EP237 - Always Day One author Alex Kantrowitz
Alex Kantrowitzer (@Kantrowitz) is the author of “Always Day One: How the Tech Titans Plan to Stay on Top Forever.” He is an on-air contributor at CNBC and host of the Big Technology podcast.
In this broad-ranging interview, we discuss the unique management styles at Apple, Google, and Facebook, as well as doing a deep dive into what makes the Amazon culture unique.
Disclosure: links to Amazon are affiliate links.
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Episode 237 of the Jason & Scot show was recorded live on Thursday, September 24th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 237 being recorded on Thursday September 24th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
[0:40] Hey Jason and welcome back Jason Scott showed listeners tonight on the show we are really excited to have the author of the book released,
this April always day one so if you’re familiar with Amazon that maybe a hint of what we’re going to talk about tonight and he’s also the host of the big technology podcast.
Alex kantrowitz welcome to the Jason Scott show.
[1:05] We are three of the have you Alex I’m not remotely implying that this is why you wrote the book but Scott is a sucker for anything Amazon so it’s the fastest way to get on our podcast is to write an Amazon book.
[1:17] Well you don’t even need to imply it I mean it was absolutely the goal and I’ve waited a long time but I’m glad to finally fulfill it here with you guys tonight.
[1:25] Yeah well very well played also for for folks that have already read the book or are going to read the book as a result of this interview,
so as not to trick you the book is actually about more than Amazon but you wisely chose to elevate the Amazon portion to the title of the book which totally worked with Scott.
[1:42] Wait wait the whole books not about answer.
[1:45] Scott’s pretending like he hasn’t read the book but obviously being the consummate professional he is he’s read everything you’ve ever written.
Before we jump into the book Alex the first thing we always like to do on the show is get a little background I got about the guests and kind of find out how how you came to your current role so could you tell us a little bit about yourselves.
[2:05] Definitely so I started my career buying digital ads right at the moment where Facebook was surpassing Myspace in the social media Arena,
and just watched it happen as a practitioner bought those ads and I spent about a year selling ad Tech,
in New York and just it was writing about it on the side and a certain point realized that this world was changing so fast that I’d much rather write about it professionally,
then do what I was doing it might have been just a function of the companies I was at but for me I saw there were so many stories that the media were was either getting half right or missing completely and,
you know I love doing the work and
you’re digging up what was going on and finding a way to tell it to an audience and just kind of made the leap so I covered the advertising industry in particular at first working for ad age
then went to BuzzFeed to cover like Facebook and Google and Snapchat and Twitter,
and while I was there just decided to go ahead and write this book always day one which looks really at the different Tech Giant work cultures that,
exists out there and the whole point of the book is these companies are moving to where the future of work is is going and we have two options one is we can like sit and fear them or two as we can call up their work.
[3:27] Their work systems and actually give them a run for their money and,
thrive in the workplace that they’re dominating and for me the idea was basically get the word out there and get the information out there and that was sort of the inspiration.
[3:40] Behind always day one is and then just as the book released I quit BuzzFeed,
I started my own publication called Big technology I what you call it in the intro its Weekly Newsletter and podcast that covers the tech Giants and it’s sort of.
Building on my work on Amazon and the other Tech Giants.
[3:56] Very cool and how are you finding being a podcast hosted.
[4:01] I mean I love it I just think there’s something special about being able to connect with people in a podcast I mean you guys know because you’ve been doing it for,
more than three years but the relationship you have with people who are putting on your show and giving you a chance you have to give almost your undivided attention,
you know when you have a show on in your in your headphones and your on a run or driving or you know going for a walk I think it’s just an amazing way to communicate with people and allows for
the Nuance that I think tap it topics in the world that we’re living in today deserve so
I don’t know I mean I couldn’t be more thrilled with getting into the podcast world.
[4:41] Nice well speaking for ourselves.
It’s way better for lazy people because you know you just hit record your ramble for a bit and you have a show like you don’t have to write all those words and you know get judged by an editor and,
you know and it’s frankly harder for the audience to give you feedback so you don’t even have to hear how much the audience hated it.
[5:03] Let’s see if you can work out an arrangement like that and any form of content production you got to make that happen.
[5:10] Yeah I like it the just be careful about the audio Engineers they tend to be prima donnas that’s my big advice to you having done this for a while.
[5:18] That’s right yeah got to make sure that you don’t have anything clicking in the background.
[5:22] Yes yes drives them crazy.
[5:24] Scot hasn’t stopped fidgeting for the four years that we’ve done the show I’m just saying right,
we’ve tried to buy him quieter chairs you name it we’ve tried it I apologize to all the listeners that have to do with it.
[5:37] Fidgety guy.
[5:38] Yeah so before we jump in the book I did,
the book starts out like even in the preface you’re having this this big interview moment with Mark Zuckerberg,
you you actually got it seems like really good access to a lot of the leaders in their senior management team that you wrote about.
Did was there some trick to that like was that just from your what Your journalist career up to that point and and your reputation or I mean like frankly I feel like there’s a lot of other,
journalists that have written books and didn’t have that kind of access you were able to secure for yourself.
[6:15] Yeah I mean I wasn’t as easy as it comes across in the final Edition I can tell you guys the story quickly if you want to hear how it all came together.
So I was covering Facebook for years here in San Francisco
or what you know I mean I’m not in San Francisco right now but it’s where I live and,
and so I told them I want to write this book based off of this interaction I had with Mark Zuckerberg and they said okay we’d be in Google said they can be in because I’ve been covering them for even longer
and then the ones I didn’t have were Amazon Microsoft and Apple.
And for me Amazon was going to be the key because I thought that you know if I’m writing a book about work culture Amazon has a pretty distinct in fascinating culture and for me nailing that that section of the book was going to be.
[7:05] Super important so even before we actually sold the book I booked a ticket to Seattle.
One way and I agreed to cats it for my friend’s moms cat lady the cat.
And basically said like all right if I sell the book hopefully I’ll get access but one way or the other I’m in Seattle until I’m out with the story.
And you know then we sold the book the day that I landed,
and I met with Amazon PR few days later basically said look like this is going to happen.
And Facebook is on board Google is on board and I’m not leaving Seattle until I’m done what do you think.
What’s let you know help me make help me tell like the most complete the most accurate story and let me actually get some people on record.
And they hadn’t participated in a book since the everything store which is Broad Stones book that came out I think in late 2013.
For 2014 so I didn’t have high expectations but I guess they figured hey we have this reporter that’s roaming around Seattle,
he’s already got these other two companies on board maybe he’s going to get you know some of the other fourth and the fifth so we might as well you know.
[8:17] Get out there and tell our story you know for ourselves and you know see if he’ll incorporate some of it and honestly like you know more I the overwhelming majority of the interviews that I did for the Amazon chapter.
[8:32] We’re with people who are not sanctioned through the company’s PR organization so I feel like people get the real story and,
this chapter it’s not just like a sugar coated repackaging of a press release but that said,
the people they did let me speak with we’re pretty invaluable I got a chance to speak with Jeff Wilkie who’s leaving but he’s their CEO of what consumer and then it from very interesting Lee Ralph her brick who was their head of,
machine learning who helped bring about this like pretty fascinating automation program in the headquarters that took a lot of the work that there are people in their retail organization we’re doing,
and automated it and it was great to have a conversation with him talking about how that project originated I had done some reporting outside but he was the guy that ran,
and so it was great to like bring the stories I had heard and sort of get his perspective on it and then I was able to visit a couple of fulfillment centers as well,
so you know I think as a reporter for me I’m always trying to tell the most complete story I think you’re missing out if you do only interviews you know outside the company,
I think you’re missing out if you only take access interviews and so I think always day one is a you know if I have to say it like it’s a pretty good blend of both,
I think it’s the first book ever that Amazon Microsoft Google and Facebook have participated in together an apple.
[9:56] Scott Galloway is really pissed about that by the way.
[9:59] I think Scott Scott’s doing fine and he blurb the book so yeah so yeah but but yeah Scott’s Kia Scott and I like I think there’s like great Synergy between the four,
and the thing that I wrote I mean I his book almost inspired me right his is all about the strategy.
You know what are they doing and always day one is more about how are they doing it look at the inside the work systems in the culture,
but have led to produce what these companies are you know are building so yeah and I mean like lastly Apple you know as per tradition didn’t participate but I got a chance to sit down with Steve Wozniak,
in a barbecue joint right outside of Cupertino and sort of.
Very end of my reporting on Apple share what I have learned from him learned and and get his perspective on it so apples out but wozniak’s and I’ll take it.
[10:54] Very cool the I definitely want to dig into the Amazon stuff but before we do I wanted to Fanboy a little bit on CNBC I’m a huge CNBC junkie the are you in the Silicon Valley office there with like John 14 those guys.
[11:07] So I’m a contributor I’ve been appearing on CNBC as a guest for about four years and then when I left BuzzFeed you know I had an opportunity to go out and be a free agent and,
work with anybody that I wanted to and CNBC and I got to talking and,
we started be a pretty great connection for between the two of us were you know again like I’ve been doing all this reporting on the tech Giant’s if you look at the S&P 500 they make up 25%,
of the of that index and supposed to be something that’s fairly well distributed across the economy and you have five companies taking up a quarter of it right so,
obviously it underscores how important these companies are you know to overall health of business in the US and the US economy which is what cnbc’s known for us the leader in covering so,
for me it was a great opportunity to go up there and be able to you know drop in when they need meat and and give my thoughts and share some of my reporting.
And it’s been great so far we were a couple of months in but it’s just been a real awesome experience to be able to appear on their shows from time to time.
[12:19] Yeah yeah they do a really good job I like the Silicon alley and that’s probably where you do most of your appearance on mentioned because that’s when they talk mostly Tech right.
[12:26] Yeah I mean I’m still working my way into meeting everybody but honestly the number one show that I’ve been on a Squawk Box by a long shot,
so you know Ike I love doing squat Buck show I feel like those host won’t let you get away with anything and there have been times where Kieran and Andrew Ross Sorkin of,
called me on certain statements and we’ve had to have little discussions on are about it and honestly if you’re going to do live TV those that’s the way to do it right like.
Let’s have let’s have some fun let’s you know not allow people to get away with statements without really thinking deeply about them and thinking about the repercussions and you know I feel like I learn every day I learn something every time I’m with them and,
and I don’t know it’s just I walk away from each appearance saying man that was fun let’s do it again.
[13:14] Yeah very cool so I could talk about that for the whole show but I don’t want to
Bernard Bernard time let’s take an Amazon what were as you as you kind of dug in there’s been some writing about day one and Bezos have been pretty open about it in his shareholder letters,
what were some of the surprises that you as you dug into the Amazon culture then also there was the you know there was that kind of famous New York Times article I think that,
2015 about in a kind of headline from that one was people crying at their desk and.
Amazon was very unhappy with that you know what were some of the surprises that you got from your Amazon interviews.
[13:51] Yeah I mean man that New York Times story we should come back to that because I think it’s pretty fascinating
look I think we talked a little bit about the day one thing obviously it’s the title of my book Let’s just you know touch on it super quickly write the idea inside Amazon with day one isn’t
you know work morning evening and night
you know keep your foot on the gas pedal even though many people there do but day one really means like think like a start-up right don’t be burdened by Legacy keep Reinventing,
and whatever Amazon does today if you have an idea of something you know to do it better just just talk about it and do it because,
the companies literally operating
it’s as if like it is one of those companies on its first day without the burden of we have to support our existing businesses or this is just the way
we do things around here okay so you said that now here’s the question how do you do that right so it’s one thing you know all these companies have like
your missions and visions of they put like some Backwater in their internet and never talk about it ever
but Amazon’s really been able to live this always day one mentality and I think they like the rest of the tech Giants have been able to do it in two ways one.
[15:02] Because they rethought the way that we do work and this modern era,
so throughout our history throughout the history of the Work World almost all work has been done to support existing products I mean think of the factory right,
you would have one guy come up with an idea like let’s make screwdrivers,
and then everybody in every employee that he would hire because almost always a he right would be making in the factory making screwdrivers and if you say hey let’s make hammers they laugh at you because employee ideas,
we’re just not a thing that they would pay attention to and that age then in like the 70s we moved to the knowledge economy were all of a sudden we say,
all right workers are supposed to come up with ideas or we’re relying on their knowledge,
but even still almost everything that people in the office do is just supporting existing products you know you might be moving numbers around in a spreadsheet but you’re not coming up with new inventions.
By and large in today’s knowledge economy I think what Amazon and the tech Giants have done is sort of flipped the whole equation on their head they’ve used,
technology to minimize that work supporting existing products which I call execution work and maximize the amount of time their employees have.
[16:15] For inventing for coming up with new ideas,
and bringing them to life and so they first reimagined work and once you re imagine working create that room,
for your employees to come up with ideas you need to actually innovate on the channels that bring ideas to decision makers.
I think Amazon has done a terrific job with that as well they’re famous for the vi pager process were instead of PowerPoints you know people right.
[16:42] Ideas for new products down in a six-page document as a narrative single-spaced often
11 Point font calibri you know style and
then they just share it through out and of course it’s good for crystallizing your thinking and catching up Executives you know really quickly
on projects that you are proposing as opposed to like going through a game of telephone but what that I do what the whole concept of writing things up.
Doesn’t Amazon is it just make sure that that ideas can get from.
Employees to decision makers in as quick a time as possible so that’s sort of like the trifecta you know in the always day one equation right it’s think like you’re a startup don’t worry about Legacy.
Use technology to minimize execution work make room for ideal work and then create channels to bring ideas from employees to decision-makers in as quick a time as you can.
[17:37] So I started a company that interacts a lot with Amazon and Google and eBay and Facebook and whatnot,
and it’s really interesting just from the partnership perspective to interact with all those companies because the thing that’s really amazing at Amazon is you’ll have a discussion with someone relatively senior there,
and they know the details of everything and that you’ll do a similar discussion with another company and they’ll have to kind of start looping in more and more people from the from various teams you know so if you have a shipping question they’ll be well let me get Larry the shipping guy in and Sally the,
payments lady in.
But you’d have that same discussion with an Amazon executive and they just know the business so deeply it’s it’s a little scary sometimes and then then you’ll go you’ll think oh that’s an aberration it’s just it’s just this guy and then you’ll go,
you know eight other people and they all know it just as well as the original person did you find that as you met various people.
[18:32] Oh yeah I mean think about the amount of knowledge that’s contained in one of those six page documents and then how many conversations you would have to have to replicate that.
And it’s totally unbelievable how well I just think about the way meetings working Amazon.
In most companies would have meetings look like right you end up sitting down with a bunch of people you probably spend ninety percent of the time.
Thinking about what you’ve done up until that point and 10% of the time.
You know actually digging into the business and making decisions at Amazon you read that 6 pager and then that whole 90% you know figuring out what we’re doing is done by the time someone says a single word.
So of course they’re going to be you know well-versed on what the business is doing just because like that’s just the way Amazon operates so,
yeah I would say that the people that I spoke with had just this deep domain knowledge it was almost as if they’re all you know CEO level expertise and Amazon in a way that you don’t find elsewhere.
[19:39] Yeah do you do you think that basis will let’s say he leaves do you think this culture will be so calcified in there that it will keep going or do you think eventually they’ll stagnant.
