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EP332 - Kelly Goetsch Order Network eXchange (onX) Standard
18 Nov 2025
00:55:13
EP327 - Kelly Goetsch Order Network eXchange (onX) Standard
In this episode of the Jason & Scot Show, recorded on Thursday, November 6th, hosts Jason Goldberg and Scot Wingo welcome back Kelly Goetsch, now the President of Pipe17. They dive deep into the evolving landscape of e-commerce, order management, and the impact of AI on consumer experiences, taking us on a journey through the dynamic developments of the industry.
The conversation kicks off with a nostalgic nod to a previous episode, highlighting the rapid shifts in technology and market dynamics since Kelly last joined the show during the height of the microservices boom in July 2021. The discussion emphasizes the transformation of order management systems (OMS) and how current customer expectations have been reshaped by giants like Amazon, pushing brands to adapt to new fulfillment models. Kelly explains how Pipe17 positions itself uniquely in the OMS space, competing not just with traditional systems but also embracing a network-based approach, citing their aim to redefine order operations for the modern era.
Throughout the episode, listeners learn about the innovative concept of the Order Network Exchange (ONX) and the Commerce Operations Foundation, which aims to standardize communications between selling channels and fulfillment systems. Kelly describes the vision of a seamless, integrated environment where data flows between systems in real-time, vastly improving responsiveness to customer orders and effectively managing inventory across various platforms. The team delves into the significance of the Model Context Protocol (mCP), which allows AI to interface more effectively with various applications in real-time, exemplifying the transformative potential of AI within commerce settings.
The conversation takes an intriguing turn as the hosts discuss the current state of e-commerce, focusing on how emerging technologies and shifts in consumer behavior are influencing future sales trends. Kelly expresses a bold prediction that more than 50% of e-commerce transactions will be influenced by AI in the near future. The dialogue also spans the evolution of payment solutions, summarizing the landscape of competing systems and the potential for disruption.
Jason and Scot further probe the notion of the web's declining dominance compared to new AI-driven shopping experiences. Kelly shares insights about the changing nature of discovery channels and how AI can reinvent customer interactions in meaningful ways, potentially replacing traditional web browsing models. Amidst these discussions, Kelly highlights the importance of fostering collaboration within the industry, illustrating how cooperation can lead to overall growth and improved customer experience.
As the episode wraps up, the conversation touches on the necessity for companies to become agile, moving away from prolonged evaluation processes towards a model that values continuous improvement. The discussion reinforces the idea that standards may provide the needed flexibility for businesses to adapt more readily to accelerating changes in technology.
Tune in for this captivating episode, filled with rich insights into the future of e-commerce, AI's pivotal role in shaping customer experiences, and the transformative efforts underway at Pipe17!
If you enjoyed this episode, please consider leaving a review on your preferred podcast platform, and don't forget to subscribe for more engaging discussions and industry insights!
Episode 332 of the Jason & Scot Show was recorded on Thursday, November 6th, 2023.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
0:42 Welcome to the Jason and Scott Show 0:57 Live from Las Vegas 1:09 Guest Introduction: Ekta Chopra 1:51 The Best Panel Ever 3:06 Ekta's Journey to Elf Beauty 4:26 Understanding Elf Beauty 6:28 From Cosmetics to Multi-Channel 8:02 AI in Retail: The Future 14:22 Maintaining Company Culture 22:30 The Impact of TikTok Shop 25:31 Attribution in a Multi-Channel World 29:19 Implementing AI at Elf 34:52 The Future of AI and Retail 40:53 Balancing AI with Humanity 46:21 The Importance of Loyalty Programs 48:04 Conclusion and Farewell
Welcome to a special live edition of the Jason & Scot Show!
In this episode, recorded live from Groceryshop in sunny Las Vegas on September 30, 2025, hosts Jason Goldberg and Scott Wingo celebrate the return of in-person podcasting after three years, reminiscing about their origins in the live podcasting scene and the upcoming 10-year anniversary of the show. Together, they welcome special guest Ekta Chopra, the Chief Digital and Innovation Officer of Elf Beauty, who shares insights into the fast-changing landscape of beauty and eCommerce.
Ekta discusses her journey to Elf Beauty, a brand that has consistently emerged as a bold disruptor in the cosmetics industry. She explains how Elf was innovative from the start, selling $1 cosmetics online at a time when digital platforms were still developing. She proudly notes how the brand has evolved from its original direct-to-consumer model to a successful omnichannel powerhouse with a portfolio that now includes elf Cosmetics, elf Skin, and collaborations with other beauty brands.
The discussion naturally transitions into the role of AI in eCommerce and how Elf is leveraging AI tools to revolutionize customer engagement and product development. Ekta emphasizes the importance of being where their community is by adopting new platforms such as TikTok, where Elf has successfully engaged consumers through authentic connections with content creators. The episode also dives into how the brand is navigating the evolving landscape shaped by AI, including enhancing search capabilities and content strategy to stay relevant and connected with younger consumers.
As the conversation progresses, the hosts discuss the importance of data and customer-centric strategies in the age of AI. Ekta shares the significance of the Elf loyalty program in creating a seamless customer experience and maintaining relationships with consumers. The commitment to "human-in-the-loop" processes ensures effective integration of AI technologies while addressing ethical concerns.
Listeners are encouraged to check out Ekta's informative Substack, "AI Chef," for insights into the intersection of AI and commerce, where she shares her ongoing learning journey and best practices for integrating AI into business operations.
This exciting episode wraps up with a nod to the future of commerce, the balance between technology and humanity, and the continuing evolution all brands must undergo as they adapt to the changing marketplace.
Join us for this engaging conversation filled with wit, humor, and a valuable glimpse into the future of beauty and eCommerce.
**Episode 330 of the Jason & Scot Show was recorded live from Groceryshop on September 30th, 2025.** Don't forget to subscribe, leave a review on iTunes, and follow us on social media for more exciting news and updates!
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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.
EP322 - 2024 Holiday Recap
11 Jan 2025
00:45:33
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.
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!
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.
EP232 - rue21 CEO John Fleming
13 Aug 2020
00:56:20
EP232 - rue21 CEO John Fleming
John Fleming is the the interim CEO of rue21. John was formerly the global e-commerce CEO for Uniqlo, Chief Merchant at Walmart, and CEO of Walmart.com. He has also served as a board member at Bed Bath & Beyond and Untuckit.
rue21 is an American specialty retailer of women's casual apparel and accessories with 670 stores that primarily designs and fabricates its' own products.
In this broad ranging interview, we discuss the challenges and opportunities presented by Covid, Amazon, the direct to consumer model, and the future of retail.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 232 of the Jason & Scot show was recorded live on Thursday, August 13th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP231 - The Forever Transaction author Robbie Kellman Baxter
05 Aug 2020
01:00:19
EP231 - The Forever Transaction author Robbie Kellman Baxter
In this broad ranging interview, we discuss well known subscription based brands including Dollar Shave Club, Blue Apron, Stichfix, BirchBox, and Netflix. We also cover issues including subscription fatigue, cancelation friction, and Rundles.
You can find out more about Robbie's consulting work and her podcast at her website.
Disclosure: links to Amazon are affiliate links.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 231 of the Jason & Scot show was recorded live on Thursday, July 30st, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP229 - NRF NXT, Google Commerce, Big Commerce S-1
24 Jul 2020
01:02:04
EP229 - NRF NXT, Google Commerce, Big Commerce S1
Jason recent events:
NRF NXT Tuesday, July 21 11:45am–12:30pm EDT "Future of Platforms"
CommerceNext July 29th 4:10 pm EE "Lesson Learned and Thoughts for the Future"
Industry News
NRF NXT was this week, a digital commerce show from the National Retail Federation (the successor to the Shop.org tradeshow). You can still register for free, and watch all the sessions on demand.
Google has eliminated commissions for it's "Buy on Google" feature on google shopping, as well as offering PayPal and Shopify payments.
Goldman Sachs equity research published: "Global Internet eCommerce's steepening curve: Raising global forecasts & identifying new winners" July 20,2020. Scot breaks it down.
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.
EP228 - Bonus Edition: Verizon Panel - The 5G Future of Retail Post-COVID
22 Jul 2020
00:55:09
EP228 - Bonus Edition: Verizon Panel - The 5G Future of Retail Post-COVID
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.
NRF NXT Tuesday, July 21 11:45am–12:30pm EDT "Future of Platforms"
CommerceNext July 29th 4:10 pm EE "Lesson Learned and Thoughts for the Future"
The Great Debate
Are we in a long-lasting, deep recession, or is at an artificial recession will quickly bounce back from? What should retailers and brands be planning for. Jason and Scot has it out. Who will be right?
Amazon News
Amazon Dash Cart
Echo Frames are frames are shipping
Q4 restrictions on 3pl warehouses
Prime day in October
Employee Health Clinics
Amazon becomes worlds largest advertiser spending $11B a year
Earning results next week
Other News
US Census Bureau Data for June is out. US Real Retail sales were up 5.8% in June, (down from 17.7% in May) but representing a 2nd month of retail recovery. Total retail sales back above Feb levels. (Numbers adj for inflation and including auto). E-commerce up 23% YoY.
Nike leaves Google Shopping
Google shopping fast shipping tags
Nike RISE new store concept in Guangzhou, China
Walmart and Amazon healthcare battle
Walmart+ coming soon?
Is digital grocery profitable?
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 227 of the Jason & Scot show was recorded live on Friday, July 17th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP226 - Blue Cape Ventures founder Hendrik Laubscher
10 Jul 2020
00:58:51
Blue Cape Ventures founder Hendrik Laubscher
Hendrik Laubscherger (@henlaub) is the CEO and Founder at Blue Cape Ventures. He is a subject matter expert in global marketplaces and cross-border trade. He publishes a very valuable weekly newsletter which you can subscribe to here.
In this broad ranging interview, we discuss global marketplaces, the latest events at Amazon, comparison shopping engines, direct to consumer, cross border trade, venture capital, and the future of commerce.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 226 of the Jason & Scot show was recorded live on Friday, July 9th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP225 - Jonah Berger author of The Catalyst
02 Jul 2020
00:48:05
EP225 - Jonah Berger author of The Catalyst
Dr. Jonah Berger (@j1berger) is a marketing professor at Wharton, and author of New York Times bestsellers Contagious and Invisible Influence. His latest book, The Catalyst: How to Change Anyone's Mind (affiliate link), introduces a revolutionary approach to change. Successful change isn't about pushing harder or exerting more energy. It's about removing barriers. Overcoming resistance by reducing friction and lowering the hurdles to action. Discover the five hidden factors that impede change, and how by mitigating them, you can change anything.
In this broad ranging interview, we discuss the major themes from The Catalyst, including the five barriers to taking action, and strategies to overcome those barriers. Listeners will learn not only how to persuade customers and prospects, but also how to be a catalyst for organizational change within our companies.
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.
EP224 - Cohort Analysis and CLV with Daniel McCarthy
26 Jun 2020
01:08:32
EP224 - Cohort Analysis and CLV with Daniel McCarthy
Daniel McCarthy (@d_mccar) is an Assistant Professor of Marketing at Emory University – Goizueta Business School, he's one of the industries top thought leaders in the field of customer lifetime value (CLV). In this episode we discuss how CLV and customer cohort analysis can be be used operationally within e-commerce companies, as well as how customer data can be used to calculate a companies true enterprise value, customer-based corporate valuation (CBCV).
Dan co-founded a predictive analytics company, Zodiac, which was later acquired by Nike. He'd made news several times by applying his CBCV to popular public companies using their public disclosures.
Listen to this episode just to hear Scot say "Goizueta."
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.
EP321 - Amazon Q3 2024 Earnings Recap
05 Nov 2024
00:47:20
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:
• 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.
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.
EP223 - Covid-19 Deep Dive
19 Jun 2020
01:07:01
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.
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
09 Jun 2020
00:39:20
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.
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
04 Jun 2020
00:46:07
EP221 - E-Commerce Logistics Crunch
Episode 221 covers recent news including logistics moves from UPS, FedEx, and Amazon.
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.
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
21 May 2020
00:50:39
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.
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
07 May 2020
01:04:00
EP219- Live Listener Questions
Episode 219 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 219 of the Jason & Scot show was recorded live on Wednesday, May 7th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP218 - Amazon Q1 2020 Earnings and Covid News
01 May 2020
01:14:56
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.
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
26 Apr 2020
00:50:42
EP217 - OfferUp CEO Nick Huzar
Episode 217 is an interview with Nick Huzar (@nickhuzar), the Founder and CEO of OfferUp (@OfferUp). OfferUp is the largest mobile marketplace in the U.S, facilitating consumer to consumer sales of second-hand goods.
In this interview, we discuss OfferUp's recent fund raise, the acquisition of LetGo, and the state of C2C Marketplaces during Covid-19.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 217 of the Jason & Scot show was recorded live on Thursday, April 23rd, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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.
EP216 - Marketplace Pulse founder Juozas Kaziukenas
17 Apr 2020
00:58:19
EP216 - Marketplace Pulse founder Juozas Kaziukenas
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.
EP215 - What to read during a pandemic
09 Apr 2020
01:13:03
EP215 - What to read during a pandemic
This episode is a list of suggested resources to read for those looking to do some professional development in the commerce space. (all book links are amazon affiliate links)
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.
EP214 - Stifel Managing Director Scott Devitt on Covid-19
02 Apr 2020
00:56:46
EP214 - Stifel Managing Director Scott Devitt on Covid-19
Episode 214 is an interview with Scott Devitt, Managing Director of Internet Equity Research at Stifel, in which we discuss the potential economic impacts of Covid-19.
In this interview, we discuss the travel, hospitality, and e-commerce industries, with a deep dive into some of the factors that will impact Amazon.
To receive Scotts research and analysis, send an email to him devitts@stifel.com and ask to be added to his distribution list.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 214 of the Jason & Scot show was recorded live on Thursday, April 2nd, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP320 - News, First Half Recap, Early Holiday Preview
17 Sep 2024
00:46:27
EP320 - News, First Half Recap, Early Holiday Preview
0:23 Welcome Back After Hiatus 2:51 Upcoming Events in Retail 7:28 GroceryShop 16:02 Retail Growth Trends 21:28 Concerns for Holiday 2024 30:27 The De Minimis Provision 40:27 TikTok's Impact on E-commerce
In this episode of The Jason and Scot Show, we discuss the current state of retail and e-commerce.
We analyze macroeconomic factors impacting the retail landscape, noting a 3.4% growth in core retail and a maturation of e-commerce, dominated by giants like Amazon and Walmart. We address consumer sentiment heading into the holiday season and the potential influences of the upcoming election and interest rate changes.
The episode also covers the role of AI in enhancing personalization experiences, challenges faced by dollar stores, and supply chain issues. We conclude with insights into Amazon's recent earnings and their strategies to engage younger consumers through TikTok Shops.
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.
Download the complete 54 page deck of all my insights from the US Dept of Commerce Retail Data for the first half of 2024 here https://rgeek.co/retail2024
Transcript [0:23] Welcome Back After Hiatus Jason [0:23]Welcome to the Json and Scott show this is episode 320 being recorded on Monday september 16th 2024 I'm your host Jason retail gee Goldberg and as usual I'm here with your co-host Scott Wingo. Scot [0:38]Hey Jason and welcome back after a very long time, Jason and Scott show listeners Jason our last show was an early May so it's been about a little over a 4-month hiatus and when people ask me I always blame you do you blame me. Jason [0:57]I do blame you and I'm bitter because in my mind. Nobody's really complaining to you but like I I've gone called out on stage by like I've I've been heckled by people that are like what are you going to do a new show. Scot [1:15]It's part of our it's it's a Nintendo like strategy where you you dribble you know if you could really constrain Supply scarcity that drives demand so yeah. Jason [1:25]Yeah it it we are we are playing 3 dimensional chess in a world of checkered players. Scot [1:31]Exactly the the real reason is as Chief digital Innovation retail and payments and grocery officer your title's gotten bigger and your your more famous your allies on a plane I can never record because I'm like how about now he's like Paris how about now Australia how about now India so you've been flying all over the world. Jason [1:52]I sadly I have been it does feel like travel is back there there have been more International trips this year than any year before coid so I I can I can only partially deny that accusation. Scot [2:08]Cool well we're glad that we have you here for for an hour give us an update what are you any uh show you know what's going on out in the world of retail as you've been expanding the globe for the Json and Scott show. Jason [2:20]Yeah it's been another Super interesting year for retail we'll we'll certainly get into some of what we think are the key topics that have been planned out this year but I have attended a bunch of events I I can't even remember which ones where since this this last show visited a bunch of customers out in the field which is always great learning new things from them [2:51] Upcoming Events in Retail Jason [2:40]but the upcoming show is in early October is grocery shopping in Las Vegas so I'll be moderating a panel on. AI enabling Next Generation personalization, at at that show which I always look forward to to grocery shop and then a week later they're they're shop talk is moving their show their other stuff to Chicago so they're going to have their first, fall shop talk that will be in my backyard in Chicago so I'll be curious to see how if the world wants another another iteration of shop talk every year. Scot [3:18]Yeah give us the behind-the-scenes did you like throw down the gauntlet and said shop talk must move to Chicago or I'm not going to attend or and run all the speaking stuff. Jason [3:28]I basically did that with everything I told every client that they had come to Chicago I told shop talk and I told you you had to come here to record the podcast and yeah you'll note we haven't had a lot of podcasts and you know I still have the same 3 customers here I've always had. Scot [3:44]But you got to show them to me for at least that's a 1 w. Jason [3:46]I did but they really just added a show they're just looking for more Revenue so like it seems like it's probably not. Not just me but I feel like your LinkedIn feed has been more active than me and mostly with accolades for for the the fund that you helped kick off. Scot [4:05]Yeah yeah so the just to update everybody I'm in a post spiffy world so started spiffy in 2014 and then, you know decided to to we got to kind of north of a 60-ish million run rate which is plenty big lots of employees lots of things going on and I had started this little side hustle well first of all I started this thing for our little local ecosystem here called the tweener list in 2015 which was just a little passion project and then started a little fund around that called the tweener fund which invests in early stage startups so I've I've really enjoyed that and decided to, move on from spiffy and make this my full-time gig so have been really enjoying doing that and actually have. I'm sure you do this where you have a list of things you're kind of like want to learn about and you can hardly ever get to it and I've been doing a lot of that the last 4 weeks and 1 of the big 1 is AI I've been going really deep on AI and it's been been a lot of fun to play around with all the cool new stuff going on there and I got a couple interesting ideas I'm not going to reveal anything but there's some interesting if you think from a AI native remember how we used to talk about mobile native well now thinking AI native I think there's some interesting things that could happen in the world of e-commerce so I'm going to I may go back to thinking more about e-commerce so we'll see. Jason [5:23]Come on back though we're we're waiting for you the water is fine man they're they're for your point there's a lot of super interesting stuff the grocery shop will be fun a a show after that that I'm looking forward to is NRF because you know they have this Innovation Pavilion and they've kind of upped the the, rigger around recruiting exhibitors at The Innovation Pavilion this year and I think it's going to it's a big year for Innovation so, probably be a cool time for all of us to meet in the New York in January with global warming it's not even cold anymore. Scot [5:58]Not been there not too long ago and it's still pretty darn cold for this North Carolina. Jason [6:04]Oh okay fair enough fair enough I'm just last year was the first time it snowed in like 2 years in New York at at in her uh and then. Scot [6:10]Okay yeah yeah last time I remember trudging through like 6 inches to get to your hotel which was painfully far away. Jason [6:17]I mean that's yeah that's been my normal life so it's been weird that you haven't had to take the heavy coat to New York so although I wouldn't recommend that if you go to New York in January I'd bring that vote uh. And, I feel like in addition to everything else I know we're going to jump into the retail but all the Apple software updates dropped today so cool new icons and emojis and and delayed chats so I can have, like Emoji based chats hit Scott Wingo at every hour of the day now it's amazing. Scot [6:48]Nice I look forward to that at 4:00 a.m. I'll have my do not disturb on to counteract your your attack. Jason [6:53]Yeah although I may need you talk about new things you want to learn 1 of the things I want to learn is how to make Do Not Disturb work right in the the modern app like the system because I feel like all the focus modes have made it complicated. Scot [7:05]Yeah I have to have you know that that kind of funny YouTube where the dad puts on 6 seat belts that's me putting on do not disturb I have to do the physical thing check the moon do my watch hit D and D in a profile and then that's that that combination of things I don't know which of them does it but that seems to stop everything. [7:28] AI in Grocery Shopping Jason [7:23]Yes I feel like I'm in a similar boat but it would be interesting to figure out how to do it for as intended. Scot [7:29]Yeah or just we know it works so just keep doing it do so just give us a preview of grocery shop can AI do better recommendations than kind of the old school way we used to do it. Jason [7:42]So 1 would hope certainly it can do it at greater scale than we used to do it there's some anecdotal evidence that it's. Better it you know part of it I'm I'm curious to talk to some of these folks So So Meta will be on my panel. They they have a strong POV you know what's going on in the digital ad space right now is all the the ad platforms are trying to talk you into going hands off the wheel and turning over. The bidding to their AI engines and I would say at the moment it's an uneven playing field there like if I if I talk to my. Performance media folks they'll tell you that the the AI robots from some of the platforms are very effective and tend to outperform a manual bidding and on other platforms that they they wildly do not so. Jason [8:33]That it'll be interesting to kind of hear their perspective 1 of the panelists is hungryroot, which to me is a super interesting example they they're truly doing AI based recommendation so they're essentially they're a ger. That is mainly filling out your whole cart for you proactively with AI based. Recommendations so you manicure a Char a cart that they recommend to you versus you hunting and pecking for each individual item and putting it in your cart and they they have some pretty interesting sales metrics using that methodology so they're all in, there you might almost think of them as like the Stitch fix of food and so they'll they'll be interesting to hear, and then my friend Ben from Endeavor and Endeavor may be familiar to some listeners not to others they're the largest adult beverage and hospitality company in Australia. And so they they have a nationwide chain of beer and wine stores that are doing some really interesting personalization hubs and kind of Shifting all of their customer touch points to to 1 to 1 so. I'll be curious to hear how effective they all claim to be. Scot [9:47]How do these it seems like you're going to need some training data like how do they Kickstart that do they look at like your email or credit card data to kind of get an idea for what you like or they just kind of start you at a demographic Baseline and build from there or do you know. Jason [10:01]Yeah well so in many cases you've been a customer of theirs for a long time right so they have you you have a significant amount of personal data I mean Walmart launched a predictive cart feature, in January that's in beta so I think it's only available to a select group of. Of Walmart Plus members but yeah it you it's trained on all of th those members pass purchases leading up to the launch of that product. Um so I yeah good question what signals do they use for a net new customer but I think the first crop where customers where they they already had a significant history. Scot [10:40]Got it cool well that's gonna be a good panel riveting it's also pretty wild they have them so close together now that's like 10 days you're gonna have to kind of like Zip back home rest for a couple days and jump in. Jason [10:50]I I do I was going to zip back home anyway so it's not an inconvenience for me but I my heart does go out to all the the shop talk folks that that have responsibilities of both shows because that I'm certain is not fun for them. Scot [11:02]Cool which of the shop talks is bigger now the. Jason [11:09]Shop talk is still the biggest show that's their March show um and it's it's north of 10,000 people so it might have been like 11,000 this year I'm not sure they, release an official number so hopefully I'm not disclosing something proprietary and grocery shop is only about half that size. So think closer to 5 500 attendees and then this fall shop talk this will be the first time so so. All all bets are off I I certainly wish them no ill will but part of me thinks it's a it's a big lift to get people. To add yet another event to their schedules. Scot [11:48]Yeah maybe the Fallen will be more Regional like you know folks in the midwest or east. Jason [11:53]Yeah I mean that that would be my initial assumption but you know they've they've been able to build up some really good shows in the past so so you know we'll see how they do with this 1 I certainly, would like to see a good show in Chicago they're in as you would remember in the old days you know there was like internet retailer here which still exists but I would argue it's it's probably well past its prime. Problem is when you did the orientation and used to teach everyone how to do e-commerce on the first day. Scot [12:20]Amazon yeah that was fun that was they were like well you do this and I was like well how many people come and they're like I usually 100 and I did it and there's like 700 people say dude you vastly underestimated your crowd size at this thing the um. Jason [12:32]I know I know you're a big draw. Scot [12:34]Yeah well of course the uh and what was always funny is people would want to meet I forget what hotel it was either Hyatt, or a Hilton and there was 4 of them around that convention center and like No 1 could ever find each other at that that Hotel chain because they know 1 realized they all had the same name I'm sure that's still a problem. Was always funny to watch the chaos ensue. Jason [12:54]Yeah. Scot [12:55]The only thing works is in Las Vegas when you're at the Mandalay Bay when the hotel is called the hotel and the bars called the bar it's like a whose first kind of scenario trying to get. Jason [13:04]Yeah I'm sure they thought that was really clever when they. Scot [13:07]Yeah that was the worst worst naming. Jason [13:08]When they first named it yeah. Scot [13:11]Cool well you guys have been waiting for it and we are recording this mid-september all of our friends and Retail and e-commerce are making their final changes to their sites they're implementing their new features they're putting new vendors in place and going through the final QA test, before the big October code freeze so. This is when the Pod turns to really thinking about a holiday of 24 it's a fun to believe that we're already here this fast and Jason to tee that up let's set the table a little bit you put out a really interesting kind of adjacent Mega deck on LinkedIn that was really good and I thought maybe we could go through a couple slides of that and kind of tee up, you know how the year has gone so far and then that'll take us into kind of a little bit of a prediction of how holiday 24 is going to shape up. Jason [13:58]Yeah yeah yeah happy to do it thanks man so maybe setting the table. I don't want to go back and get too deep we'll put a link to the deck so anyone that wants it's like 54 pages of data visualizations about about the Commerce industry so anyone's welcome to download it and check for themselves but the the highest level metric that I like to think about is this thing that NRF calls core retail so that's, all of retail sales from the US Department of Commerce US Census Data uh except restaurants Gas and Automobiles and. Jason [14:33]If you go back in time and you say how how much does core retail grow year-over-year for the last 20 years core retail grew about 3.9% a year. And then of course we had this this huge anomaly more recently which was Co. And you know I like to joke that like well you know some people feel like oh man those were really hard years for retail what they forget is we mailed 5 trillion dollars in extra cash to everyone and didn't let them spend any of that on flights or Taylor Swift tickets. And so those were actually the greatest growth years in the history of retail like we like the the peak year was like 14% growth for core retail. So we had that this like Giant mountain of unusual growth 3 years that were twice as big as the normal 3.9% growth, and then 2023 happened and 2023 was right back to the average 3.9% again, and so now we're halfway through 2024 and we're actually below that average a little bit so we're at 3.4% growth year to date. Which is you know meaningfully off from 3.9% like that you know these are these are big numbers so that's 2.9 trillion dollars worth of sales year to date. Jason [15:50]And the you know. [16:02] Retail Growth Trends Jason [15:53]When we look at holiday I I mean we'll we'll talk about it in a minute but you know that's kind of setting the the table for retail for holiday but of course. People on this podcast are probably particularly interested in e-commerce and will know that historically at least in the modern era e-commerce has grown much faster. So the problem with talking about the average growth rate of e-commerce is of course it only started about 24 years ago and so it's. You know the the rate of growth has has decreased over time if you look at the last 24 years e-commerce is growing 17% a year versus that 3.9% for retail. Over the last 10 years right before coid e-commerce was growing at 12.4% a year. Jason [16:37]So I kind of tell people think about you know e-commerce typically growing at 12% a year retail typically growing at 4% a year is kind of the. The the basic ratios so 4 times faster but this year 2024, retail is only growing at 3.4% and e-commerce is only growing at 7.5% so still twice as fast growth but a meaningful slowdown from the, historic average and you know at the risk of of giving away a spoiler. I I don't think that's like some bounce because of a spike during Co I actually think it's just an indication of the maturing of. Of e-commerce and e-commerce is a you know increasingly big chunk of of the whole retail pie it's. E-commerce is 21.8% of core retail so almost 22% so you know we'll spend over 7 trillion dollars this year and you know well over a trillion of it will be e-commerce. Scot [17:38]Interesting cool so that's the full year. Jason [17:41]Yeah well. Scot [17:43]Basically kind of an average year. Jason [17:45]So so last, yeah so so well so last year e-commerce had already started slow down it it grew again the average was about 12% it grew 10% last year and we're only growing 7.5% year to date this year. Scot [17:59]Okay got it okay. Jason [18:01]But. As I keep pointing out to people the story depending on who you are the story is either vastly better or worse than that those industry averages I just shared because the real story of of retail in 2024 is. This this concept of bifurcation right that there are 5 retailers that are vastly outperforming those industry averages. And they are eating up all of the growth in the industry so these 5 retailers represent 51% of all that growth so if you're 1 of those 5 retailers, you're having a great year if you are not 1 of those 5 retailers you're having a way worse than average year in in most cases so that's, Amazon which alone represents 16% of all retail growth it's Walmart which represents 15% of all retail growth, and it's it's Tik Tok which, you know was well under a billion dollars in sales last year and is trending towards twenty billion dollars in sales this year so they're the fastest growing retail, in the history of mankind and then rounding out these top 5 Growers