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Now displaying: June, 2017
Jun 29, 2017

EP091 - Boxed Wholesale Head of Reengagement Nitasha Mehta

An interview with Nitasha Mehta, Head of Reengagement and Boxed Wholesale. Boxed is bringing the wholesale club experience to e-commerce, is based out of Edison, NJ and has raised $132m in capital.

In this episode we discuss Amazon's Whole Foods acquisition, disruption of CPG, private label, mobile, customer acquisition tactics, and customer retention tactics. 


Episode 91 of the Jason & Scot show was recorded on Wednesday June 29, 2017.



New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 91 being recorded on Wednesday June 28th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Coho Scot Wingo.

Scot And Nitasha: 
[0:40] See Jason and welcome back Jason Scott show listeners in this week show we have a very timely guest,
nitasha Mehta is head of reengagement at boxed she previously held positions at Samsung in Amazon box is bringing the Wholesale Club experienced e-commerce based out of Edison New Jersey and is raised over $139 in Venture Capital welcome nitasha.
Thank you.

[1:06] Soonest Natasha we always like to kick out these interviews by having our guest share a little bit about their background and and how they came into their current roles can you talk to us a little bit about how you got here.

Scot And Nitasha: 
[1:20] Sure,
so I leave here and marketing at Fox I've been off for 2 years now which is been an amazing ride it's been really great to see Nvidia,
be part of that tremendous growth that we've seen over the past two years.

[1:45] Where in New Jersey part of,
companies on Amazon on in Seattle on the content marketing team for Mobile Electronics,
both been in the e-commerce and retail space for quite some time it seemed like a natural extension to.
I joined by a couple years ago and really excited to be part of the team.

[2:14] Pretty cool and you have sort of the unique title how did you arrive at that title.

Scot And Nitasha: 
[2:21] Sure thought of Engagement really has a few different facets,
my main focus is really customer retention and so hyper focus on customer really trying to understand how to find the light messages and promotion,
for a customer at the right time until about one hundred percent of my focus,
an email and push notifications are some of the channels that I meant along with programmatic direct mail and polka Matic display.
I'm so if a pre-owned Compass Bohemian title for the customer experience.

[3:04] Very cool and I always is it I was like it when you invent your own titles so then you can be the the the absolute industry Guru of that title.

Scot And Nitasha: 
[3:16] Absolutely tell us a little bit more about what you did Amazon,
sure so I managed a couple of our Mobile Electronics,
Sanders and campaigns and so worked really closely with apple and Nike on MP3 players and GPS watches as well as Garmin and TomTom not going,
population in 2010 Pacific or GPS devices,
and though many of our on-site popcorn campaigns on the pop form as well as email probably manage over 100,
weekly campaigns across multiple different brands and inventors Regal how.
What do you think about Nike selling on Amazon since you can work for them on the device side maybe you have a point of view on on shoes.
Yes but we home yet actually I'm actually not sure if if not user icon shoes yet but we were the first category with an Amazon to bring them on Direct,
we had a relationship with with,
GPS devices and so when they launched their campaign with TomTom we were able to bring them on which was really exciting at that point but to bring on the he has a venue one of the first category to do so.

[4:46] And then how about a Samsung what did you do over there.
I was on the Punic marketing team for tablet and so it's kind of on the opposite end of the spectrum working with Amazon as one of our customers and so Amazon was one of our largest suppliers,
of iron tablets on other work today cuz they would Best Buy and Walmart on the channel marketing side.
Managed promotions for tablets and this was also in 2012 when tablets,
they still are but when tablets are really On The Rise and was a really exciting place to be at that time.
Then see if it boxed for two years imagine you seen some pretty crazy growth were you like me were you in the first handful of employees.
Boxed is only a couple years old right.
That were about three years old I'm almost four actually and I started when we were almost.
I would say and since then we've.
More than quadrupled so tremendous girls were already running out of space at our third office and so it's been a really exciting ride to you there from you know the very early days.
Free Colts and then does your role change or you've held the same role and just kind of taking over more and more pieces.
Yeah I started in this little a lot of what I've done in the past really like me to.

[6:23] Focus on being gagement in particular and so if I go so slow I've been taking on more over the past couple years and I also have a,
rebagg ball and thunder marketing for work very closely with many of our Brands and suppliers that box as well.
So so imagine boxed has like a typical retail that category teams and all that kind of stuff and even relations you guys have a fun center or is that,
you don't do any of your phone that it's kind of 3 p.m. or something.
No we do have our own system in it and you have 4 at Sears across the country and so we recently just launched our fourth in Dallas,
a few months ago International in the contiguous 48 states.
Are these kind of Amazon 1.2 million square feet kind of Caesar these are iMagic pile of it smaller a little bit smaller that we're pretty close.

[7:29] Nice and for listeners that maybe aren't totally familiar with box but I what's the how do you describe the the value prop with the elevator.

Scot And Nitasha: 
[7:38] Sure,
and once on the last where the online mobile version of your wholesale Shopping Club but we don't have any membership fees and we have free shipping so anything that you normally go to the Wholesale Club on,
and spend your entire Saturday shopping we will deliver on average in two days you and all your books eyes.
As favorite.

[8:07] Don't you imagine the answers both but do you feel like are you primarily trying to take visits away from,
Costco and Sam's Club so you're getting people to recreate that brick-and-mortar experience online or are you you trying to take visits away from Amazon or maybe Prime Pantry.

Scot And Nitasha: 
[8:26] I think it's Holloway coexist with all four,
Costco fans and DJ's they don't have a strong online presence if they're putting a lot of focus on and so we also are targeting Millennials that may not necessarily,
not on the ferry started shopping at his Wholesale Club yet and so.
City dwellers and Millennial moms for example are really a huge Target of ours and and.
A new that we can coexist with all four of these other retailers.

[9:06] Got you in what are the things that somewhat unique about the club stores that some listeners may be very familiar with and others might not is they tend to have different product configurations then art.
Typically sold.

[9:21] At what grocery stores or or even that are sold in Amazon Pantry so you know you might have A4 pack or an 8-pack,
on a grocery store shelf and you might have 104 count in the club club store so we tend to call those Club packs is boxed primarily offering Club packs is that,
are you getting the same configurations or something in between what's the.

Scot And Nitasha: 
[9:44] Yeah so we primarily focus on Club packs or the Bahamas you and so we work very closely with our suppliers on,
customized packaging Pacific to eat, but still you know what's in the Fun Pack.

[10:01] Got you and is it has it been difficult like I I know traditionally in the old days Costco has a lot of Leverage I mean you know with a very small store account there the second largest retailer in the US.

[10:14] I feel like they used to have these.
These kind of draconian vendor agreements where they were the only ones that were allowed to carry a particular configuration so they had exclusivity on this card packs art are you finding it that's less true today or are you you getting.

[10:29] That's like like a slightly different version of Quebec or how is that working are you.

Scot And Nitasha: 
[10:33] Yes yes,
spell largely true what we do is negotiate a slightly different variation or size count for the econ version and so we wouldn't necessarily get a soda.
cut exact size but we would have this form or variation different packaging specific for us.

[10:57] Got it in in in general is are you finding like is a big part of your value proposition.
The value of the products that because they're buying,
Club PacSun you're encouraging them to get a bigger cart that you're able to offer really aggressive pricing or is it the convenience and not having a slap all that big stuff from the store and to the car and all those sorts of things like what what what are the primary things that you think are really driving consumers to use you.

Scot And Nitasha: 
[11:26] I said was definitely convenient but I would say that's probably one of our,
biggest differentiator is and trampolines that are not having for Lego these bolt size 3 six packs of paper towels home especially for myself living in your,
I need to go around the corner to CVS every other day for items but I can just buy one time and had to deliver and open Venus was definitely one of our biggest value Problem by overall,
we don't strive to be the cheapest prices online but the value of having the Club Vive,
RX delivered to your door and not having to pay the annual membership fee is huge Michael.
Imagine you being an ex Amazon person and you guys are in the kind of cpg category with a lot of your offerings what did you think about the whole Whole Foods Amazon acquisition any thoughts on.
Hey I thought it was brilliant and it was 1030 now.
Solution they haven't really nailed down the flash category I'm gone fast food.
Growing but doesn't have the brand yet and so I think this really helps them and help them gain credibility within the fresh-faced and I'm usually beneficial cuz.

[13:00] Because Whole Foods generally have a ton of presence of any and digital and for listening they're really going to help each other and.
Smart across-the-board.

[13:14] And then um the Amazon does have an offering it's it's left I found a lot of people don't know about it and it's kind of under serve but it's the Prime Pantry,
and it seems like that kind of is there trying to solve,
yeah kind of some more problem you guys are with a very different kind of a mechanism I've tried it before and it's like this weird gamification of fun the box and it's like hard to connect.
So it's a lot of work it felt like to kind of like Phil the boxing and going to optimize it.
You feel like you guys have a bit of a white space from Amazon that they haven't really solved the what you're doing or is there some overlap.
Yeah it's a tough I think so I think Prime Pantry and doesn't it's like you mentioned has a brand awareness,
have a very unique brand effect and the fact that we only focus on full and so that's her name differentiator from you,
time pantries yet Enough full disclosure I'm a customer we will use it at my office so we have a startup and.
Yeah it's the food is great for for that.
My family is not quite big enough to eat it that much but booked through the guys have that it works great in an office of 20 people you know we get our and then ordering is is really nice to see you guys have done a good job of.
Be able to reorder things.

[14:38] And for lizards that don't know Scot goes through a lot of snacks so that that's that's a meaningful.

Scot And Nitasha: 
[14:43] They were perfect for you,
and B videos is the flying a huge focus of ours as well and so he's a pretty significant portion of our business that's dedicated to start up like yours.

[15:01] Nice I want to dive just a little bit more into how how you're interacting with Brands and how they view you the one thing on that last question I actually think you're.

[15:13] Prime Pantry is almost the opposite of you write like the pantry is really.

[15:19] A way for Amazon to sell the small packs and entice the customer to bundle enough small packs together that it's cost effective to ship them.
And you're you're selling the big packs which are the things that Amazon normally is willing to sell as eaches even even on there.

[15:36] They're the normal website if you will but.
Honesty Bee Gees I think one of the interesting things that happen is when when Amazon announced the Whole Foods deal all the immediate talk is how that affects retailers right and you know who which retailers are most likely to be disrupted by by this new Force but I feel like there's been this,
the secondary realization,
did it's really a big wake-up call for the cpgs that may not have had very much focus on digital right so your.
Your Procter & Gamble are Unilever or you know Kindle car for those folks,
you know less than 1% of grocery is digital you know you're overwhelming largest customers are predominantly brick-and-mortar and so you know while you're starting to deal with digital it's for a tiny part of your business and now suddenly.
You have the threat that that I can a very significant player could be disrupting your category with digital and so I wonder,
like do you see that that will you know potentially make some of your your brand Partners more digitally Savvy and maybe more open to,
trying things digitally with with folks like yourselves like I could almost imagine that that's a favorable trend for you.

Scot And Nitasha: 
[16:54] Yeah absolutely and I think we've started to see that Trend over the past few years to the fact that many Brands now have a shopper marketing team but are largely focused on digital,
I live in joy tea of my contacts that I have you,
contact conversations with our phone that Shopper marketing team and their.
Much savvy are there in they were you know.
Four or five years ago and I'm so I already started to see that Trend shifts and I completely agree I think especially with this whole foods deal it will continue to grow in that direction and more.

[17:38] The absolutely,
you don't want of the interesting things insert a traditional Shopper marketing there there's a lot of tactics in addition to getting the product on the shelf that are commonly used right like so there's lots of merchandising in Coop and Brands paying for.
And positioning in sampling in and we see some of that,
on on the Amazons in Walmart's of the world is that something that boxed is doing today in terms of like offering digital promotional opportunities for for brands or is that something you're you'll consider as you you advance.

Scot And Nitasha: 
[18:13] No it's actually something that we are already offering which we probably started about a year-and-a-half ago and so we probably,
oh and enjoy these are real estate on both of our site as well as our ass.
And we called many of the placement of virtual and caps and so no at a play on the freaking water and cat food but,
definitely in English.
And excitement and engagement over these placement over the past year as well which which continues with that trend of Brands moving becoming more more digitally body.
Recool the one of the the trends at Costco I don't know about the other clubs but they have the Kirkland brand which is which is their private label and.
And I don't know where it started but it's become quite popular and they sell Auntie mall and that's primarily what they sell is that private label.
I think Amazon is actually sells Kirkland it's odd it's kind of taking a life of its own and it's one of the they sell more Kirkland online than Costco does.
Los customer you guys I really like you guys have a similar offering called Prince and spring maybe tell us a little bit about the rationale of that and how is that going.

[19:33] So if the really started off with just paper towels and toilet paper so two in the fact that he's package good that everyone needs an Zen,
there's huge opportunity there and really being into stop there and our category that's really dominated by another down even the Sherman and so we started that.
A couple years ago and has expanded the printing spring assortment free significance and it's a huge Focus for the company the team has been.
Growing pretty rapidly and now we offer everything from toilet paper to flushable wipes to hangers and most recently it was only just launched,
coffee and so both ground and whole bean coffee all Source locally.
And it's if it's not stopping there we're watching chemo and moving into the food and beverage States as well and so is definitely a huge Focus for us.
And I know she have one of things we love in our office is K-Cup coffee and but it's quite expensive in and noticed your private label is almost like half price of,
what other offerings are which is which is nice.
And it and it tastes good,
okay on the so Jason and mentioned you know the brands and in the things do they eat.

[21:09] How do you navigate having that private label when you're also trying to get the sharman's in the bounties on the side I met you the good news is you're not the first kind of.
Company to do this so I guess it's pretty well-read and ground for him.
Yeah I really just increases over all share with in that category we haven't seen any kind of libation going either way and so again you know I think there is.
There are products that are recognizable that you would always want,
I'm to partner with and and a sore on our site but if we can offer a different selection a different place with wood,
in terms most likely Target a different type of customer your that's really are our strategy that.

[21:58] Got it so I love the fact that you're you're competing with traditional clubs.
In the digital space because I fear going to talk about Costco in particular like they're very admirably retail or they do a lot right so I'm really not trying to pick on them but I freakin called them the biggest digital Luddite in the retail industry.
I think it's very overt like I think they've just made a strategic decision.
We don't want to be digital we don't want to give the customer any reason not to visit our stores and why lie.

[22:33] Can kind of understand that sentiment like ice you know I and I suspect most of our listeners on the digital podcast probably feel like that somewhat short-sighted but In fairness to them it hasn't really shown up on their balance statement yet so.
But what's interesting there model is sell stuff at the lowest margin possible they're super aggressive on price and their primary profit driver is those Club memberships.
You guys obviously aren't doing the membership and that's one of your value props is get those Club packs and get that convenience without the membership.
Bed so I presume you have to make more money selling the goods and then you have this this really inconvenient cost that we all struggle within e-commerce which is shipping.

[23:23] Like do you guys have any strategies for keeping the the shipping costs under control I mean I know it feels like that's a ever-increasing.
Cause we talk a lot on the podcast about the fact that e-commerce is growing at like 20 to 30% and the shipping guys capacities growing it like 8% and so there a.
They're constrained commodity and what they're doing is there charging more for their service as a result.

Scot And Nitasha: 
[23:48] What does,
we offer free shipping on all orders over 49 so that definitely helps with the shipping fees and then on top of that the majority of our orders,
the average order size is 9 - 10 items so we are stuck up service our customers are.

[24:19] Play higher than an Amazon sample or the typical or sides or just one or two products are order which does largely affect shipping but because that were able to eat shipping costs low.

[24:33] Gotcha and I guess one of the things that somewhat surprised me.

[24:40] Based on your category in the types of items that customers get from you I almost would have expected to see some sort of subscription service and I know Scott mentioned you have really convenient reorder service but if you guys ever you know.

[24:53] Like is that an over decision you made not to do some scription and says that something that could be in the roadmap what's the scoop on subscriptions.

Scot And Nitasha: 
[25:01] Potentially be on the road that is something that we have considered especially for certain items but.
Customers into typically reorder like baby next absolute spend baby products for subscription type of service and so that only something like thinking about.

[25:21] I may be remembering this wrong but when boxed first launched my recollection is was kind of a mobile app only kind of a thing and then later the desktop was added and again maybe I misremember yet,
but kind of curious about that mix of of mobile and desktop,
again I kind of like the desktop version cuz usually I'm doing it when I'm at work and I can kind of like,
see the product better in that kind of thing but any interesting insights you can share what you guys have learned there.
Definitely the launch of the mobile app for mobile first and also.
Attack company first and so the majority of our employees are actually on the tax team.
The innovator and improving Dorothy experiences while I was excited. And so we launched shortly thereafter.
The first years mobile is the majority of purchase it.
And the letters how many of our customers prefer to shop through the source of the app the app is really is a convenient option I personally love using the app for me order items,
simple to put process reorder and so I think,
you're having both options really great for a different use cases.

[26:57] And then you know I mentioned earlier and you said this is kind of growing part but the kind of a b2c and B2B element.
Did you guys start leaning into the B2B when you kind of saw how people were using things or or tussle bit more about that kind of how that came to be in in anything you can share on mix or anything would be interesting.
Stressful that continue growing our business.
Meet by the natural extension of epoxy started as a beauty popcorn but because you are stuck up service and deliverable and our own office manager or just the front,
LIRR employees I really am from cartoons and truly,
is our employees love the snacks in the Beverages and we need the paper towels in the toilet paper it just seemed like a natural extension and now that team has been curling pretty,
pretty quickly as well for the past year the huge Focus for us this year and in 2018.
Yeah I imagine that it's kind of where we also use you guys for a funeral off the office supplies again the kind of packaging is good as is that kind of where,
those got out at imagine before you saw the business side there wasn't a lot of the office stuff.
Right yet you continue to add a lot more selection within the office based off as we start to it as we continue to build out that part of our business.

[28:33] Wrinkle.

[28:34] I love that strategy like the more Tech Guys you higher than more snacks yourself.

Scot And Nitasha: 
[28:39] Very true it's hard to keep snacks in stock at our office.

[28:51] Hopefully that permit person has a good promo code.

Scot And Nitasha: 
[28:54] Exactly.

[29:02] So going back to the very beginning of our conversation reengagement like one of the.

[29:09] The huge challenges for all online retailers in particular 84 PurePlay online retailers is,
customer acquisition right and I think of sort of the big big player and in the space for the last couple years has been Jet and you know they famously spent,
a fortune on each customer in terms of active acquisition cost what's your strategy around acquiring customers and driving that customer value are there any particular tactic sure,
you're relying on and any that have been predicted successful.

Scot And Nitasha: 
[29:44] Sorry we pretty much,
across the board in terms of acquisition and retention but specifically acquisition-related focus on TV we launched our first,
ad campaign,
the beginning of last year and then we launched another one towards the end of the year I'm working on the 3rd right now as well at Subway has been really.
I'm really surprised MC Market and so really you know building on the Branded dolphin and having that constant exposure in key markets and then print has been used for us in terms of acquisition so,
somewhere to check that is invested a time and direct mail and print we're also focusing quite a bit on that in terms of opposition.

[30:35] Done at night I can majun Subways particularly clever because you know one one large segment of Shoppers that have kind of excluded from the the brick-and-mortar club folks are our folks that don't use that car.

Scot And Nitasha: 
[30:49] Exactly.

[30:54] Yeah so it's interesting you just mentioned a lot of a sort of old-school old-world advertising techniques and I almost wonder in some ways.
For Pure digital play like you know your tendon running a lot of companies that are predominantly doing digital marketing if you know some of the.
The print stuff could potentially be less crowded these days and so the I don't know the signal-to-noise ratio for that kind of campaign could almost be better than it used to be.

Scot And Nitasha: 
[31:20] I agree and that's what we're seeing as well we still have a huge focus on digital Facebook it's probably one of our largest and channels in terms of opposition but.
Agreed and turn the prince and then even some of some other channels that are starting to come back that aren't necessarily a saturated such as SMS.
Is also accused opportunity more suffering gagement but.
I do see a trend of some of these older.
More mature Channel coming back and playing in a very saturated space which is digital right now.

[32:01] Yeah have you experimented with any direct mail I that that detention I guess is another one is those mailboxes are a little less full than they used to be.

Scot And Nitasha: 
[32:10] Yeah we have actually up until I say about a year-and-a-half ago really focus on really use direct mail for acquisition purposely targeting a specific,
Tor zip code and planning our campaigns around that and then we started,
staying programmatic direct now on and this was a brand-new way to rain gauge with friends were really excited to touch with and so we started talking with with a company called pebble.

[32:45] Until what what is pebblepost doing for you.

Scot And Nitasha: 
[32:49] So we didn't micholi at 35 thing with them at to be engaged with,
you think I unsubscribe from our email and go up until that and if the only way.
Really engaged or engage with current customers with email or push campaigns or display programmatic campaign and so this was really exciting opportunity to,
customer that had unsubscribe from our emails I wear either unengaged from them or didn't like the content,
and Shannon promos and Deals if they were still active on our site,
and so how probable works is if a user within our specific segment.
I'm sorry sight but downstairs and doesn't convert within that session I will postal actually trigger ascend,
I'm at our postcard or catalog to that user within 2 to 3 days and it's extremely relevant and targeted.
He started targeting users 8th on what products are what category is actually viewed when they did visit the site and it's completely different,
customer they essentially then either too we send email to which is also a very saturated space.

[34:08] For sure and I guess what I love about that is it it it's almost like analog retargeting like that you're at you know what,
it's their heads Fades retargeting but but via that that analog channel that the you know is potentially a little less saturated that's brilliant,
like you mentioned course email is is very saturated but generally when I talked to folks that still is one of the better Roi tactics for them I'm assuming email is still in your mix as well.

Scot And Nitasha: 
[34:36] Yeah yeah you know this is one of our additional in terms of retention and so I'm still still.
Going to be a huge Focus for us I don't see that changing anytime soon but then again you know a good email campaign may get 20 to 30% open rates right over so even 70% users on the table that were unable to engage with info,
when you think about the number of impression that you get from a physical piece of mail.
Not only two eyeballs but depending on how larger household is because I get a multiple Impressions on a daily basis if you're like me I leave mail sitting on the counter for 2 weeks,
are we by the time.
Convergex that amount of exposure is incredible and.
Target's a completely different user than those who are very email so good.
Yeah I think blue apron's a Believer I'd get something from those guys like every every five minutes from from email.

[35:54] Yeah I think they're actually just looking to step up the the advertising spend is there they're trying to preserve that IPO.

Scot And Nitasha: 
[36:02] Call.

[36:06] One of the things when we talked to folks about the efficacy of their their digital campaigns and particularly email like the big Trend you go to any of the shows these days and you know you throw a rock in your hit 30 sort of personalization vendors,
and it seems like you know the the big the big pitch is always personalization on those marketing channels is that.
Something you're experimenting with is that working or overhyped or what's your what's your POV on that.

Scot And Nitasha: 
[36:33] No I think that's a huge Focus for us and something that we have in focus on for quite some time is really.
Affiliate emphasizing,
a one-to-one customize messages creating triggered messages they found customers havior or purchase Behavior I think that is,
Chris Lyons messages and 101 customize messages that we can send that,
that is our Focus night and definitely something that have a person and direct now is also helping out with.
Just imagine visiting our site and going to our baby category and for some reason or another you don't have,
and upconverting with another question but then three days later you received a postcard in the mail and the content is all babies focus with navy at 20% off discount any baby item on site.
And I think that opportunity there is tremendous in terms of customization.

[37:41] Quinn and you guys are actually doing that or that something you're doing up for it we are doing currently.
So you have that level of of targeting and whatnot in the mail program.
One thing I know you guys do as you have boxed bold which I think is your cash back program and then you have a loyalty program total bit about those and what they're geared towards.

[38:07] Bacco program is our partnership with Emma and so if you aren't a customer and you make a purchase on Fox with your AMEX card,
you automatically given golden box full which is free shipping.
And 3% cash back on all orders so for any regular customer or Montana?
I'm a class program is 1% cash back on every single order and so the more you order from box and more.
Cash back you get and then a mess up my little get 3% cash back.
In the free shipping it just lemonade to the the $50 threshold or how does.
And then said so as a shopper it's kind of interesting it kinda reminds me to Chatta although it doesn't have like the sum of the jet elements because you know when you're first starting your kind of like,
I can't tell if I'm going to save much and it is you kind of go though you just saving it feels like you're saving more and more than like and I was just paid on my NX I didn't really realize I was into some of their special thing,
yeah time to get through you realize you actually saved quite a bit is that that tensioner.
Explain that rational so it's a little bit different than that where the more you ask the car somewhere you're saving,
our cash back program is based on the total part value so if you're sending $100 in the order then you're going to get $1.

[39:46] So you can see it anytime in your account and so the more times you purchase was box you build on your cash back value.

[39:58] Interesting like one of the challenges with those kinds of value props.
And when it's there's almost a little bit of gamification and you're certainly like driving customer lifetime value with the dollars back but I guess the downside is.
You know a customer super price sensitive about one item and they log on your website and they look at the price of diapers and they go somewhere else and look at the price in the.
The total savings may not be reflected in that item priced it does that work against you or.

Scot And Nitasha: 
[40:31] I'm sorry I think they're a lot better value popsci we offer letter.
Different art differentiators but you have so we may not if you,
don't have it the cheapest price on say it's more about the experience I would say we should we offer to free samples on every order so it's somewhere to go wholesale,
shop in Carthage Area 3.
A lot of people go just for the samples so we've kind of levitated that online so you can choose to free samples on every order you'll get the 1% cash back on every order on,
free shipping or no membership see if I think all and all the customer experience really speak for itself,
and then not to mention I don't know if you receive battery if you notice it in your box. But we also have handwritten notes,
to every customer that I was just too so there's a nation with personalized S5 to our entire order earrings as well.
Yeah I seen that kind of borrows from the chewy folks today I don't know who started it first but they were always well known for them yeah.

[41:41] Scot Scot has a giant collection of postcards that same and you guys order a lot of Oreos.

Scot And Nitasha: 
[41:46] Call podcast research those for them the Mondelez episode.

[41:52] Exactly.

Scot And Nitasha: 
[41:53] Oh yes we've done a Facebook live with it with model eating Oreos so and said I love you.

[42:02] Very cool I'm sad to see their stock went down based on the Amazon announcement talking about the impact on cpgs.

[42:12] Yeah but I'm glad you mentioned the sampling cuz that feels like untapped area for a lot of e-commerce players I'm imagining.
The sampling is one of those areas that you're able to use as a shopper marketing program for your Brands is that true.

Scot And Nitasha: 
[42:27] Yeah,
a huge part of our current marketing strategy with our suppliers and and they love it because it's a great way for us to testing products and so for considering a sorting a new item,
stumbling program is a great way to see how our customers will respond to it and then we could also be engaged and put those customers after the fact and send them offers on the full size items,
we do I said or some I am based on what they've actually chosen to add the car,
and a kind of potential there and you're offering,
products that are new to the platform or just even leave I wasn't as limited-time offers or so you're a big focus and comes over sampling strategy.

[43:17] Yeah and so this could potentially be controversial but do you work the your private labels into the sampling program as well.

Scot And Nitasha: 
[43:26] Especially when we launch a new product and that's one of the first places that I will want to watch it as is the other sampling program.

[43:36] Yeah I love that tactic again it just,
there you know so many boxes are going out right now not taking that opportunity to introduce that customer to other high-margin products that they could potentially get addicted to seems like a real mess for a lot of players so I love that congratulations.

Scot And Nitasha: 
[43:53] Yeah.
Thank you I absolutely agree especially for a brand that many new customers haven't heard of other don't know much about a great way to introduce it to them.

[44:07] Cool one thing I thought was kind of a little bit of a non sequitur I was navigating through the site looking at different categories and of the,
one that really stuck out as being an unusual was hotel and travel with,
what's that all about.
Last week and end of the following,
today this is something that our partnership Cena's been working really hard on it and we're really excited about it at all so seem like a,
a natural extension for box,
I still have our vacation packages and now our customers and can go on and and really find some of the best hotel deals I played around with that and I haven't found better deals for for many of the hotel but that I was searching and so.
A great. Please our customers I think of a natural extension of the business.
So your Skype now getting a new variety of non-physical kind of stuff.

[45:19] Yeah if I see if you're on Boston you're looking as backup for your home or your business and why not be able to book a vacation and at the same time and so.
Skyler really excited about this and they don't I don't think this I think this is the beginning of a much larger partnership.

[45:42] Very interesting you don't I'm curious so we talked a lot about your business today we talked you know you're in a category that's,
I would characterize a sort of digitally immature and so you know you're an advanced digital player in a in a space that that seems like it's just on the verge of getting disrupted if you jump in your time machine and look forward to your two,
you know how do you see the the industry in your category changing do you think it's going to look a lot like it looks now do you think it's going to change dramatically.

Scot And Nitasha: 
[46:17] What I think with the time by we mentioned before especially with the Whole Foods acquisition I think,
more and more brands are going to invest more dollars into digital and we're already starting to see that now are at the econ,
your arms of specific brands are growing larger and larger and they have a lot more,
and as well and so I see that really being a huge opportunity over the next year or so so really,
incident and create a new and exciting opportunities with some of these friends,
one thing that I think that I went really love about working with fox,
is the fact that we're so small and then bowl and we're willing to Casting things and new features and so we've actually created features for a brand based on some of their preferences,
and though I see that continuing to be a trend machine shine over the next year or so.

[47:21] Very cool III suspect that as as you know the brand start getting really serious about digital alike as we see some consolidation of you know there's a very long time grocery at the moment and brick-and-mortar grocery.

[47:37] You know it feels like there's almost this bifurcation that you're going to potentially benefit from that like the traditional grocery store is getting really disrupted because it's it's starting to be really driven by fresh and organic.
And you know so so folks are looking for.
One experience to get that really fresh stuff and then once you have that really fresh stuff you say are you know what's the most convenient way to get all the rest of my.
My goods in so it almost feels like.

[48:04] You know where I used to do everything as a One-Stop shopping at Kroger now I'm starting to see people you know that are.
Going to all the or Trader Joe's or Whole Foods for their they're fresh and then they're relying more on club or.
You know are are big online friends for for all of those replenishment items.

Scot And Nitasha: 
[48:25] Construe.

[48:29] Well nitasha congrats on your success so far.
I think that's going to be a good place to wrap up because it is happen again we've perfectly wasted all of our a lot of time.
So when a remind the listeners that they're always welcome to continue the dialogue on our Facebook page and of course have you liked this episode we'd sure appreciate a review on iTunes if you didn't like this episode just send an email to Scott.

[48:55] Nitasha thanks very much for being on the show and joining us.

Scot And Nitasha: 
[49:00] Thank you so much for having me as a pleasure to hop on the podcast you guys are building in wish you guys nothing but the best.
I thought I think you sound like.

[49:16] Until next time happy commercing.

Jun 22, 2017

EP090 - Ken Worzel and Danny Ryder

An interview with Ken Worzel, President of and Danny Ryder, EVP, Online Merchandising & Experience.  Nordstrom is the #17 retailer on the IR500 list.   They are one of the most storied retailers in North America, founded in 1901.  Today they have 354 stores in 40 states and Canada (including full-line stores, Nordstrom Rack, Jeffrey Boutiques, Truck Club, and HauteLook).

In this episode we discuss Mobile, Fashion Retail, Amazon, and Retail Disruption.


Episode 90 of the Jason & Scot show was recorded on Tuesday May 23, 2017.


New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded live from Sunny Seattle Washington on Tuesday May 23rd.

[0:41] Hey Jason and welcome Jason and Scott show listeners.

