Jason & Scot Show Episode 111 End of Year News

A weekly podcast with the latest e-commerce news and events. In episode 111 is a recap of Decembers news events.

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Holiday Recap

• E-Commerce up approx 18%, total retail up 4.8%
• UPS Woes

Amazon News

• Amazon Holiday Recap
• Amazon wins 50% of holiday sales !?!?
• WPP, Publcis, Omnicom  spend $800M on Amazon ads

Other News

• Home Depot may buy XPO (large item logistics firm)
• Stitchfix first quarter post-IPO
• Michelle Gass takes over helm at Kolhs. (Episode 77 of the podcast featured outgoing CEO Kevin Mansell)

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

Episode 111 of the Jason & Scot show was recorded on Friday, December 29th 2017.  Last show of 2017, happy new year everyone!  Tune in next week for our much anticipated annual predictions episode.

New beta feature – Google Automated Transcription of the show

Transcript

Jason:
[0:25] Welcome to the Jason and Scott show this is episode 111 being recorded on Friday December 29th 2017 I’m your host Jason retailgeek Goldberg and as usual I’m here with your hoes Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott shirtless after a long Jason Scott holiday decided to have you back.

[0:52] Yeah yeah we had to kind of this perfect storm where you had a bunch of travel ahead travel that offset from your travel and it has been 30 days since we laid down a Jason Scott show.

[1:06] Yes the first of all the most important question have you seen Star Wars yet.

Jason:
[1:09] I have I have made good use of our time off and I feel I got caught up on all the media that you’ve been frustrated that you haven’t been able to talk to me about so I got to see the Star Wars probably a week after you but.
Totally enjoyed it and I’ll see what I can do any spoilers but I feel like I was I was pleased and enjoyed it.

Scot:
[1:32] Yep yeah I loved it there there’s a pretty good second a fan of that hates it though so it’s been I know Chris.
Over at he was previously at Puma now at Izod is very upset about Star Wars we have to get him on the shoulder after more people have seen it took to hear his thoughts on it.

Jason:
[1:50] Yeah although we might have to reserve that for the e-commerce Star Wars fan spin off podcast.

Scot:
[1:56] Yeah yeah.

Jason:
[1:58] Slightly more nutrients.

Scot:
[2:01] But for hours.

Jason:
[2:03] But I feel like this is useful information only to you and not to any of our listeners that I have done some hard work in this month I’ve totally caught up on mr. robot and I was like over a season behind you on that.
And I feel like I’m almost completely caught up on all the The Avengers Netflix series so I’m I’m excited.
Chat in the in our pre-show prep sometime.

Scot:
[2:28] The content is really coming out rapidly though so have you seen you got to watch Discovery so Star Trek Discovery is good and then the new Will Smith movie on Netflix is really good I think you’d like it.

Jason:
[2:38] Not so I am cut up on Discovery and I agree I’ve been telling joining it other than the irritation of having to subscribe to.

[2:47] The yet another service for one show that’s the CBS Show Network.

[2:54] So I’m also watching the good fight just because we used to watch The Good Wife and we weren’t interested in striving just to watch the spin-off series but since we bought it for Star Wars we’ve been watching that as well.
Yeah lots of lots of good content and it is sort of merging with the Commerce world as many of our our friends than that, space it become the major content Publishers in the New World.

Scot:
[3:17] Yeah I guess pretty wild.
So weed since it’s been a month since we had a show we have a lot to cover and let’s jump into it so first we’re going to do some trip reports and then we’ll cover some news,
and the Scooby the last show 2017 so,
in next week’s episode what should be the first show of 2018 we that would be our annual prediction show where will review those predictions we made was it Jason episode 64 I think.

[3:45] Summer back then we made some bold predictions and we’re going to ask ourselves on those and then lay down our 2018 bold predictions for what’s going to happen in all things Commerce,
so that why don’t you could have told me you tell me about some of the nursing retail you saw as you were traveling around in December.

Jason:
[4:04] Yeah so I did do a bunch of trips in December I think ironically you may have gone to visit more new stores then I had but I did.
Mention and I hope a lot of people see it now I would I got to visit one of the very first Amazon pop ups in Whole Foods so there’s now a bunch of Whole Food stores that have these dedicated Amazon pop ups and they.
Have all the the Amazon branded gadgets and a few third-party Gadgets in the store so my local Whole Foods has one.
Nothing super surprising their inventory is really good though so like they had the the security cameras when they first came out I was able to get some of the.
The echo buttons for my Ferrari Alexis here at the house so we can play Jeopardy and do that sort of stuff.
And you course heard heard my device in the background responding to to our podcast cuz I forgot to hit mute.

