A weekly podcast with the latest e-commerce news and events. In episode 261 is an interview with Benedict Evans, a well-known VC with deep familiarity with the commerce industry.
Benedict Evans (@BenedictEvans) has been a VC, an operator, consultant and an investment banker. His VC career includes a five year stint as partner at Andreessen Horowitz. He know lives in London, where he publishes an excellent weekly newsletter “What mattered in tech this week?“, a podcast “Another Podcast“, and some epic annual presentations, such as this years “The Great Unbundling.” You can find all things Benedict Evans at his website. He’s one of the most thoughtful people in the commerce industry, so we tried to cover a lot a ground in this broad ranging conversation.
Episode 261 of the Jason & Scot show was recorded live on Wednesday April 21, 2021.
[0:24] Welcome to the Jason and Scott show this is episode a 261 being recorded on Wednesday April 21st 2021
that’s a lot of twenty ones I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:41] Hey Jason and welcome back Jason Scott show listeners Jason this week on the show we have a really exciting guest he’s a renaissance man of sorts,
he’s been a VC an operator a consultant and an investment banker.
You and I love his annual Mega presentations that dig into various Tech Trends and he also has a awesome Weekly Newsletter that I highly recommend called What mattered and Tech this week.
Listeners please welcome Benedict Evans to the Jason and Scot show.
[1:12] Hey Benedict we are thrilled to have you,
it’s and it’s a it’s creating a special occasion for us I rarely get to talk to Scott during daylight hours but but because of your time zone we’re talking in the middle of the day it’s fun.
[1:29] Cool well it’s good to hear you listen to the podcast so especially the ones about statistic so it’s always good to chat about this stuff.
[1:36] You you are like one of eight listeners that enjoy my Deep – in statistics.
[1:42] Well it’s a former Equity analyst like I want to know what the number is I’m not happy with saying like so statista I want to know where is a number from and what is it what does it mean.
[1:52] Yeah there’s there’s I feel like I thread this really fine line the overwhelming majority of people don’t want to be overwhelmed with the numbers and then the eight people that are interested in the numbers I’m always nervous are going to realize that my numbers are wrong so it does it seems like it’s a very narrow audience of like
you know my mom that’s willing to
to take my content exactly as is but enough about me Scott gave some of the highlights but can you walk us through your career a little bit Benedict and how you got an interest in all this stuff.
[2:19] Sure sir so I did a degree in history I went into Investment Banking as a sell-side equity analyst so,
write research about mobile operators back when mobile networks were amazing and exciting Dynamic growth companies,
and then I went and worked in strategy and BD in media and telecoms companies for a while and then as a consultant advising,
media Telecom technology companies and then from 2014 to 2019 and a 2019,
I work for Andreessen Horowitz which is a venture capital firm in Silicon Valley with sort of 15 billion dollars under management that invests in,
people making new companies sometimes actually around e-commerce mostly around software to help other people do e-commerce but my other things say invested in instacart.
[3:14] And then at the beginning of last year I decided to move back to London and do my own thing and so,
instead of picking up some things I’d already been doing so I have a Weekly Newsletter with sort of Water by notes for the week and I have a website where I write about stuff and I do a big as you said like a big presentation,
and so I’ve been doing that for the last sort of 18 months or so which is kind of an interesting just in its own right of you know what is it like to.
Try and do content in a world where suddenly you can’t meet everybody and yet on the other hand suddenly everybody on Earth is willing to meet you by video.
[3:53] Yeah and I would argue also can seemingly consuming more content.
[3:57] It is yeah I mean it’s an interim we can maybe go into this later but I had this sort of interesting moment a couple weeks ago when I was asked to speak at a conference in September in Zurich.
And I thought actually that’s a choice now because in 2019 you either went or you didn’t do the business.
And in 2020 it had to be video.
And now it’s a question should that be video or should I go there and why would I go there do I want to go to Zurich with a be a benefit to me to meeting lots of people at the event should I hang around after I present it,
and we’re now I think just thought of trying to work out what all of that means in lots of different spheres whether it’s you know remote work or e-commerce or,
put a TV all kinds of different questions as we kind of we’ve had this of 18 months of forced experiment where everybody has to try working from home and are ordering everything on the web we inquire networks going to settle.
[4:53] I know for sure I think that experiment is still ongoing because I’m like you I’m starting to get these,
these optional in-person invites and it’s very unclear,
what my criteria needs to be for those so still still sort of sorting it out I am
I’m fascinated you you moved back to the UK not too long before the pandemic right was it.
[5:20] Yeah well I was sort of Fed Up of living in a city with no museums or art galleries or interesting shops and then of course I landed straight into the lock down saying like my timing wasn’t kind of wasn’t ideal you know so it’s a line from airplane you know I picked the wrong year
[5:36] Yeah and to give listeners an idea of your standards you move from San Francisco like they might have thought you just moved from like like Bozeman Montana or something but like by us standards that’s on the high end of culture so yeah.
[5:50] Yeah that’s what they tell themselves a lot.
[5:52] Yo I yeah I’m not disputing it just just stating the fact and I am I am mildly concerned for you because I do feel like moving to the UK has one significant disadvantage you went from a place where your,
accent like automatically conveys credibility and authority to a place where you’re just another dude with a newsletter.
[6:15] This is true yes coffee accent doesn’t really come across in the newsletter it is into the icy day she works by twice in that sort of our over a certain level and like any Foreigner I think.