are the the fastest growing return history of mankind from the last 2 years T-Mobile and shien so, it's kind of T-Mobile Sheen Tik Tok Walmart and Amazon's world and the rest of us are just living in it which is you know somewhat alarming for the rest of retail. Scot [19:26]Yeah yeah definitely is it seems like those the chinese-based guys seems like they're taking share from somebody but it's not Amazon is it dollar stores because it's kind of like this convenience-oriented lower price kind of stuff right. Jason [19:42]Yeah so it it it it's it's inexpensive variety Goods the, it it very likely is taking share from from the the dollar stores the dollar stores have not fared well which historically, you know there's there's some economic headwinds there's a thing going on in the United States that I I like to call A vibe session which means, some of the the economic fundamentals are actually pretty decent but people are really, consumer sentiment is down and people are really cutting back on their spending there's a lot of evidence that people are trading down and and trying to be more frugal, and that kind of climate normally has favored the dollar stores and yet you know they're they're definitely performing below these, these industry averages so certainly a chunk of of the Tik Tok team mushy and growth um is coming at their expense. Some of the sheen growth is coming at the expense of luxury which you know historically luxury has been been insulated from downturns in the market but you know we're starting to see. Some softness in their earnings and for sure softness in their guidance. So you know the you know people that would have bought more designer stuff maybe they're still buying some designer things but they're mixing it in with really affordable fashion from. From shien like I I am sure Amazon is losing some sales to Tik Tok shops that they would like to have but for your point. Jason [21:08]Amazon still you know growing much faster than the rest of the market and so yeah it's not it's not eroding Amazon's any share it's just eroding their Tam. [21:28] Concerns for Holiday 2024 Scot [21:19]Got it okay so that's the setup so e-commerce has slowed down a bit retails kind of doing its thing what what does that mean for holiday. Jason [21:29]Yeah so I I have become Debbie Downer I am concerned about holiday this year, so if we just kind of extrapolate out these Trends again 3.4% growth is below our historic average so if something dramatically didn't turn around if consumer sentiment didn't get a lot better. For this holiday you would expect this to be a slightly soft. Holiday and I I really think this trend of winners and losers is likely to continue through holidays so I think you're going to see a handful of retailers perform really well holiday at the expense of everyone else and I. I I think on average that's going to mean that revenue is kind of similar to traditional holiday growth. But I I suspect that that's that margins, will be even further eroded than usual so so usually for Holiday retail grows about 4.3% e-commerce grows at 12.9% I don't think we'll see either of those numbers for holiday this year and I think. Jason [22:34]You know if if retail grows at 3.7% and Ecom grows at 8% you know I still think you're going to see Amazon Walmart and Tik Tok grab, disproportionate share of that holiday spend which is going to be bad news, for a lot of other folks and those are just kind of the macro Trends you have to layer in that that there's a couple of reasons to to be worried about this holiday regardless of the trends going into this holiday so. We have a different calendar a number of days in the holiday season every year, and this is our worst year this is the year when we have the fewest days and holiday which actually you know historically does depress sales if there's fewer days to shop then then we sell less stuff and so this is the shortest holiday season that we ever get, and historically an election year is not favorable to Holiday spend right so traditionally there's some some anxiety and you know. Competition for attention, that plays into these November elections that impacts holiday and I I think you know this will be the most polarized election ever and so I think it's you know no matter what the outcome is half the country is going to be pretty depressed and that that likely you know translates into not an awesome holiday so so we got some things working against us. Scot [23:53]Yeah so if that's the headwinds I'll throw in a Tailwind so as a our celebrated CNBC junkie the all they talk about is the Fed meeting tomorrow where you know it's pretty clear the fed's going to lower interest rates and the big question is is it going to be a quarter point or half a point I think I I I'm not a prognost prognosticator on that I think whatever they do it's going to be wildly popular and relief a lot of this kind of interest rate pressure we've everything's been on so even if it's only a quarter point I think it'll be somewhat euphoric for the market and for for hopefully for consumers to feel like interest rates are coming down a little bit so maybe that'll like bump start some house buying and selling and they'll be a little bit more liquidity in the market so so I'm going to think of that as more of a Tailwind so there's some positivity going on there do you worry about the election because I think it's just going to take forever to figure out who won and, everyone's going to contest it and it's gonna be like this unknown thing for a very long time so we'll see how that goes. Jason [24:55]Yeah and you live in a swing state so I can only imagine what's happening to your media. Scot [24:59]Yeah we just kind of we can't even like the male is an inch thick full of like Gunk and you kind of have to sort through all the stupidity I'm not a political person to get to like you know the bill and make sure you pay it and that kind of stuff and then the you know, at the TV is just crazy but thank goodness I'm not in Pennsylvania I think they're getting just totally hammered right now. Jason [25:18]Yeah probably so and In fairness while we're covering Tailwind like this could be a headwind or a Tailwind but like I will say in general the macros are getting a little better right so inflation has been steadily coming down the 1 the most stubborn version of inflation had been. In in this core retail category is is food and even food you know they're all down below 3% which like pre-pandemic they were kind of in that, 2.1 2.3% and the FEDS sort of stated goal was to keep inflation between 2 and 3% so, you know we still had all the pain of the high prices over the last couple of years but like. Prices really have started to come down so on the 1 hand that helps consumer sentiment you know just like in announcement from the FED would and so that that's favorable you know most of the jobs reports have been you know pretty good there's there there's some decent news that in theory should make people feel better, the flip side is inflation going down actually hurts retail sales because the stuff they sell is cheaper and so when, comping with low inflation against a previous year of higher inflation it actually can make your comps more challenging. So yeah it's a a complicated mix of stuff going on. Scot [26:35]Yeah does that if you boil all that down do you end up with a like a semi prediction like if your clients were to say to you give me a number what what do you spit out. Jason [26:45]Yeah I I'm saying buckle up I normal retail holiday growth is 4.3% and I think we're retail growth is going to be below 4 this year. Margins vary wildly depending on the category but I think average margins are going to be down across the board like there there are going to be some some outliers like the the interest rates have really been brutal on the Home Improvement guys right like if you know people can't get loans they're trapped in their house uh they don't buy new houses they spend a lot less in Home Depot and Lowe's and I think it's pretty likely Buy holiday that there's some, some movement in the in the interest rates which like at the at the very least is going to Goose. That housing market which is going to have a trickle on effect to the the Home Improvement guys so I I suspect they'll have. Better holiday than they have the last last couple of years but overall I I'm not optimistic, you know with the caveat that some some really good operators or some people with a really clever model like the Amazon Walmart Tik toks are are likely gonna you know have a really good run this holiday. Scot [27:51]Okay cool I will I do not have a prediction so I'll stick with yours. Jason [27:58]Usually that doesn't work out well for you but thanks. Scot [28:01]I have to go review our it's been so long I have to go look at our New Year's predictions because there's always start to be coming to fruition here soon. Jason [28:09]Yeah yeah yeah I've kept half an eye on some of them and there's there's going to be some some are going to come down to the wire some I I would have thought were safer but like you know surprisingly Amazon's pretty slow getting their their AI stuff out the door so we'll see. Scot [28:23]Yeah yeah there's the so this is a sidebar that we didn't really prepare for but did you see they tried to build their own and they kind of couldn't and they had to punt and they're using and. Not anthropology the 1 that starts know they're using anthropic. Jason [28:41]Anthropic that's right yes I did see that um. Scot [28:44]Yeah so that's got to be embarrassing I mean they invested like some bazillions of dollars. Jason [28:47]To I mean Amazon is kind of a not invented here company so like when they have to give up on the internal initiative and and rent someone else's Tech that that probably doesn't feel very good. Scot [28:59]Yeah I made the mistake of changing my action button on my phone to the chat GPT voice and then I've been I switched from Google in my search to perplexity so I've gotten used to asking these pretty complex questions and then I chat with Alexa and I feel like I'm talking to a kindergarten I'm like I'll even like ask it something you know play this song from this album by that artist and it loses itself halfway through half the time I feel like it's brain is melting and it's just like getting Dumber even though I know it's at a Baseline. Jason [29:29]Yeah no absolutely and and I would say it's even more acute in my household because I live with a 9-year-old um and and his default is that, it should know all of this stuff right and it asks he asks these really complicated questions and I like can't tell you how many times a day I have to say to my son she's not going to know that. Scot [29:50]Why dad why. Jason [29:54]But but for your point hand him like, you know he basically lives to play Roblox and watch you to Awful YouTube videos um and I can hand him chat gbt 40 and like it's about as entertaining as Roblox to him which is amazing. [30:27] The De Minimis Provision Scot [30:13]Gotcha does uh so you mentioned Teemu and all that jazz you have been tracking this rule that allows China to use our postal system to send stuff free what's going on with that puppy. Jason [30:27]Yeah so that is famously called the Dominus provision and it's this rule that got. Put into the US Customs Enforcement in like 1938 and the idea was hey if people are going to ship stuff in the United States like we want to charge tax on it we want to charge duties and we want to have rules about what kinds of things from a safety standpoint and from a a human interest standpoint can be imported into our country right and so so normally you ship something from another country it has to go through inspections it has to go through duties but gosh there's this new kind of peer-to-peer marketplaces and there's eBay sellers selling stuff in London to people in the US and we don't have enough Customs agents to inspect all these little, packages that Scott Wingo is helping people sell on the internet right so we're going to pass a rule called the Dominus provision which is if you ship something that has less than 5 dollars of value, you don't have to declare it you don't have to pay taxes on it it's not getting inspected by anyone and it was really just a labor savings for for the the Customs agents in like you know originally in 1939 when like it was it was an e-commerce it was mail order back then. Jason [31:44]But in like 1996 that that. 5 Dollar limit got bumped to Dollars and then in 2016 the hundred dollars got bumped to $800 and that really opened the floodgates that's when companies like shien and tiemoue figured out that hey instead of filling up a container of stuff, and shipping that container to the US and having to pay C duties on that container and having that container come over in a boat and take a long time to get here I can put each. Sale in an individual envelope, and Air Freight it to the US and it'll be under the 800 hour minimum so I won't have to pay duties on it I won't have to get it inspected. And you know these these factories in China, and these these marketplaces of these factories in China you know quickly built a huge business shipping individual packages to Americans right and so that's. Jason [32:48]You know today they they quote unquote exploit what we call the Dominus provision. To to ship all those packages right and so there's been a lot of complaints by people that have to compete with the, the those those you know cheap Imports and there's been a lot of saber rattling in Congress about how you know this is exploitation and all these things, and so last week Biden proposed, that he was going to issue an executive order that goods from China no longer qualify for the de minimis exception and so what that would mean is regardless of the value. Every single package that comes from China would have to go through customs would have to be inspected would have to meet all of our import requirements and so, you know some people are looking at that and saying oh man that's going to put a huge dent that's going to make shien goods and Tik Tok goods and tiemoue goods more expensive. And that might rebalance you know all of these trends that that you and I have just been been talking about. I regrettably am a little more skeptical that it's going to have a huge impact. Jason [33:58]Couple of other sort of interesting facts to know about this Dominus thing so first of all. Not going to shock anyone there's a lot of american-based companies that are now taking full advantage of this de minimis Clause right so. Jason [34:12]Not going to name names on the podcast but there's a lot of big sellers that are us-based that import containers of goods to Mexico and then put those, unpack those containers in Mexico and ship, the goods in individual packages from Mexico to the US so they get relatively fast delivery and they get to bypass all the duties and tariffs and you know that's that that's being done by by a number of like big famous, uh retailers and brands in the US so this kind of Dominus rule if it if it affects goods from China. I guess the first thing I would expect to see is Tik Tok and team who are going to start shipping containers to Mexico and importing them from another country right and so we're going to get kind of a a wacko, situation and if you if you Google section 321 which is the the. Part of the the Customs law that that that amendments provision is in section 321 shipping you're going to find that there's dozens of 3pls that specialize in in doing this for you so. I think it's going to be harder to knock down than 1 executive order but the bigger problem is. Tik Tok to and shien together are by some estimates sending about 900,000 packages a day. Jason [35:33]2 of the United States and so if you could magically wave a wand and say all 900,000 of those packages have to be inspected before they can come in. Think what that would do to the rate of goods flowing into the United States right like all everybody's Imports all the containers would get slowed down because, we have the same number of Customs agents we've always had an executive order can't hire a bunch of new Customs agents that would require new budget from Congress and that seems a lot less likely. So just like the reason the Dominus was there is we didn't have enough people to look at all these packages and that was when they're way less packages than there are now so. If we could somehow like do away with Dominus like would it, reduce the number of shipments probably but it still would be way more shipments it would still overwhelm well customs and would likely suddenly mean all those goods that are I guess holiday Goods for the most part are already on the way are already here but like, it it would probably have a dramatic effect on on q1 availability of goods because it would just gum Up Customs so while I I like the ex the spirit of trying to, update the laws to have a More Level Playing Field I kind of doubt in practice that 1 Executive Order is is going to fix this super complicated problem. Scot [36:51]Yeah now that we're through earning season did you hear anything else interesting in earnings that we were not able to do an Amazon's earning podcast there wasn't really anything super exciting other than. You know kind of more of the same I think you know the AWS did better than a lot of people thought which was good, and that everyone's really focused on that because of the AI stuff everyone's worried Amazon's going to lose share but they seem to be holding their own and then e-commerce and, the retails were were kind of in line so they didn't really slow or speed up, if you have any there was a little color around Prime day but nothing Earth shattering any other interesting things from earnings Seasons you saw. Jason [37:31]Yeah so so again like what you've you've kind of had 3 kinds of retailers right you had those 5 retailers that I mentioned only only 2 of them have like earnings calls in the US which is, Amazon and Walmart. Tik Tok is owned by bike dance which has has earnings calls in China and team was owned by poor which has earnings calls in China she and is trying to go public they're trying to list in in London so we haven't really seen any, any earnings calls from them so they they've had interesting things you've actually had T-Mobile stock took a pretty big hit after their earnings because they, reported great sales but by dance like lowered his guidance and part of it is I believe. In in response to how much share Tik Tok shops has captured so this is 1 of I think 1 of the most interesting stories of the year is. Jason [38:23]For probably as long as I've known you Scott like we've always talked about social commerce and people are always talking about like. Hey there's all this attention on Facebook are people going to be able to sell Goods on Facebook and just not even need e-commerce sites anymore and the narrative we've always had is man it's been tried dozens and dozens of times and it so far hasn't worked it seems like. Us consumers don't want to shop on their social platforms they want to interact with their friends on their social platforms and they want to shop on their shop platforms, but the 1 place in the world where this does seem to be working is China where, pendo Duo on Alibaba had been you know pretty successful 10-cent had been pretty successful with with social commerce and, that narrative is kind of over right now because Tik Tok shops is selling twenty billion dollars worth of stuff direct to Consumer and Tik Tok is. Really winning with consumers attention and especially with younger consumer consumers attention so you know. Jason [39:21]Gen Z Shoppers are are gen Z consumers are spending like an hour a day, on Tik Tok like the Olympics didn't do very well because nobody watches long form video on television anymore like they're all watching all this this short form content on Tik Tok and Tik Tok has been able to turn that attention, into sales so much so that you know the most successful e-commerce site on the planet while Amazon has has kind of said like hey we can't beat him so we're joining him right so Amazon announced, a deal with Tik Tok where you can run an ad on Tik Tok have direct Commerce in that ad and check out with your Amazon credentials and have your order fulfilled by Amazon Prime, in an ad on the Tik Tok platform so that is super interesting and Amazon has said and we're going to start shipping Goods direct from China just like Tik Tok and T-Mobile and shien so they've announced that they're going to, [40:27] TikTok's Impact on E-commerce Jason [40:19]direct to Consumer from factory model you know presumably to take advantage of some of this these same de de minimis. Jason [40:27]Provisions that we we talked about earlier so it's kind of interesting to see Amazon have to kind of match some of the, the offerings and play with some of these Frenemies you know historically you know that's that's gone the other way right like it was it was the old Legacy retards that were having to begrudgingly or brands that had to begrudgingly, moved to Amazon so interesting to see Amazon moving to Tik Tok so that was a super interesting. Jason [40:56]Sort of evolution this year I'm going to be really interested to see whether the, the Tik Tok thing you know it's mostly inexpensive impulse Goods at the moment and, you know can that get traction with staples will people buy more premium Goods we're starting to see more and more Brands I just spent some time with, Keurig which owns you know a bunch of the coffee brands and they're now doing direct Commerce on Tik Tok shops so it kind of went from all unbranded stuff on Chinese factories to, you know we're starting to see branded merchandise in the Tik Tok shop so, that super fascinating and then on a much more scale 1 other thing that really jumped out of me in the investor call after the Amazon earnings is the Amazon CFO talked about. Jason [41:43]The softness that people have seen in the drug channel right and so Walgreens write a CVS haven't been having a very good run lately and and he called out that like Amazon probably got a boost in sales because the the Walgreens so helpfully locked all the products behind cages and that like uh. You know was an impediment to sales at Walgreens and caused a lot of those sales to happen on Amazon instead and so you know if you remember last year a lot of retailers were claimed you know crying about shrinking complaining a lot about shoplifting you're not hearing a lot of conversation and earnings calls about shrink this year. And now you know Amazon saying like man we're we're a beneficiary of all the the eroded customer experiences, that that have resulted from an overreaction to shrink. Scot [42:34]Hu yeah I saw there's a CVS has a thing where you can actually tap with your phone I guess it has an NFC chip in it and so I imagine you have to have the CVS app and be logged in and then you can tap to get into that cage so at least you don't have to wait an hour for someone to wander by and and get you your your pack of gum. Jason [42:55]Yeah which I have mixed feelings about on the 1 hand I really admire The Innovation and that's a clever way to reduce the friction if you are going to put all these products and product jail which is what I call those those cases the, the pro you know the the argument would be, in CVS's case you have to be a member of their Affinity program and have their app on your phone in order to unlock the cases and so like in practice essentially what that means is you know all of America used to be able to shop at CVS now it's a members-only store right like now it's it's it's essentially Costco like you you have to be a member and give them all your data or you're going to have really inconvenient access to the razor blades and so you know, I could see that going either way like if if you compare it to Walgreens or Raid where you don't get that option like it might be looked at favorably but if you kind of look at it in big picture and say wait a minute you're going to lock up all this stuff and then you're going to make me be a member of your Affinity program in order to, to just be able to do what I've always done or at least since the 1920s when Piggly Wiggly opened up all this stuff. Jason [44:01]I you know I could imagine consumers not not reacting super well to that, I don't actually know if the CVS is is like Bluetooth or NFC but you did bring up another point. IOS 18 launch today and 1 of the cool features in iOS 18 is they have apple is for the first time opened up the NFC chip to third-party apps so. Under iOS 18 it would be possible for CVS to use that NFC chip to unlock the, the uh their their smart locks that would not have been possible in the previous operating system so that's a fun Commerce innovation, that came to uh Apple today, and I haven't seen any announcements yet but I'll I'll be surprised if we don't see some some cool evolution of some of the digital wallets to take advantage of that new feature as well. Scot [44:50]Pretty cool yeah so anything else before we wrap up that that you want to prep listeners for as we go into holiday. Jason [44:58]No no I feel like we covered a lot of ground again I'm I'm super sorry on my behalf and and Scott's behalf that we've been a little sporadic with the shows we really appreciate all the kind words people have, been sending our way and for sure I take it as a compliment that people are mad at me that we haven't been putting out shows so hopefully we'll we'll be able to find some good Windows throughout the rest of the year to get some, some shows out there I you know certainly want to do a recap after grocery shop coming up and we'll certainly want to cover holiday and maybe we can do some. Go old school and do some live shows from interrupt this year if we can get you to come to to New York Scott. Scot [45:35]Yeah yeah the we'll look at the weather and see how it goes. Jason [45:39]Yeah yeah yeah if if you're an investor in his fund use use that leverage to pressure him to do it. Scot [45:45]Hey that hurts. Jason [45:46]And if you're not an investor nurse fund why the heck not. Scot [45:49]Heck yeah between your fund.com come on aboard. Jason [45:52]Exactly well Scott that's probably going to be a great place to leave it if you're super ecstatic that we are back on the air feel free to jump on iTunes and give us that 5-star review we want to refreshen those up and. Until next time happy commercing.
EP213 - Deloitte's Kasey Lobaugh Recessions and the Future of Retail
25 Mar 2020
00:51:49
EP213 - Deloitte's Kasey Lobaugh Recessions and the Future of Retail
Kasey also gives a sneak preview of new report exploring the history of predictions around "The Future of Retail". Look for announcement about that research on Kasey's twitter feed @klobaugh
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP212 - Live Customer Questions - COVID-19 Impact on Commerce
19 Mar 2020
01:05:37
EP212- Jason & Scot Show Live Listener Questions About Covid-19 Impact On Commerce
Episode 212 is a live show featuring audience questions about Covid-19 and it's potential long term impact on retail. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube.
Subscribe to the audio version of the podcast at: http://jasonandscot.com. (or wherever you listen to podcasts)
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP211 - ThirdLove Co-Founder David Spector
13 Mar 2020
00:44:05
EP211 - ThirdLove Co-Founder David Spector
David Spector is the Co-Founder of ThirdLove, a digitally native direct to consumer women's intimates brand. Dave founded the company with his wife Heidi Zak.
In this interview with Dave, we discuss the origin of the company, their data driven approach to designing products, the challenges with scaling a DTC company, and the potential role of omni-channel. We also discuss their public feud with Victoria Secret.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 211 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Wednesday, February 26th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP210 - Amazon Go Grocery and News
06 Mar 2020
00:56:02
EP210 - Amazon Grocery and News
Episode 210 is a recap of the weeks news, including eTailWest recap, Amazon Go Grocery, Walmart new programs, impact of Coronavirus, and retailer earnings reports.
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.
EP209 - Moosejaw CEO Eoin Comerford
26 Feb 2020
00:33:08
EP209 - Moosejaw CEO Eoin Comerford
Eoin Comerford is the CEO of MooseJaw. An omni-channel outdoor retailer, acquired by Walmart in 2017.
In this interview with Eoin we discuss Moosejaw's unique positioning as "The most fun outdoor retailer on the planet" and some of the innovative marketing campaigns Moosejaw has developed. We also explore their omni-channel strategy, rewards program, owned products, and some of the systemic headwinds facing the apparel industry.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 209 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Tuesday, February 25th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP208 - Elliot CEO and Founder, Sergio Villasenor
23 Feb 2020
00:48:27
EP208 - Elliot CEO and Founder, Sergio Villasenor
Sergio Villasenor (@sir_gee_ohhhhh) is the CEO and Founder of Elliot. Elliot is a modern, mobile first e-commerce platform that describes itself as: "The easiest way to sell there, there, there too, yes there & yes all the way over there. No-code e-commerce platform for every there & where you want to sell."
In this interview with Sergio, we get a great overview of Elliot's features, what sets it apart, and what their vision for the first is. Sergio also breaks some news about the platform. As of April 1st, they will offer a free SaaS version (except for payment processing fees), and will open source the entire platform.
You can join Elliots WhatsApp group by sending a message to 347-715-0728, and get early access to new features.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 208 of the Jason & Scot show was recorded on Thursday, February 20th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
EP207 - Billion Dollar Brand Club author Lawrence Ingrassia
12 Feb 2020
00:51:55
EP207 - "Billion Dollar Brand Club" author Lawrence Ingrassia h
In this interview with Larry, we discuss many of the brands covered in the book including Dollar Shave Club, Warby Parker, eSalon, Mohawk, Anker and Tuft & Needle, as well as many of the ecosystem companies that developed to enable the DTC movement including Facebook, Quiet Logistics and Locus Robotics.
We discuss the trends of DTC companies turning to brick and mortar. New ways to leverage data to identify product niche (what Larry called the "money-balling of DTC), and what the future may hold for DTC.
We also cover events that happened after the book was published, including the FTC's blocking the Harry's acquisition, Caspers IPO, management challenges at Away.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 207 of the Jason & Scot show was recorded on Tuesday, February 11th, 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.
EP206 - Amazon Q4 2019 Earnings Deep Dive
01 Feb 2020
01:04:13
EP206 - Amazon Q4 2019 Earnings Deep Dive
Amazon released their Q4 2020 earnings on Thursday Jan 30th. In a holiday quarter that has proved to be challenging for many retailers, Amazon soundly beat analyst expectations, and raised their governance for Q1 2020, driving their stock up. Amazon's market cap is currently larger than the next six largest retailers combined, and their competitive advantage may be even greater.
In this weeks episode we do a deep dive into all the details of the earning report. We look at top line results, AWS, ads, physical retail, and Logistics. We break down what it all means, and leave you with our conclusions.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 206 of the Jason & Scot show was recorded on Friday, January 31st, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Google Automated Transcription of the show
Transcript
Jason: [0:24] Welcome to the Jason and Scot show this is Episode 205 being recorded on Wednesday January 22nd 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 well those of you that are regular listeners have probably realized we has been a little while since we put out a show and the reason why is my colleague Jason here has been traveling like a crazy man.
Jason: [0:55] This is true I have my annual fun start to the year with the whole CES in RF Marathon which I just got back from.
Scot: [1:06] I thought this year you weren't doing CS what what what happened we had a client call and Russia.
Jason: [1:11] Did end up yes having to go for a shorter than usual stay at CES but I did end up having to make an appearance.
Scot: [1:18] What happens when you're the chief digital retail e-commerce strategist goes goes that way.
Jason: [1:25] Yes when you yes it's true when you have that many words in your title like unplanned trips are part of the bargain.
Scot: [1:33] Coco we thought would use most the show to kind of catch up on that and then try to work some news in there too let's start at CES in the first of all big question did you get any new gadgets.
Jason: [1:45] You know a disappointing year for me personally and part of that may be because it was a shorter trip the, the stuff like the stuff I tend to discover that like I personally want is maybe deeper in the CES catalog and I maybe didn't get to all of those booths this year I kind of had to hit the main. Main Milestone booths so yeah nothing super excited I got I maybe have a little. Personal problem hoarding Chargers and cables and so there are some nice new, um third-party chargers for the Macbook so I did get a new anchor and the new hyper juice hundred watt charging systems. Yeah no no super important purpose but yes I have some new Chargers that I have to hide from my wife I don't think she even cares about the spending I think she just cares about all the space that the unused. Chargers take up in our life.
Scot: [2:50] Yeah there's a drawer there where they all could live.
Jason: [2:52] Yeah in my workshop it's more of a a system of drawers for.
Scot: [3:01] They buy hcf like the 1985.
Jason: [3:05] I mean people people laugh at me but then we need to find a 30 pin Mac charger for iPhone 3 I have one.
Scot: [3:14] Boom I got it yeah.
Jason: [3:18] Yeah so yeah got some new Chargers and I did this is kind of CES adjacent but I did get all new networking hardware for my home office so I think you and I both did internet connection upgrades. For the holidays and I added a fancy new firewall router access point and switch.
Scot: [3:44] Furcal are you gigabit.
Jason: [3:46] I am so so Comcast just add a gigabit in my neighborhood so we upgraded to gigabit and then I'm using, this cool new device called the unify dream machine, which is from I want to say it's a Ubiquiti networks and they do a lot of. Commercial Wi-Fi equipment for like schools and institutions and things and so this is a a. A Wi-Fi access point a firewall and and said a managed switches that are all controlled from their commercial software. Way overkill for a home network but fun for tinkering.
Scot: [4:35] Yeah I think I've seen one of those is it a it looks like a little cylinder.
Jason: [4:39] It exactly so historically like they met they mostly make rack-mounted equipment and this is the first time they've, they've made an all-in-one that that is supported by their sort of, business level software and it looks like a cylinder and in fact it reminds people a lot of, discontinued Apple Wi-Fi access point and so there's some people from that we're big fans of that, that I forget what that was called like they are.
Scot: [5:11] I had one I can't remember it's called him.
Jason: [5:16] So yeah so people people think it's the spiritual successor to the Apple.
Scot: [5:23] Cool what else any interesting Commerce news is he yes.
Jason: [5:27] Yeah I actually thought it was a reasonably important year for Commerce, like the Super Readers Digest version on this show it's the consumer electronic show I personally have been attending for 32 years it's the largest trade show in the u.s. like 200,000 people, attend, many years ago it was a buying show where people from retailers would go to figure out what they're going to carry for the year now it's mainly a PR show where they try to generate Buzz for new products to, sell more new technologies but it's where a lot of consumer Technologies where watch for the first time so like the DVD player and the if you go back far enough the VHS.
