Jason & Scot Show Episode EP332 – Kelly Goetsch Order Network eXchange (onX) Standard
A weekly podcast with the latest e-commerce news and events. Episode 332 is an interview with Kelly Goestsch of Pipe17 and the new Order Network eXchange (onX) Standard.
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Chapters
0:37 Welcome Back, Kelly Goetsch
2:35 The AI Bubble: Past and Present
3:58 The Rise of Microservices
7:32 Transition to Pipe 17
9:43 The Order Management Dilemma
13:01 Network-Based Solutions
18:10 Industry Standards and Collaboration
25:48 Launching the Order Network Exchange
32:28 The Evolution of AI in Commerce
40:43 Future of E-Commerce and AI
50:24 Predictions for AI Integration
54:02 Closing Thoughts on Industry Standards
In this episode of the Jason & Scot Show, recorded on Thursday, November 6th, hosts Jason Goldberg and Scot Wingo welcome back Kelly Goetsch, now the President of Pipe17. They dive deep into the evolving landscape of e-commerce, order management, and the impact of AI on consumer experiences, taking us on a journey through the dynamic developments of the industry.
The conversation kicks off with a nostalgic nod to a previous episode, highlighting the rapid shifts in technology and market dynamics since Kelly last joined the show during the height of the microservices boom in July 2021. The discussion emphasizes the transformation of order management systems (OMS) and how current customer expectations have been reshaped by giants like Amazon, pushing brands to adapt to new fulfillment models. Kelly explains how Pipe17 positions itself uniquely in the OMS space, competing not just with traditional systems but also embracing a network-based approach, citing their aim to redefine order operations for the modern era.
Throughout the episode, listeners learn about the innovative concept of the Order Network Exchange (ONX) and the Commerce Operations Foundation, which aims to standardize communications between selling channels and fulfillment systems. Kelly describes the vision of a seamless, integrated environment where data flows between systems in real-time, vastly improving responsiveness to customer orders and effectively managing inventory across various platforms. The team delves into the significance of the Model Context Protocol (mCP), which allows AI to interface more effectively with various applications in real-time, exemplifying the transformative potential of AI within commerce settings.
The conversation takes an intriguing turn as the hosts discuss the current state of e-commerce, focusing on how emerging technologies and shifts in consumer behavior are influencing future sales trends. Kelly expresses a bold prediction that more than 50% of e-commerce transactions will be influenced by AI in the near future. The dialogue also spans the evolution of payment solutions, summarizing the landscape of competing systems and the potential for disruption.
Jason and Scot further probe the notion of the web’s declining dominance compared to new AI-driven shopping experiences. Kelly shares insights about the changing nature of discovery channels and how AI can reinvent customer interactions in meaningful ways, potentially replacing traditional web browsing models. Amidst these discussions, Kelly highlights the importance of fostering collaboration within the industry, illustrating how cooperation can lead to overall growth and improved customer experience.
As the episode wraps up, the conversation touches on the necessity for companies to become agile, moving away from prolonged evaluation processes towards a model that values continuous improvement. The discussion reinforces the idea that standards may provide the needed flexibility for businesses to adapt more readily to accelerating changes in technology.
Tune in for this captivating episode, filled with rich insights into the future of e-commerce, AI’s pivotal role in shaping customer experiences, and the transformative efforts underway at Pipe17!
If you enjoyed this episode, please consider leaving a review on your preferred podcast platform, and don’t forget to subscribe for more engaging discussions and industry insights!
Episode 332 of the Jason & Scot Show was recorded on Thursday, November 6th, 2023.
Join your hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[10:04]Sure so historically order Management Systems have been applications sitting on top of databases, and back when the leading MSS were built there was basically 1 digital sales Channel which was your brand.com and then typically you were going to 1 ARP and 1 own, Warehouse right and it was a pretty straightforward linear progression there and the MS had to be the system of record it was kind of the center of the back office, and The Innovation that pipe 17 was to start with a network first and the founders of the company saw that there are many more selling channels than ever before.
[10:44]AI now among them you know typical customer of ourselves on 8 different selling channels and that’s a brand.com, it’s Amazon it’s Walmart it’s Tik Tok we want Tik Tok partner of the year last year we want Amazon mcf partner of the year but folks are selling inventory on so many more channels than ever before.
