A weekly podcast with the latest e-commerce news and events. Episode 222 is an interview with Mark Mahaney, Managing Director at RBC. Mark just published a new research note on Amazon raising the price target to a Street-high $3,300.
Episode 222 is an interview with Mark Mahaney, Managing Director at Royal Bank of Canada (RBC). RBC is Canada’s biggest bank, and one of the largest in the world based on market capitalization. Mark is one of the top internet analysts in the world, being ranked #1 by Institutional Investor Magazine numerous times. His research on the e-commerce space are all must reads.
In this interview, we discuss his new research note on Amazon, raising their price target to a Street-high $3,300 based on the impact of Covid-19 on it’s business. In this broad ranging interview, we discuss Covid-19, Amazon’s retail business, it’s ad business, amazon web services, logistics, as well as competitors, Shopify, eBay, Etsy, and Chewy.
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[0:24] Welcome to the Jason and Scott show this is episode at 222 being recorded on Tuesday June 9th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason Scott show listeners today on the show we are really excited to have someone that is ripped from the headlines.
While we were doing our little pre-show I Got a notification that Amazon had an all-time high right now at 2 5 5 2555
eight five five so that’s interesting number and here we are in episode 2 2 2 I don’t know what all that means I’m sure there’s some some conspiracy theory in there
and that’s because yesterday one of the top internet analysts put out a comprehensive internet Report with some really juicy survey data and as part of the outcome of that he raised his price Target to a street high of $3,300 for Amazon so we’ve been trying to get on the show and it worked out that
because of this report we were able to get him on here real quick so we’re really excited to have rbc’s managing director Mark mahaney as our guest welcome mark.
[1:31] Hey good to be here thank you Scott.
[1:33] Mark we’re thrilled to have you and obviously Scott and I are both super familiar with you and and read all of your stuff but for some of our listeners that may not be as familiar with you can you give us the kind of.
The quick highlights of your career and what you do for RBC.
[1:50] Well I’m the oldest and longest lasting internet analysts on Wall Street I say that when I walk into Starbucks I still don’t get a discount.
But it is true I started in 98 the first week was his company called the eBay
that called the office that where I worked at Morgan Stanley and was trying to get through to the lead analyst and they wanted somebody to understand and listen to the story and so I did my best to try to understand it way back then shortly thereafter.
I met Scott Wingo so you know both of those were key events in in my life and I’ve tried to understand.
Internet stocks for the last 20 20 22 years now.
So that’s that includes the e-commerce giants like Amazon and eBay and some smaller named Stitch fix and chewy
online ad names like Google and Facebook Snapchat Pinterest and then a bunch of interesting one off so the travel names like booking in Expedia
Netflix Spotify like media subscription names like that so I’ve got a group of there six of us in San Francisco we do our best to stay
on top of each of these stocks it’s a fascinating industry and that’s what that’s the day job.
[3:01] Fun fact understanding eBay is really difficult but understanding Scot Wingo is even more challenging.
[3:12] Yeah and he hasn’t Mark you haven’t aged at all.
[3:15] That’s right same you and me we both actually look younger.
[3:18] Absolutely yeah I think we can agree on that so let’s dig in this report you put out yesterday it was really fascinating I’ve kind of been through it several times the overarching theme was really kind of understanding covid
Trends so maybe we’ll start there then of course we’ll look at kind of the Amazon called that you got out of that what
What did the what did the survey kind of surface for you as it relates to kind of covid-19 and what’s that doing for e-commerce short and long-term.
[3:43] Look I Eileen pretty heavily on consumer surveys most of the stocks companies I look at our
consumer-facing so you have to understand what consumers think about these companies and how their positions have evolved over time and this was our 8th Annual so we can do it for eight years.
