EP213 - Deloitte's Kasey Lobaugh Recessions and the Future of Retail
Episode 213 is an interview with Kasey Lobaugh, Principal and Chief Retail Innovation Officer for Deloitte. This time we discuss a report Deloitte published last year "Boom, gloom, or doom? What the next recession might mean for consumer companies" which is suddenly very relevant to retailers facing the Covid-19 epidemic.
Kasey also gives a sneak preview of new report exploring the history of predictions around "The Future of Retail". Look for announcement about that research on Kasey's twitter feed @klobaugh
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 213 being recorded on Thursday March 19th 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 one of our most popular annual Traditions now
second only to our annual predictions is when we have our friend Casey lobaugh on from Deloitte and he is systemically been able to share with us some really cool insights what’s going on with retail and consumer Behavior.
Personal favorite and I talk about this all the time in my pitches is the bifurcation difference between the convenience working to consumer in the valuing consumer
so that’s all Chestnut for me so I’m really excited to have Casey back on the show.
Tonight’s an extra special Casey appearance first of all he canceled his fancy Australian vacation to be on the show so we appreciate them doing that
and then second of all he was set to reveal some pretty interesting to research around the shop talk conference but that was moved due to this pandemic
thing that we’re dealing with so we twisted his arm and got Casey to to agree to reveal This research on our show tonight so we’re really excited welcome back Casey.
[1:44] Thank you I’m thrilled to be here.
[1:46] Yep and you you have a very interesting title so let me get to see if I can nail this Casey is Chief retail Innovation officer and a principal for the retail and consumer products practice at Deloitte
and you know that’s pretty worthy title and it makes soup Jason super jealous because he’s tried to jam as many words in there and I think he’s only got a quarter of what you have.
[2:08] That’s that’s the correct title this week who knows what it’ll be next week.
[2:13] Yeah and for the record of all the things I’m jealous of about you Casey that your title isn’t even in the top 10.
[2:20] Well thank you I’m plenty plenty jealous of you for all the things that you do as well.
[2:28] That I don’t know what those could be but I’m I’m I appreciate the praise know and accept the praise nonetheless.
[2:35] I’m starting to feel like the awkward third wheel over here I’ll I’ll go on mute while you guys do whatever it is you do.
[2:42] No but.
[2:44] Jason Jason III really really think highly of you and Scott you’re here as well.
[2:53] Kasey I share Scott’s enthusiasm about having you on the show because I desperately need Scott to get a new Chestnut so I feel like.
He’s reading your last Chestnut for like several years and we got to get him some new material I was hoping he wouldn’t bring up our annual prediction show though because spoiler alert later in the show you’re going to totally debunked.
[3:17] Right right we’re going to talk about some of the research we’ve done.
[3:20] Yeah but that being said I know you’ve been on the show a number of time so our most loyal listeners are pretty familiar with your background by now but as you may know
we have a massive new audience that’s growing all the time so can you kind of give us the highlights of your career and.
What all those words in your title mean at Deloitte.
[3:43] Oh I’m happy to do that so and I I think I’m losing count now but I’ve been with Deloitte in our retail practice now I think it’s going on 20 23 or 24 years
and in that capacity really during that time I’ve I’ve served the vast majority of the world’s largest retailers.
Mostly you know helping those retailers sort of grapple with with whatever was on the horizon so you know early on in my career I was helping retailers
with you know moving online so I did a lot of work with just the the.com portion of retailers
you know early on when I did a lot of work around you know omni-channel and how the channels come together how we need to think about inventory differently and and these days are really thinking a lot about where retail goes next
how do we pay attention to the signs and how do we read those signs and how do we help our clients sort of navigate through that so that’s really the quick flyby of my career with Deloitte.
[4:46] Cool so we covered the pandemic last week so don’t want to go back into that and frankly it with a good our job is to distract people from from all this stuff going on
but you know one thing I think we all agree is that this kind of
crisis has created dramatically increased the recession that will fasts will face the recession here
part of the research you guys have out there one segment is this is kind of I guess
pretty good prediction you had said that there’s probably a recession on the horizon and then you guys were talking about what that could mean for Consumer Behavior retailers consumer product goods let’s dive into that give us give us some highlights of that research.
[5:28] Yeah sure thing now first of all this this research at this point is probably about 8 months old and about 8 months 9 months ago you know
of course if you’re around the industry long enough you’ve seen you know the economic cycle is about eight or nine months ago there were signs that started to say that
the economy was starting to weaken and so we had gotten organized around that and done a piece that we call are you ready for the next Consumer recession.
And the signs that we were seeing at the time where you know several first of all you know we know that the US has faced a recession every on average about 6.1 years and it has been
nearly 10 years since the last recession so that in and of itself led us to believe that you know at some point we would be facing a downturn in the economy.
But more importantly and probably more ominously the the yield curve actually not only flattened but then inverted.
[6:23] And for you know those those of us that sort of follow economics and.
You know think about those things the yield curve is really where you know short-term interest rates you know are inverted with with long-term interest rates and it’s it’s known as sort of the number one
a recession no it’s not it’s not completely foolproof I think they say it predicted nine of the last seven inversion of the yield curve predicted nine of the last seven economic downturns
so we saw that occur you know roughly a year ago we also saw tightening monetary policy we saw Rising asset prices and really ultra low unemployment you know which which.
[7:05] Can and did and was starting to result in in Rising wages and inflationary pressure though the inflationary pressure really hadn’t appeared to the extent that we thought it was going to but those are just the ominous clouds and and of course you know.
One of the things I say about this is that this is like to use an analogy it’s like.
California comes out and says look we don’t want you burning bonfires because.
[7:31] It’s really windy and it’s really dry and conditions are ripe for for economic downturn
and so really that the clouds that I’m talking about these ominous clouds were really those signs that said we’re not sure what the spark will be
but we do know that the conditions really are starting to set themselves up for for this downturn and by the way you know any any spark that you’ve ever seen whether it was 9/11 or any other you know economic
event that’s occurred you know often times you can look at that and say boy that was.
You know how would you have predicted that that would have been the spark that really pushed us into you know into whatever economic position we get pushed into
so you know we weren’t trying to predict what the spark was we were just saying the conditions were starting to get ripe and there’s a there’s a quote that are I work closely with Danny Bachmann who’s our delete US economic forecaster.
[8:26] And he’s got a quote that I like he says I can predict with a hundred percent accuracy that the US economy will face another recession.
And then in small print he would say I just can’t predict when so we kind of knew you know something was coming we knew that the
potential is out there but of course we’re we weren’t even attempting to predict what that was
so then we said okay if you know knowing that that’s the case let’s look at previous recessions specific to retail and consumer products and ask ourselves you know what can we learn from those.
So we looked at the last two recessions the.com burst and then of course the Great Recession in 2008 and when you look at those recessions and you look at the,
the the market impact the impact.
And the recession themselves were different right the cause of.com burst was over Valley tech stocks and then the Great Recession was the housing market crash.
If you looked at corporate profits you saw two very different recessions as well.com burst corporate profits dropped only by 0.2% and meanwhile during the Great Recession they drop by 13.5%.
And the same on wages and salaries the impacts were very different as well the differences were in the labor market.
So we don’t know exactly how the next recession will play itself out but when it happens.
[9:49] It’ll likely have a significant impact on the consumer and the consumer companies that that’s what we we sort of highlighted so then we said okay well if those things are different.
You know where there are things that were.
Common where the things that we can actually pull away from those and and he’s actually become really important as we think about our situation today but we came up with three things that became very clear.
Happened the first was the growth in digitally and e-commerce.
Now of course we knew that e-commerce was growing but when you look at the numbers you look at it comparatively to brick-and-mortar we actually saw in both cases and acceleration.
Of e-commerce During the period of economic downturn now overall like retail you know showed weakness but when you pulled it apart what you actually saw was acceleration of e-commerce.
[10:42] In addition to that what we saw was.
The rise of new competitive entrance now this is really interesting because you know something was happening at the same time you know barriers to entry were coming down because technology was changing but also Capital was becoming increasingly,
cheap right as as the FED move to increase liquidity interest rates came down what we actually found was there as.
It’s this combination of barriers to entry falling and and available cash was actually allowing new competitors to enter the market at increasing rates during
and right after the economic downturn this included not only
you know new small digital native startups but we also saw European retailers
you know aggressively accelerating their growth in the u.s. marketplace we also saw consumer products accelerating their direct-to-consumer efforts so all those things together where this this new competitive entrance that that really,
were fueled during the downturns.
[11:43] And then finally and this is sort of relates to the bifurcation that you talked about Scott Lee saw the rise of discount players consumers really materially shifted to the discount players and they were experiencing average growth rates of about 6%,
while the rest of the retail industry was declining about 5% in particular during the Great Recession and after the Great Recession discount maintain that growth rate.
That they had you know obtained during the downturn so the consumer learned of a new Behavior consumer found a new channel of course that channel ended up with a flood of.
You know of quality because the traditional retailers were really trying to liquidate product so it really sort of added to the to the mix so if you think about those things as we said here today you have to ask yourselves.
You know how will those play themselves out you know we believe that we’ll see an acceleration of digital and e-commerce will we see.
Discount and an off price you know accelerate as well.
[12:48] In addition to this we see something happen with the consumer the consumer based fundamentally changed.
Due to the uneven economic recovery it happened after the first downturn of the.com.
Bubble bursting and also happened after the toothache 2008 recession if you looked at discretionary income changes during the.com cycle.
And the Great Recession cycle they were very uneven so for example if talk about the Great Recession from 2007 2017 if you were in the low-income bracket you actually ended up,
decreasing your discretionary income by three thousand dollars at the same time if you’re in the high income bracket up.
$18,000 so it was real uneven recovery and a largely that came from that came from.
[13:39] Well many facets but one facet was availability of capital so.
Liquidity slated to the market if you had good credit ratings you could Access Capital at very low interest rates.
The problem is at the same time that liquidity became available because the housing bubble you know led to the downturn we actually raised.
The regulations and raised the criteria by which we would give people loans so if you were in the high enough income bracket you could easily secure a very low interest rate loan,
the lowary off you were the less accessible that Capital was to you.
[14:18] So coming out of all of that then what was interesting this is a this is something we highlighted this year ago was this idea that if you looked at the industry of retail there was something going on you know even a year ago that was really
a little interesting and maybe a little disturbing and I was a substantial decrease in the return on assets.
That the industry was was showing and if you go back over the last 20 years 30 years what you’d find is during times of,
I’ve strength the industry would have growing increasing return on assets and only during economic downturns with the return on assets start to slip and go you know move in the opposite direction.
The problem is for retailers starting in 2012 even though we were in strong Economic Times and we were coming out of a downturn we were in the recovery starting in 2012 we actually started to see a negative.
Yeah yeah impact on returning that on assets we started seeing return on assets moving down all the way through 2017 as if the economy was actually not doing well in fact it was,
and that sort of leads to the question of what happens to an industry that is operating in
in a relatively healthy economy but they’re showing signs of weakness when it actually gets weak so I know that’s a lot of information about the research it was pretty fascinating and go through it and of course it’s more interesting to me now to look back on the research given where we’re at today.
Does that make sense.
[15:44] It totally makes sense and just to augment that one point you made like you talked about the acceleration of digital through these.
These recessions that you track.
That that’s even more surprising because you kind of looked at a couple specific recessions and one of them was the.com bubble right and so there you go,
you know man did it people overvalue dot-coms did they also sort of overvalue the utility of dot-coms and so you might have expected.
Digital shopping to decelerate when a.com bubble threw us into a recession and even there you saw digital grow.
[16:26] Yeah interesting that the way we looked at it was
and on a relative basis because of course you saw you like right in 2008 we actually saw you know retail softens sort of overall but when you looked at it relatively speaking and said okay when someone is shopping retail you know
which way are they shopping,
so you have to look at it that way to understand the acceleration because the acceleration actually occurred during a period where it looks soft and it looked like the market was softening but when you looked at it relative to brick-and-mortar that’s where you really see the acceleration.
[17:01] Yeah no that makes perfect sense so I read I got thank you for reminding me about that research I read it when you published it but then it was.
Prescient to kind of re read it right now in my big takeaway is like that there’s demonstrable evidence that these recession events exacerbate bifurcation right both of businesses.
It seems like there’s a chunk of businesses.
The do better in the recession than other businesses that there’s a gap that opens up and also as you would have to recently.
It exacerbates bifurcation of consumers and you talked about the Gap in real earnings but you’re in your report you also talked like.
Literally life expectancy there’s a big gap between affluent consumers and non-employment consumers.
[17:52] Yeah the idea of economic bifurcation is so prevalent when you really start to use that as a lens and you’ll hear me talk about this on every one of our research reports because it just.
Constantly comes back up is the whole Market wants to be fixated on age.
You know as a driver of behaviors but over and over again what we find is it’s this it’s the economics and this economic bifurcation that dramatically is more important.
To how consumers are behaving than ages so po what I say is people behave like their income.
Not like their age and I’ve got so many data points so many different lenses that we’ve used to prove that time and time again.
[18:36] Yeah Amen on that I feel like the age was actually never that,
never correlated that well but it just that was the attribute we knew about our audiences right and so like that was the attribute that everyone used but so when I will get your research and I say hey,
what can I business leader that’s contemplating like you know all the.
Current events you know there’s there’s a very real chance that throws us into a recession or at least recession like economy what are some takeaways for how best to.
Sort of be one of the winners in that bifurcation and I there a couple things that jumped out at me but like do you have sort of a top level 4.