[0:44] Today we have a pretty exciting treat for everybody we have the number 17 retailer on the IR 500 list Nordstrom.

[0:52] Which was one of the most storied retailers in North America founded in 1901 and today they have over 350 stores in 40 States and Canada including full-line stores Nordstrom Rack.

[1:05] Jeffrey boutiques Trunk Club.

[1:07] Do I need to sign the show today we have kin worzel who is the president of and Danny Rider who is the EVP online merchandising and extreme.

[1:16] Welcome to the Jason Scott show Kenna Danny.

[1:20] Very much right now.

[1:23] Thank you so much and we can start right off the bat by educating me because I'm always self-conscious when I say how look whether I'm saying it right so can we get unofficial pronunciation.
HauteLook so I am correct that I'm not saying it right.

[1:48] My overlords in Paris are going to be like horrified that I that I butcher that one my apologies monsieur.
This is another first for the Jason and Scott show we are both live so Danny and Ken are here with me in the remote Jason Scott Trio Studio.
And Scott is at our executive studio in Raleigh North Carolina.

[2:18] Bicoastal in a mixture of live and not live it's pretty.

[2:23] Exactly I feel like the five-second delay that Scott has will be super helpful because is is some some loyal listeners will know he he can get a little profane.

[2:34] Do you have a bleeping machine.

[2:36] We've only had to use it when former razorfish are on the show actually but yeah.

[2:45] We really appreciate you guys taking time out of your busy days and it would love to start off with just hearing a summary of your background.
You're rolling compasses at Nordstrom can we start.

[2:54] Sure yeah my roll.

[2:59] I'll let you not been ignored so I can.

[3:01] Exactly cement Nordstrom 7 years now.

[3:03] Now I guess I am I joined actually after a long time probably 20 years as a strategy consultant.
So that was really where I spent most of my time pre Nordstrom.
But I guess the relevant part about that is Northwest a core client of mine for about a dozen years before I join the executive team so.

[3:26] Interesting perspective as a result of having had an internal perspective now but for a long time an external perspective having worked with a lot of other retailers in consumer companies in in the US and in Europe.
And I joined initially to support our strategy team and build out a strategy function for the company is as we were sort of transitioning out of the recession and looking for for new ways to grow the company.
And then subsequently picked up some other responsibilities including our corporate and Business Development activities.
Are data science and analytics teams and then about eight or nine months ago took on the the p&l responsibility for
Which I was.
Is important I think because all those things connected mean if you look at our agenda really for the last 3 or 4 years increasingly everything comes together around how we going to deliver what's been a storied.
Brandon and customer experience how we going to deliver that in a digitally connected world so you know our focus is clearly on continue to be customer obsessed.
Digitally enabled and I'm lucky enough to.
Get to sit in a position where a lot of those pieces come together across the company and I'm also lucky enough to have been able to have pulled Danny long on his journey cuz Danny and I work together for a.
What time in Consulting and when I ended up in in in this gig I decided I should bring the smart guy with the English accent to help me sell our ideas.

[4:53] Danny how about you.

[4:56] Yes.
That's kind of quite pointed out with the accident so I was born and raised in the UK I ask you went straight from college into Consulting a little bit of a not wanting to know.
No knowing what I wanted to be when I grow up and so I went to the Consulting really thinking about to be something to gain experience and then go off into into.
Career somewhere else but I should stay for number of years and really what's my way all the way through the different ranks within Consulting until she managed to work with a lot of really interesting gun.
Dynamic different consumer goods and Retail companies around the world so that series of projects in your.
North America in the Asia and then about five years ago I received a phone call from Ken.
What was really interesting to me is.
It's really the combination of the fundamental changes happening in the retail world right now and just the opportunity to really be at the house or something that's interesting and dynamic and changing.

[5:54] But also from the outside I always thought notion was I really good company very well-run I didn't realize I didn't realize the level of ambition.
Until she being in the retail that is very well-run but also having this constructive paranoid about the world and where things are going but also not patient keep changing is is pretty pretty interesting so.
I joined the company about four and a half years ago originally is policy of the Cobra strategy team what's in a lot of different things across the whole old different parts of the company and then moved into more of an operational Rolla by 18 months ago with an ocean.
So my title is online merchandising and experience and is really three different teams that I support the first assault online merchandising team,
so a large part of what they do is really help inform up buying team on what these election stress you should be for a website and for app.
Using a lot of the customer Behavior data to my she points out where we have opportunities for a Bratz Odette for white space opportunities.
As well as they also then take the merchandise strategies and then strategies and play that out through the content the navigation on the actual product information on the website.
The other two teams I support a focus much more on the features and functionality of the web in the app I'm so this the user experience design a research team so if they do a lot of work in terms of understanding the customer need and then I should going through too much you designing the features and functionality themselves,
the news team is in the product management team to interface directly with our engineering team when she done go build those different features and functionality.

[7:25] So it's a pretty wide-ranging said of interesting different topics,
one of the best things I love about my job is I can go in one day from having a meeting with someone like a Gucci or Balenciaga to that walk down the wall to a different meeting room have a conversation with our Tech Team about the architecture of all different.
What's the difference aleutians and it finally and the day by going to look at some new features and functionality designs and think about how we can create some Co experiences so it's I definitely love those if not almost my job.

[7:55] Cool and I'm not an expert but aren't there sold Nordstrom's at North.

[8:01] There are a team of.

[8:04] 11 of us on the executive team from have the last name on the door so late Pete and Eric are co-presidents of the company.
I have different responsibilities Pete manages our merchandising areas Eric is responsible for a full price.
Brand are Nordstrom brand across stores and and and Blake Spencer lot of his time on or off price business including Nordstrom Rack stores and Nordstrom and.
And HauteLook and then Jamie Nordstrom is president of Full Line stores so my counterpart in the full price business managing our store business.

[8:43] Course need to see there's not many retailers where you still have the family involved to that level set that must be fun.

[8:50] Yeah I think it's fun it's also it's it's inspiring and I think they really they deserve a ton of credit for maintaining I think both the ambition that the Danny highlighted in terms of the admission to be as relevant.
20 and 50 years from now is as the company's been for the last 50 hundred years so.

[9:10] Yeah and that actually brings me to one of my favorite things about.
All of our jobs is it is it Danny's you mention earlier retail is really going through a significant change or disruption right now and I mean you can look at that and say it's a negative thing and scary and all that but do I to me.
It's fun that that Playbook that Danny is Grandfather wrote that was so successful.
Isn't the Playbook that we can all follow today that like the circumstances have changed so much that we all need to.
Sort of invent what retail feels like for these digitally disrupted consumers that we're all facing today in my premises.
The fundamental thing that's disrupted them more than anything else is ubiquitous access to.
The super computer that we all carry with us now though the smartphone in so I wanted to dive into how you guys are addressing that that transition and so I guess I'll start with a softball question is.
Mobile in Portland to Nordstrom do I have that right is.

[10:14] I'm still hung up on the fact that you just promoted Danny to be a Nordstrom that his grandfather.

[10:19] No no not Danny grandfather.

[10:23] There is nothing more important I mean you know I think Danny can can win in this as well but we're sitting here today and I think we're excited to be sitting here.
In large part because we're in the middle of a huge revolution in in customers experiences and what their expectations are in a lot of that.
Is directly related to super computers that started on people's desks and are now sitting in people's pockets and it has fundamentally changed.
Virtually every part of our customer journey and what customers expect from us which again I think you're right you can need to look at that as scary and risky or you can look at it as this massive opportunity and I.

[11:02] We want to embrace the latter.

[11:06] Yeah man just by the Numbers alone it's I think if you don't say mobile is really important to you as a company or as a retail of then I think you're missing a big big big point.
Play quantify we have roughly 700 million unique daily visitors to our website or app.

[11:21] I'm roughly now 2/3 of that comes through a mobile device and that is only growing the actual usage of mobile desktop web experience is declining and saw them at your own TV engagement that was seeing with Nordstrom in additional space is coming through my body Vice.
The big thing is eating things like three causes of emails that we send to customers and now opened on the phone so it's a big deal to buy she think about and I don't need two hands right with customers when they come to a premises but also when we send Communications to them.

[11:50] And I need to make thing for me with mobile is it is the device with which we can she lingcod digital and physical space.

[11:57] And if we truly believe that when one of our adventures is company is the legacy of the great stores we have in the people in the stores and then she.
Giving people great experiences in those doors the phone is the one device that cuts across both the home experience the on-the-go experience in the store.

[12:14] Cool it looks peeled onion on that a little bit how would you guys grade the progress you've made so far on.

[12:22] I guess from my perspective of back to this constructive paranoid I mean it's it's mixed I mean I think there's plenty of things that I think we can.

[12:33] Play Comfort Inn and take pride in in terms of what the organization's delivered and what we've delivered to customers.

[12:40] At the same time we look at how fast everything is changing around us and you know I don't mean just customers expectations but competitors are making us better.

[12:50] And challenging us so I think we we recognized in a wee one of the earliest retailers to be in the digital space a lot of our categories starting.

[13:00] A catalog Heritage that we had and then Translating that into it a desktop e-commerce experience and we were also early to get into the mobile.
As it is a platform in SA.
Vehicle to connect with customers but we see a huge amount of opportunity and and need for us to continue to make progress so mean from my perspective it's a cc plus I mean we still got a long way to go.
To give ourselves the kind of great we'd like to give in to give the experience I think that our customers expect us to give them.

[13:33] Yeah I would haul hot leak in car with AC grade I think we've made some really good progress.

[13:38] Just looking at I think you have to separate out more about web from app and I think on the mobile website we've gone from having a translated version of our desktop experience to watch you having a specifically designed version of arteries.
Specific for the mobile phone itself.
Is part of that doing simple things like designing the interfaces so they all touch friendly on a small screen and as well as making sure that performance is a big deal because of a sea.
Usage on a mobile phone on mobile web is Israelites and very Broad.
And then in the app we actually have a very good Fashion retail app so gets roughly phone off store star reviews in the in the App Store,
but obviously the challenge of that is that reads Fashion retail apps in particular I'm not really taken off in terms of Engagement and that is something that we're going to have to continue to push on his how to make you get people to engage with all app more.
Because apps are expensive.

[14:30] Yeah one thing I Jason I debate a lot is the gulf between conversion rates on desktop and and the mobile web and or apps,
is that one of those you guys grade yourself and do you think that will is closing or will close or at 10 to think it probably won't close it just kind of different things and Jason thinks if you put enough.

[14:50] A payment systems on there it'll eventually.

[14:53] Yeah that's that's a really tough one when you look at the dates.
What will the use queso Festival all the conversion in the conversion rankings of all different channels is highest in the app.

[15:07] That it's not next in desktop and then it's lobotomize web and there is a very significant difference across that Spectrum.
Ken and I to be this a lot about how much do we think we cannot she closed them about Gabba I think we can close a fair amount solve it but I don't think all and I don't think the reason you got,
the reason you can't close all of it is the use case quite often is you're on the bus so you're walking around and you want to just browse and get information,
what's really interesting to me is when you look at the dates of the drop off so I see the product for you rates on the mobile web is very similar to desktop.
Where it really work start to fall off is the antibiotic and then completion rates and that's if I got you as a big drop-off and so I think that just shows that people are coming to look look at products internationally added to the cart.
And then when sums of the actual how that and flows through the rest of the funnel what you get to check out there's a pretty significant drop off and nothing a large part that is the friction in the checkout and that is it's it's hard to check out on this little screen I take it you don't have your payment.
All your payment details saved.

[16:07] Also think that you guys are debated this as well but I think single-session conversion is a bit of an apples to oranges comparison across these devices I mean you look across almost any.
Activity there's more frequent but less lengthy interactions with mobile sessions than there are with desktop sessions and that's certainly true in our categories so I think.
No increase in the we look at even this conversion and engagement kind of measurement we look at it over a. Of time relative to a customer assuming that we're going.
I have experience as we can and should build that in Mobile that's going to encourage more frequent engagement even if it's lower duration.
Can you really I think while look at conversion as a function of that which is can we drive more frequency you might have a lower single-session conversion but against that customer over a period of time.
We think we can close a lot of that Gap now again I think to Danny's point I don't think you're going to close all of the Gap because part of what makes the phone so powerful as a supercomputer sitting in your pocket.
Is it in your pocket so you can use it to look up reviews when you're in a store to validate the purchase you're going to make it a physical environment you look at it on on the bus to see where the closest store is that has that Tory Burch.
A purse that you're interested in so I think there are a set of use cases that are just enabled by the fact that it's portable and that it's with you all the time.
That are different so I also think more generally you know certainly for us and the kind of retailer in the end the brand we have.

[17:42] I think we want to be careful that weird don't get so focused on conversion.
That we're not serving the customers who are coming to us for all those occasions where they're not yet ready to buy or were there looking to be inspired or they're looking to learn about fashion.
And that's a lot of folks I mean that happens in the physical environment but it certainly happens a lot digitally as well.
And so whether that's on a phone or on a desktop I think we're always looking to get the balance of creating a richness of experience and engagement as well as being there trans actually when that's when would people looking to do.

[18:15] Dad said record show I wholeheartedly agree the.
Single session conversion is you know one of the convenient things we have to measure and so I feel like it it has gotten in it in appropriate amount of focus and I certainly agree they're a bunch of.
New use cases that are Nable by that smartphone.
That we never had on the desktop in some of those don't have by intent and that's okay you like there they're great brand Impressions and your point like.
That might be buying 10 tickets fulfilled in the store or some fashion advice to share with a friend or whatever the case is so I think we're all sort of the land on that but I do want to double click on.
Danny made earlier hey there is a big gap between.
Are mobile web in our desktop web but we also have this mobile app which actually has the best conversion in this brings up this.
This frequent dialogue that I have to have with retailers in the whole debate about the role of apps and webs in your customer ecosystem.
Like I'll just say it a front I walk into a lot of retail environments where there's a huge amount of the corporate Treasurer being invested in an app.
And oh by the way there aren't very many active users on that app how do you guys think about that.

[19:35] Yeah so so we definitely think that should be a differential stretchy between the mobile web and app I think that's that's aligning that we've had internally over the past couple of years.
I think you have to take a look at the similarities and differences I think the similarities between the two is that first of all the phone,
it's a small screen with a touch screen in pots you don't have a keyboard you don't have the ability to achieve navigate in the same where you can on a desk of experience so you have to design the user experience in a way that's easy to use an intuitive but also.
Really optimizes for that phone Factor.

[20:10] The second is you can almost guarantee that when somebody is using whether some mobile web or not it's in the context of the world around them.
Which is the desktop you about your.
You're looking at a biggest green you're more engrossed Wars on the phone you basically up Harley parallel-processing either being on the bus or quite frankly I sit home and watch TV and I see I'm on my phone all the time anyway.
Answer the phone itself is actually it's a connection device that lives in the context of other things happening around you and so therefore how you design the experience has to be compelling enough or easy enough that you're not going to make it.
Optimized for that use case.
I guess you think about the differences between the two I think you have to look at the use cases and just the just add a troll owned on how people use the two different form taxes.
I'm so I think you guys are said this in the past but mobile web is a very Broad and very shallow engagement when you want to look at the time that people are spending a mobile web it's a very small proportion of time on the phone.

[21:09] People spending more time in a very narrow and deep playing in apps and so the actual the frequency vs. engagement piece.
Between the Tucson people go to mobile web very frequently but don't spend a lot of time though people go to apps and they go very deep in those apps and spend a lot of time.

[21:25] Unpretty the most compelling piece of data for me is that roughly only fat people on average only use 5 to 7 apps on a regular basis but they go right.

[21:34] And so from that perspective unless you're one of those Fighters have an app so you may have the best shiny app that does a bunch of really cool stuff.
But if people on engaging with and then you spend a lot of money to build something that actually probably isn't doing anything.

[21:47] Look at when you look up the types of Ops people to spending time in and most of them are Awesome form of Google.

[21:55] Yeah I think I think you've guys have talked about this before but we certainly agree that.
They're very different rules for these and I think it would be a mistake for us or any retailer to over-invest.

[22:07] In the app is an example at the expense of having a really convenient engagement experience in Mobile optimized web which is where the vast majority.

[22:16] Archer.

[22:18] The same time there's a subset of customers and in our case it's it's going to be probably our top 20% of customers who have a deep relationship with us as a brand and they're willing to make the investment.

[22:29] To let us live on their phone and you know that's so that's a privilege for us that we need to intern provide them with a lot of value off of that and so I think it's.

[22:38] The learning to Danny spoke so I think it's really clear to us that we need to have an app that serves those customers in a really deep way that gives them the value that they deserve for letting us live on the.
On this precious real estate that's their home screen but we all have to be realistic that that's always going to be a pretty small portion of the total number of customers that engaged.

[22:58] Number customer.

[23:00] Check early if you look at the kind of categories when I mean people we're not a financial institution where people are engaging with us every day.
And you know we're not a financial institution this sense of you know people generally have a checking account with One Bank.
So most people have a banking app on their phone because it's makes our life better with their One banking partner we are usually part of a dozen retailers that customers are choosing between and they're not going to give us all the privilege of living on their phone so we better.
We'd better have compelling experiences both ends of that Spectrum a really great will block them eyes web experience for the vast majority of lightly engage customers and I really high value-added.
Engaging app for those customers that give us the privilege to live in their phone.

[23:46] Yeah it does the last dates race so I think showed that only 3% of time spent in apps on a mobile device is in retail apps and that's because a lot of people.
Facebook always has by Far and Away the most used app in and you really go through social you go through entertainment then you go through Services which could be Banking and Kobe taxis all these different use cases that have been enhanced by put to make you happen to turn up.

[24:08] Yeah yeah I agree I've seen the comscore data there what what's an example of a feature that the app.

[24:17] Offers that's not available maybe on the mobile Weber or the desktop in full disclosure of my wife is a card-carrying Nordstrom member so I kind of know the answer.

[24:25] Thank you I appreciate that.

[24:28] Great things out it's really anything for you accessing the unique capabilities of the phone that could be the camera it could be.

[24:37] That's probably the main we have right now so we threw up right now you can visual search in multiple different ways so you can scan about the barcode of an item in the store,
I know what I should bring up the part of details and you can make a purchase or you can see additional inventory the other thing we have is visual search so you can take a photo and then we'll give you like iTunes to that.

[24:58] Yeah it hasn't rolled out yet to your Marketplace got but another example that takes advantage of of the unique capabilities of the phone is something we're rolling out.
This year and Ashley we've tested here in the Seattle Market over the past six months which is something cold Store Reserve.
And that specifically takes advantage of G location awareness so nature that experiences.
Imagine as it as an engage customer you do with a lot of customers do which start that product discovery on your phone.
And you start the journey there but a lot of you know a lot of challenge in our categories as you still want to physically evaluate the product you want to make sure it looks like what you thought I was going to look like that it fits the way you want it to fit.
And so the stories of experiences start that Journey on your phone put it in a put these items in a digital closet.
Will then before your local stores that you can try a little store will then find the product our team will find a product in the store send you a text message to let you know that indeed we found it for you and we're holding it for you to try it on.
Animal use a geo location awareness of the phone so that we can see when you're approaching the store will let you know that it looks like you're on your way in those products are waiting for you in dressing room 2 on the Metro level of the downtown Seattle store with your name on it.
You come through the door at the products already waiting hanging in the dressing room free to try it on.
You go straight to the dress and you try on the product you can be in and out in 10 minutes having done everything you wanted to do in terms of.
Discovering the product on your terms on your time but also being able to physically evaluate it without having to go through the hassle of sending it to your house and potentially having to return stuff.

[26:32] And you know that's something we've made a mobile only experience because it's really only a great experience if we can connect the dots with the messaging both ways and and the g locational awareness and.
Known the same way that Uber doesn't make sense if it wasn't an mobile only experienced something like that only makes sense as a mobile only experience it doesn't really make sense unless we can connect the dots and really personal way with you.
So I think we're looking when we talked about the sea grade I think it's because we have a whole set of those kind of experiences that.

[27:03] Customers tell us every day it would be great if you could do this for me and we need to do that we need to.
Need to use the phone really to to leverage all the assets we have in particular that the local market assets we have of of people product in place and how do you connect.

[27:19] Those assets to our customers via their their mobile device in a way that makes their life really seamless and really easy and on their terms.

[27:27] Yeah the wheel of the curbside stuff so this sounds like a nice kind of even and now kind of taking it to the next level there,
so one one other question you guys at the top of the show talked about using the phone in the store is there anything else I get you can take a picture and and scan a code and see the online reviews about using with deacons wear,
I approached a shoe display and maybe there's something that lights up on my phone that tells me more if you guys experiment with that.

[27:55] Yeah we've definitely done some testing around that the big lining on anything like that is it has to be really tied to a compelling merchandising strategy because if it's if it's just notifications for the sake of notifications and it's just annoying,
but if you can link it to a great product strategy that I she enhances the experience and somewhat we've really been thinking about is,
whether it's pecans or scanning or other Technologies like some of the light fixtures that I she help you with geolocation to Pieces as well,
it really has to be linked to what are we trying to achieve from the actual product induction diving strategy or the wise it's technology for technology sake.

[28:31] We we like to call those Mass pushes where you just push the same message I've been when they walk by the beacon go spam.

[28:41] One last kind of on this topic of the store I've noticed your Associates are all very well connected their there either they seem to be able to access internet on their point-of-sale system and then many of them have like a mobile tablet of some kind,
I never been to tell if it's an iPad exactly or what's going on at least he's in a case and hard to tell is there any connectivity there where,
you know maybe I have something in my digital closet on my phone and I can push it out to the store associate anything like that.

[29:10] Yeah so we don't quite have exactly that functionality right now but one of the things that were most excited about that is in the process of rolling out right now is really and Hunt selling tools for all sales people,
and that's going to hopefully live on the on that mobile devices so right now we've historically had a text to buy functionality that is really not a very rich experience and pretty clunky and Sons of the signup,
what we just launched about three weeks ago and is in the hands of 400 stylus to be testing right now is a an enhanced,
stop for a sales people that she allows them to search and then send what we call style bullets to customers and then customers can buy from that.
So that will always you continue to enhance and rollout feather but then the flip side of that is can then customers use that as a protest wins right way so it would sales people as well.

[30:00] Yeah we've got a whole road map of of these kind of experiences I think precisely to that that question.
Of of additional ways that we should be making it easy for salespeople and customers connect went when that's when customers want and so to your question I think you will see in the not-too-distant future are starting to turn on.
A functionality for example that would allow customers to both see a visual representation of their closet of what they bought from us in their closet but also to share that inappropriate way with salespeople and stylus when that's what they want to do.
I think is you guys can appreciate me one one of things we're really sensitive to in that context is is making sure that that truly is on the customer's terms I mean what do they want to share with whom and we want to be very.
Transparent and put all that control very transparently in the customer's hands.
So that they get to decide when that's valuable for their experience and so we're just we're working through that.
From a technology perspective but as much as anything also thinking about it from a user experience perspective how do we how do we make that really both easy but also very transparent.

[31:10] Is it they're able to control their information to make their Journey.

[31:16] What are the things that super interesting to me is a lot of the successful mobile experiences we talked about they all 10 to be in.
Certain categories right like so you think of Starbucks and it's you know such a high-volume fast turn and you think of these General merchants and it's it's a lot about like volume of transaction and convenience and ease and all those other things.
In your mind is there anything like different or unique about how you have to think about mobile experiences in the fashion business then some of those sorts of.

[31:48] Yes yes.

[31:56] I'm sure pretty much every kasperi would tell you this but selling fashion online.

[32:00] And part of that is because fashion is an emotional purchase so much of it won't fashion retailers have been good at overtime is helping you find the right product then evaluate the product by trying it on.

[32:12] Helping you all to the products are fits correctly in so it's not positive fashion Discovery is that she very hot so I think what a lot of.

[32:19] How's the next consultant I think in sounds with two by twos a lot.
For me this is 2x2 of experience versus convenience on the mobile space and particular Oshie lends itself to think about that.
Can you take on one axis you have convenience that's what things like the Starbucks of the world have really done an incredible job of making it very convenient so I.

[32:40] Make your life easier and that's where the banking apps Fallen is well because I.

[32:44] I don't pay checks in the Run Channel.

[32:44] Paychex in a brunch anymore I let you do for my phone in my life.

[32:49] On the flip side you have the experiential things which I'm all things like.

[32:53] XO the Facebooks of the wall which is more right entertainment The Sweet Spot is always easy people to do both convenience on experience and that's why things like ways really coming for me or even by which is they've taken what is a truly commodity tide experience historical and made it more interesting.

[33:07] Retail that's hard because retail isn't exactly something you do every day so you don't.
I'm sorry Taylor everyday and you don't mess I asked for product to Vice everyday and so making it whether it's experiential convenient we need to be thinking about what is it that we could be doing for the phone to my she hits on one or both of those.
And that's where I think the challenge comes in and just to make one final plug for fashion in general is.
If you look at the dates or overtime Fashions as a percent you spend a disposable income is going from roughly four and a half cents a two and a half percent.
Can I sync the well this is me hypothesizing but I think the biggest reason for that is more of the move to one line.
Because yes people to buy more experiences ammo Technologies but buying Fashion online is hard.
I'm not basing means that when people use to go to the mall to get product information and guidance and I used to be entertainment people don't do that as much and the facial online shopping experience doesn't lend itself as much to Fashion.
And it doesn't do anyone near as much of a small screen the end of that you have to see the product to buy and you have to evaluate it and take the gets harder and harder to small screen.

[34:17] Agree with all that but I also think it's very easy to sit here and make excuses for why you know retailers and retailers Like Us in fashion haven't been able to Leverage.
Mobilize it as a channel engagement better with customers and it's certainly true that.
Uber revolutionized Transportation but before Rober nobody had done it and certainly true that Starbucks created an amazing and engaging experience particularly in the integration of.
A payments in their loyalty program but before then nobody else had done it in that sector either and so.
You know I think it's easy to point to kind of the convenience aspect and I think it's true that that lends itself.

[34:58] Back to the beginning of the show we were an industry in transformation I think what we're really seeing is that nobody's cracked the code yet exactly but that's not because there wasn't a huge opportunity there I mean if you generalize.
You know even a bit broader I think there's a bit of a.
A narrative going on about how retail is kind of one to the Future Tech and traditional retailers in.
You know I'd like to take the the positive aspect to that we're in a huge business that's a fun business it's an energizing business but you know if they head of zalando recently said you know you can't lose track of the fact.
Fashions a huge business and it's undergoing a huge amount of change but pretty confident that in 10 years you might not have a car but I'm pretty sure you're not going to be walking around naked.
You people are still going to want to buy clothes right and so we're in a business that has had its core.
You know on the one hand the challenge particular as a fashion retailer that you nope the Pete the stuff we sell it if people want to want it they don't actually need it.

[36:00] But at the same time it lends itself to fun and engaging and energizing inspirational experiences so The Challenge on us to how do we take.
This amazing opportunity we have with technology to supplement what we've always done.
Witches to win with fashion Authority and service an experience with our customers how do we translate that.
Into a world where they have a lot more information at their fingertips to their phone but do it still in a fun energizing way so I think it is a hard problem but just because nobody's cracked it completely.
Doesn't mean that it's it's not an opportunity that we should take advantage of her feel really optimistic about.

[36:40] Cat that opens the door little bit I kind of have to ask the question I asked every show wouldn't be a Jason Scott show if we didn't talk about Amazon your neighbors there in Seattle.

[36:52] Yeah yeah Bookseller there in your area.

[36:56] I thought they were just the guys they gave away free bananas.

[37:01] I've taken some of those free bananas as I walk by.

[37:04] I should we we we joke about that so what I asked you tell people is one of the other things I love about my job is.
So we have most of all offices don't located in downtown Seattle and so we have a number of buildings and we're lucky enough Ken and I to be in one of our buildings that she has an amazing view,
and so we have an amazing view Westover the Puget Sound while the Olympic mountains amazing sunsets all that's great however we used to be able to see the Space Needle.
And we can see the Space Needle now because unfortunately there are two new tile blocks between us and the Space Needle that went up in the past two years and that is all friend literally a block away from us right now.
So on the one hand you can say that's a real challenge the other hand as she gives us a very real reminder every day that if we don't continue to move quickly then.
The world is going to end up in the Amazon sphere and so that's something that we really need to be focused on and so.
Takashi to build on what Ken was saying she is really about.
How do we continue to make fashion an emotional patches that people engage where than that she has an elevated experience and truly differentiate from what is more of the convenience and camozzi business of Amazon,
I want we need to do is really focus on working with all best fashion Partners to read navigate the world of digital so the,
they feel there is a very compelling growth path with us so they don't need to go down that commodity path and so that's something that we spend a lot of time on which is how is it that we can work,
with the bronze to create compelling experiences and really showcase their brands in the right way because.
In the same way that we're facing the squeeze on traffic death that feeling it even more and I think for the best friends they want to be in an environment.

[38:40] They feel like that with other great Brands and there is really brand integrity and that's something that we really focused on and I'm making sure that the additional experience really allows us to elevate that.

[38:50] Yeah I agree with that I think you know Amazon is a great company Amazon's a great competitor and I think Amazon.
We owe you know that a gratitude for Amazon for you know helping.
Create a paranoid about how to improve customer experience every day and in a digital world so I you know I think that's with all great competitors and we have a lot of them they make us better.
But I don't think that we look at the world and think that.
Amazon's going to put every other retailer out of business I think there's a little bit of a narrative out there right now that resembles you know The Narrative of that was out there 30 40 years ago about Walmart and the reality is that you know what Walmart was in that massive growth phase.
It's true one more put a lot of retailers out of business.
Yeah it's also true that a lot of great retail stories and a lot of great retail bands came to prominence at exactly the same time that Walmart was growing.
Weather that was Costco or Whole Foods or a lot of other great retailers so I think there's always opportunity whenever whenever there is a competitor that's doing new things and I think we it's up to us to make sure that.
You know wheat we compete in a way and serve customers in a way that continues to build on the things were uniquely good at and the things that customers look to us for.
So I think it's important to be aware of every great competitor out there but also to make sure we're we're right in our own Playbook and we're delivering on that and I think in the context of that.
You know we.

[40:20] The challenge we have is we're a brick-and-mortar retailer that has been an early as always been an early mover into serving customers across every Dimension and we were only move her into.
A digital Commerce in and that served as well but we need to make sure we continue to move forward.

[40:38] Again on the on the dimensions that customers look to us to be great at and I think they look to us.
As a fashion retailer who's going to help them look and feel good and also as a retailer that's going to win on by doing that in a way that makes them feel like we're personalizing that interaction with them.
I think that's the great opportunity we have I mean if you look at digital and mobile and the personalization opportunity that that creates in terms of connection with customers.

[41:07] There's a huge opportunity for us to take what's always been a calling card of ours which is personalized service.
Historically that was defined a lot through just a one-to-one.

[41:16] Relationship.

[41:18] In a store we now but opportunity deliver personalization ATS.

[41:21] Still needs to be done.

[41:22] But it still needs to be done in a way that you know is relevant to our brand and so.

[41:27] I need where we.

[41:28] I think where we are always trying to strike the right balance is a we we need to take friction out of our shopping experience whether that's a digital experience or in-store experience there's no question.

[41:38] Customers want more control they want to be able to.

[41:39] That customers want more control they want to be able to have the journey that they're looking for any given day on their terms and that means.
Take a lot of friction out of the experience but we also you know where where.
Business which is fun and exciting because it's fashion it's you know it's supposed to be fun it's supposed to be energizing it is social and we can't lose.
The context around that we're not in a commodity replenishment business we're in the business of making people feel good not just about what they bought but the whole process of engaging with us and shopping and discovering.
And so I think there's real opportunity win there whether it's in a world where Amazon is or any other great competitor we just have to.