[11:03]And also Amazon has really screwed up customer expectations because historically, everybody was fine with 5 6 day delivery times you know I ordered a digital camera for my wife’s birthday back in 2008 lived in downtown Chicago at the time, and Best Buy gave me an 11-day delivery timeline and that was normal it wasn’t considered an exception things just took a lot longer and nobody seemed to, really care that much and now we have so many more you know I I’ll give you another example my first corporate job was at Foot Locker they used to ship everything out of 1 Warehouse in Wisconsin, and now they have 8 different warehouses and they have 2 different 3pl’s on top of that, Amazon is really reset the bar for customer expectations so you’ve got a lot more selling channels and you also have a lot more fulfillment channels, and that creates the need for Network level connectivity and the same way that stripe for example or twilio or project 44 those are all very network-based Solutions, and we are the first network-based OMS and then on top of that we have ai based order management like you’d expect, so we can Route Around hurricanes if hurricane is heading towards a a city will actually reroute around that for example and stop surfacing up inventory.
[12:17]From those locations we do the same thing for labor strikes we do least cost routing we do fastest routing so very traditional order management and that’s why we are in the order management space we are categorically different. We call ourselves order operations which is a combination of that Network and AI over the top of it. But we’re we’re just different and I think we’re very much suited for especially the digitally native era where folks want something quick and cheap and easy and with us you plug in your API Keys you configure your intents through Ai and you’re good to go.
[13:01]
Network-Based Solutions
[12:53]Nice nice and I’m kind of surprised that the world needs Solutions like yours because it seems like if you’re just going to sell on 8 different platforms that what you would do is just. Bifurcate all your inventory into 8 piles and put it in 8 separate fulfillment centers and just hardwire 1 to 1 isn’t that doesn’t isn’t that seems like that would be much easier.
[13:11]Logically yes but you know and that’s the real challenge if you’ve got you know 8 pairs of size 32 jeans and you’re selling across 8 different channels and you sell through in 1, right how quickly can you propagate that change up and if you’ve got a traditional style order management system it can take a long time, and again I think our core differentiator is that network-based approach where you plug in the API keys and then we maintain it as a network level connection, and we propagate those changes up in milliseconds so categorically different approach but we’re competing in the same category, you know similar kind of to headless Commerce right headless commerce was a categorically different approach. But we competed in that same category with the traditional you know monolithic Legacy Solutions.
[13:55]Yeah and I I I a few times I feel like I’ve heard uh folks refer to it as order orchestration and is that just, semantics or is there like in your mind is there a a difference between order management and order or orchestration is orchestration an attempt to differentiate it in some way.
[14:14]Yeah I think orchestration is a feature of order management it’s a subset and there is some Solutions on the market that only do the orchestration part but I think order management is is much bigger than that.
[14:27]You know I have a a deep technical question around the name pipe 17 pipe I get like it it kind of, says to me you know order management because it’s like the pipes the piping of e-commerce and and all these things what why 17 just because it’s a prime number or favorite football player or what’s the.
[14:47]Look at Scott flexing with his knowledge of prime numbers.
[14:50]Yeah yeah I can go up to a 19 on that 1.
[14:55]So it actually really interesting and that was a question I had early on as well is you know why the 17th areas and, the area 17 is called the broadman area and what it does is it takes input from your from your eyes that nerve that powers your eyes, and it distributes it to the rest of the brain so it takes whatever you’re seeing and distributes it through the rest of your brain, and actually that’s really really good analogy I still don’t know who who came up with the term pipe 17 but I think it makes a ton of sense.
[15:26]Wow I would not have guessed that’s I’m glad I asked I learned something new I can end the podcast now I now know it.
[15:31]You picked a name that’s super intuitive to all the neuroscientists buying uh buying orders.
[15:35]Yeah it’s all ton of them now I know what pipe 17 means.
[15:40]Cool well 1 thing you had reached out because there’s some pretty interesting news going on I don’t want to spoil anything so I’ll just turn it over to you tell us tell us there’s something you’ve been working on and we want to hear about it fire away.
[15:54]Yeah today when folks are listening to this we will be live with the order Network exchange standard, and on top of that the Commerce operations Foundation and, what we’re doing is coming together as an industry to solve a problem that we’ve had now for decades there’s no standard that sits between selling channels and fulfillment channels.
[16:17]Again historically you’d go and weld each selling Channel back to each fulfillment Channel and a fulfillment Channel could be an order management system, it could be a warehouse management system it could be an Erp, it could be a third-party Logistics provider you know there’s a big world out there in fulfillment and it was you know I I guess I shouldn’t expect anything different but you know I had a pretty naive view of order management working on the order capture side, I just thought yeah you throw the order over the fence and it’s the os’s problem well suddenly it’s our problem um so I get it. But it actually takes a lot of work and a lot of innovation and a lot of point-to-point integration to make all of this work behind the scenes, so I’ve got together with a whole bunch of folks across the industry Manhattan and Sterling which are the 2 dominant ms’s. Lega ship hero Manhattan on the WMS side radial Rider civil Logistics on the 3pl side and, we’re at 52 right now at the time of recording I think we’ll be north of 65 companies that will have signed up to back the standard by the time you’re listening to this.