[19:54] Yeah I think look the culture at the end of the day is going to come from whoever the leader is I do think like you know I do think CEOs have an outsized influence in the way the culture,
operates inside a company that’s why when CEOs were like oh I wasn’t aware of how this toxic bubble happened or this toxic Behavior happened I always laugh a little bit because it’s like.
Yeah okay maybe you weren’t there day-to-day but you certainly set the tone that allowed this stuff to happen.
So Bezos I mean first of all I don’t think Bezos is going to leave anytime soon you know I when I was in Seattle reporting this book and in the time I’ve spoken with Amazon employees since my impression was always that Jeff Wilkie,
would be the guy to take over if pesos left and milky leaving to me is sort of a clear indication that Bezos has no plan.
To go anywhere anytime soon so I expect Bezos to leave that company for a long time,
to come you know as for whether the culture will change here’s my prediction if it’s somebody internal it won’t change very much because they’ve seen,
how that culture has been so effective in getting Amazon to where it is but like if Mark Zuckerberg took over Amazon after Bezos left you better believe it’s going to be a different company with him running the show.
[21:09] Oh yeah sorry that was that was hard to imagine for a second there.
[21:14] Never Say Never because actually Zuckerberg and I
write about this little bit in the book but zeca Berg ask Bezos to go and Shadow him for a couple of days you know Zuckerberg had this thing and it happens common in Silicon Valley where CEOs will ask other CEOs to spend a couple of days just watching how they work.
And and so Zuckerberg had Shadow Don Graham the CEO of the Washington Post and Don said you know Mark you’re not going to learn anything from me but end up being pretty
you know impactful in terms of Zuckerberg ability to lead Facebook and then
Don Graham eventually sells the Washington Post to Bezos but Zuckerberg knew we had a relationship even before hand and he said Dom Don you know can you introduce me to Jeff and he said sure.
So Graham asked Bezos stiff Zuckerberg can Shadow him and done Graham was you know
pretty involved with Facebook you as a board member and so just said okay let me make this asked and Bezos calls him up and says hey Don look it’s a great idea
but the only thing more distracting than having Mark Zuckerberg follow me around all day would be having Angelina Jolie in the office,
and so unfortunately we’re going to have to pass on this idea and why when I brought it up to Zuckerberg he seemed like absolutely dejected he’s like yeah you didn’t let me in I was so funny.
So anyway I don’t think it’s such a random idea you know maybe Zuckerberg snake doc next ACT is doing some sort of e-commerce business.
[22:41] No I’ve not maybe at that level of CEO but there have been a couple like pretty public examples of these CEO swaps we’re not just shadowing each other but where they trade jobs for a week which is pretty funny and Illuminating.
[22:55] Yeah that’s a fun hypothetical what happens to Facebook if Zuckerberg if Bezos runs it for a week what happens to Amazon if Zuckerberg gets his hands on the thing for for a week or two that might be interesting.
[23:07] Yeah I have a hypothesis but I maybe I’ll save it for later in the conversation I do want to unpack a couple things so first of all you do right.
A lot about the engineers mind and it’s kind of a thread throughout like a number of the.
The Deep Dives and I certainly think of Jeff as a,
as an engineer although he’s not a formal engineer but as having an engineer’s mind and so I always wondered why he doesn’t call it Day Zero instead of day one that’s has always bugged me.
[23:40] Well that’s right I mean yeah we got to take points away from besos.
[23:44] All the coders are pissed because day.
[23:45] Believe yeah he is a trained engineer though he just hasn’t worked in it for a while.
[23:50] Fair enough.
[23:51] Education is in engineering yeah.
[23:53] Yeah so.
One of the things that’s been fascinating to me and maybe we have to jump into another part of the Amazon story that you wrote about and hands off the wheel but but hold just a sec on that right like you talked
in the beginning and this to me is like one of the fascinating insights from the book that you know just this whole evolution of,
hey in the industrial revolution it was all about execution and you could add the most value by being good at execution and ideas were like almost.
Not useful and then you know ideas where a small percentage and and you know today we’re in this culture where ideas are the most difficult thing to replicate and we can.
You know frankly execution is easier it’s easier to Outsource and increasingly you can automate it and throw a i at it.
In the context of the Amazon story you you sort of have the example of a program than Amazon run called ran called hands off the wheel and when I let you explain it and then I’ll pick back up.
[24:56] Yeah and you guys asked up the top like what the most interesting thing I found in the book was and hands off the wheel no doubt was it so I heard some Rumblings that Amazon was automating.
White-collar work and its retail organization and I thought okay well this is something to investigate,
and it turns out that they’ve been running this program called hands off the wheel it was originally called project Yoda by some people and they’re saying basically instead of having Amazon’s retail employees the vendor managers.
You know do things like order products and figure out their pricing and do inventory management and even negotiate with vendors,
we can hand that all off to machine learning based off of all the data that they had.
So they started it around 2012 where they said hey like we have almost two decades of data at our disposal.
Can we figure out the way to do this work that our vendor managers would with technology instead.
And it took a little bit of time but eventually they are predictions got pretty good and so those predictions started to end up in the retail employees software tools were instead of them like typing in,
you know where they wanted to,
you know put certain units of product the a I would suggest it and they could either say yes or override it.
[26:22] And then at a certain point right around 2015-2016 Amazon’s executive said hey these predictions are pretty good,
and instead of giving our employees a chance to override them in the system’s why don’t we let them make the actual calls and then see what happens and allow them to learn,
they can adjust the machine learning tools and so they said essentially take your hands off the wheel.
And they gave them pretty high goals some employees told me as much as eighty percent of all the work that they used to do was now handed off to machines and basically what they would do.
Is audit and just say okay did you get it right and you know are there trends that we that the machines don’t know that we should try to account for like for instance you could have 30 years of historical,
knowledge but not retail knowledge but when something like a fidget spinner becomes hot how do you then,
let the algorithm know that it should start ordering some fidget Spinners because it’s not going to know but on its own it does nothing to work with.
So Youmans actually became more Auditors and doers and eventually their work became much less important inside Amazon.
[27:30] And so typically when you hear stories like this you’re just like oh those people are gone owners like obviously the company fires them but the amazing thing about this story inside Amazon is instead of firing these employees.
Amazon just made you know many of them product managers and program managers basically professional inventors inside the company.
Where they said okay well your jobs automated but we still need you to build new things and it’s this prototypical example of a company using technology to minimize execution work right because like,
you’re buying stuff but you know doing inventory management inside Amazon was basically supporting an existing product that could run on autopilot you know anyway.
And it gave them time to come up with new ideas so it maximized idea work and allowed for reinvention
and that’s sort of been to me one of the main secrets to Amazon success over the years and your listeners will know it’s not the only thing but I think it’s certainly one of the big headlines,
that’s enabled Amazon to stay on top for so long.
[28:29] I know for sure I mean I basically my career is helping people compete with Amazon right and most of the unsuccessfully and I totally agree with the the fundamental premise of your book.
You know clients are always asking me like what what Amazon’s fundamental advantages and they’re like is it you know the massive fulfillment capability they have or the huge product category catalog they have or the,
you know the flywheel and Prime and now you know those are all super valuable things,
but but my firm belief is that their biggest fundamental Advantage is their corporate agility and their ability to just.
Evolve and react faster than other companies and it’s largely because of a lot of the principles that you captured in the book.
Um but what I’m not convinced about I’ll just be honest is the hole.
Repurposing of these employees so I so I had an interesting view to hands off the wheel my many of my clients were the brands that sell on Amazon and they hated hands off the wheel right because.
If you think about it if you’re a consumer packaged good company you sell the Walmart and Target and Amazon and the way you are good at your job is,
you you got those buyers to come to lunch with you and you built personal relationships and you you know you hope that you influence them to buy a little bit more of your product instead of the other guys.
[29:53] And so as Hands on the Wheel started getting implemented those those vendors.
Lost a human to talk to and to smoother than to wine and dine and it became this ridiculous thing like,
haha my competitor lost their Vendor Manager but we’re so big we still have one,
and I always had to break the news to you yeah you have one but they they don’t do anything they just go to lunch with you and then the hands off the wheel algorithm still decides how much of your stuff to buy.
I’m curious Amazon’s famously good at hiring people and they have super high standards they have this whole bar razor program which I’m sure you ran into so so they they used all that to hire the best vendor managers they could hire.
And then they obsoleted that job which was totally to their credit.
Presumably the people that they hired as the best vendor managers are not the best inventors or idea people and so it.
Like I haven’t seen evidence that it’s not working for them obviously but it just like him like in my mind fundamentally it seems like.
Huh hiring a bunch of people is buyers and then turning them into program managers and product managers because you obsoleted their job doesn’t on its face sound like a recipe for Success like it seems like you could hire better program managers.
[31:15] Yeah well let me yeah let me give the counter-argument here right.
I fully agree with you that this experience has been frustrating for first party vendors with Amazon no doubt about it.
But it also happened in a broader context where Amazon was saying okay we’ve we’ve rode the first party Marketplace to a certain point,
for us to be able to expand to the next point we’re going to need to really foreground the third-party Marketplace and our fulfillment and Logistics services,
so it changed the business definitely changed right but this is again the whole idea that you think about when it comes to all these day one is are you going to hang on to your asset.
Milk it for all it’s worth or are you going to build for the future may Microsoft’s a good example Microsoft’s number one asset was Windows for a long time.
[32:04] And it became the number one desktop operating
system company in the world and remained so long after desktop operating systems were an important anymore because mobile operating systems became the most important operating systems in the world
and only after realized to let go of its asset then it sort of was able to reinvent himself as a cloud services provider.
And became what it is today as opposed to what it was just a few years ago,
laughing stock so yeah Amazon did definitely meet transform itself in that way and those Transformations are in Easy they’re painful,
I mean think about how terrible people in the windows division felt inside Microsoft after they were like the kings of the castle for you know their whole lives and then they realized that they were just kind of,
on the outside looking in.
[32:51] And so yeah from a from a first party vendor situation it’s painful and doesn’t doesn’t feel right and might look like Amazon is
blowing its lead but it was also this part of this necessary transformation that happened you know maybe before it needed to but kept Amazon,
you know moving forward in a way that’s helped it.
Maintain its dominance today to Second point of your question I’m going to give a broader answer and then a more specific answer the broader answer is,
I think in today’s economy we have to stop looking at people as like you know folks who do one thing and of course yes specialization is important and it takes time to learn,
to learn you know sector specific skills but on the other hand
all of our economy is becoming more abstract you know you have to be able to be nimble and think about things differently and you know maybe move to a couple of different jobs throughout your career I remember Basil’s was sitting with.
Walt Mossberg at the recode conference or maybe it was all things D at that point and you know.
[34:02] Basis was talking about her work at Amazon you need to be open to change and if you’re not interested in change.
Of course you should find a more stable career.
I mean the joke is that there are no more stable careers like that like one of the things he said is go you know become an insurance adjuster and Walt Mossberg said well they use iPads now and basil said Insurance soon enough they’ll be using machine learning and it’s true,
right now insurance is the field where.
[34:30] The Drone flies over the hurricane area and writes all the adjustments now like a hundred percent.
[34:36] Yeah I know I know I’m you know rambling on a bit but I do really think that so so yes if you are a you know.
Fire that’s that’s the type of career that you want to have you’re going to have some trouble but if you thinking more broadly about being an adult being the person who could succeed in this economy,
it’s not about job functions it’s about skills and thought process which Amazon certainly teaches then you can Thrive okay here’s the more specific example.
Dilip Kumar who was the head of pricing and promotions inside Amazon went on to become bezos’s technical advisor Shadow him for a couple of years.
And by the time that student was up his old you know domain was on its way to getting automated through it was then project Yoda and eventually hands off the wheel.
And so we had an option here could go there and sort of see his job become obsolete or he could try to invent something new and he ended up leading or being one of the members that led the team that built Amazon go which is Amazon’s check out free.
Convenience store and soon-to-be Supermarket I believe that sort of came out of this idea can we eliminate the most annoying part of shopping in real life and that’s checkout,
and and they didn’t I mean you guys I’m sure I’ve been inside of the ghost tours they’re freaking magic and they you feel like you’re stealing every time you go in.
[36:01] And turns out that,
you know that that turned out to be one of the next big moves that Amazon’s making every time you hear Bezos talk about it you hear how it’s the future for the company so I don’t necessarily buy the idea that if you,
do a retail core retail function you can’t be an inventor I think Kumar is a good counter example for that.
[36:23] For sure.
[36:24] And yeah I just think that this is sort of the way that we’re heading and the.
[36:28] No no and that’s fair enough and I’m sure Amazon would would rightly point out and I think Google and others are even more on this way of like a lot of that bar razor is less about job-specific skills and more about,
cognitive ability and problem-solving and things like that that would apply to multiple job so I’m sure a portion of that is totally fair,
um I do there’s one other theme in here that’s kind of fascinating to me like if you think about hands off the wheel and you you kind of described it really well I can’t remember is in your book
we haven’t mentioned it yet but you also wrote a great hbr article specifically about the hands off the wheel component of Amazon,
the first phase of hands out the wheel was tools for the merchant right so you know originally the merchant has black magic and only he can figure out because back then it was always a he,
how many how many widgets to buy from a vendor and put on the website right and so then,
we get this AI algorithm that suggest how many he or she should order.
But it still was ultimately up to the the human and human could override that system and I think you wrote that they discovered that the human overrode the system way too often and So eventually.
They got to the point where it was a hundred percent the the system and they you know ultimately were able to solve for all four most are all edge cases.
Um the in analogy to that also in the Commerce industry do you follow Stitch fix at all.
[37:56] I dabble.
[37:57] Yeah so Stitch fix is you know in a parallel retailer but kind of their part of their magic is personal stylist for every customer that gets to know that customer and make custom recommendations and early on they hired the the,
Intelligence officer from Netflix that had written the Netflix product recommendation engine and invested heavily in a i for Stitch fix and so they have,
you know this this Tier 1 machine learning product recommendation engine that takes all these attributes from the customer and recommends,
fixes or products for them but but Katrina the CEO at Stitch fix hit has been adamant.
The customer wants to deal with a human so we’re never going to just send the recommendations from the algorithm we’re always going to have a stylus that.
Presents those recommendations and has a chance to sort of override or curate those recommendations so and in a way that’s what like that interim version of hands off the wheel felt like to a lot of my my clients right like,
they gave my clients a human being to make my client feel better but in reality the work was being done by the algorithm and I’m curious if you think.
Over time are we all going to learn that the algorithms are better like well will there come a point at Stitch fix when they’d be better off to say,
we have world-class math picking your products instead of you know a moderately paid employee.
[39:26] Right for a high dollar product like that you probably want a blend of both so you want the AI to be so good that the stylist doesn’t have to go back a thousand times to get you something that you like,
because each one of those moments is an opportunity to that you know to lose money for Stitch fix and to annoy the customer,
and so you get the AI really good and then yeah you work in conjunction as a person and the human being becomes this concierge you know on top of the AI That’s using that to end up,
making the recommendation of the client and I do think that model you know this idea that.
That you know everything’s going to be automated and all the humans will go away,
no I’m not I’m not ascribe to that I think we’re still going to have very important job for humans but it might be something that’s more interesting right,
that is something like you know be the stylist or be the concierge from Stitch fix that speaking to you know speaking of the customer,
that sounds like a much more interesting job than like being the person that runs into the back and,
you know keeps getting different things for people to try on and be the person that puts the order in to bring it from the warehouse.
