EP230 - Amazon Q2 2020 Earnings
Episode 230 of the Jason & Scot show was recorded live on Thursday, July 31st, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 230 being recorded on Thursday July 30th 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back to Jason and Scot show listeners.
Well this is one of my favorite times of the quarter is when Amazon announces their results so,
this is this episode is going to be a hot take we're going to go really deep and peel the onion on these results because I think they're really important given where we are as an industry but also
to kind of see how Amazon's fearing doing this this crazy pandemic times.
Before we dive into specifics though here's kind of the setup so you Amazon had a pretty good quarter in q1 the pandemic really was mostly felt.
The shutdowns the shelter in place has kind of started what Jason like March 10th March 12th.
[1:27] Yeah so they had you know 75% of the corridor was pre covid and then only a small percent was kind of.
Wrapped up in covid or 1590s whatever that ends up being the.
This is a really the first quarter where we kind of understand what's going on here so from a macro perspective we just had GDP got printed that was down
32% so that's that's the yardstick with which we measure the economy gross domestic product so that's the biggest decline on record and then just to compare that you know Germany's down 10%
China asterisks is up 3.2 percent everyone believes China kind of lies on their number so who knows what's really going on.
[2:11] They're also sort of a quarter in the future like covid hit them earlier so that it that would almost comp against our yeah.
[2:19] And then the companies one other interesting aspect is we were actually set to record this a week ago but
Amazon uncharacteristically had a little bit of an extra time this time to get the results out so last year they result they announced on the 23rd and this year it's on the 30th,
so that led a couple companies sneak in there usually Amazon is one of the first to report and then it's actually pretty interesting because they reported today with
the bulk of the What's called the Fang stocks - Netflix so they Facebook was today Apple Amazon and then also.
So so that was kind of a crazy day on CNBC there are running around with their hair on fire trying to cover all of that stuff.
[3:03] Yeah the poor financial reporters.
[3:05] Yeah yeah they were like and then they're all working from home so they can't they're talking over each other anyway and they were just it was total chaos
anyway Shopify was able announced earlier in the week and their revenue shocked by being up 97%
eBay also came out earlier this week and surprised everyone with 26% growth eBay has historically been flat to slightly down on their gmv growth so that was a really nice surprise
and then on the show last week we had talked about that Goldman report I liked that talked about the impact of covid in what they were seeing they took a their own look at things and they had a blend of input from comscore any marketer
and what they had done is they had said hey,
you know prior to this pandemic we were looking at kind of a 14% growth rate and we're going to ratchet it up and 20 20 to 29 percent and then keep it pretty elevated going forward so
so I think we can kind of think of twenty nine percent as the Baseline here is kind of the new or at least the pandemic
level with which e-commerce oriented companies are growing so if we kind of do that and just to revisit this again so eBay kind of in line with that 29% Shopify effectively triple that.
[4:22] Coming into the pan demet a couple other interesting news tidbits that kind of
we're building into this so the FCC announced earlier today that they have cleared Amazon to launch their own satellite Network
so that's pretty interesting so obviously so Jeff Bezos has a rocket company I'm not exactly sure if they're going to use that I can't imagine they would use SpaceX to launch these
so so there's this kind of fun billionaire thing where you know so Elon is been working on a satellite Network and then he has had
cars with Tesla Bezos just bought was a Zoosk which is the self-driving car company and then now has launched his own satellite or gotten clear.
[5:03] And these satellite networks are Communications net like essentially the like broadband internet or or cell phone service from space.
[5:11] Yeah Wi-Fi from space starlink is the name of the SpaceX one and they're there in beta program apparently it is supposed to be a really great service so I'm kind of moderately excited about that.
[5:22] I feel like everyone is excited about that except for the astronomers because apparently it's ruining the view of the sky.
[5:28] Yeah yeah the day to get good coverage they have to launch thousands of these things I think the Amazon is actually 3000 and I think starlink is building up towards 3,000 and they do have solar panels and the reflections off those evidently really mess up the night sky so that's sad,
but hey we have faster Wi-Fi so there you go trade-offs
and finally we're not spend a ton of time on this because this is not our beat but we had these antitrust hearings yesterday
where we had both the CEOs of Google Amazon apple and Facebook
interestingly all the companies that announced today and testify yesterday and I think that was well-timed on their behalf because you didn't want to you know if they were actually going tomorrow after they all essentially just totally crushed their numbers,
that would have been a bad optics for them so that was it.
[6:17] Do you think that could have played any part in why Amazon reported later this year.
[6:21] You know I actually didn't think about that but that could be it yes I was thinking it took so just took longer to count all the money but that.
[6:29] All the money yeah do you I seriously don't know how it works so I can you just pick any date you want and there's some strategy about whether you're early or late in the reporting season.
[6:39] Yeah so if you're a if you're concerned a large company which obviously Amazon is there's a window within which you have to report and you know I think it's 40 days
so that's one input so they couldn't do like you know
August 20th or something like that that would be too late but then yeah so one of the strategies is how long does it take your Finance team so you have to run an audit so you have this externality so you have to do your work and then a third party company has to come in and do it.
And at their scale I just I just came to imagine what that audit looks like.
[7:15] A pretty good jobs program for delayed or whoever does that huh.
[7:18] Yeah yeah I just can't imagine
the scale that and then another thing you try to do try to do is you do try to avoid being on days with a lot of the same so in our in this world of Wall Street you have these coverage universes we've had several analysts on here so for this is
to 400 to listeners so what you don't want to do is you've got you know you've got these 20 Analyst at follow you you don't want to
have your call the same day as everyone else in their Universe well that's essentially what kind of happened so it is highly unusual and now I think about it you mentioned that I do think
maybe that played a role the reason I bring up the antitrust thing even though I hate talk about politics is,
Jeff Bezos pindell letter that I really really enjoyed as him telling it felt very
authentic and in his voice
having read a lot of his stuff from like the 97 letter which is that famous kind of shareholder letter from the first year they were public when he outlined hey we're going to focus on this thing called free shipping and selection and,
everyone was like what is all this stuff so this letter I thought was just really well done and I just enjoyed reading it and I thought I would
mentioned the listeners that if you have 10 minutes go read that letter it's really really good
what did you what were you thinking coming into this quarter.
[8:40] Yeah well so I mean I don't think anyone was surprised to see e-commerce way up obviously with the pandemic and
it turns out when you close a lot of stores the alternative ways to buy things or more are more popular
it was interesting to me like there's a lens you could look at like Shopify and eBay and say okay.
Demand was way up and neither of those companies would likely have a lot of capacity constraints like.
There are so many individual sellers that make up their sales like you you would kind of Imagine That.
You know they didn't have a warehouse capacity problem but you could imagine that Amazon would have had much higher demand like everyone else.
[9:28] Even at Amazon scaling with their crazy infrastructure you could imagine that that.
Fulfillment center and delivery capacity was the limiting factor on their numbers for this quarter so I was kind of curious to see how they would do.
You know just to see whether they they would say that there was any impact of that and so.
Super impressive that they had such a big quarter there was a school of thought that they lost a little share to some other retailers because obviously they had where their delivery promise and they constrain some product for some period of time and so other retailers.
Got to jump in on some of those non-essentials that Amazon had to be emphasized so I was curious how it all played out.
It was totally fascinating I agree the Bezos letter was interesting you know.
[10:18] He has a good backstory and he tells this nice story about being adopted and and his.
Adopted father and all this stuff that's very heartwarming and then he talks about what a small part of retail they are which is of course.
Isil store serving story in the in the context of being accused of antitrust and so he in the letter he mentions we're less than four percent of us retail which is just interesting.
Um take that with a grain of salt there's a lot of different ways to Define retail and I'm going to presume he pick the.
The one that made him seem the smallest but if you sort of back into some math from that it's interesting what that would mean based on like Foresters sizing of retailgeek.
Four percent would put the him at a GM V of like 218 billion.
Assuming he was talking 2019 numbers and that 218 billion would be approximately 36 percent of 2019 s e-commerce Revenue so.
I just find that interesting because there's a lot of estimates out there around Amazon's gmv.
And a chair and you know these are on the low side of the typical estimates I see so it kind of it generally passes the smell test.
[11:40] And you know there are some crazy estimates out there that have Amazon at 50% of e-commerce so.
I just found that interesting and then if you actually watch the live hearings there was kind of a even more absurd analogous moment in Mark Zuckerberg is testimony where he's talking about how.
[12:00] Facebook is basically losing to all its competitors at everything and it's pretty funny he's like,
Amazon's advertising business is growing much faster than ours and Google's advertising business is much bigger than ours and I'm like and I'm like that's pretty carefully selected facts to make it you know you sound like a pauper but yeah.
[12:18] Okay so that was the set up and now let's dig into Amazon's Q2 results with a hot tea.
[12:31] Sun News new your margin is their opportunity.
[12:41] Yes it's the best way to characterize this will probably run out of superlatives but this was a monster result and it's fascinating because
Amazon it also set it up in there the guidance they gave in q1,
saying hey we're really having to spend a lot of money on covid related things for,
you know our fulfillment centers are not running at capacity because of social distancing we're investing a ton and PPE we're going to give extra pay to people for hazard,
they had really set it up that said yeah we're going to see a spike in sales but really you should not expect a commiserate the spike in profitability in fact.
I think the number was we're going to spend over 4 billion dollars on covid related expenses which is pretty pretty material number so that was that was kind of the they've done a really good job I think
tamping down expectations and then they just really blew it away here so
you know in Wall Street language you have kind of a beat Miss A Beat
kind of coming in a whisper number there's all this stuff on how you did and then wall Street's always like what have you done for me lately so really people are kind of already thinking about Q3 so then you think about
the current quarter in the future quarter so a beat and raise or a beat and lower this was a crush in a crush or a Smash in a smash I don't know what to call it so.
[14:03] So let's dive into it so you know
as a result of these results the stock was up over 5% after hours and that's that's not a huge amount but you have to remember
this this cohort of companies were talking about specifically Microsoft Apple and Amazon there in the trillion-dollar-plus club so when I
when a trillion dollar market cap stock goes up 5% that's a lot of a lot more Capital coming into the market than even like a Shopify or IBM or.
All those are kind of like micro caps compared to what we see with the Amazon and apple off-topic apple actually really surprised people to so.
[14:42] Even though I think Amazon's going to Leap Forward into this north of trillion-dollar Club I think apple is going to even go further so so it's kind of pretty rarefied air up here
so the stock was up five percent to 30 201 analysts I've seen is already kind of nudging up from kind of 3,000 to 3,500 just on these results
so let's put it in perspective so from an overall Revenue perspective Wall Street expected Q2 to come in at 80 point seven billion and Amazon surprised coming in at eighty eight point nine billion
the the math on that is they beat the estimates by eight billion dollars or ten percent so that's
bu the billion not million that's an eight billion dollar beat I don't know how to put that in perspective how it's like several beat by like
I don't know how big JCPenney is it these days probably a billion dollars is like 8 JC Penney's or something so it's hard to even put it in perspective how big of a crush that is,
and then you know what's exciting about that is that's 41 percent growth year over year.
[15:46] You may hear us say some percentages and see some different articles out there with different percentages we always go with counting out the any impact from currencies the call it FXR Finance,
this collects changes so foreign exchange so 41 percent year-over-year growth again
yeah I think the Baseline right now is twenty nine percent so Amazon took share at their scale of over 80 billion dollars taking sharers just like,
massive just draining the bucket this was the fastest growth they've had since 2011 and back in 2011 they were a 48 billion dollar company
annually so that's just kind of crazy so they're there.
[16:34] Does nine years ago they're going this fast so not only do they have the large the rule of large numbers that they seem to be able to you know,
break but it's just kind of crazy how fast they're growing
and yet another another kind of weird thing and this kind of speaks to the impact of the pandemic is usually the Amazon you have the previous q 4 sets of this bar and then q1 comes down
pretty significantly Q 2 you get to kind of like maybe 80% of that previous q 4 q 3 you kind of flirt with the last Q4 and then Q for you set a new bar and then you reset so it's got that that stuff
pattern you see if you look at a growth chart of Amazon this Q2 was substantially higher than Q4 of 2019 so obviously do the pandemic that was this huge tailwind and they've benefited from it massively.
[17:23] Yep and remind me traditionally where would primed a land in Q2 or Q3 for Amazon.
[17:29] It would be June so it would be Q 2.
[17:33] Q2 yeah so like the previous year's numbers that they beat had this this huge holiday spending spree in it that they didn't have this year as well.
[17:43] Yeah so yeah so even further impressive did it all this without a prime day and then Jason you were watching carefully the split between North American International would you see there.
[17:54] Yeah and reminder North America is the mature market for Amazon and so you know they they tend to have more profit they're investing a lot internationally and tend to not have.
As a significant profit and it's a smaller business so it should grow faster but basically whilst the expectation was.
They would have about 50 billion in sales which would be thirty percent growth in North America and the Chi Minh at.
55 billion in sales so that's a 44 percent year-over-year growth which is redonkulous.
Um for you know a company of their size and then internationally the expectation was 19 and a half billion which would have been up 22 percent and they came in at 20 2.7 billion which was again up.
Forty-one percent so like the you know.
[18:59] Growth across the board in a variety of different markets that were all experiencing covid very differently so.
Phenomenal and super impressive.
To me the most interesting thing though is earnings I feel like people are kind of used to Amazon putting ridiculous sales numbers up on the board and the,
the annoying retort we often get is yeah but anyone could sell a lot you know when you're not making money and of course we've tried to consistently debunk that so.
This year that coming in the expectation was a buck ninety earnings per share,
and they fairly significantly beat that they came in at $10.30 earnings per share which is eight dollars and forty cents this year above estimate or or you know.
About six times the the estimated earnings.
The last year was a good year for profitability for them and they earnings were five point two dollars per.
Per share so you know the expectation was earnings would be down this year because of all these covid expenses and yet earnings were double what they were last year.
[20:14] Even with them spending four billion dollars on one time covid expenses so that's just crazy.
You know they've always been good,
cash flow and again it was a you know operating cash flow increase 42% to 51 billion dollars and the free cash flow which is of course this number Jeff wants us all to
to focus on increased 31.9 billion so across the board.
Pretty ridiculous in addition to the four billion they spent on covid they still spent nine billion on capital projects which was a lot of incremental.
Fulfillment centers it was interesting I was having a conversation with someone today and you know over the last several years.
[21:01] Amazon was opening fulfillment centers based on a location to get like closer to customers and filling gaps in their Network and you know this person who is heavily involved in in the
construction of Amazon's fulfillment
network was saying that that's no longer the case that now what's driving new fulfillment centers is where they can get space like that they're no longer like filling in dead zones.
With new fulfillment center they're just adding capacity to the reach they already have and the biggest constraining Factor at the moment is,
places they can lease that are that are big enough not you know specific locations that are close to particular market so.
[21:41] A lot of investment in growth they also hired a bunch of people
I want to say they brought in like a hundred seventy five thousand temps so you know it's crazy to think they did all these like holiday like things to meet this holiday like demand,
there was completely unplanned and they I think they said they're going to convert a hundred and twenty-five thousand of those two full-time employees so,
that's that's enormous growth on that side and
you know they're they're investing significantly in in all these high-growth areas for them so you know they're still fighting.
Tooth and nail to win a share in India there you know investing significantly in growing their their ad Network you know I,
a lot about their efforts in grocery which we're continuing to follow and obviously they made further
investments in in the health space and new Alexa capabilities so.
A lot of stuff going on in Amazon what did you take away from all that Scott.
[22:44] Yes I think the I think they were probably surprised about how much profit squirted out of this thing and they couldn't spend it fast enough it's a high-class problem I'm super jealous I don't I don't typically have this problem.
[22:58] As when you buy it you that's when you decide to shoot a bunch of satellites into space.
[23:02] Yeah might as well put pallets of cash on him and watch him out there to just just in case.
Um I did listen to The Wall Street call it was pretty terseness the prepared remarks they don't like to.
Amazon's General position which is actually probably pretty smart comes from Game Theory where you reveal as little as possible so some of the little tidbits I did Paul from there.
They one of these measures they look at is paid unit growth and that was up 57%.
That compares to last quarter's growth rate of 32 and then q1 and it slowed down to 10%.
So this is like q1 of 19 I believe that is so.
That's you know so to go from like ten percent and at that time frame up to here it's just pretty amazing I was a little bit amazed they had the capacity to ship this much because.
[23:59] But at the scale there at its heart of back in the number of packages on the call they did talk about one of the things that kind of helped them a lot is Will to things around.
Around April in March and April they really kind of limited to Essentials.
Not being stuff for code and they started kind of blend that through the corridor.
They said by June april-june sorry May June they had guns kind of like more of what they called a normal balance
but they did say one of the things that was helpful to ship all this was third-party so they've had this program I always call it Merchant fulfilled Prime mfp they called it MF in on the call I,
I don't know what that is that may be Network so whatever you call it though they you know,
they've always had this ability so if you're not in Prime then you're just filling your own packages but that's
not a prime experience so then they created this middle one where you can live up to the prime promise and be a 3rd party seller and it seems like they really leaned on that a lot this quarter and their larger sellers really kind of helped them
get to these kinds of numbers and we'll talk about 33 p.m. in more detail in a minute.
[25:13] So there's some interesting color there about the kind of went into Essentials and they kind of mixed back into their normal mix there then.
[25:22] David said that they were just surprised by how high demand was that you never see you know you never hear them
say that you know they said a lot of it was driven by Prime members so they were like super engaged bigger baskets grocery they called out several times as being a really good success area for the quarter
one of the Wall Street guys I do is I guess we've had on our Stone Mark mahaney he kind of said how far
how long till you get back to kind of like that one day Prime that we've been talking about for so long and they admitted on the call that they're still behind on shipping and then.
[25:59] They didn't really commit to when they can kind of get back to quote unquote on par so,
yeah it sounds like they're still there infrastructure is still just really creaking under this this massive load and it's not just the growth it's the scale you know that that extra eight billion dollars if you figure $80,
average selling price on something or something like that that's a lot more packages you've got a ship so so I thought that was interesting color that they are kind of busting at the seams on this whole infrastructure
I wouldn't be surprised you know they talked about investing a big chunk in this and you know
I kind of Envision there's something like 40,000 Sprinter vans out there I could see him like tripling that program yet at some point.
It's got to be bigger than UPS and FedEx on all this deliveries there's not a lot of good third party validation data on that but at some point they just got to be like way bigger than that so that was my Takeaway on that.
[26:54] Yeah yeah I thought there were a bunch of interesting things I they did talk a lot about the mix shifting to Essentials and interestingly you would.
The conventional wisdom is that the essentials mix is less profitable than the traditional mix you're selling like a lot of cpg items and toilet paper and that's those aren't like the,
the high gross margin items traditionally so so the earnings are even more impressive given.
That they had this you know mix that so heavily skewed.
Two Essentials the mfn comment I found interesting too because we had heard from several people that like.
[27:37] It's really difficult to get into the mfn program and therefore there aren't a lot of people taking advantage of it and then it's not all that.
That significant in terms of shipping volume but the comments is Quartermaine make you think that it must be more significant than.
Then some people thought so I thought that that was super interesting and then.
This this whole Logistics War thing is coming up in a lot of my conversation with retailers you know if you're not Amazon and don't own your delivery Network one of the things that's happened is there was all this unint.
Unexpected demand for e-commerce right so superficially you're like hey this is great everyone wants to buy.
You know all our stuff on the web well you got to deliver all that stuff and UPS and FedEx didn't you know Flex for Holiday capacity.
And so you know those carriers are going to other retailers in there saying hey we're only going to take 80% of your orders right and if your Footlocker you don't have a lot of other.
Places to go if UPS doesn't want to deliver all of your orders and then the next conversation is even worse now.
What volume do you want to commit to for holiday and these are our new hire surcharge drink.
[28:58] Um and that's a double whammy because like the unit economics were already challenging and now the shippers are going to take a richer mix from you and you're having to commit to your holiday.
Volumes in the most uncertain holiday period most retailers of ever face so it's really difficult to forecast demand so so if you're someone that's dependent on the third-party carriers.
[29:24] You're you're having a lot of logistical challenges right now and so you know Amazon's ability.
Deliver a lot of their own packages and you know pull a lever to make that bigger.
Um is is increasingly widening the Gap versus a lot of other e-commerce players.
[29:43] Yeah I didn't have a chance to dive into it but I saw UPS as stock surged in they had some kind of a massive beat themselves I don't think FedEx is announced yet but yeah UPS is profitability on a surge is at the.
That could have be margin that retailers effectively paying for.
[30:03] And then on top of all that there's this other you know whammy that could drop like the.
Um the the economics of the US Post Office a really unsound and an all of these bail out conversations that I haven't heard any conversation about a package for the post office so there's.
You know if they were to fall down that would take a huge chunk of everyone's capacity as well so it's scary times.
[30:29] How about let's talk about the forward guidance that Amazon provided.
[30:34] So I think the Wall Street expectation for Q3 was 85.5 billion,
um and Amazon's guidance was Slightly North of that so they gave this 87 to 93 billion range which would be.
24 to 33 percent year-over-year growth,
um so you split the difference and you call that you know twenty seven and a half percent growth is what they're forecasting for next quarter
and they are forecasting further one-time covid expenses but significantly less than last quarter so they're expecting another
two billion in covid cost versus four billion this quarter I think Amazon has formally said that they're going to stop doing the.
The fulfilment employee bonuses so I assume that's a big chunk of those
those costs and I assume you know a lot of the the four billion dollars was capital investment in in new protective technologies that they still benefit from this quarter so so I think the forecast was operating income in that
225 billion dollar range.
[31:48] Turning to third-party marketplaces so one of the
one of the areas we track is what share of paid units was third-party market shares that was kind of like in line whether it's been it's been kind of hovering in this kind of It kind of bounces between 49 and 53% it came in at 53 percent so a slight tick up from last quarter we saw a lot of growth is they do record Revenue Now call from third-party Marketplace seller services
that includes the take rate and FBA and some things like that that grew 53 percent year-over-year which I think is the fastest ever I went back
a couple of years I didn't go back infinitely but they haven't been read.
The deployment disclosing this for like two or three years so I feel pretty good saying that's the fastest that I've ever seen of that and do
compare it you know there's always people that say who Amazon's using their data from third-party to grow their first party business well if that's the goal they're doing a terrible job at it because third parties growing significantly faster than first party so first party grew 49% third-party 53%.
[32:54] Yeah and it's confusing because in this context first party means like Goods that they buy and wholesale too
to Consumers I think the a gue actual acquisition accusation is that they're using third-party data for
Amazon owned products which also aren't selling particularly well so your your point is still totally totally valid other you know the Amazon.
Manufactured products that are selling really well are these like completely unique products that have no third-party equivalent like like the Alexa
so so yeah I don't
totally buy it either I feel like it gets gets overblown did at the risk of asking you something that you didn't do the math on what does that put the 3p mix at now like what percentage of sales is that.
[33:54] I'm going to wait for a Wall Street person to chime in and we're recording the show so fast after the results the Wall Street people haven't so I will tweet that when I get it so.
[34:04] Totally fair but it's north of 50 is pretty clear.
[34:06] Yeah absolutely yeah yeah I think the last time I looked at it it was like 70% of all gmv was third party.
So that that 53 percent is deceptive because
yeah and over on the Amazon Side Of The Ledger a lot of the units are super cheap so they're like all digital downloads fall in there and kind of Kindle books so they have an aov of kind of or an asp of under kind of.
Twelve twenty dollars then over on the 3p side the ASP is more like 70 or $80 so.
So it's again when Amazon can pick a number to your earlier point about the Bezos letter when they have a set of numbers to pick from they're going to pick the one that under States.
Things as much as possible so the 53% makes you think that's the amount of gmv coming from third parties but it's kind of understated because the other side of the equation has a 1/7 or one,
third ASP compared to the number of units on the other side if that makes sense.
[35:10] Totally yeah.
So then you can't talk about Amazon earnings without talking about the cloud Wars and so in Amazon's case that's AWS
Wall Street was looking for 11 Point 1 billion in AWS revenue and it came in slightly below that so
you know one of the few misses in this whole earnings reported came in at ten point eight billion and I.
Randomly like I chuckle at that because you know we keep hearing oh AWS is the only real business in Amazon and all the rest of this stuff is just just sort of lost lots of meters and so you know.
Interesting that that's that's the only thing that.
Was a slight miss that still is like a 29 percent year-over-year increase and and you know they do have a lot of large numbers here that you know they're getting bigger and bigger.
But I think margins look like they improved for the quarter so I think they were 54%.
Which I think is uptick you know again there's a.
[36:26] A theory that because of covid a lot more people relied on cloud computing and you know a lot of the,
the remote worker services that were all living on now you know are all big AWS customers and all the.
Video streaming services which is you know most of our only entertainment right now our big AWS customers so there.
My thoughts going in I would have expected this to be a particularly good quarter for for AWS and it was perfectly fine quarter but it.
Amazing especially compared to the the the retail side of the business.
For comparison I think Google's Cloud platform.
You know is on a smaller base but but they were Slightly North of 3 billion so that was like 43 percent growth versus Amazon's 29 percent growth but on.
A business that's you know three times as large.
[37:24] Yeah yet the if there was any kind of crack in the sky perfect quarter that was the the cloud but you know I think.
We're seeing this with like salesforce.com the macro there's these large businesses are feeling the macroeconomic right
so I think that's probably what's going on here is for there's a lot of winners and losers in this this world and I think the Amazon had a portfolio and AWS was a slight loser because these B2B customers are under a lot of pressure.
[37:54] And for sure everyone was looking to you know a tester D measure so there was a chance to defer some of the the cloud costs or you know I'll bet you they even.
You know how to lower payment rate than they usually have and things like that.
Um a side note we'll do a deeper dive later but it's been interesting to me all of these Cloud providers are,
launching more and more specialized services that are available in their clouds and a lot of these are our new like e-commerce microservices and so.
You know when you start thinking about what your eCommerce platform is it's interesting you can.
More and more of your Commerce capabilities from these native Cloud providers so this week Amazon launched a new like anti-fraud system that's a.
A default service in AWS and in you know that's interesting because before this.
Before that there were you know five dedicated Point solutions that sold.
Anti anti fraud Solutions and now you know Amazon drops one of those and I think this we can Google went into public beta on a new
AI product recommendations engine Amazon already had offered one and so again like there are lots of things that you formally would buy from these like Commerce platform.