[17:27]But it’s solving that problem in the same way that we have agentic Commerce protocol in the selling Channel Side, and we have ap2 on the selling Channel side which is Google’s this is that but 1 layer down.
[17:39]Got it cool it always impresses me how you were able to get all these different vendors to work together what’s what’s this so you did that at the Mach Alliance what’s the secret sauce how do you make that work I can barely get myself together for lunch.
[17:54]You know industry cooperation is the default right we have AC and Swift in the payment space,
[18:10]
Industry Standards and Collaboration
[18:01]and I’m assuming at some point you know 1 Executive and 1 Bank said hey guys this is stupid why are we doing point-to-point Integrations with the Bank of Omaha or whatever right. Probably at some point somebody said let’s build the standard.
[18:14]You know we see the same thing with ethernet you know Bob metcalfei invented it back in the 60s at Xerox Parc and he printed it out the standard on manuals and handed it out to his competitors and they all rallied around that standard, again we have selling Channel standards now we have ACP and ap2 right and that’s more between an AI head and the payments vendors and the Commerce platforms, and that’s great but you know industry cooperation allows all of us to succeed and. A huge barrier to order management and fulfillment changes is all of the integration work that has to happen and if we can remove that as a barrier, and allow data to flow stream list seamlessly from your heads whether those heads are AI or Tik Tok or Amazon or any of those other heads, back to any back office system of record and collapse those layers a little bit there’s value for everyone there, and the other is everyone is doing mCP anyway and my pitch to them was hey this is kind of crazy that there’s no standard right now, mCP finally makes this possible let’s all get together in a line around this very straightforward pragmatic standard, and then you don’t have to build your own because obviously you’re going to do this on your own and every single person said yeah we either have just started this or we’re about to, so everyone needs to do this and this just makes sense to pull off the shelf and do.
[19:37]Awesome let’s pick on the do you call it onx or onx like what’s what how should I phrase this the ordered Network Exchange, how do you say it Onyx okay uh so let’s start it Onyx you set it to standard so does that does that mean that it’s kind of like. A file format or a you know or more of a, more of a network protocol like okay you’re going to come in with an order and it’s going to look like this and then we’re going to just kind of like the ACP is this sequence of of events that happen and the underlying data amongst those sequences is that kind of how it’s set up.
[20:14]Kind of so mCP I should probably Define what that is first um it stands for model context protocol and it’s hard to believe but it’s a year old at this point I think it’s exactly a year old by the time that this episode will Air, anthropic came up with it and they were brilliant in what they did what it is is basically a USBC port for AI. So it allows you to connect you know there have literally been trillions of dollars invested in openai and Google and you know across that whole AI ecosystem it allows you to connect those applications, back to other resources and a resource could be something like a SAS app it could be something like your Gmail. It could be something like a database but it it’s basically an API for AI, and if you pull up your Chachi PT today and you hit the connectors tab it’s going to give you a big list of things you can connect to including slack and Google Drive and, Gmail and your calendar and like we have 1 at pipe 17 we’re the first to come out with this um in our category, and once you connect up with these SAS apps you can then ask things like what is my schedule for today, and it’s going to pull data from your calendar it’s going to pull data from your email it’s going to pull data from slack and it’s going to then present you with your calendar.
[21:35]So mCP is really the Catalyst for all of this and all of the AI vendors have very quickly standardized around it as the way that you, surface up data and functionality to AI.
[21:47]And Onyx specifically is a set of tools and resources and mCP defines both so a tool in mCP terminology is a verb it’s something that you do, so capture order is a tool a return is a tool an exchange is a tool right they’re they’re verbs they’re things that you’re doing. And they also allow you to expose resources and a resource is something like an order a product inventory it’s a document right it’s a static thing that you’re retrieving. So
[22:18]Retrieved as a Json just out of curiosity.
[22:19]No it is not. We we Define the 12th mCP tools that you would expect and we Define 7 resources, and the unexpected is very clear about defining the interface what it does not do deliberately is go into how each vendor, does what it’s supposed to do so. Order capture mCP tool is going to be very different based on whether it’s an LMS or a 3pl or a WMS, and that’s fine but the input and getting that all documented, and surfacing that up to the LMS so that when you point to selling channel to an mCP server that runs the Onyx standard it knows exactly deterministically what to do and how to do it.
[23:07]I got it okay so that’s the onx side Onyx side how about the Commerce operations Foundation the CF the cough. I’m a branding genius.
