then A step above that is Etsy at 147 and Etsy had this huge win because they have all these makers that make masks so,
when masks became mandatory everyone was tired of wearing the boring you know pale blue surgical mask and a lot of people want to statement on their masks or have a themed mask or a branded mask,
Star Wars yes or whatnot that really benefitted Etsy so they were up a hundred and forty seven percent,
and then at the very tippy top of this leaderboard we have Target at a hundred ninety-five percent overall e-commerce but then if we if we kind of peel out the same day at three hundred percent and I’m sure that’s from a small base but still,
it’s really interesting to see how all these things compare.

[47:56] Yeah it’s amazing I mean this you know I I think all of this
illustrates that yeah we have had a huge shift to e-commerce I think I think it’s kind of undeniable when you look at these numbers in totality.
It’ll be interesting to see how much of it sticks like what revert as people go back to their old habits if they ever do or or are they you know permanently more digital shoppers.

[48:20] One of the things and this my information on this is three or four years old one of the things I would always hear it retailers is that the store people would always say,
yeah e-commerce is strategic and important but it’s really only like three stores and we’ve got 3000 you know it’s always compared,
you know it’s always a small percent of their overall business do you think this will change that or has have people already kind of gotten over the hump on them.

[48:43] Oh no I think it totally has I’ve talked to a bunch of like,
head digital people at retails and they all tell the same funny story that like when they were recruited for their job they were told how important digital was to to the retailer and,
how Central and strategic it was and you’re going to be on the CEOs of leadership team and and like the joke was that was the last day you saw the CEO was in the recruiting trip right like you took the job you went there and then per your point you found out.
That everybody’s focused on their Core Business and they all looked at e-commerce as the redheaded stepchild and since covid has happened,
the CEO has been sitting in all of their offices right like they’re suddenly invited all the meetings like what investments do we need to be making what do we need to do to stay ahead of the competition like the
the conversations have gotten much more real at all of these retail stores and.
I guess that’s the positive the negative has been you know we talked about historically,
that business hasn’t been super profitable and retailers have also been pretty tolerant of that they’ve just been trying to capture growth and not worry about profitability,
but now it seems like retailers and Leadership teams are a lot more focused on the profitability of that those sales as well you got to take the good with the bad there.

[49:59] Cool so that’s that’s kind of our quarterly report and a really good look at what covid has done to e-commerce what other news do you want to talk about.

[50:09] Yeah there’s a few things that were interesting to me so,
Simon Malls concluded their acquisition of Brooks brother so Brooks Brothers is one of many.
Bankrupt retailers and this this entity called spark which is a partnership of authentic Brands and Simon Malls,
Bob them out of bankruptcy and they’ve done this a few times before they previously had Boston Aeropostale Forever 21 Lucky Brand earlier this year,
and you know it’s always interesting some people are like oh you know are they going to be a good retail operator there competing with other tenants you know which kind of is the the complaint people make against Amazon as well,
so ironic that is happening in brick-and-mortar if the independent team couldn’t make Brooks Brothers work how is how a spark going to make them work it’s you know they’re all these different.
Perspectives that to me.

[51:03] These these Acquisitions seem like they’ve been super safe spark is buying these on fire sale prices so they’re basically paying less for the retailer than the value of the inventory in the retailer stores.
if they are totally unsuccessful at running the brand or getting any value out of the brand they could just liquidate the inventory and be made whole and in Simon’s case they’re protecting a bunch of rent right like they you know wow as long as these retailers are growing concerns.
They pay rent assignment if they close,
they don’t pay rent and worse that triggers Co tenancy caught Clauses with other tenants that will then want to negotiate and get out of their leases so for a variety of reasons this seems like a pretty safe.
Strategy and I think they’ve said they have a bigger pool of money if there are other good Bargains to be had and that leads me to my second news item.
One of the big rumors is the next one that they’re they’re contemplating buying is a much larger one it’s JCPenney out of bankruptcy.

[52:02] In the the argument would be the same,
that would be a much bigger acquisition because there’s just more inventory more Book value but so their spark is rumored to be one of the bidders on JCPenney the other bidder that I’m curious if you have a position on Scott is,
there’s been a lot of rumors that Amazon is looking to buy JCPenney stores not to run them but to turn them into many fulfillment centers,
in the mall that in the theory is Amazon just needs more space,
this is going to be cheap space and there have been a bunch of pundits that have talked about oh this is super smart and Amazon’s for sure going to do this and,
turning them all into a mixed-use thing that’s both doing like fulfillment and you know they could have curbside pickup at the mall and all these things like there’s been a lot of talk about.