[4:00] Amazon for 22 years but for the last eight years we’ve been surveying people we have a decent sized it’s all
in the US which is that which is a limitation because obviously at least half of Amazon’s
businesses overseas but we want to try to see what people think about Amazon whether their satisfaction is rising or falling intentions to purchase on Amazon what people are buying on Amazon how much they span are frequently and then we as you pointed out Scott like this isn’t happening in a vacuum this year this is happening in.
[4:26] During that you know the hopefully the only pandemic of our lives and an event that’s had dramatic implications I think is almost been like
like a huge billboard for online retail the necessities of purchasing products online the the benefits of purchasing products online too so we thought this the survey would show our assumption was that it would show an accelerated shift to e-commerce
it did there’s plenty of data out there from the Department of Commerce from companies like I mean my phone is data point of a frankly of last month is that
eBay is now growing its gmv general merchandise volume or value I forget which one but it’s growing it by 25% eBay hasn’t grown at that level in over a decade
it says something about how much of a boost to e-commerce as covid crisis has been we all want to shop we all need to shop we just can’t go out so we’re shopping from home and anyway that’s one of the things that came through in the.
The survey we saw record high levels of purchases online of frequency and spend and not by the way not just with Amazon but with other companies to.
[5:35] That’s amazing I think one of the common conversations I’ve had with clients is.
You know we see that big spike and then you know the magic question is how much of that spike is permanent right like I would imagine you don’t expect that eBay is going to be able to maintain that.
That 28 percent GMP growth for example.
[5:56] Yeah no I wouldn’t expect it and I think spike is the right way to think about it I think it’s a spike though within the trend and Scott knows this and you know this just as well Jason you know we’ve
we’ve we’ve gone through the last two decades watching a greater and greater percentage of our spend occurring through online channels we all know this we’ve all lived through it and so
we just had kind of an acceleration in this spend
it’s almost as if you know every year we were going to bounce up a pointer to in terms of online retail share we’re going to go from.
9% to 10% to 11% you know annually and instead what we have would happen with this crisis I think we just you know we just kind of did a leap year like we went from we probably gained 2 to 300 bits of of
up share shift from offline to online particularly in some of the more entrenched physical Store retail categories think groceries
I think Consumer Staples I think those have really gapped up I’m sure that the rate of your rear growth in online retail will
we’ll add down we’ll wave down a little bit but I think you know it’s going to waive down from a higher level and so you know net-net we’re going to just see this Rising accelerated adoption of online retail and companies that are in the middle of this
eBay to Shopify there’s a couple of these platforms that are going to really benefit from this and you’ll see it in their fundamentals and the market is already anticipated all this by bidding these stocks up to all-time highs that’s true in the case of Shopify it’s true in the case of Amazon.
[7:25] Yeah I like to talk about covid as kind of a time machine that you know may be warped as five years in the future and like five minutes.
[7:33] Yeah I like that.
[7:35] The in so cool so you know that’s the opening opening premise of your report is me and we rapidly accelerated adoption of digital shopping and then you know the next big Insight is.
In Amazon is particularly for Prime to be the structural winner of this growth can you talk to us a little bit about that.
[7:57] Yeah you know you if you would ask anybody what you know who would be the winner off of a surgeon online retail 9 out of 10 people would have said Amazon anyway
and by the way that’s pretty consistent with what we see in our survey results we have asked people for years which shopping sites do you use most often and.
Nine out of 10 times it’s Amazon of the last six years the answer has been 90 percent eighty nine ninety three ninety ninety one ninety one I mean also all those are the
percentage of respondents who say they shop on Amazon now they’ve been some interesting fluctuations below that eBay used to have almost 40 percent of respondents say that it was a site that they commonly used that’s
that’s drifted down the 30% and in the meantime
Walmart and eBay really kind of switch places one more stop from 30% as an online site where people that people use most commonly up to now over 40% so very interesting turn there but with Amazon they say very consistently at the top we do see that they ranked highest in terms of
things like price selection and convenience
particularly notable though is the gap between them and their competitors in terms of selection and convenience based on our survey work there are there is one negative thing I know we’re going to get to it in terms of satisfaction.
