We discuss ShipBob's origin story, how the e-commerce fulfillment industry has evolved, as well as the challenges and implications of Amazon and Shopify's various fulfillment initiatives.
Episode 289 of the Jason & Scot show was recorded on Friday March 18, 2022.
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.
[0:23] Welcome to the Jason and Scot show this is episode 289 being recorded on Friday March 18 20 22 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.
[0:37] Hey Jason and welcome back Jason Scott show listeners
Jason as you know we did a Amazon Fulfillment deep dive a couple weeks ago and that was quite a popular
Topic in episode and we've been getting a lot of questions from listeners about what's going on in the world of
and we are now living in a world where products used to be if you get it in a week that was amazing and now anything that's longer than 2 days feels like a lifetime
so we thought it would be good to bring on one of the top startups in the Fulfillment area the shipbob and we have with us the CEO and co-founder of shipbob dhruv saxena dhruv welcome to the show.
[1:20] Thank you so much Scott and Jason for having me excited for our conversation.
[1:24] We are looking forward to it as well I'm getting tons of complaints on the feet already that people were expecting Bob to be on the show today so you'll have to tell us how it became dhruv started shipbob.
[1:36] Yeah for sure I'll give you a quick back story on me if that's the opening question and tell you how did we come up with the name shipbob.
[1:46] That would be perfect yes I asked it very awkward we Scott is laughing at me on the back Channel.
[1:51] Yeah so.
Quick back story on us you know I grew up in Delhi India came to the u.s. in 2007 to pursue engineering my co-founder on shabaab device is also from India we've known each other all our lives.
And so we after we both did an engineering in the midwest here I went to Purdue we came back to Chicago and started.
I'll booking in a full-time jobs at software programmers and on nights and weekends as most Engineers do.
We were trying and experimenting with a bunch of thought of ideas and one of the start-up ideas was in e-commerce.
And be Engineers we were able to automate effectively everything in that e-commerce business except the part around shipping and Logistics.
And so every time you would have a bunch of folders we would have to run to the post office here in Willis Tower Chicago in the basement,
they have a post office and we would have to stand in line and basically ship out those orders out and that became the most manual and painful part of our e-commerce business.
And we wanted to find ways of automating that.
[2:58] And we would call up a bunch of these existing companies 3pls who helped companies with the shipping and Logistics take all three pills third party Logistics providers.
And none of them wanted our business because we were too small for them,
and so that got us thinking as to hey how do others small to mid-sized e-commerce businesses figure out their shipping and Logistics we realize that there really isn't a good alternative for businesses like ours who are you know ramping up e-commerce businesses and that caught us into,
thinking what should pop can be.
And how did the name come about you know so when we started thinking about building a company for helping businesses with their shipping and Logistics needs.
We were going for like like people want fast shipping so we should have ship and a fast you know like an animal name or something like a ship park or a ship Cheeto something on those lines so that it conveys.
That heylia company which helps you with fast shipping and all of these that domain names were taken,
stop after a while godaddy's recommendation engine you know started recommending you no other alternative domain names and one of them was shipbob for 299 or something,
and so we say you know we don't have money but this seems like a cool name and so if you just turned shipbob.com for 299 and that's the story of her name and so now we have a good messaging around hey,
Bob Means bending over backwards for your shipping or Bob can be a plumber Bob can be you know any
use for gyves but as Bob kennels to be a shipment so that's like the marketing angle on shipbob.
[4:24] Very cool so it's interesting because this kind of parallels a lot of a lot of companies in e-commerce they start with people building e-commerce stores and then they're like,
this part of it stinks I'm just going to focus on solving this so what is your original e-commerce store do.
[4:42] So we started were doing a lot of like printed photographs and so you know this is like 2013 2012,
bear Instagram had just been acquired by Facebook for like a billion dollars and so we thought oh wow that's photo-sharing seems to be like a heart,
market right now and Instagram is all about digital photo sharing so what if we brought back the Retro way of sharing pictures which is people would print and mail pictures to each other so our e-commerce business was that you would send us a photo.
Honor text bot we would print that photo we would frame it we would write a message at the back of the for any personal message you wanted and mail it to your friends and family all across the world.
And so that was sort of you know our big idea then like physical photo sharing.
[5:28] Cool car like frame bridge I think does some of that now cool yeah so then you you did you wind that down as you kind of pivot it over to the Fulfillment center.
[5:39] Yeah it won't down on its own to be honest because once we started focusing on on shipbob E that business wasn't really taking off with shipbob first was was so we started spending a lot more energy on shipbob.
[5:52] And then so that was 2015 earlier kind of also 2014 yet.
[5:58] Now 2014 2015 we got into this incubator called y combinator Scott so.
That allowed us to you know quit our full-time jobs because y combinator gives you like a hundred and twenty thousand dollars so that was enough money for us to like put in you know our notices on a full-time jobs and go all in on shipbob.
[6:20] Brickell so you got no Y combinator and then that usually requires you to go out to Silicon Valley for a period of time did you guys do that or are they at some point they introduced remote but I think that was later.
[6:32] Much later yeah no that's a good question so.
This is another great sort of Peace around you know building startups and Chicago so when we go into YC.
We were one of the very few companies you know.
Who did not relocate to California so it was it wasn't mandated or Partners there were very comfortable we okay with us traveling back and forth.
So every week on Tuesday they have these partner meetings but you go and tell them the progress you've made.
And so we would fly every Tuesday morning to our Mountain View California do our pitch and you know and learn and then come back and because,
we had to fly and I was you know what a red eye flight Etc it was a lot of effort so we would always try to make sure that we have enough progress that we've made in a given week
to make that trip worthwhile otherwise we would go there and we will just come out looking like we didn't really do much and that would be a waste of our time so that pressure of making that trip by productive I think in the early days for stars to work way harder,
that may be a lot of other companies simply because you know we were putting a lot of effort and these so and capital in making those trips and but we headquarter the business in Chicago.
I'll see you know which turned out to be you know pretty good decision I guess in hindsight.
[7:49] Yeah and then you know what's really interesting and I kind of live this every day so I'm curious how you
path you took here as software people you know we love to solve things with software and at some point
shipping is not a software problem right you can you can build the world's best shipping but at some point some human has to and maybe a robot but you know some something has to move a package from point A to point B
sometimes Point c d and e and then someone has to you have this middle Mile and this last mile when did you guys
realize that you're going to have to actually have like fulfillment centers.
[8:26] Um right from the prions yeah pretty much.
Because you know coming out of the running your own e-commerce business and then also a couple of other startups before then.
Be being Engineers yes we were very accustomed to writing a lot of code and then just hoping that users will show up and none of the startups are for shipbob for us worked out,
and one of the realizations that would be in the way had is that just because you build it doesn't mean that people will come,
and so you would have to spend a lot of your time and energy in making sure that you actually spend you know time on sales marketing and distribution and so when so we were very.
Early before even adding code we were talking to our customers and these customers you know who would eventually become users or loyal users.
Told us very clearly that we don't really care about great software what we care about is a great product or a great service which helps us in packaging and shipping so that influence the decision-making right.
We can't be a pure software company these Merchants are paying us because they need great fulfillment service so having our own fulfillment centers probably requirement for us before we can start scaling.
[9:36] Got it okay cool so you go do y combinator and then women did you like build your first like when did you have your first fulfillment center.
[9:48] So right at the you know when you started the company like our office and my apartment became sort of a file template.
Fulfillment center very Loosely here so you won't really be able to.
Call the Department of proper fulfillment center but you know it did the did the work so there was enough room in our apartment and enough first office.
Which is like I think thousand square feet for us to have some room for people to send us their product and we would store their inventory.
And then have couple of hours basically pick pack and ship you know those boxes out so my apartment was on the 31st floor so every evening we would get a big.
Little trolley and put all the packages and that's all a and then use the freight elevator to bring those packages to the ground level where Michael ejector words you know use the car and we'll take it to the post office.
[10:41] If you're in Jason's building he would have reported you as like a probably a drug dealer some suspicious Behavior going on up on the 31st floor.
[10:50] Yeah no.
[10:51] I'm just grateful the city planners that do the zoning didn't hear this story.
[10:56] Yeah you know it.
[11:00] It's not illegal if you don't get caught.
[11:02] You know we did get in trouble in the early days with the local post office so what would happen is again you know because we had been.
We didn't have a lot of successful startups before shipbob Beaver like way paranoid about finding customers.
And we none of us came from the sales and marketing background so we tried to run for this position where you can we find customers in the most cheapest and fastest way possible and the obvious answer to us was let's go outside the post office because there's always a line,
people don't always seem very happy or to go to a post office and so if he.
