EP243 - Amazon Q3 2020 Earnings Recap
In this episode, we break down Amazon’s Q3 2020 earnings (PDF) results.
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Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Episode 243 of the Jason & Scot show was recorded live on Thursday, October 29th 2020.
[0:24] Welcome to the Jason and Scott show this is episode 243 being recorded on Thursday October 29th 2020 I’m your host
Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott sure listeners.
In today’s episode we are going to go into what is one of our more popular series where we do a hot take on Amazon’s Q3 results,
I’ll give you one word to summarize them they were bonkers.
[1:05] Sun News new your margin is their opportunity.
[1:12] Before we dive in and take you through the highlights of the results let’s just set the stage a little bit so,
if I was there in front of you on the Whiteboard I would draw Q 1 Q 2 Q 3 q 4 in a row,
and because the pandemic and Q2 we saw a cross e-commerce super elevated growth rate of 45 percent.
Prior to that e-commerce was growing at about 15% so we have this step function from q1 2020 up to Q 2 of a 3 x acceleration of growth from 15 percent 45 percent.
[1:45] Kind of looking back to Q2 Amazon grew about 43 percent then so that was kind of the the day that we had in Q2 this kind of.
Yeah 45 percent growth rate Amazon was in line with that.
[1:59] Then we had a bunch of companies that grew faster or some degree a little bit slower but generally you know we had just this really tremendous quarter,
a lot of folks thought you know that’s unsustainable and Q3 it’s going to come down pretty dramatically.
And then just in the last week you heard it here first on the show as an exclusive we had emarketer released their fourth quarter holiday forecast for 2020.
And they’re forecasting 38% for the holiday period,
and then Salesforce just came out with theirs and they are looking at 34% and then Adobe just came out with theirs and they’re looking at 33%.
So we have this kind of interesting bracket if you will over on one side we have q to that was at 45% and then over on the other side we have Q4,
which you know if we look at kind of this range of 33 to 38 percent will call it 35 percent on average if we kind of triangulate on the three forecast there.
So what you’re seeing is the pontificate errs are kind of seeing that we’re going to drift from this high Watermark of 45% you to to 35% you for.
So that’s the stage that had me very interested to see where does Q3 come in because if we.
Maybe if we are below that 35 percent growth rate that’s that’s interesting and if we’re way above it maybe those holiday forecast are a little on the conservative side.
[3:24] So that that’s kind of the the macro stage coming into this quarterly release we did have a couple you just kind of the way the earnings results fall we had three folks.
In the in this kind of e-commerce cohort before Amazon did today so let’s see I think first we had eBay and they were at 26%.
So that would that would indicate you would just had that one data point you’d say oh wow we must have seen a really big acceleration eBay has been lagging the market already so that one’s not a huge surprise,
and in fact they their growth rate came down to points so they were at like 28 percent from revenue,
in the second quarter there your growth rate and then they ticked down slightly to 26 percent.
[4:07] Then we had let’s see I think next was at Sea and they came in at a hundred and twenty eight percent year-over-year and what’s really interesting about Etsy is they saw a huge lift and Q2 from mask.
But they had some pretty compelling evidence on their earnings call they can actually peel out the masks and their growth rate was still I think in the high 90s even excluding mask so they’ve seen this kind of cocooning and people getting really into crafting really,
and so that was interesting and they saw about an 8% decrease quarter-on-quarter so so there was a little bit of a step down.
Then we had I think yesterday morning or was this morning we had Shopify and they came in at 96 percent year-over-year growth.
And that was straight across from Q2 so that was the set up coming into Amazon’s Q3.
Jason anything you want to throw in there before we get into the results.
[5:04] No I think you covered it pretty well like just a couple things it said see it’s pretty interesting The Masks clearly were like a honey pot that was.
Driving incremental traffic and then it seems like there’s some evidence that there,
able to sell other stuff to those people which is awesome the traditional craft stores also are way up like Michaels and Hobby Lobby so it
it does make sense that people are using their quarantine time to get in the Hobbies more and I want to say I saw data point that Ed see has also added a ton of new Sellers as a result of covid so they
they really feel like one of the across-the-board beneficiaries and then I’m just going to admit the Shopify number impresses and surprises me I would not have expected,
them to stay up that high this quarter.
[5:51] Yeah and they don’t report same-store sales so there’s obviously there’s some churn and some ads and there and things of that nature but but even then you know it’s not like they’re adding someone that’s this this huge multibillion-dollar retailer there.
[6:06] And so so I think it’s pretty it’s probably actually pretty close to the same store sales I would imagine if I kind of think through the Dynamics there I would love for them to release some kind of a same store sales number but they don’t.
Okay so so then Amazon resulted after the Bell closed as we’re recording this here on Thursday the 29th.
And you know a lot of lot of earnings on Wall Street is around expectations so let me start with the expectations Wall Street was expecting and I’m going to use round numbers because it gets kind of I know it’s hard to listen to this when we go into multiple decimal points,
so Wall Street had pretty high expectations they were expecting a 93 billion dollar result which I believe equates to kind of a 35% growth rate,
so 93 billion dollars was what they expected Amazon came in at north of Slightly North of 96 billion dollars so they beat the top line by 3 billion,
not too shabby and so.
So that equates to a growth rate on the revenue side all in at Amazon of 37% and,
the Apples to Apples comparison is that that number was 40% in Q2 so a slight tick down so in Q2 they were at 40% and now they’ve down to 37%.
Because I haven’t done a total analysis this.
[7:27] Amazon at least was highly correlated in Q2 to the US Department of Commerce numbers that came out so so I think we can expect those to take down similarly into the high 30s.
About but I know where that’s gonna be really interesting to see that,
then as you dig into those revenues they give you a couple of different slices of that one of them is
bye what do they call it segment so the North America segment was up 39 percent at fifty nine point three billion,
and then International was up 33 percent on a constant currency basis to 25 billion so.
Part of this that’s really interesting to me was the international stuff had slowed down considerably more than the US which I thought was kind of interesting factoid there.
[8:16] And then let’s see that I cover everything then another thing is if you peel out physical stores which I want to go over to you in a second,
Amazon all in grew 40 percent year-over-year compared to Q2 s 44 percent so another indication that,
yeah that they take down a little bit they also had a very high percentage of orders that were third party that was 55% and then the first party Groove 38%.
So you always read these stories and there’s actually some antitrust stuff floating around if Amazon is harvesting 3 p 4 1 P they’re doing a terrible job at it because 3p is growing considerably faster than one piece,
Jason you had some interesting insights on the physical store numbers would you see there.
[9:04] Yeah so for the second quarter in a row their physical stores are down which for them physical stores is most from a financial standpoint is mostly Whole Foods.
They do have a small compliment of bookstores and go stores.
But so for the quarter physical stores was down 10% and superficially you go oh yeah that makes perfect sense people are going to the store to last and covid and buying more online so not surprising that Amazon’s,
e-commerce is growing and physical stores are shrinking but if you if you think about the fact that Amazon’s physical stores are mostly grocery stores,
no other grocery stores in America are shrinking like grocery stores were one of the biggest retail beneficiaries of covid and so you look at like a Walmart,
and they’re they’re up 15% so.
When you compare that and say oh my God Amazon’s grocery stores are down 10% while Walmart’s are up 15% that’s huge.
[10:03] But then you have as you unpack that you have to realize that the way that Amazon attributes its sales is different than almost any other retailer right so if
give a customer used to go into the Walmart store and buy groceries and now they’re buying grocery stores online which is like 25 percent above all grocery customers.
Pivoted online that still a grocery sale the Walmart however at Amazon.
The the all sales that happen online get attributed to Amazon versus whole food so when that customer moved from shopping themselves to to ordering online they suddenly became an Amazon Customer which is why the,
the physical number goes down so abruptly for them.
[10:49] Yeah pretty cool so it’s frustrating because this,
apples and oranges on how we measure e-commerce at these edges of bulbus and curbside is kind of I wish we had an industry standard or people would give us the segment so we could know a little bit better what’s going on.
[11:07] Yeah absolutely there’s a lot of interesting trends that are office gated and how they all collect and report this data differently unfortunately.
[11:17] What closer as we both know Jason Amazon doesn’t ever make profits so what kind of money losing proposition was this quarter form.
[11:27] Yeah well they continue their losing streak Wall Street had expected them to only earn four point eight billion dollars.
Which you know you could call that a loss I guess and instead they actually earned six point 1 billion dollars so I would like to be that big old loser,
but that represented like so on the net income that’s almost a 200% increase that’s 6.3 billion dollars of net income.
Um which if you’re an investor that earning per share comes in at like.
Twelve twelve dollars and 37 cents which is near double the consensus which was 741 so I think they call that a Beat.
[12:13] Yep yeah that that is a beat on the top and the bottom it’s a smash let’s see I mentioned another.
[12:21] Side note before you move on I heard a new phrase you may already know this one but I’m now hearing analysts call stocks checkmarks.
And you know what that is that’s the stock has recovered from the covid dip and now it’s back up above its previous level.
[12:40] Oh nice to kind of a Visa another way to say.
[12:43] Let’s say yeah that’s why I thought you would enjoy it so much because you’re such a big fan of this deep V.
[12:47] Yeah yeah I’m going to work that into my vocabulary here,
the another tidbit on third-party Marketplace which is my wheelhouse from a unit perspective ticked up nicely 53% of unit volume from third party and in Q2 that was 52% so
good little oh no we’re we’re 50 for this quarter and that’s a tick up from last quarter at 53 how about a,
there are other money-losing areas like AWS and dads.
[13:17] Yeah what so one other thing by the way you already talked about their International sales one interesting tidbit to me about International sales traditionally the story is.
They’re investing internationally and North America’s more mature and,
North America I want to say is like 61 percent of the revenue so they make money in North America they traditionally lose a lot more money internationally where there earlier and making bigger Investments,
but they actually we’re pretty profitable in international dish this quarter which was interesting.
[13:48] But so AWS which is you know rumored to be the only profitable part of Amazon for people that are wrong.
Was up 29 percent which is a which is very meaningful growth in almost any context it is a deceleration of growth for them and it’s the second straight quarter of that but when you think about it.
Kind of makes sense you know a ton of companies got,
conservative and implemented a bunch of austerity measures and so you know a lot of potential AWS clients probably slowed down some of their plans to move.
To the cloud or invest bigger in the cloud but I would still argue that that the long-term Prospect for the cloud was actually improved by covet like in the big picture it’s going to accelerate everyone’s.
Migration to digital and migration to the cloud so I suspect.
That will ultimately see AWS get a nice benefit from covid although it you know the big numbers it seems like it’s growth is slowing down a little bit.
[14:57] And then the the really interesting one to me is other which as we’ve talked about before on the show is almost exclusively ad Revenue,
um was up significantly it was up 49% so it was.
Other has been on a tear for a while last quarter was 41 percent,
before that I was 4441 4537 like it’s had these these very big bump UPS I was too foolish to put it in the notes but I from memory,
they’re just shy of 6 billion dollars in in ad revenue for the quarter,
um and so you know if you if you did some like simple math and annualize that they’re they’re probably over 220 billion dollar,
advertising run rate it makes them the clear third biggest ad Network in the US and thing to remember.
[15:55] Ad revenue is wildly more profitable than gmv right like you know you’re hoping the net I don’t know 10% 15%,
on your on your GM V sales but your.
Your netting like 95% on the ad Revenue because there’s you know just a small amount of fixed cost against this.
Big amount of Revenue so so that’s amazing that’s hugely profitable it’s contributing a ton to the bottom line.
[16:26] What it’s somewhat surprising because in general advertisers cut back on advertising and covid right like the first thing they did is they turned off a lot of their advertising,
but what this is clearly showing me is that advertisers cut,
back on their top of funnel ads like ads that ran in on television and ads that ran on Facebook and Google it was even complicated because there was kind of a advertising boycott on Facebook you know at the beginning of all this,
but they clearly advertisers kept spending on Amazon Amazon is becoming more of a real destination for ad dollars so,
um that that’s impressive and then of course,
because covid Force more people to shop online traffic goes way up on the Amazon properties and and AD Revenue digital ad revenue is kind of tied directly to the number of eyeballs you get on your site so.
So that helped them a lot but this is now a very material part of their business and,
you know you see every retailer in America is trying.
[17:31] On a much smaller scale get in on this act like it’s a huge initiative every big retailer their site monetization and trying to sell ads to compete with this.
This new profitability enhancer that Amazon has created.
[17:45] Bernsen and we I should
just point out we’ve been facetious about the money losing stuff and for a while so if you think about the four segments and there’s more we’ll talk about the four so you’ve got North America retail International retailgeek
AWS cloud computing and then other which is largely ads,
it’ll be less than ads up in cash flow positive for a long time the US business has been cash flow positive.
And then International has actually flipped back cash flow positive for the last Q2 quarter so,
every segment at Amazon is cash flow positive and generating towards income now it is true AWS I think contributes around half of the overall profit of Amazon,
but again you know a lot of people say none of Amazon’s Prophet except AWS all those things are false and wrong statements that,
that’s just simply not true it does kind of out punch its eyes but it’s just because it’s got such a high margin profile versus the retail segment.
[18:45] The other fun thing is ship again which we initiated here on the show and it’s got a little bit of a life of its own it’s been highlighted on in the New York Times Bloomberg and on The Today Show,
um what’s been really interesting is,
Jim Cramer on Mad Money he was kind of holding the UPS CEOs to the fire on this he didn’t call it ship again but everyone’s kind of woken up to this thing that you and I think I think will Pat ourselves on the back.
And I think we unanimously would vote that we were the first to identify this problem that you have,
already elevated e-commerce levels shipping isn’t growing nearly as fast and we’re have holiday kind of barreling at us,
so they address this one of the first questions Wall Street asked was are you guys ready for this this bump in shipping volume and the CFO said,
he didn’t use super Garden sadly but he said we know that third party shipping is going to be very tight this quarter we feel good that we have made our own Investments so there’s a little bit of a.
Subtweet I guess I would call it a little shade that he threw to the to the third parties and and you know Amazon looks like a genius here.
While she was not a huge fan of them going into this DSP program when they announced it and that they were going to build out their whole own direct consumer fulfillment it seemed.
Kind of a little crazy at the time but this was this was a genius the pandemic is made that just an obvious smart choice to have done.
[20:13] Oh yeah for sure.
And he did still put in a plug which every retailer is that like a even though we feel good about all the our own capacity to deliver still probably a good idea to order early if you’re a consumer,
so for sure for your Christmas presents I would recommend you you not wait till the last minute.
It is always an interesting line item the the biggest expense that always shows up on Amazon or fastest growing expense on Amazon’s income statement every quarter is there shipping costs,
and and they did go up by 57% again for the quarter so that’s a expensive part of doing business,
and this isn’t totally tied directly to their earnings but just to highlight you know they invested 30 billion dollars in capex last quarter that was mostly fulfillment centers.
And they basically for the year from the end of 2019 they were 283 million square feet of fulfillment center space and they’re expecting to have 294 million square feet of fulfillment Space by the end of this year so that’s.
They already had a insurmountable lead in fulfillment space and they’ve increased it by 60 percent.
Which is crazy so the.
[21:31] Yeah if getting product near consumers is is going to be a big win than its it already was game over and now it’s just like there’s no hope of anyone catching up to this.
Hopefully maybe Shopify will say there have to start building a lot of fulfillment centers.
[21:48] Yeah and yeah and there’s a lot of complications there but so then there’s my favorite part of the the whole learning segment which is their cue forward guidance and the reason is my favorite part is I feel like it’s the.
The widest guidance I’ve ever seen.
[22:04] Yeah yeah it’s uncertain times in the cone of uncertainty.
[22:07] Yeah well so most retailers have solved by just not offering guidance.
[22:11] Yeah I think Depo one of them.
It was several I think Microsoft several stocks were down not only due to Rising covid cases but for lack of giving guidance they’re starting to get punished so so the you know the
the corollary to that is all right we’ll give you guidance but we’re going to give you this this very wide bookends.
[22:33] Yeah so they they’re projecting between 28 and 38 percent growth for Q4 which is,
kind of in line with all those e-commerce estimates that we’ve seen and for them that would equate to 1 billion to 4.5 billion and income which.
Last quarter was 3.9 billion so they’re saying we could be you know Down 2 billion from last year or we could be up a half billion from last year.
Um a couple things to note like ordinarily Q4 is more promotional so income actually goes down and then this year.
[23:11] Remember Prime day is in Q4 right like that these Q3 numbers we’ve been talking about ended September 30th and Prime day was in early October,
so it’ll be interesting to see how that impacts their Q4 and then you know one thing that got a lot of analysts attention is they estimated that they have they’ll have four billion dollars in incremental covid costs.
Just for Q4,
and at first people thought that was hard costs and they’re like well wait what are you spending for billion dollars on and then what it turned out is if the bulk of that is an estimate of lost productivity as a result of covid so,
they have to social distance people in the Fulfillment centers which means they pick a little bit slower and so there’s,
there’s more in efficiencies they’ve had to hire a bunch more people and those people are slower to ramp up so there’s a bunch of beneficence he’s there so.
So that’s part of why the the despite the significant growth in income is still down as because they’re expecting their you have to spend a lot more on covid-19.
[24:11] Yeah the last thing I would highlight in this this hot take is I was like to pick through the press release and see what they’re talking about,
you know it’s been funny watching Amazon for 20 years because the press releases are is getting really long because the bullets of everything they’ve done in the quarter there just like so many more bullets Who stuff they’re doing,
so it’s always like you know we introduced 800 Echo devices and we did this and that and it’s just it’s amazing how much this one point seven trillion dollar company is banging out on a quarterly basis,
but a couple tidbits I thought listeners may be interested in and you you were very early on kind of catching on that Amazon may have some aspirations around Healthcare,
they did call out that they are I think they said by mid-november they will be testing doing 50,000 covid test a day across 650 sites,
so that’s kind of interesting you know there’s there’s almost like a little clinic inside of the Amazon Fulfillment centers I imagine it’s what they’re talking about to make sure that they’re catching all the stuff early.
[25:11] And then another area I always keep a close eye on is this this fulfillment program that they call the delivery service providers or dsps,
in there they talked about they now have 1700 dsps and the dsps are the small businesses that they 1099 with that have multiple many many trucks per partner,
so they have 1700 partners and then within that that ecosystem they created over a hundred thousand jobs delivered 2.2 billion packages and paid,
five billion dollars to small businesses which they by that they mean those 1700 dsps have earned that much.
The way it works is they get paid a little bit per package just like a FedEx or UPS what so I thought that was interesting call out I hadn’t seen that that specific before.
[25:59] And then you know to your point while she was just blown away by how much fulfillment capacity has been added and and,
you know I think over a million jobs have been added into the the Fulfillment Network which is which is pretty crazy.
So that’s the details Jason must pop back up to 30,000 square feet now that we kind of know,
the how the 800-pound gorilla did in Q3 does that change your overall view of what the holiday is going to be like do you think you do buy into that 30 that 35% kind of Zone.
[26:31] I still do and here’s why if you think of like so if you think of all of retail.
E-commerce has is a smaller so ever it’s like 15% of the the five trillion dollars in consumer spending.
Traditionally Q4 disproportionately skews e-commerce right so you would you would normally expect a much richer mix for e-commerce and Q4 because there’s a lot of people that don’t use.
E-commerce for their day-to-day purchases but they do use them for their their incremental holiday spending and so the.
Q3 was super interesting to me because obviously Q2 everyone panicked and had to do e-commerce a we saw that huge Spike from the traditional 15% growth to 45 percent growth.
Q3 was going to be really interesting because you might have expected that to settle down more right and now like it’s still early in the Q3 earnings season but our first indications are that they maintain that that level of growth,
I see that doesn’t make me scared that the ha like for sure for Holiday we’re going to have a peak on a peak or what we call a super Pikachu.
[27:43] I still would expect it to settle down a little bit because.
There already is more e-commerce you know cooked into the last year’s number 4 for Holiday quarter versus Q3 so,
to me that that 33 to 38 percent still seems viable,
you know every CEO talks about how much uncertainty there is every forecaster talks about how there’s a much bigger deviation and of course.
A bunch of people are interested in know if there’s going to be any stimulus like there is a theory that after the election next week whoever wins like you you know you could imagine Congress having more impetus to,
get some stimulus out there which.
Could be a game-changer and then you know at the moment there’s a lot of people that feel like covid is going in the wrong direction and that could have a derogatory effect so,
so a lot of uncertainty but
but to me I guess if I had to wager my own money I still feel like that high 30s is a is a reasonable place for e-commerce and next next quarter what do you think.
[28:55] I do I kind of feels like we’re settling in there I do you know.
I think I think we still have a pretty big ship again problem at 35% and I think there’s because of this cone of uncertainty you know let’s say we come up,
would bump up to 40% or kind of the high end of that range and we’re kind of up in the 38 to 40 percent I think it’s going to make it worse and.
You know one of the things I’ll tease is I’ve been working on a model one of my concerns is
we get into the Cyber five and that creates enough of a glutton the system that it doesn’t ever really recover so so because I think it’s going to be hyper compressed this year around there because
everyone’s motivated to get you to shop early so we could have this kind of
you know what we would say here in the Southeast is the the snake be eating a pretty big pig that it’s not able to digest and you know that that could cause that could.
But really accelerate this ship again problem so that’s what I’m going to be keeping it pretty close Island.
[29:57] Yeah no I think that’s a legitimate concern I had foolishly been expecting the Cyber five to be somewhat diminished this year because,
because it is exactly because of the problem you mentioned a lot of retailers would have a vested interest to to flatten it out but like frankly all the forecasters.
[30:16] Disagree with me and they think it’s going to be a monster cyber 5 and that you’re exactly right that’s gonna really gum up the works
we of course you know talked a lot about the big shippers I’ll have a quota so they simply aren’t going to be able to put more packages in a FedEx then they’ve already agreed to
what’s now happened as FedEx and UPS have stopped opening new account so if you’re a small shipper you know that are a small small retailer that was.
Going to send me try to adopt them e-commerce that’s not an option to you so that’s going to be a hiccup if there’s a Saving Grace for retail it’s going to be,
that a lot of retailers are going to lean heavily on curbside pickup and store fulfillment of their e-commerce orders so you know people like Target and Best Buy already very good at that Walmart’s moving in that direction in a big way,
so I you know I think if that cyber five is Big that people are going to compensate by really.
Focusing on promoting items that they can fulfill from stores and then you know as you get closer to the holiday like it is possible that this could be like a disproportionately large ear for gift cards because,
you know you could you can find that people just aren’t able to get the gifts they want and unable to get them where they want them in time and so we shift to these.
[31:37] Kind of digital currencies and then I guess the one other thing I’ll throw out there that’s another problem besides ship again and is.
Inventory is thin you know a lot of Supply chains were disrupted a lot of retailers were super conservative.
And so like I think it’s also true that we’re just going to run out of popular stuff for weight in the.
[31:59] Yeah it’s going to be interesting to watch a couple other little tidbits here at the end for those of you that made it this far,
the someone was telling you and I on Twitter that they’re not taking new accounts at I think they mentioned both FedEx and UPS so that’s I think that’s unprecedented I don’t I don’t remember ever.
Seeing either of those those companies kind of say hey we’re going to pause new accounts starting late October that’s kind of crazy crazy town.
And then it looks like it’s really getting backed up I’m not an expert on this but someone was emailing me these rates for cargo containers that come on this ships and,
they’ve seen these spot prices just like escalate and week on week like 40 50 60 percent and and the last couple of weeks so,
that’s an indication that gets an auction type system,
it’s an indication that that room on those the ships just coming here is very tight and the economics are very tight on that part of supply chain so so it feels like things are going to be backing up here,
the e-commerce and Retail Plumbing is going to be really interesting to watch in Q4 and.
As usual Jason I will be here reporting on it and let you know what we what we see think of us as your eCommerce plumber friends.
[33:15] Except that our pants go all the way up.
[33:17] Absolutely yeah none of that stuff here on the Jason’s gotcha.
if it’s got that’s going to be a good place to wrap it up because we’ve used up all the time we have allotted for this quick hit show it’s the second one this week so we don’t want to overload our listeners,
as always if you want to continue the dialogue please hit us up on Twitter or Facebook especially if you disagree we love to hear other perspectives,
if this show is it all helpful for you we sure would appreciate it if you jump on iTunes and give us that five star review.
[33:48] Thanks everyone for joining us and.
[33:50] Until next time happy Commercing.
EP242 - Salsify Co-Founder and CMO Rob Gonzalez
Rob Gonzales is the Co-Founder and CMO of Salsify an e-commerce enablement SaaS company that has raised over $250m and focuses on helping brands sell online. Rob is also co-founder of the Digital Shelf Institute.
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 242 of the Jason & Scot show was recorded live on Wednesday, October 21st 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 242 being recorded on Wednesday October 21st 2020
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Well when we’re not talking about ship a garden one of our other favorite topics here on the Jason Scott show is
what we call branded remanufacturers going direct or direct to Consumer brands or just simply direct-to-consumer,
and this is a big topic and we’re really excited to have a guest here that is going to be able to really help us dive in on this and shed a lot of light on the trend,
so we are excited to Welcome to the Jason Scott show Rob Gonzales he is the co-founder and CMO a chief marketing officer which is one word short of Jason’s title I’ll just point that out of salsify,
salsify is an e-commerce enablement software-as-a-service company that has raised over 250 million I’ll do a dramatic pause there,
and focuses on helping Brands sell online Rob welcome to the show.
[1:34] Thanks for having me glad to be here.
[1:36] Yeah we know if listeners know this but we record late at night and you’re an early morning person so we really appreciate you staying up into the wee hours to do this with us.
[1:45] Thank you yeah you guys are the party animals with e-commerce quit these hours.
[1:49] That’s yeah that’s what we’re commonly referred to as the party animals of e-commerce.
[1:55] You talk about sad states of Affair like what a lame industry this is if Scott and I are the party animals,
Rob it’s awesome to have you on the show excited to dive into the latest stuff but before we do we always like to get a little bit of a feel for the guests can you tell us how you,
got started and how you came to the e-commerce industry.
[2:20] Yeah in 2006 I was working in an IBM research group and right across the street,
was in Deka Technologies one of my best friend’s Jeremy is also by co-founder at salsify.
[2:34] Got a job in Deca and loved it and convinced me to come over and in Deca Technologies for those who don’t know invented search navigation merchandising for e-commerce so if you were,
building an Enterprise e-commerce site in the 2000s you weren’t just buying a single platform like you are today you’re not just buying Salesforce Commerce cloud and it sort of does everything,
what you would do is you would buy a mix of different pieces of technology and Stitch them together to provide your whole Commerce platform so the search engine the navigation system all that stuff was typically bought separate from the core Commerce.
And in Deco is the leader in that space you think about like in that period walmart.com target.com,
homedepot.com most of the big e-commerce players about 60% of the internet retailer top,
using Deca for their search navigation and Merchandising Amazon actually tried to acquire them at one point in the 2000s to to be what would have what would become the A9 algorithm,
so really really great technology I was acquired by Oracle for a little over a billion dollars in 2011 and I like that number because,
I mean in 2011 e-commerce is basically nothing so to be a billion-dollar really e-commerce search company that time really shows that the impact that in deck had that that’s when I got into it.