[9:11] But the general results here show increased frequency of purchase greater amount of purchase and then they’ve got this program called Amazon Prime which I imagine I’m sure the window family has been a long-standing member of.
And we saw penetration of that Gap up to record high levels and I reach 67 percent.
Amazon earlier this year disclosed that they had about a hundred and fifty million Global Prime subscribers based on the survey work
thinking about where the numbers could go we think that they are rapidly approaching they will rapidly approach 200 million by the end of this year that’s a lot of people they’re more loyal than regular Amazon customers they spend more they spend more frequently it’s a it’s a great
Customer Loyalty program it’s a great Revenue loyalty program it’s a great prophet loyalty program.
[10:01] And when you say 67 percent that’s your survey data or your you okay so.
[10:04] Yes that’s right 60 67 percent of it of the internet users that we surveyed our no I’m sorry of am of the people that we surveyed who said they were Amazon customers 67% of those said that they were Prime customers.
[10:19] Yeah yeah yeah I’ve seen some estimates that have 50 to 60 percent of households that kind of drives right in there.
[10:26] Yeah I know.
But I bet you it did Gap up Scott I bet you that’s what’s really happened you know in the last month or two I’m sure people’s purchases on Amazon gapped up I mean we know that they did Amazon reported that in the March quarter and
and so I’m I guess is that people realize well if I’m going to be ordering I’m staying at home.
And I’m going to be ordering a lot of stuff on Amazon I might as well you know gin up for this Prime program I’m pretty certain that’s what happened in that so that fifty six fifty to sixty percent that you see in other reports I mean those no I’m sure all those numbers went up I don’t,
the truth is probably somewhere in between us all but you know that it definitely it definitely moved up and pretty materially during this crisis.
[11:04] And then as you said it wasn’t all sunshine and Rainbows in the survey you saw some interesting feedback on Amazon’s customer service satisfaction but would you would find there.
[11:14] Yeah and this is this is a stumper I got plenty of theories but you know it’s hard to really know what’s
what’s going on but we do ask these questions about you know we give everybody response to the survey about 1,600 people give them a right variety of options are you extremely very moderately slightly or not at all satisfied and of course you would think that if there
you know if they’re Amazon customers that probably not going to say they’re not at all satisfied because then they wouldn’t be Amazon customer so you would expect the skew you know towards the extremely in the very satisfied we’ve asked this question the same way
same you know relatively large sample size over the years and we’ve seen customer scores come down used to be 88
percent of customers back in 2013 Amazon Customer said they were extremely or very satisfied
that now it went down to 64 percent in 2020 and you know it dipped down in 2018 we noticed it
and then it just dip down again I think the reasons if our survey is right you know I think it’s right you know we try to be pretty objective about this we’ve done the same question over the years so we do have a long time series here I think there’s a bunch of things that are happening one is I’m sure there were some
quality issues during the covid crisis are still are it’s just hard that for a while though they weren’t stocking non-essential.
[12:33] Items and then there were delays in getting a lot of products so I’m sure that hurt their satisfaction secondly over the years they have increasingly included a lot of third-party Sellers and I think there may that may have increase the
the risk of quality control problems not so much in the delivery but in the actual quality of the product in any customer service around that the product if you if you you know the more sellers you put on that Network you add this selection there’s almost always going to be a trade-off in terms of quality
32 company is so big that kind of gets embroiled positively or negatively in kind of local controversies labor regulations
taxes things like that so it’s just it’s become so big it’s kind of hard for that stuff not to kind of come up fourth is
as they move into categories that are really tough to fulfill and groceries this is the top of the list I think that can create satisfaction problems are for one of one of those
people who had a hard time getting a slot for Amazon Fresh and I had one delivery that just didn’t come through can’t recall ever having that with any other Amazon product that.