[52:49] That being a potential good fit and so at the moment the two big suitors that are rumored for JCPenney are the Simon spark entity and Amazon and I heard just today that the judge
called all the parties in the bankruptcy judge for JCPenney called all the parties in and kind of scolded them and said hey this is taking way too long,
you guys are to dug in like you need to come up with a solution here to resolve this quickly.

[53:15] Yeah it on the surface youth can say well that doesn’t make sense you know malls aren’t designed to be fulfillment centers,
but here’s what’s happened for the first time ever that’s really interesting is so you have you have three commercial real estate markets you have Office Space,
warehouse space and then retail and for forever retail was orders of magnitude above like 3 to 4X,
warehouse warehouse was the cheapest and just kind of put some numbers on it,
let’s just use ten dollars a square foot a year for warehouse and then 3244 retail then office park depending on the tier of it was class A B or C was kind of in the middle there so maybe like 15 dollars a square foot.

[53:59] So for the first time all that has inverted so warehouse space is now more like 20 square foot because supply and demand is kicked in if you remember your economics there is a huge demand for warehouse space now because,
you know Walmart and Target all these guys we just talked about growing a hundred percent they have a newfound desire and appetite for a lot of warehouse space,
all those merchants on Shopify etcetera,
office space obviously is in a huge decline right now and then so a small retail so for the first time those lines have crossed and it’s not inconceivable,
that now you could you know Amazon could be looking at you know 25 for existing warehouse and retail space at 15.
And that Delta’s enough where you could say you know I could take that JCPenney box and.

[54:52] Essentially do some up fit put in my loading docks on one side you know they like these kind of.

[54:59] Double sided cross docked kind of things product comes in one side and then goes out estimates on the other side.
It’s not inconceivable that the math actually makes sense from a building perspective.
Now there’s there’s some Logistics you know so a lot of these things are in heavy traffic centers so that’s going to be hard to have you know 18-wheelers coming in and out and some of that,
but those stores were supplied by 18 wheelers and they do have some loading docks they’re gonna need a lot more,
so I think it is a thing that Amazon would you know the economics actually make sense but literally six months ago it would make no sense.

[55:35] Yeah I think the economics potential can make sense but I still think it’s overhyped I don’t think it’s going to happen and I should say I’m sure Amazon will end up owning some,
former JCPenney’s locations Amazon already owns a couple of malls that’s converted in a fulfillment center so.
Could that happen again yes is Amazon buying a ton of space and are they going to go kick the tires on any.
Any potential space sure like they have 200 million square feet of space in the US and they’ve already announced building plans for another hundred million so they’re big leasers and for your point.
The the price for that retail space is way lower than it used to be but I think the logistics is a bigger problem I think whenever Amazon opens a fulfillment center there’s a huge.
Controversy around the negative impact on traffic patterns around at right like in the volume of trucks just like destroys the area and I just I just don’t think apple and Amazon want to be competing,
with you know Apple having customers trying to drive to a store and Amazon having,
trucks trying to get in and out it just doesn’t make that much sense so I I think Amazon’s really good at kicking the tires on any deal and I’m sure they have had some conversation but I think it’s gone people whipped up into a lather a little bit too much.

[56:48] Yeah and last topic I know we’re tight on time but we’re sitting here in August and we wouldn’t be in the retail world if we didn’t start thinking about holiday,
Halloween is right around the corner we got Prime day coming in October with and then the holiday what are you hearing from holidays you parse through all these comments from retailers.