[23:21]I very firmly believe that specifications require oversight and. This organization it’s the Commerce operations Foundation is basically the cloud native Computing Foundation equivalent for kubernetes right it just owns the specification only. It’s not like the Mach Alliance where it’s a community thing they’re not going to be conferences, it’s strictly phone organized around that and it owns the intellectual property so we’ve actually got a patent on capturing orders from an AI head in passing them back to mCP, so the foundation owns that trademarks copyrights we’ve got a lot of Ip and it’s all in the name of the foundation and ensures vendor neutrality, so I’m on the board alongside the CTO of Manhattan for example who is an early entro employee, you know same with Sterling you know with the rest of the vendors and the Consortium were on the board together. And then we have working groups to advance the standard both technically and commercially we want to evolve it and there might be an opportunity here to do things like. You know maybe standardized products data as well alright we’re this is very much orders down there might be an opportunity to do products up for example a lot of opportunities here to get involved for folks. Organization is very focused on the specification only.
[24:45]Yep so as it matures they’ll, you know somehow vote and approve of adding things and you know clarifications and those its kind of the body that that makes sure the standard is going the right way and getting adoption and those types of things.
[25:00]Yes entirely.
[25:02]Okay you talked about who was signed up let’s say someone’s listening and they’re like holy cow I really want to be part of this where what do they do.
[25:12]So you can go to the website it’s the Commerce Ops foundation.org and there you have information for sign up always free to contact me directly, I’m happy to get you connected and we have a couple different ways to participate 1 is the industry Advisory Board and that’s more for the brands of emergence um and they can network with peers they can pull the standard off the shelf and adopt it themselves. A lot of opportunities there the vendors can join the vendor Advisory Board I know good branding on that 1 right,
[25:48]
Launching the Order Network Exchange
[25:41]and then on the those who are actually interested in working on the specification itself uh we have a technical steering committee. And they’re able to join their we also have a friend of category and I think we have 3 maybe 4 members in that, and that’s just folks who want to stay closed they want to participate in the all members meeting they’re kind of sitting on the fence you know not quite sure about all this whole AI thing, and mCP and they want to watch from the sidelines and that’s fine too you know always happy I I’m a big believer in having a big tent.
[26:15]Yeah so I think I sort of get the the role of the standards I I am curious though like. We very often end up at a standard but it’s to me it’s less common that we start with a standard like in my experience, somebody who’s the incumbent almost always says man you know what would the best solution here would be if there was some proprietary solution that only we owned and we were wild garden and everyone had to send us money because we have the only good solution, and and usually that big incumbent does not agree to the industry standard because, they want you to have a financial incentive to be walked into them and generally what will happen is the people that aren’t that big incumbent will create some standard and wean into interoperability and extol all these benefits, and then they’ll fight it out in the marketplace and either the incumbent will be so powerful that they do win and then the standard never matters, or eventually the incumbent doesn’t win and they have to cave and support the standard like is. Am I am I right and why didn’t that happen here like it kind of seems like like like people I mean am I am I fabricating a problem that doesn’t really happen or.
[27:26]No I mean mCP is just so new I think we had first mover advantage on this and Consolidated a lot of support very early over the course of the summer when mCP and look this would not be possible without mCP.
[27:39]Physically cannot do it right the API standard if you were to do it with that would be so owner risk to adopt, it would be like Arts from NRF if you remember that initiative from. A decade ago great in concept but when you get to the point where you’re dictating database field names it becomes way too onerous to support and mCP makes this possible. The other thing you have to remember is there are yes commercial order Management systems on the market and that’s great, but Far and Away the biggest 1 out there the biggest incumbent is homegrown it’s do it yourself. I don’t know what the numbers are if I had to guess I would say the commercial order management Market is probably, 15 20% of the total market for order management out there if I had to guess.
[28:28]And the biggest barrier to adopting an MS is the integration it’s the implementation it’s a ton of work to implement a new Ms you know folks have described it as open heart surgery, and this standard makes this much much easier because for 2 levels for 2 Reasons first is the omss themselves don’t have to have fragile point-to-point Integrations with Downstream systems, so if you have a WMS and you have a 3pl that support this and you need to connect to that from the MS, you can use Onyx from the MS down you can also go from the selling channel to the MS through Onyx so it’s multiple layers, that both use the same standard if that makes sense.
[29:14]Yeah yeah I think it does and you know in my mind I imagine. There’s a bunch of solutions that are going to benefit from the the standards having emerged so early like Scott and I are older than dirt so we remember like some of the the first iterations of of e-commerce right and and Scott’s early days of Channel advisor. That was the first time people are trying to solve this problem of selling. On multiple platforms right and the the idea that you had to plumb order Management in at all was new right like like people are like oh I have this man to sell just send that number to both platforms and hope hope for the best um, and we we laugh but that’s how people did it right and. Like until relatively recently whenever some social media platform would launch Commerce like you could almost Bank on the fact that they, like, didn’t have robust you know Inventory management as part of their their solution but you know now they’re all these startups that are like inventing these new experiences and having this POV about how. The this these customer experiences should go and they they kind of have a blueprint of of a lot of the best practices to cook in so they don’t do these kind of. Stupid ill-considered first iteration Solutions.