Sort of automatically gets attributed a greater intelligence it’s like well if you manage to move and come here you must know stuff,
so you like Americans in Britain generally regarded as being sort of feeble-minded but you know once they’ve got a job then they regarded as well they must know something.
[6:40] Yeah my strategy is to move to Australia because I feel like that’s the one place where I could sound reasonable.
[6:46] I could work it could work.
[6:48] You don’t drink enough for Australian the but they do have Starbucks you okay,
a couple of follow-ups on your career when you were at Andreessen Horowitz what was your did you have a focus area or were you more of a generalist.
[7:03] Well so I think well so it’s your choice on says so when I went smartphones with a thing.
And I’ve been talking a lot about smartphones along interesting I was talking about this with somebody the other day I’ve been talking a lot about smartphones in public online along with her instead of you.
Um do you may know.
And the sort of the interesting thing was that sort of both of us were people who came from the industry and knew how to do the analysis and how to make the charts and were allowed to talk about it in public,
so there’s lots of people in investment Banks or Nakia or apple he knew all this but couldn’t talk about it in public and they’re also people who are interested but like didn’t know that,
Nokia published quarterly unit shipments on the investor relations website.
And so then but and so what I sort of built up with profile a publishing stuff online because I had a job I was a consultant I was freed and so I could say stuff in public since I was mad I was a small thing going.
Certain point small things stop being interesting because it happened.
[8:05] 90% of the developed world has a smartphone now four and a half billion people adults a five and a half in adults on Earth had a smartphone is not interesting anymore it’s like talking about Broadband adoption in like 2010 like we get it happened.
And I think there’s a sort of a general point there in Tech that the point that you understand something is generally the point that it’s time to start looking for something else.
It’s kind of the point that it’s become boring and you know it’s not what’s the important where the important questions are and say there was a time when that was no PCS in the 90s.
If a PC thing with it going to be interactive TV well that it’s not being an interesting conversation same with smartphones like it happened absol’s happened what next and so,
for one axis that becomes well let’s think about machine learning and crypto and a regulation,
on another it let’s think about what my old boss Marc Andreessen called software is eating World which you’ve basically what happens when four five billion people are online.
What happens with mass mass internet adoption,
um which is kind of like it’s like being in like 1950 or 1960 and saying well like the last 50 years was how does everybody get a car and what is a car what is a car company in the next 50 years is with Donald’s and Walmart is what happens when everyone has a car.
So you could kind of say well that’s sort of where we are in Tech now by the last 50 or 60 years is how does everyone get a computer and the next 50 years is well what happens because of that or whatever it is I suppose what I’m getting at is like the questions just keep changing.
[9:32] So when I was there I was looking at smartphones now I don’t really look at smartphones very much.
[9:39] And then you know it’s interesting if I understand you’re you’re doing some ice on LinkedIn you’re doing some work with some investors,
that looks kind of like part-time it seems like your full-time gig is really kind of being part of the crater economy is that is that a fair characterization.
[9:57] No I suppose so yeah so maybe I was I had an mft I’ve all I left row when I started a sent out a newsletter in like 2013.
It’s a bit like you know the joke that you know I didn’t realize I was doing machine learning I thought I was just making if statements in Excel I didn’t know it was a neural network and it’s not going to say I didn’t know I was making an end of T I thought I just sent his letter,
and so yeah I suppose I am,
yes I mean in the sense of poetry because I supposed to do only with some portion of what I do is actually.
Selling content in some form some portion of it is you know more conventional speaking and talking and working with people
in passing or by Zoom so you know I give presentations I spend sort of a day a week as a venture partner with a London firm called mosaic
which invests in you know series AC stage software companies in Europe and that’s fairly convert straightforward Venture Capital but I do a bunch of different things.
[11:00] Yeah I’m not sure if that was consciously a reference or not but there’s certainly a connection in there somewhere.
[11:06] Only like five of our listeners got that Joe and I was one of them all right let’s let’s jump into one of our favorite topics which is e-commerce,
you know so maybe I know we’ve had some interesting Twitter conversations of the impact of covid on e-commerce and,
one of Jason’s favorite graphs is that one that shows that we’ve like almost tripled our adoption here in the United States which he yeah I’m joking his he takes offense at that,
but what have you seen so you went you had this interesting perspective of you kind of know the US market and then now you’ve been there and UK / London what are you seeing as far as e-commerce impact during covid.
[11:49] Well so several different observations one of them is we actually have pretty good data for the US and the UK much less good data for the rest of your ordinary much harder to get and harder to compare.
Um second observation would be the UK and Europe in general had a much stronger lockdown in the US,
the US have service strong lock down in some places but not kind of nationally whereas the UK basically shut down for the last three months.
[12:19] Um and third observation is whatever you make of that the u.s. went from sort of 16% to sort of a bit over 20 percent penetration if you exclude gasoline and restaurants and things.
Um on the same basis that UK went from 20% to 30% and has been sort of bouncing around a bit had a second lockdown but in the UK is sort of stabilizing it about 30%,
um most of the rest of Europe was three to five years behind,
the UK and this is old joke that when the apocalypse comes you want to be in France because everything happens five years later there and that’s kind of sort of kind of what happens in Tech,
type the French kind of ruling class the French newspaper reading class has suddenly discovered Amazon and having all the kind of moral panics we were having about Amazon like five years ago,
like there’s a data from eurostat they don’t have penetration data but they do have usage data and in 2019 I think only about 38 39 percent of all Italians made any online purchase at all.
