A weekly podcast with the latest e-commerce news and events. Episode 254 is a breakdown of Walmart and Shopify Q4 2020 earnings reports, a recap of 2020 sales data from the US Dept Commerce, and Amazon News.
2020 Sales Data
US Dept of Commerce released it’s retail data for December, which gives us a full picture of 2020, as well as the Q4 e-commerce data.
- Retail sales in 2020 were $5.6T, representing 27% of the U.S. GDP
- Retail as a whole experienced healthy growth of 3.4% versus 3.5% in 2019
- E-commerce grew 32% to $792B in sales, vs 15% growth in 2019
- E-commerce was 14% of all retail sales (vs 11% in 2019)
- Jason wrote a detailed recap of 2020 in Forbes:
2020: Not Quite Retail Apocalypse, But Great For E-Commerce
- US Q4 comp sales grew 8.6% eCommerce sales grew 69%
- FY revenue was $559.2 billion, comp sales increased 8.6%, E-Commerce sales grew 79%
- Fourth-Quarter Revenue Grows 94% on GMV Growth of 99%
- Full-Year 2020 Revenue Grows 86% on GMV Growth of 96%
- FY Subscription Solutions revenue grew 41% to $908.8 million,
- FY Merchant Solutions revenue grew 116% to $2B
- Shopify Expands Its Checkout System to Facebook and Instagram
Episode 254 of the Jason & Scot show was recorded live on Thursday, February 19th, 2021.
[0:24] Welcome to the Jason and Scott show this is episode 254 being recorded on Thursday February 18th 2021
I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
[0:40] Hey Jason and welcome back Jason Scott sir listeners will Jason today is a big day for science nerds we saw the perseverance Rover landed on Mars with an interplanetary helicopter how cool is that.
[0:55] That is the coolest part I was super excited I actually put a note on my calendar and stop working and watch The Landing it’s pretty amazing.
[1:04] Yeah I didn’t watch it how much could you see.
[1:07] Um well they had like a pretty detailed animation for the whole thing like like you you know they don’t have cameras of the Rover in the air but they but they,
they show like a 3D animation of it you know as a checks through all these detailed milestones and then pretty quickly after they confirmed it had touchdown you got the first.
Actual photo from from the Rover and there was still like dust everywhere from The Landing so it’s.
It’s pretty amazing to think that like we can launch shoot a drone 250 million miles away and landed on a planet that’s like yeah.
[1:45] Yes soon elon’s can be landing people there.
[1:48] Yeah yeah I know he’s close on their heels my favorite part though was the news guy like after they did their whole recap he’s like um and I feel compelled to remind people this actually is rocket science.
[2:04] Yeah yeah so it’s very cool I feel like I remember some of our very first podcast we’re like early in you know as SpaceX was knocking off all these milestones and we were we were talking about those a lot at the beginning of podcasts and.
Five years later we’re still doing it.
[2:20] Yeah now every other day they’re shooting off a mission it’s it SpaceX is pretty pretty amazing.
[2:25] Yeah yeah that’s that’s become totally routine I don’t know you watch Westworld right.
There’s actually scenes in Westworld we’re like just in the background they have SpaceX Style Rocket so I glanced because it’s so rude to you know they Envision it being so routine this cute.
[2:43] Yeah very cool but even bigger than that I know one of your favorite days of the year is when the US Department data of Commerce data comes out so yesterday I’m sure you were,
up and ready and you had all your Tableau and your data scientist lined up walk us through some of the data that came out yesterday.
[3:02] Yeah you I wish I could deny it but I kind of am super excited to get up on the mornings when this data comes out because I as you’re as you’re mocking me I did set up a bunch of automation over.
Over the winter break and now I get to use it and knock on wood two months in a row it hasn’t broken.
[3:20] You wouldn’t be retailgeek if you didn’t you can’t be a science geek can’t be space Kiki and me tell you you gotta gotta pick a lane.
[3:26] I have to keep my creds so what came out yesterday is a reminder for our listeners.
The January Advanced monthly sales data so this is a.
A simpler set snapshot of what happened in January and then we got the full data set for December and so the reason that that’s particularly exciting is that now let’s us roll up.
The complete 20 20 year and kind of work back to the whole year so so we got our first advance to look at what January is going to look like,
we got a detailed look at at December in the whole year for 2020 and then there is another data product that comes out quarterly that’s the e-commerce specific slice
and that actually comes out tomorrow morning but based on all the data we already have I’m pretty confident I already know what it’s going to say so we’ll talk a little bit about it.
Um but so let’s start with January.
And it’s interesting because my take on January was different than a lot of the media coverage in January so so Top Line.
Year over year this January sales were up 10.8% versus last year so that’s a that’s very healthy increase.
[4:48] The the one of the sectors in that data is non-store data which is kind of a.
The closest thing in the Advanced Data we have to 2,
e-commerce and that was up 28.7% so so if you look at this January versus last January very robust again last January wasn’t impacted by covid and anyway so we’re comparing a.
You know post covid with pretty covid.