[30:28]Well well yes and I think what’s really interesting is if you look at I think we’re going to see more selling channels continue to proliferate especially in the age of AI and I think that’s generally.
[30:39]Yeah I’m going to take the the under on that 1 yes I think we’re going to they’re going to go more.
[30:44]We’re they’re going to go more and they need access to inventory information and other fulfillment information, way up the purchase funnel so if somebody is searching for something you have to surface the the inventory and fulfillment options up all the way up at the top of the funnel.
[31:01]And right now it’s very challenging to get that data surface because you’re going from a warehouse management system to an order management system to a Commerce platform, and then finally to whatever social Channel you know the social channel of the day happens to be a lot of layers there and at each layer things get cached and what’s great about the Onyx standard is, that standard sits on top of all of these different systems and you can go directly from a Tik Tok head for example, and directly query the inventory in a 3pl that you might be selling through right and I’m I I every 1 of these 3pls there’s a you know there’s a guy named Bob I don’t mean a stereotype but there’s always a guy named Bob, you know who’s manually entering in all the inventory you know in a green screen computer somewhere that data from Bob is surfaced immediately up to these selling channels, through mCP so you’re going directly from the selling directly to a physical warehouse and that’s what’s novel about this approach you can also go directly to your order management system or whatever that happens to be, but we’ve never had that level of data before accessible to the selling channels and I think it’s really going to accelerate the adoption of order Management Systems the commercial ones.
[32:14]And the proliferation of selling channels.
[32:17]Yeah Emperor our younger listeners that didn’t get the green screen reference that’s just a that’s a terminal application that only has dark mode.
[32:28]
The Evolution of AI in Commerce
[32:25]Yes only has dark mode exactly it’s The Homebrew yes.
[32:28]Yeah so and 1 last thing on mCP that I just I chuckle about but it’s it’s it’s like. Obviously everything gets brand washed right so I get all these pitches from these, the solutions and the main differentiating thing about the solution is its it uses AI right and so somehow that’s supposed to magically make it better right so like do you want the regular hot dog or do you want the AI hot dog right or, janitorial services or landscaping services or whatever ridiculous thing and I feel like in the Tech Community I’m it feels like I’m starting to see like, people go and the the fundamental like reason our our technical solution is better is it’s based on mCP like I I feel like it’s already developed some brand cachet and that like people that are looking for, for partners or funds or you know investment are are like leaning into their mcpc support.
[33:22]Yes so first is think of mCP is just a fancy API. And it’s really hard to go around and brag that you have a fancy API there has to be something underneath that that provides value but what what mCP enables specifically that is not enabled elsewhere is. You can do actual agent level work and I I’ll give you an example right so if you hook up an LMS. And you hook up a Commerce platform and then you hook up CRM and you hook up payments right all of these have mCP connections, you could do um a text-based input to say Claude or chat gut and actually physically write out and say something to the effect of, there was a hurricane that just went through I’d like to find all orders that were impacted and delayed for more than 24 hours, then go create a voucher code in the Commerce platform then send them a text message offering this voucher code and log that transaction in my CRM and as long as all of those parties have mCP enabled.
[34:26]AI can do that right like literally trillion dollars worth of you know investment in this AI space, if you don’t have that you physically cannot surface up your data functionality to Ai and AI cannot work with it and a big, a gripe I have on the side is you know a lot of these big existing products have a little you know clippy agent that they call AI, it is AI for sure but I think the better form is mCP where you can do real AI agent level uh actions.
[34:55]Yeah yeah AI has unfortunately become such a broad vague term that it’s all almost meaningless because it could it could refer to so many things. But speaking of AI let’s pivot a little bit because we’re we’re talking about the back end which is super interesting and super important to those of us that actually want to make customers happy but of course, the sexy end of all this is where the customers are discovering products and deciding to buy them with the help of the robots or or potentially even, turning over the the shopping duties to the robot. Like sort of the the front end of of this whole experience I’m I’m guessing that those kind of experiences are. Big Driver of New Opportunities and new customers at pipe 17.
[35:38]Yeah absolutely we’re very well positioned for that because again we’re Network Centric. And being Network Centric we plug into all of these different selling channels including AI, back office systems like erps fulfillment channels so we’re very well set up for this AI era and just generally the bar of what we’ve called Commerce is moving down 1 layer. And folks are throwing captured orders to us from many many different channels at this point.
[36:08]Yeah and Scott seems like he’s exclusively willing to talk about instant checkout like in his mind that’s the only only thing that will ever happen is. Does that is that is instant checkout already the de facto winner is that what you guys hear about or get asked about most or like do you see other, other sort of experiences or front ends being that you know potentially part of the the long-term AI shopping ecosystem.