[13:33] A lot so I think a couple of these things have kind of come together and maybe the ad units that they have in their the sponsored listings products Maybe
maybe putting a few too many of those you know in the Amazon shopping results is dinged satisfaction I don’t know I just throw out five reasons and they’re all just guesses on our part but we do know what the trend is based on our survey data that satisfaction is coming down and
this is a serious issue of the company needs to address it we think they can if they don’t that will that will impact growth if they can solve it they’ll be able to sustain the growth they have.
[14:06] But what do you think you think I’m full of baloney.
[14:10] I think you’re right but I think I think they can recover I think that they they were not expecting from March 15 April 15 I think they got that 30-day window which is probably pretty
around when you did your survey the delivery times really spread out Jason our just
talking offline and he got up to three or four days I was out weeks here in North Carolina so we’re back to normal now so I think they’ve added a ton of capacity they don’t release numbers on this but I know they bought 20,000 delivery vans
I would bet they’ve doubled or tripled that just kind of anecdotally in my area.
Actually know where the center is and just the number of trucks in generally is huge now so I think I think they can recover Jason had some more quantitative data Jason what did you see.
[14:57] Yeah I was mentioning that Marketplace pulse monitors reviews of third-party sellers on Amazon so I you know how satisfied buyers where the bottom these third-party Sellers and.
In General on average.
There are about 400,000 negative reviews of sellers a month on Amazon that’s kind of the Baseline and at the peak of covid those negative reviews went up above 800,000 so my premise there is.
Amazon totally curtailed FBA the service level for all these third-party sellers fulfillment went down and there were a lot of negative reviews.
And then they also speak with positive reviews of Sellers and in general ninety-four percent of all transactions result in a positive review for that cellar.
When people write reviews 94% are positive and during covid that 94% fell down to about 85% so like I think there’s.
Numerous data points here that are all pointing to the same thing that like.
Consumers rush to digital the service level on digital dropped because we weren’t prepared for that that level of Spike and that that created some negative.
My hypothesis certainly would be Amazon’s way better suited than almost anyone else to address those capacity issues and recover from that negative.
[16:25] Okay super.
[16:31] So and like so clearly the retail business for Amazon’s in a pretty good place like more people are shopping digitally and as you pointed out for variety of reasons Amazon Super well.
Well said it situated structurally the benefit from that transaction.
But you also talked a little bit about the other parts of Amazon’s business in the mix and you know like from a revenue standpoint that’s Amazon web services but increasingly that’s.
Amazon marketing services like what how are you thinking about those when you when you think about Amazon’s growth potential.
[17:08] We’ve referred to Amazon is the greatest mix shift story in technology
and what I mean by that what we mean by that is its fastest growing businesses are its highest margin businesses it’s a great position to be in like from a business model perspective the opposite is kind of Google
they invented this thing which is probably the highest.
Margin business ever that search advertising and anything they went into after that would have lower margins and.
You know whether that’s hardware or Cloud so for Amazon the makeshift story is they have this retail business that’s got you know
to 3% operating margins growing at you know 15 to 20% year-over-year a faster now and.
[17:56] And then you’ve got these at this advertising business is just probably 30 percent margins that’s growing kind of like fifty percent forty to fifty percent year-over-year
it is AWS business which is also got about 30% operating margins it’s also growing about 40 percent Thirty to forty percent year-over-year so faster growth businesses higher margins means just your overall margins are going to rise so
that’s kind of the business model so what
of of of Amazon that’s why it’s got will remember this back in 2014 when for the first time ever Amazon disclosed with the margins were like on its AWS business
the stock gapped up
the stock re-rated it’s almost as if the ticker had been changed from amzn to AWS because the market was so surprised that what they what everybody thought including me
that the AWS was just a commodity low-margin business turned out it was a high margin business and that was fundamentally really positive for for Amazon because it suggested this mix shift and the idea that long term you’re going to have a nice upward Trend in margins Amazon advertising and Amazon.