[6:10] Tape system in the whole VHS beta War played out at CES, and stuff like that in the Apple the Apple iPhone was famously launched during CES but not at CES as a Steve Jobs sort of did some clever counter-programming, so people go, both to like sort of do trend-spotting and see if there's any major new consumer electronics platforms that are coming down the path and from that standpoint I would like there's one big one that had the buzz I'll save for the end, but there was a lot of smaller more tactical stuff that I think is going to have a meaningful impact on, retail in particular digital merchandising it retailgeek. So most of the listeners of this show are probably familiar with e-ink if you ever had a currently have a Kindle book reader it uses e-ink, and it's a it's an important digital display technology because it's Dynamic you can change the image that's on it, it's reflective so it works in super bright sunlight and it basically takes no power to display an image so you need electricity to change the image but once the image has changed. It literally is moving ink around on the display and then you could turn off the power in the ink stays where.
[7:26] Where it was and so it's great for for not using a lot of power in an electronic book reader it, great for having high visibility even in bright sunlight but a very common retail use case is it's the main display technology that used for all the digital fact tags that I talk about all the time.
[7:45] And one of the big drawbacks of e ink has historically been that it's only black and white or only black red and white or only black yellow and white so very limited, color palette and so you couldn't do really pretty, just blaze you couldn't use it for really pretty signs and this was the first year that they were showing full color E Ink that look very vibrant and High Fidelity and so. You know we'll see you that. You know maybe we'll have some color book readers in the near future and I suspect we'll see it trickled down to a new generation of electronic. Price labels and fact tags for retail stores. So that was an interesting technology and a way cooler display technology was released by Delta Airlines of all people. And and so this is a new technology to sort of replace a. Video monitor in a public area and it's called parallel reality and so Delta Airlines found this technology and invested in the company and they've announced that the first commercial deployment will be. In the Delta lounges at the Detroit airport later this year. And what this technology does is it lets a hundred people stand in front of a TV screen and have each of them get a different Custom Image that they see.
[9:13] So so very precisely depending on where you stand you see a completely different image so the use case for Delta in this Lounge is all the customers stare at the flight status display and they all, see a display that only has their flight information or prominently highlights their flight information.
Scot: [9:32] Okay how does it know who's looking and we're there.
Jason: [9:36] So first of all as soon as you describe this to someone they're like this sounds like it's going to be some kludgy gimmick and I was super skeptical so two halves of this problem the first half is, can you really display an image that that is high fidelity and looks like discrete for each person, and I went in with very low expectations and I was kind of Blown Away like it it totally works, the the demo they had their like there's like the pixels weren't tiny so you could kind of see the pixels and, the display is made up of a bunch of. Of multiple smaller displays so you could kind of see the frame the internal frames so I'd say it wasn't, but they were super open to saying yeah we know those are the visual flaws like we already have more advanced prototypes that solve those problems and what we deploy in Detroit later this year is going to. Not have any of those those visual artifacts but basically what it's using is, beamforming where they're essentially like each pixel is a projector and they can fire different color lights at different angles so by knowing exactly where your eyeballs are relative to the screen, they can send you an image that's different from everyone else so that's the display technology as it's kind of like a projector inside of a television or.
[10:57] Thousands of projectors inside of a television and it works remarkably well and then you're very, pertinent question how do they know who and where those eyeballs are to decide what to show each person and the answer to that is, a combination of Wi-Fi RFID and your mobile phone so this is not, this won't work for an anonymous use case in the Delta model the reason they're doing it in the lounge is everyone has to check into the lounge and show that they're a member so when you walk into the front desk, you scan your mobile app they're using cameras similar to an Amazon go set up to track where you are in the lounge, and they know who you are because you were holding a mobile phone with your unique ID on it to check in and then they're able to deliver your your unique flight information to you so it. It's a kind of a combination of Amazon go for the identifying the person and their location and this new parallel reality display technology for, for beaming the different messages and so it.
[12:07] It works better than I expected it seems pretty darn close to real we'll see if they're really able to get this in a while, lateral out in an airport this year but like if it all works it's pretty easy to imagine a number of use cases for public displays and checkout systems and things like that and retailgeek, what it would be really handy to be able to show different images to different customers on the same monitor.
Scot: [12:30] Very cool was this the big one we're waiting for or know there's more to come.
Jason: [12:36] No no more to come so the another interesting technology that like was kind of spooky as Samsung was showing this. These avatars did they call neon life into these artificial humans, and so you walk up to all these five or six foot tall monitors and if there's like a person in each Monitor and they can talk to you interact you with you and they look like.
[13:04] Completely real people like in so you would assume this was a video but these are computer generated people that are extremely lifelike, and so the idea is that you could potentially walk into a retail store and you know there might be a artificial intelligence help agent. That looks like a real sales associate that you're basically looking at through a glass window that can talk to you in, and be more human that was the kind of use case that Samsung was pitching the the more interesting use case to me is like an you, render different shapes and sizes of people and put apparel on them so you know could you could this be kind of like, a digital mannequin scenario for retail stores and. It was scary life like in the one thing I would say is they would call this an advanced science project so these avatars apparently took a super long time to build and they say that this technology is still three or four years away from being completely.
Scot: [14:09] They have natural language parsing like kids or talk to them and.
Jason: [14:12] They did but that wasn't part of the the magic so they were using that were using other Samsung artificial intelligence like in fact Bigsby is their artificial intelligent agent too like decide what the Avatar was saying and to interpret what you were saying and so they weren't claiming any like. You know new new Evolution there what was new about this neon life, technology was how lifelike they could make the visual representation of a person and essentially you know it's, it's like the next step to like not paying actors to be in the movie and instead having these these digital avatars that. That will be acting in all the movies and stuff. But I you know if it gets commercialized I can imagine a retail use case for that the next product that really caught my eye in this got a lot of Buzz at the show and I think this was a, a darn impressive product came from L'Oreal and it's called perso, Scot you may have followed this because I know you try to stay close to the beauty and cosmetics base.
Scot: [15:24] I do.
Jason: [15:25] But so the idea here is, personalized beauty and cosmetic products that are formulated at home, so so they initial concept has three different products there's a liquid lipstick product there's a, liquid foundation product and there's a moisturizer so each of these is kind of a. A metal cylinder like like one of those Yeti mug type things a metal cylinder and using an app you say I want this color lipstick, and you know out of a set of holes in the top of this mug, that exact shade of lipstick or several lipsticks come out that when you then blend them together with a in applicator or your finger like mixed to the particular color that you ordered. And so the foundation comes out in a color custom color that you ordered the lipstick comes out in a custom color that you ordered and the moisturizer comes out in custom formulation that you ordered so it may be has.
[16:34] You know more moisturizing or sunscreen depending on the environment you're in or the the weather and a particular day and so the to me the one that made the most sense in the kind of you know coolest use case is the lipstick they do things like you can point your camera at your outfit, and it will recommend shades of lipstick that go well with your particular outfit and then it can produce, that lipstick for you and so the reason I thought this was pretty impressive as it seemed to work really well people that tried it were seem to think it was, not a gimmick that it was you know that they were quality products and they were totally legitimate and you know I've spoken to lots of women that think that the, the custom shade of lipstick on demand would be, total useful and I've smoked I've spoke to some women that think the custom foundations would be useful and I just think we're at this inflection point when more and more products are going to be customized for each individual user so whether that means they're fabricated custom at a factory and quickly shipped to you or they have the ability to be customized in your own home this is essentially a 3D printer for Cosmetics or an inkjet printer for cosmetics and so I it to me it seemed like one of the first viable, custom products in this category and one little Nuance that I thought was really clever about the whole thing.
[18:01] That the cylinder like could totally sit on your makeup counter at home and it seems like it would fit just fine but what happens when you want to take your lipstick with you and put it in your purse like that wouldn't work very well so it turns out the top of all of these cylinders, is removable and it's magnetically attached to the cylinder so after you specify a color and it mixes some of that color up you can just take the top of the cylinder off which is kind of the size of a makeup compact throw it in your purse and take your custom color with you so, pretty clever and then you buy refill cartridges just like you'd buy refill ink for an inkjet printer.
Scot: [18:39] That's where all the money is.
Jason: [18:40] Yeah oh for sure but so I thought that was super interesting when you get into the Health Pavilion, there were a number of players like one that caught my eyes was called DNA nudge and these guys are essentially doing a DNA test and then they're helping you select, Foods diet nutrition that match your unique DNA so again going back to this notion of customization that like, you know the diet you select the foods you buy should all be predicated based on your your underlying DNA that they help you help you find.
Scot: [19:20] Did you just come back and say error you are 99% an espresso beverage.
Jason: [19:26] That is funny so I have. Carefully avoided doing any of these DNA because I actually think there's some like significant privacy concerns and I like I don't know maybe I'm I'm. Overly cautious but like I haven't wanted to just give my DNA to one of these for-profit companies with like dubious privacy policies.
Scot: [19:53] Cool.
Jason: [19:55] I don't know what about you Scott are you totally in on 23andMe do you do it like every month to see if your DNA is changing.
Scot: [20:01] I've done both yeah it's pretty interesting.
Jason: [20:03] Okay yeah I will be honest I would be totally.
Scot: [20:06] Hi I don't have any murders out there I'm worried about.
Jason: [20:09] Yeah well I read too much of a boring life to be very worried but I but here's the thing you could have an interesting relative that you're throwing under the bus by doing this.
Scot: [20:18] Yeah they shouldn't do their crimes.
Jason: [20:20] My fair enough, yeah so again I can see it I might be being a little silly on that but I haven't wanted to do that so then you know it's the car thing is a big thing here they are, like the car car tech now tends to get launched at CES not at the auto show. So you know there's there's you know some interesting electronic prototype cars that may or may not ever see the light of day. The huge thing I noticed this year in the car Pavilion is that every car seemed to have an Alexa integration like that seemed like that was. Taking over as the like. New cabin Tech that everybody was marketing and so I think Amazon announced that they're now over a hundred thousand consumer electronic devices that have Alexa embedded. From more than 9,500 unique Brands and of course the new device with Alexa in it that I imagine you're going to need is the Lamborghini.
Scot: [21:28] Yes absolutely.
Jason: [21:29] I think that will round.
Scot: [21:31] Finally took me over the edge.
Jason: [21:33] Yeah that around out your stable just fine they're like speaking of am Amazon Integrations I Amazon has a couple booths at the show they have a booth that's primarily focused on the Alexa and a lot of third party you know, demos with that they have a booth in the home automation section dedicated to key and all the last mile Solutions and things but in the Amazon Booth one of the interesting ones was. This this cpg company Reckitt beckon sir. Commonly called RB they make a bunch of products like baby formula and finish is their big brand of dishwashing detergent. And so they have upgraded all of their packaging to have Dash replenishment built in. So when you get low on baby formula the box that you bought your baby formula in just recognizes that and automatically reorders more baby formula and when you get low on those. Those PODS of finished dishwashing liquid the package automatically orders more for you.
Scot: [22:47] The saw the Lamborghini thing in the it was funny there was like a poster which had like some amazingly handsome Brad Pitt of time looking dude and he said Alexa I'm hot, and then she said she she knew to turn on the air conditioner.
Jason: [23:05] Yeah yeah context.
Scot: [23:07] So maybe wonder how often is Jason uttering Alexa I'm hot to his devices.
Jason: [23:13] Yeah I feel like that's not even the most concerning thing you need to worry about me saying to Alexa. I mentioned Samsung Bigsby earlier computer vision was a big thing I felt like half the booths were doing facial recognition for some nefarious purpose but Samsung built it in a refrigerators so, in the past they've had these smart fridges that for example had a webcam in them so you could kind of like when you're in the grocery store and couldn't remember if you had eggs you could turn on a webcam and see the inside of your refrigerator. Which I was like to point out probably wouldn't help you because your eggs are probably in a in an opaque car turn it Carton and you can't see how many are in there, but that pesky detail aside they're now using Bigsby to do image recognition and take an inventory of your refrigerator so the smart refrigerator knows like, that you have a quart of milk and how many times you've taken it out and likely how much milk is left in that core.
[24:16] So that was interesting there were a thousand Last Mile solutions that at CES so lots of people like with, clever approaches and not clever approaches to porch piracy to delivering to your refrigerator to delivering to your garage to your car trunk drones and robots, um Kind of improved efficiency for for bow pass orders for store pick up orders and a lot of technology for like building mail rooms, notify residents when they have packages all sorts of stuff like that so this is not really a retail show and so it's just interesting to me how, booths were there like specifically solving a Commerce problem around the last mile. Um so all those were interesting tactical things that I saw at CES that I think May, may I make an appearance in the future of retail but by far the biggest platform that that you know was the most strategically important that really had his coming out party at CES this year is the new wireless technology 5G. So they've been talking about it CES for a number of years they've had prototype product but this is the first year that they have.
[25:38] Mass-produced products that meet all the certifications and work on networks that are deployed in the real world so this is kind of the the first time that 5G was truly commercialized at CES and you know I I suspect in in the show's heart of hearts, like if there's you know one news cycle that they want to win it's the you know the wave of coming 5G products and that everyone needs to throw out all their wireless devices and by shiny new, new 5G devices and then it's going to magically change the world and there are crazy stats that they you know site about how much faster 5G is than 4G so, you know hundreds to thousands of times faster bandwidth way lower latency way more devices that can hang on the same networks and you listen all this and you go man 5 G's going to change the world it's the most important technology of all times and that's mostly. The articles that are getting written about it but as I talked to more engineers and kind of you know. Really started to understand what was going on I actually am now somewhat bearish on on 5G I think it's overhyped.
Scot: [26:56] Yeah yeah they always the one I see that for his hearse like some remote surgery over 5G and you're like I don't think five G's going to solve the dead spots in fact up I have more dead spots because I won't be honest meat hours.
Jason: [27:08] I'm not sure I'm going to be an early adopter of remote Robo surgery but if I am I'm gonna insist that they have a wired connection to the robot and if for some reason they can't have a wired connection I would way rather have a Wi-Fi connection to the robot then a 5G connection to the robot.
Scot: [27:25] Yeah we're going to belt and suspenders that puppy yeah if we're not yeah.
Jason: [27:28] Yeah so it's going to be a long time before you ever going to do surgery on me with 5G but like here's here's the, the huge Wrinkle In 5G that makes it kind of a mess technology for me is. You know all these Wireless signals are over particular parts of the spectrum right and so like cellular signals and most of what we call LTE or 4G is, in the 600 megahertz to 6 gigahertz range depending on which company and what what bandwidth they own and so 5G uses that same bandwidth, and it uses some new band with that the government just sold the carriers that's at a much higher frequency and so it's what they're calling this millimeter wave frequencies and so this is, 20 gigahertz 295 gigahertz a way higher frequencies than the traditional Four G's and all of the, dramatic improvements in bandwidth that they're talking about only happen on those new millimeter-wave frequencies.
[28:34] So the the 5G technology works on the 4G frequencies and it is faster but it's kind of incrementally faster in the same way that 4G was faster than 3G, it's so call it twenty to a hundred percent faster and then you get this you know hundreds to thousands of times faster when you get on millimeter wave and so couple problems with millimeter wave number one it's mostly not built out and unavailable like there it's, there are rumors that the the iPhone that comes out this year that will be the first 5G iPhone, may or may not even support millimeter-wave but there's very limited coverage of millimeter wave in the United States like like when you don't company says they have coverage in a city that's probably one block that they cover when this millimeter wave technology and then much bigger deal is that high frequency wave. Is blocked by virtually any kind of structure so not only will it not go through walls it won't go through windows, um so you won't ever get millimeter wave signal inside of a building for example.
Scot: [29:45] Think you're gonna have to do your surgery in a tent.
Jason: [29:48] Yeah exactly so a legitimate use case is hey T-Mobile can compete with Comcast for internet bandwidth for Scott's home and if you buy it from T-Mobile what they're going to do is put a millimeter wave antenna on the roof of your building and run a cable inside of your house and convert it to a Wi-Fi signal inside of your house and because the millimeter wave can be really fast to that antenna on your roof like they can legitimately compete with your, your cable modem but you are not going to have a phone that you walk around in your office that's you know downloading movies in a second.
Scot: [30:32] Nursing so a lot of infrastructure to be built to solve this millimeter wave from.
Jason: [30:37] Yeah yeah and those those like they need many more antennas and the antennas need much quote to be much closer together to really build out coverage for millimeter wave so it's a huge National infrastructure problem and it doesn't seem like any of the carriers have really committed to like saturate their Market with millimeter wave yet so again you know most of what the carriers are talking about when they say 5G is 5G over the existing 4G bands and, it's a little better like I'm sure we'll all enjoy it but it it's by no means game-changing so that's that was kind of my, my CES recap I think most people would say oh the big thing that's going to change the face of retails 5G I'm pretty convinced it's actually not but I do think a bunch of these display Technologies are, potentially interesting and I really think that that this trend of more personalized products is super interesting for Commerce.
Scot: [31:36] Cool so then you shot straight from Vegas Rider to New York and would a would you see it enough.
Jason: [31:42] I did so yeah I got to do a prolonged my New York trip this year so I got there a little earlier, as you know you and I were nominated for an award for best retail media and we were one of the finalists so I actually went to the awards ceremony on Friday night. And I'm sorry to report that we did not win yeah so not a very credible award obviously I'm teasing. Is actually the first year of this particular. In our Enterprise and what they're trying to do is recognize suppliers for the retail Commerce industry because most of the awards are targeted at the retailer so that's kind of appreciate that and that's interesting and it was. Very well-attended event for the first year but that sucked me into New York early so then I did the whole show I got to walk all the show floors, and my limited time recap on all the show floors was, that it was a very incremental year so rather than, dramatically new stuff and new technology that you know didn't exist at the show asked year most of the booths in the main exhibit Halls were. Here's our 10% better version of what we showed you last year.
[33:04] And a surprising amount of it was really oriented towards cost reduction and, operations optimization so I would say like, the it was rare to see customer-facing stories and improving customer experiences at retail it was mostly about taking costs out of supply chain and taking costs out of operations and Staffing and. And increase Automation and that you know it things that are important to retail but frankly things I would argue like that's been a play in retail for the last five years and most of the good retailers today have. Taking most of the COS out and you know so now I feel like to really move the needle you need to be thinking about your customer experience and improving, that and I did not see a lot of great solutions for that on the inner F floor this year, the one kind of new use case that showed up in a bunch of booths is what I'll call a smart shelf so this is like Amazon go like technology it's like a shelf that.
[34:12] Either using cameras or sensors or cameras and sensors, knows what's on the shelf and it knows what you take off the shelf and it can probably recognize you and so sometimes this is used for self-checkout but way more often it was just used for inventory management, for knowing when something was out of stock or helping navigate customers to the right product or or knowing when a products on the wrong shelf for all these kinds of use cases, so I like frankly didn't think the juice was worth the squeeze walking the two main trade show floors at in RF, the the floor I had the most fun on is this Innovation Pavilion that they've had for the last couple of years but it was much bigger this year and to me like all the exciting interesting stuff was was definitely in this Innovation Pavilion and so this is smaller companies tend to be, startup companies a bunch of companies, from other countries like Israel was particularly well represented and you know here you are seeing a lot of Last Mile Solutions you are seeing a lot of. Like using cameras to solve fitment and returns and things like that so I just I felt like there was a lot more interesting. New approaches to customer experience in The Innovation Pavilion than on the main main interest rate show floors.
Scot: [35:39] What was the strangest thing you saw.
Jason: [35:42] Strangest thing I saw I probably should have come to rehearsal and gotten that question ahead of time so I could have thought about it.
[35:50] Yeah well I'll tell you an odd experience I had so you know I have this weird Affinity / fetish for these digital fact eggs. And I keep predicting that they're going to be a big thing and they never are. So of course I had to visit all of the exhibitors at this boot at the show and there's like six or seven. Big manufacturers and then probably 20 little manufacturers of these things and then RF and so one of the companies I'm not even going to name them, they're noted in my mind because they were the first tags that Amazon used in the four-star store in Amazon has changed vendors and they now use a different vendor but this first vendor um had a lot of interesting tags and some new new technology in their booth in the way I remember what I what I see at the booth in order to kind of type up my show notes is I take a picture of the booth and then I type my notes below the picture in Evernote so I tried to take a picture of this booth and they tackled me and told me that no photos were allowed and I'm like, okay do you have like a brochure something I could take no no we don't have a brochure. So I'm like so wait you have a giant 30 by 30 booth at the show and you paid a bunch of money to come here and like. You don't in any way want anyone to remember who the heck you are or be able to contact you after the show.
Scot: [37:13] We were never here.
Jason: [37:15] Yes I.
Scot: [37:16] They make you delete the picture.
Jason: [37:19] No and I mean I could have but I mean I just didn't even want to take a picture at that point I was I just thought that was so funny like ten years ago that was about get super common thing and people are worried you're going to steal their intellectual property but I feel like if you have intellectual property that you don't want anyone to know about don't buy a trade show booth.
Scot: [37:38] Weird that is weird see I knew you had one in.
Jason: [37:43] So that stuff was all interesting I went to most of the Keynotes and I feel like this is going to be a Captain Obvious comment to you but I mostly went all the key notes which are all these big retail CEOs and I've mostly decided that it's a complete waste of time going to any of these shows and sitting in on the on the CEO Keynotes. Nobody ever said like they're all perfectly media prepped and they mostly Play commercials about their businesses and no you know nobody says anything very like informative or, you know that isn't already on the public record at these things so I don't know why I always get excited to hear you know some retail CEO speak when. Like in reality like it's not bad it's just it's just not valuable or super interesting.
Scot: [38:32] Yeah yeah it's tough there at some point their public companies to so they're in their quiet period by the time this show comes out so they can't even really talked about you know anything that's.
Jason: [38:43] Oh yeah no I don't even.
Scot: [38:44] Air and yeah.
Jason: [38:45] I don't even fault them but I just tough right and so you had like Kevin plank who's you know the founder of Under Armour and you know he recently stepped down as CEO but he's like. Like Chief brand evangelists or something. One that got like a little heat Michelle gas is the CEO of coals we'll talk about this later but like you know Cole's kind of underperformed a little bit for holiday and, and so that's that's interesting but she also won the, the internet Gala award as the person of the year and there are people that are pointing out like what's the state of our industry of like the. Person of the year is like a CEO that's like let a company for five years that mostly has been in sales and market cap decline over that entire five-year period.
Scot: [39:32] Emma close a bunch of stores they've closed Less stores than a lot of other retailers.
Jason: [39:36] No I would say they have performed better than most of their peers and their Peril I think that's true and that's why it's kind of news that their their performances starting to, to soften the the one thing that maybe was newsworthy about her Kina like obviously they get a bunch of Buzz for being the first ones that were all in on like allowing Amazon returns and their store. Um and I don't know why this gets so much coverage I mean it's an interesting tactic but to me it's not a game-changing thing. But you know a big question has been like how valuable is that to Cole's like is it working and and she gave a full-throated defense of the tactic and said that it's working. Quite well and that we're happy we're doing it and that we've expanded it to all stores but then she said like two sentences that didn't like, and I'm like.
Scot: [40:38] It was very vague yeah.
Jason: [40:39] Yeah so so I don't know so that was a little interesting.
Scot: [40:43] It was interesting there's a lot of pictures on social media accompanying that article and they showed Kohl's store and had a tiny little coal sign and it was just surrounded by Amazon promotional materials all throughout the front of the store and then inside the store.
Jason: [40:56] Yeah and I think one of the things that's happening is you know Cole's is always been heavily promotional. Like I think when you return something to Amazon you get like a fifty percent off of a Cole's item certificate that you know they're trying to juice you too. To buy something presumably it's super little margins when you're on that visit, so that stuff got a lot of Buzz as you know but listeners may not know a lot of my time as in RF gets booked up with, these these various committee and Council meetings that are going on and so you know we're members of the digital Council which is a big group of. Of people that are primarily focused on digital Shopper marketing. And so you know they have a long meeting at the show and you know I'm still on the board of what used to be called shop dot-org now called the digital Advisory Board. And we have a long meeting during the show and there's usually some interesting content at those meetings so I would say both of those meetings were good and I'm probably biased because I was the speaker the digital council meeting. And I gave a presentation about like what western Brands can learn from China so sharing a bunch of, interesting tactics that are going on in China that my hypothesis is you know that people ought to be trying in in the west and.
Scot: [42:22] Is this the salty wait for you tried to get your your prediction of QR codes out there.
Jason: [42:28] Potentially I'll do anything I can.
Scot: [42:29] Talk about it the Ulta.
Jason: [42:30] I'll do anything I can to win the forecasting battle against you just got so yeah. No I did not I did not hit that hard but I got good feedback and I enjoyed doing it it's a scary audience because you know I talk to people all the time but this is like. 50 of my closest work friends that are all like smarter and more digitally savvy than me so like if you say something wrong. They're pretty likely to call you out on it so which is not necessarily as true in my day job.
[43:04] So I was pleased that that went well and then in a rare treat for me I stayed for a couple days after an RF this year, and there are a lot of events that other people program to take advantage of everyone being in town for an RF, so PS FK is a research company that does a lot of great retail content they do a bunch of retail tours in New York the week of in our. And they had kind of a direct-to-consumer day where they had a bunch of leaders from direct-to-consumer companies come in and talk and so, I got to send it on that and that was kind of interesting content I think I inadvertently got some Buzz cuz, unlike some of these really polish CEOs for the big retail companies like the CEOs for some of these startups probably share more information than they should and so one of the founders of neighborhood Goods was there there there.
[44:00] Kind of new retail concept there are like a retail Marketplace so vendors paid rent space in their store they open one store and, Texas in Dallas there now they just opened a second store in Manhattan and they're about to open a third store in Austin and in our industry via all the Talking Heads I would say they get a ton of Buzz, and, you know the one thing they don't do is disclosed like any sales data so you know you never know how meaningful their sales are but the CEO at one point mentioned that their best-selling skew by volume, by number of units and dollar volume is a t-shirt with their logo on it.
[44:42] And so I you know in my mind thinking like that probably says all you need to know about you know how much of the vendors products they're selling that are paying for space in those stores if they're evil logo t-shirts their best.
Scot: [44:55] Ouch then he went Savage on social media.
Jason: [44:58] I did not mean it to be super- but I just thought that was an interesting data point and then I went into the belly of the Beast, our friend Scott Galloway who loves his predictions as you'll know. He had an event he's a professor at NYU and he gave a lecture at NYU, kind of a couple hours sharing his recap of his 2019 predictions and doing his 2020 predictions so I sat in on that and. I don't think any of the predictions were very new to those of us that follow him regularly like you know he tends to be pretty repetitive and and so these were mostly repetitive, predictions but there was a question and answer session afterwards and I thought the question-and-answer session was really interesting and people people asked him good questions and he had you know insightful answer so that would that part was fun.
Scot: [45:56] Yeah he's a very anti Sheryl Sandberg Casper and then he's he's been antitussive for a long time and he's gotten his like face ripped off by Tesla this.
Jason: [46:06] Yeah so it's funny.
Scot: [46:08] Predicting it will go bankrupt and you know there's crazy and it's fraud and.
Jason: [46:13] Yeah yeah he thinks it's way overvalued and he it's kind of funny because he talks about he like he openly talks about this he's like people that agree with me tend to agree with me on most things I got like he's you know philosophically aligned on most things but he's like most of the people that follow me, like Tesla way more than me and they have way more digital privacy concerns than I have so he's like whenever I share my position on those two things I tend to get creamed and so like it almost became a joke like people standing up there were like challenging him on his, Tesla predictions and like you know people came up and like made an argument for the Tesla evaluation and why it was reasonable and stuff and so there were some, pretty funny back and forth on that stuff and he was making fun of the fact that like that's most likely what he'll get murdered for, and then he did a podcast after this event where him and Kara Swisher who generally agree on most things on their podcast like got in a pretty heated argument, on the whole should Apple unlock the terrorists phones and and Scott comes down heavily on absolutely Apple like should, should immediately unlock the terrorists phones in the privacy concerns are kind of, BS in Scott's mind and so and he recognizes that like, that's the other thing he gets a lot of heat for is that most people that follow him don't agree with that position.
Scot: [47:43] Wasn't swisher and RF like interviewing the politician or something.
Jason: [47:46] She was I don't remember who she interviewed because that was during one of my meeting so I missed it.
Scot: [47:53] I think it was Paul Ryan I didn't understand what the heck that had to do with retailgeek.
Jason: [47:57] Yeah so there's kind of a tradition that interrupts like a big part of interests job is Lobby is federal lobbying and it that's particularly relevant right now because why. These privacy laws that all the states pass are passing have. Potential major intended and unintended ramifications on retailers like a lot of them like arguably make it illegal to run a loyalty program for example, um so so the lobbying is a big deal in RF it's a lot of their energy as in lobbying and so if you look at the keynote speakers over the last several years in RF they had Bill Clinton shortly after he went out of office they had George Bush Senior shortly after he went out of office and so they tend to have a a big name politician and this year it was Paul Ryan but I didn't get to see it I didn't hear any particularly newsworthy things come out of it but I can't speak to it firsthand.