[5:17] But what what got a lot of media attention was the that the January sales were 5.1% bigger than December so not year-over-year month over month,
and the reason people are excited about that is because.
[5:34] December sales were lower than November’s and November’s were lower than October so you kind of had two months of negative growth looking on a month-by-month basis and so this this 5.1%,
increase kind of reverse that monthly Trend and a lot of the analysts had predicted that we might grow 1.2% and so.
5.1% was a pretty big beat.
And so people were kind of giddy about that like oh it looks like we’re we’re coming out of the doldrums a little bit,
and you know one of the big reasons is there were some economic stimulus that went out early in January and almost all the retailers I work with like.
You can see to the day when customers start getting that that stimulus it’s a very obvious Spike and so that helped help January for a bunch of retailers but I would also point out this month over month data.
[6:30] Is not that important or valid and there’s a bunch of systemic reasons why months aren’t the same and Retail has a bunch of tent poles so I generally am a lot more interested from a trend standpoint in the year over year and,
year of a year it was a January with a stellar month but I will say there were a couple outliers in this January data,
department stores were up 23.5 percent from December so month-over-month,
department stores had their first increase in about 15 years and clothing which would has been decimated the last year was up five percent,
um but again to me.
[7:14] Month-over-month trans aren’t very relevant and especially in the middle of a holiday period and.
If you if you look at the year-over-year trends both those categories were still down from last January so department stores are down three percent from last January,
and clothing was down 11% from from last January both of those are,
slower rates of decline than we saw for most of last year so it’s it is a silver lining but you still wouldn’t want to be in either of those categories.
[7:45] If we just forget retail sales you know the headlines I saw on the financial sites were you know stunning retail sales 5.1 percent versus 1.2 estimate like why was why was that estimate so off.
[7:59] Yeah so I don’t I don’t know what goes into to the.
[8:03] Who made this the Department of Commerce doesn’t make it.
[8:06] No it’s not and and further it’s not like as rigorous as like stock public company earning CPS estimates for example like I don’t think there’s a.
Like an industry-standard estimate what what you do have you know again think about this December had a weird or shape than ever before it was way more e-commerce n trick.
December and all of those sales were front-loaded in the first half of the month because of ship again and the second half of the month so you so December was,
in you know large part was half a month and so January was a full month with economic stimulus,
dollars versus December and you also had all these like you know covid reasons that sales were slow and December right.
The cases were peeking people weren’t traveling with their family etc etc so for all of those reasons it’s not surprising to me at all that,
January was way better than December but to me a more valid you know perspective is what was this January versus last January because that’s more apples to apples.
[9:17] Um but I’ll be honest I’m was more interested in in looking at the 2020 data in aggregate because you know this was a.
A very unique year and it’s interesting to see how it played out you and I had all these debates early in the year,
is it a v-shaped recovery you know what would happen all these things you know people in April were writing these doomsday predictions about how far down retail was going to be in 2020 and,
and things like that so it’s interesting to see the real data,
so for all of 20 20 retail sold five point six trillion dollars in sales which is an all-time record by the way like that’s the the,
the highest retail sales in the US have ever been that’s twenty-seven percent of the GDP which is a little bigger share than it normally is it normally is around 25 percent of GDP is retailgeek,
so that’s huge GDP to go down this year I think people expected that because of covid.
[10:15] So that growth rate is three point four percent so retail grew at 3.4 percent.
And you could say hey Jason is 3.14 percent good,
well 2019 retailgeek rude 3.5% so it’s pretty typical it’s right like we normally years we expect to be in that three to four percent range when we fall below 3 we call it a down here and,
you know we haven’t seen very many years in recent history that were above for so.
So it’s right in The Sweet Spot of typical growth that you would expect if there was no covid-19.
Which is super interesting to me so you know but there’s a bunch of micro Trends in that Top Line and in the biggest trend is,
that a way bigger chunk of those sales were e-commerce than usual so so e-commerce Guru 25.3% for the year.
Which a normal year for e-commerce like 2019 we grew 12.9% so so almost yeah so it’s basically two years of growth in a year some.
[11:25] Wait I thought it was five years of growth in a week 10 knots to noon.
[11:27] Mackenzie said 10 yeah yeah they lied.
[11:32] Well why don’t you sidebar this so that everyone is on the same page so what what happened with that so I know Mackenzie put it out and it’s somehow wrong.
[11:41] Yeah well and I.
[11:42] Did they did they blow the year-over-year aspect or what where did they.
[11:46] So they did a couple a like they were roll up of a bunch of other data sources right so they took the same US Department of Commerce data we’re talking about,
but then they took some estimates from Bank of America and and a different definition of retail from Forrester and then they they did this thing that we used to do in e-commerce all the time they said hey let’s not talk about all of retailgeek,
because nobody buys food online so grocery in restaurants shouldn’t shouldn’t be in that number,
and nobody buys cars online so let’s take cars out and let’s invent this artificial definition of core retail and call it you know growth of core retail,
So so a there’s no way to check that because there are no actual numbers for that that arbitrary definition but I’m sure I’m sure if someone from Mackenzie won on the show right now they’d be saying hey Jason it was higher than your.