Specialty firms and it feels like Amazon and Google and Microsoft are really really leaning into that that space which probably isn't good news for a lot of those traditional vendors.
[39:21] Yeah and you've talked a lot about this headless kind of trend at some point we need to do a deep dive on this and you know what if you could go.
You get all this stuff from free and build your own little front end or Mary Mary it with a Content thing that could be pretty disruptive
another little kind of chink in the Armour was shipping costs so they grew you know if we think of
overall Amazon grew north of 40 percent shipping costs through 68 percent so definitely you know scaling up this fast
that came out of extra cost on the shipping side you know I think.
Amazon will do though is they can be really smart about this continue to Amazon's philosophy as we get Revenue first and then
chewy it expenses so I bet they'll be able to look at that and say you know we had to use ups for these six routes and we've never had to do that before let's let's drop an Amazon Prime.
DSP in there and and you know go direct and take a bunch of cost out of that equation so so
you know in one way there's a two sides of this going yeah they spent a lot on shipping but they now know exactly you know what it looks like to service at an 88 billion dollar level and they can go kind of improve on that over time
I was interested in the ads business would you see there.
[40:39] Yeah so that was interesting so the Wall Street expectation was 40% growth like obviously this has been a very fast-growing category is what Amazon calls other Revenue but it's mostly them selling ads to other brands,
the they came in at 41 percent so a slight beat you know huge growth so you know they're continuing on their ad trajectory it was 4.2 for the quarter I don't even know how to convert
quarterly estimates in the annual estimates anymore because you like normally you'd have this Q4 spike is your kind of seasonality look,
and now that we have a giant cue to spike Like It's Hot you know I don't even know how to think about it but if you just you know assume that all the the quarters are equivalent that you're on a 16 billion dollar run rate which is pretty significant it's but you know it's a.
A clear third largest digital ad Network in North America behind Facebook and Google and growing much faster than either of those the one thing I will say is
I would have expected almost even better growth this quarter because an interesting phenomenon all the brick and mortar stores.
[41:51] Closed in Q2 right and all the brands that primarily sell their goods through those stores had a bunch of,
Shopper marketing dollars that they normally invest in marketing in those stores they pay for ads on the Shelf they pay first store decals they pay for
ads in the store circulars that gets distributed and ads in the newspaper to get people to go to the stores and none of those Vehicles really worked for Brands and so my expectation was almost that those Brands would
would disproportionately shift those dollars to digital channels and that they would disproportionately shift them to Amazon and,
you know while it's huge growth it's kind of when your growth based on the last couple quarters for Amazon so I Wall Street was right I was wrong but I found that interesting.
[42:42] Yes so that's kind of the the Amazon results I would say the handle this pandemic way better than
I would have ever guessed by being able to really scale up infrastructure leaning on third parties the whole thing really just they hit on all cylinders there is a little bit of a
yo what's going on in ws and I've seen some people say that adds they kind of felt like could have grown faster I'm okay with that because I always feel like,
ads are the straight off with the user experience a little bit and I'm okay with it growing a little bit slower than the overall pie how would you summarize the quarter.
[43:20] Yeah so again I was
surprised and impressed I thought that maybe their drug would be a little more constrained because of capacity issues and I thought their profitability would be more challenged because of the
the mix and and you know a lot of these extraneous operating costs and in the covid climate and so it's it's
you know you always think of things like cloud computing is this like super elastic business model which is super impressive but what what just shocking to me is
Amazon has made like their whole business pretty elastic and they you know for an unplanned holiday Spike like this
I feel like they flexed and took advantage remarkably I expected them to
struggle a little bit more so so hats off to Jeff and the Gang good job.
[44:13] I do feel like the Q3 is a little bit of sandbagging and I can understand that because we're in such uncertain times it's really hard to know
how long is this going to go on when is this you know does the GDP being down 30 percent start to impact people
you know there's a lot of counterintuitive stuff going on here it's like a very there is a very hard kind of macro environment to navigate right now so I can kind of.
I understand why you'd be conservative there.
[44:42] Yeah now in cute I mean yeah I think there's more uncertainty than usual and all these retailer forecast but you're right like you three on the one hand,
Amazon had a lot of new users for the quarter right like there were people that were not traditional digital Shoppers that because of covid-19,
shop digitally for the first time for sure there was a lot of grocery Shoppers that placed orders with Whole Foods for the first time and Amazon something like tripled there.
Their grocery delivery capacity during during covid and so you could imagine that a bunch of those new users,
that that habit sticks and they you know become a recurring users in Q3 so you know that could be favorable the Amazon it wouldn't shock me I didn't see anything in the earnings about Prime Membership but.
It's totally possible that there are a bunch of people that were on the fence about whether Prime was a good value and because of covid it suddenly became a good value so they might have more Prime users and we know,
that has a long-term impact and you know because the macroeconomic situation is probably not going to be good and there's going to be a decline in consumer confidence.
People tend to shift to value-oriented shopping and Amazon largely winds at value-oriented shopping so there's a lot of reasons to be.
[45:58] Bullish on their their Q3 you know but at the same time there's.
Like will a bunch of those one-time digital Shoppers go back to stores when their favorite store reopened as it is it likely now has and did they have a bad experience with that grocery order because it was delayed and had a bunch of substitutions in it,
so will those people go back to the grocery store like it's it's anybody's guess it's you know the the old Playbook isn't going to help you very much at the moment.
[46:26] Yeah cool any other tidbits from some of the other results you want to go over.
[46:32] I guess just super quickly you mentioned in the open but Shopify had a really good quarter you know 97 percent year-over-year growth so that was.
14 million versus expected 362 million their earnings were equally like about 10x of what expectations were so that that was impressive and I think.
[46:59] If you add up all the Shopify sellers their cumulative Revenue.
He surpassed eBay like not sure it's exactly Apples to Apples because it's a bunch of independent sellers versus.
A unified platform but but that's a you know a potential milestone.
That I think now Walmart and Shopify have both basically past past eBay.
And then I do think eBay is quarter was interesting you know I.
I had sort of felt like because Amazon lean so heavily into Essentials and had to constrain some of their service levels that that would open the door for other retailers and I certainly talked to a lot of consumers that are like oh yeah like I,
you know hard-to-find items I was suddenly you know going to non-traditional sources and so you know I think a lot of people that traditionally would have thought of eBay were giving eBay a try to see if they could get masks or hand sanitizers or,
are all of those sorts of things so it'll be interesting.
Was that a one-time thing for eBay or will they bill the lock in some of those new customers and and potentially retain them I think is going to be interesting to watch.
[48:10] Yeah that they have a new CEO over there so I'm I'm excited that he'll come in and shake some stuff up they did sell their classifieds business so they've been divested of some things that are kind of a distraction like StubHub as well.
[48:23] And that the classified business was largely International at this point right.
[48:27] Yeah it was this thing called Kijiji is kind of like yeah these classified these classifieds are weird because.
People at eBay generally have loved him and I've never used them so I just I don't know I've never understood the whole thing they sold her for like eight billion dollars so there's definitely other are there.
[48:44] Yeah Josh.
[48:46] Yeah the other thing I saw was they announced they added 8 million new customers so that's exciting to see to your point a lot of new people trying out Ebay I think they have this just branding problem where people still think of them as auctions and they need to kind of.
It is figure out yeah and then they went through a period in the Donahoe are aware they were going to kind of like take on Amazon that didn't really work out very well for them so they need to find their place in the world and hopefully the new CEO he's kind of an old-school eBay guy,
yeah I'm optimistic that
yep I think we need a variety of options out there for everybody sellers and buyers and eBay could be a big player and it's a great quarter I hope they use this as a stepping stone into fixing a bunch of these kind of work or things that they face.
yeah that would be great and that's probably going to be a good place to leave it because once again we've used up our allotted time as always if there was anything
that we didn't cover got wrong we'd love to hear from you on Twitter or Facebook this would be a great time to jump onto iTunes and finally give us that five star review always good talking with you Scott.
[49:51] YouTube yeah and shout out to some of our listeners who did do five star reviews and talk about it out on Twitter we really appreciate you guys listening and coming along for the journey we will
continue to be here and give you all the latest hot takes on things like this but then also we've in some other items as we go.
[50:09] That is terrific I'm looking forward to it and until next time happy commercing.
EP229 - NRF NXT, Google Commerce, Big Commerce S1
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 229 of the Jason & Scot show was recorded live on Thursday, July 24th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is Episode 229 being recorded on Thursday July 23rd 2020.
That’s a lot of two’s I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners well it starts in this episode we are going to focus on some news because last week we just couldn’t jam it all in and then more news has happened since then so we have a lot to talk about Jason before we jump into that you’ve had a busy week educating the world on some very various topics tell us how that went I think you spoke it in RF next.
[1:05] That’s that’s right so for people that might not be familiar
there’s been a longtime digital show about e-commerce arguably the first
treat you about e-commerce called Shop dot-org you and I were both board members when it was independent organization it got bought by NRF,
and overtime shop dot org has morphed into this digital conference called NRF next which of course was canceled this year because of covid so Monday Tuesday and Wednesday of this week,
they hosted the virtual version of NRF next.
I got to give a presentation about the future of platforms.
[1:46] The future of platforms we don’t tell us much about it because these are the kind of things we love to turn into deep Dives but give us a teaser so what’s something that’s going to blow people’s minds but without telling us what it is.
[2:00] Monoliths are dead.
[2:04] Mmm the end of the model.
[2:07] Just say no to monoliths and if you either listen to a waiter deep dive will do or you watch the segment the the digital version is free so you can still go register and all this stuff is available on demand so if you’re interested you can still go watch it,
and I Unleashed a new web architecture for future e-commerce sites on the world and it’s called Jason secret web architecture hashtag,
Jay SWA and it got a lot of play on Twitter after my presentation so just saying,
you could you could be on the ground floor of Jess wha if you view either catch our Deep dive or watch the the segment.
[2:46] What do things better just swallow or J-1.
[2:49] Jay Watts way better.
[2:51] Okay got it I saw some Jo Lighting in a when some protesters broke into an Amazon store.
[2:58] Yeah that’s called the woo.
[2:59] Joe what the heck oh okay that’s Mia well they did just walk out someone was like the Amazon apps going to charge their phone as like yeah I think it works that way.
[3:11] Yeah I mean was it Amazon ghost or looted I didn’t see that that would have been like ironic I guess.
[3:17] I don’t know if they get in but it was pretty clear they were working at it so the one I like Street I think there’s one on Pike Street I saw there was video of them smashing in a window and jumping in so.
[3:26] I saw a lot of anti Bezos graffiti on some Amazon go stores in Seattle as well.
[3:32] Controversial I’m sure Jeff’s up late at night worrying about it.
[3:37] Yeah I’m sure his security detail is all over that,
so slightly off traffic so in honor of next was three days it was really well attended there was a
pretty good diversity of topics and sessions and yeah so if you have some spare time and you you didn’t watch it live you should totally go register and watch some of the content and especially watch
the future of platforms and make sure.
That you you stay till the end and give it a five star review because former ghost guest and friend of both of ours Rob Smoltz did another presentation and we’re having a friendly competition about who gets better ratings.
[4:17] Yeah can I just skip to the reviews if I can I like that okay.
[4:20] In fact I’d appreciate you should both do that and hit pause right now in the podcast and go give the podcast of five star review on iTunes while we’re talking about reviews.
[4:29] Asking for a friend you think Dave that they would stop a little script from going and doing that a million times.
[4:35] Yeah I think you can only you have to like log in and then you can only vote once.
[4:39] Gosh that’s no fun.
[4:42] Yeah I don’t I so I historically have done well in those ratings.
I think the bar must be really low but I.
[4:53] Let’s Rob Schmaltz.
[4:55] I hold the all-time record for an RF event ratings because I did a,
a session about mobile usability and my last example I did an evaluation of the mobile rating system for the NRF,
so I finished the presentation by having everyone go to their phones and go through the process of giving me five stars I thought,
smart yeah yeah I felt very proud of myself.
[5:24] And then you just Savaged it after that you’re like was that the worst experience ever.
[5:27] Exactly yeah but yeah so I tricked enough people in the voting for me that I got a good score.
[5:33] Nice did you get to see Rob session.
[5:35] I did watch Rob session I didn’t get full disclosure I did not watch it live because it was,
right before mine and they’d like you to be on in their dream room and and all that sort of stuff so I didn’t get to watch his session live but I watched it later and it was good even though I’m not
I’m kind of cynical on the topic so he was talking about Ai and
you know he had some interesting use cases and stuff but I’d feel like AI is just so overused that I my
guards go up as soon as people start pitching me on AI solution for anything.
[6:13] Yeah I was this is a kind of a wacky sidebar but I’m sure you’ve seen this GPT 3 stuff that’s come out,
which is this natural language platform from this open to AI initiative but it’s got kind of a you know
but significant like a factor of 30 more words that it’s been fed and that its knowledge so people are feeding it all these past things they’ve done and then
it spits out stuff and I was I was gonna talk about this offline but we might as well do it on the podcast here I was thinking we have what
29 now episodes that we could feed this thing and then maybe it could just do the podcast going forward so little little side project for you look at.
[6:54] Yeah it could be vastly better.
I’m in a much more narrow scope Adobe has this cool really scary app where you feed it audio samples and then you can get it to say anything you want in that person’s voice and.
[7:07] Yes I think we can marry those together and we can have a Jason bot an ascot bot and then you and I could just go to the beach and retire from this whole thing.
[7:13] Yeah well obviously there’s.
[7:14] They’ll be our Mastermind project for.
[7:17] Way more audio from either of us than you need to train this engine but like think about all the guests we have to Ike we have this beautiful repository we could have a lot of fun in this industry.
[7:25] Yeah all right sounds good what other what other talks did you catch that were interesting.
[7:31] Yeah I tried to catch a bunch of them in and if they were pretty diverse.
You know depending on your area of interest you could lean different ways but there.
Was one of the original VCS behind Salesforce talking about like investing in the cloud and how.
Difficult that was at the time and they were rolling The Rock uphill and obviously that investment worked out pretty well for them so I found that interesting there’s a variety of.
Sessions about you know how to deal with the crisis and leadership in the crisis and some of those things.
On my day on Tuesday there there was an interesting session about the death of the cookie so several of the browsers have already.
Block third-party cookies so Safari and Firefox don’t allow third-party cookies,
Chrome is the most popular browser in at least the u.s. right now and they still allow third-party cookies but they’ve announced that they’re going to phase them out over the next two years so.
Fundamentally changes a lot of advertising tools that you can use on the internet if third-party cookies don’t exist and so there was an interesting conversation about.
What would change and what what and What alternative means people might use and just you know sort of thinking how you prepare for a world in which there’s no third party cookies.
[8:59] Yeah yeah that’s worthy of a deep dive right there.
[9:02] Yeah I mean there’s that’s that’s like the livelihoods of a lot of people so I get that yeah so.
[9:11] But you want basic stuff to work right you want as a user I hate logging in all the time so.
[9:17] Yeah and so part of it is.
[9:18] It’s going to drive me to apps because that’s why I like apps they look keep me logged in and websites now are less frequently keep me logged in.
[9:24] So that’s a again we won’t Deep dive in the platforms but part of my conversation of platforms was,
you know what are the priorities right now in picking a platform and one of them is obviously mobile and I talked about the apps versus
Naval native mobile web thing quite a bit so there’s there’s interesting.
Topic they’re the there was a good session from Dollar Shave Club talking about how,
they’re they’re heavy users of split path testing a/b testing and how they do a lot of them
behavioral experimentation on the site and so they shared some of their learnings and winnings from that and then I think Spotify was the last session on Wednesday and sort of talking about how voice is the future and podcast like the Jason and Scott show will rule the world.
[10:15] I like that did you talk to them about selling for a hundred million getting some Rogan Rogan money.
[10:21] I’m trying to play hard-to-get so we could surpass Rogan money.
[10:25] Sounds like a good strategy.
[10:26] So I did that by not not approaching them at all I thought that was pretty clever of me.
[10:29] Well it’s better when they when they come to you so will I will keep waiting.
[10:34] Yeah so that was interrupt next that was maybe more time than we allocated for that top.
Um but let’s jump into the week’s news.
[10:42] Yes so this week you know I love to say it wouldn’t be a Jason’s got show without some Amazon news but today this time we’re probably going to skip him as on news because we’re really holding it for next week so a week from today when we’re recording this Thursday of next week they are going to have Q2 earnings and
everyone’s watching that with with bated breath because there’s a lot of interesting data we’ll talk about the rest of the show that’s got people there’s a camp that feels like you know
expectations of Ronald Billet ahead there’s another camp that says no they’re just going to just destroy the numbers that are out there so it’s going to be really there’s really a pretty big split on where the not only Wall Street but other pundits feel like Amazon’s going to come out
so we’re not going to cover that this week but there was some pretty interesting news today from Google shopping and,
Jason why don’t you walk us through some of the highlights of that.
[11:33] Yeah so before I talk about today’s news I’m going to go back in the Hot Tub Time Machine 2 April and they.
We have the highest quality sound effects on the Jason and Scot show.
[11:46] That’s the hot tub fair enough.
[11:48] Exactly I like it I.
[11:50] Oh I could do this too.
[11:55] That was substantially better that some some legitimate fully work right there.
[11:58] Okay okay que me up again go.
[12:03] Let’s jump into the hot tub time machine and go back to April.
[12:10] Awesome so back in April Google made an announcement about Google shopping that they would essentially let anyone that wanted to provide a feed have free ads.
On the Google shopping platform and so at the time it was there was this it was really unclear whether they that.
You would show up in Google shopping for free but that you would still be obligated to share at a crate with.
Google if someone acted on that ad and there was a lot of conversation about that and Google was a little vague about their answer so then fast forward to July and today Google made an announcement,
that they are discontinuing,
taking a commission or a take rate on all of Google shopping so if you have an ad on Google shopping and someone checks out,
directly on that that platform you pay no commission to Google so presumably the only way they’re going to monetize Google shopping is with embedded ads that they sell in the Google shopping experience.
[13:15] Yeah it’s it’s interesting because there’s a new
so not only do they have a new leader for Google shopping but there’s this one change where.
The shopping count of Commerce team in the ads team have been separate and that’s you know allegedly when.
Apparently that’s made it hard for the Google Commerce team to gaining traction because you know it’s very easy to look at any Google result I’m sure and say well if you put this thing out there you’re going to lose this many dollars from
from the ad platform because ad platforms are robust right so so another change they had made I think earlier this year is there’s one executive that that owns both,
and then they made it a
yeah priority for him to really accelerate the Commerce said so one reading of this is finally Google there’s all this data we’ve talked about it by a thousand times on the show that shows that that more and more consumers are not going to Google to start their shopping journey and learn about products are going to Amazon
you may have some updated stats but for you know for the longest time you know Google was ahead and then Amazon surpassed and and
yeah I’m sure that’s still the case I think the last data I saw showed like 65% of people started an Amazon 35% of Google do you have any new data on that Jason.
[14:36] Kind of so I have to debunk the whole thing we the real answer is we don’t know most of that data is published from
surveys and originally most of it came from this Bloom reach survey and all these surveys are of 2,000 people.
So they asked 2,000 people when you go shopping what website do you go to First and 65% of the 2,000 people said I go to Amazon and so spoiler alert,
people are never right when they tell you what they do why give I go look at the data from their browser that’s not what they do and so even if we try to use panel data there’s some big panels out there of millions of users
it’s impossible this is to Define what a.
[15:19] A a shopping mission is versus some other search mission right so you you you have to come up with some huge definition of what searches constitute a
Commerce search versus an informational search and nobody’s just done that satisfactorily so so the real answer is we don’t know what the percentage is
if you wanted to have a conversation about a particular product category you could probably do that but.
But it’s really hard to know but directionally it’s for sure true that traffic,
is going up on Amazon search engine and presumably that is at the expense of Google and we certainly have seen Google do a lot of things that seem like defensive moves against Amazon.
[16:06] Yeah perhaps more importantly the dollars are moving right so to you probably know more about this than I do but you know Channel visor we’ve seen people kind of go through this life cycle of testing a little bit on Amazon ads and then kind of like
really ramping it up and then taking a lot out of the the other obviously offline budget spend also you know I think the Google budgets get starved out from that too.
[16:29] Yeah no for sure and and you know Amazon’s collected 10 billion dollars in advertising fees and and presumably that wasn’t all incremental like a bunch of that even very likely came from from Google and Amazon it is ironic we
talked about this a little bit offline but.
Well Amazon collects 10 billion dollars in advertising fees for the Amazon pep platform they actually pay for 11 billion dollars of Google ads they’re Google’s largest Advertiser
and so there is this funny thing they’re like buying eyeballs from Google and then they’re monetizing them on their site and it’s it’s actually a clever Arbitrage because
even if they break even if they buy an ad and sell an atom break even that
causes all that those eyeballs to fly by all these Amazon products on the Amazon platform that they get to sell to for free basically.
[17:19] Yeah and sign up for Prime and all that good stuff yeah so.
[17:23] I was just gonna one last point on that that’s kind of humorous you you talked about like the old days at Google where the ad team was at odds with some of the product teams,
there are all these new products Google has launched that are white clearly you know intended to be direct competitors with Amazon and it has to be awkward that Amazon is their largest customer that they’re trying to compete with.
[17:44] Yeah there’s a lot of interesting stories about the early days where
you know Amazon’s pulled products in and out of Google shopping a lot because they there’s this argument of having their products in their actually makes it better
to this day they’re pretty limited on what they put in there I haven’t done it a forensic check but they have some Kindle stuff Zappos the Quincy guys we’re still in their last I looked but the whole Amazon catalog is not in Google shopping
um yeah and even then early on there was a famous Bezos story where he told you know and it was actually an angel investor in Google I think to so but he told the Amazon team to share No data with them at all and so they would go buy ads but they would never.
Like install the pixel or give Google Google analytics or any insight into where it what was going on behind the firewall which I think.
[18:31] Yeah I think there’s a Jeff Bezos quote that they’re in the information collection business not the information dissemination business.
[18:38] So then the big picture is you know so I felt for very long time google has this existential crisis kind of facing with Amazon,
you know it’s not gonna be the end of Google but by all accounts.
Kind of Commerce related terms is a really big chunk of their revenue some estimates say 30 percent 40 percent 20 percent whatever it’s not immaterial and Amazon has been siphoning that off pretty relentlessly so it is interesting to see them make some news and moves here the other one that you didn’t mention is so
the buy on Google program where you actually check out on Google which I think is a better experience for mobile,
previously you could only do Google pay so then it ended up being super restricted because you said you know well we’re only going to really show the ads on
Android and you have to do Google pay or Android pay or whatever that’s called these days
and this that and the other and then suddenly you know and then Merchant has to go through this complicated thing what now in addition to making it free they have opened it up to PayPal and then Shopify as payment platform,
well so you know some of these moves kind of make me think Mmm they’re definitely someone at Google has woken up and said we need to do something about this it definitely does feel like you know too little too late and then where I kind of end up.
[19:58] Getting to is to really fight Amazon someone’s gonna have to step up and build a lot of fulfillment centers because you know if you really started the customer experience that you have to match Amazon’s customer experience there’s no way around that.
And this is a huge challenge with
all these these other experiences right Collins Sebastian who’s a Wall Street analyst who’s been on our show he was talking about in a
either a note or a tweet he ordered something from instacart Instagram for the first time and you know the shipping was like it gave this window of,
two weeks from now or six weeks from now was kind of like the window is like a three-week window two weeks away it felt like.
1999 kind of shipping levels so so it’s good to see Google chip away at this but I think the got to get like
yeah someone needs to go out and start spending in 10 billion dollar chunks if they really want to counteract the Amazon customer experience.
[20:56] Yeah no I agree and it does so you alluded to this but
Google hired this guy Bill ready to be the president of Commerce at Google and he was formally like the CEO at PayPal so an experience Commerce guy he
the the memo that it was now free to list your products on Google shopping in April came from Bill ready and then the memo that we there were no longer charging a commission to be on Google shopping,
today was from Bill ready so he obviously has his fingerprints on on these moves and you look at them together and you say oh man.
[21:34] Google is doing everything they can to get people to list their products in Google shopping they’re making it easier to list their making it less costly to last because per your point,
they’re trying to make that that platform attractive enough and useful enough to Consumers to compete with Amazon.
The in addition to those two big moves they’ve done some other interesting things so one very subtle thing they did is,
you can now send your Amazon feed in the Amazon merchant center format to Google for listing on Google shopping so they’ve,
reduce the friction to list your products if your listing on Amazon you already have a fee that you could choose to send to Google so at the very least I feel like,
they’ve made Channel advisor job easier which I know we always want want that to be the case.
You mentioned they’re accepting PayPal and Shopify they also will let you Syndicate your product straight from Shopify on to Google shopping so there’s this interesting thing,
and let’s keep talking about o Shopify is the potential competitor to Amazon,
and I hate that narrative I don’t think that’s true I think Amazon Shopify are super complimentary and don’t really compete with each other and you know part of the reason is because.
[22:53] Shopify doesn’t have in his likely never going to have a multi-vendor Marketplace experience but almost by default.
Google could potentially become the multi-vendor version of Shopify right like that if it’s.
Completely frictionless to Syndicate your products if Shopify encourages it because Shopify will actually make money on everyone that buys from Google shopping because,
they’ll use that that Shopify payment system and Shopify you know a lot of their revenue comes from having their own own payment processor now so.
[23:28] Roll that up and it’s it’s kind of interesting to watch I totally agree with you the Achilles heel of all these plans is.
That shipping experience that there’s some new features and Instagram that came out this week as well they’re not that interesting so we weren’t going to cover them but but.
In a nutshell.
Instagram has elevated shopping to a button on the homepage now so there now is a shopping tab on the homepage of Instagram that’s rolling out as we speak and some some journalists were asking me if I thought that was going to make a big difference and and I had the same thing,
experience is Colin I pointed out
Target with like 3,000 products on Instagram shopping that you can buy and so I looked at a candle on target side and that same candle on Shopify site and it’s the same price.
I said shop if I meant on Instagram site it’s the same price but if you buy the candle from Target it comes with free one-day shipping and if you buy it from Instagram it will ship sometime in the next two weeks.
[24:26] Yeah yes we are click on our stand like it’s going to be injecting in the same system so I don’t know.