Scot: [48:53] Furcal anything else we need to know about NRF.
Jason: [48:56] So that was my in a referee cap that kind of match up with what you followed on social media in the news or did I give you.
Scot: [49:03] Was it seemed like kind of the the timing was interesting because you know at the same time you had the Casper S1 filing drop in this kind of, pivoting to General news but kind of overlapped with an RF a fair amount then you had a fair amount of bad news from Q4 some of this it's hard to tell if it was just kind of there's a bunch of retailers that are kind of in that Molly gedan bucket that held on through Q4 is it's kind of crazy to once you make it to August you might as well not close any stores until until January so it's hard to know how much is kind of an overhang kind of a holiday overhang and how much is kind of. The holiday actually wasn't as good as we thought were those some of the topics that NRF.
Jason: [49:47] Yeah so not in the formal presentations but in the sort of hallway conversations this this was a big point right and, you know you and I have talked about on the show we were talking about it in December that I sort of felt like it was going to be a soft holiday that you know they were going to be profitability challenges in talking to people at this show one of the interesting things that kind of reaffirms that it was a soft holiday is there is apparently like a ton of excess product in the market which has not been the case the last several holidays and so retailers are getting asked to take a bunch of. You know deeply discounted inventory from manufacturers and what we would call distressed inventory, that there's a glut of that on the market this year and so that's a bad sign it means retailers didn't sell through all their inventory the manufacturer didn't move as many units as they expected and now they're going to liquidate all that inventory at low cost which. You know means consumers closets are going to fill up with with cheap clothes and you know it's going to be longer before they can they can sell new stuff and you know a bunch of more of this like. You know desirable Brands will show up in TJ Maxx and, places like that so there's a bunch of negative ramifications and you know it's.
[51:06] The my theory is like it's for two reasons like, that we just did have a soft holiday and people didn't sell as much as they wanted but the last several holidays I feel like retailers have been super careful about constraining their inventory and being really smart and using a lot of, new modern tools to predict demand better and so they actually, we're in really good inventory positions the last couple of years and what's different this year is potential fear of tariffs, and so my my theory which I have no way to validate but my theory is that a lot of manufacturer is particular know they're getting their goods from China. Made more stuff before tariffs kicked in as a hedge against potential tariffs and so they just ended up with higher inventory positions and they've been you know trying to sell that through to retailers, and so as you know we have a glut of product and that that actually bodes, poorly you know for the end of Q4 but also for q1 sales across much of a bunch of retail categories.
Scot: [52:12] Yeah.
Jason: [52:14] So I during the show or around the show you know there are bunt you know holiday earnings announcement started to come in. Before this show MasterCard released there. Sort of holiday recap and MasterCard has this product called spending pulse where they Aggregate and anonymize all the, the spending behaviors of everyone that carries a MasterCard branded card. And they said holiday retail sales were up 3.4 percent from November 1st to December 24th and the online sales were up almost nineteen percent and so those are decent numbers, that would calm pretty you know favorably with last year I think those are very similar to last year's numbers. And that would imply that everyone had a decent holiday but then the individual retailer started announcing their earnings and nobody has earnings. That seems like they jive with that Master card number right so so not shocking the JCPenney was down but they were down you know lower than expectations so they were down seven and a half percent which is huge, we alluded to this earlier but Cole's was down point two percent and they've been one of the, the you know better performers in the apparel category for a while so the fact that they're down was was alarming and surprising.
[53:32] L Brands was down 3% Macy's was down, point seven percent which they had been up the previous quarter so that was a big holiday Miss and then I think to me the one that was most surprising and alarming and kind of triggered some, some stock alarm Bells was Target and their same-store sales were only up 1.4 percent versus, 5.7 percent last year so that was a big mix against their guidance and you know you, you listen to that bloodbath of retailers like almost nobody you know performing above their comps and you try to reconcile that with the whole industry being up 3.4 percent and it just doesn't make sense to me I think, I think that Master Gardener is just wrong or or like there there's something unique about MasterCard carrying people that you know is different than other spending.
Scot: [54:27] Yeah yeah the. Jury's out I think until we see how Amazon and they report on the 30th and will be here on the Jason Scott show recapping that for everybody that's going to be really really important and then the second most important going to be Walmart and I'm not sure, you there in Feb 18 kids are in that off-cycle yeah. So it's going to be awesome to see how that goes because if they both didn't do well then it really is a head-scratcher but even if they you know let's say Amazon grew like 25% or something. It's kind of makes the, you can get the e-commerce number to 19 percent but like what the heck happened to the rest of retail who actually grew everyone that we know that reporting didn't it would have to be Walmart or you know. Someone else I don't know, Costco yeah maybe it's the dollar stores there's there has been a bunch of strength and kind of like what we call the value plays the dollar stores the Wholesale Club's the T.J.Maxx has maybe those are the guys that kind of saved the day and there's haven't reported yet.
Jason: [55:47] Yeah but I think no matter how you slice it like this is another version of bifurcation that like you know if holiday sales are robust like they were not, robust for everyone that there were you know huge winners and losers and you know if that was the case which it certainly seems like it was you know you're going to see that play out in you know future store closures and bankruptcies and all the other things that you know retailers have to do when they start to get into distressed. Situations and you know along those lines I think we have already seen a bunch of announcements now that they've gone through holiday, the upcoming store closures.
Scot: [56:30] Any other news you want to cover.
Jason: [56:33] I mean those are the big things like just to recap the store closures real quick like that was like expresses closing a hundred stores JCPenney's closing 6 more stores Pier 1 is closing half their stores Bed Bath & Beyond closing 40 stores, a slightly surprising one of me is bows which had a chain of company-owned stores. Is closing all of their bricks and mortar they're going to be you know a pure brand and Direct online sales only so you know a significant amount of store closures to start the year, so it's kind of falling into your whole you know Mama gettin story that you like to always talk about. And then I guess just a couple of small little news items that are like you know pretty interesting in the Commerce base Google made an acquisition of this company called pointy.
[57:25] And I wouldn't expect people to necessarily recognize pointy but pointy is a, a data company that makes it super easy for particularly small retailers to upload their store inventory to Google. So that lets you do local inventory ads where we're like you know you do a search for a coat and Google says oh that coats in stock in this store that's a block from you. And it also you know facilitates the sort of instant purchasing Google and a lot of other things and so it's it was interesting that Google's acquiring this capability to help retailers on board. Their inventory to Google much easier that you know could be the first of a bunch of steps we see in Google trying to get more serious about Commerce, and then you know the Gap had previously announced that they were going to split Old Navy off from the rest of the company, and they kind of had assigned CEOs and then this month announced that they're actually not going to do that they fired that CEO in the, the son of the founder I came back to run the company so so a lot of drama going on at the Gap right now.
[58:44] Yeah well I think they were another example like I, I don't know I think it's a high level the story was a bunch of the Gap brands are underperforming the one Gap brand had been performing strongly was Old Navy and you know so there's an argument that like. Old Navy wasn't getting full credit in the public markets because they're being dragged down by these other brands so you split up. The strong brand Old Navy from the weaker brands, and you know maybe you can carve out more value that of course ignores the fact that, like all of these Brands share a shared infrastructure the same it stuff the same e-commerce stuff the same supply chain stuff when you split them up you got to spend a minimum shh money to rebuild that you know. For both companies and and I think the thing that made this untenable was. Old Navy didn't have a great holiday either and so you know they were left with the prospect of potentially splitting up and having two distressed Brands neither one performing very well and. You know they just spent a bunch of money and and you know their employees Focus was all put on this this. Split instead of focusing on on customers and in the right product in the right right brand positioning for that stuff so so I think it became scary and they pulled back.
Scot: [1:00:08] Must be frustrating imagine if you were on that team and you probably had to separate all the point-of-sale systems and the customer databases and.
Jason: [1:00:18] Yo and I'm.
Scot: [1:00:18] Pretty far down the path.
Jason: [1:00:19] Like I'll be honest I'm sure there were people that were far down that path and the whole time they were doing it we're saying this is stupid we shouldn't be doing this and now they're pissed that they wasted all that. Because it's yeah it's not going to see the light of day but you know sometimes those are unavoidable things like you know there, there are storied brand I hope they find their way through it. But Scott that's probably going to play be a good place to wrap it up because we have hit our usual 1 hour mark so we've used up more than our allotted listener time, as always if people have a comment or question feel free to drop us a note on Twitter or Facebook and for sure we need to get those iTunes reviews going for the 2020 year fresh reviews are super important so if you haven't written a review for a podcast yet we'd love it if you jump over to iTunes and write us that review.
Scot: [1:01:15] And make them five stars thanks everybody.
Jason: [1:01:17] Yeah until next time happy commercing.
At least 5k more store closures in 2019. Yes. 9,300 US store closures per Coresight.
Amazon – Prof Galloway is big on Amazon having to create a AWS spinoff and has moderated that to tracking stock. I'm going to predict Amazon doesn't do either of those things. But this WILL be the year they break ads out. Yes. Galloway was wrong.
eBay/Alibaba – I think this is the year when they both need to do something big and the stars are aligning for a combination there. Nope.
Shopify gets acquired by one of the big ad-based companies (facebook/google most likely) Nope.
Walmart stumbles in e-commerce. Nope
Score 2/5
Jason
Amazon store count exceeds 1000 stores Nope. 571 Amazon Stores
22 Book
15 4-Star
8 Pop-ups
25 Go
2 liquor
499 Whole Foods
Walmart buys a last mile firm Nope
Another big bankruptcy (going to be a tougher than expected year, JCP, category killers Office, BBBY, Neiman). Yep (Payless ShoeSource, Destination Maternity Shopko,Forever 21, ShopKo, Gymboree, Things Remembered, Charlotte Russe, Diesel, Z Gallerie, Charming Charlie, Barneys, Sugarfina, etc ...)
Mobile commerce revenue passes Desktop – Aided by PWA's, and payment API's we see mobile gap narrow. Nope. 60/35/5 Desktop/Mobile/Tablet Nov-Dec via Adobe.
Owned brands continue to grow. 5% of retail in 2019, could be 8-10% in 2020 (as measured by IRI, for CPG private label).
Installment Payments heat up - At least one company is acquired (Affirm, Afterpay, Klarna, QuadPay, Sizzle)
Digital in-store heats up, QR codes make a comeback
Bonus: Cashier-less stores (Amazon Go), blockchain, 5G, big data, and personalization won't have a significant impact on retail. No DNVB will break out. No major retail anti-trust actions in US. Brick & Mortar Marketplaces won't take off (Showfields, Neighborhood Goods, B8ta). Shopify won't compete with Amazon.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 204 of the Jason & Scot show was recorded on Thursday, January 2nd, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Jason: [0:24] Welcome to the Jason and Scott show this is episode at 204 being recorded on Thursday January 2nd 2020 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.
Scot: [0:40] Hey Jason and welcome back Jason Scott show listeners will Jason happy New Year happy new decade hope you had a really good last decade and I hope you had a good holiday.
Jason: [0:53] I did Happy New Year to you. I'm with you on that new decade but they're you know there's some controversy about whether it is a new decade or not.
Scot: [1:01] Yeah I don't believe that it's a it's a 10 plus one problem we'll just to sweep sweep past.
Jason: [1:07] Yeah it's the twenties as far as I'm concerned so. Yes but it has already happened I nailed our intro despite the fact that we typed 2019 in the show notes.
Scot: [1:22] Azle Easter I got them there for you you found it.
Jason: [1:25] Yeah I was I felt I felt special about myself that I was able to fix that on the Fly.
Scot: [1:32] Who said the most important question is have you been able to see the new Star Wars movie.
Jason: [1:36] Oh my God Scott I've been thinking about you nonstop because yes I got to see the new Star Wars movie and obviously we'll will be spoiler-free but I I was totally happy with it and enjoyed it.
Scot: [1:48] Yeah yeah me too weird thing happen to me where I've gotten to where I kind of like the Mandalorian almost better than the movies so I don't know.
Jason: [1:57] So here's why I've been thinking about you nonstop my 4 year old is now both feet in on Star Wars everything.
Scot: [2:06] Good quality parenting right there.
Jason: [2:08] So we wouldn't want some of the movies there's a ton of like kid-friendly Star Wars content you probably knew all about this but there's like the Lego movies and cartoons and all this different stuff, and like for Hanukkah he got a lightsaber which he has not been separated from since and.
Scot: [2:27] Nice.
Jason: [2:27] We got a bunch of Star Wars books including I got him, like a graphic novel version of episodes for 5 and 6 and so now every night as part of our bedtime ritual he's his down with me and we we you know read us a segment from the book.
Scot: [2:46] Give us your Darth Vader voice.
Jason: [2:48] Yeah I'm not doing any voices on the podcast sorry.
Scot: [2:53] Baby geek I am your father.
Jason: [2:55] Exactly I have said that exact phrase tan. The what's super funny is my wife and I like you have enjoyed Mandalorian and we were watching it one night and Stephen King in like you should have been asleep and it came in and saw I like. 30 seconds of Mandalorian which we have not let him watch Mandalorian but Steven is totally 100% fixated on Mandalorian. So he's already convinced that mandalorians are way better than Jedis. Like the only character he likes from all of the previous Star Wars work is now Boba Fett and he like he brings them up and every contact and we're like. You seen 32nd.
Scot: [3:44] Team Honda.
Jason: [3:47] Anything he's like he's like four and he's asking like. Like when he sees Yoda in like Clone Wars he's asking like how is he only a baby in Mandalorian.
Scot: [3:59] You have time like it's really confusing.
Jason: [4:05] Star Wars is super confusing to explain to a four year old white guy because you start with the premise that like the bad guys have red lightsabers in the good guys have other colors and then like, it's only Don's I knew that all the bad guys used to be good guys and then become good guys again and so I. It's super like that Santa can that it yeah yeah it's a very convoluted but suffice it to say there's a bunch of Mandalorian and baby Yoda posters up in his room and he's like we're leaving in a Mandalorian World which just makes me think of you.
Scot: [4:37] Regal Walden toys are coming out so that it's going to be exciting in the next couple of weeks are all the they held them because they didn't want to spoil some of the plot elements of Mandalorian soon there's a big wave of toys coming so it's good time.
Jason: [4:50] I know and in fact a bunch of entrepreneurial people because they did not release baby Yoda toys during the show because they were trying to prove your point keep him Secret. So everybody and their brother started making baby Yoda toys and like there's been like you know a huge intellectual property Crackdown and there's like you know hundreds of people from Etsy that have been. Don the cease-and-desist orders over that.
Scot: [5:17] Speaking of toys I saw on Twitter that you were going to try to hit one of the new Toys R Us did you make it to him.
Jason: [5:24] I did I am wearing a button right now that says I don't want to grow up I'm a Toys R Us kid. Because I went to the Houston store a few days after it open so there's, Tyreke and for our listeners like Toys R Us went bankrupt or done at super sad huge disruption in the toy industry, a company bought the the intellectual property of Toys R Us and they did a partnership with beta who's been on the show a couple times, the open initially to Toys R Us stores so there's one in New Jersey and there's one in Houston Texas. So I got to go to the Houston Texas one and it was fun it was fun to see the brand, back alive and reimagined then it was a you know it's very different than a Toys R Us a traditional Toys R Us store because these are. Kind of 20,000 square foot Mall base toy stores versus. 80000 square foot big box toy stores but it was a fun immersive retail environment with a bunch of toys and, this mall which is a a mall Scott like a week before Christmas felt like a ghost town to me like it was. Tragically empty but I would argue the Toys R Us with the second busiest store in the in the whole mall and.
[6:49] Behind Apple you're exactly right side note people are only in the Apple store to get tech support but still. But this one was really busy and people like had made a special trip just to go in like the brand is so strong so it looks like these first two stores are doing pretty well and I know there's a plan to open more so kudos to them for saving the brand and beta for doing a pretty good toy execution.
Scot: [7:16] Nice the so thanks for the trip report this is our annual recap and he's always run long so I think we should just jump right on into it so being the first show of the decade and the year it is our custom I guess we've done this for fact, to do an annual prediction and then Square ourselves so way back in episode 159 we had our predictions, or 2019 so I think what we'll do is score each other to start out with and then we'll put out our predictions so why don't you go to my last year predictions.
Jason: [7:58] And before you jump and let me just say I despise this show I've had red leading up to the show in the reason is is I've never done very well that however will I have done I've gotten progressively worse every year and last year while I did quite poorly you did stupendous wave and so, it's like I've dreaded even seen what my predictions were last year and hearing about them so I'm just going to rip the Band-Aid off and we'll get through the show but your first prediction for for 2019 was that at least 5K more stores would close in 2019 and let's get this out of the way you blew away that prediction coresite which is the company we most often use for kind of tracking Us store closures had like 9300 stores closing this year IHL did a study in the world even more store closures than that in their in their study Dope by any measure way more than 5,000 stores closed and you know in hindsight I should have let you get away with that prediction because that's why, it was too easy.
Scot: [9:12] Well no I don't know if there's a lot of people saying but that was kind of going to be the worst.
Jason: [9:19] That no so if you had said there is going to be worse than last year that would have been a slightly more predict like. Tempstar 5000 was less than last year or this year but yeah I agree, most people thought there be fewer closures this year than last year in that bike by depending on how you count did not prove to be the case that much more controversial thing on the whole store closures is it more open and closed if you go by the course I track her a lot more closed than open but if you go by other studies, that are the feel more comprehensive like they're actually were more swords that open then close so.
Scot: [9:58] Yeah and I know the size Matters right to some of these are mattress stores which are pretty big.
Jason: [10:04] And I whoop all a lot of the people that say way more stores open then close are also counting like restaurants and stores for example and the end restaurants have a lot of charm and so, a lot of controversy but bottom line you started out of the gate strong you're one for one and. Your second prediction, you just you just jumped right into the gutter because your second prediction was that Professor Scott Galloway would basically be wrong. Which I like as a general principle but more specifically what you're talking about is the, an inner 9 people the climate a year ago he had just published a book about the the for one of which was Amazon so he was he was publicly speaking about Amazon a ton and he you know was really beating a drum around having to split up Amazon and they're potentially Amazon would voluntarily spin off some of their businesses because they're so lucrative and so you know the talk to usually about 8 if you ask until your prediction was kind of to go negative and say you always wrong and Amazon isn't going to be split up and isn't going to voluntarily split up in any parts of their business and, you were certainly correct none of those things happens.
Scot: [11:28] What have I learned from this anti Galloway bet is that he throws out so many things he gets one right and then looks like a genius show his we work one with hit. The bus was other ones didn't put the he's ridden the we work one for a good six months.
Jason: [11:43] Yep yeah I feel like he the first one that hit for him that really like you know he made a lot of hay en was predicting Whole Foods would be acquired by Amazon and then yeah he was instrumental in that kind of picking the, he was an early picker of the we were demise the pressure point he also predicted Amazon would acquire a bunch of other people besides Whole Foods that they didn't in my favorite prediction is about 3 years ago he said that Amazon had peaked in that you should short the stock.
Scot: [12:14] I would not have been good.
Jason: [12:16] Side note yeah that would turned out not to be good investment advice. So yeah for your point like anyone in this predictions face like the whole key is to throw a bunch out and just remind people of the ones you got right and not bring up all the ones you got wrong. But you're doing great you're two for two yeah so third prediction that. Either or eBay and Alibaba would need to do something big in 2019, and so you use you propose that potentially they might do some sort of joint venture or some sort of combination. And I have to say he's got as far as I'm aware that did not happen.
Scot: [13:03] Yeah but itself StubHub when you said that's pretty big.
Jason: [13:09] No not relative to their socks.
Scot: [13:11] It was Lucy 4 billion of 30 billion market cap that's more than materiality.
Jason: [13:23] Again I'm dreading my own predictions so I'm grading you very very strictly enough so I'm going to say you're two for three right now.
Scot: [13:35] Another thing just point out is the eBay CEO just got up and left one day if that was kind of surprised I don't know if we count that as something big happening or not there's this line with the Borden peace out.
Jason: [13:49] Yeah need to do something big.
Scot: [13:50] That's kind of a shot.
Jason: [13:52] Sell the property will parts of your company and then watch the Executive Suite I don't think that was the spirit of I think you were more proposing they would do something that would help them reacquired growth.
Scot: [14:05] Yeah but another thing I didn't anticipate us this anti-china thing that we have going on here right now so the tariffs were one thing but there's just. A lot of anti-china going on right now that I think is going to make this murderer and possible I don't think the US government would let app.
Jason: [14:24] Yeah I think there's there are some number of entanglements there that that would be challenges there aren't there were some little Partnerships there some interesting things we like, well I guess it's more JD and the Walmart in the US but. Back on track your two for three and your fourth prediction was that Shopify gets Acquired and you said potentially by one of the big add bass companies like Facebook or Google +, once again to my knowledge that did not happen are you agree or do you have a argument there as well.
Scot: [15:03] I agree and you know what's really amazing is if you look at kind of your your Shopify when I made this production was their stock is like at 1:44 and they were attending. Nick on all the stuff like 3x so weather like a 1012 blade on a company now they're $47 company they're pretty much on acquirable I think at that price and then the valuation multiple is extremely lucky so if you look at all the different soccer the service companies yet uses range of like 8 to 10 x there's something like 15 to 20 x is just crazy, good as those guys they essentially don't they will be at choir and not not a choir.
Jason: [15:53] Totally agree there they're killing it both in terms of their their financial success and valuations but also their they're just winning in the marketplace and they're like you have continuing to capture more Greyhound away from the Enterprise guys and they're doing a bunch of interesting things so we'll talk more about them in the future I'm sure but yeah they're a bunch of people that would like to acquire them but for your point like there is not that's not really economically viable at this point and then number 5, Walmart stumbles in e-commerce and I took that to mean. That they're the rate of e-commerce growth would slow over 2018 which was pretty solid gross at like 40%. And they actually were exactly at 40% again in 2020 so there, they're growing very quickly they're growing faster than Amazon certainly much faster than the, the market overall and their growth rate in 2020 or 2019 was basically the same as 2018 so like by that measure I'm not giving them a stumble in 2019 but do you you agree or was you think it was some other dimension they stumbled in.
Scot: [17:15] Agree I probably underestimated how long they had to kind of Wind by converting grocery over but I think this year probably will give you the.
Jason: [17:29] I feel like that's a common theme in all of our predictions ynm that I've noticed both you and I are sort of afraid to double down and be like wrong one year and then say say it again the next year but many of our predictions come true a year after we predicted.
Scot: [17:43] Lyrics the Alexa are pause airpods I did like 2 years and then it came up here I didn't God darn it.
Jason: [17:49] Exactly which is frustrating yes so being super brutal you ended up 245 which is way off your your historic average.
Scot: [18:02] Yeah I usually bat 500 but it wasn't wasn't there this year I mean on the stuff I feel like e-commerce slow down a little bit.
Jason: [18:13] Oh no I for sure feel like it has and I do think.
Scot: [18:16] But the pace of innovation is really slowing which is makes up makes it harder to throw out big predictions.
Jason: [18:21] Yeah I also feel like it is this point like it's the timing of many things is tougher to predict than the actual events themselves and the Horizon is now longer than a year for your point so that's that's that another challenge with this whole predictions thing but I'm not remotely confident that I didn't any better so so with no further Ado let's let's see how I did.
Scot: [18:51] Yes yes so your prediction so let's jump into this the first one is you were very giddy you probably had just visited three or four of the Amazon stores and you said look I am sure this can be over a thousand Amazon physical stores by the end of the year so I think. Whole Foods helps a lot here in this is there were there were a bunch of Articles out there that Amazon was going to because Wall Street Journal that they're going to have, thousands of Stories the right now we're sitting in about five to six hundred so you got Whole Foods 500 Whole Foods there's some pop upstairs for Stars book stores throw all that together you get sky like 555 75 so that's a pretty big Miss 57% is f on any grading scale so sorry I did not get that.
Jason: [19:53] Yeah no I'll be honest I thought, perhaps Amazon go with scale and much more you were generous that they were actually a lot more pop-up stores the last year they closed most of the pop-up store so it's possible there's fewer Stars this year than they were last year of you if you included those so yeah I wildly miss that in the only like slightly interesting thing in that in that whole thing is I feel like the one concept that has scales slightly More Than People realizes the 4-star store so there now 15 for Star stores which is like coming up on on you know the number of bookstore so pretty soon we might have more, more 4-star stores that we have book stores but nowhere close to a thousand I was wildly wrong.
Scot: [20:38] What are the clothes the popups cuz I've kept an eye on them in our malls and they're pretty popular MMOs price at the.
Jason: [20:46] Yeah yeah well you know for a while they had a ton of them in Whole Food stores, and yeah I feel like they opened a lot of them in places where they could get real estate rather than in places where. Where there was a like strategic audience need a few pop-up stores their main are some kind of interesting Concepts so that yeah I don't I don't know.
Scot: [21:12] So that's 0 4 5 4 for those homegamers keeping track of the score then your second one and this was one where I think the timing probably is going to be what this was on the heels of Target buying ships and here we are a year later that's gone really well you have Target, Ecommerce accelerated they're constantly talking about how should you store is doing well and all those initiatives that if they can anchor on ship, so your prediction was that in 2019 Walmart would buy a last-mile firm and that did not happen I think the big idea and last-mile will there be a couple one was going to just kind of Associates kind of on their way home free stuff and then the second one is this whole body camera thing where they're going to pop Associates right in your house to deliver stuff I don't think that is really caught on either.
Jason: [22:10] Yeah I know II do I agree I think they I made that prediction cuz I felt like, that honey how stuff is really growing for them and they would need more Last Mile capacity and I still think that it is true, I didn't foresee that last year but you know like as whole food as a FedEx has kind of gone push the last run away from Amazon that the company they're running to is Walmart and so we we've seen some like bigger strategic Partnerships between Walmart and FedEx and now that you know they're starting to be some some economic weakness at FedEx, I do not want to talk about this year's predictions but that you could almost imagine at one point that that could be an acquisition or some kind of deeper strategic partnership but nevertheless did not happen last year.
Scot: [23:03] So that says 045 stole your third one and I think you made a comment last year that you need to be less specific to this one's kind of interesting. And they said there could be another big bankruptcy but then you said such as JCPenney one of the office guys Bed Bath Beyond need and Marcus so you kind of had an ore in there or are you know we could have took her to this again. Being generous since we're sitting here at over to there were a lot of bankruptcies so we had the seat jabri we had Forever 21. What's rue21 was that a result 2018.
Jason: [23:49] That might have been 18 or not sure.
Scot: [23:51] One of the maternity stores Payless shoes and we'll see we had there was one of the mattress stores. So there were there were some pretty high-profile bankruptcies.
Jason: [24:07] I'm taking the win but in hindsight like that was a lame prediction like of course somebody's going to go bankrupt every year so if you're not specific at Tulane prediction and if you are specific the names I mentioned. I still am taking the win and I would point out like the one that gets talked about the most which is actually one of the smaller ones is Barney's was like the, start a story brand that went bankrupt and I know the one that almost doesn't get talked about but was most crushing and near and dear to your heart is sugarfina.
Scot: [24:37] Yeah. Steer. Okay so your fourth prediction.
Jason: [24:44] Wait wait let's recap the score I'm now one of the three. Infinitely improved over over the previous two.
Scot: [24:50] Yeah yeah you're all on at are two more to make up some some room here so your fourth prediction was that mobile Commerce Revenue would pass desktop and lessors of the show know you are a big fan of pwa which is not a rap band it's some kind of a technology for mobile stuff and also the new payment apis and some of the other stuff you thought we're going to close the mobile, I'll defer to you since you're the guru on this didn't did you.
Jason: [25:21] Yeah did we mention that that e-commerce is slowing down a lot, none of those things happened at near the scale that I thought they would end so for sure no mobile Revenue did not pass desktop revenue and I I thought I could like save face and say well that didn't happen it did happen on the big shopping days bright like so you know you could kind of make try to make an argument that oh I totally happened on December Monday or things like that but the reality is even over the holiday. If you'll get November through December, 60% of all revenue happened on desktop 35% of Revenue on mobile and 5% on tablet so bottom line I wasn't even close. Sad.
Scot: [26:12] Yep sorry dude so let's see that gives us one out of four, all right last chance on number 5 on this one, Scot of one of your anti predictions you said following things are going to be fads and not take off voice Commerce AI That's customer-facing social commerce virtual reality and boxing.
Jason: [26:38] Yeah and again not a very awesome prediction but I'm going to take the win on that and say that those things are all we're all basically feds at least in 2019, the one that feels like it's trying to get some traction and some some aspects of social commerce but but I would still argue they weren't like. Meaningful in 2019.