But I would also point out that the biggest growth in e-commerce were all those things that they took out right like tons of people were buying buying food online tons of people were buying cars online so I feel like those old.
Those old things of saying like hey there’s some categories of retail that don’t qualify for e-commerce has is no longer valid.
[13:05] But if we use this nice normalized data from US Department of Commerce we grew 25% normally years thirteen percent so that.
Is is awesome.
If you if you kind of think about the shape of the year last year 12.9% April peaked at 18.4% and then we finished the year at 15.7% right so.
But in terms of what percentage of retail the.
Is e-commerce so it never spiked up to the 33% that Mackenzie predicted in there 10 years of progress,
but there are certain categories which probably did have have five or ten years grocery probably it you know did hit our five-year forecast.
Overall e-commerce hit like our two-year forecast so it was a doubling not a 10 Xing.
[14:00] And for sure in that those retail sales you had clear winners and losers we’ve talked about this on a bunch of shows but.
The you know if you were a grocery store or a sporting good store or home hardware store you had a great year because of covid and if you were department store or an apparel store or gas station,
you had a really crappy your,
because of covid and one of the biggest Trends is this whole shift from services to products right so nobody spent money on travel and instead they bought.
Furniture and stuff for their house and mostly nobody went to restaurants and instead they bought more food from grocery stores and so those that Trend had the effect of pouring extra dollars.
Into retail and for sure it goosed e-commerce in those categories.
If you if you think specifically around food 2019 food was a 50/50 split between restaurants and grocery stores,
at the peak of covid it was like 70/30 that we were spending on on Grocery and ended up about 60/40.
So that’s an extra 200 billion dollars hundred ninety billion dollars in grocery store sales as a result of people going to restaurants OS.
[15:21] Restaurant as a whole industry were way down we’ve talked about that a lot but.
Full service restaurants in particular we’re totally creamed they were down like 92% so the whole end restaurant industry was down 15% because,
you know the Pizza Hut’s of the world and the the McDonald’s of the world like could actually do pretty well with drive-through and home delivery,
um but the full-service sit-down restaurants just got obliterated.
[15:48] And then the last thing that I will tell you I still haven’t totally figured out in surprise me is if you said hey Jason based on all those trends.
Would home furnishing stores be winners or losers and covid I would have said oh man there are a winner because instead of going on vacation I remodeled my house and I bought new dishes and new sheets and I did all these things from,
from William Sonoma and you know Lamps Plus and all those stores and I would have also said that because we were stuck at home and there was a new video game launched that electronic stores would have been way up.
And two categories that were down for the year we’re home furnishings and electronics which is interesting to me in a little surprising.
[16:32] Risk is a Wayfarer has really picked up nicely.
[16:36] Yeah there are there by in Best Buy would say they were up right so so where’s the electronics that’s down to offset best by being up,
and William Sonoma was up so what’s the home furnishings that’s down to offset that I,
it’s a little confusing to me in the overall scheme of things these are not categories that are huge numbers so you know.
There you know it would it’s totally possible for those numbers to be skewed or maybe even like not have a huge sample size in the US Department of Commerce survey data.
[17:13] And there could be Folks at only have physical stores that you know were not essential that haven’t opened yet solar something that don’t have e-commerce.
[17:20] Yeah yeah I’m certain that that is a big big part of it is they were more disrupted.
[17:26] Person will call anything else so a second I tie that back to the Amazon numbers but were there any how do we so if we think about that.
You know that I guess it was 25% so the growth the e-commerce growth ends up being what again.
[17:45] That’s the grass okay yeah so I think that is a new Baseline Amazon grew like 40 and change right like 46 47 oh that’s just cute for number your that’s a 25 as an annual number it.
[17:57] Yeah but if you if you think Amazon grew 43-39 40 so you could you know call it 40 41 percent.
[18:07] Yep so they over indexed eBay was a little bit under and then we’ll talk about Shopify a little bit but they were way over that.
Do if Walmart was over so it’s one of these things where everyone was over except eBay again how is that possible.
[18:26] Yeah the math generally doesn’t work out right like I so the answer is I don’t know like for the last two quarters Q2 and Q3,
Amazon was about exactly the same as the industry average so they they mirror this Department of Commerce data really closely cute,
Q2 Department of Commerce grew 4045 percent Amazon 43 Q3 Department of Commerce group 37 Amazon group 39 so that that.
[18:54] Correlation actually gives me confidence in the numbers to be honest.
The but almost everyone else put your point wildly outperform those you know William Sonoma was up 50%,
you know Walmart was up by Katie to a hundred percent Home Depot was up eighty to a hundred percent Target was up like a hundred and two hundred hundred fifty to two hundred percent.
BJ’s Albertsons Best Buy were well over two hundred percent so you look at all those big big companies that are up way more than the industry average in your like man a bunch of small companies.
