A weekly podcast with the latest e-commerce news and events. Episode 246 is review of US Department of Commerce Q3 data, and retail Q3 earnings reports.
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The US Census Bureau published its retail monthly data and quarterly e-commerce data this week. We also saw earnings reports from Target, Walmart, Lowes, Home Depot, Walgreens, and Kohls.
We also discuss Amazon’s entry into pharmacy. Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 246 of the Jason & Scot show was recorded live on Thursday, November 20th 2020.
Transcript
Jason:
[0:24] Welcome to the Jason and Scott show this is episode 246 being recorded on Thursday November 19th 2020,
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
Scot:
[0:40] Hey Jason and welcome back Jason and Scot show listeners.
Jason it’s getting to be holiday and I don’t know about you but I am constantly being pummeled with.
Carrier pigeons direct messages tweets linkedin’s friend stirs just messages from every possible venue and guess what they’re asking.
Jason:
[1:05] They are asking you to buy early from their store.
Scot:
[1:10] I know that yes I am getting this but what I’m getting from our listeners are people saying Scott what can I get you guys have given us so much pleasure over the year through this podcast what can we do in return.
And my answer is all Jason I want for the holidays this year is your 5 star review.
So if you can hit pause real quick and this is best in your app that you’re using if you’re on the iPhone it’s pretty simple kind of need to do it in the podcast app,
believe that five-star review that would that would be really great and that would make our your for us here at the Jason’s got show we’d really appreciate that so whatever app you’re in go in there leave us that five star review that really helps us a lot.
Keeps us at the very tippy top of the e-commerce podcast realm so we would really appreciate that.
[2:04] So alright welcome back hopefully you did pause and leave us that five star review we appreciate it.
Jason we are T minus seven days until turkey day and this is the time of the year where we really start to feel it you know kind of that nervous energy.
Here in the Commerce retail e-commerce world,
everyone holds their breaths and they been working all year planning for this they’ve got all the server’s lined up all the clouds clouding,
and just hoping that the next 20 days are super awesome but they’re also scary for everybody so.
And then this year with covid everything is going to be cranked up to an 11 we’ve talked a lot about ship again we’re going to do an update on that so we thought the days show we would.
Kind of stay on news because there is a lot going on and first of all I thought we could hit some of the really interesting Amazon news.
Jason:
[3:05] Amazon news new your margin is their opportunity.
Scot:
[3:17] Jason you have I think you’ve been I can’t remember where it’s been all cheer now I can’t remember if you predicted this but you’ve been really
kind of keeping an eye on Amazon’s aspirations to get into the pharmacy world and if I remember they bought that pihl company was at pillpack and then there was some news this week update us on what happened and what you’re thinking what’s your
what’s your point of view is it time to stop going to Walgreens and CVS.
Jason:
[3:46] Yeah so side note I was actually revisiting that prediction Show recently because I was trying to cheat and edit in that I predicted a global pandemic.
Scot:
[3:57] No that’s not fair no cheating.
Jason:
[3:58] No I would never cheat but if you happen to notice that there I must have in fact predicted it.
But yeah so we’ve talked a lot about this we’ve talked a lot about Amazon and Walmart’s General aspirations around Healthcare,
and for sure I think for the last several years I can’t even remember which year we first predicted it but like we predicted in the past that Amazon would get into Pharmacy.
And we we’ve seen sort of three previous Healthcare actions,
they actually applied for and received a number of their own Pharmacy licenses so you have to be a pharmacy you have to be licensed in every state they got licensed in a bunch of states for medical equipment so that’s not actually the,
the the medications that’s things like.
[4:48] Pulse ox monitors and glucose meters and and orthopedic equipment and prescribed equipment that customers might want to buy so so they kind of.
[4:59] Did their first step in getting some pharmacy license has a lot of us speculated that that could be a precursor to getting a medical dispensing pharmacy license.
So then they bought pill pack which is a pharmacist and online pharmacy that already had a bunch of Pharmacy licenses so they kind of got.
If memory serves something like half the country covered just by buying pillpack and for listeners that aren’t familiar pillpack has kind of a unique value proposition,
they’re a mail order pharmacy that mail your your prescriptions to you but instead of giving you all 60 of your doses of Lipitor in a bottle,
individually packaged your pills for each day so if you’re taking three conch medications you get a little plastic.
Vacuum-sealed bag with the three pills you need to take each day so make it make it super easy to take each day’s thing and so they bought pillpack they’ve been continuing to operate pillpack they’ve even done some pretty extensive,
marketing and advertising for pillpack.
And then right around the beginning of this year they bought a medical technology company that does like.
Telemedicine medical triage it’s kind of like artificial intelligence for what are your symptoms and I’ll tell you what likely is wrong with you kind of stuff.
[6:23] And then they’ve used a lot of those Technologies.
To roll out some for some health care clinics but the health care clinics are not for the general public at the moment there for Amazon employees in specific cities like.
They’ve opened a number of clinics near.
Near some of the FCS and they’ve opened a clinic near their corporate headquarters in Seattle and they I think they even develop their own covid testing.
Capability that they use in those clinics to test employees.
Scot:
[6:51] Yeah when we went in our deep dive I remember them saying they were doing you know tens of thousands of daily testing so pretty pretty substantial just internal testing effort which was pretty interesting.