Can find a few e-commerce merchants in those lines we can pitch them that idea while they are still in the line and convince them to give us their package and not go to the Post Office the second webinar.
And so we spend the first three during by see it is like a first three to six months of our shipbob basically standing in lines outside different post offices in Chicago to convince people walking in that shabaab is a better alternative than you going inside the post office.
So the post office Forks very nice people thought that we were trying to take business away from them.
[12:10] So they were sent they would call up these post office apparently post office has its own police do something so they would send out these post office cops,
who would comment she was away and so we would just go from one post office to the other like based on you know which one had last called the cops on us and so,
I think some post office might still have a picture of Jessica and the way to make sure that they don't show up again.
[12:35] Those cops are federal agents by the way they're not messing around.
[12:38] Oh man I hope they did especially because we were immigrant Founders so we can't get in trouble with the the federal police.
[12:49] The federal jails and I hear pretty nice though so good they have tennis and stuff.
[12:54] What we're going to have a separate episode about how Scott knows that.
[13:00] Okay cool so you did your wife see then you came back to Chicago and then maybe kind of update us like the bullet points to where we are today.
[13:10] Yeah so once we you know got back to Chicago post why see we were fortunate enough to raise a seed round of a million dollars and so that allowed us to,
you know take that top pill and hire a couple more engineers and hire a few more sales people and then expand the business so we opened up a warehouse in Chicago.
Where we were headquartered and then we quickly expanded to New York as well so we added a location in Brooklyn New York.
[13:38] And based on the progress that we had made you know in Chicago and New York and remember let's also limited so it requires Capital because you're opening up these fulfillment centers at the very beginning and you're also writing a lot of software which powers.
The inside operations of the Fulfillment center and so we have to raise Capital simply by the nature of the business we are in also fulfillment I'm sure like,
all your list has no it's not like a software business it's not an 80% gross margin business we have very tight margins,
and so you are you require a lot of captains in this business to scale and so every couple of years we've had to raise Capital simply for us too,
add investment dollars into building,
either the software which powers are fulfillment centers or to open up our own fulfillment centers and so The quick summary of f Bob is today is that over the last five years or so,
we raised you know close to 400 million dollars or so of venture capital,
we've added you know be as close to 1,000 employees now a lot of it on the product and Engineering teams and sales and marketing team for us too.
Add many emotions to our network but also write a lot of great stuff in which power is the back end of almost we know back-end systems of all of the e-commerce businesses using a platform.
And the business strategically also has you know evolved where we don't now need to.
[15:02] Operate our own fulfillment centers because we have four of our own social incentives each one in Chicago New York Texas and California so we kind of know how to run fulfillment centers we now partner with existing.
3pl Zone fulfillment centers who have empty capacity we bring in our software our know how our physical infrastructure into those locations,
we bring them up to the shipbob standard and then we are able to Route our Merchants into those locations and so the business now requires a lot less capital in scaling the infrastructure side of things
but not all of that Capital goes towards you know basically growing out the product capabilities and adding new Merchants into our Network.
And we have fulfillment centers in the u.s. in Canada in UK Europe in Australia.
And we of course added a lot of capabilities on a network all the parts on this wall so truly today now shipbob is a global.
Omni-channel fulfillment solution for a Merchants where we can we are probably you know on power if you were starting an e-commerce business and you wanted to compete very effectively with Amazon and Walmart supply chain we are a great alternative.
[16:13] Pickle the way I explain it let me see if this pencils for you so if someone asked me how this you know how
this kind of what I would call your one of these next-generation fulfillment companies my pitch is you had these 3pls but they were really designed for
you're kind of almost like a real estate thing where you go in and say Hey I want a corner of this fulfillment center and I'm going to lease it and do X Y & Z and then Amazon's Innovation was FBA where it was you know what much more aligned with the
the e-commerce model of yes I want you to hold my goods but they're going to turn over quickly and I want to pay more of a per transaction kind of a thing,
and I also want a lot of flexibility about how
fast I can get products to Consumers so 3pls were in this kind of old world where they weren't really built that way so then part of what you guys did as you built your own fulfillment centers with this new model and then you can kind of take that model and put it into Old 3pls bring them up to kind of like the FBA level of
above standard is that a fair summary of how you explain shipbob to other folks.
[17:20] Yes that is very real articulated Scott I might actually use that going forward and and the only piece I would add to it is,
of course you hit on the fast piece of it which is very relevant for a merchant,
the second big element of wine Merchants choose us and our network is our ability to customize the unboxing experience which is unique for that particular brand so you know when you order something on Amazon it shows up in Amazon branded box
for a merchant they want that unboxing experience to represent their brands you know.
Ethos and the brand value so whether that's a custom box you know whether it could be eco-friendly material it could be custom gift notes accustomed shipping labels Etc the ability to customize that you know that.
Transaction is very relevant for them it's almost on par alongside speed and and so that's the piece the second element of.
Of customization I guess that should Bob's been able to unlock that I think FB it doesn't offer.
[18:18] Got it and just to sort of clarify for listeners like so the goal then is it feels like it got shipped by the vendor right so it has whatever
packaging the the manufacturer would want to use and a bill of lading that has their logo and those things on it as opposed to I ordered something from cuts and then I got an invoice from shipbob or something like that.
[18:41] Yep exactly right we want to be.
In the background you know where the Shopper is building a direct relationship with the brand and and the Shopper is agnostic to whether shipbob ships or whether the brand shifted.
[18:58] Yep so and just to kind of frame this like back in that time frame the the idea of B2 C3 PLS was not common today
it's a it's a pretty crowded Market space there's a lot of a lot of options but they're back then is got kind of pointed out like there was a thing called 3pls but they were more of like a B2B service really right.
[19:22] That's right yep and so,
the reason why even we were able to even build a business here is because majority of the 3pls out there were focused on the palette and Palette outside our transaction because most of their customers,
but the bands who was selling predominantly in retail stores like Macy's no storm or Target Etc and so the concept of this High Velocity two to three units per order was very foreign to them,
and all of the infrastructure was designed to store large number of palettes worth says having inventory in each has or in single units stored in bins and shelves.
And so far from that perspective,
the reason you know if you are doing pallets and pallid out like getting into e-commerce and then getting working with small and mid-sized e-commerce businesses where you don't make a lot of money for customer Justin.
Pencil for these for these B2 B3 Tails because they were used to having.
A small number of very large customers and then designing their entire operation inside the building's only for that few number of merchants because they would be able to make a you know the entire earnings ones from that limited set of merchants,
word says it shipbob you know we we have a whole large number of merchants none of our Merchants you know are these are all birds or these massive Brands but these are growing emerging bands and.
[20:50] Productized what is very much like been away service-oriented business.
[20:55] Yep and so the profile of the typical shipbob customer is a start-up that's intending to sell direct to Consumer mostly through their own website is that a fair characterization.
[21:08] That's how we got started his and so you know today that is definitely evolved as a capabilities have grown as well so,
I would say like if you have to break down the merchants that we serve are so,
on one end of the spectrum we have these Merchants you know they could be ought to pronounce what just getting started and they're doing anywhere from you know less than a hundred thousand dollars of annual revenue on the website all the way up to maybe a million dollars or so.
So that's one and then we have Merchants who are from 1 to 15 million dollars of gmv,
and they are predominantly selling on their own website but they're also selling on marketplaces like Amazon eBay Walmart.
And then we have a mid-market segment of merchant these are relatively established Brands they are doing anywhere from 10 to 150 million dollars of gmv across all the different channels that they're selling on,
and for them you know they are in e-commerce which is direct-to-consumer they're also in marketplaces but they're also in retailgeek,
and so they and they also are thought getting to be Global and so for them,
they use shipbob because under one umbrella they are they get not only great technology but the Fulfillment solution is able to carry it across all the different channels that they're selling on,
and it allows them to manage inventory Under One Roof so in the.
I guess the value proposition over the last six years for shipbob has definitely evolved as a capabilities have grown I've grown.
[22:33] Makes total sense and I'm assuming so in my day job one of the the new categories of business that I see you like getting into direct fulfillment more are
traditional products that used to exclusively sell through wholesale and in some cases these could be quite large companies
that are used to sending pallets to Target and Walmart and now they're starting to sell some of their own goods from their own website and just like those those startups from 2014
they've got to figure out how to do the each's Fulfillment and I think they turn to folks like you as well now.
[23:06] Yeah absolutely and so you know that's the exciting piece of direct-to-consumer is that.
The technology and the infrastructure needed for you to start your own e-commerce business and be able to reach your consumers is has massively evolved so these traditional.
You know Brands who are predominant retail now they are able to participate in e-commerce in the pretty meaningful way as well and they have access to Great infrastructure and.
