The Jason & Scot Show - E-Commerce And Retail News – Détails, épisodes et analyse

EP322 - 2024 Holiday Recap

 

Episode Summary:

In today’s episode of the Jason & Scot Show, Jason and Scot recap the 2024 holiday season, and give a preview of the upcoming NRF Big Show.

The week of January 20th, we'll be publishing our annual predictions show.

If you enjoyed the episode, help us reach more listeners by leaving a five-star review on Apple Podcasts. Thanks for tuning in!

Episode 322 of the Jason & Scot show was recorded on Wednesday, January 8th, 2025.

http://jasonandscot.com

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.

Transcript Jason   [0:23]Welcome to the Jason and Scott show this is episode number 322. Being recorded on Wednesday January 8th I'm your host Jason retail geek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot   [0:38]Hey Jason and welcome back Json is Scott showed listeners happy New Year Jason. Jason   [0:45]A happy New Year and happy holidays Scott it's it's been a while it's been it's fun to catch up. Scot   [0:50]Yeah you're kind of crummy when do you start giving people a hard time for saying Happy New Year I I was kind of a little worried because I was thinking I bet Jason draws the line at third or fourth of January and here we are on the 8th so I feel like. Jason   [1:05]I accept all all well wishes I'm totally merry Christmas happy holidays as long as you want any of those variations are totally acceptable despite the fact that I'm nominally Jewish. And I'm New Year's at least through January my lights are still up out front. Scot   [1:21]Okay good I'll I'll try to for the Valentine's show I'll make sure I don't say it that though I'll stop from there forward. Jason   [1:29]If it helps people not judge me I think my Amazon smart plug is broken so I think the holiday lights might not be on. But they're still out there it's too cold to go out and get them is the problem. Scot   [1:41]Yeah yeah you and I both went warm places for the holidays so that was good because I think we're both facing a cold spell here and I think actually here in North Carolina we may get snow whereas in Chicago you're not going to isn't that weird. Jason   [1:56]That that is super weird even if we're both getting snow I'd be a lot more worried for you than me because I feel like we're we're a lot more used to it but yeah it's even weirder that like it's not not snowing here and you guys are going to get get dumped on. Scot   [2:11]Yeah yeah we're just going to shut down and hopefully we don't lose power, the so it's been a while since we laid down a pod there's a lot we could talk about any any trip reports you you've been super busy you've done some vacationing but you grocery shopped before the break and then we definitely want to talk a little bit about holiday to kind of go through some of the tea leaves that are starting to come out on how things happened let's start let's start with a trip report anything interesting there. Jason   [2:38]Yeah so at least anyone worry I have been traveling a lot I just got a note from my my favorite vendor United that they've invited me to their secret. Highest status program for for another year and this year I'm going to cross 2 million miles with United so um. Yeah I feel like that I had mixed feelings about that like it's a a cool accomplishment slash it kind of signifies that I have a sad life. Scot   [3:05]And it's like congratulations all you do is fly would you like to fly some more. Jason   [3:10]Yes and the general answer is no um so I did do a lot of traveling last year there were a bunch of trips running right up to holiday but, but a lot of them were sort of Private Client gigs more so than, industry events and I've been on 2 weeks of vacation so I frankly can't remember where I was right before those but the Big Show of course that I don't think we talked a lot about was was grocery shop which, isn't you know focused on the food restaurant and grocery industry in October in Las Vegas and that show continues to get. Bigger and better longtime listeners of the show will know kind of I talk a lot about how. Every industry is getting wildly disrupted by digital just not all at the same pace so some of the you know first categories to get disrupted. Digital where things like like Borders bookstore and Blockbuster video and then Circuit City and Toys R Us and the gap. Jason   [4:08]And that at the moment it's the Auto industry in the grocery industry that are getting most disrupted by digital so I feel like grocery shops are particularly interesting show because, in many ways that's where all the, the rapid Evolution and action is in the in the digital space so it was a a good vibrant show and. 1 of the things I'll I'll give props to the show organizers for is you know they always get good Keynotes they always get big names on stage but they share more so than many years in the past I felt like. A lot of the Keynotes had like actual interesting. Information and insights in them it was less like sort of CEOs giving the the prepared PR. Can speech and more talking candidly about what was working and what wasn't working and and you know what the priorities were going to be and what was being deemphasized in the future so I I would just say overall again it was back in October and we're in January now so. Don't press me for for a ton of specifics but I walked away. Feeling like there are a lot of useful takeaways and of course like all the all the networking and hallway conversations were were super helpful as well. Scot   [5:21]Cool were you leader of any sessions. Jason   [5:25]I was as per all of these events I'm I'm wildly Overexposed and so I I both presented a session I also moderated panel. The like I probably can't even remember exactly who was on my panel so. Scot   [5:45]It's been a long time you've got you've got vacation fog we'll give you a. Jason   [5:47]I do I do I'm gonna call it vacation fog and hope it's not dementia but yeah. Scot   [5:53]Yeah and then on the holiday recap we kind of have to wait that first week of February last I looked is when Amazon's going to announce and then right after that I think you got some Walmart and some of the other folks Target and whatnot kind of put out their data so we won't really know what happened until we get some of that but several of the folks that do pontificate have some data out did you see any data that was interesting that you want to run through I I I saw some of the Adobe stuff I was going to just run through. Jason   [6:21]Yeah well so maybe I'll just wait the groundwork a little bit like so again there's. In general we see 2 kinds of data like there's people that talk about what happened in retail which is all all of retail so it's brick and mortar mixed with eCommerce and then there's people that just talk about digital so I know you're going to jump into the Adobe 1 which is, exclusively talking about e-commerce, but of course a long time listeners of the show would know you know the history of the last 10 years is that retail tends to grow about 3 to 4% a year, and e-commerce has grown about 10 to 15% a year for each of the last years so 2024 is an interesting year we you know it's still a week or 2 before we have the final data for the the whole year, but with 11 months of data. Retailers slowed down a little bit like it's growing closer to 3% than 3 to 4% and e-commerce has slowed down it's grown about 7% this year versus the typical 10 to 15% and. Jason   [7:22]You know it could be that this is a down year it also could be the law of large numbers as e-commerce is getting you know to be a bigger and bigger part it's hard to grow as fast so it's e-commerce is still growing at more than twice the speed of retail. But that's that's a smaller Delta. Then it has historically been so that's kind of the the backdrop coming into this holiday and then this is 1 of the weirdest holiday seasons of my career. So traditionally what we always talk about is. There's an arms race to start holiday earlier that like you know retailers used to open up their stores on. Black Friday the day after Thanksgiving and they were creeping earlier in the earlier in the morning on Friday originally when I started my career they opened at 10:00 the normal opening time and then they're like wait I'm going to open at 9:00 and get people to get in the line of my store before your store and then I'm going to open at 8, and then retire starts saying hey we're actually going to open Thursday night after dinner and then oh we're going to be open all day Thursday, and fast forward 30 years hey we're going to run our big Prime day sale in the middle of October right and so, every year we talk about how holiday starts earlier and earlier and these sales start her early and earlier but here's the Dirty Little Secret. Jason   [8:39]The retailers may offer deals earlier and earlier but consumers have never spent earlier. So if we look at October sales growth it's the same every October for the last 30 years so I get it has it it's not like October has become more important over time as these sales have gotten early and earlier and so when. Amazon announced a huge sale in October and Walmart and Target quickly followed suit I actually. Kind of thought it was a nothing burger like I I didn't expect it to have a big impact and. I was wrong so October is actually been 1 of the most robust months of growth we had this whole year like it was a big spike much bigger than we had any other month. And I thought oh man that's interesting like these these sales really are having a meaningful effect this year. But then we got into November in the first 2 weeks of November were abysmal. And so you go huh we we had a bunch of big sales in October it appears people jumped on those sales uh we sold more stuff in October than ever before but we probably just pulled a bunch of demand in that would have happened in November because. Jason   [9:47]The beginning of November was awful and so then we got to Holiday the turkey 5 week and you go well what's going to happen is it going to stay soft like it has most of November but it actually bounced back and so we had this, we had this low from November 1 through November you know 26 and then, it jumped up and we had a pretty robust not not like World beating but a pretty robust turkey 5 and so then you go wow you know and by the way the turkey 5. Extended into December this year because of the the way the holiday schedule works, um and then we've all been real curious to see what would happen in December and the real answer is we don't have the December data yet we have a couple data points so. Jason   [10:30]Market MasterCard spending pulse. Is 1 of the companies that publishes an estimate of total retail sales and they published an estimate of November 1st through December 24th so not catching the last minute holiday shoppers, that said all of retail for November and December was up 3.8% so if that's true. Will take it that's that's the industry average growth that's the high side of the nrf's forecast for holiday this year and it, would kind of mean that that, December sales were pretty robust to make up for the kind of anemic November sales so so that's, the big data that I followed about overall retail and then you know we have some better more granular data on the e-commerce side and that that's where like that adobe data comes in so you want to you want to break that down for us. Scot   [11:24]Yeah it's kind of interesting as you as you talk about you know kind of pulling it in October we we always talk about the shape of the holiday right and we used to have kind of this you now as you described it it sounds like a w where the the left side of the W is like that October Spike and then you had a little decrease in early November and then the turkey 5 you come is the middle of the W and then you come back down and then we always seem to have this procrastinator kind of pop at the end I don't know about you but I I fall into that for a lot of my things I'm kind of like I get busy at work and I'm like, holy cow it's December 18th I better think about this holiday thing so you always see a little bit of a spike and some of that's driven it's kind of a self-fulfilling prophecy because that's when all the best prices happen there's the you know the Garff used to call it. Turkey chicken game of chicken discount chicken do you remember that. Jason   [12:17]I do I do. Scot   [12:18]Yeah I saw he changed jobs that was you're not going to be able to do selfies with him anymore yeah Rob gar. Jason   [12:24]Going to do selfies with Rob and I, uh NFS coming up in a few days so I I hope to see them and we'll for sure take a selfie but you're right Rob Garff a long time friend of the show and I I want to say 4 or 5 time guests left Salesforce this year so a big big change he was kind of, face face of Commerce at Salesforce for a long time. Scot   [12:42]You have to give us a an inside scoop of what's going on there it reveals secrets you get from the show on our podcast, okay so on the Adobe data, you know they they they call this November and December and they're saying online came in at 8.7% year-over-year growth which to your point is kind of below that 10% where we've been going. But we're getting to a scale where it doesn't surprise me I I think ultimately the lines for retail and online just kind of merge and blend and kind of become the same thing they did say that Shoppers they called it event based they were waiting for events which were basically price drops and they were kind of I guess they don't want to say discount chicken maybe that's not as uh fancy so they called them Event Event based shopping. Jason   [13:29]Yeah and if you think about it was invented by their competitors at Salesforce so yeah. Scot   [13:34]Yeah oh true yes sorry wrong uh wrong 1 and then this I thought you I thought interesting and it basically said groceries was the fastest growing at 13% so I guess with inflation people were just gifting groceries or or did groceries are just growing fast enough now that you know that's just faster than the holiday what what's your read on that 1. Jason   [13:55]Yeah well a couple of things so like when when if adobe's right that it grew e-commerce grew 8.7% over holiday to me that's that, totally makes sense and put your point it's lower than what we would historically expect but it's actually higher than the year to date averages for e-commerce so e-commerce is growing about 7%, through the you know the whole first 11 months of the year so growing 8.7% over holiday actually means. Jason   [14:26]E-commerce was a more important factor in Holiday than brick and mortar which I I believe and think was true so that that was kind of my first takeaway from the Adobe data and and as I mentioned, you know there's some really mature categories in e-commerce I mean you know 90 something percent of all books and music is is digital now right like you know well over 50% of electronics and toys. Jason   [14:50]Our digital 50% of apparel is digital but. You know less than 8% of groceries are digital so it's still it totally makes sense that grocery e-commerce is growing faster than anything else I don't think it's gifts. Although you know people host a lot more over holidays so they do spend more on groceries than usual. But I think it's just reflecting the the fact that we had lots of busy families that were availing themselves of the convenience of grocery delivery. And you know another Factor overlaying all of this is we we've had this kind of thing that I like to call A vibe session this year that. Consumers have really curtailed their spending on non-essential purchases so when you break down the actual categories uh all year people have spent a lot more on deeply discounted goods and on food and have to have and they've spent less on want to have so you know consumer electronics it's actually been a poor year a parallel you know has been a little mixed but generally a poor year Home Improvement has been kind of a poor year. Jason   [15:58]But you know these these have to have categories like grocery have been 1 of the stars all year so if you kind of factor in that, you know people have tended to spend more on grocery just in general and the e-commerce is a you know more substantially growing part of of grocery than it's ever been before it makes sense that grocery would win the e-commerce race for holiday. Scot   [16:23]Yeah interesting. Then they said this the so groceries number 1 at 13% the number 2 category was Cosmetics at 12.2% I think the Wingo household contributed a. A pretty big piece of that, I go to Sephora a lot against my will and then they said that category hit 7.7 billion and then they pivot into discounts they made this quizzical statement where they basically said retailers discovered that for every 1% price drop demand went up 1% being forces I was like well let's look at the edge if you dropped 100% demand would go up 100% it seems like demand would actually go up more if it was 100% off anyway I didn't really understand what they were trying to say there it's it and it made it seem like it was just like new revelation I'm like wait a minute this is called. Supply demand curve and I learned it in economics anyway I must have misread it or something I didn't kind of like grow what they were trying to say there. Did you did you have a hot take on that 1. Jason   [17:24]Well just a reminder most of the people that were good at Econ economics like don't get jobs at Adobe so I I would just remind you of that but no. I'm just kidding all my friends at Adobe who are super smart um the yeah I. Of course like lower prices generally drive more sales that that certainly true it's probably not a linear scale I think they're more saying like observationally like on their data set that it happened to play out this year that that there was kind of a linear, who asked the city between price and demand but the my bigger takeaway is I think. Jason   [18:02]This was a highly promotional holiday period right and this was kind of expected I mean again overall 2024 was a soft year in retail. We we just we'd had a couple really good years after the pandemic of of really strong growth and this is going to be kind of a. You know we'll be lucky if we get to out to an average year it's probably going to be a below average year of growth and, you know there are all these extraneous factors like you know there's there's positive and negative economic indicators but the consumer confidence has been really poor they're they're only spending on Essentials they're all trading down to cheaper Goods so you know more discounted goods and value Goods, and there was a super polarizing election that you know distracted a lot of people and it was the shortest holiday season we we get on the calendar with fewer days between Thanksgiving and Christmas than we ever than we get any other year. And so for all of those reasons retailers were desperate to sell stuff and what desperate retailers do is they discount deeper and so what we always worry about in these kind of years is that retailers will. Jason   [19:11]Go deeper discounts to kind of hit their Topline sales goals and clear out their inventory but it actually means that their margins, are going to be really poor and that's 1 of the things I really worry about this year is, I think when all the dust settles we're going to find out it was a below average to average holiday season but way below average on profitability right and that's going to have a carryover effect in 2025. Scot   [19:39]You know that's what's really matters right you know you can sell the Top Line doesn't matter it's the basically the profitability. Jason   [19:46]Bonus on the top line. Scot   [19:47]True but I have a feeling the more sophisticated people are are the kind of caught on to that trick they talked about Electronics was the deepest discount to your point of demand being kind of sluggish at with a 30% off there and then toys was number 2 at 28 toys is just a. Terrible category these days because kids don't really want toys they want to just play electric electronic games we're talking about. You can't climb baby geek anymore but you know uh. Jason   [20:15]The little geek we're going with. Scot   [20:16]Little geek retail geek Junior. You know he's into games and wants digital currencies and stuff the good old Roblox dollars and and whatnot so yeah it toys are just tough so that that 1's kind of an easy call at 28% and then they said apparel had a fair amount of discounting to 23%. So I thought that was interesting traditional Trends we've talked about for. Kind of going on a decade at this point you know this may I hope you're sitting down but a lot of people shop on their phones that was up to 55%. Another call out I thought was interesting was they they saw a buy now pay later a pretty significantly at 9.6% year-over-year and you know. It's hard to tell if that's kind of a new consumer Behavior or there's all this data that's out there that shows the consumer's kind of increasingly Under Pressure they're they're starting to get a bit of a debt thing going and. Interest rates going up have made made home buying slow down all those kinds of things are putting pressure on the consumer so, it's hard to tell the buy now pay later people would tell you know it's a whole generation likes to buy that way I'm a little skeptical that maybe it's just the you know part of the the consumer being under pressure that saw a climb there. And then they on that they said Cyber Monday was a record day for buy now pay later where it it came very close to a billion I guess 991.2 million of transactions had buy now pay later. What do you think is buy now pay later surging so is that about. Jason   [21:45]I do think it is I I do think it's it's kind of a combination of 3 things like I do think it's legitimate that that younger consumers look at debt and credit differently then then older consumers and and so I there is a legitimate thing that's hard for people our age to understand which is like even consumers that you know young consumers that have economic means to buy something. Don't like to go into like debt on their credit card and they do view these like fixed installment things where you you know buy something on 4 payments as. Jason   [22:22]Is a different kind of debt than credit cards and so I do think there's an actual consumer preference for younger consumers to, that credit vehicle so I I think that's what genuinely part of it and the buy now pay later Services continue to grow and be more ubiquitous so they're just offered, more places more retailers have them and more retailers are offering them both online and in store than ever before so, so there's more places you can use it and there's more consumers that have a preference for it that's part of it I also think, there were more distressed consumers coming into holiday so there were