Jason:
[7:03] So that’s all the history of Amazon and Healthcare and what we’ve been waiting for is when do they do something that strikes fear into Walgreens and CVS and the answer is probably this.
Scot:
[7:16] Yeah saw the stock I’m not a big tracker of those stocks but I saw CVS was down from like the mid 70s and mid 60’s so kind of a 10% drop in I imagine Walgreens with similar.
Jason:
[7:28] Yeah and I think they one or both of them had earnings calls recently and.
Somewhat counter-intuitively and maybe sometimes we get into this the those pharmacies are not.
Beneficiary major beneficiaries of covid in fact like their comps are down.
So so they are ready we’re kind of a little soft and then this Amazon announcement they all had an impact.
We’re still trying to figure all the details out but a so Amazon has announced that you can now there a nationwide Pharmacy and you can buy your your prescriptions from Amazon and you’re not.
My my understanding is you can now get like a normal person gription from Amazon it doesn’t have to be the pillpack configuration.
And it’s available Nationwide but what they really focused on they didn’t give a lot of details about that about how you would order your your traditional prescriptions,
if you had Insurance because what they really focused on is they had done a partnership.
With a I think the company is called The Insider RX to dispense prescriptions to people that don’t have insurance and give them the best possible price.
[8:50] So it feels like this first segment that they’re targeting for their kind of Nationwide Pharmacy offering are uninsured customers or underinsured customers,
and help them get affordable access to a prescription,
outside of the insurance system and there’s a variety of reasons that are probably doing that it turns out there’s.
A lot of exclusive deals in the insurance networks and so it’s probably really hard for Amazon to,
say hey Scott order your prescriptions from me and will submit it to whoever your insurance is and will get reimbursed.
Scot:
[9:29] Do you think when I go to my doctor soon I’ll be you know they always say what’s your favorite drugstore I’ll be able to see Amazon Pharmacy and then that’ll connect those things are as that a naive the other.
Jason:
[9:37] So that that is petition clear because here’s going to be the problem say you have some new medical problem and the doctor wants to prescribe some a one-time thing for you,
they’re going to they’re going to write the script and most insurance company your insurance company is going to pay no matter where you feel it so they your doctor can probably send that to Amazon and a big part of this on Amazon offering is 2-day delivery so if it’s.
If it’s something you need you know that you can start taking two days from now that could totally work.
Often when the doctor writes a prescription for some acute problem in the office you’re going to stop on your way home from the doctor’s office to fill that prescription.
And so Amazon’s not super competitive at that,
but in most cases that first prescription the most credible insurance companies are obligated to compensate the dispenser for that so there’s not a lot of controversy about that,
what gets controversial is,
if you have some chronic condition that means you’re going to take some medication for the rest of your life like the most popular which is like a Statin for high cholesterol.
Right so a lot of insurance companies now say.
Hey we don’t want you to buy that every 30 days from a retail pharmacy and pay the highest price we want you to use our Pharmacy and they’re going to send you a 90-day Supply and will only cover this under insurance if you get it from us.
[11:04] And so the NAT those mail-order pharmacies are often operated by Rite Aid and CVS and Walgreens so they all they all have you know CVS Caremark for example,
the do that mail order on behalf of insurance companies but there’s a lot of exclusives there and that’s the.
The part of the the pharmacy business that I don’t know for a fact but I would imagine is harder for Amazon to crack because they would literally have to go to these,
these insurers and get them to too.
Except Amazon is a dispensary and they have to negotiate pricing rates and they probably already have an exclusive deal with another for provider.
[11:46] So if your Amazon you’re trying to grill and Pharmacy you go oh the these ad hoc prescriptions is one place I could grow but really I need to do like one hour fulfillment for those which Amazon did not announce here.
And then the other category is a huge chunk of prescriptions are sold without insurance and so it seems like that’s where I Amazon’s really focusing and so that’s actually not the.
The bread and butter of Walgreens and CVS there are third parties that provide,
discounts and promotions to those retail pharmacies so these are companies you’ve now seen television ads for good RX and.
Shoot what’s the one with Martin Sheen something care.
It’ll it’ll come to me later but there’s a couple companies out there that are kind of in the business of,
aggregating coupons and letting customers get a cheaper price when they have to get a prescription from Walgreens without a,
a prescription and that is basically what Amazon is offering so the well Walgreens and Rite Aid like took a little bit of a value hit like who really took a value hit was good RX.
Because it seems like Amazon’s competing directly with them.
Scot:
[13:07] Single care.
Jason:
[13:08] Single Care thank you I knew it was something here.
Scot:
[13:11] One of our one of our interns were handed over to you.
Jason:
[13:13] Yeah so like the the kind of Market.
Whiplash action like really hit those guys and I’ve seen the number of analysts that follow the industry pretty close and they’re like you know what there’s a bunch of nuances,
Amazon is not going to be able to to kind of immediately impact those those businesses and the in the trade agreements are kind of complicated so,
my sense is that some of the stocks have already rebounded from this initial kind of.
So
you know every so I mean kind of we’re getting a little in the weeds but rolling all this up there’s there’s a theory why everyone shouldn’t be afraid of Amazon but of course you and I know as a general premise everyone,
should be afraid of Amazon so this first offering may not be you know the one that that,
dramatically impacts any of the existing players businesses but it certainly reaffirms Amazon’s interest and intent in disrupting this industry.
