The Jason & Scot Show - E-Commerce And Retail News

Join hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Founder and Executive Chairman of Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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May 21, 2020

EP220 - Retail Earnings News

Episode 220 covers a variety of retail earnings reports and news.

Retail Earnings

  • Walmart – Same store sales up 10%, e-commerce up 74%
  • Target – Same store sales up 10.8%, e-commerce up 141% (curbside up 278%)
  • Home Depot- Same store sales up 7.1%, e-commerce up 79%
  • Lowes- Same store sales up 11.2%, e-commerce up 80%

Race to $1.5T Market Cap (as of 5/20/2020)

Apple Inc. $1,383,649,809,668
Microsoft Corporation $1,407,941,498,171, Inc. $1,245,912,492,214

Other News

  • Amazon News – JCP and AMC rumors
  • Facebook – New e-commerce option
  • Fritolay Direct to Consumer Launch

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 220 of the Jason & Scot show was recorded live on Wednesday, May 20th, 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 Scot show
this is episode 220 being recorded on Wednesday May 20th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:41] A Jason and welcome back Jason Scott should listeners,
well everyone there’s been a lot of news that we want to cover in this episode so this is going to be kind of a news topical one hopefully you’re doing something fun for Memorial Day and listening to this song maybe a commute or
treadmill or whatever it is you’re doing before we jump into the news Jason what’s new with you house all the Sheltering in place going.

[1:04] It I have a new challenge this week Scott I’m having.

[1:10] Starbucks has reopened.

[1:12] No they have reopened so that’s a that’s just a blessing not a challenge the but my my Peloton finally got delivered after a five-week wait list.

[1:25] Oh and this is the baikonur the treadmill.

[1:28] The bike they’re not selling the treadmills right now because they’re too heavy they require like three people to deliver so they’re only doing bikes so I got my bike.

[1:34] I thought as the chief digital retail officer you may have had some inside track there.

[1:40] Not really as just a dude trying to keep his wife happy I just waited in line with everyone else and but now I’m having to do this this podcast tonight standing up because it’s too sore to sit down right now.

[1:53] Have you who’s your favorite trainer have you seen enough videos to find a your favorite.

[2:01] I have not I’m so far I’m striking out like the it’s great actually it like it so far it’s a met expectations which were high but all the trainers are a little too peppy and motivational for me.

[2:16] You need like the angry old Muppet trainer guys.

[2:19] Yes I’m hoping that I’ll eventually find some creamed onions that I can I can jam with but.

[2:26] If not you can quit our podcasts and become a curmudgeon Peloton trainer.

[2:31] That would be hysterical I would be the most awesome guest guest trainer ever and it’s no relation but the guy that invented the spinning bike is this guy Johnny Goldberg so like.
Yeah I could be his nephew or something.

[2:47] Nice have you mounted on the pot on some cup holder so you can have your two vintage drinks your to Venti Starbucks says here.

[2:54] It does it comes with cup holder so it didn’t have to do that I did Mount the iPhone holder so that I could you know keep chatting with you while I’m well I’m working out at least for the two minute warm up until I can no longer talk.

[3:07] I have a bunch of funny Peloton stories I’ll tell you some other time.

[3:14] Next yeah maybe we won’t share those with all the listeners and then.
I feel like the fun thing I mean not you know it’s mostly sad stuff but one of the fun things about the shelter in place is I feel like I’m doing as many events as I used to do but each event used to take like 3 days with travel and everything and now the events just take.
A day so I in a way I feel like I’m doing a lot more events and yet I’m less busy.

[3:40] Yes let’s let’s pretend we’re normal and let’s give us a road trip report on these events you quote-unquote attended.

[3:46] Yeah so this week the fun event I did was the second iteration of an event called Commerce live.
In this is put on by profiteer oh which is a.
Vendor in the e-commerce space that do a lot of digital shelf monitoring on Amazon.
And they partnered with Peck view which may be familiar to some listeners because that is Melissa’s company who’s been on the show.
Three times I think if I have my counts right,
and so they were very clever you know the pain right is the shelter in place holders kicked in we were all supposed to go to shop talk so shoptalk got canceled,
they decided to host their own virtual event that was you know frankly kind of last minute and add hawkish but they put together really good content and they got several thousand people to log in for the first event.
And they were desperate enough for moderators that they had me do one of the pant moderate one of their panels and then.
They had their second event yesterday so I got moderate a panel about grocery.
The keynote speaker right before me was Gary Vander check.
So we got to chat a little bit about the Jets and what a good red wine is to drink early in the morning during a virtual event.

[5:13] How about where your pulse hunting did you what pairs well with the Peloton.

[5:17] Haven’t haven’t figured that out I feel like I would be spilling too much I think yeah.

[5:23] Bad for the carpet how long into his talk did he get before he dropped a an F-bomb.

[5:30] Yeah disappointingly he didn’t at all so he was he had apparently was on extra good behavior.

[5:36] Yeah they had to pay extra for that.

[5:37] Yeah side note you know he started a media company a while ago and this month he launched a Commerce practice within that Media company so Vander check Media or Vander check Commerce,
which is focused on on helping you know challenge Our Brands and d2c Brands and all those guys,
execute their Commerce strategies so he’s one of us now.

[6:03] Yeah he always has been is a wine thing was doing
Commerce and clubs way before yeah and then didn’t he do something like some some obnoxiously large number of Super Bowl commercials went to him and he kind of helped either craft them or shape them or something isn’t that,
I saw something where he had he had worked with a lot of really large brands on their Super Bowl commercials so he’s coming he’s coming after your parent company,
he’s an enemy dude I don’t know why you’re.

[6:31] He there’s room for all of us we’re all friendlies I’m a fan I’ve been an early Wine Library consumer so.
Yeah I’m cool with it but we’ll have to have him on the show now that he’s like totally focused on the Commerce space.

[6:47] Absolutely.

[6:48] But so my panel was on Grocery and I had really good panelist so I had these three women that each run Commerce for big consumer brand so I had Elizabeth Bennet whose the
VP of global economy for Kraft Heinz I had Laura Hyland who’s the VP of e-commerce at Hinkle and then Kelly Olynyk who’s the head of global e-commerce at General Mills.

[7:13] Cool is it the single that’s the knife brand right in there always pooping on Amazon.

[7:17] No same name that would have also been interesting but Hinkle is a cpg brand that has like.
Lot of fabric care products like laundry detergents things like that they have.
I think a bunch of pet products.
So I got a pair isil is one of their brands Purex Dial soap.
Stuff like that so they are German like the knife manufacturer that yeah they’re not the knife guys that.
SQ Amazon at all cost Hinkle infect cells cells to Amazon.

[7:59] It’s confusing this should fix that over in Germany they should set that straight so that.

[8:03] If you were paying more attention during the rehearsal you would have known that.

[8:20] Yes and no so economically no because they’re like they are all seeing a nice uptick in sales /
Not necessarily very profitable uptick but what they are all doing cartwheels about which is kind of funny is.
You know these are all experienced women that like you know I think two of them you know came from Amazon at one point and,
basically they all replace the interns at the cpgs right like the cpgs like oh there’s this thing called e-commerce let’s put the intern in charge of that and then when it got too important for the intern
they hired an outsider who in these two cases
you know is these three women and their Ico e-commerce is going to be super important to our brand and like you know you’re going to be a part of the leadership team and it’s this big deal and then they arrived there
and you know they probably had the office for this from the CEO and probably like,
never got invited to the big meetings and so now of course the CEOs are sitting in their office all day long.
So digital and e-commerce has suddenly become super important and relevant to all of these consumer packaged Goods Brands as will be apparent in a few minutes when we talk about retail earnings reports.

[9:38] Like Kelly’s title head of global e-commerce acceleration at General Mills with a title like that you know if you’re ever down your rear that’s going to be a to be a rough day.

[9:48] Well so I asked her on the panel if she had a counterpart that owns all the deceleration because that doesn’t sound like as good a job.

[9:56] Head of global brick-and-mortar deceleration classic.

[10:02] Exactly yeah but so it was a it was a really good event it was fun listening Gary talked about Commerce I had an hour-long conversation with with the three panelists and got good feedback that people besides me enjoyed it so.
So within the covid dream for another week.

[10:19] Awesome well let’s jump into the news we got a lot to talk about and of course it wouldn’t be at Jason and Scot show without.
Amazon news your margin is there opportunity.

[10:42] So Amazon
in a continues to we had the Deep dive into their q1 earnings and since then the stock has been just bumping right up against new highs I think it hit a new high today I wasn’t sure if it close there or not,
one thing I like to keep track of is the trillion dollar horse race here which were well into,
pass the trillion dollar mark But Amazon’s actually third in this horse rate at one point two trillion dollar market cap,
and then you have apple at one point three eight and then Microsoft has been the Dark Horse it always,
you kind of frequently Falls to Third and then comes out and crushes it and there at one point four trillion,
one of these companies is going to be the first one and a half trillion dollar company and that’s going to be really interesting to watch that play out,
so that was interesting and then just a couple little things so Amazon has extended its work from home for its employees to October that’s one of the first ones I’ve seen with exception of Twitter that just basically said.
You all just work from home forever and then Jack went to Africa or something
the there’s a lot of rumors about Amazon so first one was that they were going to buy a MC and then the second one was that they would by JC Penney I’m curious your thoughts Jason let me hear your thoughts and then I’ll turn mine in there I don’t want to taint your.

[12:01] Yeah I don’t think they’re going to buy either I think Amazon has a very good track record and it’s very smart practice that like anytime,
there there’s a company out there in the space that that is interested in potentially being acquired or liquidated
Amazon’s going to talk to them and kick the tires because,
they like to learn stuff and you can learn a lot talking to a potential acquiree so if you know JCPenney’s is filing bankruptcy and is is on the market,
Amazon’s going to go talk to them I don’t think there’s a lot of value in JCPenney to Amazon so I actually don’t think.
That that acquisition is very real but it won’t wouldn’t surprise me at all if they food some people out to Dallas to talk to them,
in the end the same with AMC I feel like like.
The the the movie The in movie theater industry was already struggling before covid and now you know we have all these movie studios that are having these positive experiences with direct,
direct-to-consumer releases and bypassing the movie theaters and I just it just seems like,
like the value of both of those businesses are permanently eroded and in like I don’t personally see some value to Amazon and picking either one up.

[13:28] Yeah I agree the only thing I can tell we’ve been doing this podcast together for two and 20 episodes because I would have said exactly you did but.

[13:36] You would have said it better.

[13:37] Of course the only thing I could see them buying in JCPenney is doesn’t JCPenney own some Brands like a bunch of apparel Brands like the own like.
Something Tommy something they own some stuff.

[13:52] Some yeah.

[13:52] Yeah camera what there so you know there’s there’s probably you know there’s some value there but someone with a smiley face don’t they on that,
it’s got like this yellow smiley face I don’t know I don’t know the apparel world as well as you do it was funny though to watch on Twitter all the speculation so some people were like they’re going to buy all the JC Penney’s and turned them into you know.
You called them dark stores I called them Cloud fulfillment centers that doesn’t make any sense because you know if you’re gonna spend that money on that you would,
these are in malls which have high super high rents you don’t you’ll put a warehouse in a super high Renteria that wouldn’t make any sense.

[14:33] Yeah nah until the mall goes out of business and it gets rezoned.

[14:36] Yeah yeah so so yeah I don’t think any of those things aren’t going to come to fruition what other news have you been watching.

[14:47] Well we’ve had a bunch of retail earnings in the last couple days so yesterday right before my panel kicked up Walmart did their earnings and these are all like I think all the earnings are going to be eye-popping numbers
that we’re just not used to talking about so Walmart e-commerce was up 74 percent.

[15:08] I said put that in perspective like over the last two years Walmart has been one of the best performing fastest-growing e-commerce
um practices like they’ve averaged about 40 percent growth of quarter last quarter I want to say they were 35% growth
so jumping up to seventy four percent is Monster growth away more eye-popping number though is same-store sales were up 10%
so like Walmart is that a great
growth trajectory they had a bunch of consecutive quarters of growth but like usual same store sales growth for a retailer is like one or two percent is great and so
10% same-store sales growth on
Walmart’s number which is the biggest number in the world is huge 74% e-commerce growth is huge.

[15:55] And if that was the end of the story like it would be a great story of course.
Expenses were way up and profitability therefore was way down and so a lot of the retailers are going to talk about kind of missed their earnings governance because of that in Walmart’s case they said they had 900 million dollars in
extraordinary expenses related to covid
so for a retailer like Wal-Mart a lot of that is bonuses that they paid to employees to keep them at work and and you know extra safety procedures and things like that and then the news they slipped into that earnings thing which is kind of interesting
to all of us is that they also announced that they are shutting down so I I know that’s a little sad for you that’s one less Marketplace in the world.

[16:41] It is sad I’ve really enjoyed watching Jet and I know Mark really well and his early pitch was kind of so,
audacious it is kind of like almost insane and then dang if you didn’t pull it off so kudos to Mark it’s funny I saw a lot of the folks were saying you know
Walmart back basically Aqua hired Mark for three billion dollars and then some other people on the other side of the debate were saying well okay yeah if you assume.
They got this new digital DNA from from Mark and his team it’s added like a hundred and eighty billion to the Marcia caps was actually pretty good Roi.

[17:19] Yeah know exactly like it you know
correlation and causation we don’t know but market cap has done quite well since the acquisition and I would just argue that like the basic fundamentals of e-commerce have done like they were
about 12 billion dollars in Revenue they had like a million skus in their catalog
and they were growing at ten percent which is slower than the industry average when they acquire Jet and since that acquisition they’ve averaged 40% I think they’re up to like 40 million skews so.
40 times growth of their catalog mostly thanks to Marketplace and you know they’re well north of 20 billion dollars in e-commerce Revenue so,
You know despite the fact that they’re shutting that brand down which makes a lot of sense because Walmart is such a powerful brand there are not very many communities where
jet is going to have more brand recognition than,
but I’d I personally feel like Walmart got their money’s worth out of the acquisition and certainly when Doug mcmillon the CEO of Walmart was asked about that after the earnings report he said we would absolutely do it again we’re happy with how it worked out,
but you may tell me that you can’t be a CEO of a public company and and say it was a bad acquisition.

[18:38] No he’s such a straight shooter I think he would actually say that but I think he’s you know you can’t argue with the fact it’s injected a lot of energy into their e-commerce of the 74 percent how do you dug into,
you’ve kind of had this running theory that a lot of this is coming from grocery was there any breakdown of that 74 percent.

[18:55] Yeah there was in grocery was a big contributor but it’s not exclusively so there are like
Electronics did really well Home and Garden did really well and then there are categories that are just generally genomic ginormous losers in the whole covid era so I
apparel being the poster child apparel was significantly down in e-commerce for for Walmart so.
You know it’s mostly Essentials categories and stuff that you use when you’re locked in your house.

[19:33] Seems like a perils down everywhere you know we don’t we don’t have it in our show notes but I saw that Cole’s took a whooping.
The other
earnings we wanted to go through our Target I saw not to be out done with that amazing 74% climb their e-commerce was a hundred forty-one percent boom take that Walmart we’re almost going w i saw another thing on Twitter where it showed like these growth rates and then it showed like the absolute numbers and like Amazon is like you know
such a big chunk that all these growth rates are to give you this impression that there’s there’s something,
people are catching up the amazon but Amazon so far ahead and growing it you know its own twenty-five to thirty percent clip none of these amazing results are really going to
change the inevitable outcome of Amazon’s dominance but,
we’ll see the same store sales were up 10.8% it’s always you know it’s a little bit unfair that these guys got to be open and everyone else is closed but when that happens man people really come to their stores and they
earnings were 500 million was that top liner.

[20:43] No no that was 500 million in covid expenses so.

[20:46] I didn’t reach the next one.

[20:47] Little more than half of what Walmart said they the yeah we have a sophisticated thing in the show notes called a wine wrap.

[20:56] Yeah I’m not familiar with that but
think you got to tell me about this new technology then the other thing that I saw that was really interesting was same day curbside pickup was up like two hundred and seventy eight percent which is just nuts,
it’s a great experience though so it’s essentially kind of.
Valet to your car kind of thing so customers obviously liking that during the covid impact what else.

[21:23] So that.

[21:24] And Target did you find interesting.

[21:25] Yeah a few things so Target broke down their e-commerce growth by month
and so the ramp up is pretty like eye-popping lie funny so you you said hey the top line for the three months was 141 will January was up 33 percent which is pretty covid that’s kind of there
that would have been a good month for them right that’s above their average and above the industry average
February was up a hundred percent so that’s eye-popping and then March was up to hundred and eighty-two percent.
Or I just said all three of those wrong that’s February March and April not not January February March,
so April was up to 82 so it’s going to be interesting to see if we can maintain that in May because there’s a lot of evidence that like there’s all this aggressive stock up and shopping that kind of declined a little bit,
and there’s a lot of stimulus check spending in those numbers so it’s it’s definitely not a foregone conclusion that numbers are going to stay.
That high but certainly e-commerce is going to continue to stay high,
Target also disclosed that their basket size is up 12% which that kind of mirrors every retailer I’m talking to is Shoppers are shopping less they’re doing fewer trips but they’re getting more stuff in each trip.

[22:42] And then along with that 278 percent growth in curbside.
In this is a number that tells you a target for a while 80% of all Targets e-commerce gets fulfilled from stores so they’ve really invested in being efficient at picking and shipping or picking and curbside pickup are picking and delivering.
From stores and to me that’s a fundamental difference between a retailer like Target and retailers like Wal-Mart like Walmart trying to sell 40 million items.
They only have a hundred thirty thousand items in the store Target is really trying to sell their in-store assortment online and so it’s you know two different philosophies.
At the moment are both working.

[23:26] Very cool what else is going on in Big Box land.

[23:29] Yeah so then the two home improvement stores of Lowe’s and Home Depot both reported.
Lowe’s had slightly better numbers but probably on a worse base per year,
your comments earlier solos was up 11.2 percent in same store sales that’s globally in the u.s. that are up even a little bit more 12.3% Andy calm was up 80%.
Is westerners might remember the CEO it was is Marvin Ellison who you know left JC Penney last year to join low so,
increasingly seeming like a smart move
and then Home Depot was up 7.1% in Stamps or sales and their e-commerce up 79% so both the home improvement stores also did quite well in
the first month of covid.

[24:23] The did you want to talk about Best Buy.

[24:27] They haven’t reported yet we’re recording this about six or seven hours before they’re going to report so tomorrow morning.

[24:32] Oh okay teaser
the other news that I found really interesting I wanted to kind of pick your brain on was Facebook it continues to get more and more serious about e-commerce so they announced Facebook Shop full disclosure company I’m on the board of and started Channel advisor
is one of the partners in this I have no knowledge about any of the super secret stuff that goes on there that so
this is pretty interesting to Market really love this Facebook hit an all time high today and they’ve been kind of you know.

[25:04] Depressed I think their quarterly report surprised everyone because there’s been all this news that
that kind of display advertising is down Facebook seems have weathered that and then the market really liked their their increased move into the e-commerce kind of
retail side of things so the seems like a consolidate so it’s
they’re making it essentially free quote unquote free to put a shop on your your business page and then to have kind of a single way of advertising on both Facebook your Facebook page your
your Instagram Etc it was a little confusing to me so I would definitely want to pick your brain on some of the stuff so so they had
Mark Zuckerberg and Toby from Shopify had this big Love Fest so there’s a lot of people online that say Shopify is powering this thing and I think,
I’m a little confused where how does all this fit how the payments work give us unpack this for us has the guts work on this thing.

[26:04] Yeah and so I’ll tell you my understanding and I’ll be honest like there is enough ambiguity that I’m not.
Certain that my understanding is correct either so,
you know we’ll continue to watch it and give westerners updates but basically they’ve added the ability to send product feeds,
to Facebook that that at the moment can show up as a shopping experience and Facebook and later are going to be available in some other new ad units across Facebook.

[26:37] Instagram and we’ll talk about this in a minute but also on the chat platforms like Facebook messenger and WhatsApp
so they’re getting feeds
and I think that’s exactly where Channel advisor and Shopify play in they like if you’re a channel advisor customer your syndicating feeds to a bunch of marketplaces you can now send the Kate your feeds to Facebook
if you’re selling on Shopify and you have your product catalog and Shopify you can now check a box and send the Kate your your Shopify catalog
to Facebook the experience,
if you want to buy there’s kind of two paths it can refer you to your site so you can see the product information on Facebook
click through your go to your own site and conduct a transaction on your own site or you can have a native checkout experience on Facebook.

[27:32] But the native checkout experience on Facebook is,
it’s called Facebook check out and it’s basically powered by the technology that they built,
for Instagram shopping last year that was called Instagram check out and so at the moment,
um that’s not ubiquitously available I think they may have opened that up to more more Brands along with this announcement
but so you kind of have the choice you can either do Native check out on Facebook in which case The Shopper never doesn’t have to leave the Facebook platform so it’s lower friction it’s likely going to be higher conversion but there’s a bunch of compromises you give up for that and the
the payment is being passed through Facebook which has all kinds of ramifications or it can be a referral experience and then
it’s higher friction you’re going to lose more traffic but the traffic you get are going to be you know your native customers paying through your payment platform,
on your Ecommerce platform.

[28:33] And it seems like Shopify is really kind of flexing right now to use language the hipsters would use here so they’re they’re also a hitting 52 weeks high that got a huge valuation
someone say that if you invested when they went public you’d have 45 times your money so that’s,
pretty decent so they had their reunite show virtually it canceled the physical event they had it virtually and they rolled out a lot of really interesting things so they rolled out Shopify balance which is they’re effectively becoming a bank so there
the kind of the kings of vertical integration very much like Amazon has done so they’re using some of those playbooks so that’s interesting and they also have an installment payment plan,
as the as the checkout payments guy I wanted to come back to that one second,
they rolled out a fulfillment program and that’s coming out of beta with five fulfillment centers it’s never clear to me if they actually own those are fits on top of the 3pl,
do you know the answer to that.

[29:31] My understanding is they’re partnering with 3pls but I won’t I won’t be shocked if there also is some plans to open some of their own up sees.

[29:39] Yeah and then one that the super nerdy folks that listen will like is they’ve actually announced that they’re working on some robotics I think their first one’s name is Chuck and it looks like a,
cart on wheels kind of a robot and it had some cool image technology so they announce that they’re working on Warehouse automation technology and investing a bunch of R&D into that
and then they’re also rolling out a pilot for local delivery so so you know
have you had a chance to look at this Shopify balance and what do you think about it is it a threat to I don’t know QuickBooks or any of the other payment,
systems out there are is it kind of a replacing a firm on this installment plan what’s going on there.

[30:24] Yeah no I think it mine are saying is it’s much more directly like replacing a firm and these these
alternative credit check out options like affirm our,
hit we’re growing in popularity before covid pretty significantly so they were getting used on more sites they were more significant now like that we’re in the throes of the covid pandemic.
We’re almost certainly going to be in a pretty deep recession there’s going to be a bunch of consumers that you know.
We’re going to have constrain credit or they’re going to default on their credit and not have credit most e-commerce experiences require a credit card so,
almost certainly these kind of alternative credit methods are going to become much more popular over the next year or two and so I think it’s super smart of Shopify to have their own that’s that’s.
Potentially a high margin business so that that’s super interesting more retailers are going to use it like to put things in perspective and this is not economically sound in my mind but like.
Sephora is now offering installment plans for makeup and like in general.
Thinking about paying on an installment basis for a consumable does not seem like a fiscally prudent moved to me.

[31:44] Well they pay these influencers and then I come out with our pallets and they’re expensive I’ve actually taken a look at these things and we I may need some payment plans on the various pallets that are flowing into house of Wingo here.

[31:56] Yeah yeah for sure but so I just I think you know that being in that space makes a lot of sense the whole digital wallet and contactless payment space had been kind of.
Slow to catch on in the US and now because of,
fear of traditional payment means contact us payment as wildly up at every retailer PayPal just launched a QR code payment so you know that’s going to make it,
a lot lower friction for brick-and-mortar retailers to accept Paypal as a contact list,
payment system so I think those are all smart plays on Shopify stand part.
You know as they as they’re getting a lot of traction they’re getting more sellers they’re getting more significant gmv.
Smart smart to be taking a meaningful piece of the of the payment transactions for themselves.

[32:54] Absolutely now watch with entrance interest as Pepsi launched a couple of D to see things I’ve heard a lot of negative feedback about this from the digital era T and you know I
I’d be remiss if I didn’t ask the chief digital retail direct-to-consumer instigator your what he thought about this.

[33:15] Yeah so the in my little corner of the world it’s getting a lot of Buzz Sofrito a which is a Pepsi brand launched or e-commerce site called,
where you can buy Frito-Lay products so you can get your freedos in your Cheetos and all euros,
um by the bag on they also launched a site called Pantry which is kind of bundles of snacks.

[33:43] And the reason this is interesting is because a big controversy is should all these big consumer packaged Goods companies be selling direct to Consumer like should they be competing with the the Challenger brands that sell direct to Consumer and the conventional wisdom was.
No because the unit economics for selling a you know two dollar bag of chips via e-commerce suck and that you know consumers in general don’t want to buy,
just their bag of chips you know disaggregated from all their other groceries and stuff from a different vendor so there you know there was a lot of,
skepticism about whether the traditional cpgs could have a direct-to-consumer play and so seeing.
Pepsi and Frito-Lay kind of jump into this is a super interesting we’re all watching it carefully I actually think there are a lot of good reasons,
for a cpg to do that so I applaud them for doing it it’s not Pepsi’s first direct-to-consumer effort like the a lot of Gatorade products they sell direct to consumer,
um the executions are kind of mediocre too bad.

[34:52] And so I guess I don’t know that this happened but I have a feeling that this might have been a project that was,
in the funnel at
Frito-Lay before covid and then you know the huge shift to digital in the huge spike in sales that’s happening online like prompted them to kind of,
get a minimum viable product out to Market faster and cause them to launch these two so I definitely wouldn’t hold out the show The Shopper experience or the you know kind of e-commerce best practices,
on either of these sites as a as a gold example but it’s just super interesting that that a company the size of free later PepsiCo is.
Is doing this at all.

[35:38] So you don’t think it was some covid thing it was you think it was already in the works.

[35:42] Yeah I’m pretty sure the Pepsi hid used like a.
Their own front end sitting on top of a symphony Commerce which is a.
Microservices headless e-commerce platform for several Brands and I don’t know this to be the case but I suspect that both of these platforms are,
based on that and you know by our standards they’re kind of rudimentary like theirs,
you can’t use Apple pay or PayPal that check out there’s not product recommendations or up sells,
like why do you have one URL for buying bundles of product and another URL for buying individual products.
Make a heck of a lot of sense but one thing that is interesting is the offer the minimum order is $15 and then it’s free shipping.
So that’s you know not a huge order of you think about you know some of the.
The previous efforts in this space of like selling low-cost goods online like a brand less like they actually required a lot more products to in your cart to get free shipping then then free to weigh is expecting.

[36:57] Nursing so you think they’re going to iterate away at it or you think it was just kind of a one-time experiment.

[37:01] I hope they do we’ll see if they don’t iterate like I don’t think it’ll be a huge success because I think there’s,
a lot of friction there right now but you know I’m certainly going to be watching it closely.
And then I know you know your favorite topic is to talk about the retail apocalypse and like we’re you know we’re certainly seeing a new acceleration of that right so we’re starting to see.
Some significant retail bankruptcies and announcement of closures for stores.
There aren’t going bankrupt so pre covid pure one went bankrupt and they you know we’re hoping to enter a plan for restructuring.
And one of the wrinkles of bankruptcy right now is.
That it’s difficult to declare bankruptcy like the lawyers you know offices aren’t always open the courts aren’t always open and you know a lot of the plays that you normally run in a reorganization are things like liquidating all your inventory,
and you know pure one wasn’t able to hold any liquidation sales so,
they declared bankruptcy right before covid now 660 Days Later they’re saying yeah you know we don’t think there’s a path for us to continue operation so we’re probably.
Just going to close down and liquidate all the stores so you know if you if you are a fan of wicker you know your choices are probably significantly diminished.

[38:31] Post covid JC Penney had been rumored to be close to bankruptcy for a long time and so they have now filed,
I think it’s part of that they put out a plan to close like 250 more stores,
you know they’re going to try to reorganize and there’s a bunch of value there they had a bunch of debt so reorganizing without some of that debt will probably put them in a.
A better position but you really got to think about the Ripple.

[38:59] Closing those 200 stores is going to have on a bunch of malls like they were the anchor tenant in a bunch of malls they close that triggers a lot of co-tenant Clauses and other tenants in the mall that like,
they now you know will pay reduced rent or not pay their rent for a certain period of time or all these things are going to happen that’s going to put a ton of stress on a ton of retailers.

[39:21] Neiman Marcus had been you know obviously has huge debt from a previous leveraged buyout they had been rumored to go.
Bankruptcy bankrupt and they filed chapter 11 in the last couple weeks so so we’re starting to see,
the the real bankruptcies reminder sometimes that means the restructuring re-emerge sometimes it means they won’t they won’t and all the stores will close but in any case there for sure going to close a bunch of stores as part of the process,
and then we’re also hearing,
retailers that have more healthy balance sheets like a Macy’s or for sure a Nordstrom are also announcing store closure so Macy’s announced like a hundred and twenty five stores would close,
Nordstrom which is kind of the maybe we’ll call him the tallest dwarf like they’re the best performing of the distress department stores,
they’re closing 16 Mainline Nordstrom store Flagship Nordstrom stores so that’s about 20 20 percent of their Fleet,
and I think that’s just going to be a normal thing I think a bunch of these retailers that have you know are going to take a financial hit from covid are going to use this opportunity to right-size their store inventory and close a bunch of stores,
I’m predicting that like literally 25% of all the retail stores in the US might never open again because of covid.

[40:43] The 16 Nordstrom’s that’s that’s actually pretty material percentage right.

[40:48] It’s about 20% of the mainline stores so that skews them more towards their off-price stores.

[40:55] Yet so so help me understand what these stores were not profitable like why I saw some of the places they were and it seemed like they were in like you know.
California and Sacramento and areas where you think would be highly profitable do you how do you end up with 20% of your stores needing to be closed.

[41:14] Yeah well controversial so the first thing is there’s this this concept that I don’t super believe in called for wall profitability right and a lot of retailers will say
when they’re justifying not closing the stores they’ll say these doors are all four while profitable meaning like that this store by itself is a profitable store.
Um and so why would we close it why would Macy’s close these hundred twenty five stores that are all four while profitable why would Nordstrom’s close these 16 stores therefore while profitable well.
It’s because it totally depends on how you do your math about profitable and how you amortize all these fixed costs against these stores but for sure it’s the case that if you have a hundred stores
there are 10 that are doing.

[42:00] Exceeding your average you’ve got 80 in the middle that are doing about average and you’ve got 10 that are really poorly performing at the back end and
depending on how you do your math those there’s 10 poor performers make quote-unquote still be profitable,
but they’re there them the money tied into those stories is not working near as hard as the money tied up in the other stores is working,
the inventory in those stores isn’t working as hard,
and so closing those stores creates liquidity it creates Financial opportunity to invest in all of these better investment,
and the problem is particularly in public companies there’s a disincentive for retailers to close those.

[42:47] Poor performing stores right because,
they’re having a report comps every year they opened a bunch of stores last year so they don’t open a bunch of stores this year then then the cops don’t look as good,
and at some point in that rat race you start opening stores in less optimal real estate and then the other thing that happens is.
Ten years ago you opened a store in a great market and then a bunch of the consumers moved away from that market or migrated back to a city center and that suburb died and you still have that store open there,
um and so like there’s a lot of the guarantees of being a public company that caused.
These retailers to sometime open stores and not perfect locations and sometimes keep stores open longer than make sense,
and now frankly every retailer in America has this financial Nest incentive and a get-out-of-jail-free card too.
Fix this one-time opportunity and so that’s why I think we’re going to see a ton of retailers.
Clothes stores even you know relatively healthy retailers do you buy that.

[43:59] For wall thing I don’t buy people moving away like people aren’t moving away from the cities they.

[44:09] Well no but they are like so affluent people are migrating or pre covid,
we’re migrating from suburbs back to City centers it was more popular to live in downtown Manhattan than it used to be it’s more popular to live in downtown Chicago than it used to be and so wealth in those City Centre you know originally,
all the retailers in the city centres and then all the rich people move to the suburbs and the retailer has chased him there and opened up stores in all these Regional malls,
now the rich people are moving back to the city centers and so the affluence in the suburbs was declining.
We may see another Trend covid may be pushing people back out to the suburbs by the way.

[44:52] Yeah I think we Nordstrom I think the real reason is they got to look at them all right so you know they probably have really good data on the mall traffic as well as the profitability in the trends and I think the mall probably.
The mall they’re kind of like attached to probably is a bigger Factor than they would say.

[45:10] But I mean you do like so I QBs did a report last year there like there’s 1,200 Regional malls in the US and the market can probably justify about 300 of them.

[45:20] Yeah yeah if you know some of these malls Maybe.

[45:21] Ride so so again if you were Nordstrom’s and you wanted to keep growing at some point you had to open a store in a mall that wasn’t one of those.

[45:30] Yeah yeah and maybe now you look and it’s got a anchor of a JC Penney and Macy’s that’s closing and you’re like well there goes that mall there’s you know might as well cut our losses in this.

[45:42] Yeah and so again traffic was down anyway and then when you lose them all you know there’s a bunch of L Brands Victoria Secret is you know closing hundreds of stores.
You know that the malls are increasingly just have less less draw so.
It’s a big fundamental challenge now here’s the thing I always like to remind people we’re so over stored in the u.s. right like your remember my old story.
24 square feet of Mall retail space in the US for every person versus.
12 in Canada or four in Europe so we could close 25% of our square footage and we still have more retail space per person than anywhere else in the world.

[46:26] Yeah yep so so 16 is good start so you’re predicting all the Nordstrom’s are not closed.

[46:32] Not not exactly one wrinkle I will say that could make me wildly wrong at least in the short-term on some of these store closures,
um so hey I’m not alone in predicting this right like or sides predicting 25,000 stores are closed this year UBS is predicting a hundred thousand stores closed over the next four years,
one reason that might slow down store closures is the fact that due to health concerns.
We may not be allowed to have as many customers in any given store as we’re used to write so every store maybe just less profitable for the next 18 months to two years,
as we’re artificially constraining how many people are allowed in the store at any given time,
and so in that climate one of the things you would do to have more revenue is you’d have more stores,
and so you know one one fear of closing stores right now is if that if you want to close the 20% of your bed stores and keep the 80% you’re good stores.
The traffic is likely to be way down in the good stores for the next one to two years as a result of.
Regulations keeping people out of stores and fear keeping people at the store.

[47:45] Yeah or maybe what you do is you say to people hey because we can only let so many folks in here we really only want to let people in they’re going to really buy stuff so so.

[47:57] But that’s exactly what’s happening right in the old world,
the way retail stores worked as you try to get as many people in there as you could and you tried to keep them in there as long as you could write because the longer they were in there the more likely they would be to discover something that they wanted to buy,
um so now,
I don’t want people in my stores the way to maximize profit is get as many people as possible to buy stuff from me online and do curbside pickup and not tie up one of those valuable slots in my store,
and if I get you in my store I want to get you out as quickly as possible so the next customer can come in right and so.
This whole thing like instead of,
like traffic you now want better conversion you only want to let people in that are going to buy and so you know frankly a bunch of retailers are opening on appointment only basis right now like you you’re only going in the,
the Best Buy store if you have an appointment in advance and and it’s going to be a lot more see assisted selling in that store and you know they’re going to try to maximize conversion and cart size for each customer because.
You know it just it’s less profitable though the riffraff like just roam in your store when when those slots are constrained.

[49:11] Yeah you could say you know if you’re a forget the Nordstrom loyalty program but if you’re a Nordstrom card holder whatever maybe you get special shopping hours or if you plan to pay with your Macy’s card maybe we’ll let you.

[49:22] And yeah and so think of it as Disney fast pass right like you can go to a store and you can stand in line and wait your turn to go in the store or you can be an affinity member and get in the express line and get in sooner.

[49:34] Yeah very cool it’ll be interesting to watch this develop.

[49:38] Yeah it’s a bunch of Novel new Concepts that retailers are having to figure out and so if it wasn’t for the tragic impact it’s having on the people that you know we’re working in these stores it’s it’s intellectually really fascinating and it’s you know,
we’re going to be running a lot of experiments over the next six months to see what works and what doesn’t.
All right well then that is going to do it we have used up the time that we allocated for today as always if we got something wrong or we prompted a conversation feel free to hit us up on Twitter or Facebook.
And please please please jump on iTunes and give us that five star review we’ve been begging for.

[50:17] Thanks for joining us everyone.

[50:18] And until next time happy commercing

May 7, 2020

EP219- Live Listener Questions

Episode 219 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube. 

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 219 of the Jason & Scot show was recorded live on Wednesday, May 7th, 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 219 being recorded live on Wednesday May 6 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-hosts God Wingo.

Scot And Guests:
[0:40] Hello cats and kittens.
Oh sorry wrong shh hey Jason and welcome back Jason Scott show us nurse about two months ago we had our first live live live listener event and it was so popular.
That we had a lot of requests to do again we had we couldn’t get to all the questions so we have a backlog of questions from that Jason before we jump in I see we’ve got some QA going on here.
One housekeeping thing is if you do want to ask a question we would love to do it live where we’ll have you your audio come in and you can ask it.
Using the audio so that when people listen to the podcast they have a little Variety in what they hear but before we do that Jason any road trips Irani report on or any news you want to go through.

[1:24] I have done amazing road trips in the last two months I’ve been to Russia I’ve been to Europe
you know ordinarily like I booked all these gigs and I have to reserve like three or four days travel time to get to them and now I can do like three gigs in different continents in the same day so it’s a
embarrassingly more efficient and I feel like I see more credible when I’m further away on a screen than I do when people get me in person so so yeah.

Scot And Guests:
[1:57] You got in your joke timing down I found on the zoom it’s little bit harder to kind of like judge the audience with your tongue.

[2:03] Yeah I just assume I have my own laugh track I play for my own benefit and so I just I’m just assuming that that works.

Scot And Guests:
[2:12] You had time to do a laugh track but not our theme song I’m hurt.

[2:15] I’m prioritizing yeah I apologize to all the live listeners you didn’t get to hear the show music that ordinarily gets added in post but if I were a more diligent audio engineer I would have arranged a way to play it for all of you to get in the mood for tonight.
My bad Scott Moore.

Scot And Guests:
[2:33] One thing I want good.

[2:34] I was just going to say like this is a three-day Streak For Me of goodness like May the force be with you Day always a super important holiday is you know I have a young son that’s.
Like completely fixated on Star Wars so he’s decided that that’s the greatest holiday ever.
And with utter fear on his face he asked me first thing in the morning on May 4th dad do Jewish people celebrate May fourth day.
And he was thrilled.
Yeah he was thrilled to find out that it’s a non-denominational holiday and then we transition seamlessly into Cinco de Mayo and I did a lot of customer gigs with margaritas.

Scot And Guests:
[3:18] The correct Star Wars holiday there is a competition is returned to the fifth.

[3:24] Yeah I got you I did.

Scot And Guests:
[3:26] Revenge of the fifth yeah sorry.

[3:28] I could have could have stretched it out to two days I had no no idea.

Scot And Guests:
[3:34] And then today was you get to podcast So Good Times.

[3:39] Exactly I feel like and special honor we’re already being Zoom bombed in in the chat.

Scot And Guests:
[3:47] Yeah Olivia we got to bring Olivia into the live discussion.

[3:53] Yeah yeah are you oh Egypt person that’s having fun with us or are you a troublemaker that I have to boot.

Scot And Guests:
[3:59] A troublemaker.

[4:00] Seems like Olivia should get booted.

Scot And Guests:
[4:03] Yeah I vote the boot.

[4:05] Yeah alright bye Olivia it was good knowing you.

Scot And Guests:
[4:09] Well you’re booting alyvia one of the things I want to talk about is there’s been some more earnings since our last podcast last week last week we really focused on the Amazon q1 results which were
pretty stellar and then since then we’ve had
Etsy this afternoon this morning was Shopify it was yesterday was Wayfarer and then this afternoon square and PayPal
and I would say the the overwhelming theme has been you know everyone has seen this surge of activity due to the pandemic.
The PayPal CEO said he feels like digital payments have moved three years ahead into the future square as well.
One thing I didn’t understand about square is they blew away the top line but the bottom line had a huge impact I don’t know if that’s because when they sign up new customers to get some really good rate or something
and then Etsy was interesting they they have become the go-to place for handmade masks which is there have been quite a moment so they’ve sold something like I think.

[5:08] Three to eight million mask on their platform which was an amazing you know handmade face mask and then Shopify
just kind of crushed expectations and the one analyst I follow their Collins Bastion he may be on he raised their price Target from 475 to 820 and it’s currently at 7:30
so whoever asked for stock recommendations that may be an interesting one to look at because
it’s kind of one of those you know playing the the guys selling the pickaxes and shovels versus the actual folks doing the mining so Shopify stock I think it’s going to rip pretty good.
And then you have tried it about Peloton they crushed estimates as well and after hours I saw they were trading up pretty substantially
and they haven’t even been able to launch their new treadmill because it has this white glove in-house delivery that is not social distance friendly so
those are some interesting things going on in the stock side that have an e-commerce digital time.

[6:09] Yeah are we jumping into the stock question or were you just you were that was just kind of a pre-analysis.
Um yeah so a like I’m the world’s worst at stock advice and and what what I have learned is.
It turns out it’s not all that helpful to predict what companies are going to do well and not do well like what’s more important and is to understand.

[6:32] What sin or not in the existing price if you want to make money.

[6:37] So so with that huge caveat that I’m usually wrong I’m going all in on the pics at pickaxe and shovels and I’m going to suggest some stocks like.
some of the micro fulfillment centers that that grocery stores are now buying right like so my premise is digital grocery before covid-19 was 3% of
grocery sales and there was a prediction that they might get to five percent by 2022 digital groceries at 10% right now.
So basically we’ve jumped forward at least five years in the future of digital Grocery and huge caveat and digital grocery it’s wildly unprofitable so when the retailer has to pay
for all the grocery picking and the grocery delivery grocery delivery doesn’t make any money so the way retailers are going to ultimately make money on this digital grocery is.
Get you to pick up your own groceries via curbside pickup and use a robot to pick the order instead of paying a
human being to pick the order in the store and so these
these robots for grocery stores are called micro fulfillment centers and there’s at least three of them out there that have big Pilots with Grocers right now and they all have reported more than double digit.

[7:57] Um sales growth since the beginning of the pandemic and so it was super early in their evolution and so the the fact that there.

[8:08] Already seeing this this spike in demand like bodes probably really well for them so that’s companies like alphabat and take away and I’ll think of a couple others I’ll put in the show notes tonight.

Scot And Guests:
[8:23] Should we hit the audience up for some questions.

[8:36] If anyone wants a child but I think at the little hand raised there.

[8:40] Yeah should we start with a while we wait for some reason our hand should we start with.

Scot And Guests:
[8:48] Here’s Michelle let’s hope this isn’t a crazy Zoom bomber let’s see what we got.

[8:52] Oh I see it hang on Michelle we’re turning you on.

[9:09] We’re we’re excited for you to be here for the rest of the listeners you are a past guest on the show when you were with your monitor and you’ve actually started a new gig recently with Salesforce.

Scot And Guests:
[9:22] Yes I am I now work at Salesforce I started in early March there’s one place to start working at during a pandemic Salesforce is definitely it’s a great company and I’m really enjoying my time here.

[9:37] Yeah and it seems like there so go ahead Scott.

Scot And Guests:
[9:40] Have you met Marc benioff not yeah but it’s definitely on my to do list how about the top of the Salesforce Tower.
Also on top of my to-do list once it’s reopened I’m also excited about our new tower that’s coming in Chicago the top floor will be open service I hope.
Host quite a few events once it’s built in three years nice.
Yeah my question is are there any topics or themes or issues in the retail that aren’t getting enough attention.
That you think that we should be aware of.

[10:25] Good one I have a few opinions but Scott did you have something you wanted to say.

Scot And Guests:
[10:31] I would say one of the so you go to these conferences right and there’s all the talk in the front of the house and then there’s this,
back of the house talk I would say the back of the house talk I hear the most in e-commerce it’s kind of bubbling out now
is the sustainability sustainability and scalability of this kind of direct to digital brands so does DMV be have legs can you build something over a hundred million or some of these things anomalies like Dollar Shave Club and some of those or,
you earned is this kind of giant Gold Rush of these digitally native for cool Brands going to will sustain or will it die in a big fire pit of people that don’t make it through
so so I think that’s really interesting to Think Through.
The same time whenever I’m watching TV I’m seeing a lot of ads for these things now added ad rates have come down because traditional
advertisers are kind of on pause so you’re seeing a lot of these kind of calm or direct response kind of ads on TV so it’s an interesting topic that I don’t think is getting enough probably coverage out there.

[11:35] Yeah and again it depends on what echo-chamber you’re in and what you hear in terms of what you think might be covered or not covered but I’ll tell you in.

[11:45] In conversations with retailers I’m still somewhat shocked how unrealistic a lot of retailers seem to be about.
The likely duration of the impact of all of this so you know we like we talked to lots of retailers that have like this three stage plan or this four stage plan
but the the final stage of their plan is almost always back to normal and binormal they mean,
pre covid-19 and back to normal is almost always the end of 2020 or maybe.
The middle of 2021 and I’ll be honest both of those things somewhat surprised me like I don’t think we ever go back to,
pre covid-19 I think there’s enough things that are permanently going to change the retail and Commerce in the US are going to be wildly different.
In the future and so I think just the notion of going back is is.
Sort of quaint and you know frankly like we you know we’ve actually brought in some epidemiologists and some immunologist to sort of help us scenario plan and
it just doesn’t seem like you talk to any credible expert that really sees this ending.

[13:06] Or you know going back to the kind of things where we all get to go in person to a trade show or or you know go to these big mass group things or frankly have unlimited traffic in a retail store.

[13:21] Until we have a full-blown and widely distributed cure.
Um for the virus and realistically the fastest
of a vaccines ever been produced in the history of the world is five years so let’s imagine that with the crazy resources marshaled we do it way faster than that and we do it in 18 months
you still got to find a way to get 7 billion doses.
Out into the world and get everyone to take it and oh by the way a lot of vaccines require more than one dose like there’s all this negative news.
That makes me think that we’re going to return to a lot of our old activities but in a significantly modified way.
For probably two years and I like
don’t hear that a lot when I talk to people thinking about their plans when I talked to retailers that are forecasting their sales
like none of them are thinking that like for the foreseeable future they’re not going to be allowed to let an unlimited number of customers in their storm like that’s that you know they think of that as a very short term.
Thing and I you know I hope to be wrong but I think they’re missing it what about you Michelle his there anything that that’s that you feel like people aren’t talking about enough.

Scot And Guests:
[14:36] Well I am particularly curious about returns because we see all of these you know we see all the metrics to digital Commerce Commerce Rising
but you know obviously there’s a high return rate associated with.
It was e-commerce particularly in clothing and Footwear so I’m I haven’t seen too much around the returns issue and has return rates you know have that have they drop down because people you know are.
I’m buying what they don’t need they’re not necessarily buying three items only keep one or.
Our return retooling steady sort of a the shift in consumer behavior and then be we are seeing a little bit more around the actual Logistics.
Doing the returns how do you keep the merchandise clean and safe and audio process it but yeah I’m really curious about the return issue and.
How that’s factoring in into the situation.

[15:37] Yeah yeah it’s a great topic and in my observation at the moment has been like the categories that are most up in e-commerce are
not the categories that traditionally had super high return rates right so all,
digital generally always has a higher return rate than in store but in a parallel for example it’s
much more acute and
you know apparel Sales Online have been pretty soft right now and so then you know then the retailers that are really booming have temporarily
sort of.
Cancel their their return policies and so so like if anything there’s a slight extra kiss right now in profitability that that a lot of these retailers are seeing lower returns because either they’re not accepting returns or
there’s extra friction on the part of the customer to do returns and so they’re just not doing it so.
Sales of the high return items seem way down but return seem way down.

[16:39] Honestly though in my mind that’s getting overwhelmed there are all these other costs of e-commerce sales that are artificially high right now that you know are more than eating up the margin
the that retailers are gaining by by this you know what I presume is a temporary
abatement of returns and so to me like the top-line story that we’ve heard in a ton of their earnings is hey good news e-commerce is up it’s not up enough to make up for all those sales we lost in the store and those sales are way less profitable than they would have been if they were in the store and so margins are super
super challenged so.

Scot And Guests:
[17:24] When I follow the startups in the return space and it’s interesting that I’ve been at this like 20 or 30 years and
you know they always fall into two categories there’s ones that have like some digital solution where they don’t touch anything at the end of the day they’re kind of like issuing an RMA and doing some tracking
look every retailer already has that so I don’t understand understand how that
it solves anything or they go super heavy and they’re like going to build a whole infrastructure and touch every product and graded and resell it in some way and I’ve never found a company that has some kind of like solution in the middle that helps
companies handle the logistics I remember in the late 90s like this kind of.
Two to four time frame there’s a company called return by
and they raised like 30 million dollars and they went and built this big returns facility and I did a tour of it was amazing and I had all these conveyor belts and things would go upstairs and go through the sorting system and I was there in the hole I was like on the 30-minute tour and I was there for.

[18:24] You know I saw five packages go by and some of them were
the little ovens like the Barbie ovens but they couldn’t resell those because the food inside had gone bad and then there was one Barbie with without a head and that I was kind of like all right I’ve been here 30 minutes I’ve seen five products that probably can’t be sold online
what how is this business sustainable at all so returns are really hard because there’s no you know there’s probably some benefit of scale
and if there is Amazon’s going to win because they’re going to have the internal in-house scale that no one else is going to be able to get to.

[19:01] Yeah in the the related question like so like we have these kind of problems with like how do we make
stuff that gets returned safe to resell or to get some some monetization from
for the apparel guys if win at the store is ever reopen and customers are allowed back in the stores a big question is how you make dressing room safe like both
of you know how do you keep the room itself safe but what do you do with the clothes that a customer tried on and didn’t buy and so their interesting questions there
do you have to disinfect that stuff and you do it in a way that doesn’t harm or damage the products you know one one idea we’ve seen a lot in China so far is the close that customers Tryon get quarantined.
And so literally you know customer tries on a dress doesn’t buy it and they have to put that dress in a quarantined area for two days before they bring it back out.
So I think there’s going to be a lot of interesting new things that you wouldn’t necessarily think about it first blush.

Scot And Guests:
[20:06] Thanks for the question oh you’re welcome thanks for taking it good luck in your new role and Sinister softly with Marc benioff yes I will I’m gonna garfi first with Rob.

[20:18] That I feel like the garfi is easier but I do think it’s a funny time to start a new job because like you probably haven’t seen the lower half of any of your co-workers yet.

Scot And Guests:
[20:28] I haven’t I haven’t met any of them in person since I started so.

[20:32] Yeah that’s odd.
Awesome well thank you much Michelle I will safely remove you from participating so you don’t have to worry about making noise.

Scot And Guests:
[20:48] Anyone else have a question raise your hand don’t take Olivia or penny.

[20:53] Yep they’re both God.

Scot And Guests:
[20:53] The Bad actors okay we do have a right one right in when here let’s tackle that Christopher ask what brick-and-mortar retailers are going to come out of this stronger and why.
Jason took a four shot at it.

[21:08] Yeah well your friend Jim Cramer on Mad Money had a rant a couple weeks ago where he said like
we’re trending towards the world when there’s only three retailers left in the United States and in his mind they were Amazon Walmart and Costco.
I do think all of those retailers are super well situated.