you know more consumers that were forced to use it and the the thing that I don't love for the economy and that scares me about these services, are some of the really inappropriate categories, that consumers are using buy now pay later for right like if you're buying a durable good and you you buy it on installments and you know that like we could argue about the economic Prudence of that but I I don't personally have a problem with that. But if you're buying a monthly consumable on installments. That's concerning right so you know you shouldn't be buying food on buy now pay later right and yet like buy now pay later is showing up and getting used at grocery stores. Jason   [23:33]The that you mentioned Cosmetics are up Cosmetics is 1 of these weird categories where there's been this bifurcation. There's some inexpensive Cosmetics that are kind of an affordable luxury and they're doing really well, the the true expensive luxury cosmetics and the whole luxury category we saw get really soft and Q4 this year and historically, luxury is the category that survives economic downturns right because you know more fluent people tend to be. To be more resilient but this time around we have this kind of it's It's a negative vibe as much as it is an economic factor and so even a fluent people are like, don't feel great about the economy I'm going to cut back on my spending and so luxury overall especially in the United States. Jason   [24:18]Got really really soft but buy now pay later got used a lot for like consumables like lipstick and things like that so that's a a little bit of a, a worry and so I I think you've got kind of and then the the third factor that I think helps buy now pay later is, people don't like pulling their credit card out of their wallet and typing it into an e-commerce site it's just a pain in the neck and economies that have digital wallets like China sell a lot more stuff online than econ then economies that don't have big digital wallet penetration, and so for some American consumers, PayPal and Shop pay our digital wallets for some American consumers Amazon pays a digital wallet but for some American consumers a firm is a digital wallet and so there is a, lower friction more convenient checkout experience that that you know I'm not saying it's the biggest part of buy now pay later but it's another incentive that some consumers have to use it so I think, the combination of those 3 things. Jason   [25:18]You know younger consumers with different attitudes about credit consumers that you know are buying stuff that they don't necessarily have the cash to pay for and consumers that like the convenience of. Of the buy now pay later checkout flow all are helping buy now pay later continue to grow for the moment and we'll have to see if that. That carries forward but it's definitely a big thing. Scot   [25:40]Interesting the other data and I know you love this is from MasterCard spending pulse and they said retail X Autos was up 3.8% and that was kind of they had a couple other things but I know that that 1 has not 100% tracked the the Commerce Department data that that is the gold standard. Jason   [25:58]Yeah yeah so it's weird it it it should be a really good data source all all of these data sources are dubious right like the only. Jason   [26:06]Economic indicators are really care about are the public retailers earning statements right because those those are like audited um and and you know. Tend to be pretty reliable although although Macy's had a glitch this this last quarter that was kind of interesting. The the retail earnings reports are are are pretty credible all of these estimates the the US Department of Commerce data I I'm deep in that data I use it all the time I find it really helpful but you know it's it's very flawed at best and then most of these other data sources are more far than that so so MasterCard data is, a big panel of credit card users right and MasterCard has a lot of users so it it should be a good data set. You know there's a lot of people that pay with cash and so the the MasterCard data set is skewed and the economists at MasterCard would say they normalize the data to reflect All American spending even though they only see a subset of American spending, but I have to say historically of all these data sources I've seen the most fluctuations in mastercard's data versus everyone else's so, they're the only ones that have put a flag down for December and they're saying it's 3.8% which again would be decent I hope the other data sources they will get next week come in and are similar but I I'm. I'm not prepared to to say I'm very confident at this point what what the December numbers are going to be. Scot   [27:33]Yeah what was the I missed the Macy's flood what was that all about. Jason   [27:36]Where like a week before they they were scheduled to do their Q3 earnings call. They acknowledged a massive fraud by an employee in their accounting department and had to delay their earnings and restate their earnings for the last several quarters. Scot   [27:53]Wow holy cow that's a that's a pretty material fraud. Jason   [27:58]Yeah yeah and yeah you never that's never a fun message to give to the market and then you know of course. Meses is in a really challenged category department stores just aren't doing well and are generally declining and so you know odds are we're there and they did you know come out with a soft earnings report, you know that there's a couple favorable things in it but the top line is is that they're shrinking. And you know that's bad news just anyway and then when you have to you know taint it by saying and we're not even sure that that that all the all the losses we've reported the last 3 quarters like aren't even the full story it's it's it's. Investors do not love that. Scot   [28:37]Yeah that's terrible all right 2 other topics I want to talk about we have NRF coming up and you're going to be attending for the Json and Scott show where do you expect him to see there. Jason   [28:49]Retail media networks and AI I think everything is going to be a retail an AI driven retail media Network. Scot   [28:56]Some combinations of the letters a r m n i looks like a uh Wheel of Fortune kind of thing. Jason   [29:03]Yes and generally I throw up in my mouth every time I hear either of those acronyms so it's kind of it'll be a super pleasant pleasant week we. Scot   [29:11]Well I can't wait to hear your show report. Jason   [29:13]Yeah I have approximately 10,000 emails in my inbox right now which are you know from someone that wants to meet at NRF that is inviting me like today. Despite the fact that my internet schedule booked up about 3 months ago. To see their new Innovative AI driven retail media Network solution to that's going to revolutionize the retail industry. That's that's the exact extent of the pitch no more detail than that. Scot   [29:40]Do people say as the chief digital Commerce retail payments officer at pubis do you have any uh are you interested in e-commerce in in retail Solutions you must get the craziest email. Jason   [29:53]Yes exactly yes whenever they do that exact pitch I know it's from you. Scot   [29:59]Yeah for those of you that see Jason make sure you give him a hard time about his title that's it he he really enjoys it it's the only thing that brighten his day and being pummeled by the AI and Retail. Jason   [30:11]It it does because every time I hear it it makes me think of Scott and and Scott Scott is just 1 of my happy places. Scot   [30:17]That's nice, 1 thing I saw in this kind of came from my you know so so I do investing here in the Research Triangle Park area in a bunch of startups and, you know AI you're going to do this but AI gen AI to be specific and you know the the change in consumer behaviors from that are really fascinating so a lot of these folks that Source deals and they're trying to you know do lead gen by emailing you constantly, no none of these companies you're not in their target but they they do send out a lot of cold emails. Scot   [30:50]None of that works anymore except LinkedIn which is kind of odd because I get so much LinkedIn stuff I can't even hardly use the messenger. But anyway and then the other thing they said is content strategies under a lot of pressure because, the amount of traffic going to these these blogs and other kind of you know content you put out there hoping to get some inbound interest is kind of falling off a cliff and you know I talked to a couple of them and dug into it and and then I started poking around back into our world of retail and e-commerce and and started to see some interesting things. Scot   [31:21]You know number 1 what you're starting to see is SEO is changing and you know search engine optimization because Google largely dominate search with like let's call it 80% share and you know it's been pretty well known how the algorithm Works they do tweaks and things and whatnot but it's generally well known with patreon and all that stuff for for decade now or decades, but what you're trying to see is enough traffic is starting to go through openai perplexity and some of these things that and it's pulling the content up a layer your site your content that you put out there may have been part of the answer but you're not getting the traffic anymore and therefore people aren't seeing the form to generate a lead or you know oh my gosh this this is a vendor that can offer me a solution to problem X on researching so so that's interesting and then I I noticed in that same Adobe report that kind of had this little little call out where, they said and this is a quote 1 of the newest factors nudging spending is AI powered shopping assistance such as chat gbt and its competitors traffic to retail sites that came from gen AI powered chat Bots, shot up 1300% 1300 percent compared with a year ago holiday season now I'm sure it was small last year so maybe it was like 5 people in this year it's like you know. Scot   [32:41]What's the math on that 1 6000 but you know just relatively that those kinds of numbers, but still I thought it was interesting that we're seeing it over in 1 part of the world and it it's definitely kind of forming over on the e-commerce side and then, a lot of it is Shoppers are now turning to that technology for gift ideas and for you know kind of what you would call the research and and maybe a little bit of finding the product but we've got this research you know what do I want to get, Jeep this guy named retailgeek he's hard to shop for certainly not a gadget because these are get 10 of everything and they're like how do you find find narrow it down and find it and then. What's the best format to buy it in so that that kind of top of the funnel it seems like a lot of consumers are using that and I thought that was pretty interesting and the quote from the Adobe dude was you have a consumer that's a very strategic and thinking a lot about their strategy around where they're buying when they're buying what's offering the best deal and then that's where they're using gen AI the assistants are helping the consumer and co-piloting that Journey so I thought that was interesting and then right before after we did our last pod but right kind of towards the end of the holiday I saw several articles but this Business Insider 1 was like a good Recaps where. Scot   [33:54]You know there's been such an explosion of stuff out there that is increasingly hard to make a decision so there was this 1 article November 4th willing to it in the show notes and it basically was this couple trying to buy a mattress and they were just or a bed frame and they literally spent like 8 to 12 hours and just gave up they just kind of felt like it had become their job and I I do think that's kind of happening it's like it's so hard to find stuff in it I had this problem where I needed 1 of these you know dumb little dongles for my second HDMI thing for my camera and this 1 died and I had a webinar in 3 hours and I do Best Buy I had 1 but it was the 1 that's far away from me so I had to like find how instacart so then I had to back into instacart tell it. Scot   [34:38]Work address and then I went to work to pick it up and like you know seems like all this stuff is out there but the you know the the consumers are just having a hard time parsing through it all so it it's going to going to be interesting to see next year I think we're going to find perplexity has some shopping features we talked a lot about chat GPT has to be working on it, Google Gemini has some really cool stuff that I've been using their deep research and and if it was shopping capable uh they also put out a paper about agents that actually kind of has a shopping agent little placeholder on it, travel agent you know so you could see them kind of turning Google shopping and Google travel into little agent things that go do stuff for you somehow or at least give you some information it's going to be really interesting to see how this changes e-commerce because the consumer, feels a pain point and they want wanted to change but I don't know what it's going to look like on the other side what what do you think about all that. Jason   [35:33]Yeah yeah well so I I I think you're right I think it's complicated because AI is both an annoyingly overhyped buzzword that I'm sick of people AI washing everything and expecting it to sound interesting. And simultaneously I do think that there's there's a ton of AI use cases which are, totally disrupting traditional business processes all across the the Commerce ecosystem and and I think that this, kind of the idea that you started to touch on this idea of AI agents and you know people not having to go shopping for stuff and find stuff and do research and just have the the robots proactively solve shopping problems for you before you know you have them. I I I'm not going to say oh that's for sure the future and and all stores are going to go away, but I think there's a very high likelihood that it becomes a meaningful part of the consumer's tool set and I think it's going to be wildly disruptive so, I don't think it's, it's there yet and I so I don't think it's economically meaningful at this point and so in this Adobe data I feel like is a little bit it's ironic like it's it's they're kind of SEO keyword stuffing when they're implying that SEO is going away. Jason   [36:51]But the, I I think it's a you know a very small number of people were using AI chat Bots last year and now 13,000 you know 1300% more which is still a very small number, but I think bigger picture we used to all discover products, at this place called the retail store on a shelf and now a huge huge percentage of Discovery happens at this thing called the search engine right and and you know 15 years ago that would have been unimaginable how important Google would be to the to the the shopping process today and increasingly I feel like that that search traffic is under threat part of it is from retailers with better databases so you do the search on Amazon or Walmart instead of on Google part of it is, then I would argue the biggest most disruptive part is on social that you're discovering new products to buy on Tik Tok instead of on Google and, you know it's still tiny but an increasing number of it is happening on these AI platforms and this is even really before the AI agents have rolled out like what happens when there's really powerful AI agents built in the series and Amazon and Gmail and they're all plugged into every email and text message we get. Jason   [38:07]You know what what's the world going to look like then you know I think this is the disruption that we're all living through right now I think it's really hard to predict, exactly how it all plays out but I think you know if you're in the space you need to be paying attention to this and you need to be contingency planning you know how you're going to be good at all these things and what you're going to do you know as these things do become meaningful because I think it's entirely possible that, AI agents are as important to Commerce in 10 years as Google is today as the store shelf was 15 years ago. Scot   [38:42]Yeah and what's it mean like to all your, all this front-end stuff when the e-commerce basically kind of was like headless Commerce but with a you know you're not putting a you're not building any front end there's just like the front door is now the. It's not even API it's like some kind of a a genetic thing that's like calling into the API and doing stuff like hey you got 1 of these uh what's your price okay I'll order 1 of those it's going to be it's going to be tricky because a lot of the things that add a lot of extra margin like check out add-ons and you know recommended products and you previously bought this all that stuff. Maybe it goes away in that world and in some extent so it's going to be I guess retailers are going to have a hard choice to decide to even want to participate in that and you know because in the early days. I remember like the Twitter's been at this like 6 times they've tried to have e-commerce and they always try to bypass the checkout and that's kind of like what perplexity is doing and you know you can imagine a bunch of retailers. Like I think it's 1-800 Flowers they get so much from all the upselling that they do that you know maybe there's certain sets of folks that just kind of opt out of that world but then if your competitor opts in what do you do it's going to be interesting to see what happens here. Jason   [39:59]Yeah no and and 1 version of that is already happened like. The when I say we used to discover stuff on the Shelf we used to put a lot of stuff you didn't know about on the Shelf next to the stuff you wanted right, and you made all these unplanned purchases you made all these impulse purchases do you know what the most profitable real estate is in a grocery store it's the cash wrap. It's the the the Widow refrigerator that has 1 can of Coca-Cola that you can buy right as you're checking out that you drink on your way home from the, the the Kroger store, or the the mints or the gum that you didn't think you wanted that you decided you you had to have while you were standing there that those impulse purchases were a huge part of retail and when. Grocery has gone a digital grocery you know what nobody's buying on digital grocery single single cans of Coke or gum. Scot   [40:51]Yeah yeah. Jason   [40:52]Right um those those impulse items like nobody's figured out what the digital version of those impulse items are right and and you're you're absolutely right when when shopping goes from implicit I have to build a list figure out where I'm going to get that list, proactively go give someone money and then get all those things, to implicit like all the stuff that I need to run my life just magically shows up in my pantry and I don't have to lift a finger or ask anyone. Jason   [41:18]Tons of opportunities I had to upsell and influencer brand selections, and you know Drive impulse purchases are going to go away and some people will see that and say doesn't matter if the future that's where I got to go and they'll embrace it and other people will say no I'm going to hang on to the old model as long as I can right and that that happened in retail too do you know who 1 of the greatest retailers is in the modern era it's Costco they're amazing do you know how much Costco loves e-commerce, they freaking hate e-commerce right like they they say on their earnings call why would I ever encourage someone to go to my website when they'll buy so much more stuff if I get them into my store right and so they're they're 1 of the biggest laggards in digital Commerce because, they're so good at brick and mortar and, like we're likely to see some of those same same kind of companies you know resist moving to AI agents or social commerce or you know what whatever things comes next but these are all the. The disruptions that are playing out right now right and it's it's super fun. Scot   [42:24]Yeah yeah well guess what Jason it's happened again. Jason   [42:29]We've wasted a perfectly good our of our listeners time. Scot   [42:33]Yeah yeah and uh I meant to mention it at the top of the show but we were going to do our predictions but 1 of us which was me did not get a chance to work on them so we're going to make this a 2-part so we're going to this is kind of the the wrap the 24 w and then we're going to do our prediction show next time when Jason gets back from NRF and he's going to have an amazing trip report with with lots of Garff gossip. Jason   [42:59]Yeah and here's the good news if you are going to interfere in New York this week I I leave Saturday I come back the following Thursday and you are a planning on on attending, any event or content at NRF, I will see you there because you talk about Overexposed I think I'm on stage like 8 times at at NRF this year so I owe so many decks that I haven't done yet. But it it's going to be fun I'm looking forward to seeing everyone I think there's going to be a lot of interesting stuff that you know it's going to be a real vibrant exhibit hall with a lot of new, new exhibitors there's an Innovation Pavilion which is always super interesting which is you know where a lot of startups go and and there is going to be a bunch of good content, it all wraps up on Tuesday I'm doing a session on the big stage on Tuesday which is kind of going to be fun it's like a point Counterpoint debate. So a good friend and way smarter colleague of mine Christine Russo and I are going to be on stage and a bunch of our our friends in the e-commerce industry have sent in video questions and Christine and I are going to debate. The the pros and cons of of each of those questions and so I'm desperate for people to go to the show attend that Tuesday session and route for me because I think, there's about 10 Christine fans for every Jason fan. Scot   [44:18]The Jason fans are small But Mighty stuff well uh they'll be allowed loud and proud. Jason   [44:22]My my wife and son are both going to root for Christine I'm just saying um so any any any help I can. Yes anyhow if I could get his appreciated but so yeah so so interest is going to be very fun but busy. And I as Scott alluded to I have already written my predictions for 2024 I do reserve the or 25 got to get better at that, I do reserve the right to update them if I learn anything new at NRF so so maybe the fact that we're doing the prediction show after NRF this year will give me a chance to to be slightly more accurate than I've been in the past which would not be a bad thing. Um but hopefully. Yeah you got some value out of this show and we've teased you with the next show in just a couple of weeks and as always if you if you did enjoy the show we'd love for you to jump on iTunes and give us that 5-star review. Scot   [45:11]Thanks everybody and until next time. Jason   [45:14]Happy Commercing!