[40:38] Or that re folds the clothes to put them back on the Shelf after they leave.
[40:42] Because if the AI can minimize the amount of times the stylist in the person needs to go back to try to find the right fit then is doing its job perfectly.
[40:49] Freckles that’s a we want to leave some for people to buy the book so that’s good
good overview of the Amazon you also cover Microsoft Facebook and apple what interesting kind of cultural conclusions we’ve got kind of anchor of Amazon now did you draw from
[41:07] Yeah well I think the main thing that I learned was the leaders of these companies operate a little differently.
Then I imagined you know the world-class CEOs operating I mean maybe I came to Silicon Valley with this idea that.
Everyone was going to be Steve Jobs and sort of you know not give a shit about what anyone thinks and sort of stand up on the table in the middle of the campus with the megaphone,
Park a bunch of orders and demand people,
follow their Vision but I think that that would be a misconception because you having spent time with people like Zuckerberg and been in and around the offices of Google and Microsoft and.
You know touched on Amazon of course and apple to some extent like what I found is that these leaders are really terrific at eliciting feedback and it starts with the very first story in the book where I go in.
Sit down with Mark Zuckerberg and typically your,
you know your average conversation with the CEO as a reporter is you know you sit down they lecture you for about 25 minutes and the pr person in the room monitors your facial expressions and,
you know if you look concerned they say thanks for coming we’ll see you again sometime soon and you know if you look at some what engaged they might give you a time for a question or two.
But when I came in to meet Zuckerberg he immediately starts asking for feedback.
[42:25] And I was like what’s going on like this is is this a weird way of trying to sell a song you know what he’s trying to say.
And then I ended up just going and speaking of Facebook employees as we tend to do in this line of work and found that feedback is just built into everything that Facebook does so.
There are posters on the walls in the office you know back when that was a thing that’s a feedback is a gift and.
Once a two-day trainings for employees to learn how to give and receive feedback major meetings ends with a request for it and I think this is important because it means that.
[43:00] When you’re so comfortable sharing ideas with your colleagues are sharing Thoughts with your colleagues.
You’re not going to hold ideas for good products back and I certainly found inside Facebook and elsewhere in the tech Giants that when that sort of behavior is enabled people aren’t shy they actually believe what you say,
and they feel hurt and they’re going to come out and tell you things that you know might save your business one day and it certainly has happened for Facebook a couple of times.
[43:27] What you think about the Facebook go fast and break stuff and they have the of the hacker mindset and all this kind of hacker kind of stuff on all around.
[43:36] Yeah so ice actually spoke to Zuckerberg about this.
He maintains that move fast and break things is not like actually like break Society it was more just like you know push code as fast as you can to the site.
And I mean speed building the speed has always been important for Facebook and why is that important for Facebook I think it’s because social media is the most fickle of all,
product categories product categories in the world.
You know we’ve gone through so many different social media apps with Facebook itself is losing interest with teen users pretty fast and one social media networks are social media platforms start to shrink it’s very difficult for them,
to build back in fact I think Twitter is really the only one that sort of lost users and then,
brought them back and you know I mean who knows what the data says that Donald Trump isn’t necessarily responsible for it but,
you know I don’t think it’s one account I think its new environment around his presidency that certainly helped you know Twitter revive you know so that said like.
[44:41] Facebook needs to invent fast because if it doesn’t do that it’s going to it will really be dead and it has reinvented itself numerous times throughout its history from an online directory to sort of this broadcast platform where you write something on your wall,
and everybody you’ve ever met in your life and their friend see it and now it’s transforming again to a series of smaller more intimate networks with groups and the messaging.
So you know when it comes to like Zuckerberg move fast and break things like you know you might call it the unfortunate you know phrase that sort of you know stuck with Facebook as it has gone and broken stuff in a big way.
But it really captures both sides right they build fast they release products before they’re ready.
And oftentimes when they do that it has negative repercussions on society no do I think that they’re working to fix that I think there’s at least an effort inside Facebook,
I’d like to see it expanded but I don’t think they’re as unconcerned with what happens to society afterwards as they had been in the past.
[45:42] Very cool at that point in your book I so you cover it Amazon you covered those other companies and then the book takes what I’m going to jokingly call a dark turn.
And that’s because you write a chapter about Black Mirror which is a very
dark dark show but the premise about why you bring that up is,
you introduced the hypothesis that science fiction writers are probably better at predicting the future
then corporate employees and I was wondering if you could tell the audience a little bit more about about that hypothesis.
[46:20] Yeah so
definitely so first of all like I’m a big fan of the show Black Mirror obviously have watched it predict lots of different things that happened,
and will probably continue to be prescient in terms of what’s going to happen in our world but look I’m writing this book always day one from like a standpoint of these are work systems that.
I’ve helped the tech Giants in a big way and we ought to know about them and Co-op them so we’re able to be competitive in their world,
and I’m bullish on the systems but the other side of that is that like everyone who goes out and approaches Tech in a way saying this is positive and only positive has been wrong because there’s always downsides to it.
And so what I decided to do was to bring in a science fiction writer and while go Nim who helped start the Arab Spring,
and who now has some reservations about the impact of social media on the world even though he used Facebook largely to help stoke.
The revolution in Egypt and said let’s look at some of the uses of technology in the book and see where they could go wrong and I think just to push it home.
[47:32] Inside Amazon they write these narratives the six pagers that we’ve talked about and that your listeners I’m sure extremely familiar with.
And one Amazon employed ex-employee told me it was like,
it was like writing science fiction when you wrote these things because it was a story of something that’s going to happen that doesn’t exist yet and that’s largely what you do in the tech world is you dream something up that doesn’t exist then you go and build it.
But the thing about the tech industry stories as they always end happily and you have to do that for a reason right you’re in a company you’re tasked with building stuff.
You want to think about the successful case in build towards that but often that makes you blind to the negative.
[48:09] And the amazing thing is once you put a couple science fiction writers actual science fiction writers on the problem people who are used to thinking dark and dark ways,
you’re going to be a thousand times more likely to catch the liabilities in your products,
then you would otherwise and so I found it to be an incredibly useful and interesting exercise at the end of the book when I was done with my reporting to bring these folks in.
And for me you know I’m just like you know an author of a book doing one dinner with these folks so imagine how,
amazing their perspective would be inside a tech company that’s actually actively building the future every day.
And I do believe that we need many more science fiction writers working inside Tech doing exactly this thing like looking for liabilities looking where things could go desperately wrong in the future and then helping these companies look out for the problems before they happen.
[49:06] Well that’s a good jumping-off point so if we if you kind of take what you’ve learned and projected out
maybe it’s three five ten years do you know do you think it’s like 95% probability these dark mirror scenarios come true where you know we’re being surveilled all the time and Alexa devices are recording our every word or do you think that,
there’s at least some probability that that we have a more utopian future.
[49:31] Yeah well we are being surveilled all the time and Alexa devices are recording or every word they’re just I guess deleting them after 10 seconds.
But you know I think that at the end of the day in a capitalist Society.
The tech Giant’s right now are good example that they will push the limit to about the edge but they won’t go over it because they know there’s just going to be a backlash among the customers like.
Ultimately you know if your Amazon’s number one leadership Principle as you guys know customer Obsession right.
And you know you’re obviously obsessed with giving customers a good experience low prices wide selection and fast delivery,
and so like the data that Amazon collects is used in service of that I don’t think Jeff Bezos like sits on his iPad at the end of the night or is like you know there’s one remaining Kindle Fire and.
Decides to you know figure out which Amazon user he’s going to spy on.
Just for kicks in fact now he knows what it’s like to be spied on after his photos were stolen off of his phone,
or off of his his girlfriend’s phone in some way anyway look I think that like we that detect Giants need some form of data collection in order to exist every every company today,
really need some form of data collection to exist I mean I run a newsletter business and I have to collect emails you know that’s Pi I so.
[50:58] So it’s important part of the way our economy works today on the other hand like I don’t I don’t expect.
You know this widespread nefarious use of data to become.
And you know we’re definitely going to need a strong press to watch some of the ways things go wrong like I do have some concerns about.
The way that Amazon handles the data that comes off of their ring doorbells for instance but ultimately like.
These companies are here to serve consumers and,
you know if consumers know that you know there are echoes show is I don’t know if that’s still what it’s called her,
but whatever the Echo Show is spying on them in their bedroom and like Amazon employees are you know watching me sleep,
they’re going to go to Google so ultimately I think that’s the thing that keeps this baby more than anything else.
[51:53] You know coincidentally Amazon had a big product announcement today they launched a bunch of their newest Echo products and they an ring products and they had a lot of new software features and a lot of the software features.
We’re mostly around cleaning up a lot of that privacy stuff so for example.
You The Echoes all have better more powerful chips in them now so they can do more of the speech recognition.
In the devices so they send less actual data over the network than they used to,
but they built in these cool new features like you can say Alexa forget everything I’ve ever said or forget everything I said in the last hour or things like that that.
You know they didn’t used to have and they done full in and encryption on drink so I will give them credit for,
first starting to address some of those and it occurred to me as you were you were talking you know there are a couple of these big tech companies that have hired science fiction writer so I think like.
Ray Kurzweil famously works for Google and I met this guy Peter Schwartz who’s,
I wasn’t familiar with them but he’s a cool futurist that like.
[53:06] Invented a lot of the experiences in Minority Report like including the you know though II scanning in the Gap store and all that stuff and he’s a full-time futurist for Salesforce.
So I think it is your hypothesis may already be true I think they may already be starting to sort of a dad that thought process to there.
Corporate knowledge base.
[53:28] Yeah that’s great I applaud anyone that does that and it’s a two-parter right the first thing that is you hire the science fiction writers are the dark thinkers and the second part is you listen to them.
And so we just got to make sure that these companies if they telling us they’re hiring science fiction writers at their coming through on the second half of that equation as well.
[53:47] Hundred percent and I’m sure we’ll see some where they only do the first half.
[53:52] It’s a nice press release.
[53:53] Yeah and that’s a great point and that’s actually going to be a great place to leave it because it’s happen again we’ve used up all our allotted time,
but Alex we certainly enjoyed chatting with you if listeners have any further questions or comments about the show
we sure would appreciate a comment on our Facebook page or hit us up on Twitter and as always if you enjoyed this episode we’d love it if you jump on iTunes and finally give us that five star review.
[54:20] Alex thanks for joining us if folks want to follow you online what we’re what are your best places that you publish content.
[54:28] Yeah thanks so much this was a great conversation really appreciate the opportunity to be on I would say I would recommend folks go to the big technology podcast it’s big technology podcast you can get it in any
podcast app and I have a different interview up there every week everyone from
you know VC’s to timbre the VC who that sorry the Amazon VP left over its treatment of whistleblowers journalists,
and Founders so the whole crew comes on it’s been super fun so far as we talked about in the beginning so I’d love to see you there and if you’re interested in the book
it’s always day one and you can find it at any Bookseller you could just type it into Google or Bing if that’s what you’re interested or DuckDuckGo if you don’t like being tracked as we talked about in this last segment and you’ll be able to find it and,
yeah I’d love to hear your thoughts.
[55:22] That’s terrific will definitely put a link to the podcast in the show notes and until next time happy commercing.
EP236 - DNVBs w/ Nate Poulin
Episode 236 is an interview with Nate Poulin aka @digitallynativ about Digitally Native Verticle Brands (DNVBs)..
Nate Poulin (@digitalnativ) cut his teeth with DNVBs including Bonobos and Outdoor Voices and is currently the Chief Merchant for Monica + Andy. In this episode, we discuss a range of topics around the current state and future of digitally native brands.
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 236 of the Jason & Scot show was recorded live on Monday, September 14th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 2 36 being recorded on Monday September 14th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason and Scot show listeners
today on the show we are going to do a deep dive into one of our favorite topics in retail and e-commerce Brands going direct to help us navigate through this we have a really exciting guest on the show he goes by digitally native without Annie and we’re going to have to get the story on that so digitally Naik negative
on Twitter and then outside of the twittersphere he goes by Nate Poulin Nate is based out of Austin and he cut his digitally native vertical brand T that Brands such as bonobos outdoor voices and more he’s also the founder of digitally native Consulting Nate welcome to the show.
[1:21] Hey guys thanks for having me excited.
[1:23] We are excited to chat with you Nate and I know you’ve listened to the show we always like to start things off by kind of getting a little bit of background about how you came to the industry so can you tell us how you found yourself in the,
the digitally native Commerce base.
[1:40] Totally so I spent the last 15 years and retailgeek,
I started the early part of my career working for startups and this really sort of predated the proper e-commerce era.
And worked my way through retailers work for FAO Schwarz and Toys R Us and ultimately landed,
about 11 years ago in the brand sphere specifically in apparel so I work for Michael Kors for four years through their IPO and then I was sort of in my late 20s in New York City.
[2:10] Andy and the team had bonobos had been at it since 2007 this was 2009 and I decided to join bonobos
and really take a stab at this sort of whole building brands on the internet phase I felt like that was a future that and I still feel that way,
and so I spent four years of but no of us and also two years at outdoor voices and then most recently a stint at the black tux,
and then between some of those students also consulted with a number of direct consumer and digitally native Brands and really.
Through that whole journey just got exposed to the business the customer centricity,
and you know the opportunity that exists and really quite frankly have just kind of nerd it out,
um on the business and it’s something that I’m passionate about both in terms of what you know my day-to-day is,
but also you know when I click When I close the books each day I’m still thinking about it so crunching on these issues and still very much sort of part of the community so it’s been a big part of the last I would say decade of my life.
[3:13] That’s awesome we’re eager to dive into a bunch of those topics but I have to tell you I feel like we’ve already been duped I feel like you you started your retail career pre-digital and yet you call yourself digitally native.
[3:26] I know it’s it’s a little bit of a misnomer,
and that’s kind of my secret weapon I think that I actually have a pretty rich background in wholesale and Retail and so you know a lot of what I serve published from a Content perspective also folds in some of that perspective but.
You know my true love is is e-commerce and direct-to-consumer for sure.
[3:48] I’m excited to learn you get your start and toys and I’ll try not to derail the whole show talking about Star Wars choices Jason knows that I like to do.
[3:56] Well it’s so funny that you mentioned that Jason because I when I first went to New York City I grew up in Maine originally and I made a trip to New York City and one of the stops this was like sort of a 8th grade trip one of the stops was FAO Schwarz,
and they were they had built an entire floor of Star Wars toys and Lego because it was I think it was around the time of yes was episode 4.
And it was just the coolest thing that I’ve ever seen in my entire life and so I ended up working at FAO because of was my dream job I was like I need to come back here,
you know 10 years later 15 years later and work for this brand and his business so I have I do have sort of a Star Wars origin story there.
[4:37] Very cool awesome and me are you a Star Wars fan or you just just like the display.
[4:42] You know what I’m a fan of the original series.
I sort of to be honest I stopped I think on episode 5 I haven’t seen the most recent ones but I do have a 5 and a half year old son,
and so I feel like we’re going to go back through the entire involve the entire film series and I’m excited about that for him.
