A weekly podcast with the latest e-commerce news and events. Episode 142 is an overview of the week’s industry news and retail earnings reports.
- Amazon licensing it’s Amazon Go “Just Walkout Technology” to Hundai in S. Korea
- Whole Foods now selling via Alexa
- Whole Foods offering 30-minute windows for curbside pickup
- Party City selling on Amazon
- Earnings – Same Store Sales up 6% y/y (highest in 10 years)
- 40% E-Com Growth
- Traffic and Tickets up 2% in US
- Grocery pickup is now in more than 1,800 locations (40% of US Pop by EOY)
- “Clearly, the consumer backdrop is favorable, we’re getting a little bit of benefit from that”, Dan Binder VP Investor Relations
- Allowing 3p returns in stores
- Walmart co-leads $500M investment in Chinese online grocery service Dada-JD Daojia
- Same Store Sales up 6.5% y/y (highest in 13yrs)
- E-Com Up 41% (vs 36% last year)
- Traffic up 6.4%
- “I’ve been doing this for a long time, and I think this is the healthiest environment I’ve ever seen” Target CEO Brian Cornell
- Same Day Delivery 1100 stores / Curbside pickup 800 stores
- Owned Brand Cat & Jack $2B in 1 year
- 4,379 closures / 2,239 opens = 2,100 net fewer stores (net 2800 reduction in stores in 2017)
- Loss of 35M ft sq of retail space (closed stores are typically smaller footprint than new store openings)
- Industrial space is now MORE expensive than retail space
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Episode 142 of the Jason & Scot show was recorded on Thursday, August 23rd, 2018.
Join your hosts Jason “retailgeek” Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:29] Welcome to the Jason and Scot show. This is episode 142 being recorded on Thursday August 20 3rd 2018. I’m your host Jason “Retailgeek” Goldberg,and as usual I’m here with your cohost and TarHeel of the week, Scot Wingo.
[0:47] Hey Jason and welcome back Jason escutcheon listeners.
Yes it’s true. Star High I guess I’m Tarheels this week.
So we have a newspaper here in Raleigh called The News and Observer. It’s been around forever. And they do this weekly thing where someone is the Tarheel of the week.
And that was me this week. I get I get a pen. Evidently I’m excited.
[1:11] I think that’s actually totally cool. At the risk of sounding corny I am sort of proud for you.
[1:18] Thanks man. The thing that is a little complicated.
Musher in this area you may not understand. And so our state is the Tar Heel state.
But you can see the Tarheels and immanence 8 person. So I’m really a wolf pack fan.
It’s all my Wolfpack fans have been me crap this week that I’m Tarheels the week because lot of them don’t understand it’s a state thing and not a season. So yeah. So it is friction between USC NC State Duke.
[1:44] Gaji so.
[1:50] There is so that’s been fun to do.
[1:51] Oh I could totally imagine I’ve just gone from being proud of you to thinking you should not accept.
Now it’s very cool. I do. I do get that conundrum though.
[2:04] Yeah. And you were at east up in Boston. How did that sugar.
[2:10] It went really well for those that have never had a chance to spend time in Boston.
It is very easy access to a Dunkin Donut from anywhere in downtown Boston.
[2:21] I have been to Boston and there are a fair number of Starbucks to see must of been a happy camper.
[2:25] Yes. Yes. As I may have joked with you in our our voluminous rehearsals that we do for these podcasts the the show Hotel is,
a nice Sheraton that has an adjacent Starbucks and a Shake Shack so that basically has all the amenities I need.
[2:44] And a none. There sure there’s your meals right there boom.
[2:47] Yeah yeah. I never got an opportunity to have any of the show food because I was I was you know always making the super healthy Dunkin Donuts Shake Shack runs.
[3:00] And the plan was we were both going to go but I couldn’t make it because I had to help my daughter move into college.
We got a last minute note that she could move in all early so we had to do that.
But you carried the Jason Scott banner up to Boston where your triangle had played flute and you laid down some good podcasts that we’re going to be rolling out here soon.
[3:20] Yeah I sure did. It’s a good event. You know it’s a little more intimate than some of the biggest events.
You get a chance to interact with more folks.
And I got to record three great shows so listeners have probably already heard her as who’s the web psychologist from quick tell on last week’s show and into upcoming shows will be talking about,
Dell and sort of their their evolution,
from a you know pure consumer B2C company to this big enterprise company today.
And we’ll also be talking to the two founders of Tommy John and,
they’re they’re great entrepreneurial Nergal story of sort of inventing a better T-shirt and turning it into a very successful business and you know kind of an early digitally native vertical brand that will get more and moreabout.
[4:13] Yeah it’s funny when I’m not listening to the Jason Scott show my favorite podcast.