EP321 - Amazon Q3 2024 Earnings Recap

In today’s episode of the Jason & Scot Show, Jason and Scot dive into the latest developments shaping retail, tech, and consumer trends heading into the 2024 holiday season. Here’s a breakdown of the topics covered in this jam-packed discussion:

• Amazon Q3 2024 Earnings Release

• Amazon Q3 2024 Earnings Call Transcript

🎉 Holiday Season Sentiment & Retailer Anxiety

• With the holiday season shorter than usual due to a late Thanksgiving, retailers face the challenge of fewer shopping days. Consumer behavior trends indicate a shift toward essential purchases over non-essentials, creating mixed expectations for holiday spending.

• The impact of the election is expected to influence consumer sentiment, media spending, and holiday promotions, with Amazon and Walmart predicted to perform above market averages.

📈 Amazon Q3 Earnings Highlights

• Retail & GMV: Amazon’s retail revenue surged by 7.2%, with U.S. gross merchandise volume (GMV) rising 9.9%—nearly three times the industry average.

• Efficiency Improvements: Amazon’s focus on fulfillment efficiency under CEO Andy Jassy is paying off. The company’s same-day delivery options and regionalized inventory system have led to a 25% improvement in fulfillment cost efficiency.

• Growth in Essentials: With increased demand for everyday essentials, Amazon is capturing market share from traditional pharmacies, offering same-day delivery for prescriptions in select cities.

🏢 Amazon’s New Store Concepts

• Whole Foods & Amazon Grocery: A new Amazon grocery concept opened in Chicago, catering to convenience items like packaged snacks and sugary drinks, which contrasts with Whole Foods’ health-conscious inventory.

💸 Amazon’s Profit Engines: AWS & Advertising

• AWS: With a 19% increase in AWS revenue, Amazon is now operating at a 38% margin. Demand for AI-powered compute continues to push AWS growth, even as it faces GPU supply constraints.

• Advertising: Amazon’s advertising revenue reached $14.3 billion, growing 19% year-over-year. With a nearly 70% estimated gross margin, advertising may soon outpace AWS in profitability.

🛒 Rise of AI-Powered Search & Perplexity’s Native Checkout

• Perplexity’s Surge: Scot shares his switch from Google to Perplexity as his primary search engine, noting the emerging competition from OpenAI’s ChatGPT search. Perplexity now includes shopping links, allowing users to check out directly through Amazon, hinting at a new era of AI-driven shopping.

• Impact on Retailers: Retailers need to rethink SEO strategies as search shifts toward AI-powered “answer engines” that may fundamentally change how products are discovered and purchased online.

📡 What’s Next for Alexa?

• Amazon’s next-gen Alexa, powered by large language models (LLMs), faces delays into 2025. Scalability and usability challenges highlight Amazon’s shifting internal dynamics and potential headcount reductions in its Alexa division.

🔍 Is Google Search Under Threat?

• Perplexity’s and OpenAI’s expansion into search could spell trouble for Google. With monetization still in the early stages for these answer engines, the retail industry is watching closely to see how they’ll shape online shopping behavior.

⭐️ Tune In, Subscribe, and Leave a Review!

If you enjoyed the episode, help us reach more listeners by leaving a five-star review on Apple Podcasts. Thanks for tuning in!

Episode 321 of the Jason & Scot show was recorded on Monday, November 4th, 2024.

 http://jasonandscot.com

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.

Transcript

Jason:
[0:23] Welcome to the Jason and Scott Show. This is episode 321 being recorded on Monday, November 4th, 2024. I'm your host, Jason Retail Geek Goldberg. And as usual, I'm here with your co-host, Scott Wingo.

Scot:
[0:38] Hey, Jason, and welcome back, Jason and Scott Show listeners. Well, Jason, you've been out there traveling more than I have. What are retailers saying about the holiday? Are they lots of excitement? Are they more worried about the election and they'll worry about the holiday? what's going on out in the retail end.

Jason:
[0:54] Yeah i feel like the the like webster word of the year is going to be anxiety obviously we're a day before election day and everybody's anxious half the country is going to be depressed no matter what happens there but i feel like retailers are also anxious about holiday it's a weird thing we won't we don't have to get into the whole thing but it's the shortest holiday season we get uh thanksgiving super late so it's five days shorter than last year. So there's fewer days to spend on stuff. Consumers have been spending slowly, trading down the lower priced goods, buying more everyday essentials and foregoing non-essential purchases for a while. And then the election is a major distraction. It also is really hard to buy media and break through all the noise. You live in a swing state. So I assume you haven't been able to turn on a tv or look at your phone for several days um yeah.

Scot:
[1:54] Wall-to-wall and three inches of mail every day it's crazy.

Jason:
[1:56] Yeah yeah and so like like even if you're not someone that's super focused on the election like it just like the black friday ads just don't break through all that noise and it's more expensive to put that by the media for those ads and all of those things so you know there's some there's some historical precedent in previous elections that you tend to get a little bounce in spending after the election, but no election's been this polarized before. So I'm less confident that history tells us exactly what's going to happen here. And then there's this huge vibe session thing still going on where, you know, people are generally pessimistic and anxious about the economy and, you know, laser focused on the price of goods and spending less, even though honestly, like most of the macroeconomics are actually like pretty solid. Like there's a lot of economic good news that you would ordinarily expect to translate to consumer confidence and more spending. Now there was a slight uptick in consumer confidence for the first time in a while this month. So there's plenty of tea leaves, however you want to interpret them, but there there's very little certainty. My I look at all this and I say, on average.

Jason:
[3:15] The biggest retailers that are, you know, best at really being highly efficient and low cost. So the Amazons and Walmarts of the world are going to do reasonably well. They'll outperform the market. They'll have lower margins and a bunch of specialty retailers and big box retailers and people that aren't quite as efficient are going to have a really hard time. But, you know, I hope I'm wrong.

Scot:
[3:39] Yeah. Wow. Lots of wasn't there. So we got through the the longshoreman thing. Right. And then isn't there a big budget thing where the government could shut down or are we is that been kicked into.

Jason:
[3:53] It's kicked till post-election. It may still be in, there may be another budget thing in December. But again, like, depending on what changes in the House and Senate, like, that could be like a trivial additional continuing resolution or, you know, someone could go nuclear and try to shut down the government. So I think it is a risk.

Scot:
[4:17] Yeah. Okay. I don't know. We'll see. So lots of mixed messages out there for retailers to try to parse there.

Jason:
[4:25] Yeah, exactly. But we at least know what happened to Amazon in Q3.

Scot:
[4:36] Amazon News. Your margin is their opportunity. Yeah, yeah. So on the eve of Halloween, Amazon announced their results. And coming into that report, Microsoft had reported kind of slowish cloud growth. Turns out they're having a hard time getting enough GPUs and they're really having to stretch to handle all their customers' needs, which you would think would be positive. But Wall Street is kind of because they also see this whole mixed signal thing. All they care about right now is short term signals. So they were kind of down on Microsoft. And then everyone and then Meta also reported and they had a great quarter, but then they said they're going to really ramp their spending on GPUs going into next year. So there's this really big kind of wall of worry around all this money on these GPUs, which are for AP.

Scot:
[5:28] Artificial intelligence or ai and they're mostly nvidia chips so nvidia is off cycle so that i think they report in the 20s like right before thanksgiving so i'm going to be watching that one carefully so you know amazon is largely driven these days by aws so that was kind of feeding into that there's a lot of concern that amazon was either going to miss for a similar kind of thing like microsoft or they were going to announce they're just going to like buy an ungodly number of GPUs. So there was a lot of, I believe the stocks sold off going into the report, which was interesting. Usually Amazon kind of lifts a bit the day of the report. So those ended up being unfounded. They achieved an 11% overall revenue growth and operating income hit 17.4 billion and beat forecast by 18%. And that was the seventh consecutive quarter of operating income above guidance, which is good. So Jassy kind of like reset it low enough and has gotten better now that he's CEO of kind of managing expectations is kind of how I read that. And then the looking forward guidance was very well received. So looking at Q4, they kind of gave a band of seven to 11% growth. When you have 11% and you're going into Q4 and you're kind of showing 11%, that's good because a lot of people worry that they're going to project a slowdown Because when they do this, they've already got a month's worth of data. So in a way, Amazon being Amazon, they're pretty good at reading these tea leaves and kind of figuring out how the holiday is going to shape up.