[13:21] So you’ve got this very wide spread across Europe of adoption and basically the UK and like the small Northern so you know this candies Belgium Netherlands and so on,
of the USA Southern your big you at the big European countries I like 5 years behind the USA but of course the lockdown has been this sort of catalyst to make everybody at least try this stuff and Pull It Forward,
um the other number is in the if you exclude grocery which is sort of you know a third of retail sales or something.
So if you exclude grocery sales and look at everything else in the UK it’s now 40 percent e-commerce so.
We’re now at this sort of point where it’s no longer a segment or even you know some if it will even for a long time it was something that some people did for some things and now it’s something everyone does for everything,
but you’ll now it is real Tipping Point where you’re having kind of a lot of major retailers disappear or move radically pullback.
And a lot of people asking her what is this going to look like what is the world of physical retail even going to be as we come out of this.
I feel like that’s probably I mean I didn’t have the US Direct us UK comparison,
clearly like us department stores in things a bit in long-term decline but I don’t think the u.s. is at the stage of like 40% of the mall is gone.
[14:47] Yeah it’s fascinating the like I’d be curious to unpackage just a little bit like so and and these aren’t perfect numbers but rough numbers for for conversation purposes if you kind of use the same definition of retailgeek,
the u.s. is going to have about 25% e-commerce penetration versus I’ve seen 35 to 40 in the UK so so I think it clearly is.
Is wildly ahead right in my mind there are three things going on there I can in both countries there’s.
There’s a lockdown impact and prove your point the lockdown played out differently and in the u.s. it,
spread out very differently just depending on where you lived but there’s hey we’re all getting less clothes and what clothes we do get were way more likely to get online stuff like that right so.
The there’s a / stored impact which I do think is unique to the us like we.
[15:41] 4X the amount of stores per capita in the u.s. that you had in UK so there was there was a long overdue correction and the covid-19 impetus for that that correction and then there is,
I think at the moment a fundamental difference to how,
people in the United Kingdom and people in the US get groceries digitally like the the UK was far in advance of the u.s. in terms of digital grocery adoption,
before the pandemic so in the u.s. there was this huge thing over half the population tried ordering bananas online for the first time ever,
um and while I’m sure there was some cohort of new new grocery Shoppers in UK as well it was.
It was less and part of me thinks like fundamentally,
the UK is an island with much greater density like you like the bananas like we call it it’s ironic that we call it shipping because the bananas don’t have to get on a boat to go like anything that there’s not a ship involved in the UK very often,
[16:45] This is a couple’s this is I mean it’s interesting stuff in here because well so two things to say one of them is so yes the UK will sort of five percent online grocery penetration.
And no actually growing that fast I mean you got to 5% in a straight line since about 2000 basically.
And it went ten percent more or less overnight and stayed there,
and it’s still a now it’s gone up a little bit more in rent into the second lockdown I should say incidentally for all of these numbers this is not being distorted by the fact the total retail sales went down so this is after total retail sales went back up to the same level it’s still at that high level,
so UK went from 5% to 10% I think the u.s. is sort of half that at most,
um the other question I was thinking all these how much variation is there in the USA to your point about density if we were doing this analysis for New England or for California,
would this look different with the numbers be higher I mean I don’t know I think the BLS is just started doing some numbers but.
There’s I wonder how much the u.s. let the lower u.s. penetration is skewed by the flyover states if I’m allowed to call it that.
[17:55] Yeah absolutely and I haven’t seen definitive data but my sense so a very,
interesting distinction the overwhelming majority of digital grocery in the u.s. is curbside pickup,
so we all think of the milk getting deliver to the house but but something like 80% of all the digital grocery orders in the US are a customer going to a store and picking up all their bags in the parking lot instead of,
having them delivered and that’s largely because of the unit economics just don’t work in most of the u.s. neighborhoods.
[18:28] Is the density point was the you you know I’m sort of sitting in my hat and it’s my study looking out of the window in the city of,
I’m in an Edwardian you know looks like it’s not like Brooklyn but it’s you know only Edwardian by bedroom houses and there’s you know practically cues of do grocery delivery van sometimes,
all I mean that’s part of the point is that the UK retail industry is just much more competitive than the US and retail industry which you thought of gets hidden by the fact that the US has lots of supermarkets but they will kind of regionally dominant,
Lucy UK there’s like five supermarkets I can shop from from here.
[19:06] Five different chains and so there is a Tesco truck and a car do truck a Safeway truck and the sainsbury truck.
Going down the street twice a day every day and they all these custom-built refrigerator trucks.
And so that they know that degree of density does change things I think the other thing that’s happening right now it’s sort of goes onto a kind of a broader point is there’s now a wave of sort of one and two hour
guy on the back of a bike grocery delivery startups one of them is his Turkish company called get ear or get GOI cottonwoods called now there’s like three of them,
and they’re all based on basically dark stores in light industrial areas around residential areas.
and it’s guys on bikes bringing you to bought a bottle of milk a pack of Pastor a bottle of olive oil and you know whatever they can fit in the bike and it’s sort of topping up
the bay so you do the big weekly shop which might move to delivery but then you’ve got this I need its a 50 pound,
$75 spend top up which is also happening,
and that’s also course about density and how often you need it and what you wanted to pay Logistics to that.