[3:53] Very cool the deck is interesting I keep I always bump up against folks that have gone on to do other things from a deck and you probably keep better track of this than I do,
and any Commerce we always talk about the PayPal Mafia that is out there and I say Mafia in the most glowing of terms meaning people that got their start at a company have gone on to better and better things in kind of a you know
an unusually large percentage of folks,
so you guys it salsify kind of come from there I believe some of the folks at toast there’s company jellyfish you know I think I think there’s like 10 or 20 e-commerce companies that got kind of born out of inductive is that is that kind of your take as well.
[4:33] Yeah there’s a whole set of them and they’re across lots of Industries and in other places so in health care you’ve got a company called kairis,
in restaurant Services Toast of course raised a monster round at the start of 2020 at something like a 4.5 billion dollar valuation Sprout social went IPO this year they were founded by in Deca alumni,
you mentioned jellyfish is a relatively new company that’s doing really really well engineering Analytics,
so Steve Papa that a Founder CEO of and deca has been doing a play called parallel Wireless Next Generation Wireless Technologies,
and so yeah there’s just an absolute ton of companies that came out of that that group of folks and then other individuals like the chief scientific deca,
Daniel tunkel language the chief data scientist at LinkedIn after in deca,
one of the Andreessen Horowitz partner Julie you is is in deck alumni so they’re just all over the place it was a it was a heck of a company in terms of the talent that they were able to bring in.
[5:33] Was there something about the culture that kind of was it like a entrepreneurial kind of culture like what was there something special about it that you think has caused so many alumni to go on to bigger and better things.
[5:46] You know.
Jeremy Jason and I talked about that it’s really hard to pin down I mean I think the central thing is in Deca was known at that time for having an absolutely,
kickass engineering team with the best in Boston at and a lot of people believe that and.
Whether or not it’s true you know it at least had that reputation being in the top view so people that were really smart and ambitious in the Boston area.
Always had it on their list and in deck is interview process was really geared more towards hiring for just raw intelligence and ambition,
versus a particular skill set in any of the particular any of the markets I mean they just I mean they hired me as a product manager and I was.
Research software engineer at IBM I didn’t really even know how to spell product management before they hired me as one,
and that was pretty typical of a lot of The Hires that they had so it made for this really intense,
high-energy very smart culture but that also felt pretty chaotic a lot of the time to these you had a lot of smart people that were in there with their own ideas and their own Ambitions and trying to build their own things,
but yeah I think if anything I would pin it to that but it’s hard to say exactly what at that time Drew so many good people in one place.
[7:09] On top of that it was all so very much the Rolls-Royce,
top of the the hill product in the space like for a long time,
Commerce platforms didn’t even bother building search into their platform because it was sort of a given that you were you were going to use in Deca or certainly if you were an enterprise-class customer you were going to use in deca,
and they held that position for a long time even after Oracle acquired mmm.
One of the things that’s interesting Mia that’s kind of one of those stories what what in my mind what really finally knock them off the hill was they ran up against a good open source competitors.
[7:52] Yeah I completely agree with that solar elasticsearch they change the game from below the puts what made solar Nath elasticsearch even competitive was,
I’m compute capacity got a lot cheaper and,
like from it for the in decades and that guy had a couple dozen patents on their core engine was called the MDX engine the multi-room,
multi-dimensional index and the core thing that index allowed you to do was to navigate with you know sub hundred millisecond response times huge sets of data with high dimensionality and what that means is like if you go to walmart.com or you go to amazon.com.
Where they’re selling these days tens of millions or hundreds of millions of products,
and you look at that left hand navigation once you once you do a search so let’s say you go in there and you search for t-shirts and then the left hand navigation their selections such as brand color size price ratings,
Prime enabled all that type of stuff so clicking on any of those options reduces the space of,
things that match the original search of t-shirt that you are going after and it does so very very quickly.
The ability for a computer system to have a large amount of data and a large amount of those navigable.
I think about like a Walmart or Home Depot with literally thousands of product categories each with their own navigation structure so thousands of options to click from to navigate through the set computers.
[9:19] There weren’t systems that could do that back in two thousand one two three four five six seven bi Cube if you’re using business objects or cognos or something like that these systems,
would allow you to have a few dozen Dimensions at most right and then they’d sort of scale out so in Decca had this Secret Sauce of.
This index that could return search results in sub hundred millisecond time for large data.
And nobody else had that so so yeah this the open-source guys came along and they’ve got amazing products.
But but those products are not competitive except for the fact that computing power has actually gotten significantly.
Better and cheaper also in the intervening 10 years.
[10:00] Pretty cool so that’s a good segue I’m the I’m the entrepreneur in this Partnership of Jason and Scott here and I always like to hear kind of the founding story,
you guys were at in Deca guys got bought by Oracle and then kind of walk us through to the the founding idea of salsify hopefully there’s a napkin diagram in there somewhere.
Becoming first of all e-commerce is awesome it’s the coolest if the coolest face to work in because it’s so dynamic in and it’s not just dynamic as a space,
the practitioners of e-commerce whether you’re in a manufacturer whether you’re in a distributor whether you’re a retailer the people that are that are in the weeds every day,
are just trying to new things out all the time it’s kind of cowboys wild west it’s Dynamic it’s just the greatest space to be in,
so after in Deca we really wanted to do another e-commerce.
[10:50] And the big the big challenge like going back to and Decca you look at the search and navigation think about the search experience on Amazon right or the search experience on Wayfarer or the search experience on Home Depot.
These are companies that have very large product assortments and a consumer often times when they go to the site isn’t quite sure what they’re looking for,
so you know you use a generic search term you searched for you know blue t-shirt or polo shirt are you search for running shoes or you know you search for like some of these generic generic phrases and then you start looking around for what’s available right.
And when you start looking around for what’s available often times,
first of all the content is terrible on a lot of these product detail Pages even today but second of all when you click on the navigation options a lot of products don’t show up I remember we did we did,
one of our early customers as a company called Drive medical which is there the largest manufacturer of durable medical equipment think like Walkers role laters neck braces things like that.
If you go to walmart.com and they’ve got dozens and dozens of Walkers and roll laters on Walmart.com Walmart had a filter called senior right so just show me products for seniors.
You clicked at that time is eight years ago on the senior filter.
[12:05] You’d see one Rollator like the role leaders of the you know the things that old people will use to assist them in walking and.
Like literally every Rollator should be marked as senior right like there’s not there’s not like a junior Rollator that’s not a role later for somebody who’s middle-aged like me it’s they’re all senior product,
and so that’s a failure of the data tag,
now we found it in Deca that navigation if you had really good search really good navigation really good content we could quantify the conversion rate Improvement and the lift,
you could also quantify things like the house how big the cart was going to be by improving those things and and we’re talking you know dozens of points of conversion Improvement I mean huge huge impact.
And the biggest challenge that a Home Depot or a Walmart or Target or any of these companies had in delivering these experiences that converted at a high rate was acquiring content that could actually see.
[13:03] Search and navigation and Merchandising strategies so our view at salsify and the founding pieces,
was a brand manufacturer you know the Coca-Cola is Legos Levi’s Bosch’s 3 M’s of the world,
should really really care about their products being optimized for search and navigation,
where retailers go where where consumers go to find the product so they’ve if you go to walmart.com if you go to target.com you go to amazon.com you go to Granger.com,
you want to be able to your product to show up first regardless of what the search is and you want your product to show up.
For the correct navigation filters when people are searching my navigation and our experience was.
Retailers got bad bad content and Brands really did a poor job servicing this type of content and we felt that there was a immediate opening in the market there,
for somebody to help a brand manufacturer optimized for search and conversion across all of the digital retail touchpoints that consumers might be looking for their products so that that was the origin story.
I’ll layer onto that that our view of,
the system as we were thinking about it before founding the company was that well if you start really optimizing on the search and navigation and you really start optimizing for the experience management to help to help Drive conversions,
on these retailers sites.
[14:25] You know really this is the first step towards building a multi-channel Commerce platform you know empowering not just the experience on all these different multiple channels but also the transactions on sometime,
so our view was let’s start with a multi-channel experience management system that helps people optimize search and navigation.
And then live will air on the Commerce capabilities because ultimately everything’s going to have a Bible.
So that was that was the founding pieces and idea and we got after it starting in September 2012.
[14:56] So is it fair to say that and Decca you kind of learned that you know the the front and can experience can only be as good as the data in right so it’s classic garbage in garbage out thing so
so to really solve the discovery and customer experience you have to kind of go back a step to the brand because
they’re sending the retailer a bunch of junk data there’s only so much you can do to improve that right.
[15:18] Yeah yeah in what makes it insidiously difficult is if you look at homedepot.com which in decal is powering I think still is actually powering but.
Home Depot has a very broad product assortment.
And things like the depth of the bathtub to finish of the faucet the lumens of the light bulb you know all of those filters matter their material,
buying information that you want to be able to search and filter and make decisions based on right so.
Those dip those filters on homedepot.com are controlled by site merchants in the site Merchants are constantly a/b testing.
Tip optimize the site experience so you know for faucets for example let’s say that you’ve got to finish that’s Chrome and a finish that’s like burnished metal and.
The site Merchant gets this idea you know what people don’t know what these things are I’m going to call them silver let me run a site test to see whether silver converts at a higher rate than Chrome.
[16:19] So they’ll run the test and the test will determine how actually calling things silver is a really really good idea we should start collecting silver as an option for the finish of the faucet so then what happens is,
the the set of options that you can pick from a drop-down to set up a faucet on homedepot.com now includes a new option which is silver.
And Home Depot was making changes to that site site search structure,
on the regular like every single day literally as they’re optimizing their site Amazon same thing at Walmart same thing these guys they’re constantly looking at the numbers and constantly trying to squeeze out a little bit more conversion rate,
so the site data strategy isn’t constant it’s in constant flux,
so if you’re a manufacturer and you solve faucets and you’re setting an item up on Home Depot today and you fill out like it’s Chrome and then tomorrow you could go fill out you know the next version of that item and chrome is no longer an option has been replaced by silver,
like that type of little.
Change X however many hundreds of retailers you work with is the is a problem with for the manufacturer so manufacturers weren’t,
weren’t we’re just not provided the content they were also bombarded with this cacophony of changes that were really quite difficult to keep up.
[17:42] Yeah and I it’s funny I’m trying to get in my my time machine and go back to 2012 backpack then say you were a cpg company your Mondo he’s selling Oreos right the.
The person that was responsible at Mondelez for walmart.com was either the intern or it was like a.
You know 1% side job for the account team that sold to the Walmart stores and in Bentonville and so.
When they sold those Oreos in the store.
Walmart needed to know like eight attributes about the pack of Oreos but when they started trying to merchandise Oreos online the online teams like oh we want 30 60 80 attributes about the product and that poor intern,
had no juice or way to get any of that digital shelf content so I see like there’s a lot of like sales team recreating their own product content in Microsoft Excel and like manually uploading it to websites back then.
[18:43] Yeah absolutely I mean and it’s just a hundred percent agree with that and it’s sort of it reflects exactly the priority of.
E-commerce and digital strategy in general and cpg in 2012,
I mean it just it was not it was on nobody’s radar right it was it was it was a maybe a fast-growing tiny little segment that almost nobody cared about.
Just about every segment so the you know the Mondelez example,
Not only was it some interns job to fill out the content but Mondelez also didn’t really have an e-commerce strategy from a product portfolio,
so it back in 2012 in order to even make make positive margin on a sale on Amazon Mondelez I don’t know if you remember this they’d be selling like the.
The three pack of the large packs.
Probably 25 bucks so you couldn’t just buy a small amount of Oreos you had to buy like a tremendous amount of Oreos on Amazon if you’re if you’re buying them and so they were yeah they were it was back then it was really everything was manual.
[19:44] Oh yeah for the record I never noticed that because I just wanted to buy that many Oreos so.
[19:48] Yeah what’s wrong what’s wrong with buying a three pack of Oreos Corner up.
[19:52] I got to tell you that you know the birthday cake Oreos.
[19:56] Say the greatest things imaginable.
[19:58] I do my five-year-old is a big fan although we’re on Halloween Oreos right now.
[20:03] Oh yeah.
[20:05] So then we get in that time machine we fast forward back to 2020 you guys have done a couple of rounds of fundraising along the way but,
very recently you announced a big rise of like a hundred fifty five million dollars which is,
super impressive congratulations / now I’m nervous for you.
And it seems like a bunch of other vendors in the in the Commerce base of also done really well with investors lately I think I want to say Miracle had to raise the same week you did fabric had to raise this week obviously there’s been some,
some successful IPOs from the platform guys do you like,
is covid sort of heating up the space like what do you think is driving investor interest in the space right now.
[20:52] Yeah I think covid is heating up interest in certain parts of the space.
So you look at the Commerce platforms like Shopify obviously is worth a gajillion dollars right now in market cap Bigcommerce IPO Dan had just a stellar Stellar IPO,
same sort of thing the multiples in that space or just really really high right now in the public markets.
For for us the.
[21:22] In general covid is accelerates Digital Trends and you know you could say that’s a positive thing for us but the,
range of companies that we sell to is you know there’s a whole markets that we generally sell to you that have been absolutely crushed so apparel for example apparel still hasn’t gotten off the floor this year right you know Footwear is not gotten off the floor this year,
and so for you know for us it’s been you know we’ve done we’ve done well during this period because it’s digital,
but but in Broad Strokes I don’t think it’s particularly different from from what we were you know going to do anyway.
With General rise with a company like a miracle,
miracle for those who don’t know they provide Marketplace as a service effectively so you know how Amazon you could you could buy one product from Amazon that are that are sold by Amazon and you could buy products.
On Amazon that are sold by third-party sellers Miracle is basically enabling any retailer to sell third party products on their.com.
And that strategy is a strategy is very attractive to retailers that are trying to keep up with Amazon,
they look at Amazon’s 3p margins,
and they just it’s looks like almost free money right and they say well jeez you know if we could get if we can get some of that that’s good that’s helpful to us and that also enables us to have larger assortments to compete with Amazon an assortment,
and these days when all of a sudden just about every ever purchased one online.
[22:51] For retailers to have a strategy to increase assortment in a dramatic way and increased margin that a bunch of sales that’s a hugely attractive thing so you see sectors like grocery for example I think Albertsons has a,
has purchased Miracle recently right Kroger I think is purchased miracle miracle recently so these big Grocers who generally had I would say like.
An online strategy that lied you know Amazon Walmart Target for example there are standing up these marketplaces now with hey so I think,
covid for miracle has been a huge accelerator in this in the space that they’re in,
so it sort of depends I guess on this date on where were you fit in the e-commerce supply chain as to whether it’s been like hugely positive you know a little bit positive neutral right and I think you’re just seeing the fundraising reflecting that.
[23:45] Very cool we know the guys that Miracle congrats to them and to you on the big races the so
so that’s really good kind of I think that helps listeners kind of understand so you’ve spent the last 8 years like really entrenched in working with brands of all different categories
helping them get their products out to Market and you know the thing we talk a lot about is this direct-to-consumer kind of pivot that most brands are making
you know would love to hear what’s it been like watching that over the last eight years and and where do you think we are on that that Spectrum right now.
[24:19] Man yeah we’re in like the first early Innings on that Spectrum so we hit I remember we went to if you remember a couple companies that have been acquired since then clavis which is now part of a central one click retail which is part of essential content 26,
there was a bunch of us that were playing in the Amazon content and conversion optimization space and 2015 16 17 which was,
yeah it’s got It’s funny to look back and say that that those were early days on Amazon but for a lot of manufacturers in particular that were.
[24:52] White learning about e-commerce at that point those were early days on Amazon and we had a one-click retailgeek has hosted a hackathon.
And I want to say to end of 2016 out in Seattle,
it was Amazon hackathon we had VP of e-commerce from like a hundred companies and the set of us were just hosting.
Sessions on particular win on Amazon topic.
And back then everyone was talking about how the future of selling on Amazon would be hybrid cell.
So if you’re a manufacturer what that means is that you’re selling some product direct to Amazon that Amazon is then owns and sells to consumer,
and you’re selling some product as a 3rd party seller on Amazon.
And what you sold is the first party on Amazon versus what you sold as a third-party of Amazon there’s a hole deep discussion on that that strategy which is change over time.
Whether you’ve got a 33 p backstop,
for if Amazon goes out of stock on one piece sales and whether you tell Amazon about it is a whole other topic and so people were discussing that the future the best-in-class operations for Amazon required,
that a brand manufacturer have the ability to pick pack and ship and each to a consumer for the purposes of this hybrid selling.
And so I thought honestly at that time given the focus on the topic that we’re now four years in.
[26:20] Just about everyone would be doing it or would have figured it out right we would have.
In the supply chain in particular the demand forecasting models the the,
Office of the CFO has to deal with updating the way that they think about p&l for the space and like you would think that they would have done those changes to make it possible to sell direct to consumer,
You know we’re four years later I think the majority of brand manufacturers don’t don’t have the capability to sell direct consumer a lot of them are struggling to set it up right now in haste and covid-19.
[26:54] You know they didn’t have it coming into this year and so I think that space is really in its in its early Innings with the way the way that I think how it’s going to evolve.
And this might be.
I don’t know if I’m the only one who thinks this might be a controversial point the way I think this is going to be evolved is that the brand dot-coms are going to be the least important of the direct route to the,
so if you’re if you’re a manufacturer and you’ve got a brand.com and it’s got a shopping cart on and it’s powered by Shopify or Bigcommerce or Salesforce Commerce cloud or Dobie Commerce or whatever,
and you know people go to brand.com and they transact and then you ship them the.
I think that if you if you consider that one mode of direct-to-consumer another mode of direct consumer is selling as a three-piece seller on the marketplace.
Right you’re just basically using someone else’s website except instead of your website the power of the shopping cart another mode of direct consumer is the new by buttons that exists exists places like Instagram or Google shopping actions,
and you take the whole mix of those those things like by buttons everywhere as direct-to-consumer where you’re doing the merchandising and you’re doing the filling,
I think that we’re in the very early days of companies wrapping their heads around that I think we’re in the very early days of companies even investing in the capabilities to manage that and I think we’re also,
in a space where the at the end of the day the brand.com might be the least important of all those options.
[28:20] Which further complicates how they’re thinking about direct-to-consumer as a category so that that’s my general view on it’s I mean it’s I was I would have expected more change in the last four years but you know with covid I think we should expect.
Faster acceleration of this stuff in the next.
[28:36] Interesting I do I love this stuff I want to unpack just a little bit of that so the.
Your perspective about brand.com is interesting I feel like I agree depending on the category right so,
in consumer packaged Goods or food or items where the unit economics aren’t super favorable the selling at from brand.com,
hundred percent agree right like like they should for many reason still have a brand.com but it’s not a very important touch point so it’s probably never going to be a big touch point for.
Doritos or whatever right even though I know they just.
[29:14] Dot-com yeah.
[29:15] Yeah yeah however I actually think for nike.com or apple.com.
The there is a concerted effort to make that like the primary destination and they in certain brands can make that work right when they have the right product in the right unit economics.
[29:35] Yeah it’s actually it’s interesting there’s examples you pick up there’s a whole other thread here which is like in a world.
In the world of e-commerce where anybody can compete with you you know on the on the physical shell if you’re dealing with.
You know just a handful of other products in your category because there’s limited shelf space in the store on the digital shelf you could be dealing you know competing with dozens of different products in your category so the competition is significantly more Fierce and generally speaking,
there’s less market share for the leaders,
I’m online than there has been in store historically so people that are used to a certain amount of market share generally lose it as the dollars Move online.
And I think the solution to this in Broad Strokes is for a brand to be like a must-have brand right for a brand to be truly differentiated,
and Nike and apple are two Brands to your point that are truly differentiated and they built they built.
[30:27] Real loyal followings and so people will go to nike.com they will go to apple.com and they will transact direct and I see that as a result of.
Just just outstanding brand execution over a long period of time,
there’s there’s other examples that are in that same vein like lego.com I know you know you’ve got a little kid I’ve got a little kids like we got a lot of Legos we go to lego.com as the primary place to transact for Legos,
but Lego again is one of those absolutely iconic Brands Keurig.
Just as another one Keurig does a lot of volume on the current.com they’ve got the subscriptions on replenishment they.
A lot of offices will purchase from Korea got calm and bold things like that right and so I yeah you’re right that I think that I don’t know that it’s a category thing I think it’s a brand.
That we’re the ones that are really iconic brands are the ones that are going to have stronger contribution from their brand.
[31:25] Yep yeah no that’s fair I think you do have to be that iconic brand I just meant like even if you’re that iconic brand if you’re in a category that doesn’t have super appealing unit economics.
Like that that alone could have wrote you can be the best fabric care product people probably don’t want to buy Tide from Procter & Gamble like they probably want to get it with all their other groceries.
[31:50] It’s going to be interesting to see how that evolves I remember actually thinking this exact question I went.
P and p and g and spent a bunch of time on their direct to Consumer because they can you can buy anything from P&G.
Directing and Zoomer and so I ended up subscribing to the mach3 razor blades for from Procter & Gamble’s Gillette.
As you know and they’ve got like a subscription service for it and it’s great and then I went to tied,
and looked around and tie the interesting thing about the tide direct-to-consumer site is there are way more tied options available on the direct consumer site then you’re going to get in any store that’s around you,
and some of the options are really interesting compelling value oriented options for consumers when I see value-oriented I mean like.
Consumers that have a moral perspective on ingredients and things like that,
you know that they generally won’t find in whatever a Target or Kroger so there you know I don’t know it’s interesting to say how much that’s going to matter tide is also put a tremendous amount of investment in,
e-commerce packaging so if you buy Tide on Amazon you don’t get like the heavy plastic container you get these I don’t know what you call Mike these little plastic.
[33:03] Yeah the frustration free and then you get the oh gosh yet the names skipping me but.
[33:11] It bag basically it’s like it’s like a plastic bag with like a little thing that it’s meant to those like almost a refill more than the in The Jug that you normally Buy,
and so they’ve done that to make it more profitable to ship it basically and so the,
it’s just interesting to I think over time there’s no category that can’t find a way to be profitable,
from the margin and chipping perspective we look we fit We Fear had a profitable quarter Wayfarer people that company that a lot of people never thought would ever make money ever there’s no way they’re ever going to make money and they had they were profitable,
and they sell furniture and so I don’t know I think it’s all possible to make to do a direct-to-consumer it’s just a matter of changing maybe changing a bunch about how you do it.
[33:52] Yeah fair enough and for sure don’t misconstrue anything I’m saying as you shouldn’t be trying to do that there’s a bunch of benefits,
in addition to the the gross margin dollar so.
But I did a couple other things came up that that are I’ll call him semi controversial so I do a ton of these direct to Consumer engagements with brands.
And I frequently talk about like the 12 flavors of direct-to-consumer right because everyone everyone immediately goes to brand.com and my hypothesis is for a bunch of brands,
prove your point that’s that’s the least important right so there are all these other things a hundred percent agree with you I Instagram check out or or,
collectivize on Google are these sorts of things and included in my list is 3 p selling right would you you clearly defined as a flavor of direct to consumer
but in my mind when I’m telling that to a brand quiet I actually feel like I’m lying because I think there’s a way in which,
3p selling our for sure 3-piece selling on Amazon is exactly the opposite of d2c because you never meet the consumer like you never have any act like you’re totally disintermediated from the consumer.
[35:05] I mean not that fully though because you can I don’t know how many 3p products.
That you purchased on Amazon but if you get it from a small seller what will typically happen is they’ll be a card in the box,
so the small seller will ship you the box and the Box arrives and you open the box and there’s a note to you right and then note will often have a discount code for,
for a further purchase and it’ll say look if you have any trouble please just you know don’t don’t do the one star review call me I’ll fix your problem.
It does all that type of stuff so so I think there is that opportunity I’ll tell you a great story there.
[35:46] This is going back maybe five six years ago Bob land is the head of digital and customer experience at Darrell juvenile group in North America.
[35:58] And tv ads were getting pretty expensive for them,
and so what he decided to do was to take all of his TV ad budget and put it into post-purchase experience and the thesis was that in the particular for the for the car seats that Darrell was manufacturing they make something on the order of eight million car seats a year,
the idea was that if they did that they could get repeat by and they’d get word of mouth and you get good reviews and all this sort of stuff so what ended up what he did was he invested in call center based in America,
where when you get your car seat you know I remember when you installed your first car seat it’s like,
absolutely impossible to know how to do it and you’re terrified that you’re going to install it wrong and your kids going to get hurt and it’s just you know the instructions are you know totally obscure like installing a car seat is miserable,
and so with Darrell did was you know you got a you got a car seat and it would have a little unexpected gift as part of the packaging that you would unwrap it that you weren’t expecting and it would have a note that says look if you have any trouble at all,
call this number and we’ll get you on a video and we will walk you through any any question that you’ve got.
And so they invested in a call center the invested in the video and they did that so and that resulted in a tremendous consumer satisfaction great reviews and I was a good investment.
[37:19] And so I think if you look at the 3p selling you you you are having ways their of investing in the direct consumer relationship,
[37:30] Are not intermediated by Amazon in the same way that Amazon shipping that same product is right you can get creative with these approaches and start building relationship building Rapport building building consumer loyalty,
so yeah I agree I mean your point is well taken that you can’t do as much with Amazon as a 3p as you can selling on your own brand.com but I still think that there of a theme.
[37:54] Yeah fair enough and I will say part of the reason you you mainly get that experience with small Brands versus large Brands is because.
You’re really skirting with the terms and conditions on Amazon Amazon to be a 3-piece hour and if you’re a small Cellar that risk calculation is worth it if you’re a big seller you can’t risk getting kicked off the platform so you,
have to be a little more careful.
[38:17] Yeah some of those things like don’t give me a one star review or definitely in the dark gray dark gray Zone.
[38:24] Yeah well the discount code in the box is really dark okay.
[38:27] Yeah the dark razor.
[38:29] Or the even better the you know gift card if you leave a five star review if that’s a that’s classic the so Rob,
you know I don’t know salsify is different customer categories but you’ve talked to the fair amount about like cpg you mentioned fashion
do you see each of these there’s kind of different category adoption going on because like obviously Electronics were pretty early on
toys of had to get some religion around direct-to-consumer because once T are you went out of business they were kind of left without a lot of options is there a spectrum across categories of behaviors you see in any interesting things there that you can share with listeners.
[39:10] Yeah it’s been the categories go undergo their own evolution.
[39:16] With regards to that essentially how much sales are happening online so when we when we got started I remember we.
Spent the first like this is.
2013 and I every two weeks we would call into a different category to try to get a sense of whether they were interested in the product that we were solving and the most miserable two weeks was we called into dental equipment manufacturers for like a whole two weeks,
the see if they are interested in solving these digital experience problems and that went nowhere,
but you know the early traction for online is if you look at Beauty and personal care the cat at the percentage of sales that were online we’re pretty high early,
so a lot of the early companies that we worked with like the Johnson and Johnson’s and Reckitt benckiser and whatnot had already seen some of the some of the growth online and we’re already making some investment in the online experiences.
But you know other companies you look back in 2013 14 15.
But the other categories that absolutely were nowhere online our alcohol for example again there’s rules and regs about purchasing alcohol online drizzly wasn’t a thing yet and so on and so forth,
and so alcohol was nowhere and nobody was.
And you fast forward to the last two years and especially with covid covid has really made alcohol invest in e-commerce in a way that absolutely they.