Scot:
[6:58] A couple of things I thought in the report I just wanted to call out for listeners. We've talked about this a little bit. This kind of really part of Jassy's era has been efficiencies. And he's really dug into the fulfillment part of Amazon. and it's been interesting to see the results. So they had a lot of progress on the cost of fulfillment and they attributed it to three areas. Number one, we've talked about this before, but they had this new regionalized inventory system where they're just getting better at spreading inventory and predicting demand across their fulfillment centers. So if they can predict, hey, it's getting cold in Chicago, we're gonna kind of balance some cold weather stuff there or anything in that regard. Obviously, that saves the money versus having to ship stuff across the country. So they've improved that over the last year, they've improved this system 25%. And it's interesting, I triple checked this because I thought I was hallucinating. I thought I had LLM bring, but they've, you know, many of these, these have resulted in 25% improvement. So this is not a typo.

Scot:
[8:04] The, so when you get the product closer, not only is it lower distance to the customer, therefore lower costs, it's like in a closer quote unquote zone, but it also increases the number of products they can put in a box. So there are a lot of customers like you to get a daily Amazon box. And the more they can put in that JSON box every day, the better off there.

Scot:
[8:25] Then they have really expanded the same day facilities, which results in more of the products being available same day. So they now have over 40 million customers a quarter benefiting from same day delivery. That's up 25% year over year, that number of customers that are having access and getting products delivered same day. And to deliver on this, they've built a bunch of new facilities and a lot of new processes increased. And that ends up really increasing customer satisfaction, conversion rates, and speed to reorder. And then the last one is robotics and automation. There was a lot of talk on the call and then some various notes and in the Q&A from Wall Street around this one fulfillment center in Shreveport. And that's what they call a quote unquote 12th generation system. So I think it's like their showcase where Amazon has put all their best automation ideas into this fulfillment center, and it is showing really promising results, which gets Wall Street excited because if they do it one, they can scale it across their network of north of 200 fulfillment centers. It'll take a long time, but these are the types of improvements that are pretty material. It also saw that fulfillment center and the things they do in there, which is lots of robotics and new ways of automating. It had a 25% reduction in the cost for fulfillment center cost per unit.

Scot:
[9:43] That's pretty material. So let's say it costs $6 to ship one of these things. You can knock a dollar or two of that off. And this is Amazon and you're shipping some billions, tens, if not hundreds of billions of products. That is just basically margin that kind of falls to the bottom line.

Scot:
[10:03] So together, these did help with that earnings beat. And they caused a somewhere in the four to 6%, let's call it 5% underage in what Wall Street was thinking shipping, total shipping spend would be. So, you know, the good news is they're making progress on these things. And it feels like it's still early days for, I think the regional, they're probably kind of at the end of that one. I think same day facilities, they have a lot more they can do there. And I think robotics, they're very early. So it feels like they've got another two or three years of runway for improving the economics of fulfillment.

Jason:
[10:39] Yeah, I think in the press call after they released their earnings, the CFO even said that they believe there's headroom in all three. So they think they're going to continue to get additional efficiencies. And they talk a lot about those three things together, like fundamentally reducing the cost to serve is kind of the language for talking about all this stuff and what the average price is to get a box of goods to Jason's house.

Scot:
[11:09] Yeah. Another theme that you'll kind of hear as Jason, I go through some of the pieces is this has really dramatically increased consumers ordering replenishables. So, so we'll talk about that.

Jason:
[11:20] Yeah, yeah. So obviously the most interesting and important segment of Amazon's business is the retail part of the business. The numbers were all pretty favorable. So they hit $61.4 billion in revenue, which is a 7.2% year over year growth. It's a significant acceleration from the 4.6% growth in Q2. And it's a significant beat over Wall Street's expectations. It's like 3% over. So I think the revenue number was very encouraging. And a number of other retailers had reported and were saying that there were a lot of signals of the consumer slowing down. So this was, I think, surprising and well-received. Of course, listeners of this show will know you probably shouldn't care too much about revenue because revenue is a blend of the cost of goods for 1P sales and the take rate for 3P sales. So when we kind of are thinking of them as a pure retailer, the number we really like to know about is their GMV, their gross merchandise value, which is the value of all the goods they sell, whether it was on the marketplace or first party.

Jason:
[12:31] And they don't tell us what that is, but…

Jason:
[12:34] Citibank has released their estimates. Morgan Stanley's released their estimates. A couple other sites have released them. And in my pull of polls, the Morgan Stanley numbers are kind of right in the middle and most believable. And they have Q3 GMV in the United States going up 9.9%, so 10% essentially. In that same quarter, we know from the US Department of Commerce that core retail went up 3.6%. So Amazon grew almost three times as fast as the industry average, which, you know, Amazon's number one or number two are just retail out there. So that's super impressive. That's slightly lower GMV growth than they had in Q2, which was 11%. The number we'd most like to compare this to would be Walmart's number. Walmart doesn't report Q3 till November 19th, I want to say. So, so it'll be super interesting to look there. I would expect Walmart to come in somewhere between Amazon and the retail industry average. So above the retail industry, but below this 10%. So that in and of itself is super interesting. You know, Walmart probably beats the industry average. Amazon triples the industry average. Then we still have Timu Sheehan and TikTok shops out there growing faster than anyone's ever seen before. And so you've got, you know, Those five horsemen eating up most of the growth in the retail industry.

Jason:
[14:03] One thing that did negatively surprise people a little bit was the mix of, which you alluded to, is the mix of 1P and 3P sales. So ordinarily for a long time, 3P sales are creeping up as a bigger and bigger chunk of the overall mix every year. I think it was 61% last quarter, maybe. And it dipped down this quarter to 60%. So that's the first time 1P sales have gained share over 3P sales at Amazon. And the management tells us the reason for that is increased demand for everyday essentials, right? So that's the cleaning products for your house, the, you know, affordable skincare products, the things you use in your bathroom and shower. Or all of those products are more often sold 1P than 3P on Amazon.

Jason:
[14:57] And, you know, both because of the vibe session and the economic situation that I talked about earlier, and because Amazon's better at same-day delivery, they're winning more of these everyday essential trips. And that is shifting their mix slightly to 1P. In theory, it should also be eroding their margins because these items are lower margins. But Amazon did so well on the efficiencies and the cost to serve that you covered that those efficiencies more than made up for the lost margin from the slightly less profitable mix of products that they're selling with everyday essentials. So that's a super interesting trend. When you hear management talk about it, they're like, we love these everyday essentials, even if they are slightly lower margin because those customers are way more sticky and we get way more wallet share in the long run and the the more those orders we get the more volume we have to drive our.

Jason:
[15:59] Cost to serve down and the lower our cost of serve, the more we can profitably fulfill all of this everyday essentials demand. And so this is a sort of a new flywheel for Amazon, if you will. But like one tangible proof point on this is they said something like when a customer sees a one-day delivery promise or same-day delivery promise, conversion rate is 20% better than when it's a two-day delivery promise. So kind of, you know, giving evidence to the fact that like consumers have an insatiable appetite for faster and faster delivery and the faster and cheaper they can deliver, the more they can sell.

Scot:
[16:37] So- Where do you think they're taking that share from you? That's like Target and Walmart or like, you know, do you see any evidence of it?

Jason:
[16:44] Target is totally possible based on the last couple of earnings calls, some grocery, the super vulnerable place that we'll talk about a little bit later is the traditional pharmacy. So Walgreens, Rite Aid, CVS, and then all the independent pharmacists. They're for sure taking share from those guys. And they talked about that in the earnings, which in pretty funny language. So I'll get to that in just a second. But it doesn't feel like it's coming completely at the expense of Walmart, because again, both Amazon and Walmart are growing faster than the industry average, but it's pretty much everyone else that sells everyday essentials that's dipping below. Side note, we're now seeing these Chinese direct-to-consumer companies start to lean into everyday essentials. So Timu has a ton of everyday essential goods on there. So the world has noticed that that's what consumers have an appetite for spending on right now.

Jason:
[17:40] Interest rates are still a little high. People aren't moving houses. So people are not buying as much home improvement goods as they normally do. They're not buying as much, except for you and I are not buying as much consumer electronics as they normally do.

Jason:
[17:52] And they're spending more on the center store grocery assortment. And so that's, you know, Amazon through great insight or luck or whatever combination you want to attribute it to, that shift to regionalization of their fulfillment center and this like laser focus on cost to serve has really positioned them to take advantage of this trend, where arguably four years ago, they wouldn't have been well positioned for this trend. They would have said this, that's all stuff that craps out that we can't realize a profit on and that we're discouraging sales on. Now they're encouraging sales on all this stuff. So that's interesting. And then the slightly, if there's a negative sentiment in the industry regarding all of this, it's, hey, 3P sales ticked down slightly, but the revenue that Amazon is earning from 3P sales went way up because Amazon has found a lot more fees to charge sellers than ever before. And so, you'll hear a lot of noise from the 3P seller community that they're, The overall, not the raw take rate, but the overall cost to sell on Amazon when all these fees and marketing services are factored in has never been higher and makes it harder than ever for three-piece sellers to truly be profitable.

Scot:
[19:14] Yeah.

Jason:
[19:14] So that's the story on online sales. I mentioned pharmacy another trend happening in our industry is you know the way pharmacies normally work is the traffic to a pharmacy is to get pick up your prescription and then while you're there you go oh I need paper towels and you buy paper towels by design they're the worst place to buy paper towels they don't have a great assortment and they they don't have a good price but you're already there to pick up your Lipitor prescription so you know you just want to save yourself a trip and you pick and you take them home from there. So the front of house of a pharmacy only works because of the back of house. And the back of house is under huge stress. There's like three companies called pharmacy benefit providers, and they get to dictate the price that a pharmacist gets reimbursed for every prescription they fill. And these pharmacy benefit providers are reimbursing the pharmacy less than the pharmacy is able to collect from the consumer. So on a lot of popular prescriptions, pharmacies are now at negative margins and all the chronic prescriptions, if you take something every day or every week, instead of getting a 30 day supply from Walgreens, that pharmacy benefit provider is making you get a 90 day prescription from mail order.

Jason:
[20:35] So people are going to the pharmacy to pick up prescriptions less, which puts more stress on the front of the store. And then, of course, their lower overall profit, that 10% loss of traffic has a huge impact on their profits. And then they start freaking out about shrink and they lock up all the products and that chases even more customers out of store. And the pharmacies are kind of in a negative flywheel from all this. And Andy Jassy summed it up perfectly in one sentence on the earnings call. He said, brick and mortar pharmacies often require customers to make trips to forlorn physical venues with much of the selection behind locked shelves, wait in line for meds, and only to find out about pricing at the point of purchase. The largest mail order pharmacies offer delivery in five to 10 days. We think customers deserve better, which is a clear shot across the bow at the pharmacy industry. Amazon has doubled the number of cities that they do same-day pharmacy delivery to. But I actually think the big story here is not Amazon's prescription business. It's Amazon getting all this everyday essential traffic that used to go to the pharmacy in conjunction with the prescription business.

Jason:
[21:52] That has other healthcare implications in the long run. a lot of people in America go to a pharmacist to get a vaccine. And if all these pharmacies close, you know, we got to figure out how we're going to get those vaccines and things like that. They, of course, do break out their physical stores. Physical stores for Amazon is almost exclusively Whole Foods at this point, and maybe a few Amazon Go stores left. And physical stores grew like 5% year over year, which again, on itself, that's better than the industry average. that's better than most other big grocery stores are growing. And that was also a beat versus the analysts that thought they were gonna be at 5.16 billion.

Jason:
[22:32] Same story there. The mix is shifting to more essentials. And what's fascinating and interesting and controversial here is Whole Foods is a unique grocery concept. They have all of these food quality guidelines that dictate what products they will carry and what products they won't carry. And so they won't carry products that have artificial colors in them. They won't carry products that are sweetened with corn syrup, for example. And so the assortment in a Whole Foods is very different than the assortment in a Kroger or an Albertsons. And a lot of the Everyday Essentials volume is traditionally those products that Whole Foods chooses not to sell. So the fact that they're doing better at Everyday Essentials is interesting. But what's super interesting is in Chicago, where I live, Amazon opened yet another new grocery concept this month.

Scot:
[23:25] Which is now like the fifth or sixth one.

Jason:
[23:27] Yeah. So, yeah. So now called Amazon grocery. So they have, of course, Whole Foods, they have Amazon Go, they have Amazon Fresh. A few of these, they have multiple iterations of Amazon Fresh used to mean an online grocery store, and now it means a physical grocery store. And now they have this new concept, Amazon grocery. And the one and only Amazon grocery store is downstairs from a Whole Food in downtown Chicago, and it carries all the unhealthy stuff that Whole Foods isn't allowed to sell.

Scot:
[23:59] So you go down for your Rice Krispie Treats.

Jason:
[24:01] So it's literally, they carry like 3,500 SKUs and it's mostly Kraft and Hostess and Coke and Pepsi, right? And so it seems superficially, it seems very explicitly like go upstairs and get your organic produce and feel good about your purchases there, and then stop on your way out and get your guilty pleasures.

Jason:
[24:25] From Amazon Grocery on the way out, right? And so, It's unclear. Did Amazon already own this real estate and it's a convenient place for them to test it? And Amazon believes that the world needs another, you know, small format grocery store with 3,500 SKUs. That strains credulity a little bit. Or is this an overt, you know, first step at eroding the Whole Foods quality promise that was, you know, part of the core mission when John Mackey started the company and the Amazon said they would respect when they took it over? Like don't know it's super interesting i would say you know i got back from grocery shop three weeks ago amazon was on stage at grocery shop and they talked about like you know how much they're leaning into grocery and they and how synergistic all these grocery offerings are and how they're unifying them all and then the week later the ceo of grocery resigned at amazon and they and this they revealed this new concept and it seems totally muddled to me so i'm not saying Amazon can't win at grocery, but it does not seem that there's a crystal clear hypothesis from Amazon as to what a winning grocery concept looks like at this point.

Scot:
[25:39] Have you been in it?

Jason:
[25:40] I have, I have. And in fact, I'll put a link in the show notes, but I uploaded a little video tour on LinkedIn, so you can, you can go check it out. It's, I would call it most similar to an Amazon Go store without the tech. So there's no just walk out. There is Amazon.