I do listen to some other podcasts and you can’t really listen to anything without a tommy john added being on there.
If I listen to XM Radio they’re on there they’re on CNBC so they seem to have really embraced not only digital and that media but the analog media as well. I look forward to hearing their whole story.
[4:38] Yeah yeah I don’t want to spoil the surprise for you but I think it was a good show. They were super interesting so I will look forward to hearing your feedback.
[4:47] Cocq Well this week we are going to really focus in on some e-commerce news.
We’re recording this at the back half of August which is an interesting time because in the world of retail what happens is we we take a luxurious summer and then Labor Day hits and then everyone freaks out. It’s theholidays right around.
So this is when the news picks up. So we wanted to pick up some of what’s going on for everybody and and watch this highlights.
We’re going to start with.
[5:30] Yes. I think the first piece of Amazon news is exciting because it arguably makes you and I sound wise.
There was a news report that came out this week that Amazon is licensing a bunch of their technology including just walk out technology from the Amazon go store to Hyundai,
to be used in a number of retail stores in South Korea.
So you know Wisner’s of the Amazon go episode of our podcast will remember that we we talked a bit about the potential of Amazon licensing that technology and it appears we’ve we’ve seen the first version of that inthe wild.
[6:08] Yeah yeah. The you know I always you and I speak,
out in the world a lot about Amazon and one thing I like to tell a lot of people is the Amazon playbook and you know the playbook pretty simple now and they’ve repeated it hundreds of times but it’s dog food.
So dog food something out meaning use it internally.
And then every one of these steps there is a path off this ramp that is it doesn’t work until it likes the Fire phone for example it went down the kill path.
So dog food is step one step two is scale first party steps.
Step three is scale third party and then the next step is really kind of opening it up even outside of third party.
So you’ve seen like cloud computing with this FBA has gone through this and now I think this just walk out of Cassiel a store will walk through this as well.
[7:03] Yeah. So it’s going to be interesting to see how it all plays out.
As we’ve already talked about there’s a Amazon story that’s going to open soon here in Chicago so I’ll get a chance to see it in the live with much more regularity than periodic visits to Seattle.
[7:22] Have you. When does the campout start.
[7:24] I don’t think the publicly announced a date.
I have gone by the site and it is all sort of newspaper up all the windows and whatnot.
So like it appears work is happening.
[7:40] I am slightly less excited about this next piece of news but it may be interesting to listeners nonetheless.
Amazon has extended the Lexx voice shopping capability to all of the Whole Foods products so you can now place orders not just from,
the huge Amazon catalog but from all the the Whole Foods in-store products directly from your Amazon. Alexa.
[8:09] Yeah and I saw that also within the whole foods part of Amazon.
They now have you know they’re expanding the number of stores that have curbside pickup and they have 30 minute windows now.
And I think you were telling me that there’s a if you do an hour under there’s a fee but two hours is free. Is that right. With Prime.
[8:29] No. So you can order your food online and pick it up in an hour for free or you can pay a fee and I want to say it’s like seven dollars to pick it up 30 minutes after you order it.
[8:42] Have you. I looked at the list of stores in major metros of late with that.
[8:47] Yeah. Yeah I’ve tried it and it does work well.
The whole foods causes to mind supports it but it doesn’t feel like they did a major build out to support it.
I’ve seen photos of other Wholefoods where they clearly constructed some new infrastructure to support high volume curbside pickup.
[9:08] But you know to me this is a very thin Mandic for Amazon first of all I would just remind people that prior to the acquisition Wholefoods didn’t have a digital copy of their inventory online anywhere.
Like you couldn’t get a whole foods accom and even see what products Wholefoods had in their store much less. Order anything.
And now of course you can order anything from Whole Foods and have it delivered in an hour to your house or you can have it ready for pickup at a store in 30 minutes.
So I just think that’s super impressive and a much faster pace than most traditional retailers move.
And then I can also tell you that there’s a ton of grocers that are super excited about order online curbside pickup and they’re all debating the pros and cons of every nuance of their experience.
And they’re all thinking about this kind of like should we do same day pickup versus next day pick up.
And is it a four hour window after you order a six hour window.
And you know of course Amazon just comes in here and drops a bomb and says no the customer standard is going to be 30 minutes to an hour after you order you should be able to get your groceries.
[10:20] Yeah I was actually. So two interesting things here real quick.
The when we did our deep dive on the acquisition of Wholefoods you know one of the things that was kind of a question mark out there is to cart had you know a deal with Amazon.
And then you know I think it had been described as exclusive. But now we see Amazon doing curbside pickup which you would argue maybe it’s the same obviously as art which is still free but then Amazon is using flexto deliver things too.
So I think the insta cart integration is still alive so it’s really interesting you know it’s initially confusing to a consumer you know because you can go to Whole Foods directly and get it delivered or go through to card oryou can do the curbside.