[20:22] Yeah now it’s and that is fascinating like I feel like you’ve highlighted what to me is the next digital wave of grocery like the the first way like the the biggest money to be made is on these big shops right so if you can,
win a bunch of those customers that get 60 to 120 items,
um in their cart like the unit economics are easier there and that’s in the u.s. certainly where all the big Grocers focused their attention,
but you’re absolutely right like there’s a,
a totally different mission that people use grocery stores and in the US the providers are heavily fragmented right so you’re going to go to Kroger Walmart or Albertsons to get your your big grocery shop but have you live in a,
a urban city.
[21:08] Probably going to a bodega to get a bagel or a coffee or or you know replenish the sugar you just ran out of right you like all those,
those top-ups you know tend to get served by these smaller local grocery stores and now we’re seeing a boom in the in.
E-commerce for those those top up so here in the US we’ve got go puff which is kind of a,
purpose-built delivery Network that really focuses on that top up and then you have folks like door – that grew up in meal delivery trying to kind of move over into that does Top-Up missions as well so it’s,
that’s going to be interesting in the UK is that are they the same providers that are doing the top ups and.
[21:52] The different know the different companies well so yes or no so some of the supermarkets have that Top-Up thing as well because what the supermarkets have done in the UK over the last 20 years is that created what they call a Metro format,
which is sort of like a bodega size store that it’s open 24 hours and it’s right and it’s got a limited and will limited selection,
but it’s you know it’s a double it’s two or three shopfronts wide,
and it’s it’s a Tesco Metro it’s the same speeds Metro and so they’re using those as endpoints for a guy on a bike at the same time,
I mean the other interesting thing there you know just talking about door – is the number from Uber last week.
That they would like a think a 30 billion dollar run rate on rides and now fifty two billion dollar runway on ubereats,
one of the things we’ll sort of sort of to kind of Link think sort of things in here one of these want I should have one of the points I wanted made in the presentation I did in January with that instead of thinking about e-commerce by product category and saying well
books are different from makeup which are different from shoes which are different from.
I don’t know like consumer electronics which are different from something else instead you should split it into Parcels versus delivery versus bikes.
[23:11] And so on that basis is everything that can go into a brown cardboard box which is basically the airway Amazon sees the world and everything that can’t,
which is either a refrigerated truck or you go to the grocery store or it gets brought to you on a on the back of a bike.
Um and in that category you basically have Grocery and restaurant,
looking at the numbers I mean I kind of struggled with for mentioned numbers earlier I got wildly conflicting numbers based on which research I looked at but it looked like something like a third to a half of us restaurant spending is actually takeout or delivery anyway and like was before the internet.
[23:50] Yeah my number is it was close to 50 before and and was like well over 70 of Court off Prem was well over 70 during the pandemic.
[23:58] Yeah and I think like the interesting General thing I was thinking about this is a like split e-commerce into can it be a cardboard box or a bike or truck,
oh collection but the other thing I was thinking is like if you just forget about e-commerce for a minute and you kind of ask the question well why is it that you buy a pint of milk,
from a completely different kind of store from a bed or couch why does he care I have a giant store in the edge of town and Walmart have a giant store in the edge of town and the bodega doesn’t,
the night we know the answer but like if you kinds of systematized that it’s like there’s like an algebra,
of cost per square foot how urgently you need it how willing the far you’re willing to go how often you need it how big the inventory is you know add 20 more criteria that get you like a kind of a multi-dimensional scatter plot of,
aquella versus a department store versus a high-end Boutique versus a bodega versus.
Pick 10 all the retail categories and sort of what the internet does is it’s kind of like it adds three ways.
[25:01] And so it enables a whole class of new kind of retailers so like it’s like freeways and cars enable big box retail for the sake of argument and enable the different kind of Supermarket where you can fill up your car as opposed to having it carried home.
And the internet like adds a whole bunch more criteria in the same way to that whole Logistics question.
Which gets you both to my point like the one our grocery delivery versus a weekly shop and it gets you that question do I go there or do they come here and what do I pay on each side.
Which is another way of saying like maybe instead of saying the internet is completely new we should say this is just like another wave of change in retail.
[25:38] Yeah yeah I agree with that Framing and it’s interesting,
so it wouldn’t be a Jason Scott show if we didn’t talk a little bit about Amazon and I noticed you didn’t mention them as one of the trucks coming to your neighborhood makes me so they just basically ceded the UK grocery delivery space.
[25:55] They do but they’re not in grocery delivery so they of course so there’s I mean it’s the sort of someone was saying what’s the you know the children’s game where you ring the doorbell and run away what do you call that that’s called parcel Force.
Did one of the career firms here.
And so yeah there is an explosion in the other so say they were the refrigerator trucks which are all the supermarket’s plus a car do.
And then there are parcel trucks which are a whole other bunch of companies so it’s dpd it’s making supposed to office and it’s dpd and it’s Amazon and it’s a couple of other things but that’s sort of basically the story,
um but it’s just a whole other hold on the model there is existing in powder.
[26:43] Dude so Amazon’s pretty dominant there in the UK and obviously in the US doing really well do you see anything slowing them down or how do they fit into that framework you just lay down.
I think well I’d sort of propose maybe another framework so so I think like the way I always have to talk about Amazon is you know this cliché that e-commerce has infinite shelf space and I said that’s not quite right for Amazon and Amazon has one shelf that’s infinitely long.
And so everything they sell has to fit onto the same shelf and be sold in exactly the same way through exactly the same website and exactly the same Majestics in the same kind of boxes.
And the like the story of the last 20 25 years is converting more and more product categories to discover people are willing to buy it like that.