Scot:
[25:55] It's like a convenience store kind of stuff.

Jason:
[25:56] Yeah. It feels more like a 7-Eleven. There's a cafe, a small espresso bar in there. There's an Icy machine, so you can get your non-Swerpy branded Icy. And yeah, all the Twinkies and Apple Jacks you want.

Scot:
[26:12] Nice. You have to hit that first before you go out to Whole Foods because by then you'll spend your whole paycheck. You don't have any money left for Rice Krispies.

Jason:
[26:20] I would feel personal shame dragging that stuff around in my cart on my Whole Foods shop. So I feel like it's more likely to be on the way out to avoid the shame. But in fact, I took all these funny pictures because there's all these pictures about the ethical principles at Whole Foods. And it's like giant wall-size signs that say, eat good food. And then you go downstairs and it's like, buy more, get more Twinkies.

Scot:
[26:49] Maybe it's a higher conversion rate for the people that are cheaters, Whole Foods cheaters.

Jason:
[26:55] Yeah. Yeah. Again, there's probably a small cohort of people that Whole Foods is their own grocery store, but I feel like there's a lot more that are like my household where Whole Foods is definitely in our mix and there's a lot of products we only get from Whole Foods. But I have a nine-year-old son and like a lot of his preferences do not exist in the Whole Foods environment.

Scot:
[27:13] He's not eating tofu potato chips.

Jason:
[27:15] No, no. He wants the good Pringles.

Scot:
[27:20] Cool on the aws side revenue rose 19 for 227.5 billion which kind of met expectations but they were just a little bit higher so it was like right in line so that wall street was thinking 20 to 21 but they came in at 19 so they didn't really get much heat over that because they did talk about the strong demand they've they've started talking about a backlog or kind of a bookings backlog so So that was interesting. I saw a wall sheet analyst kind of do this whole thing around it and felt like there's a lot of positivity in the number that they gave there.

Scot:
[27:55] And yeah, so the margin there was very nice. So 38% operating margin. That's not even a gross margin. That's a net margin. And they saw their own benefits from cost efficiencies. They're getting more life out of their servers. Imagine what's going on here is those workloads that are not GPU bound. They're probably flat right now because everyone's obsessed with moving everything over to GPUs. So they're probably having to spend a lot less on traditional CPU type things and getting more life out of the machines than maybe they initially had thought they would. Let's see the they were also supply constrained they did call out they have their own chip that can do some inference and they're they're deploying those as quick as they can and they're also supply constrained on the nvidia chipsets they did say they're gonna spend you know they prepared wall street to buckle up for more capex that were on this one time in a lifetime demand curve so that was interesting and but no one really freaked out about it so that was good, what'd you see on the advertising business?

Jason:
[28:58] Yeah. Well, I would just add that, that 38% margin that was up from 30% the quarter before. So that, that was a.

Scot:
[29:05] Yeah, that's material. Yeah.

Jason:
[29:06] Uh, very, very meaningful. And, and I think nobody freaked out over the CapEx because they're like, Hey, we, we thought like regular AWS was like a pretty good demand curve. And, and the AI AWS demand curve is ahead of where AWS was at this point. And so I think they think there's a lot of headroom. It was interesting. They used to talk a lot about how we really only have scratched the surface on cloud compute that like, you know, some ridiculously low percentage, like only like 5% of all the workloads are in the cloud at all. So, you know, traditional AWS has all this headroom. And I assume they still believe that's true, but they don't bother even talking about it because there's so much demand for all this AI compute at the moment. So advertising, I always love talking about right after AWS, because I feel like there's this common notion that AWS drives Amazon. And you said it earlier, like all the analysts think that Amazon's at AWS with some annoying side projects. So the advertising business also had a good run. Exact same growth rate, 19%. The difference is 19% is an acceleration of their advertising business, where it's a site deceleration of their historic AWS rate.

Jason:
[30:26] So that 19% growth gets them $14.3 billion this quarter. So if you look at their last four quarters, they're now at a $58.7 billion run rate, or not even run rate, trailing 12 months. So nearly $60 billion in ads. To put that in perspective, the trailing 12 months at AWS is like $100 billion, $102 billion. So AWS is a bigger business in terms of revenue, no question. But the ads business is growing fast. They're adding a lot of advertising products, like almost all this advertising is still just in support of search. It's mostly sponsored search ads on the website. But of course, Amazon is winning more eyeballs with their media, right? And their NFL stuff is going really well. Their original programming is going really well. And they're increasingly putting ads in all that content. So like this really is like $60 billion of search ads. And there's still a lot more headroom in, you know, monetizing all of this other media that Amazon is increasingly succeeding in. And so that's interesting. Unlike AWS, which is highly CapEx intensive and, you know, constrained commodity because of these silicone chips, the ads are very low CapEx, right? And so they don't tell us what the gross margin is for the ads, but let's call it 70% gross margin. There's no cost of goods, right?

Scot:
[31:55] Yeah.

Jason:
[31:55] Let's call it 99%.

Scot:
[31:57] Okay.

Jason:
[31:58] Very popular. Yeah. They pay a lot of sales, guys, right? Like that's the one, that's, that's the one cost. And I think those are the only sale guys that don't get fired if they don't go to the office, by the way. But so 60 billion, 58 billion in revenue at 70% gross margin is 41 billion in earned income, operating income that they've made over the last 12 months for the advertising business. If we go back and apply the 38% gross margin, which is the highest gross margin they've ever achieved and not what they actually achieved over the last 12 months and apply that 38% growth margin to the last 12 months of revenue on AWS, it earned $39 billion worth of operating income. So like in the most conservative version of this, advertising is contributing more dollars of profit to Amazon than AWS's and growing faster.

Scot:
[32:48] Yeah. I 100% believe that because the cost structure for AWS is pretty, pretty big.

Jason:
[32:53] Yeah. Yeah.

Scot:
[32:54] And it's going to get worse, which is amazing that they popped up to 38.

Jason:
[32:59] Yeah, yeah. I mean, it's a testament. They do a lot of stuff really well. So that is the advertising story. Scott, I know the future of Alexa is very near and dear to your heart.

Scot:
[33:12] It is. And I've had some interactions with Amazon in like the last year. I won't go into specifics. And I came away thinking, man, the company seems like different. Like they're just like not as engaged and the people you meet are very… Company kind of feeling, which is way different than, you know, when I was at Channelvisor dealing with Amazon, you would meet a VP and he or she would know exactly how everything at the company worked. And it was like freakishly, you know, freakishly informed about everything. So, you know, case in point, they're coming out. They've been working on this for a long time. At first, it was going to be kind of, you know, late summer, fall, and then they moved it to kind of late to catch holiday. And now they just announced that they're delaying till 2025, that they're not going to have any kind of LM type technology on Alexa. They started with having, saying they're going to do their own in-house kind of a model. Then they moved to Anthropic. But what they're doing is they're finding some problems with it that in the beta testing, I read an article that said it likes to show off. So instead of just answering a question, it will give you all this extra expository. It just kind of like basically has the Jason version of the LLM.

Jason:
[34:26] All right. You were thinking it.

Scot:
[34:31] Alexa, what time is it? Fascinating you asked. The nuclear standard for time began and then it like, it can't understand basic things. So it's gotten, it's better at answering questions Alexa currently can't ask, like, you know, certain facts and stuff but it it's not good at turning your lights on and off and those types of things so they're having a really hard time with it and they even got someone they weren't on the record but they i think this is in what's the one that's in seattle starts with a v i want to say vibe that's not it anyway they they got some amazon folks to say it's because because we have a management layer that's bloated and no one can make any decisions above us and they're constantly jerking around what they want the product to be.

Jason:
[35:12] It's not a two pizza team.

Scot:
[35:14] No, no. The two pizza team thing is not happening on the Alexa product. So that's pretty interesting that they seem. And then I think Jassy just basically nuked the leader and put a new leader in there. And they're doing all this return to office stuff, I think, as a way of kind of thinning out the employee base. I think next year, we're going to see them get pretty serious about reducing headcount in a lot of groups. So it's going to be a lot of companies have gone through that. And I don't think Amazon's done as much as they probably could based on how slow they're moving on some things.

Jason:
[35:48] Yeah, yeah. It is going to be interesting. I'm a little disappointed that the devices haven't gotten better faster. I think you and I both expected, like with all the amazing things that are happening in the outside ecosystem of LLMs that like, we can't figure out a way to make these devices better. But, you know, I think we talked about it in the last earnings call that there's this kind of more advanced concept of what AI can do called agent-based AI or agentic AI.

Jason:
[36:22] And there was a little bit of a hint in the earnings call when Andy was talking about this ecosystem. And he said, you know, all these LLMs out there are amazing. They're super good at processing information and summarizing information. But what we haven't seen yet and we think is going to be a huge part of the AI capability set is systems that can take action on that information. So actually do stuff for you, not just tell you stuff. And he optimistically said, and we think we're going to be pretty good at that. And so that, you know, my interpretation there is, hey, we at Amazon are going to lean way into agentic AI. They kind of have to because they've already been beaten in the first generation of LLM. So, you know, it kind of makes sense at this point to try to leapfrog. And of course, the guy that invented the concept of agentic AI, the super credible AI scientist, Andrew Ng, is on the board of Amazon now. So like none of this is particularly surprising.

Scot:
[37:29] Yeah. Yeah. So you, you wanted to bring up something that a lot of clients are talking to you about, which, which is interesting.

Jason:
[37:36] A lot of my clients have noticed this, this intersection of three very scary events that happened in the world of retail last week. So event number one is that Scott Wingo deleted the Google icon from his dock in his iPhone and replaced it with a perplexity icon.

Scot:
[37:57] True.

Jason:
[37:58] So, Scott is all in on perplexity as his primary search engine. Like, I'm less relevant, but I totally agree. Like, it's amazing. It's my daily driver for search.

Jason:
[38:11] And I think a lot of other early adopters have all now found it to be far, far more useful than traditional Google search. So shortly after Scott announced to the world that perplexity had beaten Google, OpenAI launched their first true kind of search competitor called ChatGBT Search. For me, the jury is still out on if ChatGBT Search is better or even at parity with perplexity. It's way better than any other OpenAI at doing search type things. I still think at the moment I prefer perplexity, but if you do 10 searches, you're going to prefer the answer for both of them for different things. And so this was the second big announcement was OpenAI getting directly into the search. And then in response to that, perplexity unveiled a new feature. They unveiled a public feature, which is shopping links in the search. So now, you know, you do a perplexity search for best Thunderbolt monitor to add to my new MacBook M4, and it comes back and gives you a bunch of answers. And at the bottom of that page, it gives you links to go to product detail pages of various retailers that are selling those monitors.

Jason:
[39:29] So that's interesting. But then in beta, they've added the ability to buy the product right in the perplexity interface without ever leaving. So what we would call native checkout. And I'm not in the beta, so I haven't gotten to do it hands-on yet. But I've been watching a lot of videos from people that are in the beta. And not all, but a disproportionate amount of those links are to buy now from Amazon. So they very clearly have some kind of partnership with Amazon. And, you know, if the world were to move to these kind of AI searches instead of Google, the two major things would happen. It would totally break SEO and keyword research and all the things that are a core part of marketing today. And number two, you know, it would be super important to win that buy box and that pull position in these new search engines, this new shopping surface that didn't exist for most of the world a month ago. So this is fascinating. I feel like this is just the first evolution of a battle we're going to see play out, at least for the next year.

Jason:
[40:37] Couple of years, but if you're a retailer and you weren't thinking about, you know, what happens when all this, this search traffic moves off of Google and onto these new, new surfaces, you know, it's, it's, it's time to start putting some contingency plans in place and at least think about how you're going to participate. And if you're a product or a content provider, you need to start thinking about how, you know, what your monetization strategy is and how you're going to optimize, you know, so your products show up at, you know, for their fair share of voice or better and all those sorts of things so it's.

Scot:
[41:08] Yeah it's called the aeo so the ceo of perplexity he's a fun interview i've watched a lot of his interviews now and he calls it an answer engine instead of searching in which is really appropriate that's why i like it because it just like gives you an answer and then so instead today google gives you like some things you have to figure out you go to 10 sites you open up 10 tabs three of them are garbage seven are okay then you kind of get to an answer after a lot of work this gives you the answer and then says well here's the supporting stuff if you want to dig in further so yeah so then to optimize it he calls it aeo and they're actually seeing people do this and they're they're really tweaking you know the sites to make sure that it's more llm friendly and and whatnot which is fascinating i wonder how the the pay on perplexity works because where are your payment credentials being stored is something i'd really want to understand so that's why i'm desperate to get.

Jason:
[42:01] In the beta because those are all.

Scot:
[42:02] That Like.

Jason:
[42:03] Normally when companies that aren't in commerce space first launch a native search, There's a bunch of deficiencies.

Scot:
[42:12] Yeah.

Jason:
[42:13] When will I get it? And what are the return policies? And how do I bundle multiple products? And what about, can I use my digital wallet? And all these things. There are now people that have figured it out. TikTok Shops has a pretty decent experience for native checkout. And so, yeah, I'm super interested to dive in all that with perplexity. I have not.

Scot:
[42:35] That's apples and oranges. They're like using it up at their lair, though. like you're actually selling on TikTok. Like it's the, it's like a marketplace. But this one, they're like sending the order down into Amazon or wherever. Like that's, they've got to be doing that. You know, how, is it Anthropic? Yeah, Claude can now take over your screen. I wonder if they're doing that. Like they're storing your credentials and then insert them, like crawling it in.

Jason:
[42:55] I doubt it. Could be, I kind of doubt it.

Scot:
[42:58] Super not PCI compliant.

Jason:
[42:59] No, and to be honest, the Anthropic demo is cool because it can do it at all. Like it doesn't do it well enough to solve a real world problem yet. And so I'm kind of assuming all the examples of checkouts I've seen are retailers that I know syndicate APIs, right? And so I actually think this isn't using TikTok Shops native checkout, but TikTok has a native checkout in TikTok ads where they already have a Amazon API integration. And it seems most likely that that's what they're leveraging is that they're, they've gone out and said, what retailers are, you know, enabling checkout in, in native ad formats? And we'll, we'll, you know, position ourselves as another ad platform for those, those checkout engines. Yeah, I'm with you. It's to me, the analogy I like to use is perplexity gives you a meal, whereas Google gives you a recipe.