[19:00] Cloud services they’re both you know sizable businesses now roughly 10 billion run rate for advertising little bit more than roughly 30 billion for AWS it’s a little bit more than that and again highly profitable 8 m is M Asam is an advertising platform is the third largest generator of advertising
outside worldwide you know XX China and when we look at all of the ad platforms during this covid crisis and look to see all of them had material impacts on the revenue growth except one
that’s Amazon Amazon’s advertising Revenue looks like it’s going to decelerate but just modestly compared to Facebook compared to Google compared to
the trade desk or Pinterest or Twitter or snap.
[19:46] So they that that they’ve got lightning in a bottle there and in AWS the cloud business is probably also a big beneficiary
it’s probably a structure winner from the covid crisis because of the dramatic Ingham dramatically increased
capacity needs driven by work from home driven by remote Computing and there was a wonderful data point by this company called Zoom which has now become a household name or at least a business office name and zoom had eight 20x increase in usage
total amount of minutes used
unzoom went up 20 x like it’s hard to Fathom any business dealing with that kind of surge in demand yet they were able to do it and the reason are able to do it is because their cloud provider is Amazon and Amazon allow them to
20x increase their capacity in order to handle that kind of volume increase I mean you couldn’t come up with a better advertisement for the
for the durability the flexibility and the end the need for cloud services if zoom-zoom wasn’t an AWS if they hadn’t used AWS I guarantee you they would have had dramatic blackouts
they’re start and and you know the follow-on less important but their stock wouldn’t their stock could be half of where it is now something like that.
[21:13] Yeah it’s interesting on the ad business in particular I wonder and part of the reason that it had a slight deceleration isn’t even related to.
Potential demand for ads or opportunity platform I wonder if it’s tied to the issue we talked about earlier that like.
Temporarily Amazon supply chain was constrained and they turned down the service level for all those 3-piece hours and fulfillment by Amazon like if if Amazon tells you you have a non-essential product and they’re not going to accept new shipments in their warehouse of your product.
You’re going to turn off the ads for that problem.
And I so you know it’s not shocking that that the ad sales decelerated a little bit but I wonder if structurally.
Give a bigger percentage of customers are shifting online like Amazon competes with Google and Facebook for Ed dollars but Amazon also competes with.
Walmart and Target and billboard providers for ad dollars and I’ll bet you know my feeling is permanently.
Demand for those ad dollars has has has is likely to permanently shift to Amazon so I think even on ad platforms this might be.
Like mostly favorable for them.
[22:25] That makes sense Jason that makes a lot of sense.
[22:30] Also some of your your analyst colleagues out there and I’ll full disclosure I’ll put myself in this camp at some point they feel like Amazon is going to effectively compete directly with FedEx and UPS meaning you could you know you’re in San Francisco you could ship me a package on their Network in North Carolina for like maybe
four bucks a package versus the FedEx UPS eight to twelve dollars do you see that happening or you’re not in that camp.
[22:57] No I think that’s a probability we laid that out did a report a couple years ago called the fourth pillar try to figure out the next business that Amazon would go into
I think I got an email back from Seattle right after we published that report as long as something along the lines of you idiot why would you think we just have one more pillar.
A couple of things in mind we’ve written deep deep dive reports on their business to business opportunity you know
business supplies that sounds like Logistics to me and Amazon’s pretty damn good at logistics for consumers so I not for businesses so I think that build that business is nicely building up I’m curious as to what they’ll do in Pharmaceuticals he’s physical
stores that are these.