Wait what’s the general advice you give to someone about thinking about the kind of Investments they should make and the.
The kind of financial moves they should be making like when they find themselves in a.
[19:35] Yeah well actually the advice is better about how to think about it before the recession think about it before you find yourself in in really difficult times.
What we’re finding increasing as you can’t fall back on the old Playbook you know compressing vendors cutting sg&a reducing headcount feeling Back Store labor and just going promotional if you look back at who the winners and losers were coming out of both of the previous recessions
what’d you find out was those are not the playbooks that that led to healthy successful outcome what we found was,
for those retailers that increasingly really focused on why they matter and I know that’s an easy thing to say but but what you find is is that.
I must say it’s like being.
[20:23] Knowing what it is that your consumers really value about you and then being Unapologetic about investing into that so if you’re an off-price retailer you know know that and then invest into that,
if you’re you know if your product is supreme the know that in invest into that and what we found is that during these times and you falling back on the old Playbook we.
You know our retailers in the marketplace consumer products companies you know often times focus on the Playbook and they lose sight of that
we also said build a war chest to invest in the growth cuz it’s during these times that those companies that found themselves you know investing into
the structural change that’s happening during the downturn are the ones that are best positioned for what’s about to occur coming out now,
if you find yourself in the recession and you haven’t invested into the war chest that allows you to invest into that growth you really find yourself in difficult position because you can begin to see the market.
You know come back together get healthy and start to thrive again but you haven’t you you know you don’t have the resources that allow you to you know aggressively invest into that we also know that embracing technology automation
to increase your leverage during the times of growth.
[21:39] And then looking outside your four walls to embrace new Partnerships those are the things that really came out when we looked at who won and who approached you know the growth coming out of downturns.
Differently as opposed to the old old Playbook I I love this quote that Benjamin Franklin.
[21:57] Had we said by failing to prepare you are preparing to fail.
And that’s why we wrote that’s why we did the research because you know eight months ago was the time when we were you know trying to get our clients that sort of recognize that the risk was increasing and that they really needed to you know begin to take it seriously and begin to prepare.
[22:18] Yeah it is I think that’s fascinating in that I had an early Mentor who was a very very successful retailer Wayne huizenga and he used to constantly heart on this philosophy that.
In economically good times that’s exactly when you should most be focusing on cost reduction and cost controls and in economic down times that’s exactly when you should be investing because your your.
Capital actually works harder and gives you a higher return in those economically distressed times than it does when everybody is pretty flush.
[22:56] Yeah I think that’s that’s that’s easy to say it’s really hard yeah I always like to put my practical like as
insulting it’s easy for me to say here’s what you need to do but I was trying to put my practical hat on and recognize how difficult that really is to do
that said when you look at who the winners and losers were coming out of the previous recessions that’s exactly what they did.
[23:17] Yeah I briefly tried to learn how to ride a jet ski once and counter-intuitively when you’re about to fall off the jet ski and it’s unstable
the correct thing to do is give it more gas and go faster because that’s what makes you stable but it’s not what your brain wants to do.
[23:34] That’s a great analogy.
[23:38] Well that is awesome one last question on sort of learnings from recessions do you have any point of view like.
So you’ve got a consumer that go through a recession you know consumer confidence goes down you know eventually those recessions in.
Do we tend to see consumers behaviors rebound and do they act exactly like they did before the rebound or do these recessions tend to have sort of a hangover effect on consumer Behavior even when the economy turns around.
Without a doubt our research research tells us that the consumer adopts new behaviors during the down times that they maintain coming up.
So I I would expect a lot of the behaviors a lot of the things we see going on even today with people adopting new behaviors that that those are going.
Accelerate those are going to become prominent and I don’t expect those to fully bounce back I I would expect some behaviors to you know to bounce back somewhat,
however I think predominantly I’d say the people are learning new behaviors as they do they stick with those new behaviors.
[24:51] Michael hopefully on-demand car washes one of those papers,
all right well now that we have all that kind of Downer recession pandemic talk behind us let’s dig into the new research Casey what’s the high level of how you guys came up with this and what you’re revealing on the show tonight.
[25:10] Yeah sure thing
you know here we are its 2020 and we are the number one request for getting from our clients is it tell us about the future.
Of the industry tell us about the future of retail or we get you know the future of the store and of course that seems to be a topic that that that is hot with our clients but it’s also you know very well published out there so we looked at it and just said,
okay you know how would we think about it how would we approach that topic and how do we do it in a different way than maybe you know has already been done and that’s really what what got us to dig into this this research that,
you know that we call retail and consumer products 2020.
[25:54] Cut it and you were kind enough to give us a little bit of a sneak preview of the research and I have to say I really enjoyed it and looking forward to when you publish the final version
in there you kind of talk about seven Trends you know of what this retail 20/20 looks like
I thought they were all really good so maybe give us a high level overview and then Jason and I want to tease apart a couple of.
[26:17] Yeah before I do that let me give you a little of the Segway that gets us to the seven trends.
In in the research one of the things we did before we started our own research as went back and said,
you know how good is the industry at this idea of predicting the future so we went back and spend time over the last 20 years of research is trying to assess.
How good are we as an industry and there’s great you know Publications a lot of great you know commentary that’s out there but what you find when you summarize it all together is,
we’re really not that good as an industry.
Professing the future and then the question is well okay well if we’re not that good as an industry we haven’t been that good at it for 20 years what makes us think that you know that we had Deloitte and the way we’re going to research this is any different.
[27:09] And it’s really the findings that relate to his kind of that backwards view that gets us to how to think about this problem differently and the way I like to call it is let’s move away from prophecy.
And let’s actually get practical okay because what you’ll discover is most of the future of pieces are just.
Prophetic there’s just people sort of imagining pie-in-the-sky with the future will be like
and and the Saving Grace by the way generally is they never tell us when the future will be here so it’s potential that all those predictions they make will
you know will be true at some point however the vast majority of the predictions that have been made over the last 20 years actually as we sit here today are not true.
[27:50] Okay so if prophesizing doesn’t work then if I look back in history how would I have known,
we’re we would have ended up as an industry and the interesting part is it’s actually there
it’s actually there in the data if we’re actually paying attention to what’s going on in the data we can actually play out trends that lead us to where we’re at today
so that’s the Segway and that’s sort of the the approach that we said okay so if we’re not going to prophesize about the future let’s go look at the data.
And so we looked at our we’ve got a group with that we call our Center for Consumer insights that has phenomenal data,
a lot of different sources of traffic and sales and consumer behaviors Etc and we said
well what’s the data tell us about the future and that’s where through working with the center for Consumer insights we came up with the seven trends that we see that are broadly
shaping the future of retail and consumer products,
no by the way you got to recognize it retail and consumer products is a really broad industry said everything from apparel fashion luxury goods to grocery you know consumer products tables Etc so these are really Broad
you know in their application but I’ll go through what those seven are that the data tell us the first one is commoditization and premium ization
[29:15] And I’ll talk a little bit more about what’s going on there but we also have digital success is growing even more elusive that’s the second Trend the third Trend pertains to physical retail.
And the third trend is smaller and closer I’ll talk about the data that we’ve got there as well the next train is new models become material.
And the interesting part here is not when I see new models things like rental things like resale you know in the apparel world or or,
yo ghost kitchens in the restaurant industry those sorts of things are all new models,
and in and of themselves are not that interesting in terms of size or scale but when you put all the new models together they actually start to become material in terms of how they’re eating into share.
[30:07] The next train we identified was convenience.
As the new Battleground so again I talked earlier about the idea in the industry that says everything’s experiential and we’d actually say convenience as an element of The Human Experience in particular
is what’s driving the new Battleground the next train is health and sustainability for some.
And we talked about that Jason the bifurcation is that when you dig into health and sustainability it actually is not a broadly applicable trend is actually really applicable the higher income you go the lower income you go you actually find
reverse Trends in play.
[30:46] And then the last point is it builds upon research we had done previously and it’s fragmentation and consolidation of market share we actually see some really interesting Divergence happening
in terms of how market share is is consolidating where it once was fragmenting or fragmenting where it once was consolidating,
so those are those are the big seven forces that we go deep on and use data to support how those are shaping the future.
[31:13] That’s awesome and I let’s jump into a couple of those I do want to say I suspect you’re being slightly kind because you talked about this this ocean of retail prophecies and how you know most of them are just kind of.
Prophecies are opinions and I suspect there is a huge chunk of those in fact I just did a Google search on future of retail and there’s.
Seven million two hundred thousand results.
[31:41] And and I had a team that actually had.
Through those 7 million two hundred results and we’ve got them all categorized and we’ve gone through them so we really stared at him and said you know what are they telling us and in our research paper we really go deep into it so that you can sort of see
what the flaw is that that’s behind a lot of the approach to sort of thinking about the future.
[32:03] Yeah and so to your team and they’re listening I’d like to apologize for the 500 of them that were me but I think there’s another big chunk of prophecies in there which are the self-serving ones right which is like the the.
Computer speech vendor predicting the future of retail is computer speech.
[32:22] That’s right that’s right there there’s plenty of those in some of those are commissioned so they’re they’re commissioned by you know vendor
you know I something that does research but when you dig into them you can go okay this makes sense you’ve commissioned this study.
[32:38] Yeah so moving on from the the.
The grand setting to the sort of seven trends that you guys notice that we’re sort of grounded in your,
your consumer data set what the first one that jumped out to me is actually the first one on your list because it’s a topic I talk a lot about but that’s the commoditization and
premium ization which I feel like I’ve said that before but I never thought it was an official word until I saw the what use.
[33:07] That’s right now you can use it officially yeah you know when you look at products in particular and you look at what’s going on you know you certainly see this again and you’ll hear me talk a lot about reduction in barriers to entry,
that that consumers have access to technology that gives them visibility in a way you know that they didn’t previously have and then it also gives
you know anybody selling a product they’ve got Avenues to you so
you know if you’re buying a particular brand of something like mac and cheese you’ve literally got thousands of options to buy that very same product.
And what happens when that occurs when you know we’ve got you know slowly you’ve got margins that are being eaten into as one after another tries to out price
you know the other so we’ve got a lot of great research about how you know margins on products are being eaten away,
and that’s the commoditization at the same time you have this explosion of choice,
so you if you looked at a traditional grocery store and you looked at 1990 they’d have you know roughly 7,000 items
would be available in a grocery store in 2018 it’s 35,000 items so just an explosion you know of options that the consumer has available to them.
[34:24] At the same time we’ve seen this growth of private label in fact from 2015 to 2019 there’s been a considerable you know,
growth with you know with retailers who are coming out with their own private label product growing from about a hundred and thirty billion to about a hundred and forty three billion over a period of about four years.
[34:46] And at the same time that we’ve got private-label happening we’ve got a premium ization of private label so in 2016,
of that private label product about 15% of those products or the dollar amount would have you know been categorized as a premium,
private label product and go to 2019 and it’s grown to about eighteen percent so not only do we have private label which was once really a value play
we’ve now got private label that’s now more of a premium play so really this opportunity for differentiation really becomes you know.
The the critical component to think about in a world that’s both commoditizing and premium I guess I can’t say premium icing.
Unless I just made up yet a new.
[35:34] You can say it.
[35:35] You did sure weird.
[35:37] Thank you Jason said Jason says I could.
[35:39] #premium izing well well I kind of out of those seven I wanted to dig in on convenience as the new Battleground so tell us more about what you guys saw there as you looked at the data.
[35:55] Well first of all when we when we
talk to Consumers and you find out why they shop where they shop what we find is the convenience is the number one reason a consumer selects a particular retailer so you have to start there and by the way there’s nothing you know
I knew about that that’s not a new age consumer sort of thing in fact we as we studied this what matters most idea you know over the last 10 years we found that convenience,
continually comes in first as the most important thing so you start their second of all then we said okay well let’s go look at where the growth is in the industry.
And what we did is we took you know a look at categories where
convenience or particular retailers where convenience is a major or a primary element of the value proposition and when you categorize that way we find about 67 percent of retail growth from 2016 to 2019
comes from retailers that that prioritize convenience as part of their value proposition
in addition that you can certainly see a lot of the growth that’s happening let’s say with mass retailers their initiatives that they’re undertaking like curbside
or delivery things like that but also relate to convenience.
[37:08] And of course grocery in particular is the most desired area for convenience
but we also see things like this like what’s so fascinating about the future of predictions is there things occurring in the industry that nobody was predicting
so for example we see you know solid Healthy Growth in convenience stores.
And nobody’s nobody in you know in any of the predictions did we see someone talking about the rise of convenience stores as an important you know,
attribute are– element in the marketplace.
So across the board we see a lot of different ways you can look at it and what we see is convenience you know is really becoming this new competitive Battleground you know much more so than say,
experience like entertainment sort of elements that you might bring into the store.
[37:56] Yeah that was super fascinating it’s funny to me because I sometimes wonder like.
If convenience is even an unfortunate word to describe a category of store these days because they’re often are so many more convenient ways to.
To get a product then then those convenience stores and yet they continue to thrive and grow.
[38:19] This idea of convenience shows up in in in like when we looked at what’s really going on with physical retail it shows up very prominent there as well.
[38:29] Yeah another one of the trends that got me excited because,
embedded in this trend you talk about one of my favorite sawhorse is what I call the mobile Gap as this like shift to mobile devices but aov and conversion rate or not.
Equivalent of mobile devices to what they were on desktop so but your macro Trend was digital success grows elusive,
and explain a little bit what you mean to our to our listeners about that.