[57:07] Yeah so I unfortunately would have to say that retailers are mostly,
pessimistic about this holiday the again desperately want to be wrong and there’s more uncertainty than there’s ever been before and so I think retailers are allowing for the fact that they could be pleasantly surprised.
But there is kind of a perfect storm of negative things I think retailers are really concerned that that.
We have not seen the bottom yet of the economic circumstance for consumers and so all those Federal programs kind of.
You know bolstered a bunch of people you know we still have like way more people unemployed than,
traditional like we have three times as many people unemployed as we did in February before this all started and you know a ton of the safety net is going away for all those people so retailers are concerned about their consumers health,
or their consumers Financial Health,
in some parts of the country there still are huge health concerns that varies wildly from state to state and that is keeping a lot of people away as all of these sales shift to e-commerce,
we are running into huge capacity problems with shipping for e-commerce right so we’re the all the e-commerce numbers you just talked about Scott that basically has all the logistics companies in the United States running at holiday levels now,
and so if there’s incremental spending for Holiday there just isn’t going to be capacity to deliver it right and so you know what.

[58:35] You know suppliers doing a when there’s a constrained Supply and greater demand they increase prices and so the United States Post Office FedEx and UPS have all announced,
like the largest surges for holiday they ever have in their making customers sign up for there,
allotments of shipping now and they’re not letting particularly smaller retailers that don’t have leverage their not what giving them all the capacity that they ask for so a bunch of retailers are going to be artificially constrained on how much they can ship.
And then you know,
God forbid something bad happens to the u.s. post office between now and then they’re the biggest facilitator of all that so that’s a big risk and then you know because of health concerns
a bunch of the occasions that consumers normally have around holiday.
Are not going to happen in the usual way so people are going to go to less parties they’re going to need to dress up for those parties less they’re going to give less gifts they’re not going to go trick-or-treating as much so people are going to buy less costumes,
they’re going to give away less candy there are all these ways in which you stack all that up and there’s the potential for a very soft holiday now,
there are things that could go well and change that but you know I think I think people are hoping for better but preparing for the worst.

[59:49] Awesome I I love your continued enthusiasm.

[59:53] Yeah I mean and again I want to be as wrong about that as I was the speed of the retail recovery so here’s hoping that I eat more Crow next week.
It’s got that’s going to be a great place to leave it because,
predictably we’ve used up all our a lot of time as always if we spurred some some topic that you want to explore further please hit us up on Twitter,
for sure this would be a good time to jump on iTunes and give us that five star review I know you’ve been you know waiting to do it and this is the perfect show to do it so we sure appreciate it.

[1:00:27] Thanks everybody and…

[1:00:29] Until next time happy commercing!

Aug 13, 2020

EP232 - rue21 CEO John Fleming 

John Fleming is the the interim CEO of rue21. John was formerly the global e-commerce CEO for Uniqlo, Chief Merchant at Walmart, and CEO of He has also served as a board member at Bed Bath & Beyond and Untuckit.

rue21 is an American specialty retailer of women’s casual apparel and accessories with 670 stores that primarily designs and fabricates its’ own products.

In this broad ranging interview, we discuss the challenges and opportunities presented by Covid, Amazon, the direct to consumer model, and the future of retail.

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

Episode 232 of the Jason & Scot show was recorded live on Thursday, August 13th, 2020.

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


[0:24] Welcome to the Jason and Scott show. This is episode 232 being recorded on Thursday August 13th 20 20.
I’m your host Jason retail get Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:40] Hey Jason. And welcome back. Jason Scott show listeners today on the show we are super excited to continue what I like to call our summer of blue chip guest.
We are welcoming John Fleming to the show. John is currently the interim CEO of Rue 21 and previously had stints at Unicode Wal-Mart and he’s on the boards of Bed Bath and Beyond visualcomfort and untucked. John welcome to the show.

[1:06] It’s great to be with you guys this afternoon.

[1:09] We are thrilled to have you. John Scott gave us a little bit of a teaser but you’ve you’ve actually had a storied retail career.
We always like to start by getting just a little bit of background. Can you tell us how you got started in retail and kind of just walk us through the the elevator version of your career.

[1:26] Yeah I I got into retail in 1981 when the economy was terrible and I needed a job and,
I had a liberal arts degree which didn’t really prepare me for anything and I stumbled across Dayton’s department store in Minneapolis and got into their training program thinking I do this for awhile and,
I liked it and I was pretty good at it.
And I’ve been added ever since and I’ve seen a lot of changes in retail during my almost 40 years of being in the retail business.

[1:59] And that makes you a super young man. When you started because you’re still very youthful and you and I.

[2:05] That’s right. I started that since I was 7 years old when I started.