[23:41] What do they call me every it’s not the everything stores the go stores thank you the go stores I thought those aims on goes towards I think that’s a really interesting really novel concept that actually solves something it
gives you more time well I what a wonderful what a wonderful gift that is and anyway so I think there’s a lot of areas that I think they’re investing in and you know Amazon shipping Services makes a ton of sense to me I did
pitch that to them as the title you know is the name for that segment they just they thought about it for a little bit they didn’t like the acronym the thought that would be an odd Summit so they decided to go with something else
I think they went with shipping with Amazon SWA that’s probably better than what I had thought of and my guess is that that building that that business builds up yeah this is like this strikes me just like Amazon building our physical capacity
[24:33] To ship goods and services you got excess capacity bring on third-party sellers Amazon built out all this compute on that work to manage its own large needs they have excess capacity
go ahead and Retail it as AWS Amazon builds out a distribution Network a fulfillment Network a series of trucks too
deliver its own products and then third party products sold on its site well why not do it for third-party products sold on on third-party sites it just seems like a natural extension it’s kind of like Amazon is the fixed cost business
just they’ve got such bullish long-term views about how big online retail will be those use of been verified year in and year out
that what you want to do is you want to vertically integrate and fix those costs therefore you get super high incremental margins so I think it’s you know I think it’s inevitable I think they’re actually darn close to the size of FedEx now in terms of in terms of units
and yeah I would imagine that they’ll surpass you know UPS within the next five years in terms of raw shipping volume that include a lot of their own shipments but over time I would think they’d pass them in terms of other people’s shipments to.
[25:45] Yeah I think Scott and I both agree even before they get there even before they like try to sell those Services I think.
A unsung challenge at the moment is with all this increase digital domain and you know most retailers are talking about like seeing volumes that are similar to their traditional Cyber Monday Black Friday volumes.
And who doesn’t have capacity to fulfill that demand as FedEx and UPS and so you know Frank right.
They’ve all just tacked on a bunch of surcharges and so if you’re any retailer besides Amazon.
You know one of the the negatives of all this increase digital demand is you don’t really have the ability to fulfill all that demand or at least fulfill it cost effectively.
And so owning as much of their own fulfillment as Amazon does is I think another huge structural competitive Advantage it’s going to help them take more than their fair share of the digital growth.
[26:39] And it’s I agree with you Jason and Scott you ask the question you do you have the same answer that I would have that I just gave.
[26:47] Yeah I think I think they yeah there’s some incremental costs yeah taking another packages is almost free at some point when they build out all the infrastructure so so yeah I think they get there it’s a question of when I’ve had it on my annual prediction show for three years and then.
I’m sticking to it the one time I take it off is when it will happen so.
[27:08] I’ll wait then.
[27:10] Yeah that’s a great way to invest in it is wait till Scott get throws in the towel on the prediction show.
[27:15] The contrarian indicator I got it.
[27:17] Exactly I do want to Pivot like you have really seen this industry grow up and there’s a lot of interesting non Amazon things going on right now when we talked about in our last show was.
Like all of these new Commerce initiatives at Facebook and you know are you falling that at all and what what do you think.
Is Facebook going to be a viable player in the Commerce base.
[27:43] I’ll give you my opinion I’d love to hear yours we we do a survey of social media companies we’ve done this semi-annually.
I think we’ve done this for four years now and the last one we published just last week we asked people.
[28:04] About their usage of Facebook Marketplace and simple question we found a 51 percent of respondents had used Facebook Marketplace
back in November last time we ran it was only 33 percent so there’s another e-commerce inflection point we ask how many of you
people on Instagram have made a purchase on Instagram 23 percent of users said they had six months ago that was.
[28:30] That was fifteen percent so you know this Spike that we’ve seen in e-commerce is also translated onto these social media networks I’m I’m.
I’m I think this is a fast fascinating area of to explore I don’t know why they wouldn’t be
they certainly the traffic now it’s not it’s not conscious traffic it’s not
qualified traffic I don’t want I want to shop I don’t go to Facebook when I want to you know I don’t go to Instagram but I happen to be on Instagram and Facebook a lot
you can put relevant ads in front of me I just may not be in the mood to shop I’m in the mood to shop when I’m on Amazon so there’s always going to be limits but if they but with the traffic they have and if they can
get a little bit more of a picture of my commercial intent or not my intent my interest then there’s a chance for them to tap into what do you call that impulse shopping and then you so you get that part and what we’re seeing in this my raw data there
says that there are there is the opportunity to tap into impulse shopping on these sites now you got to go to the other side.