[5:08] What interesting thing about the Amazon pop-up store it was interesting to me the point-of-sale that they’re running in the pop-up store is clover which is a super popular.
Small-business POS system I find it humorous because.
If you go into an actual Amazon bookstore it’s kind of painted check out because they make you use the Amazon app and they don’t accept cash.
And so somewhat ironic that these Amazon owned pop-ups inside of Whole Foods which is owned by Amazon.
Take credit cards through the clover but won’t let you pay with your Amazon account.

[5:44] So very very different retail philosophy than the Apple the Amazon book stores where they don’t show prices and.
Make use the Amazon app and all that sort of stuff but I have a feeling that has more to do with a expedience than any particular strategy.

Scot:
[6:01] Yeah I’m sure someone in the bowels of Amazon is working on it PLS for a Kindle what kind of a tablet I’m sure that’s in the works.

Jason:
[6:09] Yeah absolutely.
I also got to visit the Google pop-up store so this is an annual pop-up they do in New York it was in.
Tribeca last year and I think it’s in the Flatiron District which is just a little further north.

[6:25] This year and I would say was a little disappointing last year it was a net new retail concept that used it to give live demos of all the new Amazon Google Hardware.
And you know last year the home had just launched that is your first can see that the pixel it just launched they were showing the first VR headset since there’s a lot of like.
New hardware and it was kind of a cool experience in retail environment in this year.
Everything’s very incremental like it’s it’s basically the same retail environment as last year but with the newer Hardware in it and.
You know Google doesn’t have a lot of net new hardware this year it’s mostly.
Evolutions of the hardware they showed last year so you know Google home is better than a couple permeations now that the pixel 2 which is course better to have more apps on the Google VR but like there really wasn’t any.

[7:16] Marquee thing to see your experience in the the store this year that you would have done last year so I guess.

[7:26] If you looked at it on its own it was probably a good showroom by the way you can’t buy anything that’s inside of their showroom but if you compared it to last year it was it was pretty darn incremental.
And then I did last month have a trip to Amsterdam.
There’s not a ton of super interesting retail that would be relevant to this audience.
But one of the Novelties they have a very large Apple Store it was one of the European Flagship stores.
It’s now about 5 years old but it still has the distinction of being the the world’s largest Genius bar so it has this huge Genius Bar and the only reason I bring it up is its.
It’s kind of shocking to walk in the store to huge two-story store in addition to the Super One Genius Bar.
They have tons of project tables for various services that they provide and it’s it’s really a stark contrast to the fact that like.

[8:26] 75% of the of the floor space of this Apple Store is really dedicated to Services verses.

[8:34] Selling Apple retail products and I do feel this is a large evolution of the Apple stores that you know they have.
They’ve done produced that their party products that they carry you know they’re there more focus on Apple products than ever before but that the real role of the store has shifted from.
Introducing Apple products and selling Apple product to providing service for Apple products.

Scot:
[9:01] Yara are local Apple Store upgraded to that new kind of what are they call it Town Hall.

[9:07] Jars the growth and yeah I was surprised the number of skews they carry went way down on the third-party side like the whole speaker display went away in a bunch of that stuff and it is very much more of a service kind of an orientation which is which is very interesting.

Jason:
[9:21] Yeah and of course is Apple’s bottom or third-party unit products and made them first party products it makes it less appealing for them to carry the competitors.
Products of that that’s the only part of it but it it you know there is it gyro when you would have gone,
anytime you went by the Apple Store you pop in because you be likely to see something new if it wasn’t a new Apple product it would be some new accessories and you know now like,
you know if you’re very techy it’s not very likely you’re going to walk into an Apple store and and you know.
Have the excitement of discovering something new thing you haven’t heard of.

Scot:
[9:55] Yeah,
cool so I was in New York for a personal trip and we went up to see the tree in a couple shows and whatnot and hit a lot of retail and as we were kind of wandering around the city I had a list of things to check off for SUP was the Amazon store down by Empire State Building I had not been in that one yet so I wanted to see that and were the first people I see there is Jason Del Rey one of our friends the Jason Scott shows that was kind of a,
funny coincidence in the city of what is an 8 to 10 million people I run into Jason at the Amazon store.

Jason:
[10:27] No way was he working there is that his night job or was he.

Scot:
[10:30] No he was actually he in a fellow colleague had actually done at or behind that store is the prime now hub for I guess South Manhattan and they have done a tour of that as kind of precedent and your this was.
December 19th or 20th now that’s.
Yeah yeah somewhere in there so it’s going to peak season I guess they did got a tour during peak season is of President and he was exiting through the store just kind of have a look and ran into.

Jason:
[11:00] Yeah and I knew that wasn’t his side hustle I just want to make fun of them.

Scot:
[11:06] And then.
The it’s been about 18 months since I’ve been an Amazon store and I felt like the adenta lot of cool new stuff about having to act better integrated and the checkout was you could chuck check out anywhere which is kind of neat you didn’t have to go to check out a lot of cool things they’ve done there.