[39:01] Yeah yeah first of all certainly we know that digital continues to drive a significant amount of the of growth in the marketplace it’s roughly driving 50% of of the growth just last year.
You know in retail and it’s growing at about 14.9% sort of depending on what you know what source you look at when we look at it.
You know the u.s. figures that come from the government and we’re seeing about 14.9 percent growth rate however,
we’re seeing this dramatic shift.
To Mobile so now mobile represents about 45 percent of online sales and that’s growing fast you know Mobile sales grew at about 36 percent kegger since
2014 versus only six percent for other digital channels so you seeing this shift occur but there’s a problem when that shift occurs and you mention it and it’s that the conversion rate
on mobile is actually dramatically lower than the conversion rate on desktop dropping from about four percent on average down to about 1.7 percent on average
at the same time the average order value is dropping from about a hundred and twenty seven down to 86 percent so as your as many retailers and many consumer products companies are paying for traffic
to show up at digital that that conversion is converting to dollars at a slower rate and the amount of dollars that is converting or actually lower.
[40:24] So that’s problem number one that makes digital success more more elusive however when you then add to it this idea about ad spending
because we’re certainly seeing you know an increase spending
that shift is happening towards digital advertising and we look at the increase on digital advertising or advertising overall Because by the way as you shift to digital advertising we actually not seeing a commensurate
decrease in traditional advertising which means overall advertising is actually increasing at a fairly good clip
when retail sales themselves are not you know increasing at the same rate.
[41:01] At the same time the cost for digital spend or the digital advertising is increasing and digital ad spending per person is going up again meanwhile TV is staying.
Roughly the same if not increasing slightly so that sets up a world where we have to pay for traffic
right we’re buying traffic effectively you know as we’re investing in different you know traffic programs that traffic is showing up and is converting at a lower rate driving that traffic through advertising is more expensive than ever and then on top of that shipping rate
you know I have an increase from 2010 to 2020 ground shipping is increased 76% and are 80% so,
not only not only is it like advertising but its fulfillment as well and of course wages for warehouse workers have also gone up
you know considerably all those things put together those Trends lead us to believe that going forward of course digital is an important.
You know aspect of growth but that growth is becoming either less and less profitable or in some cases it’s got a deteriorating effect on margins for four major retailers so that’s only going to become more of a problem
as we move forward.
[42:16] Yeah I liked all that except the part where you dissed on Advertising because I think that pays my salary.
[42:22] I take back anything that pays Jason salad.
[42:26] No no no but like just I mean
to kind of highlight how real it is like in your in your data set you show in like 2011 Brands were spinning considerably more on television than digital and in 2017
the television spending was about the same but now the spend on digital was much higher than the televisions been so it’s.
That that inflection point has really been passed.
And yet all the digital advertising and I say this as a digital Advertiser still kind of sucks like I’m super disappointed.
With all the events this week that we like you haven’t seen more more advertisers like curtail their advertising for what is at the moment in a relevant product or service.
But I digress.
[43:13] Yeah no no it’s a good point I mean advertising is becoming you know less effective more expensive.
[43:20] Yeah so that was that’s just going to depress me so I don’t want to spend too much time on that I do want to try to squeeze one more in because this was fascinating to me VII Tran fragmentation and consolidation and Tower westerners with that man.
[43:35] Yeah if you follow the research that we do out of the the industry sector you’ll you’ll know this term because several years back we were trying to assess.
[43:46] What the heck disruption meant everybody was saying it but we don’t know how to measure it we didn’t know,
you know there’s got to be if it’s occurring there’s got to be a way to understand what it is and to quantify it and then measure is it decreasing or increasing or you know
what’s going on with it we came up with a way to think about it you can argue that this is the right way but this is how we came up with a way to think about it when an industry is being disrupted
you know new entrants are coming in and in doing so they’re disrupting the market share
most likely they’re stealing market share where you’ve got the losers or those that you know you got you got the companies that are donating market share and you’ve got new entrance that have shown up with a new better mousetrap
better offering and they’re stealing market share so we would assume that in a market that’s being disrupted you would have increased you know turn over,
of market share so we’d be able to we’d be able to understand that by studying what was going on with market share you know and in that came the first term II called it turnover but it’s volatility you know how volatile
the market share is for an industry is a measurement that we came up with on how to study disruption and then once you study whether or not it’s volatile.
[45:05] The next question is is it volatile because it’s fragmenting or is it volatile because it’s consolidated.
[45:13] And you know as we’ve studied that what we saw you know it was roughly 2016 when we study the first time for retail in particular what we found was the volatility was increasing
as new smaller players came into the market and not only that but fragmentation what is what was driving that volatility
so now you fast forward and we looked at it again to say what’s going on now in retail what we found was the opposite and this is really sort of interesting to think about is that volatility of market share in retail is actually going down,
over from 2016 to 2019 and meanwhile what we saw was it was concentration.
That was driving that volatility so in other words the big players were getting bigger as opposed to the small players were stealing enough market share
to you know stealing it from the big players which we saw occurring roughly in 2016 so it’s interesting just to think about how the Dynamics of competition have changed and therefore how the nature of whatever disruption we see is starting to change.
Now if you jump over cuz we studied it also as it pertains to packaged goods and we actually saw the exact opposite.
[46:21] Occurring what we really saw for packaged food companies is the fragment by the way with packaged Foods you have to look at it by brand not by
aggregate company because of course a big you know.
Branded company will have many many brands that they’ll hold so we actually have to break it down and say let’s look at this by Brand level and when you look at it by Brand level what you find is
the smaller brands are really weather driving the volatility
and you see dramatic fragmentation happening in the packaged food area so just ways for us to think about disruption
and to understand the Dynamics of competition and how that’s changing and therefore you know what do we think maybe you know shaping the future.
[47:04] Yeah and like to sort of sum that up like super briefly.
So retailer power is concentrating into a few big players and cpg power is getting fragmented into more entrance and so like obviously there’s a,
shift in leverage in the whole retailer brand.
Dynamic there when that happens so that’s an interesting thing to think about when when you know both tons of companies are plotting their future.
[47:36] And when you begin to put that together with we talked earlier about premium ization you know a product and and and private label all of that plays together to think about how the consumer is shaping their view of.
What they want to buy and where they want to buy it.
[47:54] Very cool so in the paper you go into quite a bit of depth on these Trends and there’s some really good data in there and then you kind of then springboard forward and you say well let’s let’s kind of look forward and see if you
you know what you should be doing maybe give us some highlights of that for looking kind of.
[48:14] Yeah sure thing yeah I know it’s it’s sort of difficult.
To lay out I mean one of the things that comes out of this it’s difficult to say the future of.
The industry is X because what history would tell us is that the future you know plays itself out differently for different companies and different segments for different customers selling different products so there is no
no singular future and in fact as much as one companies is Iggs
and has success that actually creates opportunity for another company to zag and have success so
you know as one company finds that online retail works and other company finds that physical discount retail works and they’re they’re not at all the same future however they do certainly coexist,
and that’s really important to sort of think about you know how you think about.
[49:09] You know your company how you think about setting strategy what we say is like think about opportunity through the lens of data,
you know for every data point that tells us something is occurring you got to look at the converse and say is opportunity being created on the back sides of this you know for
like we talked about Health and Wellness
you know we can say oh man the market is being driven by health and wellness you go it is for certain consumers but there’s opportunity for for other consumers who maybe are an economic constraints and maybe don’t have the luxury of.
You know buying the high-end health and wellness product maybe they still care but maybe they’re under different constraints
so what we try and do is we help our clients sort of think about how do you scenario plan around this how do we use our you know Center for Consumer insights to really think deeply about your consumer and identify where there’s pockets of opportunity you know and generally I’d say look you can read
the predictions about the future that are that are prophecies and you know read them as.
As input but I certainly wouldn’t be you know in certain would be encouraging my clients to make big Broad
bats you know based on Prophecy what I be saying is let’s make that you know based on a deep understanding of our consumer a deep understanding of what opportunities will exist given the the changing competitive landscape.
[50:29] But if you are going to make future bets based on Prophecy they should be mine.
[50:33] They should be Jason’s that’s for sure.
[50:37] Well I feel like that’s the perfect place to leave it because we have once again used up all our a lot of time but Casey this is super fascinating thanks so much for sharing the research and I know you’re going to figure out in the weeks to come where this gets published and we’ll make sure
westerners know how to find it but thank you very much for your time tonight.
[50:57] No it’s always thank you guys for allowing me to share what we’ve been up to.
[51:02] Kasey if folks want to find you online what are you a are you Snapchatting with a client’s or what’s your.
To get in touch with her buddy.
[51:11] So of course that you can find me Casey lobaugh I’m on LinkedIn I also M @k lob aaugh on Twitter where we publish a lot of our research and our findings we do a lot of speaks at what we’re up to there as well.
[51:26] Thanks for joining us and until next time happy commercing.
[51:31] All right thanks guys.
EP212- Jason & Scot Show Live Listener Questions About Covid-19 Impact On Commerce
Episode 212 is a live show featuring audience questions about Covid-19 and it's potential long term impact on retail. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube.
Subscribe to the audio version of the podcast at: http://jasonandscot.com. (or wherever you listen to podcasts)
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.
EP211 - ThirdLove Co-Founder David Spector
David Spector is the Co-Founder of ThirdLove, a digitally native direct to consumer women's intimates brand. Dave founded the company with his wife Heidi Zak.
In this interview with Dave, we discuss the origin of the company, their data driven approach to designing products, the challenges with scaling a DTC company, and the potential role of omni-channel. We also discuss their public feud with Victoria Secret.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 211 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Wednesday, February 26th, 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.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scott Show this episode is being recorded live from the ETail West Trade show in Sunny Palm Desert on Wednesday, February 26th 2020.
I'm your host, Jason Retail G. Goldberg And unfortunately, Scott was unable to join us today.
So as usual, when we have a good show, we kind of bump Scott from the agenda, and we make up for it by having a particularly awesome guest S O for today's show.
Please welcome David Specter, the CEO or co CEO, an important distinction and co founder of Third Love.
[1:00] It's great to be here, Jason. Thanks so much. Although.
[1:01] We are thrilled to have you all, though I kind of feel it's true that you're the least important co CEO at Third Love.
[1:10] I'm probably the least important person at third love. Uh, yeah, but it doesn't mean that your podcast is any more or less important just because I'm here. Yeah.
[1:10] I'm probably the least important person,
that makes us feel special on the podcast.
[1:22] I feel like we're arguably the second best podcast in the space compared to which everyone your wife is doing today.
[1:29] Fortunately for my company, she's back at home, actually running the place, adding value. And I'm here sitting with you, Jason. A detail. So which one's more important? I'm not entirely sure, but I'm still honored to be here with you.
[1:29] Unfortunately for my company, adding adding, adding value.
[1:39] I That's why I like the double bandwidth from a power couple is so useful for a company.
[1:46] Dividing conquers what we like to say. So here I am, a detail and it's and it's an honor to be sitting with you. You've got a great podcast. Enjoy listening to you guys. So thanks so much excited Thio chat about what we're doing at their love.
[1:48] Exactly. I like it.
[1:53] So thanks so much excited about what?
Gotcha. Uh, that's ah flattering to say. And flattery will, of course, get you, like, mostly anything you want.
[2:03] Most anything you want if you want to know.
[2:04] If you want me to avoid the tough questions, Uh, that's that's a smart way to play it.
[2:08] But will it get me more sales online? That's the question, Jason.
[2:11] Yeah, we're gonna have to talk about that. But before we jump into that, listeners are always super interested in the background of our guests and particularly if you like.
We have a lot of listeners at home that aspire to be you one day. So can you share, um, sort of your your path to your current role?
[2:28] So my path is is quite different than most founders. In some ways, I was at Google.
[2:28] So my path is is quite different than most.
So I What's that? Google. I've heard of them there. Ah ah, an up and comer and I think is there for years.
[2:36] I've heard of them. They're nothing. Come, right.
I was there for a couple of years. From 2007 to 2010 after business school on business school, I met my my wife and better half and business partner Heidi.
[2:45] Business. Why, then my wife,
arguably the best reason to go to business school. You don't s so I've been told. Yes, I actually met my wife at one of these trade shows.
[2:52] And, you know, from experience, Jason.
[3:00] Oh, so trade shows air a lot less expensive than going to business school, though.
[3:03] And less work, frankly.
[3:04] Yeah, take a lot less time. So I think you actually ended up in a better place. And I did. And that way it saved in save less money.
[3:06] So I think you actually ended up in the better. Okay, I don't know. I've caused both winners.
[3:13] Uh, save more money. So Well, anyway, so we, um, was a Google for a couple of years on then, while I was that Google was recruited by Sequoia Capital to join them, I never wanted to be a venture capitalist was never on my radar. I am a builder.
I enjoy managing people building teams. I was never thought of myself as an investor whatsoever.
And so I took the opportunity, joined them.
I was based in Silicon Valley and started investing in startups in 2010 and it was really interesting time because the Internet and sort of Web to die, though three dado however you want to define it.
Jason was really starting to get prevalent on was growing quickly, and so we were sort of at the beginning and forefront of that.
And brands online were really just starting.
Prime. I'm not entirely prime did exist, but nowhere near to where it was two today, and retail was still popular that the Mullens were successful.
The death of retail sort of. That narrative didn't exist then, And so when we got started in 2010 investing, nobody was really thinking about consumer brands in the same way I took it.
A cz an initiative myself as a new investor because I thought it was something that could be big toe, actually get started on start looking at brands and where e commerce was going and so ended up investing in a company named Stella and dot.