[29:39] You’re not a vertically integrated Marketplace we are Marketplace bring you down vertically integrated so you better be careful not to put ads up there and.
[29:47] And then and then for a product where the inventory quickly sells out and then people are going to remember yeah I try to buy on Facebook and you know that
it didn’t work so what they need to do is partner with somebody who can really help them with the Fulfillment with the design of the site and they need to make it seamless if I’m clicking on an ad and I got to click over and fill out the address and the credit card information that’s friction friction friction
but if they can if they can if they can like the one thing I don’t know what percentage of
people on Facebook have their credit card information stored with Facebook I’m guessing it’s less than 1% so that’s something that Facebook is going to try to have to incentivize people to give them a rationale a reason for putting a credit card data there that gets them closer to one click and then they need to work with a merchant partner like a Shopify which is what they’re doing
that can make that that that flow seamless and just make sure you get a picture into the inventory such that you’re not showing
you know the boots when you don’t have them in inventory and can’t get them you know with them three or four days to the consumer but I think all those pieces are coming together so yeah I’m increasingly bullish on this opportunity
and I think the pieces are coming together like I’m seeing the consumer intent in my survey work I’m seeing them work with the right Partners I haven’t seen enough of the actual experience I get I’ve yet to have that mind-blowing.
[31:09] He’s of sharp like
you know I’m checking out at the grocery store I just all I have to do is reach for the Snickers put it on the put it on the conveyor belt it’s not that simple yet but if they get there that’s they came make that
they won’t surpass they won’t supplant Amazon by God that won’t happen but they’ll be able to tap into impulse shopping dollars in a way they haven’t before I’m very intrigued by it Scott what do you think.
[31:33] Yeah it’s interesting because it kind of you have to kind of loop Shopify into the whole thing so there’s there’s one school of thought that shopify’s essentially the shopping engine for Facebook
today in this latest announcement they kind of cut Shopify out a little bit like Facebook’s kind of introducing their own check out so it’s gonna be interesting to see there’s almost kind of like a three-way War kind of here so there’s like Shopify which is
the Battlestar Galactica ragtag group and then you have the social guys kind of going their own way and then you have the death star of Amazon.
I don’t know you know it’s always so hard for these people to compete with Amazon because of the shipping Logistics they have and the only company in those
that list that’s investing in that is Shopify so it’s going to be really interesting to watch this next leg of e-commerce to see can Shopify.
In this made it either on framing but the can Shopify the almost like a counter option to 3p Sellers and Brands against Amazon I think
you’re seeing a lot of people kind of frame it that way kind of.
Famously been what’s his name the Strategic review guy he’s kind of like setting it up that way but other folks kind of say no it’s just this that’s not the right way to look at it how do you see Shopify fitting into the overall.
I think they’ve surprised everyone with the amount of growth and the gmv that they’re producing so it’s hard to count them out at this point.
[32:56] I I am I’m trying to count them in and it’s a it’s a company in a stock I’ve been ramping up on aggressively over the last six to nine months I’m very intrigued by what they’re doing I like the way they think about.
Their business I certainly look at their take rate it’s like 1.67 percent.
And it’s like well wait a second you know that they if they can execute well that take great can double or triple that’s a lot of growth in the future so I’m very intrigued by their opportunity
some of the things I think are maybe false starts their ability this this app that they have I.
[33:33] Just don’t think I’m ever going to go to a shop app Shopify app to start my shopping I just and I don’t know I signed up for it then I
realized I just don’t need another notification of when my Amazon packages are coming I already got that by the way and you know Amazon will tell me and then Google will tell me to so I get it I don’t like Shopify to tell me one of my Amazon packages are coming but
but I’m intrigued by the potential to chop has but probably not as a brand Central approach probably is just the
the the enabler of D to C of D to C you know Commerce activities they talked in this last
earnings call of of enabling I think was Hines and lint I think those are the two examples that they used to sell directly to Consumers.