[11:02] Yeah but I do think it is the case that in most markets it’s a much better deal to order from Whole Foods slash Amazon rather than to order Whole Foods through insta cart.
And the the Amazon experience is a superset of the product catalog it’s available on insta cards.
So the you know I sort of predicted when we did that that acquisition show that this was bad news for insta card and that they were going to get squeezed out.
Like I don’t think Wholefoods is still honoring the duration of that that contract.
But it certainly doesn’t seem like a good long term prognosis for insta with Wholefoods.
And you know in fairness I would point out there’s there’s one potential experience advantage that insta has that I’m not sure a ton of people take advantage of.
But in many markets it is possible to place a multi retailer order from inside a car.
So you know whole foods you know famously is missing a lot of unhealthy national brands that people still crave.
And so you know if you want some Captain Crunch cereal with your organic milk in some markets it’s possible to have a card.
You don’t go to Kroger and get the Captain Crunch and go to Whole Foods and get the organic milk and you obviously won’t be able to do that from the Whole Foods direct delivery.
[12:25] Yeah. And then the other one is I was tweeting with one of our listeners and,
you know what drives me crazy about most of the grocery experiences for pickup is you’ll go to this pretty laborious process you know can take up to 20 30 minutes to get through everything in your card and then theytell you you know it will be a Saturday morning.
I’m doing this and in the end it will say the first available window is Monday at 2:00 p.m. and you’re just like.
So it may be a chicken and egg thing where they can’t tell me upfront but they should be able to you know they they should know.
You know they should get a pattern for their border and realize it’s four bags of groceries and they can’t do it until next Monday.
So it’s terrible user experience because you go through all the investment upfront which may be what they’re after but then like that Hillary window is terrible. So hopefully Amazon can offer.
[13:15] Yep that’s a universally bad experience that you see all the time right.
Like I call it the when we get a problem and there’s lots of permeation where you go hey I’m ordering this thing online for you know my nephew’s birthday party or some upcoming event.
I only want to order it if I know I can get it by a certain date.
And very often you can’t find out what that date is until after you’ve offered up all your payment details and in some cases not even then.
So that’s that’s just always a bad experience and you’re right.
It’s a it’s a super common bad experience on grocery ordering.
[13:50] Protip i just throw an apple in there and start the checkout in the middle. Jeremy tell me what the window is and then there’s the ability that to either.
[13:55] Yeah but how ridiculous is it that you that you have to learn how to hack the system to do that and think of other analytics that are like why can’t we sell any apples our conversion rate on Apple is horrible or a cardabandonments superhigh.
[14:08] Now. Yeah. To me that’s a sign that that’s their punishment for for for not telling me of.
[14:14] Yet double protip next time you want to do that click on the Google product listing ad for the app or to test it in there so they have to pay for the quick to yeah I’m a bad person.
[14:23] Kate nice. So they’ll get your devious Saari like.
[14:29] And so there this this last piece of news which is going to be interesting I could see this going either way.
Party City has formed a partnership with Amazon where they are now selling their goods on Amazon right.
And you know when you first hear that you go home party sell city sells third party products that they don’t make.
Why would a retailer want to sell someone else’s stuff on Amazon when that you know someone else can also sell that stuff.
So it’s pretty hard to have a competitive advantage there and obviously you have to give away the the margin from Amazon’s take rate.
Party City does contract manufacture some of their own things and I think a lot of what we’re going to sell on Amazon are Halloween costumes.
So in some cases these are are things that are exclusive to party city.
But then you look out in the world and you go gosh most retailers are primarily focused on on owned brands or exclusive products primarily as a strategy to compete against Amazon.
So it’s interesting that cities creating some of their own desirable products and embracing Amazon as a platform to sell them.
So I just haven’t hadn’t seen that particular dynamic play out in this exact way before and I’m gonna be curious to watch how it plays out.
[15:48] Yeah you know that will be interesting. And it was a really weird week news wise because Amazon that’s kind of the of the Amazon news and usually we have like 50 things we can talk about talk about,
that that being said a lot of other retailers had pretty interesting news it’s kind of the time of year where we’re getting the same store sales and updates from YouTube.
So Wal-Mart had a lot to say this week. Watch to kick us off with some highlights from that.
[16:15] Yeah yeah. In general I think if you’re a fan of retail it was a pretty exciting earnings season this quarter.
So Wal-Mart came in with a 6 percent year over year growth in their same store sales which was a beat over there.
Their expectation in the U.S. It was a 4 percent year over year growth which is still beat the expectation.
That’s the highest growth in same store sales and Wal-Mart in ten years.
So that’s a huge win.
They also announced a 40 percent increase in their e-commerce growth.