[5:03] Awesome yeah we can talk about the right order later in the show Jason just went through this so we have a lot of experience I’ve been Uncle Scott Uncle Star Wars Scott has been trying to help with this whole thing.
[5:16] Yes God has been a big help the only problem is my son now likes got way better than me.
[5:20] All right let’s jump into Brands so.
One of the things I wanted to talk about at the top is Jason and I have present about these topics all the time and we’ve kind of because we do it
we present together most times we kind of use a common vocabulary
that I noticed you and web have kind of a different vocabulary so we were talking about it on Twitter and I honestly forget the Genesis of this but you started this really cool you just kind of started saying well let’s build a little taxonomy so you started this taxonomy project which I have found super helpful and then we a couple other people glommed on and had some interesting insights
talk us through that and what kind of inspired.
[6:06] Yeah I mean I’ve actually sort of been in the on the back burner trying to sort of like,
organizing notes and really create some sort of knowledge base around direct-to-consumer and it really started with the desire of writing a book but then it quickly dismissed that sort of concept just because,
this industry is moving so fast that a book quickly becomes at least in my opinion becomes sort of like an artifact and not a resource.
And so I was looking for ways to kind of like.
[6:35] Build out this you know whatever note or whatnot and I stumbled upon our own research which I think is actually another one of those Twitter Darlings but it’s really just sort of a networks note-taking tool and I started to build out you know kind of my own knowledge base,
and when I pick up on some of these types of conversations whether it be Twitter or sort of back channels or what not.
It’s it’s sort of like drives me to like get to the bottom of how would we actually organize this I built another,
similar sort of exercise but crowdsourced like a library of you know but what would what would your UTC library and look like.
And so each time I go through this I’m gathering information from people who are really much smarter than I am.
And trying to like harmonize it into a way that’s actually meaningful and useful.
Since I’ve been doing this now for about 90 days and you know I I sort of think about the future and how long and the runway for this industry and I just think,
creating that value like incrementally every single day at some point will either be very valuable to me or valuable in general and so that’s sort of the Genesis of that that idea and I’ve also sort of like subscribe.
[7:46] The concept of digitally guard digital gardening and you know building a second brain and so I sort of dubbed this thing that I’m creating d2c brain,
and it’s you know like I said it’s pretty robust it’s wonderful for me because I you know I’m immersed in this every single day and the way in which we can sort of like harmonize this information is nonlinear it’s networked and so I can add
little bits to little parts of this broader network of information each day,
and sort of come back to it and reference it so that’s sort of the Genesis of the project and I think the convention I’m just going to continue to do it and hopefully in the case,
taxonomy of Brands they had some degree of value to someone out there who’s interested in this kind of stuff outside of just myself which I do find it valuable.
[8:34] Yeah I thought it would be helpful to talk through it and I don’t know who wants a tech I’m happy to take a shot at it or Jason if you want to ornate if you want to so well,
anyone want to take a shot at just kind of describing this taxonomy.
[8:50] I don’t have it up on my screen so if you guys have reference to it then I’m happy to let you guys drive.
[8:55] Yeah just you want to or.
[8:58] Sure I’ve memorized it so I’m happy.
[9:01] All right Jason you run out of it.
[9:02] Yeah so the.
It’s a taxonomy or a sort of a hierarchy in the the notion is that the highest level.
Um in the taxonomy is the primary distribution method so do you own your own distribution do you rely on third parties to distribute your product.
Um underneath the own distribution there’s a couple of different models there’s d2c brand so Marky example of that would be like Casper.
There’s private label brands that would be like while bupropion from Walgreens,
and there’s owned Brands which would be you know an exclusive brand that a retailer owns that’s differentiated and not commodity like the private label so that would be like,
cat and Jack are all as well home or something like that.
So you’ve got you own the distribution you’re either a deed to see a private label or a known brand and then under D to see there would be a couple of other potential attributes.
You could be a vertically integrated brand which I think gets you all the way too.
[10:19] You know you you menu design and manufacture your own product that you sell through your own distribution,
but this first version of vertical brand is I’ll call it old school vertical brand so it would be like the gaps and Abercrombie and Fitch has and sort of,
[10:39] Vertical fully integrated Brands the next category would be the indeed unofficial digital native vertical Brands so I,
I think when you wrote the taxonomy use glossy a as a an example I feel like you have to use bonobos since it’s Andy.
The the next category was linear brands,
and this was sort of audience first.
Based Commerce and so I feel like I’ll be totally candid I didn’t completely get this one I think this was a.
An argument from will he was using Barstool Sports as an example in.
[11:27] Yeah I think this one was like sort of the intersection between between media and commerce and that sort of.
Media brands with a Holter ultimately going to become e-commerce Brands and e-commerce Brands would become media Brands over the course of time and so that.
The future sort of looks like that Barstool model where they build like a very light.
Passionate and loyal audience and then they just speak for whatever different ways they can monetize that audience audience over time and one of the certainly one of those ways is to sell them physical products.
[12:00] Cool that toy makes sense and it’s better when you explained it right and then a specific subset of the linear brand would be the celebrity brand and like.
[12:09] Kylie Jenner Cosmetics would come to mind is that example so then if you jump over to the third party distribution you have,
big first big category is your sort of Legacy brand that’s the you know traditional brand that’s manufacturing products that they sell through wholesale that would be like Ralph Lauren,
and you’ve got kind of two distinct versions of that you’ve got a brand that was born wholesale and still is wholesale like,
Coca-Cola for example and then you have brands that were born wholesale and have made a pretty extreme pivot.
2D to see and I feel like the poster child there is Nike but there are others the Under Armour is like significantly moved to D to C VF Brands which is like North Face and vans has moved significantly to do the C so that’s a,
a subset of the.
[13:04] Of the sort of hybrid Legacy Brands and then you have these Marketplace native Brands so these are guys that were,
born assuming they would use a third-party distribution but the primary third-party distribution they had in mind was a Marketplace like Amazon or Ali Baba,
a great example there is an anchor the cables and charging accessory company that’s done so well on Amazon and.
So well in terms of my personal wallet share for some reason I have some weird fetish with anchor cables.
[13:40] And so if I’m remembering right because obviously I don’t have this in front of me as a reference that I think those those that’s the main taxonomy.
[13:51] Yeah so I think they like the impetus behind this front of taxonomy it really explores the tension between distribution obviously like owned and third-party and the relationship with the customer,
so if we think about in the purest sense you’ve got a digitally native vertical brand that’s both producing you know all the way Upstream from a supply chain perspective.
All and then delivering you know through their own Channel all the way down stream to the consumer and in my opinion that’s sort of like that that happiest path for,
you know bro long-term gross margin creation.
Because you own all those sort of like elements and you control the elements of production and distribution and you also own the first party data with your customer.
So I think I think of like the industry as swinging towards this model and the what’s hitting us and then what sort of like.
[14:44] Taking oxygen out of the bubble where out of the room is you know all of the like all of the costs of doing business with respect to e-commerce.
Instead you’ve got you know customer acquisition cost which you guys have talked at length about you’ve got variable cost of fulfillment you’ve got subscription cost of Technology.
And you’ve got this sort of like horde of data that you have to sift through to be able to make good decisions where as you know the Legacy brand model was.
Produced an overseas move it through a facility out two points of distribution and sell it to the customer and we don’t we’re agnostic to who that customer is that we just want them to walk by our store and come in and purchase something.
And so that’s just you know that’s sort of the distance that the industry is traveled.
And I think exploring each one of those sort of like elements underneath the distribution channels.
[15:35] Starts to give us like a more robust you of like how brands are competing and what the options are that exists because these brands are rational and they’re going to find that oxygen they’re going to find the happy path relative to their business.
And so breaking these big pieces down into this this sort of like component parts is so valuable because I think a lot of the.
Serve a lot of the tension that’s drawn in a lot of maybe The Angst around you to see or the forecasting around me to see,
is the conversation is really guided as though these all of these things are one big,
moving object but the reality is there’s a tremendous amount of nuance in each one of these models in each one of these businesses and so to understand them we actually have to get to that level of detail so at least that for me that’s part of that what we’re trying to connect,
tease out when we’re talking about this taxonomy and talking about different ways that Brands can grow.
[16:28] Yeah and it’s helpful to have a common vocabulary because Jason I use own brand a lot and then people like you mean private label and we’re like no it’s a little different in that you know this isn’t the Old Roy dog food we’re talking about here these are
these are Brands and to themselves like like Echo is a Kendall or like owned Brands right so
those are not the same thing as I’m going to knock off some dog food or or you know a can of beans or something like that.
[16:55] Side note for our most advanced Wesner listeners scotches dropped and awesome Legacy Walmart reference right there.
That was Sam Walton’s dog.
[17:04] Yeah yeah well Roy cool and then Chase anything else on the taxonomy.
[17:13] No I again I think it’s super useful to think about the structure and it got kind of crowdsourced and there were some good like dialogue about like you know what.
What’s the order of Precedence like what what is you know what are more important and should be higher on the on the hierarchy and I thought like that was it was a helpful exercise for my own thinking
one thing that did occur to me and I don’t feel like it should change the taxonomy in any way but Justin.
To me an interesting observation this is mostly focused on.
The primary business model that the these various entities would use to make money.
But the I feel like it is true that there are a bunch of.
Um primarily third party distribution companies I’ll pick Legacy brands for a second that are.
Doing d2c right now but probably not for the purpose of.
[18:16] Take governing significant share or making money they’re probably doing it for a test and learn customer intimacy data collection project so I like for example,
PepsiCo has launched a few direct-to-consumer sites for like snacks.com and Shop pantry.com.
Like I don’t think they’ll ever have meaningful share of the individual bags of Frito-Lay chips on that site they probably launched it as some kind of learning environment and conversely.
I would argue Casper has dabbled in some.
Retail distribution deals but usually not with the intent of wholesaling their product or having a traditional wholesale relationship but you know more as a marketing vehicle for their D to C so it is.
[19:04] Yeah I would totally agree with that and I think when you had reference glossy a versus bonobos that’s sort of where my mind went was even in the early days of bonobos we went offline you know I think in
maybe 2009 so it’s pretty early in the whole d2c Evolution and we went offline with Nordstrom as a partner and that was a really fruitful relationship
but I always in terms of classification of these Brands and I totally agree it’s like really a spectrum that moves but I typically Define these Brands by their dominant sales Channel,
so they’re dominant sales channel is pure play direct consumer even if they have a wholesale distribution business or you know they’re selling through Affiliates or whatever they’re sort of secondary tertiary model is,
I think that that tells us something about the business but doesn’t necessarily mean we have to shift their classification because otherwise there would be a gazillion of these right.
[20:04] Yeah and I like the path to the consumer as the defining Factor because it’s kind of the most interesting part of the discussion right so where you Source your stuff is as you know,
it’s it’s a factor but it’s not as important in my mind as your path of the customer.
[20:22] Totally I totally agree I mean I think it’s that conversation that like level of Sir conversation meeting with the customer.
The way that you service the demand and what the way you service the customers needs is it is it such a big differentiator and I think in doing that well that the best of the DMV BRD to see brands,
have carved out sort of better.
You know path for growth than what we’ve seen traditionally because in doing that and doing that well you get to uphold all of the values of your brand and all the tents of your brand,
as soon as you turn even if you’re a personal you have a personal brand if you start to turn over elements of your personal brand to somebody else,
you’re immediately losing control of that element you know and you can trust someone to do something or or execute something to the highest degree but it’s never really going to quite meet your own standards and I think a lot of ways,
and so and I won’t feel as authentic and that is coming from a first party,
and so I think that’s also something like hitting on that point of the relationship and path to the customer that’s just become so important in this business.
[21:29] Yeah and then as a software guy I noticed I wasn’t involved in this one but you put together a little bit of a tech stack and you called it DT C 3.0 Tech stack so you know what,
what are some of the elements so here we are it’s 2020 and let’s pretend I guess you are starting your own dnvbs
modern marketers going to need in that text act that you think about.
[21:57] Totally it’s become sort of acronym soup.
Still I’m going to try to not step on that too many times but you know really when building a brand you know whether it’s from 0 to 10 or 10 to 20 or Beyond,
I think it’s helpful to like identify and organize around the heart of your business so depending on how you’re going to compete,
or go to market you know you’re going to want to
set the roots of your text a core the core of your Tech stock around a specific Solution that’s going to be you know able to scale for years and years and it’s going to help you out compete
you know the Challengers that are out there and so whether that’s you know typically for young brand that’s either,
an Erp system obviously there’s a platform conversation around Shopify or Bigcommerce or if you’re going to build your own there’s a CRM customer resource.
Management system and there’s these pieces can be oriented in a number of different ways and also have you know
other Tech opportunities to sort of like plug into and so there’s just this almost an unlimited number of configurations that a brand can elect.
In 2020 and I think it’s interesting to dig into these different nuances and it’s interesting to understand.
[23:22] Um how about brand selects their Tech stack says a lot about how they intend on competing and creating value and orienting their value chain,
and so there’s no there’s no right answer and I think it’s another one of those cases that’s just a very nuanced discussion but one that’s changing you know and evolving quickly.
[23:41] Yeah didn’t know bonobos seamlessly weren’t a Magento and I fell over on them is it and I remember that right.
[23:47] That is exactly right so the year before I started I think it was 2010 the bonobos crashed on Black Friday and Cyber Monday and I think that’s a great example,
of you know how far we’ve come
right like bonobos had two distinct offices so have one office in New York and one office in Palo Alto so there’s an entire tech office that was building
proprietary front end technology for bonobos and some other data science projects and then you get an entire organization built around building a retail brand.
And you know those were that’s how we sort of like built a Brandon’s in 2007 through 13 and ultimately.
Bonobos even their solution Beyond Magento was to build on a spree Commerce.
And so in Shopify existed during that timeframe but there was a sort of notion that if you wanted to build an Enterprise scale you know massive brand that ultimately Shopify wasn’t going to be able to scale with those brands,
and of course now we look at that and say that was terrible decision and Consul these Brands a lot of money and a lot of time and resources but that’s,
that’s the distance that we traveled in terms of Technology one thing I will say you know now that we’ve outsourced all of this technology and where there’s all these plug-and-play Solutions but.
[25:07] You’re still spending a lot on technology is their options are great but I think that in the industry there’s they’re sort of like.
We need the fog of War a sort of like meeting all of the best pieces to wear into Tech stack but ultimately Brands would probably be better served you know just focusing again on what they need to do to compete uniquely in the world.
[25:28] Yeah so I want to jump in on a couple questions here but before I do one of the things you call that in the text a queue called a PLM and Scott and I were debating a little bit what you meant by that.
[25:43] For at least in my terms that’s product life cycle management.
[25:47] Okay we were both wrong for the record.
[25:49] Everything that had brand develops and creates a designs he sort of would go into the PLM system in that helps link
your vendors to your sort of like main staff here at Erp and one inspect the conduit of information and capturing all of that creativity and putting it into a system.
I’m curious to know what you guys thought of that.
[26:12] Well Scott assumed you made a typo and meant product information management him because you you have an icon for each thing and it was like three
three t-shirts for the the product life cycle cycle management and I was guessing potentially you meant product listing management so I could pin that could send the cake content to multiple.
Destinations or marketplaces.
[26:36] No that was the sort of like Upstream orientation there and then I did have the product information management system which I didn’t originally but someone brought it up to me so glad that was added for sure.