[21:31] You know obviously selling Essentials is a very helpful right now having already leaned into digital and particularly omni-channel retail is super helpful right now so so those read in those particular three retailers.
Probably had the best balance sheets in retail going into.
The pandemic so so those are the kind of retailers that are going to do super well I didn’t say this to Michelle but another one of the things I don’t think is talked about enough is.
How many retailers are likely to go out of business because of this and so these healthy retailers are going to grab up that share.
The in get even bigger so we’re going to see some huge consolidation at the top but even the retailers that don’t go out of business.
Are likely going to right-size The brick-and-mortar Fleets and so I we saw the first announcement it was either today or yesterday but Nordstrom is closing 16 Mainline stores which is about 14% of its
Mainline stores and people were talking about being surprised by that I actually think that’s a light I think
a significant number of relatively healthy retailers are going to close something like 25% of their stores.

Scot And Guests:
[22:47] I didn’t see at Nordstrom’s news.

[22:49] Yeah I’m here for you.

Scot And Guests:
[22:49] So do you think so so no one’s about apparel during this time and you know one Theory would be people you know they have all this you know
if they’ve survived this and have the means there’s going to be a big kind of bump in buying apparel items you don’t think Nordstrom benefits for that or you’re just not sure they make it through to that point.

[23:09] No well so I can but I think there’s a bunch of headwinds against a pair of so there is this premise
there’s all this delayed gratification and and you know in China they talked about when they reopen stores they were really hoping for Revenge shopping is what they called it which I thought was pretty funny and this this notion that there was all this pent-up demand for consumerism and they hope can customers would go out and help Goose the economy by by aggressive spending
in general like whether there are some occasions of that particular in luxury like there’s some luxury retailers that set records the first day they opened up
in general we haven’t seen that kind of Revenge shopping and part of the reason is is because
there’s huge economic uncertainty almost every Market is exiting from this quarantine period of the pandemic in a.

[23:57] A super deep and sudden recession and so consumer confidence is super low.
And so in the apparel space you just have all of these problems you had a perishable inventory that’s sitting in all those Nordstrom stores that they couldn’t sell
even though Nordstrom is pretty better than most it online the majority of their inventory was locked in stores that were locked in mall so they couldn’t sell that inventory.
It was perishable so it’s not
it’s not fashionable or desirable when they can reopen those stores most of their stores are at malls and there’s a lot of evidence that customers are more afraid of going back to the mall than they are to freestanding stores.
Nordstrom didn’t know what to do and I don’t mean Nordstrom particularly apparel retailers haven’t known what to do when they could reopen when they’re beat a man for their goods again so they’ve.
Their supply chains are all screwed up and they haven’t ordered the next season stuff.
And you know a lot of occasions that people buy apparel for.

[24:58] Are now gone like you didn’t need to buy a prom dress this year you didn’t need to buy an Easter dress this year you didn’t you’re not going back to school shopping at the moment and so.
Like even if there’s a little pent-up demand and they get a little bump when they reopen stores there’s enough long-term negativity in that apparel category that I think in any apparel every retailer is really smart
maximize their liquidity right now and get their balance sheet in the best shape they can but but particularly in a parallel you.
You really need to buckle up for a pretty rough ride because it’s not going to be pleasant.

Scot And Guests:
[25:34] When the I think it’s going to do well is Apple so I’ve had like
ten instances where I wish I could go just run to the Apple store and grab a widget or something and then you had to either wait or
I know several people at work have gotten broken computers they want to take in to have fixed and and you know if the Geek Squad or whatever that is called is broken no Geniuses to be had.
How about you didn’t say grocery.
Obviously those are going to do really well and then we have I think the drug stores have done pretty well I’ve kind of wandered into a couple of drugstores and they’ve been pretty busy and one here in town got some hand sanitizer it was like.

[26:14] No exciting.

Scot And Guests:
[26:15] Very very exciting so caused a pretty big set of demand from them.

[26:20] That in your in Raleigh that could be a huge event even before the pandemic but yeah.

Scot And Guests:
[26:26] We get excited about little stuff.

[26:27] Yeah yeah grocery is like obviously the shift to digital groceries really exciting so if you’re someone that’s in the digital grocery space in particular like there’s a huge Boom for you for traditional grocer it’s a mixed bag because
um the the shift to the digital channel
is hugely problematic from a profit standpoint and there’s other bad stuff that’s happening simultaneously consumers are buying bigger packs of stuff which are less profitable the the Grocer’s cost right now or
skyrocketing they’re paying employees more they have all these extra cleaning processes companies like get spiffy charge them a fortune to come in and and
Queen their facilities in the morning before they open they have restricted hours they can’t let as many people in so they’re like.
It is good there is higher demand for grocery there’s a lot of operational
challenges with profitability I think in the long term those gets solved but it’s not going to be an overnight thing and and then like really for grocery for it truly to be a win
there’s a behavior that’s happening right now that has to stick and and this is the most interesting thing to me about the pandemic as I talk about these kind of six different categories of consumer behaviors and which ones might be permanent versus which ones will regress after the
the quarantine at the moment.

[27:53] There’s an enormous shift from consuming meals in restaurants to consuming meals at home and if that if a version of that behavior sticks like it’s clearly not going to stick to the level we’re at now
but but if the new normal is more skewed towards consuming at home that that obviously is a
increases the Tam for grocery but if the consumption goes back to the exact same levels and it’s just a shift from in-store sales to digital sales that’s probably not an economic windfall for the
traditional Grocers it might be an economic windfall for the instacart sand fresh directs of the world and a big Debbie Downer for the pea pods of the world that turned off their e-commerce right before the pandemic.

Scot And Guests:
[28:38] Oops looks like a Christopher has question let’s see what he has to say.

[28:42] Christopher let me find you here and you are on hi Christopher.

Scot And Guests:
[28:48] Hey guys you guys actually just answer my question.

[28:51] Tell us what it was so we again take credit.

Scot And Guests:
[28:54] So it was the I was asking the question that you just answered about what brick-and-mortar retailers are going to earn a come out of this stronger I’ve got I’ve got a backup.
Yeah it’s a backup question you know are there how are retailers handling training their Frontline staff.
Specifically kind of best practices with covid and and I ask the questions obviously right like the two stores that I’ve been in.
In the last month CVS has one way aisles that their employees seem to disregard.
And and Target you know kind of has this as this buy online pick up in store option but the they haven’t made the pivot of moving their their pickup area.
From away from the cash wrap and so what it does is it sort of creates this bottleneck of people.
So I don’t know if there’s sort of any examples of companies that you guys have found that you know are really kind of thinking about sort of how to address kind of a post covid or in covid kind of environment in a better better way.
Do I take it first Jason or.

[30:02] Sure
so both hey I was sort of quoted in the Wall Street Journal article this week with the exact same observation that like Milo’s local grocer has one way Isles and all the employees and professional Pickers in the store totally ignore it right so it and you know
training customers for new behavior in the store
requires like a significant effort and a significant amount of messaging and reinforcement none of which is happening right now so that that particular example totally agree with you inside note.
Totally controversial and not good evidence that one way aisles are safer
right like so that the notion behind One Way Isles is you don’t have to walk.
Cross someone in these narrow aisles where their droplet spray is almost certainly going to hit you if they’re not wearing a mask a the science on the on the droplet spread like
your droplets are staying in the air long enough that that you’re walking through the droplets of the person in front of you even though you’re both walking in the same direction so
that’s kind of a bummer but the bigger problem is if one way Isles make you spend thirty percent more time in the store to complete your shopping list.
You’re actually walking by more people and getting exposed to more risk and exposing more people to risk.
Because of the one-way Isles then you’re actually reducing risk because the one way also that particular ones controversial.

[31:29] Direct answer to your question to me the best retail operators in the world there are killing it right now or some of the regional grocery stores
so to me an absolute hero of this is a chibi which is a regional grocery store in Texas.
Drake backstory these guys identified the potential impact of the pandemic in January sent their whole executive team to China
to talk to the the grocers in China that were being impacted by this they came back they put a plan in place in February they totally revamped their supply chain.

[32:02] They instituted all these touchless processes in the store
and they have a great engaged employee base that they really made him bass Udders for all these changes so I going to a regional like a chibi or hi v– and Iowa
those guys are executing really well if you step up to a big National grocer
um like to me Kroger has taken an interesting leadership position because not only if they rolled out a lot of best practices
they actually published all their best practices launched a website and are giving away all of their employee training materials and assets to any other retailer that wants them.
So if you’re a smaller grocer that like need signs explaining to customers what new policies are or you need audio messages to play over the PA system or you need a new addendum near employee handbook and training for employees
Kroger is giving all that away and so like it you know there was an extra level of diligence and creating that that created the materials good enough not only for their own use but to share with the rest of the world so so prop
props to them.

Scot And Guests:
[33:14] Yeah I would say you know the 30,000 foot level there’s.
You know every consumer has fear uncertainty and doubt so it’s your job to try to give them peace of mind and everyone has different response to this there’s some people that are pretty Cavalier.
And then there’s other people that are like super freaked out right so the more options you can give people then they can kind of use the risk-taking kind of.

[33:38] Choose their own risk path if you will one of my best experiences during the pandemic was Best Buy they have curbside delivery so I did a normal boat this so I did a buy online pick up in store I needed to get some batteries for
for a nest camera kind of thing and.
Then you know in the app it kind of geo-fenced and it said hey looks like you’re near the store are you ready for your curbside delivery I said yes so it did some smart things using the app and then
I’ve done a lot of curbside delivery with some of the food and stuff this one is like almost instantaneous you know the runner came out then the runner like stayed pretty far from the car
and they went to the passenger side and they actually asked and they were wearing PPE and they asked you know can I set you know can I want me to hand this to you or just set it in the seat next to you so there was like a lot of awareness on the on their side about kind of seeing where my risk level is.
I’m pretty high risk I just kind of smile
normal mode of operation but it’s really interesting that they were really sensitive to that so that was one experience I think I think table Stakes is you got to have PPE for all your staff you can’t
that has to be.
Definitely gloves and a mask you know the the more medical the mask looks I feel better as a consumer so some of these like cloth ones just kind of like you know they have like a brand on them I appreciate the brand,
you know as an entrepreneur but like the fabric Thing is a little dodgy touchless payments you know I’ve been in a lot of these I’ve tried using a lot of them and it really.
Jason you’re like this one went to a grocery store it’s called Fresh Market.

[35:06] And I used my Apple I did touchless with Apple pay and then she said I want to see the credit card why do you have a physical Apple card but she’s looking for the digits right.

[35:16] Plus the thing generates random digits is my understanding right it generates a one use credit card I tried to explain that to her and not so then so then I had to switch to ATM and then I was like well while I’m here I’ll get some cash back.
And then you know I put in like $50 cash back she’s like well the maximums 40 but then the terminal had a fifty dollar.
Cash back button and then and then I was like you know the third time I was like well maybe this one you know maybe third time’s a charm and she was like.
She’s really even Flinch because I guess it happens all the time that have these things so so do the touchless stuff but make sure you know I would have a some of the managers go through the experience to make sure it’s really working flawlessly.
That was one other thing I have found grocery shopping is I’m like the only non instacart person in there by instacart I mean
Postmates and all the other shift and whatnot so I feel like those people need some other workflow or something like their own registers or something like that because they are you know they take a lot of time to shop because they’re kind of like looking at the app and they’re kind of like you know and then they’re scanning something.
I feel like it’d be interesting to have some other alternative way maybe there’s like one store that is designated just for them or something I don’t know the answer to that but it’s kind of weird because I’m kind of like
I’m very transactional and are clogging up the aisles there’s literally like eight of them on an aisle and I’m trying to like juggle through them to get through the store.

[36:40] Yeah and there is the that’s that was a problem when only 3% of grocery was online and so now that we’re a 10 like there’s a lot more of those professional Shoppers in the aisle and and there are a lot more of those conflicts
like there are you know efforts around dark stores and those Choppers
shopping from the dart stores that some retailers are doing interesting things like they’re having professional hours and Shopper hours so both Costco and Whole Foods are for the most part not letting professional shoppers
shop the store at the same time as customers they’ve they’ve narrowed the hours that throw up in a customers and they have dedicated hours early in the morning and late at night for the professional Shoppers so
all of this has allocation problems like you know you can just sell less.

[37:31] Curbside orders if you’re limiting the hours that the pickers can pick but but since they all have artificial caps on their density in the store at the moment
it makes more sense to have the Shoppers in some hours in the customers in other hours so you’re seeing a lot of that
definitely touched your lips payment is way up in the thing that’s going to be interesting there is
you know there’s a lot of self-service POS in retail particular and grocery that I’ll have touch screens which are now
super icky right and so you can imagine
there’s a rush to retrofit all of those and the non-touchscreen solution for all those is going to be that your mobile phone interfaces with the terminal and use the
the interface on your own mobile phone and so that’s going to be a new Behavior we’re going to see rolled out and have to educate customers about but I think you know
going to those touch POS systems scanning go with some retailers it experimented with.
Is is definitely going to be bigger so so I guess some of those things are interesting.

Scot And Guests:
[38:36] What they wanted and they had put a thick mylar bag over the terminal and it was so thick I could hardly press the buttons I guess they must met you know they must take that off and clean it or something or it may may be just as.

[38:46] Yeah we just want you to believe that exactly great questions thanks very much Christopher.

Scot And Guests:
[38:52] Thanks Christopher yeah thanks guys all right we got Ricardo and Scott Waiting by Let’s see we got here.

[38:59] Okay Ricardo we are you are live hey.

Scot And Guests:
[39:05] Hey hi guys we are done here reporting to you from San Francisco they kind of a show.
Thanks for calling in what’s what’s what’s on your mind I’m curious if you can talk a little bit about like the p&l office seller obviously differentiate in the u.s. versus in China you know like a referral fees the same I was just because the same.
I think I’m really curious you know I know China is as a percentage of retail e-commerce a lot more and I think it’s maybe because they don’t have a lot of the physical stores that,
we got in the west but still when you compare with other developing nations still so much more ahead so I’m just creating your thoughts on that thanks.

[39:44] Yeah well good question Ricardo a couple of things so the dominant
marketplaces in the u.s. tend to be different than in China so obviously Amazon’s the
the dominant Market Place in the US and Amazon has a singer Lehigh take rate so they charge like a.

[40:02] Like compared to most other marketplaces a very high commission for each transaction Ali Baba’s Team all which would be the most analogous to,
to Amazon and China has a way lower take rate so first thing is the unit economics of the actual sale are more profitable for the seller because you’re paying a lower commission but that’s a little bit of a
artificial economy because Team all is even in China is even much bigger than Amazon Marketplace is here
and so visibility and discovery of your product listings is non-existent like there’s so many listings and so many products your product just isn’t organically going to be found in China and so
Ali Baba has a really low take rate because,
they charge you extra for all of the marketing services and search visibility services so what you end up doing is having to pay a lot more to the to Ali Baba’s marketing arm which is called Ali Mama to have your stuff show up and
and if you kind of compare apples to apples like the the general economics of the business end up.
Netting out to be similar by the time you pay your Amazon marketing services in your take rate in the US or your only Mama services and your take grade in the China those are similar.
But digital Commerce is way more penetrated in China and.

[41:28] You know they’ve LeapFrog brick-and-mortar as you implied so pre covid.

[41:34] Depending on how you Define retail I’ll go with the forester definition 16% of Commerce in the US was e-commerce the rest was brick-and-mortar in China it was 38% before covid.
So u.s. today in April 16 percent goes to 25%.
In February in China at the peak of the quarantine.
38% went to north of 50% so.
Digitally you’re going to sell a lot more goods and then one other economic thing that’s wildly different in China than the US the cost of delivery is.
Way lower in China so because there’s so much inexpensive labor
you you can pay someone a very low rate to deliver anything in an hour or two a in a five-kilometer radius of your store and so it enables you to offer all kinds of
cheap delivery of goods that would the unit economics would never work in the US and frankly that driver
like those guys delivering all those things I say driver but a lot of times it’s a bike or something else those delivery guys
that’s a middle-class wage in most Tier 1 and tier 2 cities in China so it the economics all around workout much better in China because of that
Scot anything I botched there.

Scot And Guests:
[42:57] Let’s get the payments I think is a little bit lower so we’re used to kind of a two percent take right I think there’s a lot cheaper.
And then the payment is to Ally pay a lot of times and then the other thing I would say is most Chinese sellers are embedded in a factory so that they’re like.
They’re very very close to where the product is made.
And that gives them an edge where you know if you’re a saint it’s awesome when you hear that works for an auto parts company so if you’re at an Autoparts retailer there’s a distributor
there’s all these manufacturers some of them maybe there’s another layer where they took it from China and then the parts from China and then added something so you can be kind of you got seven people you know two to seven people dipping into the margin stack there whereas in China you’re typically
Factory to right into the marketplace essentially maybe through a seller so because of that also it also creates this very fast feedback loop
so you’ll see like this really interesting things happen where they can you know they’ll iterate very very quickly because they have the factory tied to the marketplace and then this this feedback loop accelerates.

[44:06] Nothing if you stacked the another challenge for the Chinese seller is the same widget if you take currency and try to normalize it is selling for thirty to forty percent less in China
so the good news is in the US for the same same item and if you looked at the currency rates you’re probably get 30 percent more for that in the United States than in China because it’s so competitive and people are.
Very value-oriented the China so you have more more P to put in more margin to kind of put into things in the u.s. so those are some of the interesting differences.
Because of that you know most Chinese sellers their strategy they actually make a lot more money selling out of China so the song to Russia they’ll sell into.
Mercado Libre Brazil South America they’ll sell what the most popular destinations is the marketplaces in Australia and then obviously the US and Europe.
That’s where pre-pandemic companies like wish and all the express were making a ton selling these kind of Hot Products coming direct from China.

[45:08] Good points great question Ricardo thanks very much.

Scot And Guests:
[45:12] You guys have a good one thanks.

[45:17] Should we go to Scott Landry next or do you want to take some of the typed in question Scott.

Scot And Guests:
[45:22] Let’s do let’s just got in the will hit the typed in once.

[45:25] Awesome Scott you welcome to the show I feel outnumbered by the Scots now.

Scot And Guests:
[45:33] You are yeah I’m good treaties between us yeah exactly and I’m also here in will just outside of Raleigh I’m in Morrisville North North Carolina.

[45:44] I heard Morrisville is much cooler than Raleigh.

Scot And Guests:
[45:47] It is much cooler it is much cooler and I’m a longtime listener first-time caller I a few weeks ago you guys had on Scott
another Scott on the show and he talked about this being with time to not sit back and cut costs but to actually invest in companies
invest for company owners to invest in their companies saying that those failing to prepare prepare to fail.
We’ve also seen a lot of non-essential Amazon Seller struggle during the first few weeks of this pandemic.
You know a lot of come back strong since then but and you know these companies had to Pivot and develop a multi-channel approach to their business
so this sets up my very fun question do you know of a software that would that you would recommend to all your listeners that would help them with managing a multi-channel approach that includes.
Maybe a single user interface to manage all their e-commerce operations such as I don’t know content inventory orders marketing advertising product content feeds.
Scot Jason do you know of anything like that John A blank over here Jason guy Nick.

[46:51] I thought you were going to a channel advisor.

Scot And Guests:
[46:52] Scot full disclosure Scott’s an account manager over at John visor so he’s seeing up the old Channel advisor what we do there.
But all right yeah a lot of people start you know
to be fair a lot of people especially smaller sellers they’ll start with a Shopify Bigcommerce woocommerce Magento
one of those offerings and then they’ll have a little bit of an ability to sell and other marketplaces sometimes their shipping software will get them a connection to another Marketplace but then ultimately they’ll grow out of that and that’s kind of what we’ve built for.
Retail does.

[47:28] Yeah so certainly like I think there’s different answers it different
tiers of business and maturity of businesses like I’ll be honest I don’t generally think of there being.
Complete unified Suites that are super successful for a broad range of customers there definitely are
unified Suites in particular Niche markets that really focus on a vertical so you can find a unified suite for a Furniture retail or for a
quick serve food restaurant that are that are pretty comprehensive
it like Shopify is inching towards being a unified sweet they’re adding more and more of those services and if I were a betting person I would say like they’re eventually going to get to a
pretty comprehensive unified Suite that seems to be an important part of their strategy
and hopefully they spend their money there instead of the stupid Shop app that we could talk about later the there
at certain niches there there are some interesting unified sweet so I Oracle owns a product called netsuite which actually has like a pretty comprehensive set of e-commerce order management Channel management.

[48:37] And outside of those you end up there are some some tools that cover a lot of what you just discussed so there there are Pimm’s that are expanding into.
Feed management content management and starting to you know do more of those kinds of things so I think of like a salsify you know as becoming more comprehensive
for those kinds of things but but like honestly there’s no dominant player like the Enterprise level,
the Enterprise players are mostly pretty sucky at it like bye
by far the best in terms of a unified sweet amongst the Enterprise guys now would be Salesforce so Michelle that was on earlier could talk to you about that.

Scot And Guests:
[49:28] Thanks guys appreciate it just I was just kind of tearing up the channel advisor commercial.

[49:34] Yeah yeah yeah I can’t believe Scott didn’t send me one to play.

Scot And Guests:
[49:42] Cool alright so over in QA Kelly ask has anyone done any good research showing the correlation between retailers being owned by private equity and their subsequent and ability to react to covid.
Seems that PE ownership equals under investment in Tech equals poor ability to respond to changes in business climate but it’d be great to see some research
yeah so if you know seems like Kelly’s pretty.
Read up on this whole topic but there are this this tier of investor called private Equity firms we call him PE firms in the industry
and they essentially go do buyouts and what drives their thinking a lot of times there’s a like anything there’s a broad spectrum of PE firms they’re not all like this but a lot I would say 80 or 90 percent are in the genre
of they do some financial interest in engineering so they’ll go look at a business like a retailer they’ll see that it has a certain ibadah and cash flow
and then on the other side of the equation they have super cheap access to cash so what they’ll do is they’ll go they’ll go by that retailer they’ll use that cash flow to go by debt.

[50:44] And you know because they’ve got this cheap access to debt they can usually get a lot of debt so they can go and say this retailers making a hundred million they can put a billion dollars where the debt because the
whoever is providing this dead is just looking for
pretty small amount of cash flow to cover a large debt they do all that and then when they when they do that they effectively have extracted the future value of that retailers cash flow out and and that is what drives their
their calculations so it’s kind of like running the business through a spreadsheet based on this these kind of metrics of this current view of cash flow
the downside of that is what it does is you know it makes the company essentially a hundred percent not bulletproof so you have a recession you have something that impacts that cash flow
and then suddenly the cash flows here the debt is like 80% of cash flow cash flow dips to 30% and now the company
is essentially if it has something on its balance sheet it will burn to that relatively quickly and then go bankrupt so this is ultimately what led to the demise of
Toys R Us India Circuit City I believe had a large private Equity component here in the Southeast Belk cut by a private Equity Firm before pandemic and I’m kind of interested to see if
if they make it through pretty much most of the large retailers with the exception of Nordstrom Walmart.

[52:13] Costco the drug stores don’t have private Equity but many of the mall based retailers have except Apple
are have a big private Equity component and I think they’re at risk so I haven’t seen a study but I would say the correlations very high just because of the nature of the Beast it’s like saying how many slow
gazelle get eaten by lions beautiful pretty much all of them so I would say the correlation would be you know almost a hundred percent correlated Jason.

[52:43] Yeah I would agree with your hypothesis I have not seen the study and it is a smart interesting question if there is a steady because
the ones you disproportionately hear about are these leveraged buyouts and they of course have you know really challenging balance sheets and therefore are super,
I’m vulnerable to covid right and you know Scott mentioned the Toys R Us in certain cities of the world like Nieman is a poster child for that situation right now
the unit I can economics at Neiman Marcus are pretty favorable it’s a totally viable retailer with a unmanageable amount of debt so
right you know sorry to my friends at Neiman covid is probably putting you out of you know into a reorganization at best.

[53:27] But I don’t actually know statistically how much of the private Equity debt in retail is.
Um leveraged buyout this we hear about the over-leveraged ones the most and there’s another kind of private Equity debt which you know tends to also under invest
like the super risky early private Equity debt which is the Venture debt like those guys you know tend to not be making huge infrastructure Investments and
and that that’s
going to tighten up at the moment but there are mezzanine level private Equity firms that do invest in retailers
they don’t tend to leverage those transactions and and as negatively impact the debt so so for sure.

[54:16] All the poster child’s we hear about about private Equity investors are going to be the negative ones that are killing retail and look at Scott with his Advanced Audio Video right there but I
I’ll be honest I do think there are some private Equity firms that are much more beneficial to retailers that we just don’t hear about as much and what I don’t have a good sense for is as a total percentage proportion of all retail
like is are those there’s good private Equity firms a unicorn or they 50% and we just don’t hear about them don’t know.

Scot And Guests:
[54:49] And I don’t know Kelly if you can see the screen here but I did find this article and Retail wire it’s pretty current so July of last year so you know obviously covid is going to tick this up but they found 10 out of 14 companies that filed bankruptcy had been acquired by pe companies
they actually pay get to 1.3 million workers lost their job
there’s a classic movie called Wall Street it is pretty interesting to watch it because the whole premise of Wall Street is effectively a PE lbo
and you know this one guy has to decide the moral implication of
the spreadsheet World it looks great and then he realizes like all these people I think there’s a familial relationship
his dad worked with are going to lose their jobs so It’s oddly one of those weird things that has stood the test of time because it’s been the strategy for
30 or 40 years you get to see very young Michael Douglas as well this report I have on the screen references what looks to be a more even
kind of detailed report on this so that so you know I would Google this this kind of Jim Baker private Equity stake holder project and you could probably a lot of times you’ll see this kind of
puffy article about one of these things then you go find the underlying paper and there’s a lot more really interesting data and you can see some actual data that feeds these studies.
Next question is from do we have a lost the ability to see the hand raised.

[56:14] Yep so we have two more and we are coming up on time so we probably want to just go to speed round a little bit.

Scot And Guests:
[56:22] All right lightning round.
Um hopefully I said your name right there do you think the market for our demand for refurbished products are secondhand e-commerce go down due to the pandemic.
You know I think it definitely will you know Jason mentioned returns you know I’m not going really want use clothes and that kind of thing I think there’s you know just like I said before
I think what you could do though is if I was the seller
I would talk about how I have used you know anti microbials disinfectants sanitization I’m becoming an expert on this oddly enough I’m a computer science guy but I’ve had,
have a crash course in this so there is a there is actually an EPA website that you can go to and see which chemicals are covid effective in can bear that claim.
So imagine your seller what I would do is I would say you know I have formed these actions on this product and I know the best my knowledge it is been sanitized and disinfected and very safe for reuse so
that’s interesting we did have CEO of I always get this wrong the used person-to-person Marketplace.

[57:32] Offer up offer up.

Scot And Guests:
[57:34] I always want to I use the apparel one yeah and he said they’ve actually seen you know a huge spikes so you know we’ve seen these macro trends of home gym home office and they saw in their kind of local platform a lot of
activity going on there.

[57:51] Yeah I would say like like most things there’s conflicting Trends here right like people are more concerned because of the health ramifications
but we’re also people are like super economically conservative and value oriented and so previously owned is likely to have a pretty nice Spike and if I were a guessing man I would say it’s net-net going to be favorable
um to refurbished in previously owned because I actually like of all the health risks the virus spreading through
items that are several days old frankly like it is.
Probably in overestimated Risk in most people’s mind there are ways to make those things safe and even in the virus still exists on something
that’s a day old it likely isn’t very virulent and it’s less likely to infect you so
I have a few over time we’re going to find out that.
You’re probably not likely to catch it from a set of weight you bought from someone else that sat in your garage for four days before you use them.
But you know I think those things are going to sell a lot more so we’ll have to follow that one.

[59:00] And then Daniel Goldman with what probably is going to shape up to be our last question.
He referenced so just for those that didn’t know Jason intrigued by your comment in the last podcast that if someone offered you Amazon web services as a business I wouldn’t say no
but I kind of made the point that Amazon Marketplace is.

[59:26] Extremely profitable as well but since it’s not separately broken out on Amazon’s earning statements people don’t tend to realize how profitable it is and so my point
in last week’s show was everyone talks about Amazon web services being the prophet driver of Amazon I was saying
the percent the proportion of Amazon’s retail business that’s a Marketplace is probably as good or Better Business than Amazon web services so he’s asking why I said that and I may have just inadvertently explained it the that to me a market like it is hard to lose money on a Marketplace
the you lose money if you don’t make the marketplace work so if you can’t get enough sellers or buyers that’s how you lose money on a two-sided Market places you don’t get enough of
of both sides of the marketplace but if you have both sides to Amazon
there’s no economic risk on the marketplace there’s no carrying costs of goods there’s no inventory there’s no cost of returns there are none of those things and you take a commission on the successful transaction so it’s it’s.

[1:00:29] A hundred percent profit with extraordinarily low overhead and very little cash burden and so
like the unit economics of that are even better than AWS AWS is highly profitable but it’s actually pretty capital-intensive
and so in my mind the marketplace just scales even more profitably than AWS and I would argue the marketplaces
bigger than AWS so that was my Y and then he the smartest part of his whole question he left for last who cares what Jason thinks what would Scott think about that same question.

Scot And Guests:
[1:01:08] So the surprise surprise you because I was surprised Jason just chose Marketplace in the it’s hard to answer a theoretical question because.
It’s so theoretical but this scenario I’m imagining I’m I have the offer to either maybe buy or get AWS or the marketplace not actually take AWS because the marketplace in the retail business and Amazon are in next trip
young what makes it work also is the fact you have the Amazon offer interlinked there and then you can actually beat Amazon.
That’s what makes part of what makes the magic of the hybrid Marketplace at Amazon work really well Amazon keeps the marketplace honest the marketplace keeps Amazon honest.
Now you know there’s a lot of noise or there was there was a little bit of a scandal last week we talked about where there’s you know they always talked about this Chinese wall there ain’t no Chinese wall they’re actually using that data allegedly did.
Out what’s going on shocking so it would actually.
You know I’m kind of reminded of the eBay PayPal split that actually happened and it wasn’t too painful but I always still pay with PayPal and eBay so that was like you know those economically,
terrible I think for me to get rid of the whole payment system and then.
Now it’s getting all this value from other places so so you know the short answer is AWS is much more extractable and could have Amazon as a customer without any impact kind of like PayPal ended up being
the marketplace because of lives and is integrated so deeply with the retail experiences inextricable and if you if you pulled it apart I think the value would go down significantly.

[1:02:38] There you go and if you look.

Scot And Guests:
[1:02:39] The first thing Amazon would do is buy a Marketplace in the be with you and I don’t think you want to be in that.

[1:02:54] One thing one last thing we wanted to do is do a shout-out to Jamie Dooley he could not join us tonight because it’s his birthday
happy birthday Jamie hope you’re having some delicious cake or something probably not eating out I would guess but hopefully you’re having a fun pandemic themed birthday sorry you could make it tonight.

[1:03:12] Yeah and and happy May 4 Theta J belated me for Theta Jamie who is another big Star Wars fan.
Scot we’ve blown through our our once again our and nine minutes so super grateful for all those listeners that stuck it out with us for the whole time that was very kind of you and these are super fun and it’s great to see everyone thanks very much for supporting the show and
please be safe out there and until next time happy commercing.

May 1, 2020

EP218 - Amazon Q1 2020 Earnings and Covid News 

Episode 218 covers some Covid-19 related e-commerce news, and provides an analysis of Amazon’s Q1 2020 Earnings.


Next weeks show will be a live listener question show. Join our Zoom webinar on May 6th at 9pm ET, and you can watch us make a show, and ask your own questions.


  • Shopify becoming a marketplace? 
  • Google shopping is now free
  • Covid impact
    • 630,000 retail businesses have been closed since mid-March (about 61% of sf sq)
    • Forrester 16% E-Com -> 25% in april (70% digital influence)
    • 3% digital grocery -> 10% digital Grocery
    • Goldman Sachs: Retail Chain down 20.9% 
    • ShopperTrack: Traffic down 48%
    • Bankruptcies – JCREW, Neiman, JCP, Tuesday Morning, Lord & Taylor
    •  Gordon Brothers 25,000 stores and 100,000 restaurants could end up closing permanently this year 
    • UBS 100,000 retailers close by 2025 (15% -> 25% e-com penetration)
    • Everyone making PPE
    • Happy Story: Pets (“adopt a pet” surged about 335% in volume)

Simon Properties Opening Plans

Amazon Q1 2020 Earnings

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 218 of the Jason & Scot show was recorded live on Thursday, April 30th, 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 218 being recorded on Thursday April 30th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:38] Hey Jason and welcome back Jason Scott show listeners Jason 40 jump into it we do have a pretty exciting announcement we tested about a month ago now we tested a live event
so with listeners and that went really well we had a lot of folks on and got a lot of really good questions and engagement from
the community out there so next week we are going to do another one of those
you zoom so I think everyone’s pretty familiar with zoom at this point so put May 6th at 9 p.m. Eastern
that’s 8 p.m. central 7 p.m. mountain
6 plus 6 p.m. Pacific on your calendar in this episode show notes you’ll find a link to that Zoom
and we’ll be sharing the link on Twitter
LinkedIn and Facebook all the socials so we hope you’re able to join us and just kind of hang out talk e-commerce see each other we can’t
get together at conferences right now so it’ll be a lot of fun and we’ll talk about whatever topics everyone’s interested in talking about.

[1:41] Yeah and if you have any questions feel free to send them to us in advance.

[1:45] Jason how are you doing this is probably the longest period of time you haven’t been on a plane in 40 years.

[1:53] Yeah some maybe not quite that long but yes I like to say I’m living the covid dream I just wish I could wake up from it.

[2:03] Are you frantically checking your tickets to make sure you don’t have a flight tomorrow or you you’re out of the.

[2:10] No but there are still some like cruel reminders like there’s you and I were supposed to be in Arizona if I’m not mistaken doing a gig together this week which I was very much looking forward to.
And so like a reminder on my calendar will pop up for the check in at the Marriott Inner in Flagstaff or whatever and I’ll be kind of sad.
But I feel like the bigger question is how is my family doing if he guess they’re not used to quite so much Jason.

[2:45] Yeah and a little behind inside baseball your son and I had a little mini Star Wars podcast before this sucks one.

[2:52] Yeah he’s been planning that all day he was super excited he found out that you and I had a podcast and so he wanted to start a Star Wars one with you beforehand so that was super nice of you.

[3:02] He I’ll give you he asked what is he 5 6.

[3:06] For four and a half.

[3:07] He asked kind of like 8 to 10 year old Star Wars questions so you’re doing some good parenting.

[3:13] Yeah I will.

[3:14] A plus five stars on parenting.

[3:17] Yeah in the morning I’ll walk by and he’s having like morning meeting with his kindergartener teacher on zoom and he’s like explaining the nuances of how Anakin got turned to the dark side by Palpatine and that
Palpatine was actually tricking him.

[3:33] He’s like forget the alphabet let me tell you about Anakin.

[3:37] Exactly yeah I feel like he’s going to be illiterate but super well-versed in the Star Wars universe.

[3:43] He’ll do fine I that’s how I got here.

[3:44] Yeah it’s all it’s all a trade-off how are you guys doing in the pandemic.

[3:51] It has been a bit of a roller coaster over at spiffy on the personal side fine no no no issues North Carolina has been,
pretty mild from a,
pandemic perspective so but we’re still Sheltering in place and following all the good rules and all that good stuff but on the business side it’s been a bit of a roller coaster the I don’t know if you saw it or not but we had
ABC they do a show called pandemic what you need to know and they did a four minute episode on us this week about.
They called the pandemic pivot so we’ve had to
so a big segment of our zits if you was rental car companies and they’re obviously feeling pain because folks like you aren’t out running cars
and then another big segment of ours is office Parks so that was those two big hits that we took so we’ve been diversifying as rapidly as possible
and the ABC show highlighted we’ve moved into disinfecting vehicles but then also one of our Fleet customers asked if we would disinfect the facility we said sure so we’ve added that as a pretty fast growing product line.

[4:58] Yeah I so I’ma get spiffy Fanboy so I’ve course I saw the ABC segment and I will put a link in it in the show notes I think have to put a link to like the Twitter post because,
the link on the website isn’t Perpetual but that I thought that was a totally cool story it seem like you both,
expanded you’re offering I wouldn’t call like disinfecting Vehicles necessarily a pivot for you but then the facility’s thing I thought was very agile and clever of you.

[5:30] Yeah when desperate times call for desperate measures so we we put it out there and then
you know the other benefit is being on national TV is very good promotion so we have had a surge of activity this week so that’s we’re kind of we’ve been down the roller coaster and now we’re kind of heading back up in here.

[5:48] Yeah I if you watch that that segment and then you click through you have a facilities disinfecting landing page
on your website now and it’s super fun because there is a dude with a disinfecting cannon that seems like he can blast like
seems like he could like disinfect an entire Costco from like one location with that thing.

[6:10] Yeah we’ve invested in all these spray misters and all kinds of cool disinfecting technology.

[6:17] Yeah I’ll bet you you have learned some things you you didn’t necessarily think you would ever learn.

[6:23] It’s true as the software guy I get over my skis a little bit on chemistry but hey I can I can at least say the works.

[6:31] That yeah Bill Gates I feel like as a software guy that’s pretty credibly giving the pandemic talk so if he could do it you could do it.

[6:40] Okay.

[6:42] Have you are you keeping one foot in retail are you following the catastrophe that is covid news in retail or maybe we’ll get to that in a minute should we do.

[6:53] Yeah and we thought tonight we’d go through a little bit of news just kind of catch up on some things we haven’t been able to insert or talking to guests with the the big news tonight that we want to really get to and spend a fair amount of time on is the Amazon results
or what I would also call hey shareholders take a seat so that was kind of a we’ll get to what that means here in a minute.

[7:14] I like this I like the cliffhanger.

[7:17] So two before you to Amazon we wanted to spend 5 to 10 minutes on some of the other things going on
and I’ve been dying to chat with you all week about these two and I really just want to see it up to here your your thoughts so the two big things and I kind of put these both in
and kind of newish marketplace news so number one Google shopping announced that they’re bringing back free listings didn’t announce it this way that’s a,
that’s my my framing but remember I think it was 2012 so it started to be as this thing called Frugal that was just free then they
changed it to Google shopping branding wise and then that was paid and free and then in like 2012 it became paid only then they had a brief kind of a
flirtation with kind of shopping kind of aggregate doing their own fulfillment kind of a thing
and then kind of like it’s a good Postmates like a Postmates kind of a business model they get rid of that and then now so then it was just,
paid listings and then now they’re adding back in the unpaid listings they talked about you know pandemic had accelerated their thinking and wanting to help.

[8:31] Small businesses so that was one news I kind of think what’s going on there,
is they’ve been investing a lot in this Marketplace when your revenue from retail is way down that’s the best place to launch a Marketplace because you can’t really cannibalize you’ve already cannibalized the ad Revenue that’s always been the big hurdle for them becoming a Marketplace
also during the pandemic their shopping experience really really suffered so I tried to buy some paper towels and it was like going through.

[8:58] The darkest alleys of Internet kind of up in the Dual shopping there,
another one I wanted to ask you about a Shopify so they had this little app they moved their their notification of shipping to an app whose name arrival arrived I can remember name of
and then they just.

[9:17] That’s the former name and then they just kind of change the name of arrived arrival to shop and then they put a little bit of a front end on it and everyone’s always been kind of wondering you know
what if Shopify became a Marketplace
so I know the Strategic Regice your teacher a guy talks about this all the time Ben Thompson he was like losing his mind he was so excited so
but you know
and there’s there’s a lot of different ways to look at it I kind of think they’re going to be a front door they’re going to kind of get into the discovery game the challenge of that is when you have all these merchants.
There’s a data problem in a don’t want to I don’t want to step on your toes you may be wanting to talk about this but how do you feel about those two things and we can kind of like chat about it more.

[10:04] Yeah it depends on how you look at both of them so I think in and of there’s the themselves both of those pieces of news are like,
kind of nothing Burgers right like they like neither one dramatically change their experience or improved things in a
in a way that is likely to be very meaningful to real consumers and so that was the only thing you were ever going to see from Google about Commerce or the only thing you were ever going to see from Shopify about marketplaces I would say it was totally silly
what’s what’s potentially interesting and exciting about both is that you know they could be sort of first initial steps into,
much more significant Commerce activities right so that that’s what would be exciting to me as if Google really invented,
a new experience around marketplaces on their platform or if Shopify really leaned in but but.
These two steps by themselves are like not very significant in my view.

[11:07] Do you think they lead to something significant.

[11:10] I think we’re going to see other efforts I think the jury is going to be out it’s interesting they both suffer from similar problems in my mind like the messaging about both is pretty muddled so I start with Google shopping.
You know Google is an amazing company and so it’s always been totally shopping to me shocking to me that they’re they’re shopping offering like The Branding is always super.
Confusing and their naming conventions are constantly changing and it’s like my job to keep up on this stuff and I can’t keep up so I have no idea.
How average consumers are but so for example hey you know they did a press release with this white grandiose headline.
Group listings on Google shopping is now free.
It’s now free to list your products on Google right and so there’s a lot of people that were like paying a lot of money to list their products on Google and they’re like wait do I so now everything I was paying for I get for free which is of course.

[12:15] Not the case whatsoever essentially what they’ve done is they like if you pay for a what used to be called a product listing add or you know you you do a Google shopping listing.
You that add shows up in the shopping tab in Google but it also shows up in Blended search results in a bunch of other places.
And essentially what they’ve said is we’re going to bring back organic listings but only in the Google shopping Tab and only below the the.
The paid ads and so and they’ve never disclosed anything about what kind of traffic that tab gets and spoiler alert when someone like Google won’t tell you how much traffic something’s getting it’s because it’s not getting any traffic.

[13:02] So like having an organic listing and that tab probably isn’t going to get seen by anyone.
And so in and of itself that doesn’t seem like a very big change and there’s like something that I’m still unclear about there’s a separate thing that used to be called Google shopping actions which is.
The actual ability to complete a transaction within your ad unit as opposed to just referring you to the Commerce site to complete that the transaction and it’s unclear to me whether these.
Free listings are enabled for Google shopping actions or not and if that’s voluntary for example right so I potentially,
the listing is free but then they’re going to try to conduct a transaction that they’re going to charge you a commission fee on for example.

[13:56] That’s called a Marketplace and that’s what’s exciting I’m tingly all over.

[13:59] Yeah so yeah but it’s like I haven’t no one’s been able to articulate to me whether why is that the case with all those listings can you opt into that on a voluntary basis is that not an option that’s available.

[14:13] It’s the funnel you got to you got to bring these free people in get them addicted to a little traffic and then you flip them into the marketplace.

[14:18] Yeah it’s a great model it certainly worked for the rest of Google and Facebook so so that one again like.
Kind of muddled kind of overhyped if you just look at what it is now but you know they it is a.
A possible step towards a more significant Marketplace for five months ago they did hire this guy Bill ready he was the CEO at PayPal
so you know maybe this is like one of his first initiatives to as president of Commerce to kind of get the Commerce ecosystem Juiced and you know,
for sure Dougal wants to have relevant search results when you search for products and like increasingly they were losing that that search to Amazon and if the only results you could get from Google are from advertisers that paid.
Like you’re just not going to have a complete product catalog so to me this feels like the biggest benefit of this is to Google which is to collect more product data to enable you to have better search results that you can then monetize.
And then Shopify I’m I’m kind of concerned that I’m burning a bridge on Shopify because.

[15:36] Toby’s going to kick your butt.

[15:37] Yeah I feel like I had some negative comments on Twitter and in the press and I wasn’t smart enough to like not see see Toby on those comments so I feel like my.
My Shopify Fanboy status might get revoked.

[15:53] They’re Canadian they’re super nice and forgiving.

[15:55] That’s that’s what I’m banking on.
And again I would be interested in Shopify leaning into a Marketplace I think there there there would be some challenges for that but there would be some intriguing things about that.
This is not that right so here’s what here’s why I was pretty negative is because six hours before this announcement I was on Twitter in the middle of the night as one does,
following shopify’s Chief product officer who made a tweet that like in the next few hours we’re going to announce our most significant product release ever.

[16:31] And I’m like oh that’s interesting like that’s a pretty grandiose statement I’m pretty excited to see what they launch and,
you know I’m every couple hours I’m waking up and I’m refreshing my feed to see what they announced and then they announced this exciting new mobile shopping app right.
And at first I’m like okay so this is going to be,
you know we’ve complained for a while that Shopify actually isn’t very good at mobile right so if you want your Shopify site your,
desktop browser experience is likely going to be way better than your mobile browser experience your mobile browser experience does not have awesome performance.
And Shopify has mostly ignored,
some newer web development standards that I think are pretty important for mobile like Progressive web apps Toby’s not a big fan.
So I thought oh so their solution to mobile web is I mean mobile shopping is they’re going to launch a new app that you can shop from.
So a that was a wrong assumption.

[17:30] That’s called it’s called shop it’s right there in the.

[17:32] Exactly it’s called shop so so jump on this thing and I’m like alright let’s see what the shopping experience is.
Spoiler there is not a shopping experience as you mentioned they rebranded a app for tracking shipments.
Which I’ll come to in a minute is kind of an oily space.
Um and then in addition to tracking shipments it lets you favorite some of your Shopify merchants and it will promote.
Some items from the Shopify Merchants which you would then click to their website in order to browse or by the individual items.
And it has a super limited experience for helping you discover some new merchants.
So so a couple of things first of all if I download an app to track my shipping status.
And it suddenly changes its name to shopping and is suddenly about Merchants Discovery like I’m I am probably annoyed.
And you know everyone was arguing with me on Twitter the right no it’s genius like they built in 18 million user user base from day one by repurposing this existing thing and I’m like oh well they should have bought like The Words With Friends app.
That had a hundred million users and made that the Shopify shopping app if that’s like you know there it’s not the same audience.

[18:58] You can’t track packages worth word from Friends.

[19:01] Yeah so side note there’s a bunch of apps exist in the world to help you track your packages and what they mostly want to do is scrape all of your e-commerce purchases from your Gmail
and sell that data to evil marketers like publicist.
So that’s that’s what most show shipping tracking apps exist for and the the Shopify app it’s really weird because nobody,
shops or buys from Shopify right like you buy from beardbrand or Kylie Jenner and you have no idea what platform.
They used to sell those goods to you so a like aggregating shipping information for all Shopify merchants.

[19:49] Makes no sense because that’s not a context anyone understands and then,
they don’t tell you this but they do scrape your Gmail
and I and highlight all of your Amazon and apple purchases for example so
like not clear what the privacy policy is there but you at the very least you’re telling Shopify what else you buy and you know in this age where we’re all really concerned about what data we share with,
with whom that’s potentially interesting and then the whole,
so I’m like what this feels a little bit like bait and switch it doesn’t feel very Sharpie it’s not a very like revolutionary experience and it’s really just a bookmark to e-commerce stores to jump you to an e-commerce site and
you know a bunch of Shopify Defenders than jump in on Twitter and they’re like no you have this all wrong I’m Toby’s personal friend
and this is all about the post-purchase experience this is all about providing better customer service
and driving greater lifetime value it’s not about the first time shopping experience and so then I’m like alright well question one.
Why do you have a post-purchase experience called shop that seems kind of dumb to me it seems like.

[21:08] Because you just shopped it’s obvious Chase.

[21:11] Yeah yeah you get it more than me that’s the problem and then customer lifetime value for whom right like if I’m beardbrand which is a great,
direct to Consumer brand that happens to sell on Shopify and I get it
at market and get a bunch of customers that are customers of beardbrand and I want to provide them a great customer experience to know when their packages are going to arrive and all this stuff like,
I don’t want to send them to a third party not beardbrand branded experience
that then is going to Market other shops with competitive products to mine like it makes it makes no sense if it’s a lifetime value play it’s a lifetime value for Shopify not for the merchants and
heretofore one of shopify’s biggest strength has been their position that unlike Amazon
there they their completely altruistic in terms of benefiting the merchants and this does not feel like it particularly benefits the merchants.
That’s my.

[22:16] Doubles I’ll give a devil’s advocate.

[22:17] Yeah save me.

[22:18] He gives Merchants everything they need to be successful online but if you kind of compared it next to Amazon or any Marketplace.
Place their most deficient is.
Aggregating demand so Kylie is fine she doesn’t need help but if you set up Jason’s Star Wars store no one’s going to find you on the internet except for like R5 podcast look.

[22:46] Yeah you and Stephen.

[22:47] Cast listeners Stephen and I and maybe like five of the people that listen to this hobby that we have and so you know,
yes they’ll give you tools to go spend money but what if they could say look.
You can opt into this Marketplace and we will you will now show up in this front door that we’ve built so I think I think they will build a friend or because they’re going to use it as a way that’s what you get with Amazon you simply say.
I’m tapping into these hundreds of millions of people that you have captive there so I think they’re building that but then also
you know another if we kind of line those things up another area where they’re deficient and we know they’re investing a lot here is not only fulfillment but a fulfillment subscription program so I think that’s that could be,
you know between tracking packages and a front end is a big step I think there’s probably a middle step there where they say to folks hey.
Yeah and they have this checkout flow where they could say to people hey we use this thing called Shopify would you like to join the Shopify shipping program and get free 2-day for one day shipping,
kind of like so they can be successful we’re like shop Runner wasn’t because they’ll have a much better aggregation point in this app and in the checkouts of their aggregated merchants.
So that’s how I would do it I would start at the end like they’ve done they’ve got a they’ve got however many users of this happen now visit 80 million or something now you.
18 so now that’s pretty good that’s more than shop Runner I think shop on her head like.

[24:14] 475,000 of which have already written a review for the app by the way that launched yesterday.

[24:24] And then then put that it you have to admit that gives you a platform to launch a prime Shopify Prime.

[24:33] Yeah totally get it and I think we’re basically an alignment like.
Turn my original comment if this isn’t a first step like there could be some really cool steps that fall on and
in my mind the biggest mistake if Shopify made a mistake
is just overhyping this right like if they just said like hey we’ve got some super exciting aspiration and like you know given the situation in the world right now like we’re gonna like
you know release fast and iterate and here’s our first little step like I feel like the reception would have been.
Universally favorable but I feel like they over sold,
that this first step and yeah we’ll see how it all plays that I’m I have nothing against him I’m rooting for him.

[25:18] Toby actually apologize I can’t find it now but he essentially said yeah we had to put this out fast so we had to strip down a lot of the functionality.

[25:28] Yeah yeah I’m sure and I’m sure they have some cool stuff in the in the works to make it more better
I like I totally get it like the one thing that Shopify doesn’t provide is traffic and this is a you know a a much more mature version of this could potentially be a traffic driver for those merchants and that could be a,
a great trade-off right so if that’s what happens totally cool I would just
like to me Shopify and Amazon are not direct competitors they’re totally synergistic that like Amazon the thing they do better than anything is get give you eyeballs and Shopify you know gives you the infrastructure to have your own presence on the web
if covid-19 has taught Amazon sellers anything it’s that they shouldn’t be,
single sourced on Amazon like they should have their own presence in addition to being on Amazon so you know frankly if I was.

[26:23] This is why they’re rushing it out to compete with him I think they view themselves as.

[26:26] Yeah I would be leaning into man we love Amazon to but in addition Amazon like you you should have a Shopify presence to have your own brand and yeah instead like there.

[26:38] I’m not following your argument so your you don’t think they compete but then you do think they can be and then you don’t think they’re helping Merchants but they are helping rich.

[26:45] Yeah basically yeah I think you summarized.

[26:48] Did your cabin fever has messed up your logic.

[26:51] Yeah yeah I just I think their strengths don’t overlap I think their future is much more likely to overlap but today yeah anyway.

[26:59] Take it that was our 30 minute 10 minute segments so on to covid impact generally.