Scot:
[14:17] Yeah and whatever you do if you’re an executive at one of these companies never ever say that you’re going to Canvas ons but or you’re not worried about them or they can’t do your your business.
Jason:
[14:28] Yeah I the exact phrase you probably shouldn’t utter is Amazon’s great at selling X but our business is uniquely complicated and difficult.
Much different than all the businesses Amazon successful and therefore Amazon has no chance of succeeding.
Scot:
[14:46] Another one you probably shouldn’t utter is we’re a hundred percent Amazon proof.
Jason:
[14:52] Exactly we’re Amazon’s partner not there their competitor yeah so I feel like and besides Amazon’s never made a profit so there’s that.
Scot:
[15:01] That is so true so true you and I have that till the cows come home.
Course that’s a little Amazon update and we’re going to keep an eye on this Pharmacy very closely because we do think it’s going to be this could be a billion dollar pillar if you know this is a nibble and you know this kind of the second Noble after pill pack I would kind of say,
but it’s clear Amazon has their sights set on this one just General Health Care and so does Walmart so it’s pretty interesting Battlefield coming up,
let’s pivot over to ship a getting one of our favorite topics so,
because you and I are the ship again guys we are getting hit with all the ship again news and in fact,
if folks have hair dryers they’re taking a while to get to them or let’s see iPads or anything you and I to know about it so that’s part of the fun of being the ship again guys.
Jason:
[15:50] I like being the ship again and Guy exactly.
Scot:
[15:52] I do too I’ve learned a ton so let’s go through what kind of do a lightning around here,
first thing I’ll apologize listeners I talked about putting a model out in the last show and my day job has been kind of busy so I have not had chance to work on that I’m hoping to work on that this weekend,
so stay tuned.
The speaking of Amazon they had an article today where they are telling folks and I think this is I mentioned at the top but you know we should say,
it does look like we’re having that that V or swishy shape at least from a covid perspective so cases are hitting all times Highs hospitalizations are at all-time highs,
so we’ve got kind of the second wave of the pandemic and I think what Amazon is saying is if they have to go back into kind of that March centrioles only mode.
If that climbs the holiday it could be kind of cataclysmic so so I would say,
you know if we were keeping track of some kind of a scorecard of ship again every week since we’ve introduced it I think the chance of it getting worse than you and I even predicted are increasing.
Let me pause there and see if you agree on that.
Jason:
[17:04] Yeah no totally and I think to try to mitigate this a lot of people try to entice customers to shop early and I my sense is that that mostly hasn’t been successful so.
Scot:
[17:17] So Amazon came out and said hey you know you got
really really seriously you need to shop early this year because even we won’t may not be able to get you what you need so that was pretty interesting for them to being there
of course people kind of are like sure they want to shop early so there’s it’s going to be saying there’s going to be a segment of consumers that
I kind of think it’s fake news if you will and they do not take advantage of this and you know the Doomsday scenario is Amazon gets
and you know swamped and has to move into Central kind of stuff stores go through shutdowns in certain areas I think California actually is doing it in Chicago or are your store shut down.
Jason:
[18:00] Yeah so we’re on a advisory which is like the softer language of a shutdown and it basically meant stores.
That were previously allowed to be at 50% maximum occupancy or now a 25% so they haven’t closed them but they’ve more severely constrained the traffic that’s allowed in.
Scot:
[18:19] Yes that’s one news item and then,
several folks have reported to us drop buying products directly from Apple that most of those products are showing a inability to get anything by Christmas and this is before Thanksgiving started so.
If anyone in your you know if any of your holiday gifts are going to be of the apple variety you need to really look at that closely and then,
um I’ve had I had this exact same situation and I found you can go to Best Buy and some of the other kind of apple Outlets if you will and they,
they have little bit more inventory than Apple interestingly enough.
[18:59] And then friend of the show Erik Heller he saw an Amazon van and this is kind of part of this DSP Network I don’t think Amazon directly to this but it was clearly a UPS van that had been painted with the Amazon Prime on it so,
so I think a very clever Amazon DSP partner,
you know there’s this problem that new Vans are just all spoken for for for six months and I know this from my day job,
and so people are going out and finding anything they can so there’s the used market for delivery vehicles these are things that are like.
[19:33] 10 to 20 years old at this point there are basically taking anything you know that runs imagine someday we’ll see,
some old yellow school buses painted with prime paint and stuff with packages and they’re putting them out into the fleet I’ve little Battlestar Galactica kind of a fleet that that’s going on out there.
And in addition to that I’m getting a lot of interesting pictures of what I would call Super janky vans that,
that are being used to deliver packages now so yeah I saw one that was looked like it had been maybe in Beirut and it had like as part of the FedEx ground which is a 1099 Network kind of like the DSP program,
and then add like the tiniest of FedEx stickers on it is really funny it was like a nine by nine square it was like FedEx Ground in this like sea of denser along the side of the packet the truck so.
That is the ship again news did you see anything else that was interesting.
Jason:
[20:31] No I think you you covered most of it it just a reminder that,
this is by far the most acute version of the van problem member but they’re like a version of that plays out every holiday,
um you know FedEx and UPS maybe aren’t trying to acquire a ton of new Vans but they would like to have more Vans available so they go out and rent a bunch of vans.