Must have really gotten cream for this to be true,
um and I do think that is partially true I think covid-19 disproportionately hurt hurt smaller retailers,
um but it also underscores that there is not a terrific measurement methodology for this e-commerce data and the US Department of Commerce guys worked really hard to get this number accurate but there,
they’re dependent on the accuracy of these surveys that retailers fill out and send to them and I just I don’t have great confidence that retailers fill them out with,
with ultra care.
[20:06] Very cool did your automated cloud system survive all this thinking.
[20:14] It did it did it worked really well I found it really useful and I generated a bunch of what I think are reasonably attractive visualizations and so I’ll put a link in the show notes,
but I’ll publish a Forbes article tomorrow recapping all this data with some charts in case anyone wants to see him.
[20:31] Brickell cannot wait now I’m going to be all getting tomorrow waiting for that to show well Jason it would not be a Jason and Scot show without some Amazon news.
[20:55] This was a this was a weird week in that there was not very much Amazon news and in fact.
This one was really interesting so I think what happened here is there’s a start-up in Australia that has a Shopify competitor that companies called cells SEL Z.
And I I first heard about this because.
I saw conversation after I saw this one of the socials and people are like hey did Amazon by cells and what started this is the founder just kind of put a or someone put a nonchalant kind of like post.
I can remember is like on their blog or their about me page but it basically said hey we’re going to be shutting down soon or Amazon has bought us we’re not accepting new customers I think that’s what it said.
So it was really weird because it was super under the radar and then.
I posted it because I thought it was interesting I thought the conversation will have in a second list was the interesting part of it and then Del Rey Jason Del Rey Chase it down and gut verification from Amazon that it was true that they have acquired the company.
There’s a big online kerfuffle around you know some folks are saying oh it’s just a choir thing what is it.
And what I think is interesting is you know so we thought the news probably like what was it two months ago that Bezos was really engaged in Amazon and spend a lot of time thinking about what they do about Shopify.
[22:24] So but then now he’s effectively kind of kicked himself upstairs well that you know a lot of people are kind of like oh that must mean it’s not a priority but.
I don’t think that’s right.
Amazon’s watching these guys are really closely and they want to take our legs out and you know the interesting thing it’s a fun thought experiment for me to thank all right if you had Amazon’s resources and that’s the fun part of it right.
Sir so you know some someone.
[22:51] I would watch a space program oh wait.
[22:53] Amazon hires Jason Scott and they gave us a mission of like you know how do we take out you know or how do we slow the growth of Shopify or.
Um let’s say they’ve identified them as a threat which I think is a valid assumption what do you do there and so it’s really interesting and you know I think,
I think they’re going to take this pretty seriously and I think they’re going to go buy a bunch of things one school of thought would be you could.
You know you and I have talked about on the show a big Trend kind of a lot of people think the next generation of these platforms is going to be more headless so so microservices right.
So microservices would be a nice offering inside of AWS if you look at AWS they’ve got offerings for all kinds of crazy stuff from game development tons of machine learning.
Everything you can imagine now so imagine they could build a whole e-commerce stack inside of AWS that would be these microservices as an offering.
I think that’s going to be part of the strategy I think the cells company the cells company was known for making it very easy for people that had.
Started their e-commerce Adventures on marketplaces to then open a store.
And I think that’s really interesting to me because that would be another hook right so if you think about it Amazon need to disclose this down don’t they have like two million sellers is that a number I was at four and get two million us for globally.
[24:19] I think you’re that’s the order magnitude.
[24:21] Yes that’s I don’t know if that’s the exact right number and then Shopify is it like 300,000 that’s where they’re sorry yeah okay so.
So then you know.
There’s more there’s more people that could set up stores on Shopify than have and one strategy would be.
So if you have if you worked at Amazon and you had unlimited resources basically.
You don’t have to choose your strategy can just choose them all right so normally in business I’ve had to like really choose a strategy with a competitor and really go at it so
see typically you know kind of an a military strategy lingo you like go ahead on Adam like battle them feature for feature punch each other in the face kind of thing,
or you can try to outflank them and start to nibble away at the edges well if I’m if I’m in my thought experiment if I’m Amazon I do both right,
so I think this is a flanking maneuver this is kind of the all right let’s.
Let’s roll out a feature or set that says hey if you have a if you’re on the Amazon Marketplace we’re going to make it really easy for you to open a store I feel like that’s where this is going to go.
But then at the same time I think you would go right at with the microservices strategy so and I don’t think this is part of that but I think it’s you know I think at some point that’s going to be another shoe to drop in this because it just feels like
little bit obvious to me that they would do that so that was a really long intro I really wanted to hear your take on what you thought about.
[25:50] Yeah I think you’re wildly wrong and thinking about it wrong no.
[25:55] Okay that’s fair enough.
[25:56] Yeah so I think Amazon is taking Shopify super seriously I think Amazon’s a you know apex predator that that.
Doesn’t like to have any competition and I think they look really long term so I for sure think they’re they see the growth at the shopify’s of the world and say we don’t like that and need to have a response so I have.