[24:32] I just don’t I don’t think they have a live OMS so I think they just have this like you I suspect if I ordered that candle from Instagram I’d get it in two days from Target but I think they just don’t have a way to give real time shipping information.
[24:45] Or goes to someone they print it out it passes through six people’s hands.
[24:51] Fax it to the store.
[24:52] Data they fax it to a store someone data entered is it a trained pigeon uses the keyboard to data enter it and then your two weeks are up and now you get your package in a day.
[25:02] You could be a product designer for publicist that was pretty good.
[25:04] The things we’ve seen in this world of e-commerce Jason those are actually not that crazy,
so we’ll be watching that really closely one thing you know to shopify’s crack I know you hate this
this analogy so I’m just going to use it a lot they are compete with Amazon because they are the only people that have kind of the guts to go build a fulfillment center right so they’ve got this what they call it a dick fulfill by Shopify.
Yeah and it’s best I know they’ve actually built a fulfillment center so and you know since they’re Canadian.
Tape I have to imagine that one in candidate and one here I don’t know do you know.
[25:44] I don’t I thought there was speculation that it was more than one like I think they are it’s complicated because I the speculation I’ve seen is that it’s Blended like that they
have some 3pl partners that they’re relying on help fulfill but they own more than one of their own facilities and they did by a robotic picking company so
like they have some of their own technology.
[26:07] Another thing that was interesting that got a lot of noise on Twitter was a Goldman had any report
and this was interesting because a lot of these Wall Street analyst they’ll have a retail analyst and Amazon analyst a online offline us and then just kind of thing and this is for the first time Goldman really comprehensively got all their teams together globally
and the the.
Impetus for this was to understand the covid-19 impact on everything and it was pretty interesting so so lets you know
let’s cover the us first so the way they formatted this was they said here’s kind of like the old kind of thinking and here’s our updated,
post pandemic kind of so pre-pandemic post
so let’s look at 2020 so in the u.s. pre-pandemic they were thinking e-commerce and then I know we’d like to be really specific this excludes
travel and others so but it would include tickets and events of those kinds of things but no autos and no
travel so so they had the u.s. growing at 14 percent year-over-year of from 19 to 24 13 point 6.
[27:23] Ecommerce growing at fourteen point six.
[27:26] Ecommerce and then 20-22 2021 kind of flat 14.4 and then 20
twenty one to twenty twenty two fourteen percent so they’re now saying covid has effectively doubled the growth rate so they’re expecting,
29% from 2019 to 2020,
then you know what’s really interesting is there’s this big debate amongst folks in the e-commerce landscape imagine if you had been physically at a in RF event this would have been the the kind of the
the back alley,
the hallway talk you know everyone’s in the online world is excited we’ve gotten the surge of activity the big question is how much is going to stick well they kind of took a shot at this which is kind of interesting so they’re saying we’ve got the Surge from
unexpected 15.6 to 29 percent and then I should also say they,
they go out they grab all the data we talked about on the show so they take the Commerce data the comscore data the emarketer data.
[28:24] I think they have like Forrester data in the mix and then they also have access to a lot of data
um you know from these credit card receipts and all these things and all that they say in the note was kind of inputted into this this model which is interesting so it’s this amalgam of all these things that they look at
but then what they’re saying is it actually is going to stay pretty elevated not at this 29 percent growth rate but
you know next year for example instead of the 14.4 they were thinking pre-pandemic they’re going to they’re saying it will grow 17 percent your year,
that’s really impressive coming off of a 29% year a lot of people were like wow I thought it would be more,
the kind of unit is going down your ear but no it’s actually to do Seventeen percent on top of
29 is pretty impressive most times if you had this blip you would actually go negative the next year because you know you would you would effectively.
[29:17] Be comping against this really really big previous year number so that was interesting and I thought yeah it was pretty.
I hadn’t seen anyone really take a shot at it so I,
I thought I was cut thought provoking the think through how much of this is going to stick and be sustained and build new habit sources kind of receding to previous habits.
What insights did you gather.
[29:40] Yeah I mean well so it’s super interesting in my biggest takeaway is,
we don’t know and smart people disagree you’re right because I consume this as soon as it came out and then two days later emarketer published what they call there
20/20 us category level forecast so they had they had previously published an updated covid forecast for the top line numbers.
And and this week they published this much deeper dive that like they forecast what they think is going to happen in e-commerce in the u.s. category by category.
it’s a very similar methodology like they say in the front of the report we have a hundred and seventy-nine data sources which include all the same ones you mentioned and so we consume over 10,000 individual metrics
we synthesize all those to build this like complicated forecast model and in some ways directionally similar but in some ways,
meaningfully different so the the top line from emarketer is.
And and what what makes this hard to be perfect apples-to-apples is of course emarketer and golden and don’t have the same definition of retailgeek.
[30:58] Um so by the strictest definition of retailing comscore which excludes food restaurant tickets Auto and gas.
Um they’re they’re saying that e-commerce will grow 18 percent this year versus last year which was I want to say their previous forecast was like 12 or 13 percent so,
um a meaningful uptick they unlike Goldman they also forecast retail and they actually forecast brick-and-mortar retail would be down 14% which is.
Historic drop and so that all Nets out to us retail online and offline will be down a little over ten percent for the year so that’s the Debbie.
Debbie Downer top-line what’s interesting to me is.
[31:47] The shape of their forecast is also different than the golden one so they’re basically saying.
They give three forecast they give the strict definition of retail that excludes food and gas and they can see that that’s,
when you’re talking about e-commerce that’s not really fair because.
You know people are buying a meaningful amount of food online now right gasps their argument is no one buys gas online and so that’s why you would exclude that but they say like if you want to take cars and and gas out,
we’ll give you this this bigger number and if you want to take car’s gas food and beverage out will give you an even bigger number so the one that’s most similar to Goldman is the excluding cars and gas so that’s going to be,
twenty percent growth in 2020 and then they’re predicting 20.7 percent growth in 20 21 and 22 percent growth in 2022 so they’re actually.
[32:46] Intuitively the Goldwyn Moon one makes more sense right that you’d see a big spike this year when the brick-and-mortar stores are closed for a long time,
presuming that’s not going to be the case next year you would expect some of that to come back but the the E marketer forecast has them growing every year which is.
Interesting and and they do have a pretty granular forecast that makes it more credible so they do show like food having that same shape that Goldman’s predicting where it went way up and then it goes down,
but they show other things like apparel,
is way down this year online and in-store and it starts to creep back up online in the next year’s and intuitively.
That kind of makes sense so they aggregate all those categories together and they get this this different snapshot what’s interesting to me is,
just looking at those sales as a percentage of total retail since they’re estimating brick and mortar you can you can see how big a chunk e-commerce is and again by the strictest definition of retail 20/20.
14% of all 14.5 percent of all sales are online to put that in perspective,
20:19 was 11% by that definition so that’s a big jump.
If you pull the car and gas out twenty percent of all sales are online and just for fun if you pull grocery cars and gas out 29 percent of all retail sales are online this year so that’s.
[34:15] Say a u.s. number or that’s Global Jessica.
[34:20] Because Goldman has eighteen percent this year and they don’t have gas her Autos but they do have grocery so I guess it would be higher if you took grocery out and then because that’s a small.
Yep it’s had a huge growth but is still under index compared to like electronic or something obviously
but then you know last year they had fourteen point eight so you do see this like huge step function where we’re kind of like ticking along at 1% and then we just like surge 4% and then they show it going to 21% 2427 by 2023 the other thing I like is they have a
table that has all the different countries and you kind of think well what’s are you know what’s the high water mark can you look down this chart and you see South Korea 45% you’re like wow you know that’s that’s pretty crazy and then,
they have China at 36 percent I was thought China would be higher than that but.
[35:13] Yeah I’ve seen Pre-K covid that and again everybody has a different definition so it’s really hard and data from China,
is harder but the numbers I see tend to be that e-commerce in China pretty covid-19 38 and now it’s in the 40s.
[35:29] The just a super
I Louisville thought a framework I found useful in we employed this the in the last episode in a way we do this every year with our prediction show when you have these different opinions.
Instead of arguing in the timeframe of now I found it is I have historically found it this is true for,
my own companies and stuff it’s interesting to make predictions track those and then learn from that experience of
oh gee I was really wrong why was I wrong what was I looking at it was wrong what did this other opinion look up so so it’s kind of cool to have the gold mini-com in marketer
kind of off a little bit so then we can kind of see you know which of these is a better you know
predictor and what can we learn from those predictions that we can feed back into our models of how we think about these things.
[36:16] Yeah for sure and and both are super thorough methodology so these are not like you know just just throw away forecast that people whipped up right like.
[36:31] Then they had the last one last little tidbit on the Goldman I wanted to highlight as they do have some Trend data,
they look at kind of how did things do kind of pre-pandemic and then post pain to me so the categories that over-index to do the pandemic our furniture and appliances that’s kind of that nesting or cocooning thing going on,
cpg which you know you follow closely is largely people switching their grocery habits Home and Garden is interesting so a lot of people are
because they’re Sheltering in place or like you know I could use some fresh paint in here with or you know fixed that thing that’s been.
I don’t know what else do you have a lot of categories there are kind of neutral to- like we’ve talked a lot about apparel and accessories,
biggest losers event tickets and then toys and this was weird because I’ve seen all these other articles that,
toy sales are surging so I couldn’t reconcile the toy when do you have a point of view on toys.
[37:25] I don’t the emarketer showed toys were one of the fastest gainers online so they said 36 percent of toys
is were sold online pretty covid so this is February 2020 their estimate was 36% and may 2020 they said 47% of all toys were sold online so that’s one of the biggest jumps.
[37:46] Goldman’s shows
toys going from kind of a in line growth of six percent before the pandemic to a 45 percent decline so that that is where I think they probably differ the most and where I would kind of circle this one’s and say hmm,
that smells a little weird you know I’ve read all these you know like Hasbro I think he was Hasbro was saying they just haven’t been able to keep up
for the demand of coming direct to their website and target has been sung through toys at a pretty good clip so that makes more sense to me if your kids are I don’t have toys age kids but you certainly do and I imagine you’re buying toys at a frenetic Pace to keep your son occupied.
[38:25] I don’t because Uncle Scott just keep sending him new Star Wars stuff so that’s actually.
[38:29] One of us yeah yeah between the two of us we do yeah.
[38:33] He’s very appreciative you and he are very aligned on interest which either means he’s very mature for his age or there’s another hypothesis that I won’t share.
[38:42] He is super mature young man unlike his father.
[38:44] Exactly yeah the bar.
[38:47] Cool unfortunately another news item was another bankruptcy and you know you keep a slide that has been following these bankruptcies in that is a very full slot.
[38:59] Yeah my designer is pissed because like every time they redesign it I’m like can you squeeze everything together a little bit more to throw a scene on there and yeah that’s rough.
[39:10] Yeah so Cena file Chapter 11 and remind us what all them.
[39:16] Yeah so a Cena is a big house of Brands and Taylor would be one of their big Brands Catherine’s dressbarn is a brand they actually closed a little earlier this year but that was one of their big
they also Own Lane Bryant which is a plus-size brand so yeah and they probably have 30 brands in the portfolio and they’re mostly Mall based apparel,
and they were significantly distressed before covid and so that
it had been a family-run business the jaffrey’s like grants the son of the founder of dressbarn was the CEO for a long time and he stepped down earlier this year and so they were
trying to do a turn around
you know facing a lot of head winds as a mall based apparel retailer and then you know covid just made that impossible so so they had to declare bankruptcy they expect to do a reorganization they’re definitely going to
you know Coulson Brands and Cole some stores and and try to reopen and we’ll see how that goes.
[40:25] So I saw another report that we are year-to-date at 7432 foreclosures which is more than half of last year which I guess we’re at half of the year last year was twelve thousand three hundred and seventy so we’re pacing it
prior to the 20%.
[40:43] And if you just count flags that went bankrupt like we’ve had 25 this year we had 20 all of last year so there’s more more brands that closed as well her bankruptcy.
[40:55] Yeah and a lot of times these beasts or had the sequence of the bankruptcy there’s a
period of time where they have to go through a process that’s also down due to covid and then they closed the store so this is the store number should lag the bankruptcy number Out imagine
unless they don’t start counting those upon announcement they wait for the actual date in a store to come in I think that has to be kind of a you know a known thing.
[41:20] And of course retailgeek tin or ma get in or whatever you want to call it is bigger than just those bankruptcies so a lot of healthy retailers are
taking the opportunity to dramatically close stores right so Nordstrom
is closing 17 Mainline stores there’s what I’ll call some hidden bankruptcies Microsoft had a hundred stores and they’re closing all of them they’re getting out of brick and mortar retail right and so that’s not a bankruptcy because,
the rest of Microsoft is pretty vibrant but but there’s a awful lot of stores closing.
One that is bankrupt that had a big announcement today was Neiman Marcus so they’re in bankruptcy we knew they were going to close some stores
but the and one that was speculated to be on that list and was confirmed today is
they’re closing what their newest flagship store in Hudson yard that literally just open Grand opened a year ago.
[42:12] Yeah that’s that’s crazy that’s like a big anchor like the whole thing is designed around that.
[42:17] Yeah it’s the top floor of this entire mall so it’s a huge deal to Hudson yard and now is an awesome time to find a new tenant.
But unlike the cost to open that strike they can’t they couldn’t have come close to recovering the cost to open that store and sort of close it is just like it’s,
it’s crushingly heartbreaking and then here like a
a slight little bitter irony as all these doors were closing in miles before covid the big play of you are a mall owner was let’s get more mixed use let’s open condos but most,
of all let’s open gyms and restaurants so guess what the only two categories to do worse than retail is in.
[43:06] Yeah Jim’s and.
[43:07] Exactly so it’s pretty pretty rough.
[43:10] Yeah tough times
one thing I wanted to ask you about in this topic of Mulligan is one of the mall operators Simon properties is buying a lot of these these kind of chapter 11 retailers who are essentially their customers their kind of buying their customers and the thing that kind of
as an e-commerce guy that blows my mind is there’s a his cap physicality here that is much more complicated right so let’s say you end up with three or four of these retail these fashion brands
the effectively compete with each other so how do you reconcile that and then also now don’t you own properties and other malls who are your competitors and you’re paying rent to your competitors what’s your what’s your thought on that whole incestuous
[43:54] Yeah so my perception and I’m far from a real estate expert is these are not strategic Investments on the part of Mal operators that say like oh man,
Eros ball could be super profitable and and we want to own it and turn it around and run it at a huge profit there,
protecting their rent and they’re protecting their tenant agreements with other other tenants like one of the problems is when vain
vacancy start opening up and particularly when anchor start opening up a lot of these other tenants have these Co tenancy agreement so you’re paying
expensive rent and all kinds of extra fees to a mall because there’s a ton of traffic in the mall right and when the Apple Store we use them all
there’s way less traffic and everyone makes less money and so a lot of the we Siz have Clauses that when
the the anchor stores closed or when two men are too much of them all is vacant that they don’t have to pay rent or have to pay less rent or can break their ridiculous 10-year lease and.
[44:59] I think it’s less like Simon saying like man this is a super Strategic investment and we’re buying it because we think we know how to run retail and more
that some of these retailers that have a big footprint in their moms they need to keep those those stores occupied even if they’re not.
Operated profitably so this this first one back in 2016
Simon got together with Brookfield then they said hey together we have most of the are spot I always say it wrong do you.
[45:35] Aeropostale e.
[45:37] Yeah it’s a bad news when you’re when you’re turning to the guy from North Carolina for pronunciation help.
[45:43] Aeropostale Aero pistol.
[45:47] Arrow pistol yeah you guys turn everything into a gun there that’s crazy.
[45:51] Sur La Table.
[45:52] Exactly also bankrupt yeah.
So I think they bought them to sort of protect that that we stand I haven’t seen a lot of data that they’ve like dramatically turned it around or change the operational model and so then this year.
Forever 21 like is an anchor for a bunch of these malls and so there was a lot of speculation and and it seems like they made an investment to try to keep some of the Forever 21’s open but I feel pretty your point,
the more they they do that that the returns become diminishing right like you know,
if they’re not profitable and you own it it’s a anchor on on your overall Enterprise profits,
and you’re you’re buying these properties that are you know potentially competing with each other right and so it’s now the big thing whenever a big mall brand is at risk of closing.
The rumor is that the mall owner is going to invest in it because there they have.
The most interest in keeping it as a growing concern and so that’s a ongoing rumor about JC Penney stores that are closing or if JC Penney is enable the to reorganize out of their bankruptcy.
[47:05] It also comes up a lot I’ve lost track of the names of all the entities but you know there was this big fight about,
the Victoria’s Secret Brands and when a bunch of them were going to close their actually like the second largest tenant in most of the malls in the US and so that would be a big hit so there were rumors about that,
but the economic analyst I have read,
I feel like they’re not going to make a lot more of these Investments because it’s going to be increasingly challenging for them and their point was there’s no way they could absorb JCPenney like it UI.
It just it just wouldn’t work so well.
[47:44] I find it interesting though that they’ve got a much better balance sheet than than any of their customers so I don’t know how the mall operators escaped this Hina kind of high leverage kind of thing but the apparently they did but the Retailer’s didn’t so.
[47:58] My my original retail Mentor Wayne huizenga was a big fan of buying something once and renting it forever turns out to be a pretty profitable model.
[48:07] Yeah sounds good then was at Blockbuster.
[48:10] That was yeah so you buy a movie for for 30 bucks and you rent it 30 times for 3 bucks it turns out that’s a good business.
[48:17] And then you get late fees.
[48:18] Yeah we don’t have.
[48:19] And then you ignore Netflix and they crushing.
[48:22] Nope okay so now I gotta defend Blockbuster we.
seven years later we sold it to Viacom for 9 billion dollars in 1994 which would be 15 billion dollars today Netflix wasn’t worth close to 15 billion dollars in there for seven years of operation so,
started the company hugely monetized it got the heck out and some much later owner-operators screwed the pooch on Netflix but like to be clear the entrepreneur that started Blockbuster was brilliant and did quite well.
[48:59] Okay the other big news that we want to cover is Bigcommerce so they release their s-1 so they’re going.
[49:06] I see what you did there with the big big by the way.
[49:08] I’m not going to get into the debate over Netflix and Blockbuster that’s we’ll save that one you can
you can rest that Blockbuster one the.
[49:24] You can see how large I’m living on my Blockbuster money.
[49:26] Yeah this this probably has some DVDs in Price Hill and return the,
the good news is no one’s there to collect late fees the so the Bigcommerce s-1 dropped and
that’s ones as you know one of my weird Hobbies is I love to read these things and this was a good one the shame here is become urse appears to be a great company when you read through it and if they had gone
public in the in a world where Shopify didn’t exist then it would be much easier for them but everyone’s comparing them to Shopify and you know,
not only that they’re comparing them to Shopify today when they’re really should be compared to Shopify like 2014 so I pre-ipo Shopify because you know when you go public it really,
can add a lot of fuel to the fire because you’ve got this access to Capital that’s a lot you know.
[50:21] Bigger deeper than kind of private Capital so,
so just some highlights so Bigcommerce is doing annualized a hundred twelve million.
Growing 22 percent year-over-year this is all 2019 numbers and then you know what you have to do in a in an s-1 is keep updating out with amended numbers I’ll get to those in a second.
One one Stand Out is their gross margin is 76% Shopify
2014 was 59 percent gross margins and then now those have actually gone down to 55 percent which is kind of interesting but it kind of indicates maybe there is a
yeah so I think payments the more payments you do the lower your gross margins because you’re kind of skimming so you’re running like 3% through but your cogs is like 2.5 so that can
put a lot of pressure on the gross margins things like that so but anyway it feels like much more of a SAS business at some kind of 76 percent gross margins
they are still losing money but you know
they’re clearly on this path to profitability just like Shopify was in 2014 and ultimately got there and it’s been quite profitable so the the most private most interesting thing is everyone’s using it as a re to the Shopify.
[51:37] So for example you know
because they’re not public yet and they have to update their s-1 we have this view into March April and May which is very it was very curious about how Shopify did in those
we know March but we don’t know April May so it’s a view into Q2 and March they again they’re they’re kind of
prepayment growth rate was 22% a Bigcommerce March it bumped up to 33% April a hundred and six percent
May 86 percent so a lot of people are taking that you’ve probably noticed shopify’s stock has gone on a bit of a run it’s kind of ironic because I think a lot of people are using this s-1 and they’re reading in and saying well if.
[52:20] Big Commerce did a hundred and 686 for April and May let’s say June was a step down at 75% that’s like 90%,
growth analyzed that would just like blow people’s minds so
so it’s gonna be interesting to see what kind of happens shopify’s growth rate is about 54 percent so so a lot of people are kind of reading into the Bigcommerce s-1 that Shopify is going to have a quarter where they effectively
double their growth rate and so that’s going to be really interesting to watch and see what happens as that plays out are they over reading that or not
so then a couple other the other thing I would mention to folks is it’s really good to read these things because the,
the way to read an s-1 is unless you’re a financial like a Warren Buffett he always starts at the back.
[53:09] The boring Financial disclosures and the audit and then Works forward I like to read the Management’s discussion and Analysis called the md&a section so unfortunately the way.
The way the lawyers want you to write an S one is kind of what I would call it poop sandwich so you have to start out and you essentially say,
in a very boring way his or her business and then you kind of almost have to say here’s kind of like why it sucks and then you
did you have to say but here’s some good little pieces to think about and then again you have to kind of come and then this is the risk factors and you have to kind of say yeah and again it kind of sucks and what you’re doing there is your
you’re protecting yourself from making any forward-looking statements or anything that an investor could see you for down the road so you have to kind of like.
[53:52] Reading these things can be very boring if you start at the front because you’re going to the kind of the,
cover your butt side of it so getting to that md&a is really good and I was like to hear.
[54:03] Because actually you know haven’t been one of these you actually write that and yet goes to refinement but you really kind of need to write it because no one else can write that for you so it’s really the management team really putting down
on paper they’re words how they’re they’re doing the business and I thought the Bigcommerce one was was very good the other thing that I love to do is,
you know when Enron and play ODed it caused all this new regulations to come out one of those is regulation FD which is full disclosure so ever since then everyone’s Roadshow actually gets published out there in a video
um now this is weird because I find most people don’t know about this and they don’t they don’t know to watch these the
the thing that’s tricky though is the video has to be out there while you’re on your road show and then most companies take it down because you don’t really want that artifact so there’s this window of usually,
a week sometimes two weeks sometimes three days where that road show is up and I’ve been watching every day for Bigcommerce it usually will start to
we’ll update this one with some new data and then start I imagine next week or the week after I’ll let I’ll try to bring it up on the podcast but I’ll definitely tweet when it goes up.
And it’s at this really Arcane website called retail Roadshow where you can go watch these things so so I’m eager to watch this one because it’s going to be kind of interesting to see some people do kind of a like the Uber one was really good it was kind of like hyper if I like a Super Bowl.
[55:25] Some have very high production.
[55:27] Yeah yeah some have high production and then some you know most of the ones in the e-commerce category are super low production where you know they’re they’re almost like,
Shark Tank VC level pitch which I,
I prefer because you kind of get to the meat and potatoes so I’m going to watch for that and and see how they present on that and see what that looks like so so that was my takeaway is did you have anything from becoming she wanted to.
[55:52] A few other equipments first of all I feel like Warren Buffett probably starts at the end because he’s a very old man and he doesn’t know how much more time he has.
[56:00] Who could be.
[56:01] It’s just a theory and I also like to read them but I’m weirder than you I like to start at the risk factors because I feel like there’s just so much positivity in my life right now that.
[56:11] You’re such an Eeyore.
[56:14] Yeah that I just I just need to bring it down and.
You tell me if I’m wrong but unlike the the the sections that like each each entrepreneur clearly does write for themselves I’m pretty sure the risk factors are a popular boilerplate item.
Because they tend to have like all ten plagues in them for example.
[56:33] Yeah you’ve got to talk about cybersecurity you can have an internet outage you’ve got a lot of competitors you’re not profitable.
[56:40] And then nowadays they’re just one one bullet called like Amazon right.
[56:44] Yes you got to have an Amazon bullet in there.
[56:46] Exactly so a couple of things are interesting to me and looking through the s-1 so like,
you didn’t mention it but so they are tiny compared Shopify today they’re like 117th the size of Shopify but,
their business is more different than Shopify than people might realize so one thing the revenue per account is much higher so there’s a.
You know a common narrative that they’re there,
more mid-tier Brands tend to use Bigcommerce and there are little closer to Enterprise and Shopify tends to be along like the long tail and a lot of startups.
And the this s-1 kind of bears bears that out like the there they have far fewer clients they’re making more Revenue per,
client but also the mix of the revenue is quite a bit different you alluded to it a little bit in the payments but what’s interesting is.
[57:45] There’s there’s recurring Revenue which are the fees they collect for hosting right like that the fundamental charge is you have for using their platform and then there are these variable fees which are,
not guaranteed to be recurring but for things like
fulfillment in the payment fees when you you shopify’s echo system and the overwhelming majority of shopify’s Revenue come from fees not recurring so,
the despite the fact that there are SAS company their recurring revenue is a menorah T of there,
their revenue and that’s way less true on Shopify shop the bulk of shopify’s Revenue is coming from.
[58:26] You mean bad Converse.
[58:26] I’m sorry yeah the opposite strip Bigcommerce the bulk of their revenue is coming from charging rent for this platform SAS platform that you’re getting and they seem to be making a lot less from,
from supplement they think they have much less supplemental services so that’s that’s interesting the thing we always we never know about Shopify that were always really eager to tell and the Bigcommerce doesn’t give us any insight is like what’s the churn,
like they have all these clients but you know how many of them are are economically meaningful and how many are still active,
but in some ways the Bigcommerce model feels so although much smaller safer because they have these clients that are more locked in and it’s a you know more more material to their to their business.
[59:17] You know you know you just did a talk on this and I don’t want to do any spoilers we’re going to Deep dive but Magento just really doesn’t come up in the conversation where it’s like they just fell off the face of the earth I don’t know if that’s just me or have they have these hosted platforms just really displace them.
[59:31] Yes and no they still come up a lot with me like so they’re owned by Adobe and so you know you’re starting to hear people say Adobe instead of Magento the analyst.
So Forrester just published their wave and and adobe’s a weed or in the wave which is Magento,
and Gardner is about to publish their wave and I can’t confirm or deny that I’ve seen it but you’ll probably see them in that too.
