EP0096 - Listener Questions Part 2, and News
Michelle Grant via Twitter: Do you think Nike is one of the few brands that have the leverage to get Amazon to remove 3P inventory?
Steve White: Hey guys, when I talk to brands they have this sense that they are going to be 'pushed out' or off the platform as Amazon develops products in their respective categories- my sense is that Amazon has never acted like a bully in that regard, just adds additional competition- thoughts?
Parker Block: Who is right, @retailgeek ? Are disruptive forces going to drive retail consolidation (per @debweinswig) or fragmentation (per @klobaugh)?
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Episode 96 of the Jason & Scot show was recorded on Thursday August 3, 2017.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
New beta feature - Google Automated Transcription of the show
Jason: [0:25] Welcome to the Jason and Scot show this is episode 96 being recorded on Thursday August 3rd 2017 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
Scot: [0:39] Hey Jason and welcome back Jason Scott show listeners Jason you're you're at home the rear of the sign this is the first week this year you've been home so that's pretty exciting.
Jason: [0:50] I am for those of you that are listening this would be a good time to up your investment in Chicago area Starbucks if it's possible the individual investor in the Starbucks branch.
Scot: [1:01] Cool flowey, you wanted to start off at the top of the show and congratulate one of our friends of the show Peter Cobb he was our first guest and he's founder of ebags and he has just announced today that he is joining the board of DSW so congrats to Peter.
Jason: [1:19] Yeah that's super exciting I had a nun confirm report that his primary qualification for that job was that he was the inaugural guest on the Jason and snot ship Jason and Scott show.
Scot: [1:31] Oh yeah yeah I think it's definitely Resume Builder will have to see who the second guess was and see if they rise to Fame and Fortune as well as well.
Jason: [1:39] Exactly.
[1:41] Scot I feel like we didn't get to talk about it and I may have happened 2 weeks ago but they revealed all the information about the new Tesla and if I'm remembering right you have an option to buy one.
Scot: [1:55] Yeah yeah I'm excited the actually the day they announced it I put into pre-orders so I was going to, use one and give away or if I couldn't find some of that wanted I was going to sell the second one and, it's exciting because they did just kind of update the website and show when they're going to be delivered. And I find it hard to believe so I'm taking this with a grain of salt but it shows that both of mine would be one is to give you a 3-month window and one is October, November December in the other one is November December January of, 1718 so I doubt that I will actually be that early but it's kind of fun to think like it could be possible.
Jason: [2:38] Wow are you going to have time to expand your garage in time.
Scot: [2:42] I don't know we will see.
Jason: [2:47] That you talk about first world problems that is definitely a first world.
[2:52] I don't know if I ever told you this but that turned out to be my inadvertent brush with greatness do did you follow that there was this light controversy someone asked you on musk if he was going to get the very first one, and he tweeted something about how know we have a strict policy that whoever fate pays. The full fare gets the first one and so that belongs to one of our investors who subsequently gave me the rights for my birthday did you. Did you see that story at all.
Scot: [3:21] I did not know I missed it.
Jason: [3:23] Yes it was like a internet thing for a day and a lot of people were questioning the veracity of that policy, and so it became a little controversy on stuff but what was funny about that is, the investors name is Ira iron price and that that sound really familiar to me, it turned out he was an intern for a VC firm that was when the investors and when the reefers companies I was a principal for and so I get to work with, I rather like the week he graduated from Stanford Business School and now he's giving Tesla's to Elon Musk.
Scot: [3:58] Nice you should call him up and get on the list.
Jason: [4:01] Yeah I don't feel like I would want to want to impose.
Scot: [4:04] Yeah.
Jason: [4:06] But I will share the story on the podcast for partial credit.
Scot: [4:10] Cool actually I think it counts yet that is definitely a Forrest Gump kind of moment there.
[4:15] Two on let's jump into it on this week show we're going to cover some news from the week and last week we had so many listener questions we were swimming and listener questions we're going to. Kind of swing back around at the. Back half of the show and pick up some of that we were not able to get to so we apologize to those listeners that were waited on listening it with bated breath last episode, we will do everything we can to get to the mall of this week so let's kick it off it would be a Jason Scott show without some Amazon news so here we go.
[4:50] Amazon news your margin is their opportunity.
Jason: [5:06] Yeah so the first thing is I had several colleagues send me pictures this week from there Amazon app where in the the order tracking, Amazon was uploading photos of the Amazon box being left at the customer's doorstep.
Scot: [5:25] Yes the. You tag me in one of those tweets and I logged into my account one morning and had like 60 notifications that's like what the heck the only time that ever happens to me as if Marc Andreessen his stop tweeting but when he was he retweeted a couple things and I would wake up and have like. 500 followers so it felt like that is very exciting for me.
[5:46] It's coming in a few I was kind of thinking through the logic there and so. Obviously one of the standard carriers is not going to do that so. So USPS so it's Amazon the bulk of crime goes through ups and then they leverage USPS in the needle little bit of FedEx so none of those three cares would do it. But they do have this Care Network called Flex that not many people know about this started when they launched Prime now it's an Uber Rush type service so uses 1099 drivers and a very similar Uber like system but for packages instead of people. And they developed this for Prime now so all the prime now products are delivered that way. And then what we're starting to see is more and more packages out of the Fulfillment centers they're running some algorithm that essentially kind of. Uses that same driver not work and I believe if people are close enough for the you can ommix work out that it's. Cost-effective compared to the other options, then they will get Flex drivers actually go to fulfillment center and deliver a package so it looked a lot like my guess was that that's what those package pictures were is the flex drivers like an Uber driver they have a very.