Scot:
[44:00] Yep. True.

Jason:
[44:01] And I feel like, you know, the world has expanded from 10,000 SKUs to 800 million SKUs, like the recipes are now too complicated.

Scot:
[44:11] Yeah. Cool. I agree. It is. And there's even worse than that. There's bad ingredients, right? Like the, there's so much spam inside of Google now that it's just like really hard to find anything good a lot of times.

Jason:
[44:22] Yeah. I will admit like you've just hit my, my greatest fear about all of this. I feel like the perplexity search experience is so awesome right now, but they're not monetizing it. I mean, I, I pay 20 bucks a month, but you really don't need to. And I think back to every other cool technology that you and I have adopted, and they all started before monetization and they were all cool. And over time, the owner of that technology has turned up the dial more and more on monetization to the point where it really arose the experience, right? So, search, social, all these things were great pre-monetization. And, you know, now, you know, there's no organic content on social. There's no organic product listings that you're going to see on the first page of Amazon. Like, they've all been overwhelmed by the monetization. And so my fear is, as great as perplexity is right now, that when they really land on their, you know, that it's kind of the first hit of crack for free. And that when they eventually land on their monetization model, it'll be inferior and more noisy, as has happened in the past.

Scot:
[45:33] Yeah, we'll see.

Jason:
[45:34] Yeah. And one last side note on that. I'll tell you who wins here is Jeff Bezos because he has a lot of Amazon stock. He has perplexity stock and Amazon has a big investment in Anthropic. So it kind of feels like, you know, whoever wins here, Jeff Bezos is going to do okay.

Scot:
[45:53] Jeff would not cry to see Google taken down. A lot of people in tech would not be upset to keep Google taken down a peg.

Jason:
[46:00] I know you know this. Like many of our listeners may not know that Jeff made billions of dollars on his initial investment in Google. He was one of the angel investors in Google.

Scot:
[46:11] Yeah, he famously identified him as a threat early on and wouldn't let anyone at Amazon talk to them or share any kind of – they never installed the Pixel or anything. They wouldn't tell them what – they wouldn't buy ads on there for a long time.

Jason:
[46:25] Yeah, now they're the largest advertiser, $18 billion.

Scot:
[46:28] Yeah.

Jason:
[46:29] It's a crazy world, Scott. But that seems like a great recap for this week. Hopefully you found value in it. And if you did so, there is still room for more reviews on our iTunes page. So Apple has called us. They've said, hey, you're an enormously popular podcast. You have so many great reviews that we're expanding the capacity so that more listeners can jump on iTunes and leave us a five-star review.

Scot:
[46:55] Thanks for joining us, everyone. Hope you enjoyed the show.

Jason:
[46:58] And until next time, happy commercing.

EP312 - Amazon Q3 2023 Earnings

Amazon reported another strong quarter across the board for Q3, soundly exceeding analyst profit expectations and retail industry averages. In this episode we break down the AWS AI, Ads, and retail performance.

http://jasonandscot.com

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.

Transcript

Jason:
[0:23] Welcome to the Jason and Scot show this is episode 312 being recorded on Monday October 30th right before Halloween I'm Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back to Jason and Scot show listeners Jason it's a Halloween Eve hallow Eve but also we just watch the Mac live presentation from Apple or live presented recorded earlier presentation from Apple about new Macs, so I don't know I think I'm going to ask you about Max first are you going to get a new Mac are you sitting out this upgrade cycle.

Jason:
[1:07] I am on the fence guy of course I want one I have scheduled a meeting with my family CFO to see if I can, I can justify it so so we'll see I did not order one tonight I'm actually.
Still super happy with my M1 MacBook Pro so so I know M3 is at least three times better so so of course I want one but we'll see when I pull the trigger what about you is yours already on the way.

Scot:
[1:38] I have been a while without an upgrade and running a little long on the tooth on this guy so yes I have a new machine coming they were actually pretty generous on the trade-ins you should just do an experiment before you talk to the CFO plug-in that trade in and see if it.

Jason:
[1:56] That could be the.

Scot:
[1:58] You a better presentation also if you have an Apple credit card which I'm sure you do they have a really compelling offer there.

Jason:
[2:07] All right lots of lots of good good things to consider my nine-year-old has made it clear that we're not allowed to trade anything in it.

Scot:
[2:17] It's got dibs on.

Jason:
[2:20] He's very he's very aware of the technology trickle down.

Scot:
[2:24] Oh man well you can somewhere down the stream there's going to be one that you could trade in but I don't think it may have as much impact as your courage.

Jason:
[2:32] I I don't know if he's ever going to own a computer device with a keyboard will see but yeah he's actually not that interested in my laptop.

Scot:
[2:40] Speaking of baby geek or I guess now he's I don't know kindergarten geek.

Jason:
[2:46] Third grade geek.

Scot:
[2:47] Third grade geek what's he thinking about Halloween I hear he's kind of outgrown Star Wars which makes me casa.

Jason:
[2:56] He still like Star Wars but he yeah he is not doing a Star Wars character last year he did a Pokemon character he did Pikachu and this year he's stepped up to Charizard so that.

Scot:
[3:09] Very rare.

Jason:
[3:11] Enables well I think it depends on which Charizard butt.
That steps up the whole opportunity to build pyrotechnics into the costume.

Scot:
[3:21] All right watch out for some evil Pokemon people that try to capture.

Jason:
[3:26] Yeah I think the big debate in our house which isn't hasn't fully happened yet is who's trick-or-treating with Stephen and who's staying behind to try to scare the bejesus out of neighborhood kids.

Scot:
[3:36] I'm thinking you and a gorilla suit or you could be in the last year's Pokemon suit or Pikachu suit that could be a fun combo.

Jason:
[3:45] Yeah last year I actually had knee surgery only a few days before Halloween so I won by default because I couldn't really walk but this year I feel like I have no good excuse.

Scot:
[3:56] Right as the title shows the purpose of this as we have some Amazon news to report on.

Jason:
[4:02] Amazon news your margin is there opportunity.

Scot:
[4:15] Well Jason it was a kind of interesting setup coming into Earth earning season this quarter the whole world was focused not on e-commerce not on marketplaces not on omni-channel not on payments some of our favorite topics but also not on ads one of your favorite topics but everyone is now obsessed with AI thanks to the success of chat Juju GPT so coming into the quarter Amazon was kind of on the backside of a lot of the other big companies so we had Microsoft come out and they did really well with AI the their partnership with open a.i. / chat gbt is bringing tons of workloads to azure.
How much is their cloud computing platform and then Google really underwhelmed everyone with what they're doing there you know they're they're kind of tiptoeing it's very clear that they don't want to kill the Golden Goose that is Google search by putting too much AI to that so allow their experiments are in Bard which is kind of way off to the side I've tried barred three times I can never get it to have the features that they say it should because my corporate Google account you know either won't have access or it says that feature is not here yet.
Um and I think people are really starting to worry about Google on this one.
So then that teed it up where all eyes were on AWS to see how are they doing and I think we've covered this but.

[5:44] The Amazons approach to this is to be kind of agnostic for lack of a better word so they're kind of like hey if you want to use.
Any of these different models we're going to basically let you run them on AWS compute and we're going to have all kinds of different graphic Processing Unit or GPU tears available from you know their own chip set to older Nvidia chip sets to the new ones and kind of be y 0, LM bring your own large language model.

[6:18] And then oh yeah also Facebook did pretty well and you know they're definitely through the worst of the Privacy changes that Apple put out and they have an approach to AI that is an open source one so they're basically saying hey we're going to integrate this in our products and what we build we're going to put out there kind of almost scorched Earth in a way saying why don't we just open source this thing and maybe that will slow down our competitors who are going to use this to to generate their own revenue and because they don't have a cloud piece they don't and they're pure advertising it doesn't really, Concord hurt them to do this so they're not making Cloud Revenue off of it but it's become a popular one and it's called llama in case anyone is it from there then, okay so just not to leave everyone in suspense because we usually talk about AWS kind of later in the Amazon update we're going to cover it first so the ended up having a really good ADB is showing so I would say people got kind of panicky and we're expecting it to be down and it kind of came in line.

[7:22] But what that people excited was part of the talk track on the conference call Co jassy said that they're winning some big AI workloads they talked about some big deals had close towards the end of the quarter that we're pretty significant and what's happening is as you know what's what a i chat gbt is trained on the broader internet and anything that they can throw into there.

[7:49] And that's interesting but what's happening is corporations and.
Both big corporations for internal use but then also other corporations they're wanting to train a large language model on their data and they also don't want that data to kind of leak into the broader ecosystem so that's that's really benefiting Amazon because it turns out a lot of the data that companies want to train these lme's are are already in AWS so instead of paying all this money to pull the data out of AWS and then synchronize it back into your LM as as Amazon anticipated with this kind of open bring by0 LM model.
People are bringing the LMS to them and using the data because it's already in AWS and it's easier for the llm to just kind of go right there and grab it versus moving the data around.

[8:44] That may not make a lot of sense so let me give you kind of a random example let's say you're a big added see like I'll pick up, this one called publicist they're out of France and most people haven't heard of them and let's say that that French Ad Agency wanted to save a bunch of money they could take like.
Let's say 3:00 of content from like a podcast transcript or something like that.
And they could use that content let's say someone of their company like a detailed digital retail payment strategy vice president general manager type person with a big crazy title like that.
They could put that data out there and run an llm on day ws and train that data on it.
The llm on that data and then they could have for example just picking something random they could have a retailgeek bye.
That was basically as good as the human probably ninety percent so good enough but you know this thing could run 24/7 you could actually you could have as many of them you could clone it on two different processors after you get through the training mode and you were in D quote-unquote inference mode and it also doesn't take breaks it doesn't need, Starbucks vanilla lattes constantly it doesn't have expense reports it just.
Does its job and doesn't complain and doesn't ask for raises so that's that's a that's a use case that something like that would work did that make.

Jason:
[10:08] Specific hypothetical there Scott.

Scot:
[10:11] Is randomly chosen just kind of picked it out of the are there.

Jason:
[10:14] It almost sounds like the more words in your title the more vulnerable you would be to AI disruption.

Scot:
[10:20] I thought about that but it is does make sense because that's essentially more tokens for the AI to learn just like right there in your title you're basically asking for it if you're a robot Overlord you're kind of picking on who to go for a first I would look for large titles person.
I don't know I don't know how their training these things.

Jason:
[10:37] There I know you're the investment guy in our podcast but there's this investment theory that you don't you don't, be the little guy chasing the big Trend that way you want to do is identify the secondary Trend and so in this scenario as soon as it seems like a i is ready to replace the the blowhard Talking Heads everyone should short Starbucks seems like the.

Scot:
[10:59] Mmm that's a good point yeah I hadn't thought about that.

Jason:
[11:02] Yeah because when I lose my job and can't afford those lattes I feel like something I would like I'll take some solace in knowing that you made some money on that.

Scot:
[11:14] Yeah they'll be like on their conference call we're still working on the data but we've isolated it to this to block window in Chicago and we're pretty sure we have an idea what's going on.

Jason:
[11:26] I feel like my Starbucks footprint is a lot bigger than Chicago.

Scot:
[11:29] Well you know the the core of your Bullseye answers is going around.
Okay but in all seriousness this is a really interesting blurb from the call where they talked about their strategy gaining traction and they said there's multiple businesses are using their gen AI That's short for gender of a i.
Apps on AWS including Adidas people in our European list listeners I think they call it a deed us but I'm here in America we call, here in South the southeast caught Adidas booking.com and United Airlines.
And while Jenny eyes Revenue contribution remains small management suggested Revenue quote compares favorably.
To some of the other leading providers and this is this is interesting because Amazon's always mum's on revealing anything until the SEC forces them to break out stuff like, for the longest time we didn't know at AWS was then we didn't know what ads were and then they became material enough they had to break them out so so Amazon under Bezos would never have said those words I've like even hinting about what's going on.

[12:35] But kind of is interesting because there's a new sheriff in town and also it shows you how important it is that they let everyone know that they are not falling behind and that their room new quote-unquote compares favorably with other other Cloud providers obviously they're talking about Azure once Wall Street analyst I did it is back of the napkin and he kind of said all right I think that they're telling us this is always funny because it's like six degrees of.
You know separation so who knows but they basically inferred what they were trying to say reading the tea leaves was that it's about a 400 million-dollar business and already two percentage points of AWS Revenue.
Which was basically zero six months ago so that's that that is kind of an interesting thing that came out of nowhere and is already a 400 million quarterly business so that means it's a 1.6 billion annualized run rate business.

[13:29] If they're reading the tea leaves right on that so that was the AI part so I thought I'd be important for us to get that out because that was kind of like the new cycle really centered around that, and it is interesting you know you and I are watching this very closely there are e-commerce ramifications you know there's all kinds of, The Innovation here is so rapid it's hard to keep up with there's all kinds of a eyes for creating product detail pages and you know all kinds of, e-commerce oriented support Bots and it's just like amazing a lot of AI applications for optimizing warehouses it's just like overwhelming how much is out there we're definitely in the, tippy top of the hype curve and you know a lot of businesses are still sorting through all this but that was the that was the.

[14:16] Dean on e-commerce retail side of things and non ads with that behind us the other big win for the quarter I thought you'd want to kind of fill us in on was the advertising part what did you see there.

Jason:
[14:30] Yeah yeah I want to jump into ads I do want to just say quickly it's interesting on the AWS because they posted solid numbers they posted 12 percent growth for AWS and they announced that they won the whole dialogue was about all these AI workloads that you just covered but they haven't recognized much of the revenue from all of these new AI workload wins yet so the this 12% growth feels like.
Kind of a win based on the Legacy Cloud business even before you start to factor in all this new traction they're getting, I'm AI workload so so that does seem interesting but I just want to reiterate what you started out by saying which is, the the bed at Amazon is that you're going to want to bring the llm to your data and not that you're going to want to bring your data to the llm and that, intuitively.