And they they reaffirmed that their guidance for the whole year is that they’re going to grow Econ. by 40 percent.
Some listeners may remember last quarter they only grew by 33 percent and,
the market beat them up a little bit because the market was promised 40 percent for the whole year and they only turned 33 percent in that first quarter and Erwin’s like how are you going to make it so this quarter they hit40 percent so they still have some makeup to do.
But but trending in the right direction and 40 percent growth,
it at Wal-Mart is a big number I give you know you know anyone other than Amazon you know Wal-Mart e-commerce business is very big it’s north of 15 billion dollars so growing that by 40 percent is pretty darnimpressive.
[17:32] Yeah. And as a reminder the bay side of e-commerce growth is 15 percent so that’s you know a two to three acts based on.
[17:39] Yet. And we’re Pragyan to have to talk about that again later because that that 15 percent is feeling increasingly fishy as as we look at all the news here,
but one of the things that’s super interesting for a retailer is that traffic is actually up in the stores right.
So there’s things you can you can control by changing your experience in your pricing and all these sorts of things.
But like one of the you know the biggest needle’s most difficult to move is to get more people to show up in your store and do more shopping and at Wal-Mart in the U.S.
Foot traffic was up 2 percent in the stores. And the size of the average ticket was up 2 percent.
So those are two super favorable metrics that at Wal-Mart scale translate into a lot of gross margin dollars which is pretty exciting.
If you’re a Wal-Mart investor so super Rosy.
[18:34] I like to remind people a couple of the underlying reasons why some of those numbers particularly the e-commerce numbers were so good.
So in their earnings announcement they also said that they were now at 8500 locations where you could order groceries online and pick them up in the store.
And so it’s my contention that a big chunk of their 40 percent growth is that they keep adding more stores that offer curbside pickup right.
So normally when you talk about e-commerce you kind of think of it as this big homogeneous thing and oh we sold one billion dollars across the whole U.S. online last year and this year we sold one point five billiondollars. That’s great.
[19:15] Your goods online are generally available anywhere in the country but curbside pickup groceries aren’t right.
You can only sell curbside pickup groceries in a zip code where you have a store that can fulfill those orders.
And so the fact that they only had 1000 stores last year that could fulfill those orders and they have 1300 stores now means they essentially doubled their capacity.
So it’s not surprising that there are e-commerce growth was so high as well.
And so I’ve actually talked to analysts like you you really need to think about digital grocery sales sort of as analogous to same store sales like you really want to see a number that says what was my e-commerce in theset of stores that I had last year.
And then what was my incremental growth from new stores that I opened this year.
[20:02] Yeah. So you can make the argument that they’re kind of like you know playing a shell game and moving stuff out of the store piano and into the e-commerce know what which sounds like there’s a little bit goingon,
but the fact that still you know same store sales were 6 percent indicates that you know they maybe there’s a fair amount of incrementally in there with the Grocery pickup that that there are not.
Does it seem to be cannibalizing the store side of the business. If if if it’s growing 6 percent.
[20:30] Yeah and there are a bunch of interesting dynamics. We’ll have the deep dive into another time.
But it’s funny the things you are willing to buy and that you do and don’t spend your money on when you walk through this door and put all your products in the cart tend to be different than the things you’re willing tobuy when they’re anonymously put in your trunk in the parking lot.
And so they’re they’re actually like there is some evidence now that consumers are willing to buy more unhealthy food for curbside pickup than they are in the store when all their neighbors are going to see them with thebig tub of ice cream in the cart,
for example. Which I find is interesting.
Wal-Mart in addition and this curbside pickup which I of course I’m very bullish on Wal-Mart is also playing a placing a big bet on home delivery of groceries from a store and they said that they’ll have,
coverage in 40 percent of the U.S.
Population by the end of this year so that that is scaling as well.
And I think they made some some announcements a little earlier in the month that they were exploring some interesting automation to help pick products to expedite those grocery deliveries in the curbside delivery.
So lot of investments in that space. It’s a hot space in grocery overall.
[21:42] And you know as the executives were talking about the climate that was driving this you know they were pretty clear.
They’re like hey the number one reason that we had such a good quarter is the consumer backdrop is so favorable.
And I think that’s a theme where we’re going to hit you know again later in the show.
[22:04] Yeah absolutely.
The there was some third party news where you can now so Olmert had a marketplace.
And now you can return those products and the story used to be if you bought a third party online you couldn’t return it to the store which was super confusing for people.
So consumers get confused by the whole third party thing.
So you know this is this is a huge win for the marketplace because now you have a similar experience to any Wal-Mart item you can buy it on line or turn it online or return the store.
[22:41] Yeah and I imagine that that’s a huge benefit to consumers and pretty annoying to a bunch of marketplace sellers that are now forced into more generous terms than potentially made economic sense for them.