Jason:
[11:22] Yep and is there a coffee shop in that one that’s a little bit on the smaller side right ok Google.

Scot:
[11:26] It has a coffee shop yeah yeah I couldn’t tell we didn’t have time to stop by I could tell if they actually operate or if it’s a third-party it wasn’t Brandon Starbucks or any other brand or anything so it’s kind of Nursing.

Jason:
[11:39] And that is,
that’s on 34th Street in New York which is one of the more stories retail streets in the world that’s the largest Macy’s and a ton of retail flagships open up on that store so it’s pretty important retail real estate.

Scot:
[11:56] Yeah that’s what yeah we literally walk from there to Macy’s in like dinner a box or something wasn’t bad at all.
That was cool and it’s good to see Jason and then I stopped a lot of brand stores know we talk a lot on the the show about digitally native vertical Brands opening the store so I wanted to see some of them went to everlane which was in her everything’s kind of,
unisex Basics and the store was jam-packed that was does interesting he can actually buy stuff out of that stores there’s a lot going on there.
My favorite when I stumbled on it hadn’t planned to go is I read a lot about these sneakers called All Birds and,
there’s always described his slippers plus sneakers equals all birds and look at this really kind of wool soft kind of thing in the upper and then have a soft Rubber Sole.
I answered went there try those on those really fast and because that place was humming I mean it was like.
6 people deep try on shoes or when was walking out with boxes so you could tell there was a lot of energy around that store.
The most crowded one is a Skate brand called Supreme I’ve never had all these articles about this place where people wait overnight and.
Part of the whole thing is they only let like 15 people in this world of time cuz it’s really small so so went there sure enough there was a line literally around a New York City Block and it’s kind of funny the line breaks because.
Passes of all these other stores they get angry when that line go so you see the light you know she’s breaks in the line so.
People that don’t know how the line works all these International people trying to get in line they’ll just kind of hop in the line.

[13:26] They have all these bouncers to the line and they’re very Surly in this part of the whole experience for there, like you know this is not the end of the line go over here that’s in the line of their kind of mean to you so it’s funny to watch that.
Repeating the Supreme store and it’s literally like 60 skews in there and people were buying as much as they can get their hands on it also read that it’s.
Demand-supply so tightly most people that shop in there take all that stuff and sell it on eBay and Amazon so it’s really kind of a become a.

[13:54] People just got to camp out and get the stuff and sell it online to firstfield with looks so that was interesting.

[14:01] Yep then if you’re in the retail world you getting your gift run by story so I went by there they were quite busy and then there’s a couple new down in SoHo Adidas and Nike have some cool new stuff so I got to experience that.
All very good and then the one that was kind of thing is a e American Eagle I guess it is they have the say eStudio where is this whole concept that’s in Union Square.
Say it’s a denim shop in a laundromat and it’s kind of funny the laundromat was really more of a prop like no one was there using it,
looks like there are six machines that it almost never been choose there like these giant dustrial stainless steel machines this is I read several articles this is going to be kind of,
how to get Millennials back into the store with this this.

[14:47] Going to come get your laundry they’re going to shop while they do it the Millennials I was with can I give it a thumbs down they didn’t like that store the other things that you would have appreciated is every.
Every pair of denim had a tablet there they were too high and iPads.
But they were just sitting there plant looping a video there is no kind of integration with reviews and it’s got to start having been to the Amazon store where they pull everything from online into the store and then this one which is just like this.
Kind of looping video and spend all this money on these tablets for they were interactive at all I thought was kind of a big mess for those guys so good to experience a lot of retail on my truck which was fun.

Jason:
[15:23] Yeah it’s perfect that you were you got a chance to do that I was you went pretty fast.
Is the everlane store did you see anything digital in that store because unlike a lot of those other brands everlane really is the one that like,
started off as a digital Brandon and added retail and of course online they’re really well known for having Rich product information on there,
on their website and are super transparent like they showed up building materials for all the the products you know the real pricing for everything today have any of that in the store.

Scot:
[15:56] Not that I saw it felt like.

[15:59] It felt like a small Gap you know kind of the same kind of just Basics or like yours a sweater in four colors here is pants and five colors on a table there weren’t any I didn’t see any digital displays or any of that kind of stuff in the store.

Jason:
[16:13] Yeah that was my impression from earlier as well so it it’s interesting and disappointing a little bit that even when it’s an important part of your brand online that that.
A lot of these guys that are opening it just a few stores aren’t figuring out how to carry that through to their physical presence as well.

Scot:
[16:30] Yeah yeah, you need to walk over to the Amazon store and see how it’s done.

Jason:
[16:35] Exactly although Apple Amazon probably has some room to improve there too so hopefully next year will be talking about some of them cooler retailers that that are getting it right maybe that that should be a prediction for next year.