[42:26] It sounds like your strategy is to partner with Brands what we see a lot of other retailers doing is saying.

[42:34] Oh my gosh these Brands can be anywhere so the way to differentiate is to get exclusive brands or by the brands like what Walmart and Mark Lloyd jet are doing you guys invested in bonobos I believe.

[42:47] Is that also part of your strategy or you're really just kind of partnering with the brands and saying hey.

[42:53] I guess part of that would be don't sell on Amazon or you know we can drive a better experience Tulsa Lil bit more about that Strat.

[43:03] Yeah I can I can take a shot at that immediate into context.
Our business development corporate development strategy is very tightly linked to your customer strategy so.
Take the specific example that that you highlighted their Scot which is bonobos.

[43:21] We partnered with Andy and Andy done the founder of pronobis and his team now must be five or six years ago.
And that was really because we we saw that brand born on the web.
A brand that was highly relevant to our younger mail customer we thought it was a real opportunity there that was a win-win for customers for bonobo sent for us for.
For us it was an opportunity to have a Prada.

[43:51] That was limited distribution wasn't being sold everywhere but that would be appealing to two customers that were already in our store.
Alfabeto Bose and I think for a lot of other aboard on the web brand since then it realize that it's really expensive to scale a brand if the only touch points you have with that brand are digital.
And especially when you're in categories were physical evaluation of the product is important and so for them there was a real opportunity to scale their business and scale their brand.
Through our relationship with us and for customers customers want to have the opportunity to to get exposed to brands in multiple places so for us the investment at the time was linked to a customer strategy was never our intent.
Set to own Brands and it was never our intent for example in that context to buy bonobos as a brand our investment there was to align kind of our agendas but also to provide damn at the time with some capital and commitment from us that we were.
Important to them and and they were important to us and that.
Intern really set the stage for a whole number of other relationships we've had since then with a number of great or on the web brands that are important for our customers some of which have involved investment most of which habit.
We've also continued to invest in things that can build our business and our customer experience so that they're not.
They're going to be things that we're investing in because we think the investment.
Is aligned with helping to scale the business or to create alignment in terms of how we serve our customers so we recently invested.

[45:26] In a company called disco as an example because it's a Dropship.
Capability a platform that really makes it a lot easier for us to engage with Brands who are and Dropship relationships with us and really make that a lot easier for them lot better for them a lot better for us.

[45:43] But I think back to the limited distribution question you know are our message to Brands is not you have to be exclusive to us our messages though that we we think that.
We are a great partner for helping to build Brands and expose brands in a full price context where.
We we can provide an opportunity for Brands to scale their business.

[46:07] Providing the full expression the brand of the customer and that's knows you guys know that's harder and harder to do if you're distributed everywhere if your distributor everywhere.
I think for Brands that's a recipe were often times you lose control of your brand you lose control the pricing of your product.

[46:25] And we are frontal turn it for that and alternative that still we think has a lot of growth and I think we've had a lot of success.
I would light a branch and Danny can speak to this about showing them just the power of being in our ecosystem both full price and off-price both in stores and an e-commerce we can bring all of that.

[46:44] To our brand Partners in a way that I think they really value the commitment we have to presenting their brands in the right way and exposing their brands to younger customer and a customer they might not otherwise have.
But we're excited to be in business with brands that have their own direct-to-consumer business have their own stores week we think that.
Recipe works well works well for brand white bonobos but also,
for the more recent things you've seen us do with the likes of J.Crew and Madewell and Topshop and Ivy Park we have a long list of examples where I think it works for customers it works for a brand partners and it works for us as a business to do that.

[47:23] Yeah I would answer that that I think history is told us that exclusivity free exclusives you say can I should be more hurtful I think,
part of that is the stew way you can do a swim until you can have to take exclusive parts of a lion,
all you can have the whole brand exclusively in and historically what we've seen is if you take exclusive parts of the line then you may not get the best products because of see the Browns going to want to sell the best items in more places,
and then with regards to Brand awareness we definitely see that there was a huge benefit for.
Apollon is that she having more exposure both online and in stores in this definitely places where we actually feel that.
Weather is the wrong retail premises or select part is that I shall We Tell Pond is for them that she do allowed the Brand's be elevated and maintaining the brand Integrity Russian pretty helpful.

[48:11] The only thing I would add is that we have a pretty proactive stance now that if we see people becoming Chumash distributed and actually not maintaining the brand Integrity then.
That's a good sign for us that we think the brand is going to be on a sudden points of relevancy and so what we do need to be doing is looking for those next new bronze coming through and taking a really healthy portfolio approach to giving those new emerging Brands a great place to be.

[48:34] Cool you know one of the things that's interesting to me is.
As as consumers get used to all these mobile devices their expectations that are set and so then you got you going to figure out what what the right mobile experiences for that.
Customer expectation but then as we talked about a little earlier.
There's unique and an elevated expectations for how I would use Mobile in a fashion context and it heard means you're just talking there's actually even another tear that you guys have to worry about which is.
Like Nordstrom isn't simply a.
Apparel retailer like you you enjoy a unique place in the sort of fashion ecosystem and have a very unique and differentiated.
Brand value proposition so.
If you thought at all about like what's the the truly unique mobile experience the truly unique Nordstrom experience manifested on mobile.
You know can there be such a thing is that possible.

[49:35] Well I think the Ken's coins earlier there is there was a huge opportunity if we can get that right and so definitely working pretty hard right now to trying to find what that is and I think it starts with having a break definition of what's the role of each of the channel I think with the mobile web.

[49:50] It's really about creating a fast friendly Discovery experience and customers would like to check out they can do that.
What's interesting to me is we actually get more engagement with some of the content on our website on a mobile phone then we had she done him about website that we actually doing all day.

[50:06] How to search people coming to the homepage and then she clicking through to a story so I think.

[50:10] Does a set amount of fast easy convenience that needs to be through mobile web but also is that the sort of fast hit convenient content.
Ons not something that will definitely be playing through and then from the up experience.
It's really in kentish town this how do we create a great experience that our best customers are going to engage with on a regular basis cuz if we want to be one of those Fighters have an apps that customers engaged little regular basis.
How do we do something that allows for freaking engagements and allows a great eCommerce outside of one of our premises but also then also enhances the in-store experience in the linkage the stores.
So all rap is good really going to be all Powerhouse in times of how do I should create richer engagement or not she Elevate the experience and Sons of the shopping and Simpson experience and feed the mobile web is about.
How do we have customers come to on a regular basis cuz they think it's interesting but it's convenient if they want to check.

[51:04] Yeah I think it's fascinating that I.

[51:07] In retail at least a lot of people when they first think about mobile they think of it purely through,
the convenience lens and think that that's that's why how people are using the device and again to Danny's point I think what's interesting in the day that we see.

[51:17] What's interesting in DC.

[51:20] There's a lot of Engagement with content that's how.

[51:22] Makes sense to me people are.

[51:23] Make sense mean people are doing bite-sized engagement all the time with their phone as as a source of information and entertainment and inspiration and we're in.

[51:31] Retainment inspiration.

[51:36] You know we're not unique position I think to Leverage.
Is we have with customers around Fashion Authority do that in a fun way in an engaging way so I think the balance of how do you get that content out there.
In a way that really engaged just customers while still letting them have a frictionless shopping experience when that's the thing they're looking for that's that's the balance were looking to strike.

[51:55] The idiotic right thing about mobile phone is it is a unique device to an individual and so therefore you can truly person lies on the phone and actually.
Does a lot of great things we have in terms of what lives in the brain of all sales people with regards to styling guidance in the ability to show people the right product and so we've been working really hard in the background or really on the days room services that would allow us to do that scale through a mobile device.

[52:19] Quick here's a quick one and then kind of a long one so Apple Android a lot of the data out there suggest that even though people's traffic.

[52:28] Tends to be half and half this is both a pin mobile web the iOS users represent on the web like 80% of of actual sales even though they're they're smaller in traffic do you guys can you guys see something like that on your side.

[52:43] Yeah so actually I think I'll dates are excused for the even more heavily towards iOS nothing apart that is the demographics of our customer so roughly 75% of all traffic comes through an iOS device.
But Android is definitely growing quickly and so I think from from all perspective we don't see needs you thinking about how is that we're all going to play out and between what are system what what are investment in iOS placements through a native app vs. website,
on some light on on an Android device how that looks in the futurism is a pretty interesting question and it's a little bit of all of the above,
not thinking through what that what are the Dynamics between those two platforms cuz I has a big impact on where we want to invest.

[53:27] And then the longer one is just listening to you guys Jason I talk to a lot of retailers and a lot of them have kind of that that Merchant King kind of mentality that you know we're going to go and figure out what's the right.

[53:39] Dress for next season and that kind of thing and what I'm hearing for you guys as data personalization data scientist feels like a real commitment on your side to that to the extent your control sharing it knows this one dude locked in the basement.

[53:56] Did the Guilfoyle picture from Silicon Valley or like tell us about you know sounds like you got some pretty serious horsepower behind this thinking.

[54:02] Yes I'll let Ken's Pizza that cuz he actually supports all data science and analytics team but one thing I would say before he goes into that is,
tell me what's really interesting is if you just sent it over to Daytona algorithms and it's going to give you a lot of good predictions on what's happened in the past.
And Ashley fashion is something choir there is trillion art elements and that's where I buying too much you have a real talent is being able to pick Trends and pick ones can be important to the customers and that curation elements of what customers should be thinking about is that she a big deal.
And so I think,
Paws Of The Magic of where all welcomes together is how do we take that knowledge that exists in the head of all Bonnie team and all sales people it's really see the machines because machines are only going to tell you the review married,
and so from my perspective we looking at some really interesting ways of how do I take the knowledge of the people who I should know product really well so I she get it into the right attributes that then we'll feed the algorithms that it will be more forward-looking is fashion changes all the time.
And that's the one challenge of using data science analytics and something whether there is no constant in terms of customer demand.

[55:08] Yeah I think that's absolutely right I would say data science analytics a big topic it's a big topic for us and I suspect for anybody like us in our industry and what I mean by that is it's cuts across.
All different parts of our business so we've made a big investment it's probably one of the.
The biggest growth areas in the entire company right now is the way we've been scaling that team over the last 18 months and will continue to scale that capability.
Because it cuts across every part of the business including.
Supply chain and where we where we deploy our inventory how much we should be buying of the stuff we're buying but also.
The point about as your Highline Scot I think like what sorts of product we should put in front of customers in a given point in time to be relevant.

[55:56] But there's also basic things that we're working on that customers expect and we should do a better job on which is.
No personalization I think through a customer's eyes is a lot about.
The more they engage with us and the more they let us know them the better we should serve them which means do you remember what size I am do you help me,
by remembering you know which brands I really like and help you keep informed about what's new in those Brands but also,
help me understand what other brands I might be interested in in and to do that in a in a seamless way that you know keeps track of.
How will those activities happen in stores on a phone on a desktop think that's the expectation that we need to live up to and I think to Danny's point that used to live all in.
In a salesperson's had the fact that it now cuts across doesn't diminish.

[56:47] What part of this and it doesn't diminish the value that comes from this long Heritage and in deep experience we have and all of our people with those those folks are emergent teams or whether it's our sales people in stylist.
We have a deep well of expertise I just use a small example.
You know we found that it when we do things like product recommendations even though there is algorithms to support that those algorithms for us perform a lot better.
If we don't just take the buying information from customers have purchased these baskets but we also feeding information about what are best stylist put together.
And so if we can bring the RT in with the science we know that that actually has a better outcome for customers and so we need to put that all together but at the end of the day that's a big data science problem you can even just getting the data.
Connected in a way that you can connect to single view of product across the whole Enterprise with a single view of customer across all their touch points with us.
It's not trivial particularly when you have a lot of legacy.
A technology that that you're in the process of replacing as we are so it's a big focus it is a big growth area there's lots of different places that we see data science and analytics adding value.
But none of that sat the expansive of the art in the business it's it's a supplement to it in our view.

[58:09] Goat sounds I'm getting a mental image of a stylus and a merchant floating in a pool with computer brain connections like Minority Report people are said she needs to see the side of right now.

[58:22] I like it we should think by quest list.

[58:24] Fashion fashion precogs.
You know it's funny cuz this is very Timely.
So we've been talking a lot about mobile there's a huge buzzword I can't believe it hasn't come up yet in Mobile is the the whole mobile-first philosophy and so I kind of wanted to hear you know where you guys.
Come down on that but what what's been interesting in the last week like Google had their IO this this week and their big thing was.
Hey we've been mobile-first now we're shifting its AI first which is the the topic we were just talking about so.
I guess super question like you know are you embracing a mobile first philosophy and is that important and you know is it.
If you're not is it already too late like should we be moving on to the next thing.

[59:16] Yeah I would say so we are embracing my boss first I think to me the definition of mob office versus a fuss.
Is a little bit Falls because if you brought in the definition of marble to go beyond just a mobile device and I see how you are connected to the world which isn't in realities was happening more and more.

[59:32] Then I think my ball first hold and it's really about how do you.
How do you think about the mobile device relative to other connected devices relative to the physical environment except for and so we are definitely still thinking about my ball first.

[59:46] In terms of what about physically mean so I think the greatest example for me is when you look at the way we design not she then execute on features and functionality.

[59:55] Really we definitely are user experience team now stop with the mobile phone screen first and so they will design for the small screen and so the optimized for the small screen make it make it user-friendly make it compelling and then scale it to a biggest green lights on.

[1:00:09] And I see the way we didn't go code again sign execute against eyes very much part so I suppose the mobile device Fest.

[1:00:15] So I think that there's a very real practicality of mobile phones which is you do the work from about fuss.
But in reality what she means is it forces you to be a lot more thoughtful about design because the use of interactivity of a phone with a smaller screen with a touchscreen actually is hotter than a big screen.
I'm sorry I think it makes you fat so and so whether you believe.

[1:00:36] 10 clear what it means in terms of whether it's the mobile phone prices of the connected device starting with the smallest Creole starting with a different use case in the big screen I think makes the design hot or.

[1:00:47] I also think more powerful I mean it's a touch screen and has a camera it has a voice in her face it's geolocation Aaliyah where it's personalized to an individual those are all huge advantages in the kind of experience we're trying to create in terms of connection with customer.
I don't know how to distinguish that from AI first mean AI isn't bringing data in science and AI into the equation in terms of creating a better customer experience that still got to be delivered some.
And the delivery mechanism.
From a personalization perspective is almost entirely now moving to be that device that sits in your pocket so there may be there will be adjuncts to that whether that's Google home or other.
Active devices but at its core you know I think everything we've seen I'm sure everything you've seen is that at the core of.

[1:01:34] Good folks digital engagement the phone still sits right at the center of that and that's not going to change in the very near future.
And so I think mobile first for us is making sure we're keenly aware.
And you into the customer's eyes not just that that's the reality but also how do you make a benefit out of these features that the phone has which should have a lot of richness to our connection to the customer.

[1:01:56] The really fascinating thing for me is something it was embedded in the question which is some of the announcement that came out from Google in the past couple of weeks is.

[1:02:05] What for example enabling Google assistant on an iOS device that's a big deal.
And what that means in terms of Customs engagement with the different apps on a on a device and if they can oh she's swing more usage of Chrome on an iOS device that not changes the game a lot and Sons of the app ecosystem.
I'm in if we can I see you within Chrome if there's a way the People starts when able Progressive web app type experiences that can then,
access the different devices on the third better than the phone that starts to break up the Apple ecosystem,
I was I think how that Dynamic plays out as something that we can need to continue to watch because that's the point we said Elliott developing apps is expensive and living in the app ecosystem is LBC something that is a.
Paradigm that we all know very well but if that starts to break and you start to see different engagement bottles that is a very different way they would I should precise Investments.

[1:02:52] Cool yeah so one of the last questions were tied on time so,
as we look at kind of the first quarter results the there's some charts out there they're pretty interesting and they show,
Mainline retail is really having a hard time of it and no clubs are doing really well so like the Sams in the BJ types and then you see kind of more of the outlet E-Type places doing well I like a T.J.Maxx so.
One thing I've heard said is that you guys you have your main line in then you have your discount and you know I think some Skeptics a well,
the only reason that Nordstrom exists the the main line is to really they make all their money off the discount side the rack side how do you guys react to that.

[1:03:35] I don't know enough to even kind of like having a pinion but I've heard that said several times by people so I kind of want to throw that one out.

[1:03:42] Appreciate that Scot.
Look we're at you can you can read our financial statements to see exactly what we disclose about how we make money but what I'll tell you is that we have a full price business in an off-price business,
predominately we serve a full price customers through RR Nordstrom brand as well as our Trunk Club a business and we we serve Ross off price.
Customers through our Nordstrom Rack brand and Nordstrom and HauteLook and there's an overlap between those sets of customers and.
So from a customer perspective I think the advantage that that we bring to customers.
Is that on different chopping occasions and and it different parts of there their life folks engage with different parts of of the brands that we we offer them.
From a brand partner perspective there's also a real value-add to Brand partners because when we enter a relationship with brand Partners in a waiver the opportunity.
2% there Brandon a full price environment and to sell their brand position that brand very effectively there but we're in the fashion business none of us get it right every season so there's going to be some stuff we buy that doesn't sell,
as well as we all thought it might whether it's the brand or us as a retailer and we have the opportunity to seamlessly take that product and and move it.
Tore off price Channel and that's good for the brand it's good for our customers and it's good for us.
Weird you know we make money in all parts of our business so I don't think that's you know we don't have a substance ation going on between those but we do have.

[1:05:17] A lot of positive connections between that another example would be if you just look at.
Are the demographics of our customers there's a lot of similarities across our customer set but on balance.

[1:05:31] Brand does tend to attract new customers to our brand to to Nordstrom overall they tend to be a little bit younger.
Are there full price customers and about a third of those customers overtime become full price customers so they end up migrating and not only buying in the off-price Brandon Channel but also the full price so we look at this all the time.
From a customer perspective in a business perspective and we have a lot of data to support the notion that.
The Brand's the two brands are additive the full price and off-price business are at added to each other.
An additive to our customers and additive to our brand Partners so we're quite comfortable with that.

[1:06:14] I think that back to the start of your question you know we are in a retail transformation. Right in doing that. You're going to.
You going to see a lot of volatility I think in quarterly results says as a lot of retailers go through the process of moving from their traditional model of.
Competing to a new world and a new model of competing and that's going to have some bumps in the road I think for everybody.
And it's going to show up in people's Financial results and you know not everybody's going to come out of that in the same way I'm pretty excited about.

[1:06:45] What we're investing in and what we're saying in terms of how customers are responding to that but that doesn't mean that it's a.
Completely smooth are linear Journey it's not and that's the nature of being in industry and disruption but that's the also you know it's what makes it fun I mean I said tell our teams a lot.
You know if you can recall the first time you ever walked up to a rollercoaster I think everybody had the same reaction you first time you walk up to a rollercoaster it looks really really scary.
Can you ride that roller coaster for the first time and you get done within about 70% of people go I'm getting back in line and about 30% of people go I'm never doing that again.

[1:07:21] And I think that if you're working in retail these days you got to accept that were a really exciting.
It can be a bit of a roller coaster ride so if you don't like waking up every day and be in an industry that's going through a lot of change it's going to continue to go through a lot of change that I think is really exciting.
But it's going to be a lot of change and so I think you've got to be energized by that you have to feel optimistic about that and I think we have reasons to feel energized that optimistic but it doesn't mean.
The quarter-to-quarter it's all going to be smooth sailing.

[1:07:51] Know that that makes perfect sense and that's a great place to end because it has happened again we've perfectly wasted an hour of our listeners times.
Said that Danny can I really want to thank you for taking time out and sharing your thoughts with our listeners.

[1:08:06] Appreciate Scot preciate Jason thank you for having us.

[1:08:10] Until next time happy commercing.

Jun 17, 2017

EP089 - Amazon acquires Whole Foods Hot Take

Amazon agreed to spend $13.7 billion to buy the grocery store chain Whole Foods Market Inc., which has more than 450 stores.  The grocery category is a $795B opportunity in the US that has largely been untouched by digital.  

  • Terms of the deal
  • Wall Street reaction
  • Impact on the grocery category
  • Winners and Losers

Amazon-Scape that Scot mentions on the show

Amazon Deep Dive EP24 Podcast


Episode 89 of the Jason & Scot show was recorded on Friday, June 16, 2017.



New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode 89 being recorded on Friday June 16th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:39] Hey Jason welcome back Jason Scott show listeners tonight we are disrupting our usual weekly schedule for a new.

[0:47] A schedule format that we call a hot take this is going to be an episode where we really go deep on one big news item.

[1:11] Unless you're sleeping on a rock that big news item today is Amazon's 13.7 billion dollar acquisition of Whole Foods Jason what do you think pretty crazy day in the world of the e-commerce and Grocery on.

[1:25] It it was it was totally inconsiderate I woke up this morning with a full agenda of things I had to do and this completely disrupted it.

[1:33] Cool so let's kick it off at I'm really curious to hear your thoughts you and I haven't had a chance to talk about it so this is definitely a hot take let me kick it off with a little bit of.
Data so the deal was at $42 a share it was announced this morning before the Market opens so that's a 27% premium to the the share price from yesterday.
As I mentioned at the top of the show 13.7 billion dollar valuation.

[1:59] So Whole Foods has 460 stores they are mostly in the US they do have some stores in other countries,
87000 team members I think the last number I saw I had Amazon at 3:40 340,000 so this puts Amazon well over 400,000 employees,
another little nuances there's a 400 million dollar breakup fee and what's interesting about that is the way these deals work is you know they.
You you got there you submit a bid you work with a board the board except said but as a public company they have to accept bids from other folks.
And a deal of this size has to go through quite a bit of shareholder and Regulatory governmental kind of approvals so.
The breakup fee kind of indicates that Amazon felt like there was some risk that there could be a competitor competitive bid and then the market reacted also.
Closing at 4286 today so some hedge fund manager out there is willing to pay a little bit more than the $42 a share as kind of a bit of a hedge to see if another bitter comes in so.
Now that the kids this could be the start of the drama so I have to kind of see using things happen pretty quickly and within the first 15 to 30 days so.
I know relatively quickly if there's going to be another bit or not so that'll be interesting so Jason.

[3:18] What does that is that for a million breakup feet is that in some sort of like a poison pill that makes it less appealing for someone else cuz they would lose the former million value of what they just acquired.

[3:28] Yes so that just means that it has to be 13.7 + .4 so 14.1 so they would have to.
Go to have to cover that and it just means that you know it can't be 13.7 one.
Really so it's Amazon Amazon's argument on that would be this is how much money were investing in this and the Damage that would cause if you chose another bid so yeah.
I don't think it was 5 billion it would be insurmountable but I think it's small enough that it is not really a poison pill.

[4:03] Yeah so I'm really curious what your your high-level thoughts are on this since you're kind of real close to the grocery world.

[4:11] Yeah what should I think.
Thematically this makes a lot of sense we've talked a lot on the show lately about the grocery business and in my opinion at least that,
did the the mass market for grocery is buying line pick up in store or order online pickup in-store in the.
That requires you to have shorts and so you know a lot of the traditional retailers with would say hey this is one area where we potentially have a competitive advantage over Amazon,
you know they've been in the space for 10 years they haven't captured a lot of market share they don't have a really strong brand for fresh and they don't have any of these stores for pickup in-store so then you know couple months ago we talked about Amazon opening in the,
the Amazon fresh pickup location which was their first pilot of a online pickup in-store experience,
you know back then we said and if this works if this proves out to be the right model for grocery pretty pretty likely that Amazon will scale and scale at will either,
mean by someone that has a lot of stores or open a lot of stores and so you know.
Fast forward not very long I think less less time than any of us suspected and Amazon bought 460 stores.
To give them great buying like pickup in store locations that overlap there their existing Prime Membership very well and,
really bolster their their creds in the fresh-faced and it turns out in in grocery what really drives your selection of the vendor very often is the quality of the perceived quality of the the fresh stuff in the produce and so so like on all the scores at this seems like a.

[5:47] A very logical move for Amazon.

[5:52] Cool see you think so the prime pick up hasn't been open long enough to really have much data I don't think so so it's not entirely clear that.
That's winner and now they're putting their pedal to metal there may have been something more even opportunistic because Whole Foods had an activist kind of in their rattling some swords their valuation of been down a lot of folks shareholders had one of them to seek a strategic,
buyers and they've been struggling because they kind of invented organic category and now every other grocery store has organic,
it may not be true organic I don't know the whole Nuance of that but the other perception is out there that now Whole Foods is kind of out there alone with just organic and they're super expensive,
so it goes more opportunistic or do you think Amazon sees something with one of these tests they have going on that says scale now.

[6:47] Yeah it will no I think you're certainly right that they haven't had time to collect enough data to have those tests like influence this but like clearly they could have already made the decision that that buy online pickup in-store,
is going to be a mainstream delivery model for for grocery and into your point like there's a lot of opportunistic elements here in one,
we haven't discussed yet is you know Whole Foods was a little distressed which which presumably affects the price but there's,
a lot of new headwinds coming into the grocery space that we're not going to be favorable to Whole Foods so one of the most feared grocers on the planet is this German company called the Lidl,
and then they literally just Grand open their first crop of stores on the East Coast this week they plan to have 600 stores in the US,
what their model is is super low prices very No Frills on the service but very high quality organic produce so it's,
give you that that great quality fresh mostly through private label and and locally-sourced stuff,
add an extremely low price and then a lot of markets they've been able to get way below the traditional price leader in so,
that's a scary entrance to the US market internationally those guys compete with another German company Aldi quite a bit all the RT has a footprint in the US and they announced last month that they're going to invest.
Another I think four billion dollars in the US to dramatically expand their footprint so if you had Whole Foods that was already in a rough spot.

[8:19] You got all of these two scary new entrance Aldi and Lidl coming in into the market you have Amazon saying shoot we need a footprint of stores we need more credibility in fresh,
to release kale Grocery and you know groceries the biggest.
Consumer retail segment that that you know hasn't really been dramatically impacted by digital yet so I feel like it was just sort of a perfect storm of,
there was a good acquisition Target that had a lot of reasons to sell an Amazon had some strategic reasons to buy.

[8:52] Cool and then one of those guys owns Trader Joe's right so is it Aldi don't they already own Trader Joe's.

[8:59] I think that's a hold is who you're thinking of.

[9:01] Yeah this whole grocery space everyone owns every other one I most like will what about Food Lion and then it's part of a conglomerate that the kind of rolls up.

[9:10] That absolutely there's a lot of like there's these all were independent little Regional Grocers then and there been already been a lot of consolidation so that you know Kroger is the largest.
The stand-alone grocery retail in us that you know they're the result of the ton of of consolidation and then Albertsons Safeway is the second biggest and there they own a bunch of the Regionals including some of the ones you just mentioned and.
You know it just goes down from there although there aren't there still is a long tail there still are a lot of small Regional grocery stores that may be only five or six stores in the market.

[9:44] Tell me one of the things I always look to is it's on the Wall Street reports that are out there a lot of them have covered some of the math weave walkthrough,
one of the ones that was interesting was that you point it out it's the largest acquisition Amazon history so that's kind of interesting and the question was just this this is me we have a new.
Your new world order here is are we going to see some more really big swings kind of a thing that's interesting to think through another one.
So Cowan was pretty aggressive and by their math this makes them the number 5 retailer,
set for grocery and they did all the math of taking grocery out of Costco and that kind of thing and then they projected Amazon could be in the top three by 2021,
and I looked at that that would have to be pretty crazy gross I'm see if I will spreadsheet here I think that got them up till like 80 billion to get the number 3 based on the my back in the boat math.
Does this drive with your your kind of understanding of the grocery market.

[10:50] Yeah although like I do think that there's a there's like retail there's a bunch of different definitions of grocery and so like I think there's a couple different size of Market figures out there but but the direction I think that toy makes sense.

[11:06] Cops in woods,
what do you think about integration so so let's say you are you know you're Jeff Bezos congratulations you're you're extremely rich and you now own you're going to own Whole Foods what what's your integration plan like at where you take this thing.

[11:24] I think you're going to give away a fire phone with every purchase.

[11:28] Something damn you just left I can have to spend them back up.

[11:31] Got you and maybe a Washington Post subscription.

[11:35] Oh yeah you definitely.

[11:36] No I mean like the real answer is who knows like you know superficially.

[11:44] You'd eat a Whole Foods was not very digital you you couldn't order online you know that in fact they Outsource most of their digital Miss to.
Our friends at instacart that I'm sure we'll talk about on on this episode and so suddenly you know if your jet pays us the main thing you're going to do is.
To help help Whole Foods catch up digitally you may integrate ordering into the the Amazon Fresh order portal or you might create your own portal for Amazon for.

[12:14] Foods you're going to.
Definitely you know figure out a way to Market that ordering online to your 250,000,000 Amazon members and your you're sixty or seventy million Prime members and all this or two things that maybe even try to offer some prime incentive for shopping at Whole Foods.
And you know just really use Amazon scale to sort of fixed some of Whole Foods eels.
I feel like it step 1 and then longer-term you know.
That's 460 distribution centers that like are in that last mile delivery Zone to a lot of Amazon's most valuable customers so do you start figuring out how to.
How to turn Whole Foods into a mini Amazon Prime now Depot of some kind and and use it for distribution for more products do ya.
You know start except for the first time accepting,
returns from online purchases in a physical presence and you know some of those things right like so they're about to places that can play out there's a lots of potential synergies in the Echo System that you can imagine,
that that Amazon could have leverage to make you know all these parts more sticky but like you know I suspect like part of the value prop to to Amazon has to be,
that the Whole Foods was sort of a flat ass at and that Amazon has the the unique skills to help resolve that fly and so they they can buy it for the discounted price and then you know turn it into a more valuable asset.

[13:40] How about just kind of blocking and tackling in grocery do you think Amazon can go in there and I certainly not their mindset to be the high price kind of,
differentiator for sure and category so you would they go in there and and lower prices so for like Zappos I could argue while they didn't redo that was Apple's Apple still doesn't like the cheapest place to buy shoes so you know.
But at the same time I think Amazon probably lies this you can't win grocery bye bye being relatively expensive so curious what you think about that.

[14:13] Yeah I do think that both from Amazon's value proposition and and you know the the typical flywheel that they usually like to,
to execute is going to require lower prices that pull more people in that store and then the external pressure that we talked about earlier with you don't Walmart significantly investing and pricing Grocery and all the doubling down and and wheedle entering the market like I don't think,
Amazon strategies going to be to sit tight as the premium offering and you know frankly.
We've all seen that sitting sitting at the premium price point just just hasn't worked for Whole Foods.

[14:51] Yep what do legal in Aldi do around buy online pickup and delivery today is that an area of innovation for them or it's more just like the the super low prices.

[15:00] So we don't know about Weedle in the US yet like they they 10 offer that in markets where it's heavily adopted so I cuive talk a lot about the UK that being on much more common tomorrow Nolan just turn mine listeners,
about 1% of grocery sales in the u.s. is online that 6% in the UK is online and it's mostly click and collect.
So they do offer a click & collect in the UK for example all the has not offered really any digital experience in the u.s. today so.
You know.
It will be interesting to see art like are they looking to be a fast second mover and is the consumers adopt that model they'll jump on it like they did in some of the foreign markets.
Will the threat of Amazon cause you know all of these retailers to come to accelerate their digital plans like you know I think that's.
Going to be one of the fun things to watch and I should mention the while we've been talking the the Jason Scott show in terms of frantically been trying to get my attention and point out that as usual Scott was right Jason was wrong in.
Trader Joe's is owned by all these parent company.

[16:05] Stop stop happen again.