I think you know the.
They've also realized that the infrastructure that they need it for their retail shipping doesn't look anywhere close to what they need for the direct to Consumer so on the record consumer side maybe you choose Chopper 5 for your front end platform.
Are you choose to do a lot of your advertising and marketing on through Facebook Instagram Snapchat social media is the predominant digital marketing channel effectively.
And then you choose shipbob for your fulfillment and and running your supply chain and maybe use a form or you know or care enough for your buy now pay later like those credit financing options
and so this technology stack that you need to run your direct-to-consumer e-commerce business you know now exists,
and is completely different from what you might have used for running a full wholesale retail operation.
[24:27] Yep and I do want to just double-click on one other thing before we turn to two marketplaces and the Frenemy situation there but the
so a couple of your advantages why you develop this software to make the Fulfillment center much more efficient than traditional ones were and obviously efficiency is a huge differentiator and in the Fulfillment
you you enable all this customization and personalization
which is a better match for The Branding that all of these clients want to do one of the other things that I think of is.
3pls from that era that was sort of problematic and that kind of Amazon disrupted is like they used to make you manage your own inventory so if they had to.
Fulfillment centers you as the merchant had to decide how much good you are sending to the West Coast and how much good you are sending to the east coast and and you sort of had to do all those things and.
Amazon through their fulfillment by Amazon kind of took that that
that Inventory management burden away from some of their their merchants and sort of did all that for them and did the load balancing and all those sorts of things
so do you do that like you now it sounds like you've got four of your own fulfillment centers and a bunch of virtual fulfillment Centers do you do all of that sort of AI based
inventory allocation for your customers as well.
[25:56] Yep absolutely so and that's sort of I guess we can break that inventory allocation into two parts so one is choosing where in the network,
to send your products from your manufacturer.
[26:08] And so that's based on you know we provide all of that information upfront to a merchant base where you know based on historical
purchase data that we captured from all the different sales channels that you connect into Shabbat we can be have a model that,
Delta to fairly well as to how much inventory to store in which parts of the network,
and so that's and so you can but we don't necessarily mandate that because for these brands
you know they want to be one them to have the ability to make those decisions for themselves we provide them with all of the information and if they choose to they can have shipbob distribute that inventory for themselves for them or they can do it directly from the manufacturer
my following our data you know that we give out to them so that's on the
first half of like sending like the right amount of inventory to the right location so that's a little bit of a optionality for these bands.
And then the second part of it where we do a lot of the work ourselves is once we start getting these orders into our platform once you buy something from our,
from a branch
choosing which fulfillment center that particular order gets routed to and what shipping carrier is used for that particular transaction that is something that we that we definitely do you know
in the house and so that is a pretty important element of it because as a brand you might off be offering two day shipping on your checkout page.
[27:32] But you actually don't want you know to be using Ups 2 day or FedEx overnight to do that today transaction because that will be very expensive,
and sociable because we've captured a lot of far,
carriers performance data over time we have a pretty built out model which tells us hey if we even if you use this local Regional carrier for this particular order we have a very high likelihood it will get delivered in 2 days or less
and we don't have to pay for a UPS guarantee today service and so we are able to bring down the cost of two days significantly down at this almost the same price point
as a USB as ground shipping which is a total which is the cheapest form of shipping simply by placing inventory
in better you know better placement of inventory and a fulfillment centers but also choosing where which fulfillment center ships that particular order and what shipping carrier we use for the transaction,
for that was a little long answer but I think that is sort of the secret,
Elemental why brands of any size are able to offer a two-day next a sort of a shipping experience on the checkout page.
[28:37] Yeah if that's helpful at
when I've talked to some people about this kind of stuff they're always like how hard could this be like this comes up in the
Shopify so a lot of Shopify Wall Street folks you know they'll say well why is this so hard and you know one of my favorite things about e-commerce is going to
tour warehouses because once you get inside of warehoused you realize that this pretty complicated and the way I explain it is once you've committed to a.
[29:09] Yo an asset like a warehouse and all the people in everything then it becomes an optimization problem in optimizing warehouses is pretty complicated right so let's let's take you guys have
X number of customers in a fulfillment center let's just keep it one of the ones you own and operate to make it even
simpler and you know there's a there's a bazillion questions like how do you if you take
customer 1 through 100 do you intermix there things how do you do the packaging you talked about how do you
how tall are the shelves do you use conveyor belts do you do two floors or one floor and your fulfillment center
so what's fun about that is an engineer there's a lot of fun problems to solve their and it's a lot,
you know your explanation of the shipping is interesting because that's like yet another one so a lot of people feel like this is too easy is really easy and then they kind of run up against the the the hardness of it and they kind of have to
step back and redo it do you have a point of view of.
You know what Shopify kind of did it seem like they tried to do a software-only kind of a solution and it kind of didn't work and now they're trying to get more involved in it and you have a point of view on that.
[30:18] Yeah for sure but you framed it really well Scott which is.
Once you you know once you go inside the Fulfillment center the number of problems of that that you can potentially solve or almost endless,
and the reason it's important to attack these optimization problems is fundamentally you know fulfillment is not a software only problem.
And it doesn't come with 80% gross margins
and so it's in your best interest to optimize once you get to certain scale because every cent and dollar you share from those operating costs is a dollar that flows to your bottom line
alternatively is a dollar that you can then reduce you know your cause to your brand which then allows them to reduce their fulfillment costs and that way allows them to offer free shipping which then drives,
you know more sales on the website which then drives you no more orders into your platform which allows you to get to scale faster.
And so optimization is you know is key for you to be operating at the lowest cost possible because there are advantages of doing so.
And so there are a lot of different ways to get to Optimum to try to optimize but if you don't own and operate your fulfillment centers at least the onset you simply don't know what problems to solve,
and so at shipbob you know what I believe worked really well in our favor is because we operated our own fulfillment centers we saw firsthand.
[31:45] What are the consequences of the choices that we are making.
And that involves you know the physical infrastructure do we mix products of different merchants in the same aisle where in the,
we're in the Fulfillment Centers do we place the fast-moving skus do we take the loaf slowest moving skills and put them at the back of the Fulfillment centers away from the rest of the merchants inventory or do we place them high up in the,
under racking system how do we think about Labor planning is Mondays.
[32:15] 20% higher than Friday so do we need to staff up in the morning shift Etc and they are all and material handling and and Idol walking is such a big.
Cost of the Fulfillment centers operations how do we try to minimize that and at what scale
there are hundreds of these optimization decisions that we've had to make over the last seven years,
which then have been productized in our software in our warehouse management system which then now is being deployed across these Partners sites,
and so I think if we were to
to you know jump ahead and just do our partners sites that we don't own and operate we don't own or operate on a day-to-day basis
we would have missed out on all of these optimization decisions that we made over the last seven years which then allows us to operate,
at a much lower operating costs than any of the competition so I think Shopify I don't know,
you know the products are actually there but I think they might have tried to short-circuit their way into running virtual fulfillment centers to early without having
learned the lessons of our without having experienced the lessons of running your own building which I think they might be course-correcting now.
[33:25] Yeah it gives you the ability to go to a 3pl and say hey here's your you know 3pls are kind of V1 and you guys are like V10 so you can go in there and say
take this section do it this way here's how you know here's the barcode reader you need to use yours there's like all this stuff that has to come together seamlessly with the software to kind of execute and you guys have figured all that out and you can just kind of plop it right into the 3pl I imagined.
[33:50] That's right yeah exactly out pitch to these existing 3pls is that you have this unused capacity.
This is like a warehouse in a box that we are providing you and if you follow
you know the product or the our operating protocol then you will be able to make X dollars and order or Y dollars a square foot,
Which is higher than what you are achieving now and by the way you don't have to spend any money on sales and marketing and servicing because shabab you know these are shipbob merchants and so you should be able to make.
You should be able to generate a return on that on that space in a relatively short amount of time which makes it a pretty interesting proposition for these existing 3pls who want to participate in e-commerce but they necessarily don't have the infrastructure.
All the capital to do so as yet.
[34:44] Interesting cool so give us an idea of your scale so I saw on crunch basis it says you've raised over 300 million so congrats on that the I've been raising capital in this kind of more asset heavy World in it's not not easy so so
kudos to you for being able to fund us at the scale you have
maybe like how many packages a day are you guys processing or anything you can tell us around scale would be kind of interesting.
[35:10] For sure I won't be able to get to the.
Exact are approximate taxes but here he is maybe a good proxy you know we have close to.
30 or so fulfillment centers in our Network today we are
adding one fulfillment center a month that's the relative scale and majority of the reason why we're adding these fulfillment centers that are rapid clip.
Is because we are you know reaching.