No problem imagining that Jeff Bezos is like you know the first person in the conference room for the project Santos meetings to figure out what Amazon’s response to Shopify is and I think,
him as executive chairman not embroiled in day-to-day operations actually.
Makes it easier for him to focus on those kinds of projects so I’m toy down with all that I could easily see AWS base microservices and and super easy,
web store sales you know tied to the Amazon Marketplace being part of that answer and in fact in my annual.
[26:56] Annual predictions I think I predicted that they would have some kind of use fulfillment by Amazon 444,
you know owned web store sales as as part of the response to Shopify what I don’t think happened though is I don’t think Amazon bought seltzer.
Um for anything to do with project Santos or to have some Global answer to,
to Shopify Celta is a 35% company in Australia,
and my experience with Amazon is there one of one of the biggest not invented here egocentric technology companies around like they believe they can build.
Everything and they dissolved a Healthcare Partnership with Goldman Sachs and Berkshire Hathaway,
because those two companies were too slow so I sort of don’t think that Amazon says hey we need to compete with Shopify the way to do it is to buy the IP from these these 35 guys in Australia,
um it just it just doesn’t pencil out for me they like Jeff Bezos would put you know to Pizza team of super smart guys and they would knock it out themselves and probably are doing that right right now as we speak there’s probably a bunch of two Pizza teams working on it.
[28:11] I think the reason about cells is because Amazon’s a newer entrant into Australia,
and they’re finding that they’re not getting adoption as quickly as they have in some more mature markets and that they need,
to Goose their third their Australian third-party Sellers and I think they acquired cells because cells had a bunch of.
Australian third-party sellers so I think it was a local customer acquisition strategy in a emerging market for Amazon not part of some Global strategy and I it wouldn’t shock me at all if,
Jeff Bezos and Andy jassy and Company like weren’t involved in this acquisition at all.
[28:57] That okay we will see.
[28:59] Yeah I’m and side note I’m usually wrong.
[29:03] I don’t think it’s the foundation of their strategy I think it’s one of a hundred things they’re going to do and it’s going to be a.
[29:08] Yeah I mean if they’re you know it’d be more interesting if they had some unique IP or something like that but I just it doesn’t seem likely that they did.
[29:16] Yeah well let’s then answer this question so your Amazon how do you either stop or or hobble Shopify.
[29:25] Well you you leverage your platform advantage to say it’s way better to get my webstore platform from Amazon than it is anywhere else and the way you do that is you say,
hey if you guys want to use FBA and have Consolidated inventory between your webstore and Amazon,
then the way to do that is to use the,
you know Amazon Web Store 2.0 based on microservices hosted on the the greatest web service platform in the world,
um and that if you you want your web store on Shopify you’re going to have to figure out fulfillment yourself or you’re going to have to send some of your your.
[30:05] Your inventory to the the new Shopify fulfillment Network and you’re still going to want to leave some some of your inventory and our fulfillment Network because we have way more customers than you do,
and they’re just going to leverage their their network advantage to walk customers in,
two years ago I think they would have said oh man sellers should know they don’t need their own website they can just sell on our thing but I think they’ve lost that battle in the the,
Flagship example for me is Anchor like to me anchor is one of the greatest success stories,
that was sort of you know born because of Amazon right like their product company they exclusively sold through Amazon you couldn’t buy direct from anchor you couldn’t buy ink or anywhere else you could only buy it as a,
3p seller on on Amazon and and anchor went public last year for a with a ten billion dollar market cap,
based on that business but guess what anchor has today they have a direct website so if anchor has decided that,
hey you know what we need to own our own website in addition to selling on Amazon then it’s really hard for Amazon to credibly argue that no one else should be doing that and to me that means,
they have to get back in the web store business but like I bet you they do it organically.
[31:22] The the other interesting thing I thought about is and we’re going to go through Shopify earnings in a little bit so Shopify is fascinating because they actually don’t make,
that much money off of their their software as a service Revenue right so what they do is they basically
they almost give away the software and then the GMB flows through and then they skim off the GMB so they’re essentially you know they skim off the payments they skim off the shipping and handling they skim off
like a firm that’s part of payments you know so that so that’s
that’s interesting because it does make it hard for Amazon price against it right you can’t
you could offer a free offering but it’s almost free as it is you know it’s so so then how do you go at the gmv flow could you offer the Shopify Merchants a,
one and a half Point payment plan or something like that or you know could you because one way to look at it is,
shopify’s getting a lot of economic value off that gmv and not passing it on to the sellers could you build about business model this is what
Mark Lori did with jet this was kind of clever thing he did there is he kind of said well I’m going to take some of this and give it back to his example the buyers but here you give it back to the sellers I wonder if Amazon kind of come up with a different economic model that would
unwind shopify’s model.
[32:43] Yeah I mean I for sure,
it’s not fun and not a super appealing business to be the a longtail webstore SAS company right like Amazon was one right there was one before Amazon
it was John who web stores right and
Amazon launched Amazon web stores and took all the customers and I think what they discovered is that it’s a sucky business it’s not fun like you know collecting 30 bucks a month from these small businesses you know with 50% charm because they go out of business
and every one of them having.