[7:05] I'm very specific Amazon after the download to be a flex driver in there they can scan packages and take pictures so seems like that's the logical place where that would be happening.
Jason: [7:15] Yeah and I think partial confirmation that you're right at the first person to send me that picture was a co-worker of mine Jeremy lockhorn, and he has a one of the Ring doorbells so after you you positive that theory that it probably wasn't a UPS driver Jeremy pulled the video from his ring doorbell and, sure enough it was a woman in a tank top that look like. Dropping off that that the box of the door. Sheer in Chicago because we're lucky enough to be really close to some fulfillment centers we get a lot of, same day delivery using those Flex drivers from the actual fulfillment center in Indiana and so it's my my building I have 12 Neighbors, it's in our condo building is pretty funny we get two waves of Amazon packages a day like our UPS guy comes at about 1 in the lobby fills up with Amazon packages, and then the Fulfillment center delivers All the Same Day deliveries at about 9 p.m. and are in our lobby refills up with Amazon boxes every night.
Scot: [8:23] Wow you're just like Amazon sooner there.
Jason: [8:26] Yeah there's a lot of good trend-spotting by just walking it with my neighbors order I will say I'm someone impressed by my neighbor's they they have some pretty eclectic e-commerce shopping witch. Which always makes me happy but I think people Basque.
Scot: [8:42] You're a child the look in the box feature to see what they throwing.
Jason: [8:45] I have it as you probably know it only works with your own order.
Scot: [8:48] Yeah I know I try to.
Jason: [8:49] Which means I can never say anything because it's my boxes are always from my wife so they should have a family family plan for that somehow.
[9:00] Everyone on the plane Prime account you should be able to see or something but I think presumably the reason they're taking those pictures is to reduce fraud and you know false claims the packages when delivered that seems like that.
[9:16] The primary reason.
Scot: [9:18] Yes there are some of the on demand economy companies make it part of their user experience to kind of show the delivery one of the one of the New Generation Flower companies called Urban style mistake they actually film a little video of the product being delivered and they send it to the sender as kind of a nice little wait to see.
[9:38] It's not as kind of boring as a package sitting on a porch.
Jason: [9:41] Yeah it makes it makes the most sense in the world and you think about it it's it's kind of sad that the big flower companies can't do that cuz you would really like you never know what the product look like looks like that you purchased.
Scot: [9:53] Yeah absolutely, a couple other kind of quick hit lightning round items on Amazon news these are all kind of in the area of filament so.
[10:04] Amazon has long been rumored to be opening in Australia there was kind of definitive news that they have located a warehouse so that's interesting so their first fulfillment center in Australia has been located they've done a lot of PR around hiring for the holidays and they they did a job fair this week where they had, 50000 folks they were hiring and, moose articles I saw actually wear negative because there's so many people at these events the lines literally went on for, most people reporting waiting in the lines for eight nine hours it was interesting the financial press was kind of surprised because, if you look at the data that comes out from the government it looks like we're at effectively you know neutral employment where, almost everyone has it we have very low unemployment right now but then when you go to these events that they're hiring you know kind of. 10 $15 an hour kind of folks there are also a lot of people out there looking for working and they really would like to work on Amazon fulfillment center so that was really interesting in Amazon got a lot of, there's ton of press around it. A lot of it was negative not not really against Amazon just a line seem to be very long I'm the last one is we recovered Amazons. Q2 earnings last podcast but.
[11:19] After we recorded some news came out that the CFO essentially said one of the reasons there was a lot of expenses kind of in the four projections was that 80% of the format centers are going to open this year will be in the, back half essentially and Amazon doesn't really open fulfillment centers in November December so back-half essentially means, July August September October so when I do the math on that it's kind of crazy it makes it seem like they're going to open. Teen 220 performance centers and it kind of comes out on the high side of that so that's give me something I'll be keeping a really close eye on it is kind of the reading the tea leaves there made me feel like there are a lot of a felmet centers coming in the next 3 or 4 months.
Jason: [12:06] Yeah and that's feels like that's now going to just be an annual cycle for Amazon so it's it's funny of your investor you should almost like you know grow to expect Q3 to be a low profit quarter as they they have these huge expenses for opening these things.
[12:22] Another interesting news bit do we didn't get to cover earlier is Sears announcement that they would now be selling Kenmore appliances on Amazon and that. It was interesting for a couple of reasons but in recent months we've talked about.
[12:39] Honest to add previously said they would never sell on Amazon sewing on Amazon we talked about Nike that said Amazon wasn't right for the brand you know he's at least dabbling with some excuse on Amazon you know now we see Kenmore which is one of the you know. Few remaining valuable properties that Sears owns.