The I would definitely say like.
[1:00:06] A lot of Magento is at the moment feels to me like our past their Prime like they they were the long tail solution before Shopify,
and nobody’s successfully moved a bunch of those,
those clients up Market or to newer products and so it does feel like they’re losing momentum in that regard Adobe has a lot of juice so maybe you know Adobe will be able to turn them around what we’ll have to see but for sure the future is.
Cloud native platforms and I’m saying Cloud native as distinct from like just putting your product on the cloud.
So Magento is an example of adobe and others have put Magento on the cloud.
By just you know running a private instance of Magento on a on a virtual server instead of a an on-premise server.
It’s not really service-based and it’s it has a lot of problems whereas Bigcommerce Shopify,
and and Salesforce are our Cloud native Solutions and a lot of the newer platforms that are in the market are all Cloud native nothing everything is service-based and.
I feel like there I wouldn’t if magenta where step is stock I would not be buying.
[1:01:17] Yeah alright anything else on become worse.
[1:01:22] Nope nope I think that’s going to be a good place to wrap we have used up more of our time given that we have two shows this week then I had expected to but as always if there’s something that piques your interest let us know on Twitter or Facebook.
Please please please jump on iTunes and give us that five star review.
[1:01:42] Thanks everyone and…
[1:01:45] Until next time happy commerce.
EP228 - Bonus Edition: Verizon Panel - The 5G Future of Retail Post-COVID
Scot and Jason hosted a live panel for Verizon, entitled: “The 5G Future of Retail Post-COVID: Challenges and Opportunities.”
The panel featured three guests:
We covered a variety of topics related to 5Gs potential impact on retail.
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 228 of the Jason & Scot show was recorded live on Wednesday, July 8th, 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.
EP227 - Amazon Dash Cart and Other News
Are we in a long-lasting, deep recession, or is at an artificial recession will quickly bounce back from? What should retailers and brands be planning for. Jason and Scot has it out. Who will be right?
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 227 of the Jason & Scot show was recorded live on Friday, July 17th, 2020.
[0:24] Welcome to the Jason and Scott show this is episode 227 being recorded on Thursday July 16th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners,
Jason as you know the last three episodes we’ve had a what I would call a blue-chip roster of guests on the show and we want to take a little breather and catch up listeners on all the retail news going on
first of all Jason I think we have to address this super awkward elephant in the room a lot of listeners have pointed out to me and I’ve seen it on Twitter
that you have been presentation and pot cheating on me so go ahead and tell listeners all these other things you have going on.
[1:13] I do plead guilty I feel like I’m vast as per usual in vastly Overexposed I’m gonna.
Preempt your question with two other quick points I just wanted to throw out number one.
I’m thrilled to be here alone with you we’ve we’ve had these like three great shows in a row with great guest that I super enjoyed but the bumper of that is I don’t get to just
make fun of your wrong positions and things because it wasn’t just the two of us so.
[1:43] Yeah we’re going to definitely carve out some time for that on the show so it’ll be fun.
[1:46] Yeah so I’m thrilled to have some alone time with you Scott and I it’s come to my attention that there’s a few listeners that don’t listen to every episode,
all the way to the end of the episode and so for those of you that don’t and I don’t forgive you for that.
At the end of every episode there’s two very important things we make a plea for you to go onto iTunes,
and leave us a 5-star review so for those of you that get so much value from the front half that you don’t listen to the back half I’m throwing it in now,
after tonight’s episode you need to get yourself onto iTunes and leave us that five star review you owe it to us by this point I feel like we’ve earned it.
And number two I have a witty catch phrase that I could include every episode with and I’m not going to tell you what it is so you.
You’ll know what you’re missing.
[2:39] I don’t know if I’ve ever heard of either I’m usually you usually put me to sleep by the time I get there it is an hour later I’m sorry.
[2:44] Yeah yeah yeah it’s okay yeah no I’m grateful that you’ve never listened to a show after we published it because you wouldn’t realize how much of you is edit out of the show.
[2:53] That’s totally true I hate listening to myself so then I could actually listen in now.
[3:00] Oh my God yeah that could be a whole another show but I have all these horrible verbal crutches and it’s it’s crushing to hear me saying over and over again on the show and you don’t do that for the record.
[3:12] Well sometimes I miss us going to trade shows together and so I play our podcast at half speed and I get to have drunk Jason it’s like being at a trade show.
[3:19] Nice some.
[3:21] Play Jason if I play Jason after three Starbucks I put you on 3x.
[3:25] I like it I like.
But so yes you have correctly busted me I’ve been I’ve done a bunch of stuff including cheating on you on some podcasts.
So last week my company publish a pretty cool livestream on LinkedIn they called Trends and insights alive.
And there’s sort of a beta tester of of live casting on LinkedIn.
So they’ve done Eight Episodes this season that eighth is the final episode in the season and so you know that’s when they wanted to roll out the really big guns so the 8th episode was all about retail so we call the new reality of retail and,
two of my colleagues and I got to chat about some of the big.
Big evolutions and Retail that we’re seeing so you can watch a video of that on LinkedIn and I’ll put a link in the show notes.
[4:20] Since nobody knows LinkedIn has this I’m sure there is a huge audience.
[4:23] Yeah well it shows up in your activity feed so it’s like you you’ve.
It’s a pretty big beta so not just anyone can stream yet although you’ll be glad to know that the Jason and Scot show has been pre-approved.
For streaming on LinkedIn so if you want to do a show we could do it yeah we have clout with LinkedIn.
[4:47] There’s also a retail publication out there that a lot of our listeners are probably familiar with called retail touchpoints and they do sort of video podcast Series so I sat down with them and did a,
interview that they entitle the separating urgent from important because I think that was one of my topics that we talked about in the show so I’ll put a,
LinkedIn to put a link to that in the show notes there is a podcast,
specifically focused on the evolution of brick and mortar retail which I know you would you would have some strong thoughts about called brick-and-mortar reborn so I got to do an interview on that podcast.
[5:28] Or alternatively the path to chapter 11.
[5:31] Exactly maybe not but okay and then there’s a SAS Pim product out there called salsify in the the content team and the and one of the founders of salsify started a cool.
Podcast about the digital shelf that’s in fact called the digital Shelf.
And so I sat down with Rob Gonzalez who’s the one of the founders of salsify and Peter Crosby who’s the chief Storyteller there and we had a good.
Good conversation for an hour so in the extraordinarily unlikely event that people don’t get enough of me on this podcast there’s like four more hours of me from the last two weeks you can get and.
That’s not all if you want the freshest stuff I have like three things coming up next week too so.
[6:22] Yeah so on start Monday Tuesday and Wednesday of next week is in RF next which is sort of the,
the spiritual successor to to the shop dot-org trade show so normally this would have been a,
in-person event in Las Vegas this year it’s going to be a virtual event it’s two days a bunch of great speakers and I’m doing a presentation on Tuesday the 21st,
right around lunchtime 11:45 Eastern Time called the future platforms and I’ll be talking about sort of the evolution of e-commerce platforms and.
What people should be looking for and what what pitfalls that they might make in choosing choosing a platform so that’s a topic I used to talk about all the time and I haven’t talked about in a while so I had to do a pretty.
Pretty significant update of my appeal for that.
[7:12] I would avoid going all in on Elliot just BTW.
[7:15] Yeah yeah I debated whether to bring it up at all.
And for westerners that are following closely Elliot’s that eCommerce platform whose one of their Founders was on this show and they imploded this month and I’m not clear whether.
They just like weren’t able to ship and bring it over the finish line and kind of folded or whether it was.
More significantly vaporware and was never close to the finish line but I don’t know if we’ll ever know.
[7:44] There was an article that I tweeted that made it feel more of a prairie.
[7:49] That seems entirely viable to me unfortunately and so then the week after that another former guest of the show Scott Silverman who was one of the founders of shop dot-org has his own.
Event series that is also going virtual this year called Commerce next and so I’ll be giving a the the closing keynote on July 29th at 4:10 p.m.
Eastern Time called Lessons Learned and thoughts from the future.
So that will be cool and then in the event that you’re interested in my opinions but you can’t stand my voice well
which you would not be alone I do have a column in Forbes and I have a new article I just put the finishing touches on and I think I’m gonna,
publish that on Forbes over the weekend and that is called that retails great.
From traffic to to revenue per customer kind of talking about how all retailers are having to make this big shift from.
Trying to get as many people as possible in the store to having fewer people in the store and having to make more money on each one.
[8:55] Nice Thanksgiving us all exclusive preview of that.
[8:59] Exactly so I appreciate it if folks folks to take the time to read that and give me your feedback so that’s all my stuff I’m exhausted already is the show over.
[9:09] So I guess if people listen to this save it for next week you could have a week of Jason essentially if I’m doing the math right you could read the article on that off day yeah got a week of Jason coming up.
[9:20] Yeah yeah or you could just binge all 227 shows of the Jason and Scot show.
[9:29] You do the math in a presentation what is it like 3 weeks or something if you didn’t go back to him.
[9:36] It’s longer than any yeah I think that like if there was a remake of Abu ghraib we might feature prominently.
[9:42] When you do that in audience ever looks at each other like to see really think we’re going to do that it’s hilarious in a office kind of a.
[9:52] Cool my kids would say cringy,
all right so before we jump into the news another piece of listener feedback that we’ve gotten is folks have really enjoyed hearing kind of our opposite views of the economy so in our covid show you and I had a little friendly
Spar I guess I would say about you know what we think is going to go on so we’ve gotten a lot of there’s kind of a team Jason team Scott thing forming they’re obviously the team,
Scot crew is huge than team Jason is a couple lonely Souls
but in my experience when you have these kind of different opinions one of the best ways to kind of settle it is to make some predictions you and I do that on our annual prediction show which is kind of more about you know e-commerce Trends and things of that nature
but I thought at the top of the show would be good for here for us to kind of like
update our positions and then make a little bit of a prediction one of the one of the key differentiators where everyone’s disagreeing right now and I think you and I fall into different camps here too so
this is probably a good framework is the shape of the recovery so so the options are V which would be you know we’ve kind of come down and we’ll come right back up as quickly as we went down so that V shape you which would be like a delayed recovery so
you know call it Q3 kind of middle to late next year we do come back but it’s.
[11:14] Takes over a year to get there then there’s the L some people call it a swish
that’s kind of a super slow recovery so more like 20 22 before the economy’s kind of cooking and then there’s the dreaded W which is the we have a V and then we get into the fall,
the virus surges and then we have to go back into the bottom of the V again which then you know and then you come back out so that forms that w
and then you have seen some other shapes out there but those are the main ones so so.
A do you agree with that Framing and then be why don’t you go first and give us our view if you agree.
[11:53] Sure yeah so I feel like there’s some room for variance in in some of those descriptions but yeah those like those are certainly all all,
versions of a recovery that have been hypothesized and and,
my own opinion is that it is going to be a check mark shaped recovery which would be the Swoosh
but maybe not quite as slow as you described so I think we are still going to be significantly impacted economically and likely health-wise by covid for all of 20 21 and so.
You know I think holiday 2021 will be better than holiday 2020 which I’m not expecting to be very good but I don’t think we’re going to get back to true pre-pandemic
well levels until 2022 so,
so maybe it doesn’t take all the way till Q4 of 2022 I think January of 2022 might be on parity with January of 2019 so we may lose two years here.
That is kind of my stick and I’m I like to call that the realistic position and then I think you we’ve given the the delusional position to so why don’t you tell us what that is.
[13:14] This is why predictions matter so will some one of us will be right and it will at least be able to they’ll they’ll have they’ll be goalposts Elise
so I I’m increasingly so I’ve fought for a while and I’m increasingly seeing that we’re in a v-shaped recovery
so so first of all unemployment is interesting I think unemployment’s.
Misleading because so so you made a point earlier about you know this is the worst economic.
Depression since World War II which if you use the correct definition of depressant you’re right.
But there’s you know those were not caused by a pandemic so those were caused by other you know.
Economic impacts the government essentially cause this one is a reaction to the pandemic so,
so it’s very unusual from anything else you can’t use those past things,
this is my theory and prediction you can’t use those past like 2008-2009 which did have these very slow recoveries
as a comp so I think it’s a v-shaped recovery the data I look at is first of all my favorite data point is consumer confidence.
[14:29] And consumer confidence is actually right around a hundred which is pretty good
you know I think people would say it’s kind of neutral it’s not super negative not super positive when it goes way over a hundred people are like super positive and then when it goes under a hundred if you look at 2008 at the bottom of the Great Recession it was like
20 I think it touched like 25 or somewhere in there and that was like one of the lowest ones I’ve recorded so so you have this anomaly where,
GDP is low
unemployment’s High yet people feel pretty good and what’s causing that is the fed and the government just pumping tons of money into the economy the unemployment thing is actually
huge problem because in I’m sure you’ve heard this from retailers it’s actually impossible to hire anyone right now because they’re making so much on unemployment so once that
once that goes away in July or is diminished we have to kind of see where the government lands on that but I think they’ll be something there
I think you’re going to see employment come roaring back because essentially people will have an incentive to go back to work so so that’s going to,
that’s going to solve a lot of things there and then the other data that’s really interesting and someone had kind of tweeted This Is Us retail sales is a perfect V we’re like literally already back to the pre covid levels now you could say well.
[15:49] Yeah we don’t know if it’s going to be W or not that’s where time will tell
that’s another one there’s also these really weird data points coming out where consumer savings are at one of the highest rates they’ve ever been so people are saving a ton of money that’s because they’re not traveling as much their they did they delayed their vacations and these kinds of things
you know it’s not all that being said I do think,
macro we’re gonna have the V shape but there are going to be some segments to get left behind I think the ones are going to be hit the hardest are Airlines you know so,
people are not really traveling by are nearly as much as they used to it’s come back some so if you look at the TSA data we’re at about 750,000 Travelers a day,
a year ago it was two,
eight million so we’ve lost two million Travelers a day so the airline industry is going to have a huge challenge oddly enough it looks like the cruise industry is going to come back before their line I don’t understand that personally but,
there you go.
And then you know the other thing is I work with a lot of startups and there’s a fairly large percentage of companies that are not going to go back into office space for a long time and.
[16:52] That part is going to be delayed so those Industries will be hurt but I think we’re going to see other
parts of the economy pick that up and we’ll still have that V I also am bullish and I know you strongly disagree with us that there’s going to be a vaccine so I think we got
two good candidates in moderna and Oxford and I get all my medical news from CNBC so don’t take any advice for me but this is
this is my again I’m making predictions to try to,
see where we land on this and I do think this project Manhattan thing is interesting and you know there’s all these arguments that say well we’re going to need three billion vaccines I don’t think that’s right I think if you go and vaccinate there’s a clear,
there’s a clear set of people that have a much higher
impact from this virus so if you start at the 85 and older the people that are immunocompromised and have existing conditions that’s a significantly smaller number
you’ve protected a really big part of the population that buys you time to go do the other ones you also have herd immunity kind of meeting in the middle so I think there’s probably,
and the US are 20 million thing over three or four months that get you there
so so I’m very bullish and all that and so my prediction just kind of summarize all that is it’s going to be a V shape and you know definitely by q1 of 20,
one we will be at the kind of back where we were and I think it may be as fast as Q4 so.
[18:18] Wow Q4 of 2020.
[18:20] Okay I write so let the record show I hope to God that I’m wildly wrong in your wild rewrite like I’m certainly rooting for you.
Like a couple of things that caused me to have some concern like first of all you have a hypothesis which is perfectly reasonable but I don’t agree with that it’s a government caused recession so I for sure,
we took actions that that.
Substantially contributed to a recession and potentially triggered the recession in the US but there’s but worldwide there’s a bunch of countries that didn’t take any of those actions and they’re still in a recession right so sweet and in shutdown
people aren’t spending in Sweden in a bunch of people are unemployed Taiwan didn’t shut down people aren’t spending their right so,
there’s some evidence that even if there had been like you could debate whether the government action was helpful or not helpful and,
and if there could have been better government action almost certainly there could have been but if there were no action.
[19:25] The my hypothesis based on all the international evidence is we would still be in a recession.
It could be worse could be better the truth is we’ll never know.
I would also say I actually think there’s a very good chance we’ll have a vaccine I mostly agree with you it’s it’s possible we won’t like as much as we all want to be optimistic and we’re we’re.
Making the most prompt medical progress in the history of humankind to potentially create this vaccine it was described to me once that like making a vaccine is very hard it’s like.
Scoring a goal in hockey from half half ice but the good news is we have more Wayne Gretzky’s on the ice taking shots right now than ever before right so.
I think it’s totally possible we make a vaccine most vaccines have.
[20:20] Problems with limited efficacy.
Aren’t effective in everyone that takes it vulnerable populations often are the ones that are least likely to be able to take it it does,
it is difficult to distribute a vaccine there’s a bunch of people in the US that just don’t believe in vaccines and aren’t going to take it,
even if we do have one and so for all of those reasons even if the science goes perfectly and we have a decent vaccine in q1.
I just don’t think you have enough immunity to turn the economy around and toll Q4 and that means you won’t start seeing the economic results of that turn around and talk q1 2022 which is where my.
My estimate sort of comes from and again I desperately want to be wrong I hope you’re right but that’s my my concern.
[21:14] Well we’ve got our stakes in the ground on there’s a good year in there too.
[21:18] Other depressing news on this point from this week just to throw out there is all the banks had their earnings call this this week and the common theme from all of them is they’re all reserving tens of billions of dollars because they.
Massive default on all of their.
Their loans and mortgage properties right like that the you you hit the hammer the nail on the head it’s the weirdest recession ever because there’s this.
Very high unemployment and very high savings rate like because per your point like all this stimulus money and stuff caught and and bolstering unemployment benefits,
caused everyone to like the average American had a huge cash influx.
At the same time they weren’t working so that’s a weird weird dichotomy but all those benefits are scheduled to end in.
Couple of weeks there was a more people than ever that miss their rent payment this month there’s a even higher cohort of people that say they don’t know how they’re going to pay next month’s rent and then all these benefits are going to,
expire so there’s a chance for.
All sorts of cascading negative Financial events to happen and it feels like all these earnings calls from the banks are kind of a foreshadowing that they think it’s going to happen for whatever it’s worth.
[22:39] Yeah it’s really weird because I heard someone say that it’s like having two different movies playing on one screen because then like car sales are up.
[22:47] Yeah so you know it’s funny about that like you mentioned like oh retail sales are kind of back like the V is there.
That’s a hundred percent true if you include Auto Sales like are are,
what month did we get the reporting came out for June today so so the June retail numbers with Auto in there,
the June total sales number is higher than the February total sales number so complete recovery but if you take Auto out of that like we’re still definitely trending in the right direction but we are still below are like February level.
So it’s weird like cars are disproportionately affecting that I’ve heard one hypothesis is because.
Air travel is so curtailed a lot more people are taking,
are using their cars more I’ve heard Harley-Davidson as having a huge Resurgence people are buying motorcycles and going on on,
driving vacations instead of flying vacations,
you would know more about this than me but I have heard that as all the rental car companies declare bankruptcy and and sell off their their fleets that that’s going to put a damper on the auto sales as there’s going to be a,
full out of inventory.
[24:01] The other kind of treating them internally so we’ll see I don’t know how much of this so-so.
I would say real car usage is.
Going crazy right now which is odd because it’s usually tied to air travel but they become disconnected because people are saying I don’t want to travel on airplanes
therefore I will drive from Chicago to Detroit and I you would normally fly that so and then they kind of say well I don’t want to put those what does that 3,000 miles on my car I’ll bring the car and do it that way,
yeah so it It’s tricky to read and that’s what makes the prediction that much more fun we’ll see.
[24:39] And before we jump into other e-commerce news several listeners have asked over the last week there’s been a lot of get spiffy news and I’m wondering if you can just share a quick update on on some of that for our listeners.
[24:52] Yeah yeah I guess the biggest new so we are
we’re experiencing this V which is what I think probably influences think so we definitely had a huge dip in demand largely from fleets and then obviously office Parks have been hit that hasn’t come back but the fleet stuffs come back
pretty dramatically consumers have come back so it’s actually been pretty tough hiring so we’re hiring technicians at a pretty good pace and then one of the biggest
inbound requests we get is for people that want a franchise so we’ve kind of carved out the 50 what I would call Amazon Prime cities as you know and.
[25:28] Love Amazon and there in about 50 cities with Prime and those tend to be the cities we want to Target as well I figure Amazon has a pretty good idea where those Prime households are so
but then we get tons of requests from smaller cities like Wilmington North Carolina
a will see Memphis Tennessee that are will probably not be able to get to you for years because we’re in 17 of these 50 that we’re focused on so we’ve decided to open up those kind of
next to your market so three hundred thousand eight hundred thousand people in the Metro areas to franchising so we were able to announce that,
feels like last week yeah last week and
that has had a really good response so that’s been fun you know at Channel visor one of the things I loved every day was I got to work with thousands of entrepreneurs some of them were intrapreneurs they were like you know
early digital people in the side of Nike like we’re leading the charge but then at the same time you would deal with these entrepreneurs like
rock-bottom Golf and these crazy brothers that were selling golf stuff and so there’s a lot of fun so I’m looking forward to look at working with a bunch of other entrepreneurs in that capacity.
[26:38] Yeah that’s awesome I just take it as a good sign because I’m thinking about
all of the those that cumulative carwash and capacity and I’m doing the math on how much crystal meth you must be selling to need to launder that much money so that.
Seems really encouraging.
[26:55] Yeah I get this a lot as a car wash guy the reference it for those who don’t know is the TV Show Breaking Bad the guy by his car washes to essentially you know clean his cash so.
[27:09] Literally and figuratively yeah.
[27:10] Yeah we do not for fully of total transparency we do not do that.
[27:18] Or so you say okay.
[27:19] Cool well it would not be a Jason Scott show with Al.
[27:26] Amazon news new your margin is their opportunity.
[27:39] Yes this was a weird one and I want to check your memory because I feel like I’ve lived seven years in the last four months so I got this notification that said
congratulations Scott you are in the day one program for
Amazon Echo frames so I ordered those and they’re coming this weekend and,
I forget if we knew about this or not and if we talked about it on the show so is this new or has an I just like him.
[28:08] No it’s super it’s super annoying so,
it was announced over a year ago when they launched the echo buds they actually announced a variety of new Alexa enabled devices so they,
the earbuds they also showed a a ring that you wear on your finger and they announce these frames that you get prescription lenses in,
and for the the ring and the.
The frames you had to apply and you and I I know for a fact both applied on the first day that you could apply,
and so the reason I’m super annoyed is not even that you got in and I didn’t and that you don’t remember,
registering the reason I’m annoyed is because after I found out you got in,
I went into my Gmail spam and found out I got in in March and my invitation is already expired.
[29:04] Well next time you see me I’ll be having a conversation with my eyeglasses and you’ll be you’ll be.
[29:11] This is another reason why I see Jeff Bezos point that I should whitelist him but I’m still not going to do it.
[29:18] I think Jeff loves me best.
[29:20] He probably does your more lovable to me frankly you’re more of a wide-eyed Optimist the the he has definitely experienced a v-shaped recovery.
[29:28] Yes he he’s well on the he’s on a V with a rocket ship on the tail,
which is actually interesting because they are going to announce results next week they haven’t announced the day I’m thinking July 23rd If you kind of look at last year so we’ll do a whole show dedicated that because I do think you know,
as Amazon goes it’s really a good indicator of what’s going on in online I’m going to,
predict it’s going to be a blowout quarter based on everything I’ve seen but another thing that was really interesting kind of in your world of grocery and there was a very robust discussion on Twitter
was this idea of the Amazon – cart and you and I were aligned on this one oddly enough so let you know so this is a cart that.
[30:21] It’s really weird because everyone had one image of this thing so you can tell it was like from a press release it’s going to be in the store that is not a ghost or a not a Whole Foods I don’t know what this evening to be called
I don’t know if you know the name of it and it’s gonna be this cart that you can put some items in,
it’s really hard to tell from the pressure release if it uses image recognition when you look at the card it clearly has some cameras mounted on it and then it has a digital display most of these cards use RFID in my experience so it’s not clear if it’s going to have some kind of
belt and suspenders where there’s an image recognition and an RFID or not.
[30:55] W my guess but it’s really interesting cart and then online we had this really interesting discussion where someone said and I think it was the target guy so he met,
be a it may be you know on a different team here but he was kind of like this is the stupidest thing why would you have Amazon go and do this dumb cart you’re wasting time in Cycles what’s going on this is or you know
I think the conclusion he came up with this is this is an admission that Amazon goes not going to work,
and then you and I and other people pointed out hey you know,
Amazon’s a 1.6 trillion dollar company I don’t think because they’re trying three or four things you can kind of say this is a signal that they have failed at,
thing number one in fact Amazon has enough experiments they could run 50 grocery experiments
and to me it actually the opposite is essentially saying Amazon is really serious about groceries so they’re running a lot of experiments these are the ones we know about there’s quite another 50 coming that we don’t know about
so that was a really interesting discussion what did you think about that car.
[32:01] Yeah so well I was first and foremost excited so I’m excited about this whole deal.
Amazon has had home delivery of groceries for a long time in Amazon Fresh and dirty secret Amazon Fresh hasn’t been very successful are caught on very well in fact.
Walmart basically is kicking Amazon fresh as but.
Um so then Amazon bought Whole Foods and they started delivering and doing curbside pickup from 80 of the Whole Foods and that’s been a pretty successful service and so,
pandemic kids people want way more digital grocery in and in typical Amazon fashion they dramatically scaled their delivery of Whole Foods from 80 stores 260 stores and,
and all kinds of amazing things to expand their capacity so so Amazon’s main success in grocery is Whole Foods and so what I’ve been excited about for a long time is.
Whole Foods is super expensive groceries that only cater to affluent markets in Big City centers.
So it doesn’t you know solve the grocery problem for the bulk of Americans so a while ago it became clear that Amazon was going to open a new physical grocery store.
The first of which would be in Woodland Hills California which is a suburb of La that is not a Whole Foods brand a grocery store so this is not something they acquired this is a grocery store that Amazon is inventing and.
[33:26] You know my experience Amazon does a lots of cool inventions if they’re going to reinvent grocery I want to see what they think is going to work,
so we’ve all been excited I visited the construction site before covid where this thing was scheduled to open it was supposed to open this summer.