[2:09] Yeah and do I have it right like you were the first e-commerce leader at Wal-Mart if I’m remembering right.

[2:16] I was the second. So I followed Jean Jackson who was you know a rock star CEO that was leading Banana Republic and she came over,
to put the dream team together and she hired me to be the chief merchant.
So I was the first chief merchant at Wal-Mart dot com.
I was then technically the second CEO.

[2:39] That’s right. And then about seven years ago I started I joined an agency which became part of publishers called the RAZR fish in my first week on the job they’re like hey we have this newclient,
called you Nicolo and you have to fly to Japan and meet the team.
And I feel like that was the greatest I’ve ever eaten at work. By the way.

[3:03] That was a pretty good gig except so I got into that because they were pretty far behind it.
E-commerce had an incredible store program building flagship stores all over the world and very dominant in Asia but weren’t really doing much with e-commerce.
So I got sort of lured out of retirement to come back in and get the game and,
we put a team together in San Francisco because that was part of what what I felt needed to happen to run a global e-commerce team and what I learned pretty quickly though was the only way Iwas going to give you done was to get on that plane and fly to Japan.
I think over three years I went to Tokyo thirty six times.
And that got to be a little difficult at my age. So we actually put a great team together and we jumpstarted the business and got him to a really good level and then I went into my second retirement.

[3:53] Oh my goodness. And that that will bring us to your second unread tyrant because you at the moment have the most trendy title in retail which is interim CEO.

[4:04] In interim right. You’re not fully committed but you can get you’re focused enough that you can make stuff happen.
Yeah. So I then as I got into my second retirement that I started looking at different boards that I wanted to get involved in and I and I got on to three or four boards and was really enjoying that andsort of a broad range of,
consumer and or retail companies.
And one of them was Rue 21. And they were coming out of bankruptcy in the fall of 17.
I think it was September of 17 and I was recruited to go on the board and I did and we worked very hard to.

[4:45] The interesting thing was you know in my background I’ve only worked for world class companies and so at the first board meeting they spent all the time talking about liquidity and I’m likeWhat is this you know in vendor terms and I’m like really,
because that those were things that I really ever focused on in my retail career.
But fast forward to having that exposure and training has served me very well during this Cobra Crisis because then I was on the board for a couple of years and then we made a change in Februaryand,
I was the board member that they kind of all pointed to and said we need you to step in and,
sort of take us to the next level while we look for a new CEO and I did and at the time I remember this so clearly it’s the only time I went to Pittsburgh in this role.
I flew in and we had a meeting and got together with the team and we chartered out that year and the next three years and we’d come off a pretty successful year and things were looking prettygood.
And I think the first week of March we were up 10 percent year to date.
And you know the world looked pretty bright and then all of a sudden three weeks later we closed six hundred and seventy three stores and furloughed 9000 people.

[5:55] So it’s been quite the ride. But we did then,
open our stores starting in May and had each week we opened the stores that we could,
and the time that we were close to gave us an opportunity to sort of rethink the business and to sort of reposition ourselves because there were a number of things that as I came in I saw we could dodifferently.
And starting with you know becoming more customer focused and digitally led,
and not just thinking about stores and we learned a number of things about our customers and the way we we we did our pricing and promotion and,
the inventory that we carried and we were able to make a number of changes and as we opened the stores again the customers came back quickly.
I think the fiscal stimulus helped a lot but we’ve been able to sustain that and we’re we’re in a very good position right now.

[6:48] Awesome. And we want to dive in the cove it a little bit more but before we do I just wanna to make sure we level set everyone in the audience a lot of our audience will be familiar with Rule21 but for folks that,
aren’t I think of you guys as a solid omni channel retailer.
So I think you’ve got three hundred and sixty some odd stores.
You have a strong digital and social presence. If I have it right you primarily sell your own apparel so you’re you’re the manufacturer and the retailer and your,
primarily targeted at sort of teen and would you call yourselves fast fashion or would you call yourself.

[7:31] Well it’s interesting. That’s a that’s an internal debate we aspire to be we aspire to be faster.
We definitely call ourselves fashion but we aspire to be faster.
And that is part of the learning. So what are the things that we learned during the,
shutdown when the stores were shut down and we had a really you know a skeleton crew that was guiding the business at that point as that was as we did a,
sort of an evaluation of all of our processes and you know and how we presented to customers and you know how we engage with customers.
We came up with a new mantra which is simple fast and new.
And so that everything we looked at. We wanted to simplify it.
We wanted to move more quickly and ultimately we want to deliver newness to our customer much faster.
And so we are what you described is true we have six hundred and seventy stores.