[40:41] Step function different compared to what it was before but even so the last two years because of the rise of drizzly and others alcohol is come into The Fray and so now there are people with the title of BPD Commerce at Major alcohol manufacturers,
that have clout and that have that have budget that have investment and.
So yeah category by category when a category picks up online I think just sort of follows.
[41:08] A market being available in sales going.
I mean other ones that I’m kind of looking at in the future that word there’s really no online activity right now or like automotive automotive aftermarket pharmaceutical industrial supply distribution like electrical supply distribution plumbing supply,
there’s a there’s a there’s a bunch of those categories that I think are you know on some kind of.
Early part of the adopter curve right now that could accelerate pretty quickly with companies like you know Amazon business coming in and really putting pressure on Distributors so so yeah I think category by category has been pretty interesting at this point most consumer categories of,
I’ve got some some amount of ability to really execute and B2B I think is going to be the next next big wave over the next decade.
[41:57] Yeah it’s exciting there’s so much opportunity I feel like there’s a bunch of categories that have barely been touched so they there’s a ton of white space there,
you hide it highlighted alcohol which is super interesting and I might even argue a lot of alcohol is a subset of grocery in a feels like.
Groceries another category that that hugely got accelerated because of covid like I’m not,
I’m not sure that many Grocers could spell digital a year ago and now it’s their number one priority our it seems like you guys are really well well,
situated for that are you seeing that as well.
[42:34] Yeah absolutely yeah that the Grocer’s were basically you know year ago it was sufficient for them to maybe list products on a.com and,
and they would use their planogram images effectively as their images and there was a really much of a site experience to speak of,
and over the last year I’ll hold Albertsons a bunch of a bunch of these folks have made really significant online experience Investments I mean Albertsons you saw the two hundred and seventy percent growth or something like that,
they put out on digital the numbers are just super compelling there other.
[43:10] Yeah they actually just had another earnings call this week and had another great quarter.
[43:14] Another great quarter yeah they’re just they’re just absolutely crushing it Kroger I think was always a little bit ahead of the game from from a digital perspective and which it’s tough for a lot of these retailers is simply,
the cost to invest in making you know click and collect buy online pick up in store the.
Digital delivery to actually get these things to work and be profitable is just an absolutely massive capital expenditure,
and Kroger’s been spending a lot of money on it over a bunch of years and what you know covid has basically allowed them to do is to just sort of.
Go next level on it right actually actually really invest in you’re getting closer to Amazon like aggression and the way that they’re able to go after it so yeah grocery really came online you know it’s funny that you mentioned is alcohol is part of groceries,
the longer that I’ve been in this game the more the more I think about,
I sub sections of the grocery store is almost being totally different universes so like alcohols its own Universe Fresh Foods its own Universe Center aisles its own universe and so on and so forth.
In a way that I don’t think I appreciate it at all 10 years ago.
And each of those has had its own motion with regard to digital maturity and digital execution and all that type of stuff.
[44:30] For sure and Frozen again would be a different one.
[44:33] Frozen yeah.
[44:34] Yeah the only reason I’m at the moment kind of bundling alcohol in a covid way in the short-term artificially,
like the thing you have to remember is seventy percent of alcohol spending pretty covid with on-prem like bars and restaurants and so now you know 90% of it is
off Prim so it’s sold through some retailer and at the same time because of,
everyone’s consolidating trip so where you might have gone BevMo for your booze and Whole Foods for your fresh and Kroger for your shelf-stable stuff,
now Kroger’s winning that whole trip because you can get booze fresh and shelf-stable there so at the,
like I don’t think this will last forever but at the moment alcohol sales at that grocery store as part of that Consolidated trip our way up.
[45:21] Oh Dancing Yeah I hadn’t thought about it that way but yeah that’s that doesn’t surprise me this this stat that surprised me the most on alcohol and this is this is changed since then but.
Back in I think sometime in mid July I was talking to one of the heads of e-commerce of a major alcohol manufacturer and they were saying that.
With every restaurant in America being closed with every bar being closed with every Casino being closed with every cruise ship being close we’ve every Beach being closed and so on and so forth.
You would think that alcohol consumption.
And you know you think that the manufacturers there for their bottom line would be you think that Malcolm with something would be down and people they’re just selling less booze because all the places that sell booze are closed and what what I was told.
Who is that in Q2 actually sales for the manufacturers were basically flat so the in-store Kroger.
Bulk booze purchase and the ad home boozing.
Was more than sufficient to make up for every bar restaurant casino cruise ship Beach and so on being closed for the whole period.
[46:39] Yeah no it it is crazy and benefited per your original point it was super hard to sell booze they’re all these regulations and God forbid you try to sell booze online it’s even worse and,
as a result of covid a lot of distribution laws got temporarily loosened and so like a interesting sub theme in all this is going to be if.
If legislators are going to try to re impose those restrictions or if we’re now in a digital delivery world for.
[47:13] Do you have a take there what do you what do you think that those laws are going to be pulled back.
[47:17] I think yeah I think they’re going to partially go back but I don’t think they’re going to go back to where they were I think just like prohibition you know once people get used to this stuff it’s pretty hard to take it away.
And so I don’t know you know what we’ll have to see,
I did want to ask you one more general question on grocery because obviously you guys you know really focus on the digital shelf I want a lot about the digital stuff from you guys,
um despite the fact that groceries booming and we’re selling stuff digitally I still feel like it’s the first inning right if I go to the most successful digital grocers in the US.
It still feels like a t-shirt product detail page with some some produce information filled into it right,
and I like to do this joke I have a bunch of big digital grocer clients and I always show them an audit of their product detail page,
and I have this funny image which is a true image for one of the very large Grocers of their kale product detail page and it’s like a forward description,
like organic Italian kale and then there’s a 256 word disclaimer saying that the information might be wrong.
[48:32] Um and so I do think like as consumers really adopt digital like I imagine the digital shelf in the future like you think about all the things you’d want to know about,
your your fresh produce before you buy it and you go to China and you look at all the content that the Imam or seven fresh give you,
and it just feels like man we’re so we’re still so early and all this grocery stuff do you see any hope that we’re gonna improve now that everyone is paying attention to it.
[49:03] Yeah I mean like if we want to just pull back some of the biggest advertisers in the world are companies that sell.
Products cpg products into the grocery stores right and.
Groceries the biggest retail sector in the United States and and I think that if you look at.
[49:26] Things like television viewership and where where where the percentage of households that actually have a cable subscription just keep plummeting there’s more and more people going to Netflix means that basically people aren’t seeing television commercials.
I think the a lot of the brand dollars that are traditionally spent through a television through newspapers through other means like that.
Are going to need to be redeployed elsewhere to make a brand case and if you start from where the consumer is and work your way backwards consumers attention.
Is digital these days right and all of their shopping patterns I mean right now all of their shopping patterns are.
Online for the most part but you know increasingly in the future more and more will be and so if you’re a brand.
Yeah and you’re looking to make the case for your brand and make the and and really.
Not just sell product but you know build an emotional connection with the consumer and they’ll the heart of branding here.
Those product detail pages are the heart of your,
like more people will see the product detail page for your product on Amazon then we’ll see your TV commercial right more people will see the product detail page on Kroger then we’ll see your TV commercial,
and so I as more purchased behavior and as more traffic and consume fundamentally consumer attention goes to those pages.
[50:48] People will have to fix that problem of the Italian kale that you talked about like who’s ever selling that kale,
should talk about just like you going to Whole Foods right they don’t just sell the kale there’s like a tag that tells about the local Farm That Grew this kale and like all this stuff that’s what you that’s what you need to do it people don’t just buy a product they buy a story they buy values,
and so these product detail pages are going to evolve from,
being you know just a picture of the thing and a title to being full brand experiences and that’s what that’s what I think resonates with people,
and I think this is a broad statement about I mean this is this is a fundamental thing that I believe about most of Commerce like you look at Nike,
what are the greatest brands in the world we were already talking about then you go to a Footlocker.com or or a lot of other sites that still sell Nikes and the Nike,
photos are like the top of the shoe the bottom of the shoe side of the shoe you know the shoelaces.
There’s no there’s no lifestyle shots there’s no let’s do it there’s no embedded video about Nike there’s no nothing right and like that’s where Nike should just be reinforcing the case of the amazing brand that it is,
and and so I yeah in grocery were really I mean we’re really early days there,
but yeah I think it’s inevitable that people are going to focus on improving those experiences as the dollars and the consumer attention moves there.
[52:08] Very cool if we if we project a little bit one of the things that I’m always kind of fascinated to hear people’s opinion on is if every brand is kind of going Direct,
and I know you’re not really a big believer in the brand.com but let’s say they’re all out there doing that and then obviously you know Mall type retailers that have multiple brands or closing at an increasing rate.
What’s the world look like when all these brands are going direct is there is there some new aggregation point or what does it look like how do we how do we discover brands in the next three to five years.
[52:44] Man I mean that’s that’s a tough question there was a.
Shopify was running an experiment in in a location in Manhattan where they were.
Highlighting a handful of Shopify sites within like a mall like environment and.
They were also running other types of in-store experiments like that where they were saying okay well let’s let’s do like an interesting.
Um I don’t know about like that particular approach because to me it feels like the Amazon for starts towards like what reason do you have to go in there it’s like a bunch of random stuff you know they can’t go in there with a shopping list because you literally don’t know what’s going to be in there.
[53:29] Gift for your aunt that’s the main the main mission.
[53:33] It’s like yeah exactly like a gift store so I really don’t know I think people are going to experiment because really I mean commercial real estate is going to be pretty cheap.
After this whole covid thing and I’ll just go there’s a lot of retailer closures and most faces you know there’s a lot of love anchors like JC Penney went bankrupt and a lot of those doors are gonna close and and so I think there’s going to be a lot of cheap ways for,
people to experiment to try to answer that question I don’t actually know I mean I think,
increasingly in the world that we’re in we’re going to see more fragmentation of ideas and interests we’re going to see a lot more kind of Niche down interests of.
Smaller sets of consumers paying attention to smaller sets of things there’s less of a mass-market and more of this whole set of small markets of.
And each of those small markets of Interest have ways of perpetuating like new product Discovery across the individuals that are within the.
And so it’s possible that the way that Discovery happens in my view in the future is.
Isn’t like that mall in store browsing experiences at the past but rather,
small sets of people that have a shared interest like you know whether it’s the adult fans of Lego or.
[54:57] Whether it’s fans of the Premier League and soccer in Europe and whatever it is,
it’s these small groups of folks that have distinct places that they go and congregate where they’re going to share ideas of new things and there’s there’s a piece of me which thinks that.
People that figure out a way to unlock those types of communities and those types of engagements from a branding perspective or the ones that are going to succeed on a go-forward basis,
I know that’s not like a great answer to the question I could it’s a really hard question to answer but it’s where my kind of gut inclination is.
[55:38] Yeah I don’t know I would give it a good answer I feel like that was very insightful II totally agree on sort of the fragmentation of markets and.
I sort of think a lot of these moments of Discovery are also going to therefore get more distributed to a wider variety of different touch points right so,
you know maybe for shoes it’s Instagram maybe it’s a recipe site for new food products things like that you know I think we’re going to see a lot more micro moments,
happening in a much wider variety of touch points which is I sort of think part of the vision you have for your company right is being the engine behind all those micro touch points.
[56:18] Yeah that’s I mean that’s exactly right it’s my.
I believe I believe in that type of thesis and future and it makes it hard for a company to execute like one of the thought experiments I would like to have is.
If you were trying to build Procter & Gamble from scratch today does it look like you know several dozen brand,
giant like it is right now or does it look like a 2000 brand giant or 3000 brand giant where each of the brands is a little bit smaller and more targeted you know,
and I kind of think that there’s there’s something to that so like if I look at a couple products that I bought in like recently they’re related to the CrossFit community,
there’s a up-and-coming brand called Noble and OBU LL out of Boston,
that sells pretty excellent workout gear and it’s really the target the CrossFit Community right and they’ve got a lot of loyal followers in that Community I look at row get the fitness equipment manufacturer we are they.
David you’re killing it and covid are making it an absolute ton of money in covid as a lot of home fitnesses and the community that they’ve got is the.
CrossFit Community as well so these are folks that don’t have to advertise what don’t they don’t have to be in in for example Dick’s Sporting Goods they don’t have to be playing the Amazon game.
They’ve got a built-in brand with a built-in following into the building community and they’ve been able to do well based on that so.
[57:47] So yeah I think I think this whole micro moment small community touch,
engagement problem I think is a is a pretty important problem for lots of people to wrap their heads around and figure out how they’re how their company can or should or or won’t participate in that move.
[58:05] Yeah for sure good good call out on no bull by the way and just for listeners know even if you’re super unfit like for example me the their kicks are still super cool.
[58:17] They’re so cool.
[58:18] I’m a fan too I do want to,
I am a hundred percent agree I think categories like apparel it’s playing out the most right like in the old world Paris fashion show the new trend skinny jean everyone in the whole world by skinny jeans at the same time I feel like that,
that model is just gone there’s thousands of micro trends for different communities all at the same time.
[58:42] Thank God because skinny jeans were so I or me and.
[58:46] The CrossFit guy they probably worked out better for you than they did for me but still.
I do want to Pivot because we’re running out of time do you obviously we’re coming up on holiday like depending on how you count it already started do you have any opinion or thoughts about what this crazy covid influence holidays going to look like.
[59:07] Man I’ve been trying to think about this so my in my family my mom notoriously shops for.
Four five six months in advance right so it’s like with my brother and me and our kids will get an email from from her in August saying hey what’s where’s your kids Christmas list you know it’s like it’s August.
And so this year we got the Christmas list and it made me take a step back and think huh this is interesting because.
[59:41] They live in Florida we live in Boston we’re not going to see them for Christmas like we’re not when I would because it covid-19 traveling.
I think that’s true for a lot of people and what does that mean for the gifts that they’re going to buy and give them normally they shower our kids with a bajillion toys,
and like what are they going to do like ship a bajillion toys to where we’re living and have the kids open up a bill Jillian toys when you know they don’t get to see the kids open up the toys and.
And so I was trying to play this through in my mind exactly what what the impact on our own shopping would be and.
There’s not there’s not there’s not easy decisions on how do you actually make the grandparents and then they grandkids have a great connection across the country in this weird time that we ran,
and so I don’t know man I think it’s going to be absolutely bizarre holiday season just like in the early days I would never have predicted that,
flower of all things with sound with the sourdough Trend was going to blow up,
I’ve been making sourdough for years before it was cool you know and all of a sudden they couldn’t find flower anywhere because it was out of stock I don’t think anyone could have predicted that all of a sudden everyone is a home Baker,
and doing sourdough but that’s what happened and so for this holiday season.
[1:01:01] I think there’s a little bit of trepidation that I’ve got trying to predict anything it’s just everyone’s going to be trying to figure out how to do a remote Christmas with their families sending gifts all over the damn place,
and and so I’d so yeah it maybe maybe it means smaller gifts maybe it means fewer gifts maybe it means more of a focus on,
putting you know like checks for your college savings fund maybe it means you know all a mix of all of the above but it I the only thing that I feel like is for sure is that the.
The purchasing habits are going to look a little different than they did last year and for all the travel and get together and constraints that with us.
[1:01:42] Pretty cool we won’t hold your feet to the fire on on holiday stuff one last one and this was just I was kind of in researching the show one of our many research assistants,
pointed out that you guys have at salsify have won several,
not only kind of local local best place to work Awards but some national ones so tell us about that and you know as a fellow founder.
That’s always one of the things I’m most proud about is if you can create a place that’s great to come to work that’s that’s kind of part of the fun of being a Founder I’d love to hear what is it about your culture that is caused all these Awards.
[1:02:19] Yeah well I mean oh thanks for thanks for bringing up the I’m very proud of it.
Just like you said in terms of one of having great people and having a great culture as one of the great Perks of Being of coming to work,
one of the things that all three of the founders set in the early days is if you don’t if you’re not building a company that you love going to what’s the point now life is too short,
so first and foremost if we’re going to do anything let’s have this be a place that we just love to work and for us just based on our own personalities the type of jobs that we like.
Our jobs that were fast-paced that were intense but where people were,
supporting each other you know there’s there wasn’t backstabbing or anything like that people understood where you’re where you’re going and there’s Clarity on direction there’s Clarity on your role,
and where each individual had enough space and autonomy to really do their job without being micromanage right where people felt like they could have impact and control and contribution.
And so from the earliest days we focus on.
This concept we called empowerment it’s I know that’s a loaded word but this idea that people were really have an ownership mentality of the company and their role and position in it.
And we tried to keep that as true as we can all the way all the way through scale and so I think I think that’s largely what’s reflected there.
[1:03:45] The types of people that are attracted to that type of environment where you’ve got a lot of individual accountability and responsibility and it’s fast-paced absolutely love working working at in this type of place they tend to stick around a long time.
We also one thing that we did really well as a while back we got a chief people officer Colleen who’s just been absolutely outstanding helping us really codify the culture and.
Make it stick as the company scales you know when you’re when you’re a hundred people are you 50 people or 20 people,
especially because we have three founders we can be a lot of places and everybody can know us and we can perpetuate a lot of the ideas that we want and we get to this 400-person Plus,
range especially with covid and we’re remote we’ve got a European headquarters and we got office in Chicago and my people are all over the place most most of the people don’t know me personally I don’t know Jason person I know Jeremy person.
And and how do we set the culture up to perpetuate so Colleen has been really effective at working through the process of,
taking a lot of the early ideas and things that we cared about and keeping them true as we’ve gotten bigger,
so I think that’s what I would say is that the San Marino having a strong idea of the type of company we wanted to have what’s the core ideal we wanted people to stay true to overtime and having an operator really work with us to make it.
Make it scale.
[1:05:09] It’s always weird when you you know you cross this Chasm of not knowing like two or three people that you’re walking by but they know you and you’re just kind of like this is really strange,
that’s when culture got to rely on the culture to really kind of get there you can’t you can’t do one-on-one when you have 400 folks in the company.
[1:05:27] I do all these I’ve done all these like YouTube videos like whiteboard videos and things like that and the P that people team.
Has incorporated a bunch of them in the early trainings I didn’t know that they were doing this so for me it’s like I got this problem is compounded when people will come up and say like I saw all your YouTube videos and I don’t know there’s just something that’s.
Cool but it’s also it’s also like a little awkward for me you know what I mean.
[1:05:58] Poor baby you rock stars yeah poor baby that you guys are all so popular.
But Rob hopefully like 12 years from now a bunch of those more Junior employees will be on podcast talking about the salsify mafia and all the successful companies that spun out of out of you guys just like we,
we started out with in deca.
[1:06:20] Absolutely nothing would make me happier.
[1:06:22] And that is going to be a great place to leave it because we have slightly exceeded our allotted time,
but really enjoyed the conversation Rob as always if folks have questions or comments,
we encourage you to hit us up on Twitter or leave us a question on our Facebook page and will continue the dialogue if you got something out of this show I hope you’ll jump on iTunes and finally give us that five star review.
[1:06:46] Thanks for all the folks want to find you online what’s the best place to get to you or are you a tweeter or a LinkedIn person or both or.
[1:06:55] Is these days I’m more of a LinkedIn person so if you search for Rob Gonzalez on LinkedIn on the bald guy.
I also would encourage people to go to digital shelf institute.org I read on the blog there quite a bit and we’ve got two we’ve got our own podcast where if you like my geeking out and nerding on technology you can get you can get more and more of that there.
[1:07:18] There’s some very sketchy guests that have been on that podcast I will say.
[1:07:22] Totally sketchy guess.
[1:07:24] Speaking for myself awesome Rob thanks again and until next time happy Commercing.
EP241 - Holiday Preview with eMarketer's Andrew Lipsman
Andrew Lipsman (@alipsman) is the Principal Analyst for retail and e-commerce for eMarketer. In this episode, Andrew gives listeners an advanced preview of eMarketer’s holiday forecast, and we do a deep dive into all the factors that will play into this holiday season. This holiday season may have more uncertainty for brands and retailers than any other holiday season in our lifetime, so it’s well worth the listen.
This is an exclusive preview of one of the most anticipated holiday forecasts in the industry.
Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 241 of the Jason & Scot show was recorded live on Tuesday, October 21, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 241 being recorded on Tuesday October 20th 2020 that’s a lot of 20s,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:40] Hey Jason and welcome back Jason Scott show listeners we are 20 days into the fourth quarter and 11 a day 11 days away from Halloween,
retailers would say we’re squarely in Holiday mode consumers would say it’s not Thanksgiving yet so we’re about 30 days out.
Regardless of which side of the fence you’re on their most of you are probably on the retail side,
we want to use this episode to do a really deep dive into what we can expect this holiday 2020 we’ve already previewed some of this with our thoughts around ship And Gettin and whatnot and some of the numbers that are out there,
we’re going to go deep and go deep we thought we would bring out the king of e-commerce and Retail data Andrew lipsman,
Andrew has been at three of the top retail data companies in PD comscore and most recently he is at emarketer’s as a principal analyst.
Also we are excited to have him give us a sneak.
Exclusive to Jason Scott show listeners with the first view of this public holiday forecast from emarketer’s.
Andrew welcome to show and thanks for giving our listeners a sneak peek.
[1:51] Hey thanks for having me.
[1:53] We are thrilled to have you on the show Andrew and it’s super exciting that you’re helping keeping our audience at the very bleeding edge of insight and predictions,
but before we jump into all that we always like to start by getting to know a little bit about our guests
so you know Scott kind of mention the highlights but can you give us a little bit of detail about how you got into the the analyst world and and what you’re doing now at emarketer’s.
[2:21] Yeah so I’ve been in market research operating much my whole career
as Scott mentioned NPD working on cpg clients for a few years and then I jump to comscore in November of 2005 and actually I walked into that company
the same week that Cyber Monday became a thing so that was kind of my initiation into the world of e-commerce I really knew nothing about it
coming in and learned very quickly drinking from the fire hose over the next 12 years I led the marketing insights group at comscore had a chance to cover all things digital.
With e-commerce you know kind of being a key tentpole for me every year but all the different Digital Trends from digital video to advertising Social Mobile Etc and then,
coming up on three years now I’ve been at emarketer’s.
[3:16] That’s awesome and I heard you just started doing this new thing called for forecasting the holiday right is this going to be your first year where you forecast holiday.
[3:27] I know I’ve been at it for a while so I’ve actually been working on holiday forecasts back since 2006 my sight
in Uruguay comscore now I would say I am not the quantitative folks who are doing the heavy duty Excel work behind the forecast but I am providing qualitative input
and so in 15 years I’d say I’ve gotten pretty comfortable with
understanding the key variables that go into holiday e-commerce and many years I’d say it’s almost gotten kind of easy,
but this year I think is going to be very very different and one of the
actually will probably be the hardest to predict there’s only one other season that really Compares anywhere close to this one.
[4:14] Awesome well before we jump into the exclusive for Jason Scott show listener sneak peek of your forecast let’s start at 30,000 foot view plus I love to build the suspense
Jason’s like about the fall off his chair right now I can tell so let’s make him wait so I would love to hear as a data guy,
you know you’ve been at this a while and I’m sure you’ve refined how you come at it
I would love to kind of start there and say well what are the inputs you look at and maybe more importantly what are some of the inputs you don’t look at and maybe if you know how are you applying that to Holiday 2020.
[4:51] Yeah so in a normal year
the recipe really starts and this is for e-commerce specifically really looking closely at August data that back-to-school season ends up being very predictive for the growth rate for the holiday season so I
start with your thinking that August is kind of that the fundamentals heading into the season that’s your Baseline and then there’s just a couple of.
[5:15] Key variables that we looked at after that any shifts in key macroeconomic factors unemployment obviously if that’s changing and people
or losing jobs then,
you have to calibrate for that because that’s less disposable income consumer confidence how they feel about extending their credit into the season and then gas prices is one of those things that can just put more money in people’s pockets or take money out
pretty simple and then the key piece and one that I don’t think folks often look to very much but actually can end up making
you know percentage pointer to difference every year is just how the holiday calendar Falls so when you have those years with the really compressed holiday season
with only 27 or even 26 days between Thanksgiving and Christmas that does tend to squeeze spending people may prioritize gifts and still get all those purchases done
but they may spend a little bit less on themselves so it can dampen the growth rate sometimes you have those extended Seasons that are 32 days
and that can maybe boost it by a pointer to so those are in a normal year kind of the key factors.
[6:25] So you’ve qualified like four times in there a normal year so what so then you have all that and then now we’ve got this raging pandemic what have you done to kind of tweak the model based on kind of unique circumstances of the 2020 offers.
[6:40] Yeah well first off I will say that almost all of those factors have been completely overwhelmed by pandemic conditions but I’ll start by taking you back to 2008 which was the hardest
forecast that we ever had to predict if you could remember how the financial crisis happened
August wouldn’t be very predictive because things still looked okay in August of that year and then September and October
things dropped very quickly and we were starting to get readings e-commerce at the time was growing about
17 or 18 percent I think and all the sudden we were seeing that number drop into negative territory almost overnight.
That year we went out on a limb with our prediction and saying that we were expecting flat growth for the season 0% and other analysts were still predicting.
[7:32] Double digit growth you know low double digits there may be taking their initial estimates down from 17 or 18 percent to 11 or 12 but they still thought e-commerce was going to grow and,
we said 0% it ended up being negative 3 for the year I liken it to trying to catch a falling knife that year,
what was interesting about that year is that there was really only one vector,
that was changing the forecast in that was consumer demand you know e-commerce is really kind of discretionary consumer demand and it felt very quickly but that was the one thing that we needed to,
figure out this year I think is much more complex because one you have,
the consumer demand Vector but even within that it’s not just as simple as everything getting affected the same way you have unbelievable unbelievable variance,
across categories because of how the pandemic is changing consumer needs whether it’s no need for apparel or you know a lot of Need for Consumer Electronics around back to school or work from home.
The other key Vector that is of course Channel shifting and people you know continue to.
Toggle back and forth between when they’re comfortable only shopping online versus shopping in stores so trying to take those two very orthogonal vectors and make sense of it has been especially difficult.
[9:00] Orthogonal vectors that’s that’s good stuff you’re speaking my language now the it’s always good for your vectors have orthogonaility,
so I have a thousand questions I’ll try not to spend too much time on the background but I think this is helpful so it feels like somewhere in there you’re going to have to assume,
what the pandemic does right because if we’re going to have a,
terrible w-shaped situation like Jason predicts all gloom and groom and Grinchy then that’s going to have a different impact than a sharp V recovery like I predict did is there an underlying pandemic prediction inside of here.
[9:37] Yeah and I think the key thing is we expect pandemic conditions to last through the year you know our forecast back in the spring was very different in terms of what we expected by the second half and the holiday season
we’ve obviously had to change that I will say though
I kind of look at it through the lens of the bifurcated economy where you do still have a lot of struggling folks in the lower middle income segments and some of those stimulus funds now have run out so they may be running on fumes
but you know in the more affluent,
incomes I think you are sitting in a pretty good position people are confident the stock market is is up,
and and then also if you know people are not vacationing so you have all these buckets of discretionary spending or going to restaurants that’s now getting funneled into retail so I think that’s going to prop it up and overall Things Are,
healthier than I would have expected.