[22:57] Call did you want to move on to target or any other Wal-Mart stuff you want.
[23:02] I guess one last Wal-Mart note Wal-Mart made another investment this quarter of 500 million dollars in a Chinese online grocery service during a grocery in China is huge. There are a bunch of big players.
Wal-Mart has stores in China. It’s one of the international markets that they continue to fight for.
And it’s interesting to see them still in growth in investment mode as people remember they made a big investment last quarter in Flipkart in in China which makes 500 million dollar investment almost seem like chumpchange.
But but very clearly you know that China is still a huge digital land grab and all the big global players want to want to have a strong presence there.
[23:47] Yeah. One other aquisition thing there. They did close out the acquisition of Flipkart.
When you when you do these big international deals governments get involved and you know there is risk in there that you know either India or someone in the U.S.
There’s this whole foreign investment board thing that can kick in and say you know we have a problem with this.
This acquisition and this example is you know a lot of that happens around China.
So because U.S. has a friendly relationship with India I wouldn’t see it go that way but it is very squirrelly about retailers out of the country coming in.
So it is good news that they were able to close that flip.
[24:26] Yeah I’m sure that that was a sigh of relief for all the folks in Bentonville.
[24:31] Yes. Literally the day after Wal-Mart this week then Target announced and it was kind of funny because there was a little bit of shade being thrown there.
So there same store sales were up six point five percent which is you know 500 basis points higher than Wal-Mart and it was the highest in 13 years.
So they know a lot of people listeners that show kind of noticed that target use a lot of the similar language but that had know slightly better results than Wal-Mart. That was kind of funny.
Their CEO. You know I think it was a little bit giddy with excitement.
So Brian Cornell he said quote I’ve been doing this for a long time.
I think this is the healthiest environment I’d ever seen. End quote.
So clearly the economy has you know kind of.
And if you look at a lot of the data I will belabor it but if you look at consumer price index,
unemployment is way down and then even now we’re starting to see wages go up across a lot of different bands not just college people but hourly employees.
So. So it feels like these guys are feeling it.
You and I have a little bit of another theory. We’ll talk about after this. But that’s benefiting the department stores.
[25:50] But what are. E-commerce was up 41 percent versus 36 percent last year.
And then they have same day delivery in 11 areas.
You and I have been talking on Twitter as I go through different targets.
So I was down in South Carolina at a target and I saw him installing the same day delivery the curbside pickup there and stopping at a lot of stores around here.
And there are currently 800 stores. And then you know they have been investing a ton and owned brands.
One of the most popular ones is cat Jack that has reached a two billion dollar run rate in a year which is just amazing.
And I can say as a guy that just took two kids to college you know more and more of the stuff you buy at Target especially if you get like dorm furniture and seasonal seasonals is is kind of brands.
They have one called Room Essentials and I think we personally. Yeah. The silver dollars on Room Essentials for college kids.
[26:50] Yeah I mean I think that’s a super common strategy that we’re seeing a lot of traction on his own brands.
But Kevin Jacques is particularly amazing.
I mean imagine any any company watching a new consumer brand and getting that two billion dollars in sales in one year.
That’s that’s pretty spectacular.
[27:08] Where did that go. So like what did they displaced think.
[27:13] Baby Gap. Now I’m being slightly sarcastic Baby Gap did have a gap had a bad quarter. But why.
Most beneficial Babies R Us is a big chunk of Toys R Us.
And so you know I think there’s an argument that that target was a good beneficiary of that.
Toys R Us closing their stores this quarter. Whether that was all. Kevin Jacques or not.
I’m less clear. But but they’re killing it.
But the eye popping number out of all that target news to me was that their store traffic climbed six point four percent.
So that’s a huge number that you’re not used to seeing in a well-established retailer.
And just to put that in perspective for people I want to see a target it has about 1100 stores so,
having their traffic increased by six point four percent is the equivalent of they magically had 110 more stores that just opened for free this quarter.
[28:20] Yeah and one of the. You know they don’t quantify it but they did have a lot of superlatives around what they called it.
They had a Prime Day sale both online and in-store if I recall they did call out on their conference call that that that had some you know some really good benefits for them. And Jim.
[28:36] Yeah. Yeah I think they definitely got the nice Amazon Prime Day kiss.
[28:42] Yeah thanks dimsum. So as we were going over this we thought it was kind of interesting because the economy is doing well.
But really look what’s changed in the last 30 days. And when you dig into that I think what’s happening here is Mollah again.
So so in an ironic twist of fate we want to update you guys on store closures but we think that this is having an impact on Wal-Mart and Target.
You know the simple example is Toys R Us closing has created you know a huge opportunity even party city we talked about before.
Everyone is adding toys Barnes Noble’s adding toys.