Scot:
[16:49] Yep yep you can always aren’t you so that’s the truth before it’s let’s start it, mac review of news how do you.
How do you feel the the holiday it’s too early to call it but we we should have a pretty good read here since we’re doing this after Christmas how do you think holiday went for 2017.

Jason:
[17:09] Yeah I am pleasantly surprised I’ll even go so far as to say that my slightly pessimistic Outlook going into holiday.
It has not proven to be the case so you know there were lots of Rosy predictions going in the holiday ever are almost every year by the way.
And I had mentioned on the earlier show that often times when you have a better than average year in sales it’s because you got.
Super Promotional and you know very marginal rosian so you.
You see all these great articles in December about have a good holiday sales were and then you’d see all these badass quarterly reports in January from all these companies that talked about how they didn’t make any money.
And so that still could happen but the.
Early indications are that we had pretty rough but better than usual growth in e-commerce we definitely had better than usual growth in brick-and-mortar Commerce and that it wasn’t.
A hyper promotional holiday where where you know we just got there by by dramatically cutting costs and starting some crazy.
Arms race so so that all looks pretty encourage.

Scot:
[18:22] Yeah yeah I’m seeing the same things I’m really interested in hearing how Amazon did so I’m on pins and needles until their fourth quarter of you because.
If if e-commerce accelerated kind of the 18 maybe 20% level and I think we could see a.
Amazon 30% Q4 which day did Jeremy slow down in the 4th quarter state.
Because it’s just such a big order for them it’s it’s hard comp to do well on so if they did High twenties R30 that that just means he just soaked up an amazing amount of of share so I’m curious to see what they were.

Jason:
[18:58] And that I mean we’ve already seen some predictions I think there’s a Barron’s article that that.
Said they like 50% of all holiday sale sales work was Amazon so that that would certainly boutwell of that proves to be true.
You know what one of the data sources we follow pretty close to use the MasterCard data and they’re they’re calling it a 18% growth in December for e-commerce and 4.8% for retail which is.
A big jump that would be the biggest growth since 2011 for a brick-and-mortar retail so that super exciting and then one cautionary Tale.
Maybe with a slight astrix there’s a couple firms that track.
UPS and FedEx on time shipping and it does appear that we ran into some capacity problems particularly with UPS.
So they’re reporting that UPS had a 89% on-time shipping over cyber 5 that’s obviously like.
You know one of the the biggest Peaks.
UPS is of course trying to be ready for that Peak but you know 89% on time is is pretty low that’s that’s what is lower than historic.
And then even in the first week in December they were 91% on time and that you know computers pretty unfavorably was like last year where they were at 97%.
On time for that same week FedEx which is used a lot less in the overall scheme of things for e-commerce is it like 99% on time.

[20:33] But these numbers are accurate which UPS dispute you might imagine the.

[20:42] It is a signal you know that that’s totally in line with this trend we’ve been talking about about these carriers just aren’t growing as fast as e-commerce and so we were perpetually having a bigger capacity problem every year.
For these Peaks and so you know UPS grew about.
8% capacity this year but we just said that the e-commerce might have been around 18 or 20% and that the result is that they’re having to put all kinds of extra strength and construction zone retailers about,
what does ship Win 4 for retailers in it you know you could predict project this trend out a couple years and it certainly seems that whatever retailer Zone,
their own last-mile capacity.
There’s only one are going to have a pretty big advantage over over the the rest of the industry as,
you know the industry continues to grow faster than then the UPS can can fulfill.

Scot:
[21:43] Yeah yeah the good news though is we didn’t have a debacle like was a 2015 and a 2015 is that one year we’re like 3 million packages gutensohn the system and it couldn’t keep up so.

Jason:
[21:55] And a lot of it just miss Christmas shipment which is the course the worst.

Scot:
[21:58] Yeah yes a lot of stress on the system but it did kind of held up it looks like you know what kind of mentioned Amazon in there but let’s make it official it wouldn’t be a Jason Scott show without talking about.

[22:27] So first let’s talk about Amazon does it come in manual pressure release the week after Christmas and I will put a link to it in the show notes but.
This is about me massive it’s like.
Literally 120 bullets of of highlights I pulled out a couple that I thought listeners would find interesting the most specific one is they actually said 4 million people.
Child Prime during the holidays which decimal specific number they’ve ever used about Prime,
and it’s a big number so you know most people kind of Peg Prime at maybe 60 million,
but if you have 4 million people just come in trial for the holiday that’s pretty amazing.

[23:13] You know if if if half of those stick that’s like a 5% bump right there and just Prime books they said the top selling item was the Echo. And then.
Add Amazon Alexa has been the top.
Download in the IOS app store which I’m sure Apple loves to see which is kind of nursing they also said tens of millions of Alexa enabled devices were sold.