[12:56] Moving to Amazon in every time one of those things happened like it had a derogatory fact on the rest of the industry and sure enough the other Appliance retailer stock went down. When Amazon announced that they were selling Kenmore so you know I think we're seeing this new trend that. Then Amazon can you know at least temporarily like materially affect the valuation of all their competitors just by issuing a press release which is. Pretty interesting in one other thing it was interesting about this Kim ordeal that I didn't see as much coverage on but Kenmore also announced that they would be integrating the Alexa in a bunch of their appliances. And so that's a you know another controversial one you know a lot of retailers aren't aren't big on Alexa being the default, artificial agent in all these kitchen appliances because it obviously is giving Amazon this huge leg up and you know now for Kenmore to do it as is, pretty big blow.
Scot: [13:58] Yes I think it's you know that a lot of discussions about looks with colleagues and I kind of take it to this pretty extreme wear. I think Sears could actually do better if they would shut down a lot enough all but maybe I don't know 50 stores or something and sell the real estate and then become a house of brands that sell other places online not only Amazon but. Definitely Amazon good examples I think a really big mistake they made is they sold Craftsman for something like, 900 million dollars to I think a private Equity Firm note to Black & Decker and you know I think if they'd sold Craftsman on Amazon that would have been. That line is got to be I don't know what its revenue is but it's kind of be a. Billion dollar ear line is still quite popular out there with with tool folks so so it's interesting I don't know if this signals a change of that kind of thinking or if it's a last-ditch effort before they sell it or I don't know but it just to me it feels like. If you could have kept Craftsman.
[14:59] Cheap Kenmore of the good couple other brands sell the stores and use the proceeds to go buy more brands in and I'm kind of a family of Brands there that may be a better future for Sears and kind of like what looks like this slow death that they've been barked on.
Jason: [15:14] Yeah I know I certainly think you're right I suspect that some of the valuable Brands they've had to sell it been painful and I think they probably had to sell them because the stores are such a money sink that they just needed the cash and you know I think, you know financial hardship makes you make some some short-sighted decisions and and Craftsman might be a perfect example of that.
Scot: [15:36] Another quick Logistics one Amazon announced a whole new product called the Hub. And this is a physical Locker it's a lot like Amazon lockers and even looks kind of like it but what's different is it's meant to go into residential location so at least case they talk a lot about is an apartment building, or like your building where you are Jason sounds like maybe have a doorman so the packages are secure but pretend you didn't have a dormant then, you would put this Hub there and you'll receive packages and, the returns in there that kind of thing just like an Amazon Locker the difference is it now has a new brand called the Hub and if you go to the hub. Amazon.com you'll see a picture one of these and other really interesting difference is it can be used by Third parties so a FedEx delivery person could come in and they enter a code, there's a sequence that they they can enter on the screen and say. I have a delivery for Jason Goldberg and it would open the door and then it would know okay Jason lives in apartment. Etsy and it would somebody would message you and I think you can set up, as a resident you can log into there some software you can log into and and set some preferences of how you want to be communicated with so you would get a text message that would say. Jason you got a package from FedEx tracking number X in the hub and then you would go get it and, and you can even put packages in there and summon UPS let's say for a pickup kind of thing so it's pretty resting and.
[17:08] You know a lot of companies are working on these things and it just Amazon already is is kind of dislike their 5th generation attempted this it was interesting to see them taken more open approach which is kind of the closed public area Amazon Locker.
Jason: [17:21] Yeah and I mean it feels really smart you you go to like the grocery stores that you know do the home delivery through a bunch of these services and what you now see is, a bunch of Amazon lockers for grocery delivery next to a bunch of instacart lockers for grocery delivery next to potentially some third service, and it's taking up a ton of real estate in it it just doesn't seem feasible and so you know you use scale that to these home buildings and it's not likely that FedEx ups and Amazon are all going to get, get the locker space, in the lobby City's building so it's it's pretty smart of Amazon to say hey wolf will do the landgrave pool get the space because we'll let you use it for everything.
[18:03] And I do also you know obviously one of the things this is a dressing as just as as. You know we're being disrupted by e-commerce and so many of us are getting so many packages at home one of the real problems that's coming up is package theft and we're saying all kinds of. Interesting and Goofy Contraptions being invented to sort of mitigate that but these Walkers are obviously.
[18:26] One of the best tool so so I suspect they'll get some success with that the next news item I saw.
[18:36] Got some seller Amazon sellers and a little bit of a kerfuffle Amazon sent out a letter changing their their returns policy for three-piece sellers. All just read a little bit of the announcement dear seller Amazon is simplifying the returns process on items fulfilled by sellers. Starting October 2nd 2017. Returns of items that you fulfill and that fall within Amazon return policy will automatically be authorized customers will be able to print a prepaid return shipping label via the online return center instantly.
[19:12] There's another paragraph where they announce another future which is we're also introducing returnless refunds a feature of the tire you requested by sellers. If you choose to do so you will now be able to set rules and automatically issue a refund without requiring an item to be shipped back to you. So as a request this because in many cases it allows you to save on both return shipping and processing costs so the gist of this. Is your three-piece seller on Amazon you're not using FBA. Customer wants to return a product used to go through a process and the seller would have to authorize that return and now they're just saying hey we're forcing all sellers to take returns no questions asked.