[16:12] So one one thing that's interesting is in for listeners that haven't listened every episode first of all shame on you and II of also Prime now is in 46 markets I think last time maybe a couple more they've opened up some International and still it was caught 46 248,
and the way they do those deliveries is Amazon has their own Uber like.
Driver system called Flex so you know one of the things that it's interesting I know you're a big fan of the Click and Clack model but it seems to me they could scale that up pretty quickly I I've heard that there is.
A lot of the demand from drivers cuz it pays orders of magnitude more than an Uber kind of a thing just got better than City and you're you're bringing groceries around and not people and and evidently.
People tip better for whatever reason I guess they appreciate groceries more than people so you know it seems to me one thing that could do pretty quickly is have Whole Foods have a better delivery kind of experience where there's no.
Charge or it's part of a prime offering would you don't you do you think that's likely or you just start convinced that's kind of.
The best way to solve the grocery problem.

[17:21] No I think it's very likely and there's a segment of Shoppers that want that right like both from a geographic Stan,
point and from an economic standpoint I just don't think that that segment of Shoppers is the mass market so for sure,
Whole Foods in a Musa a reasonable amount of volume in home delivery through their instacart partnership it's it just wouldn't be profitable if the VC's weren't paying instacart to deliver those groceries right inside of certainly.
Amazon will be in a much better position to take that over and scale it and add some operational efficiencies there and so I suspect we will see,
both better click and collect experiences and better home delivery for you know the customers that want that and and you don't can be home at the right times to accept the deliveries.

[18:09] Cool what when area I kind of read some things about was.
In an area that's near and dear to your heart is payments and you know one of the Welsh you guys pointed out that one of the areas that gets the highest complaints about the the Whole Foods experience is waiting in line at the checkout,
see the Gammas on could apply some of their payment kind of methodology and then another the first thing I thought about was the ghost or at I know that's not really ready for prime time but,
you know there's got to be a lot of automation at the checkout there do you know if you were going to do that Amazon's assets what would you do to speed up that checkout experience.

[18:44] That one of the first things you could do is they could do a Starbucks style digital wallet they've got you know payment information stored for 240 million Americans,
it's so they could make it super low friction to use that storage in for me that's that stored information.
By showing a barcode on the Amazon mobile app as you go through the cashier and that as they do in the Amazon bookstore for example.
So adding that digital wallet that that links to the payment information you already have them fight with Amazon would be a super easy step.
The the Go stuff like obviously this is a place where they could ultimately leverage it or deploy it but your point you know I think it's a ways away and I think.
That the traditional Whole Foods layout is not going to wind it is not going to be the easiest environment to deploy Amazon go in so I don't think that's something we'll see you in the.

[19:40] In the early days but I could certainly imagine that grocery shopping is a whole new reason to have the Amazon app on your your phone and to Leverage.
Mobile payments maybe as part of getting you know.
Some some from them benefit for checking out right like it essentially Amazon is the world's greatest customer Affinity program and they could bring that to Whole Foods now.

[20:03] Yeah and I haven't had a chance to talk about on the show but they are released this new payment system called Prime reload.
That that's pretty nursing so the way that works is minor standing is there they're trying to get people to use Bank transfers instead of credit cards credit cards have a 2% fee Bank transfers are,
are very very inexpensive for merchants so the the way it would work is almost like a Starbucks card where do you load a tax dollars on to it at a time draw it down and then you get 2% cash back because Amazon's no longer you know having to fund that credit card transaction,
that seems pretty you know applying that to grocery is pretty exciting I've never seen our true percent back kind of program like that and grocery do you think that would be a natural one to kind of play out here.

[20:48] It absolutely could it's interesting like you know we've all been surprised.
That is taken Amazon that long in this particular case cuz that's a huge savings for them again all these customers have that stuff store they have a high level of trust with a customer like all the normal impediments that you would think we keep you from.
From aggressively shifting customers to to those electronic fund transfers instead of the credit card interchange transfers.
It's surprising it's that it's taken Amazon that long so so certainly now that they've done it you can expect them to leverage it in these doors one when nuance.
Our friends at the credit card company that are pretty clever and they usually build into their terms of service that have you want to accept their cards you have to promise to give their cards equal weight and equal billing with all other payment methods and so.
Like very often it's against,
it is is potentially against the terms of service agreement you have with Visa or Amex to offer electronic funds transfers for 2% less,
and that's why most retailers don't do that but you can imagine that Amazon at this point has enough volume that they have the leverage in their negotiation and you know it may be that we had to wait this long for the future and Amazon because,
it took this long for them to negotiate new new terms and conditions with a credit card companies that allow them to do this.

[22:11] I always heard you couldn't explicitly charge more for credit cards and but I thought maybe they were being sneaky by charging last bit sounds like you think that.

[22:19] So there's consumer protections about charging more right into that can literally be a criminal offence but the,
the charging less is is certainly not illegal but again the you know Visa you know knows that you need to accept Visa in so they can say,
hey as part of your agreement for accepting Visa you have to promise not to make these other vehicles cheaper.

[22:42] Cool another area that kind of popped my mind when this was announced this because I did that Amazon scaper I took all their brands and put them onto one.
One chart.
Your folks are listening in her haven't seen that yet it said Billy Billy Amazon skateball one word and it's funny I set down to do that and then I just like started working on.
I thought okay I'll have to have an area for all their retail offering so I'll Prime now and all that on there and then.
You know this that the other and that's like I'll do the private label stuff now and I thought okay obviously have Amazon Basics and then as I started to kind of go through all the times that I.
Founding Father folks talking about different.
Private labels there's like 50 private labels at Amazon and a lot of the newest ones are in this kind of grocery category you have wickedly Prime some of them are prime exclusive some aren't.
You could talk about Mama Bear and then another interesting thing I didn't know about Whole Foods I'm not a huge Whole Foods Shopper they have a very large private label called everyday 6365,
so so another really interesting thing here is Amazon has to pass here they can put their private label stuff into Whole Foods and then they could also.
But the everyday.
365 for sale on Amazon and Prime now and fresh and where were all these different mechanisms using private label factored into this at all.

[24:09] I do I think you nailed it like there's a bunch of synergies what will be interesting there is,
will the brands get equal-weight like like so the the whole food brands have,
probably better consumer recognition today and you mentioned Eglin 365 everyday but there's also this like whole trade and engine to a number of these brands that whole food Shoppers are familiar with will be super,
easy to imagine seeing those on Amazon the bigger question is brands that are brand new to Amazon that Amazon's just investing in like happy belly right for nuts and almonds do they keep investing in that or do they you know.
Or is there an overlapping 365 degree at the n65 everyday nut pack and they they just adopt the,
the whole food one or you know do they take 365 brand and use it for all the Amazon food like they're there lots of permissions I can play out it's going to be interesting to watch but,
I would definitely imagine that that private label was another valued aspect of the Steal.

[25:11] Yeah then come expanding from private label out of ring know Amazon has had a lot of,
water brands just in general but I'm sure in the cpg category that don't want to sell their one of the most popular or the most.
Popular ones we heard about his Honest Company and I would just just out Jessica Alba's company wouldn't sell on Amazon so then Amazon created their own diaper line and some his other things some of that worked Amazon elements in some of the Denton but Amazon seems really want that kind of product,
imagine that this gives Amazon just another kind of hammer to say to brands well you know we're going to kick you out a Whole Foods unless you sell your whole assortment at all the Amazon offerings so so there's also kind of an interesting selection angle there do you think that's going to happen.

[25:58] Very well could and don't forget Whole Foods is an incubator for a lot of those socially-conscious products oh.
You know that they have a model where like individual entrepreneurs can pitch Whole Foods and Whole Foods might put you in one store or one market and you know if it does well there you could eventually expand to,
to their National footprint in so they have this great system for onboarding those Brands like really early in their life and now you know it just.
The final win isn't getting in the 460 Whole Food stores it potentially is you know getting on the Amazon platform and and reaching turning 40 million customers so.
So I absolutely think that that that Amazon will use the Whole Foods leverage with some of these brands.
You know to get more of the more the brands they want info in front of more of the customers they want there's also an interesting one one of the most successful private labels out there is the Costco brand Kirkland Anna a fun fact,
Amazon sells more Kirkland online then Costco does.

[27:06] So they're the biggest distributor the third largest retailer was Jet and after the Walmart jet acquisition jet is actually phasing-out Kirkland off the site and so.
Now really interesting thing and you know this is highly speculative but.
Could Amazon double down on the Kirkland relationship like could they ever have smaller packs of the Kirkland products in Arnhem propria for club and start selling through Whole Foods.

[27:37] Who who initiated that stoppage at Walmart was at Costco or Walmart who said no mas.

[27:45] Minor standing is that it was that it's a Walmart decision to buy Walmart I assume that's Mark Laurie but but to phase out cuz obviously Sam's.
Gladden and Costco are direct competitors.

[27:59] Now course is you know Jets also a Marketplace so I'm sure there's still going to be 3p sellers of that stuff.

[28:06] Yeah II.
Two kind of specular things about that position I wanted it seems kind of silly to me but I just want to bounce Matthew one was will surely they'll close the stores and just convert him into fulfillment centers that doesn't make sense to me because,
you know these stores are chosen to be in high traffic retail areas that's not where you would both of them the sooner that you can ommix don't work.
So this was like some of the folks saying this for like clearly you know it.
It wouldn't even have like pick up there just be a fulfillment that seems kind of silly to me into the second one was some way to leverage the third party system in Amazon and liquid doesn't make sense in that world is.
Yeah the pricing the stuff of filming is really really hard with a physical footprint of the 3p model doesn't really work and physical.
So that down didn't really resonate with me either maybe there's some things like with some certain.
Yeah maybe like some Farm kind of stuff could be almost like 3p also what I'm more of a commission kind of a thing to help with margins or something but I don't know that down didn't make a ton of sense for me either how do you feel.

[29:12] So there and I don't know Whole Foods does much of this but there is a sort of the analogous thing in Martin to 3p would be sort of consignment sales in,
In-N-Out breaking water into their you know there are some grocery that would,
try a product on consignment but I don't see that as a big play if they were going to be a big three pleat 3p play it would be some kind of in whistle experience in Whole Foods right like so if you're,
shopping the vitamin assortment at Whole Foods and they don't have what you want like.
That you know there's a kiosk in there and you know could that now have the entire.
Assortment of Amazon and including all the 3p Sellers and you know could be there be some incentive to ship that that product to the store that's better than shipping it to home who knows right.

[29:58] But you can see it you can imagine a play like that potentially coming in for sure agree with you there's no way they just bought these two for the real estate to convert to fulfillment centers I think the smarter people are talking about,
could it be a store and NFC not could it be exclusively NFC.

[30:14] Yeah even then I mean the Whole Foods I've been in there too pretty jam-packed of people and product it's hard to kind of see him cut enough cutting out much so that for fulfillment center but we'll have to see.

[30:25] No the only way that that works is if there are categories and whole foods that are losers in the Amazon decides to get out of.

[30:31] Yeah definition so.
If you projectus forward do you think that Colin is right and we're going to see Amazon kind as a top three grocery player in like in and let's start to kind of move the chess board around what.
What happens to SAS mean does Walmart take a run at this does Walmart do anything differently it seems like they've kind of place their Bets with the jet acquisition and and Lori and and some things are doing their densities traditional Grocers react United know you've talked on the show about cougars actually,
pretty Innovative and thinking about some different formats and things would tell us going to what you think the three-year chessboard looks like on this.

[31:15] Yeah so I think this is a giant new piece of pressure on that market that's going to fragment,
the traditional grocery market right in there will be a few survivors like hard to imagine grocery is a winner-take-all thing where there's one one National provider,
but you know they're going to be a few survivors and it's again that long tail of grocery rain that we have right now is likely to go away as all those small players aren't able to compete and so,
the young we do projections in the show all the time so I'll throw out some silly ones.
I think Walmart is making big bets in the space and is likely to be one of the winners I certainly think Amazon is one of the big three and then the big question about who the turtle in is is,
if it's the big and comment that's able to survive and hang on and that would be Kroger or if it's one of these new market entrance that's like all the yearly told it that that takes that third spot,
but I would definitely say net net this this was a really bad day at Kroger this was a really bad day at Target you know those guys were already buckling down the hatches cuz they you know they had all this grocery competition coming in the market and you know the last thing you needed is,
the world's most disruptive retailer you know dropping dropping 13 billion dollars in your category.

[32:44] Yeah that's a good Segway into kind of the next segment that I call who wins and who loses so if we think about the winners I think kind of obvious ones or Amazon one today I think their market cap went up much more than what they're paying here so effectively.

[32:59] Market cap accretive Whole Foods obviously this is a great win for them they get to keep the brand that get to keep the CEO of therein,
this like this by the best outcome for them I think they're another one and all kind of say this now and we'll talk about it a little bit later I think consumers when I think you know they're there hasn't been Innovation grocery.
For forever you know we we go to the speech place there's a an IGA there which used to be if I know more and I do like a.
Was it starts of the day you have this old timey grocery store you go in there and it's no different than our Kroger or a Food Lion or Harris Teeter or or anything like that so there really hasn't been.
Tremendous innovation in this category and I think consumers going to win cuz you're going to have more choice and.
Amazon is going to come in and really create amazing customer experiences which is what they're really known for and their lower prices sets I think you know as a prime user I'm excited you know.

[33:56] I may actually start going to Whole Foods more if I can check out faster or there's some really compelling reason to get me in there to do more stuff any winners that I didn't say anything.
Think about.

[34:08] Yeah I know I do think those are the big Winners I got you know I think there's potentially some secondary winners are some of those brands that suddenly get exposure to a lot more more.

[34:22] Potential consumer so some of those those like Whole Food suppliers that could send them now you know.
Yeah have a much more prominent president positioning on the Amazon the.

[34:37] You know again it'll be interesting to see what they do for delivery there you know could be some some winners there in terms of better delivery options and you know I think that's going to be a pretty.
Easy Segway to who the losers are right.

[34:51] Yeah and I almost said suppliers but then kind of some of the things I've read kind of say that those suppliers have had a really easy whole time with all foods that they don't really put pressure on them at all and I think those days are over so so they,
it may be let's put them on the fence so and I think they win with more distribution but I think they're going to lose with getting kind of the the cram down here that they've avoided for probably 10 years.

[35:17] Yeah although I would argue sometimes those forced to sturdy measures aren't fun and don't feel good but they're not necessarily bad for you.

[35:25] I'm sure we asked the brand that would disagree with you.

[35:29] I sold create a third category winners losers and kind of on the fence and put the suppliers in there,
let's go to the losers so yeah you hinted about it earlier Whole Foods had a relationship with instacart and,
I know that they were an investor in instacart and I don't know if this is rolled out at every store but I think it was it was pretty close and you know,
all the dish been in the data out there about the scale of this but instacart was the delivery partner and I can't really see him as on keeping that at all because they already have this Flex thing Amazon likes to vertically in a great whenever they can so it feels like instacart is you know,
Banda on the short block for getting kicked out of that it is that you agree and in do you have any more information on that program.

[36:17] Yeah I don't have any more information instacart wasn't in every Whole Foods in and their relationship with slightly different in different markets the level of integration that they had with Whole Foods for example I think there's some pilot markets where the.
For the integration was very deep the and I think they are certainly a loser,
I would almost say that there the amount they lost today is slightly overblown cuz everyone talks about oh man there this 3 billion dollar valuation company that you know suddenly,
is going to go away and I guess I would argue that I don't think they had a sustainable business model yesterday right like an.
Not creative data path to profitability you know they mainly exist existed to augment capabilities that retailers should have had natively and and you know.
Would probably going to have needed we at some point and so I'm not sure if they had a super viable business model other than 2.
Keep taking more VC money to subsidize the cost of delivery and so I think you know their problem was true yesterday they just probably have a lot less Runway to discover that that's their problem today.

[37:28] So they're winners in the Jason world short where austerity is good.
Can tell you haven't been an option or Jason.

[37:37] I resemble that remark but.

[37:40] You been on the short into one of those new Cycles.

[37:43] Oh I've been on the the business end of Walmart Bender negotiations many times.

[37:50] But yeah I think is this definitely going to affect instacart but you know again I don't think instacart was on some path to a Rosy future before this.

[38:03] Glad I noticed you and I were both mentioned talk to about getting a quote to a reporter and were in that and you mentioned Target what is being pretty heavily impacted talk us to your logic there.

[38:16] Yeah what's up there not a traditional grocery store but that was one of their growth strategies right and so big part of their growth strategies these five signature categories and one of those signature categories is called Wellness.
And a big part of Wellness was organic organic food and health food and so won't Target who made a major investment in.
Upping their presence in that that market like they do have Grocery and they they've tried to use grocery to drive incremental trips and they haven't been super successful and so again they were one of these guys that were like.
Shoot we're trying to win on organic fresh when weedles coming into the market that doesn't feel very good and then you know to have.
Amazon partner up with with Whole Foods you know really makes it less likely that that.
The target is going to win by by having these these Wellness food products in their stores and then you know we're not talking about alone on this show,
Walmart also had an acquisition today of bonobos and that you know.
That is probably not not favorable to to Target either and so Target just looks like there.
They're standing still in a world where there their traditional competitors are all making you know pretty seismic leaps forward and so that that just can't feel very good at Target today.

[39:38] Yeah I didn't know it but one of the Wall Street notes eyes I saw today said Target Outsource some of the Pharma stuff to CVS and their idea was Target should just Outsource this whole grocery kind of experiment to a Kroger or or someone just so you like actively get out of it ASAP you think that's a viable strategy for Target.

[39:59] It is possible like so again if you know grocery is super thin margins anyway and so if you're not built for those margins like you're using it for traffic and you're losing money so if there's someone else that's willing to take that over for you and you still get the benefit of that traffic and you don't have any of the risk of of the losses.
You can imagine that that being the case in.
In the health case you know Target tried to run their own pharmacies and in weren't super successful so Outsourcing them you know,
what was probably not on the world's most favorable terms to Target and you know I suspect that would also be the case if they had to have Source grocery at this point.

[40:38] How many Target stores have groceries do you do tobacco.

[40:42] I do not know.

[40:43] And then you know how big it is for them isn't like 5% temperature 20%.

[40:49] I also don't know that so I will refrain from taking a guess.

[40:54] Ducks about Kroger are they they definitely were a market cap loser today I think you know one interesting thing is if you add up the market cap from the grocery kind of category 40 billion dollars was lost today so so so not only did Amazon ad,
you know plus.
Stop about 20 billion to their market cap that they took away 40 out of the market so kind of a positive swing for Amazon of 60 billion there and quiver was one of the,
biggest losers in this just from one day Wall Street think so but what kind of more should TJ do you think Kroger is in this puts them in a tough spot.
With the same kind of logical Aldi Lidl coming in and now you have this other kind of unknown player.

[41:36] Yeah cuz I got that you know they were one of the largest traditional players in the space and that you know there they were.
Under Siege from Walmart and ALDI and Lidl and you know you could really look at what all the illegal do and say man there,
they're incrementally better than how we've traditionally done it in the US and so they're going to be a formidable competitor but.
Amazon is likely going to be an exponential disrupt or not an incremental one,
and so that's that's a lot more pressure on Kroger like Kroger certainly has made some strides in the last year 2 in digital and they've rolled out.
Quick List which is their version of Quicken correct in like 3 or 4 hundred stores and you know by all accounts it's been wildly successful but those initiatives what really good in a space when no one was making any digital progress and so you you kind of got to look like the most Progressive of the,
the traditional players and now suddenly you Dome,
you don't want that Progressive and so that that you know that's going to be tough at Kroger that's a formidable new competitor in in the space and they're the incumbent.

[42:47] When I was surprised at for Milwaukee respectables Costco I think last I looked they were down about 10% or so yeah the.
I just don't think of them as grocery because you know your.
If you think about the layout of that store maybe a quarter of it is grocery but but clearly I must be missing something what what is this cause for them.

[43:11] Yeah so you know that this gets into the definition of grocery right like so what,
what percentage of their products are at risk there the least digital company on the planet right like there,
executives are still talking about how we don't really want to encourage people to go online because we'd way rather than come to the store and you know there,
there you'll be easy to make fun of them were it not for the fact that they're wildly successful.
So you know to put things in perspective Walmart's the largest retailer in the US largest retailer in the world woman has 4,000 stores Costco's the second largest retailer in the US they have 727 stores.

[43:53] So they're there that you know they're doing well and they have a formula that works well for their their customers.
You know they sell products that are now going to be in competition with Whole Foods Amazon Amazon going to make Whole Foods better and that you know that like just has to have some effect on Costco what is interesting.
Yo Costco probably does not look at Whole Foods is a direct competitor right like both from from the the products that.
Are high velocity in both both stores are very different and the size of the packs are dramatically different as well and so the the Costco assortment looks a lot closer like Costco grocery products with a lot more like.
Amazon grocery products in terms of being cost-efficient to ship right like you want to ship the 36 pack of toilet paper not the 4 pack of toilet paper.

[44:48] So you know it'll be a little interesting if the combination of Amazon in Whole Foods means that more of those packs are available to more more Whole Foods customers but.
But I think.
At this point like I don't think this is a game changer for Costco it's just you know another aggressive competitor trying to seek wallet share.

[45:10] Yeah and then the big ones Walmart so in the Amazon deep dive we did pretty early on to remember that was owed on that one.

[45:18] I don't you should have prep me for the show we should have like rehearsal or something.

[45:23] This what happens when I do a hot take so anyway we did this episode called Amazon Deep dive will have put it in the show note so you can find it a little bit easier he was one of our first 10 episodes or so in there we talked about.

[45:38] Episode 24 Amazon Deep dive.

[45:40] Oh yes I remember it so well and one of the things you and I talked a lot about is the fact that when you just look at Amazon.
Revenue numbers it's like 160 million for this year as was projected,
but inside of there is that third-party DMV which I think you have to kind of unpack,
so one of the things I like to do is say if you take Amazon one p and 3p for this year you actually get up to 300 billion dollars and then now we're going to layer in 16,
from Whole Foods so you really have a 2017 Amazon that could.

[46:16] If this deal goes through it again this kind of enough they won't get the benefit of a whole year but think of run rates Dow BS 316 billion dollar kind of Revenue run rate company.
Walmart estimated revenue for this year is 485 so Walmart is still considerably bigger than the.
Find energy of Amazon in Whole Foods but number one if you take grocery out.
Amazon's already bigger than Walmart in the number to the disparity of the growth rates is about 20%.
And the kind of project that out not too far I think it's like two and a half years then with this acquisition Amazon.
Could be bigger than Walmart all in including grocery by you know call it so that that's.
Pretty amazing and that that assumes there's no other big acquisition no what if what if I don't know what else is buyable out there from from that standpoint,
it seems like some of these things are almost unbuyable like a Kroger I don't think either Walmart or Amazon could buy that or and it sounds like Trader Joe's and so he's other International ones are so big internationally that they can't be acquired so but even without an acquisition I think the.

[47:28] We are going to see Amazon has a shot at being bigger than Walmart by 2020 if my math holds up so is Walmart Loser on this or you know I think it's kind of overblown with what's your take on this.

[47:40] Yeah I think in the short-term like again nobody likes seeing their competitors get better I'm sure Wal-Mart looked at Amazon as as.
Like their most significant competitor and so then to see them enter a space that Walmart's enjoyed a lot of success and then Amazon hasn't had a lot of success in.
Like that you know that I'm sure nobody's thrilled that that's happening at Walmart I do think they're well-positioned to be one of the survivors so if you if you look at this move in the long run and say oh this is going to force a lot more.
Industry consolidation and only the people that are able to adapt an offer good digital experiences to their customers are going to survive and you know only people that able to offer like really good products at really good prices.
And with all these good digital touch points are going to survive you know Walmart has the resources to do all those things but remains to be seen whether they will or not.
A lot of these other retailers don't and so like well I'm sure in the short run this isn't favorable and you know I think.
They made an acquisition today and they probably would have liked a happy new cycle about.
I have Progressive they're being in digital and making great progress and buying you know increasingly bigger bigger and more profitable digital companies and I think that that news I got totally obliterated by.
By this much bigger acquisition that that Amazon did so you know I'm sure in the short run that that didn't feel good.

[49:01] But yeah I think what we are setting up is going to be the Epic retail Battle of our careers which is.
You know going to be this this Amazon vs Walmart.

[49:13] Anyone else we've left off the loser list so just a couple of throw out there I saw in the stock Recaps SVU gets mentioned a lot and I guess that's super value but they seem to be,
I'm kind of micro cap on this I'm not sure what's going on with those guys.
But they were down like 16% and almost feel like something else caused it and then a couple I thought about are some of these pure digital folks that are kind of tangential to this space Blue Apron box,
any any thoughts around those guys or any other folks you think her potential losers from this do.

[49:48] Yeah I don't know that those are like I think of anything their acquisition prospects may have just got in a little kiss right like because.
Again Amazon is going to do more Progressive things more quickly than the grocery retailers are used to doing and so even in an Amazon doesn't do any Acquisitions and they build all these features out organic.
The the other significant retailers are going to need to make Acquisitions to keep Pace with Amazon right and so you could imagine.
Amazon launching you know their own meal service and that making Blue Apron look like more of an acquisition Target now you know they're going through a IPO right now so.
So you know I don't I don't know how that complicates all that but you could certainly imagine.
You know box being a box acquisition being a defensive play to stay in the digital realm in competition with with Amazon with the you know Prime Pantry type type experience.

[50:44] Crinkle one area that I saw that was interesting and I kind of.
Talked about of the top the show is there's a couple articles out there saying that this is going to trigger this huge antitrust kind of thing and,
it is weird angle they all took was there worried about job is being cut at Whole Foods that's not really any choices about any trust as more about will consumers be harmed and I just don't think yeah sure Amazon's really big but Amazon is like.
Not even a player in grocery or.
Physical retail if if Aldi Commerce is 10% and Amazon is a third of that 10% and that's being generous if you unpack the DMV most people don't need to do that so maybe they would say 25% of that 10 billion.
Microscopic thing and it doesn't feel like there's some Monopoly being built here and even.
Even then they'll be like number 5 and groceries so do you think there's antitrust risk your.

[51:40] Yeah well so I should caviar this by saying that every single lawsuit I've been in for antitrust with a doj I've lost.
So so so take my opinion with a grain of salt but that that being said I don't think this is an antitrust issue I don't even think they're going to look at it that hard because it is the space is just too wildly fragmented you know.
You like from that you know most of the,
the buzz and the the disruption in the fear about this is not liked by looking at the numbers and adding them up it's.
By Young speculating about the the strength and skill sets of of Amazon being applied to this new category in the more serious way and you know the doj is not going to have an opinion on that they're just going to look at it and say.
That just doesn't fundamentally you know a road choice for consumers and you know therefore be bad for consumers.

[52:34] Awesome those were the the big kind of points I wanted to hit on this hot take anything else you wanted an.

[52:40] Well it's you talked about some of the market cap losers I was I took a quick look at it Walmart's market cap and it seems like they're down exactly 13 billion dollars which would have been enough for this acquisition.

[52:53] So like here's a crazy question like since people could still bid on this like.
Couldn't couldn't form Walmart step into this the the bidding like I don't feel Whole Foods would be near as valuable to Walmart as it as it is to tie Amazon but could they do it as a defensive market cap play or is that all likely to.
To settle out and not be.

[53:14] Yeah market cap it doesn't actually give you dollars to spend on something sensible apples and oranges so you know their challenge probably would be.
I think they have enough cash I think their challenge would be the creativeness of it you know Walmart is held to a very pristine EPS number and if that changes our goes down that has a much more dramatic impact on their stock than anything,
so sorry I almost think that that would be a problem and you know so so I don't know.

[53:50] I don't think that would drive it if they want to do it it's going to be up crap we got to kind of get in here and keep this a set from Amazon kind of thinking yeah I think the I think they.
I think if they actually won it would actually hurt their stock worse than what you seen because my guess would be they would have to lower their numbers pretty effectively and you know the thing is I don't think Walmart knows how to go.
Whole Foods office their playbook doesn't really work in his whole different customer but but you know so I think they're going to have to your list let's pretend they want it they ended up spending.

[54:24] 17 billion dollars I think that's going to be diluted and.
In the way Walmart get Side by Wall Street. Gets Amplified almost by like a thousand so I think they would actually lose like 60 billion of market cap or something pretty substantial if they had to come out with a pretty deleted Acquisitions or weird way,
we were played those board games where you can come like getting a 3-way trap I feel like Walmart may be a little bit of a three-way trap here if they really think through them plication of of.
Of this site if you're Amazon you may actually be okay for them to go but by this and spend more and it's kind of like a win-win for Amazon.

[55:01] Very interesting okay well Scott I have enjoyed ripping with you on the exciting news for today.

[55:10] Yeah yeah we appreciate you guys,
coming in for the hot take and hope you don't mind a little bit of extra Jason Scott show this week so we will be keeping track of this as it develops at you know where your go-to source for e-commerce news,
and this is something we'll be watching very closely.

[55:28] Yep and if you have any thoughts about the news or feedback about the show we'd love to hear from you on Facebook and if you enjoyed the episode feel free to write us a review on iTunes until next time happy commercing.

Jun 16, 2017

EP088 - PwC Partners Steven Barr and Byron Carlock

Steve Barr (@Steven_J_Barr) is a partner in the Consumer Markets practice at PwC, and sits on the NRF Board of Trustees.  Byron Carlock is a partner who leads the Real Estate practice at PwC.  We sat down with Steve and Byron to talk about the current state of the US retail market and what the future may look like.

In this interview, we discuss, Mallageddon, Omnichannel, Grocery, Mobile, and of course Amazon.

PwC Consumer Markets Homepage

PwC Real Estate Homepage


Episode 88 of the Jason & Scot show was recorded on Thursday, June 15, 2017.

Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.


New beta feature - Google Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded on Thursday June 15th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Cohoes Scot Wingo.

Scot, Steve, And Byron: 
[0:39] Hey Jason and welcome back Jason is got show listeners,
Jason tonight we have two guests on the show that are going to help us better understand some of the retail and real estate dynamics that we've been talking about here in 2017 first we have Steve bar Steve is an over 20 year veteran of pricewaterhousecoopers which I'll call PWC from here on out,
where he is focused on the consumer Market Steve is a frequent for contributor on topics around retail Brands and cpg he's also on the Board of Trustees for an RF,
we also have Byron Carlock and he is the national partner and real estate practice leader with PWC and Works close to the Steve to understand physical retail Trends and how they impact commercial real estate industry he's been at PWC since 2012 welcome Steve and Byron.

[1:28] Thank you John long long time listener first-time caller.

[1:34] We are excited to have you guys on the show and we always like to get things started by giving a listeners a little bit of a perspective about your backgrounds and how you came into your rolls so maybe Steve we can start with you you want to tell us how you got here.

Scot, Steve, And Byron: 
[1:49] Yeah it's good it's really great to be with you so I leave the consumer markets practice at pricewaterhousecoopers which includes our retail practice are consumer packaged Goods practice.
And our travel and tours and practice.
The practice includes our advisory Consulting business and our traditional audit and tax practice I've spent my entire career focused primarily in the retail and consumer space and like I said I'm glad to be with you tonight.

[2:18] Traffic in Byron.

Scot, Steve, And Byron: 
[2:20] Sure and I'm on Byron Carlock I leave the national real estate practice I came to the firm from industry five years ago.
And spent the first half of my career with the Trammell Crow family a prominent real estate family based in Texas with many companies in the various.
Real estate categories of office retail multifamily.
Hospitality industrial and then I ran three routes for a sponsor before coming to the farm.
I also lead the practice across our lines of Services of.
Assurance tax and advisory my jobs almost as fun as Steve's but I'm more the dirt guy and so I'm watching our industry go through an interesting metamorphosis especially in the retail category.