[23:35] So I guess is range of 10 to 99 million devices what do you use to lower that range 10 in a lot of people have talked about.
These things aren’t that saturated there’s not many people using these devices you know that’s that’s it with 300 million consumers 10 million is.
Pretty much cereal I think that’s probably Global number too so interesting to see they’re pushing a lot of Alexa enabled devices out there.
There’s some tidbits around the marketplace they said a billion items were sold over the holiday season didn’t know Define the holiday season I’m going to guess they probably call it November one forward and I think they’re talking about.

[24:14] Thanksgiving for it at cuz they take a coffee run promotions earlier,
three-way abdulian items were sold in the Dover the Cyber 5 which is Thanksgiving the Cyber Monday they said third-party sold 140 million items on the Fulfillment side they highlighted the 10 performance centers had a million item days,
that’s a lot of items shipping out of the film It Center in this is kind of an interesting kind of flexing of their data science muscles I thought,
I thought you would appreciate they said these Coast has more holiday spirit than the West Coast because Alexa was asked play holiday music 2 and 1/2 times as frequently on the East Coast vs West Coast,
I really weird tidbit for them to pull out and it just kind of showed you know how these trends that are able to see through all the devices and machine learning capability that they have.

Jason:
[25:03] Yeah it’s it’s almost scary to think about like some of the insights they can get in human behavior was from all of that data.

Scot:
[25:11] Yeah they said like the most requested recipe was chocolate chip cookies the most requested song was Jingle Bells today I got a couple interesting things there.
When Amazon article I wanted to ask you about it said that these ad agencies and image of wpp Omnicom and pupusas.
Did they are spending 800 million in 2018 for ads on Amazon which is a 40 to 50% increase year-over-year I thought that was.
Interesting that the ad agencies are really waking up to Amazon as a an advertising video but then also I’m curious like we’re who’s losing the,
you know the the 400 million or whatever that Delta is in there is a coming from TVs coming from Google what what do you think about that.

Jason:
[26:04] Yeah it is super interesting that I mean Amazon is a great advertising platform for a variety of reasons and so I think we’re going to.
Continue to see them get more relevant at the moment you know what these are,
wildly rough estimates of third parties so I can’t get into talking exactly about what what pupusas suspend is with Amazon for example.
Directionally what I think you’re seeing at the moment is a ton of spending,
from brands on Amazon but it’s pending it’s coming out of the Brand’s trade budgets versus their marketing budget so when you you think about a.
A Big Brand a cpg like Procter & Gamble or an apparel brand or whatever like they’re likely is a CMO that has a marketing budget to build brand Affinity in his his KP eyes are things like unassisted brand recall.
He’s the one buying the Super Bowl ads and those guys I don’t think are spending a big trance are not shifting a lot of spin to Amazon yet.
But in addition to those guys there’s the sales person that owns.
All the sales that happened with Walmart or Target or Costco and those guys that have a budget,
to buy ads or promotional opportunities with those retailers to help sell products for that particular retail so traditionally.

[27:35] That could be coupons that they they co-published with that retailer order could be in-store advertising it could be an incap to make the product more visible order or these kinds of things and so now.
Amazon has become a major retailer for all these Brands and so it has an account team just like all these other brands,
and it has a trade budget just like all those other brands but instead of buying in store point-of-purchase displays or coupons,
they’re they’re spending that those dollars with a am at G and and you know most often AMS,
on Amazon platform and so if anything that those dollars are really shifting,
from other retailers that are getting smaller as Amazon’s getting bigger and the trade budget goes along with the sales,
on Amazon so you know that those dollars are probably coming out of Target more than they are coming out of network television advertising at this point.

Scot:
[28:36] Yeah I haven’t seen a circular in a long time but I’ve stopped getting the paper long time ago too so I imagine there’s there’s not a lot of opportunities to spend money on the circulars in those kinds of things.

Jason:
[28:46] OSHA disappointingly most retailers still have those programs and you absolutely can spend money on them and you know there’s a lot of sacred cows there so shifting dollars off of those things,
probably harder than it logically should be but but it’s certainly starting to happen and once those dogs get shifted to Amazon they become.
Way more measurable and.
Frankly most cases more effective in so you know once once that Ship Happens that becomes a great case study and I suspect a lot of seeing those are looking at those things.
You know I won’t be surprised if we see the the Big Marketing budget start to follow some of those trade budgets onto Amazon.

[29:28] Another Super interesting thing to me in this last month that we didn’t get a chance to talk about.
Is there have been a number of interesting signs about Amazon entering the.
The prescription drug market so that they actually got Pharmacy licenses in about 13 states.
And there are various kinds of Pharmacy licenses and this is not a license to dispense medications it’s a license to.
Dispense medical equipment so that could be the stuff you use for getting oxygen in your home or Walkers are all this this various medical equipment that Amazon that has a license to sell in like 12 or 13 states.
But when those licenses were disclosed you know that it became news Amazon’s looking at the the pharmacy business and you know whether it was coincidental or not.
We we saw CVS make a big announcement about a potential merger acquisition with Aetna,
that would sort of be emphasized CVS’s retail business,
of course Walgreens in the middle of a merger we’re seeing the big Pharmacy companies kind of,
try to diversify themselves and not be as as focused on retail at the same time that we’re seeing a number of interesting indications that Amazon might be getting into the the pharmacy business.