And then we end up with this porch piracy problem.
People see like an unmarked rental van like pull up and some you know none uniform Guy come out with a bunch of packages and they often it’s a legit.
Delivery person and they get reported to the police as a potential porch pirate so I imagine all these Jinky Vans are going to make that even more cute.
And then I just want to plug this one side note in my market here in Chicago Amazon key for business has been going door-to-door to all the buildings,
and they’re offering to install like the secure access system so my I live in a little 12 unit Condo building and we just installed the Amazon key so now all the Amazon drivers.
Can open my front door without without having to call us on the call box and drop our packages off.
Scot:
[21:45] The front door to your interior door or the building door.
Jason:
[21:49] Building doors so they get in they can now get access to our mail room to drop off packages.
Which is interesting because Amazon can do it and it’s all Wireless and it’s it’s access controlled so they can only deliver.
You know during appropriate hours and and there’s a log but like FedEx and UPS can’t do that.
Scot:
[22:18] Yeah and then I know you’re on pins and needles to jump into this there was a data drop that you want to tell listeners about.
Jason:
[22:26] Yeah it’s a datapalooza week I’ve been super excited.
So this is a fun week for me on Tuesday of this week the US Department of Commerce the US Census Bureau.
Drops their monthly retail sales data so we got that data on Tuesday and then once a quarter every three months,
they drop this supplemental e-commerce report so on Thursday we got the Q3 supplemental e-commerce report.
So both of those.
Are kind of fun and in general and in particular in covid times when things are changing so much it’s super interesting to get fresh data about what’s going on in our Marketplace.
Scot:
[23:11] Yeah and if listeners are interested we had a full show on this the episode
so number escapes me while you’re talking I’ll get one of the interns to work on it but but yeah so I always kind of because I don’t live in this data like you do I always have to go refresh myself but but walk us through
that data and what was exciting.
Jason:
[23:31] Yep so first of all that was episode 239 which was back in the beginning of October that we had to Paul and Scott on from the US Census Bureau to talk about how they prepare this data and kind of,
talk about some best practices and how to use it,
um so the first data set to come out is the monthly data and in basically every retailer in America fills out the surveys.
And what they sold in a given month in the US Census Bureau Aggregates it all up and so you know about 19 days into November or 17 days in November we find out what sales were like in October.
So retail sales in October where up.
Eight point five percent year-over-year so that means.
October 20 20 in the middle of covid we sold 8.5% more stuff than we did October 2019 which is very healthy.
Like that cat.
Scot:
[24:32] Pretty crazy like last year we were going like everyone was excited like 3% Yeehaw it’s crazy crazy Tom.
Jason:
[24:40] Exactly and so we can get into in a second into why retail sales are so up there’s some good reasons for that covid is.
Stop spending in some non-retail categories and it’s actually shifted that spending into retail categories so,
you used to go to restaurants which are not retailgeek,
and instead you’re going to grocery stores now which is retail and you used to fly in airplanes and stay in hotels which is not retail and instead you’re buying stuff to fix up your house which is retailgeek.
Scot:
[25:13] Some would say it if you charted it looks kind of like a v-shaped recovery.
Jason:
[25:18] Yeah in West you look at all the categories in that V and those people would now say as a w-shaped recovery for the record because it’s.
Like probably because of covered right now it’s going the wrong way so we’re probably going to get two v’s right next to each other but that that aside the so eight point eight point five percent,
year of your growth is awesome again you could take categories out of that there’s a category in that that’s called non store sales which is kind of our proxy for e-commerce,
it was up 29% so almost thirty percent which is interesting,
if you pull some of the categories out that aren’t traditionally very e-commerce e like if you pull auto and gas out of the retail number then you’re over your sales were even up better they were up like 10.8%,
um so,
so Healthy Growth interestingly a lot of the reporting on the data was negative because what they mostly looked at is the change in sales from September to October,
and the growth from September to October was very modest it was 0.3%.
[26:34] And so a lot of people interpreted that as,
kind of the recovery petering out and Scott being wrong and it not being v-shaped but In fairness to Scott I’m going to say.
I don’t actually care about month-to-month growth because,
every month has a different set of shopping intense attached to it and it’s,
it’s just like the month-to-month changes just aren’t traditionally that linear and they change every year depending on the number of days,
um you know weekend days versus weekdays and all these other factors so I just in general I care a lot more about seeing Healthy year-over-year Growth than I do the month to month growth but the people that worked at the month-to-month growth were like oh,
things are slowing down.
Scot:
[27:27] Got it yeah you’re over yours Waco.
Jason:
[27:30] Yeah and so yeah and so in general if you then break it down into categories there were category like building materials is up 20 percent from the same month last year.
E-commerce I mentioned was up 29%.
What else is a big cars or up big like 11%.
Scot:
[27:55] Yeah the Auto industry is on fire right now.
Jason:
[27:59] Yeah well yeah dip their two sides of the audio and Industry that you would know better than me right like the guy selling vehicles are doing great the guy selling gas are not doing well.
Scot:
[28:08] People are buying cars and then promptly not driving them which doesn’t make a ton of sense.
Jason:
[28:13] Exactly.