I think that’ll be you know they’ll be OK. But I think consumers are thinking about that.
Now when you think about toys you really have two choices Wal-Mart Target and Halloween. And back to school so so it can be interesting but we’re two thirds through the year and we thought it would be good to havea Maalik get an update.
So the way this plays out is so far this year. So again this is through mid August when this data is collected. We’ve had 4000 379 store closures and two thousand two hundred thirty nine opens.
I think it’s important look at this data because I see online a lot of times that there is no retail apocalypse. There’s you know for every store that closes there’s five that opened and they’ll talk about war or something likethat.
[30:07] That’s just flat wrong. So this is the real data. This is announced closure so it’s hard to know exactly when a retailer is opening a store or closing it.
So these are announced opens and announce closures.
So you net those two numbers out you get about 2000 fewer stores.
[30:23] Now looking back OK that’s that’s kind of where we are in 2018.
If you look back last year and again 2018 is two thirds of a year so we’ll probably have some more.
And in fact since the 15th when this data comes out there there have been more or I’ll give highlights on last year. There are 7000 closures.
So you know I don’t think we’ll get to 7000 this year. There have to be quite a lot.
And then there’s 3000 opens. So last year there was a net loss of 2800 stores.
So I do think we will probably replicate that you know. All we need is another 6 700 stores to be announced.
And I think we’ll get there. So we’ll see.
So for example Sears just announced today 46 more stores and then Lowe’s announced they’re going to close something called or worker.
[31:12] Orchard Supply Hardware.
[31:14] There you go. That’s news to me and that’s about 100 stories.
The other thing is that that kind of gets missed in a lot of these conversations is the square footage right.
So it’s easy to lose a Toys R Us and you gain a I don’t know a word.
You know a 2000 square foot Wabby showroom.
You know what. What’s the difference in the square footage.
So there are some Wall Street firms. Chris was really good data on this.
They’re projecting so. So they had they said 2017 was the worst year in since 2001 when we were in a recession then and it was a 100 million square feet that closed 110.
[31:58] They think this year will be about the same. So it’s I guess it’s good in that it’s not accelerating but we’re not losing a 100 million square feet of retail which can’t be good.
And then when you start to look at some of the stores that are closing we’ve talked about some of them but some of the ones that are opening for example Dollar General’s opening 900 stores Aldi 5 below is opening 125.
So I think what you’re seeing is this really interesting kind of to kind of speak to the bifurcation that Casey has introduced to us.
A lot of the show you’re seeing the value oriented retailers really opening a lot of stores.
But the convenience and and there are some of those things and there like a would be but we’re being open like you know 36 stores they’ve announced.
[32:45] Then you have like Inochi opening 18 there’s just no countering the the other side of that coin where you know 46 Sears I think of the size of those things that’s going to be worth,
you know 90 or 150 warbirds or something like that 50.
[33:00] So a lot of tests dealership’s Exactly.
[33:02] Yeah. Yeah so.
So it is interesting to kind of think through that. Now the other thing that’s really interesting is,
I know a lot of people in the real estate world and for the first time ever in just Aeriel the price of industrial space exceeds retail space.
Our mall space. So there’s a lot of mall space out there it’s heavily discounted.
You see things. Another big one that’s a problem is this Bonneton I’m not that familiar with these guys.
There are evidently in with a lot of these years that are closing in on these analysts also do this the math that says if you lose two anchors you’re pretty much toast.
So what’s Bonneton announced they are closing I think about 200 stores that put a big chunk of malls at risk.
Solok 100 store you know kind of half the band tines probably will make some malls fail.
So this put extreme pressure on the retail pricing in malls specifically. So now you are seeing industrial which is essentially like warehouse space.
The square footage there it’s in such supply Amazon and all these people are going up and buying all they can get.
They are now seeing that invert for the first time ever which is pretty interesting.
[34:10] Yeah it’s super fascinating and probably explains why Amazon opened the fulfillment center in an abandoned mall this year.
[34:17] Yeah yeah. Amazon just opened another famous here center here in the Triangle.
And they had to put it kind of a pretty good distance out because there’s just like you know and at the same time they’re they’re building million square foot fulfillment centers and 2 million. So.
So the amount of land they need is going up. So it’s pretty interesting.
[34:37] Yeah it’s it’s very fascinating to just put those the net store counts in some context.
I think it’s possible that the 2017 was the first year in like the history of tracking retail that we had net store closures.
So I bet that is not the normal trend like you know even in years like the 2008 when we were having a real challenge.
There were still more store openings than there were closing and so the fact that last year we actually lost net number of stores.
And we’re going to again this year and to your point like probably more severe when we look at square footage than store counts.
That is absolutely a disruptive new trend in the market.