Pasty in these fulfillment centers fairly quickly and the amount of space that we take inside of a fulfillment center is anywhere from.
30 to 40,000 square feet on the lower end as much as 90 200,000 square feet on the higher end so that's the sort of every sight every node in the network represents at least you know maybe call it average 50,000 square feet and we have close to 30 of them.
[36:04] Furcal and then it wouldn't be a Jason and Scot show if we didn't at least throw you an Amazon question.
So so it's easy to kind of you know again for someone to kind of look at this and say hey you're competing with FBA and I I get that you know.
Amazon's talked about doing you know a you know just non-market play Style Style fulfillment.
And then but then and then they've also talked about yeah you can use your own packaging and but you know my understanding is they're not really doing that at scale do you
do you guys feel like you compete against them or do you see them the other thing that also blows people's minds a lot of time is
software and sinners like you guys operate frequently will ship stuff using Amazon's API so that it can be prime eligible which is also kind of a so-so the 3pl the
shipping partner can be Merchant fulfilled Prime which thus means their products are prime eligible so maybe talk a little bit about how you feel about Amazon.
[37:03] Yeah for sure and yes you're right so we do ship inventory sometimes into Amazon Fulfillment centers as well for,
for the fpaa.
[37:15] And some of our some of our Merchants do also you know use the what you call the seller fulfilled Prime option but more on your question on the do we compete with FPA I think it is servicing a slightly.
Different segments of the market and so if you talk to most of our brands,
you know they were they won't really say that we trust Amazon with all of our data.
And so for these brands that we serve as passing that customer information or who their buyers are,
to Amazon seems like a big business dress because Amazon competes with them,
you know on the Amazon to the Amazon Basics line or you know placing the product slightly differently on the the listing speed and sector so they want to build a supply chain,
and demand you know sort of website which allows them to control their own destiny without having to rely on.
On Amazon which could potentially be problematic for them down the road.
And so in that context they want to stay away from Amazon as much as possible of course they also do sometimes have Amazon listings because Amazon is such a great.
Aggregator of demand that maybe it has a lower cost of acquisition than having to do it yourself on your website but you don't want to rely on Amazon for.
[38:40] Majority of your sales and so in you know under that,
through contacts then we don't necessarily compete with Amazon FBA because for these Brands using FPA is not even an option and so and two because then we are there under this ethos of like if I have.
Slightly Superior brand and my brand is represented through all aspects of my branding website supply chain I can I can be a better business,
then you know shipbob stability to provide us a plethora of customization options,
is a real value sell because and I know our ability to match you know this two-day Prime life experience.
I think it's a real value add and the third aspect of it if I may add is as these Brands grow larger being able to have inventory globally is.
Something which I don't think is possible with FB and fourth is if you're also getting into retail,
you know doing being able to ship Ballads of inventory to these retail distribution centers again is not an option with fpso if a brand is thinking about their supply chain as a whole I think shipbob FB is probably not a solution.
[39:51] Yeah so that really makes sense
I'm kind of curious how this is going to continue to evolve I mean it seems like there's some risk that some of these big retailers like or marketplaces like Amazon and Walmart might eventually start selling their fulfillment as
as a third party service that could potentially compete in the 3pl area and I think the the FedEx is and UPS is of the world are leaning more into it as well is.
Is the future going to be kind of all of these different Services kind of colliding and meaning in the middle or how do you see the future of this industry playing out.
[40:26] Yeah that's a hard question to answer,
because yes you know e-commerce is growing so quickly that there are so many Greenfield opportunities for different companies.
To play a part in so but I think each one probably you know like this industry benefits from scale.
And so and of course this is a hard business because you're dealing with physical products and physical inventory and physical assets.
And so I don't know if the industry would sort of all of us will start doing each other's work simply because it's by doing our core businesses by itself pretty hard and getting to scale in our Core Business is very relevant so.
[41:07] I think UPS and FedEx might
I think might have dabbled an e-commerce fulfillment but I think majority of the business still very much remains around transportation and and same for shipbob I think majority of our business is around fulfillment
we are looking at ways of adding value to a merchant Base by taking parts of the transportation and seeing if we have enough density on certain routes,
that can be that can allow us to reduce the overall fulfillment calls for a Merchants but again I think there's so much you know there's so much to be done in this space that if you.
Lose focus you can lose the advantage that you have right now so you know I and and businesses are able to grow,
simply by focusing in the core business area so for us at least you know it's mostly fulfillment and maybe pieces of Transportation sprinkled in.
[41:58] Well that seems like a toy reasonable perspective and it certainly is going to be fun to watch but I think that's going to be where we have to leave it today because as per usual we have used up all of our allotted time as always if this is episode was helpful to you we sure would appreciate that five-star review
but we really appreciate your time today and sharing a little bit more about shipbob with us.
[42:21] Now thank you so much Jason and Scott for having me this was a good conversation.
[42:25] Dexter even if folks want to follow you online do you pontificate or should they just follow the shipbob socials.
[42:32] The shipbob Socialist would be a great great dad.
[42:35] I know I would advocate for you doing more would love to read anything you write about the industry as it's been a good discussion and you know at least Jason I would read it so we can guarantee that.
[42:47] It's great to read as I got I got it.
[42:49] Boom and Jason's mom she always follows Oliver stuff stuff.
[42:54] I can convince my mom as well.
[42:59] The audience is growing by the minute well thanks very much everyone and until next time happy commercing.
Episode 288 of the Jason & Scot show was recorded on Thursday March 10, 2022.
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.
[0:23] Welcome to the Jason and Scot show this is episode 288 being recorded on Thursday March 10th 2022,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
[0:39] Hey Jason and welcome back Jason Scott showed listeners Jason covid is defrosting and you are getting yourself back on a plane and I saw that you went out to eat tail.
[0:50] It is true I don’t know if listeners can see me knocking on wood when you say that but yeah I yes went to my first post covid trade show that felt like trade show from before covid which is cool.
[1:04] Sprinkle what was what was the buzz in the like the first time and well I guess in RFC some folks got together did you end up you didn’t go to.
[1:15] I did not go to in our app and an attendee and sit in our F was I think there are people that went in and found a good but attendance was significantly down from a normal and RF show.
[1:28] Was kind of the first normal.
[1:29] Yeah and the interrupt timing was just rough because that was kind of In the Heat of the Omicron variant like re-emerging and.
Um but so e-tail is in Palm Springs in February you know.
People are like turning off Mass mandates and it felt pretty good and so the show was sold out the hotel was fully booked and if you if I just popped you on at the trade show for.
It wouldn’t have felt any different than e-tail 2019 felt to me so I think people were like frankly pretty excited about getting back together.
And took full advantage of the you know typical trade show activities that cocktail parties and and all the frivolity.
So I did a couple of sessions I did a keynote interview with the chief marketing officer from Signet Jewelers and they have a pretty interesting story during the pandemic the,
you know they even have an interesting story in the metaverse that like I didn’t realize this but millions of people have gotten married on the metaverse and are buying jewelry for it.
[2:39] Nice can you buy a is your diamond and ft.
[2:43] In some cases yeah.
[2:46] I’d like to see picture I found it.
I don’t want to actually bring up the topic of buying jewelry and then tell her it’s digital jewelry because that won’t that won’t go where I was wanting it to go.
But so so that was good I did a panel on on sort of growth tactics with a bunch of kind of younger digital native Brands and so that’s fun to get
you know some some different perspectives and some novel stuff and I did record a couple podcast there so listeners have that to look forward to will drop those over the next few weeks and so some good
good conversations with with real people in the industry.
[3:26] What was the back of the hall conversations the you and I have talked a lot about the impact that the Apple and Google privacy changes have had was that kind of one of those
yeah you’re on the stage everything is Rosy but behind the scenes I was like oh no what are we going to do with this this whole thing that’s crashing down around us.
[3:44] Yeah it depends I because I feel like there’s a couple of different cohorts at Eddie tell like there is a cohort of them
kind of smaller direct to Consumer Brands and I think those guys are right in the Wheelhouse of those impact so that absolutely was coming up
you know it there is a pretty big like e-commerce vendor community in the show and so there you know weaning into the
the super high P Trend so everyone’s talking about metaverse and,
in ftes and trying to convince you why they’re the world needs 107th personalization engine,
so you know there’s a fair amount of that stuff and then you know there’s some of the big wholesale retailers and there they were like more interest like the trends that are impacting them the most right now are things like retail media networks and stuff like that.
[4:38] Brickell all right so anything else I need to run jump in the news.
[4:45] No not yet let’s we got a lot of news to cover so let’s get to it.
[4:50] Cool well it wouldn’t be a Jason Scott show if we didn’t talk about a little bit of Amazon news.