[33:42] It did not open instead the rumor has it that they’ve been using that location as a dark store for deliveries,
and the reason they’re probably doing that is one of the things we figured out over time about this grocery store is it has a big micro fulfillment center in the back of it so it has a robot,
there holds a bunch of the groceries and automatically fills a bag with a customer’s order so it’s much more efficient at,
feeling bags of groceries for curbside pickup or delivery then humans are and that is clearly part of this new grocery concept that Amazon has,
um I’m super interested to shop a store see how that all works they have now discovered another one of these grocery stores under construction that’s promise to open sometime in 2020,
in a suburb of Chicago so I’ll get to visit one whether we’re flying or not so I’m excited about that so the new news this week is yes that,
one of the other things they’re going to have in this grocery store are these smart carts and my guess is a little different than you,
I think it’s a little simpler I’ll be shocked at the store has RFID I don’t think they’re going to put RFID tags on all the products for sale and in fact,
I think they might have a lot less products that you put in the cart yourself because I won’t be surprised.
[34:57] If you use the micro fulfillment center even when you shop in the store so you order your,
peanut butter and mayonnaise and cereal and the robot picks them and puts him in the bag won’t surprise me if you’re only pushing the cart around in the Meat and Deli area and picking your own produce and your own meat.
[35:14] We’ll see how that works but to me the smart cart looks like it’s primary feature is,
scan and go self checkout so lots of retards let you use your phone in the camera on your phone at products and kind of check out as you go Sam’s Club has a store that that’s the only way to check out call them,
Sam’s Club now you can do scan and go in all the other Sam’s Club,
Apple was one of the very first people to have this experience and they still use it broadly a problem with that is the the,
the camera in the phone isn’t perfectly situated not everyone has the right apps on their phone there’s a lot of user are it’s not the fastest experience in the world so my theory is
there’s Amazon grocery stores going to let you do skin and grow on your phone of you want but it’s also going to let you push around in one of their carts that has a.
Special-purpose camera dedicated to the task of doing scan and go in the cart so I think the.
[36:14] That cart is going to be a way to do scan and go but the cart also has a screen in it and I think they’re going to use that for media so I think they’re going to sell ads,
two vendors as part of the Walmart Amazon Media Group,
and they’re going to pop up ads in that grocery store when you’re in the appropriate section of the store so I think that’s another way to monetize it and I think there’s going to be a bunch of secret cameras and sensors on that cart,
that are carefully keeping track of everything you do while you’re in the store and they’re going to use that for analytics and data for for you know future experiments and Improvement so.
I think that’s going to be the main use case of the card I don’t think you’re going to have to use a card to shop in there I just I just think it’s going to be an option and I like per your point I totally agreed with Chris that like.
It’s just walk out or nothing like I do agree with Chris.
Doing just walk out technology in a 50,000 square foot grocery store is actually.
[37:13] More than linearly more difficult than doing it in a 2000 square-foot convenience store so I think there are reasons to think.
Amazon Go technology might work in a bunch of categories but grocery wouldn’t be the most obvious one where works so it doesn’t surprise me the Amazons trying to invent something else that fits better for these bigger stores and I also think if the smart cart thing.
Wear to work well and become popular it would be much easier to retrofit that into all the Whole Food stores they already own whereas.
Um you know go would be easiest to deploy if you’re building a store from the ground.
[37:47] I can’t get over the mental image of you in a construction site wearing a hard hat where you’ve taken an Amazon sticker and put it on there and.
You’re just like walking through like you know what’s going on in your like using a tape measure to be like oh this is where the robots going to go and.
[38:02] You just described a way smarter cooler version of what I actually did now.
[38:07] You’ve got a laser measuring device.
[38:09] Coach I should have gotten some coaching from you I probably would have gone inside but yeah.
[38:13] And then you do like a mission impossible repel and they like you’re hovering two inches off the ground and you’re like then a bead of sweat drops that how it.
[38:20] That’s basically how I roll that’s that’s what I like to call Tuesday.
[38:24] Oh man that kills me.
[38:30] Yeah so it’s exciting I think Amazon’s inventing new stuff I don’t know whether this like,
smart cards have been tried before and didn’t work it’s not going to shock me of Amazon Does It Better Than People have done it before there are some smart cards that are better than this that do cooler stuff in China that apparently people do like so there
there are you I think you commented man that smart cart looks like it has a huge bed or if it’s just running the
the electronics that’s kind of weird I wonder if it’s self-powered and there are smart cards in China JD.com has a store with smart cards that actually,
like follow an RFID tag in your on your wrist around you in the store so you don’t even have to push the cart there the car just follows you around.
[39:10] Yeah almost wondered if there’s a little Kiva robot hiding in there and it looked just like pop out and just start moving products room W fun mmm,
so couple of their Amazon items in Q4 they announced they’re going to be restrictions on third party stuff and warehouses this has been kind of an ongoing thing where they’re just kind of
totally tightening the screws of the one area of Amazon where they raise prices which is access to the Fulfillment
by Amazon side of things and then Prime day didn’t they so they had moved it they were going to have like,
Prime Vibes and then nothing really happened there and then they moved Prime day to September and now haven’t they just totally punted on it.
[39:52] Yeah so the latest rumors are that it’s going to be October I somehow got some inside information and for the life of me I don’t know how but I somehow knew it was going to be in October for several months so everyone’s like oh my gosh we just heard it was in October and I’ve been like wait
it’s been there for a month so somehow someone did me a favor and I didn’t,
I didn’t realize it and I will say super quick on that on the on the 3p Warehouse I agree with you they’re gonna have a good earnings this quarter and there’s lots of reasons to think they are.
It does seem like fulfillment capacity is likely to constrain them like if anything slows them down it’s going to be,
capacity and the thing that jumped out at me in this announcement was not that they’re constraining,
capacity it’s that they’re like by the way we’re bringing 60 fulfillment centers online this year to increase capacity and.
We’re still going to have to constrain it and you and like I don’t know if people are falling at home but like the next biggest e-commerce site in the United States of America has 8 fulfillment centers total.
[40:55] Yeah it’s just its fulfillment centers matter and I think they do it is so far game over it’s not even funny there’s no way anyone could you have to spend like.
Foreigner billion dollars or something to catch up with where they are where they’ve been you know they just been like knocking in these things out over so long the asset they have built there is massive,
it’s a Death Star.
[41:17] Another thing I’m watching kind of closely is Amazon has made some some minor health.
News lately they have announced that they’re opening health clinics in a couple cities in these clinics are adjacent to fulfillment centers because these are not health clinics at the moment,
that we believe are to treat their public there to provide Health Services for Amazon employees and so it definitely seems like.
As we’ve talked about for a while Amazon has some significant Healthcare aspirations and it feels like they’re dogfooding a lot of those aspirations by,
using by testing,
new health care approaches internally so you know for a while like Amazon’s had some interesting telemed services for employees they bought some some.
Digital diagnostic tools companies and they made those available to employers and now they’re going to open some dedicated health clinic so.
What’s interesting to me is that it’s probably a precursor to them having some big big consumer offering in healthcare space and so we’re watching that closely.
[42:26] Yeah you’ve kind of predicted Walmart would get into this and hasn’t.
[42:29] Yeah and they have yeah I thought we were going to maybe talk about this later but the Walmart has opened.
Clinics that are pretty substantial in Atlanta and now they’ve announced a bunch of other states including Chicago where they’re going to open these clinics,
and they’re pretty impressive stand-alone clinics that provide a bunch of services at.
You know Walmart level prices shockingly low prices even without insurance and that has kind of been Walmart’s ammo like they did a big thing with Pharmacy where they sell almost all generic prescriptions for four dollars so you know a bunch of people.
Even with insurance had some deductible they could never achieve and so they like literally couldn’t take the The Chronic prescribed medicines that their physician prescribed.
And you know now through Walmart they can afford them and in much the same way lots of families can afford to get an annual physical and have their kids get an eye exam and dental cleanings and things like that even with no insurance through these Walmart clinic so it’s kind of a.
Interesting approach to cost reduce Health enough to make it accessible to all the,
the Americans that that are pretty vulnerable with regards to Health Care at the moment so,
this is another initiative I hope to God Walmart and Amazon beat each other’s brains out with awesome new inventions and healthcare because we we need it.
[43:48] Yes so bad that there’s like so much room for.
[43:50] Yeah it’s a huge industry and it’s you know ripe for disruption and you know Walmart and Amazon are probably the two company like unless maybe Apple also wants to get into that.
You know those are two pretty good private companies to be solving it’s a shame that we’re having to depend on private companies to solve our health care problems but,
venturing into politics and we don’t want to go there my funnest fact of the week.
[44:16] Is add a age and they’re probably mad at me because it’s 50/50 whether I’m thinking a De Jour adweek in there too competitive Publications but one of them published a report that Amazon is now the largest Advertiser in the world.
So they’re spending 11 billion dollars a year on ads they have this novelty stat that means they’re spending twenty one thousand dollars a minute on ads but to me what’s cute about that is.
We keep talking about their ad Network and how they’re becoming a meaningful seller of ads and they’re kind of the Third.
Biggest digital platform behind Google and Facebook and you know the forecast were that they were going to sell like around there on a run rate to sell about 10 billion dollars in ads,
in a calendar year which is still a distant third from Google and Facebook but it’s it’s bigger than,
Twitter and a lot of other Pinterest in a lot of other digital Network so it’s pretty impressive,
but what where their unique is they’re the only company in the world that’s buying 11 billion dollars of ads and then selling ten billion dollars of ads so they’re they’re buying eyeballs and then selling them back to Brands which is kind of funny.
[45:26] Yeah I would not have expected him to be the largest Advertiser because you you know when you think about what you watch on TV you don’t see a ton of Amazon ads on TV.
[45:36] Then they do they have ads in Market all the time they are like a big Super Bowl Advertiser which is a big big chunk but the bulk of their spend is not TV it’s digital it’s like they’re there Google’s biggest customer.
[45:50] Yeah living the dream it’s funny because for the longest time they said we’re going to we’re not going to spend money on Advertising we’re going to put it all into free shipping and stuff like that and I guess they finally got to the point where.
They just had so much money they had to spend some one-on-one marketing.
[46:05] Well another thing where they’re a complete anomaly is I guarantee you they are the only top 10 an Advertiser in the world where nobody can name their CMO.
[46:20] Yeah I mean I yeah but the like they do not have like a big public-facing.
Marketing department right like you think of the mark Pritchards of the world that are like you know constantly out there for PNG which has historically been one of the biggest advertisers and it’s a it just Amazon is a very different approach so it’s going to be interesting.
[46:40] Cool stats that was a lot of Amazon news what other news is on your radar.
[46:45] Well today I alluded to this earlier but the middle of the months it’s been super fun for me because there,
the US Census Bureau publishes the retail data for last month about 18 days into the month so,
this morning they published the June retail sales data and.
I don’t know if we want to get into all the technicalities of it like there’s a bunch of different ways to slice the data so everyone reports the data and the numbers always look different and it’s because it’s this.
This Rich data set you can report retail sales without,
food or restaurants you can report it with restaurants you can report it without gas and Automobiles or with gas and Automobiles you can report it with adjusted for inflation and you can report it seasonally adjusted so.
If you’re reading I say all that to just tell you if you’re reading any of these statutes.
[47:42] If the person cited and did a good job they told you all those details but that’s why you’ll see a lot of variance in the data but so in general the.
The adjusted for inflation month-over-month retail sales were up.
Five point eight percent in June over May which is a,
um by historical standards of very large jump it was a smaller jump than last month which was the hugest jump of all times and that obviously followed a couple months that were the hugest,
drop of all times but it it per your point on the economy it is trending in the right direction and it’s trending in the right direction pretty fast.
The so that’s two months in a row of retail sales growing know basically you know forget the number and no matter how you slice it it’s above above average growth.
Um and basically as we discussed you we’ve kind of caught back up to our February sales levels which were the kind of pre covid-19,
numbers especially if you if you keep car in there,
a weird one this data is really bad I hate it for reporting e-commerce sales but they try they have a thing called non-store sales which used to be catalog sales and now it’s,
it still has catalogs in it but it’s mostly calm and their number there is weird it’s down 2.4% so you go.
[49:10] Since when is e-commerce been down and why would it be calm down now when everyone’s adopting digital as a result of covid and a couple of reasons.
Month over month growth like is not a awesome metric you have to really.
What you’re thinking of yeah I mean seasonality is a problem but also it just it’s so dependent on what anomaly happened the month before right like it’s much better to compare.
June of 2019 with June of 2018 and spoiler alert.
June of I’m sorry June of 2020 is 23 percent better than June of 2019 so so the real Trend here is e-commerce as way up.
E-commerce was so way up in the beginning of the pandemic that now.
As it normalizes a little bit e-commerce books down also the e-commerce number in the Department of Commerce isn’t huge and so the number of days in a month can actually impact it so there was one less day,
this month and so that you know if you take that out you know month-over-month it was actually up two percent so.
So yeah I wouldn’t I wouldn’t agonize over that number they have slightly better e-commerce data that they report quarterly and the next reporting of that quarterly data is,
August 18th so August 18th is going to be a big date because we’ll get the quarterly e-commerce and we’ll get the July retail numbers to see if we can make it three months of recovery in a row.
[50:34] Yeah I think Amazon’s cleaner data than all the stuff.
most of the people that like even like the adobe’s that you know have a lot of clients and aggregate their data like most of the the comscore panels and stuff they’re all going to tell you e-commerce is up so when the the,
Census Bureau reports is down its kind of goofy.
[50:56] A couple quick ones on Google shopping so they rolled out this is kind of
the consulate testing thing so it’s hard to know if this is a test or a permanent feature but
you know a one of our guests saw that they have this fast shipping tag and then another one of our guests Faisal said hey it’s only been 15 years and they finally realized
people that shop online want to know when they’re getting the products boom I want to report a murder and then another astute online person know.
[51:28] It’s a side note on that comment faysal actually works for Google.
[51:33] That’s it no it.
[51:35] Yeah yeah he works like in in the like especially like he’s in the autonomous vehicle division of Google.
[51:43] Okay that’s alphabet it’s different he’s in he’s in a whole nother part.
[51:47] Yeah those those crappy sales.
[51:49] He’s a w and that’s all day.
[51:51] Are still paying his salary I guarantee you.
[51:53] Yeah he’s over in W crap it over on G so it’s alright it’s he’s like in the whole back end of the alphabet all right and then Nike someone noticed pulled all their listings from Google shopping which is interesting because you know I think we just reported.
Like a week ago that Nike CEO said they’re going to move to 50% direct cells so they must have thought they weren’t getting the brand,
whatever Roi and they wanted from Google shopping.
[52:22] Yeah and Nagy does have this philosophy which is pretty bold that they’re really only going to sell their product through retail experiences that offer a differentiated experience and so mostly you know people took that to me,
retail and so what that means is.
If you’re a boring store that puts the Nikes right next to the Reeboks and doesn’t give them a Nike a chance to tell their unique Brand Story in any way
that they’re going to fire you as a customer and they have fired them bulk of their retailers and even the ones they haven’t fired.
Are increasingly not getting the good hot new Nike products and so to me this Google move feels a little bit like that right like the Google shopping still isn’t a very good experience it still has a bunch of flaws as Joe pointed out
like it’s a complete cluster with regard to win am I going to get it shipping times and so to me it feels kind of on brand for Nike to say
I’m not just going to put my shoes in a catalog tile in a mediocre selling experience.
[53:21] He had this this data points like three to five years old but I just have a hard time believing night not the Google solved it but a lot of Brands not just in the shoe category but we’ll use that as ample
they get they get really frustrated with how Google presents their products right so so there’s all these crawlers this algorithm spits out and says but here’s here’s
here’s the best Nike running shoe or something like that and then Nikes like well that’s like six years old and you pulled it off eBay and it’s used that that’s that’s not if you’d asked us that’s like not even in the zip code of like one of our top shoes and you know where the heck did you get that as a top shoe.
[53:57] It’s weird because everyone tells me that AI is perfect it’s weird.
[54:00] I don’t yeah it’s maybe Nikes wrong.
[54:03] Yeah the the fun side note on my favorite Google shopping story is someone
a couple of Reed here’s got together and they’re like hey I’m seeing something really weird in my analytics the you know we always have a lot of cart abandonment and carbonates Hoover High and we’re always trying to you know figure out what it is and we do cord cohort analysis and stuff to try to figure out you know who’s who’s abandoning carts
and we notice there’s one user that has huge cart abandonment,
across all of our sites and his name is John Smith like someone’s typing John Smith in in a bunch of cards and abandoning their carts and they’re like.
You know who is this what is it and you know they did some some digital Sue thing and found out that it’s a Google bot for Google shopping.
[54:49] Driving a cart abandonment stats everywhere.
[54:54] Yeah speaking of Nike the the the more interesting Nike news to me.
Is that Nike has announced yet another new,
Nike owned retail concept so in Nike store that they’re calling Nike rise this first one is opening in China in the,
ganju District just opened a week ago.
And you know I’ve been kind of impressed with Nikes digital in-store efforts so Nike has a store concept called Nike live which is very personalized order that leverages,
data from local Shoppers to a sort the store and it has some cool omni-channel amenities then they open this huge flagship store concept called House of Innovations there’s now several of those and
they’re to me the best example of letting customers,
use their phone in the store to legitimately enrich the shopping experience and now they have this other concept which I actually obviously haven’t been to yet,
but that also its primary emphasis is around digital shopping in a physical store and using your mobile phone in the store so,
I feel like there the market leader in doing that and I’ll be interested to see how Nike rise is different than the house of innovation.
[56:14] Yeah when it opens I want to have a suture Rita on the show because her tweet was your like oh my God I’m getting about Nike rise I can’t wait to just like can someone explain this to me in English I don’t understand what this is supposed to be
this store is supposed to reflect quote the pulse of sports and a member City and quote this is like the retail equivalent of abstract art.
So I’m picturing going in and it’s like a Picasso painting where like the shoes are all in cubes and melty and stuff.
[56:43] So my interpretation like so a every retailer when they open a new store concept they issue this like you know fluffy press release with all the cool experiences in it and the reality is.
[56:54] One or two of those experiences are super valuable to customers and customers like them and resonate with and other ones are ones that some executive thought was cool but that no customers ever going to care about right so
maybe I’m just more cynical than suit Cerrito I’ve never had a press release for a new retail store that didn’t have some silly fluff in it and I suspect she’s right,
some of the features that Nikes touting of this door probably will end up being super silly fluff and I think the one she’s pointing to the way I interpreted them is they have some kind of.
Um augmented reality experiences where you can use your phone to kind of have a,
a virtual Sports tour of the activities in the city where the store is so you’re a tourist and you know maybe you get the experience if you’re if there were a Nike rise in New York you might get the experience of
being at the finish line of the New York Marathon or you know being in jet Stadium or something like that so,
I don’t know if I’m interpreting that right but I would kind of agree with her like that’s like a kind of tangential shopping experience.
Other experiences on that list I’m much more excited about for example there instead of using those Oldham rulers to measure your feet they’re using,
image recognition to to measure your feet and prescribed shoe sizes to you and I think.
[58:20] It’s shocking that it’s taken this long to improve on that that shoot of ice that’s now a hundred years old.
[58:26] Do you step on it or like it you walk in the store and a camera sees.
[58:27] It’s just a camera that like it when there’s a home in the US there’s a home version that you can use in the Nike app but I’m guessing this is going to be a slightly more optimized version that the so the sales associate uses in the Nike rise store.
[58:42] We’re up against time and we have 60 more topic let me so the one I really want to hear about what we reward folks are making it this long is there’s been a lot of chatter about Walmart’s new kind of quote-unquote prime killer
I thought I thought it’s kind of funny because,
I think people are missed it it’s really grocery Focus so I was kind of because you’re the grocery Guru I was curious about your take on that.
[59:08] Yeah I’m of two minds so like to summarize it
Walmart is launching a subscription program you you get a membership I think the speculation is that it’s like a hundred bucks and you get some shopping benefits for that that.
That bent that subscription.
Walmart has announced any of this and in fact Jenny Whiteside the chief customer officer who was on our show a few months ago just did an interview on LinkedIn yesterday and they asked her and she said I have nothing to announce right now.
But but stay tuned because it’s it is going to be out in like a month so we don’t know what’s really in it,
and here’s my two minds if it’s pay $100 to get free one-day shipping for your general merchandise,
I think that’s going to be stupid because like it’s going to be trying to compete with Amazon Prime with a way Lamer offering right like.
[1:00:09] Amazon has way more assortment than Walmart and and whatever assortment Walmart can ship in one day is a small subset of Walmart’s assortment so–
it’s not just a matter of like some products can get there in one day like way more Amazon products are going to get there in one day than Walmart products I’m pretty confident in that so if that’s all it is,
it’s not going to be very interesting but I will be surprised and disappointed if that’s all it is I’ll bet you they’re going to bundle some sir some Walmart benefits in there that are different than things Amazon can bundle right so,
um therefore there has to be a grocery component in there like you could imagine that there’s free fast home delivery of grocery included in that,
I wouldn’t be surprised if there’s a healthcare offering in that that they’re offering some premium Healthcare stuff so I’m going to reserve judgment until I see whether offering I hope it’s not an Amazon me-too product,
if they can come up with a compelling list of values super smart and important.
[1:01:15] That they build us a recurring Revenue model for Walmart like you know as retailers are getting more and more strained on margins recurring revenues where it’s at like the the most successful in the retailer in the US by many standards is Costco,
and it’s because of that membership fee like you know when you look at Amazon success it’s all around Prime,
so I think Walmart smart to figure out what its recurring revenue is going to be eager just like everyone else to see.
[1:01:44] If this first offering next month is unique and differentiated and it can attract people or if it’s a silly shadow of Amazon Prime.
[1:01:54] Yeah I think that’s compelling it’s like hey pass $99 will give you two flu shots and a bag of groceries let’s see how that sells.
[1:02:06] Yeah well but I mean you can omit like there’s a bunch of healthcare services that people have to pay for like you could imagine them taking a hundred hours a hundred dollars out of the cost of that and then you getting all these other benefits right and that’s.
That sounds wacky but like you know when Amazon first rode up the the memo and said we’re going to give free shipping and free movie rentals,
in Prime that sounded wacky to now everyone’s like well of course you get those.
[1:02:32] Two billion dollar behemoths battling each other is good for consumers so I’m all for it.
[1:02:37] I and I think more retailers need to invent this there was I know we’re crushing time there was a bane report that came out that got widely distributed where they sort of did the math on the profitability of grocery and,
this is a these numbers unfortunately are painfully familiar to me but like a normal profitable growth Grocer in store makes two to four percent gross.
[1:03:01] So it’s a pretty pretty thin margin business and so anytime you then pick the groceries for the customer and drive them to the customer’s house.
Um you’re going to lose money right so all of this digital grocery stuff is not profitable there’s been a lot of Articles written about and Walmart.
Digital grocery not being profitable the easiest way you’d make it profitable as you charge more fees for that right and in general consumers haven’t been willing to pay those fees and so.
The the hypothesis is like that a recurring membership program may be the best way to collect fees to make grocery profitable,
and so you can kind of think about Walmart plus being Walmart’s answer to the profitability conundrum of digital grocery.
I will tell you we talked about the micro fulfillment centers and doing automated picking for groceries,
and that’s actually the real way to make groceries profitable if you use a robot to fill the bag and you have the customer pick it up in the parking lot instead of driving it to them,
you can basically make digital grocery higher capex than a regular grocery store but hit the same operating margins so then.
You don’t have to charge any fees if you can get any fees for it suddenly becomes more profitable than regular grocery.
[1:04:22] But how’s the robot going to know I like my avocados firm ish but also soft.
[1:04:29] Um so no you joke but.
[1:04:31] This is the hard thing about grocery people have really weird.
[1:04:34] Grocers like and Walmart and Amazon are both bad digital Grocers like almost every big one is,
if you live in New York and you order from Fresh Direct which is a digitally native digital grocer,
when you order the avocados it’s going to ask what day you want to eat it because,
they’re going to forecast the ripeness and give you a avocado that becomes ripe on the day you want to consume it and so customers would traditionally say I,
a day to avocado and a day for avocado and overtime on a good platform like that you also build your all your preferences for substitutions if you don’t have the 2% milk I.
Substitute the to give me the 2% milk and a different size or are you willing to accept 1% milk instead of 2% milk or do you not want milk if I don’t have exactly what you want right and so
on these really digitally mature platforms you build these robust preferences that enable it to be really smart about filling your bag you know it
Walmart Amazon and Kroger if they don’t have the milk you want you’re likely going to get glue sticks or something.
[1:05:42] So you could say the conclusion of the show is there a ion avocados is better than Google shopping say.
[1:05:50] For sure I although I doubt they have any AI it’s probably simple like that they have they have dudes that come in a.
[1:05:56] Come on that was like such a.
An interesting contrast dang it well one of the things we wanted to talk about was the Bigcommerce S1 we’re going to kick that to the next show so that’s a teaser to keep you coming back to episode 2 28 or 229.
[1:06:13] Yeah yeah so that is a great Cliffhanger and we will leave it there because it’s happen again we’ve used up our allotted time as always
if anything piqued your interest here we’d love to hear from you on Facebook or Twitter as I mentioned the beginning in the show please please please jump on iTunes and give us that five star review and appreciate everyone sticking it out with us for an hour.
[1:06:39] Yeah I would love to see your thoughts on the V shape to versus the we’ll never recover position of Jason so look forward to seeing that on social media.
[1:06:49] Yeah until next time happy commercing.
Blue Cape Ventures founder Hendrik Laubscher
Hendrik Laubscherger (@henlaub) is the CEO and Founder at Blue Cape Ventures. He is a subject matter expert in global marketplaces and cross-border trade. He publishes a very valuable weekly newsletter which you can subscribe to here.
In this broad ranging interview, we discuss global marketplaces, the latest events at Amazon, comparison shopping engines, direct to consumer, cross border trade, venture capital, and the future of commerce.
Episode 226 of the Jason & Scot show was recorded live on Friday, July 9th, 2020.
[0:24] Welcome to the Jason and Scott show this is episode 226 being recorded on Thursday July 9th 2020, I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners today on the show we are going to be talking about one of our favorite topics marketplaces
and we’re excited to get a Global Perspective from hendrik laubscher hendrik joins us live from Cape Town South Africa where he is the CEO and founder of blue Cape Ventures.