[27:07] Yeah so while you’ve been saving the world get spiffy I mean Liam giving these briefings on the likely impacts of covid to all of our clients.
And I feel like my new job is done on the Grim Reaper.

[27:23] That’s why you’re in kind of a bad.

[27:26] Yeah yeah maybe so.

[27:29] So how bad is it to say.

[27:30] Yeah it’s pretty bad so I’m not going to give everyone the whole Debbie Downer our briefing but like some highlights to kind of.
Frame the impact this is having on retail.
Right now there’s about 630,000 retail businesses that have closed since March so that’s about 61 percent of all retail square footage in the United States so.
A huge swath is just closed.
Like obviously you know a bunch of that is is Big National chains but a lot of it is also independent sole proprietor retailers and on average that sole proprietor retailer had 19 days of cash on hand so.
The fact that they’re now being forced to have zero revenue for 30 or 60 days is pretty economically.
Bunch of those retail stores are never going to be able to reopen.

[28:30] Forrester I did a pretty good analysis on the US Department of Commerce data that came out.
For March and they said the basically hey before covid 16% of all King e-commerce was online as.

[28:47] Forrester defines retail sixteen percent of all retail was online.
April we project that 25 percent of all retail spending is going to be online so a huge jump that likely would have taken 5 to 10 years.
Just happened in one month in terms of digital transition that if you you do some fancy math
that means that about 70% of all purchase decisions are primarily digitally influenced like even of you do curbside pickup or pick it up in the store you still use digital for the majority of your.
Your shopping Journey so there’s a huge,
Boone to digital shopping before covid about 3% of groceries in the US were purchased digitally right now 10% of all groceries are being purchased digitally,
so that is kind of appealing the problem is that that digital shopping behavior isn’t close to enough to overcome the loss of brick-and-mortar shopping Behavior so.
Goldman Sachs,
has this retail chain index that kind of tries to show retail sales amongst National chains and they said that April they’re all retail sales are going to be down by about 20 percent.
Which to put things in perspective in normal times like.

[30:13] Plus or minus like one to three percent is what you’re used to seeing so twenty percent down is several orders of magnitude worse than we’re used to,
Shopper track which is this company that sells traffic monitoring equipment to a lot of chains and they aggregate their data they said all retail traffic is down by 48 percent.
So that right there is the.

[30:34] It seems like to me do you think that’s light like should I be like 90%.

[30:37] Yeah and so well so.
Part of the problem is Shopper Trek cells meters to some particularly big chains that.
In general tend to be classified as essential right so they’re skewed by like Walmart and Target but but even in those stores.
That like are their sales comps are way up at Target and Walmart even in those stores
traffic is down but fewer people want to go to the store but what they had to do pretty early in this pandemic is there actually throttling traffic and not letting as many people come in at the stores
and probably don’t have time to Deep dive on that but that’s probably going to be the new normal in retail for like 18 months.

[31:23] So a huge problem it for retailers with the brick-and-mortar fleet is
you know you had some economic model where you were you know nominally profitable with the amount of traffic you could entice to come in your stores for the foreseeable future you’re going to have like half the traffic in your stores that you’re used to and
it’s in there for you know profits are going to be super challenge so most most retailers in America even if they’re allowed to open,
I really going to have to lean into digital sales and curbside pickup to augment.
Very soft brick and mortar sales because we’re just not going to be allowed to have the density in the store.
So add all that up and a bunch of retailers are going out of business right so like the ones that are already being talked about in the media there’s rumors that J.Crew could file this weekend,
Neiman Marcus has like skipped a bunch of their interest payments and and is talking to lawyers.
JC Penney is skipping payments and talking to lawyers they’re smaller chain but Tuesday morning is a dallas-based value-oriented chain that’s apparently talking to lawyers,
Warden Taylor was acquired by.

[32:43] The Footwear guys and now that looks like that they’re going to have to go in a bankruptcy again confounding all these bankruptcies is that it’s kind of pointless and difficult to file bankruptcy right now.
Like ordinarily you’d file bankruptcy you do some kind of liquidation sale try to get some value for your assets and see if you could restructure.
And at the moment you can’t do a liquidation sale so.

[33:06] And I bet the courts are jammed up because there’s a lot of you know got all these restaurants filing bankruptcies and traditions like a lot of business churn right now.

[33:16] Yeah and the dockets are just moving slower because the courts aren’t business as usual right now so so for so it’s a very weird time but there’s a bunch of retards that are at risk.
There’s this company if you ever want to invest in a company that does well in bad retail times it’s this company called Gordon brothers so they’re the guys.
Execute all these liquidation sales for all these retailers and they have come out and said hey we think 25,000 retail stores and a hundred thousand restaurants are likely to permanently close this year.
So an ordinary year for retail would be like 5,000 retail stores closing a badger for retail would be like 8,000 closing.
And and you know some closing is healthy because there’s this churn but 25,000 would be pretty unprecedented and then the restaurants are almost unimaginable.
And then a different spin on that same premise.
Is that UBS they kind of looked at this and said hey this is going to facilitate a permanent shift to e-commerce o we think.
That would permanently going to see this shift from 15% e-commerce penetration a 25% e-commerce penetration.
And that’s going to force a bunch of stores to close to keep the equilibrium and they did the math and said basically that means we need to close a hundred thousand retail stores by 2025.

[34:43] So that means you’re in that 15 to 20,000 stores going a business closing every year for the next seven years.

[34:54] Yeah so that is the super Doom and Gloom.
Portion of my normal briefing I like to always end on a slightly happy note and so the.

[35:10] I was going to ask you get invited.

[35:11] Yeah yeah well like if you pay me you get the second half of the story which is what I think you should do to survive and thrive in that Clement.

[35:20] Okay cool.

[35:21] Even if you don’t pay me the one happy Trend and all this is you can no longer adopt a pet because all the pets have been.
Adopted from all the shelter so lots of deserving furry friends have a new home which in and of itself is super happy.
Yeah there’s a bunch of metrics to look at to talk about this but one simple one is search volume on Google for Adopt-A-Pet is up three hundred thirty five percent.
The fun ramification of that is we now have the the largest cohort of new pet owners in the United States of America that we’ve ever had and of course they all learned how to get their pet food and cat litter and all their supplies via e-commerce so if you’re a
you know and Ecommerce in the pets base or pet adjacent you know you probably have a pretty bright future at the moment.

[36:18] Cool what a couple other kind of what I would call Green shoots in the
from I’ve had a lot of time to watch CNBC so a couple of things interesting their Apple and Google results were not as bad as expected and you may think what’s that have to do with anything but Apple actually
it’s going to start opening their stores here and
that will be good and then people were expecting gloom and doom from these two folks and it wasn’t as bad as expected so so there that indicates that you know.
Maybe this mix of things isn’t quite as bad and we’re going to kind of come through this faster on the other side Simon properties announced a plan to open a bunch of malls and then I had a question for you everyone talks about,
dopest and now there’s curbside delivery but the is and Opus is in store right so.
I propose we come up with a new term just to be clear so we have both this what we had,
go pack buy online pick up at Curb do you like that.

[37:18] I do unfortunately I have to tell you I believe you independently invented that but you are not the only one to have invented that.

[37:25] Shucks about in the UK they have click and collect how about clicking curb.

[37:30] You are the first person I’ve heard to invent that I’ll add one to that vernacular though
like we talked a lot about curbside pickup and that like if you’re a store with a parking lot curbside makes a lot of sense but a lot of stores don’t have their own parking lot if you’re in a mall or you’re in an urban center you might not have your own parking lot and so curbside pickup may not work and so,
I’ve heard a lot of stores that have launched a door side pick up.
Meaning we don’t let customers in the store but come to our front door with your your quick your QR code and we’ll deliver your order to you in a touch u.s. way.

[38:09] I propose we call that bow pad bulbous bow pack and moped.

[38:11] Yeah absolutely yeah can’t have enough good acronym.

[38:17] Trademark Jason discussion.

[38:20] Inside note like based on
how things were covered from SARS in China and in 2003 when we had kind of a this kind of quarantine and what we’re seeing in China right now which is maybe two months ahead of us,
you want to learn those acronyms because,
curbside pickup or door side pickup are going to be a super important part of the retail shopping experience for the foreseeable future and,
like probably has customers weren’t how to do it and retailers get better at it like probably forever.

[38:56] Yeah so another interesting kind of thing to keep an eye on is in this is again from watching CNBC in the first weeks of the pandemic and we’ll talk about a v-shaped recovery and then it was kind of like a you and now it’s like a long L but if you
there’s enough data out of China that it looks like it’s been a very sharp V recovery there so another kind of thing to be slightly optimistic
I don’t want to burst your death bubble but something to be slightly optimistic about.

[39:21] Yeah so so I like so what I’ve actually like when you dive into it what’s interesting is some segments
some categories of product had been very v-shaped in China and other segments have been very u-shaped so it has not like not everything has come back at the same,
rate which is interesting and not necessarily what you’d predict so there was a there was a theory in China that there would be a ton of Revenge shopping like that as soon as you’re allowed back in the store
everyone would have rushed back to their old vices and in some cases that has happened and then another cases,
it’s recovering very slowly like primarily because both in China and here consumer confidence is it all time low people are super concerned about the economy.
Pretty obvious that we’re going to come out of this in a deep recession and so all of those things tend to make the recovery slower.
The the most terrifying letter that I’m hearing is not U or V or L it’s w.
And that is because there are a lot of places where they thought they were through the worst open back up and then saw.
Re-emergence as of the virus and now and in the height of irony foreign Travelers are traveling back to China and bringing the virus back,
to China with them and so like the worst thing to happen here is this w-shaped recovery where sales start to recover and then get knocked back down.

[40:50] Yeah yeah I’m optimistic it’s going to be I’m going with a sharp V I’m going to be The Optimist on this show.

[40:57] I I think that’s smart positioning and I admire you for it.

[41:02] Let’s jump into Amazon results so
so it was interesting setup coming in this because eBay actually had a really good quarter they got a new CEO so you guys got a little momentum in the e-commerce world you had this kind of,
super dark clouds like Jason highlighted there
and then we had Amazon results tonight so I want to walk you through those just kind of frame this up this is Amazon’s q1 results so covers January February and March we’re recording this.
You know very late April so we have kind of a whole nother month of knowledge based on what happened in that quarter but just kind of you know time is,
getting really warped oddly at least for me and this pandemic state so just kind of put some dates out there California was one of the earliest dates to do shelter in place
/ quarantine whatever you want to call it and they did March 19th in the New York XX and another States kind of came in there all the way through as late as April 1 I think Alaska was the latest it like April 3rd or something like that so
so you really only had you know call it,
20 days out of the 90-day quarter so whatever 2/9 is from a math standpoint so so it’s really only kind of 15 to 20% of the quarter was
impacted by the pandemic and it happened so fast it wasn’t like this kind of slope into it really.

[42:27] So that being said the results are a little mixed so clear beat on the revenue side and I think 2 2 is just going to be,
tremendous if they only had 20 days of this in q1 and they had him significant bq2 is just going to be there just going to destroy Q2
see how that goes but the the- was to achieve that they had to do really heavy spending on fulfillment and my guess is what happened here is Amazon,
it is a stream a well-run company and one of the downsides of being extremely well done is you have the impact of like Cyber Monday in,
and you know
for 10 days at the end of March the system wasn’t planning for that and prepared for it so it probably took it a while to flex and know what you have to do is you have to say well we weren’t really ready for that so we’re gonna have to eat some shipping fees we’re going to have to
run a bunch of extra shifts we didn’t have people for
Grant to eat some overtime you know those are the kinds of things that just ramp cost way up because they are probably really good at predicting this is what revenue is going to be this is exact number of people we need in trucks and fulfillment centers all that and then when Revenue kind of surges 30%
it can kind of blow that up and take you a while to catch up so that was kind of the mixed part of it
let’s see another thing so that also kind of flowed through margins in the bottom line and we’ll get into specifics.

[43:52] We’ll talk about AWS that was interesting a lot of people think the stock trades more on AWS even than all the other parts I’m a little skeptical about that
but you know just kind of the early read and we’ll know more about this when the podcast lands but here tonight the stock was down 5% and you always see these news reports Amazon mrs. bottom line stock down 5% well the stocks been up 30 percent year-to-date nose actually up
five percent during the day to day so it just kind of like went back down to the price before takes people a while to just these things and see what’s going on.
So we are going to dig so that’s the high level so we’re going to dig into the corridor go through some of the results and then we’ll have
detailed and super intellectual analysis so Jason run us through the headlines on revenue and profits.

[44:39] Yeah happy to I’m just hoping
you’re signed up for the super intellectual part of the end Revenue was a happy story so Global Revenue came in at seventy five point five billion
which is up 27 percent year-over-year once you take out currency fluctuation
and that’s actually a faster rate of growth than Q4 which was a 21 percent growth so 27 percent Revenue growth,
in this in this quarter that is you explained is kind of only,
partly influenced by covid is a happy story Wall Street was looking for 70 3.7 billion so that’s a Beat,
and the high end of Amazon guidance for the quarter was 73 billion so so like from Wall Street perspective the revenue was a great story and then as you alluded to
the down side of the story was profitability right so gross margin for the quarter was,
41.3% which was below wall Street’s consensus expectation of 42.5 percent so that’s a myth,
largely for all the reasons you talked about like they just incurred a bunch of extra cost and.

[45:55] Therefore like didn’t hit their margin goals so that means operating income came in a little bit below their goal I think it was like,
it’s right around four billion dollars so I think it actually came in at 3.9 billion.
Versus a goal of 4.1 billion and shipping costs which always grow rapidly for Amazon grew.
Like at a an accelerated rate so shipping costs were up 49 percent year-over-year previous quarters we saw like 43 percent up so
faster shipping went up even faster they’re still a hangover effect you know remember it’s not that long ago than Amazon really leaned into one day delivery and so cost kind of went up for that as well so,
a perfect storm of negativity on the profit side.

[46:45] Yeah and when you dig into that revenue and Amazon used to have a lot more color here now they really only give you the kind of the Geo split so North American Revenue came in at forty six point 1 billion
that was a 29 percent year-over-year growth so again I haven’t seen numbers during the pandemic but coming into this e-commerce was growing,
twelve to fifteen percent is that kind of what you’ve seen Jason.

[47:08] Yeah I think like US Department of Commerce our comscore would say like yeah right in the fifteen percent right now.

[47:14] Yeah so yeah so here you have you know Amazon accelerating up to 29% and and acceleration the way it is if you look at the year-over-year growth from queue for their at 22% so then they ramped up to 29 percent so that’s that’s a.
More than a third increase in the acceleration of growth which is just it’s just really hard to put that into.
It’s hard to wrap your head around it because I know we’re talking about 22 to 29 wow big deal but this is this is that a 46 billion dollar quarterly rate you know and those accelerations there just like I did the math one time and they were gobbling up like 10 JC Penney’s.
A point of grow that I don’t know what that math is now but just kind of amazing.

[47:58] That’s the problem like you you hear that those kind of growth rates all the time but you hear them from the smallest companies in the industry like not from the overwhelmingly you are just company in the industry.

[48:10] Yeah there’s the rule of large numbers that Amazon seems to be able to defy which is which is pretty amazing
International revenues came in at 19 Point 1 billion that’s 20% growth all the numbers I stayed are in constant FX or what they call XFX taking out the fluctuations of financial are,
currency fluctuations so the so International Group at 20% that was also a material tick up in fourth quarter the international growth wait rate was 15%
one of the units of measure everyone looks at with Amazon that’s interesting is called the unit growth rate that accelerated,
just 32 percent year-over-year and then fourth quarter it was a 22 percent so that’s kind of the fastest-growing metric here that went from 22 to 32 so what’s interesting is.

[49:02] That accelerated more than revenue and what that indicates is asp
came down and Amazon talked about that a little bit I think they said yeah the mix really shifted a lot this Corridor to essential Goods so you can imagine
toilet paper paper towels face mask know all these kinds of things they have a lower ASP than buying
please digital camera or something like that so so that was interesting aspect of the quarter on the prime side,
this is one of the growth rates that didn’t accelerate materially it grew 29 percent this is tucked into a
footnote called subscription Services Revenue it includes some other things but it’s mostly Prime so that grew 29 percent and then in fourth quarter that was 32%
what you have to realize is the fourth quarter usually almost doubles so I think like if you looked at the third quarter it was like sixteen percent and then
because of the holiday you have all these people signing up for Prime so then it surges and then it usually goes back down to kind of like about half the rate of Q for so it actually kind of hovered at that cue for a rate so while it’s not an acceleration
it’s pretty much signing up Prime members at a Holiday pace so that that’s you know I think that.

[50:15] Probably the most material metric in here that just kind of.
This is brought all these new Prime people in they’re going to get addicted to the Amazon experience post pandemic and they’re just going to kind of raise the.
The sea level of so to use your setup that you said at the top of the show you know if we do get to that 25% of sales are our online Amazon’s going to get a disproportionate.
Chunk of that because I’m get everyone addicted to Prime.

[50:44] Third-party Marketplace the mix there has been hovering around 50 to 53 percent so even with all this going on still a lot of activity on the third party Marketplace 52% of units were from that
one of the one of the big amazon things I wanted to kind of inject here not not specifically related to the quarter is there is a lot of noise so there was a congressional hearing and some ex amazonians and then some current ones gut
got asked a lot of tough questions about Amazon’s private label business and in there and I haven’t read the specific thing maybe you have Jason that the kind of let.

[51:21] The kind of quote-unquote let slip that they absolutely do look at third party data to come up with all these products so that was kind of.
Blew Up in a New York Times article that you know Amazon is set for years they don’t do this now there’s proof that they do then you know.
One of the Amazon lawyers was like yeah but you can’t know what’s in our heart or something like that and that that caused it to get even more negative PR that they kind of like they didn’t intend to but it just kind of happened so that that didn’t sound very.
Very apologetic tickets so so there’s there you know it’s kind of tucked into politics little bit so this then this whole thing like kind of rolls into some politics going on but that was interesting because you know Amazon has said for a long time
don’t look at that data I think everyone kind of knows practical standpoint you know how do you how do you go researcher so let’s say we were in charge of.
Amazon private label batteries I mean you’re not going to look at Amazon’s data you’re going to look at,
Walmart’s and Best Buy’s but not your own that just doesn’t seem practical for a lot of different things what did you think about that article.

[52:27] Yeah so again like Amazon has.
A number of PR challenges and that certainly one and they testified to Congress that they weren’t doing that so that that like create some legitimate concerns for them like there’s part of me that’s like.
This is nothing new that hasn’t been going on in retail for 60 years right and and,
I mean private label and lately exclusive products like Target is wildly successful at creating their own products and there’s nobody that doesn’t think targets not using,
the sales data they get from National Brands to influence what what products they make so it’s a little bit weird.
The Amazon gets singled out for this like I you know I feel like a lot of other retailers are benefiting from Amazon being in the boogeyman now like even when they.
They all engage in a similar practice so to me like I don’t look at that as a super nefarious thing but I certainly understand why.
You probably shouldn’t testify in front of Congress that you’re not doing something that you are I guess.

[53:38] I did want to like once white piece of color onto the other things like just talking about the the revenue growth that you talked about,
one of the things that’s impressive in that is once covid kicked in there’s a lot of evidence that Amazon was doing everything they could to slow down sales right so you know they certainly reduce their shipping promises for non-essential Goods,
but the more interesting thing is they turned off all of these like suggestive selling features and recommendations and it really seems like when you buy stuff from Amazon right now a lot of the the successful tools they use to try to increase your basket size.

[54:13] They’re intentionally not doing right now so that Revenue growth all the more impressive considering they probably didn’t use their full arsenal.
To sell,
and then the thing that’s interesting to me on Prime is going to be there now is this event every year that really Goose has Prime Membership which is prime day and nobody knows what’s going to happen with prime Day this year like most of us believe,
at best it’s going to get postponed I think it’s on unofficially already been announced that it’s going to get postponed,
but you know you wonder what’s going to happen with that this year so interesting stuff to watch
as you know the category of Revenue that I like to always pay attention to is the
super excitingly labeled other revenue and the the the reason I’m interested in other is because other is primarily Amazon’s advertising business so the ads
the revenue they generate selling ads on their platform that that was the fastest growing piece of the revenue That’s That Grew at 44 percent which is a significant its acceleration
that amount of to like 5.56 billion dollars for the quarter.

[55:34] You know it’s it needs to be seasonally adjusted but if that’s a
a twenty billion dollar advertising run rate to put that in perspective Google does like 41 billion in advertising so,
that that they’re becoming a significant number three advertising platform behind Google and Facebook.

[55:58] And I I’m spacing in my head is Google that Google does like 41 billion a quarter right.
Yeah yeah so so 20 billion versus 120 billion so
you know still not still far away but by far the third largest advertising platform out there
so that makes them much bigger than like a snap or a Twitter or some of those folks and it’s way higher margin than all these other services.

[56:28] Yeah the growth rates are pretty interesting so Google’s growing it Google and Facebook are growing kind of mid teens so call it 13 and 17 percent so the Amazons
continue to grow kind of in this 40% so yeah your chart it out they’ll eventually catch up it’s going to take a while but
yeah you and I are saying that about Walmart for like five years and then like sure enough five years later they did that that’s the amazing thing about that Amazon is day you know.
You can kind of set these trajectories at five and ten year cycles and you know I’ve been at this long enough that you’re like crap it they just kind of did it you know if they got there.

[57:03] Yeah and so this is a place where the law of large numbers probably is working right in the much slower growth of those bigger players but,
like what’s also interesting not only is Amazon potentially catching them but Amazon is catching them with a mixed Revenue model where they have Diversified set of Revenue which is way better than being exclusive exclusively
single Source on the advertising Revenue model which is essentially the position that
the Google and Facebook are in so if Amazon ever caught them they would caught they would catch them with a much.
More robust business model than,
the Facebook’s and Google’s of the world so that is is super interesting and it has all kinds of ramifications every other retailers trying to figure out how
like this is another you like huge competitive Advantage for Amazon you can operate on a lower retail margins when you’re supplementing that Revenue with all this ad revenue and so if.
Amazon’s retail competitors you’re trying to figure out how do you get your share of that and it’s very difficult.
The other piece of Revenue that everyone totally totally follows that I tend to think is overhyped you alluded to earlier is the AWS business and AWS is an awesome business there’s no question about that.

[58:22] Revenue for this quarter native us was ten point two billion which is 33 percent growth which is.
A slight deceleration I think I think they were right 34% last quarter but but it’s been consistently.
It’s growing but but at a slower rate which again is probably the.
The law of large numbers now what is interesting this quarter is margins.
Um we’re considerably up for AWS so they’re up to Thirty point one percent versus 26 percent last quarter so that’s a.
Meaningful increase the the reason I say overhyped despite the fact that AWS has this great business it’s a great business that’s.
Segmented in the earning statement so you can see it by itself and so everyone tends to look at that and go oh that’s where all the profit is an Amazon and the retail business for example isn’t profitable,
and as you and I know and as we always try to teach listeners on this show.
You really can’t think of the retail business as one business there’s a bunch of business models in there and some of those business models,
are probably even more profitable than AWS so you know I think of for example the three piece out of Amazon’s business as being.
A much larger piece of Revenue than AWS at similar gross margins so.

[59:45] Like I would not turn down the AWS business if someone offered it to me but it’s not the only jewel in Amazon.

[59:56] They obviously in their earnings hyped up a lot of the ways the AWS is being helpful in the fight against covid-19 and you know there’s a lot of Educational Tools that they’re giving away free to teachers.
They’re providing a lot of data and processing power to researchers all over the world to help fight covid which is interesting.
The other Revenue class that I’m always interested in is Brick and Mortar retail.

[1:00:22] Um and so brick and mortar retail this quarter for Amazon was up eight percent which is super interesting because the last,
quarter and for the last several quarters brick and mortar retail had actually shrunk at Amazon so it was down 1% last quarter this quarter it’s up 8%.
And that’s actually remarkable because.
There’s a super important piece of covid friendly Revenue that isn’t in that number,
so if you think of all the people that are now having Whole Foods delivered at home and you go oh Jason yeah Whole Foods is selling way more stuff as a result of covid-19 and that’s why brick-and-mortar retail revenues up.
That would make total sense except that in Amazon’s world if you place the order for those groceries online and then pick it up curbside or have it delivered to your house.
That’s not considered brick-and-mortar Revenue so this 8% is actually people that paid at a cash register,
in a whole food store and so interesting that that jump so much this quarter,
and potentially bodes well for Amazon given that they kind of had lost ground there and and historically what they’ve said is oh yeah we lost ground because we shifted a bunch of people to digital,
so this quarter more people than ever shifted to digital and they were still able to grow brick-and-mortar Revenue which is interesting and and along those lines.

[1:01:46] I forget the count but I want to say there are like 340 Whole Food stores in the country.
They’re only delivering groceries out of 80 of them when this whole thing started and so like well.
It gets a lot of Buzz the amount of groceries Whole Foods delivers versus like a Walmart is is Tiny and what is interesting is that.
Being the great operators that they were they were able to expand from 80 stores delivering groceries to 150 stores,
delivering groceries during covid so they added a lot of infrastructure very quickly to sort of beef up their their curbside pickup and grocery delivery presents,
and a little fun fact,
I’ve been talking for a while about this new grocery concept that Amazon was working on and getting ready to open in LA and it probably was scheduled to open during this and did not open but what’s interesting is that that store in Woodland Hills has a,
unique technology in it for optimizing grocery packing and it’s called the micro fulfillment centers kind of a robotic e-commerce site that’s inside of a grocery store for
for filling grocery orders and what they’ve done with that story they haven’t opened it but they’re using it as a dark store on there delivering groceries,
out of that that store which is kind of cool so.

[1:03:08] Hipsters way we call this Cloud store like a cloud kitchen cloud storage.

[1:03:13] Sure sure that’s a few like dark store already existed but yeah I’ll go Cloud store for you.

[1:03:19] We could call it a buy online ship from cloud bop bop fluke I need to work on that I’m trying.

[1:03:26] Yeah be careful when you Wing those those acronyms like during the show you’re going to come up with some profanity.

[1:03:34] I know that’s it keeps listeners on edge they love.

[1:03:36] Awesome.

[1:03:39] Is Scott gonna mess up.

[1:03:40] Exactly so that was kind of the story on retailgeek.

[1:03:44] Yes I know we’re bumping up against time so I’ll jump through this pretty quick
you know in wall Street’s mind it’s kind of like what have you done for me lately so you one’s over tell us about Q2 so Amazon did put out guidance for Q2 which is interesting because a lot of companies have just essentially said they’ve got done what’s called quote-unquote withdrawn guidance meaning
hey so much going on I have you I don’t even know what to tell you so you know
well we’ll see how the quarter shapes up Amazon did put guidance out there and they said Q2 is going to come in at seventy five to ninety 1 billion and just kind of as a reminder at the top of the show Jason said we did 75 billion so
so kind of you know at least as good as q1 but with a fair amount of upside to that 91 billion number.

[1:04:34] Amazon has had a history of kind of coming in at or above the top end of their guidance at the midpoint there that would be 23%
your growth and you come again we’re kind of grown at 27% here so I do I feel like they’re sandbagging a little bit there and they’re going to come in at the highwomen
Part of That Wall Street was at 78 billion so kind of in line with what they were thinking they’ve been creeping that up as the pandemic stuffs happened
big surprise to Wall Street and this may be why Amazon noise goes to these invest in Harvest Cycles this was a signal that hey
we are going into the mother of all invest cycles and they essentially said hey Q2 bottom line is going to be a range of minus one and a half billion to positive one and a half billion so kind of 3 billion range there.

[1:05:19] That doesn’t sound crazy but what Wall Street was expecting was more like four billion so they effectively said to Wall Street
I know you were thinking we’re going to make four billion next quarter but we’re actually going to possibly spend all that and another one and a half billion and essentially invest five and a half billion dollars that quarter
so in that kind of takes us to the analysis color commentary so in the note to shareholders
it’s usually a lot of fluff in there but there was this really interesting line where Bezos said and I’m going to quote this quote if you’re a shareholder an Amazon you may want to take a seat because we are not thinking small so.

[1:05:57] You know I don’t know what that means but it kind of says to me everyone interpreted it different it says to me that they have,
they see the surge they think it’s going to stick and they’re going to just like
invest like we’ve never seen before into that that invest mode so that’s going to be really interesting to look at they specifically called out in Q2 they’re going to make over 4 billion dollar investment that
called it into covid related activities and you’re going to break that down for us
so let’s see so it’s gonna be interesting how much of this do they spend on covid related stuff how much is and shipping and fulfillment centers that you know
they’ve talked a lot about how they’re going to hire hundreds of thousands of folks so so that’s interesting.
Jason went what did you pick apart from some of the color there.

[1:06:52] Yeah well first of all like just thinking about that Top Line like I was terrified when I read that and the reason I was terrified is because
um you know they’re a bunch of retailers that are going to go out of business and Amazon’s going to spend a fortune grabbing all of that share and a bunch of retards that don’t go out of business are going to implement
like extreme austerity measures and spend no money so I like their share of voice their customer awareness all that stuff’s going to go down and like every dollar amazon is able to invest right now is going to work harder,
then it would any other time like so the fact that they’re like preparing investors for a major investment cycle,
is terrifying because they’re like nobody is going to be in a position to sort of match those kind of Moves In This climate,
so that’s going to be going to be you know I suspect like they’re in the long run very successful for Amazon so if you’re a long-term investor like probably don’t lose too much sleep over the lack of profitability in the short-term,
the they did say that they expected that the covid related expenses here are going to be like 4 billion dollars.
And they broke some of that out like one of the most interesting things that they broke out was that they’re spending about three hundred million dollars to open their own covid-19 Testing Lab.

[1:08:20] And this is a interesting play.
Other retailers are partnering with the labs and trying to like acquire more testing capacity but Amazon is the only one that’s trying to like build their own supply chain for testing,
and the stated reason they need this is they need to be able to test all their employees so they can,
quarantine ones that are positive and let all the other ones know that they’re safe.

[1:08:47] And so in terms of keeping their their Workforce working and and healthy,
they need this extensive testing capacity so they’re they’re mostly building this capacity for their own employees,
but then they do kind of say and if we have any left over capacity maybe we would sell that to someone else.
And if that sounds familiar to you that would be because that was the sort of.
Germ behind the launching of AWS and fulfillment by Amazon and you know potentially a bunch of,
other services and so you quite Are We Now facing some future when like.
Amazon is going to be the largest like healthcare provider in the in the world as a result of like all this infrastructure there originally building for their own internal needs.

[1:09:41] You can imagine here’s your package Json stick out your tongue swab thanks have a good day boom.

[1:09:46] Yeah and so again that’s a cost but that’s a cost that could have a significant return there are a bunch of other covid costs that are like are pure costs,
so a big one is they’ve just said hey fulfillment centers are going to have to be less efficient because,
you know Amazon is historically super aggressive about optimizing efficiency and so what they’d want is,
the workers to walk the shortest distance from the product to shipping and you know they really optimize every minute of Labor in that warehouse,
but those practices are not very social distancing friendly and so they’re now having to like intentionally space employees out more for safety and that means they’re not going to be as efficient so there’s.

[1:10:30] Hard costs associated with that,
they’re going to provide personal protective equipment for all of their employees and that has a significant cost.
They’re gonna you know they’ve invested in a arsenal of like,
thermal cameras for taking temperature to monitor the temperature of all their employees and stuff like that so there are a bunch of these,
extraneous cost that they wouldn’t otherwise need but that they’re going to incur because covid and so they’re saying along with the testing that that might all roll up to four billion dollars in expenses but they’re also hiring a heck of a lot more folks
that’s another potential long-term advantage of their able to hang on to those folks they’re paying people more a really interesting you know piece of speculation is.

[1:11:17] Like are these increase our he’s going to end up being permanent or are you know are they eventually going to build the drop down to the lower salaries,
time will tell on that one.
Like you know the query there’s going to be a lot more shift to digital shopping and Amazon is better position than anyone else to grab a disproportionate share of that so it’s gonna you know buckle up it’s going to be an interesting ride.

[1:11:44] Absolutely there so in conclusion you know the way I would characterize it is,
short-term there’s going to be some gyrations in the stock and you’re going to need some headlines that make it seem negative but you know
Amazon just kind of so the tired of all online just Rose to 25 Amazon’s been tune away at half of that and I think they’re going to make a move here to get above half of that you’re going to see more drivers more
more of the same stuff and that the scale they’re at they can invest these amounts and you said and you know everyone else is on.
Dust or it really feels like.
There’s this old political adage don’t waste a crisis if it seems like Amazon is using this this crisis that the obviously they didn’t have a role in but they’re going to use it to to increase.
To increase their share of this hugely Rising tide.

[1:12:36] Yeah and I feel like I can summarize up everything in one terrifying statement you know there was apparently like
prior to this Jeff Bezos said do I delegate it a lot more operation of the company and was kind of you know disentangling him sitting himself from sort of the micromanagement that,
he sort of was originally famous for and as a result of covid he’s like came back into the CEO seat and put both hands on the wheel
and and I think that you know I think we you can see those fingerprints and a lot of these moves.

[1:13:10] Good news for you Jason is once you get kind of the crowd punched up with all the bad news then this could be like that knock and then you can be like and let me tell you about Amazon’s first quarter boom knockout punch.

[1:13:23] Exactly I’m not a thousand percent sure how that’s good news but I’ll roll with it I’ll take anything at this point.

[1:13:29] It’s more bad news you’re just going to like you know you got a tear them down before you build them back.

[1:13:34] Yeah you know I mean there’s a bunch of Doom and Gloom in the personal cost to all this stuff is like just heart-wrenching,
but you know every forest fire like creates new growth and every time we’ve seen an economic downturn amazing new companies of and entrepreneurs of emerged and I you know,
this this totally sucks but I’m sure we’re going to see all those things again and,
you know hopefully everyone is able to weather through it,
and that’s about the most optimism I can muster as we have gone way over time if you stuck with this little time I totally appreciate it in the highly unlikely event that you
have enough energy for any questions or comments hit us up on our Facebook page or hit us on Twitter
as always if you like really long shows a perfect way to reward us would be to jump onto iTunes and write us that five star review.

[1:14:34] Absolutely thanks for joining us everyone.

[1:14:36] Until next time happy commercing!

Apr 26, 2020

EP217 - OfferUp CEO Nick Huzar

Episode 217 is an interview with Nick Huzar (@nickhuzar), the Founder and CEO of OfferUp (@OfferUp). OfferUp is the largest mobile marketplace in the U.S, facilitating consumer to consumer sales of second-hand goods.

In this interview, we discuss OfferUp’s recent fund raise, the acquisition of LetGo, and the state of C2C Marketplaces during Covid-19.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 217 of the Jason & Scot show was recorded live on Thursday, April 23rd, 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 217 being recorded on Thursday April 23rd 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 we are still recording during this fun pandemic shelter at home period and
because we normally when we’re not she’ll bring it home have day jobs record the podcast late late at night it really restricts people that are crazy enough to come on the podcast so we’re using this opportunity to go through what I would call our Marketplace bucket list.
So today on the podcast we have another bucket list guess this is pretty exciting.
One of the biggest Trends in US market places that’s kind of under the radar and if you go to like a lot of trade shows and stuff
but it is if you look at traffic data you realize there’s a really big movement here,
is what I would call a new family a new innovation around smartphone app based consumer to consumer or some people say person-to-person marketplaces.
So today on the show we are really excited to have the CEO of what I believed to be the largest one of these these new kind of mobile market places we,
the CEO of offer up Nick who’s are welcome to the show Nick.

[1:43] Thanks for having me it’s great to be here.

[1:45] Do you prefer person-to-person consumer-to-consumer or do you use some other lingo.

[1:50] I think it’s I think it’s all the same that the the main idea is you know leveraging this technology that’s in all of our pockets to kind of reimagine local Commerce as we know it.

[2:05] Awesome and Nick we may be the only ones in the planet that have a Marketplace bucket list but we’re we’re.

[2:14] Everyone needs one.

[2:15] Yeah everyone should have one but I feel like we’re the only ones that are cool enough to actually have one so thanks for helping us check one one off but before we jump into OfferUp in marketplaces
we always like to give listeners a little bit of color about your background so can you tell us what you’re doing and how you came to OfferUp.

[2:35] Yeah happy to so I’ve always been in the I’d say the Internet space pretty much since I graduated college.

[2:42] Kind of dating myself now but I used to I remember coming out of school I had to explain to people on companies why they needed a database connected to their website so that’s kind of gives you an idea of when I graduated college.
But I’ve always been fascinated by I think the the endless possibilities with the internet so in some way shape or form of.
I’ve been in at various startups you know throughout most of my career I did some briefs tents at T-Mobile.
Spend a little bit of time at Microsoft you know I’ve done a few different companies my previous company too,
OfferUp was called connects most people have no idea who the heck we were I’m not surprised but we started.

[3:26] Connects pre Friendster and so sometimes I’ll server after remind people what the heck was Friendster or Friendster came before my space and my space came before Facebook so we were very early I think I’d like to say I learned a lot of a.
Mistakes kind of how to build a company and a startup.
And you know ultimately I had no plans on doing another startup there a lot of work but I had a daughter on the way and I was so excited I went into this room full of stuff.
That I had in my house and I was going to turn it into her nursery and that became the spark,
and that ultimately turned into OfferUp and you know for me would you know I had I didn’t jump on it right away I mean clearly you know I think there’s a long as a graveyard of companies that have tried to.

[4:15] Compete locally but.
I think what what what drew me to this opportunity was this device that is now in all of our pockets but back when we started off her up you know very few people had smartphones in fact there was no Android phone.
So you know what I what I could imagine at the time was like look I just wanted to make these.
I just wanted to clear out this room like quickly and there was no easy way to do that so,
again looking at this device that had was now in my pocket I just kept wondering to myself can we is it time to reimagine what local can be.
You know through these devices so that’s what ultimately you know created this spark for me to want to you know pursue this this this opportunity.

[5:07] That that’s awesome and it’s it’s probably a coincidence I feel like I probably shouldn’t even lump the two of you together but
there’s a prolific track record of entrepreneurs coming from T-Mobile and being very successful at raising funds and I know this because,
the the guy I’m thinking of has the same name as me Jason Goldberg so.
That may not be good news for you but you’re following in his footsteps.

[5:37] So what year did you found OfferUp is this like 2010.

[5:43] I lose track of time and to be honest I thought like.

[5:46] We’re all doing that now.

[5:47] I’ve years ago I think 90 now yeah.

[5:50] Okay so yeah right when the iPhone one came out so I was good timing
talk us through the funding history I looked up on crunchbase and they were very specific they said you’ve raised 381 million that was funny they couldn’t round up anyway congrats on that that’s that’s always you know,
fundraising isn’t the best measure of success but it is one so congrats on all the fundraising walk us through kind of the funding history there.

[6:17] Yeah well I mean you know going back again to that that moment in my doorway in a room I wanted to clear out I think like like any entrepreneur
you have this big aha moment and then reality hits that you have to actually go build it and that’s when it gets hard and so.
You know again just you know why and I like to remind a lot of people that it people kind of tend to put us in this bucket of oh it’s mobile classifieds and I think.
That’s a fine public perception today but
that’s not to be clear not at all what I set out to build what we set out to build was you know to become the largest local Marketplace period
and that’s you know we what I saw as an opportunity was just unlocking local value and what I mean by that is you know 25% of.
Us households with the two-car garage it can’t park in the garage you know our homes are 30% larger than the 50s but we’re having less kids and so,
just so much stuff stuck in in our homes if you look at storage you know 10% of our population our at storage units but even beyond that and especially now
what about local retail what is what is in these stores like you can never you can’t visualize those things today and I think
the opportunity that I saw was you know again how do you.
Unlock all this value and my belief was it’s locked up because there’s a lot of friction in that experience and so.

[7:43] Anyhow that’s my long way of saying it took us a while to raise funds like the first year we only had a hundred thousand dollars raised,
and we just you know luckily I can code and design and my co-founder could you know set up AWS and set up the back end so between the two of us we pay ourselves literally nothing.
And just coded for basically a year straight.
Um and then year to we had to figure out how to get scale and I’ll spare all the details because I could go on for hours and all the failed experiments that we tried but that was very hard I was a very very hard time so ultimately.

[8:23] Scale from a technology standpoint or scale from a user buyer-seller son.

[8:27] Yeah buyers and sellers and so you know I used to show up to people who pretend you attend to your.
You posted your couch and OfferUp I used to show up and I’d buy it from you,
because we had very few post back then and I wouldn’t tell you that I worked at OfferUp I just wanted you to believe it worked and then I’d bring it back ultimately we had a small office I’d stick it in her office so you can imagine Five Guys coating it a few desks but just junk everywhere that’s what it looked like for a while,
you know it’s one of those fake it till you make it moments but it took us almost two years before we raised our series A,
and I think that was you know I think it was it was very hard I think a lot of people thought we were just trying to replicate,
and what had been done on the desktop you know I think,
you know we are all so early that was another lesson like you know we started really early and so there was no Android phones for a while and so I think that was another.

[9:24] You know I think it was one of those things where we just had to see smartphone adoption take off and then clearly we had to prove to investors that
we actually could get the flywheel to move in a Marketplace we could get buyers to potap by and sellers to post and just continue to get that final to work and so you know and when we raised our series a we were only in Seattle it was very very intentional
there was a handful of competitors at the time and I think they were probably really smart folks but,
on the technical side that I don’t think they were met you know really measuring and thinking about what is success and success is like its liquidity that’s everything and so,
we stayed in one ZIP code until we got that flywheel to Mu conversely we had competitors that were then launching,
they launched an app and so you can use it anywhere in the country and I you know I thought that was disastrous I thought that you know they were not going to.
Have success on liquidity so I didn’t worry too much about them so.
You know where as we raise more Capital over the years a lot of the focus has been early in the early days we just launching
new markets you know we stayed in Seattle for a year you’re so and then register a and with that Capital we wanted to prove that,
we could then roll into numerous other.

[10:38] Yeah so you’re very knowledgeable out Marketplace is to just grind this out yourself or did you know how did you learn so much about marketplaces.

[10:47] Yeah I have I have zero history in marketplaces that and so I actually think.

[10:51] Scar tissue.

[10:54] Benefit you know I remember hearing a podcast once with Reid Hoffman talking about.
Why PayPal was such a success and he said like look I didn’t come from banking like I didn’t know any better I just and I think that was the same.
The way I looked at this like I literally I can’t think of any time where we ever pulled up any desktop websites and marketplaces,
as an example of how to design OfferUp,
it was all just what what was the experience we wanted to create and let’s just design what that is a good example would be,
you know if you open up OfferUp today it’s going to show you items nearby you with some personalization.
And just like this infinite list of pictures when we launched nobody was doing that I mean this was pretty Instagram right so
it was a it was kind of a novel idea at the time and you know we wanted to kind of simulate this treasure hunt right we wanted to have this I just want to visualize
what’s in my neighbor’s garage or what’s in a business down the street so you know I think we’ve taken a lot of just approaches completely different and.
And back to your question I think that’s it’s probably just because we didn’t know any different.

[12:11] Um so I noticed on the crunchbase list there you had some of the some of the late-stage guys some of the mutual funds that have kind of gone early that’s interesting and then I saw Max election so he’s a co-founder of a firm and then also part of the PayPal Mafia has that has he been a good
good addition to the team.

[12:29] Oh yeah Max I’ve known Max just you know over the years and he’s always been very generous with his time and thoughts and.
Clearly very knowledgeable about payments and you know.
So I leaned on him periodically just to kind of pick his brain on what’s happening in the world and how he thinks about.
Your transactions and payments overall.

[12:56] That is terrific Nick for listeners then might not be totally familiar with OfferUp can you kind of walk us through the basic buying and selling flow and kind of what pieces you you help facilitate.

[13:11] Yeah for sure so I think on the buyers you know as I mentioned just briefly a moment ago our our view has been,
you know we want to you know we want to build the simplest largest and most,
trusted local Marketplace and that’s that shows up a lot in the product so you know when you open up the product think of it like walking into a retail store.
And we wanted to make it a very visual you know visual experience and luckily over the years one of our our.
Our beliefs was the cameras would constantly get better and we could you know really show these beautiful pictures you know it within OfferUp and that that has been true and so
you know that’s the first thing I think you notice is a buyer that it is a very different experience than going to a lot of traditional say desktop.
Marketplaces and that’s very intentional we wanted it to be kind of the treasure hunt we wanted it to,
be some elements of serendipity where you maybe are looking for a car and you end up buying a pair of shoes that that happens quite a bit you know on OfferUp,
and so you know our our average buyer you know is on OfferUp like three times a day they engage in OfferUp more like they engage in social media than they do in the traditional.

[14:32] Commerce and so yeah so if you’re a buyer and say for example you’re looking for,
I don’t know what’s popular right now like a lot of things are like like fitness equipment is on fire right now and think a lot of people are stuck at home and they can’t go to the gym,
let’s so let’s say you’re looking for some weights you scroll through you find something there by you then can then you can then read the profile about the cellar like how many radians do they have how far away do they live
do you have trusted connection through friends to that Cellar and you can read through just some overall profile information to make sure
that there’s somebody that you trust and her wanting to do business with and then the process of engaging on you know say those weights is actually very straightforward you can
if it is a shipping item you can just hit a button and have it shipped to you if it’s a local item you can just send them a message and say hey can we meet up tomorrow and,
you know the whole idea from the buyer standpoint was to make it you know a really simple experience but also back to this trust element having a profile and understanding who you’re interacting with,
not giving out your phone number like you know I think in a lot of traditional local market places you have to get your phone number to close the transaction,
um you know OfferUp is really Commerce wrapped around chat so you can communicate all the way to the point of cell without having to give it out personal information.

[16:00] And then on the seller side it’s literally as easy as taking and sharing a photo so like this chair that I’m sitting on right now if I wanted to sell this on OfferUp I would just pop my phone I would take a picture I would give it.
You know a price and maybe a short description and hit post and and less than 30 seconds my chair is now available for the local community to discover and we tend to find that,
people get engagement extremely quickly you know we’ve heard people that you know taking pictures and within a minute you know they get a whole bunch of Engagement.
And you know itself things very quickly so you know like I said that’s that’s a big focus of the product and will continue to be which will be removing,
friction and in the experience and so I think we’re far better today than I think the desktop players just because we’re leveraging.
The power and the smartphone but I still think there’s plenty of plenty of ways we can reduce friction for buyers and sellers.

[17:03] Awesome so so your to set the marketplace buyers sellers can list items buyers can find items they negotiate amongst themselves on pricing,
do you offer an option to facilitate the transaction or do you get into the payment element at all.

[17:25] We do if you enable your item for shipping so when you post an item as a seller there’s a toggle on there to enable shipping or only do local
that is a very fast growing part of our business we launched that in 2018 especially right now with,
with the people stuck at home it’s growing very very fast so you know and that case we take a small percentage,
of the transaction to be able to facilitate payments between buyers and sellers.

[17:55] Gotcha and by the way you made me super nostalgic in the beginning when you said imagine walking into a store because that
we haven’t been able to do that in a few months and it’s like you know it seems trite now I know it was like a much bigger bet in 2010 when you jumped on it but like the the Insight that,
The Experience on the mobile phone would be dramatically different and lower friction than than the traditional desktop one is kind of big and I feel like.
Optimism around the camera I like it keeps paying dividends because I know the new Apple phones that have lidar enem I could imagine you’re gonna be able to get the dimensions of that that desk or chair that you’re selling.
Now or in the in the near future up those kinds of devices.

[18:46] Oh yeah I like I said I think there’s.
We will continue its I always say that we’re kind of Reinventing herself every year so we’re going back and we’re going yep we can make this process better we have let’s save some time here so they’re just so much more we can continue to layer on the marketplace that we have but
back to the point.
You know it’s just these devices continue to get more and more powerful and we can leverage that to make it a better better experience for our customers.

[19:17] Wrinkle so you guys recently announced with your last round that you’re acquiring one of your competitors called let go tell us about that and how that’s going and why you’re doing it and.
It’s always imagine you’re in the midst of integration that’s always fun.

[19:36] Yeah so I mean you know I think the there’s a huge opportunity in the US and I think any time you’re going after a large Market you’re going to have competitors so as I mentioned even when we started we had a handful of competitors,
but I think we were the first to really start to get meaningful scale in a pretty big way.
We tried to stay as quiet as we could for as long as you could we delay doing press for a number of years we just kind of.
Hung out in our office which is in the swamp in Bellevue Washington and didn’t really tell a lot of people what we’re doing but ultimately,
you know we saw that go enter the US and.
You know I think what became interesting over the years was just kind of how we approached you know the market we’ve gone very
deep into many of the top 30 dmas and the country,
as you know as OfferUp we have markets like Phoenix and La where over 17 18 percent of the adult population in those markets is using OfferUp every single month.

[20:41] Um and with let go they you know they are as I said have more of a presence and other parts of the country and then so I think that right there made it.
Pretty intriguing to explore working with them more as we think about how do we how do we grow in other parts of the country even more how do we kind of drive a local adoption where we’re already strong.
So we thought there were quite a few synergies and not a ton of overlap I think people tend to gravitate.
To the market places where they have the most success I don’t think most users are going to use you know a whole bunch of these I think they’re just really going to focus on the ones that,
is producing the best value for them so you know I think that right there was you know as we spent more time with them it became more intriguing that there was a good you know Synergy in our in our businesses.
And then on top of that you know as we wanted to come together we just have a lot of you know I think,
product development ahead of us and things we wanted to build so you know raising capital on top of that was was intriguing it as well and so we’re feel fortunate that their investors invested and,
you know we have I think some of the best investors on the planet and OfferUp and they also participated it in this financing to.

[22:06] Are you going to there’s one strategy and mobile apps to have kind of two apps out there because it’s almost like more virtual shelf space are you guys going to have kind of two apps a little bit of different flavor are you going to consolidate them into one.

[22:19] Yeah well we think there’s a lot of opportunity ultimately in having one experience but we are definitely going to,
tread lightly and into as we explore integration with them the best way to do it so we don’t want we really want to make sure that,
you know we’re taking care of the let-go users and taking care of the OfferUp users as best we can but we’re,
I guess the point is we’re not going to just flick a switch we’re going to spend quite a bit of time and making sure we’re being thoughtful about how we how we come together.

[22:51] Yeah the mobile app stuff is always very tricky because obviously like it’s super hard to get customers to download an app and be and particularly its even way harder to get them to be a regular user of that app and so.
Fragmenting your audience amongst multiple apps you know comes with some baggage but first God’s Point like it also potentially.
Boost your visibility in that App Store.
A random side no just because it’s so sad it’s funny but one of my big clients is Walmart and they’ve had this.
This multi-year debate about if they should have two apps general merchandise and grocery or one and I’ve always strongly felt they should have won,
a few months ago they finally agreed to do that and then a month before they merge the two apps covid-19 pandemic hits and the way it 10x is downloads of their grocery out.

[23:46] Yeah you can’t you can’t predict that.

[23:49] No no so I briefly thought I finally won that argument and then the the community the world spoke.
But I do I noticed that you like to increase the level of difficulty you were just having a kid and you decided to throw in a start-up and like you decided to do a big round of funding and a merger in the middle of a pandemic so.
Props to you for that.
Um the you know to set of marketplaces are super interesting from a marketing standpoint like there’s a lot of debate one big debate is do you expand geographically or not and it sounds like you guys made a.
Intentional decision to get a concentration in some Geo’s before you expanded but the other big question is.
Can you know can you really lean into marketing to one side or the other right so are you no do you try to in hand.
Entice Sellers and then that will like pull in the buyers or do you and try to you know do you try to get buyers and that’ll pull in the sellers like has there been a.
A strategy that’s been particularly effective for you or how do you think about that.