[8:22] I think your view of us as a successful omni channel retailer is a little overstated.
We’ve been a very successful store based retailer but we’re building omni channel capabilities and that’s a big part of our growth strategy in fact we are migrating to a new platform in September andit will be the latest technology.
So it’s a headless technology cloud based API driven and this will improve our site performance dramatically,
and then ultimately you know it will take some friction out in some of the the the the the customers path primarily around checkout and make it a little more mobile friendly.
But then the real features and functionality that I think will take us to the next level will happen after holiday,
and the code but things slow this down a little bit there because of the uncertainty in April as to what the outcome of this is going to be so we had to kind of,
slow down some of the projects but then as we open the stores and could see things were going well we accelerated again and we’re really excited about the holiday season.
But you know we serve a younger consumer our customers 16 to 28 would be the sweet spot.

[9:37] We actually compete quite well with other fashion young retail brands and one of the things that I learned when I got under the hood moving from a board member to the interim CEO,
is that our best format is actually in a mall.
And as a board member I was way more familiar with the strip centers that we had and those have been the stores that we had drawn more recently.
But we do really well where we have a full competitive set and the,
findings there are that you know that consumer is not super loyal to anybody goes to the mall wants to see what’s happening with their friends and in the end our prices are quite good.
And I know from my Wal-Mart days as you know price is a good lever,
but what we’re trying to get better at is is what’s the news and the fashion newness and telling the the story that really emotionally connects with the consumer based on what the product is and thenthe promotion is more an outcome of you know how much you own.
But we have the low price position and we have the potential to be a fast fashion retailer meaning you know new newness to our customer more frequently.
But there are some internal things that we’ve had to work through to sort of speed up the process.

[10:53] Very cool the father of two daughters. I’ve been in many a Rule 21 so it’s always interesting to see the.
Yeah the displays and you obviously have a young audience and it’s always kind of vibrant and a lot going on in the store.
How many of the stores are mall based versus non mall like half Yeah.

[11:10] About half the mall based in half or strip centers. Yep. 50 50.

[11:14] Yeah. Well since we’re here kind of hopefully in towards the end of the pandemic.
I’m the optimist on the show. Jason would say it’s only the beginning. Yes.

[11:21] This is the this is the end of the pandemic. You think this is the end of the pandemic.

[11:25] I do. I’m the optimist. I said I’m the optimist. Jason thinks we’re in a five year cycle.

[11:25] Oh I I hope it’s well I don’t know that. I mean I think I’m not a doctor I don’t know anything but it seems to me like we’ll be living this way into next spring.

[11:26] Scott does. I do not.

[11:39] Yeah hopefully not. Well given that you know you’ve talked a little bit about the impact on the business so maybe walk us through.
It seems like you guys have done a good job as good job as you can navigating this so kind of march came we did shelter in place your your stores were closed. What what are you tell some of theactions you guys have taken and what it’s looking like today.
Now that we’re kind of coming out of it a little bit.

[12:05] So so we’re really quite quite happy with how we came through this.
And I think that the the reason we were able to do as well as we’ve done is because we were very decisive.
So if you think back and it seems like so long ago.
But I can remember day by day and I remember even a friend of mine that’s a Wal-Mart supplier called me let’s say the end of February.
And I think I just assumed this role and was talking about hey so what are you thinking about this. This virus thing.
And the entire conversation was around supply. Well you know we’re worried you know because we’re going to be able to get the product that we have on order and for the next week or so,
every discussion that I had you know with every company I’m involved in was really around supply.

[12:54] And then all of a sudden somewhere early in March probably 5 6 something like that in March I remember the same guy called me and we had the same discussion and he said you know youkeep talking about supply.
What about demand and I’m like What do you mean.
He goes What if customers don’t go to stores and I’m like wow. Oh come on. It’s not going to be like that you know.
And he was definitely the canary in the coal mine. And I remember him saying And then you know at that point then my CFO and I started talking and you know we were in all the discussion wasstill about supply.