[3:10] Awesome well as the the dirt guy Byron let me kick it off to you and you know so 2017 is you've been an issue for a while and I've got a majun this is kind of,
what is the most brutal years you seen us as relates to Store retail you seen over 5000 stores announced that are closing this year we've had folks on the podcast that say we can get to 10000,
and you're in that Plies Mall closures in the 20 to 30% range over the next two years,
watch County help us frame it giving your long exposure to the market and in the physical retail side how,
what are you seeing out there is it the worst year you ever seen in and any other pontifications would love to hear.

[3:51] Sure I'm going to put it in more of an evolutionary disruption time frame because I think it's very interesting to sit back and realize.
The 90% of retail sales still happen in brick-and-mortar.
And so although e-commerce is the fastest-growing phenomena in retail it's still only 10%.
Of the total spend and so what happens in brick and mortar is very important.
And certainly worth watching and you're right the store closures are going to be big we can get 7700 somewhere around in there so you're right between 5 and 10000 and the square footage vacated you know in the tens of millions of square feet.
But what's interesting for the real estate.

[4:36] For the Realtek perspective is on that which is vacated it's an offer it's an opportunity for landlords to rehab and reposition.
Answer there's National articles you know this week in the Wall Street Journal talking about.
The mall might not have any retailers in it and some of the different uses that that real estate is finding as landlords reposition the real estate.
So I'm coming at it from a bit more bullish perspective from the brick-and-mortar perspective in that I think we'll see New Uses even though those vacancies will.

[5:16] Eradicate certain retail Concepts week we refer to sometimes as the mediocre in the middle.

[5:24] Got it 60 what's your take on kind of where we are from a 30000 foot kind of you.
It's interesting one of the things Byron and I chat about frequently is the question of whether were over stored or under demolished in life what I,
yeah and what I mean by that is there are some great properties and some great locations.
I really just don't have the right retail for for today's consumer.
Transformation there is no question and you guys wouldn't have any back on the show if we didn't acknowledge that.
There is some significant headwinds for certain retailers but we have a number of our clients and I'll lean with Byron toward some level of optimism because the number of our clients.
Or investing in some very unique properties focusing on.
Experience and press partnering in ways that might be non-traditional from a historical standpoint but really connect with with today's consumer.

[6:34] Yes what's really interesting you know I feel like I am definitely on your guy side of the fence as a pro brick-and-mortar guy Scott is really the,
the digital doom-and-gloom guy on the cough but I think even he concedes that the brick-and-mortar is going to continue to be a really important part of the mix I will say however that,
I do start getting nervous cuz you mentioned that average,
10% of sales are online in a lot of segments that are important like particularly in the malls.

[7:06] That that percentage is more like 15 or 20% and 15 or 20% feels like an inflection point when it can really disrupt a category.

[7:16] Yeah do you think we're going to see some some actual category disruption or do you think it's just going to be the the weakest players in each of those categories that that we see go away.

Scot, Steve, And Byron: 
[7:27] Steve began alluding to it's all about the experience so it's that category.
Can create an experience in a reason for someone to be on the showroom in the store and experiencing the product and learning about it then that disruption can be stalled if not why why take the time out of your busy schedule to get.
And so the consumer needs a reason to be welcomed into the store and feel as though it's a worthwhile experience.

[7:54] Yeah and I guess I would have to serve two thoughts the first would be you know in addition to the numbers you shared we're actually seeing.
Many of our clients have their. Or their their direct businesses grow.
20 to 30% in the end in fact as you both know well.
Some have even grown in the in the 40 50% range and something that said we called the last two holidays.
And you know those have come true so we're seeing there's no question we're seeing the massive shift.
The other point I would make and having listened to your show for quite some time I know when I open up the topic of omni-channel.
I think there's a lot of people that talk about on the channel and I don't think many retailers are are are doing that well.
But I do feel as if the retailers are on a continuous journey of improvement.
And some of the retailers are starting to do it well but I continue to be very disappointed with.
With many of the store base retailers often my family gets tired of shopping with me because often what I do is I walk into the store.
You know what I'm doing,
my work thinks and I walk as if I'm just any consumer and trying to feel is it what's what's that experience for me if I've done things like buy online pickup in-store and I continue.

[9:30] Be amazed at how many stores make it very inconvenient for,
the consumer to really have that buy online pickup in-store experience difficult to find a parking spot,
if I have an impulse purchase or a different need there isn't a separate checkout Lanes sometimes it's very hard to find the the,
the pickup spot within the store and so we really do need to see the Retailer's transform at the store level,
and counterbalance,
the convenience that comes with online shopping but like I said I think some are starting to do it well and others,
if they don't do it you know I think they're going to add to that list of of dead banners bankruptcies and store closures.

[10:22] Yeah it it is shocking how much bad omni-channel there still is out there I know I have the luxury of living a few blocks from an Amazon bookstore and so I'm a horrible person,
but my soda pass time when I have too much free time on my hands is just to try to go return Amazon purchases at the bookstore.

Scot, Steve, And Byron: 
[10:42] Yeah and what's your experience.

[10:44] That they don't accept returns from Amazon it's me just being mean but are there any retailers you think of that you would point to as a sort of shining beacons of really taking advantage of the wrecking water footprint and doing omni-channel well.

Scot, Steve, And Byron: 
[10:59] Yeah I can think of several I don't know if we're allowed to mention particular client names.
Excuse me particular company names but yes there are some they're doing extremely well that make sure you feel like you are welcomed into the store almost as a treasured guests because they know your time starved they know you want special service.
Play make you feel like your visit was worthwhile.

[11:22] No I mean I don't know I mean for example and I'll give you a couple cuz I think sometimes we can think we can speak in terms of examples but you know what Gucci is doing at the upper end this year.
Is a game-changer and when you go in the store and you see something you like you better get it because if you don't get it it may not be there tomorrow.
Limited production runs with the special embroidery while statements that become interesting accessories to any outfit.

[11:52] It's really a fun experience at the designer level.

[11:56] Even all the way down to HomeGoods in a perch who you go in and get to see demonstrations in the cooking kitchen or in the luxury bathroom.
And you think wow I want to live like that.
And so when you see those experiences that make the product come alive it makes your store visitation worthwhile.

[12:19] Now if it's a roll of toilet paper.
Are bath soap or laundry detergent the commodity stuff is going to be sold on price and convenient.

[12:32] An empire in what would I would add to that is you know so often when we talked about how many Channel I think there's a focus of it being.
The online transaction store but also we see some retailers doing an extraordinary job of if I'm in store and they don't have the style or size that I'm looking for,
several of the leading retailers are able to access their inventory real-time often with a handheld device.
Somewhere you know exactly where I'm shopping and in many cases you know make a commitment to me.
How to get that old to The Shopper overnight or if you're in a large urban area in many cases on same day and.
Bonobos is an example of that is extraordinary I often go into markets.
And two tours in a recent Market visit.
Explain that I was shopping or just doing the tour and what was staying at a hotel and didn't want to carry bags and they made a commitment to me that.
By the time I was back at my hotel room in Times Square that they would have a package waiting for me so I think it's important to think of,
omni-channel you know going going both ways but some some are doing it well.
But that also means then that some aren't doing it well and what's especially challenging as same-store sales Decline and there's significant deferred maintenance from Information Systems.

[14:14] And investment in store associates in others it almost becomes self-fulfilling for those retailers that just don't have the resources to get it done and that's why I think this is going to be a balance of.
The winners are going to continue to win and as Byron a said you'll being stuck in the middle or I would say you know being a struggling retailer.
Really something transformational is going to happen or we are going to continue to see a decline but I I do believe those clear winners are there there's no question that they're very bullish on,
specific real estate in specific markets at very strategic specifically.

[14:56] Yeah I would definitely agree Steve I think is you alluded to a lot of the.

[15:01] The most successful omni-channel experiences with Chompers really require excellent.

[15:09] In-store inventory accuracy in so if we see a lot of retailers investing right now in New processes and Technologies and systems to get that that inventory much more accurate so they can use it in a lot more customer experiences.

[15:24] Another Trend that I think is interesting an omni-channel I'm curious if either of you have any thoughts.
We now seen a couple retailers kind of announced that they're redesigning stores around these omni-channel flows so target has a new store model I don't think they've open one yet but that literally has sort of a.

[15:44] A separate entrance for the fast visit you no pickup Goods type stuff.

[15:50] And that entrance is literally you know more convenient and separate from the the the full brows customer and I know.

[15:59] Starbucks already has a prototype store in their corporate headquarters that's a pure Order ahead pick up in in Branch experience where you literally can't order in in the store.

[16:11] Do you see those kinds of trans catching some some wind.

Scot, Steve, And Byron: 
[16:15] And I do know they're working at work harder at making it easier to return.

[16:31] Yeah and end,
it's actually great example and the reference I made a little little more subtly earlier was it was actually you know to the Target Model by the way I would say is,
I'm in a worse thing several of the mass Merchants so you know Walmart and Target really begin to execute.
Very well in the store I think those companies would would say there's always an opportunity for continuous Improvement but I think they're realizing,
the Strategic imperative,
to improve that experience and I'm quite optimistic that the leading retailers are are going to be able to pull it off in fact I think you know I think we're going to start to see,
even greater separation but I would expect those retailers,
and a few others to to separate themselves and and and do it quite well what will what will be interesting.
Will be you know at what page can they do that because.
This isn't just about you know onesies and twosies there they're going to have any of these retailers no specific brand they're going to have to transform these stores.
Very rapidly.
Happened to listen to your most recent podcast and I think that you know the conversation around the period of time that some have forecasted that it might take to transform.
You know the Sears locations as as they close United quite an extended time arises I don't think there's enough time to do it at that pace and.

[18:05] And he's going to have to make decisions that we're going to have to accelerate this and transform the in-store experience immediately.
To continue to stay relevant to smash especially with Amazon.
And look while I'm intrigued by how Amazon is is disrupting our world.
I'm continuing to be curious at what point will Amazon be disruptive and end.
Folk music may think you know I'm a bit crazy because we've seen them as the the disruptor.

[18:43] Will the time come when Alibaba and you know enter the US market or will the time come when some transformational player we've seen it in retail and sometimes it's a very long life cycle.

[18:55] I really can't stress enough the need for retailers.
To accelerate that pace of change and even for the disruptors to continue to disrupt themselves,
so thanks for bringing up the the a word it wouldn't be a Jason and Scott show that kind of talk a little bit about Amazon let's take the angle Steve will start with you and then I want you to chime in so,
it sounds like your recommendation retailers this to innovate and stay in front and Amazon could be disrupted the what about Brands I know you guys talked to a lot of brands with what do you say to Brands when they're,
you know when they're saying hey what what should we do about Amazon and we see people that have a spectrum of their evil adult partner up at all all the way to Univera deep Partnerships with.
Curious how you advise folks on them yeah it's Steve I'll go first and Byron if you want to jump in.
The age-old question here is that that question of Channel conflict right and not only.
For for their own branded stores but in many cases for their Retail Partners from a wholesale perspective and.
I'm not sure there's anyone right answer depending on the category I get much of my Amazon information from you two gentlemen.
But we know well that as they've entered certain private label categories.

[20:26] Steve quickly gas is Amazon a quickly gained a significant market share in a number of categories and I think the the most recent Mary Meeker internet Trends presentation which was fascinating.
Was one at one of the latest examples where they talked about Amazon share with batteries and I think the other category she mentioned it was.
In the in the baby category so Brands I don't think there's anyone right answer but I think I can tell you this.
Our clients are struggling with what to do and how to do it like they're all coming up with.
Individual Solutions some are arguing that just like a regular wholesale partner and others are looking to.
Come up with unique School offerings and product that not only for Amazon but for there are other wholesale partners and then for their own branded stores.
And I think we're going to continue to see folks have that dilemma and as we know there are a number of luxury players or some.
Unique players whether it be lvmh or Birkenstock or others that have made choices of not partnering with Amazon or.
Disengaging from pretzel prior partnership with Amazon so an interesting Trends to watch but I don't think there is a single answer that it applies to any category Byron I welcome your thoughts.
No I think the biggest.
The big disruptor to watch there's Walmart I think their acquisition of and their rationalization of that business into their retail model is the game changer as a southerner you know going to Walmart as a spiritual experience.

[22:08] And to make that experience convenient.
For those that want to do it over the Internet only broadens their ability to compete head-to-head with Amazon and so I think that's worth watching and when they make returns exchanges and pick up the.
Everything like that convenient in the store think about all the distribution Outlets that they've already got on the ground in your neighborhood.

[22:34] That make that experience all the easier because I think that's the one who watches the disrupter for the big a in,
one thing I've been mean nasty from a commercial real estate perspective here in our region the warehouse kind of segment is really heated up as as e-commerce has grown it is is that a national thing is they're kind of a Spider-Man in balance for that warehouse type space that,
it's important for that that amazon-like experience.

[23:00] Yes I need for three years running in our emerging Trends publication industrial has been the leading product category and it's obviously,
driven by the demand because of because of the importance of fulfillment in the new economy and so industrial is a darling I don't see it changing and the use of that industrial space is already changing to adapt to.
The environment related to returns and so you see some industrial parks adding retail elements so,
returns of e-commerce merchandiser actually sold out the back of the warehouse.
And so it's interesting to see whether or not industrial buildings become.
You know many outlet malls in the future as of adjunct service to the customer that is.
Using the goods that are moving through those warehouses yeah we have a,
but the ability to access for the Planes Trains and trucks during the holiday season has become,
very challenging for for you know many of the retailers in MN online providers so it's it's not only a competition for the industrial space but a competition for,
all of the components of that supply chain including the last mile.
That's right that's very important to note I mean so you got your large you know million-square-foot distribution centers that can be remotely located.

[24:37] But you cannot deny the need for smaller spaces close in for last mile delivery and so the competition for four walls that are compatible for that last mile delivery is heating up but it's also using space that might otherwise be underused.
And so you're seeing vacant Office Buildings.
Turn into last-mile fulfillment centers for pickups and deliveries you're seeing self storage units.
I'll be available for you no nighttime delivery.
Of the goods from the remote distribution facility and then distributed out by The Last Mile deliver first thing in the morning.
And so the use of four walls can be fungible and I think that's one of the things we're learning about this disruption is space can be used for multiple things and it doesn't always fall into the traditional categories that we thought it did.

[25:31] Cool and then Steve one last Amazon kind of nuance see if you've talked about how they're going to impact retail and brands,
how about the cpg your grocery category you know they've they've got the ghost or we just kind of walk out with things they've got the pickup store that had fresh for a while that's in several cities they've got Prime now Pantry there's almost like eight platforms they're experimenting around so that it seems like they're pretty serious do you think they're going to,
going to start to make some inroads there or do you feel like groceries too tough for Amazon.

[26:03] I think they're going to make significant inroads in it and it's interesting I'll give you something that I'm watching that may not be obvious to to everybody but you know in in in my day,
I'm 52 years old all of the large cpg companies in my life professional Life Time opens,
I'm office is and had a mandate to be located in Bentonville and there's no question that continue to be true given,
the tremendous strength and capabilities of Walmart which I continue to believe is is is going to do continue to perform well but what we're seeing is the same consumer packaged Goods companies now.
Placing folks in Seattle and so Seattle.
Seattle the new Bentonville from a cpg standpoint for the additional Bentonville cuz it's not it's not an origin and so that's my signal to say.
Cpg companies know it's imperative.
Set the alarm with with Amazon and the other thing that we're seeing is our consumer packaged Goods companies are taking a hard look at containers and scuse sizes,
wait so that they're optimized for.
The Amazon delivery model in really far for everybody's delivery model but there's no question Amazon is is going there I saw a.

[27:36] Presentation very recently not not vouching for the numbers but the forecast there was that by,
2023 that Amazon would be the equivalent of 2000 grocery stores,
in in in the US which if you compare that to you know that's the comprable size to something like I believe a great example would be like a Kroger so there's no question.
That's there going to be a significant player it's also interesting though a little bit off of Amazon but,
many listeners may know when you you know well Lidl is is has said they're coming into the u.s. and they're going to open 100 stores in the near-term primarily in the east coast and in a very targeted area,
there's going to be continued transformation in the grocery retail space.
Far beyond just the the Amazon facts I think they'll be a little effective and some others.

[28:39] Yeah it's I think the grocery space in fresh in particular is going to be super interesting to watch because that feels like a space that no one has really wrapped up yet like you know Amazon has.

[28:51] His head the pilots with fresh for a long time but you know isn't.

[28:54] In that many markets yet we just seen Walmart put a lot of weight behind digital fresh Kroger but your point like.

[29:04] All the I think it said there's they're going to spend four billion dollars incrementally in in the u.s. to grow their grocery business and I think those Weedle stores I think the first grand openings are today.

[29:16] Down in the east coast so that seems like a.

[29:20] An area where we can see a lot of new store openings and I guess what I'm curious I've heard some people say that.

[29:28] Grocery is already more like the the density per capita of grocery is even more over stored than retailing General in the US so does that mean.

[29:39] A ton of traditional grocery is going to close to make way for these guys you think that they're going to evolve you think we're the markets going to be able to tolerate.

[29:48] All these German Grocers coming in and in serving customers in new ways.

Scot, Steve, And Byron: 
[29:54] Yeah I think my answer would be I think it's going to get to,
the in-store experience that in-store experience can be different depending on who the consumer is it could be on the value end.
Or it will be on the premium experience and thinking of,
the Wegmans of the world are the ages of the world and the Publix where you know when you're in the store is it it is it can often be you know an extraordinary pleasing experience so,
look who it is no question their razor-thin margins in grocery retail and it takes,
almost Perfection which which several of the leading players on do do quite well but that tells you though there's.
There has to be some disruption to come there,
Ellen with the growth of online whether it be Amazon or or now is the German grocer isn't and you know some of the existing players you're not done growing whether you know whether it be.
Trader Joe's of the world or some of the regional and National Brands ghetto Kroger and others continue.
To transform their stores and do exceptionally well.

[31:10] Yep I think for listeners it's going to be interesting you know traditionally the way we do retail is like the super premium in-store experiences,
what for super premium products you know so Byron mention the Gucci example earlier right in the super you know value products tended to come with pretty.

[31:29] A value oriented experiences of wheedle is going to be an interesting blend because they're a super low price points which means,
the store experience is No Frills you bag your own groceries you have to pay a deposit for the shopping cart cuz they want to make sure you return the shopping cart so they don't have to pay a guy to go get it,
but then they're going to have very high quality organic.

[31:52] Produce in there and so it it if that's an interesting interesting trade-off to say hey get the high-quality products in the No-Frills environment so I'm going to be watching.

Scot, Steve, And Byron: 
[32:02] I think about yeah but think about what you just said in that which I think Mary's with what Steve was saying earlier their systems mirror their delivery.
And so their price point is complemented by what they do versus what the consumer does in order to get that price and I'm going to guess that their systems and become extremely sophisticated on sku management.
To know what's going to sell when and so they very cleverly marry a systems and process and experience.

[32:34] To the consumers expectation because the consumer pretty much knows what that bargain is when they walk in the store.

[32:41] No and I think you're exactly right Brian Byron there.

[32:44] Probably the most quantitative retailer out there in terms of measuring the efficiency of everything.

[32:54] Tut in and building the systems and processes to be highly optimized for the experience and value proposition they think customers want so I mean the only question is going to be whether American consumers,
want with what with their offering because they're very good at delivering what they offer.

Scot, Steve, And Byron: 
[33:11] Sure it's with an contrast that with the grocery store as a spiritual or Community experience where you go do everything from your wine shopping to your Fresh Foods to that evenings Gourmet takeaway to flowers to a massage.
I think I think what what we're seeing is.
Experience offerings that fit the taste and budget of the buyer in different location.

[33:36] That makes perfect sense.

Scot, Steve, And Byron: 
[33:38] Steven know it's early yet but your your holiday forecast is widely read and can you give our listeners a little taste of what you're thinking about for holiday this year here here we are in June so I'm asking you about holiday well here we are in June and I will tell you we actually are about,
to Launch.
Are our first Global holiday survey so you're you're not asking too early here's what I can tell you about holiday in advance I it was interesting two years ago.
For our press release when we lost our holiday survey which usually comes out in early October two years ago we we had a message that said,
you know an overall same-store sales increase and I know it just simply was a measure,
did not matter and it fell flat and I was very surprised that it fell flat so last year.
We should have walked away from that but I'm going to go back to it this year because it's simply doesn't matter I'm,
I am insanely bored with the holiday forecast to come out and and,
you know it comes out from a wide range of constituencies it safe overall holiday sales are going to be up 3 or 4% because that's that's what they say every year when you deal go down earlier,
and you take what happened last holiday wear overalls you know online was up 27% but like I said earlier we saw some key players Pro.
In the 40 and 50% so I think the there there we should come up with new measures that matter and one of them will be another continued growth.

[35:17] Of online which I continue to believe will grow somewhere overall near 20% but even that is is a measure that,
blind to the fact that a few folks will continue to grow at a 40 to 50% clip with,
with their online offering the other thing is I think we're we continue to be in a mode where consumers are going to spend a portion of their holiday budget especially Millennials on,
themselves and on experience friends and family I'm going to a show,
or a concert or the like so when we think about holiday I don't think it's right anymore just to look at retail sales but we really need to look at experience and then I think we're going to,
pull into our holiday Outlook the growth of post travel airplane travel and Automobiles and so holiday now is,
a far bigger picture than just retail sales but no question we'll see significant online gross I'm a little bit concerned here in June and we'll see we'll see how right I am that retailers are seeing,
there I left and desirable results for year-to-date and that they're going to be,
very tight in there ordering for holiday ends over the years my clients you know you never know what the weather's going to be like and you never know what,
geopolitical or other events may occur but if we end up having a strong holiday but they were extremely conservative on their ordering they actually may miss on opportunities that the flip side of that is when we seen bad weather and other things.

[37:00] When there's too much than they go Promotional and they go promotional early.
It really wipes wipes out their holiday self retailers have it have a dilemma because of they look in their crystal ball you know is the glass half-full or half-empty.
And we'll see but I do feel good about digital and online continuing to lead the way.

[37:25] And I will save some of that contextual I just returned this week from the real estate Round Table in DC which is the Gathering of.
250 of the nation's real-estate CEOs and we had one presentation by a former fed governor and he said the bridge between where we are and holiday is it relates to that ending level is going to be confident.
And so when we digest what it's going to take to inspire additional confidence we have to really analyze everything in the.
Geopolitical jobs and and mood of the buyer to determine how bullish they will be come November December.

[38:04] Yeah you know what I think there's going to be another one of these interesting ones to watch I think traditionally that's always been true and the consumer spending has index very closely to consumer confidence but it it seems like we're seeing a lot more standard deviation in that that correlation the last couple of years,
and I'll be on some other things I'm really nervous about for this holiday season Steve I think you're exactly right,
nervous retailers are going to go in with tight inventory but I think one of the other impacts is.

[38:35] If 7700 stores truly close before holiday this year that means our friends at Gordon brothers are going to liquidate 7700 stores worth of inventory and,
you know that that's going to have an impact on on prices and consumer demand as we as we hit holiday.

Scot, Steve, And Byron: 
[39:00] Is you know not only the Gordon Brothers on the liquidation but for some of the,
banners and brands that are continuing but perhaps having to go to the off-price channel to sort of the,
today action Ross stores we may see some some really really tremendous deals from a consumer perspective in in the value Channel.

[39:25] And I'm sorry Byron you were going to say something as well.

Scot, Steve, And Byron: 
[39:28] Everyone loves a bargain I'll give her just reminds me of of Stanley Tangers quote years ago and good times people still want to bargain and bad times they need a bargain.
And So It Goes liquidations May draw people out to spend in a way that inspires additional confidence so if that is going to be one worth watching because I think there will be a lot of closings and liquidations that.
Put some Bargains in the market to get people out to experience those.

[39:54] Yep and I think there was one quarter Larry on that that quote though everyone loves a bargain except for the manufacturers.

[40:03] So I didn't want to change topics another topic we have on the show a lot is mobile and.

[40:13] In particular you know if.

[40:15] If e-commerce is a you know small sliver of total retail sales but it's the fastest growing then you know mobile is a small sliver of digital sales but you know the fastest-growing and you know we've been talking loud about brick and mortar stores.

[40:30] What are the things that's really interesting to me about mobile and brick-and-mortar is we've got all these consumers they may be our only spending 10% of their stuff online but.

[40:39] 50% of their purchases are being influenced by digital so they're getting used to having all this digital information when they make purchases in the the obvious way to give him that digital information when they make purchases in brick-and-mortar stores is on mobile phone so I guess I'm curious,

[40:56] You guys are seeing anything interesting happening in Mobile and you know if there any experiences that you've that you've seen or that you're optimistic about in terms of Mobile use in stores.

Scot, Steve, And Byron: 
[41:08] It's Steve and there's there's no question that the phrase we often uses is a mobile matters and,
Siena resting to Think Through the story I told her earlier in the podcast around how the stores need to transform to keep up with.
Digital the same thing is true with respect to mobile and what I mean by that is it's only,
a year or two ago and it's unfortunately true for a few retailers today where if I'm in store and I want to use my mobile device.
I really get,
small version of their website and it's not a mobile design website but the leading retailers have now taken it to one click capabilities,
and so those folks that are transforming the mobile experience I had my own personal experience where I will I won't name the retailer but I was at an outdoor retailer and the particular,
shoe was on sale I wanted to have that shoe they didn't have it in stock the sale ended that day,
they didn't have the in-store capabilities to take care of me so I wanted to buy a my mobile and I was typing on this small keyboard and it was incredibly painful I was able to complete the transaction but there was nothing user-friendly about it,
that same retailer is now transformed their mobile site and with one click and using.

[42:38] In one of and Apple pay Samsung pay type options truly I think in,
two or three very quick clicks,
I'm able now to complete the same transaction if all retailers can get to that stage we're going to see explosive growth in Mobile,
especially as Millennials and gen Z years continue to take up a larger portion of of the demographic of of the act of shoppers.

[43:08] Byron any thoughts on mobile I know I just think alongside that comes the ability to fulfill the order as promised and then make the returns easy if it doesn't work.
I think a lot of folks are still working on their systems not only in the handheld convenience that Steve was just referring to but on fulfillment and returns as well.

[43:29] Call Ann on the film inside,
there's some data out there that indicates UPS and FedEx or not able to keep up with with the demand is that something easier view of thought about and kind of corollary to that is is I've kind of been a long time believer that the Amazons eventually going to,
directly compete with those guys would love to hear your thoughts on that too.

[43:50] I think it's overwhelming I had to do a return last week and it was a rather large item and I had to get the house and I asked for the time band which is usually 2 hours and it was eight hours and I inquired with the customer service.
Representative why is the band eight hours and she started laughing mr. we've got a lot of stuff to pick up today.
And we just don't know when we're going to be in your neighborhood and I thought that was you know it was honest but it was also I think indicative of what you were saying.

[44:22] Yeah and I don't have any specific use not a specific area of expertise for me but I you know I do believe extraordinary companies find ways to transform themselves in.
And I certainly believe all of the companies in the category especially the leading players.
They're going to come well prepared for in the context of holiday but overall they're actively transforming their businesses and.
Absolutely no question.
I think we're in for front floor for quite a battle,
quitbit it back to mobile Steve the last year you know we saw for,
so two years ago we saw Africa Millennial kind of oriented folks traffic going over 50% last year we saw transactions get there for the millennial kind of audience and,
other folks are kind of the past half traffic and getting towards 50% transactions sounds like you follow Alibaba I think there are like north of 80% transactional volume coming from mobile do you think this is another holiday where we kind of Step function up,
midnighter is the US going to look different I do think we like to think we stepped up and,
I'll put a Shameless plug in for our holiday survey how about we.

[45:55] Think about getting back to you in October when we went when we haven't released but it's an area of specific Focus for our upcoming,
holiday survey which which I said it being launched and why like I do expect that Trend will be exactly as as you said we'll look forward to sharing our holiday Outlook late September early October.

[46:19] We will certainly take you up on that.

Scot, Steve, And Byron: 
[46:22] Similarly will be releasing emerging Trends in real estate for 2018 and it will have a significant dedication to what's happening in retail that maybe we should maybe we should do a rematch of this in October.

[46:36] That would be terrific let's do this until we get to October where is we're coming up to the end of the show,
if you had a you know 30 seconds in the elevator with the CEO of your favorite retailer what's the number one piece of a go to advice you have for retailers this year.

Scot, Steve, And Byron: 
[46:56] Mine would be make the visit special yeah and NN mine would be.

[47:06] Focus on the consumer which clearly many of them are doing but in the end if you're taking care of the consumer I think the rest of it will find a way to take care of itself.

[47:20] Yep and then flipping it around what about to the the CEOs of the brands.

Scot, Steve, And Byron: 
[47:29] Yeah and I'll I'll take this one first plan I would say innovate and personalize.
And I think if if they're able to if you think of the leading brand whether it be on the electronic side in the Footwear & Apparel side there's no question the leading brands that are.
Constantly innovating and focusing on personalization are the clear winners.

[47:59] I have to agree 100% with that comment so let's take it out further so we were kind of looking six months for,
what's kind of you guys have been in the industry for a while so let's project out to 3 or 5 years what is retail look like you know do we have are we all sitting in our dark basements with VR goggles on like but Jason's doing or are we know what does that experience like are drones to like dropping things we have to catch him,
I would love to hear your thoughts Byron let's start with you.

[48:31] I think there's some of that that's all I was I was at a luncheon in Dallas couple of weeks ago where Ross Perot Jr shared with us that he has agreed with Uber,
to be a pilot for their new Uber Elevate drone system which will be people people delivery and package delivery in and they'll be parking there drones in.
In in Dallas and so he feels a little bit like The Jetsons but I think it's a promise just like driverless cars are upon us,
and they'll change the way we live the way we do our errands the way we receive our Goods I don't think it'll be overnight but I think it's gradual and will be here before we know it and the groundwork is already being laid for that.

[49:16] Yeah and what and what I might add I would show you I just did a market tour to New York and visited the World Trade Center and made a trip up to Columbus Circle so that included,
the Apple Store.
It at the World Trade Center the Amazon store Columbus Circle and I live in San Francisco and in the Embarcadero Center offices.
They've opened a new Sephora store and there was one thing in common from all three of those examples stores were completely full.
And the reason the stores were completely false is because they have extraordinary offerings they have exceptional Associates.
Innovative products so I believe in three to five years the retailers that continue to do those things are going to continue to have those full stores that we saw and we're going to continue to see them being extremely relevant.

[50:16] Well guys that is a perfect place to leave off I,
couldn't agree more and it is happen again we've wasted a perfectly good hour of our listeners time,
don't forget listeners you're always welcome to continue the dialogue on her Facebook page and if you like today show feel free to leave us a review on iTunes Steve Byron very grateful for you taking the time to share your insights with us in the listeners.

Scot, Steve, And Byron: 
[50:43] Thank you very much for having us it was a pleasure to join you and I look forward to listening to your next podcast,
awesome and just briefly how can people find out more about your your thoughts so you know we talked about the holiday preview that you guys do so would love to if you direct folks there,
and any other writing that you guys do that you think would be interesting if you if you have a place people can find that where do they look for you online.

Yeah you can do that and then I occasionally contribute to Forbes probably not as often as I should but I do and I find and I do try to release retail trends,
on Twitter and you can find me on my name and then like Byron said that Peter and we have landing pages both for our real estate practice and also for,
our consumer Market practice which includes the retail practice and we'd love to hear from you directly or,
folks want to follow us in any one of those medium we'd be thrilled to the follow along with you Ausable position it's.

[51:57] We sure will until next time happy commercing.