It’s funny because you at you you kind of highlighted that hey even though there are a lot of.
More accessible plug-and-play pools in all of these categories today you you know you you go out and acquire and Implement a full stack of these things and,
there’s a lot of complication there frankly are a lot of potential data silos and integration projects and,
and pretty quickly you you rack up pretty high cost of ownership and Technical debt the the,
the in the Enterprise world the debate we used to always have was Best in Class versus pre-integrated sweet right and it feels like that’s still playing out for these relatively young companies.
I mean do you go out and buy the trendy version of each one of these points Solutions and then you have to
hire a technical team to integrate all of them or can you live with the OMS that Shopify gives you or the payment that Shopify gives you or,
you know you know there are some other like pretty heavily integrated Stacks like netsuite or something like that.
[28:00] Totally I think it’s like I mentioned it it’s sort of is
it’s a decision that’s based on where you where you’re at and where you want to go in terms of the scale of the business but I have been seeing more and more that you know Brands can travel a lot further than they used to on a much lighter
Tech stack and a lot of these other elements don’t necessarily need to be integrated in so much further down the line but again it’s it’s such a difficult,
needle to thread because.
Like we just spent a good amount of time talking about how important the path to the customer is and owning that first party data and being able to synthesize it and owning it in really capturing Rich data throughout
you’re the tech stack exist to sort of organize and be a tool to harmonize all of that data and actually operationalize it and you know.
When you start to say well we’re not going to do this or not going to do that it’s a conscious decision that you’re not going to have that functionality and someone,
another brand or another business may have that may have better visibility into what is happening in their business and that’s just you know challenge that brand brands have to live with,
Doesn’t matter who you are you’re operating on a salary cap not a salary cap but like a spend cap a budget and you know you have to make those trade-offs and decisions because money runs out before opportunity does.
[29:21] The others are probably a life cycle here where you kind of have you know you’re born and you’re kind of in that
yeah that infant kind under 5 million run rate and then you know there’s a certain Tech stack and then you get to 10 to 20 and then you have to add some other stuff and then you know hundred 200 400 there’s there’s a lot more.
Part 2 the stack you have to kind of throw in there.
[29:43] Yeah there’s a I think there’s a couple of like critical elements before brand start to like it too heavy weight with technology and what one of those being foundations of data so structured data and making sure you know you have an understanding of how,
your data is coming together and then two is really a lot of these companies are so figuring out how they’re going to build their business and figuring out what channels to play in how they’re you know what products to build etcetera
and you know as that Journey from adolescence and to score like teenager and adult stage happens
you really have to nail down the process of how you operate your business end-to-end and I think.
Too often Brands don’t have those two boxes check before they you know start to like invest in some of this heavier weight technology and I think you guys are probably seen it if you try to stand some of those things up on really shoddy data is just,
it’s not a successful cocktail that you’re building so it’s definitely one where.
The onus should really be on strong foundations before Brands gets you over their heads I would say.
[30:52] Yeah and let me ask the converse so you’ve been at tons of these Brands and and advised a bunch what what’s what do people get wrong is it that
they don’t get attribution they’re not,
they don’t have Rich enough product data is it customer data is it mobile was wrong where do you where do you find people kind of miss the mark as they’re building these brands.
[31:15] I think the biggest you know evolution in the industry and the biggest opportunity has been linking
customer like actual property like order level Transaction what are we actually selling and who are we selling it to you it sounds really simple but
in a lot of ways you know at some of these Brands practice has been has been more Silo than it needs to so a lot of what I’ve sort of like worked on is how do we bridge the gap between marketing creative,
merchandising supply chain operations like how do we bring that group together operate in a way that you know.
Doesn’t levies that this data sort of like operate in silos or accumulate in silos we need to be able to like.
Build the view of the entire customer journey and then and the product that supports it so I think that’s sort of been the biggest you know
opportunity for direct to Consumer Brands is really tightening that link between marketing and operations /
[32:18] Product and I drop on like back in the Michael Kors days when you were in a legacy brand the
to Mark the marketing team in the merchandising team we’re on different floors of the building and you know rarely interacted at sort of anything below a leadership level and so it’s
really that’s a fundamental swing that we’ve seen in the retail business is that you bring those Bridging the Gap between those two functions.
[32:49] That that totally makes sense I wanted to Pivot off of the tech stack a little bit right.
Obviously you’re a good advocate for for sort of digitally native Brands and you’ve worked for a number of them it feels like the,
the public narrative on them has shifted a lot lately like it used to be like oh they’re the future they’re the up-and-comers like this is you know the next wave of everything and more recently if you know you’re starting to hear like.
Yeah you know maybe that trend has kind of petered out like maybe it’s run its course and so I’m I I don’t know like I have on the mixed feelings but like where do you stand do you feel like.
Dnvbs is mostly played out and you know just wasn’t able to achieve scale and and you know was interesting but but not a game-changer or is it still early Innings and there’s a,
a significant chance for dnvbs to change the world.
[33:52] I think we’re still very much in the early innings,
I think the like I mentioned before I think brands are seeking gross margin and seeking oxygen to continue to grow,
and I think there’s from a pure play perspective it’s challenging it’s a challenging environment for digitally native Brands but I do think that,
the shift in consumer Behavior towards e-commerce is is loosening some of that and creating some you know competitive advantages for brands that are that are really communicating digitally as their main platform with customers,
so I think you know and then you also have technology like Shopify and some other elements that are enabling these businesses to start up with a lot less capital and really like reach a certain level of success,
taking less investment so I think we’re still in the early Innings and I also think that there’s going to be continued innovation in the way in which you know Brands reach customers like right now.
We’ve got a couple of very congested channels those being Facebook Instagram.
In terms of like creating that spark and that you know interest in the awareness of a brand and discovery of a product
and I do foresee there’s just by force of like the size of the digital prize I think some of those things are going to become unstuck for a direct to Consumer Brands and then I also think that you know.
[35:20] Branding is going to evolve or is evolving creative is evolving,
and product will continue to elevate and iterate in physical product I mean and innovate,
and I think if we can bring those elements together dnvbs d-des he’s going to have a really great future
um in what I love about it is you know everyone’s trying to move to this mom like not everyone but the large share of brands are at least interested or testing like we talked about earlier
and so there’s there’s definitely smoke there we just have to figure out the right formula bring it together and bring it together in a way that.
Is efficient and allows these Branch to thrive and continue to grow profitably and reach a certain scale.
[36:04] Hmm yeah I could totally see that do you happen to be familiar there’s a construct that Gardner invented called the Gartner hype cycle.
[36:12] I’m not familiar.
[36:13] Yeah so it’s really cool and it’s shocking how many things tend to fit this curve but essentially,
what what Gardner hypothesized by mainly around technology Innovations a long time ago was new stuff is always getting invented.
And when it’s new it almost always gets overhyped and the like the utility of it.
That is Promised wildly exceeds what it could actually deliver.
And so gardeners premise was eventually every new trend or technology reaches what they call.
Peak of inflated expectations so they draw this curve and it has this initial like huge Spike and at the top of it you’re at the peak of inflated expectations.
Part of the reason I like the Gartner hype cycle is because of these funny names so then what happens is.
[37:04] The technology you know it becomes apparent the technology isn’t going to deliver.
[37:09] The those over those inflated expectations and so the technology starts to drop down the slope and they call this downslope the trough of disillusionment.
[37:21] And so you know sent you know so pick anything artificial intelligence right like I would argue it’s probably right at the peak of inflated expectations right now and.
Two years from like there was a time when QR codes were super overhyped and everyone’s talking about them and like they’re going to cure cancer,
so then QR codes fall into the trough of disillusionment hey they didn’t cure cancer people were totally wrong they were overhyped this is lame,
but eventually these products mature and they climb out of the trough of disillusionment into this area that.
Gardner and calls the slope of Enlightenment where they eventually achieve this plateau of productivity where they kind of.
Deliver commensurate value for what they are and so Gardner pick all these different categories and they map all the trends in this category on the on these hype Cycles,
um and when you see some of them like it totally makes sense like you know QR codes got wildly overhype they dropped in the trough of disillusionment guess what’s happening right now
like QR codes are you know reasonably productive for a variety of use cases,
and that was maybe way too much work to explain it but to me dnvbs like are perfectly following the hype cycle as well like.
[38:41] There was.
Peak when they were over-promising and they may be starting to drop into a trough of disillusionment but that by no means means that there’s not a plateau of productivity in their future.
[38:53] Yeah I mean I think that’s totally right I think when we look back at some of the brands that maybe have driven some of the like the collective disillusionment and dnvbs one,
we’re judging a brand that’s still very young right and we look at a Michael Kors I’ll drop him now and again you know they we went through the IPO and 2011.
[39:15] Of course was bankrupt you know in the in the 80s and had this tremendous run of success.
And there’s other stories that are out there right as like businesses and types of business models that have gone through you know,
gross and contraction etcetera and so we’re one we’re judging the business the opportunity that exists in the NAD,
in a very early inning of its development not the terminal point and to you know there’s just a tremendous amount of learning and being on the Leading Edge that has happened over the last,
years or so with respect to you how to you know how to do this you know how to build the railroads and infrastructure and all this kind of stuff to access customers to be able to.
Grow and scale and I think particularly on that end.
On the side of Technology on the side of supply chain on the side of infrastructure we’re still in it on the side of Technology we’re still very very young and those those types of,
you know Innovation with that in terms of,
picks and shovels Etc is really going to drive electric Menace amount of growth and opportunity for digitally native Brands and on a much more efficient scale so I think that’s absolutely right.
[40:31] Yeah this is a good time to make a big announcement Jason because he’s a big believer in in where we are on the hype cycle he is going to release a mattress and it’s going to be the retail retailgeek dnvbs because we don’t have enough dnvbs companies right Jason.
[40:49] Absolutely and what’s going to be unique about this mattress is actually going to fit in a box and I can ship it right to your house.
[40:55] But what if you don’t like it can you return it.
[40:57] You totally can there’s a no-questions-asked 30-second guarantee money-back guarantee.
[41:03] Awesome you’re innovating again.
The I work with a lot of startups and one of the things that comes up a lot is what’s the address bull market of all these Brands going Direct,
and I went through this with cello visor where you know the early days people would say well what’s the addressable Market I was like
retail and then would laugh at me the so then I had to kind of like show well here’s this
magazine called internet retailer and they have the IR 500 then they did the hire 1,000 and there’s a thousand companies and here’s their sales and and you know then we can extrapolate from there this many number of companies Etc
have you ever thought like what is the addressable Market of all these these brands that are coming up.
[41:49] Yeah I mean I think.
I think emarketer put out a survey or study this year that was suggested that direct to Consumer Brands we’re going to do about 18 billion in Revenue now this was released early in the year so my assumption is that that’s going to get
except Blown Away
in terms of the the expectations for the industry this year and then we think about as you mentioned total retail for exclude automotive and we exclude restaurants that’s about 3.8 billion,
and so direct-to-consumer right now as a penetration to retail is less than half a percent percentage point and.
[42:23] Three point eight trillion.
[42:25] Three point eight trillion science thank you for crafting and so when I think about the opportunity.
Over the next ten years I don’t think it’s unreasonable to expect that we get to 10% direct-to-consumer.
And you know I 10% obviously you’re doing for you know 400 billion dollars in Revenue
and I think you know the path to get there is everything that I just mentioned around unlocking the efficiencies at scale,
and I think the only guard rail that I would meaningfully put against the ultimate growth of direct consumer as share of Market is just the the fundamental economics of selling e-commerce when you
include cost of goods sold and you include all of the variable costs of doing business and fulfilling each order you know it gets you squeeze out a lot of the prophet and opportunity,
and so I have started this thesis around you know.
Average order value and how that impacts the viability of pure play e-commerce obviously the higher you go the respect to average order value the more margin you’re creating even if the rate is lower,
and so I think there’s going to be a tension or a ceiling with low aov products
metal that will continue to be dominated by that the Amazons and the Walmarts of the world that really have already built a lot of this efficiency that I’m that I’m talking about that’s really inaccessible for,
each individual brand as we think about that brand growing in some business.
[43:52] Okay yep so.
So how about this thought experiment so so if we were on a whiteboard I draw a big circle that that would be retail and that’s three point eight trillion and then I would draw a circle inside of there and that’s that’s
DTC today and I put it inside because
everything sold at retail is effectively what we’re calling a brand and I should have said this at the top of show we we Loosely used the word brand to being you know a manufacturer of goods sometimes people get confused like in our Twitter conversation someone’s like well where does Macy’s fit in this and we’re like well that’s that’s a retailer not a Brandon
they didn’t kind of get the manufacturer versus retailer kind of differential there maybe hopefully people were falling along with that,
do you agree with that and in that bubble inside is going to get bigger and hit some terminal velocity to your point is that kind of how you think about it.
[44:42] Yeah absolutely and that’s totally right I think there’s it’s easy to get tripped up on that terminology but I think that divided between retailer and marketplaces is accurate,
and I just think you know at some point when you think about the.
Most efficient Avenue for growth for some Brands it’s going to be scaling offline versus continuing to scale online,
and that we’ve already seen that right we’ve seen it with Harry’s going to Target and many many others bonobos going to Nordstrom back in the day and so we’ll continue to see that you know just as
oxygen air gets a little bit thin as you continue to grow
and you find a password that you can find more oxygen and more scale more distribution brands will continue to do that and the question becomes one do we do we still call them direct to Consumer as we talked about but that’s where I see that the ceiling and the cutoff taking place,
but I think if you’re if you’re selling over a certain price point let’s just call it $75,
from a Navy perspective I do think that there’s a lot of Runway
with pure play e-commerce and continuing to scale Brands and it’s good again I do believe just based on where the world is going and where Commerce is going I it should get easier rather than more difficult.
You know but that’s sort of where we’re at where I see things many out over time.
[46:06] That and that makes sense side note on the the emarketer stat you you quoted I’m sensitive to this because I’m way over published on the internet.
That that emarketer report on d2c will always stand out to me because there’s a paragraph in it about what a failure Peloton is.
[46:27] So to say that.
[46:32] That hasn’t aged particularly well,
but I’m curious though to talk about the the complete other end of the brand life cycle for a minute because it’s made the news a lot,
there are a bunch of brands that were story Brands you know had huge consumer adoption made made people a ton of money and in recent times.
Have like lost customer interest gone bankrupt and in most cases been acquired by Simon Malls and I’m curious if you’re following that Trend and if you think there’s.
You know anything interesting like do those brands have a second life with Simon or did Simon reconstitute them and spin them off or is that just you know where where you know former glorious Brands go to die.
[47:19] Totally I I’ve been really like sort of digging in on this particular topic because as you mentioned these are you know these are brands that I grew up with you know part of my sort of Journey and story so just I have like an affinity to these
these brands are very curious as to where their final destination will be and so,
you basically and I don’t have any you know knowledge other than what I’ve gathered so this is really more of my perspective on it as an outsider but.