[13:26] And I said to her like we should model what happens if we drop 10 percent.
And I remember having this discussion I was like I was on the phone with her I was in California at the time and you know she was in Pittsburgh and you know she we were looking and she said Ithink we’ll be OK at 10 percent. I’m like What about 20.
She goes wow that gets a little dicier. And then I remember talking to my friend again and he said well if you close your stores and I’m like that’s never going to happen.
I remember this so clearly. And that was like March 6th.
Well on March 12th the world changed right. That’s when the NBA shut down.
And like just the dominoes just started falling.
And at that point we were doing everything we could to stay open.
So for the next week I would say you know it’s kind of like the change management thing.
Like at first we were in denial then we were in resistance. Right.
And so from March 12th to about March 18 around us there were municipalities and or states that were mandating closing.
And so every day I’m on call it be how many stores do we have to close and you know on the first day it was like 12:00.

[14:30] That was another 20. And I remember even doing a virtual town hall because I was in California and I was headed back to Pittsburgh like on that Monday which would have been like,
15th or 16th and talking to the team about you know we’re going to do everything we can to keep the associates and customers healthy and safe but we’re going to keep our stores open becauseclearly our customers you know they still are coming to the store.
Because at that point we were just running down let’s say 10 12 percent it had really dropped yet but then on the I think was the 18th or 19th of March.
And again I’m in California and Governor Newsome likes is going to shut down the State and San Francisco is going to shut down.
And I just was struck by the fact like Oh my God this is real this is happening.
And the next morning it was a Friday. I got on the phone with the team,
and I said I think I think everything’s getting shut down and we had a discussion about it and I said I think we should get ahead of this and we should plan to shut down.

[15:34] For two months because this isn’t going to play out quickly.
And on that Friday at eleven o’clock Eastern time we made the decision to shut down six hundred and seventy three stars and furlough 9000 people.
And we did it by end of business day the next day on a Saturday. We did it and we focused on being shut down for two months.
And I think that was a huge success factor for us because if you remember at that time everybody was having the same discussion but they were thinking I’m going to close till the end of March.

[16:04] You know I’m going to close to the first week of April and I think being in that middle space paralyzed a lot of retailers because we were able that we canceled inventory.
We shut down the stores. It gave us a chance to evaluate our processes to think about what we’d look like when we opened to do talent evaluations.
I mean we went through all these steps and we were I think we were a month ahead everybody.
So by the time we opened and magically it was about exactly two months we started open stores opening stores the second week of May and we opened 180 or something the first week and 100 thenext week and it just went through that and got,
a majority of them I think in California we still have some stores close because it’s mandated by law by law.
But we have we have over 650 stores open and we’re doing well and we have a you know a slimmer team than we had before.
And we streamlined a lot of processes and we started to take steps towards being digitally first because we’re using the digital channel to better understand you know our customers and demand andyou know using that information to better run the stores.
And so we’re getting there and we’re in a good place and I know I would say even outside of room the lesson that I’ve learned is that there’s three things that are gonna make companies successful init during copied and coming out of all of it.

[17:23] You’ve got to be relevant. So if there isn’t something that’s clear that you do and you can differentiate yourself and your brand stands out from the rest there’s no reason.
And that’s where I think department stores are going to have a problem because I just don’t think they’re relevant anymore.

[17:41] Second thing is you’ve got to be agile. You know there’s going to be things that change.
I still think you know I I’d like to think we’re almost it’s almost over but it’s not.
And we’re going to be thrown into a number of different situations over the next six or eight months we may have to close stores we’ll be opening stores we’ll have to pivot to more digitaldistribution.
There’s going to be things that are going to happen and the companies that are agile we’ll be able to handle it.
And thirdly you got to be very disciplined and that person primarily around financials and that’s where I go back to the first thing I told Joe is when I got involved through,
you know I’m not used to working in financially distressed companies and yet you know seeing a company come through bankruptcy and get back on its feet,
was very valuable experience to me because you know on that day we decided to close all the stores.
We immediately you know shut down all of our payables. We shut down all of our cap ex.
We focused on liquidity. You know we renegotiated terms with lenders.
I mean we were on it and I had a great financial partner to help me through that.
But you know that a little bit of experience that I had early on in being on the Rue board which is a company out of coming out of bankruptcy sort of prepared me for this.