Jun 9, 2017

EP087 - UBS Equity Research Analyst Michael Binetti

An interview with Michael Binetti, Equity Research Analyst at UBS, covering apparel and footwear brands, department stores and speciality retailers.  His coverage universe includes:   Abercrombie & Fitch Co,, American Eagle Outfitters Inc, Chico's, Coach, Express Finish Line, Foot Locker Inc, Gap, Hanesbrands, J. Jill Inc, JC Penney Co ,Kohl's Corp, L Brands , Lululemon, Macy's, NIKE, Nordstrom, PVH Corp, Ralph Lauren Corp, Ross Stores Inc, TJX ,Under Armour Inc, Urban Outfitters and  VF Corp.

In this interview, we discuss Omnichannel, Mallageddon, Brands vs Retailers, and of course Amazon.


Episode 87 of the Jason & Scot show was recorded on Tuesday, May 30, 2017.


New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this is episode is being recorded on Tuesday May 30th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot & Michael: 
[0:39] Hey Jason and welcome back Jason Scott show listeners Jason you're on the road again.

[0:46] I am I am in not Sunny New York City today.

Scot & Michael: 
[0:50] Cool well I finally get to ask if you've been to the Amazon store it's opened and there was a lot of Twitter activity over the weekend and I'm assuming that's going to be on your list of places to visit.

[1:02] It is today was my first day here and I did not make it today but I will over the next couple of days candidly,
I'm not expecting to see anything that we haven't seen in the Chicago store and in fact it sounds like it may be a subset of the Chicago store so what for a full report in the next podcast.

Scot & Michael: 
[1:21] Copo listeners I'm sure on the edge of their seat for that,
and what folks one of the topics we cover a lot here on the Jason Scott show is what I like to call mall again that's the Relentless drum beat in the last year year-and-a-half of store closures Mall closures and pressure pressure on physical brick-and-mortar retail,
top listeners understand better what's going on out there in the exciting world of physical retail we decided to go right to Wall Street.
Jason physically went but we're virtually going to take you there today on the show or excited to welcome Michael binetti,
Michael is a managing director at UBS covering apparel and Footwear brands,
department stores and Specialty retailers he has a very broad coverage universe and it may actually be simpler to list the things he doesn't cover but let me take a shot at this is a covered Universe includes Abercrombie & Fitch American Eagle Outfitters Chico's coach Express Finish Line Foot Locker,
Gap hanesbrands J.Jill,
JCPenney Kohl's L Brands Lululemon Macy's Nike Nordstrom PVH Corp Ralph Lauren Corp Ross stores TJ Maxx Under Armour Urban Outfitters and VF Corp,
well that was a mouthful Michael were real excited to have you on the Jason and Scott show exercise 3 guys thanks so much for having me.

[2:40] Cool and you are one of those rare while shooters that is not in New York is that right actually when we work at I work at in New York for a month and I'm in Chicago.

[2:51] I love to have Fellowship Coggins on the show of Michael good deal.

Scot & Michael: 
[2:55] Although you're not here very much I think.

[2:58] This is true I am not there as much as I would like to be but the next time I'm there we'll have to have you back on the show and we can make fun of Scott together.

[3:07] Good deal so before we jump into it love to get the listeners a little bit of background about how you came to the retail business can you sort of walk us through your your background a bit.

Scot & Michael: 
[3:20] Absolutely so,
quick intro on me and I want to go into research and Dustin research straight out of business school I'm about 14 years ago ready I got really lucky.
Right out of school I got a job at a big global bank UBS I've been here the whole time I started out just randomly getting a job on the consumer and Retail team as an associate on the restaurant sector but that sector didn't have enough Amazon risk for me so about 9 years ago.
Ask me if I wanted to cover some of the retail stocks and so I started out covering the Branded apparel and Footwear companies that you just mentioned Nike and Under Armour and Ralph Lauren and Coach it's been super fun in the best part of my job is.
Even though we're just grinding it out here analyzing spreadsheets and income statement I cover the consumer sector,
and not just any sector the apparel and Footwear names so when you tell people that they jump right in and everybody's got an opinion on these brand cuz we all interact with them every day and use them and I can't tell you how many times.
Ghetto people outside of the industry to try to help me out with my stock calls with stories about how many kids on their kids soccer team or wearing Under Armour and Nike and versus what they used to be so it's great everybody knows he's breath.
I'm about five years ago UBS asked me to have the department stores those guys have a lot of secular challenges today but they're still really big companies,
and it's really important where American shop for these categories and then about two years ago we had of the off-price retailers you just mentioned like TJ Maxx and some of them all retailers like Lululemon American Eagle so pretty broad coverage at this point,
we really liked at the heart of everything that's in the consumers closet the brands they buy and where they go to buy them.

[4:55] Nice and Michael is it's ironic if you would have stuck it out in the restaurant industry long enough I have a feeling the Amazon risk would have eventually gotten there.

Scot & Michael: 
[5:03] Tranchulas will get their boobs getting there too.

[5:06] Exactly.

Scot & Michael: 
[5:07] Yeah or you could have jumped to cloud computing and avoided it with nothing.

[5:14] Maybe like Logistics or telecommunications or something like that maybe.

Scot & Michael: 
[5:21] Cool what let's kick it off kind of it at thirty thousand foot level it's right in the middle of Q2 kind of 2/3 way,
done with the quarter we've seen the q1 results come out and then we're starting to see the same store sales for May so we have pretty good read on the house 17 is shaping up for folks give us a,
it was kind of broad overview of what you're seeing out there quite a disappointment.
First quarter earnings season conference call this when we heard from.
Anna management teams of these companies giving us their outlook for the year for second quarter and I would say the thing that's different is,
that they're trying to embrace him more conservative posture and realize that you know they don't know what's coming as well as they thought they had the last few years so he's learned,
and I'll from some painful quarters in retailer last 2 years it will become more conservative as they is they look at and the first quarter results which broadly,
guest in our expectations the bad internally in our own expectations on Wall Street and they've taken a pretty conservative posture,
for me the results of Ben mix a lot of these guys reported in a middle of months when they had you know.
Sales numbers moving around around Mother's Day and things like that so I think people if it's tough to say if if,
these companies are being conservative because they don't have a clear view with the calendar shifting around or they're just playing,
not liking what they're seeing and wanting to stay on the very cautious side though say in general the same-store sales outlook for the near-term and for the year have moved down.

[6:57] I from these companies as a gauge of what they think is going to be happening over the next three six nine months.
Interesting are there so if you'll hear coverage Universe who's kind of on you know I don't know how you you do your ratings but you know,
anyone anyone that you know when when you're out there talking to investors who do you usually kind of .2 is as someone that's kind of surviving or are doing well right now.

[7:26] Yeah I would say probably the best example to be in a PVH Corp which listeners may remember the old Phillips Van Heusen company.
Am980 PVH few years ago they own Calvin Klein and Tommy Hilfiger name brands that they're much more well-known for these days and they're just really position themselves well it's it's privately you know within a group.
Includes Nike it's the most Global name in our coverage of a full loan for region business Asia Latin America Europe so they've got a lot of global whitespace to attack and they're they're doing a really good job with it.
I'm in and I would say the names of this mushroom animus is that right now are very few and far between.
Ross stores at a good you know if prices everybody loves value America after all right he doesn't love low prices gas prices Ross stores and TJ Maxx headquarters.
Mainstream retailers PVH is fairly limited story right now,
pdhc sarson cuz when I think of Tommy I think Ralph Lauren Ralph Lauren you know is is not doing terribly well right now it isn't that Global diversification that they have or like what what is a dissenting apart.
Yeah, some much you know is much as you listen to me be in the u.s. here and no no the brand here it's a much more powerful brand in in Europe even than it is here and now starting to expand pretty aggressively,
into Asia for Tommy that has its Origins obviously in the u.s. in the in the 90s it was very popular and it kind of went by the wayside went out of fashion but they really restored a lot of strength to the Brandon.

[9:06] And you're up and it's really a great sound Basics preppy red white and blue type brand and in Europe is got a lot of momentum there.
Ralph Lauren on the other side I guess and tell me was coming from a lower base so you know for them to grow and succeed was a little bit a little bit easier during the most recent few years when Ralph got really big.
And really broadly distributed selling lot of similar products in the red white and blues and you know what's happening in the end markets in the Retailer's I'm right now that are.
Motion are going backwards I'm so if you were really big heading into the going backwards been even more painful for for Brands like Ralph Lauren.

[9:46] And Michael one of the things that that I've known as it sounds like in North America like the biggest compliment you give someone is that they're doing less badly than the than the industry is it.

[9:59] I mean.

[10:01] Is that right like are there any even like really small apparel brands that you think of and you say like wow they're really growing or bucking the trend or or is it like.
Just answer the universal accent at the emit the moment that that apparel is pretty tough in North America.

Scot & Michael: 
[10:16] Yeah it's more Universal than it has been when I,
first cover the sector in the late 2000 even in the recession there was there was moonshot little companies that were clearly going somewhere like Under Armour and Lululemon they were just moving really really fast,
any big enough to be on people's Radars in the investing Community is not clear-cut set subset of small Brands and retailers like that,
today the ones that are the most interesting are ones that are kind of got one foot across the bridge into.
E-commerce and digital and they're not quite big enough to be public companies yet to recover Brands let we got cover company like VF Corp and owns about 30 brands.
They're probably looking around for some Acquisitions in areas like that PVH which we mentioned before on recently bought in and online Intimates business,
True & Co which is base pay,
Mia women go on and do a fit quiz for their their bras and for some of their Intimates in and you come out of that quiz really feeling like I just retail ask me some really good intuitive questions I'm going to trust them with purchases in this category that's really specific,
the teeny tiny brand you know there are just there just aren't that many.
I'm Like You Under Armour to lose of a couple years ago that are a big enough SB public company stocks that still fit in that have very high growth rate today.

[11:36] Interesting it it it it seems like one of the potential challenges even on the acquisition front like some of the SharePoint the sort of the the pre public.

[11:46] Play the pure digital plays the revolves are bonuses or something I know they're not pure digital but digitally native Brands the.

[11:55] It almost seems like they're struggling to get big enough that they're even an interesting acquisition Target for the vfc of the world.

Scot & Michael: 
[12:03] That's a very very good point in,
analyst Urbana bus Which whichever you prefer to grab that it had and I've had a relationship with Nordstrom for a long time so some people have wondered if,
that would be something I would make a good pairing or if Knorr would want to have them in house for whatever their reasons are that hasn't even come about,
that's the kind of model that people need to be thinking of scaling it up into the Brave New World or you know verses in the past Under Armour new how to become a big brand.
Able to look at a lot of things Nike did and they had a booth blueprint a Michael Kors was able to look at.
How to say here's how we're going to do this cuz he's guys are trying to figure out how to have inventory list stores and different kinds of shopping experiences and still you don't have,
very strong online presence to your kind of wandering off into the Wilderness turn yourself in a lot of ways and it's not quite as easy as it was back in the day.

[12:57] What's that scale need to be for this may we have some fledgling Brands out there listening what what do have to be for a one of these brand houses too kind of consider you to be interesting.

[13:09] I guess there's a couple ways to think about that but or if he has since we brought them up I mean and we mentioned trueandco which is you know,
TVH didn't mention how big it was my son says that is very small they characterize it is in significant earnings of a really that was a very small acquisition but they really wanted to latch onto the technology and the expertise inside of that company and frankly if they can.
Take what they learn from that acquisition and use it for Calvin Klein's women.
Intimates business and lay that Big Brand on top of a new capability while that that could end up being a homerun for them for VF Corp which is a much bigger.
Company uses the last big acquisition they did was Timberland.
And that was that years ago and why the big gap is now they said look we really,
find something at the billion dollars and revenues are bigger we really want something that'll move the needle it or company that we can sink our teeth into and those billion dollar Acquisitions have proven very hard to come by.
So I wouldn't I wouldn't be surprised if the industry shakes out and start settling on things closer to the three four hundred million dollar range on as being a very you know good sweet spot even the ones that thought in the past billions Where I Wanna Be.
2000 scale or business.

[14:23] We seeing some other segments where you could just pay a billion dollars for a company that's probably only worth three or four hundred million to get there too I'm not sure that's a good strategy but.

Scot & Michael: 
[14:32] TV tray you be trading some balance sheet flexibility be paying up for a brand and I'm to try and bolt on some earnings in that case and,
can work your benefit that's about on yourself and your board of directors like letting you down on yourself you know,
coach just bought Kate Spade in a lot of people's eyes are very similar Brands if you peel back the onion a little bit there fairly different cake too much younger brand and Coach to set look we think we can run this better we can put it on our supply chain.
We can use our big Global Assets in China to to Really tap into these guys opportunity fast coach the thinks they can take it and they can extract or any doubt of this fashion the company could on a standalone basis.
So you know definitely there's people out there looking for a particular environment to your point earlier if it's very very tough out there and the guys,
we're feeling most comfortable with as stock Investments are the ones that don't necessarily need the economy to get better the consumer to get better for the stock to work they have internal projects like,
coaches. Cuz they have to work on and pound some earnings out of that even if the consumer is pretty tough.

[15:41] Sure what are the things we hear from a lot of the traditional brands that have big investments in brick and mortar is.
You know the beat the omni-channel drum they like a one of our competitive advantages is going to be on the channel and and you know there's all these unique advertising and customer experience advantages around,
having physical stores super question,
do you buy into that do you do you feel like there is a potential competitive advantage in having stores and if so are there any brands that you think of is doing.

[16:14] Omni-channel particularly well.

Scot & Michael: 
[16:17] All those two answers to that there's there's the guys to have a lot of stores today that are saying you know stores are in advantage.
But the reality is they probably need to go backwards,
start app like you mentioned a couple of us like that it don't in stores today that don't have to distract themselves it how do we sublet these things how do we sell real estate in monetize it over the next two years they can just say look like we starting from scratch.
We don't want to get you a thousand stores you want to get to 100 and that's a much cleaner path forward those are most of those are small company.
I'm not as far as I think the second part of your question was just in our they was it are they good yummy channel breaking motor guys.

[16:57] Yeah or is there any particular brand you think of his being better than the pack in terms of of leveraging those stores for a competitive advantage.

Scot & Michael: 
[17:05] Yeah I would say that the sum of the,
teenage brands that cater to a customer is a digital native and her much more digital fatty Urban Outfitters has a very very big e-commerce business I think it's up over over 30% which would be at the high end of,
of the group that we cover one interesting little fact the way was I think American Eagle asking no smaller,
Henry Taylor in the malls in the US on their first court all I think they said that.

[17:37] Internet penetration as a percent of sales was up something like 700 basis points year-over-year.
And I know just from listening to your show you know the average for overall retail in the US much less the apparel sector and much much lower in that so that's kind of a.
Now that's kind of a heart-stopping comment when you hear small retailers hitting that much of their traffic Move online obviously speaks well to how well they're doing.
I'm sure digital business but I'm fat that's kind of datapoint the stops if you cover your socks like I do to have several hundreds of thousands of stores at that kind of day point makes you stop and say well where where are we really headed here.

[18:14] Yeah even if you're starting it even if you're starting at a really nice and base that's a big number so.

[18:22] That that's very interesting one of the the.

[18:27] Certain narratives you hear a lot speaking of eCommerce and and seeing it get bigger for some of these these retailers in the e-commerce industry the story is All oh well the.
Apparel is in the tank and department stores are going away largely because of.

[18:44] Of the shift 2 online buying right and inside that you know the digital guys are convinced it's that that that's really the Big Driver and you know they're these Church floating around on the on the internet that show sort of you know.

[18:58] 20 years ago department stores being 10% of of consumer spending and other down to a couple and and you know 20 years ago e-commerce was 2% of consumer spending and now it's up to 10 and so it sort of looks like they flip-flopped and you could say oh well.
That's where it went but then I know,
you you look at all the growth in those those discount stores in it you know that they've taken a bunch of market share from someplace and so is I'm guessing the answer is both but do you have a.

[19:24] A sense for.

[19:26] For where the consumer is Shifting is it going from from brick-and-mortar to digital or is it going from full price to off-price what's the.

Scot & Michael: 
[19:35] I mean both of those I would say those are very much both themes in a very both very very powerful obviously he Converses you're suitably powerful but if you look at if you just look at it.
Big off prices you think about TJ Maxx and Ross and then Burlington which is gotten to be a bigger business your last few years and just look at what those those companies percentage of total,
us consumption in in the apparel category.
Can you look at the period before the Great Recession and there was kind of humming along as a small percent of the total industry and then when the recession hit it was just unbelievable ramp.
Kids coming out of college with no job so maybe in the past they would have said to themselves you know I'm really a department store Macy's or Kohl's person.
Yeah that's where I go to shopping and maybe TJ's like out of a secondary.
Destination for me those days are over when you come out and you are on it an unbelievable budget that you never thought you'd be pressed to and and it became a very primary,
call source of the primary destination for parallel for a lot of those consumers that were really stretched and you just saw the numbers hit the ramp and then the recession ended and the consumer just never left those stores.
Today just kept growing boxes and it seems or sales growth I'm in there just in boxes that's been way on top of what the industry Trends are there,
Panther outpacing the department stores by anywhere from.
606 10 percentage points as far as their growth rate every quarter that goes by at this point so that is you know it's not e-commerce which is the sexiest thing to talk about.

[21:13] But it is a very powerful value equation and drives a lot of customers into those boxes on eCommerce is obviously the other one.
And if there's different in again within my group there's the retailers that have to deal with their traffic being down significant amount and the Brand's figuring out look you think the consumers to once he's products we just got to figure out how,
give it to them where they want to buy them and that they should be in OK shape longer-term but there's still it's not it's not a graceful transitional put it that way.
When did ironic things about that is the Discounter is usually don't they under index on eCommerce so you mentioned like some of them all bass team folks are kind of in the thirties my understanding is department stores are pretty anemic when it comes to e-commerce.

[21:58] Yeah I think they're around there many many years behind and again they're trying to they're trying to retrofit Legacy assets that were built to,
yeah I have back rooms and some consumer and some customer service people on the floor and cash registers to trying to retrofit those things to be able to ship from the stores make their inventories more efficient,
yeah I think.
Tell very well aware of the situation they face trying to make the generator return off those old assets but if they you know if any one of the executives in these businesses had to add it to start over if you ask him how many stores would you have old you differently.

[22:36] I know you hear a lot more discussion about building for the digital future from the ground-up hope there's no doubt that in their DNA and in their hearts they're very much trying to figure out what to do but I do know that it's obvious,
just from looking at stock prices as a scorecard that it's here at your at a generational change in the pressure on that on that category right now.

[22:58] Yeah I mention of the top of the show the mall again,
you know there's there's been this I just read an article today that was on Business Insider that you know there's 3600 store closure so far this year and they I think they just straight line to that and they said all that equates probably 10,000 this year,
do you have a model on that or like what's what's your point of you of your how bad is it is where are we are you know your Chicago and saw use a baseball analogy is this like just the first inning of this whole thing are where are we in the,
the stretch what's going on here I mean for sure,
Helen am I working on getting the department stores under a lot of pressure but they're still the center of the Wardrobe for a lot of,
in the Middle America if you look at them as like a Bellwether you've had Macy's come out and say we're going to.
Close 100 stores you that JCPenney come out and say we're going to close 138th and Sears is not a stock to recover their closing a bunch of stores.
I'm struggling for a long time so you look at those you think about with those malls are going to do in the Macy's drops off the end of it you know.
We're not even close but not everybody's announced.

[24:08] Got everybody say after first quarter with just a little. Time to judge you know we have to bunch of these retailers have you noticed any impact in the malls where.
Macy's or JCPenney went away and I say you know probably not enough time somebody that won't we can probably fast forward for you what's going to happen in that mall.
And they just know it must sees companies have not yet,
straight down analyze the data on come out to their investors and say look here's how many stores we're going to have to close based on what's going on base and all the traffic going to e-commerce based on our co-tenants me Smalls going away so there are there are.
Hi Times of closures, I mean the article you read today.
I wouldn't be surprised as a very close and and frankly even for Macy's and JCPenney the world that is in town so many stores,
to tell you what they think they need to do today based on the situation that's still a moving Target I've you know I've no doubt in my mind they'll be closing more stores on as time goes on.
Interesting Lee when we talked to retail experts about it and say you know Macy's going to go from.
Call middle 700 stores down to Mid 650 store that I don't mean to pick on Macy's just that they're good bellwether,
how did they know that's enough and do you know what an organizational undertaking it is to close 100 stores and so.
You have a wanted to see Penny 1000 stores wanted to.

[25:38] It's so physically hard I mean employment lawyers in the retail industry to go through each store and figure out how to unwind a very old lease agreement how to,
I don't mind the coach energy cause you have a lot of these malls at Macy's goes away that lets store like the gap.

[25:57] Abercrombie look at their lease and say hey we sign this you know under the agreement that you were going to have a Macy's here and look I'm going away we don't we can get out of this lease right it's it's a very very very much of a.
Spider's web gets kicked off anything start,
I'd no idea I had for bigger numbers explain that a little bit more so I'm I'm I'm in e-commerce guy so the co-tenants he thinks it sounds like what you're saying is the anchors they have their deal with them all but then like the small stores they have some way of attaching and saying,
alright we'll pay you this rent but we want that anchor to stay is that a pretty common thing and,
it is if they look at them all they say look them all desirable times has the set of characteristics they're going to want and I'll population surrounding them all within 20 minutes drive time to has so much in so many over 100,000.
Income household incomes when you look in the mall and a market that's got to malls and one of them's older mall like if your coach think about it you say you know.
Honestly you so agree to these terms that are at the top of the industry for good amols on rent but you know it's it's contingent on it being enough demand from consumers over time.
In that mall and one way to become lock that in and she say what we want co-tenancy with.
Call or some such as the following ten retailers and we want to see an Apple store they're going to the store that because we don't go to the store we don't go and open a Coach store in the mall.
Populations moved on and all the guys in a nail salons and ice cream shops left it there by such a way of protecting themselves so.

[27:31] When you go to say we're going to close on you stores boy there's a big group of people at the table for the sit down and stare at you know the Macy's closes.
How many retailers it triggers Arco Tennessee cause it allows them to get out of here allows him to move 10 miles down the street to the newer shopping center that got better traffic or we can renegotiate the run slower.
Turn down if we don't try to keep them it's just he becomes a very complex process and lots and lots of hands are at the table during those discussion.

[28:02] Do you have a estimate of how many malls will close if if you're if you kind of think 10K is directionally right on stores do you guys look at kind of what them all Impact is.

[28:13] You know our retail experts that we lean on to help us was thinking through that pointed to the maybe twenty 30% of the malls in the US eventually rule will go away.
No time frame on it cuz it for example we hosted we hosted a dinner recently with a couple of very very prominent experts and in.
Real estate in retail real estate II said just as an example and its much-talked-about you know if its ears was to end up going away.
It would take ten full years to repurpose.
Chose those Sears boxes is Sears literally just went lights out at some point and I don't have a view on whether they will but if they literally want lights out.
It would take ten full years to sit down store by store and say what is this community need.
Can we convert this into a Cheesecake Factory can we turn this into a bowling alley return a new brew pub.
You need to be a call center Industrial Center or does it just need to be pulled down so it can if there's going to be.
A lot of in a one-off evaluation what to do with each of these at the end of the day I wouldn't be surprised to get the 20 or 30% of the malls and not the numbers you were talking about.
Call now to include things like obviously Sports Authority went away last year I put some of those stores or not,
yeah those are all there's a mix there it just kind of put some balance on it 20 to 3% of miles how many malls are there in like fifteen hundred miles are in.

[29:36] Yeah I've heard numbers like that it depends on how you get into definition like cold as a retail recover them they're largely off mall that there any power centers that include,
you know a Lowe's or a Target or Best Buy a lot of times it's you know that the numbers changed a little bit depending on how you define it but I would say 1500 gas,
so 30% would be like 500 Miles closing or some some period of time down the road.
And probably several hundred of those you can't even if you live near one you probably forgot it was there like there's some pretty old real estate there.
So that's pretty gloom-and-doom any any Silver Linings in there you know I think that you know in.

[30:17] I think that I'm not a Retailer's is Dad kind of person but I do think we need to know.

[30:24] Total industry store countdown much much lower before returns in margins can stabilize on note from a lower base of assets from smaller number of stores I'm so I think that.
Who's going to be on right now on the retailers too.
Remove a Crosley to reposition themselves to be able to kind of work through some of what's coming so next year's is a consumers continue shifting online,
equilibrium of stocks will have a little bit easier time Brands like I said though the brands are sold within those part of it right like you think about.

[30:56] You know Macy's or even a Sports Authority or Footlocker there's a lot of businesses selling other people's brands.
And then you Grandpa Foot Locker Nike and Adidas and Under Armour they went and built big strong Cool website for the last five years -
Question exist before she's got a brand that are sold inside your boxes.
Available to Consumers elsewhere in some situations you going to work through that you can see some natural advantages for the Brand's who they don't have to worry about.
And taking down all these brick-and-mortar that they set up over the last hundred years or whatever might be but they got to figure out how to get there.
Product to where the consumer wants to buy it and big size and Ricky in in Europe they've got it.
Big online retailers that are not cold Amazon believe it or not and they got like a midday so since the londos and things things that are.
Call different names and Amazon it's not everybody wants to shop for everything on Amazon we don't really have any that's not have any public companies to cover.
In better just retail apparel apparel and Footwear retailers online so that it's really about just figuring out,
Mia where the consumers going to buy these products in 5 years and frankly that's the that's the question that would Flomax these Brands the most right now if you ask him the very simple question to a Big sophisticate Brand company,
just say hey you know right now you're sold in everyone in Macy's doors or everyone of.
With some other sporting good stores stores where is the consumer going to buy your product and five years.

[32:27] Is it surprising to hear unsophisticated of an answer you get from some people and it just tells you the very smart people I really don't know exactly where the ball is headed right now.

[32:38] Yeah I mean it is the obvious answer for those brands that they have to go direct is that what you're saying or what are the answers do you.

Scot & Michael: 
[32:49] Some of them well yeah they should all they all have to have a direct there's no doubt about it you're your own website.
Will be worried you know you have to skin the game to leave the Retailer's to show any third-party retail if your Nike you say look we we showcase this product this way it did really good here's a bunch of the day to behind it,
let's build out some things on your website to maximize this opportunity came along I'm use it showcase your very best product you relief pentacle.
Product you can use it to Showcase a very wide array of your product and then you have to go out to the brick-and-mortar world or to the.

[33:28] Together by retailers any other thing with the product you got to make sure it's not the same,
your Nike exercise shirt at Macy's that it is a Kohl's that is a JCPenney's got to be different product and consume any to get different things in different places so that it does you know I think the next five years will be easier for the brand cuz you don't have to deal with,
they're not they're not free of things like that is scratch your head about and say okay this stuff is quite a bit of burden to us do we go to Amazon do we even go.
A lot of a lot of the concerns they have at Amazon today or concerns they had with other blank you know insert name of huge retailer from the past.
Hanesbrands recover they they've been dealing with in Walmart's temptation to want to carry this very strong brand at a lot of mericans like on their shelves.
Same time it's really profitable for Walmart to go manufacture their own private label underwear and put it on the Shelf next to Hanes you know Amazon a lot of problems and concerns they have about going in the Amazon and what it means for them,
not exactly brand new to them but it is the next round of old retail problems.

[34:32] Yeah that it's interesting so you know we've had a lot of brands on this show and obviously a big topic for them as is going direct like it feels like one of the big impediments to go Hinder.
None impediments but downsides to going direct for them is they sort of benefit from the in efficiencies of the wholesale market so your your Nike and you you come out with a new skew and before there's any consumer demand for that skew.
All the wholesalers have to buy enough to fill all their shelves and so when when your distribution channel gets way more efficient and you're you're selling through Amazon on Demand or through your own website on demand.
Suddenly you're not selling those shoes until the consumers actually want them so that feels like that's a little bit of a challenge on the brand side and then.

[35:17] At the same time those wholesale retailers are looking at their future and saying.

[35:21] Shoot there aren't going to be a lot of middlemen in the future if we want to maintain a relationship with a consumer we need to build our own Brands and it seems like we're watching a lot of retailers.

[35:32] Can a moving beyond private label and trying to build their own aspirational Brands and you know you certainly like Amazon's got a full complement of a of.

[35:41] New apparel Brands but you also see.

[35:44] Target and you know rumor BestBuy rumored Walmart Acquisitions and all these these.

[35:52] Traditional wholesale retailers look like they're investing in the brand space are we on a collision course.

Scot & Michael: 
[35:59] I guess I knew problem you know I'd probably half of the products sold at JCPenney or Kohl's or private Brands private exclusive brands with a new design and develop in house so it won't be a new problem.
But it's same time as you know I just have a natural bias when any company brand or retailer tells you here's this thing that we're going to do big part of our strategy and our growth and.
Top really that related to what amazing at it's an encore saying we're going to do great and I got to develop.
Luxury an aspirational brands in here.
Hodges Companies got a lot of expertise in real estate selection and product you know procurement and interation of really cool questions of apparel for consumers all the sudden we're actually design and now we're going to find,
relationships of factories in China to do this efficiently in and build sourcing offices on the ground neck it's a tricky it's a tricky game.
The brand that there is Thursday you know Karen the stick to going to going to rock you on all the retail you own all the pain there's a lot you can make a lot of money if you your Nike and you sell a pair of shoes through your own website and it really efficient,
and I really high price points and don't have to mark it down and sometimes that can be for example higher than you would sell it for at Footlocker or Finish Line and that that's great and you get all the rewards right what if it's really doesn't sell,
you get all the pain,
there's no one no one to share the pain with that scenario a lot of these realities wholesale Brands If the product doesn't perform they'll go.

[37:37] They'll go back and it'll go back to the Retailer's know if they will offer you some money after the fact to help with marking down the product I didn't perform it will take them back when we Tire Factory Outlets will clearstone some through spell for consumers don't walk in here and see,
stacks of shoes or shirts on sale and start thinking bad things about our brand on the brand want that either.
So yeah that's when it kind of comes to Village and everybody's got a vested interest in not having a leftover inventory they didn't perform laying around.

[38:04] For sure I feel like some of the other.

[38:08] Challenges you hear about apparel brands in particular is I've never to bunch of times that,
did the trend is just that apparel like good apparel Casa lesson so you know pretend to be the consumers buying as much apparel as she ever did but it just.

[38:24] Cost less and therefore less Revenue to those Brands than it used to be as by chains get more efficient to manufacturing gets more efficient than all of that is that a risk for these apparel Brands is that they're there a RVs are just going down.

Scot & Michael: 
[38:40] If you look at your point earlier about near the off-price there's our who Pride themselves on having product if you're 60% below equivalent product at department stores they've obviously occupied a lot of the incremental.
Retail square footage in the country over last 10 years also you've had names like H&M.
Zara Zara in a new one if you start a Primark is coming over from,
call from the UK there you know to start a build stores on the East Coast never even lower price than any of these guys is if you think about it all every square foot of retail that's being added in the physical world and in the US,
is charging lower prices than the square than the square footage that was here before there is pretty consistent downward.
Pressure on on pricing and its industry.
Overton over time these brands of been able to manage it when you have things like a big shock to the system like,
Manufacturing in China and currency goes one way on you and all the sudden you're buying things a lot more expensive than you thought you were when you build a factory there then they can't really keep up,
with some notification Airy pricing on Apparel in the US over time in Spanish been okay but if it's not a,
can a great situation to be in when your ear pricing mechanism is going backwards on a consumer's,
Sesame looking over their shoulder and saying look I can get this you know whatever Levi's are Skechers shoes whatever it is I can get these at TJ Maxx and Knots last season's.
Product but it's so much lower on price point than enough going to win the day for me as that wind of my purchase.