[27:31] Where you know start with books but it turns out there’s an awful lot of other categories that you wouldn’t have thought people would buy like that it turns out they are willing to buy like that,
um and then the other side of e-commerce is yes people will buy it online but not like that.
So you need a completely different web experience different kind of recommendation or service,
for you need to have free returns or it needs to be hand-delivered or whatever it is but it needs to be something other than the Amazon commodity logistic model.
And so I mean you see this in the kind of the market share,
that you know they’re also to people who are under the impression that e-commerce is 75 percent of retail and the Amazon is a hundred and ten percent of that but of course it isn’t,
um you know Adams and his goal sort of seven or eight percent of us retail it’s got a bit less than half of depending on how you count it instead of it’s got sort of 4045 percent of u.s. e-commerce and it’s kind of the same in Britain,
Maybe a bit higher Court member rather unsurprisingly you look at the share in lockdown and the the online-only retailers share went down as a show of e-commerce but there’s a whole other question a lot well what are the other ways of buying this,
which I would think you know basically you never the what’s old is new and Amazon is the new Walmart and Amazon Walmart converted a whole bunch of stuff into Walmart.
[28:54] And Amazon is converting a whole bunch of stuff into Amazon but it doesn’t follow that everything becomes that.
[29:01] What are some of the other modes so you mentioned like Uber Eats and food delivery which is kind of a different mode what are some of the other modes that you’re seeing.
[29:10] Well so I think I mean just this is mechanistically there’s parcel and then there’s truck brings it to you there’s you go and get it and then there’s guy on a bike,
we just don’t like the kid on bike brings it to you there’s also sort of orthogonal to that the set of so that’s a very Silicon Valley word but same sort of next to that you’ve got like,
I should say societal next to sound clever you’ve also got like free returns,
for subscriptions or subscriptions where you get 10 things that you don’t know what we don’t know what you’re going to get and so there’s lots of different kind of merchandising and retailing models.
Um that are quite distinct from the Amazon merchandising in retailing model which is like you know whatever you know you can have any color you want as long as it’s black.
[30:02] I do so one that that we’ve been following closely is live streaming which is kind of caught fire in China,
but as you know some of these things they kind of catch fire in China and they stay in China they don’t so like
you know what I would call chat Commerce as a big thing in China hasn’t really kind of made it out there do you see live stream becoming one of those are you seeing any evidence of that like in your.
[30:24] So I think a lot of people trying it so it’s clearly on everyone’s experiment list for this year will it work I don’t know.
I mean I think this is like the general puzzle I have looking at China which again is sort of on my list to write about I read about it as a column in my newsletter but I should write about it again it’s like sometimes I feel.
[30:45] So this is what we’re saying this so like I started Mike when I started my career I’m mobile internet was everyone was very excited about mobile internet if it didn’t actually exist anywhere except in Japan.
The Japanese operators that launched this thing called I’m out and equivalents of I made which was a phone that had a packet-switched network and an internet connection and it was unmetered,
when I was submitted a comment anyway it was cheap and they had an app store and you could look at stuff on your phone and you have like a big not even color screen but it’s like a big screen with lots of text,
he was a mate and they were like millions of people using this and the chart was going up into the right and it was amazing and they were kind of to sort of lessons from this the first is that I made turned out to be a dead end it wasn’t actually the future.
The second was that you couldn’t actually find out what was going on except like a third hand because you couldn’t use the product yourself you couldn’t read the language.
[31:40] You couldn’t read the,
like discussion of it by informed people because it was all in Japanese you couldn’t go there because it was like $5,000 to go there and even if you did go there you still couldn’t use the product if you want a Japanese resident you can buy the phone so everything was sort of a third hand,
and you tear this stuff about this amazing stuff that was happening in Japan you would quite know okay is that actually what’s happening and be what predictive value does that have,
easy like I don’t know it’s like you go to a country another country on holiday and you see a retailer that you think that’s really cool I wish we had that at home a bender but you know it wouldn’t work.
Like you couldn’t take that retailer on just do it in LA and expect it to work.
[32:17] And which is still the thing I should have wonder if I look at it all the other this is repairable to this in Tokyo chit China we sighs how much of this is put how much of this is being accurately described in the first place.
[32:30] Because that was the whole problem with like the whole bot thing to in four years ago everyone said oh we chat is amazing and it’s all about Bots and Chinese people said like no it isn’t it’s not about possible.
And the other piece is like how predictive is this how much of this is about Japanese the Chinese market structure and LeapFrog in traditional retail and like five other criteria about how that market is set up and it wouldn’t necessarily work here.
And maybe the third step is which is one of the things I think is interesting about Clubhouse is is it that you take that core concept but you do it in a complete different way.
So Clubhouse looks a lot like stuff that was happening in Japan so in China a couple of years ago a bit in a little bit it’s also completely Americanized.
It doesn’t have 800 things on the screen and you know it’s not that visual overload that you get with two European eyes looks like that’s how that’s how European see Chinese apps are like oh my God there’s so much stuff on the screen but it has tipping and subscription and it’s not add based in the same way and you pay for content.
And so I think that’s like a generalized thing I wonder if I look at all of this stuff in China you have like eight or nine hundred million people you have a huge number or smartphones
you have a huge number of entrepreneurs scrambling over each other frenzied Innovation creation copying of every kind of course is going to be amazing ideas coming out of there.
But it’s a big jump to go from that to look at one particular company and say well that will work here.