[19:57] And there's a lot of small sellers then on the forums and on the the Amazon forums. I really outraged about this because you know you know they feel like they're getting getting cheated by by these nefarious buyers that buy stuff and then. Indiscriminately return it and I think it was even some confusion some sellers thought they'd be forced to use this this returnless refund. And that clearly isn't the case that's really designed for products where you know it's more expensive to ship the product back than it is to just throw it away or something like that and so you know they're giving that as an option to sellers but. I don't think this is news for anyone in FBA I don't think it's news for any of the big sellers but you know I do think it's. An interesting play I understand the sellers being upset by it but as a customer I think it makes a lot of sense when Amazon is doing. It's really confusing and complicated when the terms of service are different for every product you buy. Based on who sold it to you right so I buy 3 things they may have come from three Cellars. On Amazon I typically don't even notice that and so then if I want to return all three it's very odd that two of them are returned with no question to ask and one of them the return is denied so this seems like a. A step to force more consistency in a more customer-centric. Approach on Amazon and you know certainly at at some cost to Amazon sellers which I understand they they probably don't appreciate.
Scot: [21:29] Yeah yeah a lot of small sellers view returns is kind like this. Battle Ground and they the Dig and dig their heels and have these stocking fees and all this kind of stuff they try to turn into a profit Center and I think the larger sellers of kind of said look please. Those days of Internet are over that's comic 1995 thinking let's returns are here to stay just got to make it in your modeling and that's not going to be the profit Center in whatever the cost is. Put it in your business model and go forward you can't just, can have that kind of thing and I agree with you it it's level sets to user experience that makes it a lot cleaner than than kind of the password to Congo reach every sellers return thing and go to the different rma's and all that stuff. Another Amazon news item is I think one day in the future will look back on 2017 and it'll be the year of Amazon private label because seems like a new private label is launching every week right now so this is your for long time you had a couple out there anchored with amazonbasics and, couple others pins on and and Stratford and things of that nature and then this year there's been like literally a new one is discovered, every month so this month so you know. Private label is called the fix and it's Prime exclusive so all these private labels are either Prime exclusive or not this one is a prime exclusive private label and its Footwear and Handbags so.
[23:02] It's got kind of a very floral bright kind of a look to it so it'll be interesting to see how that does.
Jason: [23:11] Yeah you know I think there's some possibility that Amazon you know has been the Nemesis of Peter Cub forever and so what a coincidence the day Peter goes to work for shoe company Amazon start selling shoes.
[23:29] But yeah I do think it's going to be interesting obviously you know every industry looks at Amazon and then go oh man they're doing great and all these other Industries but, but our category is much more more complicated and you know I suspect a bunch of people at, a Vera Bradley in Michael Kors and you know all the other brands or you know waking up this morning and either. Being being concerned or or not but but they certainly probably should be based on the success of some of the other Amazon brands that they've been able to build.
[23:58] And I just always like to remind everyone like we get in the habit of calling these private labels because they're their brands that are offered by the retailer but. You know my joke is Alexa probably doesn't feel like a private label to the the product managers for Bluetooth speakers at Sony.
[24:17] Seems like they're full fledge brand.
Scot: [24:20] Yeah and unlike kind of what I talk to other brands they kind of say well we've competed with private label for very long time which is true but it's. Different because you know these are frequently tagged. With Amazon Choice they're designed in such a way to be very diffi like mature Brands so it's not like Old Roy dog food where it's like clearly the the Walmart brand or something like that so there's a couple that are there's like wickedly Prime and amazonbasics obviously, but you know when they when they do these apparel ones they slip them in there and, you know it is as a consumer that's not familiar with every brand it is hard to tell so if you do a search for dress shirt or black dress and you will see I'm guarantee they'll be a strip of Brands up there and two of those are private label so it's kind of a I like to do this I go into a, like you I present a lot I'll go into a presentation and and pull that page up and say what's the private label and I would say almost understand the time people cannot a hundred percent gas at the, there's one that dough gas in it other one don't they will mess up so I think it's people should take these very seriously.
Jason: [25:35] For sure and think about it like what the next likely plays are with all these brains right like Amazon guns going to use. All their data on selling Handbags and Footwear across all products, to identify the attributes that customers most want they're going to use the search results in the the non converting products and figure out where the gaps are in the market and so there, they're going to be able to use this huge amount of data that they have, dictate what you know how their product lines evolve which is a potentially big competitive Advantage now they're going to install cameras in a bunch of people's dressing rooms and take pictures of their outfits so now they're going to be able to help. Help no much more so than any other manufacturer, the exact fashion sense of all their customers and what products they tend to wear and how frequently they tend to use them so that's going to give him another big advantage over over the traditional Brands and then you know course they're going to roll all these products into, the Amazon wardrobe offering and you know send free trials to customers to let them keep them if they want them like they're just building so many pieces of. Ecosystem here and if your you know your attritional handbag manufacturer or footwear manufacturer that just makes products and tries to sell on you know. You know I think you really need to think about it like you're not just competing against another skew your complete competing against a whole new echo system that that. You know in the medium-term is likely to change how people shop for these products so that's going to be interesting to watch.
[27:06] The next news item I had I'll be honest I'm not sure what to make of and you you had a particular interesting Theory, stripe made a press release in stripe as a, very popular payment Gateway particularly with smaller Sellers and marketplaces in they made an announcement that they were now. Providing an undisclosed conducting transactions for an undisclosed percent of Amazon sales. So Amazon is now using stripe for some of their payment processing.