[10:36] Yeah and for listeners that are playing Jason and Scott Bingo you can check bifurcation off and then we also have orthogonal vectors so so that’s good your,
your ping and right through there okay last question on this so the way you’ve described as kind of like what I would call more of a bottoms-up you’re kind of saying,
all right I looked at back-to-school and all these factors that’s more of a top down,
do you do a bottoms-up where you then kind of say let me also look at a bunch of categories and it seems like you would need to for the pandemic you mentioned you know with in there you’re going to score down fashion let’s say and up,
Holman and some of the trends we’ve seen is there a bottoms-up and a top-down approach and you like triangulate or how does how does all that come together and in the final,
[11:20] Yep absolutely and then it’s not just categories that we’re doing detailed analysis and all the categories as well and top retailers so you put all those pieces together you start to get a pretty well-rounded picture.
[11:33] Who says somewhere in there you’ve got a Amazon Walmart Target kind of forecast as well.
[11:38] Yeah and you know we do a top 10 e-commerce forecast that most folks are familiar with we do a few more retailers beyond that once you account for
those retailers you’re already talking about 65 or 70 percent of the e-commerce Market.
[11:55] Yeah and then this is so that I said the last one was last one at this is really last one the so we had the,
you know the Census Data guys on and it was really interesting because it’s really hard to think about like boat this in curbside pickup right like is that e-commerce or not where do you fall on that is that
if there was a buy online pick up in store kind of situation is that going to be in your eCommerce site or is that you’re going to be on your retail side.
[12:22] That is e-commerce it counts towards those numbers I would say though is you think out about our numbers into the future
understanding that behavior you have to understand it as sort of a component of retail
because really that is symptomatic I think of a lot of temporary Channel shifting they’re certainly certainly an emerging Behavior with clicking collect a lot of that is people who want to buy it the big box retailers
but they prefer not to go into the store right now in the future they’ll go back.
[12:54] I’m surprised Andrew there’s a couple of vectors that you always hear about that you didn’t mention in a normal year tons of people publish all these stated preference surveys and they’re like to plan,
give more gifts or less gifts spend more this year West this year it sounds like you don’t use any of that kind of.
Qualitative stated preference data in your in your forecast do I have that right.
[13:19] I look really strongly at behavioral data I think those are the strongest signals you know if I see huge variance in survey data and stated preferences
that might get taken into account but in general what people say they’re going to do and what they actually do can often be very different.
[13:36] That was a total trick question because I’m super cynical about stated preference data especially around holiday I feel like there’s never been a correlation between what people say they’re going to spend on gifts and what they actually spend.
[13:48] The Perils of survey data.
[13:50] Yeah but another one that comes up that I’m on I’ll confess I’m also cynical on is in a normal year a big Vector everyone always talks about is the weather.
[13:59] So I love knocking down a lot of these things so I think the whole weather thing,
is while it can have an impact on an individual day or an individual geography that is totally overstated it really I think comes from retail CEOs liking to have the act of God excuse,
stand there’s also a very strong media bias whenever there’s a snowstorm in New York right this becomes an excuse for what’s going to happen to e-commerce,
it just it never falls out that way we’ve actually tried to test this over the years and the most we could ever find in some of the biggest storms were like the smallest smallest differences.
[14:38] Yeah I I tend to feel like it’s also self normalizing like if you have a really harsh winter.
You sell a lot more winter apparel and you sell a lot more heavy coats and things like that.
If it’s a mild winter somewhere like people are out and about more and go to stores more often so it’s almost like.
A little self normalizing to the extent that it does have any impact and then.
This is obviously an extraordinary year new mentioned a lot of the vectors that are difficult to predict this year I’m assuming a lot of them or also contradictory right like I think of for example I’ve seen some data,
they like savings rates are uncharacteristically high and yet consumer confidence is understandably pretty low right so you got to kind of.
Figure out how all those things play against each other.
[15:27] Exactly there’s a much more predictable amount of disposable income that people will spend in a normal year if people have a stable job,
and they’re all of a sudden not spending huge portions of their discretionary budget,
how much of that ends up then going back into retail spending.
I don’t know there’s a lot more variance around that number you know from consumer to Consumer so that’s where I think a lot of the variance comes in this season.
[15:56] Awesome well given all of that uncertainty let’s jump into it what is going to happen this holiday.
[16:03] So I’ll begin with the total retail number we are surprisingly expecting growth of 0.9% so very marginal growth
to just over one trillion dollars for the season it would be the second straight season Breaking that trillion dollar threshold for November and December.
[16:25] If you had asked me back in April or even met if we would see positive growth in the holiday season I would have said no way,
so to me that’s kind of a silver lining even though it’s obviously a bit lower than we’ve seen the last few years I think the big headline is that e-commerce is projected to grow 35.8%.
290 billion that’s an incremental fifty billion dollars in spending on e-commerce versus last year’s holiday season.
And then brick and mortar is going to decline 4.7 percent to eight hundred and twenty-three billion so basically this brigant brick-and-mortar hole is going to be completely filled and then some by e-commerce.
[17:10] I’m going to call that good news and a couple of sort of qualifying questions they’re like so e-commerce growth of 35 percent versus last holiday or 35.8 what is a typical year of e-commerce growth like what was last year.
you can go back a lot of years and it’s kind of 15% plus or minus a few percentage points is e-commerce has started to mature we’ve seen that number may be in the 13 percent range the last few years so that’s pretty typical so.
[17:40] Yeah so so we’re talking more than double the typical e-commerce growth rate.
[17:45] Easily more than double yeah.
[17:46] Yeah and then brick and mortar or maybe even so total retail I know there’s some more variance here but like a typical year is like three and a half or four percent growth.
[17:57] That’s right yeah when that when the economy is fairly healthy yep.
[18:00] Yeah and so we’re looking at just under 1% versus 4% so definitely well not a negative year a down year and then one last question.
Is I know you are super aware everyone has a different definition of retail so what is in that number is does that include,
automobile doesn’t include grocery Does it include restaurant what.
[18:24] It’s not restaurants But it includes gas and auto so that’s a key part of it that inflates the number,
overall now it’s also why our e-commerce penetration definition,
is lower on average so we’re expecting this holiday season to reach 18.8% e-commerce penetration
by that definition that includes gas and auto so it’s actually a really high number that that number is typically and you know low double digits.
That said if you take out gas not oh you’re talking about a number that’s about six percentage points higher so essentially 25% of e-commerce will or of retail this holiday season will happen online.
[19:09] Wow and it’s funny I tease one of your former employees comscore because they use a really narrow definition I mean they they stayed all of them but they use a really narrow definition of retail like they pull,
grocery out they they pull like Health Services out and so they always report a very high percentage penetration.
[19:29] And I was part of that decision back in the day and I will say that at the time in which that decision was made,
grocery online was so negligible
that I think it could be justified at this point and we’ve had these discussions at emarketer’s,
online and even higher if you expand the definition Beyond food and beverage so it just doesn’t make sense at this point to exclude that from the denominator.
[20:01] No and I think that is the funny thing right is there there was a time when if you were talking about e-commerce you’d say well those categories aren’t eligible for e-commerce no one’s buying bananas or cars online.
Like arguably now all of it is right like certainly grocery got a huge kiss from covid but so did automobile surprise you know I should maybe not say surprisingly.
[20:27] Exactly tons of dealers are now selling cars are like so the manufacturer in most cases can’t sell direct but but a ton of dealers even small dealers are now doing a significant volume of automobile e-commerce so it’s interesting,
but I digress so 18.8% penetration and.
Free covid what like what would like by that definition of retail what would you what was typical penetration.
[20:56] Well it’s always a bit higher in the holiday season so I think are in our prior forecast pre covid we are expecting it to be somewhere in the Fourteen percent range for the holiday season so a pretty big boost.
[21:09] And then a super common talking point is covid propelled SX years in the future in five minutes so pre covid you remember like what year you would have predicted in nineteen percent penetration.
[21:23] So some of our forecasting analysts have calculated this and they said it’s basically pushed us two to three years into the future.
[21:31] Yeah and I would argue like overall that makes that that seems totally viable and it’s wide variance based on categories right like there were categories that were already heavily digitally penetrated and they may be.
[21:44] We’re a little more linear where there are categories that weren’t very digitally penetrated and they’re probably more.
[21:49] Grocery you could be four or five years into the future absolutely now one of the interesting points I’ve started to get some pushback on,
is that you know as we get out into 20 21.
There’s I think there’s this assumption out there that once we reach this new penetration level that that is The New Normal,
I don’t think that’s entirely the case I think we’re going to have to kind of give back some of those gains as some behaviors normalize its you know it’s driven both by the,
numerator of e-commerce and the denominator which is largely driven by Brick and Mortar so as brick and mortar recovers and expands that numbers going to sort of calm down all else equal,
e-commerce will still continue to grow faster but I think people should sort of reset their expectations that we’re not going to continue to see this kind of exponential trajectory and that thing’s kind of have to flatten out for a year or two so the growth can catch up with itself.
[22:45] Yeah so let’s dive into that just a little bit more so the in my mind there are categories where the.
The the transition to digital is likely to be more permanent like if,
if Walmart had 25 million mobile app users on their grocery app before covid and now they have 50 million one can presume they’ll continue to use that mobile app for some of the time right so so that.
Digital transition could be more sticky if they’re simply not going to the store for safety reasons and they’re in they’re eager to go back to Restoration Hardware as soon as they can then that transition to online furniture probably.
Isn’t as sticky the the thing that I have heard a lot of interesting speculation around is.
[23:39] There’s a ton of variance in data but a lot of people are saying that traffic in general foot traffic in stores is down about 25% and so then a couple magic questions come up.
Is that traffic ever going to come back and I’ve actually heard people speculate that it’s not and at the moment.
Common behavior is consolidation of trip so I traffic’s way down at Walmart like.
Revenue is actually up because people are making fewer trips but they’re spending a lot more in the trips they do make like are you thinking at all about any of those Trends and you have a position about like which of those might be.
Permanent Trends versus tertiary.
[24:21] Yeah so I think,
for most established behaviors they will kind of regress towards the trajectory that they were on before in the direction.
Grocery is a category that I think is permanently changed and the reason is you have a lot of
new first-time online grocer users who were compelled to do this and otherwise wouldn’t have done it people like my parents you also have people maybe like me who was a,
a couple times a year online grocery Shopper usually just when I wanted the convenience because I was coming back from vacation to an empty fridge beyond that I didn’t do it if I go from
two times a year to maybe six or eight times a year in the future which is totally feasible you know I have some sort of habit formation around it that’s a big difference,
in Behavior so I think that has permanently shifted if I think about a category like apparel.
[25:18] People were already mixing between online and.
Brick and mortar and they had different times or different use cases and when they wanted to go into the store and touch and feel and all those things that you go to Brick and Mortar for,
and other times where e-commerce just provided convenience.
So I don’t see I see that category kind of normalizing over time I think most categories will probably normalize but we will see some patterns that get baked in a bit more to your question about consolidating trips,
I do think to the extent that we are doing a lot more pre-shopping and trip planning some of that will probably,
get pulled into the future so while I don’t think you’re going to continue to see Walmart’s you know average basket size Jump by 27% as I think it did last quarter I wouldn’t be surprised to see it
you know increase a bit more than it otherwise would have.
[26:14] Yeah to me that’s going to be one of them I have no idea what’s really going to happen but it’s going to be one of the most interesting things right I give there were a bunch of retailers that one in this trip consolidation,
and they tended to be ones with bigger assortments,
it’s going to be really interesting to see if those retailers can hang on to those customers or if the specialty retailers get those visits back the.
Sort of pivoting a little bit.
Do you have a perspective about how Prime day being in October impacts holiday like is are they is that successfully gonna,
pull holiday earlier I know you had a prime day forecast and I do want to talk to you a little bit about that but in general do you think.
We’re going to see more holiday sales in October and therefore the the turkey five could be a little lighter than usual or how do you see that playing out.
[27:11] Well I’m going to say yes and no and I’ll tell you what I mean here so first off another one of my favorite narratives when you cover retail every year you hear the same narratives that you know.
Retailers try and pull holiday shopping earlier and earlier and I think a lot of the Genesis of that is that you see the.
The holiday promotions in stores beginning in October.
I don’t know how responsive consumers are to that Jason you would know better than I do at Brick and Mortar but certainly an e-commerce that’s never been the case consumers really tend to start their shopping around the Cyber 5. At least in earnest.
But the reason that happens is because there’s coordination on behalf of both retailers and their promotions and consumers,
wanting to kick off their shopping at that point,
to me why shopping actually will get pulled forward this year is because Prime day has created a new tent pole close enough to the season that you have this coordination among consumers and retailers,
so and more importantly I think it’s gotten consumers thinking about these purchases earlier in the season so now they’re really primed.
[28:18] For the next six weeks I think before the Cyber 5.
That they’re going to be much more open and receptive to messages even if there’s probably going to be something of a lull here before activity starts to really pick up again we also by the way have you know
an important presidential election will probably provide a bit of a early November distraction.
[28:42] Yeah yeah
it’s interesting because in a normal year I mean retailers all he’s want to pull in sales early right like that’s not a new phenomenon mostly because they want to
get to that consumers wallet before that consumer has a chance to spend that wallet anywhere else,
this year I do we generally think I could tell you I have a ton of clients,
that are really concerned about a bunch of factors later and holiday ship again in being one and inventory levels being another,
and so that they very legitimately,
are urging customers to shop early but the irony is they have a complete credibility gap right so they’re they’re all putting messages in Market about how you should shop early and we’re not going to have better deals later in the season,
but of course I don’t think consumers are buying it at all I think if they see a deal now they’re going to expect to see a bigger deal on Black Friday.
[29:34] Yeah consumers may not believe it but I think they’ll be driven by their own impulse which is to Consumers I think are actually concerned about
deliveries getting to them on time they’re concerned about product scarcity in a way that they haven’t been in other season so,
and by the way their home and doing a lot of online shopping anyway so I do think we will see a real pull forward effect this year.
[29:59] So I had mentioned Prime day forecast your forecast was around was just under 10 billion is that right was it.
[30:06] Yeah we projected forty-three percent growth 29.91 billion.
[30:11] God you and how and do you have a position on how how it played out.
[30:16] So the data so I first I’ve seen some reports that I think we’re not
great that little conspiratorial because Amazon,
didn’t tell other numbers and were just pushing the third party sales numbers I take that as you know just wanting to kind of message things in favor of smbs given everything else that’s going on.
[30:40] That’s the antitrust message.
[30:41] Yes so.
And there were some traffic data that was reported that said you know flat growth I don’t think that was a great Third Party Source for this specific data Edison Trends was the one that I looked at most closely because it’s based on actual
sales data and that’s a thirty-six percent growth which kind of felt right to me but then you know the numbers that we do know,
our Amazon said sixty percent growth and third-party sales to three-and-a-half billion so that’s real numbers.
But then we also saw Marketplace pulse report that said that two-thirds of sales that they were seeing were we’re first party,
so if you just do the quick math on that that actually gets you to the number of about 10 billion or even a little bit more than 10 billion so I think,
directionally our forecast is probably fairly well in the ballpark.
[31:36] That’s that’s just the Amazon any thoughts on knock-on effects so the Salesforce folks were out there reporting to their data that they were seeing pretty big spike sitting on Amazon retailers.
[31:49] Yeah I mean I think we seen everyone benefit Amazon you know definitely take share on these days that everyone can get into the ACT,
I think it’s increasingly important for them not to concede mindshare
damn is on especially on the cusp of the holiday season so I think they did well to run those promotions generate some a bump in sales and you know get consumers not locked in exclusively to Amazon going into the season.
[32:19] Brickell so seems like so we haven’t jumped into it one of my favorite topics is ship again do you think,
do you factor that in your forecast is there some expectation that
as we get to the Cyber 5 we’ll talk about what you think some of those days look like but you know I’m thinking Cyber Monday could just really Jim the whole system up for a couple weeks there could be so many packages
are you thinking that plays a factor or what is your thinking on ship again.
[32:48] I think it’s going to factor into thinking from consumers it I think it can hit
sales growth on the margins especially later in the season but a lot of those sales that might have gotten clipped from e-commerce in the past I’m talking about let’s say past the December 14th and when free shipping day is.
This year a lot of them are going to stay within the channel because they’re just going to migrate to click and collect purchases.
So so I think you’ll see you know that point in the season Amazon lose some relative share and that share go right into the pockets of,
The Big Box retailers for example but broadly speaking I don’t think that that’s going to have a huge impact on the overall growth rate for e-commerce.
[33:36] Got it and then how about is this holiday a shorter or longer.
[33:42] So we’re on the short end.
This holiday season last year was the shortest possible at 26 days so then it usually kind of gets one day longer every year because of the leap year we actually get two extra days
one benefit there is it gives you kind of a better cop when you had that two-day adjustment but 28 days is still kind of on the shorter end of holiday seasons.
[34:08] 20/20 it’s been so long I forgot it was a leap year feels like a decade ago.
[34:14] It’s the biggest leap you’re ever they added 5 years to this year so mixed results on pulling holiday in early when I asked you if cyber 5 was going to be maybe a little lighter I think I got a no can you talk a little bit more about that.
[34:28] Yeah I mean so the whole pie is getting so much bigger for e-commerce eCommerce this holiday season and what’s gonna end up happening is it’s just going to concentrate more around the tent poles,
every single year cyber five gets more and more important Thanksgiving Black Friday Cyber Monday every single year they grow,
at a faster rate than the Benchmark so we expect that to continue I think,
Thanksgiving is going to be especially interesting this year it’s now the third biggest e-commerce shopping day of the Season we expect it to jump forty nine and a half percent to six point one eight billion,
and the reason for the huge growth rate is so many retailers are closing their doors that day and you know this is really the first year also that,
retailers are closing their doors when mobile Commerce has been the thing so I think of Thanksgiving is the ultimate day for couch Commerce Black Friday is going to be our first ever 10 billion dollar day it’s going to jump,
just under forty percent to ten point two billion,
but then that will be quickly surpassed by Cyber Monday which will jump 38% to twelve point eight nine billion and be the heaviest spending day in history.
[35:43] Got you and,
so some of Cybermen likes our Cyber Monday was originally structural right like you had your vacation and you went home you had way better internet at home you may not even have a computer at home,
and so obviously you stole all your bosses infrastructure to shop on Monday that’s of course not true anymore everybody’s digital everyone has access,
but now people aren’t even going to work on Monday right so I assume the main reason that Monday is still such a big pillar is because it’s now a habit and it and in general.
Digital tends to be more promotional on that day is that do I have that right.
[36:23] It’s expectations and the coordination between retailer and consumer so in the same way that you know we saw this sort of.
Growth rate on Prime Day this year although we don’t know for certain let’s assume that that Edison forecast is or.
Report is in the ballpark yet so that points you to these growth rates you know well into the 30s maybe 40% range so I see no reason not to expect that that will happen for Cyber Monday this year.
[36:53] Dude I’m curious of you been watching digital at all for the weekend weekday Trent so I can interesting thing in brick-and-mortar ordinarily.
The brick-and-mortar does much better on the weekend.
Particularly grocery people don’t have time to shop for groceries during the week so Saturday and Sunday are the biggest days one of the impacts of the pandemic is,
that the sales have leveled out across all the days because people can shop on a Tuesday just as easily as they can shop on a Sunday.
I’m curious if you’ve seen any any change in the digital behavior in terms of the weekly Cadence at all.
[37:30] Yeah I think there’s some of that effect what’s interesting though is that the weekends in recent years pre-pandemic we’re actually growing at a much faster rate so already there is some normalization and leveling out there was,
it’s kind of organically happening is people started their shopping online so I don’t think the effects are going to be quite as pronounced but you’ll certainly see some of that.
[37:56] Yeah and then another super funny friend in e-commerce is I have a bunch of clients that see a spike at 2 a.m. on weekends like after people get home from the bars and I’m I’m curious what’s going to happen this year when people aren’t allowed to go to the bars.
[38:11] I don’t think people have stopped drinking at home so I think you know.
[38:14] Yeah but I just just like the weekend weekday thing they’re drinking all the time now right there spreading it out a lot more.
[38:20] But they’re drinking a lot more and with access to a computer so there’s much more potential for drunk shopping.
[38:26] That could be worth the Five Points were of what we’re already seeing yeah.
[38:31] It does Bode poorly for returns by the way but yeah.
[38:34] Let’s run a panel with a breathalyzer duck mixed with them let’s dig into some categories what are you what are some winners and losers that you’re thinking for Holiday 2020.
[38:46] Yeah so I start with consumer electronics huge category
that you know in the last couple of years I’ve been impressed with just the diversification the category there are so many interesting new smart home electronics it all sorts of different price points so you’ve got that as a Baseline.
But then you have the gaming console Wars coming in this year,
and then an iPhone super cycle there’s just so much there that I think will drive that category to be the biggest winner of the season.
[39:18] So you’re a believer that we’re in an iPhone super cycle.
[39:22] I think so even if it doesn’t live up to expectations it just it seems like people are ready for the next one.
[39:29] Cool we need to like a audio clip Jason like super cycle or something like that next time.
[39:36] I’ll look into getting that added.
[39:38] Okay have the audio team work on it.
[39:46] Okay sorry I interrupted you keep going with other categories or exciting.
[39:51] So toys and hobbies and in that we actually include fitness equipment so there’s a lot of the digital Fitness Trend and then obviously toys I think have just been,
generally elevated throughout the pandemic so that we should do well home decor I was actually surprised about this category because I always think of this as the second most discretionary category after apparel.
And I initially thought with the recessionary had winds is category would not do well and it’s done very well so in especially,
with the winter coming people are just going to be nesting I Thinkin.
[40:29] You know a significant way so that category should do well food and beverage you know this is sort of an extension of the grocery Trend but we’ll just leaned more into Specialty Foods and alcohol things of that nature,
as far as struggling categories really the only one that I can Spotlight is being in a tough spot as apparel So Many Factors there.
Obviously no demand for Workwear event where at the moment you know athleisure that pocket will do fine obviously,
but then you know I think margins also can really get hit this season,
and there are almost competing with themselves in a way because they’re going to have to unload a lot of inventory at discounts and so even their higher-margin goods you know might be competing with.
Their own good so I just think those margins are really going to be compressed I wouldn’t be surprised by the way if you had stronger sales just because there’s so much stuff at a great price but I can’t see where the prophets really come from.
[41:34] You have any thoughts on what the hot toys going to be.
[41:38] I wish I knew that I’ve got young kids I should know this stuff better but I really don’t know what the hot toy for the season is actually I just got my Amazon catalog and I just started leafing through in the mail but I did not look did you get a peek.
[41:53] I did yeah I got the Amazon catalog the I can’t find any prices in it though it’s so confusing.
[41:59] It’s your supposed to use the augmented reality on the Amazon app or scan the QR code Scott.
[42:04] I don’t believe in QR codes that’s a.
[42:07] One has Dynamic pricing so they can’t print a catalog with pricing because they change it all the time.
[42:12] I know I’m just teasing you up for your your QR code.
I don’t know I’m gonna go Mandalorian baby Yoda so that also helps with the bingo so they can check the Star Wars square off of the bingo card.
[42:30] Yeah I have a feeling Star Wars merchandise will do well for sure but you know what’s one the last couple holidays and I feel like there’s a bunch of new versions of it are all these watery toys like these surprise toys.
Where you you buy it and have to open it to discover what you got.
[42:47] Yeah the law and all that kind of stuff.
[42:49] Yeah so that was last year’s big and I’m not sure it’ll be the same one this year but they’re everyone’s leaning into that Trend so there are these like Mattel has a bunch of dolls that.
The attributes of the doll our office skated in paint and you have to dip it in water to reveal.
Like what color hair you got and stuff like that so I have a feeling,
some of these surprise toys will be high on the list but we’ll see Andrew you reminded me and one thing I wanted to slightly Backtrack on a factor we didn’t talk about that I suspect May contribute in some way,
to the growth this year is there are several significant categories of spending that are down and the revenue from those categories is likely to move into retail right so you mentioned.
Home is looking like it’s going to be really big this year partly that is likely because people aren’t going to be traveling as much so instead of a vacation you improve your.
Your home and for sure you know restaurants used to get forty percent of your calories and restaurants aren’t getting that right now and so Grocery and specialty food is,
getting all those dollars that weren’t in your old definition of retail but are in in your definition of retail so it kind of grows the whole pie if you will.
[44:15] Exactly and you also have people canceling their gym memberships and that’s
going right into fitness equipment and the new Peloton if you can’t take your family on vacation you may see more jewelry gifting is you want to
treat your spouse so there’s all sorts of these little pockets of consumer spending that are just getting redirected.
[44:40] Yeah the one thing I think the jury people are worried about is if guys aren’t out and about and misbehaving is much they’re not going to have as many reasons to buy more jewelry.
But welcome that maybe a specialty one will see so what about you so you kind of hit on some of the categories,
let’s talk about like other particular retailers that you think are going to be winners or losers and who should we be investing in.
[45:06] I don’t give investment advice but Amazon’s are pretty safe bad I think they’re going to have really they’ve had you know and
epic second quarter and I think the fourth quarter is going to be historic both the prime day and everything it’s situated very nicely for them for
the holiday season then I look at the high performers from The Big Box retailers Walmart Target Best Buy Home Depot all them have been growing their e-commerce business at you know
a hundred percent in some cases or at least north of 70%,
and there are also well-positioned for clicking collect they will win those less frequent trips
to Brick and Mortar so extremely well positioned so basically the rich are going to get richer and then you know I look at some other brands that have just performed I think exceptionally well
in the pandemic Peloton I think that’s obvious and they’ve expanded their product line considerably and for lower price points so I think that should open them up
to a much broader consumer base
Lululemon and Nike have made the transition to DDC so strong I think that’s a much more profitable.
[46:18] Way to take their business and they’ve done surprisingly well it brick and mortar too so I call it that whole segment,
and then one other one that I think it could do really well as Etsy
and what’s interesting here is everybody kind of flooded onto Etsy for $5 masks and they got this big mask bump in the second quarter,
but I think it introduced the platform to a lot of new.
Consumers and you know it’s always done particularly well in the holiday season or its kind of best oriented to holiday gift-giving so I’m very curious to see what happens when you mix those two things together I think they could have a really strong Q4.
[47:00] That’s that’s totally interesting,
I hadn’t thought about that like I was worried as he was going to struggle to comp against their Mass quarter but you’re right like they on-boarded a bunch of new customers and people stored payment and,
yeah that that makes total sense that’s a good Insight in your,
written report you picked one other winner that I was somewhat surprised by you know I’m talking about.
[47:26] Which was that.
[47:28] Someone in the travel industry yeah in my mind like they could be the.
Relatively good performer but it just seems like luggage has to be a category that’s getting creamed right now.
[47:41] But is so this is relative so given that they got dealt maybe the worst hand of the pandemic or among the worst hands of the pandemic.
[47:49] Yeah right behind.
[47:51] Right I’m you know I think they’re doing some interesting things and they’re expanding their product line and and they’re generating some excitement so with a lot of these d2c Brands I think,
to prove themselves my question for them is what’s your next ACT I think away is finding its way into its next ACT and they’ve,
had some kind of innovative products at lower price points that have worked well I’ll be curious to see what their marketing messaging is because what I would start to do is Mark it to 2021 right like when we’re out of this pandemic,
you’re going to want to take those vacations you’re going to want to go to those events whatever the case may be I think there’s an opportunity to start marketing a bit to the Future so while I think they still have,
a tough hand to play this season I think you’ll see some bright spots from them.