[4:56] Amazon news new your margin is there opportunity.
[5:08] Yes so one of the things it’s been a busy week for Amazon so
just yesterday they filed one of their SEC documents their annual report effectively and surprised Wall Street with two little good nuggets so one of them is they’ve they’ve expanded their stock buyback
over time as you issue stock options and restricted stock units to employees as incentives your stock count grows and EPS is calculated by earnings
/ your Share account so when your chair count goes up it puts a natural pressure downward pressure on your EPS number.
[5:44] So Wall Street loves the buyback so they increase the available by back to something like 20 billion which is pretty big number,
but then more and more interestingly Amazon’s been one of those stocks that has kind of refused to split and then just recently alphabet,
I think ask is the after microphones off that announced a split and Amazon did that to this is this is one of those
kind of fascinating psychological things so when you do a stock split does it change the economics at all right so you just say hey we had 500 shares in there worth a dollar and now we have
to let’s see if they usually do a reverse split so you have there were.
So 500 shares the dollar and we’re going to get down to 50 cents we have a thousand and fifty cents so the economics are the same but
what happens is in many brokerage accounts you can’t buy a fractional shares so
it makes the retail investor Amazon stocks kind of around over a thousand dollars so when you do a split it does make it so more people can buy and then there’s a psychological thing that’s irrational where people just feel like it’s cheaper.
[6:55] Even though it mathematically is so so all that was really well received and then and it’s been interesting because,
they also signaled that.
They’re not going to be doing as much capital expenditure this year as prior year so so Amazon goes to these invest in Harvest phases and on the call the you and I covered it they were,
they were pretty cagey about it and I think Wall Street didn’t like that they were going to be an investment especially after covid it didn’t kind of make sense they built so much fulfillment centers,
so there were some elements of this where they clarified some things and it gave Wall Street a really nice kind of vibe that they’re not going to be investing a ton on capex
and then I thought it was interesting they announced they’ve announced a lot of these little kind of Acquisitions and they did one recently this company called Vico if I’m saying that right veq oh
it’s kind of like a multi-channel shipping solution so they’ve you and I have long.
Posited that Amazon is not a fan of Shopify and all the gmv that they’ve grown in that’s going through there and in Amazon’s eyes they view them as a competitor and so you know.
[8:09] There’s a lot of speculation that they’re going to come out with some kind of a Shopify killer or some kind of competitive offering to Shopify so this gives them a pretty interesting shipping kind of non Amazon shipping solution
kind of like a ship station they acquired point of sale system
that was based out of India then this goes back like 18 months ago they acquired a little e-commerce player out of Australia so it kind of feels like they’re assembling some pieces to something so it’s either
little local groups doing random things or there’s a big plan and they’re assembling things I’ve said this before I’m still think.
[8:48] I think the best strategy here is to take all these Services create microservices out of them,
and then sell them and compete with like the fabrics and the Commerce tools is that the other one always forget it yeah you kind of so have a headless option
and put it in aw that’s because you already have so many developers using AWS that would be a great entry point into people that are like pay I need I need a cloud-based point-of-sale functionality of some kind or I need any of these little pieces
that’s my guess who what’s going on and then and then some people
that talk to you said all right if they do that then cows an SMB how are they going to compete with Amazon with Shopify do smbs going to use these micro services and,
I think then they also build a little kind of Shopify killer on top of those microservices almost like a,
demo that basically says look what you can build with these micro Services of a Shopify like platform that’s what I think is going on but I’m curious to hear what you think.
[9:49] Yeah so I kind of think you’re wrong we’ll see the I could easily see them
like they’re they’re releasing a ton of microservices on AWS all the time right and so I will not be surprised at all if they release a stack of Commerce oriented microservices for AWS that.
Could compete with Shopify I just don’t think they would do that by acquiring these companies that are on like a whole disparate set of Technology stacks and you know don’t have significant scale and aren’t necessarily like,
have some competitive IP like I’d like Amazon could buy all these could build all these capabilities that these companies have.
With very little effort so I look at each one of those companies and I’m like it kind of solves a practical problem for a particular.
[10:42] Stakeholder in a particular Market I mean you know Amazon’s trying to expand their into Australia and they bought a Marketplace that had a bunch of sellers in Australia right
Amazon’s trying to capture more share in India and in India a bunch of the orders don’t get shipped to the consumers home they get shipped to a retailer
the Aggregates the orders and then customers go to that retail and pick it up so now they bought a POS system that a bunch of those retailers run in these small villages in India and I do think Amazon is,
interested in is certainly going to make a bigger move in shipping and.
You know I think if you’re trying to get people to use Amazon Freight and Amazon shipping for non Amazon packages one of the things you need is a is a shipping manager software package to give to all of those,
those companies so I think that’s what the qos so I think I don’t see these Acquisitions as some sort of super strategic set of Mike rolling up of microservices.
But we shall see.
[11:48] Yeah we should go back in the hot tub time machine and we record our annual predictions but next time.
[11:56] And side note I will one other prediction I’m glad we’re not going to go back and visit is.
Um Whole Foods did open their first just walk out store in Washington d.c. this month.
And I will readily admit a year ago in this show when we talked about the significance of just walk out I said.
Probably be a long time before we see this in a Whole Foods because there’s all these logistical challenges that like are not an Amazon go store but are in the much bigger grocery format like you know.
Each has of fruit and stuff you know bulk items that have to be weighed and you know retrofitting this technology into an existing store that wasn’t designed for it is a lot harder than building a purpose-built.
Environment and you know there’s there’s challenges with things like bathrooms I listed all these things and very smugly said so don’t expect to see.
Just walk out in a Whole Foods anytime soon and then less than a year.
[12:53] I remember you saying it was pretty much impossible.
[12:55] Yeah clearly I thought it was impossible and I feel like that that created a moonshot team at Amazon which then did it.
[13:06] Because Jeff is just like oh Jason’s challenge me now the gauntlet is down.
[13:12] Exactly so so congratulations to team Amazon I have not gotten a chance to shop that I have shop the the Amazon Fresh stores with just walk out so which is kind of an intermediate step so so I’m excited to see how that plays out.
[13:27] Yeah kind of a a
tangential Amazon news story we talked about this on our last episode which shut out the listeners we had really,
your kind of strong engagement from from you guys about the Amazon
Logistics deep dive we appreciate everyone not only listening to that at you know we were concerned it would be a little boring kind of going through all these counts of what they’re doing but at least
I find it riveting and but we got really good feedback on that and we appreciate when listening to that buried in that at the time we did talk about
shopify’s earnings where they basically came out and said their previous iteration on partnering with 3p else to do chipping hadn’t worked,
and this was actually predicted by by facile over it fabric I think he mentioned on the show he’s been pretty vocal on Twitter about it too I’m not revealing some secret and,
um Wall Street was then they said they’re going to spend
what was it a billion dollars on fulfillment centers which seemed laughably small especially in the context of the.
[14:30] 260 ish large fulfillment centers Amazon house and that would get them two day shipping which just doesn’t logically make sense to me and then Jason you pointed out that’s not
not even where the market is now but the update on that is Wall Street was not amused and what happens is.
When you’re high-flying stock with a big multiple and your your your model.
[14:56] Becomes part of the story and your Shopify has these really high both gross and net margins and relatively high growth and so their growth has slowed down and then Wall Street kind of it was kind of a
doomsday scenario so all streets like all right you’re slowing down your growth you’ve got the shipping problem you always talk about how you’re not worried about Amazon but something’s going on here and then on top of that you know they basically,
said to Wall Street we’re going to change our margin structure because we’re going to take all our ibadah and plugged it into this
spying warehouses so Wall Street hates it when you make a change like that and you kind of say I’m a 80% gross margin business and now
I’m going to be a 60% right whatever it is so the stock has like been in a world of hurt so it’s basically gone down by half I think
depending on whatever timeframe you look at and then there’s been a lot of stories about folks leaving and it’s kind of create a little bit of chaos so it’s going to be interesting to see
can Shopify executed on this can they do it and not
I’m really freaked out there investor base what happens with employee turn so so it’s kind of the first time they’ve had a bit of a misstep or or a resetting of their valuation so it’ll be interesting to see how that plays out.
[16:12] Yeah yeah I I’ve been following closely I side note on facile dazzles the CEO of
fabric which is a headless Commerce company that in some ways competes with Shopify and
I actually ran into him in detail and side note he just raised they just raised like two hundred million dollars at a billion dollar valuation.
[16:33] Yeah I’m a super jealous of his ability to raise capital.
He seems to preemptively do it he was always like I know we just raised a hundred but these guys really want end so we’re letting him in for like 200 at a you know a bazillion dollar valuation so high class problem.