[18:56] Very cool one. One kind of tactical question is so. So you’re you know it’s early March you’ve got your storage kind of.
I imagine loaded with summer inventory what what do you do with that stuff now that you’re opening do you do you have to flush some of that or do you have enough of a season that you can kindof get it working out of the store.

[19:11] Yes. So actually the stuff in the store was was good because it was just we had just been getting receipts for spring and they were you know the floor set was only a couple of weeks old.
By the time we shut the stores down so we basically just mothball the stores and locked it down.
The issue was more what was coming because we knew we were going to miss two months of sales and so thankfully we were eliminated all that and we were very and again I think you know onMarch 20th we were looking at that number.
You know we knew what the number was. We knew it had to go away. And we made it go away.
So by the time we opened in mid-May we were about where we wanted to be in terms of inventory and it was fresh enough.

[20:00] And I think the combination of the pent up demand from the consumer the fiscal stimulus and the lack of other alternatives for our customer to spend money on because think of it during thattimeframe there were bars and restaurants.
There weren’t movie theaters there were places to go spend your money.
So they actually were looking for places to spend some money and they in some cases they had more money than they had before.
So we got a good jumpstart I think in that it gave us a chance to sort of refine the presentations in the stores.
Know we did some training. We we we got our stores focused going back to the simple fast and new mantra.
We removed a whole bunch of tasks that we used to do in the store and just got the stores focused on serve customers.
We’re going to we’re going to flow the products better.
We’re going to be much clearer as to where you put it and we’re going to streamline the promotions because in the past we were always you know messed around with the promotions every daybased on you know what we thought was going to drive traffic and in the end it didn’t. It just created confusion in the store.
So this simple fast and new approach really was was adopted very well by the entire organization and even the store organizations has felt like we simplified their lives and let them focus oncustomers.

[21:17] The other thing that we were able to do is we launched the loyalty program and this was all in the works before I even took over but it was all store focused.
So our company was really a store focused company and that was one of the first things that I wanted to change when I.

[21:33] Took to gotten the chair was that you know my background is going back to 2000 is more you know the retail has changed,
and I grew up in an era when retail was you know product focused and store driven and I was a product merchant for the first 20 years of my career.
But then you know I was very fortunate that I got into the online space and the visibility to customer information in real time.
You know I don’t know that I would have articulated it this way in 2000 but you know if old retail was product focused and store driven new new retail is customer focused and data driven and sothat,
that gave us an opportunity to start to make that pivot at roo and really get focused on who our customer is.
We launched the loyalty program online. It’s been fantastic.
You know it’s driven engagement with our customers and now we’re now we’re rolling it out in the stores and we expect to have two thirds of our customers enrolled in this loyalty program by nextyear.

[22:34] That’s awesome and I want to drill into some of the digital stuff.
But I do want to poke on malls just a little bit because you’re a great opportunity to talk to someone that is living the mall experience right now.
I just read a scary quote from David Simon who’s the CEO at Simon malls,
and it was something to the effect of Yeah I was feeling pretty good about getting back to work in June and July feels less good and now I’m totally confused about what’s going to happen inAugust.
And he was kind of talking about the fact that like yeah we got most of the malls open but you know now various parts of the country are having challenges and it sounds like they’re having to reclose some malls and it’s really unclear,
what the future is are you guys just having to kind of,
like I assume in most mall situations you don’t even get to pick when you’re open or not.
That essentially the mall is going to make make that decision for you. So it’s just it feels like you just have to be really agile and be prepared for whatever comes.

[23:35] Right. So there’s a couple of things that went on. I think everybody was pretty happy with June and I do think there was a pent up demand in basically all retail channels.
I think June you know there may be some laggards I’m not sure that the department stores did that great.
But but most retailers I think had a nice June into July but then you have two things that created headwind mid-July into August and they’re actually all impacted by Colgate right.
So as the business started to soften a bit mid-July if you charted my business nationally and we have stores in 46 states it looked like a coded map.
So any place mid-July where the virus was starting to increase our bid business was running down and most states were red.