And so like I’m perfectly fine jumping on the bandwagon with you and talking about Mawle again because you know I do think this this is an Armageddon for a lot of the malls in the U.S.
I’m less willing to talk about retail Armageddon because I do think.
[35:47] That there’s a lot of segments of retail outside the mall that have far fewer headwinds than the mall based retailers have.
And you know so I like retailers absolutely being disrupted but right now like digital is certainly one of the big factors I would argue there are other other factors that are contributing to it as well.
But as we’ve talked about on the show a lot the U.S. is uniquely over stored with 24 square feet of space per person versus like the UK where they have five square feet of space per person.
So even if retail was going to grow revenue and be healthy we still have way too many,
stores and so the fact that that we’re having a correction in that like to me alone isn’t isn’t super worrisome.
But but I think what we’re seeing is even when the economic factors are really good like they are this quarter and in Wal-Mart and Target are giddy.
It’s not. It’s affecting different retailers in different segments,
at dramatically different rates and so it’s that rising tide is not lifting all boats lifting a bunch of boats and it’s weaving a number of those boats boats in the malls in dry dock.
[37:04] Yes it’s a really interesting set up thinking about holiday 18 because we’ve got the economy really cooking.
You’ve got less competition because these stores are closing.
And then you’ve got Wal-Mart and Target kind of heading into September with what feels like a really robust tailwind.
So it’s going to be a pretty interesting holiday to see how things come out.
And then you kind of teased this earlier that the thing that continues to befuddle me is you know everyone talks about e-commerce growing 15 percent. I just checked the U.S. Commerce data.
They came out with Q2 it like 15 percent like fifteen point five percent e-commerce growth.
But here we have now we know Amazon reported you know kind of in the high 20s.
Wal-Mart and Target are in the 40s. Platforms like shopper fire in the 20 30 percent the only the only company I know of that’s below 15 percent is eBay. Kind of like six to nine percent.
[38:05] So it just really continues to not add up for me where if we take the biggest guys Amazon’s half of e-commerce Wal-Mart is is a big chunk.
A lot of times Apple gets counted in here. Apple had a great quarter.
I don’t understand there has to be like when you do the math there has to be like a slice of 10 percent that’s growing minus a thousand percent for e-commerce. Only growing 15 percent.
So I keep coming to this conclusion that I think e-commerce has got to be growing faster than the 15 percent it just kind of mathematically has to so well that someday,
we’re going to get to the bottom and build a table and really dig in on it but not today.
[38:47] No. Very true. It’s going to be interesting to see as it becomes a more important part like accurate data is going to become more important.
And like we we just don’t have numbers we can rely on right now for the actual size of e-commerce and the growth. So,
something we’ll probably talk about a lot more. But there are a number of other odds and ends in the news that I want to make sure we saved just a little bit of time to cover. So again I don’t want to brag.
Chicago feels like the the new retail e-commerce capital of the world like we get all the new stuff first.
And this this month Google announced that they’re going to open their first permanent store.
And of course they have chosen Chicago for that store so Google has done a bunch of pop ups.
I think we’ve talked about some of them on the podcast before.
They’ve done one in Tribeca the last couple of years selling all their their Google branded products.
But the first permanent Google store is going to open up here in Chicago and there really hasn’t been a lot of word about like,
what the goal of the store will be is it predominantly selling pixel phones in,
google home voice products you know or you know is it going to sell third party products and so it’s going to be interesting to see what that looks like and I will look forward to doing a trip report when this store open.
[40:09] You can only camp out for the Amazon go store in Chicago or the Google store which winning in a.
[40:15] I would do the Google story because I had been Amazon go store so it just you know for me it will be newer.
And I guess I’m I’m less certain what I’m going to see in it.
[40:27] I remember you gave a trip report to Google pop up store and you were not happy.
There was some V.R. thing that didn’t work and they didn’t understand a pixel question you had.
So I don’t know. We’ll see. I think the bar is going to be set high for them to do a major.
[40:44] Yeah. Right. Retail is very hard. And you know so some of these digital companies that that’s not their core business you know find it out the hard way when they first started trying to have these these directconsumer experiences.
[40:56] Yeah I saw two interesting digital native vertical brand news items.
So in the empty your movement watches and this is interesting because they kind of both fit in a theme I thought that was kind of interesting so I called the the analog dinosaur by as the digital diva.
So they sold their company for 100 million dollars cash upfront plus a hundred million dollar earn out to movado.
So a traditional watch company buying the direct consumer kind of digital native brand.
And then as part of announcement it was revealed that a company had 70 million dollars in revenue run rate which is,
you know so against 100 million that’s maybe like a little bit more than one times one and half times revenue which isn’t too exciting but if they can get their turnout at 200 million then you’re talking three times that.
That’s that’s pretty good when there was more secret.