[24:58] Yeah so you know in the early days if I was to say what was one of the harder periods and.
It’s going OfferUp it was definitely getting the flywheel to move and I’ve heard a lot you know a number of people say building marketplaces are really hard and then they’re also really hard.
To kind of break down and you know I know that pain because not only did we figure that in Seattle but.
Every time we entered a new market essentially we were creating a brand new Marketplace so you know what
I used to know what we used to spend a bunch of time on was looking at kind of the overall metrics that really mattered and I used to always say hey we need to get neighborhood sick we need to create the zombie apocalypse
like how do we get you know how do we get you know how do we get the flywheel to move where the seller post something then the buyers there and the buyer has an amazing experience and then they tell their friends and family and it just kind of keeps going and going and going and you know,
what what are those attributes of those markets that are really material and what we found early on was.
Population density definitely matters to a certain degree.

[26:04] You know whether matters like do you really want to move a couch and in Chicago,
in the dead of winter we actually you know we’re thinking about that and then we said no like nobody wants to do that and,
and so luckily we found markets that that we thought you know just had the right attributes and we really over invested in those markets and Allah is a great example I mean I always had massive Market a lot of people have cars they can move Goods around
the weather’s nice most of the year it’s very viral most of OfferUp s’ growth is we spend dollars on marketing but to be clear most of it is word of mouth and I think that’s it goes back to the obsession over the product and,
created a really simple experience between buyers and sellers and and because of that you know most people I run into ask them how they heard about OfferUp and it’s usually friend friend or a family member.

[27:02] Yeah those were I think some of the harder learnings in the beginning you know today where I you know I really give kudos to my marketing team like a lot of the work they do I mean we do all of our marketing in-house a hundred percent,
um you know and that team.
All kind of works together external marketing internal Communications and we’re constantly call them day Traders they’re constantly
um you know looking at markets differently and sometimes they’ll try to drive more Supply and Target sellers more sometimes they’ll pull back but they are constantly iterating all throughout the country
sometimes at a national level but many times on a local level to kind of make sure that,
supply and demand balances is where it needs to be.

[27:50] Awesome and then we talked earlier about like when they check that that available for shipping option that you potentially can facilitate payments,
I forgot to ask.
Right is that exclusively through I could traditional credit card processor or do you guys offer like I imagine consumers could do this outside of you but do you guys facilitate any kind of digital wallet like a PayPal or something along those lines.

[28:18] We don’t today but again this is a big growth area for us and I think there’s a lot of opportunity.
To make a much better payment experience in the US.
Especially now if anyone’s gone shopping recently who the heck wants to carry cash around anymore who wants to touch these POS systems at now like the one at the store down the street from me has like a piece of Saran Wrap over it,
and then it and then it right next to it it has a bunch of hand sanitizer so an egg.

[28:54] Was already unappetizing now it could kill you.

[28:57] Yeah now I can kill you right and so.
If you look to the rest of the world I feel like we are so far behind in the US and you know I’ve had people ask me well why is that and my response is usually you’re asking the wrong question to be asking who what company.
You know is going to be the one that helps to drive this and and I think you know because of our local presence and how many millions of monthly meetups we have and.
You know we have more kind of merchants Now using OfferUp you know I think there’s a big area there in the US but I get I get more and more frustrated.
Week after week of trying to figure out you know another new POS system I could go in there well if I put the chip in all y’all do the chip and then you hit this button why did I gotta do this and I’m.
I just want to pull your hair out every time it’s not a great experience and it needs to needs to evolve.

[29:49] Yeah I actually have an Instagram feed that is exclusively pictures of handwritten notes on POS terminals explaining how to use them.

[29:58] I gotta I gotta I gotta follow you then because I hear hear.

[30:00] It’s Saturday it’s not hard to find.

[30:03] Yeah.

[30:04] Now how to find material and yeah it’s funny because it’s like people forget but PayPal and the US and Ali pay in China they you know their original purpose was not necessary to digitize cash it was,
to you know create a more robust trust system for peer-to-peer transactions and so I could certainly see that playing out.

[30:28] That’s and that’s a big part 2 I mean that is that is a big part is really,
bringing trust into local transactions you know and and online you know it’s,
it’s already there anyway if you’re shipping things it’s already you know that’s that path has been proven again and again so this is definitely an area where we’re pioneering and there’s still a lot to figure out but something I’m definitely passionate about.

[30:53] Nice and then unfortunately is like it’s things start opening up from the pandemic we’re likely going to be in a.
Some flavor of recession and you know a lot of consumers could be tighter on credit so you know I could even imagine things like like the installment model and things having a.
Having a role but in addition to that the other thing that would.
Maybe fit at some point is do you guys think about ever helping to facilitate that shipping when that’s an option.

[31:25] Yeah so so today we as I mentioned we introduced this in 2018 we have payments and
we’re presently enabling shipping for items under 20 pounds and under $500 so you know part of that was simply just to kind of get the foundation and get the Kinks figured out and there’s been a lot of work,
as you can imagine when we first launched that but over overtime like I envisioned that anything on OfferUp should be,
deliverable in some way shape or form so I think there’s a lot of work to figure out how to do that the right way,
so that will continue to explore different ways to do that.

[32:09] So if you’re if you’re not in the payment flow then unlike a traditional Marketplace like an Amazon or Ebay then presumably you’re not taking at a crate
so explain to us what is the business model where are people paying the list or our walk us through kind of the different areas where you make money.

[32:31] Yeah so there’s there’s two different I’d say kind of buckets for monetization today at OfferUp and the first one is promotions and the second one is paying so
you know when it comes to Promotions our Focus there simply to help sellers to be more successful.
So you know we have first party ads for example where you know you could come in as a seller and you know you can pay it increase your visibility on the platform
just helps you sell things quicker there’s also a reoccurring subscription model there where you could say okay
myself quite a bit you know I’m going to I’m going to pay a monthly fee and I’m just going to keep rotates a five items into that into the feed
and we and we help to that seller to sell those items faster,
we also have a Autos business where you know this this was
I’d say a vertical that just blew up on us that we had we had wasn’t like we were Geniuses I swear there was probably just a convention
one year and I think Vegas and I think somebody must have stood up and said hey I’m selling a lot of cars on OfferUp and all said and this vertical just beginning.

[33:46] Huge for us across the country and so in the last few years you started to spend more time
thinking about how we can help auto dealers to be more successful so that is another promotional tool where we integrate with their their dealer management system so they don’t always have to use the app you know if a car goes on the lot the magically goes on OfferUp.
We also give them advertising analytics they get a special badge on their profile there’s a handful of things we do to make sure that
this they stand out and so we have thousands and thousands of paying car dealers and that’s growing very rapidly,
and then on the payment side it’s you know today mostly shipping as I mentioned.
And that’s that’s why we’re taking a small percentage of transactions there.

[34:36] I’ve also seen some ads like a big Star Wars fan I see game stock advertisers bunch of cool stuff in the Star Wars category is that is that if you guys built your own ad Network or is that pulled from like another ad network of some kind.

[34:49] Yeah so we incorporated you know the third-party ads that you see in there are a number of years ago primarily because it was easy one and two it actually.
Helped buyers and it was one of those where I was saying we’re never going to put ads in there it’s going to ruin the feed.
But I found actually the opposite was true where buyers were finding that hey maybe if I couldn’t find that kids bike down the street that I wanted but maybe I could see one you know,
from a you know some local retail store and have it shipped to me or go go buy it.
The other thing that it did was also enabled people to do some pricing comparison right so they maybe they see that brand new bike and they see one very summer,
in the feed and they realize they’re getting a really good deal on that so we do do some third party advertising which you can kind of see through out the feet as well.

[35:47] Yeah I think you guys do a great job at it there’s a price and it’s very clearly an ad where it’s not like you know someone named other marketplaces where you’re kind of like you know
Max why is this showing up and you’re targeting is really good to other ones you’re kind of like why am I seeing this random iPhone accessory when I’m over here looking for couches.
So so that’s super helpful you mentioned earlier a bunch of kpis to get the liquidity going give a give lister’s any metrics you can share and you know I don’t want you to
get it any uncomfortable space but anything you can give us about the scale of the business to help them understand I think that would be interesting.

[36:26] Sure yeah so I think the you know what I would say you know going back to.
Be buying things from people in the beginning liquidity and my mind is everything you know the switching cost to join to try any marketplaces,
is not not that high so we wanted to make sure that we were we were the best Marketplace we could be for local buying and selling so,
you know what I could say around that is you know on a monthly basis we have billions of dollars in GMB,
from transactions happening on OfferUp and so it’s great to see that we’re providing that value and success for buyers and sellers.
You could also probably glean this from the App Store but you know the OfferUp app is now but installed over 90 million times we’re only focused on the US.
So we’ve been a top I’d say we’ve been a top-10 shopping app for many years now so I’m pretty proud of that considering.
You know we’re up there with giants you know multi billion dollar publicly-traded companies so it’s pretty happy to see that.
You know people have been telling others about OfferUp at such a high rate that it’s kind of.
You catapulted us to the top and we’ve been there for for such a long time.

[37:45] And I think I think the other thing again but I’d share is kind of what I said before is we have markets a lot of our special you know top markets where you know we’re close to 20% of the entire
adult population using Opera every month and I think that’s only going to get better as we continue to improve on the product experience and drive more,
you know adoption there.

[38:09] Let’s try to think again maybe something worth sharing with listeners around just what’s happening you know with the marketplace today and so,
you know if anything you know I really feel for.

[38:22] You know a lot of people and what they’re going through out there right now I think a lot of businesses are hurting not just for additional but also tech companies and.
Fortunately for us it’s the opposite like we are we have been growing so quick over the last number of,
months and the categories are really changed like I think part of the challenge is people can’t you know they can’t go to the store down the street so how are they going to get certain Goods,
and so our shipping business or seeing a lot more people shipping things electronic specially videogames I think video games are very you know trying to keep the kids busy.
You know locally we’re seeing a lot of what I call kind of porch pickups where people said hey let’s stay stay stay safe as socially distance but hey I’ll just leave the you know just leave the dresser out on the.

[39:17] On the on the on the patio or the door and just leave my knee or the matter.
Ring the doorbell and show me that you’re leaving the money there so I think there’s,
you know I think people are behaving differently but we’re definitely seeing a shift in categories where like I said like Fitness is way up household goods Electronics tools,
things around the yard so not I don’t think surprising for most people but definitely seeing it’s been great to see how OfferUp during this time is able to really you know help help people and how those categories have changed.

[39:57] Sprinkle the so we saw such an advisor when I say we is interesting we saw the
the stimulus checks hit like starting on the 15th and it’s we saw this kind of overall lift this is all public from webinar we saw this overall lift and then like this really interesting kind of taking off into another gear around then,
did you guys see anything around that stimulus check time.

[40:23] Yeah so the you know this is an interesting time of year for OfferUp heart of it is usually spring cleaning,
and that’s definitely happening quite a bit but we’ve also noticed
around stimulus and and tax time it definitely a lift you know you can you can tell when people are getting their taxes or tax refunds and stimulus check so by the day as you can see like this huge,
step up and overall engagement.

[40:55] Yeah like on the flip side of that are you finding any extra challenge like you know a lot of your goods were we’re sort of handed off person a person and I imagine there’s extra trepidation about.
Social distancing and stuff like that are you having to take extra steps to make people comfortable with with person-to-person transactions right now.

[41:19] So we you know we spent a lot of time just kind of thinking about this and we have a Blog where we posted kind of our overall points of view and guidance on that I think the challenge clearly is it say,
it’s a local city by City,
decision and it’s still shocking to me that there’s still a number of cities that haven’t really quarantined so you know I don’t think it’s our call to be specific.
On exactly what you should and shouldn’t do but we did have some overall high-level guidelines and encourage people to pay attention to what you know your city and officials are saying locally and try to adhere to those.
But I think it’s a definitely a kind of a,
get a thread the needle lightly because we want to be able to help people but we want people to be safe and especially when stores and resources are close like where can they get things right now and so,
I think in one level we’re providing a service to help people but we want them to be safe and adapt.

[42:26] You know we’ve seen auto dealers for example selling cars right now and you’re kind of like well how is that working and what you’ve seen them do.
You know the post an item on OfferUp and they’ll communicate around it and then they’ll jump on the phone with the the buyer and they’ll do title and they do all the paperwork and financing.
And they just bring the card I just bring the car to the buyers house and they just wave at him out the window here’s your car congrats and I’ll leave the key right here for you and.
So this you know you’re seeing people you know adapt during a time like this to figure out how to how to make it work.

[43:05] Yeah that’s fascinating and you mention Auto which is a an interesting category to me like you you don’t necessarily think of that as a.
Peer-to-peer ton of play but it really is right like is that a category you guys entered intentionally or was that a pleasant surprise or how is that played out.

[43:27] Yeah so as I mentioned a little bit earlier it was it was a pleasant surprise I would love to say we were Geniuses and really figured something out there but,
um I think it’s again back to,
trading this this very easy to use local experience I think a lot of dealers started jumping on our platform because it was so easy to list cars and attract a lot of buyers,
and so we just move clearly benefit benefited from that so you know I think I definitely think today we’re probably one of the top places in the country,
to buy a car I mean we sell.
Millions of millions of millions of cars on offer up every year and so you know it’s definitely a big vertical for us that will continue to invest in.

[44:15] That that’s awesome the like another one that I’m just somewhat curious about so I try to follow the Platforms in China pretty closely and obviously you don’t taobao is,
is a huge consumer to Consumer platform there and one thing I’ve noticed over the last like four or five years is.
They have dramatically pivoted from being super product-centric like being a catalog of product to being very content set direct so they’re like really leaning into the microblogs and the short video and all those sorts of things,
like I haven’t seen that as much by anyone in the u.s. like do you think that could work in the US or do you think there’s just a different sensibility or.

[44:58] And just to elaborate on what you’re saying are you are you talking about where people are showing off products and are these short videos.

[45:07] Yeah yeah it gets it’s like a seller would you know now is likely to have their own page on you know I like think of it like a microsite on taobao and they’re they’re doing like HSN Style,
you know what a little 60-second product demo videos to sell their goods.

[45:26] Yeah I mean I think that’s definitely interesting you know I think that’s something that we could continue to explore and play with overtime,
you know I think there is a time and place for that
especially if you’re a power sellers selling you know a lot of items and you want to build some Affinity around what you’re doing you know today at least you know the majority of OfferUp is really kind of overall,
you know peer-to-peer so.
I wouldn’t say your I could see your average seller doing that and depth but I could definitely see I think more powerseller spending the time to do that and then again like I said before these,
phones keep getting better right the quality is getting better all around and so I think it’s just a more engaging experience versus what,
you know what it may have been in the past.

[46:18] That’s a good let’s let’s explore that so you obviously spend everyday kind of marinating and the e-commerce juice of marketplaces and transactions or anything where do you think things are going to go in the next three to five years or we’re going to have like.
AR VR or do you think it’s just going to be better kind of experiences along the lines of what we’re having here.

[46:39] Well I mean I definitely think there’s a big there’s a big movement happening it’s already been happening but
I think because of covid it’s probably going to move quite a bit faster and that is just the overall again unlocking of local value in my mind you know
85% of Commerce,
it’s still not online today it’s local and I think for everyone that’s in Tech we’ve kind of scratch our heads and like Oh I thought we all used you know the big e-commerce players that are out there and,
um I think they will continue to evolve and probably grow and chip away at that number,
but I think there’s just a lot of Locked Up value all around us and you know part of our vision is how do we create the best experience and help.
You know sellers to bring those those things online so I think that that moment is going to happen,
at an accelerated Pace especially right now you know I think there’s a lot of struggling businesses that,
you know soon as covid hit and their physical store closed then the answer was like well now what do I do and so,
you know if they can bring product online we can help to facilitate those those transactions in the pretty meaningful way so.

[47:59] My vision for OfferUp has always been I just I just want you to open up the app and for almost anything you need locally we have it and we’re able to help you facilitate that in the easiest possible way that we can do that,
so you know again it’s great to see
that we already have you know huge percentage of the population using the product and buying and selling things you you know billions of dollars worth of goods every month but I still think we’re in the first inning I think there’s just a lot more we can do,
you know for our customers.

[48:30] Cool nigga you know one thing that we haven’t talked about yet is,
our friends at Facebook like they obviously have this Marketplace platform is that a direct competitor is that like how do you think about Facebook Marketplace and is that getting any traction.

[48:46] Yeah I mean to be clear Facebook has had some type of Commerce even before we started OfferUp I mean you know I think,
Facebook has definitely been,
you know a large Network and there’s there’s a zillion different things you can do on there including Commerce so you definitely have to take them seriously you know as a competitor.
You know I think the other thing that I think gives me you know some level of comfort is just how many different things they have to focus on as a company like it seems like.
For every competitor that comes out they immediately have a solution or they’re trying to create their own there so I think they have many different things they’re trying to do and we have one and we’re going to go very deep and do that thing.
The best that we possibly can and obsess over that but you know definitely a competitor and as I mentioned.
Anytime you’re going after a large Market you’re going to attract competitors so.
Yep they’re the out there and definitely definitely spending time on Commerce for sure.

[49:55] Yeah it’s usually a bad sign if no one else on the planet ever wants to go after the same Market you see.

[50:00] Yeah your idea is probably not a good one.

[50:02] And Nick that’s actually going to be a great place to wrap it up because we’ve used up our allotted time but if listeners have any comments or questions
we encourage you to continue the conversation with us on Twitter or on our Facebook page and I really want to thank you for
taking time out from this crazy pandemic to talk with us about marketplaces.

[50:26] Thanks for having me it was good to finally talk to someone else because I’ve been hunkered down in my Den now for seven weeks so thanks for getting me out of the office mentally.

[50:39] So we really appreciate it and then if folks want to follow any of your thought leadership or anything do you are you a Twitter or you still on prinster you mentioned that was that earlier.

[50:51] Yeah you can find me on Twitter at Nick huzar.

[50:56] Awesome and we’ll put that in the show notes so everyone be safe and well out there and until next time happy commercing.

Apr 17, 2020

EP216 - Marketplace Pulse founder Juozas Kaziukenas 

Episode 216 is an interview with Juozas Kaziukenas aka “Joe” (@juokaz), the Founder and CEO of Marketplace Pulse (@marketplacepulse).

In this interview, we discuss the state of North American marketplaces, their trajectories, and current impacts of Covid-19.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 216 of the Jason & Scot show was recorded live on Thursday, April 17th, 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 216 being recorded on Thursday April 16th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners
Jason we’ve had on our list of folks who want to have on the show for a while our guests today,
but because we have a weird recording schedule because you and I have day jobs we usually record late at night and that’s inconvenient for most guests we were excited one of the Silver Linings of the pandemic is we can now
record during the day so we are really excited to have Joe Kazuki – also known as Joe Joe is the CEO and founder of marketplace pulse
welcome to the show Joe.

[1:14] Hey Jason and Scott thanks for having me.

[1:17] It’s awesome to finally have you on the show Joe and as Scott pointed out I’m having trouble adapting to this giant Yellow orb that’s facing me while I record a podcast that feels very unusual for me.
So Jo I know you’ve listened the show before before we jump into it
what we always like to get a little bit of background about our guests so can you tell us a little bit about what you you did prior to Marketplace pulse and what led you to start.

[1:49] So I think all the way back in 2008 me and a bunch of friends started the books e-commerce company.
Kind of Amazon 0.1 and then 10 years forward from that I’ve been much more focused on marketplaces stand of understanding the markets both here in the US and.
And what right.

[2:13] That’s awesome and so then like what gave you the actual inspiration to launch launch the like sort of editorial side versus being a practitioner.

[2:26] It’s funny because I was reading about biggest stars and YouTube.
And it kind of meat it’s kind of made me think like who would be the biggest retailers and the biggest merchants on marketplaces specifically being Amazon so Marketplace post ended up starting off as literally a list of top Amazon sellers.
Thank you used to be called Doubles in size that’s calm and since the launch I started noticing that a lot of Sellers and other brands in this space,
kept coming to the site to check the rankings to see how everyone’s doing and since we were kind of collecting so much data and through that data getting so much Insight that overtime kind of blood more and more towards the story of content as you can.
The trends we’re seeing the changes we’re seeing that the data we are seeing that all about that content and.
I think I spent the next three no it and it sort of content and kind of sharing articles on our side became a pretty big Focus.

[3:28] Very cool so tell us where does the data come from so so I think I have an idea but I kind of want to hear it from you and you maybe include what marketplaces does your technology look at and then what types of things do you look at across those marketplaces.

[3:45] So we try to look at all the major Market places both in the US and Europe and elsewhere so like Amazon eBay Walmart cool shopping target market place which at Sea and I’m sure and others as well.
And the data you collect is kind of center around probably two main areas.
First one being open merchants and sailors on marketplaces and the second one being Brands and products.
And so to understand that and kind of get the data we just run a pretty.
Pretty large set of data ingestion operation which relies on scraping and apis and all the partners and other sources of data.
We collect as much as we can we can of clean it we store it we are private obviously over the years,
and value whatever use case becomes the we are able to look back at the data and provide that because I actually as a business we work primarily with other companies for building marketplaces themselves,
so we help them that that by providing data on the kind of a leading Market places.
But also since we look at this data all the time and we talked to people like yourselves on the time being we also kind of get questions asked and we try to answer these questions from our data and going to publish them on our site.

[5:05] So if Jason and I opened up a Marketplace for our podcast that featured travel coffee and Star Wars stuff we could come to you and say hey what are the top selling.
Star Wars items across these categories and what’s big and coffee and you can you can look into that data set and then make recommendations based on what you see across marketplaces is that a,
instead of good use case.

[5:31] Are we going to help you figure out the categories that Brands you should be selling where would you be sourcing these Brands so it which sellers can provide you that assortment,
as well as getting into more specific details like hey which Partners you should be working to help you with the onboarding of sellers or like what’s a partner ecosystem even looking for you so it’s kind of a multi-dimensional,
problem for a Marketplace because it’s it’s really not just a product you can on board but also the core we sponsor coming from who is fulfilling them who are Partners in the software space etc etc.

[6:04] Even without your data I’m pretty sure travel is not a good category during the pandemic.

[6:08] It’s definitely not it’s definitely not.

[6:10] Making a long-term I’m thinking long-term.

[6:13] I like it and so like do you have full-time developers that are constantly like having to sort of tweak your your data acquisition tools as the marketplace has sort of changed,
their presentations.

[6:30] So we are a tiny company but luckily we rely on a lot of automation to kind of validate the data they’re ingesting as well as to notice any sort of changes in the kind of ingestion pipeline so,
that’s usually not a big problem for us any sort of changes these marketplaces make and getting Hands-On pretty pretty quickly.

[6:51] You ever just sell the data so I know from my experience at Channel advisor there’s about a bazillion Wall Street people that want to build hedge funds off data like this and do all kinds of crazy things is is that part of your business model or it’s really more
kind of advisory Services based on the data.

[7:07] So we do some data but primarily to marketplaces and kind of software and services companies in the space of e-commerce we had had many conversations with Wall Street companies as well but.
I guess so far we found that there are much better sources in this kind of alternative data space for the Wall Street Market.
Primarily being like most of them utilize kind of credit card and email processing data.
Robbery been potatoes about the marketplace itself so it’s like if you if your what if you’re involved with anyone understand Amazon you’re much better off acquiring credit card data than what we can provide for you because they’re sort of things they’re looking for are much more.
Going to particular to the noise and I guess our data would just have too much noise for them but we had kind of.
Be honest we had to leave the try to come and help them understand what this even the Amazon Marketplace because of all the kind of award e-commerce players in the space that you still find that it’s going to the most misunderstood player in this space,
given how large it is.

[8:11] Yeah isn’t that interesting just to follow up on the data so I think of you like,
your methods you’re going to get much better visibility to the digital shelf like what products are offered like the velocity that stuff is moving on and off shelves,
Like in any of the attributes about the products that are on the shelf that that like credit card data set you mentioned is going to see a lot more about the consumer Behavior so it almost seems like.
They’re there to sort of different data points that like together tell an interesting story am I thinking about that right or.

[8:48] Yeah that’s true that’s true so we try not to spend too much effort in trying to estimate sales velocity for anything because that’s really.
Well done from credit card data and of emails and all the other alternative data sources I guess we spend much more effort collecting data on the covid building blocks
it’s like a products themselves and Brands themselves with all the merchants and sellers and categories and how all that’s kind of space looks like on a kind of very granular level.

[9:14] Yeah now I’m curious you started out as an e-commerce entrepreneur and now you your super deep and knowledgeable about.
The the sort of opportunities that you know emerge in marketplaces like where there’s a gap between,
demand and offers and you know where there’s a good source of product all these things I it has to be tempting sometimes to want to act on that data yourself versus.
Showing that insight to others.

[9:48] True true but at least for now the focus has been much more in the data side of things as well as like the market self understanding the market,
and I think having been in in this kind of in a position of selling things before I both miss it and don’t miss it at the same time.
Especially especially in times like these where kind of sales are compressed for everyone in marketing budgets or cough I’m I guess I’m someone happy not to be selling any products I think given moment.

[10:18] Yeah fair enough and then I did one other granular question about the data so like of the people that are,
like watching marketplaces and sort of extrapolating data from marketplaces it seems like you you do extrapolate data about the products but what,
you’re also getting a lot of data about the sellers of the product and so I actually think of there’s some other companies out there that also.
Monitor the digital shelf and they focus mostly on product data and they sell that actually back to Brands so I think of like.
Edge essential or profiteer or companies like that the kind of monitor the digital Shelf,
to tell Procter & Gamble how you know how their product is being presented versus someone else’s but the data source that I see like you ever go out that I’m not familiar with anyone else that provides is,
information on the actual sellers like how many sellers they are you know are they domestic sellers are Chinese sellers like what categories is the seller based growing things like that am I.
Am I accurate or am I misinformed there.

[11:29] Absolutely Services business has been kind of the core dataset we’ve been building since we started,
specifically being all the sellers and Merchants on these marketplaces and we try to,
beside you basically collect data on every single Merchant on all these marketplaces to have.
Like a full understanding of what’s working for these Merchants what are we selling who are the top Merchants where do they come from like how to be fulfill things etc etc because again on marketplaces.
Differently from an online retailer on the marketplace it’s not just about the products it’s also about the kind of a supply side of things and where does that Supply inside of things comes from.
For example a question B we tried to answer before was like.
If you shop on Amazon you notice that there’s a lot of items which look like me came from AliExpress or Alibaba.
And yet it wasn’t clear that I’m weak how many of these items are actually sold directly from China as opposed to US based sellers importing them so,
we spend some effort trying to figure out okay covid mountains on Amazon or of all merchants on eBay how many Alexei come outside of the US and others like a surprisingly large number,
large number especially coming from China.

[12:50] Very cool and just as I thought on that one I mean that was one of the trends I feel like you uncovered is there’s this perception that it was a lot of domestic importers and and you’ve really been able to track the growth of,
of Chinese sellers on them on the platforms.

[13:07] Yeah I think most people have this impression of Amazon Marketplace as being largely like a platform for,
people who drive around to Walmart stores and buy Closeouts and then sell them on Amazon Marketplace.
That’s that’s very clearly completely not true and not only is there are many many different types of businesses here in the US we also have an incredibly large.
Portion of a marketplace coming from I thought our countries as far away as China when kind of helped by the Amazon Fulfillment services.

[13:43] Yeah and then the last question we’ve been just talking a lot about Amazon but your data isn’t exclusive to Amazon right like what marketplaces are you guys tracking right now.

[13:53] Amazon eBay Walmart Etsy Google shopping which target market place and a few few Smiles as well.

[14:03] Scot and then mostly the North American iteration of those marketplaces or are you trying to look globally as well.

[14:11] We try to look globally.
For example for Amazon of course we look at all the countries animals and is running the marketplace and should be leaders not 15 15 countries obviously eBay is a global platform at least a global platform which is a global platform,
we don’t spend too much effort yet on looking at.
The properties of Alibaba like Timo and taobao but that’s much more so because we just don’t have a big business case for bath and,
I think most most us Brands don’t really care about them too much yet that’s why we focus much more on like what’s relevant in Europe and the menu in the US.

[14:48] Gotta okay well let’s jump into it so obviously all our listeners are pretty familiar with the
the big Marketplace is right so in the u.s. I think mostly of eBay and Amazon like what what is the high-level story with sort of the tier 2 marketplaces like the Walmarts and wishes and targets are they.
Growing are they getting traction are they like losing share to the Amazon like what’s what’s kind of the,
the macro view of Market places in North America.

[15:21] To me I think tier 2 only has a single company and that’s Walmart.
They’ve launched their Marketplace all way back in 2009 but kind of really got into it.
In 2016 and probably over the last couple of years made it an actual important part of Walmart itself.
Just from an announcements you saw about the company as well as the seller acquisition we’ve done I think just very sweetly finally surpassed 40 thousand merchants.
Which we acquire my very very differently than Amazon so that number is actually pretty,
pretty large because they acquire an approval to join Roman marketplace so woman is on a very good job at integrating the marketplace into the.
Kind of overall Walmart selling experience and buying experience you can return items from the marketplace into Walmart stores as well as all that other stuff and then you have,
to me I think like a baseless third-tier,
of marketplaces the likes of wish and go shopping and target market places which are basically either trying to do similar things like Walmart or or Amazon is done,
for our very strong in their in their own niches like for example XE is obviously not trying to compete with Amazon but at Sea on their own right is an incredibly strong Marketplace in the handmade and vintage Goods.

[16:40] And and to me it’s probably the most exciting kind of development in the spaces it’s probably all the niche market places marketplaces which focused on the particular category of products for a particular use case,
obviously at seize the most known now,
but you see many more and clothing and sneakers in streetwear in any sort of imaginable category,
and they tend to view the content around the marketplace much better so they’re not only being debate Supply they also kind of build content and tutorial content around it which tends to work really well.
And and then you probably have even more so kind of.
Kind of traditional retailers still trying to launch their own marketplaces but to me that’s.
Probably an old strategy kind of companies trying to be much more like Amazon but they’re probably not kind of strong players at the moment.

[17:38] Gotcha so just to kind of put some rough orders of magnitude to this like like how many sellers are on Amazon right now.

[17:46] What Amazon has over eight million sellers worldwide so three million just on in the US.

[17:55] And then in do you have an estimate for the number of skus that are offered or a.

[18:02] It’s funny because we get asked about this on specific on Amazon school calendar all the time and as of probably the last two years we have stopped tracking that number because it became completely meaningless,
I think the last number we had from years back was 550 so 560 million skus.
And since then it became even larger and yet.
It doesn’t it kind of it no longer represents any sort of meaningful metric to track because Amazon adding a hundred million more skews no longer represents in any sort of measurable sales growth because these skills get kind of.
We stayed in there in the vast Universe of battle sounds good.

[18:43] Yeah and I assume there’s a tremendous amount of churn in there too so I they added a hundred million skus about a hundred million skus died and no one’s ever going to see them again.

[18:52] Yeah I was going to Amazon’s assortment this is the most chaotic assortment in retail probably ever invented,
because it not only are we having thousands of new sellers everyday all these sellers are bringing probably tens or hundreds of thousands of often new products new private label products.
My place every day so like a sort of changes in the SKU count are pretty much meaningless.

[19:14] Yeah but it’s still helpful to me in this one context this sort of order of magnitude context so so Amazon’s got three million sellers in the US and hundreds of millions of skus,
and then you kind of cat characterized Walmart as a,
growing tier 2 Marketplace so put that in perspective for us you said that was forty thousand Merchants verses.

[19:36] Walmart has 40 thousand merchants and they have much less an Amazon because they’re kind of an invite-only approval Marketplace so you can’t just join Walmart they would have,
ten times more Merchants if it was open and Walmart has 15 million skills at the moment.

[19:54] Yeah and and if I’m not wrong 50 million actually represents tremendous recent growth from them because before they really leaned in in the marketplace they probably had under a million skus.

[20:05] Yeah so one of the numbers we always tracked about Walmart is how much of a catalog comes from Walmart itself and how much of that comes from the marketplace and.
Pretty much since 2016,
all the girls that’s something the marketplace like Walmart itself still only sells I believe three million excuse and all the other skills have come to the marketplace.

[20:29] Interesting.
And so then like what is your sense is there and so you kind of you gave us this nice framework Tier 1 Amazon eBay tier to Walmart and then tier 3,
General Merchants wish Google Target and then Niche niche market places.
Is there more opportunities for General Merchants marketplaces like could you see a Google or Target catching up to Walmart and being a tier 2 player,
could Walmart like ever catch up to eBay and you know be a alternative to your one player or do you feel like.
I assume you’re going to say there’s plenty of opportunity left for niche market places but like for the general merchants.
Like is a his that played out in your mind or do you think there’s still a lot of opportunity for people to capture share.

[21:24] Three other ways going to stores in this first it’s very clearly that.
What kind of establish large retailers like Target and best bikes should be able to fairly easily to grow Marketplace similar like Walmart.
And achieve the same sort of kind of merchants Grove as well as well as you growth I guess for companies like Target the question is do they actually want that.
Because if you look at their latest quarters they’ve been saying that most of our sales growth is coming from store delivery.
You can’t really integrate the marketplace into store delivery as easily.
And no actually no one has done that to me you are still so technically you could do that on target but in reality they probably won’t covid at least not going to try it because the stores are working so well for them.

[22:12] And then on a second-tier I think like to me Google’s attempt it’s probably the most exciting because they are also at a company like Amazon and they also have,
theoretically unlimited amount of capital to go after Amazon so if Google really push the pedal.
To the floor and actually tried to go after I was on the thing they could do a pretty good job given the sort of assets we have the given the sort of the user traffic may already have,
but I think for all these companies the question is like do they actually want that because you can become,
like I’m not a couple of billion dollar a year Marketplace launched by Google somewhat easily,
but like Google wants to build a hundred billion dollar business has not been done and our businesses so,
competing with Amazon or launching another meaning for business for all of these companies means having to wait many many years before it becomes meaningful and it’s unclear yet of like is anyone willing to actually wait.

[23:15] Yeah interesting and it is it’s funny like,
you could imagine an alternative reason Google would want to grow it besides just the revenue like they have this super important you know hundreds of billions of dollar Revenue stream called advertising,
that they need to protect right and and if,
if the marketplaces are stealing the eyeballs on the advertising from Google like when one reason Google might want you no more a stronger Market Place would be to keep the eyeballs in their echo system and not have weakened.
To an Amazon or someone else.

[23:51] I think you’re completely right like a lot of shopping already happens at Google,
just Google itself doesn’t really monetize it as much as it wants to nor it can control it as well as it probably wants to,
they always have Google shopping and they have some rich content that Google as a company has done many many things from like they’re all kind of in parts and none of them are connected to an actual shopping entity people can go to,
and the Outlook over the last couple years again Google shopping and still the marketplace they’re adding Merchants all the time they’re going to school calendar trying different things but there.
They’re not a sort of all out it hands as you probably would expect from a company as kind of as big as Google.

[24:33] Yeah and I will see how it all plays out but one thing that get that makes me want to watch him even a little closer as you know like four months ago they did hire Bill ready from,
PayPal and created a new role they didn’t have a Google prior so he’s president of Commerce a Google and so you know you sort of bring in a credible,
e-commerce Weider create this new title like there’s these endemic reasons they might want to do better at Commerce so like that that at least.
Gives me reason to believe that they’re going to lean more heavily into this base.

[25:07] To me though I think there’s one kind of important caveat is how can Google do this and not upset and I trust Watchers.
Because for Google like then adding shopping usually means adding shopping elements in to search for all the other properties we already own they were already find for similar terms in Europe a couple years back,
anything more meaningful with probably risk some of these finds again so for goo is the kind of a balancing act of like how do you actually do that without upsetting the kind of an ecosystem of people who now rely on Google search traffic for the shopping.

[25:46] I know for sure I feel like that’s the one of the new normals right is is sort of balancing your business growth aspiration with your antitrust risks.

[25:53] I would argue that kind of did this with travel to so so they did this in travel where you can actually book right in Google and they got away with it so I don’t I don’t know.

[26:01] For example like if Walmart join school shopping Marketplace and people can just buy through Google from Walmart.
Like does Walmart want that or do they want people to go to actual Walmart and then buy from there it’s kind of.
All these has the advantages and disadvantages But ultimately the larger the retailer is the less they want to be aggregated behind an aggregator on Google so,
I just I could never foresee Google being able to aggregate large retailers like Target or Walmart they will always refuse to be a part of this.

[26:38] Yeah I guess the one Edge case where it seems like there might be some leverage for them to aggregate the big retailers is.
Literally just as a foil to Amazon right so,
you know if Amazon you know if Alexa gets the most traction and Alexa gets built into all these appliances and everyone’s you know now everyone’s appliances as reordering Pantry items,
exclusively from Amazon if your,
Walmart or Target you’re unlikely to build your own smart speaker echo system to compete with Alexa and so you know you may look at Google as the less competitive more friendly partner,
that you might try to enable to be a more complete competitor against Amazon.

[27:24] That’s some people from Google Cloud which is the competitor of AWS and their business Stitch to retailers is basically.
We hate the Amazon you hate Amazon how about you just move all your Cloud infrastructure to go about and this works really well so yes I completely agree like.
Kristen kind of players in this space who will driver who we do anything else but work with Amazon that’s an opportunity.

[27:50] Yeah I think that’s actually the official sales pitch for Google Cloud platform and for Microsoft Azure so.

[27:56] Aggressive very easy fish I’ll take it.

[27:57] Yeah yeah so one other topic we want to talk about in general in the marketplace is is what if any role you CD to see companies playing in this whole Market Place Evolution like,
intuitively like if I took a real literal definition.
It doesn’t seem like d to C in Marketplace like are super compatible but it seems like in practice a lot of D disease think they’re directed consumer play is via marketplaces is that.
Do I have that right or how do you think about it.

[28:31] I think it depends on the kind of the purity of a brand is trying to be I had I am seeing a lot of.
Small niche market places in the DTC space to focus on a particular category so for example sorry I was talking to these guys maybe last month who build a Marketplace specifically for Street Wear.
And all the brands inside of it are already PC Brands because the marketplace can bring them,
obviously Shoppers as well as data they couldn’t get on a traditional marketplaces like Amazon and yet but if you see Brandon has a more manageable kind of acquisition path than just trying to do it themselves.

[29:10] Because to me the reason why kind of DPC doesn’t work on Amazon or any other of these major marketplaces is the fact how how these marketplaces handle data exchange as well as kind of user interactions.
It doesn’t have to be like that so the kind of the more modern Marketplace has built for the DPC space do share a lot more data than Amazon does and douche and do give the way for Brands to talk to their consumers through but Marketplace.
And I’m sending in all this becomes possible so think like is Amazon a great home for DDC brands,
it was fun enough nowadays because we live in a pandemic and some of these Brands will inevitably have to kind of rely on Amazon to get some sales out of it but,
once we have passed that I said I do see that like a lot more Market I just Google built so informative to see space because all these markets can do is basically aggregate,
demand and then the brands can benefit from that much more easily than themselves trying to acquire this in users.

[30:08] It’s like marketplaces are the new virtual retailer you just don’t have the store element.

[30:13] Yeah so I think it’s always been the case that like if you’re Nike you can build a store in the middle of a desert and people will probably come to you,
like most brands are not Nike most brands who built stores in the desert will never see anyone come to them they can’t force people to come to them if they just spend a lot of money on marketing,
but that’s obviously has limited time Horizon so as Brands try to acquire users at much more favorable costs,
like Michael please do play a pretty important role and I think they also allow Brands to kind of acquire the same user.
If I would have to compete with other brands also trying to acquire the same user like a lot of Brands and travel.
Like Barrel raising advertising costs because they’re all trying to acquire the same user even though but same users probably buying from all these branches anyway.

[31:02] The one exception is if that desert is in Las Vegas or Dubai people actually will come to it.

[31:09] I forbid we should wish Italian brand I think it was proud of the builders store in the desert in maybe outside of Texas.

[31:15] Yeah you’re exactly right it’s a fake store but it’s a very funny photograph yeah.

[31:20] But I think to me like my lesson from areas like yes those great yes product you did,
no you’re not a product like most brands are not product most breaths if they tried it will just lose my clique,
to me like that’s kind of the marketplaces versus writing your eCommerce site and tribe you do your own acquisition is shopping mall versus Your Own Story the desert.
Like yes either ghosts can work but I guess basically decide which one will work better for your kind of capital constraints I guess.

[31:49] Be cool so that gives us a good overview of the landscape and it wouldn’t be a Jason and Scot show if we didn’t talk a little bit about Amazon here when we’re recording Amazon’s flirting with new kind of all time highs around,
let’s see.
2400 and change definitely flirting at well over the trillion dollar club and kind of nipping at the heels of apple and Microsoft,
which during a pandemic is kind of an unusual thing so
seems like they’re seeing a pretty big surge they had to turn off FBA Sellers and a bunch of those kinds of things do you have any data that indicates how they’re doing through,

[32:30] What’s most interesting about Amazon is event over all their sales are up and yet any individual brand or seller is either very negatively impacted by this for very positively impacted by this so you have this incredible.
Kind of spread of people and companies were very happy about their sales and very upset about their sales but like Amazon overall is their cells.
And there are enough that some people like sometimes I talk to sadly it’s basically they’re having a friend day every day.
And I mean it’s I think it’s still hard to judge just how much sales increase on Amazon because given how large they already are but they clearly have increased.

[33:10] Yeah the give us an idea of the winners and losers is it is it kind of category based on dimension.

[33:19] Yeah I mean it’s kind of obvious the thing that keeps you look at Travel,
nobody’s buying that if you look at swimwear no one’s buying that if you look at sunglasses no he’s buying that and yet everyone is buying the things you would need for your house the things you would need to work from home the things you will need to get entertained while you’re at home as well as work out the home,
been of essential items like all the health items as well so I think this spread of categories is probably the same across all the different retailers.

[33:49] So you did a blog post where bandanas were hot.

[33:52] Amazing amazing I haven’t bought one yet but I just think about it because I tried I tried buying face masks now for a while and they’re obviously sold out everywhere and if they’re not,
they’re like they’re shipping from China it’s going to take a month to get to you so I think I think I’m going to get some bananas and try to make a,
try to make a face mask for me because one of the other items we’ve been looking at is weekly look at search traffic on Amazon and see how they train Trends have changed,
and like for example one of the trends I saw maybe now three weeks ago was in fact that like I stole it paper sold out,
many many people are started by the days which wasn’t even like a popular category before and Amazon and all of a sudden became hugely popular.
And then maybe in early February the biggest explosion I saw,
friends of mine manage kind of Amazon in sizing for a few different brands and one of the Brand’s we manage out of energy for so kind of survival food kits and that brand went from selling,
is this a couple million dollars a year to selling a couple million dollars a day on Amazon.
And that’s that’s when I knew I’m like this is this is this is serious crisis as well as people are really scared about that so to me of him nothing like looking at that,
kind of different changing consumer than an Amazon kind of has been killing an interesting insight into what people think they need to kind of push through the days.

[35:17] Yeah you had another blog post we talked about some of the negatives of this surge walk us through some of the data on that.

[35:25] Yeah so one of the things we always look at is how many negative reviews are these merchants and animals and receiving and,
usually that number overall that number tends to spike as Christmas approaches,
because people have placed the orders but order is not getting to them before Christmas and then they realize it’s never going to get to them in time so they leave a negative review and they usually cancel the order.
But then as of last couple weeks ago I started looking at that number again I started noticing that it’s it’s spiked even more and then it usually does.
And what about spiking in negative feedback on Amazon is coming from sellers who bought face masks hand sanitizers toilet paper and all the other essentials from Merchants who often don’t have those products.
And are using fake tracking numbers to kind of basically hide the fact that they have never been to ship a product or being shipped the wrong products like cheaper alternative is of the face mask,
for when it all the toilet paper which triplet completely different item all together so as much as I was in is increasing in demand.

[36:32] A lot of that kind of issues within policing of the marketplace as have resurfaced as kind of merchants are trying to insert themselves into this massive wave fourth increase the man,
and since I mean if you go to Amazon today you will find that there’s no face masks or hand sanitizer some toilet paper in stock.
But yet as a merchant if you claim that you have it in stock you can try to kind of weasel your way into that search results page,
and because that serves our page is receiving so much traffic you will get a few sales in before Amazon realizes we need to come need to kind of block you so Amazon has been in this.

[37:09] Kind of.
Crazy position of having to deal with actual issues of like fulfillment operations as well as employees and now also having to deal with this sort of marketplace chaos which is doing with all the smaller Merchants trying to kind of
benefits from the marketplace not necessarily saying something but also sometimes by selling something they don’t actually have.

[37:32] Yeah it’s I mean the level of difficulty was already complex now it’s almost unimaginable like,
pivoting slightly I’m sort of curious how you think the pandemic is influencing how Brands think about Amazon is it,
is it potentially driving Brands to Amazon or off of Amazon or what do you think.

[37:55] I think that like don’t really I think all of us would probably agree that now you’re starting to see Brands go back to Amazon go back to selling on Amazon Branson previous every excuse that obviously we’ve all seen that announcement from Birkenstocks,
we seem to be going back to Amazon I think we’re at that point in time now where the sort of ideological refusal of selling my Amazon in a past.
Is probably being questioned by Executives now because as we see their own sales in their own channel is decreasing their trying to find other channels too,
do something items through and if they’re not selling on Amazon it’s an obvious choice and it’s an obvious channel to have immediate sales,
so it’s very clear that,
it’s not yet mr. of acceleration Brands jumping back onto Amazon is definitely going to accelerate even for Brands who have previously.
Refuse the blatantly bit like they will have to change their view because it’s
it’s wild for the last decade they could have made this kind of strategic choice of not to be on Amazon,
bad choice and things just kind of been taken away from them now because of just the sort of crazy conditions we are living now where so much of shopping is kind of centralized on to Amazon
as and limited budgets they have to spend on marketing means that.
Like I wasn’t all of a sudden became probably one of the better choices they have to have any sort of lemony.

[39:22] Yeah there’s almost this odd Paradox at the moment I think you’re you’re exactly right like if you had decided you were staying away from Amazon,
some of your resolve is probably eroded and there’s there’s there’s more arguments in favor of you being there and I certainly think Amazon is going to emerge from the pandemic with greater share than they had going in and so,
you know.
Same reason people rob banks that’s where the money is like if you want to sell you probably need an Amazon presence but the one Paradox is,
there is a cohort of brands that maybe weren’t very digital Savvy and they almost looked at Amazon as a hundred percent of their digital strategy,
and if you’re an apparel brand and you thought the mean way you’re going to sell digitally is on Amazon and you suddenly became,
a an essential product that couldn’t get you know your FB a product replenished you probably were getting being,
exclusively dependent on Amazon so it on the one hand I see a lot of brands that had been resistant moving towards Amazon and on the other hand I see,
number of brands that were kind of single Source on Amazon you know trying to diversify their portfolio little bit are you seeing that as well.

[40:38] I think I’m seeing the same thing like this sort of increase in demand for 3pl their Housing Services has definitely skyrocketed,
as brands are even trying to find other ways to,
selling on Amazon or going to average over their houses they can use to sell on Amazon and I mean for many many of these Brands we can’t really do that on fulfillment as effectively,
as they kind of new to now because often they don’t even have this sort of that house capacity,
or staff for it so yes absolutely I think many Brands who have either relied on that wasn’t before,
for having sold on Amazon before but now can’t even ship out instead be a are all flocking to 3pl logistic companies to do it for them.

[41:25] How about private label Brands you’ve done some interesting reporting there what are you any updates on what you’re seeing there from the pandemic or any other thoughts on the the plethora of Amazon private label brands.

[41:38] It’s that one of the guess one of the most infamous reports you’ve done was last year about that the Amazon private label brands,
the kind of the cord Discovery from that was the fact that like they are attempts are obviously very wide but most of the brands that launching and haven’t been as successful as most people the still they are,
and to be honest like since then Amazon itself as a company has really been as aggressive and launching new brands,
they are so launching amazonbasics products all the time but in terms of Brands they would be launching especially clothing brands which kind of comprise most folio brands that trend is definitely die down,
but in the same space a lot of the private label Brands and Amazon are launched by the smaller smaller merchants and,
as much as that it’s still happening that obviously has been hit very hard by the pending first by.
Not being able to Source items from China as effectively as before that is mostly recovered but there’s still some issues with the logistics from from the point of view of costs and state but also a thing,
many many many companies in the space who previously relied on data to figure out what we should make.
I think are finding that they can’t use data as effectively anymore because the trends are changing so so fast that by the time they’re able to Source it say.

[43:02] If you see that the bananas are becoming high demand from the time you’re going to be able to Source them and get them onto Amazon it’s going to be June and the man has gone so I think the sort of the the stability of demand.
Has previously allowed private labels to be built and I think now that the stability is gone I think it’s much harder job for me small images good and also,
access to Capital now is much more constrained Amazon lending itself as killed their program and are not issuing a new loan so when we smaller companies to get Capital to launch new brands it’s a much harder job.

[43:39] Well let’s let’s pivot over to eBay they just sent out some new CEO and I’m kind of excited about that it’s a guy I think I’ve met him a couple times when he was there and kind of Circa
V 208 I believe.
Jamie iannone so you know they’ve been kind of rudderless for a while but do you know
to their CEO departed about six months ago they’ve sold StubHub they’re about to sell their classifieds are talking about it and what not they’ve been distracted by a lot going on do you think Dave benefited in the same way that Amazon has during this pandemic.

[44:16] I don’t think so and I don’t think so for two reasons first.
Yeah I was looking at that traffic across all the different retailers as well as eBay eBay doesn’t seem to have any sort of measurable lift from this which I think is pretty disappointing for them and I think second of all.
I don’t think many people think of eBay as a great place for Essentials.
And that’s why it’s so much of shopping is happening on Amazon as well as other kind of traditional retailers.
EBay is much stronger and other categories but many of these categories are not that important anymore so I’m sure we’re going to have are having some increase in demand in some categories but overall,
I would be pretty shocked if they having an actual and measure measurable major increase in sales because of the sort of,
this sort of weird positioning they have as a company visually I think only became more apparent than any more visible during this visit the spend the night.

[45:12] Any other interesting Trends on eBay that to speak of are they losing sellers in this kind of sideways area that they’ve been for a while.

[45:21] I think eBay has not in like Amazon has has been trying to Police Products on there on the catalog as well
but since its eBay to me is also the most the most fun Marketplace because you can buy a single toilet paper Square on Amazon concert on eBay pretty pretty easily,
which always doesn’t sell in a remarkably so if you if you search for toilet paper on eBay it’s a much more eclectic mix of products than other retailers would have,
and in terms of like seller seller leaving you may tend to have a pretty unique set of sellers a lot of them are selling collectible girls a lot of them ascott sorry memorabilia following selling car parts so like none of these sellers,
have clear path to other marketplaces so I don’t based on measurable kind of,
leaving of Sellers from eBay or onto a onto eBay I think that’s that’s been mostly stable.

[46:18] Interesting today they’ve sort of got those they have an advantage with some of those incumbent categories but they seem to be struggling in the categories where they overlap a lot of other marketplaces is that their summary.

[46:32] I think they dig has the biggest jobs or when you see CEO.
Is figuring out just exactly what is the direction and what’s the core focus of eBay.
I think you bae hasn’t been able to answer that question for the last decade as it kind of try to became closer to Amazon.
But like after all the years of efforts is now just a worse version of Amazon,
without any sort of benefits of Amazon you you would have just literally by shopping on Amazon so eBay is basically figure out like where where does it want to be,
because it’s still want to be in the same competition as the sort of the real real or the stock X or Etsy or just want to be more like Amazon your more do more general merchandise because now it’s tries to do,
all those things at the same time and doesn’t do a great job at any one of them.