You’ve got authentic Brands Group which has been working with Simon and most cases and sometimes they’ve been working independently,
to roll up these brands in these properties and as you mentioned a lot of them like Aeropostale Nautica Brooks Brothers Forever 21,
Sports Illustrated these are Brands like Brooks Brothers was founded in 1818,
Sports Illustrated has been around since 1954 so these are brands that are have a richness in terms of you know our culture American culture richness in terms of their history and of origin story,
and I think what we’ve seen in kind of ties in with the direct consumer and digitally native movement is that,
it takes a long time to build a meaningful brand you know it really is a Brick by Brick process of building that brand so you don’t knock all those bricks down in one day you sure the business can suffer and in some cases they can go through a bankruptcy and come out on the other side but.
My view of this is that you know Simon and authentic spring break group are buying these properties for.
[48:49] You know seems to some people as like okay you’re just throwing money away but I look at it as in many cases of tremendous value especially if we can gather enough of them you within sort of our brand portfolio.
And then you know you’ve got them all order the largest bottle opener in the country operating a hundred eight malls and 67 Outlets.
And so you’ve got a distribution Network for all that product and so we just kind of went through the taxonomy of Brands and talked about distribution own versus.
Third party and now this isn’t going to be own cuz obviously there’s you know there’s a there’s a relationship here and there’s rent to be paid Etc.
[49:24] And when you look at it at a very high level across those businesses their cert vertical izing and rolling up all of these Brands and what they’re seeking I think is.
You know if we can move some of these Brands through some of our channels we can collectively you know revive these brands,
we can invest in these Brands we can you know generate more revenue and margin off of these Brands and they’re you know they’re fine with I would say I would guess they’re fine with Transit like the,
actual volume that the breads are going to do lowering because you know again they have that sort of like networked relationship where they’re really focused around.
How do we make these the pieces fit and then you know they’re also acquiring if they bought Sports Illustrated as a mention and so they have the license there and they’ve got a media property to distribute some of these contact some of the content and some of these Brands so I think it’s you know.
There’s a lot of talk about malls and being over retailed and over you know square foot and the United States which I don’t disagree with but I do think you know.
Sometimes the opportunity swimming in the other direction is easier to get to then you know going the direct consumer path so certainly at the scale that they’re trying to do it it seems like there’s a big opportunity there.
[50:42] Yeah I hope that a number of these brands do earn a second another act I mean I think we’re all desperate for Toys R Us to come back.
[50:51] Seems super strong at the moment one fun irony though I feel like if Simon acquiring a bunch of these Brands is you know in all the antitrust talks and hearings one of the things that always comes up is
Amazon is the is playing the game and they’re the referee.
And I feel like it’s going to be funny to see the shocked look on a bunch of senators faces when they find out that the Brooks Brothers suit that they’re wearing is also the referee and playing the game at the mall.
[51:20] Absolutely it’s definitely going to be interesting to see how this sort of plays out and it’s you know as someone who’s just you know passionate.
Follower of the retail industry and someone who’s been in the industry for a while these are the types of things that are just so interesting to me because it’s really unique set of circumstances in one I don’t think we necessarily seen at this scale before and so,
how this plays out I actually think it’s going to have a meaningful you know impact on physical retail and Brands opening stores and malls.
So there’s quite a bit at stake for the American Consumer here and for these Brands and Retail in general.
[51:59] Yeah that that’s the kind of brings me to the end game so that you guys have a mall there Jason remember the name of it it’s almost like DTC mom.
[52:07] In Austin yeah.
[52:10] Remain yeah yeah and so we actually went to a show and walk through there and we did a whole episode just kind of walking through.
And you know that’s a really cool experience you get these really deep brand experiences but then online you know if I kind of think through the endgame here,
it’s a really weird customer experience to do we just go to social media and Google and we search for Brands and find them and then we have.
The Casper experience the bonobos experience or do you think at some point there’s an aggregation of these things online that you know makes them have a better,
Discovery mechanism unified check out and that kind of thing and you know we’re do you see that going down the road.
[52:55] Yeah I think it’s it’s a really good question when I spent a lot of time sort of trying to unpack.
I think the challenge with like a roll-up or a Marketplace of direct to Consumer Brands is we start to mute what makes them great,
in a lot of cases which is you know like the origin story,
the authentic Mission the purpose you know the energy and the creativity of the brand and the product
and so if you start to build a marketplace around that then inherently the marketplace becomes the conversation and not necessarily the uniqueness of the story of a specific brand and so what I would expect.
[53:34] Is an inventory on the flip side of that you’ve got,
certain the strength in numbers conversation in the economies of scale of actually rolling up some of these Brands if you actually did do that on the certainly on the back end of the operation.
And so I would expect we see sort of like,
smaller either holding companies or smaller conglomerations or smaller Acquisitions that you create these little PODS of direct to Consumer and digitally native brands that are anchored,
around an individual around a customer and they’re sort of a niche their preference that,
and I think we’re starting to see some of that already that were brands are starting to,
buddy up or even you know move together partner together cross-pollinate Etc,
around these particular Lifestyles or preferences I just don’t see like,
unless you know I actually was sort of trumpeting that Shopify should do something like this a while ago but that doesn’t seem to be their game I feel like they’re probably the one that could be that become the DTC Mall,
but they haven’t shown their cards yet with respect to any intent to do that.
[54:43] Yeah the Jason what do you think.
[54:46] So you’re saying this shop app is not a turnkey de Simo.
[54:51] No it is very good at telling me when my packages are going to arrive though so I appreciate that.
[54:56] Yeah and the answer this year by the way is your weight,
is when your bases are going to arrive because it covid ya ya know it I mean who knows how it’s all going to end the.
I don’t personally see that being the in-game for Shopify to become that that much I just think it’s Shopify is amazing at a bunch of things and.
I just think building D to see traffic is not something that they’ve.
Done it all or have any endemic advantage in doing and that’s what you would really like that that’s the hardest thing to get to build a deed to see Bray Mall it’s not the the sellers it’s the consumers.
[55:47] I don’t know.
[55:48] Yeah as a consumer I want a discovery vehicle because I didn’t know about that italic one until I just kind of saw people talking about it on Twitter.
And you know it.
It feels like there’s this huge opportunity to be the discovery engine for people interested in this category and right now people just kind of it’s just Word of Mouth you just really or you know a store or something you don’t it’s really hard to discover these things.
[56:13] Yeah there’s a been at there’s been a couple that have popped up I mean very shop I think is trying to make a move into this sort of space of being like a trusted
you know source for recommendations and then on the characterize it probably unfairly on the more like Consumer Reports
sign of things may be dating myself with that reference but you know you’ve got thing testing
which is really been done a great job of digging into DTC Brands and really doing like unboxing and product reviews and all that kind of stuff so those are those are some of the resources that we’re starting to see
I think it’s just you know it’s still,
the search for breaking up the duopoly or the you know the ownership that Facebook Instagram and Google have over attention and eyeballs you until we get you know meaningful crack in that armor
it’s still going to be really difficult to make.
Direct-to-consumer discoverable outside of those channels and that’s where I think physical retail and that’s where I think you know wholesale and all those other channels
come into play because
there’s still a large portion of individuals like lives you know assuming that we get back to some degree of normalcy where we’re doing things and you know in three dimensions we’re doing things in public we’re doing things socially and you know so I think,
a lot there’s a lot of tension with how we’re going to make direct consumer more discoverable and get in front of more people.
[57:40] Yeah I got to be honest I am sure something is going to come along to disrupt it like I think it’s less likely to look like a.
DDC version of a search engine or a catalog or you know sort of a traditional mall like I you know I don’t think it’s going to
I’m not a big fan of like the neighborhood Goods of the world and the,
those kind of d2c aggregators or Tim Armstrong’s DDX and all those sorts of things
I think it’s going to be something that’s more out-of-the-box right so if I had to bet I have no idea what it’ll be but if I had to BET right now I would be more likely to put money on something like.
And maybe it’s tick tock that you know probably not Oracle Tick-Tock but but some future iteration of tick-tock that that’s more likely to disrupt Amazon as the sort of.
D2c Discovery vehicle.
[58:34] I will hardly agree there I mean I think if you look at the legacy of QVC and HSN,
these are massive businesses that could drive tremendous amount of you know attention and revenue and and you know I think that’s absolutely a place that’s ripe it’s just yeah,
how do you get enough.
Energy and get enough movement behind it to get onto the platform I think that’s the hardest part is just you know acquiring and building enough of a network effect to make that valuable for consumers.
And for brands.
[59:08] Yeah it’s hard to say and even harder to do so I think you’re right but now I think that’s going to be a great place for us to leave it because it’s happen again we’ve used up all our allotted time
as always if you enjoyed this episode we sure would appreciate that five star review on Amazon.
[59:27] Nate thanks for joining us we really appreciate this is a great conversation we could have gone another hour but I know people need to go to sleep and stuff
if folks want to learn more about your thought leadership you put out there and what not work what are some of the best places for them to find you.
[59:43] Yeah really the only sort of social Channel I have is on Twitter you can follow me at at digitally native with no e on the end and thanks guys I appreciate this has been really fun.
[59:55] Yo I know he just run out of characters.
[59:58] No actually there is a digitally native with an E who has no followers and has never tweeted.
And so I’m patiently waiting for Twitter to clean that out and hopefully be able to take over that territory.
[1:00:13] Jack if you’re listening help us out here.
[1:00:16] You say that like there’s a chance he’s not listening.
[1:00:20] Well you know he’s busy could be in Africa are working on Square tonight or something.
[1:00:25] Yeah when I heard he has a couple gigs so good point really enjoyed the conversation thanks very much for the time Nate and until next time happy Commercing.
EP235 - Amazon Grocery, Walmart+, Holiday Preview
This episode covers the latest Amazon Grocery news, the launch of Walmart+, and our first look at holiday 2020.
Episode 235 of the Jason & Scot show was recorded live on Thursday, September 10th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 235 being recorded on Thursday September 10th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott sure listeners Jason you and I have been at this retail thing long enough to know that once Labor Day it,
it’s it means we focus all our attention and energy into holiday
so because of that we have we’re going to talk about that a little bit on this show but we also have a bunch of news to cover but before we dig into that let’s talk about some events we have coming up.
[1:05] Yeah Scott I feel like you and I are wildly Overexposed over the next two months.
[1:10] Well the Kardashians show was canceled so I think this is our opportunity to really push and fill that slot.
[1:16] Yeah if you like there’s a dearth of content out there and you and I are rising to the occasion.
[1:22] Absolutely we’re here for you America.
[1:24] So with that in mind I am doing six public events in the next two months so the first one is coming up next week is on Tuesday September 15th.
It’s Commerce alive which is a virtual conference that profiteering launched right after we all started getting.
Locked in for covid so this is the third installment and they’ve been super popular so I’m looking forward to.
To doing this one next week I’ll be moderating a panel on retail our search strategies and we’ll be talking about like what what things have worked and what things have changed as a result of the pandemic so that should be interesting and that’s free too,
anyone that wants to attend I’ll put a link in the show notes but then Thursday of next week September 17.
You and I are doing a show together that’s going to be a free LiveStream on LinkedIn that’s hosted by my employer publicist.
[2:22] Yeah do I have to know French for this one.
[2:24] You do not have to know French but you do have to know that you’ll likely have the potential to get me fired.
[2:31] Yeah I don’t know if that’s a plus or a minus for you but you know if you haven’t thought it through I’m probably living with you if I do get fired.
[2:40] If I wear a beret and talk about French fries is that is that enough to get you fired.
[2:45] Freedom fries yeah that would be really.
[2:47] I just see all bonjour a lot all right I’ll try not to do those things I’ll try not to be fired and I can’t have that pressure on me and I you’re a great,
podcast podcast co-host but not sure having you live here as a long-term solution.
[3:06] Yeah I agree with that and I also feel like wow a lot of things could go wrong exposing you to all my colleagues my work colleagues and customers the one thing that I’m pretty confident isn’t going to happen is when they fire me they’re not going to come looking for you to replace me.
So that that’s next Thursday that’s will put a link in there to you guys are all welcome to jump in on that and that’s going to be live streamed on LinkedIn,
and then the following week Wednesday September 23rd you and I are getting the band back together again we are,
doing a keynote together at digital day North America which is a the North American event that retail Global puts on.
And for folks that follow the event Market carefully you basically single-handedly started this event as I understand.
[4:00] No there’s a guy in Australia that started this and I’ve been actually went to Australia and spoke out at once and it’s a lot of fun so it’s going to be.
It’s always good to get outside of the US and see what’s going on in your Commerce and this has got a global feel to it as in the name so
it’s gonna be interesting and a lot of the other speakers are near and dear to my heart in the marketplace world so we’ll be talking a little bit more about marketplaces than we normally do if that’s at all possible.
[4:30] Nice nice I’ll be relying on you for that content I just meant Phil the founder of the show I didn’t mean to imply you were the founder but I feel like he has told the story that you were one of the first.
Excellent pieces of content in that show that really helped him build the audience.
[4:46] Yeah happy to help.
[4:49] And so then I will be reciprocating I should have mentioned this when I when I mention that you could get me fired at publicist,
because on Wednesday October 7th so a month from now,
you and I will be doing a joint keynote at the channel advisor connects show so if you embarrass me badly in front of my co-workers I’ll be able to reciprocate.
[5:14] Yeah yeah so we have mutually assured destruction which I think is the best path forward.
[5:21] But I’m looking forward to that I’ve been going to that event for a number of years and that has always been awesome so sad that we won’t see each other in person and get to eat some barbecue or anything but.
I’m sure it’s going to be a good event and then.
It would be hard to do as good a job without you but then I have a couple more events in October on my own so Texas A&M has a retail degree program and they’re hosting a retail Summit.
On October 8th and 9th so this will be right after the channel advisor event and I’m doing the keynote on the second morning on October 9th.
[5:59] Pro tip what they love there is when you start out and you’ll hook them and you do your horns they love it there.
[6:04] Yeah I have I have several clients that would love that but I don’t think that’s the right mascot for Texas A&M.
[6:13] Give it a shot unless you have ins report back.
[6:15] Next you are you are always looking out for my best interest I super appreciate that,
and then our friends at shoptalk are trying a new format event one of the best parts of shop talk has always been the sort of networking and the the peer interactions,
and so on October 20th through the 22nd shoptalk is going to be hosting this interesting new Meetup format where they sort of match.
Subject matter experts together with practitioners and like have a bunch of conversations in,
on specific topic so I’ll be one of the experts that you can match with so.
Please don’t make me feel like the last girl at the dance like sign up for that free shop talk Meetup thing and pick me.
[7:01] Awesome wow Clayton Clayton request.
[7:06] Yeah I’m begging and so that’s that’s a lot of events that’s a lot of chances to hear you and I and just in the interest of getting full sympathy from her audience like everyone should know that for every one of these public events we do.
Um you and I have a lot of private corporate events as well so so a lot of a lot of content a lot of stuff to talk about in the next two months.
[7:26] Yes we’ll have six you’ll between two of us I guess we’ll have six public events then we’ll have some podcasts in there in the next two months so there’s probably literally,
20 hours of Jason and 15 of meat that you can enjoy over the next two months.
[7:43] Which is about the right ratio.
[7:45] Yes absolutely the any other events.
[7:52] No no that feels like quite quite enough in fact I was going to ask is that the end of the podcast did we just do an event podcast.
[8:00] Well another one I’ll throw on there because it wouldn’t be a Jason Scott show if we didn’t talk a little Star Wars is Mandalorian season 2 is coming out October 30th.
So I think I propose we do a binge podcast sigh milosh with every with all three people that would be into that.