Scot:
[28:14] I need a new car that I’m not going to drive.
Jason:
[28:16] Yeah and then grocery is up like 10% so those are the categories that had like like frankly like huge tail winds from,
from covid you didn’t go on a vacation and you got a stimulus check so you bought that new car and you’re thinking your your vacation this year is going to be a car trip right so you bought that new car,
you’re not going to restaurant so you’re buying more groceries you’re you know you’re not traveling as much so you improve your house right so those categories were the big head winds and then exactly as you would expect,
there’s a categories that were big losers gas is down 14% people aren’t driving to work right apparel is down thirteen percent you know people aren’t wearing as much clothes department stores are down 12%,
and restaurants are down 15% so,
that that’s kind of how the the monthly data played out and I would say these were all trends that we saw in September and they continued through to October and so I didn’t see any like.
Dramatic changes of Direction this was this is all pretty what we would expect at this.
Scot:
[29:27] Yeah and what I peeked at the data one thing that jumped at me is it looked like,
you know the pork kind of fashion industry is just taking it on the chin and it seems like it’s getting worse is that is that your read on it like it’s decelerating even more.
Jason:
[29:44] Well so yeah it depends on how you worked it got really decelerated early in covid when people weren’t going to stores and going to malls,
and then it started to recover a little bit like there is a hypothesis that like.
You might need some warmer clothes even if you’re not going anywhere and one more clothes are more expensive than summer clothes and so like,
in general you want you expect to see a little bit of a lift in Winter I don’t think we’ve seen a lot of that and it’s just this triple whammy like apparel had a bunch of head winds before covid-19,
there’s they have more head wins in covid and the majority of places where people buy clothes separately have a bunch of head winds from covid so it’s a.
Triple whammy against the apparel industry and and I would say just in general,
ten years ago you spent six percent of your income on close today you spend three percent of your income on clothes so it’s just like there’s no there’s no good news in the apparel space.
Scot:
[30:47] Yeah so I’m an e-commerce guy and I like the simple version of this so this data said and Q2 Commerce group 45%,
this data drop isn’t the one that really pinpoints e-commerce right that’s the one.
Jason:
[31:02] Two days later we had that one drop right so last quarter exactly you said 45% e-commerce growth and so this quarter was lower it was 36% e-commerce growth 36.7%.
Scot:
[31:16] Okay so that has dropped okay yeah so the non-store being 29 isn’t just e-commerce they do this other drop that just e-commerce and that was higher than that 29.
Jason:
[31:25] Exactly exactly and and the that 2019 was a monthly number the the 36.7 percent is a quarterly number.
Scot:
[31:34] Okay good alright.
And then but that’s interesting because Amazon came in at 37% but that’s,
total Amazon North America was 39 and then if you took out physical stores which I think is the best comp they were at like 40 percent.
Q3
Jason:
[31:57] Close to this 37% right like so they they tracked last quarter so Amazon last quarter was 43 percent and the industry average was for the quarter was 45%,
this quarter Amazon’s 39 percent in the US and the 44 your point if you want to take out the stores and the industry average is 37 so they’re there,
they’re right in line and not shockingly Amazon is a reasonable.
Surrogate for this quarterly data now another thing you get to see in the quarterly data is what percentage of all retail e-commerce is.
And so last quarter to two retail was like e-commerce was like sixteen percent of all retail including all the categories that.
The US Census Bureau includes in retail which does include like gas and restaurants,
I’m sorry not restaurants but it does include gas in cars so so last quarter was sixteen percent of all sales this quarter it’s dropped down to fourteen percent of all sales so what.
This is totally intuitive but what could have happened is for part of Q2 brick-and-mortar retail was closed or less accessible and so e-commerce was the only alternative right so as we moved into Q3.
[33:11] People are continuing to lean on e-commerce e-commerce is still super important it’s the fastest-growing way for people to shop and new people that learned how to shop that way are continuing to use it but.
People do have better access to brick-and-mortar stores in Q2 and so in Q3 than they did in Q2 and so the brick-and-mortar sales came back a little bit more which means the ratio of e-commerce to Brick and Mortar drop down a little bit.
[33:39] Does that make sense and that’s also frankly why I mean 29 percent is or I’m sorry 36 percent is still unprecedented growth white compared to a normal year.
Yeah but so the reason it didn’t grow quite as big as because you didn’t have this you know hey all the clothing stores are closed and I need socks.
Scot:
[33:58] So one way to read this is if we kind of draw a line from Q2 at 45% and now we have Q3 at 36 percent you could say Q4 continue to decelerate be like you know low 30s right
or you know I guess what I’ve been thinking is we’re going to see a pickup again where it’s going to kind of.
I think the more likely scenario is it will stay at this elevated kind of high 30s and there’s a chance it could go up into the 40’s like we saw you too especially if we have this covid situation and I’m specifically talking e-commerce here.
Does that do you agree with that or did you come to a different conclusion now you’ve seen the data.
Jason:
[34:38] It’s hard because I’ll call it like the five-factor model right like so if Q4 was just another quarter like you’d probably predict like a linear Trend here and so the rate of growth would probably slowed a little bit more,
um but Q4 isn’t a normal quarter it’s a quarter that has accelerated consumption overall and accelerated spending and so in a world win a disproportionately high percentage of that spending is online that should actually.