So I don’t have any juicy numbers but it is in this theme is their traditional mattress company Surtur acquired tough to needle one of the many Casper like kind of mattress and box companies.
[42:00] And what’s interesting about that release was a couple of things.
Number one they specifically said the reason we bought this these guys is we’re going to have them build a whole platform for certain.
So I guess it of doesn’t really sell direct to consumer.
And this is probably driven by the chaos in the mattress world that the mattress firm announced that they’ll probably go into bankruptcy,
and sort of is owned by a private equity firm and there’s a lot of speculation that private equity firm kind of has to buy the Mattress Firm because there that’s like some ginormous chunk of their revenue.
[42:37] And then a lot of people have been wondering about Mattress Firms because there’s kind of a you can hardly drive a block you know in these strip malls without you know sometimes you see pictures on mine ofMattress Firms effectively next to each other.
And so there are there were clearly overbuilt on Mattress Firms.
Another little tidbit of that is they did say they believe sort of said they believe 30 percent of mattresses are now bought through e-commerce and this was kind of there.
You know it was fed to them saying hey this is pretty serious we need to get involved.
[43:14] Yeah that certainly seems like an industry that was disrupted like the traditional model is pure wholesale model and has come of the slimy version of a wholesale model like all these Matt mantra’s companies makeunique models of their mattress.
For every retailer so that the retailers can all offer price matching guarantees knowing that they’re the only ones in the world that carry that particular sort of mattress for example and so that the whole model is wholesaledistribution,
and you know of course they’ve been disrupted by all these direct to consumer matters companies Casper and Tupman needle and you know I think there’s a cohort of like six of them.
So yeah not not shocking that you’re seeing the old guards you know play defense by trying to acquire the new guard.
[44:05] I also you know there were a bunch of other retail earnings reports we’re not going to deep dive into all of them.
But T.J. Maxx which you know there they’ve been a very good position in the market place for a long time with the value oriented retailers.
They had another beat this year this quarter.
That’s them them having a quarter is impressive because they’re working against pretty aggressive comps so some of these retailers that have had you know sort of a lot of bad quarters,
you know announcing that your growth was good against those soft sales in the past isn’t as impressive as as it is for like a T.J.
Maxx Macy’s had a really good quarter. They had a beat.
[44:47] They also credited the sort of turnaround in the consumer environment as a major factor and they I think actually raised their guidance for the rest of the year.
So that that’s encouraging.
You know they’re they’re the big anchor left in most of those distressed malls so you know they’re going to be particularly interesting to watch,
Nordstrom had a beat you know Nordstrom is normally viewed as kind of the safest of the the the anchor stores and the department stores and so you know they’re working against decent comps and they were up 4percent same store sales.
Their economy was up 23 percent which sounds modest compared to some of the companies we talked about earlier.
But to your point that still dramatically above what allegedly is our industry average growth.
So you know doesn’t doesn’t seem to jibe.
And then one last piece of news that was interesting to me on this show talked a little bit about own brands and retailers investing in that strategy.
And you know I see it a lot that that’s one of retailers primary strategies for defending themselves against Amazon has sell stuff that Amazon can’t sell.
[46:06] Kroger has an own brand called simple truth which is actually the largest organic foods brand in the U.S.
And an interesting piece of news I noticed this month Kroger is now selling simple truth on teamo.
So this seems like a extra benefit of doing well in the own brand.
Most retailers really struggle to expand geographically and just because you’re a good grocer in the U.S.
Moving to China and trying to open grocery stores in China is really challenging and you know the most retailers don’t successfully expand internationally the way they’d like.
But when you build these own brands and then you can leverage existing marketplaces to expand those brands internationally.
That seems like a much lower risk higher likelihood of success waited to diversify their revenue into international expansion.
So I wouldn’t be surprised to see a lot more of those kind of plays and certainly we mentioned Captain Jack earlier that that seems like an obvious one to see some some international expansion on.
[47:17] So that is a lot of news. And I want to remind listeners that we’re coming up very soon.
Less than three weeks away is the annual shop dot org Summit in Las Vegas.
It’s the 12th through the 14th if you haven’t made your plans yet.
Go ahead and book that trip. I will be there and would love to catch up with any listeners that are going to be in Las Vegas this year.
And that is going to be where we’re going to have to see that because it’s happened again. We’ve used up our allotted time. As always if you have any questions or comments about the show please jump onto ourFacebook page and we’ll keep the dialogue going there.
And you know now would be a great time to finally thank us for this podcast by jumping on iTunes and giving us that five star review.
That’s really the best way for you to thank us if you are finding the show to be valuable.
And of course if you’re not finding the show valuable the best way is to call Scott on his personal number and talk to him about your Greven.
[48:22] Absolutely. I look forward to hearing this.
[48:24] And so until next time. Happy Commercing.