Scot: [27:02] If I give you that one.
Jason: [27:03] Yeah I'm desperate for I'm desperate for a win that would give me the 22052 at least IU.
Scot: [27:08] Yeah yeah and then you threw out because you're you're Jason you just couldn't stop at 5 got a Bonus and you said Amazon is going to breakout Prime Revenue you're really specific I had to go back and listen. Cuz I had a feeling you're kind of get a little slippery on it so Amazon has not broken out that's that's a no.
Jason: [27:31] Yeah what really happened is I misspoke what I meant to say is that callonwood breakout primary. For Amazon and I yeah I said it wrong.
Scot: [27:43] Yeah but since I was a bonus will you know we won't we won't count it so it's practically a tie this year so which is to me that's a loss cuz over the over the The Arc typically beat me by three or four answers.
Jason: [27:59] And so it would be a win for me but since you basically came down to my level it doesn't I don't think it feels good for either of us but at least.
Scot: [28:06] What are you get better.
Jason: [28:07] At least we've established our credibility now so I'm sure it was on the edge of their seats to hear our wise predictions for next year now that we've shown how I'm nipotent we are.
Scot: [28:17] We're going to rebound to I can feel it go do you want to join to do yours first.
Jason: [28:22] No I want to hear you're so I can potentially use them.
Scot: [28:27] Yep so here's my five predictions so I mentioned earlier that Shopify is kind of gone up 3x in a year that just feels you know, very nose bleeding to me and there's a lot of new competition coming out so I think whenever you have a value creation event like that where they've essentially created 45 billion dollars out of town are there could be a lot of money chasing Shopify, I don't know what their weaknesses but every company always has one so it's going to be interesting to see, what comes after them what angles they come after and all that good stuff so that's that's my prediction is that they're going to wilt a bit and you know I'll put a.
[29:14] I need to put something more specific there I'll say they did kind of stay at this market cap or go down 10% somewhere between kind of here in temperature I don't think there's going to be another kind of like huge run up type your and it's going to be largely your folks waking up to say wait there is competition out there for this business model. But you don't think that doesn't get talked about this to turn just has to be like through the roof right so just on a unit turn to have to just be turning tons of customers and now in a cohort, it probably is its revenue for the cohort pipe the GMB for the cohort crime makes up and then that's what drives the revenue, overtime it just feels like there's going to be sup Rider light shown on part of their business model that isn't, this kind of perfect kind of price for protection company.
Jason: [30:09] No I would agree with that I do think that maybe the one thing that that mitigates that a little bit is they are starting to successfully go upmarket a bit and get like some slightly more. Stables lower turn customers with higher gym be so so maybe that balance is out in the long run.
Scot: [30:29] Yeah it's like a million at the base of the pyramid though and it takes a lot at the top of the pyramid.
Jason: [30:35] It just takes one Kylie Jenner.
Scot: [30:37] That last. That's my first prediction my second one and another prediction we would kind of I can't remember which was did that for a long time is part of me just like the earpods I was saying, Amazon will get into delivery that is, that would be a double a man because it sucks such an obvious once and for the longest time FedEx UPS said no no no there are partner or not our competitor the bloom is totally off that one right now where was like okay this is bad in fact you mentioned earlier FedEx is like getting hammered over this and so did Amazon kind of dug the knife in further where they won't even let seller fulfilled Prime sellers use FedEx because they say the service level isn't good enough.
Jason: [31:32] Yeah you talk about throwing some holiday shade.
Scot: [31:34] Ouch ouch so as a result of FedEx is under a lot of pressure right now and I think it's going to cause some kind of interesting thing to happen you know you got eBay out there kind of rudderless right now you could see FedEx eBay you could see you mention Walmart I think there's going to be some interesting, kind of marriage that happens with FedEx in and it's can be driven from the world of e-commerce.
Jason: [32:04] Get I like that one.
Scot: [32:06] Predictions for 3 this is not my forte but there's just a lot of Buzz around returns so there's several startups you could probably write them better than I can save Mall. BCS contact me about this which means it must be like just kind of, yeah they're all trying to solve returns problems and there's all kinds of clever ways of doing this of no Consolidated return centers different ways of managing the supply chain that kind of thing so I'm going to say 2020 will be the year where you know they're just probably be some kind of a winner that emerges from that and they'll be kind of like ShopRunner has try to do and not to successfully the offer a prime and a network of retailers that form an alternative prime one of these startups will be successful and I guess I'll Define it as. Raising over a hundred million something like that something that's like pretty pretty. Obvious that their leader they'll be pretty successful in in kind of taking a run at offering an on Amazon, multi retailer multi-brand approached returns.
Jason: [33:25] So that's funny I wrote a similar prediction I didn't end up using it because I thought it was two wonky but I totally agree with the sentiment it does like I think it's returns it become a huge acute problem and so you know we're seeing lots of new investments in the hole reverse Logistics base to try to solve it so it that that seems reasonable although somebody raising a hundred million dollars is not peanuts so the so I like your. You're taking a stance.
Scot: [33:58] That's my third and fourth one is a keeping with my mall again which has been a winner for for two years in a row I'm going to say you know what you call 9000 store closures in 2019 it's a good start. So I think we're going to have many more store closures I'm going to say at least eight thousand so continuing to keep, about the same as last year if not more I think we are going to see, I just feels like we're still over stored in a lot of different categories like drug stores that kind of stuff so I put that one out there.
[34:34] And then this one this is one of these I've made a long time and I'm always wrong but I've some reason I'm back to it this year I just finally believe Google has is waking up to the Amazon Fred and and starting ticket much more seriously now they're there, terrible branding job at it but I think execution wise there is something there they have this Marketplace which is essentially called shopping Google shopping. Actions and you know the sink, they're getting pretty serious about it and I think this year they're going to get really really serious about it so what's that mean so I think I think. Overall I think I could see them actually in the hunt to buy an eBay or FedEx or something like that that could be interesting and then you know another one is the shopping actions is it's always just been this kind of on the edge like well a little Beyond 2% of Android latest Android lollipop popsicle Twix and yes it is a being like percent of a percent of a percent and not Material so so I'm thinking they get pretty serious about it meaning it's going to get a lot of exposure I'm on not only just some fraction of Android but across all Google properties.
Jason: [35:59] So I like it how like what were you cancel BC to know that that that happened like you expect them to be like I'd top 100 retailer like what would what's the.
Scot: [36:11] I think yeah I think 10% of shopping traffic going through it would be material so I would come start there.
Scot: [36:22] And I would look at like search marketing as someone like the referee on this search marketing. Was that search engine land or one of those.
Jason: [36:31] Ya SE land.com. At least to get the ball rolling you know the last month they announced Bill ready who is that executive PayPal is the new, like VP of Commerce a Google so they like they haven't a new person to sort of weed that initiative so that maybe bodes well for your prediction.
Scot: [36:53] Yeah I worry about it because these payments guys want you when you've been in the payments world everything looks like a nail so so I worry we're going to get Google pay 8.0 embossing.
Jason: [37:07] So yeah supposedly and I I don't know but I think he's got some non-competes and supposably like is being hired explicitly not to get involved in pain.
Scot: [37:17] I did not know that.
Jason: [37:19] So maybe that will benefit you.
Scot: [37:23] Let's we can only hope.
Jason: [37:24] Yes yes I like it though.
Scot: [37:27] All right those are my five what are your five.
Jason: [37:29] Awesome duck so my first one is I'm just going to take yours from last year and protect them for this year. Thinking of you just missed the timing and given all the ones that that have happened the past that's my new strategy so last year you predicted it Walmart, would would have a hiccup in 2019 so I'm going to say in 2020 is the year that the Walmart rate of growth slows down and I don't, actually mean that that, is a distressing anyway I just think sometime this year they're going to finish rolling out online grocery pick-up to all of their stores and they're going to have to comp against, stores that were opened last year where has for the last few years they've had this benefit of opening a bunch of stores and going from zero to some, some big number of digital grocery so I think it's going to be much tougher to maintain that 40% growth rate so I expect that growth rate to go down, which is enough kind of natural and then I'll throw out a wacky one and say I also actually think that this might be the year that Mark Laurie exits from Walmart.
[38:43] Just think like, that he's probably been there awhile like we weave you know started to see some of hit a lot of the jet people have, kind of transitioned out now Andy Dunn has transitioned out that the guy has basically unlimited funds in the bank like I think he may just be like he's accomplished with what he can accomplish it at Walmart and we we might see a Changing of the Guard.
Scot: [39:08] Did Nadal Ray say that he had like four years to make a trillion dollars but so it feels like they're being expensive choice.
Jason: [39:18] Yeah I think it will be a I think he could afford an expensive choice I don't know how that would all work out like I could imagine him to go shooting some sort of payout, it made sense for both parties will see.
Scot: [39:35] Is that a nand or nor.
Jason: [39:37] Yeah so I want my official prediction to be that the rate of growth slows but if Mark Lori does away this year I want permission to go. Galloway and just like launch a website that's called Jason predicted that Mark would we.
Scot: [39:52] Got it so it's amore with the Galloway Asterix.
Jason: [39:56] It's the color its color exactly. So then my next permit prediction again following the trend that I like to always you always make some Amazon prediction so I'm going to steal that and. How to be honest like part of me feels like this is too easy and not a very controversial prediction but so many things don't happen that that like I do think it's fair I think this is the year that Amazon finally opens its own grocery concept bike separate from Whole Foods and I think it's going to be targeted at a more affordable price points and I think it's going to dramatically heat up the sort of digital grocery Wars and most notably, the Walmart Amazon Kroger battles.
Scot: [40:44] Cool.
Jason: [40:46] So number three is that I think we're going to see a lot more emphasis and talk about owned Brands this year and that's going to significantly grow as a part of retail so last year about 5% of all retail goods were, like private label type products and I think it could be dramatically bigger in 2020 I think it could be sort of in that 8 to 10% range. Which would be a huge disruption in the retail Marketplace.
Scot: [41:19] What's your data source.
Jason: [41:21] The 5% is actually 4.6% and I will have to I do have to get my intern to pull it out but that's predominantly focused on like the cpg and grocery space so it's one of those those Data Tracking companies but I'll find it for you.
Scot: [41:47] So it's not Jason Goldberg go to himself.
Jason: [41:49] No no no I we need a credible we need a credible external.
Scot: [41:53] Is a data point out there were on the lam purses.
Jason: [42:00] Yeah I like that one we just put it in the Echo chamber and and it'll become real.
Scot: [42:06] That'll be interesting so that does that include digital native recall brands or this is more just like Target spending up.
Jason: [42:17] Yeah, so I'm primary thinking about omnichannel retailers like Shifting the focus to Brands they own rather than so like to be it's more of the the, Captain Jack's of the world like I think Walmart's going to make a major effort to grow their own Brands Target you know me is is putting a huge effort into their new grocery brand and I I just think, the big macro Trend in in retailers we're going to see a couple retailers really try to can compete on, sort of Assortment and being the everything store and then in North America to me that's Walmart and Amazon and every other retailers going to try to win by selling stuff that no one else has and so I just think that's going to result in a lot bigger, Pechanga retail selling their own stuff instead of other people stuff.
[43:12] We shall see ya. My fourth prediction is you know you you have on the area that there's a lot of momentum at the moment and returns and reverse Logistics another one for me is the installment payment space so I said installment payments are going to dramatically heat up and I think that's going to result in at least one major acquisition in that space so I think like, when I talk about installment payments I'm talking about a lot of these companies that are sort of alternative credit means a lot of them are kind of like, Finance your purchase in for for monthly payments that kind of thing and cities are friends like affirm and afterpay and Karma and I I just think that you know next year you see one of those acquired Maybe by a major credit card company or Bank you know I think some of the big traditional Financial folks are going to want to own a piece of that hot space And so there's going to be some good acquisitions.
Scot: [44:15] Who who do you think this is an addiction but I'm curious who you think the buyers are going to be like traditional like Financial folks like City or or is.
Jason: [44:26] Yeah so I think I think the big the big Banks participating banks that have a retail credit Division if you are receiving retail credit services so you do private label credit cards for like Best Buy, these guys are now taking a chunk of that space and and they've accomplished something that you've always wanted to do which is their built into the checkout flow which is super valuable to these credit card issuers and so I could easily like imagine one of those credit card firms wanting to acquire one of these guys I also think you could, you know it could be a PayPal or, square or you don't even like one of the big credit networks like Visa.
Scot: [45:15] Singing payments do you have plans to move to Africa this year.
Jason: [45:20] I was going to but I've been told that I only have one job and so I'm not qualified to to like move to Africa and remotely do my two CDL jobs. Who would you be referring to buy a by chance.
Scot: [45:36] So Jack Dorsey CEO of Twitter and and square it's just kind of randomly said he's going to move to Africa for some. Of time if she can get Scott Galloway it really angered him he's very upset about.
Jason: [45:52] Yeah but In fairness like I think of you a shit like Square in particular you're like, why is my guys been in a lot of his time on this Twitter thing and then now he's going to do it from Africa like that that would seems like, that would be a legitimate reason to have some concern.
Scot: [46:12] Yeah yeah yeah.
Jason: [46:14] Yep I would love to visit Africa but I think it would be on vacation and then my V prediction. Is one that I feel like I used to do all the time and then you know I skipped a year, so what will try it again I think this is going to be a year that digital in-store really heats up and the surprising piece of that is this much-maligned a technology that people in our industry like to make jokes about the the ugly QR code I think is going to make a a major comeback at retail and we'll see a bunch of of a Retailer's deployed QR codes for various forms of mobile wallets and particularly for like, letting you scan products and read reviews and things like that ends in retail stores. So those are my five and then.
Scot: [47:08] DuckTales risky people hate QR you want a visceral hatred of York.
Jason: [47:12] Yeah I feel like it's it's a bit of sneaky success I feel like there's a lot of people but they're pregnant primarily pendants that like have all this negativity around the QR code but didn't secretly you know. There there's a bunch of of use cases where the QR codes have been like Paramount like it's, it's you know a huge chunk of all payments at Starbucks and it's Walmart pay which is secretly been a success and it's you know it's it's Snapchat and if you go to China it's everywhere is WeChat so, so hopefully we'll see you by usually I am dead wrong in these things so I am not overly confident about any of them but. But I'm at least throwing it out there and again because the bonus is always treated me so well I thought I would throw a bonus in this year.
Scot: [48:03] What do you have for this year.
Jason: [48:06] So my bonus is I'm just going straight negative because I'll be honest when I first read these forecasts all five of my forecasts are things that we're not going to happen and then I realized that I can't I can't be that guy right so so I tried to make more optimistic reasonable forecast but then I reserve the right to point out all of the Ebenezer Scrooge bah humbug, moments so here's my long list of things that are not going to happen this year cashierless retail stores like Amazon go blockchain 5G big data and personalization none of those those Technologies are going to have a major impact on retail Talking Heads are going to go crazy about them and write stories about how you know if you don't do it immediately you're going to go out of business, but I think they're going to be the examples of success are going to be few and far between I don't think, everyone loves to talk about DJ need a vertical Brands but I don't think any of those are going to break out in a be particularly successful in 2020, I for sure don't think we're going to see any major retail antitrust actions in the US.
[49:11] So that would be my negative Scott Galloway prediction I also don't think the the brick-and-mortar marketplace stores so that's beta showfields neighborhood Goods I don't think they're going to have a huge success or break out in 2020 and Shop of eyes getting a lot of Buzz right now but the the, thing I hear most about Shopify is that they're going to become a viable competitor for Amazon and I actually don't think they're going to compete with Amazon at all in 2020.
Scot: [49:42] Yeah that the people that say they can compete feel like they think it Shopify would have some front door kind of marketplace Tech experience that kind of what you think people are looking.
Jason: [49:54] There's people that talk about maybe they aggregate traffic and have some kind of marketplace experience where you could shop across multiple vendors you know they they bought a logistics company this year in the rapidly building out there with just aches and on paper that looks like, fulfillment by Amazon and some people are like oh that's competing with a fulfillment by Amazon but as I as we said earlier in the show I admire Shopify think they're making a bunch of the right decisions and they're doing really well. None of the services they provide to a client in my mind. Replace or compete with any of the services Amazon provides in anyway and like, I think they're for the most part synergistic in there they're going to have a lot of customer overlap but it's the end of the day Amazon is in the business of generating a huge amount of traffic and monetizing that traffic and they sell that traffic to their customers and that's exactly the opposite of what Shopify does Shopify does everything for you but get you any traffic whatsoever and you are totally responsible for bringing your own traffic and so I just think, that's a that's a, both sides of that strategy makes sense for both companies but I just I think all the pendants that are like oh you know the secret competitor for Amazon's going to turn out to be Shopify I just don't see it.
Scot: [51:15] Any other bonuses you want though there.
Jason: [51:21] No no no no I think I press my luck enough hopefully that you know there's some nuggets in their our listeners will be able to use they shake their 2020 and that will be able to redeem ourselves when we unquestionably I enter the new decade next January.
Scot: [51:43] Yeah you know what maybe it would be fun as if listeners I'm just doing this off-the-cuff so what if listeners wanted to add some and we could kind of like aggregate some of the better ones in and talk about them on the next show but then also when we do the recap see what had a third competitor which of these listeners and see how they do against you.
Jason: [52:05] Yeah that's a great idea because I it's it's kind of boring coming in second so I feel like third would be that's why I've been to just.
Scot: [52:14] Looks like it would feel better if it smells cancer.
Jason: [52:17] Fair enough. So maybe I try to take only the worst products that be funny I try to cherry-pick the worst predictions and then it still be me so yeah I'm totally in on that if listeners want to jump on to Facebook and we leave any of their own predictions or hit us up on Twitter will be happy to aggregate them put them in the show notes and include them in our recap next year and that's going to be a great final call to action because it's happen again we've used up our a lot of time so definitely love to hear all of our listeners predictions and also feel free if you just think, Scott and I are crazy and you want to refute any of our predictions we'd love to hear your thinking behind that and as always the beginning of the year before you get really busy at work is a perfect time to jump on iTunes and finally give us that five star review.
Scot: [53:10] Things are running Jason congrats on salvaging a tie out this year.
Jason: [53:15] Thanks very much it it it it feels good to be West behind than I usually am thanks everyone for listening and until next time happy commercing.
EP319 - Amazon Q1 2024 Recap
07 May 2024
01:07:57
EP319 - Amazon Q1 2024 Recap
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.
Episode Summary:
In this episode, Jason "Retailgeek" Goldberg and Scot Wingo dive deep into Amazon's first quarter results for 2024, analyzing the company's performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon's business and provide insights into the company's future guidance for Q2 2024.
In our latest episode, Jason and Scott cover a range of topics, starting with their reflections on recent events such as May the 4th and Cinco de Mayo. Jason shares intriguing stories from his extensive travels and interactions with listeners worldwide. Scott delves into the intersection of e-commerce and the auto industry, honing in on Carvana. The duo also delves into the U.S. Department of Commerce retail indicators data, shedding light on trends in retail sales and e-commerce growth. The conversation pivots towards Amazon's recent earnings report, contextualizing it within the realm of AI investments by tech giants like Meta and Alphabet, offering valuable industry insights and analysis.
The discussion continues with a focus on Amazon's earnings report, zooming in on concerns around AWS amid heightened competition from Alphabet and Azure. The rising trend of AI investments, particularly in data training applications, is explored, alongside the growing popularity of open source AI models due to cost and privacy considerations. Despite a conservative Q2 guidance, Amazon impresses with robust revenue that surpasses Wall Street expectations, particularly in operating income. The retail segment shows exceptional growth, exceeding operating income estimates for both domestic and international divisions. Notably, Amazon's performance in brick-and-mortar stores, spearheaded by Whole Foods, demonstrates resilience with a 6.3% growth rate. AWS stands out with a 17% growth, dispelling market share concerns and showcasing accelerated revenue growth, illustrating Amazon's continuous growth potential and innovation prowess.
Scott delves deeper into Amazon's positive quarterly earnings report, emphasizing the remarkable revenue performance, especially in operating income. Insights are shared on Amazon's successful agnostic approach to LLM models and the potential advancements in generative AI. The conversation shifts towards the burgeoning ads business at Amazon, underlining its profitability and future growth prospects. Scot also outlines Amazon's Q2 guidance and the potential impacts of consumer spending patterns on the retail sector, including concerns about changing consumer behaviors and economic pressures shaping market dynamics. Jason complements the discussion with additional perspectives on consumer behavior and economic influences reshaping the market landscape.
Furthermore, we embark on a detailed exploration of supply chain logistics, with a spotlight on Amazon's expansion into third-party logistics services, revolutionizing traditional retail strategies by sharing proprietary capabilities for wider adoption. Insights from Andy Jassy shed light on Amazon's logistics business approach. The conversation expands to include how companies like Spiffy are embracing a similar model of sharing proprietary products to drive innovation and revenue growth, showcasing an evolving landscape of retail innovation.
The podcast unpacks the complex world of grocery retail, highlighting Amazon's experimental forays like Just Walk Out technology and the Amazon Dash cart, while examining the challenges in delineating Amazon's grocery sector strategy. A comparison is drawn between Amazon's strategies and those of rivals like Walmart and Target, who are adapting their product offerings to match evolving consumer preferences, offering a comprehensive view of the dynamic retail and supply chain management sphere. Dive into our engaging discussion, explore retail dynamics, and keep a lookout for more insightful content.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 319 of the Jason & Scot show was recorded on Sunday, May 5th, 2024.
Chapters 0:23 The Jason and Scott Show Begins 2:56 World Travel Adventures 5:53 Commerce Tools Elevate Show 6:53 Jason's World Tour Plans 7:22 Where in the World is Retail Geek? 20:43 Amazon's First Quarter Earnings 23:23 Sandbagging Strategy 26:45 Amazon's Dominance in E-commerce 27:44 Online Segment Growth Analysis 28:53 Offline Store Segment Analysis 31:35 Spotlight on AWS Performance 34:32 Data at AWS 42:02 Gen AI Revenue Growth 46:24 Consumer Pressure 49:56 Supply Chain Evolution 53:46 Leveraging Technology 58:08 Disruption in E-commerce 1:01:54 Amazon's Grocery Strategy 1:05:01 Retail Industry News Transcript
Jason: [0:23] Welcome to the Jason and Scott Show. This is episode 319 being recorded on Sunday, May 5th, 2024. I'm your host, Jason Retail Guy Goldberg, and as usual, I'm here with your co-host, Scott Wingo.
Scot: [0:37] Hey, Jason, and welcome back, Jason and Scott Show listeners. It's been a while, but first, happy Cinco de Mayo, and also a belated May the 4th, Jason. Did you have a good Star Wars day?
Jason: [0:49] I did. I did. I feel like Star Wars Day always makes me think of the podcast because I feel like we have spent many of them in my latter life together.
Scot: [1:01] Yeah, absolutely. Any exciting new Star Wars experiences or merch?
Jason: [1:08] No, I understand you got some vintage merch. merch.
Scot: [1:13] It's not, but they, back when I was a kid, you would go and if you went every week to, I think it was Burger King, you would for the, I think it was Empire. I have the Empire right here. So definitely Empire, but you would get a glass. Now it turns out these were full of lead paint, which would kill you, but that was the downside.
Jason: [1:32] Not recommended for drinking.
Scot: [1:33] You got a very, yes, I never, being a collector, I never drank out of them. So that's good.
Jason: [1:37] Saved your life right there.
Scot: [1:38] Yes, but I did drink out of the Tweety Bird. So that me, me. I'm sure I got some yellow lead paint from a twitty bird glass. Anyway, so they came out with a Mandalorian kind of homage to those glasses and they were at the Hallmark store of all places, not where I usually hang out, but I got to go to a Hallmark store and the little ladies that worked there were, I wish them all an awesome May the 4th. And they looked at me like I was from another planet and it was hilarious. My wife's like, stop, they don't know what you're doing.
Jason: [2:07] Wait, they didn't have a big May 4th section in the Hallmark store?
Scot: [2:11] They did. The little ladies didn't know.
Jason: [2:13] The overlap of people that still buy Papyrus cards and celebrate May 4th is probably not great.
Scot: [2:21] It was very humbling. It was a humble May the 4th, but I got my glasses and I was happy. I'm happy for you. And then tonight we had tacos for dinner, so I'm hitting all the holidays.
Jason: [2:30] I feel like we should have tacos for dinner every night, whether it's Cinco de Mayo or not, but I'm i am happy for that.
Scot: [2:35] We do have a lot of tacos but this was a special single denial edition.
Jason: [2:42] Well, very well done, my friend.
Scot: [2:44] Thanks. Well, listeners of the pod have been all over me. They're like, why aren't you recording? And I said, it's not me. It's Jason. It's Jason. Because you have been traveling
Scot: [2:55] the earth, spreading retail geek goodness. Tell us, we are way far behind on trip updates and all the different countries. It's like you're playing, do you have like a little travel bingo where you're just like punching, what is it, 93 countries?
Jason: [3:09] I do. They call it a passport. Oh, nice. Yes.
Scot: [3:13] That, uh, little book that you get to carry. Yeah.
Jason: [3:15] Yeah. Yeah. Yeah. I have been on a lot of trips and it sounds like you and I may be telling complimentary lies because I also, I've had an opportunity to meet a lot of listeners in the last, we'll call it seven weeks and which they're always super nice. And it's always super fun to talk to people. And obviously they're, you know, strangers recognize my voice in line at Starbucks at all these e-commerce shows. And then we strike up a conversation. And then the next question is always, where the heck is Scott? Because they're always disappointed to meet me and not you. And now the new thing is, and why aren't you producing more frequent shows? And my answer is always that you're dominating the world at Get Spiffy and that you're too busy.
Scot: [4:00] Uh-huh. I see. Okay.
Jason: [4:02] Well, we're both very busy.
Scot: [4:05] You're traveling more than I am. I'm busy washing cars.
Jason: [4:08] Yes. I think both are fairly true, but I did finish a grueling seven-week stint where I got to come home a couple of times on the weekends, but I basically had seven weeks of travel back to back. In my old life, that would not have been that atypical, but post-pandemic, The travel has been a little more moderate. And I have noticed that I have my travel muscles have atrophied and I don't really want to redevelop.
Jason: [4:35] So the seven weeks was a lot. Please don't ask me for trip reports for all the commerce events because I kind of can't remember some of them. They're all a little bit of a blur. But I was at Shop Talks, I think, since the last time we talked, which is, of course, probably the biggest show in our industry. And that was a very good show. I did get to see a lot of our mutual friends and a lot of fans of the show there. So that was certainly fun. And maybe in another podcast, we can do a little recap of some of the interesting things that came out of Shop Talk. I did produce a couple of recaps in other formats for work clients, so we could certainly pull something together. I also went to a vendor show. One of the e-commerce platforms out there is called Commerce Tools, and they had their annual customer show, which is called Elevate in Miami. So I got a chance to go visit there. They're one of the commerce platforms that I would say is winning at the moment in the kind of pivot away from the old school monoliths to these new sort of SaaS-based solutions. And commerce tools in particular are kind of pioneers in pushing this actual certification around a more modern earned stack that they they coined mock. And I think I think we've had Kelly from from commerce tools on the on the podcast
Jason: [5:51] in the past to talk about that. But that was a good show. I got to meet a lot of listeners there. And a funny one, several listeners were like.
Jason: [5:59] I would apologize for the, the, our publishing schedule lately. And they're like, I'm cool with it. I like that. Like you don't do a show if there's not something worthwhile. And then, you know, when I do get a show, it's like a treat. So I don't know if they're being honest or not, but that made me feel a little better about some of our, our, our Tardis shows lately. So those, those were good events. I also spent a week in India with some clients and that super interesting, a lot of commerce activity going on there, a lot of different market dynamics than here. So that's kind of intellectually pretty fun to learn about and see what's working there that might be working here or what, you know, why things tend to play out differently there. So that's interesting. And then I have a lot more international trips booked right now.
Jason: [6:48] So coming up, I'm going to Barcelona, London, Paris, and Sao Paulo. So if anyone either has any favorite retail experiences in any of of those cities, please send them my way. I'll be doing store visits in all those cities. And if you're based in any of those cities, also drop me a line. Hopefully we can do some meetups while I'm out there.
Scot: [7:07] Cool. It's Jason's world tour. You can do a little pod while you're there.
Jason: [7:12] We have done a bunch of international pods in the distant past. I remember hotel rooms in South Korea and all over the place,
Jason: [7:19] Japan that we've, we've cut shows from. So, so totally could.
Scot: [7:23] Yeah. We'll have to do it. Where in the world is retail geek? That could be the theme song. I just sampled that.
Jason: [7:30] Yeah. So besides cleaning the world's cars, what have you been up to, Scott?