Scot: [27:46] Yeah this was a tricky one cuz it was reported everywhere and it was hard to chase down the. The source and its in a Bloomberg article will put it in the show notes and seems like the author saw Amazon's logo on their site and that was almost kind of the. The Germ of the whole article who's winning pieces you know how they became a unicorn not stuff which is great but then you know it is weird because so stripe is. Primarily used for mobile payments and I just got to imagine that core Amazon which one you think about amp. Mobile is the the Amazon app I find it hard to believe they would use stripe but the. Interesting thing about Amazon culturally, is every team is independent and so the cost of that is you don't get a lot of reuse of sometimes nowaday forestry used to the the cloud platform called AWS which is kind of how they saw some of that but I have seen teams at Amazon just kind of like me, their own kind of choices for things and dude. Copies of things like for example in Prime now launched it had a whole different set of product images and taxonomy and things than Corey Amazon and, traditional companies would say well why would you do that that's silly but Amazon favor speed over over efficiency so. So my guess my first guess was while there's a team in the Amazon that wanted to move quickly if for some reason they didn't really want to use Amazon payments per se so they probably just use stripe then I was kind of thinking what.
[29:24] That be two ideas I had were, so the treasure truck is really starting to scale up an. You can imagine that that's going to be one of those scenarios where you're going to need to be out there, you're in the field with a point-of-sale system Amazon doesn't have anything quite like that and you're going to want to be.
[29:44] Having an individual process payments kind of a sales rep kind of thing so that kind of struck me as potential area and then another one is maybe like some of the Amazon book stores or something like that maybe. Oster using has striping bedded and then you know the AWS team is kind of its own Rogue thing that I was thinking maybe they certainly are processing a lot of credit cards there maybe Stripes used on the B2B side there and some context, yeah or maybe there's some other Amazon app haven't really thought of this launch in the last year that that used to stripe to as as as payment processed I just went to really hard to believe that core Amazon is using stripe unless you know this is some precursor to an acquisition or. Did Solving some.
[30:28] You know it could be maybe an international kind of think so sometimes you know you're going to Sonny's markets and the it would be too expensive to add support for payment Type X and maybe stripe party has it, those are kind of the things or maybe they wanted Amazon pay or Apple pay added to something and you know, Apple present keen on letting Amazon into that so they stripe give him coming arms-length way to have that those are kind of my thoughts on this I don't think it's kind of what, you know the kind of implied in that article.
Jason: [31:05] Yeah I think any of those are possible like I greet with you unless it's a precursor to an acquisition it makes no sense then Amazon would just start using stripe as kind of a. 1/32 primer for people about payments like. If your small pair a small seller and you want to start taking credit cards you're likely going to pay a 2.9% fee for credit cards and that's the, the base price that striped charges to accept a credit card the more volume you get the better price you can negotiate. And so if you're a huge retailer. Only 10% of your sales are online so you're selling if you're Walmart you're selling 300 400 million dollars billion dollars. In stores you're selling 14 billion dollars online. You want to aggravate all of that sales together to get the absolute lowest credit card fee possible and that size you're actually going to install your own network and have a direct relationship with a bank. Either a little smaller than them you're going to use one of these Enterprise providers like cybersource or Chase payment. Amer maybe Braintree you know that these are all really common with the big Enterprise sellers. And where stripe is really fit is for smaller Sellers and newer sellers because what with stripe uniquely did is stripe said hey we're not going to try to offer features that appeal to the CFO making the decision. What service they're going to use we're going to offer features that appeal to the developer deciding what service to integrate. And said they they have much better api's and documentation and implementation guides and you know if you're a small startup and you want to add Payment Processing.
[32:43] Million times easier to implement stripe then something one of the other payment providers I mentioned so they kind of grew viral RI some of those small companies have become quite large. But that's really historically been there Niche the big Enterprise company retailers haven't been using them in the biggest retailers for sure wouldn't use them because they would just agregate up all there. There their transactions so it makes very little sense for Amazon to take a small percentage of their revenue, pull it out of their deal with a bank send it to stripe where they would almost certainly have to pay higher interchange fees it just it just doesn't. Doesn't make sense unless there's something else going on like you you theorized.
Scot: [33:23] Yeah and you just jog something for me one of stripes, biggest benefits therapy eyes is not only are they good at charging cards but they're good at disbursements that ends up being something you need if you're going to be a Marketplace so Airbnb is large customer of theirs and so imagine you rented your apartment out to you would want to collect from the renter and then you would want to receive payment and that disbursement part is is kind of tricky because, you as the person receiving the dispersement you may want it to an ACH on a credit card or who knows PayPal or something so then that makes me think, the newest Marketplace in Amazon is Amazon Home Services where, they are doing a lot of these you know installations of those kinds of things were there collecting frown when in and dispersing on the back end so that that's like another option I can think of is, strike could be the disbursement platform for that.
Jason: [34:18] Yeah yeah that totally possible so that that is going to be interesting to watch.