Including your son so that.
[8:24] I was going to say I feel like I’m the second most excited person in my house about this I feel like my 5 year old toddler is like completely signed up for it.
[8:34] Okay well I’ll put it out there and we’ll we’ll see who waves a flag on them.
[8:39] Awesome one follow-up question there it’s not going to be bendable right like they’re they’re Disney’s not going to release them all at once that’s going to be a weekly thing right.
[8:48] I don’t know I think they did that the first time to milk sign ups but they’ve done a bunch of other stuff,
they’ve done I think as come out simultaneously so I don’t know that’s a good question I actually have not seen anyone comment on that.
Well maybe we’ll just binge the first ship is it a binge watch one should probably not well do a talk commentary on the first show.
So some of the big news this week I wanted to get your hot take on is there’s been a lot going on around Amazon and groceries,
one of the more interesting ones was there was this larger format store called Fresh and
yeah if listeners already call one of the cool differential differentiators is the – cart
so there is actually one of these is opened with limited availability and a reporter got in there and had a really interesting report nervous we’re talking about it on Twitter but I wanted your
you’re taking here and then also what else you’re hearing around Amazon grocery.
[9:48] Yeah yeah so I mean covid has been a big Boon to digital grocery in general like that,
depending on how you count there was a three percent of grocery was via e-commerce pretty covid and at the moment it’s tracking at about twelve percent and even Amazon which was obviously the most digital of the Grocer’s.
Pre covid has said that they’re their digital grocery business has tripled since covid so not surprising that there are a lot of,
new Concepts emerging in the in the omni-channel and digital grocery space most of these were in progress already at Amazon but it it’s no coincidence that they’re all getting.
Brought to fruition now so as you mentioned.
The biggest news is a new grocery concept so this is Amazon Fresh So it’s a completely separate concept from Whole Foods the it’s a 35,000 square foot store in.
A suburb of Los Angeles.
[10:50] 35,000 square feet is considerably larger than any of the Amazon branded stores that have opened in the past I go or or four star.
And the price point of the food items is going to be lower than whole food so Whole Foods tends to only carry.
Premium and healthy products that so this Amazon grocery store will carry all the main consumer product so Campbell’s craft Coca-Cola.
Carry stuff at lower prices it will still have the the formerly Whole Foods private label brand 365 so first thing is it’s a.
More affordable grocery concept from Amazon so that alone would be interesting.
It does not have the Go technology so you can’t just load up your cart and walk out but what it has is scanning go so,
the cards have scanners built into them you can scan each item as you put it into the cart and then you don’t have to go to a checkout at the end you can just walk walk right out of the store with all the items that you have scanned,
that’s a more traditional flavor of self-checkout than the fancy go stores.
[12:01] But in Amazon’s case it’s built into the cart which is kind of cool so you don’t have to use your phone there’s there’s a fancier camera built built right into the Amazon Dash car,
as you pointed out to me on Twitter there’s no paper price tags in the store they’re all digital fact tags,
for pricing and product information and live ratings and reviews part of the reason that they’re using digital there’s Amazon changes prices so much and they want to have the same price online that they have in store so they had to use the digital tags.
And so in the aggregate it’s all kind of interesting there’s been some controversy over you know how popular the – cards will be there not huge,
so you you know you they’re not as big as a traditional Kroger car that could carry five or six bags worth of groceries they can only carry like two bags of groceries so.
Some people were sort of surprised at that and the thing that no one has talked about and again we haven’t got a chance to go visit the store ourselves yet.
In looking at the floor plans for this store it looked like the back of the store was reserved for an automated picking system for deliveries so what we would call a micro fulfillment center I’m pretty bullish on these things I think they’re important part of making digital grocery profitable.
[13:14] And so I was curious to see how Amazon would integrate one of these in their first store and nobody is talked about the experience of that yet so I don’t I don’t know if they actually have it or don’t have it,
you certainly can see that products are inventoried on traditional shelves in the store so if they have a micro fulfillment center it means they have cans of soup.
In the Fulfillment center and on the Shelf so they have them into inventory locations which be a little bit surprising so I’ll look forward to.
To getting more first-hand reports from that store.
[13:47] Yeah I think the
dinner the Amazons response on the cart was that this whole store is designed for kind of an urban setting kind of a bodega kind of a thing where you go shopping more frequently and thus you need less bags was kind of their response which was
which is interesting.
[14:05] Yeah and I believe they probably did do some research in January that said for this store in this demographic that that you know the average shop is this big,
um it’s interesting the store is not super adapted to covid right so,
in covid people are shopping less and buying a lot more and buying a lot bigger sizes so that January research that they use to design the store may not be.
The most current so that will be a little interesting,
they have a lot of like Self Service amenities that retailers are mostly moving away from at the moment like salad bars so they went live with a salad bar section and and it’s closed because covid.
You know people were freaking out about the size of the card and oh it’s going to fail because the cards too small you know I think the current might end up being too small but I think that’s an easy thing to fix.
And you know that standard deviation of shop sizes is very large like there will be people that are walking there and buy four items and there will be people that try to buy a hundred and twenty items and will push two carts around.
[15:06] Yeah as a software guy like the cart because it’s got this cool you know it’s good,
either a barcode scanner an image processor or both and then it’s got a scale,
so you know as you’re adding things to the cart in one of these two bags it’s got a little LCD display on there that’s calculating what’s in your literal cart and then you
you can just essentially pay their it looks like in walk out so that’s kind of a clever idea and so I’m intrigued to see what technologies the cart has what it’s loaded with and
you know the pictures we’ve seen show that it has this really big under cart area that’s boxed off so I’m kind of curious what’s inside of there,
that’s a battery it has like a massive battery kind of component to it that seems like overkill for what we can see is in there so
so I’m excited to one day get hands on it and kind of understand more about what’s going on inside there.
[16:00] Yeah and just I mean I don’t we maybe he’s been our too much time on it but scan and goes not a new idea at grocery lots of retailers offer it you can you can go scan and go at Sam’s Club right now but if.
Traditionally use your phone and,
problematic it like the camera isn’t totally optimized for taking pictures of barcodes but also your only likely to look at that phone screen every time you put something in your cart and try to scan it right so,
the cool thing about having the scanning go built into the dash cart is there’s a screen that’s in front of you the whole time and what that lets Amazon do is say,
you’re in the ice cream I’ll I see that you have chocolate fudge and sprinkles in your cart already I can offer you a special promotion for the ice cream I want to sell you or whatever not that anyone needs to promote ice cream but,
but you get the idea they can use that screen to do suggestive selling and make offers and things and and it likely will be much more.
Compelling then it would be to make those same offers on your phone that you’re only going to glance at occasionally so,
the fact that it probably scans better the fact that it can weigh in the fact that it has this marketing screen on it is interesting and then you and I both know.
They haven’t promoted this but it’s collect I guarantee you it’s collecting a heck of a lot of data about how people are shopping and what what they looked at and didn’t buy and all those sorts of things that Amazon will.
Will will monetize at some.
[17:29] The cart path.
[17:30] Exactly so just to kind of close the loop on this Amazon Fresh concept which is super interesting,
this is the first store that opened in La Woodland Hills two more stores in La coming Irvine and North Hollywood so there’s going to be three of these 35,000 square-foot stores in LA.
They also are opening one right now in Chicago in a suburb near me called Schaumburg and that’s going to be a little bigger store that’s a 43k store so that’s,
a good-sized grocery store,
there are get to visit in person you know even though I can’t get on a plane interestingly the original plans for this store called for a dining restaurant inside of the store so.
Restaurants are somewhat problematic in covid it’ll be interesting like if it opens in the next month or two maybe it opens without the restaurant will have to wait and see.
[18:20] So then so the so we’ve got three stores freestanding stores in La one freestanding store in Chicago V store is maybe the most interesting,
another store in La in Laverne Hills California is going to be co-located with a cold store,
so this is a 88,000 square foot cold store and 38,000 of those square feet will be dedicated to an Amazon fresh grocery store.
That basically will be like sharing a wall and a door with Cole’s so this is Cole’s downsizing from an 80,000 square foot store just for coals to a 50,000 square feet for coals,
and having a new Amazon grocery store inside of the coals which.
You know potentially drives a lot more traffic because you you know you might shop at Kohl’s.
You know three to eight times a year but you go grocery shopping 52 times a.
[19:16] Yeah you get some carrots and blue jeans.
[19:18] Exactly so so that will certainly be interesting and then there’s some other grocery stuff going on,
Amazon has had these go stores which are convenience stores or I would even say they’re kind of grab and go restaurants for a number of years now those stores tend to be really small like.
The smallest one I think is like 500 square feet but they’re normally like 1,300 square feet two thousand square feet or 2,300 square feet,
so they they’ve opened a grocery store that does use go so this is a Amazon grocery go,
and it’s in Capitol Hill which is near Amazon’s corporate headquarters it’s a 13,000 square foot store or 10,000 square foot store so it’s the biggest go implementation out there and it’s been open for a while.
They just this week opened a second go grocery store in Redmond which funnily enough is Microsoft’s backyard,
so potentially a bunch of Microsoft employees will now be shopping at this just walk out technology,
13,000 square foot grocery store so these stores are creeping up there still way smaller than the,
Amazon Fresh concept that that doesn’t have go but you know we’re starting to see go in bigger use cases with more skews which is interesting and they have announced.
That they’re going to open a go grocery store in Washington DC as well.
[20:43] So that a second new grocery store concept from from Amazon and then a third concept open last week.
Under the Whole Foods brand they opened a Whole Foods online only store in Brooklyn.
So there’s a whole food store that you can’t go in and Shop you can only order for curbside pickup or home delivery of your Whole Foods if you live in Brooklyn.
[21:09] So this was funny when they made this announcement I saw someone on Twitter that’s like wait a grocery store you can’t go into so Amazon’s opening a website.
Which I thought was pretty funny but at the rest of the world would call this a dark store and so it’ll be interesting to see if that’s a,
a trend that that Whole Foods does more of his well that’s so that’s a lot of grocery stuff happening in Amazon,
and you know their competitors aren’t sitting still either so this is a hot space to watch it’s a hot space to get in if you’re if you’re thinking about your next career in digital Commerce.
[21:44] Yeah I forget who said it but they kind of characterize this all this is Amazon thrashing around Grocery and not really getting traction,
and my point was this is how I am as on invent stuff right you and I both have a Amazon fire phone and you know they they will,
keep trying at something until they get it right I guess the phone they stopped it at V1 they realized that that was that wasn’t going to work but then that’s what became if they hadn’t done that they would have had echo which was essentially the two of the whole idea so.
I feel like Dave,
they’ve put a really big Target on this and there or a bull’s-eye I guess I should say and they’re really focused on figuring out grocery and it’s it must be super strategic because they’re investing a ton here.
[22:30] No I hundred percent agree like wagons interesting that they haven’t won and and super succeeded are ready,
but they’re you know they’re certainly in the fight their competitors are well armed as well so that’s part of why it’s fun like some of these other fights you know when you’ve got.
You know a billion square feet of fulfillment space more than everyone else it’s almost not that interesting of a competition.
You know this groceries kind of a Level Playing Field and so it’s fun to see what like Kroger Walmart and Amazon are all doing to figure it out.
[23:01] Yeah and we’re definitely going to talk a little bit about Walmart but before we go a saw today
that JC P JC Penny finally found a home and the I was watching the stock market perspective Wall Street was not happy because I guess whatever price they sold out
did not result in any shareholders getting anything at all went to debt so what’s your take on that.
[23:26] Yeah so the the eventual buyer there were a lot of rumors there are a lot of silly rumors I thought were stupid that Amazon would buy them for the property.
The buyer ended up being to mall operator Simon Property Group and Brookfield property partners.
So you know the mall operators Bob JCPenney there’s a play we’ve seen several times lately.
You know one of the the vested interest them all operators have is that if these guys liquidate then the malls lose.
A ping tenant,
which would be a bummer but even worse if it’s an anchor tenant like a JC Penney typically is that triggers a lot of code tenancy Clauses and so suddenly there’d be a lot of other retailers in those malls that would be entitled to,
renegotiate or even get out of their leases and the mall operators really don’t want that so they had a,
I’m sure they’d like the economics of buying JCPenney and hope to make it profitable but on top of all that they had this these.
Additional incentives to.
To not let JC Penney fall into liquidation and and so I like what’s been interesting to me is I feel like the internet is lost its mind over this like they’re all talking about how like.
Wait is this you know if the mall operator owns all the retailers is that fair competition in the mall and what is this you know what you know what is this mean for for monopolies and malls and all the you know and it’s it’s a.
[24:53] I’d I mean I don’t think it’s that big a deal.
I don’t you know again we’ve seen this with a bunch of apparel retailers this is the biggest retailer that these guys are.
Are biting off but I it doesn’t feel like a game changer to me I’m grateful that all those employees at JCPenney you know their jobs are safe for at least for a little while.
[25:24] No no it I mean it’s over a billion dollar deal the thing that makes this appeal like.
These are real value Acquisitions for Simon right like so I don’t know if JCPenney pencil that exactly like this but all the other acquisitions.
Simon and and their Partners In this case Brookfield sometimes it’s been authentic brand sometimes it’s been all three of them in the fake case of Forever 21 the price they paid for this retailer was less than the value of the inventory that they acquired.
Right so in a way it’s a no-lose I give you if you know you can liquidate the inventory for the value you paid.
Then everything on top of that gravy the rent you save if you know if you are able to save the retailer and get them back to profitability like those are all gravies but the downside is pretty low if you know you could liquidate the inventory and get your money back.
[26:15] Yeah and then pivoting back to grocery Walmart announced walmart+ what was your take on that.
[26:23] The jury’s out you know people have been talking about this forever Jason Del Rey like broke a story that this was coming along time ago and then every month he had to write how it got delayed,
and so I’m sure he was grateful that it finally went live so there’s a membership program from Walmart Janey White.
Janie said who is our guest on episode 200 who’s the chief customer officer there this is in horror portfolio so she’s done a bunch of interviews about this
and she starts out every interview saying like this is not prime like you don’t need to compare it to a prime we’re not trying to compete with.
But of course anyone that looks at this is instantly going to.
[27:04] Compare it to Prime right and that’s the way all the journalists are talking about it so it’s basically a hundred dollars a year membership 98 dollars a year or 13 bucks a month,
and you get unlimited free deliveries,
you get a couple other benefits you get fuel discounts a bunch of Walmart stores have gas stations in depending on the configuration you get up to five percent off on your gas,
and then they’re activating some unique in-store tools for you that aren’t available to the general shopping public and so the first tool,
that they’re enabling is scan and go in Walmart so what this means is if you’re walmart+ customer,
you can walk in with Walmart fire up the Walmart app on your phone you can scan a couple items and walk out of the store without having to get in line or go through checkout so very similar to what we just talked about with the – cart only you do it on your phone.
[27:56] Interesting fact here,
Walmart piloted this before in Walmart for the general Shopper and then they turned it off and so we don’t know why they turned it off now they’re just making it available to walmart+ users.
This amenity is already mentioned is available in all the Sam’s Club stores to any Sam’s Club member so so three benefits but it’s not,
at the moment the benefits aren’t a heck of a lot different from an earlier sort of shipping program that Walmart had so it feels very incremental and I’m saying the jury is out,
like in the long term.