[36:36]I mean ACP was the first standard in this entire category and it was released what 6 weeks ago maybe I mean Scott would know I mean with retail gentic how how how long ago was that Scott.
[36:50]It was 9:30 so let’s see 30 days so 38 days ago 3.
[36:55]38 days ago.
[36:58]Sorry to cut along on the tooth.
[36:59]At the time of this recording I’ve heard Etsy there are a handful of Shopify customers that’s it right as as far as I’ve ever heard that’s it so we are early.
[37:11]Uh and they were in Camp ap2 so that was interesting to see them come over.
[37:15]Yeah but look we’re very very early with this and I think I always have to remind myself that we make the same mistake with every new technology we overestimate its impact in the short term and we underestimate it in the long term, I think the web will slowly die over the coming decades, you know is my 14 year olds gen Alpha daughter says websites are for old people and you know like that’s how I got my start was building websites and it makes me a little sad to hear that but I think she’s correct. And you know there are a lot of problems with the web today the the web is what brands want you to see not what you want to see necessarily you know I think of them as carefully curated digital Billboards not necessarily what I want specifically, Google’s the same problem right when you search for how to select a TV you get a whole page of ads that come up, retail media you know not going to name names here Jason but you know retail media has has caused challenges with the customer experience, you know customers are getting whoever paid most you know not whatever is most relevant. Europeans have blessed us with gdpr and those annoying banners that you can’t get rid of you get 15% you know if you join our mailing list banners like the web itself is a very very poor experience these days and it’s especially poor experience on a mobile device.
[38:28]And I really think that AI is for the moment at least and I’m sure it’ll be corrupted like the web was but for the moment at least AI is a dramatically better experience and I can imagine a future where the web is replaced by AI that just generates, things for you in real time based on what you want.
[38:47]Interesting yeah so couple controversial things in there uh. First of all like you you echoed Scott’s favorite platform that the web is dying right and. I I chuckle because to me every time there’s something new everyone’s like oh it’s gonna replace the old thing right like Marc Andre you know famously predicted software was gonna eat retail for example and the web was gonna put, brick and mortar out of business and now ai is going to put the web out of business and answer engines are going to put Google out of business and. I think all these new things are better and solve solve either Legacy problems better than the old Solutions or they solve new problems that the old solution couldn’t even solve. But to me it rarely do these things go out of business I mean there’s still a robust vinyl record business it’s much smaller than it once was but all those Billboards that you just made fun of, those all still exists and people charge more for them than they ever have before like if you want to if you want to buy a billboard on the side of the freeway in in San Francisco right now you have a 2 year wait list because there’s way more people that want to, want that Outdoor Advertising then there is Media available so I I agree there’s a lot of use cases where I would prefer to use AI to a website. But I’m going to be somewhat surprised in my lifetime if there aren’t still use cases that are well served by the kind of. I don’t know what the right Paradigm here is but pull pull solution of the web versus the push solution of AI if I have that.
[40:17]Yeah and look I still get catalogs over Christmas and they’re great it’s fine I think we’re.
[40:21]Yeah and by the way they work better now than they did 5 years ago.
[40:24]I’m sure so generally when we have new technology it doesn’t replace the existing,
[40:43]
Future of E-Commerce and AI
[40:32]at least in the short and medium term it’s it’s net new additive and and what what are we at in terms of e-commerce penetration of physical retail it’s like 17 18 the US.
[40:43]If you want to be generous and depending on how you want to divide it up you could say 22 but someplace in the 1822 would be the the ring.
[40:51]But look more developed markets are you know 40 50% and just generally kids sorry I sound the old least you know it’s not old now but I’m going to say you know kids these days they prefer their digital experiences right that’s what they want, more than going into physical stores so I think we’ll see you know as the economy continues to grow that compounds over time I think we’ll still see physical retail you know as always people still want that in store experience, but I think a lot of the gains are going to be digital and if I look at where folks are shopping you know it my my daughter you know she’s doing all of her discovery of things through Chachi PT, my 11-year-old does the same thing my 72 year old mother-in-law who’s not a very you know good with a tech person she does chat GPT constantly these days. I see it personally in my life it’s going to at least take, a lot of the discovery we’ll see about the you know the actual transactions but it’s going to be sizable over the the course of the the the coming years.
[41:50]I think we’ve already we’ve just uh hit the the thumbnail for this episode is going to be Kelly saying young kids today don’t want to touch grass.
[41:59]They don’t they really don’t I you know I’m sure people have been saying this for centuries but it the kids these days are just different.
[42:09]They are they have longer attention spans. Let’s jump into payments so you mentioned there’s these kind of competing things out there there’s ACP ap2 what’s your.