[33:56] Yeah it’s interesting as you’re explaining it like I’m also thinking like I noticed there’s a very often a fishtail version of this to write that the.
The real numbers that were already impressive in China for you know some like different behaviors than we see here,
keep getting Amplified every time someone tells the story so I you know live streaming Commerce is 70% of all Commerce in China and you know WeChat is 50% of all Commerce in China and all these things that are like objectively not true.
[34:26] Yeah and you can tell.
[34:27] Yeah and I.
[34:29] Is there anyone can make up any old bollocks about what’s happening in China and people will believe it.
[34:33] Man yeah and toll recently and you know I was desperate to understand these real experiences and so I have a lot of Chinese co-workers and I there were super patient with me,
sort of like annotating screenshots from from various apps and things but,
to your point like it was impossible for me to experience,
are we pay for example right because you you literally need a Chinese bank that an American citizen could not get like that very recently is not true but like all of those digital wallets were,
not available the westerners and when you take digital wallets out of all of these ecosystems the experiences wildly different.
[35:15] Yeah is actually a which is to my point exactly like trying to understand I made 20 years ago.
[35:22] Yeah yeah.
[35:23] Literally be like looking at pictures and stuff and stuffing stuff through Google translate if that even existed then and try to work out how this works.
[35:32] Yep I’ve sat in a number of meetings at Best Buy when we’re talking about if we should have a web browser and using the wildly successful I’m owed example but yeah so I do want to,
half pivot I guess still on Amazon another topic that comes up a lot and I know you you have a strong perspective on it is this whole notion of
Amazon private label and and you’ve done some some awesome writing that Scott and I have both enjoyed talking about you know what a,
a miraculous new invention private label is since Amazon invented it a few few weeks ago and what is potential implications are an antitrust can you kind of.
Give us your primer there.
[36:17] Yeah well sorry I was kind of interesting so.
This is kind of Trope of attacking tech companies where you say you idiot you invented the thing that already existed so people looked at Lyft line and said you invented buses.
[36:29] And the funny thing is when people complain about private label by reaction is you can back congratulations you invented retailing.
Because this is book that I kind of talked about quite often by Zola,
from the 19th century called Bonner did and happiness of women which is basically a novel about the creation of Bon Marche and it’s equation of department stores in the nine 1860s 1870s.
And the central character instantly turns a Draper’s shop into a department store through force of will over like 10 years and there’s highlight pages and pages in this book about return on Capital and stop days.
[37:08] Um and working capital and he invents lost leaders,
and there’s like two pages where his staff is saying but we’re losing money on every yard of this and he says yes I know that’s the point and he invents free returns.
And of course and fix prices if you can’t have a discount until you’ve got a fixed price and free returns and catalogs,
and meanwhile the the shopkeepers on the other side of the street as saying like have you seen what that Maniac is doing he’s selling hats and gloves in the same shop he’s got no morals it’s indecent.
And you read this thing and it’s like this is people describing hours this is Amazon
you know this is this person who’s creating this different way of packaging up all this business and selling it in different ways and innovating furiously on every different aspect of it but one of the points is that the thing that he’s selling is a loss leader is private label fabric.
[38:01] And you kind of you you go and you look it and it’s maybe this is a point about you know UK versus American retail like I never would have occurred to me that you wouldn’t know the supermarkets are full of private later product.
And you go and look at the history of this and like the FTC wrote this like a hundred page report in the early 30s on chain store private label brands.
[38:22] And guess what it’s like a quarter of all these girl sales in the US are private label brands in the early 30s and so I think the sort of the interesting thing here is to say look.
This is the stuff that you were describing.
At the most basic level has been part of retail 450 years every retailer does his most weed hairless do it way more than Amazon it’s like one or two or three percent of Amazon
sales it’s 20 to 30 percent of sales and most retailers you’ve heard of except for the Gap where it’s a hundred percent but you know how I’ll get Macy’s Wal-Mart it’s 10 20 30 % of cells.
And so so the question here is like is it that you just didn’t know this happened and you’re shocked and astonished to have find out about it.
[39:07] Is it somehow different when Amazon does it.
And of course it’s different in some sense because like Amazon is in a supermarket but is it different in some kind of meaningful sense because like yes of course they have scale they do so there’s Walmart,
yes of course they look at the data of what selling in their store yes well done so does every other retailer they have computers do they know what they sell.
He’s a they’re looking at what you’re searching for but not buying and that’s a different kind of data to the data the Walmart has well maybe.
But how him how big a deal is that as opposed to the fact that they’re just competing with their suppliers like all retailers.
Case is actually just a moral Panic is it that you had no idea this existed you’re shocked to discover and you think it’s amazing in the evil because you think Amazon is amazing evil.
I’m always a genuinely something different about the way that Amazon does this that matters.
Um or of course do you think that all our retailers should be stopped from doing this.
And you can say that but you do have to understand that that’s like a third across K you’ve just band.
[40:14] So I think those are the sort of the interesting questions of course they intersect with a kind of a joke that Berman made earlier that there are people who think that Amazon is sort of like 45 50 75 percent of American retail so you do actually have to understand their Amazon is roughly the size is the same size as Walmart,
no it doesn’t have a monopoly.
But then it does have a monopoly in certain very specific areas you know there are certain businesses where I’m as an only is the only Channel not just in private label but you know it works.
Does that person have a does that person have Market dominant dominant does Amazon have market dominance in grocery obviously not his it have market dominance in books obviously.
[40:51] Yeah no it’s super interesting and it’s funny I was.