[1:00] Guys Jason and Scott it’s a massive pleasure to be here as a regular listener to guess I’m glad to be here.
[1:07] We are thrilled to have you on the show as you know we always like to start out by giving listeners a little bit of background about our guests so can you tell us a little about yourself and blue Cape Ventures as well.
[1:18] So background is in the 2000s I worked for.
[1:26] A Fortune 500 company in the u.s. my God badly sick.
I’m was forced to come back home to South Africa and do the the thing that’s happened in 2020 people having to rebuild their lives because of.
Conditions that they can manage themselves so I went back to school then got lucky in 2008 to get onto a rocket ship that was,
a boat by naspers one of the biggest investors in the emerging markets and and I’ve pretty much ID e-commerce box since like early,
I travel around the world I’m not going to Nigeria for business turkey.
I’m China often talk to the u.s. almost annually obviously not this year because of what’s going on and then my company look at the interest we’re a boutique consultancy that helps brands.
Make sense of global markets we help investors basically,
determine what’s next I due diligence and all kinds of things that are not allowed to discuss because of long and long long pages of India’s or not bore you with that
but in general it’s about helping people make sense of marketplaces and of global internet Commerce which.
Is it’s a it’s a thing but it’s still not well understood in my opinion.
[2:56] Awesome and you publish and I may have the frequency wrong but I want to say a weekly email newsletter where you recap a lot of global Marketplace news.
[3:09] So yes so what essentially happened was in Middle 2000s I decided or when I worked for NASA but it became quite apparent that.
Understanding what the trains all for e-commerce is kind of a big deal IE you don’t want to be left behind so I think the most logical thing at the time for me was to basically go to the US which is essentially we converse online started.
And I have since made lots of friends in various cities such as New York Seattle Chicago and the like and
what I saw with everybody was the same problem and the problem is people are time-starved like they are still today however the newsletter is is.
Mostly aimed at helping people understand what’s important because if you miss an important announcement from Amazon or giant or something that happens in the priest.
The implications of massive it could be millions of dollars gone like you’ve never seen before.
So the news late though was was started to help investors and Executives and comments people just know what’s going on and in the news that I normally tackle a topic that’s either on my mind always been in conversations with clients,
that I think is worth discussing Jason.
[4:26] Yeah and I have been a regular reader for quite some time I find it super useful because it’s going to come as a shock to you,
but Americans are very self-centered and we tend to think that everything happening in Commerce and and retailers happening in the United States which is of course.
A giant fallacy,
and so I you know like to track a lot of the other hot markets I spent a lot of time tracking China but outside of the US and China it becomes much tougher to stay abreast of,
everything going on and I found your newsletter to be one of the best tools for doing that.
[5:04] That that that that’s that’s one of the primary reasons I do this in the things that as you mentioned you’ve got to do super Paul’s but then if you’re a brand you know you essentially want to be playing and all these other Emerging Markets as well so
you know understanding what is new or the big players for example in Germany or in Brazil or in Africa it’s a big deal so
yo it’s a it’s a it’s a labor of love it’s 25 hours a week where I basically soft through an inordinate amount of content content
normally about 400 stories and then I curated based on what I think is important and in general in general the feedbacks always good and it’s always nice to hear people like yourself talk about it in the way like you do because.
Daddy’s the purpose of the news lately it’s about helping people track stuff that’s important because not everybody has
focus and the ability to track multiple markets at once.
[6:00] Yeah and for sure and you know it’s an underrated skill to curate and decide amongst all of that information what.
What is important in in worthy of a Time investment so I appreciate that you’re good at that and you do it for me.
Um and I know you primarily have been working from your home office so I just want to double-check has anyone told you that you’re you’re actually quarantine now and not allowed to go out.
yes I think that can can be described as the do we need to any Mantra you know things that we get old a lot of things I’m so sorry Africa we’ve
today’s I think they number 106 we’ve been under covid-19
lock restrictions so it’s not really changed anything for me in the sense that I’ve worked remotely.
404 for over 3 years so I may be based in South Africa but.
My clients are based in the US and in China and in Europe so.
My day is generally like that advertisement you see on TV it’s not a 12-hour day so it’s yes they all restrictions but.
Luckily you know like you like everybody on this call you know we on the podcast you know we are able.
Work remotely and interact with our clients remotely and you know it’s kind of been like really interesting to see how the world has changed in a space of three to four months.
[7:27] Wrinkle let’s dig in on marketplaces so we we teased Folks at the top there
you know so it’s been really interesting here in the US you know we’ve seen these cycles of marketplaces where you had kind of like the pure plays like the eBay’s of the world and then you had a lot of the retailers have added marketplaces that’s been a big Trend now we’re seeing kind of these
previously niche market places get a lot of play like Etsy people have always been surprised how big that niches I’m going to know if calling it a niches of thing
and then even you know we’re seeing marketplaces stretch into car-sharing and Airbnb just a variety of different different explosions of this concept
you know what are you seeing from a from your your position there are kind of the trends and where we are in this life cycle of marketplaces more from a Global Perspective.
[8:16] So from a Global Perspective I think it’s it’s very dependent on What markets the marketplace are in so at a very high level.
I think you can see that in Europe and in the u.s. marketplace is all pretty mature and or in most cases.
Very horizontal and or in most cases either getting regulated or or in the processes of being more regulated so it feels to me personally that the,
the growth of stagnated.
[8:51] So it’s much more of just lit wash rinse wash rinse wash wash rinse repeat but we look at globally I think
in China what’s very clear is that we’ve got the ecosystems that are.
[9:08] Evolving we consumers are able to actually is like Amazon in the UAC anything from entertainment to shopping to undermount to video 2,
all kinds of things where,
it doesn’t it doesn’t I haven’t seen that evolve as fast as outside of China obviously in Latin America India Middle East while these companies in the marketplaces have been there for between 5 and 10 years.
It’s still very early and consumers are still now not sure about using them just because of the trust factors in the fact that.
You know you have in most cases have Amazon available in the market and that’s the The Defector choice in most cases so.
And then obviously I have to speak about Africa because I live on the continent though we are still very very early and I think the general trend for me is that.
Or very very hard to combat I think you also see vertical specific Marketplace such as the Land O in Europe re looking at.
The product Market fit the now going off the luxury consumers just because the fact that they market cap isn’t going at any any write this as fast as Amazon’s in Germany who is globally so
it’s Dawn to your calls for your question Scott it’s a very nuanced quit.
[10:29] Jenny missing States very dependent on the market but I think in general that the strong are strong and the weak on or hopeful hoping that they can grow at the same speed as the big boys.
[10:39] It wasn’t there at one point there was like a mercadolibre of Africa where it was kind of like the operated in all the different countries and had some cross-border trade is is that company still around I can’t remember the name of it.
[10:50] Okay so in Africa at the moment we have I think these two real Marketplace is all three we can talk about so these Junior which is the.
The marketplace that that’s the one you remember friends that’s owned by rocket internet that is essentially being re looking the.
The profitability just because of the fact that going since going public in the US it’s just not been built their reports of equal reports have been disappointing then the other one is.
He’s mole for Africa which is essentially a cross-border service that helps African shop on all things.
Amazon in marketplaces where they control you know aware us we everything is delivered in package and then being sent to the African continent because guys,
the thing is what you guys don’t realize is that if you were in Africa by default.
I’m our created called on mostly blocked by us platforms so if I buy something from Amazon ginley
I will have a follow-up email saying look we need you to prove that you are who you say you are and can you show us a picture of your credit card just because the fact that fraud is a massive issue.
[12:03] All those Nigerian Prince’s that need me to hold their money for him.
[12:07] Yes I was going to get to that it seems really.
We win you get emails almost daily about the fact that you’ve won like some gazillion dollars from some rich oil family in some African country and and sadly that is made.
Cross-border Commerce very difficult in Africa but it’s also.
It’s made it it made it a very interesting place to look at what’s going on and how it’s changed on a per country basis.
[12:38] And then the so the
covid has been kind of a global phenomenon and here in the US it’s you know
it’s certainly accelerated the growth of e-commerce there’s that kind of famous chart that says you know took us 20 years to get to 16% and then like you know an eight months we accelerated another
ten points or so do you think that’s going to be a global phenomena or is it really concentrated in like the US and Europe.
[13:07] I’ve been doing in frying with this this very specific question and and I think.
For me the trends that I see coming out of covid is one is horizontal marketplaces that don’t have cpg products have really struggled so in South Africa
our base Marketplace which is funded by naspers.
Cycle of Dad no CBG products and they got they got really got crush like based on legislation so I think I think.
I’m of the of the belief that I think a lot a lot of consumer Behavior has changed and people have now realized that you can buy over the internet
it’s not as bad as everybody thought also marketplaces in general have whatever you want,
available as quickly as possible and in most cases you get it inside due to three days and then get me started on bond like 24 hour delivery that doesn’t exist.
[14:08] It’s just a case of in most markets I believe we will see the post covid Behavior.
Of consumers starting the online search either on Amazon or some On Demand app or some grocery business I think that’s going to be a reality because the fact these guys is that we are still looking for a,
go Blue go with vaccine and until– that you know going to the retail store with all of the opportunities to getting sick is still there it
it’s not it’s not it’s not a good idea as somebody that’s educated did you go to Ruidoso.
[14:43] That hat is all super awesome but I am very excited because
for the first time in the history of the Jason and Scot show I finally get to utter one of Scott’s catchphrases he’s always stealing mine it wouldn’t be a Jason and Scot show without talking about Amazon.
I’m joking obviously but you recently wrote a really interesting article about PE firms that were requiring like Amazon FBA businesses and that’s something we haven’t really seen in the US and less God’s going to correct me on that,
can you tell us a little bit more about how that’s playing out.
[15:15] So what’s interesting is that.
The firm’s that are referenced in this blog post are all USB phones and all interested in this big gray so as I mentioned in the article.
Be investors and some companies that I’ve introduced active now kind of gotten to the degree way they feel that.
[15:40] As Amazon’s dominance is basically become more visible due to Logistics and selection.
And Jeff’s Infamous flywheel will you get to a point way they want in on it however in saying that these firms.
For me as I mentioned in the article sometimes I just I just like mine like realize it really is this what you’re thinking about doing,
and the great news is that these so many questions that this this FBI thing.
I don’t want to call it the train because it’s not a drained I’m of the opinion that it’s a fad in the things that investors want in on the opportunity so,
these that supposedly 300 billion opportunity for third-party sellers on Amazon but my question to everybody and on these calls that I’ve had with these PE firms or.
You can’t have a third party business on Amazon and and and then follow the Good Ol P model of like basically.
[16:46] Making it bones and basically just bones only without any real investment that doesn’t work so that that’s that’s a major full for me in the thinking secondly.
And this is normally also when I read normally realize you aren’t dealing with is the question is if you ask these firms you know do they know that Amazon in eastern the service is very clear it does not want.
[17:10] Third-party sellers selling their accounts that’s that’s kind of a big deal that’s how that’s for me is that mr. massive red flag in the saints that.
[17:20] Why would you want to spend hundreds of millions of dollars by having something that potentially can be taken away from you very quickly and then these same investors then are also not aware of the fact that you know Amazon.
If you are a Marketplace seller.
The opportunity for them to give you a terms of service violation or for you to have your account Block it’s so large,
that the risk is essentially outweighs in my opinion the whole opportunity in saying that I think yes Amazon is important.
But I think if you are very being very strategic you know I think what’s more interesting is that we are seeing big Brands go directly to Consumers.
[18:06] But these all these companies are realizing that they have to be closer to the consumer so my question to all of these P investors were you know all you away that statistically,
you will get no information from the Amazon black box and also you are not going to be able to.
Interact with the consumer so why on Earth would you want to spend something that is essentially a big bag big black box and.
Then you you have this projections that you can have hundreds of millions of dollars of sales in 24 months time really.
If you want heard of this thing called the the Amazon Honeymoon way after 6 months your audio invitation and hard work of advertising basically goes away I mean.
So as I mentioned in the article I think it’s just it’s a it’s a it’s a trained that’s I think is a fad and it’s also a case of.
People not understanding what the opportunity is and if it’s an opportunity my question is why I have the pig really good investors in Commerce,
you know I’m not going to mention any names because they are plenty of them why they not investing in these Amazon FBA businesses yzp firms that have names that you will never ever hear in public,
because they just you don’t know about me.
[19:26] Yeah it’s interesting Theory so that so you know so I’ll play the other side of the coin.
You could go by four or five of these will call Marketplace Centric businesses and have $100,000,000 kind of Top Line business growing pretty rapidly right and you know
some some diversification of categories but to your point you do have this single point of failure with Amazon and other marketplaces and I think what a lot of the
the theories I’ve heard is you know gosh if that’s a hundred million dollar business on these marketplaces if we really kind of.
Put the offering out with an e-commerce front end maybe we could get double it
go over three or four years now you have a 200 million dollar business hundred million e-commerce storefront a hundred million marketplaces this generating this is all Financial modeling you know that the
the Umbra the cash flow even our elements would then because they’re buying these things really cheap it kind of hits that
private Equity Roi and then of course they’re buying it all is super cheap debt on top of that so,
with you it’s definitely a riskier play than they probably realize they’re getting into.
[20:40] Scot for me the thing is yes teii you that argument but for me the case T’s is that if you’re an investor you’re your biggest like point is you need to generate Roi for your investors.
And for me the biggest thing that I continuously see which makes my age span is is that people forget.
It’s easy to model that something a business that you basically by is going to do a hundred million dollars in either turn all that stuff.
But the reality is that you need skills which are not in the mon.
And it’s not available Jeep number one number two what I also don’t blows my mind is these assumption that the Commerce is easy it’s not and,
the the amount of work that needs to 20 commas business to generate 200 million dollars and in run right Nevada and all that stuff it’s a lot
so yeah consider me just I’ll just consider or discontinue just,
completely in awe of the the delusion that I see from investors just because of the fact that it doesn’t make any sense to me and for that I’m saying it’s not like I have not had any Commerce experience you know it’s.
When I speak to my friends in the space we all say the same thing e-commerce is really really really odd and the opportunity for points of Failure Its.
These a million opportunities for stuff to go wrong.
[22:08] Yeah yeah I don’t know this is a sidebar but I don’t know if you’ve been following the the Elliot drama
yeah so we actually had them on the show really good PR and then they just recently imploded because I think they had this this excellent Vision but unfortunately you know I
don’t think that they could kind of execute on that or and there’s all this kind of weird stuff coming out now so it is hard you know so anything else on Amazon before we change topic.
yes I think I think we just need to quickly mention that yesterday Amazon made something really interesting that might be very interesting announcement the announcement essentially is that
businesses third-party businesses the Account Details will now be shown by default.
And essentially this is on one another one of the attempts at trying to show that they solving the counterfeit.
Problem by showing the details of the business owner and the entity that on Amazon and yeah I must say I think it’ll only on small businesses because.
We will see more lawsuits in terms of enforcement of Brands and all that stuff but doesn’t really solve Amazon’s really big problem counterfeit yeah I’m not so sure.
[23:26] Yeah yeah I’m not sure why they’re doing that
I’ve seen some folks in the Press saying you know this is going to solve all these things but you know what you’ll having having talked to mostly sellers you’re going to find out it’s going to be you know some random llc at some random address it’s not going to be super informative I don’t think it’s going to be this like
oh my God that secret Cellar was really Jason Goldberg and now he know.
Selling Hawaiian shirts sun on Amazon.
[23:52] Exactly I think part of it is is a simple liability issue that like you know in general Amazon takes a lot of positions that hey we’re not the seller the liability is on the,
on the cellar and there’s a bunch of different permutations of that.
And so I think people are like well how can you say they’re liable when you won’t you know you’re shielding who they are.
[24:14] Yes I hear that but my argument to do that specific story Jason is is that this announcement has been active in Japan and in the UK for
overdue years and it’s not changed a lot the only thing that it’s done what’s what it’s done is it’s just basically helped the government cannot collect tax so hello wifey and all of that complications and techniques has,
and doesn’t really solve issues that Scott mentioned Mmm Yeah I’m not so sure.
[24:42] No no I’m don’t get me wrong I hundred percent agree with you I don’t think it changes anything but I think it was a checkbox thing that Amazon had.
To retain their their claim more so than anything out and / Scott’s Point like there’s a funny thing that we see in the US a lot.
There’s a lot of brands that want to toe dip in direct to Consumer but they don’t want their wholesale Partners to know.
And so they find a third party entity to be a three-piece seller on Amazon on their behalf and so it’s it amounts to a shell company for a big cpg and they’re they’re not doing anything illegal they just don’t want.
They’re their trade Partners to know that they’re also selling on Amazon.
/ Scott’s point if they have to disclose their going to disclose that show company it’s not like it’s going to suddenly reveal some super well-known cpg on the on the Amazon register.
[25:40] One thing I definitely wanted to chat about is I know you worked for a comparison shopping engines at one point or were heavily involved in the industry
seems like that’s kind of died off maybe with the exception of Google shopping which I think is trying to turn into a Marketplace there just kind of struggling to get there
do you think comparison shopping engines or dead or are they actually pretty vibrant in other parts of the world.
[26:02] Scot I think the sad reality is that I think you’ve you’ve nailed the explanation number Google’s comparison shopping it’s it’s neither here nor the and sadly the way I look at conferences.
It generally starts with classifieds then it moves to marketplaces and then moves the brains and these no mention of comparison shopping I am of the opinion,
I’m not even on the opinion having seen having worked with companies over the last three years it’s comparison in was it was at the time was great it’s a legion it’s a legion situation but consumers no longer want the legion they want,
a platform with I can buy get everything done and.
Contact somebody means something that was right or wrong and I just think that from a comparison point of view as it pains me to say it’s just I think it’s one of those things that we will just remember fondly and.
Hazel just vanish deadly.
[27:00] Yep yes fun fun fun times but
the time is up how about how about these Marketplace initiatives from so we mentioned Google that you also have Facebook kind of flirting there with kind of they started with a classifieds I don’t know if this is global or not they have the USF this Marketplace and now they’ve announced you know kind of
check out some things that they’re doing then we have Shopify is Shopify a global phenomenon are you seeing or is there a kind of like a version of a Shopify out there that is the
non us Shopify that that’s got a lot of traction.
[27:35] So to answer your multi-threaded question me so.
[27:40] I knew you could I knew you could parsa.
[27:43] So literally start with the first thing is yes Facebook Marketplace is available in South African but,
like in the US and I hate saying this and I don’t want to be derogatory but it’s a Facebook it’s,
it’s a crime I even which is a nightmare so I don’t see that going anyway I’ve heard murmurs anecdotally that they’re going to change the name of it because of the fact that it’s got a very bad
outside the US so I’m not sold on Facebook almost myself I just I don’t think they have the DNA for it in saying that let me just before you guys jump in and hit me over the edge of something
it’s a case of I still think that Instagram is a massive opportunity and Instagram shopping,
I just noticed since like February of this year with the wood with Coburg.
Using Instagram to find local businesses is way easier than using Google so I think these are different definite opportunity for them
time to actually capture the part of the market that isn’t getting a lot of love IE the local situation in terms of your Shopify comment.
[28:51] Shopify outside the US is massive it doesn’t get a lot of love.
Because they don’t want to give away the kimono and show the world that it’s a big business but it’s a massive business and more brands are beginning to realize that
Shopify provides you with all the tools all the extensions and applications and whatnot and expertise that.
You can can whip up a website very quickly and it’s for me it’s it’s,
it’s within an interesting time in a sense that these rumors that we Commerce is going to IPO,
which I don’t think is going to be the case I have a feeling that they might be bought on ninety nine and a half by somebody
and then you have workers comments which is you know they but I think
Toby’s Mission and that of Shopify in empowering the rebels I think it’s a big deal and I continue to be amazed at the
at the Justice League business I know Jason got a lot of flack for not being very cool on the the whole shop at.
[29:53] I saw that and I’ll be honest that I’ve used it and it’s nice but it’s the value-add is questionable but but the but the point is is that.
This is a company that is evolved and grown at the space in the North American Market,
that has basically got people excited and let me just also just jump in and say don’t get me started on the comparison between Shopify and Amazon the is no comparison they are to
different businesses with two different business models he’s nothing that gets me more aggro when I see people comparing Shopify with Amazon,
it’s neither you know they they are either complementary to one another or they do they are in the separate lines but don’t stop me on the whole comparison story because that also is.
Big bowl of hot day.
[30:47] Yeah we’re a hundred percent aligned on that I there’s comparisons and annoying me and I mean they’re inevitable because they’re too fast growing well-known companies that are quote unquote in the Commerce base so it and everyone is desperate to write about their being.
[31:04] Jason will it’s which one’s going to win.
[31:06] Yeah I mean if y’all like nobody likes it when I say this but to me.
Amazon Marketplace and marketplaces in general like the main value-add they give is they find audiences for you there a traffic source,
and so when I think of Amazon marketplace right the primary competitors for Amazon Marketplace in North America are Google and Facebook.
Um and you know I would argue that for audiences with purchase intent.
Amazon’s consistently winning so we’re seeing audiences weave Google and Facebook.
To go to to Amazon I think Facebook’s making more progress on Discovery experiences and certainly Instagram and you know frankly I think.
Tick tocks recent problems are probably also going to directly benefit Instagram.
So that that stuff’s all super interesting I do have to tell you Toby’s blowing up my Microsoft teams Channel right now heat the answer is shopify’s very big outside the US because Shopify isn’t even a US company.
[32:17] Well moral of the story is that Shopify.
It is for me it’s a huge it’s getting to you because terminal seems that it’s helping people get online and that to me is in a time where we see retailer of the retailer growing.
Into liquidation or bankruptcy leave it for me that’s for me is the one angle that I hope,
people spend more in con instead of saying it’s like you’re saying that it’s going to be the future what’s going to win or whatever that’s irrelevant the point is is that this is getting brands.
On the internet with getting consumers the opportunity to buy from consumers.
[32:59] Being able to buy from Brands and do to your question or statement Jason about the competition for Emma for Amazon,
I totally agree with you and I think what you’ve what we what I’ve seen is that these DTC businesses which have also basically been seen as the,
the solution to all bands problems which is also not the case is if you are a what I’ve seen is that if you’re a DDC business and you’ve hit the plateau at 25 million dollars in annual sales,
you know we do you go to get that next round of growth and in most cases it’s Amazon as much as they hate the platform.
That’s the platform that they use to grow whether it be through a different product different product line or something else but point is you’re a hundred percent right.
It’s purchase intent and essentially monetizing data that nobody else is God.
To get people to buy your product and and that is essentially what Amazon is a reviewing microscale in the sense that.
It’s a post office it’s a marketing firm and then with a slight dad – of retail in it.
And that for me is one of the biggest misunderstandings of all of those.
[34:11] Yep and and by the way in important distinction they’re in the business of renting you the audience not selling you the audience for your earlier Point all these.
Yeah all these companies that are you know thinking like oh that’s the way to get customer intimacy and I talked to a lot of brands that are like my direct-to-consumer strategy is to sell through Amazon.
[34:32] Yes nice nice.
[34:33] Mike and Amazon’s in the business of owning the audience and loaning it to you not letting you acquire it through them right so.
[34:44] But you did.
[34:46] This cannot be cannot be seen and and owning versus renting or loaning it’s a massive it’s one of the things that I also see I totally agree with you I’ll see you at night I hear that and I just think but
guys really this is not like inside baseball knowledge and at this he’s out there in the public this is what consultant should be telling variance you know.
Amazon isn’t your friend it’s merely a channel to get you to grow but that’s that’s it.
[35:15] Yeah we totally agree you you mentioned the the digitally native brands that like you know eventually turn to Amazon and marketplaces for scale I want to dive into that a little bit because if you.
If you look at my Twitter feed you would be utterly convinced that.
Retail is dead and nobody nobody know retailers are doing well that marketplaces don’t exist and that the future of Commerce is a hundred percent.
Digitally native brands that like invent their own flavored water and sell it direct to consumer.
A is that like are you seeing that as strongly outside the US as we’re seeing it inside the US and I would argue that.
They’re winning hype but they certainly aren’t winning in terms of actual business success.
[36:03] Okay so these are million ways that you can unpack unpack that question I’ll start with the first thing I also see might would have
do the followers also
one would sway that retail retail was supposed to be dating 1999 it’s still alive and kicking Amazon has come and stole their shops open and now the BBC businesses are supposedly the flavor of the month.
[36:27] I think to answer your question what bluntly I think dtc’s are nice you know but it’s not a silver bullet and,
I think very much that outside the US in markets such as India and South Africa and in Brazil and
all over the show we all we all seeing companies like launching direct-to-consumer you know the thing is what I find mind-blowing is that direct to Consumers was always been late it’s just,
it was called something different but we’ve always bought directly from brands
you know it’s not something new now you now you buy something that’s was made in China and that has a like a massive stick on that says a name of a Bad Company already like a toothbrush or whatever
for me the thing with DBC businesses all yes they are great but my counter quick counter-argument all of that normally is okay how many mega mega,
exit every scene not many have we seen any real growth in terms of getting,
more than 50% of a specific category evening by a b2c business.
[37:37] I haven’t seen that and you know I think what the misconception is that essentially these DTC businesses all
it’s custom customer acquisition opportunities in small towns that’s what it is it’s a bolt-on for a large brand so if you are a,
Julie or you are a Procter & Gamble all your a Johnson & Johnson all whoever you know these companies have their own legacy issues with let’s not get into that.
But the point these is that they haven’t done the best job in getting closer to the millennial consumer so,
buying a DPC business it’s not validation that the business is one you know I mean I find it always ironic these businesses start as they are the ante
incumbent and minute ENB income advised him and then suddenly the pr really Society you know
we said being that we are here and everything is glorious and what a great business that is just like guys kit with it,
it’s a it’s a customer acquisition play in a sense that a company spending 200 300 400 500 600 a billion dollars on,
buying access to a consumer group that they’ve not done well with X is it is it and to answer your question about outside the US.
[38:53] It’s still really the same the sense that these entrepreneurs that are seeing the opportunity for for opportunities to interact with,
with consumers but the question that I always come back during its I haven’t gotten a really nice answer for that is that what
he’s the actual Nexus or like the defensible of advc business and if you tell me it’s Community I’m going to open the window and I’m going to jump
because it’s not.
[39:19] Don’t do it don’t do it but I take your point.