[47:28] Yeah yeah it’s going to be any I mean that’s a fundamental challenge for a lot of companies but yeah you definitely have to be able to have a clearly articulated,
reason for existing and so that’s going to be a challenge for Jamie when he he gets to eBay you know he is coming from Walmart Sam’s Club he had a lot of success sort of running.
E-commerce for Sam’s Club and then got promoted to be I think I think it’s official title might have been like.
Co overall of so it will be.

[47:57] EBay eBay has to disrupt itself but I don’t know anyone who has an idea of what that would look like I personally don’t have any idea as well.
It’s unclear what do they actually do to kind of to find New Growth but it’s very clear what they’ve been doing for the last decade doesn’t actually work,
and you can look at their sales growth is non-existent and we sort of incremental changes are not going to get them to the growth they want to see so they can keep extracting more and more revenue from the salesman having,
and that will continue to increase their stock price as a public company but like in terms of growing Marketplace and growing place people go to shop at.
It’s not going to happen unless they have like a major change and covid around the platform.

[48:42] For sure it’s no it’s no fun being the one losing share in a rapidly growing Market the what about some of the other players I think of wish for example is kind of being an interesting situation like it,
it seems like it’s not the most awesome time to be right between the US and China in terms of trade which you know it’s probably a negative but then on the flip side.
They’re very value focused and you know we’re probably gonna have a bunch of consumers in in the u.s. in a pretty deep recession you know and maybe those like sort of affordable indulgences are going to.
Going to be more popular than they have been in the past.

[49:21] I’m a big fan of wish because the thing is very Unapologetic Marketplace we’re not hiding that most of the things it’s are coming from China we’re not hiding that most of these things are low quality and affordable girls we’re not hiding that it’s going to take awhile to get those items,
well I come from getting bad but like as of to probably two months ago,
which is obviously completely collapsed because they rely so much on demand deliveries from China.

[49:48] That that which were first impacted by the all the men back exposing down and are still negatively impacted by the kind of increase in cost as well as decrease in availability of all the deliveries from China so.
I’m not going to put a number on it but their sales are down and it’s unclear yet of when they’re going to be able to do recover because,
like I uniquely some of these other companies which mostly operated by running around their houses here domestically wish,
while having some of the assortment here in the US most of it comes directly from China so,
like they’re having issues with the demand side of things by maybe some poison works on buying or much anymore as well as Supply things as a supply side of things which is,
deliveries and the assortment size from China so they’re in them very tricky position but at the same time I think,
like wish knew they could be trouble one last year we were all discussing import duties from China like wishes exposed to that very much anything now they’re very clearly exposed to all that kind of.

[50:55] International delivery as well as supply chain constraints.

[51:00] Yeah a potential long-term risk there is like so they obviously rely a lot on the US Post Office for the last mile delivery in the US and they’ve always benefited from these super favorable rates from,
a very old Global postal treaty that were a part of and at the moment like seems like the US Post Office is like on the verge of economic collapse.
I’m hopeful that there’s some some sort of last-minute save but it’s it’s very possible that that last-minute save involves like renegotiating or getting out of some of those.
Those International treaty so it may not be as favorable terms for wish.
However the US Post Office emerges from all of this.

[51:48] I agree I don’t think they’re in a good position at the moment they like me it was a beautiful business and obviously I’ve been able to grow it fairly,
well I think it’s doing at least 10 billion dollars in jail B which is obviously,
very major number that’s larger than most marketplaces would be doing but it’s also built on infrastructure made can’t like reliably rely on.
Part of that is obviously shipping from China but also part of it is like not having any infrastructure themselves relying on USB as well as all the domestic shipping Partners in all that every country’s very end so it’s yeah it’s not a great place to be in at the moment.

[52:27] Very cool it really appreciate you taking time during a busy pandemic time to come on the show any other any other trends
you know we had before the show we talked about you have some good hacks for making sure your Amazon order gets in and I’d also love to hear your thoughts on where our marketplaces in three to five years.

[52:46] So first of all if you’re relying on online groceries you have to figure out a browser extension to help you with that this is something I did maybe the last week and I’ve since then I never had a problem placing an order,
on Amazon Prime now so it’s a huge lifesaver.

[53:06] Just like a honey or you wrote your own.

[53:08] No it’s basically a Chrome extension which refresh is a checkout page on Amazon,
to try to spot a slot opening once my slot opens it sounds like a desktop notification to me so you just have to leave it in the running in the background and next thing you know you have the place your order.
Sebastian has been great and then in terms of marketplaces the thing,
they are having especially now obviously incredible time because most consumer shopping happens through marketplaces,
like marketplaces in the u.s. already are combined,
the largest online retailer in the US that’s means like the most interesting status that they all the marketplaces combined,
or in the kind of a slice of the market place of from Amazon is larger than Amazon is larger than any other retailer so Marketplace already play a huge part but the thing with the directions we are going into is.

[54:02] Hey.
Miche marketplaces which done which focused on particular categories and do content as well as coming user Community much better than Amazon eBay could ever do.
Second business to business Market places that’s a huge area of growth.
Obviously have Amazon business is falling all over my place watching this space I’ll do the business buying is now being done through marketplaces and even on Amazon site that’s the part of Amazon which most people completely forget or,
don’t even realize even exist and that’s already a very huge part of the sales and then I think I think third there’s a lot of focus on managed marketplaces,
somehow he managed micro-business are remarkably says which help you not only by providing you a wide selection of Supply but also they pick the thing,
you are you want so whoever is a managed Marketplace because you don’t think the driver over its upsides driver is best for you,
so we will see this continuously going that direction is even,
as even marketplaces like Amazon and eBay will be much more kind of pressure to be in a position of trying to help consumers to pick the item that you want,
rather than providing them to just endless list of items available millions of items account of what in relying on the consumer somehow picking the thing they want so.

[55:21] Kind of super this deposit all in perspective like Matt like marketers is going to be continuously growing bigger and bigger but they’re also going to kind of change in shape,
to move away from these generalized marketplaces like Amazon to focus on their own strengths because I think
it’s your e-commerce business right now only trying to build up my confidence right now it’s probably a bad idea trying to go directly against Amazon’s business
or trying to go to the marketplace this follows the same model it’s a much better idea to do something differently or have a different model and examples like Etsy and exams like wish,
like they’re all doing really well on their own like truck by not trying to be like Amazon and eBay who did try to be like Amazon are obviously not doing as well.

[56:08] Joe you know usually people that are pro Marketplace on the show are really just pandering the Scott but it’s very obvious that you have True Religion about Market.

[56:20] They are great.

[56:21] Yeah no and clearly like globally they are winning like it seems like the the dominant most successful form of.

[56:29] Do me do me a favor like to kind of put it all like in the final perspective like to me a Marketplace is just,
it’s a reinvention of a shopping mall for the internet which means the aggregate consumers in a single place,
boss allowed single shops or single Brands to talk to these consumers much more cheaper than having to do their own,
kind of customer acquisition and inverse a Marketplace will always make sense and sure you will always have Brands and retailers who can run their own stores and current that on that position but ultimately a Marketplace could always do it much more efficiently the question becomes
like how do you do that and still retain some kind of brand value and not give up all the to do something like Amazon.

[57:12] Yeah well well said and that seems like a great place to leave it because we have used up all our allotted time as always if you had a burning question or comment feel free to hit us up on Twitter or Facebook
if this show is valuable to you we sure would love it if you jump onto iTunes and give us that five star review,
Joe real pleasure talking with you thanks very much for taking the time.

[57:34] Hey guys thanks for having me.

[57:36] Joe Fox want to follow some of the awesome content that you guys put out there what’s the best place.

[57:42] Marketplace or if you want to find me luckily I have the one of the most unique names you can think of so if you just if you just Google my name and you’ll be able to find in two seconds.

[57:55] That is terrific we will put those links in the show notes and until next time happy commercing.

Apr 9, 2020

EP215 - What to read during a pandemic

This episode is a list of suggested resources to read for those looking to do some professional development in the commerce space.  (all book links are amazon affiliate links)

The episode also features an interview with Rishad Tobaccowala (@Rishad) Rishad’s is the author of “Restoring the Soul of Business: Staying Human in the Age of Data” published by Harper Collins. Additional writings can be found on the Re-Inventing blog. The interview starts at 15:50 of the podcast. Rishad also has an amazing photography feed on Instagram @RishadT.

Another book mentioned on this list is Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption – Stephen Dennis. Stephen is hosting a virtual book launch party (including @retailgeek and some e-commerce celebrities) on Tues April 14 at 4:15pm ET, that will include myself and some commerce guest stars. Pre-register here.

Here are some always updated resources:

Here are all the specific resources mentioned on todays show:

Personal Development

Startup / Entrepreneurship

E-Commerce / Retail / Case Studies


  • Glengarry Glenross
  • Boiler Room
  • The social network
  • Girlboss –  Based on Nasty Gal founder Sophia Amoruso’s autobiography #Girlboss
  • Office Space

TV shows

  • Undercover Boss
  • Shark Tank
  • The Profit
  • SiliconValley
  • Halt & Catch Fire
  • Mr Selfridge
  • Succession
  • Mr Robot
  • Black Mirror

Non Conventional

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 215 of the Jason & Scot show was recorded live on Wednesday, April 8th, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scott show this is episode 215 being recorded on Wednesday April 8th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] A Jason and welcome back Jason and Scot show listeners first of all we hope everyone is saying safe and enjoying some time with your family as we all go through this battle with the
the Coronavirus
one of the unexpected trends that we’ve noticed about this fun pandemic self quarantining time is that folks are trying to carve out a little bit of time for professional development.
So we thought you know let’s do a show where we talk about some of our favorite books for kind of listeners and starting with kind of the.
You know the colonel of e-commerce and Retail where we spent a lot of our time but then also expand out a little bit and talk about more professional development type titles.
Sound good to you Jason.

[1:23] Yeah that’s awesome but before we jump into the actual books I just want to get a couple things on record like I’m trying to ascertain how Millennial you are Scott are you a paper book guy or are you ebook / Kendall guy.

[1:37] I am strange I guess so I like to read
fiction before I go to sleep because if I read like one of these books were going to recommend before I go to sleep I won’t go to sleep I get so fired up I know that’s probably strange but that’s how my brain works
so then so I use Kindle for my fiction reading in the evenings and then most of my nonfiction
before working from home full-time I commuted to an office and this is back in those days if you remember so I have about a good hour in the car
maybe a little bit longer and I would audible the nonfiction stuff out for some reason,
you know that that combination of being on a commute and having it being read really lands well for me and makes a little more engaging.

[2:30] Yeah interesting so your moat so you’re very little Papyrus and your Kindle / audiobooks.

[2:37] Correct yeah
are the reason is I’m I read a lot and I don’t know I’ve never been to your house but she came to my house I have like literally 20 but cases full book so there’s a practicality of you know my wife and I are both Avid readers and essentially
every square inch where we can put books as full so we had to switch to digital.

[2:56] Yeah no I went through a similar Journey I’m in a condo and I imagine we have less storage space than you I say imagine but I know for a fact we have less storage space than you and.
Wait it just like I beloved I loved owning these books and I felt good about owning them but like.

[3:18] I just didn’t have the space and then when I travel all the time it’s actually annoying to carry books because if you’re going to finish one that means you have to bring to physical books with you and swept them around.
On this on the trip so I kind of have pivoted to only owning books digitally and I’ve actually started this.
Economically unhelpful habit what I like to do now is I buy the Kindle version and I buy the audible and for most of the books most of the business books that they have this great whisper SYNC feature where you can.
Toggle back and forth between the audio book and the Kindle version and it it keeps you synchronized to the place and,
what I’ve found that useful for is if it’s a book on listening to and there’s some super important Point that’s made in the in the audio version,
I like to stop the audio version crack open my iPad go to the Kindle and it’s already right what I just listened to and I can highlight that,
and then you know Kendall has this great feature where Aggregates all your highlights and notes so so it’s almost like I can do I can highlight text in the audio version of the book which is.
Kind of cool in handy.

[4:33] Be cool if you had dyslexia do this where you could say have it read it and then pause it and have a highlight like an audio could you do a voice on voice highlight.

[4:43] Not to my knowledge that would be a cool feature Alexa has good features for listening to audible books but I haven’t if there’s a marker highlight thing I have not experienced it yet.

[4:55] Jeff if you’re listening please take that as a feature request thank you.

[5:00] If he’s listening you know he’s listening so then.

[5:01] Yeah I didn’t want to brag but.

[5:04] Yeah I do I also want to address the elephant in the room before we get into the book list of books we were having this conversation offline a little bit.
Are books even relevant anymore like is it the like I feel like for a lot of my career books were super important and it was like you know their books that were.
Like really influenced how I did my job and things I learned and we’re super valuable.
Today like it doesn’t seem like the best source for for timely relevant information.

[5:37] Yeah yeah into that and then you know attention spans I definitely feel it personally and I see it in my kids the social media has given us kind of these
this snack size kind of appetite for content right and it’s increasingly hard to just sit down and open up a three or four hundred page
book especially like a business book and then you know things are changing so fast.
It is hard to find those books they really stand the test of time so so yeah I agree and then you know so because of that we’ve actually thrown in a couple more
you know we probably call this a media show not just books because we have a couple kind of streaming TV shows and movies that maybe kind of
were interesting to certain folks that don’t want to sit down with a book be it audio or or paper or ebook.

[6:28] Yeah and that is funny because I am.
You know I was thinking about the books I wanted to talk about in the show and we’re going to we’re going to go through a bunch of books I actually built a web page with a wider list of book recommendations and so I was like oh this will be my comprehensive list of all the books I’d recommend someone read.
And there are a bunch of books that are some of my all-time favorite books that I actually couldn’t bring myself to put on the list because while they were super important when they were written in 1990 or 2,000 or 2010.
You know I don’t think they did stand the test of time and so it was interesting to me like a lot of the books that were quote-unquote about retail I feel like retail has changed so much.
Heck retails changed so much from three months ago that I didn’t find that those books held up really well but there were a lot of my hall of fame books about like.
Customer psychology and those sorts of things which are Super relevant even though they might be 20 or 30 years old so it’s kind of interesting.

[7:30] Yeah absolutely let’s jump into it.

[7:33] Yeah let’s let’s do it so side note if anyone’s listening in the show on exercise equipment we will put a complete list of all the books in the show notes and I’ll put a link to the website I reference so
no need to try to take notes during the podcast and with that out of the way let’s jump in what are you reading right now.

[7:53] Yeah I thought we’d kind of
cut them into categories and and since we are talking about you know personal development thought we’d start with that category
book I read a couple years ago and I just kind of stumbled on this because I started following his daily Paris group periscopes he does a daily kind of a coffee
kind of periscope it’s got out Adams the author of Dilbert.
So he’s a cartoonist you may think what does this guy have to do with anything well he’s probably the most,
educated cartoonist well I don’t know if cartoonist are educated but he has an MBA he’s an economist he’s got you know a lot of different things there he’s a trained hypnotist oddly enough so he wrote a book called.
How to fail at almost everything and still win big I wanted to start with that one because it has two big ideas that I found really interesting.
So these things you kind of already natural
naturally do maybe but it was cool the way he framed him and talked about him so the two big ideas from that book are this concept of using systems versus goals.

[9:01] And and
this is super helpful because you know he uses a kind of weight loss example where it’s easy to set you know it’s very easy to say hey I want to lose X pounds and then you fall off that pretty quickly because it go like that
is increasingly hard to get to if you get off track it’s easy to throw away that goal an example of a system would be you know I’m going to measure my calories every day and make sure I come out Nets X calories and exercise to get there
that’s going to be my daily system and if you can kind of commit to a system it’s a lot easier because you can build it into a day it’s easier to track,
and then sure enough you look up and boom you’ve achieved your goal be it weight loss or whatnot this one’s really important because.
You know I talk a lot to Young Folks at software companies and things and the question I get is like how do I organize my day and that’s kind of part of the system to is making sure that your so let’s say you’re just starting out in a sales career or something,
spend time prospecting spend time managing your pipe and build a system and then improve that system over time and before long,
got this really great system for managing your life so that’s a really good one Hill goes into a lot more details,
the second framework I really like in that book is this idea of continuing to your life to build your skill stack.

[10:21] I have a computer software background and knew nothing about Finance marketing I’ve never taken a,
ticket some econ classes but I’ve never taken like the classes you would take for a business degree or an MBA so but I’ve learned all that over the years and you know it’s part of my skill stack now
so that it’s this really interesting idea of thinking and visualizing right you want to improve your life and your career.
What can you add to your skills fact that you don’t have.
The third point in that book that’s really interesting is he talks about one of the biggest skills that you can add to that skill stack as persuasion.

[11:00] So Persuasions
pretty important so you know I’m an entrepreneur so on any given day I’m having to convince you know an investor to invest in my company an existing investor to invest more customer to do something an employee to do something recruiting an employee
every pretty much all my day is persuasion convincing this random guy to do a podcast with me those are just examples of you know
things that we’ve that use persuasion for so you know
as an entrepreneur I use it all the time but even if I know a lot of our listeners you know maybe you’re working in a larger company as kind of a what I would call an intrapreneur you’re kind of on the digital side of a large company well you actually have a bigger
persuasion mountain to climb than I do right because a lot of times you got to convince some dude in a store to give you credit for a sale or fill in a word or whatever it is
so I wanted to also fold in here that Scott Adams has two books on persuasion once called win big lie others called Loser think that’s more recent just came out this year.
And then so I strongly recommend does to and then he actually I like his approach this a little bit better than some other folks because it’s very practical and he gives you kind of you know,
tips that you can actually start to apply like how to pay somebody in these kinds of things but then once you’ve read that then I’m more technical approach is by this guy that’s considered the Godfather persuasion Robert child Nene.

[12:26] His two books are influence the psychology of persuasion and then he has a newer book called pre suasion a revolutionary way to influence and persuade.
What’s kind of mind-blowing about,
this is what you get your head around persuasion pre suasion is you can actually Prime people to be persuaded faster and easier so that’s kind of interesting there’s actually a step before where you can actually.
You get pretty good at persuading people you can get better at doing it quickly by using pre suasion,
so those are two that’s kind of a whole class there in that genre of persuasion and the Scott Adams is a really good introduction into this if people haven’t really read on it.
Read about it before.

[13:10] Nice I love all of those and it’s funny persuasion I talked about a lot in presentations.
And there’s a funny backstory to to the book he was like he was a candidate for his cognitive psychology PhD when he wrote the book and he basically,
in his Studies have discovered that we are all hardwired with these cognitive biases.
And it dawned on him that evil marketers could use those cognitive biases against consumers and sort of persuade them to,
take actions and buy things that weren’t necessarily in their best interest so.
Supposedly he wrote the original influence thinking that like you know what have you made consumers aware of these cognitive biases they’d be less likely to be affected by them and so he had this altruistic goal of like informing people so they wouldn’t be,
manipulated and the book became a global international bestseller because every marketer in the world.
But the book has a manual to use to trick consumers into buying things.

[14:17] So I just love that story I’m a big fan of that category 2 and I actually am reading a new book that just came out last month that’s in the sort of.
Cognitive psychology space it’s called The Catalyst how to change anyone’s mind and it’s by an author I like Jonah Berger Joan has a professor at Ward and I think and,
he wrote a previous book called contagious and contagious was all about like what are the attributes that causes something to go viral and it became kind of a,
Bible in the social media space and so this new book,
is about how to actually convince someone to change their mind and like early in the book he makes the point that like you know most people’s inclination is to,
argue with people or debate with people which is an entirely unsuccessful way of getting someone to change their mind and so he.
He works across all these different Industries and he finds case studies with like.

[15:19] The FBI’s best hostage negotiator right and he makes the point that hey you think about this hostage negotiator and he’s got to convince.
Someone to do something that they absolutely don’t want to do that’s going to have a horrible outcome for them right so give yourself up,
and go to prison and so he talks about like the tactics that that negotiator uses and the approach they take,
the try to successfully you know have these like super high stress situations come to us more safe,
conclusion by getting the the criminal to change their mind and so it’s fascinating and there’s a bunch of sort of practical advice if you really want to change someone’s mind versus just,
feel good about arguing with someone it’s super helpful book so I think it’s a good tool to put in the marketing Arsenal.
My other recommendation in this category is a new book that just came out this year called restoring the soul of business staying human in the age of data and that’s written by Richard tabaka Walla and I think it was released this January.

[16:29] Hey Jason you know Richard Wright.

[16:31] As a matter of fact I do he’s a longtime former coworker of mine and I actually invited him on the show,
so without further ado,
please welcome to the show the former Chief growth officer publicists gentleman who was named by Time Magazine as one of the top five marketing innovators in the world and a guy who could get me fired with a single phone call,
Rishad tobacco Wawa.

[16:57] Thank you very much and I’m glad to be here.

[16:59] We are thrilled to have you Rashad you know we did overlap at publicist and a fun fact I don’t know you had a much longer and more storied career their than I have had but I have an annual review every year and I always sit down with my boss,
and he asks what my career aspirations are and I say well my ultimate goal is to be Rishad.

[17:19] Well who are you are you have you lack imagination.

[17:23] Yes I could see how that would be your perspective but my boss is perspective is that I should set more realistic goals.

[17:29] That’s great.

[17:31] But all joking aside you you’re someone that has done almost every role in boob assist your,
super beloved and as you are stepping down from a full-time role at poobah says you’ve had this like I want to call it like a year-long victory tour where I feel like you visited every office and all your old friends and you just have this.
Never ending stream of Twitter photos of you with.
10 20 30 year friends that you you worked with that are now all the luminaries and leaders of our industry and it’s like I think it speaks really well to you this enormous network of people you.
You’ve cultivated that all these act in public like they love you.

[18:16] Yes it’s either that or I have to like two pictures over the years one of the two.

[18:20] Exactly well I’ll let our listeners be the judge but I do want to get your book and talk about that but a tradition we have on the show is before we get into that we like to get a kind of brief.
Um synopsis of your career and how how you sort of develop the point of view that you shared in the book so can you share with our listeners your background.

[18:43] Sure absolutely so I grew up in India came to the United States after getting a degree in advanced mathematics to get an MBA at the University of Chicago.
And I started my career with a company called Leo Burnett which is that advertising agency.
And I thought I’d stay there for two to three years and 37 years later I was still there.
The last time my business card said Leo Burnett was sometime in 1994 which is about 25 years ago.
I worked in account service on big class like PNG.
And then moved into our direct marketing department and saw something called digital in 1994-1995 launch one of our first digital agencies.
Then helped launch Stockholm which is what about media companies.
And then we merge with another company eventually we got bought by publicist in 2002 which is about 18 years ago.
And over the years at Goldman says I helped build the case for some of our digital companies that we bought each digit SI cherries a fish and for the last five six years,
I served what was the direct wobblers sort of the board as both the chief strategist and the chief growth officer.

[20:03] At about two and a half years ago as Maurice Levy step down and he was the CEO.
And I’d work with more recent another gentleman coach actors who are 25 years.
I sort of said at some stage I need to do something different and once they were convinced that what I wanted to do was be a writer and speaker.
And I could still be related with the company we began a transition which is sort of that to are you talked about.
And I am still senior advisor to the group I still have an office my key card still works but I no longer am a full-time employee which means I have no clients to look after.
No boss and nobody working for me otherwise still connected in some way to the company and my focus really is writing this book which I began about three four years ago with Concept and thinking about it.
And the basic Trend was I was getting a little bit worried.

[21:02] That as the world was becoming more data-driven more digital more math driven.
That companies were making mistakes of becoming too left brain.
And I call that the spreadsheet will be coming spreadsheet driven companies and I believe that successful companies need to combine the spreadsheet which is obviously very important that the data.
But combine also that with the story which is the people that culture.
The values and and thinking about it over 3/4 years I began to realize that companies that combine the two,
what companies that actually did well and companies that tilted either two words the spreadsheet too much like let’s say a Wells Fargo you began to open Fake accounts or like Boeing ship the plane which wasn’t ready.
On the other hand if you watch was too much to the right you end up ended up with a company like we work which is all story but total bullshit at least from an economic perspective.

[22:03] It’s a story just not a true story.

[22:05] It’s not a true story exactly so the whole idea is if it’s all story without a spreadsheet you have we work it’s lots of spreadsheet without a story you’ve got to Wells Fargo.
But you combine the two industry after industry companies that combine the two.
Not only are more successful in the near-term but their stock price does well and in every sort of stuff and it says compared your Southwest United Airlines or,
you know Pixar / Disney to a lot of other companies or Costco to the old Walmart and you began to see that.
This this basic belief that was all about that data and math was actually very short-sighted.
And in fact heard companies more than help companies and given that I was a digital Pioneer have an advanced degree in mathematics and people think I know the stuff I’m not anti math anti data anti digital anti anything.
And so that’s how I read what I wrote for book and surprisingly it appears that I wrote the book for a post covid-19 world so people said you know this was going to happen and I said no.
The book is as in fact it resonates even more today than it did two months ago.

[23:21] That is awesome and it’s great that it’s even more topical I still have to imagine from your Publishers perspective it’s not optimal the launch a book when you like can’t fully go on a book tour right.

[23:33] Yeah well I was somewhat fortunate in the fact that because the book came out on January 28th in the United States and Feb 20th outside the United States and I had started sort of promoting the book.
Immediately unlike January 1 as soon as the holidays were over so I got to be on the road actually from Jan 1 to approximately March 7.
So I was had good eight nine ten weeks of doing so now we’ve somewhat slowed down but I have one particular advantage.
To really one is as you know Jason.
When I speak I speak without notes or slides or multimedia which basically makes me a very zoomable Sky possible.

[24:25] Speaker and so I’m still speaking which helps on the book tour without actually physically going anywhere.
But the second thing that helped you know to a great extent was the fact that my book actually.
Resonates with the times that six of the twelve chapters seems to have been written specifically for today’s world like I have a chapter on how you manage workforces.
When they’re not all together in one place have a chapter on how you lead when you’ve got tough times and so those two things which is my ability to basically speak without notes and the fact that people are very hungry,
in this including our chapter on when you’ve got time how to use it.
And also how to upgrade your mental operating system all of which what people are doing so it turned out to be.
I wish we weren’t in these circumstances but it’s turned out to be all right but I’m looking forward to going back into the work you know the world out there,
and and because I was writing about humans and not about an event in time the book doesn’t age so the fact that there’s a pause in the book tour doesn’t hurt because when it starts it won’t be.

[25:42] Be dated at all when you.

[25:43] It won’t be dated at all if I could be more relevant on the other hand.
You know it’s not pleasant to see what we as a society are going through some writing a lot these days and I’m trying to think of the positive side of the troubles we are in.
And so the framing some stuff from my book I call this era which I think is so not the Great Recession that we occurred in 2008 2009 but I called this era that we’re about to enter the Great reinvention.
Because I truly believe that people are going to come out of this different than when they went in one because.
Nothing like this has happened before in my 40 years if I could most people’s lives and which is everybody in the world is affected all at the same time.
Which is rare the second is we all are effective for 60 to 90 days,
and habits change in 60 days so either you start or stop doing things in 60 days then when you restarted it’s very different and very you know unusual.
And so I do believe coming out of this people are going to be looking for safety they going to be looking for society they going to be looking for security it’s going to be a different world and so I’m thinking a lot about that these days.

[27:01] Yeah I feel like another thing I saw you talk about when you were talking,
sort of coming in the book on social media that really resonated with me is hey everyone saying we’re working from home we aren’t really this is not work from home this is work under duress.

[27:18] Yes so the key is this is completely work under duress because you know we have three big challenges and that is everybody who’s listening to this so the first.
As long as you’re a human being I think you have these three challenges but it’s sort of differentiates a little bit on you know what your state in life is ETC.
The first one basically is we are extremely anxious about own health,
help us people our parents our kids our team members so you know you normally don’t work from home with this anxiety that people are dying in the thousands and you could,
get that if you go to the grocery store so that’s number one,
the second is you basically have this particular area of fear and the biggest fear that we have R2 and most of them are around economic,
which is will my job still exists because every day you see companies layoffs,
between 10 to 50 percent of furlough between 10 and 50 percent of the employees,
so that’s the second one in the third is uncertainty which is when will this end how will this end and nobody works from home under those circumstances where you basically have kids sitting in the house with you.
We shouldn’t be there worried about your health what about going to the grocery store water that your job will disappear.
Right there is not under any circumstances working from home is basically working under duress.

[28:47] Yeah no I totally resonated it is funny like I like you travel a lot and so when I’m home I often do work out of my home office and free pandemic.
I would be super concerned about my family interrupting a work conference or something like that and I if it ever happened I’d be really embarrassed and one of the things that’s been kind of funny about our present circumstances is I have kind of a cute I won’t tell him this but but acute four and a half year old son
and now I almost create an opportunity for him to come in and interrupt every meeting because it’s almost expected and appreciated and.
Makes me feel it helps me like form a more personal bond with the people I’m interacting with.

[29:32] So I actually posted something that was it’s a real story and it happens to be the CEO of one of our very large clients.
His mate his name is Laxmi under a salon and he’s the CEO of record been Seeker or now known as RB.
Which happens to make products like Lysol.
His products actually are doing very well there Lysol and they’re like Trojans and apparently you know condom sales are going up in Lysol sales are going up.
And he basically there’s an interview with HIPAA The Wall Street Journal and literally the way it ends is his mother he’s living in London with his 79 year old mother,
and his mother comes in and says you have not taken the garbage so he stops his board meeting and takes the garbage out.

[30:19] Yeah I love that the.
I did want to pick one bone I do have a small bone to pick with you though you you referenced earlier than no slides thing.

[30:31] And this is funny one of the reasons that I think of you frequently in my career is because but you do do a ton of,
client and public presentations in your you know very in demand public speaker and as you noted.
You never use slides I’ve watched you from the the wings a lot and it seems like,
you’ve jotted down you know the key bullet points that you want to discuss on a napkin or something and and you walk up there and had this really engaging conversation with the audience and it feels like.
There’s there’s less Detroit as between you and your audience and I feel like it really facilitates you,
um sort of having a bond with them and it feels more interactive and authentic which is all great,
I also do a lot of public speaking and I use a ridiculous amount of slide so a it always makes me feel bad about myself because I feel like.
I’m using a prop that you don’t need but but even worse than that,
I’m usually doing those slides at like 3 a.m. the night before the presentation and I’m thinking to myself
you know Richard went and had a nice dinner had a cocktail use the cocktail napkin to jot down his notes for the presentation tomorrow and got a good night’s sleep and I’m sitting here at 3 a.m.
You know trying to find the right image to put into a stupid PowerPoint deck so I.

[31:58] Difference the big difference is when I see your presentations I enjoy that and I say thank God I don’t have to do such amazing presentation.
Because the big difference is while you do have amazing slides you you use them as a backdrop but you speak without you know reading numbers from them or reading words from them,
you basically use them as sort of a prop but not as some kind of crutch so a lot of people use things as a crutch you don’t use it as a crutch use as a prop but the two reasons of the two or three reasons that I
don’t do the slides one is because it requires work.
Oh I just you know I’m down lazy but as importantly when you do slide somebody then says they want to see them and that requires like having a meeting to prepare the meeting which is a bit difficult.
But the most important reason and this you can’t do obviously because you share a lot of very valuable information which requires you to have those slides because when I look at your slides this isn’t just like a using slides because you,
using them because they actually add to the show but one of the reasons why I don’t use slides and why you actually don’t use them as much as you think you do.

[33:09] When you don’t use slides people play the slides in their head so when I’m speaking.
Actually there is a slideshow going on it’s sort of like a form of radio it’s like the theater of the imagination and what I began to realize is people think I’m speaking to all of them because they’re visualizing.
Their own slide where and that became what I found is very powerful which is not only if it was just that I’m going to save time and be lazy that doesn’t make a good presentation I’d get fired for doing that,
it’s because actually if you think hard enough about the audience and you customize it which is what I do.
People in the audience that actually played in their own minds I think you wrote everything just for them.

[33:57] Yeah that’s awesome.

[34:00] Jason speaks people close their eyes and envision the slides and sometimes they make kind of light snoring noises.

[34:08] Yeah but you know what happens is he has so many slides you gotta Clyde’s are so strange,
got to have a look at that because you’re seeing this big car wreck train wreck happening and you’re trying to figure out like how is this going to play out that’s what you’re going because you should see a slides they’re almost like.
It’s this almost like Van Gogh on drugs.

[34:29] This is fun we get to team up on give Jason her time I like this.

[34:34] In my defense and I feel like you gave me a nice compliment their Rishad which I really appreciate but the in my defense it is true like my sides tend to
images that support whatever story or point I’m trying to make as opposed to,
actually having the information on the slide and so the one thing I do dread is for your point like when a client or show organizers like hey can you send me your slides in advance or can you do and I’m like,
well I can but they would make no sense because they’re not the content like they’re not the story,
you know it’s like it’s kind of like asking to see the illustrations from a book without saying the words.

[35:14] Exactly exactly at that so that that’s out of the way it is and so what are the the you know the fun ways I try to sort of also redo.
Just like I thought of rethinking the presentation.
You should as you’ve read my book what’s unusual is I read mented the book without people without changing the format of the book so the,
it’s obviously available as a book at an audible at a Kindle and everything else but,
I sort of thought about that most nonfiction business books tend to only have one good chapter and then somebody just repeats and repeats and repeats,
and so I decided to write 12 different books instead of it being a book of essays is actually a theme and the theme is the story of the spreadsheet.
That’s I basically said I’ve written the first Spotify playlist of a book where you can basically read every chapter in any order.
And as a result people that Amazon are now asking the question how come they don’t have a shuffle mode on Kindle.

[36:14] The other question you kind of outlined companies that are to Excel and opposite in the Spectrum do you have a case study of a company that kind of does a good blend between the two.

[36:29] Yeah so I would basically say that in every category I select having in almost every category I could name like one particular leader.
So in in the world.
So the film for me the leader always was Pixar because Pixar basically told amazing emotional stories using state-of-the-art technology.
I basically think about it pizza delivery it’s Domino’s,
right the improves their Pizza they basically read the very thought of themselves as a Distribution Company or logistics company that delivers pizza.
But they really want to own the entire category of pizza so they’re willing to give you a coupon for Domino’s anytime you buy any pizza so now if you go to a grocery store and you buy a pizza you have think about dominoes,
which is absolutely brilliant in Airlines at Southwest compare Southwest to United and I believe that the most.
For many years it was one of the most underrated technology companies don’t of course that was not underrated was Adobe so if you look at the decisions that adobe made in Adobe right now is the second most valuable Enterprise technology company after Microsoft.

[37:40] And so categoria and many see these leaders and I know some of these folks who lead these companies
they have these amazing people who combine the spreadsheet on the story and they and and and and often it is leadership that makes the difference if you think about Microsoft.
For 10 years its stock price went nowhere and Steve Ballmer yelled and screamed Windows Windows Windows.
Write it it stack ranking math machines and everything.
In such an ideologue basically came on he gave everybody the spoke growth mindset he talked about basically a becoming a learning organization versus a know-it-all organization,
you focus basically on business primarily,
right and productivity he got out of a lot of the consumer business with the exception of Xbox and and in effect,
and he got rid of the windows Division and the stock price went up fourfold in 3 or 4 years.
And he’s a much more Humane boss with a company that is much more people oriented.
But on the other hand it’s results are better than anybody’s.
And so you know whenever anybody tells me they make decisions with numbers I tell them two things one is you are not human being because humans select with their hearts they use numbers to justify what they just did,
and if you work in marketing and tell me you make all the decisions with numbers are in the wrong World on the other hand if you do make all your decisions with numbers and let’s see working in the world of.

[39:10] Finans sooner or later you’re not going to have a job because AI does a much better job with numbers and computers do a much better job with numbers than human beings so anytime you make it
you saying it’s all about data or All About Numbers my stuff is don’t be silly and for most companies do with the exception of a few like an Amazon a Google or Facebook and a few others.
Data is very important but I sort of defined data is electricity.
Which is it’s so important that you can’t work in the future without electricity but on the same hand almost no company differentiates Itself by through its use of electricity I don’t see a company saying I use electricity better because I’m better.
Different better and so there’s this confusion and that was one of the reasons I wrote this book but it’s it’s kind of remarkable because it’s you know I found that.

[40:00] Because the focus is it still help people think see and feel differently about how to grow themselves their teams and their company,
that it is resonating with all kinds of people CEO CFO CMOS young people because part of it is it’s training on how to think,
and we have forgotten how to do that so big part of this book really is a,
you have amazing potential and I call everybody a leader but here are some things that people may have never taught you and you may want to think about and that’s probably why I think people should read the book,
which is it will make you more productive as a CFO of a company just bought 300 copies for every employee in his company and I said you’re a CFO what you buying this book called the purpose of business and all of that,
he said when I read it and two of The Twelve chapters maybe five percent more productive I decided therefore,
that each of my employees will become 10 thousand dollars more productive so what the hell your book will be cause 20 bucks by.

[40:58] Yeah and that absolutely is one of the things I love about the book as I feel like in my day-to-day life,
my colleagues and my clients get like really focused on The Shining baubles right like everything’s about the new marketing tactic or the new ad unit or the new e-commerce platform or whatever the widget is and it.
In the long run it feels like all of those things.
Are only 10% of the business problem and the other ninety percent of the business problem is the people behind those tools and how they work together and how they collaborate and.
Um and I feel like your book is a lot of super practical advice about improving the 90%.

[41:40] Yes and explains what and how to frame the 10% and because I know that 10% so well I can talk about framing that 10% and then focusing on the 90 because I truly believe there are only two ways to change a company.
And that is to basically either change the people or upgrade the people mind sense right everything else is a press release.
And we don’t play enough attention to that so this basically says a year so you pay attention which is if you get upgrade the ninety percent of the people,
how they work the talent the skill sets the company will do better it’s not different than you know world class sports teams usually world class sports teams have a disproportionate share of talent,
and then they have a coach that make sure that they work together and not at counter purposes and they win.

[42:29] Yeah the that is terrific on the flip side though I feel like one of the challenges with your book is because it has these twelve chapters and there,
they’re sort of very varied in topic it’s your book is really annoying to summarize.

[42:45] Yes that and that’s part of the the two parts of the book that is sort of annoying which is what it’s as hard to summarize the way I’ve basically summarized it is it help you think see and feel differently about it to grow yourself your company and your team which is number one,
and number two I would basically say is it basically says that for to succeed you have to come by.
Everything you know about the left brain part of you which is the spreadsheet out of you and combine it with the story part,
add depending on the situation that combination can be 75 30 25 or 25 75 or 50/50 it’s never hundred zero.

[43:26] Yeah.
So Rishad apologize we are coming up on time but I do want to let our audience know about one other important Rishad fact.
And that is that,
in addition to being a great business leader and now author you are very accomplished photographer and it seems like you you use your opportunity to travel all over the world to capture these,
amazing landscape and Architectural photography wherever you go.

[44:01] Yes it’s one of the key things which is you know in fact I mention it there’s a chapter in my book on how to use Stein.
And you know one of the key things is I look at photography as a way to see the world differently but also to remember that it’s passing Us by.
Which is one of the reasons the opening line of my book is time is the only thing we have,
and these days we now truly recognize that time is the only thing we have whether we have too much of it or we are worried that we will die and have too little of it.

[44:33] Yeah I feel like in a pandemic there’s two kinds of people there’s working parents that have none of it and then there’s there’s empty-nesters are people without children that like suddenly have discovered some more of it.

[44:45] Absolutely absurd.

[44:47] Rishad speaking of time we have sort of ran out of it but I’m thrilled you are able to drive by and I can’t wait for this pandemic to be over so you can get back on the road and you can update your Instagram feed.

[45:00] Absolutely but thank you again thank you for your audience and thanks to both of you all bye.

[45:04] Thanks for Sean unfortunately I have not read your book but it is on my list and coming soon.
So the next category that I wanted to jump into is what I would call start-up entrepreneurial books and again you know this is for my entrepreneur buddies out there most impressive read them but if your intro
preneur I think there’s a lot you can pick up from these so I want to start with some of the classics so one of my favorites and I go back to this one probably once every two years just to kind of.
Remind myself of some of the concepts is good to Great by Jim Collins,
he’s kind of a recluse and he was just recently did a little PR tour so there’s some podcast he did one with see you do it with
Tim Ferriss and they do Joe Rogan no I don’t think he did but he did a couple podcast that were were just outstanding he has a little addendum to the book called turning the flywheel where he talks about evidently apparently,
he helped to Amazon deliver develop the flywheel that we all talked about all the time and he has a lot of really other interesting examples of flywheels in that little short book.

[46:14] This one actually spoke in the same conference with him recently and unfortunately he has passed away in the last year and this is the innovators dilemma by Clay Christensen
this one for the longest time I couldn’t understand the early days of e-commerce why big companies were acting the way they were like it was so clear to me that this was going to be the thing and they’re like yeah we’re just going to Outsource this whole thing and it’s going to be a small part of our business and I’m just like.

[46:38] Wanting to shake them and say my God can’t you see this is going to be the future and I didn’t understand of have a way to put that into you know understanding why these big companies were so hard to move and then the innovators dilemma came out and I was like
this guy totally nailed it he totally just makes a lot of sense now to me
another classic one and again for for someone like me that starts these new products and has to figure out all right why isn’t this getting the adoption I want it to how do I how do I.

[47:07] Get up that curve is called crossing the chasm and that’s a really good one for any
any kind of a start-up any new product that you have out there it’s got a lot of kind of great ideas for every every adoption curve has this dip in it how do you get across that tip that’s the chasm.

[47:25] I think that’s Jeffrey Morris all right yep
and then so those are kind of what are called Old chestnuts so totally stand the test of time you can pick them up today and they’re so extremely relevant some of the more modern ones there’s one called 0 to 1 by Peter teal
this was interesting because people have a kind of a binary reaction to it I just got a funny it says it’s called zero to one you know most startup people don’t like it
but then I found a lot of kind of more General business people love it so that’s interesting I’d be interested to hear how readers react to it what am I
one of my challenges has been there’s not a lot of books for startups when you get past like a hundred people there’s tons of books for how do you find product Market fit and like the early days of the startup but there’s
you’re having historically been a lot of what do you do when you get to kind of like 10 million and a hundred people how do you get 200 million or a billion and this is where probably my most,
my most favorite modern book by Ben Horowitz is called the hard thing about hard things and it’s with the first books I found we’re actually kind of
explains all the stuff of how you’re going to feel problems are going to hit when you get to like them employee number 200 and all the things you need to do to push through that so that’s one of my favorites.

[48:43] Speaking of that earlier stage you know I think I’ve practiced that this,
got put into writing as Lean Startup so how do you how do you get something out and get feedback faster that’s pretty much a staple because agile software development is worked its way into
all aspects of companies now but at the time it was kind of a weird thing to Think Through.
Um it spiffy we have to implement a lot of processes and procedures more so than I’ve ever had to do in any other company so there’s a book They’re called the checklist Manifesto that I found
absolutely helpful
and then Ben Horowitz just recently came out with a new book that’s kind of moron company culture which is really good what you do is who you are and then one of the last ones in actually want to add another one.

[49:29] Is Think Like Amazon we had John Rossman actually on the podcast and I go back to that,
there’s a lot of cool Amazon isms in there that I’m using on a daily basis like this concept of a two-way door of if we make a decision let’s be able to get out of it,
and I found that a really useful framework there’s like 10 or 20 of these in that book for me that are really helpful to help explain to someone
why we’re doing what we’re doing and why would you why would you try this if we just have a plan for I’m doing it well here’s why we don’t want to get stuck on the wrong side of that door for example
the other one is Extreme ownership I’m doing this from memory and this is by Jocko will will Nick
ex-navy seal my partner is 50 is an army guy and you know when I first read this at kind of it’s all about you know being a Navy SEAL and going out and killing people your kind of like well what’s that have to do with business,
and but you know increasingly especially in these times when it does feel like we’re under Fire,
I found that a lot of the concepts and that one are really really good and he has a great podcast to Listen to If you want to get super fired up and like
where if you’re having a down day and you want to watch some of his YouTube stuff that’s really really good content to kind of get you out of a little bit of a funk or depression.
How about you Jason.

[50:56] I think he’s got some Jocko has a couple extremely highly regarded appearances on the Tim Ferriss podcast as well.

[51:05] Yeah yeah absolutely and he’s on Joe Rogan all the time as well.

[51:09] And then for listeners that are following the John Rossman was on episode 181 talking about things like Amazon.
Yeah so that’s an awesome list I am reading another book that I would kind of put in this category.
The came out this January called future is faster than you think and it’s by this guy don’t.
Knew nothing about Peter diamandis and I don’t know if I’m pronouncing his name properly but this is a topic that you and I talked about a lot it’s this this concept of exponential growth.
And how everything particularly in technology is getting adopted at a much faster rate than ever before and so it’s kind of.
A framework for thinking about how.
How to operate in a world in which the future is coming at you faster than ever before and so you know it’s like as we’re doing this podcast Disney plus just got its 50 millionth subscriber right and.
Five years ago it took Netflix much longer to get 50 million subscribers and you know way before that it took HBO much longer to get 50 million subscribers so,
just kind of a interesting helpful book to sort of help you think about running a business in a in an accelerated world that’s growing at an exponential rate.

[52:37] He said one of the founders of Singularity University with Ray Kurzweil they’re biffle’s.

[52:43] Yeah hence the his hands his love of exponential growth.

[52:47] Yes absolutely it’s kind of interesting because I you’ve seen me talk about
this tonight I lead with that example A lot of times of exponential growth and how we’re not used to it it’s really interesting in this world of viral contagions that there is a bunch of people that just can’t get their head around exponential growth.
They’re like you know well .01% what does it matter you’re like well you know if you keep moving the decimal every other day that’s a pretty quickly.

[53:16] Yeah I think unfortunately a lot of people are learning about exponential growth in the context of the pandemic right now.

[53:22] Yes yeah the the hard way cool anything else on the general books Journal business set.

[53:30] No I have a longer list again I’ll put on the on the web page but that you know that I think that’s a great great list for now.

[53:39] Cool so then the third category we wanted to talk about is what I would call kind of e-commerce retail digital retail
payments and that kind of thing
this category I found the ones that hold the better test of time for me and our little more engaging or when I would call business biographies
so one of my favorite in the world of retail is Sam Walton made in America this one’s hard to find because it’s out of print so you have to buy it kind of used but it’s really good it’s got a lot of great stories about how
CM would just fire around America and you know be over some City and be like we’re going to put the Walmart there anyways in this little.

[54:19] Kind of I don’t know what kind of plane it was but and then you know sure enough they would build a Walmart there so that’s a really good one talks about you know
the whole concept of Walmart and how I scaled it up that’s pretty amazing in that same genre Ken langone who started one of the founders of Home Depot he has a book called I love capitalism that’s kind of his life story and it talks about.
How you used to work for a hardware store and there could be a better way and did the big box thing and it’s really really a good history of retail and you know,
just like Sam he’s had a very rich kind of post Home Depot business life also
and then as we get into the world of e-commerce the perfect store which is,
about eBay from Adam Cohen that was a bit old but still holds up pretty good I think the eBay story is really interesting from a Marketplace perspective
the good Google case studies called in the Plex the Facebook one that I recommend is called the Facebook effect,
it’s not a salacious as a lot of the other Facebook ones it really talks more about you know the iterative way they built Facebook.

[55:27] The best kind of the go to Amazon book is called the everything store,
my good friend Brad Stone you can actually find my name in that book if you want to go little spelunking there,
and then a bird to little bird told me Brad’s working on maybe either updates that book or a new book so I’ll be kind of watching for that so much happens with Amazon your,
but of course regular listeners know we spend half our time talking about all the new stuff coming on Amazon that it’s hard for him to keep that up and then
Doug Stevens who is speaks it a lot of the events we go to has a really good book in the world called in the world of retail called re-engineering retail that,
I think is interesting and kind of talks more about experiential kind of retail and a lot of the topics you talk about Jason.

[56:16] Yeah yeah for sure all good ones the it’s funny I read a ton of business biographies,
and I love reading them I do feel like some of them have these like.
Pearls that are Evergreen and some of them are like super interesting at the time but I’m not quite sure have as much legs.

[56:40] So you know it is a little interesting but you know other business biographies that I’ve read recently you know not too long ago we had weary and Gracia on from the billion-dollar brand Club,
um which is cool because it’s talking about a lot of direct-to-consumer biographies many of those stories are not completely done yet so it feels like,
work in progress,
um another book that sort of loosely a business biography also on Amazon is Amazon for CMOS which is by Kiri Masters,
I’m sorry like that but the book I’m reading right now in this category of.

[57:23] Kind of like specific retail advice is called remarkable retail how to win and keep customers in the age of digital disruption,
and that’s by another guy in our sort of speaker and social media ecosystem Steve Dennis and he’s a longtime executive JCPenney and then later Neiman Marcus,
and so I’ve read the book but it actually doesn’t launch until next week so it’s why it’s releasing on April 14th,
and because the pandemic he can’t go on a book tour so he’s having a virtual book launch,
on on April 14th at like 4:15 in the evening so if you happen to be listening in this episode before Tuesday I’ll put a link in the show if you want to join the virtual book launch,
and I will be participating and having a conversation and there’s going to be several other,
surprised e-commerce guest stars so it might be a fun way to hang out on Tuesday afternoon if you’re available.

[58:27] Very cool I’ve never seen the virtual book launch so it’s going to be exciting to see how that goes down I’m look forward to seeing how he signs books across Zoom.

[58:35] Exactly.

[58:37] It’s going to be some way.

[58:39] Yeah I’m leaving that testy.

[58:43] And then for those folks that do not want or need if you’ve read all these books already or you’re not into books that’s not your thing this category is kind of multimedia so shows movies streaming anything in that kind of category
one of my
kind of all time classic business movies is Glengarry Glen Ross you can’t work with a sales team unless you’ve watched this in this is where all these kind of chestnuts of
ABC always be closing coffee sir closer closers there’s a lot of kind of sales people language that comes out of this movie and it really kind of.
Catcher some does a good job of
you know articulating to people that aren’t in sales what it’s the pressure of being a salesperson can feel like and of course it’s Amplified like
like nothing else in the stakes are much higher than in reality but it’s pretty interesting how they do that another fun one is Boiler Room same kind of a thing Wall Street you got to put that in there,
classic Michael Douglas Wall Street The Social Network.
That’s a really good one to kind of see a dramatization of how Facebook was created at the music and that is exceptional
this is one that I find a lot of people haven’t seen it’s called girl boss and it’s on Netflix it’s a Netflix original.
It tells the story of how a retailer Jason you got to help me out with her name Sophia Amorosa Zurich.

[1:00:07] That sounds right to me yes.

[1:00:08] Yeah okay so she started this this apparel e-commerce site called Nasty Gal and fun fact it actually started out as an eBay
so she started as an eBay seller this is really cool because it kind of shows this and I’m really super familiar with this life cycle because,
it might company started a channel advisor we have like thousands of customers like this where you know it started out as she she wanted to
make money to go buy something so she started
collecting vintage stuff finding it and selling it and then suddenly you know you look up and your apartments full of boxes in your you got a seven-figure eBay business and then she kind of graduated out of that into a retail facility and so
that did a really good job kind of showing that lifecycle that that’s really common for a lot of how a lot of e-commerce businesses are born
you have to watch office space that’s kind of a classic comedy around kind of what life in the office is like Jason is a consultant I feel like you.
You live that every day effectively and then another good one is start

[1:01:15] This is kind of a documentary about these guys that started a company and its classic because a lot of times you see this sad situation where these
these Founders will get together they’ve never really met each other and then they spend like the next two years just excruciating Lee arguing with each other and ending up with zero so so this this one kind of covers a situation like that and it’s a good
warning of if you’re going to start a company pick your Founders a little bit
carefully and then make sure you have those tough decisions early versus at the very tail end of the whole thing.
On TV shows I really enjoy Undercover Boss that’s kind of a cool way to see it’s so it’s a little staged and.