Scot: [7:35] Well, it's kind of funny. My worlds are colliding. So a lot of the analysts that you and I know from the e-commerce world are creeping into the auto world and their gateway drug is Carvana. So in the world of retail, we have Amazon, obviously. Well, Carvana is kind of Amazonifying used cars. They had a bit of a drama kind of situation. They were the golden child of online cars. And then they totally pooped the bed. They did this acquisition. They loaded up with debt. And then after, I think it was 21. So they had a good COVID. They surged. And then the debt got in front of them. Used car prices bop around and they kind of like got in an open door situation where they had bought a lot of cars for more than they were worth suddenly. And then they plummeted and everyone thought they were going out of business, but they have had a resurgence. So it's causing a lot of the internet analysts to now pick up auto tech or mobility or whatever you want to call it. So it was fun. I got to do a live chat with Nick Jones. He's been a friend of the show. I don't think we've had him on due to some compliance stuff that his company has rules around, but he's at this firm JMP and it was kind of wild to talk about, with someone about both Amazon and what we're doing at Spiffy, which is basically a lot of Amazon principles applied to car care. So it was interesting to have someone reach out and say, hey, I think this is a thing. And everyone tells me I should talk to you about it. And I was like, oh, yeah, I would love to. So it's kind of fun.
Jason: [9:01] That's very cool. And isn't it also a thing, I think half the vehicles on the road are now owned by Amazon. So I assume that's an overlap too. too?
Scot: [9:09] Yeah, not half, but a lot are. The number of last mile delivery vehicles are very, very large. And we work with a lot of them, so it's kind of fun. I started spiffy somewhat to get away from Amazon and still all I can talk about. Nope. So embrace it. I love Amazon. Love me some Amazon, Jason.
Jason: [9:29] I'm glad you do. I love them too, but I feel like I spend most of my career You're unsuccessfully helping people compete with them.
Scot: [9:38] Hey, got to play one side of the coin. It's a gig. You're going to be more like them or how to fight them.
Jason: [9:43] It's a gig. It is indeed. Yeah.
Scot: [9:46] Cool. I thought we are going to talk about some Amazon news. But before we jump in, you have done your magic with your data analysis interns. And I'm sure there's an LLM and an AI thrown in there. Let's start with some of the things you're seeing in commerce trends from the data that's out there.
Jason: [10:07] Yeah. So as everyone knows, I have a little bit too much of an infatuation with the U.S. Department of Commerce retail indicators data. And these guys, you know, publish monthly estimates of retail sales in a bunch of categories. And, you know, we've talked about this many times on the show, but broadly over the last several years have been really interesting in retail. 2020, 2021, and 2022 were the greatest three years in the history of retail. Like we mailed like $6 trillion in economic stimulus. People didn't travel or go to restaurants as much. And so we sold way more goods than ever before. And so those three years, retail grew respectively at like 8%, 14%, and 9%. The 20 years prior, retail averaged about 4% a year in growth. So normally pre-pandemic, you'd expect 4% growth. We had these three, you know, wildly pandemic influence years where we grew really fast. And then last year we finished a little below 4%. So, so we were around, I want to say it was like 3.6%. So it was growth. It would, it would have been in line with pre-pandemic growth, but it certainly felt like a significant deceleration from those heady pandemic years. And so, you know, people are super interested to see how does 2024 play out? Does it?
Jason: [11:32] Kind of return to pre-pandemic levels, like what is the new normal?
Jason: [11:37] And we now have the first quarter's data from the U.S. Department of Commerce, and I would call it kind of a mixed bag. If you just look at the raw retail data that the U.S. Department of Commerce publishes, they're going to tell you that retail grew in the first quarter 2.8%. So that's a little anemic, right? Compared to historical averages, that's not a great growth rate. Most of the practitioners that follow this podcast care about a particular subset of retail that the National Retail Federation has dubbed core retail. And so the National Retail Federation pulls gas and automobiles sales out of that number. And gas is a decent size number and it's very volatile based on the commodity prices of gas. And auto is a huge number that has, as you're well familiar, its own idiosyncrasies. And so that's how they justify taking those two out. And if you take those two out and you get this core retail number, retail in the first quarter grew 3.9%. So kind of to align with how the NRF talks about retail, we'll say Q1 overall was 3.9%, which is very in line with the pre-pandemic historic average. So disappointing by pandemic standards, but kind of traditionally what we would expect.
Jason: [13:05] What is unique in that number is.
Jason: [13:09] That it's very bifurcated. There are clear winners and losers, both by categories and specific practitioners. So if you break down the categories, e-commerce is the fastest growing chunk of retail. I'm sure we'll talk more about that. Restaurants were the next fastest growing categories. And categories like mass merchants and healthcare providers outperform that industry average, every other segment of retail underperformed the industry average. So things like furniture stores did the worst, building materials did really poorly, gas stations did very poorly, electronics did poorly, and side note, electronics have been the worst performer since the pandemic, which is kind of interesting and challenging. So you've had this weird couple categories doing really well, a bunch of categories doing really poorly. And then within the categories even, if you look at the public company's individual earnings calls, what you tend to see is a couple of big players performing really well in overall retail, that's Amazon and Walmart. And then a lot of other retailers really struggling. So that even that's like in general merchandise, it's Amazon and Walmart that are lifting the boats. And it's folks like Target traditionally that have performed really well are actually struggling at the moment. So the average is kind of hard to follow at the moment.
Jason: [14:37] But that is kind of how things play out. And then we have some preliminary e-commerce data, but the actual Q1 e-commerce number that the U.S. Department of Commerce publishes will publish on May 17th. So that's 12 days from now.
Jason: [14:53] And crunching the numbers that we have available at the moment, that growth is likely to come in at somewhere between 8% and 10%. I'm guessing more like 8% or 9% growth. And so that also is twice as good as overall retail, and it's more than twice as good as brick-and-mortar retail. But that is noticeably slower than the historic e-commerce growth rates pre-pandemic. So kind of file those two numbers away. The overall retail industry is growing at 3.9%. The overall e-commerce industry is growing at about 9%. And then we have our friends at Amazon that dropped their earnings announcement just before May 4th so that they could celebrate May 4th, I think.
Scot: [15:39] Yeah, yes, that's a good setup. And without further ado, let's talk about Amazon's fourth quarter. It wouldn't be a Jason Scott show without a little bit of...
Scot: [16:01] That's right. On April 30th, Amazon announced their first quarter results. And the setup coming into these, so you had the data you talked about, but like to drill in a little bit. We had Meta, the artist formerly known as Facebook, and Alphabet, the artist previously known as Google. They announced and they both basically told Wall Street, AI is the cat's pajamas and we're going to spend anywhere between $10 and $40 billion of capital expenditures on it, meaning NVIDIA chips. So it turns out the way to play all this is basically buying NVIDIA. So hopefully you bought some NVIDIA stock. Maybe this is not a stock recommendation or when it's too late, so... And also don't take stock recommendations from podcasters. Anyway, so there was all this angst and people were a little freaked out coming into the Amazon results because Meta was down like pretty substantially, 20 to 30 percent. And Alphabet was also up substantially. You also had Microsoft come in there and they really crushed it. Their Azure is really lighting it up with AI. And they announced that they were going to invest a lot. And there's this rumor that a $100 billion project, it's got a name like Starship or something, but it's not Starship. Spaceship? Stardust? I don't know what it is. But it's going to be this mega data center, and they literally can't find a place to put it because it's going to consume so much power. So they're going to have to maybe build a nuclear plant next to it or some wacky thing.
Scot: [17:31] Anyway, that was the setup. up. So coming in, Wall Street was very, very concerned about Amazon's AWS division, which is their cloud computing. Because if Alphabet is building out their infrastructure, and so is Azure, that's the two biggest competitors for AWS. And is AWS getting its fair share? And is it going to announce that it's going to have to go build some $40 billion kind of a thing? Also, another Another thing, and I'm kind of curious on if you're seeing this with your clients, but in the, I follow this, you know, the AI, you can't do much without seeing AI everywhere. But the part I'm most interested in is what are big enterprises spending money on? This is like your Fortune 500s. They're all experimenting and really getting into it. And where they're finding a lot of good use cases is training on their data. So they'll say, you know, hey, I'm Publisys. How many documents do you think are inside of Publisys? I don't know, 8 trillion documents. Documents and you know wouldn't it be helpful just the ones I created and who is this retail geek and he's he's created uh you know 90 of those and you know so you know imagine you're starting new at publicists you're gonna be like where do I start going through some of these documents for us and if you had a chat bot that was like hey I've read all that you know I can navigate you through everything that's been published or you know whatever I'm certainly you.
Scot: [18:50] Providing a very big metaphor, certainly be more divisional and all this kind of stuff. But that's where big companies are spending the bulk is they're taking their data in whatever format it's in, be it a relational database, a PDF, whatever it is, they're trying to train it. They don't want it to go up into the, they don't want to train the LLM so that other people get the benefit of that and can see any confidential data. So that's really important. So it needs to be gated in these types of things. Because of that use case, open AI is not great because people are very worried. A, it's very expensive and it's only an API. So OpenAI hosts itself and you call it through an API.
Scot: [19:25] Those API calls are very expensive. They're getting, as OpenAI has gotten more popular, there's more latency. It's taking forever to get answers out of this thing. And a lot of people are very concerned that even though there's ways to call the API such that it's in a window and not being trained, that maybe it leaks in there. So because of all these elements, the open source models are becoming very popular. And right around the time Meta announced, they announced their Llama, which has become quite popular. And what's nice is you can host it wherever you want. And it's kind of like WordPress, where if you are a serious WordPresser, you can host it somewhere yourself, and you can kind of understand that. Otherwise, there's other people that will host it for you. But it has the nice feature of you're just getting the weights and whatnot, and it's it's pretty clear, it's pretty obvious, it's not training itself on your data. So a lot of people like it because it's quote unquote free. It's not an API usage based. It's a pay once to set it up, pay for some resources type thing and you're done. And it's also not going to train on the data. That's one of many. There's probably 10 or 20 pretty commercial grade open AIs out there.
Scot: [20:38] Okay. So that's kind of the setup to get to the earnings. things. So from a big picture, this was a really good quarter. Asterix, the guide made Wall Street a little bit nervous. So-
Scot: [20:53] And one of our research analysts just said it's Stargate, which is also a sci-fi series. They must have that on Prime Video or something. There's probably some callback there.
Scot: [21:01] So they beat for the quarter Q1, but then they also kind of tell you what's going on the next quarter. Amazon doesn't provide fully your guidance. They just kind of give you a snippet. So when they report one quarter, a quarter, they then tell you what they think the next quarter is going to do. So Wall Street got a little bit ahead of its skis, and the guide for Q2 was below what Wall Street wants. So it wasn't what we'd call a beat and a raise, which is the current quarter was a beat and the next one they increased. It was a beat and a guide down. So that probably tampered Wall Street. But ever since Jassy came in, Andy Jassy, this has been his MO is to be pretty conservative because Wall Street's very much an expectation engine. And the more, if you can beat and tamp down expectations, it makes it, it's a little bit rougher in the short term from a stock price, but it makes next quarter better and then so on and so forth. So it's a smart way to manage the long-term vibe of the stock, the mindset, the expectations around your stock. Okay. So revenue came in at $143 billion versus Wall Street at $142. So pretty much in line. But most importantly, where Amazon really threw people off was on operating income. Yes, Amazon is profitable. This is the proxy for operating income. True Amazonians would tell you, no, it's cashflow. We can go into that, but this is kind of the way they report to Wall Street. So this is kind of the standard operating system, if you will. So this is what we're going to use, but it's a proxy for cashflow.
Scot: [22:28] That was 15 billion for the quarter and Wall Street expected 11. Well, you know, 4 billion on a world of 143 doesn't sound like much, but between 11 and 15, that's a very material beat. What is that? Like 38%, something like that.
Scot: [22:44] So that was a really nice surprise. And, you know, Amazon goes through these invest and harvest periods and everyone's been feeling like they're going to be back in investing which would mean they're going to start lowering operating income as they invest but it's actually kind of beating expectations, also this is the fifth quarter amazon has come in at the high end of its guidance or above its guidance since basically you know on operating income and that corresponds with when jassy came in so this is his mo right now is to kind of like beat and lower beat and lower you know exceed expectations tamp them down not get not get ahead of his skis and it's working really well.
Jason: [23:24] Sandbagging for the win. I like it.
Scot: [23:26] Yes, it is. Having run a public company, this is a lesson I learned painfully. So that's something we can talk about over beer sometime.
Jason: [23:33] I will book that date. Yeah. And the retail business sort of followed in line with that. They had like some nice growth, but like the real standout number was the improvement in margins and the significant positive operating income from the retail segment. So I think the actual operating income from U.S. Retail was like $5 billion and the Wall Street expectations were 4.3. So again, that was another strong beat. Total revenue, which revenue is not the same thing as retail sales, as we've talked about on the show many times, that we would use GMV as a proxy for that. But revenue was $86.3 billion for the quarter, which I think was in line with the analyst expectations.
Jason: [24:27] And I think this was the largest operating income that Amazon has ever reported for the retail business. So that was super interesting on the domestic side. Traditionally, domestic has done pretty well and international has been a money loser because, you know, they've been less mature. they've been investing a lot in growing international and they haven't had the same kind of margins. This was the first quarter that they reported positive operating income for the international division. So that's another super encouraging sign for investors that maybe they've kind of passed that inflection point on a lot of their international investments that they've made in the EU and Japan and the UK, which reminds me is not part of the EU anymore.
Jason: [25:13] So so they kind of beat beat international expectations across the board on income. Revenues were lower. So revenues were like thirty one billion dollars, which was below expectation.
Jason: [25:25] But they they earned like nine hundred million in operating income. And I want to say the the the Wall Street expectation was like six hundred million. So so again, like a 30 percent beat, which is pretty, pretty darn good. Good. They also, a bunch of analysts have, you know, taken these revenue numbers and they try to back into a GMV number. And I would say the bummer at the moment is there's a fair amount of variance in the estimates, like different analysts have different models. So I have kind of been putting to a model of the models together and trying to kind of find a midpoint. And like Like based on that, the Amazon's GMV globally probably went up 11.5% for the quarter. So if you're comparing this to other retailers or the U.S. Department of Commerce number, overall GMV went up 11.5%. The U.S. was stronger. So the U.S. probably went up at 12.2%. So again, we talked about core retail was up 3.9%. Well, Amazon U.S. GMV was up 12.2%. So, you know, three times faster growth than the retail industry overall.
Jason: [26:39] And again, Amazon is mostly e-commerce, very little brick and mortar,
Jason: [26:44] which we'll talk about in just a minute. But even if you're comparing Amazon to that e-commerce number, if e-commerce comes in at 8% or 9% and Amazon's at 12%, they're by far the largest e-commerce player out there and they're still substantially outgrowing the average, which, you know, is very impressive and should be very scary to every other competitor out there.
Jason: [27:08] One analyst kind of put together an estimate of what they thought the earned income contribution from Amazon was for retail and ads together, pulling AWS out. And they had it at $27 billion in earned income if Amazon was just a retail with no AWS. And that puts them right in the ballpark of Walmart that spent off about $29 billion in earned income or operating income. I keep saying earned, but I mean operating income. So, so that is all pretty impressive and simultaneously super scary.
Jason: [27:45] Scott, did you drill down into the online segment at all?
Scot: [27:49] Yeah. And, you know, what I would tell listeners is picture a block diagram where you have this big, big rectangle, that's the whole Amazon entity. And, you know, so what we're going to do is talk about the segments. And the first segment is the biggest one, which is the retail business. And that, that's what you just.
Jason: [28:04] Biggest and best. Wouldn't you say?
Scot: [28:06] Coolest.
Jason: [28:07] Coolest. All right.
Scot: [28:08] Cool. Okay. Yeah. Yeah. Okay. I'll, you know, I don't know.
Jason: [28:11] It is for you.
Scot: [28:14] Um, I think the whole enchilada, I like the, the way they do this and I'm trying to replicate it. It's 50. We'll talk about that in a second. The, so then the, you know, so then another segment is AWS, another segment, I think marketplace should be in some segment, but they don't break it out. So it's just kind of in kind of hidden inside of the blob that is retail. So we tease some of that out here on the show. They purposely hide it in there. So no one knows how awesome it is, I think. And then they've got AWS ads and a couple other things, but we'll talk about this. So as you dig into the retail business, there's a couple of ways to look at it. You can look at it by domestic and international, which Jason just did,
Scot: [28:50] or you can look at it by online and physical store. So the online biz grew 7% year over year, which if I remember your stats, well, you don't have it until may 17th so on may 17th we'll be able to know how that compared but probably the one you can compare is the offline biz which is the the store comp that they have, And Jason, you saw on that one, what'd you see?
Jason: [29:16] Yeah, so physical stores grew 6.3%. So again, like, you know, when we say all of retail grew 3.9%, a big chunk of that's e-commerce. Brick and mortar probably grew at like two to 3%. So Amazon's brick and mortar growing at 6.3% is actually super impressive. And it's kind of interesting, you know, for several years, Amazon has had experiments in a bunch of retail formats. So they've had these Amazon Go stores, stores. They had Amazon five-star stores. They had bookstores. They had a fashion store. They're trying all these things. And of course, the biggest chunk of their stores is they own Whole Foods. And so offline stores for Amazon was kind of a mix of all these different concepts. In the last couple of years, they've kind of cleaned house and gotten rid of all those concepts. And so, you know, nominally there's a few of their own grocery stores called Amazon Amazon fresh open, but the vast majority of online offline retail for Amazon is, is Whole Foods. And for it to be growing at 6.3% in the current climate is, is a really good sign for Amazon. And, and I would say somewhat impressive, you know, on the earnings call, they, they announced that they're working up a new format for Whole Foods, which is a smaller format store that's It's going to open in Manhattan. So I have that on my ticker file to go visit when that's open.
Jason: [30:38] You know, the whole grocery space for Amazon is super interesting, but maybe we'll talk about that a little bit more later. But I will call out, they did launch a service that there's been some controversy over. They launched a $9.99 a month grocery delivery service, which essentially lets you have all you can eat free grocery delivery to your home for an incremental fee of $9.99. And they're spinning that as, you know, a cool new grocery service and enable more people to shop for groceries online. And there are a lot of articles about it, like.
Jason: [31:13] They used to have free grocery delivery included in your Prime membership, right? And so they've kind of like, I look at the big arc of all this and say, there used to be a lot more free services in Prime that they've kind of peeled out. Then they started charging for, and now they'll let you get it free again for another $120 a year.
Jason: [31:32] So interesting things happening with grocery that we could probably talk more about later. But I'm kind of eager to dive into some of these other businesses like AWS.
Scot: [31:42] Yeah. So that's the one that everyone was really waiting on the call to hear how it went. And good news, AWS exceeded expectations. Everyone thought it was going to grow 14% and it came in at 17%. And if Wall Street likes, they like a lot of things, they like beating expectations, that's important to them. But their favorite thing is ARG. And that is not a pirate day thing, ARG. It is Accelerating Revenue Growth. Wall Street loves that more than anything. And that's what they delivered for both the ads and the AWS part of the business. And what that means is that as the law of numbers kicks in, so back on the retail business, the only time we see that accelerate is in the fourth quarter and that seasonal acceleration, right? We've gotten used to that for decades now. It always happens in the fourth quarter and whatnot. So it's what you would expect. But this is quite unusual for a relatively mature business. This thing's $25 billion a quarter. So this is a $100 billion business that accelerated. And so that tells us that there is a lot more wood to chop here. It has not gotten near its addressable market. And it really allayed fears that they were losing massive market share because they're, quote unquote, behind on AI to Azure, which is Microsoft offering, and then the Google hosting solution as well.
Scot: [33:05] That does not seem to be the case. So they did very well. So they came in at $25 billion and Wall Street was expecting $24.6. So that was really, that accelerating is what really made everyone very happy. And then the operating income came in at $9.5, way ahead of Wall Street at $7.5. So another pretty material 20% beat on this component at the bottom line. And this is really interesting. There was some really good language around this. And this has been Jassy's statement all along, and it's coming true. His early Amazon's early play was we're going to be agnostic on models and it's kind of like bring your own model we'll work with anything now with open AI they're not going to ever host open AI but they'll they're not going to stop you from working with it and then they for these open source ones they've made it very easy for you to spin up an AWS instance throw a little llama in there and I would make a llama noise if I I knew what they said I guess they make like a sheep sound. So you throw a little alarm in there and it does its thing. And, you know, the benefit of them being agnostic on these LLMs is most likely they have some or all of your data, right? Because they've been at this so long that if you're doing cloud computing versus on-prem, most likely a lot of, if not all of your data is in AWS. Extracting that data, you know, imagine you had terabytes or or what's the biggest,
Scot: [34:31] bigger than terabytes? I always forget this one.
Jason: [34:33] Petabytes.
Scot: [34:34] Petabytes of data at AWS. They literally have a product that they can send a truckload of hard drives around and get your data. That's how much data there is that you could never push it across the internet, that there's so much data. So if they have that data and that's what you want to train on, you don't want to have the latency of the internet between your data and the training. So you'd really need the LLM to operate near your data. And this is what they predicted two or three years ago, kind of around the, the, the launch of chat gpt when all this stuff really started to accelerate and it's coming true so everyone feels a lot better about that then their body language this time a lot of times they were kind of like this is what we're doing and we're pretty sure it's going to work now they're like it's working and people really felt relief around this because everyone there was a set of people that believed it but then you know open ai's pitches nope our lm is going to be we're spending, billions of dollars we're going to be so far ahead none of these open source things are going to keep up. If you don't have us, you're going to be so far behind, you'll be like playing with crayons and everyone's going to be playing with quill pens.
Scot: [35:42] So it was really good to see that this is not what's happening, that people are embracing, enterprises are embracing these open source models. They are in the same zip code performance-wise from results and much cheaper than OpenAI's offerings. And what Amazon said specifically was very positive around what is It's kind of abbreviated Gen AI for generative AI. And it's kind of a way to encapsulate this. And they said that it already is a multi-billion dollar run rate business. And you always have to parse what they say. So multi-billion can be anywhere between 1 and 9.9, right? And you'll see why I drew 9.9 there.
Scot: [36:25] And inside, as part of that big AWS number, and they believe it can be rapidly tens of billions. Billions so they're basically saying it's not double digit billions so it's a single digit million which is where i get one to nine point nine but they basically hinted that that it is growing so rapidly inside of there that it's gonna be tens of billions and this is why they saw accelerating revenue growth which made everyone happy it wasn't just people you know moving some more you know loads on or something boring loads around relational databases or something it was the juicy ai stuff so this got everyone so lathered up that three analysts did price increases and they cited that this was one of the reasons the biggest price increase was from sig susquehanna and they put the price up to 220. At the time all this happened the stock was at 175 and today it's around 185 so it's been up nicely but 220 is a pretty big big you know even.
Scot: [37:20] From where they expect that's where they're thinking i think most these guys look at a year to two years as a time horizon on these prices so and that's the the high i have you know again there's a wide range some people think it's going to go down some people think it's over price so go do your research this is not a stock recommendation but i just thought it was interesting that people get really really excited by by this whole gen ai largely the body language that, and it's, Amazon doesn't pound their chest much. So the fact they were, was kind of a new, new way of managing Amazon and Jassy's pretty conservative. So he must've felt pretty good about it, but also that they needed to ally, allay, allay, allay, whatever the right word is, get rid of these competitive concerns everyone's been talking about.
Jason: [38:05] Yeah. It feels like a pretty big prize out there. Jassy and the whole team always talk, Just AWS, even before you get to Gen AI, they always remind everyone, hey, 85% of the workloads are still on-prem. So like this, as big as AWS looks, if the long-term future is 85% of the workloads are on the cloud and only 15% are on-prem, there's a lot of headroom still in AWS. And then, you know, you add this new huge demand for AI on top of all that. And like this, it's almost a limitless opportunity. And I want to tie the AI back to retail, though, for just a second, because there's another bit of news that I haven't seen covered very much, but is super interesting to me.
Jason: [38:51] There's a particular flavor of AI out there, a subset of generative AI that's now being called agentic AI. And that's sort of a clever amalgamation of agent-based AI. And there's a very famous AI researcher, this guy, Andrew Ng. He's the founder of Coursera. He's done a bunch of things. He was the head of Google Big Think, which was one of the first significant AI efforts. And I want to say he was like on People Magazine's 100 most interesting people list in like 2013 as an AI researcher. So the dude's been around for a long time. He is one of the biggest advocates for this agentic AI. And the premise is that if you just ask an LLM, you take the best LLM in the world, and you ask it to do something for you, that's called zero shot. You give it an assignment, and you take the first result you get. It's a zero shot. You get pretty good results. But if you...
Jason: [39:53] Turn that, that LLM into multiple agents and break the task up amongst those agents and potentially agents even running on different LLMs, you get wildly better results.
Jason: [40:05] And so his, his research kind of showed that, Hey, if, if Jason goes write a PowerPoint presentation for his client, explaining what's going on in commerce. And I just give that to the turbo version of ChatGBT 4, I'll get a pretty good deck. But if I say, hey, I want to create four agents. I want to create a consultant to write the deck and a copywriter to edit the deck and an editor to improve the deck and three people to pretend to be mock customers to poke holes in the deck and have all those agents work on this assignment. I could give that assignment to chat gbt 3.5 and it would actually output a better work product than the the newer more advanced model was by by breaking the job into these chunks and so in retail you think about like this is the idea of assigning higher level jobs to shopping right so instead of saying like going to amazon and saying oh now it's a ai-based search engine and i'm going to type a long form query into search and get a better result.
Jason: [41:09] The agentic AI approach is I'm just going to say to Amazon, never let me run out of ingredients for my kids' school lunches. And the agent's going to figure out what is in my school lunches and what my use rate is for those things and what weeks I have off from school and don't need a school lunch. And it's just going to do all those things and magically have the food show up. And this is a long diatribe, but the reason it's relevant is is this dude, Andrew Ng, was named the newest board member at Amazon three weeks ago.
Scot: [41:40] Very cool.
Jason: [41:40] I did not see that myself. Yeah. And so if you're wondering where Amazon thinks this is going, like this, in my mind, ties all this tremendous opportunity in generative AI and the financial opportunity in AWS directly to the huge and growing retail business that Amazon runs.
Scot: [42:02] Very cool. Oh yeah. I had not seen that. So maybe Wall Street picked up on that. I'm sure. And maybe that was another part of the excitement.
Jason: [42:09] Yeah. But all of that is just peanuts compared to the real good business in Amazon, which is the ads business. So again, you know, Amazon used to, to obfuscate their ads business. They've for a number of quarters now had to report it as earnings because it's in their earnings separately, because it's so material. And it was another good quarter for the ads business. It's hard to say whether it's actually accelerating growth or not, because the ads business is very seasonal. So the ad business grew 24.3% for the quarter versus Q1 of 2023. Q4 grew faster. So Q4 grew at 27%, but the 24% growth is much faster growth than other... Q1 year-over-year growth rate. So however you slice it, it's a good, robust growth rate. If you add the last four quarters together, you get $29 billion worth of ad sales. There's lots of estimates for how profitable ad sales are, but there's no cost of goods for an ad, right?
Jason: [43:13] And so it's very high margin. So if you just assume, I think 60% gross margins is a very conservative estimate. But if you assume 60% gross margins, that means the ad business spun off $29.5 billion of operating income over the last 12 months. And to put that in comparison, AWS is big and profitable as it is, twice as much revenue at over $100 billion now, but it spun off like $23 billion in operating income. So the ad business is a much more meaningful contributor to Amazon's profits than even AWS.
Jason: [43:51] And another way I've been starting to think about this is what percentage of the total GMV on the Amazon platform are the ads? And they are now 6.5%. So that's a very significant new tax. You know, as Amazon has hundreds of millions of SKUs available for sale, no one's ever going to find your SKU or buy it if you don't do some marketing on the platform for that SKU. And that's this 6.5% tax that Amazon's charging. And in the same way we said, hey, AWS is a really robust business. And then there's this thing called generative AI that can make it even huger. All of this ad revenue we're talking about is really coming from their sponsored product listings, which is like basic search advertising on the retail platform. Last quarter, Amazon said, by the way, we have this huge viewership streaming video service called Amazon Prime. And we're going to start putting ads in the lowest tier version of Amazon Prime. So unless you want to pay more, you're going to start seeing ads on Amazon Prime. And that's another huge advertising opportunity that hasn't been very heavily tapped yet. So the analysts are pretty excited about the upside of Amazon potentially tacking on another $6.5 billion in Prime video ads onto the $50 billion of search ads that they already have.
Jason: [45:11] And so ads are a pretty good business to be in, which is why every other retailer is trying to follow suit with their own sort of version of a retail media network.
Scot: [45:22] Cool. I imagine you get a lot of calls to talk about that.
Jason: [45:25] Oh, yeah. I actually, I'm sick of talking about it. So one nice thing about working at an ad agency is there are now thousands of other experts. You know, I was one of the early guys in retail media networks. Now there are thousands of other experts that are way more credible than me. So I don't have to talk about it quite as much, but it still, still comes up in every conversation.