[15:24] Makes a lot of sense so it seems like investors were always pretty happy with their the AI Cloud case that they made.
Um so that being said.
As far as I'm concerned an even bigger win for them was the ad business so so they generated 12 billion dollars in ad revenue for the quarter that's up 26 percent versus Q3 of last year.
Year-to-date that means they're had businesses up 23% from the year before so you know we're comparing that to like the 11 or 12 percent growth they get on AWS.
Um

[16:02] The ad business grew 21 percent last year so it's grown 23 percent this year that impugns depending on how you factor in seasonality like a 46 to 50 billion dollar run rate for the ad business right now, so if you take a conservative estimate for the the the, margin rate on that business that's generating 2728 billion dollars worth of ibadah for Amazon which is a huge.
Huge business and much more profitable than a WS by the way.
So the ad business was very robust and a couple of injured interesting takeaways.
Amazon is adding more and more video properties they have Thursday Night Football you know they announced that they're going to start embedding ads and Amazon Prime and they'll have a premium offering to bypass Those ads.
So there's a lot of opportunity for.
Kind of top of the funnel linear programming ads at Amazon none of that is in this.

[17:09] 12 billion dollar number right now or very little like all of the potential they've they talked about for this for these non Commerce ads.
Is all sort of incremental the weather getting right now.
At the moment the vast majority of all Amazon's ads are bottom of the funnel the the sponsored product listing is by far the most.
Popular ad that that's growing particularly well and with the particular mix of economic headwinds we have at the moment, a lot of advertising is Shifting to bottom of the funnel people are less interested in investing in awareness and more interested in investing in sales and Amazon turns out to be, the best destination to take that that those dollars to put them into digital ads that generate.
Bottom of the funnel results so this quarter everyone was really interested to hear from the advertising companies, to see if advertisers were going to be cutting back right and so you know you mentioned meta had their their earnings call Google had their earnings call Facebook I'm sorry.

[18:17] Snap had their their earnings call and ads were uniformly up across everyone's earning so metas ads were up 23%, Google's ads were up 11% Google broke out YouTube ads which were up 12% snap ads were at 5%.
But nobody's ads were up as much the 26% that Amazon's were and nobody has had the consistently rapid add growth that Amazon's had the last three quarters.
Um so the economic headwinds like do not appear to be.
Putting a huge crimp in the the digital advertising business and they appear to be disproportionately benefiting, Amazon and so then you go wait next quarter they're going to be selling ads on all of their video programming and that could easily add another 5 billion dollars just for in to this this annual run rate so.
A lot of green lights in the Amazon ad business.

Scot:
[19:21] The I'm not a huge Sports person but you mentioned Thursday night football and have you seen and kind of marrying this back today I think if you seem Prime Vision have you played with them.

Jason:
[19:31] I have yeah.

Scot:
[19:33] So for listeners what they do is on Thursday Night Football if you watch from actually I do it on my Apple TV and I'm in the Prime video app.
And then you can it takes you to the standard broadcast just like every other thing but you can go in and then you hit down arrow and you can select a different broadcast which is, Prime vision and what it does they've added feature since they did it they started it they've added all these new AI features that are really amazing so during a pass play they'll show you the most likely Target they put like a Madden asked Circle in real time under the player and, he'll flash like green or something if he's a possible Target on the defense though they'll show a potential Blitzer.
They'll show you fourth-down probabilities in real time you know and it's just amazing they've added tons of features of that since I've been watching it and I find it like really adds a ton to the game too.
Kind of see you can see the strategy in real time mostly broadcasters you know they'll talk about it like Tony Rome or something but it's way after the play after they've had time to put together animation this is doing it all in real time it's just mind-blowing the amount of compute it must be thrown at that and you know I think it's a it could change the way you think about sports and in a really interesting way.

Jason:
[20:49] Oh yeah increasingly it's a better experience watching the game at home then you can get in the stadium.

Scot:
[20:54] Yeah the stadium doesn't do that.

Jason:
[20:56] They side note for soccer at the World Cup they actually did but you have to watch the whole game like through a are on your phone.

Scot:
[21:05] Let's see you at the stadium watching the game on your phone.

Jason:
[21:09] Yeah I mean and it was cool right like saying same sort of thing like it's overlaying all this real-time stats and probability was amazing.
Like it's not a very good experience to like hold your phone up and have your camera on the whole time to sort of get all these stats and so.
Yeah yeah side no Thursday Night Football is the bane of my existence because I do play Fantasy Football and I never have my act together to have my lineups all set before Thursday night so, usually the game starts and I have to pray that I don't have any super important players that I fail the start and then I can enjoy the game.

Scot:
[21:46] Okay understood anything else on Dad's.

Jason:
[21:53] No I think that covers it pretty well on ads you know just.
We've we've talked about a lot on the show but the overwhelming success Amazon's having with ads has this of course trickle-down effect that every other player and commerce paste is trying to figure out how to monetize their their traffic and get their share and at the moment nobody's getting, anything like Amazon's add, Commerce ratio and of course the audience eyes is start dropping off really quick after Amazon right you know you get a lot less eyeballs at Walmart then you have it on Amazon and a lot less eyeballs it Target then you have it Walmart and you know once you get smarter than that it starts getting real fragmented real fast.

Scot:
[22:39] Yeah how do you were still there still even though that's a big number they're still like way far away from Facebook right so so number one is Google by a really big margin and number two is Facebook and then it's Amazon and they're like way ahead of everyone else but they have to even though they're outpacing them, a little bit it would be like decades before they caught up in my own remembering that right.

Jason:
[23:00] I'm not no I'm not going to say decades it's an order of magnitude it's like 102 million 100 to 200 billion dollar annual run rates for those other guys and.

Scot:
[23:13] But they're kind of getting to half right.

Jason:
[23:15] Yeah yeah they are like they there with like within 50 percent of Striking Distance of number two.

Scot:
[23:23] Yeah if you had said that to us five years ago we would not have believed it I would I would not have seen how I've been.

Jason:
[23:30] Yeah I've been playing that what would you have thought five years ago game a lot and you you know you talked about who all the winners are in AI if you said five years ago the AI is going to become a huge thing what company is going to win like you we would have all been on Google.

Scot:
[23:43] Yeah yeah or apple or it would not have been startup called open air that was nonprofit that flip to profit no one saw that coming including Elon Musk yeah.

Jason:
[23:55] And by opening I you mean Nvidia but yeah.

Scot:
[23:59] One tidbit I saw on ads I love the leak read the Wall Street reports and they largely talked about the same data but a lot of them are good at very good at modeling and they can when Amazon doesn't tell them something like they don't break out they break out the revenue for ads but they don't break out the profit so it kind of gets swept up into this larger number but then they give you enough pieces you can kind of back into it so one of my favorite analyst he's a friend of the show Scott Devitt he modeled back through there and to your point he basically said that the ad business has a 60%, EB de margin so net margin of 60 percent which is basically like just money raining at this like Google's business model which I guess makes sense because Bass.

Jason:
[24:46] Is it is good.

Scot:
[24:48] Yeah because it is Google's business model and this ties into you know you know more about this government stuff than I do but Google's in a pretty nasty fight with the FTC, or the DJ I can't remember some government Bureau important entity that that is claiming they have a monopoly on search and they're basically pointing over here and saying look at these Amazon guys they're closing in on us pretty quick and they always reference those stats that show you know like more than half the people start product searches and those online.

Jason:
[25:19] Yeah no it's super interesting I Scott Devin is way better at Financial models than me but I actually think he might be under estimating the profitability and part of it is.
It's.
There's a lot of room for gray area like if you think about the the Amazon business it's super fascinating you know the number one digital Advertiser in the United States of America is you know who buys more ads than anyone else.
Amazon.
18 billion dollars a year of ads they buy just from Google so they buy 18 billion dollars worth of eyeballs from Google they use those eyeballs to sell a bunch of stuff that they make money on and then they sell 50 billion dollars are the pants to those eyeballs.

Scot:
[26:05] Ticket Arbitrage.

Jason:
[26:06] It's amazing eyeball Arbitrage and you know it's.
So how much of that acquisition cost are you factoring into the profitability of the ad business versus the like I would argue that these are not separated bubble businesses as much as ever wants to talk about ads as a separate business to me it only exists because you have all this traffic for Commerce and it's it's a core part of the the Commerce math at this point but we shall.

Scot:
[26:39] Yeah when we did our instacart coverage of this one now instacart been public for a while and you look at their numbers they're basically only being the whole instacart business is being valued a zero except for that so they're basically trading like an ad company so all of Wall Street said okay that grocery part is kind of like that yeah is there we'll put it in like you know.

[27:02] A hundred million dollars and then the ad business is like worth date hundred million dollar ad businesses where they gave it a really nice multiple of like 5x so that's interesting I'm sure, you're going to spoiler alert you're going to see a lot more ads on Insta guard the yeah a lot of people there is a negative and you know no one ever talks about this but a lot of people and this usually comes from a Amazon sellers and they always have kind of a love hate hate hate hate hate relationship with Amazon you know a lot of them would say and I hear this from consumers that the customer experience is the user experience is degraded on Amazon because there's just so many darn ads now you know the and I see it too if I'm looking for a specific thing I'm kind of like a dad at okay that's what I was looking for at some point there is cannibalization there and you know what we don't know is what did they lose from yeah doing this like was their product they didn't sell because people couldn't find it or we'll never really know that but you know kind of hope they're smart enough to figure that calculus Alden make it a huge net positive versus the cannibalization getting close to the ebitda contribution.

Jason:
[28:10] Oh yeah no I think two things like there definitely is an impact on customer experience and every retailer that gets into this space has a different philosophy about that and Amazon's appears to be the monetization is just worth it but you know you think about everyone other retailers that are not waiting and quite so hard, are trying to balance that and then the new interesting thing is if you're any retailer other than Amazon where all your eyeballs really are is not on your website it's in your store right and but you go we'll wait a minute, the these disruptions that people might tolerate as digital disruptions on a website they may not top you know nobody wants to junk a fi, um a physical store experience with a bunch of you know make it feel like you walked into Times Square every time you walk into, retail store so there's all this interesting calculus on where everyone should land on that the other interesting thing to me is for a while there was a.

[29:13] An opportunity for the best practitioners to get outside return so there was a subset of all those Amazon sellers that were really good at the Amazon ad, execution right and they did their smart about where they put their bids they were smarter about the attributes they put in their ad there are smarter about the creative they made for their ad and they could get outside Returns versus other sellers on Amazon but the first Trends you mentioned the AI affectation of this whole business.

[29:43] Has sort of made the best practices, dummy proof right and so now you know you just hand a product shot to Amazon and it makes the ad for you and you turn over the bidding strategy to Amazon and it optimizes your bidding for you and so it's squeezing more of the potential profit like out of all of these these other businesses that are built on top of Amazon because it's, kind of.
Normalizing the the ad business to everyone and it just becomes a pure pay to pay like who's going to be the most for this eyeball.

Scot:
[30:21] Yeah kind of supports your theory that maybe the Madonna's higher because they don't have a lot of people sitting there at adding images or something like would they used to do back in the olden days.

Jason:
[30:31] Is that you used to need this thing called what is it called Ad Agency.

Scot:
[30:35] Yeah good cut the if you can just get one of those Bots I discussed or just like you have a some a I do it for him.

Jason:
[30:40] Yeah yeah that was a funny example a few minutes ago.

Scot:
[30:44] Unrelated news Jason is brushing up to c v so hit him up the so just to zoom out to the big picture so so we kind of dove into the to topical things A to B Us / Ai and adds, those together really causing Amazon to beat Revenue that they came in about one percent higher than Revenue so it was kind of like a slight beat / meat but where they really exceeded oh and revenue came in at 143 billion were they really crushed it was operating income and these two contributed to it but also retail did some interesting things that also yeah I think dramatically helped beat expectations operating income came in at eleven point two billion and expectations which is Wall Street consensus is what they say was seven point seven billion you know so that's like what let's like.
Five per billion beat you know like a huge be compared to whatever.

Jason:
[31:49] 35%.

Scot:
[31:51] Yeah so that push the stock up 10% and then also we'll talk about guidance and that was positive so, it's been interesting Amazon stock has been kind of in a you know.
Funk for lack of better words has been con rallying around at the same level and literally for quite a while like 18 months and this was the first Catalyst to cause a big move and that it's market cap a 10% move at Amazon Lester look we'll get one of our researchers here one of the interns I look okay.
So you know they were like 1.2 trillion and now they're like 1.4 trillion so that's you know a move like that takes a lot of dollars when you're bigger than a trillion dollar business to move things it's like a lot of.
A lot of value creation can happen in a 1.2 trillion dollar company when it shoots up ten percent in five trading days.

Jason:
[32:44] 10% 0 by a lot of rocket fuel.

Scot:
[32:46] It will yes a lot of dates with helicopter Pilots as well and a lot of cool new clothes, so there were some really interesting things you know we spend the bulk of our time here on the Pod talking about retail and e-commerce to our favorite topics so Jason there's a lot of really interesting stuff going on in there as well you want to fill us in on that.

Jason:
[33:08] Yeah everyone just wants to talk about ads and AI but it turns out that Amazon is actually a pretty good retailer.
And so the the retail business also had a good quarter and to kind of set the table, every every listener the show knows I love my US Department of Commerce data so that came out last week 4.

[33:31] September which gives us Q3 data for the industry so us retail data in September this was up one point year-to-date sales in the United States January through September we're at one point nine percent this year versus last year.
It's a 35 percent versus before the pandemic in 2019 so 1.9% is not very good growth by historical standards we would normally expect about 4% growth.
So if we just look at Q3 growth the industry was up 2% which again half of what you would typically expect.
So Amazon's growth for Q3 is 11 percent versus that that industry number of 2% so 11% growth, is very robust the if you kind of, look at Amazon's growth since the pandemic that Q3 number means they're up 85 percent versus Q3 2019 and their year-to-date number is up 111 percent versus 2019.

[34:33] So Amazon is a very large retailer arguably number one or number two retailer in the US now, and they're growing way faster than the industry average, and again depending on how you count Walmart would be the number two retailer which is also growing significantly faster than the industry average so that actually, tells you everything you need to know about the rest of the retail industry is that where you know we're having a significant bifurcation and with winners and losers in the space.

[35:07] The other side of the retail business for Amazon is international and historically North America has been a very mature Market that has grown and generated profits, International has not made money for Amazon and I would say it was a mixed bag in terms of their International performance, on a constant currency basis International sales were up 11% which it's a smaller less mature business so you'd like to see it growing faster than the, the mature North American Market, um but they're operating loss is way smaller so last year this quarter they lost 2.5 billion dollars this year they only lost a hundred million dollars so nearly break it even for the quarter.
Um the this did not come up in their their earnings and no one asked them about this but Marketplace pulse reported earlier this month.
That appears Amazon has.
Meaningfully curtailed their International expansion and a lot of markets they had announced they were expanding into they seem to have delayed.
Postponed or canceled a lot of international market openings, so International definitely is not the start of the show it is also true of a lot of the other markets that say that Amazon's in still have more.