I found myself in a mild Twitter feud on this topic this week that I had to retreat from,
because I sort of made the same point you did that you know hey Amazon has like one percent penetration and you know 25 to 50 is not is not uncommon so Amazon’s the worst private-label her in the history of retail at the moment.
And then you know we were talking about the various categories of private label and and I pointed out that the interesting thing to me are the,
desirable unique products that retailers are starting to invent that our own Brands right and so I use that Target has a bunch of good examples of this like cat and Jack is their apparel brand,
but my hypothesis was.
Like arguably the most successful version of this recently is the as I hit mute the Alexa the you know which is essentially a
private label product that that Amazon invented and a bunch of people in Twitter like push back in there like,
that that’s not a private label product that’s something you know Amazon invented the the whole category while I can.
I don’t know I might go so Amazon invented the Bluetooth speaker that’s interesting but but you.
[42:06] Reporting invented the clock radio.
[42:08] Exactly and so but but I did really like you know is there a way in which they did an interesting mashup and that unlocked you know huge demand sure right like I’m it’s an impressive product but it’s,
at that whole Space is super interesting and the same people that are pushing back and going like oh this is you know uncompetitive unfair Behavior,
certainly enjoy their Kirkland 5 pound bags of nuts and they certainly enjoy their Alexa and you know you go back,
the history of retail retail started out as the the product inventor selling their own product right like wholesale is is a much newer invention.
[42:45] Yeah I mean I think the.
So to specific in a general points is specific point is I think the interesting thing about Amazon Marketplace is that if you are super thoughtful Innovative creative sort of regulator if that’s not in any sense an oxymoron.
You would propose that Amazon be obliged to provide wholesale access to its Logistics and it’s e-commerce.
Like if that’s your view think Amazon is a monopoly or anything Z Amazon is guilty of Market abuse what’s your remedy well they have to provide wholesale access to the logistics and website and guess what they do in fact that 60% of the business.
From and I think the the interesting sort of General point.
Is here and this is sort of a point I might sort of what Emily talking about regulation is like.
[43:34] The the kind of the eye-catching hand-waving sloganeering stuff generally falls apart when you start asking questions so like let’s break up Google,
okay into what and what problem does that solve YouTube is still YouTube it still doesn’t have any competition let’s break up Facebook okay that doesn’t stop teenage girls looking at self-harm content on Instagram those are different kinds of problem.
The stuff is going to hurt is regulating where the buy box can appear around Marketplace.
It’s you know regulating the price that Amazon charges for shipping,
from Marketplace and in the same way it’s going to be no the at the hey antitrust off that’s going to hurt is going to be digging deep inside the mechanics of the ad marketplaces,
and finding some Loosely worded email and finding Google ten billion dollars and making them sell double-click.
No it’s not that doesn’t make a great book title that takes 20 minutes to explain what the fuck just happened if I’m allowed to say that case 20 minutes did it’s a staff that takes 20 minutes to explain what happened and turns out to be 15% of Google’s profits,
that’s where I think most of the regulatory staff will actually bite.
[44:49] I know we’re running up against time and we want to be we’re thankful that you took time out of your schedule to talk to us
the I didn’t want to end without talking about just kind of at a macro sense your latest Mega presentation was around great unbundling,
so maybe tease listeners with kind of what is that and maybe one example of something coming out of the Great unbundling.
[45:13] You know it’s always kind of a challenge to you know talk about what’s happening in what’s changing in tech for either more than one minute or less than two hours.
Um because you can either say look everything’s going to be software or you can all you got off and you spend an hour and a half talking about what’s happening in Indonesia you know like and digital transformation and all kinds of other stuff that I didn’t even mention,
um I think the kind of the cool thing that I wanted to talk about was and this is great and I started with this quote from one of the owners of Kraft Heinz where he said I’m a terrified dinosaur I thought I was in a world of kind of efficiency and old Brands and profit maximization and now suddenly everything’s being disrupted.
[45:51] And I think you can kind of generalize this to like everything in retail and e-commerce is clearly breaking apart and no one knows what the new stability will look like.
Meanwhile because you have this completely different channel that totally changes everything in cpg everything in brand everything in consumer product because suddenly the way that you sell it completely changes and that creates all sorts of different kinds of competition a different kinds of product.
And then third very obviously the whole world of advertising is breaking apart like Google and Facebook between them and now probably half or more of total us advertising.
Maybe more I’ll remember the number now and say like this this we’ve gone from this world of basically creativity and telling stories to being data.
And meanwhile that place doesn’t have ads and so like the whole world of brand has changed the whole other retailers changing the whole world of
after I think it’s changing and of course TV as well is complete completely broken apartment
and you know where the show is going to be what channel the channel is going to be one of the aggregate is going to be and in all of these things the kind of the model it’s like you used to have this very clearly defined go-to-market where you have the people who made things and the people who are aggregated and sold it and now that’s all been broken apart,
all the people who used to sell to aggregators whether that’s TV companies or retailers or any kind of data market and now like okay well we’ve got completely different aggregators and also maybe we should be going Direct.
[47:19] And ever wants to customer relationship.
Most of those companies however most consumer brands are actually not consumer businesses they’ve never they don’t actually sell makeup they sell trucks full of makeup.
To warm up or 240 and they’ve never actually been a b2c business.
Um and now suddenly they all need to think about whether they should be a b2c business and if not what are all the new b2c businesses that will completely take over their Channel,
and what how much data they should have and what they should do with their data and what all of this means
and so this is great quote from great Jim Barksdale from like 25 years ago there’s only two ways to make money in business bundling and unbundling.