Accelerate the rate of e-commerce right so that’s that you know the second Factor the third factor is that the.
The.
Fourth quarter like was already an uncharacteristically high quarter for e-commerce why people have already learned a shop online more for gifts than they do for their day-to-day needs,
so that would it’s hard to grow from the bigger number so the fact that Q4 is the biggest number of last year means the rate should slow down a little bit and then we have the ship again in factors like,
do retailers have enough inventory do they have enough shipping capacity so you kind of apply all,
you know some some estimate for all five of those things and like I think we’re going to end it a super healthy number I kind of put that 33% out there is like where we’ll probably land so that’s,
so I D celebration from this quarter but still you know very healthy by historic standards.
Scot:
[36:01] Yeah cool and then there’s also so on top of this data there was a plethora of folks we covered Amazon and really dive here but we we’ve had a good more than a handful of retailers
push out their results what were some of the highlights you saw there.
Jason:
[36:19] Yeah so yeah it was a good week for earnings so Cole’s announced this week in their comps are down,
it’s so funny how Wall Street works by the way right like so cold like Cole cells apparel apparel sucks their comps were down 13 percent but because the expectation was that they would do even worse that was actually favorable to their stock right,
e-commerce for Cole’s was up 25% which compared to all the other categories we’re talking about isn’t that healthy but for Cole’s where e-commerce has been a challenge for a variety of reasons like that’s pretty Healthy Growth,
it’s a dramatic deceleration like coals had 45% e-commerce growth in Q2 they’re having 25% e-commerce growth in in Q3,
and so that’s interesting right.
The next retailer that announce earnings this week was Walgreens and they announce earnings before this Amazon news by the way so I don’t think this Amazon news head.
[37:19] I mean I didn’t have any impact on their earnings so their us comps were up three percent I think they’re Global comps their their their parent company owns boots and UK
I think overall complement of actually been down so I’ll your flat but us comps were up three percent which is kind of traditional grown on covid growth,
e-commerce was up 39 percent and what’s interesting and Walgreens was a little bit of an outlier their e-commerce was up 39 percent in in Q3,
30 commerce was only up 23% in Q2 so they’re one of the few companies we’re going to be talking about today.
Who’s e-commerce is actually accelerating which of course bucks the industry trend.
Scot:
[38:02] Yeah I wonder why.
Jason:
[38:04] Yeah I don’t know the real answer part of it could be that none of these companies were.
Awesome and e-commerce before covid and so you could imagine that like hey as they suddenly had a lot more demand for e-commerce they scrambled.
Improve their e-commerce amenities and stabilize their site and do all these things and that they got better operationally in Q3 but I don’t know if that’s actually true.
Scot:
[38:31] Yeah or they rolled out curbside and that gave him an attribution her.
Jason:
[38:34] They for sure did roll out curbside in the middle of all this yes.
Scot:
[38:37] Yeah yeah that helps yeah or speaking from anecdotal evidence they now have hand sanitizer so maybe that drove it.
Jason:
[38:46] Anybody that has hand sanitizer you would totally want to to be betting on right now,
so that the next two people that do earnings where the do-it-yourself stores Lowe’s and Home Depot and reminder they’re one of the huge winners in covid people people are spending way more money on their home as a result of covid-19,
and solos comps were up 30 percent which is nosebleed like that’s amazing.
Why do you spend your whole career in retail and you never have a 30% like comp for the entire network that’s crazy their e-commerce was up a hundred and six percent.
E-commerce is very significant is the stores but as a percentage of total sales it tends to be kind of below because they sell a lot of items that aren’t that convenient to ship.
So as curbside picks up like e-commerce gets unlocked for a lot of these guys but hundred 6% is way above the industry average and then to compare that and cute,
to Lowe’s was 135 right so they had a huge e-commerce quarter last quarter and there.
They had another big one but their rate of acceleration has grown but man a lot of people walked in the store and spent a lot of money.
[40:04] And then Home Depot also like very impressive like just doesn’t smell quite as good as well as their us comps were up 24-point 16% which again is amazing,
unless your your direct competitors up 30 their e-commerce for the quarter was up 80%.
I’m trying to remember they were a hundred percent last quarter so same same kind of story they went down from a hundred percent Q2 e-commerce to 80 percent growth Q3 e-commerce,
and then they also announced which I like to keep keep an eye on 60% of other e-commerce got fulfilled from the store so either it was a store pickup or they ship the products direct from a store.
[40:47] So that’s the do-it-yourself guys and then the last guys are too big General Merchants Target and Walmart both announced this week,
and let’s do Walmart first Walmart had,
very good comps on a very big number right so there comes where 6.4 percent which doesn’t sound as impressive as the home-improvement companies.
[41:10] You know if you consider the Walmart is the largest retailer in the world like growing 6.4% is.
Ginormous we meaningful to Walmart,
their Q3 e-commerce was up 79 percent versus they were up 97 percent for Q2.
So so though that was widely considered like super solid numbers across the board and well above expectations for Walmart so they had a good.
Good earnings call Walmart owns a separate retailer Sam’s Club which also had good comps they were their comps were up 11.1%.
They’re the club e-commerce isn’t quite as big a deal so Club e-commerce for Sam’s was up 41%,
and Sam’s announced that they had 10% membership growth as these club guys are all membership-based so 10.4% membership growth so so both Walmart and Sam’s Clubs did well,
the what’s interesting though is.