[39:21] Community what what what floor of the building are you.
[39:25] Luckily I’m luckily I’m on I’m on ground level so if I jump up jump out of the window I’m gonna just basically full like a couple of meters.
[39:34] Just landed some bushes okay.
[39:35] With my athletic ability that could still be perilous but I trust that you get.
Yeah no totally agree I feel like emphasizing the the channel so much like.
Completely missing the point like if if you come to me and say I’ve got a great business and its defining characteristic is that we
sell direct to Consumers and that’s all I know about them I’m not remotely interested if you come and say I’ve got an amazing product that has this amazing Market fit and a lot of people want it.
I’m super interested in that business and I’m confident a good good leadership team can find the right mix of channels to get that to the consumer profitably.
[40:16] Exactly Jason and as you tweeted recently in a question from another podcast host is is that these you know I think it’s very important also to notice that.
While these big cpg companies IEP Chico and all these guys are doing the DDC thing it’s very important not to get both,
by the by the actual IP in the sense that yes the website will continue to look the same yes it will continue to basically show the the same products.
It’s essentially just these Brands wanting.
First of all he died a number one number two they One customer feedback without going through a wholesale and Retail which is just the moment is a pain so I think it’s very much,
the DTC thing is it’s a it’s a channel like you mention totally agreed and it’s not a silver bullet as I mentioned earlier Commerce is a hard and the isn’t a silver bullet
maybe except a few Jeff Bezos and you have like a bazillion dollars in your bank account but other than that for us mere mortals it’s hard it’s a daily struggle of you know millions of file filing points and it’s just.
Guys can I make a consumer happy yes or no if the answer is no go back to the drawing board and fix it.
[41:31] Yep cold let’s let’s pivot to cross-border trade I know that’s another area of interest to you here in the US we’ve kind of were years into this kind of
Chinese us trade War which I think is put a bit of a,
blanket on it you know before then we had so Ali Baba had all the express which was this huge cross border trade kind of Behemoth and then we’ve had wish which is a Marketplace I’ve never understood but is always.
Exceeding everyone’s expectations what are you seeing from your perch there in South Africa as it relates to cross-border trade is kind of Ali Baba running away with this globally or are there any other players.
[42:11] So let me just say bluntly in terms of cross-border e-commerce
the Chinese platforms and especially Alibaba that they like light years ahead of the rest IE why number one they’ve invested in it heavily number do they’ve done Partnerships with government do to basically get
local interaction where they can create like trade free zones and everything so to answer your question Scott in my long-winded Way South is that
cross Buddha yes are going to do you are totally agree with you the triangle has impacted definitely however in saying that I think what
it also has its shown companies what they weaknesses are in the saints that,
as much as I also am fascinated by wish in the sense that it makes no good it makes no business scenes in a sense that you are selling low priced Goods but now you are seeing them covid into.
You know wanting to offer retail software they are you know offering a retail Partnerships closer fulfillment and.
[43:14] And they growing massively in a country
with the name of protozoal Which is far away from everybody in the USA so I think cross-border trade for me is there I think,
it will continue to grow at like polite you would like to speed in the sense that consumers will always want products of high quality no matter where it’s made from and,
you know I’ll be honest I buy a lot of products from the US just because the fact that I can’t get it in South Africa so.
The confession I have to make you on this podcast and I am a Swedish fish like expert I love the candy yet
I cannot find in South Africa so I’ve defined the business that brings it to me to South Africa just because of the fact that I love this stuff so.
[44:00] I think with cross-border also we seeing a slight strategy stuffed in the states that,
like wish like what you mentioned wish I think we are seeing the emergence of platforms wanting to,
essentially offer local Solutions so if Alex threesome he’s a business I’m fascinated with in the sense that in the last 18 months they have
the dairy hauled in the saints that they all know offering Brands the opportunity to interact with consumers they are growing
gangbusters in in Brazil in Latin America they’re growing at the mess of not
in Eastern Europe and in Russia just because of the fact that they have the products for both the high end and the low in which is not generally available so.
[44:46] I think the one fact that with cross-border e-commerce that that’s not getting enough attention for me is the whole postage Packaging.
Cost and the fact that you know you have an entity like the usba studies financially under huge strain just because of.
[45:06] Legacy agreements in the Postal Union or if I got the name wrong for that I apologize but the point is is that,
if you look at the postal business World Allied the post has basically been hit really hard in the sense that people are no longer doing Lakers I don’t know,
I can’t remember when last I got a little especially not now we haven’t that boastful like three months but the point is is that packages and online shopping has basically become,
the growth of these businesses so cross-border place has an additional element to it because now you’ve got to go through border control and product organization and
costs to get it to the consumer so I understand that certain got countries like the US one Higher postage rates because it doesn’t make sense that certain countries like China can
emergent consolidating it from China to the US doesn’t make sense it just doesn’t so from a from a macro macro point of view is I think
what I’m seeing is I’m seeing a lot more cross-border shopping and Latin America I’m seeing a half a degree in Africa with services at just morph Africa doing
great work and they gotten a minority investment from DHL which is a big deal which for me kind of validates what I’ve been doing
um and consumers generally want they want quality and if the quality is not available online in the market or in a store you know they want to be able to go to a website and buy it and if if that.
[46:31] He’s going to take thing to know 12 or 14 days thing that’s its I think cross-border is I think Ross board is one of the most underappreciated pots in Commerce just because of the fact that.
It’s hard but I think from a growth point of view it’s one of the things that I’ve seen executed well in the last three years basically it just it makes businesses go from good to Great really quickly.
[46:54] Yeah it’s super interesting it’s we’re all I’ve been on pins and needles here in the US because as you as you mentioned the US Post Office was under some severe Financial pressure prior to covid and in this far there hasn’t been any discussion of.
Economic assistance so it’s.
It’s concerning and obviously if it were to fail that that benefits the one player in the u.s. that has the most of their own Last Mile which is of course a mess.
I do want to oh and I forgot to ask a Kia doesn’t do cross-border trade in to South Africa to get you those Swedish Fish.
[47:34] Y’all but it’s too painful I want a simple solution on the go to one website I want to do basically put it in my car.
Have the easiest execution in terms of my details and they not have to worry about getting it to me so Jason thank you for your very nice consideration but we have it working and it works so yes I get it now.
[47:58] Okay cool I know you mentioned that a lot of your clients and a lot of the readers of your newsletter are from the Venture Capital Community and I’m just curious.
What’s what’s your perception of what’s going on in that segment at the moment like are they all turtling and slowing down because of covid are they identifying New Opportunities and they’re hotter than ever what.
What are you saying there.
[48:24] So from a venture point of view I think
I think what we’re seeing is is we seeing the great the great investors double down but they doing it very quietly in the same state I think
investments in this certain sectors or for example like DDC you know it’s not going to happen just because of the fact that,
the model is now basically being shown like the king without the clothes on so the.
[48:50] The Goodwill is an ox that I work with I guess they had to continue doing Investments but they’re looking for new opportunities so
one of the opportunities that I can speak about because it’s I think it’s very well known he’s is that I’m seeing a lot of interest in the B2B space in the saints that
everybody’s not realized at the global foods are exactly is not going to be unbroken so
I’m getting conned getting from the actual form of manufacturing point to the shop or to the consumer it’s so massively massively massively confusing so there is an opportunity I’m.
I think the I think the Venture investors the question that I always ask myself is that in invest is essentially looking into the future and,
What is the next thing so I think the next thing is stuff like returns which is still up buying the is the B2B space.
[49:54] I think one has to look at the stuff like replenishment rights and you know what do consumers need daily you know so one of the very interesting things that I’ve seen in covid in South African I’ve spoken with friends in the US as well is when covid struck here
flour eggs and orange juice became like a lottery tickets in a sense that finding it
was one thing getting it into your boss good
and actually paying for it was like winning like five multi gazillion-dollar lotteries in a sense but it doesn’t mean it just didn’t exist so the question for me is I think from a covid point of view.
[50:32] The covid is essentially shown investors in my opinion that there is opportunity stolen Commerce as much as the investor Community wants us to believe that Amazon is the be-all and see all of e-commerce
it is they already but they all still opportunities and I think
helping suppliers helping consumers and even helping entrepreneurs solve really odd things you know I find it
Leon to imagine you know you’re a milk foam and you having to basically untap your mouth because you can’t get it to a process so all you know you can’t get your oranges on your farm to a
because there’s nobody throws to me that that blows my mind and I’ve been following the stories in the US on that so.
[51:16] For me the opportunities all day the good investors continue to invest but what the guy what the the guys and the girls in investment spice are doing Jason is justice
they being way more diligent number one and they have been way way more selective in the sense that they want companies that
have profitability from day one they no longer believe in Market Market size winds also the days of uber like growth and spinning like a gazillion dollars and having Bad actors in your business ever
it’s just doesn’t it just doesn’t cut it anymore so from from as I say all in all of Interest still very much alive it’s just
it’s quiet and the guys are all girls all looking for opportunities for the next thing.
[52:02] Cool speaking of the next thing that’s a good time to talk about the future of e-commerce so sounds like you know you’d like the B2B space and some of these kind of less sexy things a returns and whatnot but let’s look out
kind of five to ten years what are some of the trends you see that that are going to be forming e-commerce as we look out a little bit further.
[52:21] So I think one is I think I’m going to get a lot of flack for this but I’m going to state in any case I think live streaming was going to become a big deal
you know since that getting consumer interaction and relationship building was.
Chef’s all creators or t opinion leaders I think that’s going global so that I think is a big deal I think,
the 160 pots of Commerce I think will get solved so.
One of the one of the things that I’ve found really interesting within the covid space is that my QR code for payments as basically,
Skyrocket that just because of the fact that actual.
Money and God usages it’s not really safe so you want something where you can basically pay for a purchase easier or in Jason’s case you know he wants to know that if he whips out his phone and he buys a Starbucks you know he’s going to get it like immediately
these no opportunity for something to happen then we’re gets block sorry Justin I just I had.
[53:31] God bless you yeah.
[53:35] So I think from the from a future point of view I think we will see the the other thing that I think is not getting a lot of a lot of attention currently is I.
Getting X retail staff back to work is a very big opportunity that I see.
[53:52] Gaining more speed with you know today reading that solar table is also gone for bankruptcy it’s really being Brooks Brothers yesterday it’s really being,
Audrina and the thing is what for me it’s lost in this conversation is that retail restaurants in general,
so these are two sectors that have been absolutely battered so
getting those people back to work and and guys like me just be clear on something this does not mean that they are all going to work in FBI warehouses
if you tell me that people are going to work
and we’re Oz’s I am going to once again open the window and jump one floor because that’s not the work I’m talking about actual staff who used to work at mode storms or
Brooks Brothers All In categories that are have been really hard to solve as though fashion is still a returnable user story
large value large items such as freezers and fridges and white goods it’s still a pain,
we just have to look at wifey’s finances to just to see what the struggle that continues to be so I’m pretty bullish I think,
I think one also has to be very realistic in a sense that,
I don’t see e-commerce ever getting past fifty percent of total retail in any Market if I just look at what’s going on in China the investment into like.
[55:18] Multiple channels I’m not going to use the word that I sold another word omni-channel with their accounts and moral of the story is the consumer now expects to be.
[55:29] Communicated with the same message whether it’s install whether it’s online whether it’s in a small version store whether it’s at the collection Point whether it’s with the on-demand delivery The Experience now is it’s way more,
sophisticated than what it what then what he was recovered in the things that covid has made me
more appreciative of the hard work that the logistics Focus do you know I think driving a UPS or FedEx truck daily must not be the greatest job either yet
these people do it and it’s a thankless job but these thankless jobs have become really important so I’m hoping that you know stuff like autonomous delivery
basically evolves from being at the bottom.
Hello GPS annual 60 Minutes section on drones and actual you know getting the Livery is to people in like.
Really Diamond complexes which are at the moment that massive at risk because of covid and these these just,
I think Scott summarize it really well at the top of the question that he’s there’s a lot of unsexy opportunities in Commerce that remains masts of the next opportunities.
[56:41] That is an exciting thing to be thinking about and it’s going to be a great place to leave it because
it’s happen again we’ve used up all our allotted time as always if you enjoyed the show we sure would love it if you’d jump onto iTunes and give us that,
five star review if you have any questions or comments about the show feel free to hit us up on Twitter or face.
But Hendrick really appreciated you taking the time out and really enjoyed your.
[57:11] Gentlemen Scott Jason it’s been a privilege it’s I always enjoy following your Twitter
streams in the since there is always a good it’s a reality check about what’s going really on and being able to share the international specific table with you,
listen as I think is important is because the fact that sadly the world is more flat than what it’s ever been.
[57:35] I think Centric and if folks want to kind of Follow You what’s weird to you mostly publish your thoughts.
[57:41] So the easiest way is on Twitter so my Twitter handle is a chi in Lau be it’s the my.
First three letters of my name and surname I have opened a tweet at the top of the page for folks that want to subscribe to my newsletter because I am blessed with one of the most.
All the names and surnames do you remember so just look at my Twitter handle in the show notes they see easiest way to subscribe to the newsletter,
and I look forward to getting a few new readers.
[58:18] Yeah we think I speak for Jason we strongly recommend your newsletter I know we’ve really enjoyed it and get a lot of really good flavor for what’s going on outside of the our little bubble in the US.
[58:31] For sure and until next time happy Commerce Commercing.
EP225 - Jonah Berger author of The Catalyst
Dr. Jonah Berger (@j1berger) is a marketing professor at Wharton, and author of New York Times bestsellers Contagious and Invisible Influence. His latest book, The Catalyst: How to Change Anyone’s Mind (affiliate link), introduces a revolutionary approach to change. Successful change isn’t about pushing harder or exerting more energy. It’s about removing barriers. Overcoming resistance by reducing friction and lowering the hurdles to action. Discover the five hidden factors that impede change, and how by mitigating them, you can change anything.
In this broad ranging interview, we discuss the major themes from The Catalyst, including the five barriers to taking action, and strategies to overcome those barriers. Listeners will learn not only how to persuade customers and prospects, but also how to be a catalyst for organizational change within our companies.
Episode 225 of the Jason & Scot show was recorded live on Friday, June 26, 2020.
[0:24] Welcome to the Jason and Scot show this is episode 225 being recorded on Friday June 26th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners Jason the stars have aligned up and we have kind of the pandemic to thank for this it’s the one of the Silver Linings and you and I have long admired a couple of academics and we had Dan on the show last time and then we have another academic here that comes from
the world of marketing and persuasion so I want to hear his bio from his words but we’re excited to welcome Wharton Professor Jonah Berger to the show welcome
[1:11] Thanks so much for having me.
[1:13] We are thrilled to have you I’m a big fan.
Before we jump in do you mind maybe giving our listeners like your brief background and also like we’re going to talk about your latest book cattle aspect if you could also touch on your previous works that would be awesome.
[1:31] Sure so in my day job I’m a marketing professor at the Wharton School at the University of Pennsylvania have been there for about
13 years do a lot of research on social influence change word of mouth and my products ideas and behaviors catch on.
A few years ago I wrote a book called contagious why things catch on which changed my life a little bit the core I’m an academic so I love research and teaching
at that book came out and it’s now out in over half a million copies in 35 languages around the world
gave me the opportunity to work with a lot of companies and organizations so,
I learned a lot more about marketing than I ever had getting a chance to work with everything from Big Fortune 500 is like the Googles and the Nikes and the apples of the world to small startups and everything in between and I’ve really enjoyed learning about how both marketing works at different organizations but
but how business works
different places and every industry is obviously different but there’s a lot of interesting commonalities between different organizations and that’s part of what drove me to write the newest book.
[2:34] That is awesome and Scott alluded to but in our last episode we had Dan McCarthy on who’s a warden alum.
[2:43] Fantastic yeah I know Dan quite well.
[2:46] So this is a fun series for us I’m used to being the second smartest guy on the show and it’s now annoying that I’m like I’m falling further down the list.
The so one other thing before we jump in that I think is important for Scott and our listeners to know you’ve been a Jeopardy question.
[3:03] I had nothing to do with it but I got a random text one night going to do you watch Jeopardy and I said
of course not why no I have watched Jeopardy but I’m not an average Jeopardy Watcher and they said you’re on Jeopardy and I said what do you mean and so yes I have been a question on Jeopardy was very nice of them to include me,
and I don’t know why they picked me but it’s very very nice.
[3:29] It’s one of those random things we start getting all these texts and it’s kind of funny.
[3:33] Yeah one other word in question there seems to be just like a big Nexus of activity in e-commerce Innovation there I don’t know if that is coming out of the MBA program or your side or do you all kind of work on it together so
Dollar Shave Club and bonobos aren’t a lot of those kind of digitally native vertical Brands didn’t they have origins in Wharton.
[3:55] Yes yes oh I actually had the Warby Parker guys in my class
and a number of years ago as they were building and they’re nice enough to come and speak in my current MBA class every year and sort of tell students what it’s like to sort of grow a company from from start to finish but yeah definitely a lot of interesting stuff in that space going on
also a lot of interesting work going on and kind of natural language processing and taking unstructured data text Data language data weather
collected online or off and starting using it to extract behavioral insights.
[4:24] Do you guys have a track in the MBA program all these folks are going through or just kind of ended up being a cohort that was just kind of awesomely successful.
[4:32] You know I think it’s a little bit more of the latter they’re certainly more interested in these topics and more kind of research and discussion about these topics and I think if one person does it other people look and go oh that’s an interesting path let me let me check that out and apply it to a different sort of domain and so you see a lot of social influence at work even within the students and
and within career choice.
[4:52] Got it cool let’s jump into the book so I’ve tried to use the pandemic to add some new skills I got introduced to the ideas of persuasion through the Dilbert guy Scott Adams I don’t know if you’ve read any of his stuff,
I found that nice lead adjustable and then then he kind of points you to chill be me if I’m saying that right.
[5:13] Yes child in yes.
[5:14] Yes that was like a little too academic for me and then I found your stuff sits kind of nicely in the middle there so for for folks that are kind of new to this idea of persuasion
give us a an idea of where is the science on this and that’s a good segue into probably why you wrote the book but you know what you know
a lot of people feel like it’s kind of mumbo-jumbo the kind of persuasion thing but it seems like there’s some really good kind of you know science behind the snow.
[5:44] Yeah I mean people have been doing research on persuasion for decades so I don’t want to say a hundred years but we’re probably close to a hundred years of empirical work on persuasion obviously many.
They work a philosophy of work before that,
lots of great research coming out of whether it’s psychology or sociology or other related domains business school domains looking,
how do we change Minds how do we change Behavior how do we drive action,
you know sometimes it may seem like random or luck you know many of us may think you have to be really persuasive person is that individual differences and being charismatic.
You know some of that certainly helps but a lot of its just about tools a lot of its you know if you have if you know the right tools and approaches and ways of generating change anybody can do it and so,
you know that’s what I and others really try to spread the word about as you know you don’t have
to be I’m not the most persuasive Communicator I don’t give the best speeches you know
in my own life it’s not like everyone listens to me all the time but I think if we understand why people change and when people change and also when people don’t change and the science of persuasion and change we can be much more effective change agents.
[6:55] Yeah it’s been a i
I kind of started working on it really more cuz I’m a I’m an engineer and it’s always been hard for me to be a good salesperson so so I was kind of trying to use it for that but I found it like super useful for pitching and then a lot of internal stuff too so so getting
more people on board with what you’re trying to do so using some of the tools there the thing that blows my mind is so so I kind of went through a cycle of disbelief around persuasion the now I’m a Believer and then there’s pre suasion where you can actually Prime people to better receive your message which is kind of,
I’m kind of in the mind blown adoption of that now too.
[7:29] It could be here.
[7:31] Yeah and then the other thing before we dive into specifics at a high level is I think it’s really interesting how social networks in many ways are these little Persuasions engines that you know they measure your.
They have analytics with clicks and what you react to and how you react to it you have a point of view on social
got you know kind of like the Facebook thing like are those good for society or they have the kind of gone over to the side of evil like a lot of people are coming out of Facebook and saying you know we purposely build these things to be addictive and give you a little dopamine hit
kind of and then accelerate that cycle have you ever thought about that.
[8:08] Yeah I mean I think what’s challenging is that tools are tools and those tools can be used for good or bad
right so you can use a hammer to build a house you can use a hammer to hurt someone
you can use persuasion the science of persuasion to get people to eat healthier and save the environment and you can use them to get people to buy things they don’t need the tools are the same it’s how we use those tools and so you know I certainly think Facebook
and other online Technologies connect people and speed the flow of information which can be great in many ways these tools can also speed this read of disinformation and make people dissatisfied and unhappy and so
you know part of the challenge with today’s day and age and data is you know anyone that has access to individual level data is trying to make their products.
More engaging right each of us would prefer to go to a website and have that website show content that’s more relevant to us rather than less.
Right you know none of us want to go online and see articles were not interested in we want to see articles we’re interested in the problem,
that though is that creates an incentive for these sites and platforms to design content that’s more engaging based on the stuff we like which does make it more difficult.
And so I think you know they’re both upsides and downsides and it’s.
And less regulations going to come in and regulate these spaces it’s really up to us as individual consumers to say what do I want to get out of these platforms and what don’t I want to get out and how can I take advantage the upsides and avoid the downsides.
[9:35] That’s awesome and I want our listeners to learn how to do that but before we jump into it.
Once one set of contacts that I think is super interesting most of our listeners are like e-commerce operators digital Shopper marketers and they hear you in there I guarantee you they’re immediately going to.
Oh man there’s stuff I can learn here to persuade my customers to act in the way I want like you know buy more stuff or or not cancel or.
Make purchase decisions that are beneficial to them and.
There’s a lot of stuff we can talk about their to me what’s interesting is these days I spend a lot more time with clients.
Helping them affect internal changes that they want to change their the digital team and they’re trying to convince the CEO to.
To wean into digital more or break down silos or or you know affect all these organizational changes that.
Really difficult changes for people to to accept and so you know frankly when I read Catalyst I read it primarily through the lens of.
Oh man there’s a lot of practical advice for me in helping coaching clients to affect the organizational changes that they see.
[10:54] Yeah this is actually a perfect segue to I think what you guys were talking about going to next but you know this is the same thing I sort of realized right so you know I after contagious came out I got a chance to work with all these different organizations,
and I kind of saw that everyone had some version of the same goal.
You know they all had something that they wanted to change sure that the marketers wanted to change consumer Behavior there’s an
you know sales folks want to change clients minds but the leaders want to transform his ations employees want to change their bosses mind you know Parts the organization want to get other parts by in parents want to change their children’s Behavior Starbucks want to change Industries nonprofits want to change the world.
We all have something that we’re trying to change whether that’s external,
internal Even in our personal lives but often change is really hard you know often we push and we pressure and we could Joel and we had more reasons and facts and figures,
nothing happens and so the question I started to wonder is you know
could there be a better way and after diving to literature and conducting new studies and you know engaging in interviews with hundreds of professionals you know everyone from top-selling salespeople to transformational leaders you know I’m happy to report that there
is a better way and it just requires that we think about change a little bit differently than we’ve been thinking about.
[12:09] I love that I mean can’t you we effect change by just yelling louder for people to change.
[12:14] You know I we laugh I laughed when you said that I think everyone who’s listening that goes on that’s ridiculous that’s what we all do all the time.
Right so you know I.
Some survey work at the outset of this project and sort of asking people don’t write something down that you want to change or that you’ve wanted to change and then list the ways that you’ve tried to get people to change.
And over 98% of the time,
it’s some version of basically yelling its let me provide more reasons let me provide more facts let me provide more figures let me make another PowerPoint deck let me make another sales call let me just convince you that this is good if you just had this piece of information you’d come around.
Pushing Hazard call it really isn’t working you know I think a good way to think about is you see a chair in middle of the room and you want to move that chair pushing is a great way to get that.
Chair to move how do you push on one side of the chair the chair will go.
Want to go and and so we use that same intuition when we apply it to people you’ve got a person you want that person to go in a certain way you think pushing that person is the right way to go but the problem is that people are not chairs.
Right when you push chairs chairs go when you push people they push back and so pushing just isn’t going to cut it.
[13:28] Yeah the brutal example that made it totally real for me in my own life is you know it work I like to think I’m a Nuance guy and somewhat persuasive and have all these these robust interactions with folks.
But I’m now the dad of four and a half year old.
[13:46] Yeah yeah but man you go tribal really quick right and you know he’s not doing what you want and you know.
Guttural instinct is just to I tell him to do it and it turns out that does not work at all with a for you.
[14:02] Yeah I actually have an almost three-year-old and I feel very much the same way that you do you know I think pushing pushing off and doesn’t work and so
you know I think what’s been interesting about sort of looking at this space and so you know pushing doesn’t work.
What does and so I’ve spent the last year’s diving to the research interviewing all these folks and what was need to me is you know you talked about being a parent and indeed actually talk to not only business professionals but people from other Industries,
you see a lot of the same things coming up in different places so actually some of the techniques top-selling sales people are using was actually the same thing
parenting experts tell you to do with your kids
it’s just called different things you know I interviewed hostage negotiators and substance abuse counselors the type of approaches they use are the same things that some transformational leaders were doing
the underlying science was the same,
but they weren’t necessarily calling it the same thing or thinking about it the same way and so what I think was really neat about this book is seeing the same stuff again and again you know to me what I kept seeing is
pushing doesn’t work we need to take a different approach and that approach basically comes from chemistry you know in chemistry change takes forever,
it takes forever to turn carbon into diamonds it takes forever to turn plant matter into oil and so chemists often increase the temperature and the pressure.
[15:18] Squeeze things harder increase the temperature it forces them to change but there’s a special Sefton set of substances that chemists often use that essentially makes change easier
makes it faster makes it better and they don’t use temperature and pressure they actually use a different approach and that approach is to lower the barriers to change
the substance don’t you know force people to do something or Force the material together they essentially reduce the amount of energy by figuring out what the obstacles are and mitigate them.
These substances do everything from clean you know that Grime on our contact lenses to clean our car’s engine people won dozens of Nobel prizes for research in the space and these substances are called catalyst
and what’s really neat about the idea of catalyst and we think about candles in the social world is just people that create change as change agents but catalyst have a very specific approach really good catalyst.
Push harder they go why hasn’t this person changed already and what is preventing them.