[16:49] You would know better than I but I have heard the advice frequently repeated that the best time to raise money is when you don’t need it.
[17:01] It is true yes I always raise money when I’m down to my last dime which is the worst.
[17:06] Yeah I did tell him I was expecting like fancier suits in a bigger Booth a detail and he seems like he’s not spending the money on that stuff it’s.
[17:17] Now he’s hiring Engineers like crazy.
Some other news and I know Jason you have some to run through Saga through this quick the still follow eBay because it’s kind of an interesting story and you know they’ve even been to the pandemic they.
[17:34] Sorry for our younger listeners eBay is a website that sells stuff like Amazon but before Amazon.
[17:41] Yeah it’s this auction format where you like you takes a week to figure out if you bought the product or not it’s not not great in today’s instant,
instant feedback but to be fair most of their products are sold with buy it now so they’re auctions is not the majority but they’re still kind of always called the auction company so they’ve had that.
There’s all these startups that are nibbling away at eBay in different categories because for the longest time I felt like eBay should have vertical buying experiences because if you’re a comic book collector you want,
to search for certain things that matter to you versus a shoe collector versus a,
electronic Gadget buyer versus whatever but they stubbornly would never vertical eyes that experience and so now they are very closing the experience so they’re finally kind of waking up to this there’s
let’s see they’re going to have some some different experiences for what was it,
it was couple luxury goods shoes sports cards then this interesting there’s this kind of one interesting Trend in Collectibles that I think is going to go into other areas is.
[18:50] Different ownership models so taking a physical good and putting a digital ownership on top of it so there’s a site called dibs and
this actually came up Greg Bertinelli we had on the show two years ago he’s a VC that really kind of execs eBay guy and he’s
focuses on these kinds of models but what dibs does is let’s say you have some really cool rare baseball card and you could certainly sell it and then extract all the value but what if you could.
[19:19] You put it in a digital Vault a vault somewhere and then you could sell 40% of it so you could get some liquidity from your baseball card but you still own it and then you you could you don’t have to sell the whole card,
and then you know some of those fractional rights could be shared and and whatnot or if someone wanted to buy the whole card they could and then you could transfer to them and it would stay in the ball so there’s all these companies that are doing really Innovative things around this
all this this side of digital marketplaces
is within the purview of the SEC so all this is this is not crypto which is kind of over on its side the side kind of going rogue outside the SEC for the most part these are all blessed by the SEC and
and then there’s two that are very popular ones called Rally Road in the other ones called Otis and they do more
they actually go out and buy various Collectibles and things and then you can have fractional ownership
so for example in the comic book world one of the most famous comic books in my generation is called Amazing Fantasy 15 and that’s the first Spider-Man.
I don’t have that comic book because it’s like 300 thousand dollars or something like that and that’s that’s crazy and but you know.
[20:31] But it’s actually an interesting investment because I’ve watched it for 30 years and it’s gone from five thousand dollars when I was a kid to three hundred thousand dollars now so.
You can invest in that by buying a fraction so eBay announced their starting this thing called the eBay vault which is going to be this 31,000 square feet secured facility we’re going to be able to store all these assets
they say it’s going to the largest one in the world which didn’t make a hundred percent since me because that just doesn’t I guess we just had you know Mark on,
talking about million square foot fulfillment center so 31,000 square feet just doesn’t seem huge but I guess it’s full of vaults.
Then that also enable them the whole eBay model and this is kind of like the Shopify story we’re for the longest time they refused to touch a product because you know they’re their margins are super high because they never touch the product,
so it’s a zero asset business well all these companies have come along that touch the product so there’s.
I mentioned some of them but then there’s like goat and the shoe company’s stock X where they’ll actually get the sneakers in and they’ll thumbs up and say we’ve looked at these These are really you know Michael Jordan error.
Sneakers and they we’ve authenticated them there’s a lot of companies that do this in handbags who’s the one that does it for apparel.
We could put all your apparel you want to sell in a bag and they’ll take it and.
[21:57] Rio Rio our thread upper.
[21:59] Thredup thredup that’s what I’m looking for so it’s interesting if you look at it every eBay category someone has kind of come in and added a high-touch experience and chewed up a fair amount of the GMB that used to be on eBay so they’re finally kind of reacting to them,
and then I thought you would find this interesting they are going to launch a,
they’re gonna let you put videos on your listings and then they’re going to have a live video streaming pilot for sellers so that could be kind of interesting.
I’m kind of excited to see you like what your average eBay sellers live stream looks like it’s going to be it’s going to be kind of a.
You know a menagerie of things to look at there that’ll be funny
and then I thought you being a payments guy you’d be really excited about this Innovation that call it the digital wallet and
lets you store balance from your eBay sales and then you can use those let’s say Jason you sold one of your widgets for $100
you can use that hundred dollars to now go buy stuff.
[22:52] Wow that’s an amazing idea.
[22:54] Yeah it’s also known as PayPal 1997 so so so let’s.
[23:00] For our younger listeners as Scott’s not being sarcastic PayPal did start out as a eBay digital wallet and they spun it off so this is kind of a redo.
[23:10] Yeah yes they’re basically having to you know.
They’ve got divorced from PayPal they had this they got separated from PayPal and then they went their separate ways and now they’re basically having to just reinvent PayPal instead of eBay it’s kind of.
Kinda weird but they you know being eBay they didn’t just say well let’s do it everyone else doesn’t just license stripe they’ve got all this features they had to kind of like go do it all themselves so
they’re now just finally getting a digital wallet so there’s been this period of time where if you sold on eBay there was no way to take this fund and then put them back on eBay you just you know and I’ve been doing some eBay selling and it’s like super painful it’s like constantly
emailing me and it’s like it feels like literally like,
the first version of PayPal so so doing some Innovative things there and then other areas they’re just kind of like they’ve been hobbled because of some of the corporate structure things that have gone on.
[24:01] Yeah and we are teasing eBay a little bit but In fairness they still are like the second or third largest e-commerce site in the u.s. so.
[24:09] Yeah I love eBay and I wish I still feel like there’s this big kind of nugget of goodness in there that needs to be unlocked they just needed to kind of do it faster and kind of more aggressive with.
[24:21] That now did you talk about the vault already.
[24:24] I did.
[24:25] Yeah so prediction for next year that I’m going to put on my list is there’s going to be a Nicolas Cage movie where he has to break into the Vault and steal something you heard it here first exactly in Ft.
[24:45] Yeah there’s nothing Scott likes better than than talking about like Amazon antitrust and inflation has his two favorite topics but I should note while we’re covering all the news that the,
the monthly inflation numbers came out and there’s there’s a ton of different numbers but one that gets talked about the most is this Consumer Price Index which is kind of a random basket of goods that were selected in the 1950s,
and based on that index over the last 12 months that index has gone up by 7.9% so that’s the.
The highest it has gone up in the last I don’t know more than 30 years,
so that’s pretty significant and that was one of the big talking points at e-tail is.
You know what what are the impacts of inflation going to be on the market and in Howard consumers going to react so,
there is significant inflation out there right now and it is like factoring into a lot of retail and e-commerce players plans are you worried about inflation at all Scott you think it’s overhyped what’s the.
[25:53] Now I’m very very worried about its going to hit that.
I don’t think it’s in control at all and it’s in this kind of spiral I think we’ll hit the this stagflation thing so you know imagine your retailer your labor is going up
imagine you’re an e-commerce gas prices are
you know hitting between four and seven dollars depending where you are in the country so now you have all these yeah I’m shocked we haven’t seen fuel surcharges for everyone maybe they have and I just missed them so now it’s going to be,
more expensive to ship stuff and then you have to raise your prices and then that causes more inflation and then you know
and then people need more wages to afford the stuff you just raise the prices on it that there’s a vert there’s kind of a worry there’s a bit of a flywheel there that I don’t know how you break out.
[26:43] Yeah no and even before all of this fuel unrest like fuel was already the,
the category with the highest inflation and now it’s you know likely to go even much higher so that that’s in very unfortunate and it does I’ve seen some studies,
and this is may be counterintuitive but when you think about it it makes sense.
Inflation is impacting the the low price sellers the most right so if you if you have a little extra margin in your product you can act as a shock absorber a little bit and absorb some of this inflation but if you are,
are selling at razor-thin margins so think dollar stores like they’re getting hit the hardest by inflation and.
[27:30] The other three dollar stores now.
[27:31] Exactly and the consumers that shop lower-priced retailers which you know tend to skew younger consumers so Jen’s ears.
[27:42] They’re feeling inflation much more than older cohort so it’s.
It is in unfortunate and definitely has a potential to be stifling on on a lot of the growth we’ve been talking about over the last couple of years.