[40:15] Yeah I got it and then I guess just one more on Brands the other thing you here is that the,
just the basic model for creating desire for a particular apparel brand is.
Dramatically getting disrupted right and so you know that you hear the old model,
tell it you know yet the merchant princes the Mickey drexler's or whatever they decide what's going to be hot and they they.

[40:38] You know go to Fashion Week and show that stuff and it takes him like nine months to get those products into the market and everyone buys the same thing because it has the same logo on it and you know that these days,
it's a lot more likely to be some micro influencer on YouTube that's that's driving demand for something you know in a much shorter turn then then it is Mickey.

Scot & Michael: 
[40:59] Yeah that's a great Point example of Mickey Drexler J.Crew example,
they own all their own products or they can say this is catching on Fast let's go quickly where's you think about the relationship you point to before with Leica,
Ralph Lauren in the main cheese or Calvin Klein at Macy's so much can speed up when there's no more people in the decision-making chain so there's advantages and disadvantages to being able to speed up and Chase Trends these days and say that.
There is a degree of every brand that opens their mouth and retails up in their mouth they've got a speed and issues going on to try and speed those things up to chase Trend faster I'm to your other point and back in the day what you know what you want to say to wear until I was cool as what.
Okay, cuz they're good Dell Latitude to a good people at Macy's,
found the product they brought to your town in the stores that and I'll meet you looked at it said that's an aspiration purchase me this when I want to look like it's what I want people think of me when I dress and.
Remember being a kid and you know we had to go we had to go on vacation California for me to get a pair of vans that I saw in a movie on some guy or something like that right like those days are done.
So now your point see somebody I didn't scream she somebody music video she somebody on YouTube that's an influencer or so you know like coach just signed Selena Gomez one of the most.
The highest Instagram following as you can imagine the amount of viewership that they get by going through her and is also.

[42:32] And with younger consumers there's a bit of a bit of social currency that happens within the first kid at your high school to show up at the party on Friday night with some Brandy song.
Funny YouTube clip in the background and you know you figured out where to find it if some small retail in California on the internet and how to ship to you and I was yours you found it in your first and you want when call that social currency.
I'll be in the first one to find that those kind of things just did not happen,
15 years ago or more so for sure these things are changing very very quickly it's a whole different mindset than one old Merchants who used to really do a great job of picking out very good collections with her own for 12 people.
Thought about it some it is very different than it was.

[43:13] Yeah yeah God bless Sean Penn for wearing those vans in the Fast Times at Ridgemont High.

[43:19] I'm tracking you know one of the insightful things I heard recently and I wish I could remember who I first heard it from but they were talking about that,
Instagram problem and that like in the old days you were you know if you were a kid in high-school you were one of two hundred or maybe even one of 2000 and you know it was possible to be,
pretty unique by just getting to a good store and you know spending a little bit more for the the premium product or whatever but but.
Trying to be unique amongst your your pool of 10,000 Instagram friends is a is a whole new level of Challenge and you basically can't do it in a mall.

Scot & Michael: 
[43:59] Yeah it's pretty tough now it's um.

[44:02] Yeah I'm a girl and going to school and then in the very clear Trends just ran through your school like wildfires like if this was the aspirational brand if you remember some of the Brand's eighties and nineties that ran through like in big big size,
as friends you know like we just had a big one was already we still have on with you know with Adidas selling their very old decades-old 30 year old,
Superstars and Stan Smith every kids got have a pair and I was like a clear,
old school trying to me like I just came through and that's what everybody wanted that's how I used to be those are getting fewer and further between it's much more and micro merchandising and individuality.
You know the formula for that is really not you know going to your traditional department store,
and seeing you know what they got in in the stacks and racks in the stores he's this what num,
one follow-up on Canada brand topic,
what do you think the answer is in five years where is the consumer going to buy your product what brand and I know this isn't your business but if if you left Wall Street and went into Consulting and you're you're sitting there at McKenzie or,
what else kind of Consulting places and debris and asked you what what what you think the answer is.

[45:18] I do think we need I think we'll get to a point where there's going to be some platforming I think that right now if you and I wanted to go start a brand today.
Very affordable relative to history to do that to find decent manufacturing capacity and in Asia or elsewhere bring it on to the US stores to get good distribution from.
Yeah most of the digital native eCommerce sites with you know that are.
Trying to be better brand your good best in the inspections good better best trying to be better and best there still you know they're still fighting for their namesake as well,
so you can probably find pretty good butiki at distribution for a brand right now if you're a startup,
no good better better best friend though so that guy was his barrier to entry right now is fairly low but I don't think it stays well I think it's going to go up I think it's getting and he's getting harder to compete I'm priming,
everybody walking around with them all in their pocket these days straight you don't have to walk in the store and haggle with somebody I know the lowest price immediately thanks a lot to hear your good friends at Amazon I know the lowest price that I can find this thing on,
quickly and I walk into the store armed with it I think it's going to get harder and you're going to see you know prices continue to compress and I don't know if manufacturing of it cheaper or more expensive but,
listen to chasing low-cost manufacturing overtime,
then you go through some of the things we were thinking about early in the year were a lot of these stocks got hit really hard when there was talk coming out of Washington they were going to put a tax on the border well guess what industry Imports just about everything.

[46:51] From across the border to these stocks got hit really really hard.
I'm at station one that was like a primary conversation you think about that and I think you're going to get to a point where you going to find more these brand saying you know what,
I want to get myself attached to a big supply chain like a VF Corp mph owns a basket of brands are coaches now certain owns and Brands I want to leverage their manufacturing efficiency,
relationships in Asia there and branding internal consultancy whatever the hell you know if you have courses very good at building,
you have them on the show before like North Face and Timberland and vans they're very good a Consulting these guys on on their marketing strategies in their distribution strategies I think the value of that is going to go up.
I won't be surprised they're still companies of some size but I wouldn't be surprised if you see much more fragmented apparel and Footwear Market going forward.

[47:45] Got it that's a good Segway the you know what kind of nibble around the edges and it wouldn't be a Jason Scott show if we didn't spend a fair amount of time directly talk about Amazon I realize they're not in your coverage universe so I'm not going to ask you like Eva. A three decimal places or anything but,
you know how from,
The Winds of your coverage Universe you had kind of Macy's probably 3 years ago Terry Lumber and kind of famously said oh good luck and apparel you know you guys won't be able to,
deal with returns without having stores and now that that that turned out to be a bit of a bad call are these guys still in denial about Amazon do they have a strategy or where where are retailers when it comes to their their Amazon strategy.
You know there's been a lot of turnover among Executives in the space lately and one of them on our way out the door actually said to me recently.

[48:35] I sexy and I probably a lot of headaches and over next few years probably retiring a great times I like that,
Amazon the competitor to corrected me on that answer you know or Amazon is just you know if you think about your Harvard case study were the four drivers of consumer purchase and think about how big convenience is in the fact that everything can get delivered to you.
Today's our last now that's a real kick in the gut have to deal with for anybody so I would say though I don't think Terry was,
strong though I don't say no I think that the consumer does like having a place nearby to go return things and you think there is value in brick and mortar it doesn't look like it and looking at some of the stock prices in my group.
Because they're all got to go from a lot of brick-and-mortar to a lot less brick-and-mortar but I do think there's value in store count of a certain size and then there's a lot of.
There's a lot of reality in in his comment that you know about what Amazon has been are not going to want to deal with and look they're not going to go away it's a high margin category and you can make a lot of money on it but.

[49:40] Right now if you look on their on their website it really looks like it's it's much more focused on predictable.
Inventories and in categories that are more basic that they can look at and say we know with some certainty,
how much is it going to go out the door and it's much less in categories like you would expect to see at like Nordstrom,
make an example of those guys got a nail fashion every quarter it's like we're a very fluent person who cares a lot about this season,
does the shop for their clothes and when that stuff doesn't sell,
spring they got to sit down and come up with a markdown strategy get it out the door figure out how to work with friends to you know move product Crown all those things that's a whole different part of retail and just figure it out you know,
predictable inventory flows and categories like you're basically vies jeans or basic hanesbrands,
underwear and t-shirts and stuff like that but a little left over at the end of the season,
coin in Iran this a Tad earlier but I want to drill into it you've you've done some really interesting research on you know what,
lbrands dagradi Amazon be kind of the in your coverage Universe you have the book in so you have Under Armour who is dramatically embraced Amazon and you have Nike that's essentially shunned Amazon yeah what.

[51:00] Where do you think bran should fall on that Spectrum or you know what are they talking about what are the kinds of topics that the brands are thinking about in this hole kind of Amazon dilemma.

[51:09] How's it going question we do a lot of work on that and talk to a lot of people in the Amazon ecosystem on that at the end of the day in this category would specific is Brands care the most about what their product.
Looks like and and pricing of spray there because our pricing but.
I want name brand but she go on Amazon right now and search on one of the Brand's I covers very very.
Basic product and is it in one of Ryan's doesn't have a relationship with Amazon the search that it comes that comes up on Amazon is,
it won't take you long to realize that is not what that company wants its product looking like a lot of it is like doo took a shirt out of a box,
it's like rain cold and they just threw it on table and took a picture of it now it's on Amazon instead there's a lot like there's not like a wrinkled shirt.
I am at the top of the searching right so.
Those are the things that these Brands care about like they need to inspire you to like live a better life by the clothing that you wear and that's what he seen all the Billboards right and that's not always reflect and I am so,
that's what I'm thinking about there's trying to think of it then you go like I'll call it out because it's writing it down really nice job but like Levi's,
research on Levi's on Amazon and you click on the red Levi's logo itwist you away to a virtual Levi's shop and shop at Scot.
They're advertising campaign videos that they created at Levis that show the product exactly how they want on their models you put into the product full size runs full color runs it's like you know you're actually dealing with like.

[52:44] Hundred percent legitimate Levi sales and leveraging all the great things about Amazon same time.

[52:50] That's what all the brands are trying to figure out now I don't know if if it is Levis just happens we first there because they cut some kind of a different deal or accept less profits upfront or anything like that but,
they're in their first brand of the great example of really doing Amazon well in the consumers us,
consumers I think everybody wants to figure I will have to figure out how to do that,
eventually because look there's not a lot of transaction growth in the US you're either talking to folks like you J Max and Rossiter.
Drawing category you talking Amazon if you want category gross everything I have to wrestle with this eventually.
But those are things that they care about the most and probably the things that you know the only sit down to table impound out fama's on the most of the next few years,
yep and then I'm by no means a fashion Guru but I figured you'd have a point of you on this they just announced today that they've hired,
I'm going to totally butcher this but Christine Beauchamp is that it,
and I think she's been around a lot of your coverage universe as kind of a well-known fashion executive Williston It Ralph Lauren and other places maybe Jason,
nose better not do that is that a what's that mean to have her at Amazon.

[54:03] Go to the point of seeing when I said earlier that they're not going away in this category and there's some things that there maybe not the best at.
But in no way should anyone expect them to go away they're going to keep investing in it I think they bought a full.
Square Block in Brooklyn to build a photo studio for their apparel business a few years ago and I remember riding around in cabs in New York and half the taxis in town had a Amazon fashion.
Advertising on the top of the cab there you know you're not going to go away I don't I don't I don't think I was foolish enough to think that they're going to go away and stop pushing in this category.
But you do see you just keep moments like that go by and you're like well this is a turning point this is the datapoint to they're getting more not less.
Serious about this category they want these brands in I guarantee you they're circling the Nikes and Ralph Lauren's of the world of European luxury guys they want they want those guys on Amazon,
very very badly and I'm sure some extent all those guys want to figure out how to have a very and profitable relationship with Amazon to,
recently back around like firing her like a reminder very serious about this.

[55:07] Yep in that.
I'm always trepidatious when I anytime I hear this sentence yeah but this this next category will be extra hard for Amazon and have unique barriers because I just feel like they've.
Knock down so many barriers in categories that they moved into.

[55:23] The one you do hear about a lot lately is that the higher fashion guys go yeah Amazon has totally done great in apparel but.

[55:35] Fashion is a whole different thing from apparel and and you know Amazon doesn't have the right DNA to win in fashion like.

[55:42] Do you hear that and what what what's your point of view there is like should the fashion guys be worried about Amazon.

Scot & Michael: 
[55:49] Absolutely you know there's there's a bit there's a bit of a stigma about being you know what,
how do you call the everything store for anybody right like what I'm Walmart or Target or any retailers in the past is the commonly everything store in the country there's a certain amount of like you know I'm going to,
going to go to the new store in town called cold cuz I don't,
I don't really like buying my shirts at the same place I buy my dog food in toothpaste and I want to feel like a fashion relevant human being and and things like that but you know at the end of the day if you kick out that.

[56:22] A leg under the stool that is convenient it's just so easy to get the stuff and it kind of got the product that I want anyway and it's called fashion and and high fashion stuff if they get their hands on it and they can.
And they can sell it to me in this way that I like buying things,
I would not assume that they're not going to be able to figure out fast and look a lot of stuff at shirts and pants at lightweight foldable it's very easy to ship it's you know I think I'm on your last so you were talking about them getting into Pharmaceuticals and stuff.
What can seem Easier by comparison and selling high-end shirts on you talk about trying to figure out how to get into Pharmaceuticals.

[56:57] That absolutely one of the X and a gun.

[57:00] Amazonians on the show was talking about a category like live plants being a little tougher and then I finish that show only to find out that my wife had ordered a bunch of live plants for aquarium from Amis.

Scot & Michael: 
[57:13] Nothing safe yeah I got a life plan for Mother's Day on Prime now it it came it was really well done.

[57:25] Impress events Garrett.

[57:28] A couple things I just want to cover up quickly one of the plays were seeing from a lot of the traditional department stores is the if you can't beat them join them strategy and it seems like every department store now has a,
in an off-price concept is that.

[57:45] Of a long-term viable strategy for those guys is that you know they they they make a lot of noise about it not being cannibalistic and and stuff but.

[57:54] That that seems questionable.

Scot & Michael: 
[57:57] Yeah we'll see I say it's now it's it's always easy to set up 10 or 20 stores in and look at the economics and said he was first time 20 that we put in the very best markets we could think of to do this they're going really is going really well what's going to the next 20 that's fine,
mistake to think like that that's good economics but you know we'll see when it when it become you know to become a scalable business you know what.

[58:20] If it's tough to think about you think about it like what people at TJ Maxx and Ross to their kind of like you know there's other Like the Wolf in Pulp Fiction either here to fix problems for you if you got too much inventory at the end of the season,
or TJ Maxx we can buy some of this leftover stuff from you Levi's or PVH Calvin Klein whatever it is we can buy,
a lot of it we got a lot of stores and we can break it up and then do it we call camouflages for you across thousands of stores that consumer doesn't come in and see.
Tile to the ceiling of Calvin Klein shirts in there like there's a problem with Calvin Klein based on the small number of units in here right so,
that's a lot of value for them to you know that they put cash on the barrelhead take a huge amount of inventory off your hand at the end of season and they never come back from Mark talamonti so the off-price there's a lot of value like that you know I think about.
Your Kohl's or Macy's or even Stacy Penny tries to get in something like that different animal,
same guys that are buying NC's and stuff from you her going to coming back to you and saying every want to cut it also serve this functionality of like solving problems but likes on the problems occur in our other stores so we're going to,
figure out the sitter's processes you it's it's a much more complicated say.

[59:33] Got it one of the so one of the other Trends who wanted to kind of.
Check in with you on is this athleisure kind of trend it is very hot and and going really well and you glue lemons in there you put Nike and Under Armour in there and there's a lot of other kind of things going on there but it seems like Nike and Under Armour have kind of,
slow down is that something else going on there or is athleisure kind of run its course.

[1:00:00] I don't think I've leaders down there still a lotta man from the retailers who are,
questions like that I was think about who's standing closest to the consumer and has good insights as to what consumers town and they want in your calls in your Macy's in your JCPenney's or they're all you know still expanding their,
space dedicated to these Brands you talking about and Lululemon slow down a bit and on most recent quarter but if you know I would say there there,
far from the worst situation I have in my in my coverage groups I still think athleisure is very much a,
Megatron it's been going on with a Lulu Lulu I killed in 2007 Under Armour 2005 it's a little it went on for a little too long they call it a fad or Trend I happen to think that a lot of problems right now,
yeah even the best of the brands we have trouble when the top 5 retailer in the US goes bankrupt and that's what happened last year was Sports Authority.
Search all kinds of extra inventory sitting around there's there's unplanned liquidation sales going on here and there that are causing distractions and you know,
your point earlier it's an industry that has a long lead times Brands order stuff from factories 9 months ahead of time if I'm boats coming over from Asia,
right after retailer shut down and we are shut down in middle of last year already ordered Christmas.
Ernesto shows up in the stores and I think that's causing a little bit of pressure on pricing.

[1:01:30] I would say that there is to be share a little bit of complaining from the From The Trenches about the impact of some of the Innovation coming out.
Lately from the brand hasn't been a splashy to really give the consumer a compelling reason to come on into the stores so that a split between the two,
Jason are doing our best I think we both.
That's a lot in yoga pants so hopefully that'll that hoe.

[1:01:59] Straight that's that's an image I won't be able to unimagined what about Footwear is it basically the same to the transit or playing out there or is there anything unique happening in the shoe side of the business.

Scot & Michael: 
[1:02:11] Nina Footwear it has slowed a little bit to be fair I would say you seen a lot of momentum out of Adidas over last year if she Nike Under Armour slow down and Footwear side.
In general the Footwear category is I would prefer to apparel it's if it's not very hard to manufacture apparel.
And it's you know there's a lot more competitive encroachment all the retailers get a great product and from the brands they eventually got to try to go figure out how to do a private label version of it and there's nothing two factors lined up waiting to help you with that.
Is much different actually really hard to manufacture the stuff does not as much competitive problems with.
Private label things like that but has slowed down a little bit there's a little bit of lack of innovation there but I would put my money on Footwear coming back faster than apparel though,
so once we started, de 30000 foot level and kind of take you back there to close it out,
sounds like we're going to trim 30% of malls as last stores to close we're over stored those kinds of trends,
and where does it end Dewey Dewey level out at some equilibrium or are they going to a bit of a tailspin here because no one of the things I've seen is when these guys do close the stores they,
you know that seems like they're always a little surprised by how much revenue they lost like that there seems to be a little bit of a domino effect,
we've also heard from folks on the show that it hits our online sales how do you how do you land the plane when this is going on.

[1:03:45] And that's why I'm going to the point earlier was about you,
we hear brand you have to we're going to be distributed in five years is not clear answers the same for retailers they're very much answering like look we can see you know with some reasonable visibility out 12-18 months in our business we're going to need,
you know and and and check it again I mean Macy's like I said his closing Hunter this year they did close 60 in the prior-year in a couple before that so it's is getting bigger right now across the industry I think you'll end up,
Luc Big Brothers change like that and like the for 600 store count probably eventually if you got and you got some stores like you know like Lululemon or Kate Spade which coach toast,
what's the starting point is a very low store count and they probably just by cut it off at that point in focus on how to your point you close the store there's been.

[1:04:40] There's a lot of focus on transferring your sales right if you're if you're a JCPenney or Kohl's clothing store in the market you want to try and test a few of these and figure out what the best way to kind of redirect traffic to your next closest store e-commerce site.
Please retail if it'll just flat out tell you look when we close the store we lose every penny of the sales in that zip code it literally goes to zero,
and there's more hopeful people that are close stores and bat and I won't think anybody out but they say we think we can retain about 25% of the sales,
a nearby store Ecommerce I mean the range of the answers that different companies have had for what they can retain is so wide that I would consider,
I think there's a huge amount of risk if you hear anybody tell you were going to retain those fails and it put a lot of things to choose or not because you're not trying to figure it out but,
I got to go lower how much sales did we lose as we close the stores is very hard to predict and the other variable is,
what happens to my forecast I laid out here about what I'm going to retain in my stores when like a bunch of other stores around me close that I didn't really think about.

[1:05:44] And that market just goes colder that mall goes darker you know everybody's kind of reroute to them all down the street that I wasn't planning on them going to.
I think it's going to be the ability of these guys to forecast their sales which reasonable certainty is fairly reduced right now.

[1:06:04] Very cool and Michael it is happened again we have used a perfectly good hour of our listeners time so we want to thank you very much for joining us and if folks are interested in following a research online where can they find you or follow you.

Scot & Michael: 
[1:06:18] Yeah that's what everyone you know our clients have access to research we have a lot of private Wealth Advisors associate on the best of you get access to it and then we do we do a lot of media like this so we're always early findable somewhere.

[1:06:35] Thanks for joining us we really appreciate it.

[1:06:40] Until next time happy commercing.

Jun 2, 2017

EP086 - Dorel Juvenile Group Bob Land and Jamie Dooley


An interview with Bob Land is the VP Consumer Engagement and Jamie Dooley is the Head of E-Commerce at Dorel Juvenile Group.  Dorel Juvenile is the world’s leading juvenile product company and has over 11k employees globally. They have a portfolio of 11 brands include Cosco and Safety 1st.

In this interview, we discuss Dorel's to to market strategy, including:

  • Wholesale
  • Direct to Consumer
  • Marketplaces
  • Physical/Popup DTC
  • B2B

In particular Dorel is a hybrid seller (1p and 3p) on both Walmart and Amazon's marketplaces.



Episode 86 of the Jason & Scot show was recorded on Wednesday May 24, 2017.


New beta feature - Amazon Automated Transcription of the show:


[0:25] Welcome to the Jason and Scott show this episode is being recorded live on Wednesday May 24th 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot, Jamie, Bob:
[0:40] Hey Jason and welcome back Jason Scott show listeners you know Jason some of the feedback we get says that some of our jokes especially yours are juvenile so we have perfect guest for the show tonight.

[0:52] Internist that that feedback is mostly from my family.

Scot, Jamie, Bob:
[0:57] Guy cuz they get to live with them all the time so tonight we're really excited to have two members of the door old juvenile group e-commerce team dorel juvenile is the world's leading juvenile Product Company and has over 11,000 employees globally they have a portfolio of 11 Brands including Costco and safety first,
we're excited to have on the show Bob land who is the VP of consumer engagement and Jamie Dooley who is the head of eCommerce welcome Bob and Jamie hello.
Alright cool so what what part of the world I'm in Raleigh Jason is back home in Sunny Chicago where you guys at.

[1:36] I am in the Backwoods of Southern New Hampshire and put our company is actually headquartered in the u.s. in Foxboro Massachusetts probably about 15 minutes away from the.

[1:51] And I'm in the back words of Boston okay so the first Speaker there was Jamie and II was Bob for those either don't recognize their voices.

[2:01] We always like to start the show by getting a rundown on your background and how you got to your current rolls and maybe a little bit about what the the scope of your role is now so Bob can we start with you.

Scot, Jamie, Bob:
[2:14] Sure sure I'm I'm kind of the the old man of eCommerce it seems I started off in eCommerce in 1995.
Not sure how often you you hear that but I work a Polaroid and I was a product manager on it,
try to call to make a print you know those machines that you going to a CVS or Walgreens and you can't hear photo,
we did that 95 and we use the internet to you know send some photos to the Internet so it was.
Kind of an early beginning I went to Rensselaer which is a little College in Upstate New York engineering school lunch and 1999 and if you know those guys.
Happy tailor.
And then for CVS Pharmacy in around 2001 when I got into the affiliate space know if you guys are the affiliate world like I do but I started.
And a Commission Junction.
And then it starts from 2006 all the way to 2011 where we got bought by rapper 10 which is a pretty large e-commerce player out of Japan.
That's why I stayed for a while on their leadership team and then found dorel that's our video ad from our new CEO recruiting people for a digital transformation so I've been there been here ever since.

[3:44] End and how long is ever since when did you get to dorel.

Scot, Jamie, Bob:
[3:47] The three and a half years but then e-commerce terms is talking about sweat 7 is that the multiplier.

[3:54] I think so so you're off probation then.

Scot, Jamie, Bob:
[3:59] Double secret probation.

[4:02] Awesome in Jamie what about yourself.

Scot, Jamie, Bob:
[4:06] Well I'm just tangentially my probation officer I need to call him after this process will that I'm a giraffe.

[4:14] That was one of the conditions of your parole if I'm not mistaken.

Scot, Jamie, Bob:
[4:18] And absolutely was so so I went to MIT for graduate school.

[4:24] That's like a liberal arts college in the in the Northeast.

Scot, Jamie, Bob:
[4:29] Yes yeah it's a little small school and I actually I was one of the only people in my graduating class but actually went into retail so I would I got recruited out of.
Alabama teacher to go work at the Bayern brick-and-mortar for target with snow very traditional Japanese e-commerce go go to MIT and then go into rock music.
Has the buyer of rock CDs for for Target.
And then what is a brick-and-mortar bar Provo Target in and Staples and then ultimately ended up back here in New England working for Wayfair where I was.
The director category management for a number of categories including the baby categories that I was really my first entree into the baby space as well as toys and game rooms.
And ultimately went to Dunkin brands or Dunkin Donuts headquarters where I where I live retail merchandising in eCommerce and then more recently was the,
director of e-commerce merchandising strategy for Toys R and
Most recently I've been at the route for about a year-and-a-half now and I'm head of e-commerce where.
I actually came to the company name because Bob and the leadership team and painted a really exciting vision for.
Transforming what was already a very well-known company in the baby's face into more e-commerce focused and digital organization.

[5:59] Very excited to a part of that change over the last year we made him take the Kool-Aid right off the bat.
I was keeping track and I think between the two of you we've got 480 of the IR 500 so congratulations on that careers.
Pretty robust set of companies to work for thank you.

[6:23] So what's up let's kind of started a high-level and kind of work our way in peel the onion is at work so,
you know you guys were at retailers before and a vendor there and now you're at Brand so tell us a little bit how do you guys think about channels and then just just,
macro online offline in and how,
no important that is for you guys dabs about you in so that they must be pretty important and then as we know and then within the channels within online I'll pry have a follow-up so just start there.

[6:58] Sure so we saw into a number of different channels and just high-level so you guys are so of the listeners and everyone understand.
We were the largest manufacturer in the US of baby products that everything from strollers car seats to infant Health Products like thermometers.
Safety monitors and probably the product.
People probably with his the Baby on Board sign in a lot of cars that that is so when we when we think about Channel there's obviously we went to the traditional brick-and-mortar retailers.
We we silent appear quite online retailers as well.
We also have a very strong and growing DTC Channel weather and I can talk a little bit more about you what comprises Rd to see Channel marketplaces.
Start with kind of don't think of Market places around my marketplaces as part of Vita C.
But if so that's probably another Channel we looking at and then we have we we have done physical stores and pop-up stores so Wickham orders is kind of our own channel.
And then we have some B2B channels list.

[8:18] Cool so Mom.
What your summary of the scope of of online and is this kind of guys or Ground Zero or is there been some progress.

[8:29] Yeah I think we've had some Dennis progress over the last probably the last year-and-a-half and in terms of not over not only just a digital transformation in the mentality of probably approach,
e-commerce but from a sales perspective as well so the industry.
Depending on the category were and we Runnin so many different categories and Rd Commerce penetration ranges anywhere from 10 to 50% off,
30% and we're certainly not work with a lot of our competitors haven't been at and wait there to know that we're certainly at the high end of.
About scale in terms of.
Penetration relative to the rest of the industry and we're obviously a really big company were bitching about a billion dollars a year.
E-commerce business is certainly one of our fastest growing parts of the business that work cited about that so we feel like.
But you were going to really embraced the change and we continue to see things coming out of the hangout e-commerce.
It's kind of nice I was allowed to go as broad as we have.
In that you know we didn't when I you know only doing gay to see or only the e-commerce group,
where in the space we're going to be call a consumer engagement but really it's we have the the brand marketing budget as well.
We have call center we have to see via Parker places with several different groups under kind of One Umbrella.

[10:06] So we from our perspective if we you know we feel that we should start selling,
Autoflower call center upselling services or things like that we're absolutely he was in our Charter to do something like that so it's it's a nice bit of freedom,
inside of a relatively large company do you guys operate at so we had Greg,
poster on from VF Corp and they they're kind of like a sinner for e-commerce and then the brands kind of feed off of that in other places other,
other kind of houses brands with talk to there's almost like independent groups that kind of run things how are you guys set up at a macro Essence macro level.

[10:49] We're a core team so each one of the brands.
So the five really that we operate out of out of Foxboro and.
The week of the group the go-to-market team on once the NPD process the new product development process goes to a certain point we do all the launch planning for the company,
read we really don't get into Channel management is probably what we draw the line with the sales team but it's really a core group.
That that.
Works to really extend the the brand marketing so the brand teams really only get to work on product development.
And core brand development and then we really do the activation now part of the brand.

[11:38] Got interesting you know,
I'm always fascinated I have some clients that are brands that very robust direct-to-consumer business is and then I also have some some brands that are super early in their DTC journey and those guys are always terrified about the channel conflict issues,
I'm sort of assuming by how robust your your channels are that that that if there were any concerns those concerns of sort of played out in the past is that the fair characterization or is that still something you have to Grapple with.

Scot, Jamie, Bob:
[12:15] I think we still we absolutely grapple with it everyday I wouldn't say.
It's it's a huge obstacle for trying to run eCommerce but we're certainly mindful of.
Are we evolve our Retail Partners as we're managing to the Sea,
and I think we've approached it where we we don't we don't want to actively compete with our major Retail Partners uncertainly in my career taking Amazon honest is never a good idea.
Walmart or any of the other.
Major retailers video into our goal is to provide regardless of the channel to customer purchased directly.
Rr1 PV terrorism cell,
on the marketplace is and then our call centers in P2P our goal is ultimately to have all those channels work worth in Harmony and not trying to shoot against each other first.

[13:17] Ghana and I'm assuming you're sort of Court digital team isn't just a supporting the DTC so you're probably also providing content and assets and stuff for your for your 1p partners for their own e-commerce efforts is that.
Is that true.

Scot, Jamie, Bob:
[13:32] Yeah that's absolutely true I think that's part of how we tried to,
just saw the vision to our Retail Partners and throughout the organization is that what we do from a contract perspective or everything that we're doing to enhance the customer experience online is certain Morrison.
Healthy overall company attorney just to this point it's taking awhile No 3 or 4 years now.
It's like a data Liberation movement had 7 or 8 products,
catalogs you can spread all over the world all these different databases and recently called salsify a kind of bring it all together.
And really once we took moves like that and really didn't rely on Legacy systems anymore of your completely rebuilt the marketing technology Stacks we we train the prods managers to develop,
content in in you know the way that it should be developed for online so it was kind of it's getting to a point where it's a lot easier than it used to be.
Wow the barriers have been really knocked down at not to say that we don't find new barriers kind of every week I'll place in front of us but I think the systems that the kind of the level of.
Citizens have a really empowers everybody we would taking a lot of cost out of the business to you nobody not by giving off of these Legacy systems cell.
What a nice Pivot Point here.

[15:05] Yeah I find that.

[15:09] Often is a cost savings for brands that you know in the old world you under nose to you or treating the same content multiple times for multiple touch points and when you're when you get those more robot systems you get better content reuse often.

Scot, Jamie, Bob:
[15:24] Yeah I agree absolutely we also we're spending money in the wrong places,
so you don't know gone are the days we have to do $30,000 photo shoots for a single product launch as far as I'm concerned for dorel anyway.
You know we do social,
social photoshoot we invite you know parents who live within 30 miles of the office to bring their cute baby in for the day and we shower them with gifts and you get amazing photos out of a session like that,
and you're doing consumer engagement so it's kind of my fault now.