[16:13] Rather than pushing think about what are the barriers to change one of the things getting in the way and how to mitigate those those barriers and you know across across my research I found again and again that the same five things kept coming up
and so I put them in the book you know and we’ll talk maybe about a couple today but the first is reactants the second is endowment third is distance the fourth is uncertainty.
And the fifth is corroborating evidence and each of these are an obstacle that tends to get in the way where they were trying to change minds or drive action
you put all five of them together they and spelled the word reduce and as exactly what great Catalyst do.
Catalyst don’t push harder and provide more facts more reason they don’t just yell louder great Catalyst do is they find the barriers they find the obstacles and they reduce.
[16:58] And for listeners at home they can’t can’t visualize the framework it’s because Jonah cheated he used to others for collaborating evidence so that.
[17:08] Grumbling evidence does have two letters it’s two words but I agree with you it is a small cheat if we’ll call it that.
[17:15] Exactly to make a good mnemonic mnemonic wow I can’t say that.
[17:18] You need a mnemonic for new money the so let’s dig into one let’s talk about the first barrier which is reactants.
[17:28] Yeah and so I think to talk about reactants I’ll just use a story if it’s okay it’ll take a couple minutes but I think it illustrates the point nicely
this is a story about a product deck sure that many of your listeners are probably pretty familiar with and that is those things that we throw in the laundry called Tide Pods so many of you probably use Tide Pods but you probably know the story behind them and and that is that a few years ago tide was trying to figure out how to make laundry doing faster easier they wanted to come up with something which wouldn’t get your hands sticky and already pre-measured and it could release
difference where the car goes into the laundry at different times they came up with these things called Tide Pods that’s a little packets truck in the lon.
Free they’re wonderfully help do you want to read and make it much better this pain
hundred million dollars in marketing thought they could take a big chunk of the billion-dollar laundry market so they released iPods Tide Pods do okay but then there’s a problem.
[18:19] And that problem very simply is that people are eating them and I want to pause there for a second because some of your lists are probably going no no I must have misheard him like.
I thought he said eat them there’s no way people would be eating these chemicals no you didn’t mishear me people are eating chemicals so there was a funny video on CollegeHumor a satirical article on the onion suddenly young people are challenging each other online to eat
Tide Pods it’s called The Tide pop Challenge and so imagine you’re a tide executive Procter & Gamble executive when this is happening you’re sitting there going
what are we supposed to do people are eating detergent you know this is ridiculous we’ve got to do something so they do it most organizations will do they come out with announcement saying don’t eat Tide Pods.
[19:00] They’re bad to eat don’t eat them and in case that’s not enough that her a celebrity Rob Grog Gronkowski to go on social media shoot a short video telling everybody not to eat Tide Pods they think this will be enough.
They think that telling people not to do it.
Be enough and that’s exactly when all hell breaks loose so search interest in Tide Pods goes up over 400% visits to poison control go up as well more people come to into poison control with sort of,
tide pod related injuries and have come in in the next two weeks and the prior two years essentially a warning becomes.
Telling people not to do something makes them more likely to do it.
[19:38] And I know most your listeners will probably be never faced with this exact situation but it’s an example of a much broader phenomenon and that is real.
[19:46] Right when pushed people don’t just go along they push back it’s not just that when you tell people not to do something and makes them more likely to do it even when you encourage people to do something.
It makes them less likely to do it and the reason if the core is that people have an ingrained anti persuasion radar.
Essentially almost like a spidey sense or an anti-missile defense system and any time someone tries to persuade them that system goes off.
People want to feel like they have freedom and autonomy over their choices why did I buy a product when I use the service I did it because I wanted to do.
I’m in the driver’s seat I made the choice because I liked it I have freedom and control over my life
but as soon as someone else tries to influence them where that person is emboss where that person is a colleague or that person is a marketer through an ad or other means
now they feel that reactants because it’s not clear whether I like something because I like it
well I’m interested in something because someone else told me I should do it and if someone else is telling me I should do it well then I’m less interested in doing it in the first place the the anti persuasion radar goes up I avoid the message I ignore it or even worse I counter arguments
I think about all the reasons why what someone is suggesting is wrong right and so all of that makes it really hard to persuade people
and so you know reactants is clear hopefully explains the science reactants but then you know if useful I’m happy to talk about a couple ways to reduce it because I think the key Insight is that selling is not going to work.
[21:06] Yelling is not going to work right we can’t sell people we have to get them to buy in we can’t persuade people we’ve got to get them to persuade themselves by giving them back some of that freedom and autonomy and guiding choices rather than forcing.
[21:20] Can we just tell people not to buy our products.
[21:22] That’s a good I will write that down on the list I’ll put that one in the next.
[21:27] You guys joke but there is a very well-regarded brand Patagonia and their their most successful campaign every year is it holiday they run a giant ad called do not buy this jacket.
And it’s it works fabulously for them not sure it’s totally repeatable but yeah.
So if that doesn’t work right how do we use that to have do we use our awareness of reactants to more effectively persuade.
[21:58] Yeah so I think there are a couple ways
and so the first I’ll call kind of providing a menu I talked about for in the book maybe I’ll mention maybe to briefly here but but one is what I call providing a menu
and the intuition there is very simple whether you’re presenting to a client whether you’re trying to pitch a boss or a colleague in a meeting we’re often trying to convince people to do something
and the problem with doing that is they’re not just sitting there listening their anti persuasion radar goes off they know we’re trying to convince them and so they spend the whole meeting or the whole pitch think about all the reasons why what we suggest.
[22:33] Sure marketer you say your product or service is great but why wouldn’t you say it’s great it’s yours right you’re going to tell us about all the reasons why we should buy it
but that’s probably not right sure colleague you think we should start this new initiative or spend more money on digital but
you’re in the digital Department of course you would think that right where that where’s that money going to come from how do we know the digital is going to grow and there’s the future of our business you know how are we going to reposition employees who are we going to hire was like a high school debate team member they spend the whole meeting poking holes and what you’re saying leading your argument to crumble.
And so what great Catalyst good change agents do is they don’t just give people one option they give them multiple.
[23:09] Don’t just give them one potential Direction one potential product when potential service they give them a few and what doing that does is it shifts the role of the listener.
Rather than sitting there and thinking about all the reasons why they don’t like what you suggested now they’ve got a different job now they’re sitting there going huh which of these do I like better.
And because they think about which one they like better they’re much more I could have pick one
at the end of that meeting or at the end of that pitch because they focused on the upside is in some sense rather than a downsides and I call that providing a menu because notice what you’re doing you’re not giving people infinite choices you’re not give them a hundred or two hundred you give them a small limited Choice set.
But you’re choosing that choice set.
You’re choosing a small set of options that you’re pretty happy about them picking from and you’re letting them choose from within them you’re giving them Choice you’re giving them freedom and autonomy within a larger
larger option set in sometimes you’re guiding their choice you’re not forcing them to pick one thing or something else
but you’re guiding the direction that they go and you see the same thing in our personal lives also right you know often someone asks us what we want to do one evening or something we give them an answer and they think about all the reasons why they think that’s a terrible idea if we give them two options
now they’re going okay interesting which of those do I like better and they’re much more I could
pick one of the ones we suggested in the first place and so providing a menu is a great way to encourage people to move in that direction not because we force them to but because we gave them choice.
[24:30] I love that that makes total sense and if you think about it we see lots of examples where where.
Good good sales people are sort of.
Selling a set of options versus a single option like intentionally or unintentionally to leverage that.
I want to move on to some of the other barriers but before I do I have an inappropriate question I’ve been dying to ask with the example of the Tide Pods like fresh in your mind.
Were you tempted to pick up the phone and call Clorox when you know they were.
They recently like stressed with creating ad telling people not to drink bleach.
[25:10] You know what’s Ben.
Both funny in some ways sad about the recent sort of covid and coronavirus situation there many things that are challenging about it but is the approach that sort of the government and health organizations have used
because they’ve essentially used the same approach that they’ve used for decades and it’s the same approach that doesn’t always work and that approach is just to tell people what to do.
[25:34] Rights of the good thing tell people to do more of it if it’s a bad thing tell people to do less of it
you know just like people used to say hey eat your vegetables and exercise now it’s wear a mask just like we used to tell people don’t drink and drive and you know don’t do drugs now it’s
don’t go to the store stay home and the challenge with these things is even if we might be willing to wear masks to start if an organization or group is telling us
do it now we’re going well okay I don’t want to just do what you’re saying maybe to exert my freedom and autonomy I’ll just do what I want and not do it right to go against what
what you’re saying and so I actually wrote a piece probably now two months ago in the Harvard Business review,
sort about how to apply some of these ideas of reactants to the current situation because I think they’re very very.
It right I mean you know take a slightly,
related example or sort of a case of these things not necessarily giving people choice but another example I talk about in the book is.
Essentially highlighting a gap right point out a gap between people’s attitudes and actions and so it’s the same thing not telling them what to do but really encouraging them to do something by pointing out.
[26:42] What they’re doing what they might recommend for someone else’s different and so you know take it to a covid situation someone was saying oh you know I have a colleague in the office who isn’t wearing a mask,
and I want them to wear a mask but you know if I tell them to they’re not going to and well rather than telling them to wear that mask why do you stay some egg hey.
If your elderly grandparent or your son or daughter your young son or daughter your elderly parent if they were walking around the office would you want them to wear a mask.
What you want us to wear a mask the first one was a yeah of course I’d want them to wear masks add want you to wear masks I want them to be safe okay but then why aren’t you wearing a mask.
[27:17] Because what that very subtly does I’m not telling them hey wear a mask I’m asking a set of questions that highlight a gap between their attitudes and their
and people want those two things to be in line
if we say we care about the environment we should recycle if we say you know we you know are interested in digital marketing we should do things that are consistent with that when our attitudes and our actions don’t line up
we do work we resolved that cognitive dissonance by sort of forcing them together we have to change our attitudes we have to change our actions
and so if I would recommend that other people would wear a mask if I would recommend my grandparents or parents wear a mask well then how can I walk around not wearing a mask and so by highlighting that Gap you can really encourage people to do something.
Not again not by forcing them to but by encouraging them to resolve the distance between their attitudes and actions.
[28:06] Yeah I like to based based on reading your book when I’m talking to folks I like to say hey I have a friend who’s a doctor and a lot of his patients are getting infections do you have any suggestions on what we could recommend for that doctor.
[28:17] I love that I love that yeah that’s great right because again you’re asking someone for advice you’re asking not telling them.
[28:24] Yeah and it’s there’s great examples in the book on that on like helping people.
Stop smoking for example in Thailand and stuff but one of the things that is that’s interesting to me about the reactants barrier and then I’ll move on but.
It feels like it can be very bifurcating right because you have this other Concept in the book you call it like the zone of acceptance right which is part of the distance greater if you were someone that was.
Predisposed to wear a mask and this.
You need to start wearing masks comes out like you just where I’m asking you end up on on one side of the thing but if you were someone that was less predisposed it felt like a bigger change to you it was less acceptable you to wear a mask.
The fact that people are telling you to Omit to wear a mask just push you further away from wearing a mask and so we end up in this weird bifurcation.
That I think we’re seeing play out in the real world like right now where people are making incredibly irrational arguments.
For not wearing a mask because they’ve become so so entrenched like because that zone of acceptance was unacceptable.
[29:32] Yeah I mean I think what you’re pointing out is that different people are not doing it for different reasons right there’s a set of people that would have done it but now they won’t because you’re telling them and there’s a set of people that might have done it but your ask is too far away and so they’re not doing it.
All right so I think in both of those cases we need to be a little bit smarter about the way we’re trying to change others.
[29:49] Yeah I want to Pivot to one of the other barriers you call endowment and that there’s this well-known cognitive bias the endowment effect and.
I am any other markers have been using a version of it for a long time and it’s different than the version that you bring up in catalyst.
Traditionally like we think of the endowment effect of is if I can get the customer to imagine they own this product.
It will be more difficult for them to make a decision not to own it so in in retail stores the real tangible example is.
Let’s take all the fun products out of product jail out of the glass cases and let customers handle the products and try the products in the store so that.
Digital cameras or the mobile phones or the GPS units I if you can actually use that in the store now the decision you’re making is.
Am I going to I’m imagining I own it so I have to make a decision to lose ownership by walking out of the store without it.
And so I feel like that that’s been a really useful tactic but then in the.
The book you bring up the point that that same endowment effect can be a barrier to people affecting the change they want to make or that you want.
[31:07] Yeah so first of all I love that example as a way to sort of encourage people to imagine they own something and this one and use it I think the challenge of change is it’s not just getting people to do something it’s getting people to let go of what they used to do,
right so the challenge of Change Is Not Just hey I’ve got to get people to buy a new phone but I’ve got to get them to give up their old phone instead challenge
you’re selling a service is not just hey I get to get to the by the service because they’re using no service but often they’re already using a service how do I get them to switch to my service and that’s really where the endowment becomes challenging right because we all have that status quo bias while
attached to the things we’re doing already and so you know the service I’m using a ready or the phone I’m using already
that thing is valued more than the new thing because I already have that thing I tell a funny example in the book of sort of my own phone buying Journey where I had this sort of
old iPhone at one point is like an iPhone 4 I think it was or something like that and it was basically broken I could barely use it anymore but I didn’t want to get a new iPhone yet because I wanted an iPhone that was the same size I basically wanted exactly my phone just not.
With more space and not all the broken features and so I kept waiting and waiting and waiting hoping this would happen because I was attached to the old thing.
[32:22] And change really has a couple pieces right one it’s uncertainty about the new thing maybe we’ll talk about that in a couple minutes right it’s
new things are riskier Neo phobic how do I know that new things actually going to be good but we’re also attached to the old thing
we’re also attached to the products and services and ideas and stuff that we’re already doing and it’s very hard to get people to let go of those things that’s why you know we hold on within organizations we hold on to existing projects that were already funding and doing but we don’t start new ones that’s why consumers buy the same product again and again and again and don’t bite
new things as often they buy the same version of Old things but they don’t buy new products and services often because it’s easy to stick with the things you know.
Were attached to those things we value those things more.
Research shows that objects are valued more if we own them than when we don’t you know research shows a long you’ve lived in a home the more value think it is even above and beyond market price and so it’s really challenging to get people to live
let go of old staff and so we have to figure out ways to ease Endowment in some sense by making them less attached to the old thing than they might be otherwise.
[33:26] Yeah and you brought up the fourth barrier uncertainty tell us about that one.
[33:32] Sure yeah so you know I think the good way to think about uncertainty is
anytime there’s something new we don’t know whether it’s going to work the marketer says the product is good or the service is good.
[33:46] The colleague says the initiative will work and it will be better than what we’re doing before but we don’t actually know that
in some sense there’s some uncertainty and lots of research shows that whenever we feel uncertainty we hit the pause button
right and we can see this going on right now with with covid and everything else you know many companies are sort of waiting until things resolved themselves to figure out what to do and what’s really interesting is you know many of these organizations
if they actually wrote down the decision tree and there are two paths let’s say A and B if a happens they probably do one thing
and Abby happens they might actually do the same exact thing
and lots of research shows that even when path a and path be the outcome what you do or the same if you’d not sure which way it’s going to go yet with your going to go down the first path the second path even though you do the same thing you still want to wait.
To figure out what’s going to happen right because we don’t know and that makes us feel uncomfortable and so the challenge there’s is how do we get people to unpause
how do we get them to avoid just saying well I’ve never used this thing before I don’t know if it’s any good I’m not necessarily going to do it there’s always switching costs if I’m buying a new phone that’s the cost of the phone in terms of money if I’m using a new service is the cost of integrating with my existing system in the time and the effort
to do it but it’s not just that there’s a cost it’s at the cost is that now and the benefits are later.
[35:03] To use a product or service I have to pay you this money engage the time do all this work now to maybe get this benefit later
maybe the new phone will make my life better but I don’t know and I’m not going to be able to figure it out until I’ve already paid those upfront costs and even worse
the costs are certain in the benefits around answer.
[35:21] Sure marketer the product or service you’re selling you’re saying it’s going to be better but I’ve got to pay for it first then I’ve got to wait a little while until I see whether it’s actually better and so why would I pay upfront costs
for uncertain benefits and so a lot of what I talked about in the book is you know to solve that barrier to reduce uncertainty.
We have to make it easier for people to try things.
And I think that many of your listeners are probably familiar with the freemium business model right this model of giving away something for free and then encouraging people to upgrade to a premium version
so take what you know a Dropbox or a New York Times or a Pandora or Evernote Skype LinkedIn all of these companies use the freemium model where there’s a free version you can upgrade to a premium version
and it’s clear why.
People like customers consumers like this model right they don’t have to pay for the product or service is great for them but it’s also great for those companies because what freemium does is it lowers the barrier trial.
Before you have to pay that upfront monetary cost now you
and so it’s easier for you to experience the value of the offering not because the marketer said it was good because you experience it yourself right now that that gator has been lowered a much more likely to hop over it check out what you’re offering.
And because I realize it’s good be willing to upgrade to the premium version and so frame is a great way to lower the barrier to trial but it’s not the only way
It’s actually an example of a much much broader principle in a much older principle you know if you think about test drives for cars for example there’s no freemium there.
[36:49] I just know free version of Card a premium version a test drive is basically just says hey check out the car for free and if you like it.
Well then passing money but it works on the same principle if you drove to a car dealership and they said oh you’re interested in the car pay us $30,000 and then we’ll let you check it out
no one would buy a new car but that’s essentially what we do all the time with the products and services we say hey trust us it’s really good all right well no one’s going to check that out it so
test drives do what samples at the grocery store do is they lower the barrier to trial that’s not freemium but they make it less work less costly for people to experience the value of that offering and once they’ve experienced it they’ll be much more likely to buy it.
More like it a try means it’s more likely to buy.
[37:31] Yeah and are like some of the tactics we see real commonly in e-commerce like the guarantees the Zappos you know free returns or the.
Casper trial or the word be Parker will send you five glasses and let you pick one like are all the those all feel like tactics that are designed to help address this uncertainty.
[37:52] Yeah I think it’s important and I do some work in this in the book to sort of separate some of these different in terms of how they’re working right so even just compare the front end and the back end right so what a money back guarantee does it doesn’t change The Upfront cost.
You still have to pay the money you still have to get the mattress into your home all those other things but it says if you don’t like it you can give it back,
and so that’s going to maybe encourage people to do the thing on the front end because they have more certainty that they don’t lie like that they can give it back other things work on the front.
Right think about why Casper started opening up stores for example I bet one reason Castro opened up stores is yeah money back guarantee encourages people to order the mattress
but you still got to get a mattress to your house get it up the floor put it on your bed move the old mattress it’s a lot of work
and people are sitting there going man if I don’t like it it’s not going to be trivial to get rid of it yes I can get my money back but it’s not trivial and so I’m still not willing to take the plunge The Upfront cost is.
Hi and so what a store does it allows you to sit on the mattress before you buy it just just like a test drive and so you can think about things on the front end as sort of lowering the very to trial making easier to get in and you think on the back end is sort of making it reversible make it easier if you don’t like it
to give it back you know free shipping is on the front end makes it easier to get you free returns is on the back end make it easier to give it back if you.
[39:09] I really like it and there even some other examples that I talked about that are slightly different less than front-end and back-end more about sort of driving discovery
because I think the challenge with trial is trial works really well if people know you exist and they think they like you but they’re not sure what you’re offering is great right there ready moved far enough down the funnel,
that they said oh what you’re offering is pretty good and if you make it a little bit easier I’ll do it right I’m there what about all the people that are not that far along in the funnel.
What about all the people that aren’t even in the funnel because they don’t know you exist or the people that are the beginning of the funnel but they’re not sure they’d actually like what you have to offer right or they think they don’t like
what you have to offer and Acuras actually doing with this a couple years ago so carmaker Acura people who drove actors love the brand.
They go by another actor they were super happy there just weren’t enough people like that and it’s our accurate was doing test drives,
who takes a test drive only the people who know the brand and think that they like it and so they’re trying think about how do I get more people.
To test drive the car essential experience the car and so what they did was really clever they partnered with W hotels and they said hey if you’re staying at the W Hotel you can get a ride anywhere in town in an Acura for free.
[40:16] You need to be a car buyer you don’t need to be interested in acura’s per se you just need to want a ride to the airport or your meeting or whatever it is and we’ll give you one for free did everyone who stayed at the tail
take a ride for free no but over a hundred thousand people did and over
10,000 them actually ended up buying the car tens of thousands of ended up buying the car why because they got a whole bunch of people that weren’t that far in the funnel didn’t realize accurate existed might have been injured in the brand sit in the back of the one on the way to their meeting or the airport learn there was actually a pretty nice car and then decide that maybe it was worth checking out and so what that did essential as it drove discovering right in brought the trial
and I talked about a lot of other examples like that in the book trials really great but it still requires work on the customers part to be aware of you and go take that trial if you can drive discovering bring the trial to people it’s going to be even better.
[41:04] Yeah you know it’s funny there’s a special version of trial that’s creating a challenge in retail because of covid right now.
In-store sampling is of course super popular and you think of a grocer like Trader Joe’s or Costco it’s a ingrained part of the shopping experience.
But now because of covid-19.
But it doesn’t seem very prudent to have a open tray of food and encourage people to be pulling down there mass and consuming food in the aisle and so.
We’re all struggling with.
What’s the alternative version of sampling in a covid friendly way and my hypothesis is that at home trials are going to become the thing that will put sealed samples of all that food,
in your bag and let you discover it at home if you thought about that at all.
[41:53] Oh yeah definitely man even think about you know and it’s different than food but you know think about what they do at hotels now where if you stay at some hotels you know the mattresses or the furniture is actually provided by mattress or Furniture companies and allow you to experience it
right so again you’re not going to the store to bring the experience to you there even some cases where they’re doing that was close
where you know if you’re interested in certain clothes you tell a brand the type of things you like you show up at the hotel and in the closet are some items you can try and they’re right there for you and so again it’s bringing the trial to you.
You know I think about you know you stay at a hotel they have little bottles of shampoo or toothpaste and so again it’s all of these are sort of making it easier for people to try stuff I certainly think that fewer people are going to physical locations at the moment and so
ways to bring trial to people or help with that and I imagine we’ll see that in food as well you know if for a long time people can’t
go to the grocery store as easily not trying things as easily then setting things home with people as a way for them to experience it.
[42:53] I like that I want to touch on one other barrier before we run out of time and I think there are versions that come up a lot in e-commerce in this one can you talk a little bit about corroborating evidence.
[43:05] Yeah and I only have a couple minutes left so I’ll make this one shorter rather than telling a long story but I think the intuition around corroborating evidence is very simple,
if you sell something that’s relatively cheap
relatively not risky relatively similar to what people are already doing a little bit of influence goes a long way moving a little bit of barrier is enough to get them to change if you think about a scale.
We’re sort of a seesaw and you’ve got a pebble on one end if you put something small in the other end you can move the pebble
a little bit of barrier removal will get the pebble to move but if you’re selling something that’s riskier it’s more controversial it’s more unusual it’s more novel it’s more expensive it’s going to take a lot more work
to get people to change right you’ve got to move the boulder rather than rather than a pebble and in these cases you really need corroborating evidence.
People need more proof before they’re willing to change their minds and we often think we’ll just provide that proof right I’ll send more information I’ll send more reasons and if I just give people more information they’ll change but the problem of is it comes from the same person it often gets discounted.
Right sure you say this thing is good but you’re only one person,
you only provide so much proof how do I really know it’s good and that’s really what corroborating evidence and others come in there’s a nice saying where it goes you know if one person says you have a tail you laugh but if five people say you have a tail you turn around to take a look.
[44:26] And I think that’s exactly the intuition here,
when multiple people say something even that one person says oh you have a tail you really have a tail let me tell you what you have a tail you’re going to laugh and think they’re an idiot right they’re wrong,
this crazy person is wrong if five people say it you’re pretty sure you don’t have a tail.
But five people are saying it well then I better go ahead and take a look and so it’s not just about the amount of proof.
But the number of people providing that proof and that’s really where we need to think about involving multiple others when their prior clients or prior users of a product or service providing multiple doses in a
what period of time making sure people here from multiple others or get
multiple sources of information about something that’s where online reviews can be really helpful right where multiple people are saying they like a given product or service for a particular reason but it’s really all about providing corroborating evidence or multiple sources of proof
in a small enough time that it provides enough evidence to tip the scales.
[45:19] Yeah I mean in that that makes perfect sense that’s I think of all those social proof the ratings and reviews and user-generated content and all that stuff is being sort of the collaboration cooperation there.
We’re almost out of time I want to squeak one last question in to let you close whenever we talk with listeners about the psychology of persuasion and things like that like the thing that always comes up is what are the ethics of this are we.
Like using cognitive biases to trick people into decisions that are bad for them is that what this is about and I know the answer is no but I’d love to hear your perspective.
[45:53] You know when the book first came out
almost all the reviews were positive but there was one negative review and I was really bummed I hadn’t read it but I was like why did this person give the book three stars you know I’m sort of disappointed and I read the review
and if you basically said this book has some great principles in it.
But charlatans and hucksters and you know bad sales people are going to use these principles to get people to do bad stuff
and first of all I said well if you think that’s the problem that’s a great I’ll take that problem and if
these principles are so useful that if people just use them they can do anything they want that’s I’ll take that as a five-star review the know it’s a three star one but I think in some sense there right right I mean these are tools
tools are tools and tools can do good or bad you know Hammer can hurt people Hammer can help build good things and so I don’t think it’s that the principles themselves are good or bad I think it’s how we use those principles and so I think you know
I can’t tell you whether the product or service or idea you’re working on as a good or bad one I know when I work with clients you know I keep that in mind and try to think about is this an organization that I’m proud to work with but I think more generally there’s a lot of places people and things that could use help
and so hopefully people will use these tools for good.
[47:05] I certainly hope so too and that’s going to be a great place to leave it because we have used up a lot of time but Jonah we superimpose enjoyed the conversation and thank you very much for taking the time to tell our listeners about the book.
[47:18] Thanks so much for having me I hope they enjoy the book and in case it’s useful they’re a bunch of free resources on my website so just my name.com resources there’s a guide to changing your boss’s mind there’s a guide to changing your colleagues mind one for you know changing a
your customer clients mind and so hopefully people find those useful.
[47:36] Thanks Jonah and listeners if you enjoyed the conversation hop on into your favorite podcasting app and we’d really appreciate a five star review.
[47:44] Thanks again everyone and until next time happy commercing.