So awkward transition off of that.
Ring in a piece of news from from last week Nordstrom became the the latest retailer to launch a retail media Network.
And I will talk more about.
What I think the prospects are for a Nordstrom retail MIT media Network on another show but I just wanted to use that to sort of highlight.
It’s one of the topics that’s coming up most in my conversation with retailers and Brands is.
Every retailer is leaning into launching these advertising networks like we talked on our Amazon Deep dive about Amazon disclosing,
the revenue from from their Network and it’s huge so every retailer and their brother is trying to launch one and they’re trying to collect dollars from every brand and the brands don’t really know how where and why they should be investing in them so there’s a,
a lot of discussion and test and learn.
And debate at the moment about retail media Network so I did knock out my position on them on Forbes article that I’ll link to but I was going to propose to you that we should,
finder there I guessed and do a deep dive in retail media networks in an upcoming show.
[29:12] Yeah I don’t think anyone knows more about it than you are so maybe it’ll just be a jacen solo deep death.
[29:17] Yeah I think 10 of my co-workers and pupusas just rolled over in their grave when they’re just say that they’re like dude that dude doesn’t need his head to be any bigger and we all know more about it than he does.
[29:27] Well we get a lot of listener feedback that’s essentially more Jason so can never have too much Jason.
[29:34] That may have something to do with I have the direct email to the feedback account.
[29:39] And then one last piece of news that happened yesterday is our friends at Twitter,
um expanded in e-commerce pilot that they’ve been running so they have had this this limited pilot where you could essentially on your Twitter account.
Sell three items so you kind of you had a carousel that could show up in your Twitter account for these three items and the expansion is
that they now let you upload a product feed with 50 or 10,000 items in it so you can you can send
Twitter 10,000 items you sell and at any given time you can,
activate up to 50 of them so you kind of have a little mini store with kind of like a,
you know a category page with a bunch of product tiles in it and you can you can shop through any of these these 50 items,
and it’s it’s what we would call a non-endemic check out so if you decide you want to buy one of these items you don’t buy it.
From Twitter and give Twitter your payment information you click on that product tile and it takes you to.
The that Brands e-commerce site on their on their store and you check out there so it’s kind of a.
[30:59] Twitter cause it e-commerce but it’s really a referral site to these Brands and it’s interesting that there.
They’ve tried a lot of different Commerce experiences none of them have been a home run,
this is a new one and I have to say and I know you have had similar feelings about this I’m kind of skeptical that the referral is a very good customer experience because what tends to happen is.
You upload this product fee that you know was probably accurate when you uploaded it but this is all Dynamic data something that you upload goes out of stock or the price changes or
you you fix an error in your CMS on the URL and so that now the product listing on your website,
doesn’t perfectly match the product listing.
On Twitter and that you know customers really don’t like that when they click a product at One Price or in one color or you know that that you say is available and then you get to the website and it’s,
a different price or a different color or not available and on launch day they had five.
Different vendors that could sell stuff and I click through all of them and three of them you know,
had we’re selling five products that were already wrong on day one so it looks a little problematic.
[32:17] You have literally had this like conversation with five iterations of the Scituate ER and it goes like this is super.
They tend to be this isn’t just one of al-ahly Silicon Valley companies they’re like super arrogant where insert
company name and we know all about software
okay and hey we’re going to do this Marketplace and it’s gonna be great and here’s how it’s going to work we’re going to sell stuff and we’re going to run people through this check out and then at the end we want to figure out how much inventory there’s and I was like
well you could do that but that’s exactly wrong right because you want to
before someone dies something you want to make sure you have it in stock or else it’s a consumer is going to get really frustrated and leave and they’re always like well it’s a beta we can fix that later why invest in real time inventory now and then they never got a beta because us so then they’re always like I’m like how’d the test go and like well consumers hated it
and I’m like so we’re not moving forward and I’ll say will you realize you set yourself up to fail,
like no our data indicates that they wouldn’t have engage with it even if the inventory thing worked you’re just like.
[33:23] I don’t understand so we’ll see if yeah they don’t don’t understand the importance of this stuff and that the customer Journey they want you know people want,
colors to be the same variance the all the all the blocking and tackling of e-commerce is actually
pretty hard if you don’t think it through and most of these companies this kind of say oh my God third party cookies are going away we need an e-commerce solution and then it travels down to an engineer that that has no idea how to how to get it done.
[33:55] Yeah and I guess In fairness I don’t there’s no easy answer like one of the five beta
clients is Verizon and I don’t know this to be the case but highly likely the Verizon told Twitter we don’t want you to take the customers money because then you’re the seller of record we want you to send customers to our website right so like the.
You’ve got this conundrum that that like the brands that want to sell stuff want want to own the customer they don’t want to rent the customer from Twitter but then you know when you do have this kind of two step
experience it totally breaks and it’s got as you know we have these kind of consistency problems,
just on our own website so when you add Twitter to the mix like it gets much worse and it’s it never works for customer experience.
[34:42] Yet built a whole company to solve this and it has like 120 Engineers working on it all the time it’s a hard problem it’s not it’s not going to be something you can like put like a five-person engineering team on and have this great integrated e-commerce experiences just like not going to happen.
[34:56] Yeah but that company you just mentioned sound like such a good idea though that sounds cool.
[35:00] Thanks thanks it’s been a good run.
[35:03] Especially after you turned over the keys to competent leadership I feel like that was been a.
[35:08] Finally hit its stride after I got out of the scene.
[35:11] Exactly so I thought we would try something new we just covered a bunch of interesting to us but random news over the last two weeks it also kind of is,
quarterly earnings season and so a bunch of retailers over the last couple weeks since our last show have had their their Q4 earnings which of course also gives us their their 2021 earnings
and we could do it a tower show on all these earnings but what I thought we would just try to do is a earnings rapid fire.
Because we are known for for being able to summarize things really briskly and and concisely what do you what do you say to that.
[35:54] Plus rapid fire this puppy lightning room.
[35:56] Awesome so what I’ve done is I’ve taken all the companies that I thought would be relevant to our listeners
and I’ve bundled them into three buckets what I’m calling the winners which are companies that had a really good year what I’m calling the neutrals which kind of you know tread water and when I’m calling the losers,
um which are you know the folks that lost ground so in my winners category the first earnings is Dick’s Sporting Goods they actually had a mediocre Q4 they were up 5.9% versus,
20:21 there in 2021 was up 28% versus 2019 so so decent growth,
um the their digital was actually down Q4 of this year so you’d go Jason why are there winner well,
the if we look at their full year their sales in 2021 were up forty percent from their sales in 2019 so the so,
huge growth throughout the pandemic and they were such a big winner in the first year of the pandemic that they still had growth in the second year but it was on top of these huge comps so,
um so you know forty percent growth on a two-year stack you know for a retailer of their size,
is a huge win and just a fun stat I’m trying to track for a bunch of these guys that now puts them at 27 percent digital sales so one out of every four dollars that dick stakes in,
is from their e-commerce site.
[37:24] Does that purpose.
[37:27] It would include both of us are curbside pickup.
[37:32] Okay that’s Jean.
[37:34] Um so then my second winner is Walmart.
The their Q4 was up 5.6% you know again they’re the largest retailer in the world so they have the hardest number to move,
and 5.6% is considerably up from there they’re sort of historical average and that’s on a big comp because they were up 8.6 percent this quarter,
last year but the real reason they’re a big winner is e-commerce.
On a two-year stack was up is up 70% so this was.
The third largest e-commerce site in the United States two years ago just behind Amazon and eBay there now the second largest e-commerce site in the US and they’ve grown 70% in the last two years so that’s astronomical and again.
They’re their full year sales were pretty good up 6.4% last year up 15% on a two-year stack and this is a company that normally goes up two or three percent a year so.
So I another big winner and then my biggest winner for the year is Target so.
[38:47] They had great numbers across the board they were up eight point nine percent for the quarter they were up 20% this quarter last year so too.
You know big numbers on top of big numbers again on the full year they’re up 20% versus 20 versus two years ago and their digital is a standout in all of this there there.
Two years ago their digital was up 145 percent and then they grew another 21 percent last year on top of that.
So monster numbers and I like how they break out their sales so so just a couple of things to know they’re the only company I’ve seen that report two.
Segments they report store originally needed sales versus digitally originated so where did the order get placed,
and they also separately report store fulfilled sales versus fulfillment center fulfilled sales so.
[39:46] Eighty percent of their orders comes from a store 20% of their stores,
of their orders come from digital but 96 percent of all their sales are fulfilled from a store so virtually all their e-commerce has fulfilled from the store what’s interesting about that is what that means is they are selling.