Scot:
[30:58] Yeah yeah the CVS setting the stuff was quite popular on CNBC is a way to kind of have an Integrated Health platform and should be interesting to see you.

[31:10] What stops Amazon from doing the same thing you know they could open up their own health insurance armor something there’s there’s no business I don’t think he was on would get into so to be a nurse in the seat.

Jason:
[31:20] Yeah I normally.

Scot:
[31:21] How that how it plays out.

Jason:
[31:22] When when you know Amazon gets in any new business like their quickly are people that run up and go well here’s why that business is different than other ones Amazon’s been successful and here’s why Amazon won’t be able to be successful here right like in in general,
all those barriers proved to not be very big barriers in Pharmacy one of those big barriers is that,
you know you really have to have a partnership in agreement with the insurance companies,
to enable the the folks that are insured by those companies to get their prescription meds from you and since that the traditional pharmacies of locked up a lot of those deals,
you know people have speculated it would be hard for Amazon to answer without a a insurance partnership.
And what’s what’s interesting is there’s a huge chunk of people that are now buying,
their prescription meds out of pocket and not using Insurance either because they’re underinsured or don’t have insurance or because they’re they’re finding that you can in many cases,
get better rates on the prescriptions than the negotiated race that the insurance company has locked them into in so you know one one piece of speculation is the Amazon could really be focusing on,
Pharmacy products for people that are paying out-of-pocket versus,
you know being a big part of the the insurance industry and of course it’s not outside the realm of possibility Amazon could buy a big insurance company pretty easily in the same way they bought Whole Foods.

Scot:
[32:54] Yeah yeah absolutely another kind of kind of.

[32:59] It’s going a little bit outside of Amazon but are our friends at recode. Jason had a interesting scoop where,
hi he had heard this kind of the cowboy rumors that Home Depot was looking at acquiring there are Logistics partner which is XPO XPO Logistics is.
A company that focuses on The Last Mile logistics for heavy items so if you’ve ever gotten something delivered from a Home Depot like Appliance or a set of cabinets or,
I furniture and that kind of thing XTO is well known for that and you know what what he was reporting is that.
Amazon’s looked at the company and if amp it as part of their Furniture efforts to Amazon’s doing a pretty big push into Furniture I’m sure Wayfair use XPO also but that I haven’t seen anything specific to that,
but if you have a pretty good lock on this kind of heavy stuff being delivered so you know what.
What’s interesting is Amazon sniff somewhere and other retailers really wake up and are starting to make pretty big news this would be like a 9 billion dollar acquisition so this isn’t just kind of a small,
defensive plays on these things that are happening here based on what Amazon’s doing so it’ll be interesting to keep an eye on that one to see what happens.

Jason:
[34:10] Yeah but you can you can easy to imagine you know you’re in one of these businesses that predominately deliver big heavy stuff like Home Depot or Furniture Company in Hugo hey what would happen to us if Amazon bought our fulfillment.

Scot:
[34:23] Yeah yeah seems like the best antidote for that is to start building up that kind of capability like like Amazon is doing so interested to see if,
retailers do that and what it would cost him,
Cheryl or she will be on board with that when I could dine ask you about that was announced during our break there was Target acquired shipt s h i p t there’s all these companies name,
Chris plays on the word ship this is D grocery delivery company I think they’re out of Alabama are some somewhere unusual they’re not a Bay Area delivery company,
Target acquired before between 500 and 600 million depending on how they’re not works and stuff so kind of furthering this kind of grocery delivery battle with what do you think about that.

Jason:
[35:05] Yeah it was so for clarification this is not the company that Kmart uses to ship your pants right so that’s an old e-commerce.

[35:17] For those of you that used to watch that the Kmart original e-commerce ads that were pretty funny will put a link to those in the show but yeah that was a big acquisition and and actually,
Target 2nd and condition this year in the Fulfillment Channel.