[48:41] What not one fun fact I watch this daily we’re recording this on the 20th on the 18th we surpassed a million Travelers for the first time since the pandemic and through airports.
That’s down from 2.6 million year prior but that’s the highest level we’ve seen since like March tenth or something like that.
[49:01] Yeah you’ll have to decide who you think has is more prescient and and has a less of a.
A bias reason but so the CEO of United came out very strongly the zoom totally sucks and business travel is for sure going to return to a hundred percent of its pre-pandemic level and then Bill Gates came out and said.
There’s no way business travel is ever coming back.
And so maybe they both have self-serving reasons it just occurred to me because Microsoft assume he still has a lot of Microsoft stock teams is a big player in the.
In the virtual meeting so who knows who do you think are going to be the losers in the pandemic from a retail standpoint.
[49:41] So I think it’s really just it’s the stores that have the most Mall exposure so that really begins with department stores.
And obviously this is a secular decline that’s been happening but so driven by apparel
it’s not as easy for them to do click and collect I just think they’re in you know a tougher than normal spot and then one other retailer.
I said in past years you know I thought was struggling with competition was Victoria’s Secret.
You know they had kind of the rise of the d2c brands obviously some self-inflicted wounds with their own brand.
But then this season you know one other thing that stacked against down aside from having hi Mal exposure is that they have a high dependence on their d2c business but low aovs,
average order value so.
What ends up happening is that you know that just totally eats away at whatever margin you had so I think they’re just feeling it from from every direction this season.
[50:50] Yeah no I that certainly makes sense I have a.
Hypothesis that depend emic more so than creating new trends that never exist in the world it’s dramatically accelerating a lot of Trends we were already seeing and this is a perfect example of peril,
in department stores already had had winds and those got accelerated Victoria Secret had,
more headwinds than most in apparel and those it feels like also probably got exacerbated but one question I get asked a lot and I don’t I don’t have a super insightful answer so I’m seeing if I can steal one from you.
Is there of the department stores I get that the whole category is not looking awesome is there a department store that you think outperforms the rest of the market like whose best position of the department stores.
[51:35] Nordstrom consistently I’m always impressed with the store experience I feel,
good when I go into Nordstrom I think they did a really nice job so even with so many factors stacked against them I think they find a way to sort of keep their head above water
I don’t think this is going to be an easy season for them but I would expect them to outperform their competitors.
[52:00] Yep that’s usually my go-to answer but in the back of my mind I’m nervous amongst other things they closed a bunch of Mainline stores and so from a comp standpoint it’s going to be tricky for them.
[52:14] Yeah they’ll be able to bounce back eventually but they’ll have to get through this cycle.
[52:19] Cool any other surprises are Tippets you want to share before we wrap up.
[52:26] No I just think this is going to be a really really interesting season as an analyst I kind of love,
pouring through all these,
variables and trying to make sense of these orthogonal vectors right it’s they’re colliding in ways that are very difficult to predict so I say very confidently that this forecast is probably going to be the most off,
any forecast that I’ve been a part of in the past and yet I still feel good about the
the logic and sort of the directionality behind my thinking so I hope that’s a listeners takeaway is to understand sort of the Y rather than expecting me to nail that number on the nose.
[53:10] You let me let me put it that just a tad so so in the second quarter we saw e-commerce grow 45% do you agree with that.
[53:20] Yes I are numbers very close to that yet.
[53:22] Yeah so then Q3 it’s until I see the Amazon numbers and I don’t think the Census Bureau has opined on all of Q3 yet it feels like a ticked down a little bit what did have you guys said what you thought Q3 was.
[53:36] I’d have to look back at that that I it’s the relative low point in percentage but I want to say it’s still low 30s.
[53:43] Low 30s right so then you’re kind of saying and we’ll kind of so now we’re down in the low to mid-30s and you’re saying holiday will go up a little bit,
what if holidays up like 45% does that would that surprise you with what’s the cone of uncertainty do you think this is a plus or minus,
two points kind of thing here or could it go up as high as 45 percent from compared to your 35% forecast.
[54:08] So 45 seems a little bit High just because.
That was what we saw in Q2 which I really do think was the peak in terms and also it’s just always harder to grow at a more aggressive rate on a bigger base in the holidays that said I definitely think we could see a number in the 40s.
Not out of the question and if that happens I think it will be due to the fact that consumers actually did pull their spending forward and they were kind of consistently spending.
During that you know middle part of November when I kind of expect that growth rate to dip for a while.
[54:46] Question for you if we have a big number like that traditionally e-commerce has much higher return rate than then brick and mortar and since we’re shifting so much sales to e-commerce do you anticipate its.
That we’re going to have a rough in of holiday in terms of returns.
[55:04] Return a get in yes I think that’s very likely.
[55:07] Returning it.
[55:09] Especially with with you know listen I think the volume of apparel sales will be strong I don’t think the prophets will be there but you will have a high volume and if what are the it’s like 5 to 10% of apparel
sales in Store return but it’s like 30 or 40 percent online so yes this can be a,
reverse Logistics nightmare come January.
[55:32] And if you if you think capacity is limited for shipping all this stuff reverse Logistics capacity is even more constrained so that’s going to be a mess.
[55:39] Yeah it’s good for calls Maybe.
[55:41] Yeah yeah last question so we have these forecasts like there’s more uncertainty this holiday season than there’s ever been before do you have any tips or tricks like what would you be watching,
as we progress through the holiday I do you look for earnings announcements from Individual retailers that are sort of Keystone’s,
you know there’s some vendors that have pretty big customer bases that report some Digital Data on their customer base has like Salesforce or adobe or people like that like is there are there any favorite things you look for to tell you whether your.
You’re over underperforming your forecast.
[56:20] Salesforce and Adobe are going to be your fastest best
Reed’s early in the season because they’ll get reporting it pretty quickly and they’ll update it those are very good temperature checks you’ll see some Divergence you know there are some large retailers that may not be in their footprint but they both had big Footprints so as long as you can
calibrate your thinking to understand you know where some of those biases might present they’re going to
be your best temperature checks to kind of follow what’s happening throughout the season.
[56:51] Cool and when Jason said his last question this is kind of not a question but where can people find you online I guess it is question.
[56:58] On Twitter I’m more of a consumer than a tweeter at a lipsman or you can find me on LinkedIn.
[57:06] Yep and then obviously emarketer’s.
[57:09] And emarketer’s.
Now part of Insider intelligence.
[57:16] Yeah and I feel rumors about morning Brew.
[57:19] Rumors are swirling I’m reading them just like everybody else and I know nothing.
[57:25] Feels like you guys are making moves though I saw some new job listings come out this week in your organization as well.
[57:31] Yes and we just brought Zia wig Darren to oversee our content team so that’s also exciting especially given her retail background from shop talk.
[57:43] Yeah side note pet peeve on that before she left shoptalk she could jeweled me into being a,
in expert in this like shoptalk meet up that’s happening as we’re recording this over the next three days and so she booked me for like 36 meetings with random people over the next three days and then she left.
[58:03] Same I’m enduring that as well.
[58:05] All of us okay I did for today I’ve got six tomorrow and I think six the next day so yeah it’s.
[58:13] She got us all yeah congratulations does he oh well played.
[58:18] Boom throw Grenade on the way up.
[58:20] That is actually going to be a great place to leave it because we have once again used up our allotted time,
as always if you enjoyed this show we sure would appreciate it if you jump on iTunes and give us that five star review if you have any questions or comments you can hit us up on Twitter or Facebook,
we will put links to some of Andrews research in the show notes the big research that he’s talking about won’t be published or slightly after this podcast so we may have to append it to the show notes later,
but Andrew really enjoyed catching up with you and really appreciate you sharing all this great Insight with our listeners.
[58:58] Thanks for having me on guys.
[59:01] Until next time happy Commercing!
EP240 - Amazon Prime Day Recap
Episode 240 is a recap of Amazon Prime Day 2020, and a review of the US Census Advanced Monthly Retail Sales data for September.
Episode 240 of the Jason & Scot show was recorded live on Friday, October 16th, 2020.
[0:24] Welcome to the Jason and Scott show this is episode 240 being recorded on Friday October 16th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners.
Well it has been a very busy week of e-commerce news we had prime day this week earlier Tuesday and Wednesday that was exciting and then also one of your favorite days Jason the US Census Data dropped so,
and we talked about that just way back in episode 239,
so we thought we would put a short show out there really just kind of review the news and make sure everyone was up-to-date because we’re heading into the holiday period.
[1:10] That’s awesome and it feels special for me because we’re recording this show on a rarity for us you and I are spending Friday night together so I feel like I’m usually only good enough for a week night with you so I feel special that I got a weekend.
[1:24] Yeah I’m going clubbing later so I had time to squeeze you in.
[1:27] Nice I appreciate it well before we jump into all the awesome content for this show,
I wanted to remind listeners that if you’ve been enjoying the podcast the best way to reward us for all the hard work we put into it is to jump onto iTunes and give us that five star review,
it’s annoyingly difficult you you actually have to go into the podcast app,
is the only place to write reviews and you can write a review or you can just click on the five-star and be done with it,
but that really helps us with discoverability on the on the various platforms and help us find new listeners so if everyone would take a moment to do that we’d greatly appreciate it.
[2:08] Yeah and then also today was kind of exciting you and I were both quoted in the New York Times.
[2:16] Yeah yeah I know I feel like we finally made it.
[2:19] Yeah we can did your mom see what did you tell your mom what’s that.
[2:24] Yeah yeah I did share it with some family but more fun my social network just has a lot of people that read the New York Times regularly and even,
number of people apparently there’s this till this thing where they,
they take all the Articles from the website and they somehow recreate them on Papyrus and I guess mail them to people,
so apparently there’s some kind of physical thing called The New York Times that you can read and I actually had several family members that read the Papyrus reach out and say
I have no idea what you do you seem like a total fraud but you’re in the New York time so you’re legit now.
[3:05] Wow good I’m glad that that strengthen your relationship with your family.
[3:10] Yeah well they still don’t like me but they were impressed by that one moment I think they all correctly assumed I was riding on your coattails.
[3:17] Yeah they’re they’re tiny so it’s good that you can fit on there the.
The will put a link to the article in the show notes but it was really about ship again so,
the this is a Weekly Newsletter our weekday newsletter that they published called on Tech and they were highlighting some of the things we talked a lot about about on the show so we’re excited to be in there.
[3:41] Yeah for sure.
[3:42] And then speaking of ship again kind of semi-related I guess so Amazon held their Prime day and this was interesting because it’s the first time we’ve had a,
October Prime day they shifted it to the pandemic.
And then Amazon did have a pressure release in a typical Amazon fashion they gave us some tidbits but then left us wanting more.
So what they announced is the first of all the announcement was really interesting and that.
Unlike previous years where they kind of pound their chest and say this was the biggest Prime day ever they did not say that so a lot of people implied from that that it was a terrible day,
but then I think the right read on that came from a lot of Wall Street analysts who said they just really don’t want to be pounding their chest because they’re under scrutiny,
around a lot of Monopoly talk so,
they just really wanted to highlight third parties so that was the Press so they essentially said that sales grew sixty percent year-over-year for third parties and this is when they line up Prime days from last year’s June to this year’s October so it’s not just like,
these random days and October group sixty percent year-over-year and then they said this is the part that was interesting is they said that third party sales drove 3.5 billion in gmv.
[4:58] So that was good and then then this is interesting because some Wall Street folks kind of implied okay,
well typically half the units Amazon reports this on a quarterly basis about half the units come from first party have from third,
therefore if you did three and a half over on the third producer party side you probably did three and a half on the first party therefore it was a 7 billion dollar Prime day.
But then other folks said well if we kind of dig into the numbers a little bit.
The first party just because it’s 50% across a quarter doesn’t mean it was over Prime day,
and then you and I know that the top sellers are always Amazon’s own devices and they ran some ridiculous deals online,
there’s an echo dot for I think the lowest it’s ever been and a couple other things on there and then when you look at the best sellers they typically had something like 18 of the top 20 slots,
so then folks can look at that and say well what if.
What if that’s that three and a half billion from third-party actually is on the maybe that’s about 1/3 so then you get this bracket of on the low-end about 7 billion in GMB for the prime day-to-day events,
and then on the high end around 10 billion do you have a pinion of where that landed.
[6:13] Yeah I imagine that it was on the lower end.
Part II think all the regulation aside if it if it was.
A huge blowout day I still think they would have trumpeted that more and the fact that they were focusing on on the three-piece hours and emphasizing the small business is I’m sure it was a huge day but I just find the
the kind of seven billion numbers are probably more credible.
[6:49] Cope and then.
Couple other interesting things I think the theme of this one so there were some of the third-party data providers out there one of them were active ones on Twitter was this lady called kala Schwartz.
I think she’s relatively new at Salesforce they’ve been hiring a lot of people in there their retail strategy group.
And she was really reporting I live data and so so my understanding of this data and we should have her on the show so this is this is my unofficial understanding of this data,
is essentially the demandware data and maybe some other stuff in there but largely the old platform known as demand where which is now,
Salesforce retail cloud or something so it doesn’t include Amazon,
which is which is interesting so what they saw is in that data set they saw over fifty percent increase in traffic to non Amazon stores on the first day and then,
that continued so they saw a pretty robust I think overall they saw 71 percent more,
compared to when it was in the June July timeframe.
So so I think the theory there is more and more retailers glommed onto Prime day and benefited from it so it feels like.
The non Amazon folks were probably the winner this Prime day which is kind of an interesting turn of events.
[8:13] Yeah for sure and I think you’re right I think the the web.
Traffic data from Salesforce comes from Salesforce Commerce Cloud which is formally demandware but they actually do have another cool data set that she also used in that article they also have exact target right so they have a bunch of people
that do outbound marketing and she was actually able to do some analytics on other retailers,
and found in found that like on average retailer sent 20% more emails on Prime day,
then they typically do in that day and that a significant portion of them I want to say eighteen percent of all the emails that got sent out on Tuesday and Wednesday reference the word prime or holiday in them.
right you know her premise from that was that a ton of other retailers are were promoting sale either holiday sales or you know specific counter Prime,
programming in their outbound email and then just sort of reinforce that another cool report that I’ll put a link to in the show notes,
came from one of the Forester analyst so she took the top 50 e-commerce sites in the US and visited them all on Prime day and screenshot of them all so she put together this,
the school PDF showing you know what everyone’s primary messaging was on Prime day and.
You’re you’ll see a theme like almost everybody had a holiday sale running on on October 10th which is you know much earlier than you would ordinarily expect to see.
[10:00] Any other interesting things you saw in Prime day.
[10:03] Um I think you you hit on all the big ones there I always just get a chuckle so.
Amazon a they did say that it was the largest to sales days ever for third-party sales.
Which is which is interesting you know even though a lot of people estimate that third-party sales were much more part of the mix on Prime day than.
They usually are but Amazon always tells us what the top-selling products are and every market and and from past years we know those are predominantly,
Alexa products this year they didn’t,
include that on any of their list so it’s all the non Amazon products and it just occurred to me that when covid over and we can take a vacation
I feel like the people in Netherlands turn out to be much more fun than the people in Spain because the best selling product and the Netherlands was a Lego Star Wars stormtrooper helmet.
Which I feel like you and I could both relate to and the best-selling product in Spain was like a dish detergent.
[11:06] Come on Spaniards got it up your Prime Day game.
[11:09] Their rap is like totally cool and hip but apparently they’re not as in the Star Wars Legos is than as the the Dutch would that be.
[11:21] There there Maslow’s pyramid is inverted got have Star Wars at the top versus cleanliness.
[11:26] Yeah or maybe the Spanish are just so hip that everyone already have a Lego Star Wars stormtrooper helmet and therefore they didn’t need one for Prime day.
[11:33] Could be could be we’ll have to have someone on the show to to dig into this Burning issue.
[11:39] Cope well let’s I know you love to talk data let’s dig into the retail sales that came up I’m still
I’m still kind of in the Fanboy glow from having the guys on the show so it was exciting to see the data come out days after we had talked to them.
[11:56] Yeah so we talked to him last week that was last week’s episode they sort of explained how they did all this data and they reference in the show that on the 16th we get next month’s Advance retail data so I came out first thing this morning
and kind of the very top line was retail sales were up 1.9 percent from last month.
So that’s encouraging like there’s some argument that there’s been a Resurgence of covid so there might have been some fear that there was less spending so two percent is,
is Meaningful growth and and they’re like top-line everything they measure was up 5.4% from.
[12:40] September of 2019 so as we talked about in last week’s show.
I’m not very interested in a month over month eight I don’t think it’s all that relevant for retail so I quickly stripped out the,
then the kind of non-retail e category so I took out Autos which side note for people in the Auto industry like you new and used auto sales are actually significantly up.
But I also took out gas which gas sales are significantly down,
and so I and then I compared it to last year’s number not seasonally adjusted because we’re comparing the same month from two years,
and so court so I’ll call that core retail core retail was up 7.5 percent from last year,
so when you know further Evidence when we talk about that that V shape.
Recovery in general it’s absolutely true that that the overall industry is comping significantly above last year which is remarkable given what we’ve been through.
[13:44] But I did then break down the individual categories and what’s what’s really happening here is there are two big pools of money that consumers traditionally spend money on that is not retailgeek.
And covid is as cause people to not spend money on those categories and instead that money is flowing into retailgeek,
so basically you have about 8 billion dollars in spending a month that used to go to restaurants and and is now going to grocery stores instead because restaurant sales are so diminished.
And then you have about eight billion dollars in spending that used to go on vacations,
that’s now going into people improving their homes and items for their home so so you’ve got kind of Sixteen billion dollars in incremental spending that flows into retail from that,
and then we saw the non-store sales.
Category which we talked about in detail in the show asked last week but basically that’s mostly e-commerce will call that 75% e-commerce and then some catalogs,
and that’s the fastest growing category of all that 17 billion in spending so,
you add that 17 billion to the other two eight billion numbers and that basically was accounts for the entire 7.5 percent growth.
[15:06] Wrinkle so at a 30,000 foot level in Q2 we saw e-commerce grow at 45%
that makes sense to me because the Census Data really lines up with Amazon which feels right and then what this is telling us is we’ve come down to sub 30 percent growth in Q3.
[15:26] First September yeah this is not yet yeah so we don’t we don’t know Q3 and,
and a reminder we get this monthly data which is the least perfect measurement of e-commerce it’s this non-store number and there’s a bunch of challenges
there’s a better e-commerce number that comes out once a quarter and so there we will get a better Q3 number,
but it’s going to be interesting that like from from the September data you would infer that it’s going to be down from the what was it last quarter like 44 and a half percent or something from memory.
[15:56] Yeah and even like a Forester had and Goldman had 30% and maybe emarketer so so that would be you know during the course of the quarter maybe it slipped yeah.
[16:07] I failed to mention it but the actual official increase was 27% for non store sales so 20 you know.
There are there are several other indexes out there of e-commerce like Adobe and Salesforce and I won’t be surprised at all if they report a bigger number than 2727 sounds feels light to me.
Um if that is.
Completely accurate then what that would mean was that e-commerce was about twenty percent of retail sales in September.
[16:39] Yeah so that would be down to because we’re usually at this 30 we caught search that thirty percent right.
[16:45] Yeah I love how you call it usually but yeah at the moment we’ve been we’ve been trending in the high 20s or low 30s pre covid we were in the teens so so yeah possible that that,
you know as retailers opening up a little bit people were starting to move more back to stores but I have to tell you all of the the.
Databases that track store traffic are also I would
characterize them as wildly imperfect and not agreeing with each other so take them with a grain of salt but most of the best store traffic data still says that we’re down about 25% overall in terms of foot traffic.
[17:27] So like yeah you would assume then that that that should drive a bigger e-commerce number even than 27 percent.
[17:35] Yeah well Amazon announces Q3 on October 29th I had erroneously thought it was going to be next week,
but it’s the week after so we’ll be doing a show on that and it’s going to be interesting to see how that compares do you know when the quarterly data will come out will that be before or after the 28th.
[17:54] That is a great question and it is knowable so we just have to stall while we’re talking the e-commerce quarterly data is going to come out on November 19th.
[18:05] Okay so we’ll get Amazon first and then the data so that’ll be interesting we can kind of see how those line up.
[18:10] Yeah I will say though so the on November 17th so two days before that we’ll get the the September or I’m sorry the October Advance sales and.
Expect that e-commerce number to be ginormous because there is all this Prime day activity and every competitor digital activity so I would expect the growth in e-commerce and in,
October to be wildly larger than it was in September.
[18:40] Yeah I know we’re jumping around here but I’ll connect these dots the one of the theories from the Salesforce folks was that this is going to Prime day in October is going to shave a pretty material amount off of,
what I call the Cyber five do you share that or you think that there’s enough Gap in there that it’ll it’ll be different.
[18:59] It’s Tricky so I in general I do share that I think.
If you look at the turkey five and you’ll get total retail sales for those five days brick and mortar and e-commerce,
it’s going to be for sure,
right year because retailers are desperate to pull sales in earlier their everybody’s worried about their inventory so they’re worried about running out of product because the supply chains were disrupted,
and you know per our discussion about ship again and they’re really worried about getting a bunch of orders right so retailers are desperate,
to not have all the sales happen on that turkey 5 and then,
nobody wants Black Friday to be a big in person day right like they don’t want the big crowds because it’s not very covid friendly and they have limited capacity so.
[19:48] Paradoxically retailers are hoping that the Cyber five is a lighter now because they’re discouraging people from going in the stores that’s going to shift more sales from those five days online so so you’re going to you know have kind of.
The whole tie the lowering and then a little wave raising for e-commerce but I have a feeling net-net that that.
Retards are going to successfully pull some November sales into October and therefore the November sales will look a little more modest but I also suspect,
the consumers don’t totally trust retailers when they say the best deals are now and so I don’t think retailers are going to pull as much sales into October as they’re hoping to.
[20:33] Well Scott I feel like in a huge Rarity we have succeeded in producing a short show,
so I’m calling that a win,
again if you enjoyed this show and you thought you were going to get a really long workout and instead you just got a really short workout you’re welcome,
and we totally appreciate everyone listening and look forward to talking to you next week we got a bunch of exciting shows and guess on tap.
[21:03] Yeah after you leave that awesome five star review over on your favorite podcast listening technology head on over to Facebook and like us over there we also have a LinkedIn group
then you can follow us on Twitter I’m Scot Wingo with one t and Jason is retailgeek with 1K.
Correct well there’s a tea.
[21:28] Oh jeez the recycle yeah the world’s worst Power I feel like that’s how you know my tweets are authentic and then I’m not paying someone to write them is although spelling errors, and I on that note I am going to wish everyone a great and happy weekend and until next time happy Commercing!
EP239 - Retail Sales Data with US Census Bureau
Paul Bucchioni is Branch Chief and Scott Scheleur is a Supervisory Survey Statistician, both with the Retail Indicator Branch, Economic Indicators Division of the U.S. Census Bureau. In this interview, Paul and Scott walk us through the real sales data products that the US Census publishes and gives us advance about how to interpret the data.
Episode 239 of the Jason & Scot show was recorded live on Wednesday, October 7th, 2020.
[0:24] Welcome to the Jason and Scott show this is episode 239 being recorded on Wednesday October 7th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-hosts Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners,
Jason if there’s one thing we agree on it’s our love of data and one of our favorite data sets is the e-commerce data published by the US Census Bureau.
Both of us get a lot of questions about this data we talked about it a lot I think it was episode 233 we spent a fair amount of time kind of just talking about the data and what was going on there that we saw and,
so we get all these questions and we thought what better way to understand this data then to hear the details right from the horse’s mouth.
So on tonight’s show we were really excited to have and we just learned that they listen to the podcast that’s even more exciting Paul book kyani and Scott Sheeler on the show from the US Census Bureau welcome to the show guys.
[1:28] We are doing terrific and Paul I know you guys listen to the show so you know exactly how we always start we like to let the guests
introduced themselves a little bit to the audience so maybe we could start with you can you tell us a little bit about yourself how you came to the field and in your current role at the US Census Bureau.
[1:47] Sure so I started my career at the Census Bureau about 16 years ago and the entire time that I’ve been there I have been working in the monthly retailgeek,
I’ll Branch so I’ve always always been working with retail and one way or another my background is in finance and economics,
I dealt a little bit with Finance in the in the stockbroker type field before I came to the bureau but since I’ve been at the bureau I’ve been in the monthly retail started as an analyst I’ve worked on all industries that has to do with monthly Retail Sales inventory,
e-commerce and I’ve been I’ve been in here ever since and working as a manager now I’m the branch chief of the of the retail branch and
yeah that’s pretty much what I’ve been doing the last 16 years.
[2:31] That is awesome I’m always terrified to talk data and economics with people that actually know the fields like we have these phrases at work there are people that are data fluent and there are people
that our data literate and I’m like barely data literate.
Thrilled thrilled to have some data fluent people on the show and Scott can you introduce yourself.
[2:56] Sure thanks Jason Scott Schiller I’ve been at the bureau will just say longer than Paul and.
You know I’ve been involved in basically retail wholesale and services my whole career currently both Paul and I are in the economic indicators division.
Where we are kind of responsible for measuring a lot of the economy from the trade balances to the manufacturer shipments inventories orders data to the quarterly Services data to monthly wholesale and of course to retailgeek.
So we have a we cover most most of the economy in our division and our specific areas responsible for what,
fancy title is consumption and wholesale indicators which basically means we can cover consumer spending,
retail and services as well as the wholesale piece of the economy so that’s what we’re currently doing prior to the bureau I actually started your right out of college.
[4:05] That that is certainly impressive and,
I just want to clarify because some before we even get going people talk about us Department of Commerce data and they talk about Census Data you guys both worked for the US Census and this,
is in fact US Census Data right so I’m assuming for the most part people are confused when they give other departments credit.
[4:29] Yeah so you’re correct I mean like the US Census Bureau is part of the Department of Commerce so you know and it’s it’s always been one of those things where every time a release comes out you’ll notice when you look on the news or something it says the US Department of Commerce released today,
three tail numbers right but it’s comes from the US Census Bureau.
[4:47] Got it and then this is for sure the coolest part of the US Census Bureau is that also true.
[4:54] Well absolutely of course.
There’s no doubt about that everyone just thinks that you know you know I’ve always said oh is that the clarifying Scott probably has to do the same thing whenever we’re somewhere and someone says hey what do you do for a living and because I work at the US Census Bureau what do you think they say oh so you can’t people right so it’s not
nope there’s there’s more to it than that so.
[5:12] Yeah I was going to say like I assume everyone’s first reaction is wait you only have to do anything like every ten.
[5:17] Every 10 years right what do you do the rest of the time yeah I have to come up with some so many answer but it’s not hard.
[5:22] Yeah I like to even reduce that you’re from the bureau it makes you sound like the FBI I bet you at cocktail parties are like we’re from the bureau.
[5:27] Yes we’re from the bureau you just slam it down yeah.
[5:34] Let’s start it at kind of the the super 30,000 foot level you guys put out a bunch of I guess you call them products so there’s like the advanced the monthly the quarterly,
maybe talk listeners through those products and then you know how do you get this data and roll it up into the products.