Hard yet which is much more than Walmart but you know probably the most direct analogous competitor to Walmart,
and Target like in my mind may have the most phenomenal performance of all these companies so their comp growth was 20.7%.
[42:32] Which for a general Merchant with as big as they are that 20.7% is huge,
they’re they’re digital drums was a hundred and fifty five percent which is way down from last quarter’s a hundred and ninety-five percent right so so but unlike where we were talking about these big numbers in the Home Improvement guys,
Target is one of the biggest e-commerce sites in the US so the fact that they’re like growing at this pace is super impressive and of course.
[43:05] Target is excellent at Boba so they own the shipped vendor and they a lot of their e-commerce is,
same day at stores so they’re they’re same day delivery sales were up to hundred and Seventeen percent so people are,
totally taking advantage of those amenities,
and in to me this is an inside baseball step but it’s one of the most eye-popping things of all 95% of all of targets orders are fulfilled from stores so target has amazingly said,
we’re not going to build a network of fulfillment centers and have all this fragmented inventory and,
rely on FedEx to get our stuff to you we’re mostly going to sell our store assortment to people and make it really easy to come and get it or will drive it to your house as a last mile solution and that’s working phenomenally well for.
[44:10] Yeah you do like after this year probably want to retire those places because you probably don’t want to be comping against all this the I will also say just some interesting like inside stats and Target.
[44:23] I’ve seen similar stats in the past from Walmart but so targets ticket went up pretty considerably like the average orders up 15.6 percent.
[44:33] Which means that traffic was only up 4.5% right so,
like people are going to the store less and they’re buying more when they go to the store like Walmart version of that’s even more extreme like their traffic might actually be down in their average ticket might be even higher,
so Walmart and Target are beneficiaries of this right and for a variety of reasons,
um at the moment you want to be a retailer that sells a lot of different stuff because if consumers want to visit fewer stores they’re going to go to the stores that have all the stuff they want right so,
Target and Walmart win on assortment you for sure want to have essential good so that you’re not forced to close at any point when the covid spikes and Target and Walmart both.
Both meet that criteria and for a variety of reasons
you want to be a big company with a robust supply chain and leverage over vendors so that you can get products on your shelf to be able to sell,
and so covid is disproportionately benefiting big healthy chains over small independent retailers and Target and Walmart are both big healthy chains so,
that’s that’s basically what’s happening in unrelated news that I totally don’t understand but I’ll just mention it while we’re talking about Target Target also announced that they’re cancelling their subscription program which totally surprised me.
[45:55] Because like subscribe and save it at Amazon is a very successful very important program and it’s a bunch of vendors toy lean into it there’s a lot of reasons to say that consumers,
are really interested in these auto-replenishment Solutions like subscriptions,
and so you know you’re seeing a lot of retailers that don’t have robust subscription programs trying to add them,
Target canceled there’s and what they said was,
customers like our same-day pick up so much that what’s happening is they they don’t want to be on auto-replenishment they just want to know that like as soon as they realize they need something they can get in an hour with home delivery or store pickup.
And so.
I believe Target’s good at one-hour delivery through these same day Services I totally get that and I get like that therefore,
their utilization of subscription might be less than some other retailers but I just I would have imagined there was still a loyal cohort that preferred subscription,
and and didn’t you know it just surprised me that they had something they turned off I guess.
Scot:
[47:04] Yeah well maybe yeah they listened to our customers got it.
Jason:
[47:08] Yeah yeah I mean I trust that they know what they’re doing and their results kind of speak for themselves so that it I just found it interesting so that was kind of the,
the stick on earning so that was a ton of super exciting stuff I did see just a couple other little news news bits.
Scot:
[47:27] It does always make me scratch my head though because you know all those were significantly greater well there’s this attribution problem but I think I think the attributions about the same if I remember,
the the guys so if all these guys were a hundred percent Amazon grew in line who grew is zero or negative I guess you have like JC pinions here’s like the.
Jason:
[47:49] So you notice there were no in this hat week there happened to be no department stores that reported right and so all those department stores are going to be soft,
there was one apparel retailer it was Kohl’s and they were significantly negative right but if this had been an earnings week where we had 20 apparel retailers.
White might you know you you would have expected all or the vast majority of them to have negative comps right,
so we do have Gap I think is coming up next week like that will be an interesting one to watch from an apparel standpoint,
we also have a Best Buy and dicks and they’re going to be more interesting to me because I can like I’m sure the expectation is the gaps going to have pretty severe e- comps,
Best Buy and dicks are boat like so sporting good stores are kind of another beneficiary of covid so you’d expect them to have really good cop.
And slightly surprisingly.
Electronics has been mostly like a minor beneficiary of covid so it’s been a bump but not a very big one.
Scot:
[48:57] Yeah so a couple of things so we’ve got some new iPhones so that could surprise us and then the gaming consoles I don’t know if you track this but the the new Xbox and the PlayStation are sold out everywhere and there’s a,
just unmitigated frenzy for those unlike I don’t think I can remember,
maybe when the we came out it was like this but I haven’t seen quite such a frenzy for those two units as we’re seeing right now so the problem is no one has them so so I don’t know if they’re going to be able to be in your your.