[35:35] And it’s interesting to for folks that aren’t familiar with shipped you can kind of think of them as like an instacart they they have a big network of.
1099 employees.
That they send to the store to pick up goods and deliver them same day to Consumers and so they they do some fresh grocery deliveries and they do a lot of General Merchant deliveries.
I need the have been doing some work for Target but they also do Kroger and Costco I think and so if you’re Target.
You’re buying this company that that a bunch of your competitors are using right now for same-day delivery and that’s a little bit dicey like target has said in the short run we’re not going to change them at all we’re going to.
Continue to use them and.
It’s a little tricky you you pay shipping $99 membership fee to be able to get deliveries from them and then you get deliveries from any of the retailers in their Network,
and obviously the more retailers they have in their Network the more valuable they are in the more likely they are to be able to get people to pay.
These $99 membership fees so if Target was investing in shipped hoping shipped would just grow as a separate entity.
It’s a scary investment because if your Costco.
You might not want to use shift anymore now that they’re owned by one of your competitors Target right and so.

[37:08] Potentially the company becomes West valuable when one of their customers buys it you know especially when they’re banking on this networking effective.
Of having more retailers in getting more customers.
The the other side of this would be to say hey Target just needs more capacity for doing same day delivery themselves and they’re buying ship for that that capability in there eventually going to,
ship them away from the separate business model towards just being a resource for Target.
And you know that would make a lot more sense but then they probably overpaid for it right because they probably paid a valuation based on.
On this growth projection that ship has it as a separate entity so it’s a little bit of a catch-22 how how Target will use them.
But it certainly makes sense that that retailers need to be thinking and investing in,
their own last-mile capabilities like particular you’re going to be in the fresh category you want to think about how you’re going to do home fulfillment on Fresh which is point to point.
So I think there’s some interesting things I’m glad to see Target making investments in here like this is potentially a risky investment.
Given that that you know Target’s claiming that they’re going to let them run as a standalone company in there there you know now potentially tainted as a standalone company given the throne by Target.

Scot:
[38:37] Yes they have to think the value is if we roll out same delivery to ask Target stores we generate y sales and it’s worth $500 to get why sales so I sales must be like in the billions of dollars which makes sense to me.

Jason:
[38:51] Yeah and Target you know which is doing well at e-commerce over 50% of all Targets e-commerce is fulfill from spores in so this is really,
Expediting that that’s for fulfillment and since target has a store close to someone that many consumers,
same day can be you know potentially cheaper than shipping and in many cases so you know it it is leveraging Target strength which is this this big network of stores that are close to Consumer so big picture I like it you know I hard to say whether they pay the right price for it or not.

Scot:
[39:29] We’ll save it for the prediction show but I’m curious if you think this causes Postmates an instacart to kind of if those pens fall as well from this acquisition so we’ll save it for next year.

[39:42] I want to report on is Stitch fix we talked about when they’re S1 was filed we spent a fair amount of time going through that and explain that model will since that show they went public and,
that is kind of a lukewarm reception so when you go public you put this range out there.
There ain’t nothing was 16 to $18 the price a little bit below that range at 15 which is an indicator that you know if people were concerned a bad the.
Have a negative backdrop blue apron had missed a quarterly number as.
Stitch fix was out on the road which is terrible timing these things happen so so they could do it you know that.
Google subscription models even though once food and wants apparel and we know on the show that’s vastly different problems to solve it but I think investors kind of said.
This is this is a challenging segment let’s punish but let’s let’s.
Not punishment put on more risk around the stitches thing get 15 but then was really interesting is,
there’s I want to go public there’s a about a six-month of three to six-month window before you announce your earnings,
so they didn’t have any news or anything.
People as they got familiar with the model I don’t know exactly what happened but it got up as high as 28-29 then they announced their quarter in December 19th and,
you know there there’s kind of Tale of Two Cities there I think they did really well on the quarterly results compared.

[41:13] Going forward they did talk about there should be some pressure on margins and having to spend a fair amount on sales and marketing to acquire customers some folks reacted negatively and then it came back from them so I would say it’s been a successful IPO there,
last I looked there in a market cap of about two and a half billion which is,
pretty good and you know so I think there are there out there doing really well and you know I think this investment is going to be with people watch to see can they really turn that into active.
Subscriber system.

Jason:
[41:44] Yeah and it’s not automatically a bit I know the higher price you get in that IPO you know the more money that is for the company in the short run but in the long run,
it’s not necessarily a horrible thing that you you have some room post-ipo for that kind of bump right in that bike,
certainly you know create some advantages in terms of equity for employees and and all that sort of thing right.

Scot:
[42:12] Yeah yeah there’s.

[42:15] Target also depends on who’s selling IPO so do you have primary source and secondary shares so if your investors are selling in diepio and they get a low price that’s going too bad because they are looking for a high return,
what is the company selling shares you know there is an argument to be made kind of Goldilocks it be somewhat conservative other people tell you no.
Did Equity you’re selling you should maximize the value of that and do what you can so I think it’s a.
Nothing and I was just one mile marker on this very long road and it’s really kind of start of a New Journey so so I think it’s good that they’ve done well and and people are following them and there’s been some turning there still there.
Base of shareholders but it seems to have gotten sticky and people that are believing it or are there now know there are a lot of naysayers that kind of talk about it.