Scot: [45:43] Very cool. All right. So then that was the basic gist of the corridor from a high level. And then it came to the what's going on in Q2. So that did come in lighter than folks expected, as I said, and they guided the top line to 144 versus 149. Let's call it 146 and change at the midpoint. They always do this range kind of thing when they're doing their guide. And Wall Street was at 150 consensus. So, you know, a tidge below two or three percent below where they wanted. But the operating income guide was above Wall Street. So they're kind of, we'll take it. Como si, como sa.
Scot: [46:21] So that was, you know, I think Amazon tapping things down. Yeah. Now they did talk a lot about consumers being under pressure. So they said in the, it wasn't in a Q and a, it was in the prepared remarks and Jassy said it, which is kind of like the more important stuff. And I will say it's really nice to have the CEO of Amazon back on these calls because Bezos basically ditched them after, I don't know if, I think he came the first two quarters back in 97 but i honestly can't remember but he has not gone to the calls and jassy's been to them all so it's really nice to hear from the ceo and he answers very candidly i feel you know he doesn't feel as kind of like robotic as many ceos when they get on here because it is a stressful thing that you're going to say something wrong, but there was this exchange well first of all he he in his prepared remarks he talked about.
Scot: [47:12] I forgot to put the exact language, but he said, we're seeing a lot of consumers trade down. So they're seeing, you know, we're seeing this in the auto industry. Tires is this huge thing where it's under a lot of pressure right now because people are just waiting. So there's a lot of this, you know, it's not showing up in the data that I've seen, but there's, you know, maybe the inflation data, but not the GDP and some of the other unemployment data. But it feels like the consumer is under a bit of pressure here, and they talk about that a lot in the prepared remarks. So I thought our listeners would find that interesting. Jason, before I go into this longish little thing that I wanted to just cover, what do you, did you pick up on any of that consumer stuff? Are you hearing that?
Jason: [47:55] Oh, yeah, that's very common. And remember, in the beginning, I mentioned that there's this weird bifurcation that some retailers, even in categories, are doing well and others aren't. And some categories are doing well and others aren't. That's super complicated to get to the why. But the most obvious why is that consumers feel like they're under a lot of economic pressure and are trading down and are deferring certain types of purchases. The easiest way to see this is own brands and private label sales going up and, you know, national brand sales stagnating, see things like chicken protein going up and beef protein going down. You know, there's lots of examples out there, but the retailers that are best able to follow the consumer as she trades down are tending to do well. And the retailers that only cater to the luxury consumer, the super luxury is still doing fine. They're somewhat insulated. But the folks that haven't been as able to cater to the value consumer as much have struggled more. And the non-mandatory categories have struggled more. So Andy's comments exactly mirror what we're seeing going on in market dynamics and what other retailers are saying in their earnings. It is slightly weird because if you just look at the macros.
Jason: [49:18] It's objectively, the consumer is doing pretty well. There's actually a lot of favorable things, but there's a ton of evidence that the consumer sentiment is that they're really worried about their household budget and are making, you know, hard, hard financial decisions.
Scot: [49:36] Yeah. Yeah. It's tough out there. Well, hopefully it'll get better. So one of the questions I want to just kind of pull out some tidbits, because this has been a theme on our pod for a long time and I thought it was really, really interesting. And this is going to get into the weeds of supply chain and this kind of thing. So sorry if that's not your jam. We like to talk about logistics.
Scot: [49:56] Side note to you, Jason, I saw that deep dive we did on Amazon logistics is still like our number one show and all the stats and stuff, which is kind of fun. So someone cares about it. Anyway, one of the friends of the podcast, Yusuf Squally asked a question. He's one of the analysts and he said, as it relates to logistics, so he's talking to andy on the call back in september you launched amazon supply chain can you help us understand the opportunity you see there where are you in the journey to build logistics as a service on a global basis and does that require a huge increase in capex a function increase in capex which means huge so jesse said this was a very long answer so i'm going to pull out two snippets you can go read the transcripts can you put a link to that in the show notes absolutely yep yeah so so i'm just gonna give you the the snippet the whole thing is worth reading but it would be like another 20 minutes to do that. But so Jassy starts out and says, I think that it's interesting what's happening with the business we're building in third party logistics. And it's really kind of in some ways mirror some of the other businesses we've gotten involved in AWS being an example. And even though they're very different businesses, and that we realized that we had our own internal need to build and launch these capabilities.
Scot: [51:01] We figured that there were probably others out there who had the same needs we did and decided to build the services out of them so this is this model that really blows the minds of traditional retailers where you know so walmart has this huge data you know capability there's this this urban legend that they know when people are pregnant before they do they can see changes in their habits or they know who all is on weight loss drugs they they see your buying habits so intricately that they can do that that's a neat capability but they view it as proprietary and And that's old school thinking.
Scot: [51:32] What Amazon does is says, well, that's a cool capability. Let's certainly someone else needs it. Let's open it up. This is one of my favorite things at Amazon. And it's so counterintuitive that in my current car world, I talk about this and everyone's like, why are you, we're doing it a lot at Spiffy. And they're like, well, why are you doing that? That's like your proprietary thing. And we're like, well, that's just how it should be. And like, this is a better way to do it. And it's really interesting that still today, Amazon's built what I say, $100 billion business out of AWS, which has used this and people are, are befuzzled by the whole thing. So I, I thought that was an interesting use case. And then he, he goes into some details there that are pretty obvious for our listeners, like how this is gonna work. But then he basically kind of brings it back around and then he says he wraps up and says, I would say that supply chain with Amazon is really an abstraction on top of each individual block services. And in those services, he talked about all the things that, that, you know, FBA and last mile delivery and buy with a prime. He talks about each of those kind of and how awesome they are. So he's basically saying Amazon supply chain wraps a bow around all that. And it gives this collective set of business services is growing significantly.
Scot: [52:43] It's already what I would consider a reasonable size business. I think it's early days. It's not something we anticipate being a giant capital expense driver. So it's because they've already invested in all this that doesn't require additional capex. And then he finishes and says, we have to build a lot of the capabilities anyway to handle our own business. And we think it will be a modest increase on top of that to accommodate third-party sellers.
Scot: [53:05] But our, there's a typo in the thing. Our third-party sellers find very high value in us being able to manage these components for them versus having to do it themselves. And they save money in the process. So I thought that was a really interesting, interesting. So they're really leaning into this supply chain. I think that ultimately they'll open this up to more consumers where you can send Aunt Gertrude in Detroit something from Chicago for three bucks a package and just throw it in an Amazon box, maybe a return box, and it kind of makes it way cheaper than you can FedEx it. I think that's coming, but it's really interesting to see. The way they think about things and his articulation of it was very crisp,
Scot: [53:45] and I really enjoyed that. I was geeking out on that when I was listening to the call.
Jason: [53:50] Yeah, for sure. That actually came up in some of the conferences I was at that he, you know, Jeff Bezos famously wrote this memo a long time ago about kind of being an object oriented, company and having all these building blocks that people could easily access and use internally and externally. And, and that this was kind of Andy Jassy doubling down on that. Yeah. It's Biffy is an example of that. Like you inventing some cool products that make it your jobs easier. And then you're selling those products to, to your potential competitors.
Scot: [54:20] Yeah. So two examples, we have some devices we've developed for ourselves. One is a tire tread scanner. So it does 2D and 3D tires, tire tread scans. It's called Easy Tread. And we developed it for ourselves because we touch 3,000 cars a day right now and we wanted to measure the tire treads. And the state of the art is a Bluetooth needle. And it's, you know, you have to lay on your back. The cars are on the ground for us most of the time. So you have to like get underneath there, measure three things, and then it Bluetooths to a phone. Then you have to take it, the data entry, it doesn't have an API. Then you have to like take what it measured and then now cut and paste it into something else. It's kind of, kind of redonkulous in our world. So we developed a solution for that and we're selling it externally. And then the big, the big one is from day one, this has been the plan is we've built a ton of software for Spiffy. So we're, you know, we've got 400 technicians, 250 vans doing all kinds of services across the US and there's no operating system for that. So we, there's no like Salesforce for that or Shopify. So we had to go build our own. And so we've built, you know, route optimization specific to this parts integration, fitment integration, VIN lookup, all these things that are required integration with tire suppliers, oil filter suppliers, oil suppliers, parts suppliers, all these things. So we have like 150 things we've integrated with and pulled in from all over the place.
Scot: [55:44] And then labor management, all the reporting that comes along with it, all that stuff. And we're starting to license that out as its own platform to anyone that wants to do auto services. And so these dealerships and large auto service companies are coming to us and finally saying, this seems kind of obvious now that we need to provide the ability to go to our customers. They call it at their curb. They use a different language than we do. But basically what you and I would call mobile, you know, last mile delivery of the service. And we're starting to license that out. And it's a lot like AWS, right? So we had to build this for our retail business, which is doing the services and now we're licensing it out a lot AWS and we have this device business. So it's been, I would not have, it comes intuitively to me now. Cause I've been, you know, basically living this lifestyle for 20 years and watching Amazon do it, But it's been fun to kind of build a company with this mindset of we're going to take these things we build and give them to other, not give them, but sell them to other people. And then that makes them better. And they help us pay for all the R&D that we've done on it.
Jason: [56:48] Yeah, that's very cool. And that gives listeners a very tangible example of why we haven't been able to podcast quite as frequently as we'd like.
Scot: [56:56] Yes.
Jason: [56:56] I do, at the risk of making this the world's longest episode of our show, I do have a geeky add-on to the supply chain conversation. Yeah. So a lot of these services that they're adding to specifically what they call supply chain with Amazon are around importing services, because an increasingly high percentage of all the stuff Amazon sells is.
Jason: [57:20] Amazon is taking care of importing it, right? And most often from China, but from all over the world and taking care of all that logistics and getting it ready to sell and deliver via the world's most impressive last mile to consumers in America. And there's tons of complicated, high friction touch points and processes to flow all those goods. Well, the big competitors out there to Amazon at the moment that we've talked about ad nauseum on the show, like Shein and Timu, had this kind of direct from China model where they're putting all the goods on 747s, flying them over, and they're taking advantage of this loophole in the postal treaty called the de minimis provision to not pay taxes or duties or have all these goods inspected that they ship into the U.S. and U.S.
Jason: [58:07] Businesses have been complaining it's unfair. There's like all kinds of talk about it. We've done shows on this and I'm sure we'll do others. So here's the new thing in supply chain.
Jason: [58:15] All the people that have been complaining about this are now doing it because guess what's happened? A bunch of these companies have been born that now help every other brand in the world take advantage of the de minimis provisions to near shore their goods. So you're a footwear manufacturer, you make your shoes in Vietnam, Instead of shipping them to the U.S. On a pallet and paying taxes and duties, you ship them on a pallet to Mexico, and then you send them individual parcels across the border from Mexico into the U.S. and never have to pay taxes or duties on the stuff. So I don't know if that will last in the long run, but that's a very disruptive, significant change happening in the whole world of e-commerce supply chains as we speak. That's pretty interesting. Interesting. Had you gotten wind of that yet?
Scot: [59:07] No, no. That's all new to me. Thanks for sharing.
Jason: [59:09] Yeah. That's probably how you're going to have to start getting your spiffy stuff into the country now too. I won't, I won't, we won't go there. But the one other piece that did not come up in the earnings call, but a controversy around Amazon since our last show is news articles came out that Amazon was de-installing its Just Walk Out technology from its grocery stores. So Amazon had built Just Walk Out into several of these Amazon Fresh stores and they built it into Whole Foods. And if you know the history of Just Walk Out, this was the original intention of Just Walk Out was was to do it for grocery stores, but it was too hard at first. So they, they started with these little convenience stores and now they had scaled it up and everyone thought that was the future. And, you know, in the last eight weeks they announced, yeah, we're, we're uninstalling it from the grocery stores. It's not a good fit. And the articles that came out both started out saying that, but then they pretty quickly extrapolated from that to say, Amazon's giving up on just walkout technology.
Jason: [1:00:09] And it was a scam anyway. It was a bunch of, it was thousands of people in India that were just watching the cameras and doing the work. It wasn't really AI or technology doing it. And then Amazon had to quickly go into a PR spin cycle and they sent reps out. They're like, you know, guys talking on a bunch of podcasts about, no, no, no, we're not abandoning Just Walk Out. We just learned that it's not a good use case for grocery and all the SKUs and all the weight-based SKUs in a grocery store. So we still think there'll be lots of good use cases for Just Walk Out, but that's not gonna be the grocery innovation that we actually think the grocery innovation is the Amazon Dash cart.
Jason: [1:00:51] And the India thing just turns out that like when you're training LLMs, you do have humans look at the LLMs results to improve them, right? Like it's a natural, you know, appropriate part of the, the LLMs and Amazon was probably doing that, but they do have a lot of technology around these just walk out. But so it became this whole thing is Amazon abandoning grocery is Amazon abandoning, just walk out.
Jason: [1:01:16] Andy has made it clear. They're still going after grocery. He said in the earnings call that we're, you know, we're doing really well in growing at the non-perishable side of grocery, which is all he, he, he even mentioned this antidote. He said when the general merchants first started trying to get into grocery, which is code for Walmart, that Walmart started trying to sell groceries in 1990, that at first what they sold was shelf stable, non-perishable stuff, paper towels. And they got pretty good at that. And Amazon's point is we're really good at that and do really well at that.
Jason: [1:01:49] We're not very good at fresh, frozen and perishable yet. And we still have to figure that out, but we do have this new model, Amazon Fresh concept in Chicago called V2 and we like the results so far. And we'll hope to refine that and scale that one day. And it'll be interesting whether the unique value prop is dash cards. When the technology guys from Amazon said, hey, we're de-installing Just Walk Out, they kind of hyped up these dash cards, which are these smart shopping carts.
Jason: [1:02:22] I'm by no means I'm writing Amazon off as a grocer, but I am very skeptical and cynical about these dash cards. I live in Chicago, so I've been able to visit the stores that have them. And, you know, a typical store has six of these dash cards and they have 50 to 100 shoppers in the store. So it just, it, it doesn't, they're not scaling it to try to be, you know, a good solution for all the shoppers. And one of the main things you try to use a shopping cart for in a store is to get your 60 grocery items to your, the trunk of your car. And two problems with the dash cart is it doesn't fit 60 grocery items and you're not allowed to take it out into the parking lot. So I still think, I think there's some work to do still on the dash carts, but all this sort of came new ahead leading up to the earnings call this year. So I did, I did want to mention that, I don't know. Are you optimistic about Amazon Grocery, Scott?
Scot: [1:03:17] They haven't quite figured it out yet. I think they're still kind of lost. Seems like they're leaning in. The $9.99 thing is really just Whole Foods, right?
Jason: [1:03:28] No, it's unclear. Amazon delivers groceries from two models, from what they call Amazon Fresh and Whole Foods, and they put too much work on the consumer. The consumer has to decide in advance which one they're ordering from, and you can only get part of the products from each thing. Yeah, I hate that.
Scot: [1:03:44] It's like whenever I find stuff, it's split in there and I just give it. And then it's kind of like, what are you doing? And I'm like, I'm just trying to find stuff I want. And I want this granola and this thing. And it's like, well, you can't do that. I'm like, well.
Jason: [1:03:57] Yeah, you can only get that Hook's cheddar cheese from Whole Foods, but you can only get the Doritos from Amazon Fresh. And you didn't opt in to either of those. So it's confusing. It's a mess at the moment. And again, grocery is a huge part of retail and it's the highest frequency retail. So, you know, if you care a lot about knowing the data about consumers, you want to win in grocery. But it's it's also very different. Like Andy Jassy has said in past calls, we understand we're the only way to win in fresh and imperishable is to have a lot more product, a lot closer to customers. And that's why, you know, we might need physical stores. And Amazon has proven they're really good at fulfillment and these hub and spoke delivery models. They have not won at brick and mortar retail. And, you know, we were looking before the show, Whole Foods is a little bit bigger than when Amazon bought them. But, you know, Amazon hasn't really like, you know, poured gas on Whole Foods in any meaningful way either.
Scot: [1:04:57] Yeah. So they need to figure it out. Not a very day one kind of experience. Yeah.
Jason: [1:05:02] We'll have to do another show, but across the parking lot from Amazon, there has been some other retail news. A big one was, you know, Walmart's invested billions of dollars in healthcare clinics. And they announced this month that they're closing the healthcare clinics, which is super interesting. At the same time, Amazon is actually ratcheting up their pharmacy business. So they're now offering same-day delivery of pharmacy goods in two cities and expanding to six more cities. So that's the healthcare industry is really following all that stuff. We could talk about that. And one that I think every listener should follow really closely, Walmart launched a new owned brand this year. The biggest brand launch Walmart's done in 20 years called Better Goods, which is elevated premium food products sold by Walmart. We talked earlier about the consumer climate's really favorable to these higher value store brands. And if you look at the companies that are performing the best in grocery, it's the companies that own their own brands. It's Trader Joe's, it's all the... Costco's the largest CPG in the United States of America. Costco's bigger globally.
Jason: [1:06:08] Kirkland is bigger globally than Unilever. And so super interesting that Walmart is kind of making its first significant entry in that in a long time. And then the retailer that historically has been doing the best of that is Target, who's been struggling as of late. And what they launched most recently last month is a new brand that's competing with dollar stores called Dealworthy that has the lowest price point products that Target's ever offered. So we talked about the consumer being stressed and Target not necessarily having a good answer for that. This Dealworthy brand seems like their big effort to try to catch that value consumer that they historically haven't captured. So lots of stuff in this world of own brands, which if you're a competitor to Amazon, the best way to compete with them is to sell stuff that they don't have. So that's a super interesting space as well. We'll have to do a show about that coming up.
Scot: [1:07:01] Yeah. Yeah. Thanks for sharing that. We'll keep an eye on it.
Jason: [1:07:04] Yeah. And with that, we've blown past our allotted time. So people complain we didn't podcast enough. So we gave you two podcasts in one show.
Scot: [1:07:12] Yeah. Careful what you wish for, folks. Boom.
Jason: [1:07:16] But hopefully you enjoyed this and we still would love that five-star review. Again, if you live or have familiarity with any of those global cities I'm visiting coming up, please drop me a line. And thanks everyone for sticking with us. And thanks everyone for all the kind words and comments that we've both heard this quarter. Until next time, happy commercing.
EP203 - Shopper insights from NPD Checkout
13 Dec 2019
00:47:27
EP203 - Shopper insights from NPD Checkout
NPD Checkout is a product from NPD that scan physical and digital receipts from a panel of more than 100,000 users to get a unique look into consumer purchase patterns in a variety of product categories.
Jeremy Allen, Group President of Checkout, and Patty Altman, SVP Client and Business Development at Checkout join us to discuss what we can learn about the holiday from their dataset.
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.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 203 of the Jason & Scot show was recorded on Tuesday November 16th, 2019.
EP202b - Cyber 5 Recap with Adobe's Taylor Schreiner (audio repaired)
06 Dec 2019
00:36:32
Support the Show:
The Jason & Scot Show as been nominated for "Best Retail Media Resource" by the VIP awards. We'd appreciate your support, if you could take a minute to vote for us.
Adobe Recap
Taylor Schreiner is the Director of Adobe Digital Insights. He uses Adobe's data to give us a recap of the Cyber 5 (the five shopping days from Black Friday through Cyber Monday, this year Nov 29 - Dec 2).
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.
EP202 - Cyber 5 Recap with Adobe's Taylor Schreiner
04 Dec 2019
00:36:32
Support the Show:
The Jason & Scot Show as been nominated for "Best Retail Media Resource" by the VIP awards. We'd appreciate your support, if you could take a minute to vote for us.
Adobe Recap
Taylor Schreiner is the Director of Adobe Digital Insights. He uses Adobe's data to give us a recap of the Cyber 5 (the five shopping days from Black Friday through Cyber Monday, this year Nov 29 - Dec 2).
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.
EP201 - Cyber5 2019 Hot Take
03 Dec 2019
00:29:13
EP201 - Cyber5 2019 Hot Take
Cyber 5 is the five shopping days from Black Friday through Cyber Monday (this year Nov 29 - Dec 2).
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.
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.
EP199 - Dreamforce and Retail Earnings
21 Nov 2019
00:54:40
EP199 - Dreamforce and Retail Earnings
Episode 199 covers the 2019 Dreamforce Conference as well as this weeks news including Walmart and Target earnings reports..
Dreamforce
Salesforce held their annual Dreamforce Conference in San Francisco this week. They launched a major new functionality "Customer 360 Truth" a universal customer data platform.
Singles Day - 11.11 Day - $38.38 billion US (up 26% YoY)
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
Episode 199 of the Jason & Scot show was recorded on Thursday November 21st, 2019.
EP198 - Holiday Forecasts
12 Nov 2019
00:57:00
EP198 - Holiday Forecasts
A weekly podcast with the latest e-commerce news and events. Episode 198 covers the 2019 holiday forecasts, store visits, and news.
Reviews
Jason & Scot both received the new Apple AirPods Pro and the Amazon Echo Buds. Both liked the Apple product better. Echo buds had better noise cancelation, but an inferior fit/design, poor microphone, and a case that's too big for a pocket.
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.
EP197 - Personalization Deep Dive
08 Nov 2019
01:02:39
EP197 - Personalization Deep Dive
This episode is a deep dive into Personalization.
Definition and Level Setting
Best Commerce Practices
Future Opportunities
Conclusion and Recommendations
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 197 of the Jason & Scot show was recorded on Monday, September 30. 2019.
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.
EP196 - Apple Flagship, News, and Listener Questions
04 Nov 2019
01:06:35
EP196 - Apple Flagship, News, and Listener Questions
A weekly podcast with the latest e-commerce news and events. Episode 1946 covers a visit to Apple's new flagship on 5th Ave in NYC, recent industry news, and listener questions.
Apple 5th Ave Flagship Reopens
News
2019 Holiday season has 6 fewer days between Thanksgiving and Christmas
Credit card companies release new e-commerce payment flow EMV SRC
Q1: Michelle Grant - Amazon and Walmart have patents around predictive shipping. Could you speculate on what impact predictive shipping will have on commerce? You mentioned it in episode 187, but it would be great to get more details.
Q2: Holly Marie Pfeifer What's the future look like for personalization with ITP cracking down on Safari and talks about Google being close behind in restricting third party cookies?
Q3: Jeff Vogl I saw Jason's question to Tobi about performance and PWAs, do you see them actually sticking? I know they "hot" right now, but how many PWAs do either of you have on your phone? Of those, besides Amazon, how many do you really use? Seems like something that works for the Amazons and Nordstrom's of the world, but do you see it as a mid market reality?
Q4: Karri Koivuniemi Any new info regarding what Adobe is doing with the Magento? What's your brief take on the current ecom platform landscape?
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 196 of the Jason & Scot show was recorded on Thursday October 24th, 2019.
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.
EP195 - Coca-Cola VP of Shopper Marketing April Carlisle
31 Oct 2019
00:45:00
EP195 - Coca-Cola VP of Shopper Marketing April Carlisle
April Carlisle, VP of Shopper Marketing National Retail Sales, The Coca-Cola Company. In this broad-ranging interview, we discuss Coca-Cola's digital footprint and strategy, digital shopper marketing, the evolution of e-commerce for consumables and grocery, and the future of shopper marketing.
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.
EP318 - Temu Deep Dive with Earnest Analytics
15 Mar 2024
00:42:45
EP318 - Temu Deep Dive with Earnest Analytics
Episode Summary:
In this episode, Jason "Retailgeek" Goldberg and Scot Wingo dive deep Temu, the online marketplace operated by the Chinese e-commerce company PDD Holdings, that has become the fastest growing retailer in history.
Joining us on the episode is Michael Maloof is the Head of Marketing for Earnest Analytics. Earnest works with world-class data partners to acquires, anonymize, and productize insight about the entire U.S. Economy. They have posted numerous insights about Temu in the US this year:
In this episode we cover who Temu is, how big they have become, who their customers are and what retailers they are likely impacting, their go to market strategy (and especially their marketing spend), the controversy around their use of the Global Postal Treaty, and some of their potential risks. We also explore where they could go next. If you're in the commerce space, you'll want to make sure you are up to speed on Temu.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 318 of the Jason & Scot show was recorded on Wednesday, March 13th, 2024.
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 318 being recorded on Wednesday, March 13th, 2024. I'm your host, Jason "Retailgeek" Goldberg. And as usual, I'm here with your co-host, Scott Wingo.
Scot: [0:39] Hey, Jason, and welcome back, Jason and Scott show listeners. Jason, one of the topics that is coming up a lot this year, we talked a lot at a lot in our recap and our preview is Temu. By many measures, people think they're one of the fastest growing e-commerce companies in history. If you watch the Super Bowl, I think they spent $8 trillion on ads there. So we want to do a deep dive into this and cover a number of topics. We want to talk about a little background around Temu. What's it mean for U.S. retailers? And, you know, it's a Chinese company. Does it even matter? If yes, why? Because Temu isn't public and they are a Chinese company, they don't really disclose any information. So we wanted to bring on a guest that is basically a Temu expert. So we looked around and we found Michael Maloof. He is the head of marketing at Ernest Analytics. Ernest works with world-class data partners to acquire, anonymize, and productize insights about the U.S. economy. They have posted lots of articles. This is how we found Michael. I think you know him as well from the trade show circuit. So he's going to help us do this deep dive into what's going on at Temu. Welcome to the show, Michael. Michael?
Michael: [1:59] Yeah, thanks so much for having me on the show. Big fan of your annual predictions and the work you guys do. So I'm head of marketing at Earnest Analytics. We're the leading credit card retail pricing and healthcare claims data provider for investors and retailers. Before Earnest, I was actually a tech and telco analyst over at Goldman. The two credit card data sets we work with now, Orion and Vela, are probably the most pertinent to my conversations about the consumer economy and certainly this conversation today about TMU. They sourced respectively from a large account aggregator, like a budgeting app, and part of a POS system in the US. And Ernest essentially takes these massive and messy data sets, normalizes structures, and then puts them onto our platform so everyone from portfolio managers to marketers can see this third-party data. For example, you'd see market share, competitive benchmarking, customer behavior, revenue predictions, and macro trends for thousands of companies, including TMU.
Scot: [3:03] Awesome. Thanks, Michael. And then, so which sector did you cover when you were an analyst at Goldman Sachs?
Michael: [3:08] Tech and telco. So anything in the tech space, we had a few marketplaces in there, telecom companies. It's been a while though. Ernest has been my home now for seven years.
Scot: [3:20] Okay. Was this in the Anthony Noto era you were there?
Michael: [3:23] This was in the vera rossi era she was my my lead where we recovered uh latin american tech and telco.
Scot: [3:30] Very cool awesome yeah they did goldman did the channelizer ipo so i get to know the team there pretty well awesome well before we jump into the data which we're excited to kind of hear what you have to share here jason i know this has become a very hot topic in your world you you You spoke on it at NRF. In your day job, you're getting tons of questions about this. I think you're booked out solid with Tmoo briefings. So those people pay big money for it, and our listeners don't pay. Give us the free version of your backgrounder on Tmoo.
Jason: [4:05] Yeah, thanks, Scott. And I'm sure we'll spice in some other tidbits as we go, but I'll try to give a concise bullet. it. Temu is a subsidiary of a company that used to be called Pinduoduo in China. It's now called PDD Holdings, which is infinitely easier to spell, by the way. And PDD Holdings is one of the largest e-commerce companies in China. On a market cap basis, they keep flip-flopping with Alibaba. So they're super competitive. They're way north of like $400 billion in GMV in China and had a really interesting trajectory, but a couple of years ago, they launched Tmoo into first UK and then US, now 49 other markets as a new retail concept. And so a couple of things I'd want folks to know before we dive in with Michael, first of all, the name is a loose English acronym for team up price down. So I always pronounce Tmoo as in team.
[5:08] There are multiple pronunciations out there, even from Tmoo employees. So I'm not sure there's an official pronunciation. In the United States, they launched in September of 2022. So they're about 18 months old now. And most folks were not familiar with them until, a surprise, three months after launching, they bought a Super Bowl ad. So they became familiar to millions of Americans with the Shop Like a Billionaire ad that ran in the Super Bowl in 2023. And then as Scott alluded to, they bought five ads in the Super Bowl this year. So they haven't disclosed what they paid. A normal 30-second spot in the Super Bowl costs about $7 million. They ran four ads during the Super Bowl and one during the postgame. So estimates are in the kind of $20 to $30 million that they spent just on that ad. There's a bunch of estimates for how big they are in the U.S. I'm eager to hear what Michael thinks, but his old rivals at Morgan Stanley have them at about $16 billion in GMV in the U.S. But more interesting, Morgan Stanley estimates they're going to be $32 billion by 2030. So you think about a retail company that launched in September of 2022, and then in the first year, business sold $16 billion worth of stuff. That's the fastest growing retailer of all times. We do know from other sources that they get more traffic every year than Target.