[42:24]And for westerners ap2 is Google’s version of instant check out yeah.
[42:28]There’s some flavor of mCP where they’ve added some stuff on there so it can kind of do payments and then there was a2a so that was a whole there’s like 6 of these out there now it’s I lost track of it, and then all the the traditional guys have some flavor of these things too like Visa has 1 MasterCard has 1 and so on. What do you what do you think about being a standards person what do you think do you think all that will settle down or we’re going to have a little bit of chaos there for quite a while.
[42:57]I think we’ll have selling Channel chaos for quite a while the world is kind of splitting into 2 camps you’ve got the open AI stripe camp with ACP. And then you’ve got more of the Google PayPal camp. With ap2 and that’s fine you know it’s you know VHS and betamax took a long time to figure out. I think AI is a winner is a winner take most type of ecosystem just like searches for example you know in the search business you’ve got Google and they have a near Monopoly. Although I know that they dispute that term but they do um and I think we’ll see the same thing with AI because again you want to use 1 Aiello, what you bought you wanted to know you know what your preferences are your likes and folks get really stuck they get very sticky with 1, and I think we’ll see that 1 rise and it might be jet GPT who knows right it’s still pretty early but 1 of them is going to rise. And as a result the standard that it is most closely associated with whether it’s ACP or ap2 is probably going to win out and be the standard.
[44:08]Well Scott’s looking at this going back to the the like oh the incumbents try to walk in a proprietary solution and then agree to an open standard only if they must. In payments of course the the incumbent is the credit cards and all their interchange fees right and every every Merchant I’ve ever talked to hate them. Uh and so I’m I’m kind of curious like there’s a lot of merchants that are secretly hoping like oh is is this Evolution to to AI Commerce and all these new standards is that going to. Open up the door to alternatives to the credit card conglomerates and their interchange fees. And I would say like the early indications are know that the incumbents are, first in and they’re locking in their their their interchange you know based credit card fees to to all these new payment platforms as the default Solutions like do you have a. POV about how that might play out.
[45:07]Yes yes and so I I mostly agree with you I think the Nuance is that actual core payments processing, they they don’t make a lot right the margin is racing to zero, and I’ve heard of a lot of big Brands and Merchants being given fees at Cost basically because it’s not just the PSP right it’s not just the interchange fee right there are 3 4 5 vendors, all taking a cut and when you stack those up that’s where you get the couple percent take rate, but core payments processing like brainery did brain tree which is owned by PayPal I heard that they did a trillion and a half dollars in payments processing, and it’s a very very low margin business for them right core payments processing is is not very profitable anymore even at scale even with volume, and that’s why you see PayPal and stripe and a lot of these other PSPs they’re adding value in the term in the the form of their own checkout right because obviously the take rate is much higher, and they can provide more services like advertising and you know cross-selling and all sorts of other value ads if they own that checkout button so that’s kind of why they’re doing it, but yeah I generally agree with you.
[46:22]Cool let’s let’s Zoom do you have another 5 minutes we’re at the top of the hour okay Jason do you. I do so let’s zoom out a little bit I saw the PayPal CEO say that by 20 by 2030 so 5 years from now 25% of e-commerce will be influenced by AI, do you agree with that do you think that’s aggressive or do you think that’s conservative.
[46:48]I I think more than 50% of transactions will be influenced um I I see AI much better for discovery. I think we’ll see 25% of e-commerce transacted by AI in 2030 25% of the non-amazon non Walmart category. But again I just look at my own family and people are hooked on their chat GPT and that is very much accelerating over time.
[47:18]Scot where are you on that.
[47:20]I like to look to to our earlier Point At You know I feel like e-commerce has slowed down so I get more excited about. I I think this is going to accelerate e-commerce in a way we can’t predict yet the only 1 I’ve seen is a Wall Street firm Bernstein came out and they said it’ll accelerate at 1 and a half to 2 and a half points and, Jason what are we like 8% 9% right now e-commerce the digital side.
[47:46]So it’s actually slowed down like the government shutdown so we no longer have data.
[47:50]Yeah the last time you had a data point.
[47:52]Yeah but the through the first so the last 10 years 15% growth a year for e-commerce the last year finished at like 8.7% growth for e-commerce for 6 months of this year 5.6% growth for e-commerce so it’s. Swelling down by those metrics um.