[36:26] Just general macroeconomic headwinds than the United States does at the moment a lot of the world has a more severe version of the same macroeconomic problems that we have.
In the US so a couple interesting tidbits.

[36:44] But in the discussion about the retail business that you know the CFO Bryant.

[36:54] Scot I always pronounce his name wrong alsop ski, um brett-brett else got a soft ski talked about how despite the fact that their they had nice growth in retail that they are seeing a cautious consumer who's generally trading down and more Deal seeking, then usual and that's consistent with, cautions that we've heard from other retailers that actually gives me some significant pause for Holiday which we'll talk about later, the the thing that that Amazon was really touting in the retail business is that they dramatically improve their cost to serve, and their speed of delivery in Q3 and that largely was thanks to an initiative they started a couple of quarters ago, this transition from a single National fulfillment Network.
To a regional fulfillment Network where they have eight distinct District regions in the United States, that each sort of operate independently in the goal is to have all the the inventory that that Scot Wingo wants to buy, in his region so the goods have to travel less far are less expensive to get to him, and get to him faster and what they announced in the earnings was that the transition to this this.

[38:19] Regional model has gone better and exceeded their expectations they're getting more.
Incremental profit and faster speed of delivery than they even projected, um out of transitioning to that so this is.

[38:37] I know we talked a lot about how big and what a huge moat Amazon would just accept our but I still feel like this is under appreciated by most Amazon's competitors and their there.
They're just opening a bigger Gap in speed of service and one of the things they mentioned is that they see a direct correlation between consumable sales and speed of service when they promised that they can get them there faster they sell more paper towels, so I think it's very clear that that consumers want speed of service, and Amazon has a huge advantage and it appears to be getting even bigger so that's interesting another thing I talk about a lot.

[39:20] Um is there's a few new retailers that are also stealing significant share, um very quickly and they're primarily Chinese companies so it's she in and most notably Tim oh, and so well like they certainly didn't come up in the Amazon earnings a lot of the analysts started looking at the the, rapid growth that Tim is getting and trying to figure out if they're stealing share from Amazon and evercore did a big consumer survey, and the results of their survey was that Tim ooh is mostly not stealing share from Amazon that most of its shares coming from, other retailers and in many cases coming from brick-and-mortar value retailers in the US so the dollar stores and it appears that that Amazon is more insulated from the.
The growth and profit that they're getting so all of that you know rolls up to be a pretty impressive.
Quarter I you've talked about it a lot but it kind of feels like Amazon's got a bunch of knobs that they can turn whenever they want to improve profitability and it feels like, they both added more knobs that can turn this quarter and they turn some of them.

Scot:
[40:37] Yeah the other thing that's really interesting is if you look at.
Amazon and you can't really read because they have so many employees in the Fulfillment centers you can't really tell their employee growth and it's surging right now is they prefer prepare for holiday but another really interesting trend is Google meta and there's one of the other ones Microsoft their revenue per employee is surging so they're they're actually not hiring many people right now and, the assumption is these companies are leveraging AI internally and becoming exceedingly efficient and you kind of wonder.
Is Amazon doing the same thing I hear inklings we have kids that are not so far out of college they don't know folks looking for jobs and things I hear inklings that Amazon is not really hiring that much as they kind of were at one point so I kind of wonder, are they also hiding behind that that have like a million employees and it surges like 200,000 for holiday so it doesn't look like they're being more productive but what they don't do is put out corporate versus fulfillment center.
Have to have an idea that if we looked at corporate there also.

[41:48] One dial they've turned its new is I think they're not hiring as me folk because people are getting a lot of efficiencies from these AI.
Systems that these companies are dogfooding internally.
And because they're they're a little bit further ahead than kind of like what we see out of the lme's I think they're doing some really interesting things that they will productized and we will we will see what they're doing in a lot of it can be this like really focused you know create an ad you know a lot of the stuff that used to be, kind of out sourced or you would have to throw a bunch of bodies at it I think there's LMS doing a lot of that you know customer support Bots think things like that that you know I think there's a lot of efficiencies going on inside of their that's helping these guys really beat their earnings numbers.

Jason:
[42:38] Yeah I do think that's true it's not lost on me that just as the retailgeek bought is gonna replace me at poobah says all the other places that might have hired me are also not so my fallback is that I may be washing cars at spiffy so we'll see how that.
That all plays out but I promise to work hard of it if it comes to that Scott.

Scot:
[42:58] Absolutely it also we could just turn this podcast into the entire ads so that could be could be here our second asked yeah.

Jason:
[43:04] We can monetize the podcast I'm not I'm not doing that to the listeners they advertisers would make us make a shorter podcast Scott.

Scot:
[43:13] Yeah yeah.

Jason:
[43:14] I'm not down for that I'm not down for it.
Even if I have to wash cars the I think you're certainly right like a lot of these companies and Amazon very overtly has has put some more barriers and in place in terms of corporate hires.
The one notable exception being the AI space they're hiring pretty rapidly.
Um but I also think in addition anything you mentioned that Amazon's actually finally like really leaning into the Fulfillment center automation so while they've always.
Been a leader in in having fulfillment center, not all their fulfillment centers in a big chunk of their fulfillment centers were not highly automated and so I think they're now automating all of them and they're rapidly moving to sort of next-gen automation.
Um you know where everyone else is kind of putting their first robots and you know moving things around the warehouse more efficiently.
Amazon is like rolling out new technology that's a lot more.
Seamless in how the people and the automation work together in a in a safe cohesive way so I do think one of the levers Amazon has is.
You know to really add more Automation in those in those fulfillment centers and in that cost to serve.

Scot:
[44:39] Absolutely it's kind of interesting because we started spiffy, which is my on-demand car care company where you're going to come wash cars people are like AI is you know they'll be a robot that can do this in five years I was like I don't know like you know the Boston Dynamics robots are cool but they're not.
Let's just programmed well I don't think it's like that you know it's not thinking and who would have guessed that a I would replace you know the digital retail Talking Heads first and and not.
Not the physical things I think the physical stuff is going to take a lot longer but who knows once these a eyes you have there's Tesla has that that demonstration of theirs was The Optimist that you know it kind of is learning things as it goes and making inference in real time so that is kind of you know we who knows where all this is going to go.
If we back to it now and not science fiction but your term science fiction so.

[45:37] Looking forward for fourth quarter they put guidance out that they're going to see growth in the fourth quarter of 7 to 12% the midpoint of that range which let's see would be 9 and change itself was five and a half percent above the consensus midpoint so this is what we would call A Classic.
Meet Top Line Crush bottom line on the current quarter and then raised the next quarter both top and bottom line pretty substantially so that you know.
This is an important data point when we kind of swirl it together with your Department of Commerce data it does seem like Amazon signaling they're feeling pretty good about the fourth quarter and everyone felt like this was kind of conservative given I didn't put the bottom line number but they felt like that was pretty conservative given what they just did and you know they felt like dad a lot of room to kind of beat that number and maybe it's going to be more like 14 15 percent growth which would be you have a new post covid reversion hi I guess you would look at it where do you did you leave this feeling more optimistic about Q4 or we are your classic Jason curmudgeon myself.

Jason:
[46:54] Yeah no I think I'm mostly curmudgeon e not for Amazon I actually I think their guidance seems realistic to me.

[47:06] On the top line I think the bottom line is just totally up to their whims like if they want to blow away the bottom line they can if they want to invest at all in you know new.

[47:18] New AI capabilities and and keep the bottom line constrain they can do that too but the that, Top Line I think they're likely to hit their guidance and again you know one or two other big retailers might you know have a pretty robust holiday as well but I actually think that that sucks all the, the potential growth out of the market for holiday and so I actually think.
That sort of signifies potentially Bleak holiday season for a lot of other traditional retailers so I guess it's a.
Little bifurcated it's good news for Amazon will see what a Walmart's Q3 earnings look like they announced on November 16th, but I do feel like endemic lie Amazon and Walmart have some, some inherent advantages that are insulating them from some of the economic headwinds and I think that that really just makes things, that much more difficult for the the rest of retail and so I desperately want to be wrong but I think it's going to be, I kind of disappointing holiday for a bunch of folks there also was sort of some if you really listen to the Q&A portion of the investor call, there.

[48:45] The the CFO in particular had some concerns about capacity around Q4 and one of the things he called that was carrier capacity which is interesting because Amazon does so much.
Of their own fulfillment now that they're just way less dependent on third-party carriers but if he's worried about carrier capacity for Q4 you can bet that means that every other retailer ought to be really concerned, about carrier capacity for cube Q4, and so we you know we feel like we talked about that every holiday season but Amazon's got a lot of.
New fulfillment center capacity that's coming online in Q3 of this year and will even in Q4 and so I guess.
If there's one thing that could glitch it Amazon if there's not enough delivery capacity if some of these new fulfillment centers have any, any sort of glitches or delays and coming online that you know that that could be the constraining factor for their Q4 growth.

Scot:
[49:50] There's so sprinkle of curmudgeon e speaking of holiday where can listeners go if they want to get the best holiday news even though we haven't been potting as much as we want to because our day jobs have been absorbing a fair amount of time this year we are going to have some killer content around this holiday and kicking it off we have our very own jacent live not an AI and you're going to do a little webinar for Commerce next what's that all about and when is it.

Jason:
[50:22] Yeah yeah so on Monday November 6 which I think is a week from now if I'm not mistaken we're doing a Commerce next webinar where we'll sort of preview the holiday season so you heard the very early preview just now but we'll go into more detail share some of the third-party forecast for Holiday Good News, all the other predictors are much more optimistic than I am so so we'll hit that on November 6 and then of course there will be all the good real time holiday news that will be will be hitting pretty hot and heavy here on the podcast so we'll we'll have some of the best data sources, right before and after the holiday to kind of talk about where things are going and what actually.

[51:15] And with that I think it is happen again we've used up all our allotted time as always if this deep dive in Amazon's earnings was valuable for you the way you can repay that value is to jump on iTunes and give us that five-star review.

Scot:
[51:31] Thanks everyone and Jason until next time.

Jason:
[51:34] Happy conversing.

EP223 - Covid-19 Deep Dive

Episode 223 is deep dive into the retail impact of Covid-19 pandemic over the next 18-24 months.

COVID-19 TIME MACHINE

Covid-19 is a time machine, propelling commerce five years into the future.

• New Behaviors:
  • Shift to Digital
  • Brand Agnostic
  • Pantry Stocking
  • Nesting
  • Health & Safety
• Recession
• Changing Retail Landscape
• How Will it End

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

Episode 223 of the Jason & Scot show was recorded live on Thursday, June 18th, 2020.

http://jasonandscot.com

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.

EP222 - RBC Mark Mahaney on Amazon

Episode 222 is an interview with Mark Mahaney, Managing Director at Royal Bank of Canada (RBC). RBC is Canada’s biggest bank, and one of the largest in the world based on market capitalization. Mark is one of the top internet analysts in the world, being ranked #1 by Institutional Investor Magazine numerous times. His research on the e-commerce space are all must reads.

In this interview, we discuss his new research note on Amazon, raising their price target to a Street-high $3,300 based on the impact of Covid-19 on it's business. In this broad ranging interview, we discuss Covid-19, Amazon's retail business, it's ad business, amazon web services, logistics, as well as competitors, Shopify, eBay, Etsy, and Chewy.

http://jasonandscot.com

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.

EP221 - E-Commerce Logistics Crunch

Episode 221 covers recent news including logistics moves from UPS, FedEx, and Amazon.

Past Events

• Jason NRF Interview
• Leaders of Change Interview

Upcoming Events

• NRF Global Trends from the Reopening of Stores June 8th, 11am ET.
  Hear from retail industry leaders Jason Goldberg, chief commerce officer of Publicis, and Sucharita Kodali, VP and principal analyst at Forrester, on what retailers are seeing as their global stores reopen post-COVID-19

Amazon News

• Amazon adds 12 new planes (now has 80 on it’s way to 200).
• Prime day moved to September, Summer Sales June 22nd.
• Amazon Grocery Store coming to Chicago
• Lowes- Same store sales up 11.2%, e-commerce up 80%

Other News

• Gucci – Personalized Video Shopper
• UPS/FedEx – Surcharges
• Kylie Jenner – Inflated revenue ($177 million last year)
• Instacart Media Network
• Target Instagram Checkout
• Shopify Marketcap $90B, IBM $114B
• Lickable Screen – Norimaki Synthesizer

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

Episode 221 of the Jason & Scot show was recorded live on Wednesday, June 3rd, 2020.

http://jasonandscot.com

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.

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 Amazon.com, 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.

http://jasonandscot.com

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.

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.

http://jasonandscot.com

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.

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.

Announcement

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.

• https://us02web.zoom.us/j/89837125650?pwd=QTM2QWZKRDlSNFFIU0xnRmZ2VWowQT09
• Password: 877145
• Webinar ID: 898 3712 5650
• International numbers available: https://us02web.zoom.us/u/kuutcaEJm

News

• 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

• Earnings Release (PDF)
• Presentation

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.

http://jasonandscot.com

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.

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.

http://jasonandscot.com

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.

Transcript

Jason:
[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.

Scot:
[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.

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

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

Nick:
[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.

Jason:
[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.

Nick:
[2:14] Everyone needs one.

Jason:
[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.

Nick:
[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.

Jason:
[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 fab.com so.
That may not be good news for you but you’re following in his footsteps.

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

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

Jason:
[5:46] We’re all doing that now.

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

Scot:
[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.

Nick:
[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.

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

Nick:
[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.

Scot:
[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.

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

Scot:
[10:51] Scar tissue.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.
Your.
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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Jason:
[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.

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

Jason:
[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.

Nick:
[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.
So

[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.

Jason:
[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.

Nick:
[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.

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

Nick:
[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.

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

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

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

Nick:
[30:03] Yeah.

Jason:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Scot:
[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.

Nick:
[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.

Jason:
[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.

Nick:
[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.

Jason:
[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.

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

Jason:
[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.

Nick:
[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.

Scot:
[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.

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

Jason:
[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.