[34:22] So okay that sounds interesting I just don’t think I’m going to
go to Hines.com when I want to buy catch up but I’m going to want to buy Hines and so but I’m not going to go to Shopify to find a place where I can buy
Heinz I think I know where to buy Hines so I don’t know it there’s an opportunity there but there’s a lot of lot of lot of paths that could go the wrong way for them
but they seem to be like a very disciplined management team so I’m giving him the benefit of the doubt we have an out perform on that stock for what it’s worth and yeah e-commerce opportunities inflicting up for them as it has for Amazon in this in this covid crisis.
[35:03] Yeah so so you kind of look at this big picture.
You have dramatic digital acceleration like it seems like it’s you know Amazon and Shopify are both currently poised to benefit from that digital acceleration.
What about some of the other digital players like who else do you think ends up being a winner in this like you mentioned eBay had a.
Sort of unexpected Spike I also think of Stitch fix and chewy is to of though I.
Bigger play you know digital digital folks are they is this Rising tide that’s going to lift all boats or.
Do you think that they’re going to lose share to Amazon and this.
[35:44] Well near-term the rising tide will lift all boats achoo as a company they were Prince earnings after tonight I would think this is a company that dramatically benefits from the covid crisis I saw that Smuckers
which owns Believe It or Not owns a large array of pet food
products like Meow Mix is in there Kibbles and bits and all your other favorite cat food that they had 60 percent growth year over year
in online retail sales I mean you know jeez they’re doing that I imagine to he’s going to put up some pretty big numbers tonight now they better that stock is really gapped up dramatically but I think they will I think they’ll put up I think they’ll put up really good numbers you had two Trends there
and you know one is that people had to buy pet products and and food and supplies online the second one is just kind of tangential for pet owners like myself
there was a Dish been a dramatic move towards pet adoption
in the last two months because of shelter-in-place regulations that hadn’t occurred to me right away but you know people when they’re when they’re forced to stay in.
[36:48] Indoors like that they look for companionship and that led to a lot of people to a lot of people adopting pets and of course you have to feed the things
and well you better you know the you’ve heard about this thing called chewy and so people signed up so I think they have like a two to three year
just accelerated adoption of their services and by the way unlike the rest of retail you know where it is interesting to go in and try out things in stores you know for fashion apparel and you know there’s experiential shopping I don’t think there’s such a thing as pet food experiential shopping so I would think that that’s a category that’s just right for dramatic
acceleration online so I Chuy’s the name Stitch fix to is just a couple of question marks we have.
Around it like I’m surprised the growth isn’t better there but they should benefit Etsy clearly as benefited to and not just because of
people buying designer face masks my guess is that there they’ll have a sustained acceleration but that’s TBD.
[37:45] Yeah it’s interesting it’s funny like I have to do these briefings and I give all these negative Trends and you know the world is going to end and so the the palate cleanser I always throw in there.
Is every pet in every shelter has been adopted it’s like the one one sort of feel good story and all this and you’re exactly right like.
We have the largest cohort of new pet owners in the history of the US and none of them could get their pet food or cat litter or toys.
Promised or so.
We’ll see but I’m expecting that this hats had to be super favorable for chewy and then of course Amazon is also a great competitor in the pets page.
Yeah so I think that’s a great insight and that’s actually going to be a great place to leave it because we’ve used up our allotted time.
But Mark super appreciate you taking time out I know you’re in high demand right now and a lot going on and we really enjoyed you sharing some of your insights and your.
[38:42] Jason great talking with you Scott always a pleasure talking with you great to I’ve learned a lot from Scot Wingo over the last 20 years and I plan to learn a lot more of the next 20 years wish you both and your family’s health and safety.
[38:54] It’s becoming Mark we look forward to seeing you at a one of your shows when we can get back to traveling and back to normal.
[38:59] Absolutely see you buddy.
[39:01] Until next time.
[39:02] Happy commercing.
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