Scot: [34:22] Cool and non Amazon news just a couple of quick ones, Stitch fix has been widely reported to be close to following an IPO and then they actually have apparently file to confidential IPO. In the way this works is there is a jobs Acton before the jobs act you would minimally familiar with this process you would, you have to file your S one and then you would essentially put everything you're doing out there in the public so as you go back and forth with the SEC your documents are out there for everyone to see, and you maybe the market goes to a rough. And you want to pull the IPO you've already kind of revealed all of your deepest darkest secrets so what the jobs I did is it allowed for companies with a under billion dollars of Revenue to file confidentially so you get a period of time where you can file you know you have to tell anyone you have seems like they have chosen to tell people they filed but it gives you this kind of air cover where you can work with a cc, you can, you can even cut an update the documents over a quarter to and essentially get ready for my PO and then do the timing. Whatever works best for you can see how the market rolls out in it leaves alleviates kind of a lot of the risk and stress of the IPO process so a lot of. Series out there of why they're doing it now and I do think if it kind of the math they were reported to be at like a 800 million dollar run rate, I bet they were getting pretty close to the billion-dollar run-rate and you lose the ability to do this so you also see this kind of decision Point kind of at that billion-dollar run rate of your gosh we need if we're going to do this confidentially we can have to do it now.
[36:05] So I think, I think that's to be really interesting to watch when they do take the covers off that US1 will report on it because a lot of people are very curious about what's going on under the hood there.
Jason: [36:16] Yeah I hadn't even thought about that but then she'll risk that they go over the threshold that's that's super interesting the other. A news tidbit I had was an announcement from Walmart and JD in China and for those that don't know JD is the largest. Direct seller e-commerce site in China so you know we always talk about Alibaba which is Team all and tell about those are both marketplaces so jd.com is the largest kind of traditional. Reseller of other people's stuff online and they have announced a pretty interesting partnership with Walmart to, host a shopping Festival which here in the US would call a sale holiday on August 8th next year so that's that's going to be an interesting. New play from Walmart in JD and China to try to create their own shopping holiday to compete with alibaba's single day on November 11th.
Scot: [37:16] Yeah freak will be interesting to see if they're going to call it like all each day or double 8 answer seems kind of can't call it singles day.
Jason: [37:25] No but I suspect we're going to have a podcast to cover it next year.
Scot: [37:30] Absolutely.
Jason: [37:32] So was you mentioned upfront we did we did listen or questions last week which were great and very popular but we didn't get time to answer all the listeners question so it is once again time for.
Scot: [37:53] Questionnaire questionnaire question love the echo did you you must have done that one at the Grand Canyon.
Jason: [38:04] Exactly I give that sound effect was a little shorter we would have had time to get all the questions in last week.
Scot: [38:09] I never know if it's ever going to totally stop, our first question this week comes from a longtime friend of the show Michelle Grant she's at euromonitor in this one was from Twitter and her question do you think Nike is one of the few brands that have the leverage to get Amazon to remove 3p inventory, and that's what they're calling Marketplace skating so what you think Jason.
Jason: [38:37] Yes I do think they're one of the few but I think it's a combination of things right like I think I think you have to be a big desirable brand and I think in in Nikes case the levers they had is that they, we're not selling on the brand and they're one of the the most requested products on Amazon and Amazon you know didn't carry except through. Through a three-piece hours and so I. Like I do think that was interesting that they had the leverage to to clean up the the the marketplace by by draining Sales & Products Direct, I wouldn't surprise me if we see a couple more of those deals but I certainly don't think they're going to be commonplace I certainly think in general. Amazon's not going to be willing to do that and you know frankly as they knock down a couple of these top. Top brands they want they're just going to bless less future brands are going to have less leverage to cut the same deal that Nike cut.
Scot: [39:33] Yeah I agree I think there's literally 5 to 10 brands that could get this kind of treatment things going really interesting is how will this relationship work so yeah you can paint a scenario where. Nike went into this genuinely wanting to sell more product and clean up the marketplace or you could say we'll maybe this was kind of a little bit of had faith in there like okay Amazon will sell some of our in Nike has a good better best will sell some of our good in a little bit of better but none of our best, and you're going to clean up the marketplace and then you know the other part were not privy to as what is the pricing relationship so.
[40:13] Amazon hates it when they can't change the price of a product they will they will live up to map pricing. But if you see it cheaper somewhere else they really like the flexibility to lower price so you can see this relationship being a little twisted if. Couple scenarios so so let's say Nike has somehow negotiated Amazon can't do that that's going to drive Amazon crazy not being able to the price so that's one scenario where this relationship sours another scenario is where. You know.
[40:44] Amazon goes and changes the prices like maybe Nike came in thinking we've got our pricing under control that's not a big deal fine change prices if you find it lower and it was on so good at that that that's a good may surprise it in my experience and I deal with their very surprised that, Amazon so aggressive with pricing and then be when they call him on it Amazon can provide like a detailed report that says here's why we lowered the price it was you had it at, in Iowa there was the store that had it in with a it was even cheaper per se but it came with a gift card and that's why we not to ten bucks off across the country so I think that could cause some friction and then, Amazon is forgoing some a lot of Revenue and a lot of margin and maybe a year into this it turns out that, 3p was more practical than Nike I I don't know what the outcome of that would be but I got imagine Amazon has some data there so it's kind of interesting to see how this relationships going to play out over time at I think I see more scenarios where it kind of sours and then they cut split up then. Baby come back together later or so we'll we'll see how it goes.