[28:35] What are the exact delivery benefits you get how many products are available for delivery how fast are they available for delivery like that’s the great unknown with Walmart’s delivery service,
how meaning for the fuel discounts and what you know tools do you get in the Walmart store and have and how valuable are are those to you.
To me it’s neither a game changer at the moment or or Dead on Arrival it is.
The future of retail is you know creating this this sticky recurring revenue and kind of transitioning from being a retailer to a platform so it certainly makes sense to me that Walmart’s trying it,
you know we’ll see how much adoption they get but to me this is mostly about.
Keeping the Walmart customer in protecting the wallet share of the best customers more so than it is Conquest in new customers to.
[29:27] Yeah I’ll through a shout out to the fuel discount we.
So I have an electric cars to this doesn’t apply to me but to my wife and the rest of the family the Wii shop it Harris Teeter which is a Kroger brand and
they have a fuel point system there and you know you can save 32 cents 50 cents a gallon
and can either go to their branded gas or their partner with some BP’s and other stations and there’s there’s this
it actually works really well I mean it’s built you know loyalty kind of a thing there that I was a little surprised about the people love to save money on gas.
[30:04] For sure I would say they disproportionately seek seek deals on gas and it’s not going to surprise anyone Walmart’s a super competitive gas retailer anyway and so this discount like is pretty meaningful to people that want that deal,
as we’re recording the show it’s the first NFL game of the year and Walmart’s running a big ad during the game promoting walmart+ so that’s kind of interesting.
[30:27] I’m keeping you from your your Walmart at.
[30:29] I’m okay I’ve seen it and then the you know small but exciting news is that Walmart is now delivering e-commerce orders via drones and I feel like,
your backyard is their first test Market do I have that right Scott.
[30:46] Yeah they’re in a little city here called Fayetteville I don’t know why they would have chosen that one but yeah and they’re using an Israeli drone
format which is called the fly tracks and it goes six miles and can carry six point six pounds unfortunately that is outside of my range that’s it he’s about 45 minute drive so maybe you miles away from here.
So unfortunately I’m not gonna be able to test that for listeners right now but I’ll have to dream up a trip to Fayetteville to an address where I can receive a drone delivery and see how it works.
[31:21] Yeah well I just remind you a lot of Walmart’s have a McDonald’s in them and 6.6 pounds would be about eight Big Macs so just.
[31:32] Bring my son he likes looks couple big mix.
[31:35] There you go.
[31:37] Cool one of the news items that I was excited to see and I’ll kind of bucket this into a,
eBay CEO starting to have a new impact and just as backstory first of all I’ve been a huge fan of eBay for a long time I’m a big collector and love The Collector origins of eBay,
it’s been a little sad to see the stewardship of eBay and it’s gone sideways you know over the last.
Certainly in the last leadership and then at the end of the last leaders tenure there was a lot of controversy and,
we’ve talked about a little bit on the show some really weird stuff went on there but you know so Jamie is the new CEOs name I would say his last name but I’m going to butcher it so I’ll just call him Jamie,
he was an eBay for eight years kind of early in his career and then left and then went Barnes and Noble and then had a long career at Walmart where he started out in Sam’s worked his way up bleeding Sam’s so you’ve probably met him in that context I would imagine you know.
[32:36] Jamie in a way.
[32:37] Okay there you go I knew you’d know better than I would I always want to say one at the end in that message me.
Then he got promoted from the Sam’s Focus to be CEO for all of e-commerce and then he joined got recruited by eBay to be the new CEO in April of this year,
so we’re just starting to.
You know he’s kind of got his sea legs and starting to make some changes first of all they’ve been running a Content campaign that’s been really good kind of back to the roots kind of thing.
And then one of the things that’s been a little sad to see is some of these niche market places picking off areas of eBay that was there they’re kind of bread and butter one of those was collectible luxury goods like,
Louis Vuitton bags not my personal category but definitely there’s a lot of collectors that love that stuff.
And the real real came out and really kind of among some other players but I think real real is by far the biggest one there now public.
[33:36] Took that category away from eBay and and kind of wrapped it in authenticity and more guarantees and a more high-touch guaranteed model which obviously resonated with the luxury space.
So this week eBay announced an authenticity guarantee program not a lot of details out yet but essentially I kind of took it as a net positive that they’re you know they’re kind of waking up and saying hey,
this was ours to lose we lost it now how are we going to kind of either stop the bleeding and or get back some of this.
Product that has leaked to a competitor at this point so.
So I’m watching eBay closely I think it’s going to take a while but I really like what I’m seeing from from Janie’s Jamie’s tenure so far.
[34:18] Nice nice yeah that’s going to be interesting to watch I feel like the
the transition to digital because of covid is God you know some renewed attention on eBay as well so they you know are probably in a good Scituate good position to launch some new services.
[34:36] And then we wanted to use the last little bit of the show talk a little bit about holiday and what we’re kind of.
What we’re feeling and hearing out there we don’t have any of the formal forecast out yet so those tend to come more towards the Halloween side of things,
correct me if I’m wrong in RF kicks it off and then you have like a comscore Forester and a bunch of others kind of coming out it’s gonna this is gonna be the hardest year to call
so part of it ties into this discussion that we won’t get back into is the shape of the covid recovery right so that’s obviously the overlying kind of factor
but what have you what are your either personal thoughts or what are you hearing about holiday externally.
[35:21] So very frequent conversation amongst my retail clients everyone is on,
I would characterize it as everyone is on pins and needles like there’s there’s a lot of hypothesis has that it could be.
E decent holiday.
There you know there’s some some reasons for optimism’s but there’s also some reasons for concern and it’s less predictable holiday season than,
we’ve ever had in my lifetime so so folks her are really nervous,
and the sort of unofficial beginning of the holiday season is this back to school season that we’re in right now and I can tell you that the early indications from back-to-school are not super encouraging so a lot of the retailers that,
traditionally have a big back-to-school,
have said that things have been a little slow so far I’m not sure that that’s indicative of how people are going to spend for True holiday because there’s a variety of reasons back to school is different than say Christmas,
obviously a lot of schools didn’t open this year apparel is a big chunk of back to school sales and apparel is,
particularly impacted by covid so the back-to-school feedback is a bummer but I don’t think it’s conclusive.
[36:38] What is going to be interesting to me is the normal Cadence of Hollywood of Hollywood of holiday is likely to be disrupted like normally we have this big in person Day on on Black Friday which is.
[36:52] If you don’t care about channels and you just look at total sales we sell the most stuff on Friday and then we sell the most stuff online that following Monday,
and you know we sell twenty percent of the stuff we sell for the whole year over these two months,
but those you know there’s two days or I think you were one of the first people that kind of coin the Cyber five talking about that Thursday through Monday period,
you know that that used to be a huge spike in sales,
and this year I don’t think it’s going to be quite as prominent because a few things have changed number one a bunch of retards have decided to close on Thanksgiving so,
in my you know opinion sort of bravely announced that they would close on Thanksgiving let all their employees stay home with their families and then a bunch of other big retailers immediately followed suit so Target Best Buy,
Dick’s calls all announced they had closed before this year there was kind of an arms race the other way like everyone would announce their opening an hour earlier and they kept you know,
they crept from Friday to Thursday and there they were opening more stores earlier making more employees work over over Thanksgiving,
so this is a nice Trend ordinarily that would mean that Friday sales would be even bigger because you’d be shifting all these Thursday sales to Friday.
[38:15] The traditional sales we have on Friday I don’t think are going to happen this year like normally you have all these doorbusters in your what you’re trying to do is get a bunch of people to stand in line and st. Stampede their way into the store,
as soon as it opens Friday morning this year those stores are only allowed 25% of the occupancy,
that they’ve had in past years and so there’s very little incentive to have crazy deals to get people queued up to have to wait to get in the store all day some of my clients have said like probably don’t need to water the grass if it’s raining,
and so I don’t think we’re going to see these big doorbuster deals I think that’s going to slow down Friday sales,
Home Depot is actually making an ad campaign around it and so they’ve announced black Friday’s canceled and what they mean by that is they’re not having a bunch of sales on that specific day and they’re going to spread their holiday promotions out over two months,
starting in October Target is also starting its promotions in October,
Prime day which is normally a summer holiday is pushed to sometime in October and so that’s probably going to start the holiday promotion season for Amazon,
and so I just feel like the combination of all these things there,
there’s good Arguments for and against how much total spending will have over a holiday but I have a feeling it’s going to be spread out a lot more evenly around this whole two-month period than it is those five days what do you.
[39:36] Yes so I’m on record that we’re having this v-shaped recovery I think it’s going to line up to be,
in the holiday I do think stores will have limited capacity everyone’s already pre announced they’ll close Black Friday.
I think it’s going to push it all online and the retailer is going to try to spread it out but it’s probably not going to work because Human Nature.
And then I think it’s going to coalesce around Cyber Monday because so I think I think.
Yeah the store days of Thanksgiving and Black Friday which have had increased online sales but but pale in comparison to Cyber Monday I think.
I think they’re going to go online and be way way up online but then Cyber Monday is just going to be,
yes huge day because it’s going to effectively replace the Black Friday excitement that we have I think they’re going to hold their promotions for that day they’re really juicy ones and consumers there’s going to be this game of chicken between consumers and retailers,
and the consumers are going to win and and they’re going to try to start early,
you know we’ve even seen I think it was Costco that’s famously already got Christmas out right after Labor Day,
that’s not going to work but I think you know the that Cyber Monday is going to be really really big.
[40:56] And I think I think we’ll see a lot of sites go down because I don’t think they’re going to be ready for all that to we always do but I think it’s going to be like orders you know I think we’re gonna see like a really big problem there.
[41:06] Yeah I mean one of the things people are legitimately concerned about is the traffic we’re seeing every day right now is very similar to what we normally would see on Cyber Monday so the magic question is if Cyber Monday is.
Incrementally as much larger from the Baseline this year as typical then nobody site has ever prepared for that before and the holiday Readiness prep that people did last February,
to get ready for this is not going to be adequate and so you for sure a bunch of sites would fold.
I don’t know what’s going to happen I think there’s enough uncertainty that you know it would be dangerous to assume that anyone knows but the.
I would argue it was already a trend that a lot of cyber monday sales was shifting earlier in that week why you know as mobile became a thing,
people were shopping online on Thanksgiving their shopping over the weekend and this year when weigh less people are going to get on a plane and be spending Thanksgiving with their extended family,
I think a lot of online shopping is going to start even earlier and with stores not open and people not going for doorbusters,
I just think a lot of the traditional Monday spike is going to get pulled back and prove your point the only thing that would really change that is if.
Retailers are way more promotional on Monday than they are on Friday for example so that’s going to be interesting I mean it is like.
[42:33] There are new products coming out so you know as you well know that the video game platforms have a new format where this year so you’ve got this Sony PS5 and the Microsoft Xbox series X,
um so you know in some ways like that could Goose holiday that iPhone you know is going to get released late and there’s some you know it’s the 5G version so.
You could see way more of a super cycle of those sales which could be interesting,
I will tell you retailers are nervous a lot of the sort of covid subsidy dollars are wearing off you know the doesn’t look like there’s going to be a second stimulus check,
the a lot of unemployment benefits could actually expire for a lot of people in a lot of states and so there’s there’s some,
anxiety over what the consumers status and you know will be for Holiday Inn at the moment while spending is high consumer confidence is not high so,
it’s anybody’s guess what happens in terms of you know how that that confidence impacts holiday spending so it’s,
it’s a very uncertain it’s we’re gonna have to watch it closely and I’m going to be way more interested in the,
the sort of interim data sources we get like when Adobe starts reporting actual sales that they see on websites more so than the than the surveys that like in RF and comscore are going to put out.
[44:03] Yeah and then an upgrade cycle I don’t think you mentioned that that we’re excited about is the iPhone 12 so I’ve been reading on our reports about this,
and I know you’re less excited about the functionality but I’m super excited about it and,
the analyst reports have been reading they’ll do this really interesting analysis of existing installed base and you can look at different traffic and see what who has,
I don’t know what’s the oldest living iPhone I think it’s a for I think there’s still some fours out there.
[44:36] So their analysis is there’s more old iPhones than ever before and use and then we have covid so you know a lot of people are spending more time on their phone,
and then the other one is there’s these carrier Cycles where,
you know if you aren’t on the fancy iPhone upgrade program like you are where you get a new one every year,
you’re on more of a two-year cycle with your your carrier and then they look at that and there’s a big alignment that happens here where you’ve got covid somewhere usage more people probably interested in upgrading their phone,
The oldest iPhone base ever and then some alignment of the carrier upgrade cycle and they’re calling it an iPhone 12 supercycle so,
September 15th is the day they’re going to allegedly roll out the phones and then they’ve also announced that or it’s leaked that,
unlike previous years where you could kind of order and get them very quickly due to covid the supply chain did delay when they’re gonna be available so that’s going to push them into the October time frame so a lot of stuff going to be going on around holiday this year.
[45:44] Yeah yeah it’s totally going to be interesting I’ve also heard interesting things about you mentioned the supply chain for Apple all the supply chain issues are going to be interesting to write so there’s one school of thought,
oh man there’s a bunch of inventory that we didn’t get to sell all year there’s a bunch of unsold apparel it’s going to be the mother of all clearance sales TJ Max is gonna have to you know open tents for all the cheap clothes that’s going to be heavily discounted,
but I’ve also heard from a lot of retailers that know the supply chain guys,
reacted super quick and cut off their supply chains to try to protect themselves and so there’s going to be constrained inventory in there there might not you know be enough product to meet demand and a lot of categories and so I like.
Hard to say how all that Nets out.
[46:29] Yeah yeah so then what’s your bottom line is it going to be.
Overall retail down compared to last year flat do you agree e-commerce will be a pretty big surge it’ll be think we’ll that 45% kind of trend that that we’ve been seeing.
[46:47] I do I so I think when you look at the will call it q 4 or the holiday quarter,
the I think that the top line numbers are going to be pretty good like I think overall spending on holiday will be pretty good I’d it’ll shift heavily to digital,
so you’re you know I think you it’s totally reasonable to expect another 45% e-commerce year-over-year growth,
for the whole industry but I think that Top Line number is going to mask the fact that there are just going to be a clear bifurcation of winners and losers and and,
you know I think games and electronics and home is going to do really well I think apparel and department stores,
are really gonna gonna struggle so well you know I I think.
Net net good holiday but that man you know I think they’re going to be some categories where it’s going to be really tough what about you.
[47:48] I’m going to say.
E-commerce accelerates from the 45% so I think we get up to the 60s because a lot of that brick and mortars just got to come online if the stores are going to be closed during the ski days.
Don’t think they’re going to get people in the stores to get excited if they don’t have some promotional stuff and it’s going to back it up to you Cyber Monday so yeah.
[48:17] Totally reasonable guess you are putting a lot of faith in the it guys to keep their systems running to get get 65 percent year-over-year growth but I hope it happens.
[48:25] Yeah thinking this for the cloud.
[48:27] Exactly and Scott that’s going to be a good place to leave it because we’ve used up a lot of time as always we’d sure appreciate it if you’d finally jump over to iTunes and give us that five star review we’ve been begging for.
We’re looking forward to seeing the bunch of you live on all these events coming up this month until next time happy commercing.