The 60,000 items that fit in a store are all of their sales versus if you look at,
Amazon eBay Walmart a huge chunk of their e-commerce sales are this super long tail of millions of skews so it,
Target had big numbers and they’re doing it differently than everyone else and then the the number I talked about the most is.
[40:30] You know they’ve been really successful with their own Brands and to kind of put that in perspective about 26 percent of all of their sales
where sales of of exclusive stuff you can only buy at Target so those own Brands were 30 billion of their 106 billion in sales,
so that’s phenomenal and then you you were talking about curbside pickup the curbside pickup numbers are also silly in 2020 during the pandemic curbside pickup went up six hundred percent at Target and then last year,
you know that six hundred percent is crazy but you go oh yeah because all the stores closed and people had to drive up
but then last year when stores reopened you’d expect that to dip way down and they
curbside pickup went up another 70% on top of the six hundred percent from the previous year so so curbside pickup is a huge growth they,
you know they bought a curbside company right before the pandemic and so I like they’re kind of clicking on all cylinders right now.
[41:33] The 96% number 95.
That’s so I’d go to a lot of targets and I’ve never seen like,
most stores that have shift from Storer there’s like some corner where it’s like a total poop show of people trying to,
package stuff in the middle of the store and things Target is that true I never see that and it’s kind of fascinating to me it seems like the stores would have this huge shipping piece that I’m not seeing somewhere,
and it’s not like they have a ton of storage in the stores.
[42:04] So they did a really.
[42:06] Just a shipped is it shipped that’s doing it is that kind of what they’re coming in there.
[42:09] No it like they did a remodel for most of the Target stores where they actually Shrunk The Selling space so they used to have no back-of-house like they’d have all the live inventory on the floor and they actually Shrunk The Selling Space by like 10 or 15 percent
and built a shipping center in the back of the stores that you can’t see right,
and so they now have dedicated shipping they like they literally had to go like negotiate with other carriers because carriers are used to delivering stuff to these stores but not picking stuff up from these stores
so they had to work all that and they’re there
doing so much volume now that you know what they’re big players got they have their own sortation centers and they work differently than Amazon the search the stores instead of shipping to the customer.
Like do multiple shipments a day
via private trucks to the sortation center and then all the items are shipped from the sortation center and so that lets them use this like hub-and-spoke and have super stores that have extra inventory for these orders but all the inventory is sitting in a store until a customer orders it
and then it goes through this this multifaceted distribution system to either go to the front of the store for curbside pickup via shipped or to the back of the store
out to a sortation center and then via USPS to a customer nearby.
[43:31] You want ship from store came out everyone in e-commerce kind of laughed because you’re taking the most expensive commercial real estate,
and using it as a shipping and warehouses are dirt cheap well it’s inverted so.
[43:46] I say that used to be true.
[43:47] So now it’s actually probably more economical to ship from the store than anywhere else from open Pure commercial real estate angle because covid is killed so much retail space and then at you know at some point like office parks.
That that that used to be the highest and then you so you should be Office Park retail and warehouse and now it’s Warehouse retail and Office Park so so it’s totally
all all mixed up and creating a whole nother economic model that we’ll have to kind of see what happens there’s you know a lot of people are taking these malls and converting them into fulfillment centers
I was in one I was in a Sam’s the other day and I was like.
Billy I’m in feels like a Sam’s that I guess it was a Sam’s and it was one of those sounds that he commissioned and they turned it into this weird kind of open Office Space and it was it was very strange because it felt like.
Literally having an office in a Sam’s.
[44:41] Yeah yeah that doesn’t sound appealing when you describe it like that.
[44:44] And they had that whole what do you.
[44:46] Do they still have like like samples necks.
[44:48] Well they were saying they were saying.
They had a hard time putting some like 3D printers in it they had a hard time because the floor was angled and it was because it was like where some freezers were and they dangled the floor to act as drainage and I guess they had to come in and re-engineer like a whole big section of it.
And I shopped in this house before too so it’s kind of weird like a new kind of where all the stuff was in her but they also do that what is that we some of your buildings do it where you check in and you don’t have a spot every day as a fan.
[45:21] Like hoteling.
[45:22] Yeah hoteling so they like the couldn’t they couldn’t understand like why no one wanted to come to work so like make it so you know Dad like all these impediments for people to come to work and they’re like we don’t know why more people aren’t coming in it’s like well.
You’ve made them feel like you know kind of fourth class citizens they kind of they don’t have a place to sit every day they can’t bring any personal items it was kind of funny and they’re basically sitting in a Sims.
[45:48] All right yeah I think there’s going to be an interesting question about like reuse of all this the the brick and mortar space then closes so but it doesn’t sound like you’re you’re going to be investing in the we work 2.0.
[46:04] Side note and I
I miss the most by far important and Brilliant move in that whole Target Whitney the major feature they announced is that you can now order Starbucks to be included in your curbside pickup order.
[46:20] Game changer.
[46:22] That that does feel like a game changer.
[46:25] I was picturing you being first alone.
[46:27] It feels like they’re targeting a couple people than I know.
[46:30] Well as fellow Starbucks kind of Sword the target ones I have found out you’re not as good or know that you like the.
[46:40] Some of it the taste is not the same.
[46:43] Their franchisees.
[46:45] Yeah and you can’t mobile order which is government I guess this is mobile ordering.
yeah so I think it is a clever move to like so these impulse and consumed on the way home items at curbside I bet we’re going to see a lot more of that but I am with you if I have the option I usually like to go to a Starbucks Company Store over a franchisee because the
the experience is more consistent at the company store but I’m saying that to someone that’s selling a bunch of franchises so we should maybe be careful about that.
So neutrals I have my first neutral is Best Buy they had a slightly negative quarter they were down 2.3 percent they were up 12 percent this quarter last year.
You know they actually did decent their kind of,
two-year stack they’ve grown about ten percent which is you know above what what a lot of retailers grow,
but they they are in a category that in my mind like seems like should have really benefited from the pandemic and you just don’t see.
Like this huge huge benefit in their full year numbers so I put them in my neutral.
They are now at 39 percent of all their their sales are digital and at the peak of the pandemic it was over 50 by the way.
[48:10] So certainly increasingly their most important store Ulta beauty you know they’re their company that was probably pretty negatively affected by the the pandemic and they had you know a decent year their full year comps.
[48:27] Pretty significantly this year but it was because they were so awful last year so they were down 20 percent last year they’re up 30% this year so they’re up on the two-year stack but not amazingly,
and then all the apparel guys like in my mind there’s two kinds of apparel guys there’s apparel guys that had a horrible Court year last year and or two years ago and did better last year and ones that,
had a horrible year two years ago and are still really struggling right so Kohl’s Gap and Nordstrom and Ralph Lauren are all in that kind of.
Had an atrocious year two years ago and are having a decent little recovery this year.
Um and then like Abercrombie and Macy’s I would put in that category of had an atrocious what your.
Two years ago and you know so far pretty weak recovery this year.
So those are my first two losers are Abercrombie and Macy’s and then someone who you would think would be really poised to benefit from,
the kind of economic downturn but have really struggled over the last two years are the dollar stores and and especially Dollar Tree,
their Q4 was decent it was up.
2.5% but they’re they’re basically up 1.1 percent for the year.
Which is you know pretty slow growth when the industry grew like 20%.
[49:53] So that that is my super rapid fire earnings recap are you impressed.
[50:00] Nice I am I like how you segment it do the dollar guys.
But I didn’t listen to the reports are they signing inflation is kind of basically or is it like so it’s their own pricing but I imagine going after that value or any consumer unfortunately they’re they’re the ones that get hit the hardest with inflation is that was that kind of what’s happened in there.
[50:23] Yeah so that that is happening now like most of their negative performance over the last two years is kind of
dollar stores are the least digital so in the pandemic when people are going to the stores last they they became a less viable option right like if you didn’t want to go to a Target you could shop from Target online like pretty seamlessly but dollar stores
very often don’t offer e-commerce they were disproportionately impacted by supply chain disruptions right so
you know if you’re a big General Merchant you could make all these plays to try to line up merchandise but you know the dollar stores are trying to buy.
Distressed inventory in remaindered remainer remaindered inventory so they like didn’t really have the option to be as proactive as some of the the,
the discount General merchants and so so they had a lot of supply chain disruption so that those were there,
they’re bad news the last two years there’s a school of thought that they’ll,
have a they’ll be decently positioned in an economic downturn but but we shall see.
[51:29] Coble thanks for doing that.
[51:31] If that was helpful for you we will remind you that the way you can repay us as you can jump on iTunes and leave us that five-star review.
[51:40] Thanks everyone we appreciate it and until next time.
[51:44] Happy commercing.