Jason: [41:54] No I think you're exactly right and the 3p Marketplace is such an important part of Amazon success it just it seems like. Yeah that's to be a really compelling reason for them to do something that that negatively affects that. So the next question we got is from Steve White and, Steve is a co-worker of mine on the the Commerce team it sapientrazorfish so no Steve very well and he he sent the question hey guys when I talked to Brands they have a sense that they are going to be pushed out of the, platform is Amazon develops products in their respective categories and then he goes on to say my senses then Amazon has never acted like a bully in that regard just adds additional competition, thoughts so Scott is are they going to kick off all the shoe companies now that they have private label shoes.
Scot: [42:45] No no I think you know they Amazon love a couple things today love fast free shipping they love Amazon Prime and the kind of loyalty it builds and Trust the things they love on top of that or selection and volume so there's this classic Amazon flywheel, Scot funny up and talk about this for 10 years now I run chose to flywheel, in and at the heart of the flywheel is selection and value and that's that's where, you know they don't really push Brands off so so I think, what I'm saying is this really interesting kind of hat trick where you'll have a name brand out there so let's say. I don't have Bob I was buying something that has buying some shorts so Columbia shorts are out there and they were like $80 maybe $60 for last year's kind of thing that was the name brand, men's shorts and then there was an Amazon Brandon there and then there was a Chinese brand so so I think they they like giving consumers that option to say hey here's here's a wide price range of things you decide, and they're all prime eligible and you decide what you like do you want, us to have a cop put our brand on something and call it the Amazon choice and the private label do you want to take a little bit more risk on quality and whatnot with a Chinese kind unbranded Cellar or do you want to buy from the name brand name brand that has you know it's more expensive and you're going to get you. Better fabrics and better this a together with that one so so I think I think.
[44:21] That brand shouldn't worry about that now would they should worry about those the slice of the pie because even though they're still on there we weave there's stairs. Lots of case studies that we see everyday of these traditional Brands they don't really pay attention to their Amazon business, and I'm not real brand comes in and soaks up like 80% of the Amazon Market overnight and that's hard to fight against even if your name brand because just the way they Amazon machine works with SEO and sales rank in the ad system in FBA and all that it can be very hard for a traditional brand, did they have to make some really fast. Big decisions that big brands are not good at making to catch up to that sir so I think the risk is actually that they lose a slice the pie, and that's the entire Amazon Pie which is the very big pie.
Jason: [45:10] Yeah once again I totally agree I think the. There's very few things are going to do to get kicked off the Amazon platform I mean you know violating terms and conditions. You know fake products stuff like that or, selling stuff that Amazon can't make a profit on you know if you know you can fall into that category and get kicked off the project the platform but, it certainly is unlikely they're going to kick you off the platform to preference their own Brands to your point. Like it can be harder to win the buy box when Amazon has products but I don't even think that they. Manually putting their finger on the scales in most cases. For those private Brands I think they just know how to score better in rank better in there and answer the result they're going to win the buy box more. And you know when those search results more. And therefore it is you say get get a bigger piece of the pie I would say the one place work like this still isn't getting kicked off but we're probably feels like it's getting kicked off it is. You know something like the echo is getting like so heavily promoted around holidays like Prime day and and Christmas and you know it could be. Pretty hard to elevate visibility for your competitive product you know if you're competing against one of those. Does core Amazon products but I don't think we're going to see that for all the private labels on Amazon.
Scot: [46:44] Yeah and here is our last question this is from Parker block this one requires a little bit of setup so there were two articles recently out there another friend of the show who has been a guest Casey Low by he had an article out talking about kind of the fragmentation of retail so lots of Little Stores sign things and Brands going to react so, Lots in this big kind of.
[47:08] Tons of choices for consumers at the same time a popular writer Deb weinzweig she used to be an analyst at Citi now she writes for Fung retail. Sheeran article that said know there's all these disruptive forces going on in retail and we're going to see massive.
[47:28] Consolidation so essentially you're going to go from you know I don't know how many retailers but if you look at kind of Mulligan and you start tracking the number and they've been very good at. That tracking the number of store closures and then projected store closures and all that it's pretty easy to convince yourself there's going to be. Walmart Target and apparel company and, or two or three in a couple luxury ones some dollar stores some clubs and then that's kind of it so a lot of the retail is going to go away and we've seen enough more bankruptcies this year than we've had ever so, so that's a long set up so the question is and I'll let you tackle this one Jason, are disruptive forces going to drive retail consolidation which is Deb's argument. Or are we going to have fragmentation which is Casey does seem to be mutually exclusive outcomes so I'll I'll turn it over to you Jason to hear your thoughts.
Jason: [48:22] That's very very clever I was actually hoping to hear your answer and then I was going to tell you whether you were right or not, but well they seem to be mutually exclusive I actually think they're not and so I think the answer is both but I'll I'll. Be a little more definitive than what I mean by that the.
[48:42] I feel like we're going to definitely see a consolidation of people that are segregating other people's stuff and selling it. So traditional retailers that buy stuff from third parties mark it up and sell it I just think that's going to. Increasingly be a hard business to be in in differentiate yourself in and we're likely to only see a handful of those product aggregators, and you know obviously at this point though the one that that certainly seems to be winning as in North America is our friends in Amazon but at the same time.