[1:01:58] More than three or four of them kind of get old but you know if there’s a certain business you want to kind of learn more about it’s a good way to do that shark tank is a lot of fun to watch with the family and kind of guests you know it’s a fun thing to see you know hey would you invest in that company and what do you think their evaluation should be
um another really good one is the profit this is on CNBC and this guy you know I was going to name wrongly.

[1:02:20] Marcus Lemonis.

[1:02:22] Leah notice he owns Kemper world you probably got better idea.
And all pretty much most the Sporting Goods things except for Dick’s right.

[1:02:34] He’s acquired a number of them recently in bankruptcies so again.

[1:02:39] Martin’s Gander Mountain yep.

[1:02:43] There may be more available in the near future.

[1:02:44] Yeah so a lot of his a lot on the profit you know there’s a good diversity of companies he goes in and turns around but there is a fair amount of retail there they’re not big box they’re usually kind of local retailers,
how about you Jason and he anything in the multimedia category.

[1:03:02] Yeah so you know.
I like to watch a binge watch shows while I worked out and we’ve all had a little more time to exercise lately so I’ve caught up on a bunch of stuff that was in my backlog,
um so I just recently finished the last season of Silicon Valley and,
to me that’s super important because I don’t know if anyone knows this but it’s Loosely based on get spiffy.

[1:03:28] Let’s hope not.

[1:03:30] So except Smith is going to end better but but the characters,
the characters are very very similar so that super funny and a great parody of Silicon Valley there’s a much less popular show that I really enjoyed the AMC made called Halt and Catch Fire,
which is kind of a dramatized documentary of like the.
Early eighties birth of the PC Atari kind of.
Yura and it’s pretty fun and mostly historically accurate which is cool.
Another one that folks tend to have not heard of but for retailers I think is a great one is called mr. selfridges.
And so this is the BBC show that was done about three years ago and it stars Jeremy Pivens,
as this iconic retailer Gordon suffrage who.

[1:04:31] Was a senior executive for Marshall Fields here in the US moved to London and open their first,
um department store called selfridges and a lot of the,
the retail best practices that we still use today and a lot of the slogans you here in the retail industry all came came from him so things like the customer’s always right for example are,
is one of his quotes and he led a very interesting colorful life so there’s a good soap opera quantit quality to the storytelling so that’s a I think that was a couple Seasons that BBC did.
I also recently caught up on succession which is excellent and I imagined,
plays out in the Wingo family when they’re talking about the spiffy Empire so,
highly recommend everyone watch that feel like you got to watch mr. robot so that you know not to store any of your secrets on anything digital.
And then I love Black Mirror which is kind of a.
BBC remake of Twilight Zone and it’s all these stories from the near future and I use quips from the show all the time at work because they’re all these,
sort of scary probably realistic projection of like what our life is going to be like in five years that that’s.

[1:06:01] When they when they paint the picture it’s kind of concerning.

[1:06:06] Very cool yeah I love Blattner do you like the last season had the automated pizza delivery van that was kind of cool.

[1:06:14] Yeah there it’s funny all these shows are starting to work these like near real-time things and I also I’m watching Westworld right now and they just had like in the last episode this week like,
like in the background while two characters are talking you see like for SpaceX rocket so I gland.

[1:06:33] Yeah yeah this call is on those funny
cool in the last category is what I would call non-conventional you know areas to go to learn interesting things one thing that I find is underutilized by a lot of folks is
there’s all these public companies in our category and if you’re interested in any company that’s public
part of being public as they have to disclose tons of stuff so one of my favorite documents to read is the S once when a company is about to go public if I was this document with SEC called Ness one and it’s this
it’s called a poop sandwich so it’s kind of got it’s really weird thing having done this you have to kind of say you know
our company is terrible you probably shouldn’t invest and then you say well here’s why we think it actually is okay and then you like you and you’re like
but there’s all these risk factors and we’re pretty sure it’s not going to work out so you have to kind of find that meet in the middle which is the really good stuff we’re management actually describes the business in their own words
I’m just called the management disclosure and
mm DNA and I don’t know I’ve got that but just look for management discussion and so that’s really really a cool way of reading things so you know kind of thinking about our audience
the Stitch fix one had this really interesting description about cohorts of customers and how they applied a i to those chewy had a really interesting one around how their subscription business work Casper to had this really.

[1:08:01] Really well-thought-out discussion of CAC versus LTV It’s oddly some of the best business writing you’ll find in for modern companies kind of buried inside of there so I know that’s a weird hobby but that’s I really like to read those
then if there is a business that you find fascinating like I’m obviously a bit obsessed with Amazon I listen to all their conference calls read there
quarterly reports and those kinds of things other ones in the industry I would recommend eBay Shopify has some really interesting kind of conversations on there’s one line that was kind of top of mind this week.

[1:08:38] On the furniture side is Wayfarer so they’ve kind of they saw sales spiked like 30 or 40 percent due to this quarantine so I’m going to be interested to hear what they have to say,
Etsy has seen an increase as people have been cocooning or nesting,
Ali Baba’s always interesting if you’re interested in the China side of things and then every public company has an investor relations site and on their they typically have their latest presentation they give to analysts and that’s another really interesting,
way of seeing how these companies talk about themselves you’ll get a lot of really good presentation ideas because these companies.
If you go look at Facebook’s or anything they’ve probably spent humility Philippe $300,000 on the graphics in this one deck so so you can kind of crib some good,
deck Graphics if you will from looking at some of these really high-end investor relations Decks that are out there so I like to poke around on that stuff as well.

[1:09:33] Yeah that’s awesome you actually turned me on to a related resource when these companies are doing IPOs after they file the s-1 they go on this road show too.
Sort of turned up investors and a video of a lot of the road shows is at least temporarily available in a lot of cases right.

[1:09:54] Yeah there’s a site that no one really knows about called retail road trip and they’re they’re up there for a very short period of time which is frustrating because it’d be fun to go back and look at like you know the Amazon Roadshow or something
but they are really really good so you know see one of my favorites Riesling was the Uber and Lyft one’s really good.
Yeah they’re they’re the Stitch fix one was excellent,
so that’s another really good kind of a area to go and you have to kind of unfortunately get to go kind of like log in if you especially if you know a companies going public you can kind of see when it’s coming
with this economy we’re in right now there’s not going to be eating probably for six months but,
keep it in the back of your mind if you hear Aaron B is going to go public Airbnb or whatever you can go and watch that as well.

[1:10:46] Yeah and then sort of a special case of the investor conference calls a number of these companies put out annual shareholder letters and of course.
The the Amazon one is particularly famous and like that’s one of the things I always look forward to every year is the new,
Amazon shareholder letter and the all-time classic is the 1997 version of the shareholder letter and it’s so classic that he reprinted in every new show at the end of every new shareholder letter.
And then like on the.
I don’t know if I’d say opposite end of the spectrum that another shareholder letter that’s like slightly less retail e is Warren Buffett’s Berkshire Hathaway,
shareholder letter always has a ton of interesting Insight in it and you know side note people forget but that warm Warren is a very big retailer that owns a bunch of retail in that portfolio so.
So it tends to be retail relevant.

[1:11:45] Awesome so that is a plethora of resources for anyone that’s looking to consume some new information and again like I’m going to try to put a superset of this on the website and I’ll put some links in there,
to sort of like the all-time classic list of books and putting on the books we have here and in the show notes will try to put a list of everything we talked about on the show,
but we’ve ended up using up a little bit more than our allotted time so we should probably wreck this up as always if you enjoyed the show we sure would appreciate a review on,
iTunes and if we miss some resources that we should include definitely hit us up on Twitter Facebook we’d love to add to the list and what are some new things that Scott on I should read.

[1:12:31] Thanks everyone hope you enjoyed this list of books and other media on how to improve your your situation while yourself quarantining and until next time.

[1:12:45] Happy commercing.

Apr 2, 2020

EP214 - Stifel Managing Director Scott Devitt on Covid-19 

Episode 214 is an interview with Scott Devitt, Managing Director of Internet Equity Research at Stifel, in which we discuss the potential economic impacts of Covid-19.

In this interview, we discuss the travel, hospitality, and e-commerce industries, with a deep dive into some of the factors that will impact Amazon.

To receive Scotts research and analysis, send an email to him and ask to be added to his distribution list.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 214 of the Jason & Scot show was recorded live on Thursday, April 2nd, 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 214 being recorded on Thursday April 2nd 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot W:
[0:38] Hey Jason and welcome back Jason Scot show listeners hopefully everyone is surviving their quarantining and shelter in place
and Jason and Times of Crisis like this I find I get really down in the weeds it’s kind of just pulled out plow through everyday grind it out
but sometimes it’s helpful to talk to folks that work at a higher level they’re seeing a broader spectrum of not only
companies but Industries and then the macro environment and the best place to look for that is Wall Street So to that end we are excited to have one of the top internet analysts on the show Scot debit
Scot is managing director of Internet equity research at stifel welcome to the show Scott.

Scott D:
[1:21] Hey guys thanks for having me.

[1:23] We are thrilled to have you Scott other than the fact that I am now feeling outnumbered to Scotts to only one Jason.

Scot W:
[1:30] Yes the between the three of us we have two of us we have three teas.

[1:34] Yes the S is are also popular so it’s got a tradition on the show we always like to start getting a little background about the guests so could you tell us a little bit about your background and then what your your area of focus or your role is its default.

Scott D:
[1:47] Sure sell-side analysts and cover the consumer internet sector.
Mostly u.s. space companies and the sub sectors include e-commerce you know so Amazon
that’s see Peloton the real Railway fare Stitch fix but we also cover Alibaba and JD in China and then their digital names include Netflix and alphabet we also Cover online travel and the ride-sharing companies as well.

[2:20] That’s awesome and have you always been a cell size analyst or how did you how did you come to the veal.

Scott D:
[2:27] Sure I worked in industry for a few years mostly at Dell after graduate school and then for the better part of the past 20 years I’ve been
I’ve been in this role started out as an associate analyst working for a senior analyst back in 2000 and then it kind of worked my way into the
into the role shortly thereafter we cover my team covers about 35 companies in total us internet.

Scot W:
[2:56] Pickle so your Universe for kind of folks on the phone so on the e-commerce side you have Amazon Ali Baba at see everywhere you put Peloton there’s that e-commerce you think of it I guess I think of it as a digital native brand.
Real real Wayfarer Stitch fix and then you also cover Netflix you mentioned all that Google.
JD JD on your list.

Scott D:
[3:21] GD GD booking Expedia Uber Lyft yes.

Scot W:
[3:25] Yep and we’re looking cool let’s start at the big picture and then we’ll kind of peel the onion as we go as it were.
So clearly this pandemic were as a recording this the jobless claims came out six million new jobless we’re going to clearly,
but the economy into a bit of a tailspin here what’s y’all’s big picture on kind of the how this plays out is this a v-shaped recovery is this 18 one thing a six-month and give us give us an overview of kind of the
the big picture.

Scott D:
[3:54] Yeah I can.
I can give you my personal view of that from just a macro overlay standpoint I mean I think I track the data every day as does everybody else and
it’s pretty rough out there right now
but you know but hopefully we do kind of get to the other side of the virus and you know the underpinnings of the economy going into this we’re quite strong
their stimulus behind us so you know I think my base case you know that then influences
my coverage and and modeling of internet companies would be something between like a V and a U-shaped recovery on the back of this and in as it relates to.

[4:42] Internet specifically we expect the advertising business to be down
ten to fifteen percent that’s roughly in line with what it was down in the o89 crisis certainly at the bottom
you know it could be worse but but that’s a good starting point until we start to hear these companies actually talk about current conditions e-commerce interestingly
right now is running above Trend because of the mix shift the Staples and groceries so overall recently Trends have accelerated according
third-party services like Adobe data today to 20% plus but
you have certain categories that are down as much as fifty percent in grocery that’s up as much as a hundred percent so very much depends on the products that one is selling within travel.

[5:32] And and and ride sharing which is tied to travel you know conditions are quite weak down 50% or more very much tied to the
the airline and hotel industry so that gives you a broad kind of picture of like the base case it’s now built into our models if I had to guess you know I would guess
are numbers you know probably going down further before they go up.

Scot W:
[5:58] Yeah yeah and so if we can think about how this will play out people report q1.
The quarter just ended so we’re going to have kind of 45 days of that and then you know they’re only going to have kind of a 15 to 20 day view of how things were right well the time they report that may be able to shed some more color so just feels like we’re gonna have a lot
you’re probably three to six months of bad news before we can kind of get to the good news of if I think through the way that all plays out.

Scott D:
[6:27] It’s probably in the best interest of companies to
just remove you know any any formal guidance for remained other year and you know potentially give qualitative assessments of current conditions but beyond that
just wait until more information is available and I think that’s probably the the best approach that corporate could take right now and some companies have begun to do that
Twitter data at the few other companies did it outside of our my coverage universe but you know a simple related company Shopify did it overnight so I assumed that
any company that does within my coverage give guidance is probably going to pull it back when they report.

Scot W:
[7:09] Yeah absolutely so let’s start at the the most heavily hits this travel industry you know I saw something that said like Travelers or down 92%
Jason’s are most frequent traveler and I have he hasn’t traveled in like four weeks so he must be just chomping at the bit.

[7:26] The I did something last week that I haven’t done in about 4 years I put my suitcase suitcase away.
I mean it sounds silly but it felt very weird.

Scot W:
[7:40] So so for that to come back Scott what do you think they have two you think we’re going to like change the configuration of planes so that we’re six feet apart going forward or like what what do you think it takes to kind of build confidence back in that industry.

Scott D:
[7:55] I think it will be a slow rebuild it’s hard to kind of determine.

[8:00] You know consumer Behavior coming coming back out of this and you know how corporations like say the airline industry you know will need to operate for a period of time
it’s probably too early to guess but but
but spaces in between seats is an option initially that’s not something you know that’s in place now but the flights are so empty that it doesn’t really matter
and you know I think I think in the end.

[8:34] The airplane configurations will likely be consistent with what they were historically but as we come out of this and consumers you know again
we gain confidence and things like
traveling you know that you could have instances like that and you know our expectations for the online business which is you know directly tied to Airline bookings and hotel stays is not down
you know as low as like the occupancy levels that you hear some of the hoteliers talk about what your 10
yeah roughly 10 15 percent but that’s just because we have built-in expectations of you know recovery starting
you know this summer which may prove to be
optimistic so are you know the bottom of our estimates get down to you know closer to fifty percent versus the 80% because month by month we actually begin to assume that things recover and that’s like I said
a few minutes ago you know in many cases I think as we update things you know our expectations will slowly grind lower you know as we get more information.

Scot W:
[9:34] Yeah I haven’t been I’ve been so focused on my own stuff I haven’t really looked at the ride sharing group have they been hit as hard as the travel industry or people still using ride-sharing in a pandemic scenario.

Scott D:
[9:48] No it’s about the same.
And it’s it’s very much tied to that but even even with the lockdowns that are occurring you know where you don’t have trips that are directly tied to travel
you know those are down meaningfully like like in some cases close to a hundred percent our estimate for to queue for ride sharing is down 50.
And and if the lockdowns hold through June you know then that will prove to be.
And aggressive estimate numbers will be lower than that.
So you have to look at these companies you know to the extent that your your listeners focus on things like this you have to look at these companies and look at balance sheet you know and things of that nature because some of these companies are going through a period right now
where if they don’t have solid balance sheets they could run into some considerable troubles.

Scot W:
[10:41] Yeah absolutely yeah it’s a lot of people didn’t have Pandemic in their crisis planning.
So you talked about within e-commerce obviously grocery is kind of over indexing and whatnot and then he said some categories are down as much as 50% what are what are some of the categories that aren’t doing well in e-commerce.

Scott D:
[11:02] Let’s see fashion down 51 percent according to one of the data sources that we look at.
Luxury retail down over a third e-commerce you know in aggregate
outside of Staples and grocery down almost 50% so anything that is.
Really consumer discretionary with a few exceptions
or down because you have you know offsetting that you have some of the stay-at-home benefit like
things like fitness equipment and you know other categories that are holding up better because PCS are doing quite well because people are rebuilding offices at home
and you know but the biggest driver right now of this growth this kind of 20th percent growth is just a mix shift
to grocery which is you know lower margin category but from a volume standpoint you can definitely see it in like Amazon’s hiring plans.

[12:07] Yeah you know it’s been funny like there’s there’s categories that that are up that are intuitively obvious like you mentioned that you know everyone’s buying the equipment for their work at home setups or their teach at home setups I’m always fascinated by the sort of.
Less obvious trends that start to emerge so across a bunch of my clients a product category that’s wildly up that makes sense but I would have never thought of is adult puzzles.
You know step stuff I got his people.

Scott D:
[12:37] That doesn’t make sense after you bring it up.

[12:39] Yeah once you see it you’re like oh yeah of course but those are the kinds of things and and you know what we’re starting to see what we didn’t see in the first two weeks but we’re starting to see now is all the at home.
Beauty care right so you know set everyone realize they’re not going to get to their salon and have their hair recolored or their nails done or their haircut and so suddenly everyone’s on YouTube learning how to trim their own hair with clippers and everyone’s buying.
Clippers and at-home hair kits and things like that.

Scott D:
[13:10] Yeah what’s most interesting you know that I found
in going through other other down Cycles whether it was you know mm or 108 o9 is that some you know is monitoring these changes in consumer habits
And trying to assess those that don’t revert bat because from an investor standpoint you know I think the internet generally speaking tends to be a
a significant market share Gainer
on the back end of down periods and and those consumer habits that change to something that is
better than what they were doing before under normal conditions consumers are very slow to change but in periods like this
they have to out of necessity and so that tends to drive you know significant kind of investment opportunities when you do get to the other side that benefit names like.
Amazon and an alphabet and and and and maybe even a Facebook but also something like a Peloton you know that a cover where there is an underlying Trend underway to Fitness in the home
that you know potentially is accelerated by this and it really doesn’t slow down on the back end of it.

[14:25] Yeah it that that is fascinating and difficult to figure out right because there’s some categories where you go it’s pretty obvious it’s not going to revert so if you bought a Peloton your.
You’re probably not joining the gym in three months or at least your you’re less likely to because you have that.
Capex now that you’ve invested in at home fitness but if you were having your groceries delivered.

[14:53] It’s a completely open question whether you’ll keep having your grocery delivered after the pandemic or whether you’ll go back to.
To shopping in the grocery store and I bring up the grocery one in particular because they’re it feels like there’s any even extra Paradox there like obviously with everyone Sheltering and home we’ve got.
Way more people trying at home grocery delivery or trips had grocery delivery than ever before which which the digital groceries are thrilled with.
But the experience that’s being delivered is the worst possible version right so.
You know every delivery is late every delivery is missing a bunch of items and has a bunch of you know weird inappropriate substitutions and then all these things and so there.
You know amongst the folks I’m talking to it’s a super open question like they’re getting way more Trials of their service than they ever had and could ever imagine but many of those customers aren’t having a great experience and are using it out of necessity so once.
Once this sort of pandemic a baits like it feels like a really unknown.
How much are those those behaviors stick or how many of those customers they lose because the experience was some up you have any like how do you even think about that but.

Scott D:
[16:04] Well you know everything is a hypothesis right now and.
Giving given where we are you know my with I totally agree with it with everything that you said in terms of it’s not necessarily a better experience you know groceries been slow to transition for reasons Beyond just consumer
the pace of consumer habit change because going to the grocery store is actually still quite convenient what may come of this is I think in the case of grocery you will you will very likely get a reversion back to
going to the store to get groceries because it’s still quite efficient and cost-effective but that you may have consumers more willing to,
supplement the experience with you know certain.
Categories whether it’s whether its buying the dishwashing detergent and things that hadn’t come to mind that that the consumers now realized that is readily available to get delivered to the home that could have an impact on overall trips
but you know it’s a it’s not one where I think you’re going to have a full-scale transition
over to direct distribution of grocery they’ll be some benefit it won’t be near what you’re seeing at the moment.

[17:19] Yeah I wanted to go back to something else you had said earlier like obviously you know they’re all these categories that are.
Wildly down and you know they’re mostly implementing austerity measures and trying to you know figure out how they can weather this and and you know we’re all trying to figure out.
How whether it’s a v-shaped recovery or a U-shaped recovering what that looks like.
I wonder if there’s a difference though like some of the categories you’re talking about like airlines are hotels I know I know there’s an occasional debate but like I think in general.
It’s known that there are nominally profitable models or at least the unit economics are favorable and they you know Airlines and hotels have demonstrated that they can deliver their services profitably and so.
When when they’re thinking about a recovery they’re trying to get back to where they were before but you know there’s a bunch of these businesses like Rideshare and Uber where.
Like nobody’s demonstrated that the unit Economics work so when they like lose all their revenue it just means they’re burning through their investor were War chest faster than ever before.
Like is it our those companies are less likely to have a recovery than companies that have a viable unit economic model or or.
You know do you feel like that Uber is going to be in the same shape afterwards that they would have that they were in before.

Scott D:
[18:43] It’s a great question on one hand Uber and Lyft or much less levered,
but they’re not they weren’t profitable businesses going in the way that the Airlines and hotels were but they’re certainly much less levered
then the airline industry so if you were to this is something that boobers said publicly if you were to run bookings down 60 to 80% for the rest of the year,
Uber still ends the year with four billion dollars of cash and and access to a two billion dollar revolver left in fact doesn’t have any debt so you know there
they you know that seems like a
pretty close to a worst-case scenario in terms of that we stay down here for the rest of the year so I’m comfortable thinking that neither of those companies has balance sheet risk but to your question whereas in the airline industry
certainly without the the.
The federal government providing funds that whole industry potentially you know would go away before the end of.
3Q if not to Q because of the leverage in the model and.

[19:53] And so I think you know we still have to prove the unit economics of ride sharing any other side but to the extent that travel does recover you know I think that both companies sit in.
In relatively strong positions and the question for everyone involved in that industry hoteliers.
Airlines in ride-sharing is what do volumes look like
Under The New Normal on the other side to Scotts earlier question of what have Airline configurations look like how do people travel what a conferences look like and how many are done virtually Etc all those things that we don’t yet know yet we’re going to have you know
potential long-term ramifications on on the trends across that industry I’m you know of the view that we will get back to
normal at some point in terms of people traveling the way that they once did but that could be much longer than other Industries in their past back to normality.

[20:51] Yeah so one other question I know Scott super eager to get to Amazon and I promise we will in a second but one other question to benefit all the CEOs listening to the show this week
a pre-pandemic a common conversation I would have with a retail CEO is.
This challenge around making strategic Investments because there’s lots of strategic Investments that like the CEO
knows that they need to implement for the long-term benefit of their company but many of them have adverse effects on short-term revenue and profitability and you know
frankly like most CEOs feel very locked into.
Performing against their comps and so while there’s a ton of negative stuff about this pandemic.
Like I have a hypothesis that like one small Silver Lining is like a lot of businesses are going to be off the hook for comping this year and they’re like they’re they’re me you know maybe a one time opportunity for.
Companies to sort of reset expectations with their investors and make some more forward-looking Investments since.
Like for most businesses there’s just there’s no hope that they’re going to favorably comp against last year given this like.
Am I thinking about that right or is that is that just Whimsical thinking on my part.

Scott D:
[22:12] I think it depends on the depends on the the impact you know.
Current conditions at any individual business in terms of like the first thing to address our current conditions to the extent that one can address current conditions and still have the flexibility to think about strategic,
options that are deeper into the future and have a capital position which they can deploy Capital then I think your
your scenario in a makes sense because no one’s really going to be looking at at numbers in the near term in terms of profitability outside
just flat-out solvency so I think every situation is quite unique to what that Corporation is dealing with.

Scot W:
[23:00] Coppola wouldn’t be adjacent Scott show if we didn’t dig into Amazon a little bit what’s your what’s your macro thoughts on the impact of the corner virus on Amazon.

Scott D:
[23:11] Well from an e-commerce standpoint you know I think that Amazon is is.
Doing quite well you know mix shift certainly to cpg grocery,
you know could have margin implications I’m sure there’s costs Logistics wise and hiring wives to deal with this you know that.

[23:40] Could have impacts on profitability they’re seeing a mix shift you know away from FBA right now because of the way that they prioritize
Essentials and that has a negative impact on 3pf be a yes so there’s there’s Justice
kind of the minutiae if you will that you know has a net negative impact on the margin profile of the business but I think the
power the strength of this company within e-commerce is more evident today than it’s ever been and Amazon’s of pure example of when we do come out of this a company that will be in a stronger position because
if the government doesn’t seem to be focused anyway on saving the retail industry
and so you had a companies that were on potentially week paths before this
which those paths have been accelerated on you know Macy’s in is an example that’s been in the news in the past week and that happened during the oh 809 crisis and a lot of that share gets reallocated among
the strong company is the same thing will happen again so e-commerce wise I think never been stronger
really and and this is the shines a light on
I think the power of Amazon’s model within their Cloud business you know you’ve seen some data points out of Microsoft that also showed that the way that the economy has transitioned
you know in some ways at least is beneficial to the cloud business Amazon’s like.

[25:03] Spin as it relates to investment ideas probably the most Rock Solid company in fact it’s the off the checklist but I think it may be the only company that I cover that was up.
Year-to-date through 1q the stock is actually up in 1q.

Scot W:
[25:20] So the cloud I could almost argue that they could have some challenges are because it’s a lot of startups using the cloud and we’re gonna probably have less the failure of startups is going to spike for sure and less new starts but
the same time you could argue these larger companies are going their workloads are all going to continue to move to the cloud I guess do you think Amazon’s delivery.
Capability I was thinking through this someone’s so that there is they did that one day walk out and then they fired that guy,
and they said he wouldn’t keep social distancing and I’ve been doing Amazon warehouse before and people are like shoulder-to-shoulder at some of these pick lines I wonder if it’s reduced their Cape their capacity just having to do implement
social distancing and procedures like that at the warehouses have you seen any data on that.

Scott D:
[26:11] I’ve not but I but I think that is.
That is likely yeah that may have an impact on overall efficiency yeah I mean.

Scot W:
[26:21] To your margin point.

Scott D:
[26:23] Yeah that you know have an impact on margin and of course you’re seeing you’re seeing I’m sure in your personal life changes in delivery times and things of that nature but that’s more related to this
favoring of Essentials than anything else but as it relates to efficiency I’d be surprised if it’s not down.

Scot W:
[26:40] Yeah it’s interesting when I talk to Merchants you know to your FB a point there there actually,
you know a lot of people have a hybrid model where they’ll have some stuff in FBA and some stuff out there for the first time ever the stuff that’s not an FBA is getting much higher pull through than the stuffs an FBA because it seems like Amazon is putting these really long delivery times on the
the non-essential FBA stuff so then I think we’re also seeing that spill over into the other e-commerce providers that people normally.
Wouldn’t start out like a Walmart or Target I know they’re not in your coverage University think you think they take a little share from Amazon here or,
the share is really the way to think about it is the Commerce guys take a ton from the offline guys that are closed and that’s how to think about it.

Scott D:
[27:27] And and you’re speaking to like Walmart’s Marketplace business or just Walmart in general.

Scot W:
[27:34] Just just I guess more their e-commerce business you know I’m seeing more people online anecdotally saying you know gosh I’m ordering from Walmart and Target now because the delivery times on Amazon of gotten so long.

Scott D:
[27:45] Yeah yeah certainly I think that Walmart.
Costco come to mind less familiar with the activity at Target right now but I would assume they’re getting a bump in their business as well so.

[28:02] All four of those companies I don’t cover three of them but it’s safe to assume they’re all seeing lifting their business as it relates to like share shift within e-commerce you know potentially
there could be some of that because of the way that Amazon’s D emphasizing FBA but but I think they’re probably doing well.
Holding their own and you know and doing quite well in terms of delivery guarantees on
the essential side which is where all the growth is right now I’ve just anecdotally you know we I think we’ve probably had 15 Costco boxes in the last you know two weeks show up and you know it started out on time
then before you knew it you know the delivery times were backed up a good five days we had a Wegmans order
you know that it took five days to wait to go pick it up at the Wegmans by the time that 5th day came up they canceled the order so I think you know many companies are
we’re having issues you know and I think Amazon’s probably relatively well positioned versus even those bigger traditional
General merchandisers as well but you know we’ll see I mean earning season it’s going to be the craziest earnings season
since you know I’ve been doing this in 20 years and probably I think some that have been doing this even longer than that I’m not sure how far you have to go back to to have something that’s comparable
you know to this but we have a lot more information within the next two to four weeks as companies speak for the first time about current conditions.

Scot W:
[29:31] You know I feel like Amazon’s investment in their own delivery network is
they obviously didn’t know this was coming but it was very very smart because now they don’t have to fight over that one FedEx truck that’s making it to my neighborhood every week they have six Prime vans.
Spin around and doing that so I think that’s been a huge Advantage for them to own the full vertical ization of that supply chain.

Scott D:
[29:57] I totally agree and having so many different
distribution centers as well I mean they haven’t been impacted in the way that some of them my smaller coverage has like like the real real as an example
they have to fulfillment centers in the US they both been shut down for different reasons you know so so the fact that Amazon is so distribute in the way that they are
there haven’t been any noticeable issues that have made it into the media but even to the extent that they do run into
issues at certain places they can reroute you know and still deliver to the consumer.

Scot W:
[30:31] Are you in the camp that Amazon ultimately competes with FedEx ups with her fulfillment or do you think they keep it as an internal capability primarily.

Scott D:
[30:42] I’ve I’ve always had the view that their competition with FedEx and UPS is more about pulling.
Product off of that grid and into their ecosystem so effectively FBA.
And in combination with an increasing percentage of the fleet being Amazon trucks is the way that they.
Ultimately compete with UPS and FedEx versus the more think creative out-of-the-box thought that they that they ultimately provide
similar services to those I think they’re already having an impact in terms of just simply the way that the.
That the size of Amazon’s network is growing that it’s pulling product outside of UPS and FedEx and that’s kind of been my.
My base case for the direction that they’re heading that’s all that they’ve shown to the outside world
you know to date and if that changes you get more visibility to something more distinct than you know change my view there but I’m not I’m not over the view that they’re building
UPS and FedEx internally.

[31:49] Are you following and worried at all about what happens to USPS and all this because it like is you probably know.
The post office is Amazon second.
Biggest delivery partner after themselves and for most of the rest of e-commerce it’s the biggest delivery partner and they’re in serious financial distress they you know weren’t included in the stimulus package so it’s
it seems like their future is uncertain.

Scott D:
[32:18] That’s a problem,
I did see that they weren’t included in the package and and you know there have been other rumors around as well in terms of their operations during this crisis so I mean that’s just going to be something.
The monitor.
It’s an important partner of Amazon so you know it’s definitely going to be something that could be a problem to the extent that their activities you know slow during this period or
or even you know beyond this period that the Postal Service struggles to operate I again in this area My Views been that.
The government will ultimately keep the Postal Service.
Running because it’s necessary you’ve seen some political.
Kind of calisthenics around this topic and that Amazon is not paying enough but
but without Amazon them in the you the Postal Service would be an even worse position so it’s kind of an interesting debate and one that will continue on but but I don’t think the Postal Service you know we’ll just we’ll just go away it will get funding
even if it comes at the last minute.

[33:30] Yep yeah I certainly hope so it’s hard to imagine a world without it what one thing you know you talked about.
E-commerce in the mix being you know shifting much more to Essentials and so there’s there’s sort of winners and losers in that.
One thing that I imagine is a bit of a bummer for even the winners is it feels like this new mix is fundamentally less profitable right so you know I know you don’t follow Target but like targets an example where
they’re ordinary mix with skewed heavily towards non grocery Grocery was a much smaller piece of their total mix than Walmart or Costco.
And so now that you know they’re mix is skewing heavily towards grocery that.
Grocery is systemically less profitable and then the way that all these guys are having to deliver grocery right now all the extra hoops and supply chain challenges.
It feels like it’s less profitable than ever.

Scott D:
[34:25] I agree the only one that doesn’t have quite the same impact so that would that would have an impact on the Amazon Walmart and Target left so Costco because of their markup model Costco you know
Garner’s a higher margin on their Kirkland brand you know which is probably not doing well at the moment
relatively speaking in terms of
product mix so that they have a little bit of a wait there but they’re markups across their business outside of Kirkland or quite consistent so they’d be the only one I’d say that
that wouldn’t see a meaningful margin impact outside of Kirkland mix the other three
certainly you know will have a lower margin impact benefit of mix but but the downside is percentage margin.

[35:13] Yeah and that you the those retail exclusive Brands is another interesting one on following pretty closely because.
There was already a strong Trend consumer preference with shifting to these exclusive Brands and they are better for the retailer and there’s a lot of good economics attached to them.
But my hypothesis is another secondary impact of this pandemic is.
Consumers are much more open to substitution and they’re trying many more new brands than ever before so if you were super loyal to Charmin toilet paper.
Right now you’re just thrilled to get any toilet paper right so the toilet paper you get is Presto brand from Amazon.
How many consumers will decide that Presto is good enough and not go back to Sharma.

Scott D:
[35:57] Time will tell and you know the throw another wrench into things when you get when we do get to the other side of this you know,
if one thought that China supply chain.
Was you know a risk to retailers prior to this I’d have to think that these things are only going to get more difficult
on the other side without going into into depth in that area a you know I do think that the possibilities of nationalism protectionism and things like that certainly could emerge out of this and have impacts on the retail industry.

[36:39] Yeah so like thinking specifically about some of these ecomp layers that you follow argue you mentioned Stitch fix real real.
You know what is going to happen with those I think of Stitch fix in particular is like.
The largely been the the direct to Consumer internet darling but then you know their last earnings were slightly soft and now they’re in this category apparel that’s that you know has a ton of potential head winds as a result of the pandemic.

Scott D:
[37:13] Yeah so let me quickly hit on the others for that stand out that are you know kind of that
small mid-cap e-commerce company Stitch fix is on that list and the Stitch fix customer one of the.
More meaningful use cases for the product is.
Dressing for work it’s not many people you know are doing at the moment other than those that have cameras in their house and are on news channels and so I think that you know Stitch fix his business while
it’s one that certainly has the potential.

[37:48] And and I think was was executing on becoming a leader in in soft lines in this new world of distribution there
they indicated you know some potential weakness in the coming quarter and I would imagine that that.

[38:04] Is is likely happening if not even worse the real real I mentioned
you know which is used luxury items they long-term I think their business model is sound short term
they are not shipping product out of their facilities now because of not being an essential business
in California New Jersey where where those states are on lockdown so you know they’re operating but they’re not they’re not currently shipping out of the facilities
wafer is in the furniture and Home Goods business wafer is not a profitable business and it’s one that it tapped been tapping the debt markets and so you know that lack of profitability is something that
concerns investors especially when one has Leverage.

[38:51] You’re comfortable thinking that that they will be that their brand will resonate you know similar on the way out of this as it did on the way in but I think that’s a company that
in terms of the stock itself it trades more like a leopard business like an airline you know than it does an e-commerce company at the moment because it’s the one that has the most
that of these names in the final one would be at Sea which is just a discretionary item Marketplace business which there
operating at a very high level but
I would assume demand for their products is down considerably right now so you know their numbers will likely be week as well and I put them on one side of the grid is Staples and Grocery and
and the other side is everything else you know at see each one of these companies falls in the other everything else which is down 2250.

Scot W:
[39:42] That’s how I could almost talked myself into a contrarian view because you know Jason talked about adult gaming and
playing puzzles and stuff you can almost think if people are stuck at home it may be a good time to pick up a craft and maybe they benefit from that some degree but I guess the macroeconomic would probably swamp that.

Scott D:
[40:00] Yeah well I yeah I I could talk myself into anything right now and I think that’s the it’s certainly.
Certainly possible and I think you know they will probably whether it better than you know than eBay across their broad set of categories for that reason you know but,
I just don’t know you know there’s not a data source that I can point to that that fully confirms that but I think that anecdotally you know I’ve heard similar things in that category.

Scot W:
[40:32] Let’s talk a little bit about eBay I actually.

[40:35] Before we go to eBay Scott one other thing I was just curious on Etsy like the so it does seem like in the short term they might get more sellers right as people get laid off and.
Turn to Etsy but I like another long-term potential benefit for Etsy is I’m growing increasingly concerned about what holiday is going to look like for everyone because of supply chain disruptions right so ordinarily.
The big retailers would be planning and executing their holiday supply chain right now which you know is much more difficult and.
Like basically a hundred percent of the toys that everyone buys for holiday come from a Chinese supply chain that’s pretty heavily disrupted like there’s a there’s a contrarian view of my mind that.
People might be getting a lot more Etsy gifts for Holiday than ever before because the traditional options might be diminished.

Scott D:
[41:28] That’s possible offsetting that they have you know a good bit of business that’s event-driven.
Weddings and things like that and so you know it’s hard to tell but I think you know I.
That’s it to me is a very Sound business it’s well-managed it’s not levered you know and as a Securities analyst you’re thinking of stocks like that’s the type of business that.
I would want to be building a position in knowing that at some point we’re going to get to the other side but I probably wouldn’t be building a full position with the amount of uncertainty with where we are in the process right now if that makes sense.

Scot W:
[42:04] Makes sense so on eBay I haven’t been following very closely in the last two years I know I know the CEO left and kind of a prompt manner what’s going on with eBay these days.

Scott D:
[42:20] Well I mean the closest StubHub deal that was a in hindsight a Herculean effort business effectively.
Shut down shortly thereafter in terms of business operations and so the fact that they were able to get that deal done was Quite a feat
I wouldn’t feel good to be on the other side of that transaction you know at the moment but um but as it relates to that’s just you know financials and gives them access to Capital to
continue to buy back stock over time as they’ve been doing you know the underlying kind of fundamentals of the business.

[42:57] I think can before covid-19 through and on the other side and continue to be week I mean I think it best.
EBay gmv is a GDP plus a couple points you know business and and at worst it’s GDP or point less and that isn’t
is not something that I think is hugely problematic for the stock because it’s kind of priced for that.
As the way they you know we all tend to think of the world in terms of growth assets it’s just it’s not a growth asset and more and I think that’s the way that you think of it in terms of the way it’s impacting them right now
given the categories that they’re in in the fact that they’re not in the areas that have all the growth is that their numbers will be weaker than that that Trend you know near-term and more consistent with,
with overall e-commerce Trends and then when we get back to run Ray you know this business will be growing two three four.
Best case five percent again and that’s eBay.

Scot W:
[44:06] Yeah yeah do you think they get acquired or they just kind of muddle along it kind of to 3% for the first syllable teacher.

Scott D:
[44:15] Well the list of buyers isn’t particularly long but.
You know so so Ali Baba doing something and.
Even before this with the current Administration was near impossible to the extent that they ever even had an interest you know the one that’s most stood out to me.
In terms of not saying it would be a fitness area but in terms of the perception that it would be a fit would be Walmart you know but
but you know outside of that like I said I mean list isn’t particularly long and you know I don’t have a strong view in that area in terms of whether they get consolidate or just kind of slowly but surely
privatize the company through generating cash and buying back stock.

Scot W:
[45:05] One other thing you mentioned at the top of the show that you know you’re going to you just paying a fair amount of softness on the advertising side in my day-to-day it spiffy we do a relatively.
For us a large amount but it’s very small compared to other folks but the efficacy has gotten way better on digital advertising Jason may have a point of view on this to because it just seems like there’s a lot less competition out there for
which you know it’s an auction so it drives the bidding so so we’re actually seeing very positive things on Google and Facebook for example
what say little bit more about what your hear what you’re thinking about Google and Facebook and how they’re going to fare through the next three to six months.

Scott D:
[45:49] Yeah well that’s great I mean I think that one thing to consider with the advertising you know marketplaces is travel as is you know
roughly fifteen percent of the industry and so
if that’s down 50 to 80 you know you get as much as 10 percentage points of drag just alone from travel and then you have.
You know the the mix shift in terms of towards Grocery and Staples that really I think right now.
Those that are Distributing those products have less of a need to actively market and then you have everything else which I think is you know where you’re talking about whereas if you have product that selling
the efficiency of the advertising right now is probably higher
then it’s been since going back to Oedo 9 when news of what smaller businesses if you had a product that was selling but everything else you know that’s down their ad budgets are down commensurate
with their revenue so the fashion industry fashion e-commerce you know down 50 they’re not spending on on advertising and so there’s a whole like mix of
the aggregate advertising industry numbers and that’s why in aggregate you get these numbers that are down 10 you know worst-case down as much as 20 but if you have a product that sells.
You know right now I would imagine that your rates are as effective as they’ve been in years.

[47:14] Yeah.
It’s interesting it’s I think you’ve hit the nail on the head it’s complicated because there are like Windows of opportunity there but there’s some you know pretty big scary macro Trends as well.
Someone that whose salary is largely paid from advertising on I’m trying to follow it closely but I have no idea how it’s going to play out.
I want to do sort of.
Pivot to thinking about the big picture long-term just a little bit as we kind of get close to wrapping up here the first thing that strikes me in a bunch of these segments even if the segments down are the categories down it seems like we’re.
There’s a lot of acceleration of winners and losers so I know you mentioned a perils heavily down there’s a ton of challenges in a pair at all.
Nikes probably better position than a lot of their competitors to whether that down Ness and emerge with.
Greater share versus their competition for example right and Walmart and Costco my you know are likely to emerge from the retail category stronger than some of their traditional competitors like.
Big picture does that does that just eat mean consolidation and to fewer stronger Brands and retailers and as like.
You know does that create investment opportunities or is that like fundamentally bad at like you see it playing out like that.

Scott D:
[48:37] I absolutely do I mean I think that to try and put it succinctly Darwinism you know is accelerated during times like now and so.
You more so than ever want to own leaders and leaders will win on the other side I mean this is a
horrible period in human history but but humans are resilient and you know it’s highly likely we’re going to get to the other side of this hopefully sooner rather than later and you know this is why companies
the best companies do the best through all environments and you mentioned Nike there’s a good list of very high quality
Brands retailers and otherwise that when we do start coming up will be significant share gainers unfortunately,
either either in a very weak.

[49:31] Categories in terms of like department stores where the world is just moving away from that generally you can still be a great operator but it’s the power of the the industry that’s dragging you know the business down or you could just not have a
great business those won’t recover and you know and I think you saw to know 809 you’re going to see it again here
if you’re building a portfolio of Securities you know and your and you think about the safety of,
of your positions versus being lever to recovery I think a lot of those blue Championship names are the names that you want to be building positions in
right now Amazon you know on that list and certainly at the top of it but Google
you know as well you mentioned you know others that that I don’t cover but there’s a long list of other names as well.
I bet Mike you would wish that they were maybe selling through Amazon at the moment but that’s a different different topic maybe maybe they will.
Some resolution there although I doubt it that would be interesting because that would help for the time being.

[50:34] So you know what’s funny about that so.
I do want to double click on that one because it is it’s coming up a ton I have a feeling there’s a lot of people that weren’t selling on Amazon that wish they were and you just hit Nike but the.
It is also interesting there are a lot of people that were single sourced on Amazon so they looked at Amazon as their primary path to Market.
Um and a bunch of those sellers.
Are really taking it in the shorts right now particularly their non-essential category so if you are a business that was built exclusively on Amazon FBA.
You are and you think you’re going to have a future at all you are right now planning a future where you’re no longer a single Source on Amazon right so you’re either talking to Walmart about being on their Marketplace or at the very least your.
You’re thinking about applying for you no vendor fulfilled.
Prime or you know augmenting Amazon with some 3pl services like is there like clearly the macro Trends are going to favor Amazon but I wonder if they lose a little bit of Market
please share as as their Partners try to diversify themselves a little bit.

Scott D:
[51:45] It could happen under the service is so strong when tied in with prime under
99.99% of operating conditions you know excluding this moment in time that I think that you may have you know vendors that build emergency capabilities in or
being able to Source themselves or even layering in additional marketplaces but for the most part FBA will you know
what will likely go back to right where it was
when this ends I mean that’s just that’s my view because of the power of the product but but in the meantime I think what you’re saying is you know is absolutely accurate in terms of that there
going to be contingency plans put in place it’s just a matter of how active those will be once we get through this.

[52:38] Yeah and how it isn’t Heather if they’re economically meaningful at all that farpoint like
is prime certainly is very strong hey so let’s let’s wrap up on a slightly more positive question like appropriately like there’s a lot of Doom and Gloom right now totally get it but when I’ve been looking through history at some of the.
The the near analogies to this situation like a the first thing is there is no Perfect Analogy to this situation.
But when you look at something like SARS and and its impact in China One of the interesting things to me is you mentioned you follow Ali Baba and JD.
Arguable that was founded because of SARS and for sure.
Ali Baba was dramatically accelerated as a result of SARS and today you know those are two of the biggest e-commerce players of all time.
Like is our when we look back on covid-19 and we’re telling our grandkids about this this time when we had to home-school them are they are we going to be talking about some new companies we’re not even thinking about today that.
Become giant players because of this sort of disruption.

Scott D:
[53:49] Very possible it certainly we’re going to be talking about the strength of existing companies you know that are that are beneficiaries of this no doubt and and then I do.
I believe that it’s very possible that you have a whole new grouping of companies that emerge from this as well and you know if you look at we have
been through as a global Society various crises over many many
decades if you just simply pull up an S&P 500 chart you know that goes back to the year 1900 I mean I think you can comfortably without getting into the weeds of the our current crisis
assume that this too shall pass you know the questions that remain are more around depth.
And duration at some point
there will be treatment for this at some point there will be a vaccine for this you know it’s just a matter of how long do we have to bridge to get to the other side and I’m as optimistic as I’ve ever been in terms of that good companies will prosper you know on the back end of this we have a period of a month to you know
a number of months to see
where we bought them before we get there and I think we’re at the still towards the front end of that as has been indicated by you know by the government and the various stay-at-home initiatives are in place in the US.

[55:08] Yeah that that that is very well said and that’s a great place to leave its God because it’s happened again we’ve used up our allotted time but really appreciate the conversation and you’re inside thing I know it’s crazy right now so thank you very much for
taking the time to sit down and talk with us.

Scott D:
[55:26] Thanks so much Jason and Scott really appreciate it.

Scot W:
[55:28] If folks want to follow you online is there a centralized place where where you publish or anything like that.

Scott D:
[55:35] We don’t publish actively online but you can follow me on LinkedIn you can also email me at Devitt sdev itts, STI Fel and we can add you to our distribution list.

Scot W:
[55:51] Yeah I strongly recommend that so I read pretty much everything Scott puts out its really good read and you can tell he gets kind of punny with some of the subjects it’s always fun to try to decode what is puns are on those.

Scott D:
[56:04] Thanks a lot guys.

[56:07] Awesome and if folks enjoyed the show we love a five star review if you’re sitting at home with nothing to do great time to write the review if you’re trying to home-school a toddler
don’t stress it don’t bother reading review just survive the next few weeks.
And so with that thanks again Scott and Scott and until next time happy commercing.

Mar 25, 2020

EP213 - Deloitte's Kasey Lobaugh Recessions and the Future of Retail

Episode 213 is an interview with Kasey Lobaugh, Principal and Chief Retail Innovation Officer for Deloitte. This time we discuss a report Deloitte published last year "Boom, gloom, or doom? What the next recession might mean for consumer companies" which is suddenly very relevant to retailers facing the Covid-19 epidemic.

Kasey also gives a sneak preview of new report exploring the history of predictions around "The Future of Retail". Look for announcement about that research on Kasey's twitter feed @klobaugh

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


[0:24] Welcome to the Jason and Scot show this is episode 213 being recorded on Thursday March 19th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:38] Hey Jason and welcome back Jason Scott show listeners Jason one of our most popular annual Traditions now
second only to our annual predictions is when we have our friend Casey lobaugh on from Deloitte and he is systemically been able to share with us some really cool insights what’s going on with retail and consumer Behavior.
Personal favorite and I talk about this all the time in my pitches is the bifurcation difference between the convenience working to consumer in the valuing consumer
so that’s all Chestnut for me so I’m really excited to have Casey back on the show.
Tonight’s an extra special Casey appearance first of all he canceled his fancy Australian vacation to be on the show so we appreciate them doing that
and then second of all he was set to reveal some pretty interesting to research around the shop talk conference but that was moved due to this pandemic
thing that we’re dealing with so we twisted his arm and got Casey to to agree to reveal This research on our show tonight so we’re really excited welcome back Casey.

[1:44] Thank you I’m thrilled to be here.

[1:46] Yep and you you have a very interesting title so let me get to see if I can nail this Casey is Chief retail Innovation officer and a principal for the retail and consumer products practice at Deloitte
and you know that’s pretty worthy title and it makes soup Jason super jealous because he’s tried to jam as many words in there and I think he’s only got a quarter of what you have.

[2:08] That’s that’s the correct title this week who knows what it’ll be next week.

[2:13] Yeah and for the record of all the things I’m jealous of about you Casey that your title isn’t even in the top 10.

[2:20] Well thank you I’m plenty plenty jealous of you for all the things that you do as well.

[2:28] That I don’t know what those could be but I’m I’m I appreciate the praise know and accept the praise nonetheless.

[2:35] I’m starting to feel like the awkward third wheel over here I’ll I’ll go on mute while you guys do whatever it is you do.

[2:42] No but.

[2:44] Jason Jason III really really think highly of you and Scott you’re here as well.

[2:53] Kasey I share Scott’s enthusiasm about having you on the show because I desperately need Scott to get a new Chestnut so I feel like.
He’s reading your last Chestnut for like several years and we got to get him some new material I was hoping he wouldn’t bring up our annual prediction show though because spoiler alert later in the show you’re going to totally debunked.

[3:17] Right right we’re going to talk about some of the research we’ve done.

[3:20] Yeah but that being said I know you’ve been on the show a number of time so our most loyal listeners are pretty familiar with your background by now but as you may know
we have a massive new audience that’s growing all the time so can you kind of give us the highlights of your career and.
What all those words in your title mean at Deloitte.

[3:43] Oh I’m happy to do that so and I I think I’m losing count now but I’ve been with Deloitte in our retail practice now I think it’s going on 20 23 or 24 years
and in that capacity really during that time I’ve I’ve served the vast majority of the world’s largest retailers.
Mostly you know helping those retailers sort of grapple with with whatever was on the horizon so you know early on in my career I was helping retailers
with you know moving online so I did a lot of work with just the portion of retailers
you know early on when I did a lot of work around you know omni-channel and how the channels come together how we need to think about inventory differently and and these days are really thinking a lot about where retail goes next
how do we pay attention to the signs and how do we read those signs and how do we help our clients sort of navigate through that so that’s really the quick flyby of my career with Deloitte.

[4:46] Cool so we covered the pandemic last week so don’t want to go back into that and frankly it with a good our job is to distract people from from all this stuff going on
but you know one thing I think we all agree is that this kind of
crisis has created dramatically increased the recession that will fasts will face the recession here
part of the research you guys have out there one segment is this is kind of I guess
pretty good prediction you had said that there’s probably a recession on the horizon and then you guys were talking about what that could mean for Consumer Behavior retailers consumer product goods let’s dive into that give us give us some highlights of that research.

[5:28] Yeah sure thing now first of all this this research at this point is probably about 8 months old and about 8 months 9 months ago you know
of course if you’re around the industry long enough you’ve seen you know the economic cycle is about eight or nine months ago there were signs that started to say that
the economy was starting to weaken and so we had gotten organized around that and done a piece that we call are you ready for the next Consumer recession.
And the signs that we were seeing at the time where you know several first of all you know we know that the US has faced a recession every on average about 6.1 years and it has been
nearly 10 years since the last recession so that in and of itself led us to believe that you know at some point we would be facing a downturn in the economy.
But more importantly and probably more ominously the the yield curve actually not only flattened but then inverted.