[4:39] Back when I was at Sequoia was quite involved in the business.
As much as an investor on the sidelines can be, but got very interested in broadly female base commerce.
[4:49] And so, in other words, women that were building brands online to serve other women.
And because the percentage of women founders is so low, generally it's higher now, and we're lucky that it is higher now.
But it was even lower then, and there was a lack of our dearth of the number of female focus brands that we were seeing online. And so what we decided to do is make it an initiative to actually find those businesses and brands.
And in many ways, as it was at Sequoia and was thinking about what we were looking for as investors.
[5:25] Hide and I were talking about the intimate apparel space, and it was a category that I had never thought of.
Uh, certainly thematically, it was never on our radar again. I was thinking of sort of female based commerce, commerce, new sort of web, 2.0, base brands.
DdC wasn't a term then, on sort of where the Internet was going from a commerce perspective, and she was thinking about intimate apparel,
and sort of in our living room at night, just like many businesses that air started, we started conceiving of of what then was called something else.
But what is now third love and we started to get really sort of excited about what we could build online and where we thought this industry was gonna go over the next decade.
And that was really the beginnings of third love on our living room in our living room, on our dining room table, laying things out before we took the sort of bold leap that every entrepreneur takes in this country and quit her job.
[6:22] That is awesome. And ah, I suspect a majority of our listeners are already familiar with third Love. But for those that aren't can you gonna give us the elevator pitch? About what you doing? What you're you're unique value properties.
[6:36] Absolutely so we set out and and have executed on today, really three things.
One was to build a brand which is authentic and highly inclusive, too. Was architect away to buy abroad that doesn't require a fitting room or visit to a store.
And three was not designed and manufactured better product.
Using the latest in material science and data science to absolutely nail fit and comfort two areas fit in comfort that really have never been a part of the narrative. Previously in this category you know women for the most part, which was very interesting to me as we were looking at the category.
Nobody really likes their bra. Nobody has a strong attachment to the brand that they wear.
It's fine. It does the job. They have to wear it.
It sort of part of what they need to do every day. But they don't really enjoy the experience shopping for it, nor do they like the product very much. And so we thought there was a huge opportunity Oh, to do those three things.
But look in summary, we wanted to change the status quo and how comfortable abroad can be and wanted to build a brand that was for every woman, regardless of size, shape or ethnicity.
[7:41] That that is awesome. And it's it's shocking in hindsight.
Ah, but But, you know, you really think about the successful players in the space prior to your entry, and it frankly feels like they were mostly focused on marketing two men, Um,
so somewhat shocking that there was, like, such a white space tow both market, too, and,
like focus on product attributes specifically for the users of the product.
[8:07] Yeah, you know, that was really surprising to me. I I like you, Jason.
Have been on the other end of that marketing as a man by this gift for your spouse or something along those lines.
And I was always really surprised that the marketing, as I started to think, sort of outside the box of me as just a consumer.
Why the marketing was always so focused on me when this was a category where the vast majority of purchases in it our focus on women but our focus on their needs and focus on them as,
as moms, as them as business executives, as them as doctors, as nurses, et cetera.
And so I was really surprised that the vast majority of marketing prior to Third Love was focused on that.
And so what we set out to do, which again was quite counterintuitive given that the largest player in the space was peaked at a $30 billion market cap in 2015 I was doing very, very well with very high margins,
that we would think that we wanted to do something completely opposite of what they had done.
So from a sort of building a startup perspective.
It seems pretty crazy on and funny enough, the investors that we pitched mostly thought we were crazy.
[9:21] Yeah. Uh, you tell me This is true for you, but a in talking to female entrepreneurs, Um, there's a common story that it's really hard to pitch your business to V.
C's because they the tender not have empathy and see the market opportunity for products that have, ah, value Prop two women less so than the men.
So they tend to not understand a woman's problems, and therefore the opportunity is strongly.
[9:49] Yeah, And you know, I had somewhat of a leg up because I sat on the other side of the table.
[9:54] Yeah, I'm sure.
[9:56] And the leg up, though, that I had was when I started to think about how we needed to pitch third love to a mostly male audience.
I had been in that audience previously, so I had the opportunity to think through what we needed to do differently and what the people on the other end of the table who are not, for the most part, are not sexist at all.
And the end of the day, whether it's widgets, bras or the next great you know, Social Media platform, they ultimately don't care.
Veces wanted back great entrepreneurs going after large markets, building riel sustainable businesses, and so and they don't care what it could be.
Uh, and so when I thought through what we needed to do differently in this category, we really needed to sort of change the narrative of what we were gonna build and how we were going to do it.
Uh, and that was really what helped us get off the ground and helped us appeal to what was a mostly male audience when we were pitching. As you said earlier, a mostly female oriented business.
[11:01] Um, so fast forward to today. Ah, couple weeks ago, we had wary Ingrassia on the show s o. He's the author of $1,000,000,000 brands.
And as I I assume, you know, uh, you are one of the prominently featured brands that he writes about in the book.
Um and so am curious. Ah, like, I assume you've at least read that chapter. Does it feel like he captured? Ah, an accurate representation of your story, Or is there any quibbles you'd like to take? Well, he's not here to defend himself.
[11:34] You know, we were honored to be in Larry's book and to be sort of one of the the company's defining the direct to consumer New Age brand generation.
And he did a very good job of capturing this story of Third Love and how we got to where we are today. And you know where we are today. It was, you know, it's seven years in, so we're on, sort of not even really on first base yet. We're just getting started.
Uh, but how we got here to almost first base if we if we put it that way, is a story in itself and one of perseverance.
Many, many, many challenges.
[12:11] Lots of late nights. I and a lot of failures on a lot of mistakes to Heidi and I have always been one to admit our mistakes and to try toe try to spend time thinking about what we would have done differently.
And fortunately for us, Way made numerous near fatal mistakes in the early days of the business.
[12:33] Example was manufacturing in Mexico on trying to build a maid on demand supply chain the broad industry interesting Thio.
Most men or women have no idea about this Broad's one of the most complex garments to produce.
There's 30 components in a bra, even with automation today in manufacturing things air mostly hand cut in hand sewn and being outsiders in the industry.
We looked at that, and then in the by the way to that point, the amount of time it takes to develop a new size and a new style is very, very cumbersome and laborious.
It takes a long time, and so s so you need to have a large wallet and you need to have a big company to develop it.
Which is in part, why the largest competitor in the space has gotten so big on the untold story of them is really supply chain.
And there's a lot that they did in the supply chain that we have a tremendous amount of respect for, because getting supply chain dominance to be able to produce product at that kind of scale is really hard to dio.
And so we looked at that as young founders and we said, What do we want to do? Different how we flip this pretty backwards process that's been the same for five decades?
[13:45] Flip it on its head and just do things differently.
How can we use technology to build something that's fundamentally different?
And so we conceived of a new way of manufacturing that we that enabled us to get into the supply chain.
People wouldn't have taken our call if we just said We want to make a better bra in China.
[14:03] Uh, and so they took our call and, by the way, didn't take our call because we had no volume.
We didn't have money to spend. And there's a lot of money required on the manufacturing side, the manufacturer side to get a new company up and running with new sizes and new styles.
And so nobody wants to work with a new company because of the amount of cap access required to get them started in R and D.
And so we had a pitch that was very, very unique around made on demand, and they don't demand while it didn't work, and it was a near fatal mistake.
That mistake, like many things in it start up, is what enabled us to be successful today in the supply chain in a fairly short amount of time because of that learning that we had with this mate on demand supply chain,
in Mexico that enabled us to get a foothold into the supply chain, that we were then able to pivot to Asia and start getting started.
T get started building what is fundamentally a better bra with entirely novel raw materials.
Better fit half sizes. And we're the only company in the world that offers half size bras, 34 B and 1/2 C and 1/2 et cetera.
We couldn't have done that without some of those early mistakes.
[15:10] That is awesome, and I wantto poke on the half sizes.
But before I d'oh if I were toe grossly oversimplify, wear his breakdown Of all the companies in the book, uh, he kind of talked about.
There's these these three different ways digitally native brand, um, might seek to gain advantage, right?
Like there's there's companies that take cost out of the chain so they can sell a lower price product. Warby Parker, for example.
There's companies that reduce the friction to acquire the product.
They make the buying process easier. So bed in a box versus having to go to a traditional mattress store, which could be a miserable experience on.
There's companies with, like, unique product innovation that in some way, uh, invent a better mousetrap. And most of the companies he talks about 10 to primarily have one of those three.
Advantage is one of the things that ah, as an outsider I admire about your company, is,
it seems like you're really leveraging all three advantages, so it feels like you focused on a unique product that's better than what was available.
You have, ah, lower friction way of acquiring it, and because you're direct um I'm not sure you're necessary competing directly on price, but you're able to offer Ah.
Ah, very strong value proposition.
[16:32] Yeah, And again, I This is, I think, in order to build a successful director consumer business and by no means every successful we have so much more work to D'oh!
[16:32] Yeah, And again, I I in order to build a successful,
I don't mean to be successful.
[16:44] You have Thio Well said Jason.
[16:45] You're 13 years away from being overnight success.
[16:51] Um, yeah. I mean, look, we I don't think that having just one of those things allows you to be successful having just lower price,
and the website doesn't work because everybody does that.
An Amazon does that Amazon does that and can compete with you all day long and get it to you a lot faster with better customer service and way more selection.
So you have to have a combination of many, many things.
[17:21] Our category is one where price is important, but it's not one of the most important factors to it.
Uh, and what we said was, we don't want to compete on that, because what we offer is fundamentally better.
Now we may not be an overnight success and grow to $100 million in a year because we offer something for $35 right?
Or the same prices. You could buy it at Wal Mart or target even lower in some cases.
[17:48] No, what we said was, Let's just fundamentally focus on the core differentiations for the category, which is much better product more sizes,
better brand that resonates with women of all sizes, shapes and sit in shades and then, lastly, await a shop that you don't have to go into a retail store on.
That was a key differentiation for us in something uniquely unique to our category.
Women don't enjoy shopping for this product in store.
It's not something I do socially with their friends. It's not a fun experience and what we want.
And also there's women everywhere eyes, women all over the country and in states that don't have any crossed yours, Uh, and so in small towns that are, you know, 500 miles from the closest mall.
And we want to be able to reach all those women and offer them something just as great as the woman in New York City or San Francisco.
And so the way we do that today is through a great website experience that's highly personalized and through something called fish Finder that we conceived of Fit Finder.
[18:53] Through a variety of questions allows you to get, you know, for the most part the perfect fit down to the half cup size to date.
We're very proud and sort of another kind of pinch me moment. Given that, you know, we still view ourselves a start up.
17 million women have taken Fit finder.
[19:10] That's amazing. Uh, one of the things I really like about your story is it's always interesting to look at someone's original hypothesis for their business and how it has to evolve.
Um, and I feel like you've had a bunch of evolution, like so as I understand it, when you originally launched the company, you had this hypothesis that,
like the original broad buying experience, sucked, um, and that you know, this some version of this fit finder could be, ah, much more enjoyable way to find the perfect fit bra.
But in the process of building that, you found out that bras in general don't tend to fit a significant segment of women.
And so the half size thing was less your original hypothesis. But something that you discovered is you got to know customers in your space.
Um, you found a great a great white space to address.
[20:02] Well and 25% of our sales we have 80 plus size is 25% of our sales are in half sizes,
on we estimate through our data, and we have one of the most comprehensive data sets in the world on this because of what we do and how we fit people.
[20:22] 30% of women are should be in half cup size, right?
And so it's that data. It's it's it's the holes in the data that we saw where our machine learning our other algorithms would say to us recommend to this woman,
machine Learning would say this recommend to this woman 1/2 size.
We kept seeing that over and over and over again before we came up with half sizes. And again, this was data that nobody had ever seen before.
If you shopped him all, um, there is no data.
I mean, maybe there's your credit card data and some some foot traffic data, but that's it.
You don't data on her preferences in her size and body type etcetera.
So we have this massive data set that kept growing. We kept seeing the holes in the data and kept scratching her head because the the algorithms would spit out errors and save us.
We don't know what size to recommend to this customer. Help us train me.
And we kept seeing this pattern over and over again and we said, Wow, there is as you said, a white space here.
There's a large percentage of at least our customers which,
as it grew, we started to realize was more, uh, you know, mapped closely to the United States who are 1/2 size who are in between cup that we should address in sort of one of our tag lines.
Now his shoes of half sizes. Why shouldn't bras?
And that just boils down the fundamental problem.
[21:49] Why shouldn't we give customers what they want? Well, the reason why nobody had before and the reason why nobody else has been able to do it. It's twofold. One.
You can't develop 1/2 cup size without the data set that we have. It's not about just splitting a B and A C in half.
There's more nuances to it, and you need a fit model to be able to fit it on and develop product off of.
We don't you know, for the most part, we don't use fit models at third Love.
Secondly, in a retail base business you already constrained by footprint, you're already constrained by a stock room, right?
Where for our category, there is a lot of inventory already.
Let's say you have 30 sizes. You have 30 sizes in every style color variant, which requires a large stock room just to stock that in retail because you don't want somebody to walk out, you don't have their style, style or size preference.
Um, in our case, reused warehouses.
We have the Internet, so we can stock, you know, depending upon inventory costs, in holding costs and in warehouse space, we can stock almost an unlimited number of sizes.
If we needed to, we won't. But we could, and so is your supplier exactly.
[22:54] In case your supply chain guys are listening, You can relax now.