[5:54] Sure I’ll take that I’ll start with that so
right so you really can’t talk about all the monthly retail programs without kind of seeing like where it starts from its senses and so you know but besides that our monthly surveys we have an economic census and then we have also an annual retail trade survey so
you know the economic census is basically the foundation of the retail programs it’s collected every five years,
and it’s similar to like what we were just talking about that the 10-year population counterpart that the senio what it does is it collects information for all retail stores in the US including sales by product business,
characteristics employment and payroll and then there’s the annual survey which comes out every year and that’s roughly about 20,000 companies,
okay and that collects more than just sales and inventory it also collects things like purchases and accounts receivable and things along those lines and then you get to the stuff that we do in our branch,
so the monthly retail trade survey and the advanced month of retail trade survey which I know can sometimes give people a little hard to understand,
the the monthly retail trade survey is roughly about 13,000,
sample size okay and what we do there is that collects that actually collects sales data inventory data and e-commerce data,
and it comes out approximately six weeks after the close of the reference month it’s been around since 1951,
um and about eight you know week it’s we’ll talk about the data in a little bit about like at the types of data that’s easily adjusted seasonally adjusted.
[7:23] And then the advanced one which is the advanced monthly retail trade survey which I believe is the one that most people use in the one that everybody gets excited about on release day on CNN and Wall Street that is a sample size of approximately 5,500 companies,
it’s a subsample of that monthly retail trade survey just like the monthly retail trade survey is a subsample of the annual survey that has been in existence since 1953.
And it goes it basically what the only the only.
[7:57] Did data that we collect on that survey is sales data because it’s such a quick turnaround because it’s a it’s basically it’s released approximately two weeks after the close of the reference month so as Jason probably knows,
it will be the D September data will be released next Friday,
on October 16th and that will release the September data and that will also then release the monthly retail trade the preliminary data for August,
so and then in addition to that one last piece is the is the quarterly retail e-commerce product which as you can imagine comes out quarterly and that collects just the e-commerce data so it takes data from,
just the just the e-commerce forms the data that has already been collected on the monthly retail trade survey but it’s broken down into just e-commerce,
and then we also have a supplemental product that came out last year which gives you even more granular data and takes that Top Line e-commerce number and breaks it out into
internet’s codes which will get into different Industries so you can kind of see more and more of the granularity which people have been asking for for some time though so.
That’s kind of like the quick overview without spending too much time on that I hope that hope that hit and what you.
[9:09] Yeah it’s super helpful can you give us a sneak preview of the data I’m just kidding.
when you said some of these things go back to the 50s that immediately popped in my head was someone had to go you know I’m envisioning that being on like some kind of a punch card and then like having to convert it into some format that you can work with now is how does that data like.
How did you guys have to go convert that data back to something you can you can now make more.
that’s very great very very good question so when I first started here a long time ago one of my first tasks was to we had all these on paper.
And so we scan them in basically there and some of them because you can imagine we’re quite discolored
but we had them and so what we did is we stand them and we were able to put them on the web as PDF documents and they are on their from so if you actually go to our website which we will talk about later
census dot-gov backslash retail I’ll try to plug that as much as I can you will see on there we have all of our historic data for releases so users can go in and then they can actually pull up like the May 1964 release and see what the sales were back then
it’s pretty cool.
[10:23] Very cool wow.
[10:24] Believe it or not I you know what Paul got here I gave him that assignment and somehow somehow he still stuck around he didn’t like go running for the Hills.
[10:32] That’s The Hazing the new guy.
[10:34] It was like the hazing.
[10:35] Yeah I got a first project for you what do you know about.
[10:38] It’s right here.
[10:38] I’m still with him yeah I was a little worried I said is this is this what I’m going to be doing for when I got here like.
[10:47] If scanning off.
[10:49] Yeah right right.
[10:50] The so there every five year you when you said all retail stores so that’s so like what how many retail stores are there’s are like 50 thousand a hundred thousand like I have no idea.
[11:02] So I thought like this one so so basically the economic census does,
basically a collection of all firms with employees so so that’s roughly you know I don’t know what the latest number is maybe the million range of locations retail locations of course there’s not that many.
Retailers because there’s Raquel from multiple locations but we.
You know we do ask retailers that have a number of stores to provide information for each of their individual stores so it is a massive operation,
you know not quite to the scale of the 10-year population census but it’s a.
It’s a pretty big operation where we do reset kind of like all of the information we have about businesses we have methods to do that in the interim between the five years there’s there’s ways we get structural changes and we get updates from,
other administrative sources but that’s a big kind of once every five years begin to reset do an actual physical kind of like basic like a physical count.
[11:59] Wow you guys like Dread that year like wins then went to the next one I don’t know where we are in the cycle.
[12:03] So it’s not every year in the Years ending in 2 and 7 so the next one 2022 and Paul and I defer to our colleagues on that one we let them handle that one we got our hands full with the month.
[12:12] Yes there’s a there’s another another area that takes care of that just like there’s another area that takes care of the annual break them all up so.
[12:21] But we work we work very closely with them as you can.
[12:24] Yes you guys spend the bulk of your time on the monthly and quarterly just making sure all that that that’s enough Cadence that it’s a full-time gig.
[12:30] That takes up all of our time it’s a challenge enough to get that data out as quick as we do with with with.
As reliable as we’d like it to be is collecting all the data that we do so yes it keeps us very busy and then we have other things that we do which we’ll get into later like when we actually you know,
Benchmark to the annual survey every year so we have different things that we do besides that that keeps us busy.
[12:55] Awesome so I want to double click in the some of this but a couple of quick questions first so 13,000,
businesses fill out the the monthly retail trade survey and five point five and a half thousand
businesses fill out the advanced monthly is it the same 13 + 5 .5 every month or does it cycle or.
[13:19] Great question so what we do
it is the same every month for a certain period of time so we do a what we call a business sample revision we do that roughly every five years for the monthly retail trade surgery and about every two and a half years for the advance monthly retail trade survey
that way it gives its it give it puts less burden on respondents out there
you know so that someone’s not reporting to the survey for you know which 40 years straight or something like that and now obviously depending on the type of company some people there are companies that stay on the survey for a longer period of time
but but it is the same ones each month and the 5500 that are on the March sample side are just a subsample from that 13,000 in the month of retail trade survey.
[14:05] Got it so on that cycle you pick your 13,000 respondents in your 5.5 and then it’s actually the law that they have to fill out that survey right like.
[14:16] So it is the law for them to fill out the annual but the but the monthly retail trade and the advanced retail is not mandatory it is voluntary but we do stress the importance,
to the responders from when the when we mail them and talk to them.
[14:32] Gotcha and then so then we ask for these 13 and then presumably you very reliably get some subset of that and some subset you don’t get like if you if it’s voluntary and some people don’t,
provide do you just use like some statistical means to sort of level it up or or.
Yeah so we there’s lots of documentation on our website as well since it’s not gov backslash retail that has sections about like how data is collected how the survey works,
and so you know we talked about ways and they’re how we how we handle and how we take care of companies that did not report in time and and Scott can even give you a little bit more information on this as well.
[15:21] Yeah basically if the company doesn’t report then yes there you know as part of the monthly retail trade survey we will.
We will develop an estimate for them based on either the reporting history of the company or how the companies the other companies in the same industry are performing for that month.
So we do come up with a replacement value for companies if they don’t report.
[15:46] Got it okay and fun fact I was actually just on the in RF digital council meeting this week
and the the in RFC Chief Economist was you know talking about some stuff and he you know not surprisingly who averaged a bunch of your data and
people are asking all kinds of questions about your data and like you know these are all the vp’s of e-commerce and a as a joke and this will make more sense later they all called themselves the chief non stores officers that’s the.
The Unofficial title that they all gave themselves and they were all talking about how when they were earlier in their career they used to be their job to fill out the census.
[16:29] Yeah so there are several people that are like oh man I used to have to do that every month,
so so that’s that it just kind of fun to think about so we’re all.
Super short attention spans of course and so everyone pays attention in my world to the advanced monthly because we want to talk about last month as soon as possible right and so two weeks after the month clothes you give us this cool Advanced Data.
A month later you get a bigger sample does,
so I’m assuming if I wanted to look at like a three-year Trend or something I’m probably smarter to use the monthly survey monthly product versus the advanced monthly product because I’m only losing,
one one month of data and I’m getting a bigger sample size.
[17:19] So yes you’re correct so the advanced one like you said is the one that everybody looks for right it’s that first indication of how the how the economy is doing in the number that,
that that people see and then what happens is you have time then so you know there’s real if a company cannot report in time to that advanced survey then,
can report in time for the possibly for the monthly okay so so you’re going to get more you’re going to get more data in the monthly series then you do in the
in the advanced because there’s because over time you’re going to add to it because you can revive at any moment in time you can revise the prior month so like when we put out data next next,
Friday for the September March will also be putting out the,
August preliminary now that just came out last month so there should be more data that comes in you’ll get a more updated number which is when they start to talk about what are revisions are out there,
um so yes if you’re going to develop any type of Time series that would be what people would use and then even more so than that what happens every year as we will in the in the April time frame as we will put out our annual revision
our Benchmark report to the annual and could and opens up for us to add even more data at that point so that’s how that would work does that make sense.
[18:33] It makes total sense and then one more question because Scott’s chomping at the bit to jump in the.
When you get that more data like do you actually publish a revision for example to the advanced product or or does it just show up in the the monthly product.
[18:52] So it’ll show up in the advanced product as the prior month but it will also show up in the monthly product so because only the prior month is getting revised so that’s where you will that’s where you’ll see it,
we do not go back and like recreate the report again if that’s what you’re.
[19:08] Yeah I know but but so to be clear like on October 16th you’re going to publish an advanced monthly product that has the September data in it you’ll publish the monthly product that had or no.
That has the August data in it.
That right yeah August and we also publish a revision to the August Advanced Data or no.
[19:32] No there will not be a revision to the August Advance there will be there will be a revision to the August preliminary but you’ll see that in the September advance in the columns where we show the revisions to the August that will be there and you’ll also even at that point in the August,
a full report that comes out you’ll also see the final revision that you can make for July so you can still actually correct that as well.
And so that’s that’s how that works.
[19:59] The other thing to add there is when we release the monthly retail trade survey so like in the example we’re using.
When we release the August you know next week when we also released the September Advance the August will also include a bunch of additional detailed levels because the advance is so quick and sample size is smaller,
you know the so you know the industries are sub-sectors we come sub-sectors that under retail that we are able to publish you know are somewhat Limited.
You know so we are able to expand that and publish a lot more detail.
When we do that when we do the larger monthly survey ferns for example like in clothing stores like in the advanced will publish clothing stores butt in when we get to the,
monthly were able to break it down in the women’s clothing stores or Family Clothing Stores or shoe stores or,
Alex cetera so that’s that’s the advantage of having the larger sample and having a little more time to get it done is that we are able to dive into the data a little deeper.
[20:55] Brickell I don’t know why I never connected these dots but just does all this roll up into GDP.
[21:02] Great question again so yes so the the it’s about a third of the retail that is about a third of the personal consumption expenditure component of GDP so and the other two-thirds is made up of services so that’s how,
[21:18] Yeah I have a started a new company that’s Digital Services so I have this whole Spiel where I talk about GDP breaks down you know consumer services are much larger than super good so you guys create GDP that’s crazy you measure you measure GDP.
[21:32] Yeah we actually were and we work with we work with PE a a lot who creates GDP so they’re actually you know when we were in the building they’re in the building were into so it’s a little easier.
[21:42] Trust me out I don’t know why.
[21:44] Yeah there are Sister Sister agency of us under Department of Commerce.
[21:48] Very cool okay I never I never connected that I don’t maybe I’m the only ones but who knows.
The sudden let’s go let’s go back to the data so Jason kind of tease this a non-store definition give us on the e-commerce guy on the show so how does e-commerce come out in these reports
store non-store what are the definitions of all those things.
[22:13] So I’ll give you the high level,
it in the in the monthly report so in the advanced report but we have an on store number that comes out at a very high level and I’ve heard Jason hit on this before in previous episodes it includes more than just e-commerce so it’s going to include things like
Fuel and like direct Sellers and catalogs for those that are still around things like that so and then once you get to the monthly retail trade survey the the larger one where there’s a little bit more detail There’s an actual e-commerce line there,
and so in that line now it’s you’re taking out the fuel and the direct seller so you just have the e-commerce but you’re only have the e-commerce for,
that do not set that do not fulfill from their store so they have a sense they’re big enough that they have a separate Warehouse that they fulfill from and that’s what goes into that number
I’ll let Scott now talk a little bit about what goes in if you’re into of what goes into the quarterly e-commerce report and how that breaks it down even a little further.
[23:10] Yeah so so so on the cool you know so on on the monthly you know we have that line that says electronic shopping and mail order houses you know so keep in the mail order houses in there.
Switch back to what it used to what it started as basically,
you know but it but it includes you know anything a company that would be classified as one of those things wouldn’t would have so if it’s all sales whether it’s online whether it’s whether they actually still have some mail order operations if they take a phone call.
You don’t process an order that way all of that data would be included so it’s not a hundred percent e-commerce.
And it’s not all of the e-commerce so what we try to do in the quarterly basis is we produce two things one is just a high-level report.
That basically takes sums up for all of retail and this will be excluding Food Services because technically that’s not retailgeek.
What’s the total e-commerce number that’s the number that you know comes out once a quarter.
You know that gets quoted and and you know what we released the second quarter e-commerce data like on a seed like Dustin basis and I know we’ll probably talk about seat adjustment later that was roughly about 60% of.
Retail sales for the second quarter so that’s so that was the original report that reports been around since the fourth quarter of 99 we started doing that back then.
[24:25] Of course in recent years and you guys have touched on this in you and some of your podcasts.
You know it’s a little grayer what companies are now doing with their online fulfillment.
And as a result we’ve tried to adapt what we’re able to provide to the users specifically you know that’s Paul said.
The goal behind the non-store is that that’s really a non store operation well now you have all these things like you know fulfill from store ship the store.
Pompous you know you have all these different components which graze the.
[24:58] You know what are people doing how are they breaking it out how are how are people reporting the data and you know at the end of the day we’re at the mercy of the retailers to basically.
Report the data as they see it and Argo and and because like like Paul indicated,
you know we’re relying on the businesses to produce the survey we try to align when we asked them with what they have,
you know we don’t want to give them all these elaborate instructions that basically maybe at the end of the day would basically label us to put it in all the right buckets.
They can’t give it to us and then we just lose the response and that would be worse so what we tried to do is we tried to say okay you know recognizing that there might be some inconsistency and you know how a company either you know ships to your house or you buy online pick up in store and how that’s fulfilled might be different.
We basically produced an experimental product about a year ago and actually I think Jason reference this in a podcast not too long ago that.
[25:55] You know where we kind of tried to combine it and say okay you know what regardless of whether a store tells us they fulfill it from their store or they fulfill it from a warehouse you know if the store is say you know clothing store.
Let’s just some all that data together so if they fill it for filling from their store for Phillip from Warehouse no matter what the.
You know what the origination is you know let’s call that like a digital transaction online transaction everyone call it and let’s kind of group those together so that you could kind of see how things are.
You know how that performances you know across the various Industries and how it compares to one another so so that was a big that was a big achievement we were able to do that with the data we already have some companies which was nice we didn’t have to reach out and burn the company’s again.
And and it did provide some granularity and of course with with the the data that’s been coming out of the past.
You know five or six months I mean it’s really provided some insight into what’s been going on.
[26:50] Trickle the this is a question to feel free not to answer this so you know so it’s neon e-commerce guy I immediately kind of think well you can’t measure your Commerce without measuring Amazon is there do you capture Amazon in this at all or are and it’s fine if you can’t say.
[27:06] We can’t we can’t.
[27:06] We can’t say you’re correct we cannot say.
[27:09] Yeah I mean I’ll retell all retailers are eligible to be selected for the sample but we can’t talk about any specific ones.
[27:16] Got it okay I have had a feeling that maybe since about that’s fine,
um nothing that’s really interesting though is so like Amazon is there’s Amazon themselves and then there’s like all these third-party sellers so it seems like you know and then you know the company I started previously we had thousands of these little sellers so.
To you know 13,000 could be a bunch of small ones you could have big ones do sir how do you get the mix for that to try to look like the u.s. mix sir is there some specific stats magic you do there.
[27:48] Yeah so basically and that’s kind of where the economic census comes in is that by having all that information on all of the businesses in the United States were able.
Stratify the sample so that we can you know.
Um produce estimates at the levels we want to and make sure we have a good mix of the large businesses small businesses Etc,
and we stratified based on size and size of the business and you know and then we can use the economic Census Data as kind of a you know the target population make sure it’s representative.
[28:17] Got it that makes sense yeah so that gives you you know you have this five-year check in to kind of understand what the what what the statistical relevance of everything is.
[28:29] Awesome so just a couple more qualifications on the e-commerce and we’ll move on obviously like this is what we get the most questions about so-so
a white just to re-emphasize what you’ve already said every every retailer accounts differently in some some Count Their e-commerce separate some don’t some
call it e-commerce if they take the money online some call it e-commerce of the products deliver to the hat like there’s a ton of different definitions and you’re trying to ask questions that the retailer is likely to know verses.
[29:02] So super hard.
[29:04] It’s a challenge.
[29:05] It’s a challenge for sure I can absolutely appreciate that so in the abstract perfect world if,
Scot Star Wars memorabilia.com and I don’t have any stores I’m only online I should be reporting a hundred percent of my Revenue as e-commerce and so on the
Advanced monthly it’s going to be bundled into the non-store and in the monthly it’s going to say e-commerce right.
[29:31] That is correct you would you would be what the industry calls a pure play so you would be your entire your entire business,
live solely online you would fill that out right and did exactly what you said you would be in the non-store category in the advance and then you would be in the,
you would be in the electronic e-commerce portion of the monthly and then you would also be in the quarterly report.
[29:54] Yeah and then if I later opened a store and I sold half of my stuff out of the store and the other half I shipped to customers homes from my fulfillment center,
in an Ideal World I should be reporting half of my sales as store sales which would then show up in the
in the appropriate category which I assume Star Wars memorabilia is essential Goods is probably the category that.
[30:20] Mmm Yeah.
[30:23] And then the other half of my sales I would report as e-commerce is that am I thinking about.
[30:30] That is correct right and if you were so nice as to break that out for us and give us that data like that then yes it would that’s how we would capture correct.
[30:36] But it’s entirely possible that someone filling out the survey is just going to say we’re predominantly stores or were predominantly e-commerce and therefore we’re going to put all the numbers in.
[30:46] And this is kind of like what Scott had hit up before you know where we’re always going to be at the mercy of the retailer right as to how they deem what they what they think the definition to them
is e-commerce or retail rates oh
no matter how we tweak our definition or try to learn more about the definition from doing research and talking to people you know we know what we want and we know what we deem to be what e-commerce is it’s just getting everyone’s opinion to buy in on that as is that as I said before is always good is always going to be the challenge but we’re always we’re always trying to reach out and talk to different
agencies and and and establishments to see you know what others are thinking as well and we’ve gotten some good good feedback from people.
[31:26] Yeah we spent weeks spend time working with like a lot of the trade associations you mentioned National Retail Federation earlier we you know we work with them you know and and try to you know and others to make sure that we.
That our definitions represent kind of how the industry views,
you know the definitions the e-commerce of course is changing so fast so rapidly that that’s a hard one.
[31:51] Are the challenges it’s a moving Target.
[31:52] That’s a moving Target.
[31:54] You’re talking about and I know you can’t talk about specific retards but if you were talking about Target five years ago they had a bunch of e-commerce and they shipped it all from a fulfillment center today they fulfill 80% of their e-commerce from stores so
like whatever was right five years ago for them would not be right today.
[32:12] Exactly one other one other clarification is that you know what we do for e-commerce in terms of companies that have like a separate e-commerce division,
versus their brick-and-mortar stores either whether they started as brick and mortar and went to e-commerce or vice versa it’s so early what we would do for any part of retail so if a company operates furniture stores and they operate clothing stores.
You know that’s two different Industries and so we would ask them to split out that data separately and for the most part companies will split the date out,
and similarly with the e-commerce move we get good cooperation the companies will split out the data so that we can put them into the different Industries and measure how furniture stores are doing and clothing separately so that we don’t like.
Put the furniture Trend in the clothing in the clothing stores industry so,
so that’s it’s similar to how we do it for all the industries with you know we would so a complex company that operates four different types of stores you know Grocery and furniture and clothing and department stores or something could be in for could get for different.
Request from us to fill out.
[33:14] Got it and then one more thing I need Commerce and then I’m going to move on I promise,
the a cool thing about the new e-commerce products is so if you’re just looking at the monthly data the monthly product you’re going to see,
e-commerce aggregated so you’re going to see a total number for e-commerce but you’re not going to know how much of that was a parallel versus home goods for example
and so so one of the cool things about the quarterly product is you you then try to categorize,
or disaggregate the e-commerce into those categories do I have that right.
[33:50] You do that has been something that has been asked of us for a
pretty pretty long time and as you can imagine to get a new product up and running takes it takes years and years of research and talking to people and Smee and Scott were involved with that as well as other as well as some of our other colleagues meeting with different organizations and stuff and so to get that put out for that granularity for people you know,
it was a huge success I think people would gotten some some very good feedback on it because and especially like if you look at the if you look at like the most recent report you know in a time like now we’re a lot more a lot more activity is happening online
right you wouldn’t you wouldn’t know from the quarterly table that we put out before when it was just the Top Line number that something like,
food and beverage stores were up a hundred and one percent from the previous quarter from second quarter to the first quarter and that
and that from the prior year quarter is up 220 percent I mean,
that’s that’s huge and we would have never got that before without us having it that supplemental table you want to just got a large e-commerce number and I think a lot of people would have just been like oh yeah we know e-commerce is large right now because everybody’s buying online writing is all this new stuff like buy online pick up in store
so to get that granularity with and get to see a lot of these different Industries and what they’re doing you over years I think is a definite value for people.
[35:08] Awesome so now I want to transition so you mentioned your url census.gov forward slash retail you’ll be happy to know that’s the third favorite on my favorites bar.
[35:22] That makes me happy probably makes God happy too so.
[35:24] Wait what what I want what are number one.
[35:27] Yeah don’t be too mad it’s Gmail and like my my work salesforce.com login.
[35:34] LOL that yeah that’s good.
[35:37] So you’re right up there I’m not saying I organized it by frequency or anything.
[35:43] You are where you are so but on the morning of August October 16.
I and a lot of other people in the industry we’ll get up and we’ll I’ll admit I get up to eight to actually wait for the data it’s already waiting for me,
I’ll get up that that data is available I’ll do you know look at see what happened and I will start throwing out some tweets about like what I found interesting about the data and so will a bunch of other people and,
to my annoyance none of us will say the same thing or quote the same data so I.
Three people will all say oh the the US Department of Commerce or I will say the US Census Bureau.
Released this data and x and it was by 5.2 percent or whatever right and then someone else will say
a different thing and it’ll be four point three percent and another and so I want to kind of and I think I know why that’s happening and I know you guys know why that’s happening but I want to our listeners to understand
um what’s happening there’s a bunch of different cuts of the data in different ways to look at it in different ways to talk about it and unfortunately most of us.
[37:07] Good you don’t.
[37:08] So so the first thing that that,
like so they’re like I want to unpack that a little bit there’s a couple of parts of that but the first thing is you do,
you have like top lines but then you have a bunch of categories and,
most of us are interested in a particular subset of categories
and if unless I’m mistaken you do us a couple of subtotals right so if we just wanted to talk about Automotive
there’s an automotive line if we just wanted to talk about the top line there’s a top line but for example the top line is going to include
new car sales it’s going to include fuel sales and it’s going to include restaurants which you guys call Food Services is that.
[38:00] That is correct yep I was going to I was if your I was going to tell you like the different breakouts we have if that’s what.
[38:08] Yeah yeah yeah.
[38:09] Sure so we are we so like on the advanced report for example will have the retail and Food Services total that’s everything with retail and like you just said the right the food service is right you what we will what we will provide and publish is a not seasonally adjusted number
and a seasonally adjusted number so and then we’ll you’ll have the level and then you’ll also have the percent change from the prior month.
And the percent change from the prior year right and then you also have like the rolling quarter,
so like what you were just saying is you will get a lot of different the matter with depending on where you go you might see one that says retail sales are up like you know to tensor and another one says retail sales are up 5/10 right they one could be looking at
I had not seen easily adjusted other one could be looking at seasonally adjusted one could be looking at year-over-year what we tend to focus on and what a lot of people mostly quote is the seasonally adjusted month to month,
Trend and then whatever the revision was along with that total like you were just saying we also then provide a total that excludes,
motor vehicle and parts dealers because that is a category that a lot of people like to see they want to know but since Otto is so big and make such a large portion roughly like twenty percent of the retail total people want to see what would it be.
without auto brightness so we provide that number and then we provide a number that excludes guests just gasoline since that’s a big number and you know with everything that’s been going on that goes on with gas and how that’s so price driven,
people want to see what retail would be like without that number and then we have a total excluding motor vehicle
and parts and gasoline so it excludes bolted oh so you could just get the number
retail without those in it and then there’s the retail number so that number is retail excluding Food Services if you do not want to see Food Service it’ll still have the motor vehicle and parts in gasoline in there but it will remove the,
the food services and then one last one that you’ll see and it does not come from us but a lot of people in what you might hear something to the effect of the be a control group,
and so what that is is that’s retail and food services and they take out Otto,
building gas and food services so that’s a number that sometimes you’ll see quoted in various news outlets but it does not come from us we did we don’t have that control group that we use.
That kind of clarify some of the categories and the different okay good.
[40:27] Yeah so the first thing is like a bunch of us could be taking a different segment that we’re looking at and it could be one that you gave or it could be one on calculated myself right guy
I can aggregate it up a bunch of the categories and just get gas for example if I want it right and side note.
[40:46] Part of the reason people would take categories out is particularly if you’re interested in e-commerce historically there’s some categories that weren’t very e-commerce friendly like almost no gas is sold via e-commerce so I today there are some,
some edge cases where maybe it is but for the most part you know gas wouldn’t be eligible to be,
any Commerce sale in the old days a lot of people don’t consider restaurants part of retail I disagree but I get it and in the old days there was no e-commerce for restaurants now there’s a lot of e-commerce for restaurants with door – and whatnot
in the old days nobody ever bought groceries via e-commerce,
now a bunch of people are buying groceries versus e-commerce so in the old days if you wanted to say like the core categories that were,
common for e-commerce you might have take it pulled grocery out and food services and gas in Auto right
but today you know Tesla sells online you know grocery is like 12% e-commerce right now or something like that
four for each of those things that the definition than a that someone like me might use
like to be fair like Hat Wag we have to put more of those categories back in because they are increasingly falling into the e-commerce bucket.
But so besides that you hit on some other things that we all tend to use differently you give two sets of numbers seasonally adjusted and non seasonally adjusted numbers.
[42:13] Yes so I’ll try to tackle this one.
This is this is a popular question as you can imagine so so generally speaking you know the data we get and we aggregate up goes into producing we call are not seal adjusted number.
With a couple of caveats one you know the industry much of the retail sector follows like the.