Jason:
[49:28] Well that’s like I’m assuming they wouldn’t be in Q3 comps anyway I’m assuming like they’re like even if you did it took a pre-order in Q3 I don’t think you recognize the revenue until you can fulfill it.
Scot:
[49:38] Yeah iPhone Pro was right 12 Pro 12 and.
Jason:
[49:41] Some a subset of the Apple stuff started to be in Q3 but the bulk of its going to be in Q4,
the the video game platforms are going to be in Q4 I totally agree I like there’s a lot more Tailwind e stuff for consumer electronics and Q4 just like,
there was a lot of tail in windy stuff for electronics in the very beginning of Q2 like when you first went home.
Everybody upgraded their home office right so everyone bought a monitor and they bought a laptop for their kid to do school at home and you know so there was this covid Spike for electronics it just wasn’t sustained you didn’t you just
you didn’t keep buying new electronics over the last six months and for your point.
There’s going to be a lot of people like you know treating themselves Q4 and so you know I it won’t surprise me at all if,
if Best Buy has a good Q4 but I’m kind of not expecting them to have a very spectacular Q3 but I’m not a stock analyst so we’ll see.
Scot:
[50:40] Yeah be interesting to keep an eye on it.
Jason:
[50:44] Yeah and then any of that surprised you Scott or do you feel like.
Scot:
[50:51] These numbers are just like so high it makes me a little suspicious like yeah I think so I think Walmart continues to benefit from grocery Target doesn’t sell that much grocery do they.
Jason:
[51:03] They’re leaning pretty heavily in the grocery and so it’s they’re not as good at grocery as Walmart but it’s a much more meaningful part then it was even six months ago.
Scot:
[51:12] Yeah I wish we could peer inside of there and like you know kind of like the department of the Census Bureau level of category data I think what we would find is it’s kind of interesting but.
Jason:
[51:22] And so I should say one side no non-target well they are selling a lot of grocery and they’ve dramatically improved their merchandising and offering and grocery what they haven’t had until just now is,
e-commerce for grocery so all that curbside pickup and same-day stuff it has not has been for general merchandise not fresh,
and like I think only as of like four weeks ago or they now starting to really sell fresh through that stuff so I suspect that will be another,
another bump for them when they get that up to scale.
Scot:
[51:54] Yeah it’s going to be interesting to watch The Apparel guys I think that’s where we’re going to see the big loss is coming from and you know I think they’re they’re suffering and we’ll see how that doesn’t further closings are not going to do well for me.
Jason:
[52:07] No I agree I think the department store guys in the apparel guys it’s going to be pretty rough.
And then like just to slight news Tibbetts I’ll just throw out there for those of you that want to go read up on your own the I just thought interest were interesting one of the trends I talk a lot about is,
um Brands going direct so you know major well-known Brands going direct to Consumer we’ve talked about PepsiCo has a direct to Consumer site,
so fun fact there it seems like they’ve refreshed that site so snacks.com,
seems like it has a lot of new content but the new one this week is Coors Molson,
launch the direct-to-consumer site and nobody would have had that on their bingo card right like delivering alcohol like a major Brewery delivering alcohol to home,
why is a pretty interesting pilot that I hadn’t heard a lot of people talking about now it’s in UK it’s called the Revel I don’t know a ton about it but that I just that was an interesting thing that I have on my.
[53:13] My notes to learn more about and then obviously I follow digital grocery a lot it’s super important Trend in this whole covid thing ahold,
just bought fresh direct which is a native digital Grocer in New York and it’s super interesting to me because,
Fresh Direct is a hold in very high regard their their small grocer that was born digital I would argue they have a much
more mature Richard digital grocery shopping experience than almost anyone in the u.s. because they’ve been doing it better and longer but they’re their promise scale like they,
don’t serve a lot of customers you know they’re in there in one geography,
a hold is a much larger Global grocer but has kind of a modest footprint of stores in the US until recently a whole don’t.
[54:05] Like the best fresh direct competitor which would have been Peapod here in Chicago and so what’s what’s odd to me is like the month before covid ahold got divested themselves shutdown Peapod.
Which was bad timing,
but and now you know fast forward six months they’re buying something that looks like a better version of Peapod although smaller Market,
in infrastructure so that’s super interesting,
the one thing I’d say is I think it was a real Miss from some of the bigger more traditional Grocers they should have bought fresh direct has an echo higher because they,
you know Kroger Walmart and Target all need to learn how to sell better better groceries online.
But so that that’s interesting little acquisition in the space.
Scot:
[54:52] Yeah absolutely.
Jason:
[54:54] And Scott I feel like we finished a little early so as a Thanksgiving treat I think this is the last show we’re going to record before Thanksgiving,
I thought as a Thanksgiving treat that we might finish up a little early and give our listeners back some some free time to plan their Thanksgiving meals.
Scot:
[55:15] Yeah yeah Happy Thanksgiving everyone we are thankful for our listeners listening to the show and giving us all the feedback that we get and we really appreciate our little Community here on the Jason Scott show and hope everyone has a
safe restful and filling and filling Thanksgiving.
Jason:
[55:33] Yeah I will Echo all those sentiments I hope everyone has an awesome Thanksgiving and stay safe and until next time happy commering.
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