[22:58] But the point is, we can do things that are important and are requested whether she's requesting it directly or indirectly by her data for the customer, we could give her what she wants.
Instead of pushing her into a size that we have in a retail store, we could give her what we want and developed product way, way faster and new sizes because of that data set, and so that ability to do that with the Internet.
The ability to use data in a really, really smart, powerful way is really what has allowed us to address a much larger portion of the market as an example.
One of the largest companies out there, they only go up Thio. I think maybe a double D cup in store, right.
That's because they're constrained by that by the shore we can offer.
And so they can't go after a larger woman. They can't go after a larger and a larger part of the market, the larger part of the total addressable market or the TAM we can because of the Internet, because of warehousing because of our ability to use data.
[23:55] I love it. And so that that customer intimacy in that direct customer data, um, enabled you to discover this opportunity and half sizes.
Conversely, it sounds like when you started the company, you have a hypothesis that the camera, phone and computer vision would be, ah, revolutionary way for women to help fit themselves.
Um, and it seems like today the fit guide is working phenomenally, but it's it's largely not a computer.
Vision based was I'm curious. Like, Was there a learning that that that wasn't the right approach for women?
Is that still the future? And it's just too early in the technology curve. What? You're your p O V on that?
[24:37] Yeah. I mean, so you're right. I mean, we, uh That record.
[24:37] Yeah. So,
right, E let the record show I'm right.
[24:47] Computervision and using a smartphone app to get fit was very, very novel for when we did it, we were operating off of a chipset.
I phoned 45 That was probably 1/4 of the speed of what we operate today. Maybe even 1/10. And I don't know exactly with a with a camera camera optics that are far, far, far less powerful.
Furthermore, open TV, which is an open source library for computer vision that we were also utilizing was nowhere near as advances it is. Now.
We're building all of this in house again. We wanted toe always find a way to bridge the gap.
So a woman didn't have to go into a store so we could reach a woman in Barrow, Alaska. For all those Barrow Alaska fans that are listening to this.
[25:33] It's a big audience for us.
[25:35] Barrow, Alaska is on the north slope of Alaska. And that's an example because there are, of course, amazing, amazing women that are there, and we want to be able to reach them.
We want to be able to reach women everywhere in this country and prior to third love you needed to go into a store to do that.
And, of course, all women over a certain age need to be wearing a bra or should be wearing a broad for the most part.
So, um, we want to be able t o reach everyone that we possibly could.
And so this smartphone app that we developed and a lot of technology, and today we have a number of patents on it, all of which have been granted on.
The technology that we developed was really, really novel. But the problem was, the conversion process wasn't as simple as it needed to be.
You couldn't be sitting on a bus to work and using the APP you couldn't be laying on the couch watching TV.
Using that you could be laying in bed, doing it to be in front of a mirror, wearing wearing a tight fitting tank top, pulling your hair, pull your hair back, take your smart take the smartphone cover off, and then through the use of two photos and the smartphone itself was the reference object into the mirror.
[26:42] We use the gyroscope for calibration. We use the flash. Recalibration was really, really novel we had hundreds of thousands of people that use it.
We were Editor's choice in the APP store way. Want a lot of accolades and awards for it. We were very proud of but didn't work because the conversion process was too long and when it worked for people, it worked incredibly well, and women loved the experience.
But we weren't growing as quickly as we needed Thio. We learned a lesson about conversion.
Now that Data said, without those early mistakes, without building that app, we couldn't have used that initial data set to then Pivot and I talked about pivots earlier because they've been really important in our on our history and in our growth.
We couldn't have pivoted into fit finder today. So those initial learnings about conversion, that initial data that we had,
went into powering what is fit finder today, we never would have able to get those algorithms off the ground without that initial data set.
[27:34] No, I totally see that. The, uh I am a hypothesis. Usually I'm wrong.
Um, but the a lot of the smartphones now have actual distance measuring capability. Like, you know, it was on the front camera for facial I D.
And so I keep waiting for the the version of that to be built into the back of the cameras. And I think when we get that, we'll get hyper accurate measurement, and I feel like for a lot of fit mint categories, that's gonna be a game changer.
[28:02] Yeah, Jason, you're right. It's the true depth camera on the front of of of the latest versions of the iPhone is coming to the back.
I had the technologists and very, very excited about that.
And what we need to do as retailers or retailers is find ways to make it easy for her to shop from home and to not have to return a product.
Our return rate is is incredibly low for the industry, but it's still hi, um uh, and higher than we would like it to be.
And at the end of the day, for us, putting customers first is our is our most important core value internally at the company.
And if we think of it through that lens, putting customers first, nobody likes have to return. Nobody likes to get a product that doesn't that doesn't work for them.
Fit Finder while, while it is very accurate, doesn't work for everybody.
And so someday we will take some of those new advancements on smartphones, pivot R i. P, including our patents, and build out what will be the next version of being able to get fit from home using a smartphone. It's very exciting.
[29:03] Very cool. I will be looking forward to that. I do want to touch on the date a little bit. You referenced it a lot. And to me, it's one of the most important competitive advantages of the D to C model.
Is that direct customer intimacy and the the competitive data you can gather about how your meeting customer needs air?
Not so you know, you mentioned that that the first versions of that fit finder gave you a data set that taught you that the standard sizes didn't fit.
I advise a lot of big established brands and a super calmer common conversation is should we have a direct to consumer model and my my general advices, your issue is less about whether you sell direct to consumers versus cell through wholesale.
You're your problem is you need the customer data that those direct to consumer companies air generating. So if you're a traditional bra manufacturer, you sell. You brought a walmart and WalMart sells it to a consumer.
You have no idea whether that customer was happy with the bra or ah, whether that that bra particularly well fit.
And so the fact that you do have that data gives you ah, huge, defensible advantage versus the traditional apparel manufacturers.
[30:15] Yeah, and I and I think, Look, everybody is in the data arms rates race today.
Whether you're a traditional retailer, whether you sell car parts, everybody is focused on data on the one thing that we did differently. 1/3 love is we built this company from the ground up with a focus on data.
Right. So we had the advantage that we had while we didn't have the resources, We don't have the capital of a large company.
We had the start of hustle, and we had the foundation that we started from the ground up, which would be very hard to change if we were a well established business that was focused on using zeros and ones to our advantage.
[30:50] Yeah. So let's let's pivot a little bit and talk about one of the big challenges I generally see with digitally native brands.
So, um, in the modern era, uh, particularly with the advent of Facebook and Google and digital marketing, it's become much easier and cheaper to launch a company and have some initial success.
So we look out there and there's a ton of of digital native brands, Um, that get out of the gate fast and, you know, grow to some size by cost, effectively advertising on Facebook.
But in general ah, bunch of those D d C company's sort of plateau like they're they're hits a point where the next of eyeballs on Facebook or even more expensive than the ones you bought, um, and it becomes hard to profitably grow.
So when we look at all the the D to see companies that get talked about a lot, a lot of them kind of hit this plateau, and it's been really hard for them to continue to grow.
And I'm curious if a if you're worried about that at Third Love.
If you've hit that plateau, um, if you have ah strategy to continue to get new customers and grow, you know, even as the the ad buying on Facebook gets more expensive and more competitive.
[32:05] Sure. Well, we're always thinking about the challenges of scaling acquisition marketing on. We have a really great leader on our team now that spends all over time thinking about that.
[32:18] We have a couple, uh, advantages, though one. We have very high gross margins.
Uh, and it didn't used to be that way. In fact, our course Martin just be a lot lower.
And we've been able to scale gross margins dramatically through improvements in our supply chain.
And again. Supply chain is a huge differentiator in our category. It's the untold story of the large, successful businesses in the space is their dominance and supply chain.
And so we've done a great job of scaling that which allow us A you know of the you know, when you buy a bra were able to spend that money,
on the Delta from in gross margin of profit on things like marketing on things like data science and data engineering.
So we can create a better experience, and that really provides us an advantage.
Furthermore, the other advantage, which is an advantage for everybody in this space on no different for us is this is a highly recurring high repeat business.
When a woman finds a bra that fits, even if she doesn't even like the brand, uh, she tends to stick with it for a long time.
[33:21] And so from Analects standpoint, do you guys tend to look a customer lifetime value, like is that important?
[33:22] You guys value customer. LTV is incredibly important to our business. We measure that, uh, it's unlike some of these other categories that you mentioned.
It's not a one time purchase, right? If we do our job, and I'd like to think that we do our job 90 plus percent of the time I delivering a great product that fits in a really phenomenal customer experience, she will be our customer.
I hope for a decade or more on that's inherent to the category, right? It just There's no reason to switch if you find something that fits, especially 1/2 size, obviously we have a distinct advantage of half sizes to nobody else offers that outside of half sizes.
If we provide something that really is phenomenal, that exceeds all expectations that she loves, we provide a brand that she that resonates with her that speaks to her, not that speaks to her husband.
We can really, hopefully keep her for a very long time, and that's our job, and that's what we're focused on. Eso.
There's two sides, really our marketing strategy. One is acquiring new customers and having purchased us purchased with us before, and the second half is providing a great experience to our repeat recurring revenue customers.
[34:34] That's awesome. Ah, I also I noticed that you want to pop up store, brick and mortar store in New York this year, and I think you also have a partnership with Bloomingdale's. If I'm not mistaken is, ah, brick and mortar, part of the the expansion strategy.
[34:48] Well, we we haven't had a partnership with any other retailers in two years, so we don't the only place to buy third. Love is through third love, so we're we're fully direct in terms of our retail store.
[35:02] We, uh, unlike other director consumer players that built stores very quickly after they got started.
We waited almost seven years before we launch our first store, and we wanted to prove a number of things out before we went into retail one.
We operate in a category that women don't want to shop in a retail store for generally right. It's unlike other county, unlike apparel.
Unlike a number of other direct markets where the experience just is better, you know you're dealing with the fit of pants or the fit of a blouse.
These are things that, frankly, it's a lot easier to try and a couple sizes in a couple outfits and figure out what works for you in store. I have to deal with the return.
We operate in a category that's not that way. So we really wanted to prove out a great customer experience to put all of our resources, all of our energy into creating that customer experience.
The challenge with retail is it is very, very labor intensive and very time intensive.
It requires an entirely new skill set, and we're in the early days for learning that skill Set 1/3 love.
But so far, the learnings in our one concept store in Soho haven't really successful. We're really, really happy with what we've learned in that store, and that will prove on that will be a part of our strategy going forward what we've built out there.
But it's not gonna be the strategy of blanketing the entire country with as many stories as we can.
We want to create an experience that is a creative to the overall online business. That's our objective.
[36:24] That is faring well before the watching the continue evolution of that strategy.
Um, I want to pivot for a second and and, ah, talk about the controversial topic from this week.
So you you referenced your big competitor a number of times and we're all friends here.
That's l brands Victoria Secret.
And if I have the story right, you guys sort of ended up inadvertently in a feud with Victoria's Secret. I feel like, ah, one time CMO. They're sort of like shockingly called you guys out and you got into a little bit of a public dialogue.
Fast forward to this week. I feel like you guys definitively one that because I L brands is selling Victoria Secret at evaluation much lower than their peak.
And the narrative about this decline of Victoria's Secret is largely that they lost their audience and weren't weren't appealing to customers.
And when brands like third Love that talk directly to women emerge that it became impossible for them to compete.
So congrats on crushing Ah ah, formidable competitors. Do I have that story right?
[37:35] Well, you know, Jason, you said earlier that we've definitively one that, and I don't agree.
We will when? When every woman in America is wearing something that fits her and wears a brand that resonates with her and speaks to her,
and that she's not ashamed of wearing or receiving the catalog from a brand that her six year old daughter I have a six and 1/2 year old daughter,
or her 12 year old teenager who's getting into her first bra isn't ashamed to be shopping on in,
or wearing Ah, brand that she doesn't hide the catalog or hide the pretty pink sparkly bag because she's too embarrasses. Have anybody at work see that she was shopping there?
That's when we'll win. So again, we're really just at the beginning.
We've got so much more work to do In order to do that, I wouldn't necessarily say that we are in a feud with that company.
[38:36] We are building something that's really different. We're building something that really is the antithesis of what they built in every way. Online verse offline.
The brand is very, very different. Everyone knows that. Who is familiar with with what we're doing.
The number of sizes we offer is 2 to 3 acts larger than theirs.
So inherently we can go after a much larger portion of the market I.
[38:59] And we offer a a really data based experience that that enables me to shop from the comfort of home so sort of securely uncomfortably, and that's that's very different.
And so we have so much more work to do there. I think that L brands has created there many of their own problems on, and I don't think that we deserve the credit for it.
Actually, we deserve credit for changing the narrative out there, but we don't deserve credit for their downfall. And, um, you know, I hope that, you know, competition's a good thing, and that's what makes America great on.
I look forward to hopefully that them emerging as a stronger competitors because having some competition is good and them changing their narrative, changing their brand, changing the types of models that they show is a really good thing for the world on.
They have a large voice, so I'm hopeful that they can and I look forward to competing with them in the future.
I think they've got a lot of work to do. They were bought by private equity for those that don't know and bought by a private equity firm known for sort of taking a cleaver knife and chopping things apart.
I hope for all of the amazing women that work there, and I'm sure there are.
I know there are many amazing women that work there that too many jobs aren't lost, so I'm hopeful of that.
But third, love is hiring so well stated, very magnanimous of you.
[40:18] Very cool. Well, that's ah. Very well. Say, did. In very magnanimous of you, I do know that we can both agree to the extent that third love does deserve credit. Is Heidi and not you.