[15:56] Place very interesting we might want makes for that more but I do want to touch on something you you introduced a little earlier so Amazon is one of your Retail Partners you're selling to them 1p you're also selling on marketplaces and I'm presuming one of those marketplaces as is Amazon so you're sort of sailing,
food through two methods and we often call that sort of a hybrid model is that do I have that right and if so can you can you talk our listeners through how that's work for you.

Scot, Jamie, Bob:
[16:31] Sure yeah and that's absolutely right yeah we are hybrid we we've sold by 1p for over a decade.
1 times and then we launched on Amazon Marketplace about a little over a year ago and it just took off and fantastic and.
I think we have a really good partnership with our vendor managers on a one piece side and we're we're fortunate enough to have the Rangers for top managers on the marketplace side so I think so.
Yeah meet me at some pretty wacky goals to his phone e-commerce perspective.
Last year and we beat them pretty and within certainly the marketplaces were a big part of that in addition to the overall eCommerce performance.
Water brands I talk to you they get really confused by this that kind of say.

[17:24] Alright so I get the whole sale thing why would you have 3 piano,
an answer to this. Like from from your perspective you know what was it that led you to kind of explorer that and and what are some of the levers that gives you to pull in the in the Amazon side effects.
I think for us when I got hired I was hired to talidi to see and I don't think we really knew how we wanted.
Focus mostly on transfer store on marketplaces physical store.

[17:59] What is strong physical store on sales revenue stream in Europe.
So I looked at it from a wax way and I think from from traffic perspective certainly it was it would be easiest to go after online marketplaces that was one of the.
The major factors that. I thought about when we were.
Trying to decide which do we focus on first focus on all them now but you only have so much resources in the beginning.
I love that we have the safety net that you've done your podcast the parking lot about craft items and then we can go.
A safety net for when or if Amazon decides to send to crop out items we can put them on the marketplace pretty easily and then.
Our products kind of engine in six pockets and I talked about this in the session I do,
and I are coming out where we will get it from A New Perspective an existing catalog perception online on one exclusives or what would call Alexander's.
Accessories and then exit 17 closed. So it gives us the flexibility to.
To go in and decide how we're going to approach each one of those product buckets for each one of our friends in our portfolio and gives us a lot of options for how we want to we want to drive sales for each of those.

[19:31] Graco so in the early days how much skew overlap is there between 1 p and 3p a lot of the folks I've talked to they the first explorer 3p because you know they presented,
10000 skews the Amazon Amazon spot 1000,
and if you would initially is a way to get the rest of their product line up there is that the case with you guys it sounds like there's a little overlap there cuz you do that safety-net kind of do listing approach.
So there's absolutely no overlap on the Amazon side Amazon actually doesn't allow that so if anyone from Amazon is going to kill the lamp.
What we and other and other Mark of places that does allow us and a little bit of a safety net so if the one piece side goes out of stock already.
The house of a three-piece.

[20:27] In just a clarifying question on the overlap.

[20:33] So does that include out of stocks so if if Amazon carries ask you and they go out of stock can you sell it as 3p until they come until they make another by or or do you just stay away from those cubes entirely.

Scot, Jamie, Bob:
[20:48] Why I think this.
If you're if you're sticking to the letter of Amazon's policy is that if Amazon carries an item or merchandise is an item on the one piece I'd you can't set that I'm up,
on the three people and their algorithms actually flag,
you and tell you that you don't know what to do that if it if it's a text if you have an overlapping you on the marketplace.
There is any one of the other.
The oversight that a lot of people have is that it's not just really one p vs 3T there's three different types of freaky and three different types of One Piece One of the types of one piece is from where.
You're you're not the seller record it's not a Marketplace relationship with one.
Amazon is still the seller record but it's very much like what you talked about Jason if Amazon goes out of stock it automatically defaults to a Dropship order within our warehouse.
That's almost like a Marketplace you can take advantage of his laundry feeding the SI weight.

[21:55] Got to and have you experimented with any vendor the field FBA stuff in your portfolio.

Scot, Jamie, Bob:
[22:03] Yes absolutely we actively use a PA now and we continue to work out any but the cost of shipping is one of our biggest challenges and seven e-commerce.
E-commerce player and certainly you as a friend so FDA is certainly getting more expensive so we need to make sure we're watching that obviously is a very.
Very powerful traffic drivers.

[22:33] Yep.

[22:34] And then on the one being three-peat one of the the complaints I often hear or one of the obstacles to being a hybrid seller is obviously Amazon has tools for One Piece settlers in Vendor Central and they have this Seller Central 4,
for three-piece hours do you use those tools and just use them separately,
play for both sides of your business or if you look at any of the sort of third-party systems that try to agregate those two tools.

Scot, Jamie, Bob:
[23:04] Yeah yeah so we are we both we do use both systems vendor Central and Seller Central.
Anyone who is both knows that the day that you have available to you on that much more robust.
Been trying to figure out how to drive more cell weather looking stop at the conversion or just all the metrics the jobs available.
And was your business even on the one piece side even if you have one with the skull premium Ara.
You don't have access to that kind of data so to answer your question yeah we looked at a number of third-party Data Solutions,
some of them I think some of your other around previous speakers on the podcast like Lisa or Andrea,
or one foot retail or friend you those are the solutions we've looked at more about the more we're about to sign a contract actually this week with one of them as you mentioned between,
what size of the business in concert,
cool um I know you guys are real active on Amazon advertising and we've touched on that with some pass gas but would love to hear how you guys think about it and maybe just for listeners you could recap,
the I think people get kind of I know I do get confused there's all these kind of alphabet soup that gets thrown around and since your hybrid you have every,
every tool available to you so maybe give a quick rundown of the tools available that's one p and 3p and then which ones you use and then would love to hear.

[24:40] Any thoughts on the efficacy of those programs.

[24:45] Sure so at a very high level I'm just so many different programs that Amazon has but I mean I think the paper forms from.

[24:55] Formed if you were wild about nine months ago.
There was just a much more defined difference between what you have available is a one piece and what you have available to speak also AMS has three different types of.
Advertising on there is lots of products there's others headlines and then there is,
but you only as a 3p so are you only had access to sponsor products on the MSI where is One Piece a drive axle.
So from that perspective on the one beside you I talked about this even a couple of months ago and today is a one-piece so are you have just much more.
Options available to you from a marketing perspective advertising perspective available.
What we're hearing is that all three types of of a nice advertising are going to be available,
Sellers as well so I think you're starting to see Last of Us and certainly is not about your podcast Amazon is going after the digital advertising.
I wouldn't be surprised to see all options offered to post 137.
On the AMG side.
It's more of a branding experience if I necessarily something that's going to be easy you usually try to sell so we can use both but though.

[26:32] We found that at least in the past AMG is is not have the tire off an artist is a mess with.

[26:42] Contra listeners OMG is,
more like banners and it kind of brand oriented advertising so CPM style advertising in AMS is more search CPC type advertising and there's there's several flavors of it with an Amazon of where things show up but that's kind of the the broad distinction there.
Right and I am hearing about a lot of different beta program that there's the testing on the AMD side 30 when I getting much better be targeted.
Open up advertising office again so.
I think it'll be interesting to see what I am to get better I would have said,
did this kind of a question and what's what's take this out of dorel just for a second cuz you guys are,
you have been around that at retailers and all so do you guys think there's risk to some of the other AD companies out there you know so pretend you or at Toys R Us made as bags ample and you know I'm sure they have a huge,
Google about didn't you know,
seems like Amazon lose a lot more your there's the stat that always comes out that 55% of products are just started Amazon think that's a bloomreach stat but then there's also a Forester head supporting data on that up till about 2 years ago so,
you know it it's kind of interesting to think you could this really be a challenge to,
Google and and we're seeing broadly people really, they experimented year ago and now they're shifting budget directly out of Google Wallet over towards that side how do you guys think that's that's.

[28:20] Something that could happen I do yeah I have p.m.

[28:28] I'll defer to Bob with a bob has a much deeper background and digital advertising sign on them yeah I think you know.

[28:39] Even just thinking about Darrell and what we've done we've really it's almost like you're shutting down our brand advertising.
You know I'm pushing the money really over into Amazon just because it's almost becoming.
Some of the weirdest as well.
So if I say it well I'm going to do this launch a new product all that effort goes into launching that new product on Amazon with AMS.
And if I'm looking sumur all the time I don't know how much they're still going,
to know bloggers who have been paid to do a review on a product I think it's almost like letting the people vote so if I want a product I'm going to go to Amazon going to trust that whatever I type in,
it's going to be if it's a bestseller with great reviews,
how much more convincing do I need to buy that product so even some of the more considered buys I think if there's going to be a shift if it's already not know happening now.

[29:44] Yeah what do you think about so I've also heard from Brands and about this common affiliate thing so what they're saying is you know,
I advertise on Amazon and I thought I would get lift on Amazon and I can measure that but I'm also single lift off Amazon yeah what's your reaction to that.
Oh yeah absolutely it's relatively well known about the kind of $1 for.
I'll spend on Amazon equal $7 outside it varies by category so you know when baby like our products receive more like an $8 left and I was out of Amazon that's the tricky part is is.
It's not that straightforward to measure you know it we're not seeing exactly those numbers so I think it takes it takes time.

[30:32] Very cool so does it feel to you like that's a trend that's unique to Amazon in North America and they're just becoming a great ad platform or is it a shift to reach Arizona like we are you guys also investing in like,
Walmart's equivalent which would be w/imax or or any of those sorts of things.

Scot, Jamie, Bob:
[30:53] That's a good question Walmart.
Even even for a mess we don't use the reporting that I am s at all really we really kind of built our own reports and will do the same with W Max.
And really have concentrated a lot of the other dollars right there because with guys like Triad and hooklogic can come your other choices on the on the other retailers website they've always.
Kind of obscured the Bry.
To some degree so it's been it's been tough I'm hoping that those systems evolve a little bit more in their little bit less opaque I think they're going to have to to stay competitive.

[31:46] Dangerous a wino there's a bunch of wmx salespeople listening right now so I'm sure you'll be hearing from them from the.

[31:53] What will will will be that point home that that transparency and access to data is one literally one of the impediment with folks spending money with you.

[32:04] So

Scot, Jamie, Bob:
[32:06] I think you're pointing that out that's one of them I think she was the thing through the the challenges with.
Madison mdfl now it's won the data for the day is just not easy to come by and it's not a Preposterous some of the more that was advertising Channel.
Second is mobile mobile experience and desktop experience of War.
I don't know that anyone including Amazon it's real practical.
Mobile experience.

[32:44] Yeah which is interesting because you would you would certainly think like it is hard to believe there's a technical or skills and pediment keeping someone like Amazon from building.

[32:54] A great advertising platform and great report and a great mobile experiences.

[33:02] Just feels like they haven't got around to it yet but hopefully I don't know if you know this but Jeff is a big listener the show so you know this could be triggering an email as we speak.

Scot, Jamie, Bob:
[33:12] Does a Jeff email happening right now.

[33:18] Should be on the advertising are there any other considerations that you guys think about it in terms of maximizing your your results on Amazon,
I noticed I and I should have mentioned this up front I've got a 20 month old in the house so I'm the big user of your products.

[33:36] You've dramatically slowed down my midnight snacking because like all the the safety first products in my kitchen make it much harder to get food out in the dark.

Scot, Jamie, Bob:
[33:46] But thankfully that's pressure machine isn't protected.

[33:52] Exactly just just a product idea for you is some LED lighting and some of that stuff might be helpful.

Scot, Jamie, Bob:
[33:58] Will cost us a penny more to make them glow in the dark.

[34:02] Exactly.

[34:04] But I have noticed you guys are well represented in all the different Amazon programs and so you know you have a lot of add-on products I also noticed you guys have some Amazon Choice status,
product so you know I guess I'd be,
pictures do you overly like try to achieve those things with how are you managing your portfolio of all those those sorts of things.

Scot, Jamie, Bob:
[34:29] Where are the where walkie to have it I wouldn't say that we we were able to.
Tell you exactly how we go out I mean certainly bourbon is a profitability quotient.
Turn on internet with your private label Amazon.
All I got for those were going to answer your initial question as we look at managing the business there's just.
What I've been talking about the last year-and-a-half if we break eCommerce and Jeff's into seven centers of excellence in,
Amazon a particular kind of fall into one of those centers of excellence be we live and breathe it's almost like a religion where.
One of them is marketing and another is information technology Partnerships and people.
So each one of those are you looking at and we break it down from quarter-to-quarter.
From year to year and suddenly we have a now next future plan for all of them.
Respective definition.
Which one of the bed say from Amazon perspective we talked about the marketing operations is probably just fine.

[36:00] All the all the other ways and everything dipped Amazon train their customers to a second term to find shipping Apartments.

[36:09] Got it in,
what you don't want to do things that we haven't talked about that scares a lot of people per ticket on the one piece side of Amazon his pricing like do you hit is that been an issue for you do you have a strategy or any any pricing tips for,
for folks that are going to put their products on Amazon's platform.

Scot, Jamie, Bob:
[36:32] Bob's Bob's advice to me in the beginning with don't lose money so I try to price my products while products not to lose money before 1.

[36:45] Can you make it up in volume if you do.

Scot, Jamie, Bob:
[36:47] Exactly.
My kids are starting to do the new math so maybe you can but I'm old school so I don't know how to turn it negative.

[37:03] We know one of the things we talked about a lot and you mentioned it earlier when you talked about third-party data switch.
Is the we say the date is more important and we're crossing with your friends as much data systemically to make the decision we have map policies for a number of our friends that certainly helps.
I mean it's the Wild Wild West when you don't have enough policies so the constant challenge to take a look at and what's going on dynamically in the forecast.
Pricing stand for in where would possibly looking at ways to differentiate.
I think we're going to see a boom in brands that traditionally may have not looked at map policies.
Just because of what you know Walmart continues to be priced leader you know Amazon will continue to follow but now you got Target saying they want to be a price leader to and in others.
So in that kind of environment as a manufacturer brand gear you know it's like maybe I would have traditionally had a map policy on my premium products only but that's going to change use my.
Roll out of my policy for my mqp in Opp lines as well just took for protection.

[38:23] Wow yeah that is interesting I could totally see that there are a bunch of other 3p sellers that sell your products on Amazon I'm assuming most of those are authorized sellers is that.

Scot, Jamie, Bob:
[38:38] I would say it's a mix so.
That's not the challenge is simply word been a lot of great partners that you sell in the marketplace and then there are some that.
Yeah we're not exactly sure how they so I think we're starting to see and evolution are not just Amazon Marketplace but,
I'm Walmart's and others where it's harder to be that Arbitrage type of cell are in I think we're hoping that'll help with,
look at Channel management we're constantly looking at how to make sure that we have a clean Channel well only authorized stores and food in.

[39:19] Yep you having to invest some significant resources in that.

Scot, Jamie, Bob:
[39:25] Yeah I think we are,
we have already and I think we always keep trying to go for the very top.

[39:36] It's much as we'd like to spend as much as we could on each of those centers of excellence and one of them is more Channel Management telephone number.

[39:49] Not totally get it so another topic that comes up.
Is the you know those rare occasions win you you fall out of compliance with Amazon and one way or another and the obviously the big Spector looming over everyone's head is suspensions is that.
Is that coming to play for you guys at all like are there any common mistakes or tips you give to folks to avoid getting in the Amazon Penalty Box.

Scot, Jamie, Bob:
[40:18] Yeah I think for us we had the fear of god guitar organization did not want to.
Ever end up getting suspended and no fortune.
We've had just an amazing operation to approach every yes I weigh very aggressively so the shipping.

[40:42] I need this more than just on time shipping at that way but others is a number of them that we've been fortunate to have a great class functional approach with my advice would be certainly have.
A good set of.
Watch all team members who are Partners in the business to understand what you're trying to do set the vision and then and check in on a very regularly.
We were trying to brick-and-mortar First organization so that was a lot of the time we spent at least in the first 69 wants was just educating.
A lot of people within the organization of Argo how we Commerce works and specifically how Amazon work.
And I think the more communication we were able to have and then.
Huge amounts of visibility to every part of the company Bob's a big believer in that class is really Champion Joe having everything.
Are white dashboard in every department so they can so that we can really track you know are we are we tracking to be with shipping so how are we doing this today so I think are the Penalty Box as Bend.
Great team effort and I think it starts with setting the vision for everything.
That's why one of our favorite the software platforms is geckoboard.
Which is Wheel of software that does one particular purpose but doesn't really really well and I want just allows you to push up.

[42:16] It just allows you to creep dashboards on a monitor so I think what we did or invest heavily in the operations and consumer support.
Those are two big pillars for us so even if the point where we had to sacrifice and maybe you know advertising dollars marketing dollars to really get that those two pieces of the business really humming along,
and are the call center just wanted you know national award for for excellence which is really really cool in it but we had to ramp up.
You know social support Amazon answers answer programs on other retailers it's really we had to,
where do expand the team and be in more touch points with consumers so we think that's really going to pay off long-term.

[43:08] And just one last point about suspension beyond the SOS from operational perspective there are dozens of ways you can get yourself suspended in the cellar whether it be,
Aaron products at all the wild with 1p or any reviews or seller ratings or selling counterfeit products oh,
I think what we had was a couple of subject matter experts.
Or through all the different essays and rules and everything that Amazon foot.
On on the portal to allow showers to know how to optimize a business intro we communicated that very clear with ravioli,
cool so that that's been super helpful to hear,
some some real world stories from you guys about how you manage Amazon and let's put a little bit and talk a little bit about Walmart so imagine you guys have a long history of selling wholesale to Walmart are you participating in the marketplace and and,
I guess I would make you one of the very rare hybrid Amazon and Walmart so so curious what your doing on Walmart.

[44:16] Yeah we are we are hybrid for Walmart as well we launched,
probably the best possible time to launch on Walmart marketplace was in November 4th.
Trey doesn't want to watch anything.
But it's as if they really had fantastic resolved even before last year so really out of the cave you were very fortunate to see.
Well and I think I would a little bit last year e-commerce as a team we exceeded our sales goal.
But your dog and 16 by 70% and certainly Walmart marketplace was with a big part of getting us a star sailboat certainly crushing that pool.
Cook any other channels marketplaces or you know anything you think that's kind of interesting that you think other brands would find kind of fascinating.

[45:17] I will wear on eBay as well and we're on chat we watched on chat about a month before they got bought out so he might feel like this that had something to do.
I think we're always looking at different opportunities to find what are products in front of many customers are too small.
Yeah for eBay some people kind of view it as an outlet kind of a thing or other people just kind of put their main line on there and do you guys have a kind of certain part of your hot how eBay fits into the strategy.

[45:53] I wouldn't say it if it will you we've completely solidified or crystallized on her arm how how how we approach eBay.
I think we do have a healthy mix of a farm products as well as what we call Mike SSM ignoring clothes on eBay.
Again you brought it up about Channel.
Certainly there's some good extermination candy Bays doing a lot to try and improve the merchandising especially the baby category so we're we are happy to part with them and help help.
Apart of that the improvement in our categories.
Yeah found eBay is very good brand religion so they're there being a lot more friendly DeBrands lately and I think a lot of that has to do with how Who Came From Home Depot he can understand that Dynamic better than them folks hit that maybe didn't have that experience.

[46:53] Yeah I'm a big fan of how a lot and having watched him what he did at Home Depot was when she was really impressive so I'm hoping they can do the same.
What we don't want to do is just go on to any Marketplace for the sake of being there so I say that we have a crystallized our strategy but we do think very closely about know what Ridge Marketplace.
What is Protonix Place Mall.
It's easy to launch a new Marketplace you know as we see fit.
Know if we want to try something else we can easily be up and you know I matter with no days or weeks so that it's not really a huge investment if we want to play with something which interesting is watching at Walmart marketplace evolve.
Just month after Mom very interesting focused as a company and we're going to benefit from it and other reports and dashboards going to get better,
it's it's an interesting year to be on Walmart marketplace that's for sure.
Yes seems to be a big big area and Lori's in there swinging the bat like crazy so we'll see what kind of comes up,
requires and he's an amazing guy I mean we were we were riveted.
So while he certainly has a captive audience so we're definitely big fans.

[48:24] So yeah funny funny story between Mark and me I interviewed with Mark at Quincy.
Where do a month before they close the deal with Amazon and then we visited with Market Chad about a month before Walmart plaza Sol.
I feel like I got to start taking more meetings your guy you should get out of stock options I don't know if that's,
that may violate some ethics thing but that's not my problem that's your problem,
what questions do you guys are in a lot of places in earlier you mentioned you have kind of six categories of products is there I know some some,
brands have kind of a good they look at these channels and there's some mapping that happens where they'll say alright,
Channel B I'm going to put this type of product there but not this type of product and you guys have any how do you think about that,
but everything everywhere that's another valid strategy as well no I think we definitely.
Where were careful when in will have a specific kind of game plan for.
Access Imaging Closeouts versus completely different strategy for how we're going to approach this.
Anything for my Walmart exclusive so yeah it's none of that spray and pray kind of approaches to the TV.

[49:54] Got it you guys are.

[49:57] I'm going to characterize you as very digitally mature for a branded manufacturer in the in the digital Spectrum in interesting Lee a lot of clients that are,
very large wholesale businesses that are really just getting started on the digital side of the fence and you don't.

[50:17] One of the big challenges you always run into is.

[50:21] Getting an organization to change its all this institutional inertia and all these antibodies that are in the organization that fight all of these kind of new initiatives,
it sounds like you got to go through that in your you're beginning and Darrell like do you have any advice for for folks that are just getting started on their Journey.

Scot, Jamie, Bob:
[50:45] Go ahead because I've never heard that before.
I'll say that one of the reasons I came to dorel was because.
And our CEO told me on a vision where they already started down that kind of mentality show.
And made the investments in just a lot of the out-of-the-box thinking in terms of Technology Investments.
And resources were a lot different than most of the other cpg companies and other vendor partners that I work with another retailers.
Even being your 2016 at the bottom bathing how many still just trying to figure out e-commerce oh.
I arrived having seen a vision that was already somewhat said I was just sort of evangelizing that Vision but I think that's the big that was the really important part of our successes.
Evangelizing that Vision in getting people excited and I think in many cases this kind of Captain Obvious with a lot of people.
It's almost a threat to their job so number one you have people who will get and say am I going to be out of a job in six months because of his e-commerce.
Or this is 20% extra work for what it was already a very hard job so I think.
I've been walkie I think we had a cross-functional team for 100 people that really jumped on board but I think we also had a really strong Vision that was able to get people energized with from the top down.

[52:24] Bob Probert already established.
It was a very difficult have a full head of hair too but now not so much but I think you know what we're trying to do is digital transformation from the inside,
what is the most difficult in my opinion and in my experience and I don't recommend it it's it's just it's the long path but because you do have to you know evangelize quite a bit and you know I understand it's going to slow you down a little bit,
what are the things that I'm trying to do is build a startup type of culture we're just the sense of time is is very different.
So you know instead of people communicating in the email they're there now communicating and giora.
Is it just a complete shift and in first I would say just get the the early adopters like you need a ring of people that get it,
are we have a dining kaybern on our team that is a web Technologies guy that we just we know that we can throw anything at this guy and he's just amazing.
And he can quickly integrated system or develop a database or so I think having kind of a crappy team to start with.
Yeah the Band of Brothers kind of thing helps a lot but then you have to just keep converting the people who want to be converted and then kind of work your way down the curve to the people who you know they're going to be really resistant.
Where I'd say we're Midway down that Journey right now.

[53:54] Then cool it sounds like I don't to put words in your mouth it sounds like you had a blend of evangelizing some of the Legacy employees that were most susceptible to become part of the digital solution and then you brought in some some outside digital disruptors,
is well I eat Jamie does that do I have that right and does that seem like the right approach to.

Scot, Jamie, Bob:
[54:21] Yeah I do I really think that one of the big mistakes is to go kind of Whole Hog you know out of the gate what one is to do almost nothing and just talk about transformation and that that's just seen companies I've been at companies that are done that.

[54:36] But just to be clear that's fine as long as you're paying a consultant like sapientrazorfish while you're doing that.

Scot, Jamie, Bob:
[54:41] Exactly that's exactly what I say but no you know what's funny is it's almost like if I took a step back for a second the the the key.
To to Our Success so far has been lots of quick wins and constant wins,
so not just sitting this massive gold in a way out there but really understanding let's let's just a few small goal let's let's get all of our product data in one place so we can actually use it okay,
let's go with salsify salsify not very expensive so I can put it on a credit card so it kind of scrap a system together,
and then build kind of agile process ease around that and then people gravitate toward the money,
now you can just follow the money if we're making the you know massive Headway and there's dollars and the dollars keep adding up people tend to say,
you know I want that maybe I haven't had that in my team and I want to go on that team I want to be on the successful team so you just kind of read this internal inertia and guys like Jamie it's easy carries that flag,
and people just want to follow him.

[55:56] Very very cool by the way this is going to sound super cheesy I call that stair step approach The Stairway to awesomeness.

Scot, Jamie, Bob:
[56:04] That's exactly what it is.

[56:06] Yeah they like you know you you paint that aspirational picture of where you want to get and you just can't do it in one giant big bang project so the stairway to awesomeness is the way to go.

Scot, Jamie, Bob:
[56:16] And if you give Jason six beers I think is the number somewhere in there 4 to 6 he will sing Stairway to Heaven but it's Stairway to awesomeness and it's it it's a thing to behold another time,
yeah yeah yeah no no beer is here on the podcast this is definitely a dry podcast.

[56:35] Either did I.

Scot, Jamie, Bob:
[56:39] So we have about five minutes for one last question and I wanted to get super high level you guys have both had great careers and in retail and Brands and digital,
where do you see the future of e-commerce is it going to be no Celexa after smartphones or you feel free to kind of go,
two years outer are 10 years out so just would love to hear your thoughts seven haven't seen kind of the the play out so far.

[57:10] Bronco versus Bob's is probably better than mine so I don't so I think your two two things I see one or.
I would have to it a little bit earlier is that I think so.

[57:24] What what's available for a one piece and what's available for three people I think it's going to start to quote the gas going to start.
Obviously the growth Amazon enjoying a large part of that is I think he's going to start more more.
More of that consumer experience I've become more consistent on orthopedic in one piece.
In particular I think about advertising and one of the gaps that I see that I think expect is probably going to happen and I hit just.
You say it with artificial intelligence but I think ribbon Predictive Analytics to help.
To help cpg brands in to help anyone who wants to use digital advertising or to use it for,
projector for casting I think that needs to happen and I think I just it still seems really Nathan I think I see a lot of solutions out there.
Don't take into account all the dozens of of sales drivers and forecast in the theaters that are need to be followers and I think they're supposed to Lucien to still feels on in the brick-and-mortar world.
You're not taking into account estimated ship windows or find a drink or the dozens of things that can help to drive,
sales on e-commerce side that's just don't doubt it don't get back turd in then I don't think this is any human being to make those decisions.

[58:58] As they're using them to the forecast there the sales or Churchill Drive their advertising can I think it has to be any item,
that's a prediction I'd see Captain someone diacetyl.

[59:16] Yeah Predictive Analytics it's definitely going to be pervasive in all everything that we that we do.
I worked at a company where we built our own real-time bidding engine and it's it's very complex but as computing power power gets better and this more people working on projects like that,
a lot of the manual activity 72 will just gravitate toward that kind of naturally taking over I see a lot of near-term stuff.
Nothing that's important where I really think that retailers will start understanding that no Prime is not a shipping program.
You don't like I really do think that once other big retailers develop Prime like programs and it you know the full breath and power of a program like that fell under the sun understanding the the game.
And I really I don't like I haven't seen.
Seems kind of small attempts at a prime like program but nothing nothing even close to it if if it's not a shipping program what is it.

[1:00:24] It's I mean it's like it's a massive loyalty program it's it's the stickiness that the.
That you just can't get out of it it has unbelievable unmistakable value.
I think they've gone well past the you know the yearly the annual fee for the program in terms of value at this point.
I really do think that that is a massive way to build loyalty.

[1:00:54] Go to know you guys are both.
Deep in the world of Amazon do you think it's game over or do you think that you know just like we saw in.
Bob you're old enough to remember this used to be that you know no one could be the IBM there you would just like it,
people just call him up to get mainframes installed and then suddenly Microsoft took over and then it was Google and now it's Amazon you know what do you any votes on like the next Dark Horse you know is it going to be a company we've already heard of it is it some company that's like,
two dudes in the garage right now that's a good one Jamie want to go first for that one.
So I yeah I mean history tells us no one no company remains thought when I first Are we more than more than 50 years even if it's still around and I think she's somewhere.
They're fucking a trance of Walmart's probably one where they're starting to come around they made been made my friend information.

[1:01:55] I think one of the things I think about is on demand that you fart a lot of them.
Disruptor obviously Amazon going after 2 but.
Medium different different category next Amazon.

[1:02:20] Oh that's crushing I've spent like 85 episodes trying to to get Scott's ego down and you just told him that he's the future of e-commerce crate.

Scot, Jamie, Bob:
[1:02:28] You're going to pay me in cash my check,
what's what's amazing to me it almost seems like Amazon is is Bucking that the you know the old trend of you know IBM companies like that just kind of,
really having to Pivot hard and and swallow hard to and now it major inflection points is the scale that's the thing that gets me,
it's no looking at you no announcements from Target sing over going to spend a billion dollars and,
supply chain up when Amazon spending well 18 billion,
yeah it's just the scale is is something to really think about it how do you how does a disruptor in a two guys in that garage.
Really really break into that no no I'm not saying Amazon perfect I've noticed a lotta,
a lot of Kinks on a on a daily basis in the armor or chinks in the armor where they're even like my guaranteed shipping package didn't arrive in 2 days.
Several times now so you know there's definitely some Growing Pains there.
But I got to think it's only another giant it's got to be like a Walmart that really really can can keep up with those guys.
I also since I worked at racquet and I would not discount all these guys that are overseas currently that have just been watching the market patiently.
Rakuten Alibaba out there they're just massive groups that certainly have the power to and they're not known to be first movers remember.

[1:04:08] They they watch and they're perfectly fine to be the second or third yeah they're the only guys that have kind of beat,
Amazon Kenosha Amazon didn't do well in China and continues to be kind of like number three or four there and I don't know about Japan Amazon's done pretty well in Japan but yeah they're they're definitely rocked Anna's is still a major factor there,
oh yeah oh absolutely I think probably going to the guarantee for me is the.
You can check back thirty years from now I think when Bezos decides to retire a walk away that's definitely rest I mean you work at Target and,
dominant really when Bob all that stuff down on that was I was really when started,
start to struggle Walmart Walton and I can see the same thing no one ever gave us has to step down no disrespect to the rest of the leadership team but it's a pretty big dr. Phil.

[1:05:07] I think your point that no no Empire was forever Jeff is made that point and said but what you really want to do is just make sure that your Empire outlives you.

[1:05:19] Repeat the same strategy there because it has happen again we've wasted a perfectly good outside I really want to thank you guys for spending an hour with us and sharing the knowledge.

Scot, Jamie, Bob:
[1:05:38] Thank you thank you.
Yep Bob and Jamie thanks for joining us and low plug here for Jamie and I Jamie is going to be one of my speakers at the internet retailer Conference & exhibition also known as IRC on June 6th I do a day there that's called Amazon and me where,
we go pretty darn deep about these kinds of topics in a,
12 hour Extravaganza so if you're interested in that topic join us then and Jamie will be there,
what's the just went through 18 decks on this whole thing so you're talking about hybrid is that right Jamie is that the topic.
Yeah I'm talking about how to manage your Amazon strategy whether you're one p3p or Hut.
Yep so overall strategy yes and your presentation is awesome so people are going to love it thanks guys and hope to see Jamie I'll see you there and I hope to see some listeners there.
Thanks looking for toys.

[1:06:36] Until next time happy commercing.