[33:16] Different needs and desires and different things they want to see on your road map right so I think in 2015 Amazon just said the juice isn’t worth the squeeze here,
like we’re not getting any benefit from this let’s just get out of this space,
and per your point Shopify figure it out the the equation to make money it’s not to charge more for the web store because small businesses can’t afford it,
and it’s not make the unit economics you know super lucrative for charging a little for that web store it’s,
you know get a nice piece of all the gmv that flows through that web sort through this whole assortment of services,
and side note that’s Amazon’s main model for profitability to write like like Amazon’s Maine,
profit driver is not consumers buying from Amazon,
it’s third-party sellers selling on Amazon right and they sell 20 billion dollars worth of ads to those third-party Sellers and they sell,
you know I don’t know how many billions of dollars of FBA services and credit card processing services and sales tax calculation services so Amazon’s right in the middle of that that gmv stream,
and that’s the reason I think they,
they decide to get back in the web store business is that they can monetize it now with all those those incremental seller service revenue streams that they didn’t have in 2015.
[34:43] Yeah yeah let’s um I guess that’s a good place to pause and then let’s pick it back up and Shopify because then that’ll give us some numbers to do it before we do that let’s have a little appetizer of Walmart earnings.
[34:57] So they release their earnings this morning and it was interesting I read the top line numbers and I’m like man had a good quarter and a good year right,
and the market did not agree with me so so from an investor standpoint it was a Miss there their earnings per share came in at one point three nine,
they had a big adjustment in there they had a bunch of write-offs and stuff too but the
the Gap earnings per share was 1.39 and consistent consensus estimates was 1.51 so they.
Um and then compounding that miss their guidance for 2021 was not very optimistic and that this is a trend I think we’re going to see across every retailer,
is everybody is going to say,
20/20 was an exceptional year because of covid and we’re not going to come up very well against it right and so you know we have more covid costs and we’re going to probably see slowing,
consumer sentiment in 2020 so combination of the Miss and the low guidance Walmart stock took a pretty good hit I think they closed down 6.5 percent today.
[36:06] So if you’re an investor that was an interesting story that I didn’t toy so you coming,
um but if you just look at it from how did they do as a retailer their Q4 comps were up 8.6% so Amazon’s the lard or Walmart’s the largest retailer in the world,
and they grew 8.6 percent which is like more than double what you would ordinarily expect,
them to do right so that’s a fabulous quarter and then e-commerce growth was sixty-nine percent,
so again that’s a huge number if the,
industry average is 40 percent if if you consider Amazon the industry average or 25% if you look at the US Department of Commerce,
sixty-nine percent growth for the quarter is in e-commerce is great.
[36:58] What wasn’t so great in Q4 is their profitability they you know as Walmart’s mix shifts to e-commerce like they have challenging unit economics and profitability goes down,
they had some they raise their,
their labor rates last year and paid can their Associates more they paid hazardous hazardous duty pay and all these other,
other unique covid fees and so so fair enough profitability was was definitely a soft spot but from a customer demand standpoint.
I thought they had a great quarter they also announced that 20:21 was going to be a huge capex year for them they’re expecting to spend 14 billion in a.
[37:42] Normal big year for them is like 10 billion and by the way like those 10 billion dollar years were.
We’re like from the days when they were building out a lot of Supercenters and so to spend 14 billion in a year when you’re not going to do a lot of new store growth.
Um is a remarkable commitment to investment and what they said is a bunch of that Investments going to be in fulfillment and automated fulfillment and particularly,
grocery store micro fulfillment which should scare Scott because that was one of my predictions,
in our January show they’re making a big investment in health care and and services that go around retail in addition to retail which might sound familiar if you follow the the Amazon Playbook at all.
They also did announce that they’re going to increase their average wage to $15 an hour,
um average being an operative word their target and Amazon raised their minimum wage their starting salary to $15 an hour Walmart still not committing to that,
but they are committing to have an average wage of $15 an hour and I want to see which is a raise for like half a million folks and.
[38:56] The I want to say they’re starting salary is still like 11 11 bucks an hour so that’s going to be a big expense,
so and again this was Walmart’s last quarter of the year so you can now see their full year and so their full year they ended up with five hundred sixty billion dollars in Revenue,
which was up 7.7 percent on a constant currency basis,
u.s. comp sales were up 8.6 percent which is a phenomenal year e-commerce for the year grew 68 69 percent or I’m sorry seventy-nine percent eighty percent so that’s that’s,
very fast growth for the second largest e-commerce site in the United States and then kind of an interesting one,
in 2019 e-commerce was 2.5% of Walmart sales now e-commerce is 6.2 percent of their sales so it’s become digital is becoming real at Walmart.
[39:51] Brickell awesome and then anything else there.
[39:57] I know that you know it’s going again this is why you should take retail advice and not stock investment advice from Jason.
[40:07] It’s all about expectations yep speaking of expectations let’s talk about Shopify earnings like that transition.