[40:21] I do know that we can both agree to extend that love does.
It's not, you know, 100%.
[40:29] In case she's listening. I just wanted to make sure. Um So listen, we're coming up on time.
I do want to get one other question before we do one at a time.
Um, if you and I get in that time traveling DeLorean and fire up the flux capacitor and jump sort of five years in the future from today, do you have a vision for how the shopping experience might change?
I mean, is our store's gonna be gone, and we're all gonna be buying her stuff from direct to consumer. Like what?
What's the consumer landscape looked like five years from now? Mr. Fancy MBA xvc successful entrepreneur.
[41:07] Well, I unfortunately, based upon inexpensive education, that probably wasn't really worth very much. I still can't predict the future.
Uh, so I think that where we're headed is a world that is truly on the channel, where there is a lot less retail, and the retail that wins is retail, that is differentiated.
That looks very different from it. It looks today that has a digital experience built into the retail store.
Experiences are what people want.
They are looking for more than just product. They can get that same product online, the exact same product you can buy in a store today you can always buy online.
I don't know of any examples that you can't are very few examples.
And so I think that the world in the world of commerce online in the future doesn't look all that different than it looks today.
I think we will see sort of the evolution of the smartphones that we all carry around as processing power grows and optics get a lot smarter and the camera on the front.
[42:16] Those sorts of things will enable technology companies like ours to actually be able to create really great at home experiences to bridge the gap.
But retail still won't go anywhere. And the retail that wins the retail that would be highly differentiated and creates a great experience in store that again is a creative to that online experience.
But the Allman Experience has to lead because that's what consumers want.
[42:37] That is a great advice, and that's gonna be a great place to leave it, because it's happened again. We've used up our allotted time.
[42:38] Great advice, a great place to be because it's happening. We've used up our A lot of times.
[42:44] Um, you did mention that you were hiring It turns out there's a bunch of great e commerce pros and digital marketers that was in the podcast. Is that a particular geography that you're looking for talent in our.
[42:45] You did mention that you were hiring It turns out there's a bunch of great commerce frozen digital marketers.
Listen, podcast, is that a particular geography that you're looking for?
Third love is we're about 300 people, and we're headquartered in San Francisco.
We are hiring mostly in San Francisco for the digital marketing pros that you mentioned, so please reach out to us. We're at careers dot third love dot com on dhe.
Let us know kind of what you're looking for. If you see any jobs that sparked your interest, whether you're in the Bay Area or somewhere else, we're certainly open to having people relocate to the barrier.
[43:23] Awesome. We will put that link in the show notes. So no need to write that down of your driving. David's been a real pleasure. I've really enjoyed our conversation. Thanks very much.
[43:30] Thistles. Superfund, Jason, thanks so much. And thank you to all the listeners out there and thank you to all the customers of Third Love and the future customers.
[43:35] The customers and the future. Absolute. Look forward to having human down. Thank you so much for your support of our business.
[43:38] So we look forward to having you and thank you so much for your support of our business. We are just getting started.
[43:45] That is awesome. And until next time, happy commercing.
EP210 - Amazon Grocery and News
Episode 210 is a recap of the weeks news, including eTailWest recap, Amazon Go Grocery, Walmart new programs, impact of Coronavirus, and retailer earnings reports.
eTail West recap
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 210 of the Jason & Scot show was recorded on Wednesday, March 4th, 2020.
Google Automated Transcription of the show
[0:24] Welcome to the Jason and Scot show this episode being recorded on Wednesday March 4th 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:37] Hey Jason and welcome back Jason Scott show listeners there has been a ton going on in the world of retail.
Amazon and e-commerce so tonight we are going to focus on the news for we do that Jason you before coronavirus hit you had done a little bit of traveling and now I think your wings are probably clipped a little bit.
But you were a Tito West.
[1:01] I was it was a tough duty to go to Palm Desert in the middle of a Chicago Street snow storm.
[1:08] Toughen did you bring the family or you left them back there to deal with that while you were your sunbathing.
[1:15] I did the the family did stay at home they they were certainly welcome to attend
but I think they chose are my four and a half year old certainly did not choose to stay home but my wife chose to stay in Chicago,
for her work in life apparently are kind of a big deal.
[1:38] Yeah cool how is this.
[1:38] I have some big news for you with my son those God I'm kind of depressed.
I feel like my son my four and a half year old son is turning to the dark side of the force.
[1:51] Everyone goes through a face there's a the the dark side is there's a big draw there.
[1:59] That yeah I he's begging for like Darth Vader and kylo ren action figures and I drove him to school this morning and we had to sing Imperial March theme song over and over again.
[2:13] Nice that's some quality parenting.
[2:15] Yeah he totally has it down.
[2:17] As long as he's in the universe and not you're not talking All-Star Trekkie then he can be on the dark side.
[2:22] To my knowledge he does not know that Star Trek exist yet.
[2:26] Good good.
[2:27] But so yeah so that aside I did get to go to e-tail West last week which was a pleasure listeners may already know that because we already published one of the shows from e-tail
I got to do an interview with Owen Comerford who's the CEO of Moose Jaw.
Smooth jazz a great outdoor apparel retailer that was oddly purchased by Walmart a couple years ago.
[2:56] Cool and he's stayed on to run de.
[2:58] Yeah it's Moosa is famous for their clever and quirky marketing and oh and is actually the,
the owner of that marketing so for a long time Owen was the CMO and was responsible for a lot of the campaign's that made him famous and then Owens boss the the CEO of left to go.
Run Blue Nile and Owen was promoted to CEO so.
Doing a good job there a Moose Jaw and then he has a side hustle Walmart also made him the sort of general merchandise manager for outdoor for all of Walmart.
Yeah so that was a good conversation and they do clever marketing campaigns like if you're afraid to break up with your boyfriend or girlfriend call us and we'll break up with him for you.
[3:51] Yeah never rabid kind of audience that rates things and is really into the outdoor stuff and and really engaged right.
[4:02] Yeah yeah they're super smart about engaging their customers and they behind the scenes they have a really powerful 360 degree view of the customer and all that all that good stuff so.
They definitely have a bunch of best practices.
Somewhat aided by the fact that they're relatively small prior to other Walmart acquisition yeah so that was a.
Great conversation he gave one of the Keynotes and then we got him in a conversation and then probably next week we'll publish a conversation I had with Dave Spector who's one of the cofounders of third love which is a.
Highly successful direct to consumer or women's lingerie primarily bra.
Manufacturer and reseller and we'll probably talk a little bit more about third love in part of the new segment later but so that's a,
a teaser for now.
[4:55] And then you know there's a lot of content a t-tail there's actually multiple tracks going on so you kind of can't go to everything.
And I did have some duties.
To record some podcasts and some other things while we're there so I didn't get to see everything but a couple of the just quick standouts for me,
there was a guy who I hadn't seen before who I'm I'm afraid I'm gonna mispronounce his name Robert petrich.
Who's in Industry the retail industry manager for Facebook.
[5:28] And so he was talking a lot about Instagram check out which is a topic of interest to me so he kind of had this interesting framework he said hey Facebook,
we think about these three main phases of the customer Journey the discovery phase the purchase phase and the post-purchase phase.
And essentially between Facebook and Instagram we feel like we dominate it Discovery and we're doing well and have a lot of good products in there,
but we really think I were deficient in the purchase phase and the post-purchase phase and so that's a major focus of.
His effort and so like through that framework Instagram check out is.
There you know biggest but still early initiative in purchase,
and so he kind of gave a Nike case study of Instagram check out where Nike partnered with this,
fear of God brand and they launched a new shoe for Cyber Monday and they sold completely sold out of the shoe and in one minute,
um and he sort of highlighted that that a number of primarily Street Wear Brands women's fashion brands and Beauty Brands are having a very high degree of success using Instagram check out and he announced that,
in the process of expanding that program which was.
[6:47] Interesting to me because they've been in this beta for a long time and they haven't allowed new new brands into the program so it was good to hear that there.
Expanding that program and then he also pitched something I guess I'm a little more skeptical of but you know he had at least one good case study using Facebook Messenger as a post purchase tool.
So the case study there with Sephora has sort of natural language appointment booking through Facebook Messenger so if you want to,
book an appointment with a beauty consultant you can kind of do it using natural language on Facebook messenger and he in his case study he was saying that
they have an 11% higher booking rate on Facebook Messenger than they do the Sephora website or any other support of touch points.
So he was kind of pitching it for that I to me like.
There's so many Communication channel channels now that they're sort of a signal to noise problem across all these channels but.
[7:52] That that was kind of interesting I got to host a couple panels so I did a direct-to-consumer panel on how brands are.
Able to capture customer data and improve their products and services and so there were three kind of interesting execs on that panel Megan Whitman who's the chief digital officer Campari Beauty,
Kyle Hoff who is the CEO of a direct-to-consumer furniture company called Floyd which is kind of the
the online Akia if you will and on kit Patel who's the VP of merchandising at boxed and I was super sad that you weren't there because I know
boxed plays a major role In Stocking The get spiffy snack Shelf.
[8:38] Absolutely yeah.
[8:39] And so they had some sort of interesting insights on cat talked a lot about,
boxed own private label and how they're able to leverage the other customer data they get and feedback they get to sort of shape the the offering for.
For their private label products so that was interesting and then I did kind of a.
Predict the future panel with with two guys Mike apostille who's a co-founder and CEO of a.
Emil company called factor which is surprisingly big much bigger than I realize they sell a hundred thousand meals a week so these are.
Just reheat any meals at home for whatever whatever your nutritional information you know interest or Diet is.
And they it's super interesting because they do a bunch of post-meal surveys,
they get a really high response rate and so they do a lot of like Micro Data about which meals customers who liked and what they liked and didn't like and they really use that to shape there.
Their future meal planning and then Bob Bennett who's the VP and General Merchandise general manager of consumer engagement at Petco.
and Bob had some interesting insights but I'm also super nice to Bob because Petco's based in San Diego and so have an eye towards my retirement job being some kind of e-commerce gig in San Diego.
[10:08] Yes hopefully Bob's listening.
[10:11] Yeah exactly and then I got to give a keynote on direct-to-consumer on the third day and so I took the opportunity to totally poo poo the direct-to-consumer channel.
So I want I want I want recap the whole thing it was a short presentation
but you know they're all these these direct to Consumer presenters and there's all these case studies about these direct consumer companies so I kind of highlighted the fact that hey,
there are all these different companies that track direct-to-consumer companies so I picked one the interactive advertising Bureau so it's a,
Trade Organization of digital advertisers called,
usually they go by IAB and IAB publishes this list called the IAB 250 which is.
Their opinion in the 250 most important direct to Consumer companies to watch so I pulled all 250 companies and said hey how many of those companies have sold at least a hundred million dollars a year,
ever and how many of the 250 would you guess are over a hundred million in sales.
[11:22] I warned you in rehearsal that you'd have to guess 25 toy reasonable guess but way too high seven of the 250 companies have sold over a hundred million dollars a year.
[11:30] Holy cow.
[11:31] Yeah and only two have sold a billion dollars a year and those two by the way are Stitch fix and chewy,
both of whom primarily sell other people's stuff so they are technically direct-to-consumer and they do both have their own brand but they mostly are,
and online wholesaler not a vertically integrated direct-to-consumer company and one of them chewy is.
Hugely successful on the revenue side but while the unprofitable so of these hundred and fifty companies one company that sells a billion dollars a year profitably and you know a bunch of these companies are,
unicorns from the private Equity valuation standpoint but but
very few of them have have meaningful market share at the moment not to say they won't ever but it like it's sometimes easy to get caught up in the in the hype and sort of overvalue where they're at right now.
[12:27] Did you know that chewy and Stitch fix sell other people's stuff direct-to-consumer.
[12:34] I did know that but so does Walmart.
[12:36] It's right there it's right there it is still direct-to-consumer.
[12:40] Yeah I mean isn't every retailer direct-to-consumer.
[12:42] Yeah Staples has a B2B piece.
[12:48] This is true but director business.
[12:52] Cool seems like you were kind of running the show over there you're going to be like the you're going to be on putting together the whole thing here before we know it.
[13:00] Yeah if they're listening winter events in Palm Desert I'm in.
[13:04] Said the Chicago.
Cool sounds like it was a fun trip and you get to flex the old speaking muscles which is always good it wouldn't be adjacent Scotch oh if we didn't kick off with a little bit of Amazon news.
[13:25] Design news your margin is their opportunity.
[13:34] So let's start with your favorite topic Jason which is grocery there's been I've seen a lot of interesting topics around Grocery and I saw you actually wrote an article about this in Forbes so
give us an update on what's going on in the Amazon grocery line.
[13:49] Yeah yeah this is awesome week for grocery so a couple of things came out,
last week right before e-tail Amazon opened a new Amazon go format in Seattle this called Amazon GO Grocery and so.
Traditional Amazon go stores are these just walk out stores,
you go in you take your products you walk out and Amazon uses cameras to track you and charge you for what you took I've always said that well well their disguises convenience stores that Amazon ghost orders are really,
restaurants because they're primarily selling Ready-to-Eat food for business people to have for lunch
and in fact secretly if you dive in all of Amazon's propaganda for go like they call them restaurants so this is a new format that uses that same just walk out technology
for an actual grocery store so it's quite a bit larger it's five times larger than a ghost or so it goes stores about
five is exaggeration a ghost or is about 1,500 to 2,000 square foot this is a 5,000 square foot store this this store has about 10,000 skews so five times as many skus as a
a ghost or had and the skus include things like,
a butcher shop with with meats and organic produce.