[6:36] They've been the most downloaded shopping apps on the Android and Apple app stores since they were born. So they've kind of owned the top of that list. And a couple other little interesting things. They are a marketplace. They have invented a model they call next generation manufacturing. So they're a marketplace. It's all three-piece sellers that are selling goods on Temu. But unlike traditional Western-based marketplaces, Temu does a lot more of the work, of listing the products and fulfilling the products for the factory. So they may, if you're a factory, they say the only thing you need is a cellular internet connection, and they provide you all the infrastructure to become a successful seller on Temu. There's somewhere between 80 and 100,000 Chinese factories that are currently sellers on the marketplace. And then one big innovation is this week, they're turning on the ability for U.S. Marketplace sellers to sell and fulfill their goods from the U.S. as well. So one interesting question about a marketplace is, are they competing for sellers with Amazon and Walmart? And now they're bringing that fight to American soil. So that, I feel like, is enough to get us started. There's certainly an interesting company that's worth following.
[7:52] The way I originally discovered Earnest is through this show. One of our most popular guests, Dan McCarthy, has been on a few times talking about his his CLV methodologies. And our listeners have really enjoyed his his commentary. He has partnered with Earnest Data several times to do some really interesting analytics. And you guys at Earnest have published a couple of those as thought leadership. And so that's how I first met you. And then, Michael, I noticed you published like three articles on Temu this year.
Michael: [8:22] That's right. Right. Teamio has been one of the top client asked for themes. It's definitely something we're seeing a lot in the press. We work a lot with those thought leaders as well. And that's something that we're getting a lot of questions on from everyone from business to fashion to Dan McCarthy. So glad to answer any questions there. We are kind of in a unique spot, kind of have the dashboard on the consumer economy, if you will. Basically what's going on within the last few days we can see everything from customer acquisition they have to their gross market merchandise value.
Scot: [8:56] Got it let's let's start at the basics and let's pretend you know so i see Temu and you know it looks like they've got and you know one of my theories is it feels a lot like wish.com so it's really kind of cheap stuff slower ship going to what i would call value-oriented and consumers, you know, in your data, what, what kind of customer are, is buying this and then how fast do you think they are really growing?
Michael: [9:22] Yeah, let me answer the second one first. Timmy's growing very quickly. Like you said, from late 2022 onwards, our data is showing double digit month to month growth, which is just explosive, right as it became a household name. In the first three months, for context, it had roughly as many weekly active users in the US as the largest fast fashion brand, Shein, and within 10 months had surpassed Shein in sales. And it had taken Shein years to get to that point. So really, a much shorter timeline. For an idea of size, about 18% of US households have shopped at TeamView since its launch. And in terms of GMV, in February, we saw about 1% of Amazon's US GMV. If you look at that, if you just break that out over the whole year, I believe in 2023, their net sales were something like over $500 billion. You're looking at around $50 billion in gross merchandise value moving through the service. But nevertheless, it's kind of not made really meaningful inroads with the largest online brands. I mean, it's still 1% in a good month. And that's actually decelerated since 2023. In fact, February of 2023 had fewer sales than January, despite the really heavy advertising spend you mentioned.
[10:47] So yeah, there's some signs that the growth is kind of changing there. Mainly that retention is increasing even while this like...
[11:01] New customer acquisition-based sales growth model is slowing down. TeamU's average customer lifetime value tracks higher than Walmart. And we're seeing customers becoming much more loyal. So that's an interesting kind of plus for them while sales in total are kind of hitting a lull. But yeah, let's talk about who those customers are too. It's definitely been one of the more interesting finds from our data. Despite the really low price points and that kind of gamified discount system, TeamView's US customer base skews middle to high income, actually. Sales among customers earning that over $190K, which is obviously very high up there, they're the fastest growing income bracket. And that's from May to January, May of 23 to January 24. So those sales to customers earning under $55K, like less than the median U.S. household income, that's actually the slowest growing. So today, about 44% of TeamU sales come from earners making over $130K. Not only do high-income earners account for the largest share, they're outgrowing. We just think that TeamU resonates mostly with customers with more disposable income. income, people who can afford to take a gamble on an item that might not work out.
[12:27] You buy a floor mat for $5, it doesn't work. A middle high income person might just say, hey, it was $5 wasted, but the poor people don't always look at that. They're looking for a little bit more bang for their buck, can't afford that type of gamble. Yeah, it's interesting.
Scot: [12:46] Cool and then you've you know you mentioned that they're you know basically their ltv is going up do you have any insight into why are they getting better at like maybe predictive analytics or recommendation engine or you know they see jason bought some gadget and then they they know he's now a gadget geek and they kind of start targeting do you have any insight into what's driving that that bump in LTV?
Michael: [13:09] That's a good question. So I don't really have much insight into that. I try not to get out over my skis in terms of the data that I have available to me. We're looking at retention. We're looking for what's called a smile. Dan McCarthy talks about it all the time, which is over time as a company starts to bring back more customers that stopped stopped spending with them. And that's been pretty rare to see in e-commerce history. That's something they've managed to do. How they're doing that, I'm not totally sure. So it's definitely going to be the key for them to continue growing as new customer growth slows down, though.
Scot: [13:52] Yeah. Jason, do you know?
Jason: [13:54] Yeah. Well, so I don't know. I just want to point out that while Michael is wisely trying to not get over his skis, I live over my skis. So I'll tumble down the ski slope once again. One of the things I maybe should have said up front or maybe apparent to a lot of people is T-Moves marketing spend isn't just that Super Bowl ad. They're spending a fortune on digital ads and almost certainly losing a lot of money on every sale. So there's a Wall Street Journal article that came out this week that said that Temu or PDD overall spent over $2 billion with Facebook and was Facebook's largest advertiser. They're also Google's largest advertiser in the U.S. And so they're buying a lot of customers. And the the Wall Street Journal estimates that they're losing $6 on every sale. They're spending so much on customer acquisition. And so in that first year, they're doing a ton of marketing. There's a ton of people that never heard of Temu. They're acquiring those customers. They're getting that first order.
[14:54] And, you know, a mini version of this is what Wish did until they ran out of money. But though it doesn't seem like there was a lot of evidence that Wish ever got traction, right? Like they didn't get those repeat orders. And what I think we're seeing And what I've seen in some of the data that Michael shared with us is that Temu very much is growing that LTV, getting repeat orders, even as the flood of digital marketing they're spending is sort of losing some efficacy as the law of large numbers kick in. And then I would also say Pinduoduo in China and now Temu in the U.S. Is very well known for their gamification. So they have lots of clever gamification mechanics on their websites, group buying, contests, gifts, one-time deals that are all like very carefully crafted to entice you to make an incremental purchase and to make an unplanned purchase. So I think all of those things appear to be working and then they hit you on social media with, you know, a huge spend, you know, right when you're, you're doom scrolling and expressing some, some purchase intent through your clicks.
Scot: [16:08] Very cool. How about you, Michael, you mentioned this, this, this slowdown, which is exactly opposite of what I would have thought given the Superbowl ads. What do you, does the data show you anything there? Is it? Normal or like what what's going on.
Michael: [16:23] Yeah i mean i don't know i don't know what would be normal for this company that's still up hundreds of percent a year but when i'm looking at at month over month growth which is the kind of the best way i can think to to look at it it is pretty remarkable there was some sort of a step change in august of last year where it went from growing double double digits each month to growing just single digits or down. The holidays, December actually was smaller than November in terms of their sales. And January was smaller still, makes sense. But February, also very challenged in terms of sales. I'm wondering if they're in a sort of spiral in terms of the new customer's first time kind of buying frenzy is over, or if this is a shift towards very purposely trying to get people in the door and they're just actually tapping brakes a bit on advertising spending. I'm not totally sure what this signals just yet.
Scot: [17:35] Got it. Okay.
Jason: [17:36] Is it safe to say that there's no clear evidence that spending $30 million million dollars on the Super Bowl had a super observable impact on their sales.
Michael: [17:46] Okay. Yeah. So the Super Bowl. Let's talk about that. The million dollar question or $30 million question, I guess. The answer is probably not. There are a lot of ways to measure advertising effectiveness, as you guys know better than most. Brand awareness and net promoter score. But yeah, for a young company like this facing slowing new customer growth, I'd imagine they're looking to move the needle with each of these like big marketing events and the data just suggests that their multiple ads on February 11th had no meaningful boost in sales actually TeamU saw a noticeable deceleration in sales growth following the event actually kind of, like sales were significantly slower in the next few days. So unless they're measuring this on a much longer timeline, I don't think this investment was worth it. I think they would be better just plowing dollars into digital, wherever that is.
Jason: [18:42] Yeah, it's super interesting. You know, obviously for listeners that don't know, my salary gets paid by those Super Bowl ads. I work for a big ad agency for which I'm very grateful. But the lot of controversy around our water cooler the day after the show. That was a spin that you rarely see. And in one metric, it clearly had an impact. There was a lot more discussion about Temu than any other company on social media the day after the Super Bowl. So the Super Bowl ads triggered awareness and conversation. I think they were the second behind Verizon, which had Beyonce, right? And so there was a lot of talk on social media. It was not all positive. There was a lot of discussion on social media, but people that hated the team who had the first time they saw it because it was sort of by Super Bowl standards, not a very high production animated ad. I think they made it in-house and they, you know, ran it with much greater repetition than audiences are used to. So it generated a lot of conversation that didn't necessarily translate to sales, at least that we can measure in the short term. And so that that's going to be interesting long term case study about what what these kind of, you know, splashy big reach audiences can and can't can't do. Right.
Michael: [20:00] You know, I don't, again, skis and getting over them. It just seems like the outcome for them at this point should be a little further down the funnel. And I don't see how advertising spend like that will marginally get someone, persuade someone to buy a team you that wasn't already going to. It seems, yeah, it was a lot and there was no really movement in our data, either in new signups or in sales. I think there's some other research out that downloads are trending downwards or slowing down as well. We don't have that data, but I was reading elsewhere. So I think, Scott, this is maybe more to your 2024 prediction that people are realizing this is wish and slowing. and becoming less enamored or falling out of it.
Jason: [20:52] No, no, no, no. Scott's predictions cannot be right.
Scot: [20:55] Wait, if I hear that, you're pre-anointing that I'm right. Is that you're here in March, you're saying I was right with my prediction. Man, I'm good.
Michael: [21:04] I didn't want to pick a side here, but I think people might be falling out of love with it, although it's not because it's not wish, it's because they're out wishing wish. We can talk to it a little bit. But I think people just realize Teamio is managing to disrupt Wish. And we can talk to the brands that it's disrupting. That's just one of many. It's got higher retention, bigger scale than Wish. But it does have the same limits as Wish and that this deep discount model doesn't have the big household brands that people want when they're making those everyday purchases that are slightly bigger, like the Tides and Cloroxes or the recognizable alternatives. There are just some things you don't want to replace and you don't want to gamble on. I don't think anyone wants to spend a dollar on detergent and see what happens. It's just going to be tough for them to scale at some point. I think the question we should be asking is if they've reached that point yet. I'm not sure. The sales growth slowing suggests they could have. But in the meantime, they are actually taking a wrecking ball to several other brands. So just because total sales is slowing doesn't mean the disruptive effect is slowing.
Scot: [22:22] Yeah, let's go, Jason.
Jason: [22:51] Because Temu is buying so many ads and driving the price on all those auctions up. So don't know if it's moving the needle on consumer impact or not, but it for sure is having an impact on their competitors, at least in that regard.
Michael: [23:04] So you're saying maybe their goal is to just suck all the oxygen out of the room?
Scot: [23:15] Yeah, and you've teed us up there. Who is, is it retailers or is it more brands? Who's getting impacted by this? And kind of embedded in this question is, do you have an idea of the categories? Like if we looked at that pie of the 50 billion GMV, is it largely electronics? Is it apparel? Like what are the big wedges inside of there?
Michael: [23:35] Yeah, well, so the great part about transaction data, it's really good at looking at brand disruption, or I should say retail disruption by brand. Not great at looking at the categories. You know, I don't see what an individual breakout of a credit card receipt is. I'm just seeing where people are spending. So I think that's the question I'm more equipped to answer. In terms of impact, some of the folks you think of when you think of mass market and discount retailers like Five Below and Walmart, the ones that you immediately want to ask if they're being disrupted, they seem like they'd have the most overlap. They've been pretty untouched, actually. Part of its overlap, only 19% of Walmart and Amazon's customers have even tried TeamU. And that's about the same as the total percent of US households that have tried it. substantially the whole country has made a purchase at Walmart and Amazon. So they're just not as at risk, maybe on the margins. But what we're seeing, I guess, next step up with some risk is the dollar stores. Dollar General, they share about a quarter of their customers with TeamU. And if you look at Dollar General's customers spending at TeamU, it's up over 800% year to year from January 23 to 24. Obviously, a super small base and flat. at Dollar General itself.
[24:54] And then those TeamU customers who aren't, or those Dollar General customers who aren't TeamU customers, they're spending slightly up at Dollar General. It suggests that there's some impact. Again, not the biggest that we've seen. So I'd say like dollar stores kind of marginally.
[25:10] This is not as supported by data, but just putting the data point together that the TeamU customers are spending less and TeamU customers are richer, you could come to the conclusion that Dollar General role is losing out on richer customers looking for deals a little bit. Maybe they're popping in for something they really don't want to spend a lot of money on, like a party, something like that. That's where the sales that they're losing is. Which actually kind of takes us to the last and biggest impact. Wish and AliExpress, as well as all those hobby lobby party supplies, like Oriental Trading. So I'll start with Wish. Their customers are just fleeing. I think there's no better way to say it. 50% less spend on Wish in January 2024 than January 2023, and over 680% increase at TeamU. That's just astounding. The Wish customer, once they try I, TeamU, they're done. It's game over. It's similar for AliExpress. And I think that what TeamU has really done early on, we need to think of them less as like an Amazon killer, and more as a brand that just came in to consolidate the existing demand for this deep discount online spending that these two, AliExpress and Wish kind of got off the ground in the US.
[26:35] In terms of the hobby space, Oriental Trading, Hobby Lobby, Party City, they all experienced double-digit declines year-on-year in February among the customers who also shopped at TMU. And these brands, they're catering to occasional and discount merchandise. I think they're really going to struggle adapting to TMU. It's like I said, the person who doesn't mind throwing away $5, $10, $15 on party supplies if they don't work out. But it's a one-time thing anyway. way you know it's it's things that they're somewhat disposable items to these customers and very interchangeable got.
Scot: [27:12] It i noticed you didn't mention amazon on that list is there is it there been an amazon impact or has it been.
Michael: [27:18] That's great good catch pretty negligible just just like walmart they're just brands on those platforms at this point that you can't find at at these places i think when i say on the margins that's what i mean there could be hey, I need this small thing for my kitchen that I could get for $1 or get for $3. And that might be the sale they lose out on, but they're doing a better job of being one-stop shops. And I think with what we've seen, it doesn't seem like the business model is set to take on Amazon yet.
Scot: [27:57] Got it. Yeah.
Jason: [28:00] You know, a couple of things that come to mind. A, I think the dollar store thing is super interesting because historically dollar stores haven't sold very much online. Like, and, and, you know, usually their excuse is that, that super low price point discounted items don't work online. Right. And I, I think like in some ways I look at Temu and I say, they're actually the digital dollar store that did figure it out. Now.
[28:25] It remains to be seen whether they can make money doing it in the long run. But it doesn't surprise me that those are some of the categories that are being disproportionately impacted. And I think you really hit something interesting on some of these everyday essential retailers that sell the brands that consumers are looking for and trust.
[28:46] That, to me, feels like a different shopping occasion than the shopping occasion I think Timo is winning. Branding there's this whole new trend on all the social media platforms called dupes and you know people think of like knockoffs and forgeries where you you try to pretend you're a brand that you're not but dupes is a something different dupes is this is a very similar product to a name brand product but it it overtly is not the name brand product and it's a way better value and they're now these big cohorts of consumers that talk about their dupes and brag about their dupe finds and, you know, proudly make these, these dupe decisions. And it feels like those are the kind of things where, where Teemu's playing really well, where, you know, you're into, you know, crafting and you've, you know, there's some expensive machine, a cricket machine for cutting vinyl. And you say, oh man, I found a dupe on Teemu for 20 bucks, right? Like those Those feel like the kinds of occasions they're winning when you're willing to trade down for that no-name product and take a gamble versus when you know you want the Tide dishwasher soap.
Michael: [29:58] I think that's a great point. They're taking advantage of the trading down phenomenon in general right now that a lot of brands are seeing, a lot of retailers are seeing. This is the perfect spot. I'll just go ahead and see if Temu has it. Maybe they will, maybe they won't.
Scot: [30:15] Cool. One topic, and this is kind of a jump ball for you guys, is the, you know, I read a lot about this shipping model, and this was always Wish's kind of secret sauce is there's this, there's this like loophole in the postal code where if you send this something small, you know, it doesn't have any tariffs, number one. And then number two, there's like this really cheap postal rate, or I can't remember if China subsidizes it or it's free or we subsidize it, but there's some, there's kind of like double loopholes. There's a tariff one and a shipping one. And I've seen some noise lately about people wanting to kind of shut this down. Do you guys, either of you more expert on that than I am and have an opinion on if it's going to be sustainable or not?
Jason: [30:57] I could certainly jump in there. So what you're talking about is there's this thing called the Global Postal Treaty. And it's a prearranged agreement between like 95 countries, 94 countries for how they'll deliver each other's mail. When you try to ship a letter from the U.S. to Germany, the U.S. Post Office is going to hand it to the German Post, and they need to know in advance how much the German Post is going to charge the U.S. Post Office to deliver that so that the U.S. Post Office can charge a rate in advance to you to deliver those things. So this global postal treaty is super valuable, and it makes it possible to cost effectively and, you know, with predictable rates, mail stuff all across the world.
[31:41] Unfortunately, there's a couple of problems with it. There was the developed nations agreed that for less economically developed nations, they would have a preferred rate. So they would charge even less to deliver. The U.S. post office would charge less to deliver mail from a developing economy than they would from an established economy. And until recently, China was characterized as a developing economy, which is probably not accurate. And then the Postal Treaty specifies a dollar limit that it only is in effect for packages under a certain value. And so this is called the de minimis clause of the Postal Treaty. In the United States, the threshold is $800. So when Temu ships something to a consumer in the U.S. that costs under $800, they get a predetermined rate from the U.S. Post office, which is often cheaper than the rate to mail something from one part of the U.S. to the other. And Scott, per your point, there is no tariffs charged on that item and there is no import inspection on that item. So, you know, normally when we, you know, if a U.S. Retailer imports a container of goods from China, there's all kinds of inspections to make sure that the factory in China met labor standards and, you know, met environmental standards, and then they pay tariffs on all that.
[33:08] The team who hands one package to the U.S. post office, they they get to bypass all that, which, you know, is, of course, controversial. No one wants to get rid of the Global Postal Treaty or even de minimis. But what they're saying is that the U.S.'s 800 hour threshold is probably way too high. Like China's threshold for reciprocation is something like forty dollars or something. So you could you could put a big dent in Temu if you just lowered the the threshold. And so there's There's, you know, noise in Congress about trying to change that limit. I would say that, you know, it is an unfair advantage in many ways, and U.S. Companies are certainly right to complain about that.
[33:51] I would say that Temu is different than Wish. Wish took advantage of this cause. Temu takes advantage of it way more effectively, right? So Wish sold, you know, was a marketplace, and they had a factory sell something to an American consumer. And then it was up to the factory to get it to the American consumer. So the factory had to have their own postal account. And then they, you know, had to trigger this postal treaty. And there was no shipping confirmation. And often Wish products took a very long time to ship and a very long time to arrive. As part of this next-gen manufacturing model that Temu has, they do all that for the seller. And it uses Temu's postal account. And they expedite all of these things. Most of these goods get air freighted to the U.S. and put into the U.S. postal system. So while Wish items would have averaged three or four weeks delivery time.
[34:46] Temu normally averages like five to seven days, and they almost always outperform their shipping promises. And in fact, they even have a guarantee. They give you $5 back if the package arrives late. So, you know, part of the reason that I don't think they're just purely Wish 2.0 is they actually do have a better, more reliable shipping experience than Wish. And they actually more effectively take advantage of this postal loophole than Wish ever did.
Scot: [35:18] Yeah. And Wish took the proceeds of their IPO and built out some fulfillment centers. And they almost did their own version of that Amazon dragon boat or whatever that was called. Has T-Mood signaled they're going to do something like that where they have, you know, even more?
Jason: [35:32] Yeah, they already have in some. So they're in 49 countries now. So they do have D.C. fulfillment centers in some of those countries. They've actually talked about opening a fulfillment center in Mexico for delivering goods in the western U.S. And so so they are talking about that. But then this other big thing is starting this week that a U.S. Seller could list their goods that, you know, the goods are already in a warehouse in the U.S. that US seller could list their goods on Temu and then deliver those goods from a US fulfillment center. So that's a potential way to get much faster delivery times for Temu. And we've already seen some badging. Temu has items with a rapid ship badge that are guaranteed for two-day delivery. So it does seem like Temu recognizes that over time, their fulfillment model is going to have to be more nuanced than just the the individual parcels uh coming one at a time but but you know that still seems like the the sort of biggest foundation of how they're delivering all these goods got.
Michael: [36:36] It um the minimus though i can't imagine that much they would change would really have an impact we're seeing average ticket prices at 38 last month for for timmy like are they thinking thinking of reducing it by that much or.
Jason: [36:52] So, I mean, a just talking about way over our skis, like my, my political acumen is very poor, but yeah, I don't think Congress is gonna do anything. I think like at most they'll have a, a hearing and try to look like tough guys talking about how unfair it is and how they're gonna try to protect the American businessman and the American consumer. And then when push comes to shove, they won't, they won't do anything, which is my, my cynical nature. But you're right. Right. Nobody's talking about dropping the de minimis low enough to to, you know, really trigger the bulk of these these Temu shipments. So it's it's more likely if they made a change, it would be a gesture, not like, you know, some some game changing thing. Now, you know, there's another big Chinese company out there, ByteDance, which is TikTok. And like there there is a bill going through Congress right now to ban TikTok. And so, you know, if something like that were to happen with, with a PDD or Temu, you know, that, that would of course, you know, be a, a big threat of a disruption.
Scot: [37:54] Yep. And then on that example you gave, Jason, of a U.S. seller in a fulfillment center, is that Temu's fulfillment center or the seller's fulfillment center?
Jason: [38:04] The seller's fulfillment center. So potentially what would be one of the ironies of this is, of course, as Amazon has expanded their fulfillment services, you could be an Amazon seller, be using FBA, and sell something on Temu and have Amazon fulfill it for you.
Scot: [38:20] Yeah, Wish did something like this. What we found was the U.S. Seller struggled to get things in the price point that consumer wanted, right? It's like it's such this low quality stuff that almost has to be offshore for even to the manufacturer.
Jason: [38:36] Yeah, I think you are 100 percent right there. I don't think they're going to like we don't know what the uptake is going to be on these U.S. Sellers. It's an interesting talking point, but it doesn't seem like there's going to be a bunch of U.S. Sellers that are going to likely participate in this like low price dupes demand that they have today. Now, what would be interesting, Pinduoduo, I mentioned, which is a huge, huge entity in China. Pinduoduo started with this same stuff. They started with really inexpensive marketplace goods. And as Pinduoduo got bigger and more established and won the hearts and minds of Chinese consumers, they moved up market. They started selling brand name stuff. They started selling higher quality stuff. And today they're a hybrid seller. PennDuoDuo in China sells their own goods in addition to marketplace items, which I've never seen before. Usually it always goes the other way. And so there's at least a premise that like maybe the U.S. sellers don't like add to the current assortment, but maybe the U.S. Sellers help Temu round out their assortment with some higher price point, you know, more recognizable goods for the U.S. consumer that helps them win more wallet share.
Scot: [39:49] Interesting. Cool. We're running up against time. Do you guys have any other topics you want to hit before we call it a show?
Michael: [39:58] No, I think it's fair. You know, I already mentioned one of your predictions. I should talk about the other one. Just to pick on Jason for a second. I don't think we'll make it to the 75% of target USC comm this year for Temu, Jason. Sorry. It's like a stretch.
Scot: [40:17] Man. How do we get Michael on the show more? Like, I'm really enjoying this. This was a really good guess.
Jason: [40:24] I feel like you're calling the winner of the Super Bowl in the first quarter, man. Come on.
Michael: [40:27] Okay, well, I'll just put it this way. At 18% of the US households, three months into the year, it seems unlikely at their current growth that they get there. My view basically though, writing this, is that they've done a great job in the first year of attracting folks with a lot of disposable income to buy things that they likely wouldn't have bought anywhere else, like party supplies, household goods. It's maybe a different model than they they have in China. The challenge for them now, you guys both definitely identified this, that it's basically to convince people to switch everyday spending from Amazon and Walmart on those bigger items. And they don't have the assortment right now for that. And that's what you're mentioning. They need to either move up market or figure out what that assortment looks like. But that's going to be a bigger hurdle. They're reaching critical mass. They just have some decisions to make internally at this point.
Jason: [41:17] Yeah. Well, in general, I feel like that is going to be a great place to leave it for this show because we have run out of our allotted time. But Michael, we really appreciated your insight. We'll certainly have you back. I know your view of the U.S. economy is useful for a whole bunch of topics that come up frequently on the show. But as always, if listeners enjoyed this episode, I hope you will jump on iTunes and leave us that five-star review.
Scot: [41:46] Thanks, Michael. And this has been really good for Jason's ego. So I feel like you've knocked him down a couple of pegs. I appreciate that. And then if folks want to read more about your writing or connect with you, is LinkedIn the best place or are you more active on TikTok? Where can people find you? Yeah.
Michael: [42:04] Michael Maloof on LinkedIn. I'm always posting a lot of Ernest data on there. And then also on our company blog, ErnestAnalytics.com. Go to the Insights blog and subscribe.
Jason: [42:17] Yep. And I will put links to both the team new articles you guys published and your LinkedIn in the show notes.
Michael: [42:23] Thank you.
Jason: [42:24] Until next time, happy commercing!
EP194 - Amazon Q3 2019 Earnings and News
25 Oct 2019
00:45:12
EP194 - Amazon Q3 2019Earnings and News
Amazon Q3 Earnings
Revenue accelerated in the US and intl due to 1-day prime juicing demand
US - 24% (Q1 - 17%, Q2 - 20%, Q3 - 24%)
Intl 21% (Q1 - 16%, Q2 - 17%, Q3 - 21%)
Unit growth (items sold) accelerated to 22% - 4% acceleration (18%) - fastest in 2yrs.
This came at a cost - profits were down 26% y/y and TODO wall st estimates because shipping costs grew 46%
Specifically GAAP operating income of $3.16b came in 2% below street consensus of $3.22b EPS was $4.31 vs street $4.56.
This caused the stock to soften by 7-9% in after-hours trading and articles are already out that bezos no longer richest man.
Amazon's Q4 midpoint revenue was $4b below Wall St. estimates and they projected lower margins than wall st expected.
Specifically, guidance is $80b-<->$86.5b with midpoint of $83.25b - implies 15% growth, 5% below Wall St.
Amazon's Ads biz which grew 45% y/y and represented $3.6B in the Quarter. Brian T. Olsavsky - CFO: "So other revenue, which is principally advertising grew 45% this quarter, up from 37% last quarter. And the biggest thing in there is advertising and advertising grew at a rate higher than that 45%."
Amazon News
Amazon Ad Conference - 400 people "AdCon 2019" 10/2 & 3
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.
EP193 - Hershey's CDO Doug Straton
23 Oct 2019
00:49:54
EP193 - Hershey's CDO Doug Straton
Doug Straton, Chief Digital Officer at The Hershey Company. In this broad-ranging interview, we discuss Hershey's digital footprint, the challenges of temperature-sensitive products, incumbents versus challenger brands, Amazon, Hershey's data strategy, and the future of digital grocery.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 193 of the Jason & Scot show was recorded on Tuesday September 17th, 2019, live from the Grocery Shop trade show in Las Vegas, NV.
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.
EP192 - Macy's VP of Innovation Parinda Muley
17 Oct 2019
00:35:04
EP192 - Macy's VP of Innovation Parinda Muley
Parinda Muley (@parinda), the VP of Innovation and Business Development at Macy's. In this broad-ranging interview, we discuss a number of Macy's innovation initiatives including ThredUp, Macy's Market @ Macy's, B8ta, Story, and Style Crew. We also talk about the strategies for fostering innovation, and how retail innovation is likely to evolve in the future.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 192 of the Jason & Scot show was recorded on Wednesday, August 21st, 2019. live from the eTail East trade show in Boston, MA.
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.