They are they actually smashed expectations so Wall Street Hanna met a buck Twenty Eight on the EPS side and it came in a buck fifty eight so be by 30 cents.
But the stock went down and I think what you had there was.
You know a lot of runaway expectations so there’s there’s printed expectations which is kind of analysts consensus and then there’s kind of like quote-unquote whisper number and my sense is whisper number on Shopify everyone was kind of like Mmm Yeah.
Amazon came in pretty good and Saudi Bay and you know will they be able to continue this over a hundred percent growth in the answer was no so they Top Line grew at 94% which.
Is just amazing right for the fourth quarter but I think people had let their expectations run away that it could be higher because Q3 there were at a hundred nine percent and then back into to a hundred nineteen percent.
So it was a pretty good step down from from those growth trajectories.
[41:13] That’s a first world problem when your growth deceleration slows down a 94%.
[41:19] It is but hey it’s Wall Street they’re hard to please what have you done for me lately.
And then we’ll talk about in a second but I think also so Wall Street you kind of look at the print and then the forward-looking stuff so,
so so you know beat be current but then we’ll talk about the four projections,
for the year that puts them at 99% I know that was pretty frustrating to them I hate it when numbers do that to me can’t you just get that one more percent there to make it triple digits.
The revenue grew for 2020 full year 86% and the gmv grew 96%,
and then gmv for the fourth quarter was over 41 billion that puts them at a hundred twenty billion for 2020.
So if you line that up against Amazon’s third-party gmv that’s about,
40% and I think there are there are bigger than eBay Now by a good margin that number I think last I looked if you take Autos out of eBay I think there’s sub a hundred billion still.
[42:18] I’ll have to have one of the interns fact check me on that and then as we mentioned it’s really interesting if you take that slice of Revenue that they have there.
The subscribers subscription Services which is the soccer as a service Revenue the software licensing Revenue that was 280 million,
but then merchant services was 700 million,
so you can get the mix there that you know I think it’s 4060 so 40 percent of the revenue comes from software revenue and then 60 comes from quote-unquote merchant services and this is where they’re essentially,
charging a merchant two and a half points for payment and then you know passing through two and making a half point on that gmv that flows through there,
then they make laugh Point here so they effectively have at a crate like a Marketplace would but it’s against all the services and aggregate that there are consumers that there.
Their business customers are using and then yep,
so that Merchants Solutions actually grew a hundred sixteen percent so when,
you know which grew faster than govt which means they’re take rate went up effectively so there,
you know the their Merchants merchant service Revenue grew faster than gmv and overall Revenue so it took share from the software side of the business.
And then the take rate is going up so there you know whatever mix or things are happening there.
[43:47] Um so one of the things that I think shocked Wall Street a little bit is that they effectively said that they’re going to get very serious about the Us distribution Network and,
storing and shipping things I think they had one fulfillment center up in Canada where they’ve experimented with this and it sounds like they’re going to lean into it so that’s going to be interesting.
And then another thing that was announced around their earnings was that they are going to put their payment system on Facebook check out so I thought that was a little tidbit that I wanted as the payments guy wanted to get your feedback.
[44:18] Um so yeah so so if we if we tie that back to that Amazon acquisition you know.
This is definitely going to be on you know Amazon’s radar so they’re DMVs heading to 1/2.
It one way to look at is you all are selling things into this pool of people selling online now they’re going to be building their own F be a competitor,
so it’s going to get really interesting to see what’s going to happen here and then Ivan IV,
I thought it’s funny the Shopify and I don’t know if this is a corporate policy but there,
there are social media people there like poking the bear at at Amazon so when Bezos left they did a kind of an odd goodbye kind of a thing that I thought was kind of it was funny but.
It was definitely you know not I’m a pretty risky
kind of guy that was just kind of like I was just like oh my God I if I was to see a that’s that was a little bit of a step too far so so there’s there’s definitely going to be a really interesting story this year watching these two battle it out and I’m excited to watch it.
Watch the blows land.
[45:28] Yeah I’m hoping to launch a new television service which is going to be Toby and Jeff Bezos playing Starcraft so we’ll see you that.
Comes to fruition but seems my money would be on Toby actually in Starcraft but.
[45:44] Who has the coolest hat would be even better.
[45:46] Good point yeah they both have discovered some interesting foil later in life but yeah I mean.
It’s funny because I do I think shopify’s a phenomenal story that growth is Monumental in the fact that their 40 percent of Amazon’s third-party Marketplace like.
That that is serious right and they’re competing for the same wallet and so they’re absolutely competing for dollars,
and they’re both well resource to escalate the fight so it’s going to be exciting to watch,
the thing I like I try to remind people of is that they don’t actually have huge overlap in services today right like what Amazon does better than anything else is they acquire eyeballs,
and then they they rent those eyeballs to sellers through all of these services.
Shopify does exactly the opposite the one thing they don’t do is bring any eyeballs to to your product they exclusively sell you a bunch of services for you to monetize the eyeballs you already have and so,
for sure they’re gonna grow an overlap each other and you know we’re starting to see that with a fulfillment networks and and various things but they’re not starting from a.