[15:19] The go didn't have and that you know potentially are harder for the camera to recognize.
So a big evolution in the Amazon Go technology and a new grocery concept for Amazon so that alone would have been super exciting
and I would put just one caveat on that while it's a lot bigger than a traditional ghost or it actually still is small by grocery store standards
so that's not a huge amount of skus and that's not a big footprint for an American grocery store that's about the size of it the typical European Grocery Store.
And I was super curious how they were going to do things like sell bulk items like how do you sell Apples by the pound.
Um using the just walk out technology in the answer is you don't they're they're selling everything by the Aegis so,
yeah so you pay per apple or / banana rather than by weight so it's so interesting.
Like a shift they obviously did for their convenience not the customers but it'll be interesting to see if customers like that alternative model or not.
[16:26] Some chatter were some guy said he defeated the camera did you see that.
[16:30] Yeah and I almost wondered if he's a podcast listener so a ton of journalists got invited to the grand opening,
and one of the things that I always pointed out about a one of the problems in scaling Amazon go is there's things you can't do in this camera-based or like have a public restroom.
And the reason you can't is because you can't put cameras in the restroom and so then you have a problem someone scans their way into the store
using the mobile app and so you know who they are and then you're tracking them around the store with a cameras and you keep track of what they bought and then you know when they walk out you charge them for those purchases will if you let them walk into a public restroom in the middle of that shopping trip,
you lose that your identification Mark for that customer and so
you know one of the problems you have is go to a bigger store and it's more a higher expectation that you're going to a restroom
so turns out this Amazon go store does have a restroom and so this clever journalist figured out yeah I'll walk into the restroom I'll see I'll carry two jackets with me and so I'll change jackets in the restroom so I come out with a different color jacket and sure enough by doing that he was able to steal all his items and wasn't charged for them.
[17:45] Was he arrested.
[17:46] No no I mean oh well at least not at the time of publishing his article.
I always thought that I always assume the solution would be that you have to leave the store to use the restroom and then you have to scan your way back in with your phone.
Yeah but so that's an interesting little little Edge case another Edge case that seems like they're trying to solve is in a ghost or you can only shop alone,
so if you walk in with your family they each have to have a.
Their own app or have a separate cart and now with this go grocery store you can actually scan in multiple people and then any items taken by any of those people.
You get charged for and group shopping actually is a big deal so it makes sense.
[18:35] So the jacket thing can't they use eventually face recognition would do that or is there a reason they're not doing faces for for privacy reasons.
[18:44] The real answer is I don't know they're you know,
you could imagine that like I imagine they are using face and then they're like hashing it and you know just using it for that that session so they're not storing it or doing anything with it but.
They just don't force you to give like a face profile like you know what I mean like you're naturally walking through the store so they have to be able to track you from multiple angles and so I imagine they use a lot of attributes of your appearance to track you and obviously
if your back is to all the cameras the facial recognition wouldn't work so they can't exclusively rely on facial recognition.
[19:22] But you scan your app it's logged in so they know if let's say they do scan your face they knew who Jason is and your kind of assuming they don't store it but maybe they do and I don't know.
[19:35] Yeah I don't know these are all educated again you can imagine ways they could solve it right so it's
it's not a deal-breaker it's just harder but so Props on Amazon they're moving the concept for further when they originally invented the idea of just walk out store they had a grocery store in mind and with the technology available at the time it was too hard,
so now it's become easier they also said that they've,
significantly reduce the cost I imagine it still super expensive but I believe them that the cost is going down
but I was almost more excited about a much lower profile.
Revelation that came out this last week at Amazon we've been talking about Amazon opening a.
A alternative grocery store that's not a Whole Foods grocery store that's a full-size grocery store in Los Angeles and it's been under construction for a while people have walked by and then.
Um I want to say Bloomberg got access to the store and got to visit the store before it opened and the big surprise to everyone is oh there's not a lot of digital Innovations and it mostly is a very traditional grocery store layout.
[20:53] Um so this is a 33,000 square foot store so that's a legitimate Us full supermarket.
And it was kind of interesting that it was you know didn't have a lot of digital shopping Innovations in it,
I have assumed for a long time that it was going to be lower price point groceries and targeted it more value oriented customers than.
Then Whole Foods but a clever blog called Hungry TV h n gr y TV,
um sort of track down the architectural plans for this store and they uncovered something super interesting that 7,200 square feet of this 33,000 square foot store.
Are dedicated to a micro fulfillment center so what this is is.
[21:50] Robotic grocery picking machine and like the brand name is even on the floor plan so this is a Michigan company called de mantequilla.
Which which make micro fulfillment centers for grocery stores and so very clearly this new Amazon concept is going to have a lot of groceries stored in this robotic system that then automatically picks them for the customer,
and so we don't know exactly how this will work yet but one model is customers go to the grocery store do their own shopping and take home their groceries.
[22:24] For deliveries they use this automated picking system to more cost effectively pick the orders and deliver them to you.
And that alone would be interesting that that is a huge Trend in grocery but another alternative would be.
You shop for certain items yourself in the grocery store where like individual selections important so you want to pick your own,
pork chops and you want to pick your own fresh produce,
but you really just want a bag of Oreos and all the bags Oreos are the same so there's no reason to push a cart by Oreo Island grab Oreos,
when you can just like build a list on your phone and have the robot fill the cart for you so,
the fact that this this micro fulfillment center is built into this new Amazon store is very interesting and that to me does make it.
Much more revolutionary grocery store than maybe the Bloomberg journalists realized when they they got the walkthrough so I'm,
and that sort is likely going to open imminently so I'm super excited about that,
and that kind of prompted me to write this article in Forbes about the the great grocery Wars and how Amazon Walmart and Kroger are sort of battling for the hearts and mind of,
digital grocery Shoppers in the US so I'll put a link to my article in the show notes of anyone wants to Deep dive into what's going on in digital grocery right now.
[23:49] Very cool and another Amazon news we're going to talk about coronavirus but since we're talking about Amazon they did have a big travel freeze which was which was interesting and then a lot of companies have
pre announced that they're going to have a rough q1 due to the virus so for example apple and
Microsoft both pre announced that they probably would miss their numbers due to supply chain issues and then I don't know why Microsoft would.
That was kind of weird when I guess how about any other Amazon news that you've been tracking.
[24:24] Yeah a few things
so there's a lot of Buzz yesterday about another new store format that at Amazon opened journalists found a pop-up store in Seattle that was focused on Amazon Basics bedding.
So this is like their version of the Casper mattress.
And like that is interesting to me I actually think the journalist kind of misinterpreted what they were seeing so there actually have been I want to say.
Five Amazon pop-up stores that have opened in the last three months and Amazon used to have hundreds of pop-up stores.
They famously closed them all and then they quietly reopen six of them and five or six of them and they all have these rotating themes so one month the popups might have been about,
audible books and the next month they might have been about,
mama bear food and the current month's theme for these pop-up stores is amazonbasics bedding and so what I think is new is they added a seventh.
Location for the pop-up which is.
[25:37] So that's kind of interesting one that is more interesting to me and I know you being a fulfillment geek would be excited about is,
they also announced that they had opened a new kind of fulfillment center and I want to say they've opened four of these,
and this is Kyle call it a tweener fulfillment center.
This is a fulfillment center that holds a hundred thousand items,
closer to population centers so a true Amazon fulfillment center is like a million square feet and holds,
millions of products this is a hundred thousand square foot store that holds a hundred thousand items and as a result of these things they're able to guarantee 5 hour delivery on a bunch of product so it's kind of like.
Amazon Prime now on steroids and they've opened them in Phoenix Philadelphia Dallas in Orlando.
[26:36] Very cool yeah Prime now are very small so that I have.
[26:40] Like 20 thousand items.
[26:41] Yeah 5,000 square feet interesting so you know.
It almost feels like the next phase of prime one day is prime same day so feels like they're they're laying the groundwork for that under the guise of it that'd be the ultimate kind of a head fake is you know.
Tell Wall Street they're continuing with prime one day and then at becomes Prime same day without a huge amount of new investment that would be interesting.
[27:08] Yeah and part of me and I may have this wrong but I sort of imagined there that those two things are almost synergistic that essentially they said like hey.
To honor our one day we need to stay you know it's more cost-effective to Stage the most popular items closer to the customer and so they they sort of design these new fulfillment centers to too,
increase profitability and service level for the,
Amazon Prime one day and then as they did that they go oh and by the way there's a subset of customers that we can have an even better service level now that we've done this right and so why wouldn't we offer,
you know faster same day delivery to customers whom we.
[27:52] Yeah very cool.
[27:54] So yeah those are I guess where my last little Amazon tidbits.
[27:59] I brought up the coronavirus let's let's kind of talk about that because it's an unpleasant topic but we need to kind of think about how is this going to impact everything for our listeners here so first of all kind of this is kind of
coming in waves if you will so when we first heard about this
the main concern was supply chain so and you know that Apple pronouncements when it really kind of caught onto my radar it was pretty early there
and that's because the virus initiated in China and if you have a lot of Chinese components than it's going to impact you
my initial thought was there's a lot of Chinese stuff sold on Amazon I wonder how they're going to get impacted one of my
one of my favorite analyst con Sebastian he actually kind of said you know because they have this Marketplace there's always multiple offers from those products so it's almost kind of like,
yeah you don't really have a single source so so by having the marketplace model Amazon in an interesting way is almost kind of,
D single point of failure did supply chain whereas an apple conversely has because of
the components and controlling complete vertical ization of everything they have a lot of single points of failure in China so that was interesting and then he also mentioned.
[29:20] You actually kind of came out and came out with a list of companies who would be hit the most from this but then what I want to talk about is the ones that would do best in Amazon was on that list it was very
counterintuitive to what I was thinking
and his argument was also on there was like Peloton Netflix obviously Zoom some of those you kind of thought about but his whole idea is that based on what we've seen in other countries when there is a large outbreak,
people go into he calls it cocoon mode so that's an interesting theory is you know if people are having to kind of self quarantine on their houses to avoid being in crowds what does that mean,
and his whole point is real you're going to still need stuff you're not going to want to go to the grocery store where presumably,
people have been in there touching all the products and things you're going to want a cleaner supply chain to your house which means or e-commerce which is benefits Amazon so I thought that was an interesting take.
[30:14] Yeah no for sure and I feel like the the most like,
direct example is yeah so it's great for Peloton and it's bad for SoulCycle right like you don't want to go to a physical place and take a class with 30 other people but you'd rather
workout at home and in that case once you buy a Peloton you're locked into the Peloton so it's not like,
you just for God you know you skip something for a month and then you're going to go back to it after the,
the the virus updates,
you know if you're you you in many cases go through a one-way door to make some purchase decision to do something at home versus out in public and so like it could have some long-term impacts,
and they're just all these angles to this but like I'm with you the the first announcements
coronavirus started showing up in a bunch of earnings reports and it wasn't retailers it was manufacturers and the interesting thing was it was ones that obviously have supply chain dependencies like
like apple that makes a lot of the product in in China,
but it was also like companies that make their product in the US are still dependent on ingredients from China so I want it was like Coca-Cola has made in the US but it uses aspartame that's made in China and so,
you know not surprising in the global economy.
[31:44] We the the world supply chain is very dependent on China so potentially impact there and uh you know just a ton of factories.
Shut down they're actually starting to open up again but I think the interesting thing is this kind of juxtaposition that,
some business like in some ways this benefits businesses right so in the u.s. right now,
um where the the fear probably outpaces the real risk you have a lot of quote aggressive shopping unquote and all these retailers are selling four times as much
paper towels and disinfecting wipes and hand sanitizer is they ever had before in some retailers have now said that the,
the sales increases there will be material.
[32:34] Which is interesting, they all have lean Supply chains and they're all running out of that stuff and so I kind of feel like like.
[32:43] There's a pro and a con to that.
But then our friends at coresight did a survey and ask a bunch of customers if their shopping behaviors might change as a result of.
Concerns over coronavirus and not shockingly a significant percentage of customers
said like 25% said they already are avoiding going to public places and fifty percent said that they definitely would have things got worse and so you know the premise is,
if you're a mall owner you know this this is certainly bad for you a bunch of retards that said they've already started to see,
um persistent traffic declines if you're a retailer at an airport you've already been decimated because air travels way down and so the traffic to those airport stores.
[33:40] Is way down but then again the cocooning could potentially be an upside for some businesses so if you're launching a digital grocery service,
and your biggest problem is that a significant portion of the US consumers haven't tried ordering their groceries online yet.
You know it probably is pretty appealing if you're afraid to go to the supermarket because of all the people there it's probably pretty appealing to try your first delivery order and if that is a good experience for you.
You you might be inclined to use that service regularly and Scot I don't know if you knew this but there's kind of a precedent for that.
[34:23] Um so.
The second largest e-commerce site in China is of course JD.com JD.com basically exists because of the SARS epidemic in China so,
so prior to SARS.
Jingdong Trading Company is selling CD-ROM drives at electronics bazaars and Shanghai and when SARS hit,
all these bazaars closed and the founder of jingdong trading had a bunch of inventory of the CD-ROM drives it couldn't sell and so because there was this kind of prolonged quarantine,
he started trying to sell the CD-ROM drives on bulletin boards and was so successful in doing that that he launched a website JD.com,
and they of course become one of the biggest e-commerce players in the world.
[35:16] I did not know that.
[35:17] Yeah so who knows potentially there will be some new.
Businesses emerging from this sort of temporary cocooning and the the other category that I feel like is gonna like potentially be decimated by this.