[49:15] That we're seeing a lot of product manufacturers have lower barriers to entry to sell direct to Consumer than ever before I mean 50 years ago if you invented a product the only way you could get it to Consumers was to get it on the Shelf at retail, and today it's it's much easier to sell that stuff to wrecked a consumer and increasingly. You you would want to go from a margin standpoint and from a customer intimacy standpoint and from a data standpoint, and you have to because that's, tell me what you can control your price and differentiate yourself and you know not not just be you know and see if 100 million products on Amazon and so I think what we're going to actually see is.
[50:01] A fragmentation and sellers in the form of product manufacturers that are selling their products direct and we're going to see a consolidation of sellers in the form of aggregators that sell other people stuff.
[50:16] So so Casey Deborah you're both right.
Scot: [50:20] You unpacked the mutually exclusive arguing very well the aldila controversial and disagree with you to some extent so I'm going to go consolidation and. I put a star by that so let me come back to that in a second but let let me dress fragmentation night do you think it is interesting we talk a lot on the show about the digitally native vertical Brands but what's interesting if you kind of look at it. They haven't scaled as big as you would think they would right so so the splits pick on bonobos they've been on the show great brand love them love Andy's riding and all that stuff, but they sold the Walmart you know they didn't create kind of a 5 billion dollar brand and. I don't never disclose sales but I think they sold for 300 so if we give them kind of a 1x sales or maybe that was to set put some between 150 and 300 million. You would think with the vast audience online that they would have been able to just keep selling in Skilling online that I haven't opened stores but they ultimately had to open stores to get consumer awareness so. So I think there will be Brands willing to sell direct but it's going to be hard because it's very it's a weird customer experience to not have them aggregated in some way, and that's what traditional retailers have provided now back to my consolidation I think we're going to have consolidation but I pull astrix by it because I think the consolidator is going to be different than what we think they are, tell me the traditional folks like an Amazon a Walmart kind of department store kind of thing but I think what will happen is.
[51:52] As these Brands want to get consumers to consolidation points will be where your attention is and. China is a really good example of this where you know you have WeChat has become itself it started out as an app. App for chatting it is become this portal or Channel now that people shot through so the app has become kind of the. What's the web essentially so it has the tire web inside of an app and that's. A form of consolidation so if it kind of project that Ford in the US I think what you'll have is you'll have some traditional retail points of consolidation but I think actually what will be bigger is going to be, it was some the platform consolidation so I think you actually will have a fair amount of sales going through Facebook it's hard you know and I. Put Facebook I put in stew and all that stuff inside of there and then also when you look at people where people are spending their time things like Snapchat Google and then maybe even at the device later maybe an apple or.
[52:53] Yeah it's kind of nother kind of consolidation point so. That's how these brands are going to have to be able to get in front of consumers because they just can't do it through traditional channels and.
[53:07] Part of my thinking on all this is that we go to a much higher percent of sales that are online and that's kind of what's happened in China as well to drive that behavior so so I think consolidation but not just retail consolidation but. No attention consolidation which may be a retail thing like Amazon but it could also be Facebook Twitter and yes those guys have tried all this but I think it comes back around in some form and that's the, platform for discovery that I am you're if you're not playing on those your you won't be found on the internet.
Jason: [53:41] That's very interesting. I will totally buy that it can spend the fact that most of the platforms have had very little success today I I certainly agree that is going to be easier and easier to push the, the transaction out to the point of Discovery so if if they're in a new points of Discovery they could ask absolutely be consolidation points, so that that's a great call at Scott I'm going to Sweet Lee clarify my answer when I said, brand selling director going to you know therefore be a bunch of pregnant at Sellers I suspect the overwhelming majority of those Brands still will sail with the aggregator so I don't mean no exclusively sell Direct, but I think they'll they'll certainly you know do their best to earn as much of the direct businesses they can and you know particularly if you look at it through Scots timeline. The other thing that's going to happen is a lot of the buyers for this stuff are going to be computer chips are all agreed them's that are doing Auto replenishment in your home and. You know that the Samsung dishwasher is not going to care whether it buys your tide from Amazon or direct from Procter & Gamble and so you know I think that's going to. Create greater opportunity for for those direct Cellars in a bunch of those categories. To have a meaningful Direct business so would that said I have a follow-up question for you is a Marketplace.
[55:02] Consolidation or fragmentation right so on Amazon where I've got you know a huge number of sellers but a single cart is that actually. Fragmentation of sellers or consolidation of carts.
Scot: [55:16] I think it's consolidation because and I think their traditional way of thinking about. Consolidation is front doors so that's kind of the approach I'm taking his like you're going to how many please it offline metaphor how many physical front doors do you end up going through. That number will drop off line in offline I think now it's your counting the fragmentation is the number of buying entities or if sellers of record behind the front door.
[55:48] I think that's kind of a nuanced kind of view of it but I see where you're going with it but yeah I think it's the front door is kind of how I am I'm answering the question.
Jason: [55:58] Cool Scott we we meet at we got all the way through or listen or questions, and that is perfect because it is happen again we've wasted a perfectly good hour of our listeners time so we certainly would encourage listeners to continue the dialogue on our Facebook page if you love this episode we greatly appreciate a 5-star review on iTunes and feel free to use Twitter or Facebook to, send this new questions and we'll agregate a bunch of them and do another listener question show in the future.
Scot: [56:31] Yeah thanks everyone for all the questions we really appreciate it.
Jason: [56:34] So until next time happy commercing.