[43:07] They don’t believe that it’s kind of an algorithm company and it is it is hard when they also say they have something like 3,000 stylus them company with 3000 stylish set up so people are still trying to figure that out.

Jason:
[43:22] Yeah and that you know they truly are an interesting company that they’re certainly claiming a lot of interesting successes or an artificial intelligence and you know both,
gopher merchandising for for you know deciding what goes in that that fix that box and,
you know how sticky those products are two customers how many they keep but also they’re starting to use that artificial intelligence to Define new products and and sticks Stitch fix his kind of shifted from,
predominantly being a reseller of other people’s apparel tub to producing their own products based on this artificial intelligence data now that they have.
This big critical mass I think it’s we’ve talked about on the show before the chief data scientist there is that Chief data scientist from Netflix so,
pretty credible team on the artificial intelligence stuff and in many ways these guys are the poster child for artificial intelligence research retail so if.
It’s cool that they’re public in there.
You know disclosing more information and we’re getting a c under the under the covers a little bit more so certainly someone to to follow closely.
For that also interesting that you know it’s a female run company and I say that because the the next piece of news we have is about another new weed female run company which is Colts.

Scot:
[44:41] Yes yes a Kohl’s promoted their Chief digital officer to CEO so we actually had Kevin on the show Kevin Manziel and,
this is this is really not official yet I mean they’ve announced it but it doesn’t happen until I think May of next year but there’s been a lot of Articles kind of talking about how she’s going to save the company.

Jason:
[45:01] Yeah I’m always excited about this because Michelle is the latest in a sort of class of the.
Digital Executives becoming the chief executive of the company and you know that we’re really just starting to see the first wave of those so am I mean like one of the very first ones.
Was Art Peck who’s now who is the VP of e-commerce at Gap and is not running Gap.
Billy Mays been on the show Huey Ren e-commerce for Abercrombie & Fitch she’s now the CEO at surlatable.
How often is is a guy we know well in the industry that ran digital it at Home Depot and then became a senior executive at eBay and he’s not the president at Macy’s.
And so you know Michelle is is the latest in in this class and I’ll be really interesting to see what she does at Kohl’s which is.
Particularly interesting Lee position so it’ll be another in some ways there like the department stores that are.
Really struggling right now and are looking for some reinvention and in some ways they have some.
Unique advantages around pricing and treasure hunting and you know things that have traditionally been hard to do digitally so it’s certainly going to be interesting to follow.

Scot:
[46:20] Did you see that article about so Walmart has this incubator called store number 8 and they’re working on some pretty cool stuff I figured you’d be work to speed on it than I am.

Jason:
[46:29] Yeah they they’ve name this incubator store 8 which is a based off of a Walmart store 8 which was the Prototype store and they are.
Like both have a bunch of internal projects and are investing another projects.
The they’ve announced a couple projects recently one that that is potentially a competitor to the Amazon go which.
Will probably be talking soon as I have done a deep dive in the past will probably be talking about again the future because I I strongly suspect pretty soon that Amazon go stores going to open to the public.

[47:05] Walmart store 8 his has announced a bunch a bunch of initiatives around VR so this one Katie Flanagan who runs that the incubator for Walmart.
And she’s very bullish on the future of VR Commerce and so they they recently had a big guy with the Huffington Post and they should a bunch of.
Of tech startups that are doing.
You know there is interesting things with VR increasing when you with Walmart brand so they showed I got a mod clown cloth be our concept in.
A bona bus VR concept and I have to say there’s a ton of interesting stuff coming out of the incubator I have great respect for the.
The team at Walmart but I am not personally as a bullish on VR Commerce in the next couple years as it feels like they are I think it’s.
You know it’s an interesting technology but like in many ways it’s it’s it’s to sort of awkward and intrusive.
To really be a convenient shopping experience and you know most cases you know the shopping experiences that are winning are the ones that are lower friction than anything before.
And you know throwing on all this awkward VR equipment to go shopping.
Doesn’t feel super super exciting to me like if anything I’m I’m more optimistic on the sort of a our experiences than the VR experiences.

[48:34] Why does minor people than me at Walmart so it’ll be interesting to see how that all plays out.

[48:39] But you know predicting the future is exactly what we’re going to do on our next show so assertively TuneIn.
2 2 episode 1 12 or we’ll recap the Bold predictions we made from last year,
Anna Scott and I will both share what we think are some of the surprising things that are going to happen in 2018.
And with that I’m happy to report that it’s happening again we’ve used all our a lot of time.
So we certainly appreciate all of our listeners sticking with us if you enjoy the show we’d love to get that 5 star review on iTunes weed encourage you to leave feedback on our Facebook page and continue the dialogue.

Scot:
[49:20] Thanks everyone for joining us and have a Happy New Year.

Jason:
[49:23] Until next time happy commercing!