[47:01] They’re competing for the same dollars but they’re competing from two opposite ends of the service spectrum and so it’s you know they’re going to meet in the middle somewhere,
and it’s going to be interesting to watch but like you know my big takeaway from your numbers are,
um not only is the is that g that Revenue that’s tied to gmv is much bigger than the revenue that’s tied to subscriptions it’s growing,
twice as fast right so it’s both,
they win when one of their existing customer sells more they win when they sign up a new customer they win when they find more services to sell to that same customer they win so that that is a nice Network,
um and you know let you let you see what investors are seeing in this in the Shopify model and you know I in the back of my mind I’m hearing that soundtrack,
you know your margin is my opportunity you know I have a feeling that that Jeff and project Santos are,
not gonna sit back idly while that happens.
[48:03] Yeah absolutely another thing that’s interesting got.
[48:08] Just on the shop pay thing them being on Facebook isn’t that interesting to me but it what it signals is right so.
It’s highly unlikely,
that there are new buyers that are going to go to look at the new Air Jordan shoe on Instagram and buy it because they can now pay with shop pay right like I you know I doubt there was anyone that said like who I really want that shoe I’m gonna buy it through Instagram check out.
But I’m not going to use PayPal only do they accept my shop pic,
um so I don’t think it brings any new eyeballs to the those products on Instagram like I don’t think it’s a big draw but,
if you already decide you want those shoes and you find out that checking out is going to be easier and lower friction because your payment information is already stored because they’ll accept your shop pay I do think it can improve conversion,
for the people that are already discovering that product so to me it’s.
[49:06] There’s it’s a smart play fun shopify’s part and Facebook’s part to offer it it’s probably not game-changing or super,
um at the moment but what’s super interesting about it to me is as far as I know it’s the first example of shop pay being accepted outside of the Shopify echo system,
um in this is another interesting you know potential Battleground you know the one of the biggest pieces of that of that gmv Revenue stream for Shopify is because you know they used to,
to Outsource credit card processing to stripe and others and now they’re doing it on themselves,
and if Shopify is going to become a legitimate digital wallet and offer their payment you know method available you know far and wide that that is kind of interesting,
Amazon is tried to do that and hasn’t had very much success because.
The Amazon brand is in direct competition with every other retailer the Shopify brand really isn’t right and so it is interesting.
If this first move to Facebook signifies you know Shopify deciding that one of their growth opportunities is,
is digital wallet that is an area where I think they’re strong and have a competitive advantage over Amazon so that that.
[50:26] Yeah and then
then there’s been a lot of speculation so then there’s a recruiter for Shopify that’s very he hangs out in the Twitter circles you and I frequent like the DTC and kind of area and the retail e-commerce group and then he put a.
Really interesting listing out there essentially saying we’re building a high growth team you need to be on the west coast and we’re looking for a lot of talent and kind of from the D in the,
DTC world so that and a lot of other hints have me thinking I think it was this one of my prediction said they’re going to build a Marketplace so so I feel like I feel like they’re going to go at the eyeball part of Amazon and it’s gonna be interesting to see how that goes for.
[51:10] They could like I think I’m less optimistic that they will then you and others are,
they totally could and you could interpret that job listing as,
as you know a Skunk Works to hire people to build that Marketplace but to be honest I give you look at through a different lens that same job listing could be for a team to help,
Sell Shop paid tune on Shopify Merchants right like so you know it could be other things it could be selling those fulfillment services to other Merchants it could it could be lots of things.
[51:43] Yeah but it’s DTC no those are all B2B this is a consumer team.
[51:48] Yeah yeah well we’ll have to see again A lot of people are speculating that they’re going to do it and they have the resources to try and I’m not even saying that they will fail but what I will say is.
They don’t have any proof points that they can attract eyeballs and attracting eyeballs is super hard and so just because they’ve been successful in these other businesses.
Um does not mean that they’re going to be able to create you know the hundreds of millions of consumers brand Affinity that that they would need to to compete with an Amazon.
That’s super hard to do it would be an impressive story if they they launching can do that and and the day they do that a bunch of the things that people like about them suddenly breaks,
so you know a lot of the reasons you do business with them is because they,
they don’t compete with you and they don’t compete for eyeballs and they don’t claim ownership of your customer in the same way Amazon does so as soon as you become a Marketplace,
you’re gonna start struggling threading the needle with all of those things so you know you can imagine ways to part we do it but but it it could get messy.
[53:04] All right so it’s going to be a really interesting 2021 with this battle of these two Tech Titans and it’s gonna be interesting to see how it plays out.
[53:12] Yeah I admire the heck out of both companies I’m glad they’re both there and I hope I hope they do compete in a bunch of services and make him all better for all of us so.
I think you know as non financially in observers I think it’s going to be super interesting to watch.
And Scott that’s probably a good place to leave it because we’ve
taken a short Newsweek and turned it into our full hour-long show as always if you have any thoughts or questions about any of the topics we discussed today you can totally hit us up on Facebook
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[54:05] Until next time happy commercing!