The on-premise restaurant business because they've already been under a lot of stress consumers are consuming a lot more restaurant meals off-premise they're mostly getting delivered by these.
These delivery marketplaces and the the economics for the restaurants themselves are horrible when this happens.
But now if people are cocooning more and going out less they're likely to order even more meals for home delivery and that's that's going to be a disaster for the on-prem restaurant business.
[36:04] Cool how about I know you were bummed that some of the events were canceled too.
[36:09] Yeah there's a little controversy there so like that.
For those of us in the industry like this is a busy event time of the year and so there you know a number of big events have been canceled Google and Facebook both canceled their developer conferences,
Adobe just canceled their big customer conference in Las Vegas,
and we're about two weeks away from shoptalk which is a you know one of the best shows in our industry,
is still scheduled to go on in Las Vegas and I'll be honest I'm grateful I'm not one of the event organizers and I'm super curious what they're going to do because.
It's increasingly looking like it's not going to be viable to have this show like tons of attendees and speakers work for companies that are that are limiting you know non-essential travel.
And I'm sure a lot of people just have concerns over you know traveling to a big event in Las Vegas so it's going to be.
Interesting to see whether we have a shop talk this year or not.
[37:11] Yeah we will see are you going.
[37:16] If they have it I probably will go you know we have to see like.
It is funny if you remember shoptalk sold this year so.
The fact the founder of shop talk already seemed super smart right like he had flipped a couple trade shows he sold shop talk for a particularly good valuation.
And you know he built a great show they did a really good job they grew rapidly for three years and then he sold it and that already looked brilliant now it looks.
[37:51] Because the new owner that paid like a pretty rich premium for the show is now stuck in this position like.
Do we give all of our exhibitors their money back or do we try to have a show that you know potentially is going to be the worst year ever for the show as you may remember
they're doing a novel thing for the show they're having only female speakers and so from my perspective,
it will be a tragedy to have only female speakers than have no one show up because everyone's afraid of the coronavirus so I just I just think there's a lot of.
Issues Tangled Up In whether or not not they at whether or not they have the show and I'm glad it's not my call.
[38:30] Yeah wonder how so you know a channel visor we do a show and you commit you know,
years in advance and you you spend a lot on the show and you have to guarantee hotel room so I wonder I wonder if a viral outbreak is kind of a reason to be able to get out of that.
[38:48] Yet so I don't know if they're contractually obligated to but from a Goodwill standpoint most companies are having to let customers out of their commitment so
the I mean I had a non-refundable room for for Adobe and they refunded that like
Adobe basically sells out the Venetian and the Palazzo and so I imagine those hotels are going to be empty now,
because they you know they weren't marketing rooms to other people for that week and I'm sure shoptalk would be the same problem at Mandalay Bay,
United Airlines just announced that you know they're waiving all change and cancellation fees and they're actually cutting back their schedule so all these travel and hospitality companies
you know are really bearing the brunt of the cost for this so it's a it's a mess.
[39:38] Yeah yeah it's can be interesting the we don't really talk about travel on the show but it will kind of
Ripple to our world because Google has pretty high concentration of travel advertisers social media guys I think are pretty small at I would guess I think Google is like the 15 to 20% range they have kind of four or five verticals that are each 20%,
retail being one of them maybe politics there's kind of a weird thing that it actually could be okay that it's a political year maybe that'll help them.
It's gonna be interesting to see how these things were blowout and other places.
[40:15] Yeah yeah for sure and obviously not not something that people plant or budgeted for.
[40:20] Cool another news item I wanted to get your opinion this our resident Walmart guy is this Walmart plus kind of Amazon Prime killer
I can't tell feels underwhelming but I wanted to see if there's something on this there.
[40:36] Yeah so side now you're calling me the Walmart guy but you're the one that camps out overnight to get the new Star Wars toys at Walmart.
[40:45] Yeah but I've been to Bentonville once how many times have you been.
[40:49] Yeah more than once Fair Point yeah so Walmart had a number of interesting announcements in the last two weeks so you're right
Walmart did not announce a new
Amazon Prime competitor but some news apparently leaked and so I think originally Vox recode had an article and now a bunch of other people at articles and Walmart kind of confirmed that the,
the basic details of the article where accurate,
but the news was that Walmart was adding a monthly subscription program that sounds somewhat like.
Amazon Prime and in fact it's called Amazon or Walmart plus and so,
again one more didn't do a real announcements we don't really know what's in Walmart plus yet the speculation was at a minimum that they had sort of free home grocery delivery.
[41:51] And there was like some speculation that there are a bunch of other potential Services Walmart could be bundling in that in a separate announcement Walmart opened a number of health clinics.
Which is a new major Initiative for Walmart and so there is some speculation that Health Services could be bundled in this we don't know yet so it'll be interesting like I guess I'm on the bubble.
I think it's really smart for a retailer to evolve into an echo system and have a sticky membership program and obviously Prime is the,
the most economically successful membership program in the history of Earth,
but another retailer Costco has you know pretty close to the second most successful,
membership program so you know it's smart for Walmart to want to have a really successful program so in that sense like I'm encouraged that they're doing something.
[42:46] It's hard to imagine what it could be that that's going to stack up favorably to Amazon Prime so I guess that's my fear like I'm going to reserve judgment until I see what's in it,
but I hope what they do is something very different than Prime instead of just trying to do a me to version of prime because I kind of feel like that would.
But they did bundle in that same week some other news came out so I thought you might be more excited Walmart a t-tail Walmart officially launched Walmart fulfillment service so they call that a wfs,
which is their version of Amazon's FBA,
and this very much sounds like a me to offering compared to Amazon but I would argue here it's a smart unnecessary one Walmart has.
You know pretty open about its aspirations to to develop a serious successful Marketplace,
and to me it feels like like table Stakes for a really successful Marketplace is.
You have to help all those sellers with fulfillment so that you can have a high service level and you can kind of match Amazon Prime one day and and the only way you're going to do that is if you fulfill the goods for.
For the sellers and so this this was not shocking news but but like a pretty important evolution in the marketplace at Walmart do you.
[44:15] You sort of agrees God or you think it's not necessary the this point.
[44:20] I do you know when you don't have when you have kind of a what I call hybrid marketplace with one p n 3p
and the 1p experience is just typically so much better than the 3p experience because
third parties generally are smaller businesses they don't have the same shipping infrastructure so
so having that fulfillment by or the this example Walmart fulfillment Services as this Middle Ground
you know I'd say it brings the customer experience that much closer and that's what you want to have a vibrant Marketplace you want it
you want it so similar that the customer doesn't pause and say oh this is from a third party that's going to take a lot longer or come in a weird box or.
The last one I got was all destroyed or came to a carrier I don't like whatever it is that there's those things kind of chew away at the overall customer experience so I think it'll be good.
[45:11] Ya know and then you know Walmart has already accepts returns for 3p sales in their stores and so I don't think they announced anything but you could imagine
Walmart leveraging their network of stores like they could potentially stage some popular 3p products they're like there's all kinds of interesting.
Twists on the Walmart fulfillment Services if you if you layer in the 5000 super centers as well as the the Walmart's fulfillment centers.
So that's interesting and then they did also announced kind of the next step in a reorganization,
like over the last couple months they had merged several departments between walmart.com and Walmart so instead of having separate teams and Bentonville and San Bruno
they had shared responsibilities but one big function that was still separate was
there are separate Merchants buying stuff for the web site in San Bruno and Merchants buying stuff for the stores and Bentonville and so this month they announced that they're merging the merchandising organizations and having one so this is all
to me like positive steps in breaking down the silos and having a single omni-channel organization.
[46:27] Very cool speaking of omni-channel a lot going on in the world of Mulligan so
you know it seems like there's a lot of chaos out there you mentioned so malls are shaky just kind of coming out of queue for still
and then here we are in q1 with this this whole thing the traffic's gonna be down to grown up due to coronavirus what are you seeing going on in some of the mall retailers.
[46:54] Yeah well I think there's a bunch of news like obviously it's retail earning season and so like you can look at all the mall retailers there but some sort of stand adds to me
Hudson Bay Company which owns Saks Fifth Avenue didn't have a very good earnings call and
word came out this week that the CEO Helena falx is stepping down she was a highly regarded CEO she was
like the CMO of a CVS I think it was if I'm remembering right before she stepped into this role and she she fixed a lot of
sort of institutional problems that sex and frankly got rid of a lot of the,
the ancillary businesses that they were in a really you know put the focus on sex so now she's leaving and,
like one of the investors whose primarily a real estate guy who's been sitting on the board is taking over as CEO and you know from.
Retail practitioner standpoint.
[47:59] That doesn't feel like a very forward-looking move that you have the successful retail operator leaving and you're replacing them with an investor real estate type.
Type person you know usually those aren't the people that.
Grow traffic and and profitability and Retail organizations so I liked that potentially a bad sign for force.
[48:27] And then in other leadership shakeups Nordstrom which I sometimes call the the best of the bad performing department stores,
they were actually up in terms of same-store sales so they were up 1% if the full at the Nordstrom stores and they were up 1.8 percent at the rack stores.
Which was below their guidance and is not very exciting growth and it's below and you know the retail industry average for growth,
but compared to most department stores which are shrinking being up you know is better.
[49:05] A standout thing for me and their earnings is their digital was up nine percent which is way below the industry average so like you don't see that very often.
We joked that the industry average has to be wrong because it seems like every retail on the planet claims to have bigger growth than the,
14% that US Department of Commerce says so in order from case they're saying hey we only grew nine percent that's pretty surprising for someone that we think of is a,
kind of best-in-class digital department store and I don't know what the full story is but part of it I'm sure is.
That Nordstrom is more digitally mature and they do you know have 35% of all their sales are digital so you know it's maybe it's a little bit of a lot of big numbers that it's.
Hard to grow as fast when you already have significant digital sales
but out of that earnings call they announced a little bit of a leadership change they had two CEOs a co-ceo thing they had the to Nordstrom Brothers Pete and Eric and and they announced this week that Eric would be this the sole CEO and
Pete would act as president and chief brand officer so you know apparently someone pick their favorite child.
[50:18] Interesting yeah I'm sure those complicated behind the scenes to figure that out and you know they had tried to go private for a while and just couldn't get it done it.
[50:30] Yeah yeah the family tried to bring it private and they yeah you're right they couldn't come up with a sweet enough deal apparently.
And then the one that was like the I would call the biggest news is Victoria Secret which is their parent company is L brands.
The they have a storied CEO less wax where who's like arguably responsible for
the success of Abercrombie & Fitch
Express for a long time and he's been the CEO of Victoria's Secret for 50 year or of L brands for 50 years
they announced that they were selling Victoria's Secret,
to a private Equity Firm or 55% of the equity to Sycamore Partners at a surprisingly low valuation so 1.1 billion dollars.
And you know so based on Revenue there was a.
[51:37] You know in expectation that the valuation might be considerably higher you know Victoria Secrets really struggled lately because they you know their whole marketing stick is this,
aspirational perfect image of beauty and they mostly were selling like discount bras in stores that were really designed to cater to men,
and increasingly they're all these new you know bra companies and direct-to-consumer companies that were like way more focused on.
Meeting the needs of the women that actually use the products and it had more sort of inclusive marketing strategies and you know that they had a particularly dumb CMO it,
Victoria Secret that you know famously said they would never have any models that weren't perfect because.
[52:21] That's not what women want to think of themselves as and so the whole like Victoria Secret Beauty show and.
Fashion show and all those things kind of once we're strong marketing tactics had really sort of started to work against them,
and so you know the it's interesting they had to sell at a pretty low valuation there was probably a period in the,
mm when they would have you know valued Victoria Secret at like 6 or 10 billion dollars somewhere in that range to only sell it one.
Is a pretty big admission of defeat,
and I mentioned that next week we'll have an interview with Dave Spector was one of the founders of third love,
like arguably third love is one of the accelerators of this Victoria Secret decline,
and they accidentally got in a fight with Victoria Secret so they're the small direct-to-consumer company that no one had ever heard of and that same stupid CMO at Victoria Secret that
you know mentioned that they would never have any flawed models also said that they were they were never going to be anybody's third love they were always going to be everyone's first love.
[53:35] And and that kind of you know prompt this this public spat and you know third was continuing to do really well and and Victoria Secret just,
sold in a fire sale in the last week's or had to step down so kind of interesting that kind of the whole female image thing mask the fact that they also had a bunch of stores in bad malls,
that are just dying and they're primarily sold everything at thirty to forty percent off so just a bunch of traditional model based apparel challenges in addition to their.
Positioning Challenge and I guess the one thing I would point out is well,
you know it sucks to have a company that was super valuable in you only sold it for 1.1 billion dollars I will point out that albanians bought Victoria's Secret for 1 million dollars in 1982 so
if you just look at where you started and where you ended it's actually a pretty good story.
[54:29] Low basis if all kind of tie it all together with a little bow here if Neil from shoptalk head owned Victoria Secret he would have sold at the top.
[54:41] And congratulations to an eel / let me know if you need any help carrying your bags to your vacation home.
[54:48] In San Diego.
[54:48] Exactly I bet you he's vacationing at even cooler places.
But Scott that's gonna be an awkward and perfect place to end it because it's happened again we've used up all our listeners time but as always if we struck a chord or you want to continue the conversation we encourage you to jump on our Facebook page
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[55:34] Yeah thanks for listening and also longtime listeners recruit a new listener and have them leave a review.
[55:40] Even better and until next time happy commercing.