[6:23] And for you know those those of us that sort of follow economics and.
You know think about those things the yield curve is really where you know short-term interest rates you know are inverted with with long-term interest rates and it’s it’s known as sort of the number one
a recession no it’s not it’s not completely foolproof I think they say it predicted nine of the last seven inversion of the yield curve predicted nine of the last seven economic downturns
so we saw that occur you know roughly a year ago we also saw tightening monetary policy we saw Rising asset prices and really ultra low unemployment you know which which.

[7:05] Can and did and was starting to result in in Rising wages and inflationary pressure though the inflationary pressure really hadn’t appeared to the extent that we thought it was going to but those are just the ominous clouds and and of course you know.
One of the things I say about this is that this is like to use an analogy it’s like.
California comes out and says look we don’t want you burning bonfires because.

[7:31] It’s really windy and it’s really dry and conditions are ripe for for economic downturn
and so really that the clouds that I’m talking about these ominous clouds were really those signs that said we’re not sure what the spark will be
but we do know that the conditions really are starting to set themselves up for for this downturn and by the way you know any any spark that you’ve ever seen whether it was 9/11 or any other you know economic
event that’s occurred you know often times you can look at that and say boy that was.
You know how would you have predicted that that would have been the spark that really pushed us into you know into whatever economic position we get pushed into
so you know we weren’t trying to predict what the spark was we were just saying the conditions were starting to get ripe and there’s a there’s a quote that are I work closely with Danny Bachmann who’s our delete US economic forecaster.

[8:26] And he’s got a quote that I like he says I can predict with a hundred percent accuracy that the US economy will face another recession.
And then in small print he would say I just can’t predict when so we kind of knew you know something was coming we knew that the
potential is out there but of course we’re we weren’t even attempting to predict what that was
so then we said okay if you know knowing that that’s the case let’s look at previous recessions specific to retail and consumer products and ask ourselves you know what can we learn from those.
So we looked at the last two recessions burst and then of course the Great Recession in 2008 and when you look at those recessions and you look at the,
the the market impact the impact.
And the recession themselves were different right the cause burst was over Valley tech stocks and then the Great Recession was the housing market crash.
If you looked at corporate profits you saw two very different recessions as burst corporate profits dropped only by 0.2% and meanwhile during the Great Recession they drop by 13.5%.
And the same on wages and salaries the impacts were very different as well the differences were in the labor market.
So we don’t know exactly how the next recession will play itself out but when it happens.

[9:49] It’ll likely have a significant impact on the consumer and the consumer companies that that’s what we we sort of highlighted so then we said okay well if those things are different.
You know where there are things that were.
Common where the things that we can actually pull away from those and and he’s actually become really important as we think about our situation today but we came up with three things that became very clear.
Happened the first was the growth in digitally and e-commerce.
Now of course we knew that e-commerce was growing but when you look at the numbers you look at it comparatively to brick-and-mortar we actually saw in both cases and acceleration.
Of e-commerce During the period of economic downturn now overall like retail you know showed weakness but when you pulled it apart what you actually saw was acceleration of e-commerce.

[10:42] In addition to that what we saw was.
The rise of new competitive entrance now this is really interesting because you know something was happening at the same time you know barriers to entry were coming down because technology was changing but also Capital was becoming increasingly,
cheap right as as the FED move to increase liquidity interest rates came down what we actually found was there as.
It’s this combination of barriers to entry falling and and available cash was actually allowing new competitors to enter the market at increasing rates during
and right after the economic downturn this included not only
you know new small digital native startups but we also saw European retailers
you know aggressively accelerating their growth in the u.s. marketplace we also saw consumer products accelerating their direct-to-consumer efforts so all those things together where this this new competitive entrance that that really,
were fueled during the downturns.

[11:43] And then finally and this is sort of relates to the bifurcation that you talked about Scott Lee saw the rise of discount players consumers really materially shifted to the discount players and they were experiencing average growth rates of about 6%,
while the rest of the retail industry was declining about 5% in particular during the Great Recession and after the Great Recession discount maintain that growth rate.
That they had you know obtained during the downturn so the consumer learned of a new Behavior consumer found a new channel of course that channel ended up with a flood of.
You know of quality because the traditional retailers were really trying to liquidate product so it really sort of added to the to the mix so if you think about those things as we said here today you have to ask yourselves.
You know how will those play themselves out you know we believe that we’ll see an acceleration of digital and e-commerce will we see.
Discount and an off price you know accelerate as well.

[12:48] In addition to this we see something happen with the consumer the consumer based fundamentally changed.
Due to the uneven economic recovery it happened after the first downturn of
Bubble bursting and also happened after the toothache 2008 recession if you looked at discretionary income changes during cycle.
And the Great Recession cycle they were very uneven so for example if talk about the Great Recession from 2007 2017 if you were in the low-income bracket you actually ended up,
decreasing your discretionary income by three thousand dollars at the same time if you’re in the high income bracket up.
$18,000 so it was real uneven recovery and a largely that came from that came from.

[13:39] Well many facets but one facet was availability of capital so.
Liquidity slated to the market if you had good credit ratings you could Access Capital at very low interest rates.
The problem is at the same time that liquidity became available because the housing bubble you know led to the downturn we actually raised.
The regulations and raised the criteria by which we would give people loans so if you were in the high enough income bracket you could easily secure a very low interest rate loan,
the lowary off you were the less accessible that Capital was to you.

[14:18] So coming out of all of that then what was interesting this is a this is something we highlighted this year ago was this idea that if you looked at the industry of retail there was something going on you know even a year ago that was really
a little interesting and maybe a little disturbing and I was a substantial decrease in the return on assets.
That the industry was was showing and if you go back over the last 20 years 30 years what you’d find is during times of,
I’ve strength the industry would have growing increasing return on assets and only during economic downturns with the return on assets start to slip and go you know move in the opposite direction.
The problem is for retailers starting in 2012 even though we were in strong Economic Times and we were coming out of a downturn we were in the recovery starting in 2012 we actually started to see a negative.
Yeah yeah impact on returning that on assets we started seeing return on assets moving down all the way through 2017 as if the economy was actually not doing well in fact it was,
and that sort of leads to the question of what happens to an industry that is operating in
in a relatively healthy economy but they’re showing signs of weakness when it actually gets weak so I know that’s a lot of information about the research it was pretty fascinating and go through it and of course it’s more interesting to me now to look back on the research given where we’re at today.
Does that make sense.

[15:44] It totally makes sense and just to augment that one point you made like you talked about the acceleration of digital through these.
These recessions that you track.
That that’s even more surprising because you kind of looked at a couple specific recessions and one of them was bubble right and so there you go,
you know man did it people overvalue dot-coms did they also sort of overvalue the utility of dot-coms and so you might have expected.
Digital shopping to decelerate when bubble threw us into a recession and even there you saw digital grow.

[16:26] Yeah interesting that the way we looked at it was
and on a relative basis because of course you saw you like right in 2008 we actually saw you know retail softens sort of overall but when you looked at it relatively speaking and said okay when someone is shopping retail you know
which way are they shopping,
so you have to look at it that way to understand the acceleration because the acceleration actually occurred during a period where it looks soft and it looked like the market was softening but when you looked at it relative to brick-and-mortar that’s where you really see the acceleration.

[17:01] Yeah no that makes perfect sense so I read I got thank you for reminding me about that research I read it when you published it but then it was.
Prescient to kind of re read it right now in my big takeaway is like that there’s demonstrable evidence that these recession events exacerbate bifurcation right both of businesses.
It seems like there’s a chunk of businesses.
The do better in the recession than other businesses that there’s a gap that opens up and also as you would have to recently.
It exacerbates bifurcation of consumers and you talked about the Gap in real earnings but you’re in your report you also talked like.
Literally life expectancy there’s a big gap between affluent consumers and non-employment consumers.

[17:52] Yeah the idea of economic bifurcation is so prevalent when you really start to use that as a lens and you’ll hear me talk about this on every one of our research reports because it just.
Constantly comes back up is the whole Market wants to be fixated on age.
You know as a driver of behaviors but over and over again what we find is it’s this it’s the economics and this economic bifurcation that dramatically is more important.
To how consumers are behaving than ages so po what I say is people behave like their income.
Not like their age and I’ve got so many data points so many different lenses that we’ve used to prove that time and time again.

[18:36] Yeah Amen on that I feel like the age was actually never that,
never correlated that well but it just that was the attribute we knew about our audiences right and so like that was the attribute that everyone used but so when I will get your research and I say hey,
what can I business leader that’s contemplating like you know all the.
Current events you know there’s there’s a very real chance that throws us into a recession or at least recession like economy what are some takeaways for how best to.
Sort of be one of the winners in that bifurcation and I there a couple things that jumped out at me but like do you have sort of a top level 4.
Wait what’s the general advice you give to someone about thinking about the kind of Investments they should make and the.
The kind of financial moves they should be making like when they find themselves in a.

[19:35] Yeah well actually the advice is better about how to think about it before the recession think about it before you find yourself in in really difficult times.
What we’re finding increasing as you can’t fall back on the old Playbook you know compressing vendors cutting sg&a reducing headcount feeling Back Store labor and just going promotional if you look back at who the winners and losers were coming out of both of the previous recessions
what’d you find out was those are not the playbooks that that led to healthy successful outcome what we found was,
for those retailers that increasingly really focused on why they matter and I know that’s an easy thing to say but but what you find is is that.
I must say it’s like being.

[20:23] Knowing what it is that your consumers really value about you and then being Unapologetic about investing into that so if you’re an off-price retailer you know know that and then invest into that,
if you’re you know if your product is supreme the know that in invest into that and what we found is that during these times and you falling back on the old Playbook we.
You know our retailers in the marketplace consumer products companies you know often times focus on the Playbook and they lose sight of that
we also said build a war chest to invest in the growth cuz it’s during these times that those companies that found themselves you know investing into
the structural change that’s happening during the downturn are the ones that are best positioned for what’s about to occur coming out now,
if you find yourself in the recession and you haven’t invested into the war chest that allows you to invest into that growth you really find yourself in difficult position because you can begin to see the market.
You know come back together get healthy and start to thrive again but you haven’t you you know you don’t have the resources that allow you to you know aggressively invest into that we also know that embracing technology automation
to increase your leverage during the times of growth.

[21:39] And then looking outside your four walls to embrace new Partnerships those are the things that really came out when we looked at who won and who approached you know the growth coming out of downturns.
Differently as opposed to the old old Playbook I I love this quote that Benjamin Franklin.

[21:57] Had we said by failing to prepare you are preparing to fail.
And that’s why we wrote that’s why we did the research because you know eight months ago was the time when we were you know trying to get our clients that sort of recognize that the risk was increasing and that they really needed to you know begin to take it seriously and begin to prepare.

[22:18] Yeah it is I think that’s fascinating in that I had an early Mentor who was a very very successful retailer Wayne huizenga and he used to constantly heart on this philosophy that.
In economically good times that’s exactly when you should most be focusing on cost reduction and cost controls and in economic down times that’s exactly when you should be investing because your your.
Capital actually works harder and gives you a higher return in those economically distressed times than it does when everybody is pretty flush.

[22:56] Yeah I think that’s that’s that’s easy to say it’s really hard yeah I always like to put my practical like as
insulting it’s easy for me to say here’s what you need to do but I was trying to put my practical hat on and recognize how difficult that really is to do
that said when you look at who the winners and losers were coming out of the previous recessions that’s exactly what they did.

[23:17] Yeah I briefly tried to learn how to ride a jet ski once and counter-intuitively when you’re about to fall off the jet ski and it’s unstable
the correct thing to do is give it more gas and go faster because that’s what makes you stable but it’s not what your brain wants to do.

[23:34] That’s a great analogy.

[23:38] Well that is awesome one last question on sort of learnings from recessions do you have any point of view like.
So you’ve got a consumer that go through a recession you know consumer confidence goes down you know eventually those recessions in.
Do we tend to see consumers behaviors rebound and do they act exactly like they did before the rebound or do these recessions tend to have sort of a hangover effect on consumer Behavior even when the economy turns around.

[24:11] Yeah.
Without a doubt our research research tells us that the consumer adopts new behaviors during the down times that they maintain coming up.
So I I would expect a lot of the behaviors a lot of the things we see going on even today with people adopting new behaviors that that those are going.
Accelerate those are going to become prominent and I don’t expect those to fully bounce back I I would expect some behaviors to you know to bounce back somewhat,
however I think predominantly I’d say the people are learning new behaviors as they do they stick with those new behaviors.

[24:51] Michael hopefully on-demand car washes one of those papers,
all right well now that we have all that kind of Downer recession pandemic talk behind us let’s dig into the new research Casey what’s the high level of how you guys came up with this and what you’re revealing on the show tonight.

[25:10] Yeah sure thing
you know here we are its 2020 and we are the number one request for getting from our clients is it tell us about the future.
Of the industry tell us about the future of retail or we get you know the future of the store and of course that seems to be a topic that that that is hot with our clients but it’s also you know very well published out there so we looked at it and just said,
okay you know how would we think about it how would we approach that topic and how do we do it in a different way than maybe you know has already been done and that’s really what what got us to dig into this this research that,
you know that we call retail and consumer products 2020.

[25:54] Cut it and you were kind enough to give us a little bit of a sneak preview of the research and I have to say I really enjoyed it and looking forward to when you publish the final version
in there you kind of talk about seven Trends you know of what this retail 20/20 looks like
I thought they were all really good so maybe give us a high level overview and then Jason and I want to tease apart a couple of.

[26:17] Yeah before I do that let me give you a little of the Segway that gets us to the seven trends.
In in the research one of the things we did before we started our own research as went back and said,
you know how good is the industry at this idea of predicting the future so we went back and spend time over the last 20 years of research is trying to assess.
How good are we as an industry and there’s great you know Publications a lot of great you know commentary that’s out there but what you find when you summarize it all together is,
we’re really not that good as an industry.
Professing the future and then the question is well okay well if we’re not that good as an industry we haven’t been that good at it for 20 years what makes us think that you know that we had Deloitte and the way we’re going to research this is any different.

[27:09] And it’s really the findings that relate to his kind of that backwards view that gets us to how to think about this problem differently and the way I like to call it is let’s move away from prophecy.
And let’s actually get practical okay because what you’ll discover is most of the future of pieces are just.
Prophetic there’s just people sort of imagining pie-in-the-sky with the future will be like
and and the Saving Grace by the way generally is they never tell us when the future will be here so it’s potential that all those predictions they make will
you know will be true at some point however the vast majority of the predictions that have been made over the last 20 years actually as we sit here today are not true.

[27:50] Okay so if prophesizing doesn’t work then if I look back in history how would I have known,
we’re we would have ended up as an industry and the interesting part is it’s actually there
it’s actually there in the data if we’re actually paying attention to what’s going on in the data we can actually play out trends that lead us to where we’re at today
so that’s the Segway and that’s sort of the the approach that we said okay so if we’re not going to prophesize about the future let’s go look at the data.
And so we looked at our we’ve got a group with that we call our Center for Consumer insights that has phenomenal data,
a lot of different sources of traffic and sales and consumer behaviors Etc and we said
well what’s the data tell us about the future and that’s where through working with the center for Consumer insights we came up with the seven trends that we see that are broadly
shaping the future of retail and consumer products,
no by the way you got to recognize it retail and consumer products is a really broad industry said everything from apparel fashion luxury goods to grocery you know consumer products tables Etc so these are really Broad
you know in their application but I’ll go through what those seven are that the data tell us the first one is commoditization and premium ization

[29:15] And I’ll talk a little bit more about what’s going on there but we also have digital success is growing even more elusive that’s the second Trend the third Trend pertains to physical retail.
And the third trend is smaller and closer I’ll talk about the data that we’ve got there as well the next train is new models become material.
And the interesting part here is not when I see new models things like rental things like resale you know in the apparel world or or,
yo ghost kitchens in the restaurant industry those sorts of things are all new models,
and in and of themselves are not that interesting in terms of size or scale but when you put all the new models together they actually start to become material in terms of how they’re eating into share.

[30:07] The next train we identified was convenience.
As the new Battleground so again I talked earlier about the idea in the industry that says everything’s experiential and we’d actually say convenience as an element of The Human Experience in particular
is what’s driving the new Battleground the next train is health and sustainability for some.
And we talked about that Jason the bifurcation is that when you dig into health and sustainability it actually is not a broadly applicable trend is actually really applicable the higher income you go the lower income you go you actually find
reverse Trends in play.

[30:46] And then the last point is it builds upon research we had done previously and it’s fragmentation and consolidation of market share we actually see some really interesting Divergence happening
in terms of how market share is is consolidating where it once was fragmenting or fragmenting where it once was consolidating,
so those are those are the big seven forces that we go deep on and use data to support how those are shaping the future.

[31:13] That’s awesome and I let’s jump into a couple of those I do want to say I suspect you’re being slightly kind because you talked about this this ocean of retail prophecies and how you know most of them are just kind of.
Prophecies are opinions and I suspect there is a huge chunk of those in fact I just did a Google search on future of retail and there’s.
Seven million two hundred thousand results.

[31:41] And and I had a team that actually had.
Through those 7 million two hundred results and we’ve got them all categorized and we’ve gone through them so we really stared at him and said you know what are they telling us and in our research paper we really go deep into it so that you can sort of see
what the flaw is that that’s behind a lot of the approach to sort of thinking about the future.

[32:03] Yeah and so to your team and they’re listening I’d like to apologize for the 500 of them that were me but I think there’s another big chunk of prophecies in there which are the self-serving ones right which is like the the.
Computer speech vendor predicting the future of retail is computer speech.

[32:22] That’s right that’s right there there’s plenty of those in some of those are commissioned so they’re they’re commissioned by you know vendor
you know I something that does research but when you dig into them you can go okay this makes sense you’ve commissioned this study.

[32:38] Yeah so moving on from the the.
The grand setting to the sort of seven trends that you guys notice that we’re sort of grounded in your,
your consumer data set what the first one that jumped out to me is actually the first one on your list because it’s a topic I talk a lot about but that’s the commoditization and
premium ization which I feel like I’ve said that before but I never thought it was an official word until I saw the what use.

[33:07] That’s right now you can use it officially yeah you know when you look at products in particular and you look at what’s going on you know you certainly see this again and you’ll hear me talk a lot about reduction in barriers to entry,
that that consumers have access to technology that gives them visibility in a way you know that they didn’t previously have and then it also gives
you know anybody selling a product they’ve got Avenues to you so
you know if you’re buying a particular brand of something like mac and cheese you’ve literally got thousands of options to buy that very same product.
And what happens when that occurs when you know we’ve got you know slowly you’ve got margins that are being eaten into as one after another tries to out price
you know the other so we’ve got a lot of great research about how you know margins on products are being eaten away,
and that’s the commoditization at the same time you have this explosion of choice,
so you if you looked at a traditional grocery store and you looked at 1990 they’d have you know roughly 7,000 items
would be available in a grocery store in 2018 it’s 35,000 items so just an explosion you know of options that the consumer has available to them.

[34:24] At the same time we’ve seen this growth of private label in fact from 2015 to 2019 there’s been a considerable you know,
growth with you know with retailers who are coming out with their own private label product growing from about a hundred and thirty billion to about a hundred and forty three billion over a period of about four years.

[34:46] And at the same time that we’ve got private-label happening we’ve got a premium ization of private label so in 2016,
of that private label product about 15% of those products or the dollar amount would have you know been categorized as a premium,
private label product and go to 2019 and it’s grown to about eighteen percent so not only do we have private label which was once really a value play
we’ve now got private label that’s now more of a premium play so really this opportunity for differentiation really becomes you know.
The the critical component to think about in a world that’s both commoditizing and premium I guess I can’t say premium icing.
Unless I just made up yet a new.

[35:34] You can say it.

[35:35] You did sure weird.

[35:37] Thank you Jason said Jason says I could.

[35:39] #premium izing well well I kind of out of those seven I wanted to dig in on convenience as the new Battleground so tell us more about what you guys saw there as you looked at the data.

[35:55] Well first of all when we when we
talk to Consumers and you find out why they shop where they shop what we find is the convenience is the number one reason a consumer selects a particular retailer so you have to start there and by the way there’s nothing you know
I knew about that that’s not a new age consumer sort of thing in fact we as we studied this what matters most idea you know over the last 10 years we found that convenience,
continually comes in first as the most important thing so you start their second of all then we said okay well let’s go look at where the growth is in the industry.
And what we did is we took you know a look at categories where
convenience or particular retailers where convenience is a major or a primary element of the value proposition and when you categorize that way we find about 67 percent of retail growth from 2016 to 2019
comes from retailers that that prioritize convenience as part of their value proposition
in addition that you can certainly see a lot of the growth that’s happening let’s say with mass retailers their initiatives that they’re undertaking like curbside
or delivery things like that but also relate to convenience.

[37:08] And of course grocery in particular is the most desired area for convenience
but we also see things like this like what’s so fascinating about the future of predictions is there things occurring in the industry that nobody was predicting
so for example we see you know solid Healthy Growth in convenience stores.
And nobody’s nobody in you know in any of the predictions did we see someone talking about the rise of convenience stores as an important you know,
attribute are– element in the marketplace.
So across the board we see a lot of different ways you can look at it and what we see is convenience you know is really becoming this new competitive Battleground you know much more so than say,
experience like entertainment sort of elements that you might bring into the store.

[37:56] Yeah that was super fascinating it’s funny to me because I sometimes wonder like.
If convenience is even an unfortunate word to describe a category of store these days because they’re often are so many more convenient ways to.
To get a product then then those convenience stores and yet they continue to thrive and grow.

[38:19] This idea of convenience shows up in in in like when we looked at what’s really going on with physical retail it shows up very prominent there as well.

[38:29] Yeah another one of the trends that got me excited because,
embedded in this trend you talk about one of my favorite sawhorse is what I call the mobile Gap as this like shift to mobile devices but aov and conversion rate or not.
Equivalent of mobile devices to what they were on desktop so but your macro Trend was digital success grows elusive,
and explain a little bit what you mean to our to our listeners about that.

[39:01] Yeah yeah first of all certainly we know that digital continues to drive a significant amount of the of growth in the marketplace it’s roughly driving 50% of of the growth just last year.
You know in retail and it’s growing at about 14.9% sort of depending on what you know what source you look at when we look at it.
You know the u.s. figures that come from the government and we’re seeing about 14.9 percent growth rate however,
we’re seeing this dramatic shift.
To Mobile so now mobile represents about 45 percent of online sales and that’s growing fast you know Mobile sales grew at about 36 percent kegger since
2014 versus only six percent for other digital channels so you seeing this shift occur but there’s a problem when that shift occurs and you mention it and it’s that the conversion rate
on mobile is actually dramatically lower than the conversion rate on desktop dropping from about four percent on average down to about 1.7 percent on average
at the same time the average order value is dropping from about a hundred and twenty seven down to 86 percent so as your as many retailers and many consumer products companies are paying for traffic
to show up at digital that that conversion is converting to dollars at a slower rate and the amount of dollars that is converting or actually lower.

[40:24] So that’s problem number one that makes digital success more more elusive however when you then add to it this idea about ad spending
because we’re certainly seeing you know an increase spending
that shift is happening towards digital advertising and we look at the increase on digital advertising or advertising overall Because by the way as you shift to digital advertising we actually not seeing a commensurate
decrease in traditional advertising which means overall advertising is actually increasing at a fairly good clip
when retail sales themselves are not you know increasing at the same rate.

[41:01] At the same time the cost for digital spend or the digital advertising is increasing and digital ad spending per person is going up again meanwhile TV is staying.
Roughly the same if not increasing slightly so that sets up a world where we have to pay for traffic
right we’re buying traffic effectively you know as we’re investing in different you know traffic programs that traffic is showing up and is converting at a lower rate driving that traffic through advertising is more expensive than ever and then on top of that shipping rate
you know I have an increase from 2010 to 2020 ground shipping is increased 76% and are 80% so,
not only not only is it like advertising but its fulfillment as well and of course wages for warehouse workers have also gone up
you know considerably all those things put together those Trends lead us to believe that going forward of course digital is an important.
You know aspect of growth but that growth is becoming either less and less profitable or in some cases it’s got a deteriorating effect on margins for four major retailers so that’s only going to become more of a problem
as we move forward.

[42:16] Yeah I liked all that except the part where you dissed on Advertising because I think that pays my salary.

[42:22] I take back anything that pays Jason salad.

[42:26] No no no but like just I mean
to kind of highlight how real it is like in your in your data set you show in like 2011 Brands were spinning considerably more on television than digital and in 2017
the television spending was about the same but now the spend on digital was much higher than the televisions been so it’s.
That that inflection point has really been passed.
And yet all the digital advertising and I say this as a digital Advertiser still kind of sucks like I’m super disappointed.
With all the events this week that we like you haven’t seen more more advertisers like curtail their advertising for what is at the moment in a relevant product or service.
But I digress.

[43:13] Yeah no no it’s a good point I mean advertising is becoming you know less effective more expensive.

[43:20] Yeah so that was that’s just going to depress me so I don’t want to spend too much time on that I do want to try to squeeze one more in because this was fascinating to me VII Tran fragmentation and consolidation and Tower westerners with that man.

[43:35] Yeah if you follow the research that we do out of the the industry sector you’ll you’ll know this term because several years back we were trying to assess.

[43:46] What the heck disruption meant everybody was saying it but we don’t know how to measure it we didn’t know,
you know there’s got to be if it’s occurring there’s got to be a way to understand what it is and to quantify it and then measure is it decreasing or increasing or you know
what’s going on with it we came up with a way to think about it you can argue that this is the right way but this is how we came up with a way to think about it when an industry is being disrupted
you know new entrants are coming in and in doing so they’re disrupting the market share
most likely they’re stealing market share where you’ve got the losers or those that you know you got you got the companies that are donating market share and you’ve got new entrance that have shown up with a new better mousetrap
better offering and they’re stealing market share so we would assume that in a market that’s being disrupted you would have increased you know turn over,
of market share so we’d be able to we’d be able to understand that by studying what was going on with market share you know and in that came the first term II called it turnover but it’s volatility you know how volatile
the market share is for an industry is a measurement that we came up with on how to study disruption and then once you study whether or not it’s volatile.

[45:05] The next question is is it volatile because it’s fragmenting or is it volatile because it’s consolidated.

[45:13] And you know as we’ve studied that what we saw you know it was roughly 2016 when we study the first time for retail in particular what we found was the volatility was increasing
as new smaller players came into the market and not only that but fragmentation what is what was driving that volatility
so now you fast forward and we looked at it again to say what’s going on now in retail what we found was the opposite and this is really sort of interesting to think about is that volatility of market share in retail is actually going down,
over from 2016 to 2019 and meanwhile what we saw was it was concentration.
That was driving that volatility so in other words the big players were getting bigger as opposed to the small players were stealing enough market share
to you know stealing it from the big players which we saw occurring roughly in 2016 so it’s interesting just to think about how the Dynamics of competition have changed and therefore how the nature of whatever disruption we see is starting to change.
Now if you jump over cuz we studied it also as it pertains to packaged goods and we actually saw the exact opposite.

[46:21] Occurring what we really saw for packaged food companies is the fragment by the way with packaged Foods you have to look at it by brand not by
aggregate company because of course a big you know.
Branded company will have many many brands that they’ll hold so we actually have to break it down and say let’s look at this by Brand level and when you look at it by Brand level what you find is
the smaller brands are really weather driving the volatility
and you see dramatic fragmentation happening in the packaged food area so just ways for us to think about disruption
and to understand the Dynamics of competition and how that’s changing and therefore you know what do we think maybe you know shaping the future.

[47:04] Yeah and like to sort of sum that up like super briefly.
So retailer power is concentrating into a few big players and cpg power is getting fragmented into more entrance and so like obviously there’s a,
shift in leverage in the whole retailer brand.
Dynamic there when that happens so that’s an interesting thing to think about when when you know both tons of companies are plotting their future.

[47:36] And when you begin to put that together with we talked earlier about premium ization you know a product and and and private label all of that plays together to think about how the consumer is shaping their view of.
What they want to buy and where they want to buy it.

[47:54] Very cool so in the paper you go into quite a bit of depth on these Trends and there’s some really good data in there and then you kind of then springboard forward and you say well let’s let’s kind of look forward and see if you
you know what you should be doing maybe give us some highlights of that for looking kind of.

[48:14] Yeah sure thing yeah I know it’s it’s sort of difficult.
To lay out I mean one of the things that comes out of this it’s difficult to say the future of.
The industry is X because what history would tell us is that the future you know plays itself out differently for different companies and different segments for different customers selling different products so there is no
no singular future and in fact as much as one companies is Iggs
and has success that actually creates opportunity for another company to zag and have success so
you know as one company finds that online retail works and other company finds that physical discount retail works and they’re they’re not at all the same future however they do certainly coexist,
and that’s really important to sort of think about you know how you think about.

[49:09] You know your company how you think about setting strategy what we say is like think about opportunity through the lens of data,
you know for every data point that tells us something is occurring you got to look at the converse and say is opportunity being created on the back sides of this you know for
like we talked about Health and Wellness
you know we can say oh man the market is being driven by health and wellness you go it is for certain consumers but there’s opportunity for for other consumers who maybe are an economic constraints and maybe don’t have the luxury of.
You know buying the high-end health and wellness product maybe they still care but maybe they’re under different constraints
so what we try and do is we help our clients sort of think about how do you scenario plan around this how do we use our you know Center for Consumer insights to really think deeply about your consumer and identify where there’s pockets of opportunity you know and generally I’d say look you can read
the predictions about the future that are that are prophecies and you know read them as.
As input but I certainly wouldn’t be you know in certain would be encouraging my clients to make big Broad
bats you know based on Prophecy what I be saying is let’s make that you know based on a deep understanding of our consumer a deep understanding of what opportunities will exist given the the changing competitive landscape.

[50:29] But if you are going to make future bets based on Prophecy they should be mine.

[50:33] They should be Jason’s that’s for sure.

[50:37] Well I feel like that’s the perfect place to leave it because we have once again used up all our a lot of time but Casey this is super fascinating thanks so much for sharing the research and I know you’re going to figure out in the weeks to come where this gets published and we’ll make sure
westerners know how to find it but thank you very much for your time tonight.

[50:57] No it’s always thank you guys for allowing me to share what we’ve been up to.

[51:02] Kasey if folks want to find you online what are you a are you Snapchatting with a client’s or what’s your.
To get in touch with her buddy.

[51:11] So of course that you can find me Casey lobaugh I’m on LinkedIn I also M @k lob aaugh on Twitter where we publish a lot of our research and our findings we do a lot of speaks at what we’re up to there as well.

[51:26] Thanks for joining us and until next time happy commercing.

[51:31] All right thanks guys.

Mar 19, 2020

EP212- Jason & Scot Show Live Listener Questions About Covid-19 Impact On Commerce

Episode 212 is a live show featuring audience questions about Covid-19 and it's potential long term impact on retail. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube. 

Subscribe to the audio version of the podcast at: (or wherever you listen to podcasts)

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Mar 13, 2020

EP211 - ThirdLove Co-Founder David Spector 

David Spector is the Co-Founder of ThirdLove, a digitally native direct to consumer women's intimates brand. Dave founded the company with his wife Heidi Zak.

In this interview with Dave, we discuss the origin of the company, their data driven approach to designing products, the challenges with scaling a DTC company, and the potential role of omni-channel. We also discuss their public feud with Victoria Secret.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 211 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Wednesday, February 26th, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Google Automated Transcription of the show


[0:24] Welcome to the Jason and Scott Show this episode is being recorded live from the ETail West Trade show in Sunny Palm Desert on Wednesday, February 26th 2020.
I'm your host, Jason Retail G. Goldberg And unfortunately, Scott was unable to join us today.
So as usual, when we have a good show, we kind of bump Scott from the agenda, and we make up for it by having a particularly awesome guest S O for today's show.
Please welcome David Specter, the CEO or co CEO, an important distinction and co founder of Third Love.

[1:00] It's great to be here, Jason. Thanks so much. Although.

[1:01] We are thrilled to have you all, though I kind of feel it's true that you're the least important co CEO at Third Love.

[1:10] I'm probably the least important person at third love. Uh, yeah, but it doesn't mean that your podcast is any more or less important just because I'm here. Yeah.

[1:10] I'm probably the least important person,
that makes us feel special on the podcast.

[1:22] I feel like we're arguably the second best podcast in the space compared to which everyone your wife is doing today.

[1:29] Fortunately for my company, she's back at home, actually running the place, adding value. And I'm here sitting with you, Jason. A detail. So which one's more important? I'm not entirely sure, but I'm still honored to be here with you.

[1:29] Unfortunately for my company, adding adding, adding value.

[1:39] I That's why I like the double bandwidth from a power couple is so useful for a company.

[1:46] Dividing conquers what we like to say. So here I am, a detail and it's and it's an honor to be sitting with you. You've got a great podcast. Enjoy listening to you guys. So thanks so much excited Thio chat about what we're doing at their love.

[1:48] Exactly. I like it.

[1:53] So thanks so much excited about what?
Gotcha. Uh, that's ah flattering to say. And flattery will, of course, get you, like, mostly anything you want.

[2:03] Most anything you want if you want to know.

[2:04] If you want me to avoid the tough questions, Uh, that's that's a smart way to play it.

[2:08] But will it get me more sales online? That's the question, Jason.

[2:11] Yeah, we're gonna have to talk about that. But before we jump into that, listeners are always super interested in the background of our guests and particularly if you like.
We have a lot of listeners at home that aspire to be you one day. So can you share, um, sort of your your path to your current role?

[2:28] So my path is is quite different than most founders. In some ways, I was at Google.

[2:28] So my path is is quite different than most.
So I What's that? Google. I've heard of them there. Ah ah, an up and comer and I think is there for years.

[2:36] I've heard of them. They're nothing. Come, right.
I was there for a couple of years. From 2007 to 2010 after business school on business school, I met my my wife and better half and business partner Heidi.

[2:45] Business. Why, then my wife,
arguably the best reason to go to business school. You don't s so I've been told. Yes, I actually met my wife at one of these trade shows.

[2:52] And, you know, from experience, Jason.

[3:00] Oh, so trade shows air a lot less expensive than going to business school, though.

[3:03] And less work, frankly.

[3:04] Yeah, take a lot less time. So I think you actually ended up in a better place. And I did. And that way it saved in save less money.

[3:06] So I think you actually ended up in the better. Okay, I don't know. I've caused both winners.

[3:13] Uh, save more money. So Well, anyway, so we, um, was a Google for a couple of years on then, while I was that Google was recruited by Sequoia Capital to join them, I never wanted to be a venture capitalist was never on my radar. I am a builder.
I enjoy managing people building teams. I was never thought of myself as an investor whatsoever.
And so I took the opportunity, joined them.
I was based in Silicon Valley and started investing in startups in 2010 and it was really interesting time because the Internet and sort of Web to die, though three dado however you want to define it.
Jason was really starting to get prevalent on was growing quickly, and so we were sort of at the beginning and forefront of that.
And brands online were really just starting.
Amazon existed.
Prime. I'm not entirely prime did exist, but nowhere near to where it was two today, and retail was still popular that the Mullens were successful.
The death of retail sort of. That narrative didn't exist then, And so when we got started in 2010 investing, nobody was really thinking about consumer brands in the same way I took it.
A cz an initiative myself as a new investor because I thought it was something that could be big toe, actually get started on start looking at brands and where e commerce was going and so ended up investing in a company named Stella and dot.

[4:39] Back when I was at Sequoia was quite involved in the business.
As much as an investor on the sidelines can be, but got very interested in broadly female base commerce.

[4:49] And so, in other words, women that were building brands online to serve other women.
And because the percentage of women founders is so low, generally it's higher now, and we're lucky that it is higher now.
But it was even lower then, and there was a lack of our dearth of the number of female focus brands that we were seeing online. And so what we decided to do is make it an initiative to actually find those businesses and brands.
And in many ways, as it was at Sequoia and was thinking about what we were looking for as investors.

[5:25] Hide and I were talking about the intimate apparel space, and it was a category that I had never thought of.
Uh, certainly thematically, it was never on our radar again. I was thinking of sort of female based commerce, commerce, new sort of web, 2.0, base brands.
DdC wasn't a term then, on sort of where the Internet was going from a commerce perspective, and she was thinking about intimate apparel,
and sort of in our living room at night, just like many businesses that air started, we started conceiving of of what then was called something else.
But what is now third love and we started to get really sort of excited about what we could build online and where we thought this industry was gonna go over the next decade.
And that was really the beginnings of third love on our living room in our living room, on our dining room table, laying things out before we took the sort of bold leap that every entrepreneur takes in this country and quit her job.

[6:22] That is awesome. And ah, I suspect a majority of our listeners are already familiar with third Love. But for those that aren't can you gonna give us the elevator pitch? About what you doing? What you're you're unique value properties.

[6:36] Absolutely so we set out and and have executed on today, really three things.
One was to build a brand which is authentic and highly inclusive, too. Was architect away to buy abroad that doesn't require a fitting room or visit to a store.
And three was not designed and manufactured better product.
Using the latest in material science and data science to absolutely nail fit and comfort two areas fit in comfort that really have never been a part of the narrative. Previously in this category you know women for the most part, which was very interesting to me as we were looking at the category.
Nobody really likes their bra. Nobody has a strong attachment to the brand that they wear.
It's fine. It does the job. They have to wear it.
It sort of part of what they need to do every day. But they don't really enjoy the experience shopping for it, nor do they like the product very much. And so we thought there was a huge opportunity Oh, to do those three things.
But look in summary, we wanted to change the status quo and how comfortable abroad can be and wanted to build a brand that was for every woman, regardless of size, shape or ethnicity.

[7:41] That that is awesome. And it's it's shocking in hindsight.
Ah, but But, you know, you really think about the successful players in the space prior to your entry, and it frankly feels like they were mostly focused on marketing two men, Um,
so somewhat shocking that there was, like, such a white space tow both market, too, and,
like focus on product attributes specifically for the users of the product.

[8:07] Yeah, you know, that was really surprising to me. I I like you, Jason.
Have been on the other end of that marketing as a man by this gift for your spouse or something along those lines.
And I was always really surprised that the marketing, as I started to think, sort of outside the box of me as just a consumer.
Why the marketing was always so focused on me when this was a category where the vast majority of purchases in it our focus on women but our focus on their needs and focus on them as,
as moms, as them as business executives, as them as doctors, as nurses, et cetera.
And so I was really surprised that the vast majority of marketing prior to Third Love was focused on that.
And so what we set out to do, which again was quite counterintuitive given that the largest player in the space was peaked at a $30 billion market cap in 2015 I was doing very, very well with very high margins,
that we would think that we wanted to do something completely opposite of what they had done.
So from a sort of building a startup perspective.
It seems pretty crazy on and funny enough, the investors that we pitched mostly thought we were crazy.

[9:21] Yeah. Uh, you tell me This is true for you, but a in talking to female entrepreneurs, Um, there's a common story that it's really hard to pitch your business to V.
C's because they the tender not have empathy and see the market opportunity for products that have, ah, value Prop two women less so than the men.
So they tend to not understand a woman's problems, and therefore the opportunity is strongly.

[9:49] Yeah, And you know, I had somewhat of a leg up because I sat on the other side of the table.

[9:54] Yeah, I'm sure.

[9:56] And the leg up, though, that I had was when I started to think about how we needed to pitch third love to a mostly male audience.
I had been in that audience previously, so I had the opportunity to think through what we needed to do differently and what the people on the other end of the table who are not, for the most part, are not sexist at all.
And the end of the day, whether it's widgets, bras or the next great you know, Social Media platform, they ultimately don't care.
Veces wanted back great entrepreneurs going after large markets, building riel sustainable businesses, and so and they don't care what it could be.
Uh, and so when I thought through what we needed to do differently in this category, we really needed to sort of change the narrative of what we were gonna build and how we were going to do it.
Uh, and that was really what helped us get off the ground and helped us appeal to what was a mostly male audience when we were pitching. As you said earlier, a mostly female oriented business.

[11:01] Um, so fast forward to today. Ah, couple weeks ago, we had wary Ingrassia on the show s o. He's the author of $1,000,000,000 brands.
And as I I assume, you know, uh, you are one of the prominently featured brands that he writes about in the book.
Um and so am curious. Ah, like, I assume you've at least read that chapter. Does it feel like he captured? Ah, an accurate representation of your story, Or is there any quibbles you'd like to take? Well, he's not here to defend himself.

[11:34] You know, we were honored to be in Larry's book and to be sort of one of the the company's defining the direct to consumer New Age brand generation.
And he did a very good job of capturing this story of Third Love and how we got to where we are today. And you know where we are today. It was, you know, it's seven years in, so we're on, sort of not even really on first base yet. We're just getting started.
Uh, but how we got here to almost first base if we if we put it that way, is a story in itself and one of perseverance.
Many, many, many challenges.

[12:11] Lots of late nights. I and a lot of failures on a lot of mistakes to Heidi and I have always been one to admit our mistakes and to try toe try to spend time thinking about what we would have done differently.
And fortunately for us, Way made numerous near fatal mistakes in the early days of the business.

[12:33] Example was manufacturing in Mexico on trying to build a maid on demand supply chain the broad industry interesting Thio.
Most men or women have no idea about this Broad's one of the most complex garments to produce.
There's 30 components in a bra, even with automation today in manufacturing things air mostly hand cut in hand sewn and being outsiders in the industry.
We looked at that, and then in the by the way to that point, the amount of time it takes to develop a new size and a new style is very, very cumbersome and laborious.
It takes a long time, and so s so you need to have a large wallet and you need to have a big company to develop it.
Which is in part, why the largest competitor in the space has gotten so big on the untold story of them is really supply chain.
And there's a lot that they did in the supply chain that we have a tremendous amount of respect for, because getting supply chain dominance to be able to produce product at that kind of scale is really hard to dio.
And so we looked at that as young founders and we said, What do we want to do? Different how we flip this pretty backwards process that's been the same for five decades?

[13:45] Flip it on its head and just do things differently.
How can we use technology to build something that's fundamentally different?
And so we conceived of a new way of manufacturing that we that enabled us to get into the supply chain.
People wouldn't have taken our call if we just said We want to make a better bra in China.

[14:03] Uh, and so they took our call and, by the way, didn't take our call because we had no volume.
We didn't have money to spend. And there's a lot of money required on the manufacturing side, the manufacturer side to get a new company up and running with new sizes and new styles.
And so nobody wants to work with a new company because of the amount of cap access required to get them started in R and D.
And so we had a pitch that was very, very unique around made on demand, and they don't demand while it didn't work, and it was a near fatal mistake.
That mistake, like many things in it start up, is what enabled us to be successful today in the supply chain in a fairly short amount of time because of that learning that we had with this mate on demand supply chain,
in Mexico that enabled us to get a foothold into the supply chain, that we were then able to pivot to Asia and start getting started.
T get started building what is fundamentally a better bra with entirely novel raw materials.
Better fit half sizes. And we're the only company in the world that offers half size bras, 34 B and 1/2 C and 1/2 et cetera.
We couldn't have done that without some of those early mistakes.

[15:10] That is awesome, and I wantto poke on the half sizes.
But before I d'oh if I were toe grossly oversimplify, wear his breakdown Of all the companies in the book, uh, he kind of talked about.
There's these these three different ways digitally native brand, um, might seek to gain advantage, right?
Like there's there's companies that take cost out of the chain so they can sell a lower price product. Warby Parker, for example.
There's companies that reduce the friction to acquire the product.
They make the buying process easier. So bed in a box versus having to go to a traditional mattress store, which could be a miserable experience on.
There's companies with, like, unique product innovation that in some way, uh, invent a better mousetrap. And most of the companies he talks about 10 to primarily have one of those three.
Advantage is one of the things that ah, as an outsider I admire about your company, is,
it seems like you're really leveraging all three advantages, so it feels like you focused on a unique product that's better than what was available.
You have, ah, lower friction way of acquiring it, and because you're direct um I'm not sure you're necessary competing directly on price, but you're able to offer Ah.
Ah, very strong value proposition.

[16:32] Yeah, And again, I This is, I think, in order to build a successful director consumer business and by no means every successful we have so much more work to D'oh!

[16:32] Yeah, And again, I I in order to build a successful,
I don't mean to be successful.

[16:44] You have Thio Well said Jason.

[16:45] You're 13 years away from being overnight success.

[16:51] Um, yeah. I mean, look, we I don't think that having just one of those things allows you to be successful having just lower price,
and the website doesn't work because everybody does that.
An Amazon does that Amazon does that and can compete with you all day long and get it to you a lot faster with better customer service and way more selection.
So you have to have a combination of many, many things.

[17:21] Our category is one where price is important, but it's not one of the most important factors to it.
Uh, and what we said was, we don't want to compete on that, because what we offer is fundamentally better.
Now we may not be an overnight success and grow to $100 million in a year because we offer something for $35 right?
Or the same prices. You could buy it at Wal Mart or target even lower in some cases.

[17:48] No, what we said was, Let's just fundamentally focus on the core differentiations for the category, which is much better product more sizes,
better brand that resonates with women of all sizes, shapes and sit in shades and then, lastly, await a shop that you don't have to go into a retail store on.
That was a key differentiation for us in something uniquely unique to our category.
Women don't enjoy shopping for this product in store.
It's not something I do socially with their friends. It's not a fun experience and what we want.
And also there's women everywhere eyes, women all over the country and in states that don't have any crossed yours, Uh, and so in small towns that are, you know, 500 miles from the closest mall.
And we want to be able to reach all those women and offer them something just as great as the woman in New York City or San Francisco.
And so the way we do that today is through a great website experience that's highly personalized and through something called fish Finder that we conceived of Fit Finder.

[18:53] Through a variety of questions allows you to get, you know, for the most part the perfect fit down to the half cup size to date.
We're very proud and sort of another kind of pinch me moment. Given that, you know, we still view ourselves a start up.
17 million women have taken Fit finder.

[19:10] That's amazing. Uh, one of the things I really like about your story is it's always interesting to look at someone's original hypothesis for their business and how it has to evolve.
Um, and I feel like you've had a bunch of evolution, like so as I understand it, when you originally launched the company, you had this hypothesis that,
like the original broad buying experience, sucked, um, and that you know, this some version of this fit finder could be, ah, much more enjoyable way to find the perfect fit bra.
But in the process of building that, you found out that bras in general don't tend to fit a significant segment of women.
And so the half size thing was less your original hypothesis. But something that you discovered is you got to know customers in your space.
Um, you found a great a great white space to address.

[20:02] Well and 25% of our sales we have 80 plus size is 25% of our sales are in half sizes,
on we estimate through our data, and we have one of the most comprehensive data sets in the world on this because of what we do and how we fit people.

[20:22] 30% of women are should be in half cup size, right?
And so it's that data. It's it's it's the holes in the data that we saw where our machine learning our other algorithms would say to us recommend to this woman,
machine Learning would say this recommend to this woman 1/2 size.
We kept seeing that over and over and over again before we came up with half sizes. And again, this was data that nobody had ever seen before.
If you shopped him all, um, there is no data.
I mean, maybe there's your credit card data and some some foot traffic data, but that's it.
You don't data on her preferences in her size and body type etcetera.
So we have this massive data set that kept growing. We kept seeing the holes in the data and kept scratching her head because the the algorithms would spit out errors and save us.
We don't know what size to recommend to this customer. Help us train me.
And we kept seeing this pattern over and over again and we said, Wow, there is as you said, a white space here.
There's a large percentage of at least our customers which,
as it grew, we started to realize was more, uh, you know, mapped closely to the United States who are 1/2 size who are in between cup that we should address in sort of one of our tag lines.
Now his shoes of half sizes. Why shouldn't bras?
And that just boils down the fundamental problem.

[21:49] Why shouldn't we give customers what they want? Well, the reason why nobody had before and the reason why nobody else has been able to do it. It's twofold. One.
You can't develop 1/2 cup size without the data set that we have. It's not about just splitting a B and A C in half.
There's more nuances to it, and you need a fit model to be able to fit it on and develop product off of.
We don't you know, for the most part, we don't use fit models at third Love.
Secondly, in a retail base business you already constrained by footprint, you're already constrained by a stock room, right?
Where for our category, there is a lot of inventory already.
Let's say you have 30 sizes. You have 30 sizes in every style color variant, which requires a large stock room just to stock that in retail because you don't want somebody to walk out, you don't have their style, style or size preference.
Um, in our case, reused warehouses.
We have the Internet, so we can stock, you know, depending upon inventory costs, in holding costs and in warehouse space, we can stock almost an unlimited number of sizes.
If we needed to, we won't. But we could, and so is your supplier exactly.

[22:54] In case your supply chain guys are listening, You can relax now.

[22:58] But the point is, we can do things that are important and are requested whether she's requesting it directly or indirectly by her data for the customer, we could give her what she wants.
Instead of pushing her into a size that we have in a retail store, we could give her what we want and developed product way, way faster and new sizes because of that data set, and so that ability to do that with the Internet.
The ability to use data in a really, really smart, powerful way is really what has allowed us to address a much larger portion of the market as an example.
One of the largest companies out there, they only go up Thio. I think maybe a double D cup in store, right.
That's because they're constrained by that by the shore we can offer.
And so they can't go after a larger woman. They can't go after a larger and a larger part of the market, the larger part of the total addressable market or the TAM we can because of the Internet, because of warehousing because of our ability to use data.

[23:55] I love it. And so that that customer intimacy in that direct customer data, um, enabled you to discover this opportunity and half sizes.
Conversely, it sounds like when you started the company, you have a hypothesis that the camera, phone and computer vision would be, ah, revolutionary way for women to help fit themselves.
Um, and it seems like today the fit guide is working phenomenally, but it's it's largely not a computer.
Vision based was I'm curious. Like, Was there a learning that that that wasn't the right approach for women?
Is that still the future? And it's just too early in the technology curve. What? You're your p O V on that?

[24:37] Yeah. I mean, so you're right. I mean, we, uh That record.

[24:37] Yeah. So,
right, E let the record show I'm right.

[24:47] Computervision and using a smartphone app to get fit was very, very novel for when we did it, we were operating off of a chipset.
I phoned 45 That was probably 1/4 of the speed of what we operate today. Maybe even 1/10. And I don't know exactly with a with a camera camera optics that are far, far, far less powerful.
Furthermore, open TV, which is an open source library for computer vision that we were also utilizing was nowhere near as advances it is. Now.
We're building all of this in house again. We wanted toe always find a way to bridge the gap.
So a woman didn't have to go into a store so we could reach a woman in Barrow, Alaska. For all those Barrow Alaska fans that are listening to this.

[25:33] It's a big audience for us.

[25:35] Barrow, Alaska is on the north slope of Alaska. And that's an example because there are, of course, amazing, amazing women that are there, and we want to be able to reach them.
We want to be able to reach women everywhere in this country and prior to third love you needed to go into a store to do that.
And, of course, all women over a certain age need to be wearing a bra or should be wearing a broad for the most part.
So, um, we want to be able t o reach everyone that we possibly could.
And so this smartphone app that we developed and a lot of technology, and today we have a number of patents on it, all of which have been granted on.
The technology that we developed was really, really novel. But the problem was, the conversion process wasn't as simple as it needed to be.
You couldn't be sitting on a bus to work and using the APP you couldn't be laying on the couch watching TV.
Using that you could be laying in bed, doing it to be in front of a mirror, wearing wearing a tight fitting tank top, pulling your hair, pull your hair back, take your smart take the smartphone cover off, and then through the use of two photos and the smartphone itself was the reference object into the mirror.

[26:42] We use the gyroscope for calibration. We use the flash. Recalibration was really, really novel we had hundreds of thousands of people that use it.
We were Editor's choice in the APP store way. Want a lot of accolades and awards for it. We were very proud of but didn't work because the conversion process was too long and when it worked for people, it worked incredibly well, and women loved the experience.
But we weren't growing as quickly as we needed Thio. We learned a lesson about conversion.
Now that Data said, without those early mistakes, without building that app, we couldn't have used that initial data set to then Pivot and I talked about pivots earlier because they've been really important in our on our history and in our growth.
We couldn't have pivoted into fit finder today. So those initial learnings about conversion, that initial data that we had,
went into powering what is fit finder today, we never would have able to get those algorithms off the ground without that initial data set.