The retail reporting calendar right they opt they don’t operate on a calendar month they try to keep four and five week periods together to maintain the times of years and the kind of comparable basis year-over-year so they so they report,
you know not for the month we’re measuring so for September or something I think the.
[42:55] You know they’ll report appeared at the moment either going to return home and he’d acre for September was but if sometime in early October right so it’s it was a period that ended in early October wasn’t really September first,
So we have to adjust that to put that on the same basis because not everybody follows that we asked them for their September sales and you know something like the Auto industry doesn’t typically follow the Reach Out calendar the grocery industry has their own calendar,
in many cases so so we put all of that on the same basis well once you once you do that and whether you have to do it or not,
there’s differences of course in months there’s differences in numbers of days you know from the extreme of 28 February so for this year when it’s leap year the 31 in a number of months,
you know if we just kept the data Nazis they just at you would have increases just based on the different number of days in a month.
It also have differences in the month or increases or decreases based on the fact of what those days are in the month you know if you have a month that has five Saturdays in it that can be a huge.
Increase in certain things like you know just think of a grocery store on a Saturday versus like a Tuesday so if you had a.
You know if you had 5 Saturdays in a month it could overly inflate those numbers so that they may not be comprable you know to what you’re comparing it to last month or when you’re even comparing it to last year because the calendar can shift a little bit.
So we do we do make an adjustment for assent to that trading day difference we do have some adjustments for things we call like moving holidays this.
[44:22] Both the most obvious example of this is like Easter and the change in spending patterns around the Easter so when it’s in March,
the spending is going to fall more in March when it’s in April the spending is going to fall more,
an April depending on the timing when it’s in the middle kind of overlaps two months so we make an adjustment for that then of course we also make an adjustment for really what the what we call it which is seasonals the seasonality of the industries this is the fact that you know.
In the springtime people are planning a bunch of flowers so they’re going to a lot of lawn and a lot of nurseries and you know so so will we have to do a seasonal adjustment to account for the seasonality,
um so so we do all three of those things we do a seasonal adjustment,
we do a holiday adjustment were appropriate not every month of course and we do a training day Jasmine so they basically you could put all of the months on the same basis any Theory you can compare any any period you want across the whole time series you can do a month the month a year to year,
um you know you can take any quarter and compared to any quarter and a prior year the goal of that is to basically remove.
Remove the extraneous factors that might cause the data to be different to hopefully.
You know uncover the actual underlying you know growth or decline that might be going on in retail.
[45:36] Yeah okay
and then you also highlighted one other variable that comes up a lot like people will quote a percentage and it’s super important to know whether they mean percentage change from last month or
change from the same month last year.
[45:54] Yes that’s and you know and I know a lot of the industry follows you know year-over-year as the metric that is tracked and of course A lot of it is same store your every year we don’t do same store we do.
Whole store so basically if you if you had 500 stores last year and you have 400 stores this year you’re going to show a drop you’re not going to show a sing store for just a 400 you have,
if you and vice versa if you have 600 instead of 500 you’re now going to show an increase,
you know rather than just the performance of those 500 stores one important thing to clarify actually that I meant to mention earlier was,
we don’t press the dust this data so it is nominal and nature so things like gasoline where it which can be volatile for prices you know that can be,
and that’s one of the reasons like people try to exclude gas sometimes because it may be a little misleading,
because there is there is no price adjusted done our friends at me yeah they do that when they put it in the GDP they do a price adjustment.
[46:51] Yeah and I was going to say less frequently but occasionally you will see some US Census retail data that’s,
attributed as inflation-adjusted and my assumption is that something that someone did with the data themselves after they got it from you you got you guys don’t,
don’t do that right now.
[47:14] Right we don’t do that it’s just that’s other people you know this thing as you can imagine it’s probably just there’s a lot of people sitting there waiting for the data on that day right and so they get
data set they downloaded into whatever program they want to use and they run their own regressions or models and apply things and they come up with their own
and you know they might fail to say and whatever article whatever that you see are their tweet or something they might put something there that is of like fact that it came from us but that’s not the truth.
[47:37] Yeah totally got that okay and then now I’m going to throw out my premise for which data I prefer to use you can react if you want right,
so in general if I’m talking about.
In absolute number for a particular month so the dollar value of last month’s sales in a particular category or whatever I’m going to use the not seasonally adjusted number,
because that’s that’s the actual number that happened in that given month,
but as soon as I start talking about Trends over time or comparing two different times I’m going to
quickly switch to seasonally adjusted numbers because it’s going to be more accurately reflect.
The true true changes from between those two months.
[48:31] I think that’s I would probably agree.
[48:33] Yeah I was going to say the same thing I think would you say makes complete sense using over the time for the season just to take out as everything Scott was just talking about,
like the moving holidays and seasonal seasonality of stuff you want to see what the true Trend would be I think that makes sense but from a one-month perspective if you want to see what they’re real,
data is and you want to look at the Nazis Lee Johnston I think that makes sense as well.
and then in terms of year-over-year or month over month I’m for retail and there’s look all this data is there because there’s a legitimate reason you’d want all of it I’m a big fan of year-over-year
data because they’re like you know even with the seasonal adjustments the.
There are too many things that are just intrinsically different from from month to month in in retail or in most categories of retail so it just it feels to me more apples to apples,
to say you know what happened versus the same period of time the previous year.
[49:36] So what you say makes sense and I think you’re a lot as Scott would probably agree with a lot of a lot of out what you will see from
from news outlets out there and and companies and research firms they usually report year-over-year and even when we’re looking at like when we look at our data and we compared it to outside things like what we receive from like black box intelligence for like for Food Services or for things like that a lot of those,
places and a lot of those organizations will quote year to year so,
yeah I mean it definitely makes sense I think we’re we definitely show that’s why we show both I mean and what we focus in on is I think people want to see on the day of is always they want to see like what happened from last month but I guess you know it’s whatever serves your purpose.
[50:19] And I think and I think they’re in the current time if they deal with the with the pandemic in the past few months I think the.
You know it’s important to use the month the month and the year to year in conjunction with each other right because some of the trends are so extreme.
Bennett kind of it’s easy to get lost in like the size of the numbers going down and coming up.
So using it you know in conjunction with the year-over-year gives kind of a checkpoint against Okay so.
This is saying for this month it’s up or down X but like what does that mean like where we at compared to pre-pandemic levels or or you know where we at compared to where we were last year and I think I think it’s important to be able to use both.
And I think one of the event is one of the you know advantage of having seasonally adjusted data is in theory you could compare you know August of this year to February even though maybe that’s a not comparison you normally would do,
you could do it because you know if you wanted to kind of see you know a before-and-after kind of perspective.
[51:17] And that’s why in our report we’ll all we will supply the month or month and the year to year and then that’s easy Johnson this easily Justin and we’ll put out tweets because like a sky was just alluding to
you know you see something interesting like like from last month in August like food services and drinking places were up like four point seven percent
from July server was like okay that’s been up like three months in a row now but it’s still down 15.4 percent from last year and throughout the whole year,
it’s down when you look through the first eight months of the year so when you look at a lot of these different categories they look good on a month-to-month basis not so good on a year-over-year basis but then some of it is the other way around,
where things look great on a year-to-year basis like what we’ve seen with non-store retailers through the through the last 6 months or building materials right or Grocery and I think when people see that.
In those categories that makes a lot of sense.
[52:06] Yeah and so then two other little things just popped up I forgot to mention earlier but but when your,
thinking about what categories you want to look at when one kind of gotcha to know is there are two categories that have the word food in them right like theirs
Food Service which is a restaurant and and then there’s there’s food retail which might be like a grocery store.
Do I have that right.
[52:31] Yeah so the Naik the industry 445 that is food and beverage stores
so that’s going to be your grocery stores your liquor stores your your all those types of all the other grocery stores they’re not restaurants so what’s in the 722 industry which is Food Services,
and restaurants is exactly what it is you get things,
like all your takeouts and your food your restaurants and your fine dining your limited all anything that has to do with that it’s not a not a grocery store so sometimes people get that a little a little confused.
[53:03] Yep know exactly and then you just reference something that I’m ashamed to say I didn’t know but it suddenly occurred to me of course you do you guys Tweet stuff yourself like is there a Twitter account we should be following.
[53:14] We do so we actually have a Twitter account and an Instagram and a Facebook it’s just that US Census Bureau
and actually on the so if you follow that on the day of the release we haven’t we call up with our tweets they get reviewed and then they are released on the day that we
we put out our report will put out a number of different things will show a different flavor of like our month you know a month-to-month trends that look interesting year over year Trend so we’ll put anywhere but sometimes between eight
eight sometimes 10 will do it on our quarterly reports also and we’re going to start to try to get into the business now of,
you know not necessarily just on the day of the release but if we have some interesting things that not to overload everybody all at one time to maybe like later in the week or sometimes throughout the month is just to also put on some interesting facts.
[53:55] Nice and I’m assuming it’s super easy for just anyone in your office to just send out tweets under the government accounts.
[54:04] It’s the easiest thing you’ve ever seen I mean we can do it so we never get any backlash or anything it’s love you me and Scott do it or sub knocking yeah.
As you can imagine yes is it is difficult but it’s something that we’ve been you know it’s gotten a lot of good feedback you know our department the area that runs that it’s nice to see like when we’re like we’re actually think one month we’re actually trending and there was like some some cool stuff going on there and that it’s really it’s really neat to see that stuff.
[54:31] The so I know where you guys were
we’re recording this at kind of a late time so we’ll go through these quickly you kind of talked about how you look at some other third party data do you guys kind of triangulate on that at all or our feed it in so we have people on the show that can
they look at credit card debt there’s tons of data out there do you guys look at that at all.
[54:54] So yes we’ve actually well first of all we use a lot of third-party data just in the normal analysis and validation as we you know like a sanity check against what we’re saying,
but then we also in recent years have been working with a number of companies to try to kind of blend the data between like the third-party data survey data other administrative data that we might have internal to the bureau,
to try to produce some some estimates and actually just last week we released a new product that is actually it’s another one of these experimental products that we did for the.
For the e-commerce breakouts but it actually is breaking out our monthly data by state.
So we’re doing modeled estimates where we are blending data from a third party Source from survey data and from internal administrative data and producing from January 2019 to the present.
Um monthly data by State for the non non non store the non e-commerce basically the brick-and-mortar component of.
[55:56] Because allocating the revenue to the e-commerce component that we’re still working out of figure out that methodology so.
But and and you know and so we partner with some third-party companies investigate how we could do this the accuracy of their data and we’ve been working on it for a couple years and we were able to produce something and we’re always looking to like,
see what other data is out there there’s data is much more available than it’s ever been before and you know we.
We’re trying to say when we can leverage without having the burden the retailers which already have enough on their plates.
[56:31] Cool random question to does is the services that’s not you guys but our do they have Geographic breakout Gina.
[56:38] Services does not does not get servers with the services data is on a quarterly basis and of course it covers mean it’s like you mentioned earlier it’s a huge part of the economy so it’s very Broad in nature but no we do not have,
Jagger got Geographic Baker breakouts yet but we do that is on our list.
[56:59] Tell me you know a guy that would love Geographic break out of auto services data.
[57:04] I will make sure I went and when when we need it when we need somebody to support us I will come back to you in a little while and you can give a good statement.
[57:12] So a you need to commit to fill out some good surveys.
[57:15] I will I’ll be happy.
[57:15] Yes yes yes.
[57:16] That’s right we expect your cooperation if course we couldn’t tell anybody if you were we’re not on the same.
[57:24] Absolutely and I wouldn’t divulge that either.
[57:26] Would be it would be totally obvious because Scott is actually the biggest part of the service economy so if it’s a big number you know he’s in there.
So in one one side note on the third party data there are ton of other people that like have their own panels or surveys or things and they publish data,
what listener should know is almost all of those companies index their data to your data.
[57:54] Yeah so you know if they’re hearing from 10,000 people and they want to scale it up to.
They do a correlation and say hey how does our estimates map with the the US Census Data and it follows a closely then they feel like it’s it’s it’s credible.
So so when you’re looking at almost any data set in our space there’s a good chance it’s at least influenced by this US Census census,
so it’s very fundamental I do want to wrap up we’re almost out of time but just briefly talking about tools we’ve talked about your website a couple of times and I would just plug on your website,
that it’s surprisingly functional
so listeners should know you can download Excel data you can download a PDF and you know you can load that Excel stuff into
or a CSV into whatever Analytics tool you want but you also have like a.
Pretty functional kind of click and an answer query engine so you can pick which of these categories you want and what date range and whether you want to adjust it or,
or not and you can grab almost any data set that you might want pretty easily straight from the the website.
[59:09] That being said there are other tools that are pretty integrated with your data.
So I I know Google has some experimental tools with their bigquery where they have some of your data although I don’t think they grab it right away.
Is it the st. Louis whose.
[59:28] St. Louis fed Fred yeah.
[59:31] Fred so that’s st. Louis fed and they have some really cool
tools that are pre-loaded with your data I’m lazy and I sometimes use a commercial tool that you do have to pay for called wide charts that has a bunch of your data in it are there,
are those the like I’m assuming you guys primarily like use the raw data like are there any tools I don’t know about or that are,
personal favorites of yours.
[59:57] I think you’ve hit on the on the ones that pretty much are they you know we’ve worked with Fred before and so we’re familiar out of familiarity with them
yeah the ycharts I know I’ve used them for Scott Scott uses a you know
we’re always looking at different things I mean you know where data guys also obviously so we’re always looking at all types of stuff but yes we do use a lot of our lot of our own data and I’m very happy to hear you say that the website is is functional because it wouldn’t be good at people
we’re having issues like finding things on there you know we’re always looking at ways to improve that to I mean we’re actually probably going to be going through a transformation at that website at some point soon to make it even a little bit easier but,
so that’s always good to hear Scott I don’t know if there’s anything else that you might use.
[1:00:39] No I mean we work closely with the folks at the st. Louis fed and and to make sure their data is there I mean you didn’t mention but our data is available in API so anybody who wants to pull the data,
can pull that data pretty quickly you know and so people people are able to do that we.
You know so I mean and you know you meant to Google you mentioned ycharts there’s a lot of people who aggregate our data and,
and and sell it and one thing we want to remind people is that you know the data we produce is you know like you said it maybe maybe some people manipulate a little bit,
you know make it a little bit easier to have function to work within the way you you need it but all that day is available free on our website,
and that people do repackage it and there are there’s value-adds what they do and they cases but it is all available free and you know.
That’s Paul I would say there’s ever anything when you go in there you’re confused you can’t figure it out you know reach out to either one of us will make sure we’ll make sure our contacts informations and,
show notes to and feel free to reach out to us with any questions or help for navigation or Insight or whatever and we’ll help anybody weekend.
[1:01:50] You may regret that offer but that’s awesome.
[1:01:52] No that’s why you have you have our email now you have our email and phone number so we can’t hide.
[1:01:58] The in one one minor last question I mentioned so October 16th is the next drop I never get up early enough to know the answer to this so like is there a particular time of day that it officially goes live.
[1:02:11] 8:30 a.m. on the dot every yeah so the so the 8:30 is from time as always when,
the when the advanced report comes out and that of course you’ll get the the full report from the prior month and then our e-commerce report so the third quarter will be coming out on November 19th that report comes out of ten o’clock and you’ll get the supplemental to data along with that.
[1:02:34] Gotcha and are you guys up super late on the 15th finishing this or did you finish it at a reasonable time and.
[1:02:40] So it all depends it writes it all it all depends it I would say most of the time were up decently late,
you know we love it though we’re into the day that we want to make sure we have everything you know that we’re comfortable with and so yes we’re usually because we do all our all of our own dissemination in the office as well,
and then we’re you know then we’re coming up with the tweets and then we have to clear our data with our in-house folks and then we even do a briefing downtown what we did with when we were in the office with the undersecretary so it’s a lot.
[1:03:11] I don’t want to get put a call at all but but I would highly advise you to not go downtown right now.
[1:03:16] Yes I know.
[1:03:17] So we’re really grateful for all you do this is super super important part of our industry and it’s really helpful that is going to be a great place to leave it for this show because I’m slightly exceeded our allotted time as always if people have specific questions you’re welcome they hit us up on Twitter or Facebook I will put links to the
the Census Bureau website Scott and pause
contact info and some of the tools we mentioned in the show notes but guys this was a real pleasure I really and I learned a lot so I really appreciate your time.
[1:03:51] I’m glad I had a good time thanks for having us.
[1:03:54] Yeah we really appreciate the opportunity of fun.
[1:03:56] Thanks for joining us Paul and Scott we really appreciate not only coming on the show but you guys are you know the data you put together is amazing and we really appreciate it and you know position awareness is really important in you guys give that and we really appreciate it.
[1:04:10] And until next time… happy commencing!
EP238- Holiday Shipageddon
This holiday season will be a mixed bag for retailers. Health concerns are likely to drive many more consumers online, but can retailers and shippers, who are already experiencing Cyber-Monday levels of e-commerce handle the increased volume?
Scott Silverman (@scottsilverman) of CommerceNext and Ken Cassar (@kcassar) of CassarCo join us to discuss the holiday season, including a CommerceNext survey of 1,000+ consumers, and 60+ digital retail executives to understand how aware they may be of shipping delays, trade-offs they'd be willing to make in order to get free shipping, etc.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 238 of the Jason & Scot show was recorded live on Thursday, October 1st, 2020.
[0:27] Welcome to the Jason and Scott show this is episode 238 being recorded on Thursday October 1st 2025
man this year is going fast I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.
[0:45] Hey Jason and welcome back Jason Scott show listeners.
Welcome to the first day of Q4 2020 hopefully your q3s were all ahead of plan and your seems to our sales were decent given that we're in a pandemic.
[0:59] Jason back way way back I don't know if you can remember back this far back in episode 235 we talked about some of the factors that could impact holiday.
And surfaced this kind of concern that we may be running out of shipping capacity before we really get too deep into the holiday.
I have coined that shipaggedon.
So that is really interesting and we've got a lot of Twitter and and listener trap in questions about this so it seems to be top of mind with everyone.
So we decided here in episode 238 to do a bit of a deep dive on this,
and we decided you know that you and I know enough about shipping to get trouble but we needed to bring some more folks into the conversation so we're really excited to have on this episode.
Two experts and they're also regular listeners of the show Scott Silverman who Probably sounds familiar to a lot of you and then Ken kassar.
They have both been watching this closely and they just did a consumer survey of over a thousand people to understand the consumer side of this how they're thinking about.
I'm shipping delays shopping earlier late that kind of thing,
but then they also did a survey on the digital executive side to understand how our merchants and retailers and Brands thinking about this.
So excited to have you guys on the show Welcome Scott and Kim.
[2:21] Thanks for having us.
[2:23] Glad to be here.
[2:24] We are thrilled that I have you guys and we're excited to jump into it
but as you know we like to always start by giving the listener a little bit of background about the guests so Scott I'd love to start with you your name will be familiar to listeners because you were a guest
way back in episode 66.
So quite some time ago and then you have you made cameos on a number of shows since then some listener questions shows and others
um would you mind reminding the the listeners a little bit about your background and e-commerce and what you're doing today.
[2:59] Sure well super excited to be back on the Jason and Scot show I have been in the e-commerce digital retail industry for over 20 years,
describe myself now is a digital retail connector I spent about 10 years Running Shop dot-org which was the previous,
online group of the national retail Federation I did that until,
2010 and since then I've been doing things on my own that are related to,
bringing e-commerce leaders together for information sharing learning shit and
networking including putting together a conference called Commerce next which focuses on customer acquisition and growth,
and and that's been I've been spending quite a bit of my time on that and that's really where this survey came from and we'll get into that a little bit more in a bit.
[4:00] Very cool and always apropos to talk to you around holiday e-commerce because amongst your mini claims to fame you actually coined the term Cyber Monday did you not.
[4:14] I was the co-inventor with Ellen Davis from NRF and that I was the inventor of Cyber Monday.com which is a fundraising affiliate site.
[4:27] Yeah there was actually run by shop dot-org and later interrupt that raised a ton of money for scholarships for kids in the digital space.
[4:36] Yeah absolutely.
[4:37] So some very cool stuff so I was great to have you back on the show Scott and then Ken this is your first time on the show but your analysis has been on the show a number of times because you
have been one of my secret weapons can you introduce yourself to the audience.
[4:52] Yes I am Ken cassar I
have been in the retail industry for 25 or so years but made the jump to e-commerce and 1998.
At the time I was working for BMG Direct that's 11 CDs for the price of one
decided that Direct Mail probably wasn't going to have the promise that e-commerce had and jumped over to a strategic advisory company called Jupiter research at the time in the subsequent 25 years I've spent
most of my time in sort of this weird intersection of data analytics and strategic.
Opportunities and strategic threats that come out of that focused on the retail industry working with both Brands and retailers spent 10 years with Nielsen five years with Racket and intelligence
and now I have my own Consulting shop called cassar Co
and we work with retailers Brands and the vendors that support them helping them understand what is happening in the retail industry again with a focus on e-commerce with a focus on that
intersection of data and strategy.
[6:05] Awesome and we are excited to jump into some of the original research you have but I do want to frame up the topic just a little bit to make sure all our listeners are catched up in the highly unlikely event.
That some of them haven't listened to every episode sequentially so.
About a month ago FedEx had their their quarterly earnings call and they tweeted some interesting growth data about their company and.
They were showing some pretty impressive growth in 2018 they added 5.7 percent additional parcel capacity for the year,
in 2019 they added 7.8% additional personal capacity and then they were talking about for 2020 with this unprecedented e-commerce demand because of covid that they were actually adding.
11.4% additional personal capacity so significantly more capacity than they add in a normal year which is all good news.
[7:07] I pointed out to Scott on Twitter that well that's great news.
That's way less capacity than e-commerce is growing right so while FedEx was adding 5 to 8% a year e-commerce was growing.
Thirteen to fifteen percent a year and this year the most conservative estimates are for 18% growth.
You know the last couple quarters we've seen.
Depending on how you want to count between 45 and 80% growth and so my my hypothesis was.
Man if there's more e-commerce demand in Q4 than there was in Q3.
There's going to be a significant comeuppance because the none of the carriers are going to be able to flex to have the capacity to fill all the extra e-commerce orders.
And so the sort of test that hypothesis a little bit,
I actually reached out to another vendor in our space ship Matrix and ship Matrix is a software tool that a lot of e-commerce sites use to manage their shipments so they see a big chunk of all the,
the parcel capacity that gets sent out to FedEx UPS USPS and Eamon Amazon.
And they they track on Time Performance so they told me that in 2019.
[8:25] FedEx ups and the post office all kind of hover around this 95 to 98% on time rate and that for the last six months of the pandemic.
They've been averaging more like 92% so down.
Cut three to five percent worse performance than they normally have so the The covid increased demand has already hurt there on time performance.
Their data actually shows the Amazon struggling even more that Amazon normally has a 95% on Time Performance for their two-day deliveries and that they're now running at 85% so they're down like.
10% so to kind of wrap that up.
Covid is forced a bunch of people to shop online we've been trying to ship a lot more packages.
The none of the carriers have the ability to flex.
As quickly as the e-commerce demand does and so there's there's great concern about what that means
for holiday and that's what prompted us to do this show today talking about the holiday 2020 and the impending shipping nightmare.
[9:37] Yeah this good framing Jason and you know if things are buckling and Q 3 and Q 2 what's going to happen in q 4 if we usually that incrementally drives on top of what you're seeing in the earlier quarter so.
That's a good time to kick it over to Scott Silverman maybe maybe start us off with how how you guys came up with the idea for the survey and what the impetus was.
[10:02] So we've been leaning into research through the entire pandemic with Commerce neck so
I think we had some of the earliest data available at the end of March in terms of hearing what retailers were experiencing from the pandemic and we've been doing check-ins
between you know that period and now.
But in the middle of August we were talking to one particular retailer who was hearing from a lot of other colleagues that,
they were expecting some kind of shipping capacity,
announcement or policy from UPS and and or FedEx there were a lot of rumors that it might be around 30%.
[10:50] Then this is on you know there's a lot of things to unpack here there's the surcharges the increase demand that's going to come from shipping and just generally there's just more.
Shopping that's going online during the pandemic is as we all know.
And so we thought we really needed to be helpful to our community get and try to provide some,
some data for them and we thought we could do something where we would look at both consumers so we have a partnership with bizrate insights and they did a survey
for us with over a thousand consumers and then
tapped into our community and had 63 retail Executives and a variety of different categories they generally were skewing on the larger side like a
a hundred million or higher in terms of annual revenue and that allowed us to get a pretty good picture of what everyone was experiencing at the same time,
you know I've known Ken cassar you know probably that you know over 20 years,
and he you know I learned that he was spinning up cassar,
and we thought maybe we could work with Ken to have him do some of the analysis on the data so we ended up working with Kanna I'll let Ken kind of walk through some of the,
the high points of what we learned.
[12:17] Well thank you and and and Scott when you hit first reached out as like Scott's so he's in heat the guy that invented Monday but Cyber Monday which is which is a much much better thing than than my.
[12:28] Let the record show I like the guy that invented Saturday a lot more than Scott.
[12:32] Indeed but the but yeah now I was really excited to be able to dig into this stuff and the what was interesting here is we were able to field kind of simultaneous studies with that looked at
how consumers were feeling and how Merchants were failing at the at the same time with specific regard to the shipping issue
and and the and you know and I think you know probably the most interesting finding at least the best place to launch from is when we asked.
[13:05] Merchants about their biggest consumer related concerns and we also asked about logistics which we'll get to but we asked about their biggest consumer related concerns for the 2020 holiday season
the top of the left the top of the list was
their concern about consumers expectation of fast free delivery coupled with
shipper related issues 63% of the retailers that we surveyed had cited that and kind of double clicking in when we asked about concerns that Merchants had around fulfillment specific delivery specific issues
the the biggest.
[13:48] Challenges or concerns came back to shipper related issues the first 60 percent of merchants said that they were concerned that shippers make app deliveries during Peak demand
and and number two short a very very closely behind they worry about shipper surcharges straining profitability
when we click over to the consumer data
we see good reason for retailers to be worried about this because when consumers are asked about their expectations the promotions that are going to move them in this year they're the things that will motivate them are certainly free shipping
followed by a whole bunch of other issues but the but the but they want to make sure that they're getting free shipping
and in with the elevation in e-commerce demand that we've seen and I think everybody has kind of different numbers but what's pretty clear is that after a period of dramatic elevation things have come down a little bit but we're moving into holiday that is historically the
most significant crunch on the e-commerce out of the business so I think everybody from both the merchant side as well as the consumer side are concerned about what this holiday season is going to look like.
[15:04] If I could just jump in just like adding to the consumer side one of the questions we asked was if you're planning to spend time with fewer loved ones over the holiday season is in you could expect,
that was a pretty high number almost half of the people said that that was the case which,
means that there's going to be a lot of people buying gifts remotely instead of buying gifts in a store and then you know.
Taking them to you know Grandma's house where you're having Christmas dinner or whatever you're going to do and exchanging gifts so I that seems to be placing even more pressure on this current situation.
[15:45] Yeah and I think you asked a terrifying follow-up question which was hey if you're not going to be visiting family in person do you do you plan to give as many gifts as usual or fewer.
[16:00] We did ask about holiday budgets and and the and amongst our survey respondents,
it was mid 30s percent call the number of dump my head but the but mid 30s or so had said that they intended to spend less on gifts this holiday season.