[48:08]Yeah and it doesn’t feel right to me because it’s, I think we’ve stagnated and what I what gets me excited is I think it’s going to really reignite the growth in e-commerce and, you know I would love to see us get back to 15 so I think by 2030 there’s a shot we get we really see a nice acceleration of e-commerce because it’s just going to be a much more delightful experience and today it is better at kind of the discovery or research phase but, jet is working very hard on what I would call the find a buy side and it’s pretty good and, you know I think the lack of ads which is controversial right now but right now not having ads makes it a much more streamlined trustworthy process as well. And I I think that’s going to be interesting and you know I think it’s more interesting to think about how much is this accelerate e-commerce and then also what’s that due to that we need to get that. That coverage or that penetration number moving towards 50% not 22% so because in many other regions there are you know. The APAC region they’re 90% you know digital Europe most most countries in Europe are at like 40 50 60%, so I think we’re oddly laggards on that and we have a lot to catch up so I’m hoping it it is this kind of new fuel to the fire to really accelerate the industry. More orders for you.
[49:33]Anyone still listening um I just I just want to go on record saying like I don’t I don’t agree with Scott’s Global e-commerce penetration. I’ll just weave it at that for now but yeah I’m sorry Scott go ahead.
[49:46]Okay no that’s it uh.
[49:47]And and speaking of AI like I think AI is so categorically different than other shopping because it has pictures of you like people use this for therapy you know every consumer preference, I mean and that is so valuable and people develop these these weird parasocial relationships with our AI right you’ve heard the trend of AI boyfriends and girlfriends right, like people love it and if you have your magical AI assistant that’s always upbeat and happy tell you to go buy that handbag that you know you’ve been wanting but probably shouldn’t buy like,
[50:24]
Predictions for AI Integration
[50:20]that’s I I see that as a huge driver of growth sorry I just had to interject there.
[50:25]Yeah but to be clear you absolutely should buy that handbag.
[50:31]Cool any other predictions we love predictions on the show I I found, the timeline we’re on now is like a whole different timeline than we’ve lived the last 20 30 years and it it’s, it’s just crazy like I thought chat GPT would have a Marketplace he kind of thing maybe next year probably by 2027 boy boy was I wrong on the timing on that 1.
[50:53]Yeah it’s crazy so you know if you look at where it’s heading right now over the past I mean it feels like a couple weeks, chpt specifically is released apps they have agents like an agent Builder tool they have social they have creative with yep they’ve got a browser now they’ve got creative. They’ve got Commerce of course. Third marching really really fast here really fast so I think they’re kind of going to be the next super app so that would be my prediction is we see a these AI apps turn into more Chinese style, super apps including payments and social and shopping and, business and I think longer term I think AI kind of becomes the head for business and SAS applications as well that’ll take a while.
[51:43]Conscience in any wrapping thoughts before.
[51:46]Uh just 1 1 follow up on the pace of change 1 of the things that’s I mean there’s a the great saying like you know things have never happened this fast but they’re never going to happen this low again. 1 of the things that increasingly is obvious to me when I go talk to clients and they’re talking about like how to adapt to this new reality. Is we’re still trying to fit all our old, approaches to this new world right and the 1 I feel like we’re underestimating the most is the speed of change right like there as like every corporate organization is based around, these annual planning processes an annual budgets and like you know frankly they’re even, months in a rears on that so you have to walk in next year’s Budget Inn, September of this year and and all of these things and you know in your world Kelly like, let’s have a shootout and pick a technology platform whether it be e-commerce or OMS or whatever and let’s do a 6-month evaluation and pick the best 1 and then sign a 3-year contract for that 1.
[52:49]In the new world it just feels like all of those cadences are fundamentally broken like if you walked yourself into any, technology stack for 3 years you’re you’re probably screwed in Doom not to have the best technology in 3 years and have you you know make all your investment criteria based on, on 18th month Horizon you’re probably not going to be making good Investments like. I I don’t know what the future looks like but I feel like companies are going to have to reinvent themselves around this kind of, new reality of reevaluating everything every every week or every day.
[53:26]Yeah and look I think that’s why I’m such a fan of Standards is because we implement the standard all of us as vendors and if you don’t like 1 of us you just toss us out right if we as pipe 17 aren’t delivering, do you dump us and go to another honest compliance and that’s fine that’s how the world should work we as vendors should have to earn the, the value in the trust of our of our customers and with standards in place it becomes very very easy to swap us out.
[54:02]
Closing Thoughts on Industry Standards
[53:56]Yeah uh kind of sucks that we’re in a world where we have to make that possible but like it did it does seem like best for the customer. And that’s that’s where it should should go and Kelly that’s probably going to be a good place to leave it because once again we have used up our allotted time, but it’s awesome to catch back up with you we’re going to be excited to to follow these these new standards and even though you said there might not be a conference I’m hoping to get an invite.
[54:29]Yes that I just I just wish I had more reasons to travel and eat rubber chicken.
[54:34]Well thanks for having me Jason I’m sure I’ll see you in a Starbucks line somewhere at some conference it seems to be where we meet up these days and Scott always appreciate all the work you’re doing with retail genic he really helped us as an industry keep on top of all this.
[54:51] And until next time… Happy Commercing!