[27:34] No, I totally see that. The, uh I am a hypothesis. Usually I'm wrong.
Um, but the a lot of the smartphones now have actual distance measuring capability. Like, you know, it was on the front camera for facial I D.
And so I keep waiting for the the version of that to be built into the back of the cameras. And I think when we get that, we'll get hyper accurate measurement, and I feel like for a lot of fit mint categories, that's gonna be a game changer.

[28:02] Yeah, Jason, you're right. It's the true depth camera on the front of of of the latest versions of the iPhone is coming to the back.
I had the technologists and very, very excited about that.
And what we need to do as retailers or retailers is find ways to make it easy for her to shop from home and to not have to return a product.
Our return rate is is incredibly low for the industry, but it's still hi, um uh, and higher than we would like it to be.
And at the end of the day, for us, putting customers first is our is our most important core value internally at the company.
And if we think of it through that lens, putting customers first, nobody likes have to return. Nobody likes to get a product that doesn't that doesn't work for them.
Fit Finder while, while it is very accurate, doesn't work for everybody.
And so someday we will take some of those new advancements on smartphones, pivot R i. P, including our patents, and build out what will be the next version of being able to get fit from home using a smartphone. It's very exciting.

[29:03] Very cool. I will be looking forward to that. I do want to touch on the date a little bit. You referenced it a lot. And to me, it's one of the most important competitive advantages of the D to C model.
Is that direct customer intimacy and the the competitive data you can gather about how your meeting customer needs air?
Not so you know, you mentioned that that the first versions of that fit finder gave you a data set that taught you that the standard sizes didn't fit.
I advise a lot of big established brands and a super calmer common conversation is should we have a direct to consumer model and my my general advices, your issue is less about whether you sell direct to consumers versus cell through wholesale.
You're your problem is you need the customer data that those direct to consumer companies air generating. So if you're a traditional bra manufacturer, you sell. You brought a walmart and WalMart sells it to a consumer.
You have no idea whether that customer was happy with the bra or ah, whether that that bra particularly well fit.
And so the fact that you do have that data gives you ah, huge, defensible advantage versus the traditional apparel manufacturers.

[30:15] Yeah, and I and I think, Look, everybody is in the data arms rates race today.
Whether you're a traditional retailer, whether you sell car parts, everybody is focused on data on the one thing that we did differently. 1/3 love is we built this company from the ground up with a focus on data.
Right. So we had the advantage that we had while we didn't have the resources, We don't have the capital of a large company.
We had the start of hustle, and we had the foundation that we started from the ground up, which would be very hard to change if we were a well established business that was focused on using zeros and ones to our advantage.

[30:50] Yeah. So let's let's pivot a little bit and talk about one of the big challenges I generally see with digitally native brands.
So, um, in the modern era, uh, particularly with the advent of Facebook and Google and digital marketing, it's become much easier and cheaper to launch a company and have some initial success.
So we look out there and there's a ton of of digital native brands, Um, that get out of the gate fast and, you know, grow to some size by cost, effectively advertising on Facebook.
But in general ah, bunch of those D d C company's sort of plateau like they're they're hits a point where the next of eyeballs on Facebook or even more expensive than the ones you bought, um, and it becomes hard to profitably grow.
So when we look at all the the D to see companies that get talked about a lot, a lot of them kind of hit this plateau, and it's been really hard for them to continue to grow.
And I'm curious if a if you're worried about that at Third Love.
If you've hit that plateau, um, if you have ah strategy to continue to get new customers and grow, you know, even as the the ad buying on Facebook gets more expensive and more competitive.

[32:05] Sure. Well, we're always thinking about the challenges of scaling acquisition marketing on. We have a really great leader on our team now that spends all over time thinking about that.

Marker 02

[32:18] We have a couple, uh, advantages, though one. We have very high gross margins.
Uh, and it didn't used to be that way. In fact, our course Martin just be a lot lower.
And we've been able to scale gross margins dramatically through improvements in our supply chain.
And again. Supply chain is a huge differentiator in our category. It's the untold story of the large, successful businesses in the space is their dominance and supply chain.
And so we've done a great job of scaling that which allow us A you know of the you know, when you buy a bra were able to spend that money,
on the Delta from in gross margin of profit on things like marketing on things like data science and data engineering.
So we can create a better experience, and that really provides us an advantage.
Furthermore, the other advantage, which is an advantage for everybody in this space on no different for us is this is a highly recurring high repeat business.
When a woman finds a bra that fits, even if she doesn't even like the brand, uh, she tends to stick with it for a long time.

[33:21] And so from Analects standpoint, do you guys tend to look a customer lifetime value, like is that important?

[33:22] You guys value customer. LTV is incredibly important to our business. We measure that, uh, it's unlike some of these other categories that you mentioned.
It's not a one time purchase, right? If we do our job, and I'd like to think that we do our job 90 plus percent of the time I delivering a great product that fits in a really phenomenal customer experience, she will be our customer.
I hope for a decade or more on that's inherent to the category, right? It just There's no reason to switch if you find something that fits, especially 1/2 size, obviously we have a distinct advantage of half sizes to nobody else offers that outside of half sizes.
If we provide something that really is phenomenal, that exceeds all expectations that she loves, we provide a brand that she that resonates with her that speaks to her, not that speaks to her husband.
We can really, hopefully keep her for a very long time, and that's our job, and that's what we're focused on. Eso.
There's two sides, really our marketing strategy. One is acquiring new customers and having purchased us purchased with us before, and the second half is providing a great experience to our repeat recurring revenue customers.

[34:34] That's awesome. Ah, I also I noticed that you want to pop up store, brick and mortar store in New York this year, and I think you also have a partnership with Bloomingdale's. If I'm not mistaken is, ah, brick and mortar, part of the the expansion strategy.

[34:48] Well, we we haven't had a partnership with any other retailers in two years, so we don't the only place to buy third. Love is through third love, so we're we're fully direct in terms of our retail store.

[35:02] We, uh, unlike other director consumer players that built stores very quickly after they got started.
We waited almost seven years before we launch our first store, and we wanted to prove a number of things out before we went into retail one.
We operate in a category that women don't want to shop in a retail store for generally right. It's unlike other county, unlike apparel.
Unlike a number of other direct markets where the experience just is better, you know you're dealing with the fit of pants or the fit of a blouse.
These are things that, frankly, it's a lot easier to try and a couple sizes in a couple outfits and figure out what works for you in store. I have to deal with the return.
We operate in a category that's not that way. So we really wanted to prove out a great customer experience to put all of our resources, all of our energy into creating that customer experience.
The challenge with retail is it is very, very labor intensive and very time intensive.
It requires an entirely new skill set, and we're in the early days for learning that skill Set 1/3 love.
But so far, the learnings in our one concept store in Soho haven't really successful. We're really, really happy with what we've learned in that store, and that will prove on that will be a part of our strategy going forward what we've built out there.
But it's not gonna be the strategy of blanketing the entire country with as many stories as we can.
We want to create an experience that is a creative to the overall online business. That's our objective.

[36:24] That is faring well before the watching the continue evolution of that strategy.
Um, I want to pivot for a second and and, ah, talk about the controversial topic from this week.
So you you referenced your big competitor a number of times and we're all friends here.
That's l brands Victoria Secret.
And if I have the story right, you guys sort of ended up inadvertently in a feud with Victoria's Secret. I feel like, ah, one time CMO. They're sort of like shockingly called you guys out and you got into a little bit of a public dialogue.
Fast forward to this week. I feel like you guys definitively one that because I L brands is selling Victoria Secret at evaluation much lower than their peak.
And the narrative about this decline of Victoria's Secret is largely that they lost their audience and weren't weren't appealing to customers.
And when brands like third Love that talk directly to women emerge that it became impossible for them to compete.
So congrats on crushing Ah ah, formidable competitors. Do I have that story right?

[37:35] Well, you know, Jason, you said earlier that we've definitively one that, and I don't agree.
We will when? When every woman in America is wearing something that fits her and wears a brand that resonates with her and speaks to her,
and that she's not ashamed of wearing or receiving the catalog from a brand that her six year old daughter I have a six and 1/2 year old daughter,
or her 12 year old teenager who's getting into her first bra isn't ashamed to be shopping on in,
or wearing Ah, brand that she doesn't hide the catalog or hide the pretty pink sparkly bag because she's too embarrasses. Have anybody at work see that she was shopping there?
That's when we'll win. So again, we're really just at the beginning.
We've got so much more work to do In order to do that, I wouldn't necessarily say that we are in a feud with that company.

[38:36] We are building something that's really different. We're building something that really is the antithesis of what they built in every way. Online verse offline.
The brand is very, very different. Everyone knows that. Who is familiar with with what we're doing.
The number of sizes we offer is 2 to 3 acts larger than theirs.
So inherently we can go after a much larger portion of the market I.

[38:59] And we offer a a really data based experience that that enables me to shop from the comfort of home so sort of securely uncomfortably, and that's that's very different.
And so we have so much more work to do there. I think that L brands has created there many of their own problems on, and I don't think that we deserve the credit for it.
Actually, we deserve credit for changing the narrative out there, but we don't deserve credit for their downfall. And, um, you know, I hope that, you know, competition's a good thing, and that's what makes America great on.
I look forward to hopefully that them emerging as a stronger competitors because having some competition is good and them changing their narrative, changing their brand, changing the types of models that they show is a really good thing for the world on.
They have a large voice, so I'm hopeful that they can and I look forward to competing with them in the future.
I think they've got a lot of work to do. They were bought by private equity for those that don't know and bought by a private equity firm known for sort of taking a cleaver knife and chopping things apart.
I hope for all of the amazing women that work there, and I'm sure there are.
I know there are many amazing women that work there that too many jobs aren't lost, so I'm hopeful of that.
But third, love is hiring so well stated, very magnanimous of you.

[40:18] Very cool. Well, that's ah. Very well. Say, did. In very magnanimous of you, I do know that we can both agree to the extent that third love does deserve credit. Is Heidi and not you.

[40:21] I do know that we can both agree to extend that love does.
It's not, you know, 100%.

[40:29] In case she's listening. I just wanted to make sure. Um So listen, we're coming up on time.
I do want to get one other question before we do one at a time.
Um, if you and I get in that time traveling DeLorean and fire up the flux capacitor and jump sort of five years in the future from today, do you have a vision for how the shopping experience might change?
I mean, is our store's gonna be gone, and we're all gonna be buying her stuff from direct to consumer. Like what?
What's the consumer landscape looked like five years from now? Mr. Fancy MBA xvc successful entrepreneur.

[41:07] Well, I unfortunately, based upon inexpensive education, that probably wasn't really worth very much. I still can't predict the future.
Uh, so I think that where we're headed is a world that is truly on the channel, where there is a lot less retail, and the retail that wins is retail, that is differentiated.
That looks very different from it. It looks today that has a digital experience built into the retail store.
Experiences are what people want.
They are looking for more than just product. They can get that same product online, the exact same product you can buy in a store today you can always buy online.
I don't know of any examples that you can't are very few examples.
And so I think that the world in the world of commerce online in the future doesn't look all that different than it looks today.
I think we will see sort of the evolution of the smartphones that we all carry around as processing power grows and optics get a lot smarter and the camera on the front.

[42:16] Those sorts of things will enable technology companies like ours to actually be able to create really great at home experiences to bridge the gap.
But retail still won't go anywhere. And the retail that wins the retail that would be highly differentiated and creates a great experience in store that again is a creative to that online experience.
But the Allman Experience has to lead because that's what consumers want.

[42:37] That is a great advice, and that's gonna be a great place to leave it, because it's happened again. We've used up our allotted time.

[42:38] Great advice, a great place to be because it's happening. We've used up our A lot of times.

[42:44] Um, you did mention that you were hiring It turns out there's a bunch of great e commerce pros and digital marketers that was in the podcast. Is that a particular geography that you're looking for talent in our.

[42:45] You did mention that you were hiring It turns out there's a bunch of great commerce frozen digital marketers.
Listen, podcast, is that a particular geography that you're looking for?
Third love is we're about 300 people, and we're headquartered in San Francisco.
We are hiring mostly in San Francisco for the digital marketing pros that you mentioned, so please reach out to us. We're at careers dot third love dot com on dhe.
Let us know kind of what you're looking for. If you see any jobs that sparked your interest, whether you're in the Bay Area or somewhere else, we're certainly open to having people relocate to the barrier.

[43:23] Awesome. We will put that link in the show notes. So no need to write that down of your driving. David's been a real pleasure. I've really enjoyed our conversation. Thanks very much.

[43:30] Thistles. Superfund, Jason, thanks so much. And thank you to all the listeners out there and thank you to all the customers of Third Love and the future customers.

[43:35] The customers and the future. Absolute. Look forward to having human down. Thank you so much for your support of our business.

[43:38] So we look forward to having you and thank you so much for your support of our business. We are just getting started.

[43:45] That is awesome. And until next time, happy commercing.

Mar 6, 2020

EP210 - Amazon Grocery and News

Episode 210 is a recap of the weeks news, including eTailWest recap, Amazon Go Grocery,  Walmart new programs, impact of Coronavirus, and retailer earnings reports.

eTail West recap





Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 210 of the Jason & Scot show was recorded on Wednesday, March 4th, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Google Automated Transcription of the show


[0:24] Welcome to the Jason and Scot show this episode being recorded on Wednesday March 4th 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:37] Hey Jason and welcome back Jason Scott show listeners there has been a ton going on in the world of retail.
Amazon and e-commerce so tonight we are going to focus on the news for we do that Jason you before coronavirus hit you had done a little bit of traveling and now I think your wings are probably clipped a little bit.
But you were a Tito West.

[1:01] I was it was a tough duty to go to Palm Desert in the middle of a Chicago Street snow storm.

[1:08] Toughen did you bring the family or you left them back there to deal with that while you were your sunbathing.

[1:15] I did the the family did stay at home they they were certainly welcome to attend
but I think they chose are my four and a half year old certainly did not choose to stay home but my wife chose to stay in Chicago,
for her work in life apparently are kind of a big deal.

[1:38] Yeah cool how is this.

[1:38] I have some big news for you with my son those God I'm kind of depressed.
I feel like my son my four and a half year old son is turning to the dark side of the force.

[1:51] Everyone goes through a face there's a the the dark side is there's a big draw there.

[1:59] That yeah I he's begging for like Darth Vader and kylo ren action figures and I drove him to school this morning and we had to sing Imperial March theme song over and over again.

[2:13] Nice that's some quality parenting.

[2:15] Yeah he totally has it down.

[2:17] As long as he's in the universe and not you're not talking All-Star Trekkie then he can be on the dark side.

[2:22] To my knowledge he does not know that Star Trek exist yet.

[2:26] Good good.

[2:27] But so yeah so that aside I did get to go to e-tail West last week which was a pleasure listeners may already know that because we already published one of the shows from e-tail
I got to do an interview with Owen Comerford who's the CEO of Moose Jaw.
Smooth jazz a great outdoor apparel retailer that was oddly purchased by Walmart a couple years ago.

[2:56] Cool and he's stayed on to run de.

[2:58] Yeah it's Moosa is famous for their clever and quirky marketing and oh and is actually the,
the owner of that marketing so for a long time Owen was the CMO and was responsible for a lot of the campaign's that made him famous and then Owens boss the the CEO of left to go.
Run Blue Nile and Owen was promoted to CEO so.
Doing a good job there a Moose Jaw and then he has a side hustle Walmart also made him the sort of general merchandise manager for outdoor for all of Walmart.
Yeah so that was a good conversation and they do clever marketing campaigns like if you're afraid to break up with your boyfriend or girlfriend call us and we'll break up with him for you.

[3:51] Yeah never rabid kind of audience that rates things and is really into the outdoor stuff and and really engaged right.

[4:02] Yeah yeah they're super smart about engaging their customers and they behind the scenes they have a really powerful 360 degree view of the customer and all that all that good stuff so.
They definitely have a bunch of best practices.
Somewhat aided by the fact that they're relatively small prior to other Walmart acquisition yeah so that was a.
Great conversation he gave one of the Keynotes and then we got him in a conversation and then probably next week we'll publish a conversation I had with Dave Spector who's one of the cofounders of third love which is a.
Highly successful direct to consumer or women's lingerie primarily bra.
Manufacturer and reseller and we'll probably talk a little bit more about third love in part of the new segment later but so that's a,
a teaser for now.

[4:55] And then you know there's a lot of content a t-tail there's actually multiple tracks going on so you kind of can't go to everything.
And I did have some duties.
To record some podcasts and some other things while we're there so I didn't get to see everything but a couple of the just quick standouts for me,
there was a guy who I hadn't seen before who I'm I'm afraid I'm gonna mispronounce his name Robert petrich.
Who's in Industry the retail industry manager for Facebook.

[5:28] And so he was talking a lot about Instagram check out which is a topic of interest to me so he kind of had this interesting framework he said hey Facebook,
we think about these three main phases of the customer Journey the discovery phase the purchase phase and the post-purchase phase.
And essentially between Facebook and Instagram we feel like we dominate it Discovery and we're doing well and have a lot of good products in there,
but we really think I were deficient in the purchase phase and the post-purchase phase and so that's a major focus of.
His effort and so like through that framework Instagram check out is.
There you know biggest but still early initiative in purchase,
and so he kind of gave a Nike case study of Instagram check out where Nike partnered with this,
fear of God brand and they launched a new shoe for Cyber Monday and they sold completely sold out of the shoe and in one minute,
um and he sort of highlighted that that a number of primarily Street Wear Brands women's fashion brands and Beauty Brands are having a very high degree of success using Instagram check out and he announced that,
in the process of expanding that program which was.

[6:47] Interesting to me because they've been in this beta for a long time and they haven't allowed new new brands into the program so it was good to hear that there.
Expanding that program and then he also pitched something I guess I'm a little more skeptical of but you know he had at least one good case study using Facebook Messenger as a post purchase tool.
So the case study there with Sephora has sort of natural language appointment booking through Facebook Messenger so if you want to,
book an appointment with a beauty consultant you can kind of do it using natural language on Facebook messenger and he in his case study he was saying that
they have an 11% higher booking rate on Facebook Messenger than they do the Sephora website or any other support of touch points.
So he was kind of pitching it for that I to me like.
There's so many Communication channel channels now that they're sort of a signal to noise problem across all these channels but.

[7:52] That that was kind of interesting I got to host a couple panels so I did a direct-to-consumer panel on how brands are.
Able to capture customer data and improve their products and services and so there were three kind of interesting execs on that panel Megan Whitman who's the chief digital officer Campari Beauty,
Kyle Hoff who is the CEO of a direct-to-consumer furniture company called Floyd which is kind of the
the online Akia if you will and on kit Patel who's the VP of merchandising at boxed and I was super sad that you weren't there because I know
boxed plays a major role In Stocking The get spiffy snack Shelf.

[8:38] Absolutely yeah.

[8:39] And so they had some sort of interesting insights on cat talked a lot about,
boxed own private label and how they're able to leverage the other customer data they get and feedback they get to sort of shape the the offering for.
For their private label products so that was interesting and then I did kind of a.
Predict the future panel with with two guys Mike apostille who's a co-founder and CEO of a.
Emil company called factor which is surprisingly big much bigger than I realize they sell a hundred thousand meals a week so these are.
Just reheat any meals at home for whatever whatever your nutritional information you know interest or Diet is.
And they it's super interesting because they do a bunch of post-meal surveys,
they get a really high response rate and so they do a lot of like Micro Data about which meals customers who liked and what they liked and didn't like and they really use that to shape there.
Their future meal planning and then Bob Bennett who's the VP and General Merchandise general manager of consumer engagement at Petco.
and Bob had some interesting insights but I'm also super nice to Bob because Petco's based in San Diego and so have an eye towards my retirement job being some kind of e-commerce gig in San Diego.

[10:08] Yes hopefully Bob's listening.

[10:11] Yeah exactly and then I got to give a keynote on direct-to-consumer on the third day and so I took the opportunity to totally poo poo the direct-to-consumer channel.
So I want I want I want recap the whole thing it was a short presentation
but you know they're all these these direct to Consumer presenters and there's all these case studies about these direct consumer companies so I kind of highlighted the fact that hey,
there are all these different companies that track direct-to-consumer companies so I picked one the interactive advertising Bureau so it's a,
Trade Organization of digital advertisers called,
usually they go by IAB and IAB publishes this list called the IAB 250 which is.
Their opinion in the 250 most important direct to Consumer companies to watch so I pulled all 250 companies and said hey how many of those companies have sold at least a hundred million dollars a year,
ever and how many of the 250 would you guess are over a hundred million in sales.

[11:18] 25

[11:22] I warned you in rehearsal that you'd have to guess 25 toy reasonable guess but way too high seven of the 250 companies have sold over a hundred million dollars a year.

[11:30] Holy cow.

[11:31] Yeah and only two have sold a billion dollars a year and those two by the way are Stitch fix and chewy,
both of whom primarily sell other people's stuff so they are technically direct-to-consumer and they do both have their own brand but they mostly are,
and online wholesaler not a vertically integrated direct-to-consumer company and one of them chewy is.
Hugely successful on the revenue side but while the unprofitable so of these hundred and fifty companies one company that sells a billion dollars a year profitably and you know a bunch of these companies are,
unicorns from the private Equity valuation standpoint but but
very few of them have have meaningful market share at the moment not to say they won't ever but it like it's sometimes easy to get caught up in the in the hype and sort of overvalue where they're at right now.

[12:27] Did you know that chewy and Stitch fix sell other people's stuff direct-to-consumer.

[12:34] I did know that but so does Walmart.

[12:36] It's right there it's right there it is still direct-to-consumer.

[12:40] Yeah I mean isn't every retailer direct-to-consumer.

[12:42] Yeah Staples has a B2B piece.

[12:48] This is true but director business.

[12:52] Cool seems like you were kind of running the show over there you're going to be like the you're going to be on putting together the whole thing here before we know it.

[13:00] Yeah if they're listening winter events in Palm Desert I'm in.

[13:04] Said the Chicago.
Cool sounds like it was a fun trip and you get to flex the old speaking muscles which is always good it wouldn't be adjacent Scotch oh if we didn't kick off with a little bit of Amazon news.

[13:25] Design news your margin is their opportunity.

[13:34] So let's start with your favorite topic Jason which is grocery there's been I've seen a lot of interesting topics around Grocery and I saw you actually wrote an article about this in Forbes so
give us an update on what's going on in the Amazon grocery line.

[13:49] Yeah yeah this is awesome week for grocery so a couple of things came out,
last week right before e-tail Amazon opened a new Amazon go format in Seattle this called Amazon GO Grocery and so.
Traditional Amazon go stores are these just walk out stores,
you go in you take your products you walk out and Amazon uses cameras to track you and charge you for what you took I've always said that well well their disguises convenience stores that Amazon ghost orders are really,
restaurants because they're primarily selling Ready-to-Eat food for business people to have for lunch
and in fact secretly if you dive in all of Amazon's propaganda for go like they call them restaurants so this is a new format that uses that same just walk out technology
for an actual grocery store so it's quite a bit larger it's five times larger than a ghost or so it goes stores about
five is exaggeration a ghost or is about 1,500 to 2,000 square foot this is a 5,000 square foot store this this store has about 10,000 skews so five times as many skus as a
a ghost or had and the skus include things like,
a butcher shop with with meats and organic produce.

[15:19] The go didn't have and that you know potentially are harder for the camera to recognize.
So a big evolution in the Amazon Go technology and a new grocery concept for Amazon so that alone would have been super exciting
and I would put just one caveat on that while it's a lot bigger than a traditional ghost or it actually still is small by grocery store standards
so that's not a huge amount of skus and that's not a big footprint for an American grocery store that's about the size of it the typical European Grocery Store.
And I was super curious how they were going to do things like sell bulk items like how do you sell Apples by the pound.
Um using the just walk out technology in the answer is you don't they're they're selling everything by the Aegis so,
yeah so you pay per apple or / banana rather than by weight so it's so interesting.
Like a shift they obviously did for their convenience not the customers but it'll be interesting to see if customers like that alternative model or not.

[16:26] Some chatter were some guy said he defeated the camera did you see that.

[16:30] Yeah and I almost wondered if he's a podcast listener so a ton of journalists got invited to the grand opening,
and one of the things that I always pointed out about a one of the problems in scaling Amazon go is there's things you can't do in this camera-based or like have a public restroom.
And the reason you can't is because you can't put cameras in the restroom and so then you have a problem someone scans their way into the store
using the mobile app and so you know who they are and then you're tracking them around the store with a cameras and you keep track of what they bought and then you know when they walk out you charge them for those purchases will if you let them walk into a public restroom in the middle of that shopping trip,
you lose that your identification Mark for that customer and so
you know one of the problems you have is go to a bigger store and it's more a higher expectation that you're going to a restroom
so turns out this Amazon go store does have a restroom and so this clever journalist figured out yeah I'll walk into the restroom I'll see I'll carry two jackets with me and so I'll change jackets in the restroom so I come out with a different color jacket and sure enough by doing that he was able to steal all his items and wasn't charged for them.

[17:45] Was he arrested.

[17:46] No no I mean oh well at least not at the time of publishing his article.
I always thought that I always assume the solution would be that you have to leave the store to use the restroom and then you have to scan your way back in with your phone.
Yeah but so that's an interesting little little Edge case another Edge case that seems like they're trying to solve is in a ghost or you can only shop alone,
so if you walk in with your family they each have to have a.
Their own app or have a separate cart and now with this go grocery store you can actually scan in multiple people and then any items taken by any of those people.
You get charged for and group shopping actually is a big deal so it makes sense.

[18:35] So the jacket thing can't they use eventually face recognition would do that or is there a reason they're not doing faces for for privacy reasons.

[18:44] The real answer is I don't know they're you know,
you could imagine that like I imagine they are using face and then they're like hashing it and you know just using it for that that session so they're not storing it or doing anything with it but.
They just don't force you to give like a face profile like you know what I mean like you're naturally walking through the store so they have to be able to track you from multiple angles and so I imagine they use a lot of attributes of your appearance to track you and obviously
if your back is to all the cameras the facial recognition wouldn't work so they can't exclusively rely on facial recognition.

[19:22] But you scan your app it's logged in so they know if let's say they do scan your face they knew who Jason is and your kind of assuming they don't store it but maybe they do and I don't know.

[19:35] Yeah I don't know these are all educated again you can imagine ways they could solve it right so it's
it's not a deal-breaker it's just harder but so Props on Amazon they're moving the concept for further when they originally invented the idea of just walk out store they had a grocery store in mind and with the technology available at the time it was too hard,
so now it's become easier they also said that they've,
significantly reduce the cost I imagine it still super expensive but I believe them that the cost is going down
but I was almost more excited about a much lower profile.
Revelation that came out this last week at Amazon we've been talking about Amazon opening a.
A alternative grocery store that's not a Whole Foods grocery store that's a full-size grocery store in Los Angeles and it's been under construction for a while people have walked by and then.
Um I want to say Bloomberg got access to the store and got to visit the store before it opened and the big surprise to everyone is oh there's not a lot of digital Innovations and it mostly is a very traditional grocery store layout.

[20:53] Um so this is a 33,000 square foot store so that's a legitimate Us full supermarket.
And it was kind of interesting that it was you know didn't have a lot of digital shopping Innovations in it,
I have assumed for a long time that it was going to be lower price point groceries and targeted it more value oriented customers than.
Then Whole Foods but a clever blog called Hungry TV h n gr y TV,
um sort of track down the architectural plans for this store and they uncovered something super interesting that 7,200 square feet of this 33,000 square foot store.
Are dedicated to a micro fulfillment center so what this is is.

[21:50] Robotic grocery picking machine and like the brand name is even on the floor plan so this is a Michigan company called de mantequilla.
Which which make micro fulfillment centers for grocery stores and so very clearly this new Amazon concept is going to have a lot of groceries stored in this robotic system that then automatically picks them for the customer,
and so we don't know exactly how this will work yet but one model is customers go to the grocery store do their own shopping and take home their groceries.

[22:24] For deliveries they use this automated picking system to more cost effectively pick the orders and deliver them to you.
And that alone would be interesting that that is a huge Trend in grocery but another alternative would be.
You shop for certain items yourself in the grocery store where like individual selections important so you want to pick your own,
pork chops and you want to pick your own fresh produce,
but you really just want a bag of Oreos and all the bags Oreos are the same so there's no reason to push a cart by Oreo Island grab Oreos,
when you can just like build a list on your phone and have the robot fill the cart for you so,
the fact that this this micro fulfillment center is built into this new Amazon store is very interesting and that to me does make it.
Much more revolutionary grocery store than maybe the Bloomberg journalists realized when they they got the walkthrough so I'm,
and that sort is likely going to open imminently so I'm super excited about that,
and that kind of prompted me to write this article in Forbes about the the great grocery Wars and how Amazon Walmart and Kroger are sort of battling for the hearts and mind of,
digital grocery Shoppers in the US so I'll put a link to my article in the show notes of anyone wants to Deep dive into what's going on in digital grocery right now.

[23:49] Very cool and another Amazon news we're going to talk about coronavirus but since we're talking about Amazon they did have a big travel freeze which was which was interesting and then a lot of companies have
pre announced that they're going to have a rough q1 due to the virus so for example apple and
Microsoft both pre announced that they probably would miss their numbers due to supply chain issues and then I don't know why Microsoft would.
That was kind of weird when I guess how about any other Amazon news that you've been tracking.

[24:24] Yeah a few things
so there's a lot of Buzz yesterday about another new store format that at Amazon opened journalists found a pop-up store in Seattle that was focused on Amazon Basics bedding.
So this is like their version of the Casper mattress.
And like that is interesting to me I actually think the journalist kind of misinterpreted what they were seeing so there actually have been I want to say.
Five Amazon pop-up stores that have opened in the last three months and Amazon used to have hundreds of pop-up stores.
They famously closed them all and then they quietly reopen six of them and five or six of them and they all have these rotating themes so one month the popups might have been about,
audible books and the next month they might have been about,
mama bear food and the current month's theme for these pop-up stores is amazonbasics bedding and so what I think is new is they added a seventh.
Location for the pop-up which is.

[25:37] So that's kind of interesting one that is more interesting to me and I know you being a fulfillment geek would be excited about is,
they also announced that they had opened a new kind of fulfillment center and I want to say they've opened four of these,
and this is Kyle call it a tweener fulfillment center.
This is a fulfillment center that holds a hundred thousand items,
closer to population centers so a true Amazon fulfillment center is like a million square feet and holds,
millions of products this is a hundred thousand square foot store that holds a hundred thousand items and as a result of these things they're able to guarantee 5 hour delivery on a bunch of product so it's kind of like.
Amazon Prime now on steroids and they've opened them in Phoenix Philadelphia Dallas in Orlando.

[26:36] Very cool yeah Prime now are very small so that I have.

[26:40] Like 20 thousand items.

[26:41] Yeah 5,000 square feet interesting so you know.
It almost feels like the next phase of prime one day is prime same day so feels like they're they're laying the groundwork for that under the guise of it that'd be the ultimate kind of a head fake is you know.
Tell Wall Street they're continuing with prime one day and then at becomes Prime same day without a huge amount of new investment that would be interesting.

[27:08] Yeah and part of me and I may have this wrong but I sort of imagined there that those two things are almost synergistic that essentially they said like hey.
To honor our one day we need to stay you know it's more cost-effective to Stage the most popular items closer to the customer and so they they sort of design these new fulfillment centers to too,
increase profitability and service level for the,
Amazon Prime one day and then as they did that they go oh and by the way there's a subset of customers that we can have an even better service level now that we've done this right and so why wouldn't we offer,
you know faster same day delivery to customers whom we.

[27:52] Yeah very cool.

[27:54] So yeah those are I guess where my last little Amazon tidbits.

[27:59] I brought up the coronavirus let's let's kind of talk about that because it's an unpleasant topic but we need to kind of think about how is this going to impact everything for our listeners here so first of all kind of this is kind of
coming in waves if you will so when we first heard about this
the main concern was supply chain so and you know that Apple pronouncements when it really kind of caught onto my radar it was pretty early there
and that's because the virus initiated in China and if you have a lot of Chinese components than it's going to impact you
my initial thought was there's a lot of Chinese stuff sold on Amazon I wonder how they're going to get impacted one of my
one of my favorite analyst con Sebastian he actually kind of said you know because they have this Marketplace there's always multiple offers from those products so it's almost kind of like,
yeah you don't really have a single source so so by having the marketplace model Amazon in an interesting way is almost kind of,
D single point of failure did supply chain whereas an apple conversely has because of
the components and controlling complete vertical ization of everything they have a lot of single points of failure in China so that was interesting and then he also mentioned.

[29:20] You actually kind of came out and came out with a list of companies who would be hit the most from this but then what I want to talk about is the ones that would do best in Amazon was on that list it was very
counterintuitive to what I was thinking
and his argument was also on there was like Peloton Netflix obviously Zoom some of those you kind of thought about but his whole idea is that based on what we've seen in other countries when there is a large outbreak,
people go into he calls it cocoon mode so that's an interesting theory is you know if people are having to kind of self quarantine on their houses to avoid being in crowds what does that mean,
and his whole point is real you're going to still need stuff you're not going to want to go to the grocery store where presumably,
people have been in there touching all the products and things you're going to want a cleaner supply chain to your house which means or e-commerce which is benefits Amazon so I thought that was an interesting take.

[30:14] Yeah no for sure and I feel like the the most like,
direct example is yeah so it's great for Peloton and it's bad for SoulCycle right like you don't want to go to a physical place and take a class with 30 other people but you'd rather
workout at home and in that case once you buy a Peloton you're locked into the Peloton so it's not like,
you just for God you know you skip something for a month and then you're going to go back to it after the,
the the virus updates,
you know if you're you you in many cases go through a one-way door to make some purchase decision to do something at home versus out in public and so like it could have some long-term impacts,
and they're just all these angles to this but like I'm with you the the first announcements
coronavirus started showing up in a bunch of earnings reports and it wasn't retailers it was manufacturers and the interesting thing was it was ones that obviously have supply chain dependencies like
like apple that makes a lot of the product in in China,
but it was also like companies that make their product in the US are still dependent on ingredients from China so I want it was like Coca-Cola has made in the US but it uses aspartame that's made in China and so,
you know not surprising in the global economy.

[31:44] We the the world supply chain is very dependent on China so potentially impact there and uh you know just a ton of factories.
Shut down they're actually starting to open up again but I think the interesting thing is this kind of juxtaposition that,
some business like in some ways this benefits businesses right so in the u.s. right now,
um where the the fear probably outpaces the real risk you have a lot of quote aggressive shopping unquote and all these retailers are selling four times as much
paper towels and disinfecting wipes and hand sanitizer is they ever had before in some retailers have now said that the,
the sales increases there will be material.

[32:34] Which is interesting, they all have lean Supply chains and they're all running out of that stuff and so I kind of feel like like.

[32:43] There's a pro and a con to that.
But then our friends at coresight did a survey and ask a bunch of customers if their shopping behaviors might change as a result of.
Concerns over coronavirus and not shockingly a significant percentage of customers
said like 25% said they already are avoiding going to public places and fifty percent said that they definitely would have things got worse and so you know the premise is,
if you're a mall owner you know this this is certainly bad for you a bunch of retards that said they've already started to see,
um persistent traffic declines if you're a retailer at an airport you've already been decimated because air travels way down and so the traffic to those airport stores.

[33:40] Is way down but then again the cocooning could potentially be an upside for some businesses so if you're launching a digital grocery service,
and your biggest problem is that a significant portion of the US consumers haven't tried ordering their groceries online yet.
You know it probably is pretty appealing if you're afraid to go to the supermarket because of all the people there it's probably pretty appealing to try your first delivery order and if that is a good experience for you.
You you might be inclined to use that service regularly and Scot I don't know if you knew this but there's kind of a precedent for that.

[34:23] Um so.
The second largest e-commerce site in China is of course basically exists because of the SARS epidemic in China so,
so prior to SARS.
Jingdong Trading Company is selling CD-ROM drives at electronics bazaars and Shanghai and when SARS hit,
all these bazaars closed and the founder of jingdong trading had a bunch of inventory of the CD-ROM drives it couldn't sell and so because there was this kind of prolonged quarantine,
he started trying to sell the CD-ROM drives on bulletin boards and was so successful in doing that that he launched a website,
and they of course become one of the biggest e-commerce players in the world.

[35:16] I did not know that.

[35:17] Yeah so who knows potentially there will be some new.
Businesses emerging from this sort of temporary cocooning and the the other category that I feel like is gonna like potentially be decimated by this.
The on-premise restaurant business because they've already been under a lot of stress consumers are consuming a lot more restaurant meals off-premise they're mostly getting delivered by these.
These delivery marketplaces and the the economics for the restaurants themselves are horrible when this happens.
But now if people are cocooning more and going out less they're likely to order even more meals for home delivery and that's that's going to be a disaster for the on-prem restaurant business.

[36:04] Cool how about I know you were bummed that some of the events were canceled too.

[36:09] Yeah there's a little controversy there so like that.
For those of us in the industry like this is a busy event time of the year and so there you know a number of big events have been canceled Google and Facebook both canceled their developer conferences,
Adobe just canceled their big customer conference in Las Vegas,
and we're about two weeks away from shoptalk which is a you know one of the best shows in our industry,
is still scheduled to go on in Las Vegas and I'll be honest I'm grateful I'm not one of the event organizers and I'm super curious what they're going to do because.
It's increasingly looking like it's not going to be viable to have this show like tons of attendees and speakers work for companies that are that are limiting you know non-essential travel.
And I'm sure a lot of people just have concerns over you know traveling to a big event in Las Vegas so it's going to be.
Interesting to see whether we have a shop talk this year or not.

[37:11] Yeah we will see are you going.

[37:16] If they have it I probably will go you know we have to see like.
It is funny if you remember shoptalk sold this year so.
The fact the founder of shop talk already seemed super smart right like he had flipped a couple trade shows he sold shop talk for a particularly good valuation.
And you know he built a great show they did a really good job they grew rapidly for three years and then he sold it and that already looked brilliant now it looks.

[37:50] Genius.

[37:51] Because the new owner that paid like a pretty rich premium for the show is now stuck in this position like.
Do we give all of our exhibitors their money back or do we try to have a show that you know potentially is going to be the worst year ever for the show as you may remember
they're doing a novel thing for the show they're having only female speakers and so from my perspective,
it will be a tragedy to have only female speakers than have no one show up because everyone's afraid of the coronavirus so I just I just think there's a lot of.
Issues Tangled Up In whether or not not they at whether or not they have the show and I'm glad it's not my call.

[38:30] Yeah wonder how so you know a channel visor we do a show and you commit you know,
years in advance and you you spend a lot on the show and you have to guarantee hotel room so I wonder I wonder if a viral outbreak is kind of a reason to be able to get out of that.

[38:48] Yet so I don't know if they're contractually obligated to but from a Goodwill standpoint most companies are having to let customers out of their commitment so
the I mean I had a non-refundable room for for Adobe and they refunded that like
Adobe basically sells out the Venetian and the Palazzo and so I imagine those hotels are going to be empty now,
because they you know they weren't marketing rooms to other people for that week and I'm sure shoptalk would be the same problem at Mandalay Bay,
United Airlines just announced that you know they're waiving all change and cancellation fees and they're actually cutting back their schedule so all these travel and hospitality companies
you know are really bearing the brunt of the cost for this so it's a it's a mess.

[39:38] Yeah yeah it's can be interesting the we don't really talk about travel on the show but it will kind of
Ripple to our world because Google has pretty high concentration of travel advertisers social media guys I think are pretty small at I would guess I think Google is like the 15 to 20% range they have kind of four or five verticals that are each 20%,
retail being one of them maybe politics there's kind of a weird thing that it actually could be okay that it's a political year maybe that'll help them.
It's gonna be interesting to see how these things were blowout and other places.

[40:15] Yeah yeah for sure and obviously not not something that people plant or budgeted for.

[40:20] Cool another news item I wanted to get your opinion this our resident Walmart guy is this Walmart plus kind of Amazon Prime killer
I can't tell feels underwhelming but I wanted to see if there's something on this there.

[40:36] Yeah so side now you're calling me the Walmart guy but you're the one that camps out overnight to get the new Star Wars toys at Walmart.

[40:45] Yeah but I've been to Bentonville once how many times have you been.

[40:49] Yeah more than once Fair Point yeah so Walmart had a number of interesting announcements in the last two weeks so you're right
Walmart did not announce a new
Amazon Prime competitor but some news apparently leaked and so I think originally Vox recode had an article and now a bunch of other people at articles and Walmart kind of confirmed that the,
the basic details of the article where accurate,
but the news was that Walmart was adding a monthly subscription program that sounds somewhat like.
Amazon Prime and in fact it's called Amazon or Walmart plus and so,
again one more didn't do a real announcements we don't really know what's in Walmart plus yet the speculation was at a minimum that they had sort of free home grocery delivery.

[41:51] And there was like some speculation that there are a bunch of other potential Services Walmart could be bundling in that in a separate announcement Walmart opened a number of health clinics.
Which is a new major Initiative for Walmart and so there is some speculation that Health Services could be bundled in this we don't know yet so it'll be interesting like I guess I'm on the bubble.
I think it's really smart for a retailer to evolve into an echo system and have a sticky membership program and obviously Prime is the,
the most economically successful membership program in the history of Earth,
but another retailer Costco has you know pretty close to the second most successful,
membership program so you know it's smart for Walmart to want to have a really successful program so in that sense like I'm encouraged that they're doing something.

[42:46] It's hard to imagine what it could be that that's going to stack up favorably to Amazon Prime so I guess that's my fear like I'm going to reserve judgment until I see what's in it,
but I hope what they do is something very different than Prime instead of just trying to do a me to version of prime because I kind of feel like that would.
But they did bundle in that same week some other news came out so I thought you might be more excited Walmart a t-tail Walmart officially launched Walmart fulfillment service so they call that a wfs,
which is their version of Amazon's FBA,
and this very much sounds like a me to offering compared to Amazon but I would argue here it's a smart unnecessary one Walmart has.
You know pretty open about its aspirations to to develop a serious successful Marketplace,
and to me it feels like like table Stakes for a really successful Marketplace is.
You have to help all those sellers with fulfillment so that you can have a high service level and you can kind of match Amazon Prime one day and and the only way you're going to do that is if you fulfill the goods for.
For the sellers and so this this was not shocking news but but like a pretty important evolution in the marketplace at Walmart do you.

[44:15] You sort of agrees God or you think it's not necessary the this point.

[44:20] I do you know when you don't have when you have kind of a what I call hybrid marketplace with one p n 3p
and the 1p experience is just typically so much better than the 3p experience because
third parties generally are smaller businesses they don't have the same shipping infrastructure so
so having that fulfillment by or the this example Walmart fulfillment Services as this Middle Ground
you know I'd say it brings the customer experience that much closer and that's what you want to have a vibrant Marketplace you want it
you want it so similar that the customer doesn't pause and say oh this is from a third party that's going to take a lot longer or come in a weird box or.
The last one I got was all destroyed or came to a carrier I don't like whatever it is that there's those things kind of chew away at the overall customer experience so I think it'll be good.

[45:11] Ya know and then you know Walmart has already accepts returns for 3p sales in their stores and so I don't think they announced anything but you could imagine
Walmart leveraging their network of stores like they could potentially stage some popular 3p products they're like there's all kinds of interesting.
Twists on the Walmart fulfillment Services if you if you layer in the 5000 super centers as well as the the Walmart's fulfillment centers.
So that's interesting and then they did also announced kind of the next step in a reorganization,
like over the last couple months they had merged several departments between and Walmart so instead of having separate teams and Bentonville and San Bruno
they had shared responsibilities but one big function that was still separate was
there are separate Merchants buying stuff for the web site in San Bruno and Merchants buying stuff for the stores and Bentonville and so this month they announced that they're merging the merchandising organizations and having one so this is all
to me like positive steps in breaking down the silos and having a single omni-channel organization.

[46:27] Very cool speaking of omni-channel a lot going on in the world of Mulligan so
you know it seems like there's a lot of chaos out there you mentioned so malls are shaky just kind of coming out of queue for still
and then here we are in q1 with this this whole thing the traffic's gonna be down to grown up due to coronavirus what are you seeing going on in some of the mall retailers.

[46:54] Yeah well I think there's a bunch of news like obviously it's retail earning season and so like you can look at all the mall retailers there but some sort of stand adds to me
Hudson Bay Company which owns Saks Fifth Avenue didn't have a very good earnings call and
word came out this week that the CEO Helena falx is stepping down she was a highly regarded CEO she was
like the CMO of a CVS I think it was if I'm remembering right before she stepped into this role and she she fixed a lot of
sort of institutional problems that sex and frankly got rid of a lot of the,
the ancillary businesses that they were in a really you know put the focus on sex so now she's leaving and,
like one of the investors whose primarily a real estate guy who's been sitting on the board is taking over as CEO and you know from.
Retail practitioner standpoint.

[47:59] That doesn't feel like a very forward-looking move that you have the successful retail operator leaving and you're replacing them with an investor real estate type.
Type person you know usually those aren't the people that.
Grow traffic and and profitability and Retail organizations so I liked that potentially a bad sign for force.

[48:27] And then in other leadership shakeups Nordstrom which I sometimes call the the best of the bad performing department stores,
they were actually up in terms of same-store sales so they were up 1% if the full at the Nordstrom stores and they were up 1.8 percent at the rack stores.
Which was below their guidance and is not very exciting growth and it's below and you know the retail industry average for growth,
but compared to most department stores which are shrinking being up you know is better.

[49:05] A standout thing for me and their earnings is their digital was up nine percent which is way below the industry average so like you don't see that very often.
We joked that the industry average has to be wrong because it seems like every retail on the planet claims to have bigger growth than the,
14% that US Department of Commerce says so in order from case they're saying hey we only grew nine percent that's pretty surprising for someone that we think of is a,
kind of best-in-class digital department store and I don't know what the full story is but part of it I'm sure is.
That Nordstrom is more digitally mature and they do you know have 35% of all their sales are digital so you know it's maybe it's a little bit of a lot of big numbers that it's.
Hard to grow as fast when you already have significant digital sales
but out of that earnings call they announced a little bit of a leadership change they had two CEOs a co-ceo thing they had the to Nordstrom Brothers Pete and Eric and and they announced this week that Eric would be this the sole CEO and
Pete would act as president and chief brand officer so you know apparently someone pick their favorite child.

[50:18] Interesting yeah I'm sure those complicated behind the scenes to figure that out and you know they had tried to go private for a while and just couldn't get it done it.

[50:30] Yeah yeah the family tried to bring it private and they yeah you're right they couldn't come up with a sweet enough deal apparently.
And then the one that was like the I would call the biggest news is Victoria Secret which is their parent company is L brands.
The they have a storied CEO less wax where who's like arguably responsible for
the success of Abercrombie & Fitch
Express for a long time and he's been the CEO of Victoria's Secret for 50 year or of L brands for 50 years
they announced that they were selling Victoria's Secret,
to a private Equity Firm or 55% of the equity to Sycamore Partners at a surprisingly low valuation so 1.1 billion dollars.
And you know so based on Revenue there was a.

[51:37] You know in expectation that the valuation might be considerably higher you know Victoria Secrets really struggled lately because they you know their whole marketing stick is this,
aspirational perfect image of beauty and they mostly were selling like discount bras in stores that were really designed to cater to men,
and increasingly they're all these new you know bra companies and direct-to-consumer companies that were like way more focused on.
Meeting the needs of the women that actually use the products and it had more sort of inclusive marketing strategies and you know that they had a particularly dumb CMO it,
Victoria Secret that you know famously said they would never have any models that weren't perfect because.

[52:21] That's not what women want to think of themselves as and so the whole like Victoria Secret Beauty show and.
Fashion show and all those things kind of once we're strong marketing tactics had really sort of started to work against them,
and so you know the it's interesting they had to sell at a pretty low valuation there was probably a period in the,
mm when they would have you know valued Victoria Secret at like 6 or 10 billion dollars somewhere in that range to only sell it one.
Is a pretty big admission of defeat,
and I mentioned that next week we'll have an interview with Dave Spector was one of the founders of third love,
like arguably third love is one of the accelerators of this Victoria Secret decline,
and they accidentally got in a fight with Victoria Secret so they're the small direct-to-consumer company that no one had ever heard of and that same stupid CMO at Victoria Secret that
you know mentioned that they would never have any flawed models also said that they were they were never going to be anybody's third love they were always going to be everyone's first love.

[53:35] And and that kind of you know prompt this this public spat and you know third was continuing to do really well and and Victoria Secret just,
sold in a fire sale in the last week's or had to step down so kind of interesting that kind of the whole female image thing mask the fact that they also had a bunch of stores in bad malls,
that are just dying and they're primarily sold everything at thirty to forty percent off so just a bunch of traditional model based apparel challenges in addition to their.
Positioning Challenge and I guess the one thing I would point out is well,
you know it sucks to have a company that was super valuable in you only sold it for 1.1 billion dollars I will point out that albanians bought Victoria's Secret for 1 million dollars in 1982 so
if you just look at where you started and where you ended it's actually a pretty good story.

[54:29] Low basis if all kind of tie it all together with a little bow here if Neil from shoptalk head owned Victoria Secret he would have sold at the top.

[54:41] And congratulations to an eel / let me know if you need any help carrying your bags to your vacation home.

[54:48] In San Diego.

[54:48] Exactly I bet you he's vacationing at even cooler places.
But Scott that's gonna be an awkward and perfect place to end it because it's happened again we've used up all our listeners time but as always if we struck a chord or you want to continue the conversation we encourage you to jump on our Facebook page
or hit us up on Twitter and as always we really would appreciate that five star review on iTunes a ton of listeners have been super generous and written great reviews but most of you have been listening for so long that we don't get as many new reviews as we used to and
part of Apple's algorithm is freshness so we need we need some of you longtime listeners to give us the 30 seconds in jump over to iTunes and write that review.

[55:34] Yeah thanks for listening and also longtime listeners recruit a new listener and have them leave a review.

[55:40] Even better and until next time happy commercing.

Feb 26, 2020

EP209 - Moosejaw CEO Eoin Comerford

Eoin Comerford is the CEO of MooseJaw. An omni-channel outdoor retailer, acquired by Walmart in 2017.

In this interview with Eoin we discuss Moosejaw's unique positioning as "The most fun outdoor retailer on the planet" and some of the innovative marketing campaigns Moosejaw has developed. We also explore their omni-channel strategy, rewards program, owned products, and some of the systemic headwinds facing the apparel industry.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 209 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Tuesday, February 25th, 2020.

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Google Automated Transcription of the show


[0:24] Welcome to the Jason and Scott show this is episode 209 being recorded live from the Ito West trade show in Sunny Palm Desert,
on Tuesday February 25th 2020 I'm your host Jason retailgeek Goldberg
and unfortunately Scott was unable to join us this week so you get twice the Json for half the usual price
but as always when Scott ditches me we make up for it by having a particularly awesome guest so I'm thrilled to welcome to the show Owen Comfort who's the CEO of Moose Jaw.

[1:01] Thank you thank you for having me.

[1:03] I'm super excited to have you I feel like I'm somewhat familiar with Moose Jaw and we can maybe get into that later but the for our audience that isn't familiar can you give us the snapshot on who most joyous.

[1:17] Sure Musha is the most fun outdoor retailer on the planet,
according to our moms we have actually been around for almost 30 years started in brick-and-mortar retail but now we're one of the top online players and outdoor retail so hiking camping apparel equipment all that great stuff,