Been tracking this sort of behavior for quite a while consumers consistently say that they intend to spend less during the holidays
then they actually then they actual earlier than previously but the but this year is so different that I'm more inclined
to believe it this year than any other year and I'm pretty.
Believing of the forecast that I've seen that show a relatively soft overall holiday season unless you're an online retailer and then it seems that it's going to be a very very different story this.
[16:57] Yeah and can debunk this if I'm wrong but my hypothesis so always take consumer surveys about how they're going to behave with a huge grain of salt of course the in general I would say,
consumers dramatically underestimate how much they're going to spend on themselves for holiday so they always say they're going to spend less,
and then they end up buying more items for themselves.
But they overestimate how much they're going to spend on other and so my my fear is if you're not going to be looking your aunt and uncle and cousins in the face across the table.
And in your survey they're already saying they're planning on gifting less than they probably really are going to be gifting less.
[17:47] Well I mean one counter to that is I heard this today an interesting thought is that.
All of the money that people would be spending traveling to you know on airfare and hotels and such and such could.
Could potentially be.
You know rerouted no pun intended into gift purchases so maybe that would give some more Credence to people spending a little bit more money because they're going to have a little bit more money having traveled less.
[18:20] Yeah no I think that's valid and super interesting.
To me that that goes into this bucket that that you guys call that in your report and of course Deloitte and others have talked about I think Cowan brought up this year as well a super common description of this holiday is bifurcation.
And one of the ways that's described is hey there are a bunch of consumers that had probably planned an expensive vacation they're not going to take and so they may have more discretionary.
Spending to invest that they might be more inclined to improve their home or.
You know buy more toys or invest in the new video game platforms that are coming out this year like there's this these this whole host of categories that could benefit from this.
Affluent consumer with extra cash and and like without doing a deep dive in the macroeconomic situation.
[19:15] Savings rate are uncharacteristically high so there.
There's a premise that there are savings dollars to invest in Holiday of consumers choose to do that right so that could be the upside of the bifurcation is,
affluent consumers could spend more and they're certain categories like toys Electronics.
Home Improvement food that could all benefit from that the downside of the bifurcation is.
The bottom 25% of all wage earners still have a 16% unemployment a million people just applied for unemployment this week for the first time.
The enhanced benefits are expiring there's a hundred thousand Disney and Airline workers about to get laid off.
And all of those consumers are likely burning through that high savings rate and they could shift into.
Real recession mode and you know feel a lot of economic insecurity in there for.
Legitimately spin spin the last for a holiday and then of course there's holiday categories like fashion.
[20:26] You know probably are going to be hurt by the fact that there's not going to be a lot of parties to go to this year all the Halloween people are probably going to be hurt by the fact that the CDC.
Says you shouldn't go trick or treating.
And side note the CDC came out this week and said going to a retail store to Thanksgiving shop the week of Thanksgiving is a high-risk activity that should be avoided.
So lots of weird Trends driving more spending and less spending so how do you how do you figure out how all those are going to net out I guess is the magic question.
[21:02] Bi and you know the I had done some analysis of credit card data from a partner of mine Affinity Solutions a few months ago and
we were looking at the the changes in spending over time at looking at different income groups
in this this was March through April through May through June and July and it was absolutely incredible to me how much more volatile the spending was Andrew and apparently responsive to government stimulus lower-income groups were and and they are absolutely the folks that are the most at risk at this point
in the economy and and so we need to watch that really close.
[21:44] Polly and the unemployment rate I think more than anything else is the number that we ought to be paying attention to right now when I look at the overall Census Bureau spending numbers
they can lull one into complacency the while
April and May were dramatically below the previous year by June and July we were up by August we were flat and
remember during August we started to see some of the government benefits being curtailed
the I think we want to keep a really really close eye on some of the numbers that are coming out,
and I think that at least for a few months it seems highly unlikely to me that there's going to be a political solution
that is that is going to help kind of pad what could be a difficult time and and so I generally worry more than I am optimistic with conflicting signals.
[22:39] Yeah yeah that's good to keep an eye on everything let's jump into the survey you when you kind of went to the highlights there I thought was interesting where.
You know consumers we have this friction consumers want fast free shipping and they don't and they want it all the way through the 24th right and then retailers are worried about being able to provide that.
Where are we you know where is consumer expectation Amazon raise the bar of this year from two days for Prime to one day it's not on every skewb they're kind of constantly trying to implement that and then the pandemic shifted a bunch of that around.
Um and then converts it on the other side of the coin where are the bulk of the Retailer's from your perspective Landing.
[23:24] Yeah I can jump in on that I mean you can Sky you can probably you know let us know you know like how much of the.
Shipping infrastructure that Amazon owns itself but I think it's safe to say that they'll be less affected,
by this then all the other retailers but what we're hearing from the Retailer's,
and a lot of you know some of this is in the survey some of this is just anecdotal and from conversations is there's a number of things that are trying to do I mean I think everyone,
you know once to manage expectations I was talking to someone from Land's End and they were talking about adding additional Communications,
from when the order was placed to when the order gets delivered to keep consumers aware of where the package is,
we're hearing about retailers that I think would like.
Get shot people to buy earlier I don't know,
I think that's a you know a mixed one whether that can be accomplished or not because I think consumers have some pretty.
Deep habits there especially around the holiday they're always expecting really good deals around.
[24:40] You know Black Friday Cyber Monday or as you get later into December I heard one example from B&H Photo that,
they talked about do offering a guaranteed best price which I thought was pretty creative so to you know make customers feel a little more comfortable that,
they're not going to see a lower price later in the holiday season but there's always that cat and mouse game going on between customers and retailers and the customers waiting until the end thinking that they're going to get a really good price and on top of being
and you know and we can kind of go did you know into all of these but I think they're also looking at you know backup carriers alternative carriers certainly,
I think as you were mentioning earlier and if that was Jason or Scott about,
the curbside and buy online pick up in the store being a little bit of an outlet where you're less dependent on the carrier's things like lockers I don't know,
how prevalent that's getting we didn't ask that I wish we would have it would have been interesting to see if any of the retailers are actually going to you know you know be able to use lockers to alleviate a little bit of the pressure.
So yeah those are some of the things that we're hearing about.
[26:04] Yeah it's two follow-ups there so Amazon's at about sixty percent sixty six percent of their own packages now,
but my senses and there's been some blog posts in their never super specific I think they're pouring on as much on to that as they can at these at the individual they're adding dsps and they're adding capacity at the ESPYs.
So I think of the ones Jason went through they'll have the most ability to add delivery capacity I don't know if it'll keep up with the demand though.
I think I saw this week this is kind of irrelevant news items that Lowe's announce they're going to try to put Lockers in a lot of stores and.
The school they looked they looked a lot like Amazon lockers I don't know what vendor they're using or if they kind of built their own Jason do you did you see that.
[26:47] No you busted me I actually did not see that.
[26:50] Maybe I imagined it who knows.
[26:53] I didn't catch that one either the I did actually try to measure that back in my racket on days and and so this was two years ago.
And we're just looking at Amazon and it was a surprisingly small percent of Amazon orders were going through lockers
but but fast forward a couple of years with more availability and with retailers that have more prevalent brick-and-mortar locations it could be a could be a different story
you know one of the one of the things that had really kind of struck me from the research that we did we the consumer side we asked consumers
about we stated
many retailers are going to be facing issues this year with shipping capacity and costs what
trade-offs would you be willing to make in order to be able to get free shipping and 38 percent
of the consumers that we surveyed said that they'd be willing to go to a local store to pick up an order 31 percent said that they would be willing to wait longer for an order to ship and I think for a lot of retailers not sent not named Amazon that is going to be the key to the holiday season.
[28:07] Trying to press consumers toward lower cost lower pressure options that will that will that will hopefully make the whole Enterprise
operate more effectively but we'll see to Scotts Point earlier will see how well they're able to get consumers to budge from their past habits
historically have been skeptical that consumers will change their their past behaviors in any dramatic way however in a year where
when I go to the grocery store they tell me which way to walk down particular aisles and I'm compelled to buy brands of toilet paper that I've never heard of before the it may be it may be a different story than in the past.
[28:53] Yeah so let's poke on some of those those ways returns are going to try to change and how successful they're likely to be but before I do that the,
the our show intern chimed in while you're answering that last question and annoyingly pointed out that Scott was right that that was announced last week plans to add lockers and 1700 stores,
and apparently as part of that announcement they disclosed that 60% of all their own online orders are Bulbasaur are fulfilled by store so makes makes total sense for them.
Um so so going back to ways retailers would like to change shopping behavior for the pandemic you guys alluded a little bit to retailers would like Shoppers to start.
Shopping earlier and I feel like we've already seen a ton of efforts on the part of retailers to make that happen right so.
Amazon is announced Prime day which is the 14th and 15th of October so for Amazon for all intensive purposes.
[29:55] Thanksgiving huh promotions of already started because they have pre-primed a sales running right now they're going to run into this big to two-day Prime thing and I assume they'll roll right in a holiday.
Walmart and Target have both counter-program sales the day before Prime day or a couple days before Prime day.
Um Target Home Depot and a bunch of other retailers have announced they're not going to have one day giant doorbuster sales for Black Friday because.
None of the Retailer's wanna encourage a giant line outside their stores and a lot of their stores are unrestricted capacity so they can't let a ton customers in the store anyway and so instead of one day doorbusters on Black Friday.
They're doing two months of sales starting in October so so there's tons of promotional activity to try to entice the The Shopper to buy early the retailer wants that Chopper to buy early because that means there's.
More days and more shipping capacity to fulfill that order there's a whole variety of things that that are safer for the retail or if they can get him to shop early.
Um the magic question though is our consumers going to believe the retailer like when a consumer sees a deal now or they going to say hey there's going to be an even better deal on.
On Black Friday or later and and therefore don't stop start early or can this promotional activity.
[31:18] Change that behavior like do you have a sense for what's what's really likely to happen Ken in terms of of holiday shopping shifting earlier.
[31:28] Yeah it's a you know I I've got to say that like when.
When I think back to analyses that I've done where I've looked at holiday spending on a day-to-day basis
year over year where you anchor on Cyber Monday it
amazes me how consistent that curve has been I spent
five years when I was at Racket and trying to find interesting things to say about the fact that patterns were as consistent as they were either over here
and and so it is an uphill battle I believe that the unofficial beginning of the holiday shopping season this year is
Prime day or prime days however when I think about it and and that all retailers need to kind of Orient themselves around that I do not believe that necessarily means that retailers need to
explicitly counter program against
Amazon and Amazon's promotions but they need to realize that that is the beginning and collectively spreading demand out as much.
[32:40] It is critical the I think that this year more than any other there is going to need to be a Harmony between marketers and,
infrastructure folks or operation folks like we've never seen before the marketing folks have got a not be myopically focused on driving sales they need to think about when those sales that are occurring and and and they've got a,
bring to bear all of the powers of this persuasion that they've developed not to get people to buy but to get people to buy
at an appropriate time.
And they have all the headwinds of the habits that they've developed over the course of years where consumers have justifiably come to expect the best deals to come later in the season it is a it is no small challenge.
[33:28] What we had a webinar on this topic where we shared this data and one of the panelists was the CMO from B&H Photo Jeff gerstel.
And he made a really thoughtful comment related to this and he's the CMO.
But he said really you should be asking yourselves a year from now you know what did you do to satisfy your customers most and if you're in a
you see that at the maybe there's a small percent of orders that are high risk for being fulfilled you walk away from those and let someone else take those and potentially fail,
but really focus you know on the orders that you feel most confident you're going to be able to do an amazing job with and think long-term the about,
how you're going to build your brand over time and how people are going to remember you and and don't,
take on too much this particular holiday I mean it I think it's.
You know foreign for just about every marketer out there to not,
really you know put their foot on the gas during the holiday season but this might be the one year where you want to back off a little bit and lay off the gas.
[34:45] No that's a great Point Scott and I actually think that that is I mean that's excellent advice and I do get a sense that that's the way the majority of.
Retailers are leaning I've spoken to a lot of retailers that are anticipating having earlier cut off days than usual so.
Um the last day though except in order and still promise delivery for Christmas.
People are just assuming like you know the service levels from the post office are going to be really unpredictable.
The you know the capacity from the other carriers as we've already discussed and so they're they're trying to be conservative because they would rather sell less stuff than,
be the the retailer that ruined Christmas by taking a bunch of orders and not delivering and I think the carriers are thinking the same thing I think.
FedEx and UPS are being really aggressive with their clients and saying hey you have to sign up for a quota of how many packages you can ship you're not going to be allowed to ship more packages than your quota.
Like they don't appear to be looking to grab every order they possibly can they appear to be being really conservative to make sure that they can deliver all the orders they grab so I feel like.
That that might be the way that folks are leaning in general this year.
[36:02] And then there's going to be some products in categories where there's still going to be an inventory problem and I mean we've had,
you know folks you know from a guitar manufacturer talked about you know the shortage is that they've had we've all heard about bicycles and I don't know if bicycles are you know the.
You know factories have been able to kind of get back and begin to bring more into the market but,
you know I think some retailers are going to be thinking about well,
maybe this is an opportunity to sell more you know be more exclusive sell things that full price not be as aggressive on discounting there's so many different things going on this holiday season it's going to be really interesting to watch.
[36:46] Yeah in one one data point that that I do want to share from our Merchant survey,
we had asked retailers where they intended to cut off non expedited shipping because of course.
Expedited shipping for many retailers is available up until two or three days before Christmas but you're going to pay through the teeth for it but non expedited shipping is really I think where the rubber hits the road.
Fifty-two percent of the merchants that we surveyed plan to cut off.
Or set their non expedited cut offs between December 14th and 17th and then another 25% between December 18th and 21st so those are the folks that are kind of living out on the edge.
[37:33] This year more commonly the 14th to 17th is the is where those cut offs
seemed to be coming kind of related to that is shipping speed and and here we asked merchants and that same survey
how what their standard non expedited shipping commitment was
and sixty-three percent of the merchants that we surveyed had that shipping commitment at four days or more
and and so the so unfortunately I don't have a comparison relative to last year but to me this feels consistent with last year where we had historically been seeing some pressure to get faster and faster so I'm feeling conservatives amongst retailers.
[38:23] Very interesting that's a symbol of our listeners are obviously on the retailer brand direct to Consumer side seems like we're all four of us are in agreement that this can be a particularly rough year for this this ship again.
Some best practices we've surfaced are moving up your last delivery date sounds like the consensus from the survey was December 14 to 17.
We've talked about improved Communications.
The you know being really clear about what's expedited and and not expedited both piss curbside ship from store,
what are some other things that you guys are either hearing from the survey or anecdotally that folks can do to help.
Get out of the freight train that's kind of coming out of here.
[39:09] I mean I just you know old-fashioned you know contingency planning you know being flexible and where your,
moving your resources if you need folks to go into your fulfillment centers and you know pack more,
boxes or things like that which I don't even know how that's going to work with covid but yeah I mean I think that's we're hearing quite a bit of that as is just,
being prepared for a lot of different scenarios and be flexible with your team be able to do as much as you can it's.
Sounds cliche cliche ish but I think that's also a big part of it.
[39:56] Yeah the and I think a lot of I think a lot of the pressure that
had been a lot of the e-commerce related pressure that had been sitting on the e-commerce fulfillment centers and the past.
Are going to are going to shift this year to the store because of curbside and Papas and then also when we ask Merchants whether those with stores with their they plan to ship
significantly differently items from stores relative to passed to last year 41 percent said that they were significantly increasing the throughput of shipments from their stores and and so you know I think for retailers
it's more than ever the focus for e-commerce is going to come back to the store and and retailers have got to get
training employees early they've got to cross train employees they've got to be prepared for a whole mess of different unpredictable scenarios and if I were running a large retail chain I would I would start my hiring a couple weeks early to make sure that people were ready
to deal with situations that they've never dealt with before and to be as adaptable as possible.
[41:13] Yeah it's interesting we've had this.
Kind of debate for a long time that the you know the omni-channel are harmonized retailers whatever you want to call them they had this a set of stores that they were under utilizing this the pandemic kind of a weird.
Unintended consequence I guess of the pandemic could be that they're finally going to lean on those stores another interesting kind of option that we saw in the news this week was Sephora announced a partnership with instacart.
So a lot of people are kind of saying alright we've got both purpose and,
curbside but that still you know requires people to come to like a mall like setting where the parking you know during holiday it's always really particular tricky and then,
a challenge with Opus is the you're going in waiting in line to get in the store because the reduce capacity.
[41:59] So the instacart thing is interesting because there's these last mile networks that have been built up for either grocery delivery in the in the example of instacart,
or than there you have shipped and others Postmates kind of straddles both then you have all the food delivery companies.
And and then you have Uber of course and and even maybe lift down the road you could see all those guys kind of playing a role in last-mile just kind of interesting the.
The other side of the story there though is one of the fastest growing from a GMB perspective in the pandemic has been Shopify and their merchants.
So I wonder if they'll be under the most stress the pure play a kind of SMB,
you know they really have no they're not like Amazon and they can build their own thing Shopify is kind of.
Helping a little bit they have their own fulfillment centers but they're there are all those guys are going to be relying on USPS FedEx and UPS.
And they not going to be able to go out and buy the big what do you call it Jason where you pre buy it the.
Whatever that is they're not going to be able to go kind of pre biocapacity like the other guys do you guys agree that that's going to be the most Under Pressure quadrant here.
[43:12] It's an under-pressure quadrant.
If you decide strategically that you want it to be if you want to try to compete with when I saw that Sephora news I was thinking what do they really want to be competing with Amazon in
on that level of service or do they want to compete on their product
and the availability of product and their ability to help consumers understand and and I think there are a lot of retailers out there that could potentially be over investing in getting products to Consumers quickly
where they perhaps ought to be investing a little bit differently in the consumer experience and
and and I certainly believe that there is a segment where immediacy matters a lot but,
just my probing through consumer surveys leads made over the years with some kind of you know
longitudinal view of it feel like there's latitude now like there hasn't been before and consumers are going to have a tolerance for a slow boat and and and and retailers really ought to take
advantage of it unless they happen to be competing very very directly with Amazon and they're only two guys that I can think of that fall within that bucket.
[44:27] There's you know the other way of looking at the the instacart deal is.
You know it's an outlet for you know when you know your most dependable.
Carriers are going to be stretched then and you're looking for a series of outlets to kind of flatten it out a little bit and put less pressure on the existing carriers.
And I haven't looked closely at that particular partnership I don't know if the if it is going to be like the same fast delivery time or you know would instacart be able to.
You know take all day to get something to somebody or even the next day or something like that.
[45:15] Yeah no Scott I actually think you're right in this case that obviously there are lots of.
Last mile delivery service is that historically have hung their hat on you can get the stuff fast as with by us that we can get it to an hour after you order it or whatever but I think for this holiday what we're seeing a lot is.
Retailers that just need to find a safe way to sell more of their store inventory so the thing people forget about sometimes I know you guys understand this but if you have a fulfillment center and a thousand stores and you have.
10,000 Jason and Scot show mugs to sell.
You're going to have 5,000 of those spread out across those stores and you're going to have five thousand of them in the Fulfillment center so getting.
Ten ten thousand orders at the Fulfillment center doesn't help you have half your inventories in the stores or vice versa like you have to match that Supply to demand so.
Like retailers can't win by just having all their no man shift online they would have a bunch of inventory tied up in stores.
That they then wouldn't be able to sell and so curbside pickup Barb opus.
Are super appealing because they give you that e-commerce experience and they're still selling the store inventory and I think some retailers are just concerned.
[46:34] Consumers aren't going to want to do.
Boba's are curbside because of safety issues or inconvenience issues with driving in the mall over holiday and so to me I think a bunch of these retailers that have added.
Last Mile home delivery for this holiday,
are really just trying to make sure that more of their inventories of liquid and that they can sell it so if Sephora can get instacart to drive stuff home for people that let them sell more of their inventory I know Bed Bath & Beyond is,
also did a deal with instacart and shipped I.
And we actually had a vendor on the show a year ago episode 166 called ship see in this is that's exactly what they do they're like an aggregator,
that that you know pull together like 60 of these Regional companies that can drive that stuff to you and.
Fulfill those orders to you so I think the service level might not be same day it might just be.
[47:29] Relatively cheap easy way to deliver store inventory.
But I want to Pivot for a second because earlier in the conversation you brought up what to me is another interesting point that we haven't talked a lot about yet which is inventory issues so.
Pandemic hits in March people aren't sure you know how this is going to be impacted like one of the early predictions was.
Oh man these doors are closed for two months they're not selling any of their inventory holiday we're going to be flooded with inventory and it's all going to be super cheap because everyone's going to have clothes from the wrong season that they're trying to sell.
And what it looks like to me is happened is a bunch of retailers.
Got really cautious early in the pandemic and dramatically curtailed their holiday orders and so I actually think we're staring at the opposite problem I think.
A bunch of retailers are really lean on inventory this holiday and and we potentially in the latter half of holiday might start running into.
Availability and supply chain problems do you guys get any sense about inventory issues and did that come up in the survey of the the digital execs at all.
[48:44] Yeah you know it's funny the concerns about in stock on key items.
We're highlighted both from our Merchant and consumer surveys the it wasn't
necessarily at the top of the list but it's pretty close to the top of the list it was number two on both
and and so yeah that is absolutely a big issue the my advice to retailer is this year is,
identify your key inventory items and I mean maybe it's the top hundred maybe it's a top thousand items but the but those where you believe you've got any risk of being out of stock you've got to think like neck like Netflix and Netflix when you type in a movie
The Big Lebowski and they don't have that movie they've got
hundred other suggestions movies like The Big Lebowski retailers have got to be armed with alternate suggestions for out of stock items I think in order to be successful because I I agree that out of stock issues are going to be rampant
[49:46] I don't envy the position the retailers are in I mean it obviously it's super challenging,
you know in a variety of different ways but on the inventory issue.
Like we're seeing a lot of news you know of this second wave of covid happening and what if that really gets bad and there's like another full-blown lockdown in December
then you know what happens what if they have to shut down fulfillment centers are in now they're over inventory,
there's so many different you know scenarios that could happen right now it's it's a really challenging time.
[50:27] Cool it wouldn't be a Jason Scott show if we didn't talk a little bit about Amazon and I know the prime day announcement probably came after you did your survey but wondering if you guys have a point of view of.
This new kind of October ish Prime day.
[50:44] Well what we did here the retail mean when we ask the retailers.
They didn't have the exact date I think they knew it was going to be in early as October but we ask them if they are going to participate with their own sales or they're going to sit on the sidelines and the majority
said they were going to sit on the sidelines so,
I thought that was interesting we'll see if it actually happens there there were a number of people that said they were undecided so there you know now that they have the specific date
we may see a lot of those undecided you know decide that they're gonna actually going to participate especially if they feel like,
this really is the beginning of the holiday shopping season and it's a way to,
get some of those orders in get people shopping earlier to spread things out have,
you no longer period to get products out to them so I don't can do you have anything more you want to add based on what we saw in the research.
[51:45] Yeah I do
in it just an addition to what to what you're saying it's got the you know this Prime day is a I do think it's going to be a significant sales day I just actually saw the emarketer
forecast for Prime day and and they're they're anticipating a pretty significant increase and
and and you know and I think that that it's easy to dismiss that as well that's before the holiday season but,
but it's not it that is I believe going to chip in to holiday sales for those that are prepared I think consumers are going to be prepared this year and and yeah that I think that is going to
again Amazon is almost starting the holiday season with
a 10-yard advantage on the on the rest of its competitors because of the traction that they've had with prime day in the and the past.
And so as everybody else really does have a bit of an uphill battle out of the out of the gates.
[52:44] And gotcha now can I'm not sure Sports metaphors work when covid has ruined all the professional sports leagues but.
[52:51] And when you mix your metaphors all over the place.
[52:54] Just using so that dovetails perfectly to our last question and I'm going to have to make it a lightning round question because we're getting close on time but I do want to get just kind of the 32nd overview from each of you.
We've been talking a lot about this increased e-commerce demand for Holiday from the very beginning of covid there's been a huge increase e-commerce demand and the most common way I hear retailers describe it is.
Every day has been Cyber Monday right so you know Salesforce talked about that across their whole platform Shopify,
you know said that they're running it higher than then Cyber Monday rates Amazon traditionally says that Prime day is a bigger Peak than Cyber Monday so,
in this world when we're all on a tidal wave that's already bigger than Cyber Monday and Cyber Monday is coming up.
Like what's gonna happen right like it are we going to have a peak on top of peak and if so will retailers be able to execute or.
Like is is all that demand already cooked in and we're just going to see you know the the very high level we already have sustained through holiday so maybe I'll start with you Scott do you have a.
A guess on how that's going to play out.
[54:11] I mean I do think there's going to be a peak on a peek I think the retailers are planning for this.
They're doing you know trying to get capacity trying to do these all these other things get people to shop earlier,
I think it might be an opportunity to not be as aggressive on discounts to,
you know sell closer to full price and and you know maybe more profitable potentially you know helping,
you know to subsidize a little bit of the profitability that's not going to happen from stores so I think that's a you know an interesting scenario I'm calling it interesting scenario because I don't have like a,
I don't want to be that confident to say that I think that's actually going to happen for sure.
[55:02] No I wrote it down that's your prediction can what about you what do you thinks gonna happen.
[55:08] Yeah I mean I think I think the pressure on e-commerce operations I think it's got to be relentless this year
the in for bigger for bigger retailers that have larger operations where they can absorb e-commerce pressure into broader store operations those are folks that have a lot of work to do but they're fortunate
and for other retailers I think it's going to be a combination of working overtime being Scrappy trying to figure out how to do this and to Scott Silverman's point trying to throttle demand at times in order to in order to make sure that it doesn't
that it doesn't bring the walls of the Fulfillment center is collapsing down.
[55:47] Yeah I I tend to agree I think there's going to be a peak on a peak there's going to be a little bit of a bifurcation the.
The retailers that invested in elastic capacity and move to the cloud are probably way better situated than the retailers that are running their e-commerce site on their own Iron right now so that that's going to be interesting and of course.
Nobody nobody has done holiday Readiness like load testing with these kinds of loads so it's this is going to be a very Live Test.
But I think that's going to be a great place to leave it because we have once again used up our allotted time.
Scott can really enjoyed having you on the show and talking about this super important issue we're going to have to stay close to it for the rest of holiday.
As always have listeners have any questions or comments about the stuff we talked about today we'd love it if you'd hit us up on Twitter or our Facebook page and will continue the conversation,
and as always if you enjoyed the show please jump on the iTunes and give us that five star review that's the holiday presents cotton I most want and it doesn't require any shipping whatsoever.
[56:57] Ken has got really appreciate it where can folks find you online if they want to follow your thought leadership.
[57:05] Well let's see I'm on Twitter but don't post a whole lot.
I mean I think you know the the we can give you a link for your show notes where people can download the study
that we've been referencing quite a bit but Commerce next.com is where you know you can see a lot of the other research that we've been doing and the
webinars that are rooted in research and so on I would say yeah Commerce next would be the best place to find all that information.
[57:36] Okay again.
[57:37] And you're always welcome to go to cassar co Cas SAR co.com where when I remembered to I post all thought leadership that I had that I create.
[57:50] That's awesome I will put both of those links in the show notes and until next time Happy Commercing!