[24:23] And any place where it was under control primarily you know the north parts of the Midwest parts of the Northwest.
Business was very positive and that sort of played out as you know we’d had this surge of increases with the virus.
Now that combined with the uncertainty around back to school,
and I think this has been you know fairly well publicized is you know it’s not clear like when schools are starting it’s different by municipality.
Some schools have pushed it out. There’s some schools in the south that have started again.
Some are going to days on two days off.
And that uncertainty has basically killed the opportunity to hit the peaks of back to school.
So like sats are terrible for two reasons. One those are the biggest volume days and there’s there was urgency in the past from consumers because it was almost like holiday they knew I had twomore weekends before school started. Well there’s that urgency doesn’t exist.

[25:26] And the second thing is in most cases the hours are reduced which isn’t a bad thing.
And actually it paid off really well in June from a profitability standpoint.
I know in our case we used to be open 10 to 9 in almost every location.
We’re now open eleven to seven so.
So there’s three fewer hours and during the week it hasn’t mattered because the patterns to the customers have evolved and there isn’t the urgency.
And so we don’t need the extra hours and we just we just bank that and savings our operating costs.
But on Saturday it’s a problem when you get into these peak timeframes.
Now what I will say is it looks like we’re getting the other side of it because we’ve been charting our business based on you know school starts early mid late,
and the first stores that really had a difficult time with early starts both in terms of it’s not clear when they’re going to start.
So there wasn’t the urgency and they’re up against these big numbers including these tax free events that all moved out.
So the first wave of that was very difficult but now we’re seeing that that first wave of stores are running positive comps for us again because we’re past we’re past the hill from last year and we’remore into our base business.
So we still have to work through the mid and the late waves but I think what’s going to happen and what I’ve told my team is we’re going to evaluate our back to school business on more of an eightor nine week timeframe instead of a six week.

[26:52] Because I think it’s just going to extend a lot longer because there isn’t the same sense of urgency.
And so that could be what. Part of what he’s talking about because the traffic has been very very mixed and that consistent.

[27:06] Yeah. And that that’s a recurring theme I have heard is you know a lot of national retailers you you tend to be one size fits all.
You run the part of the advantage of your scale as you get to run the same campaign everywhere and you get good efficiencies from doing that back to school being a perfect example and in thePost-Cold world per your point.
You can’t go live with the same message in North Dakota that had 400 cases that you you are in Atlanta for example or something and so it’s like I feel like we’re all having to learn to be local andper your point. Did school open.
Is that hybrid like all of those things are are new skills I see retailers sort of acquiring very quickly.

[27:48] Well in and pricing too because you know if you run the same if you’re trying to drive some kind of promotion that you’re trying to get incremental unit sales out of where you have no trafficyou’re just going to deflate your sales.
And that was the one that was hard for the team because this is a team that you know is used to a highly promotional business.
And you know in even talking through you know pass back to schools I mean they were changing prices all the time because there was the six week window back to school which was the secondbiggest six week period in the year next to Christmas for this business. And you couldn’t miss a day.
So. So there was always these adjustments on price and you know that’s where I just had to convince them like look at this.
I mean sure you could you could we could drop the price on denim the BOGO free which is basically 50 off but you’re just going to deflate your sales because you need to get a 60 percent lift tooffset the markdown.

[28:41] And as we went through it and we really looked at like let’s price this stuff so we think we can sell at a regular price at a fair value and you know make adjustments along the way.
But if there’s if there’s if the traffic is off 50 percent in Florida Texas and it’s in it’s flat in Michigan you know you can’t run the same pricing everywhere.
So yeah it’s been but we’ve kind of erred on the side of let’s not be as promotional let’s let’s try and go out with fair prices and let’s try and manage the units or that margin on a unit basis.
And it’s worked and in some ways I think I always sort of had this theory that you know like you get into the holiday season you get into December like everybody goes 50 off everything.
For one thing I hate that because that means you’re selling your very best things at the same price you’re selling the very worst things. And as a merchant that’s a bad idea.
And so I’ve always been sort of averse to this like 50 off all or 40 off all.
And I believe that you know pricing and promotion is as much about merchandising and understanding what the customer wants and what your ownership is.
So that’s that’s like another process that we’ve been able to learn and discover.
And the team is now you know fully supportive of because they see the results.

[29:54] It’s a and unfortunately it’s shaping up to be a 50 percent off. Maybe the new 20 percent off this holiday we’ll have to see but it’s not looking good right now.