And what’s happening now is like everything across brand retail consumer products advertising TV is being unbundled.
And it’s going to get re bundled at some point in some ways but we don’t know what.
[48:08] Yeah I find myself I’ve got 20 subscriptions right to all these different things so now I need someone to do aggregate that for me where I unplugged my cable thing because it got too expensive but I’m spending just as much but now I’m having to manage 20 subscriptions.
[48:22] Yeah exactly I said it was with the point earlier it’s like the remaking of retail around the freeway or the remaking of retail around electricity and around elevators and department stores you know it’s another of these sort of generational resets of how all of this stuff works.
And like all the cars are thrown up in the air no nose with a little girl and not everybody is going to have a DC business in five years time and that applies in Hollywood as much as it does in.
[48:52] Yeah and then it’s kind of fun to think through so in the world of e-commerce all these brands are going direct which is interesting and but then
you know from a consumer standpoint where does it stop because you don’t want to go to 80 different
websites to get that one brand you know to the extreme example you know there’s a benefit to the grocery store of having one place that has all these brands aggregated,
We’re kind of in an unbundling phase and then I wonder is there a new model that comes along and is the bundling or does Amazon kind of become the bundle or do you have a point of view on where that goes.
[49:26] So I think clearly you know it’s a different way to think about this and one of them is clearly not everyone’s going to be able to go to Road and a lot of stuff will collapse back in I think the way that WWF,
WWE wrestling people rolled back into a bundle with interesting because you would think that would be a standalone brand that would be able to do that and they decided didn’t work Disney can.
Um Sony can’t like insanely build its own direct-to-consumer subscription video business probably not so what a Sony Pictures do.
Um says a lot of those sort of questions I think there’s a sort of a subtext within this and maybe another layer in this is I had this wrote this things that are four five years ago that I called lists of the new search.
And I she showed a slide to accompany the other day and I had a picture on the one hand of Macy’s from my 1910 you know the store the biggest store in the world,
on the other hand there’s a store in Tokyo that just sells one book.
[50:23] They change it once a week and they’ve got a table piled of copies and they’ll tell you about the book and the kind of the question is like how do you find a product,
see if you go to this store they only sell one book so that you don’t have a discovery problem but you’ve got to know that the shore store exists which basically means either advertising or they’re paying rent in the right part of Tokyo and so the that part of Tokyo is the aggregator.
Oh you can be in the multi-brand boutique and you’re not quite as hard to find but that Boutique has to find you and has to choose you and you still have to know about the boutique
for you can be in Macy’s and then like okay you’re going to be a bit difficult to find that but you’re not going to unlike you to walk past that product now or you can be an Amazon and you’re one of however many hundred million schools and you’ll never like walk past it you have to know what you want.
Um and so but if you’re in Amazon and you have to know then how do I know it exists while I read about it in Vogue or read about it in wallpaper or GQ or somewhere.
And so this is sort of sense that like you can either be.
This carefully curated thing but how do you find the curation or you can be in this vast thing that has everything but then how do you find it in the answer is well some other kind of curation but there’s like there’s not like an answer to that there’s just kind of a pendulum that swings back and forth.
[51:36] Yeah it’s fascinating to me it’s I kind of putting a historical retail lens on it again like in a,
in a earlier world when there were was a choice of three hammers to buy like you could bundle discovery of hammers with consideration of hammers and fulfillment of hammers right and that’s what independent hardware stores did and then the,
the pianos of the world or the the Home Depot’s of the world said hey now there’s a hundred Hammers and it actually became way harder to,
discover and pick a hammer because they did such a good job of bundling,
fulfillment and distribution of all these hammers when Amazon makes 80,000 different hammers available,
they can they simply cannot also be the point where you discover and decide on Hammers and so I actually think it’s.
Bundling fulfillment in some of these things or purchasing some of these things has created new unbundling zuv,
Discovery and so you know that’s an interesting space to me in Commerce right now is how how many.
Products used to be discovered on the Shelf of a grocery store and are now being discovered in a tick tock video or whatever else.
[52:49] Yeah I mean I think a lot of this is Pop Culture which is to the point about you know we’ll live streaming work I don’t know that’s like saying well that new,
my fashion magazine for teenage girls while I don’t know maybe,
awesome but he knows a lot about that and it’s pop culture and its retailing and Merchandising it’s not really a technology question and it’s also I mean that you know the maybe another way of thinking about this is that like in,
1800 there was a very finite amount of product,
there was also very limited number of customers you know number of people who are actually kind of consumers in any really meaningful sentence for fully like a couple of thousand people in each Country and
then the Industrial Revolution happens and suddenly you have infinite product and you also have like many more consumers and then you have but you have the gatekeeper of the logistics
on the retailing and the which is either the retailer or the media to tell you what bye,
this is the bait The Gatekeepers are the newspapers and magazines on the one hand and the retailer on the other side and maybe the retail is whole set up behind them.
Um so you have infinite product and customers but you have this gatekeeping function its activation function and now you know you don’t.
[53:59] You know now it’s Google or its Amazon and Amazon has however many hunting a hundred million schools or its Alibaba and they said there’s infinite product and infinite choice.
And that almost gets that gets you to the book store that only sells one book.
I mean I remember years ago reading about it I denim store in Tokyo that was called not found because they didn’t want to show up in Google they wanted it to be impossible to find them in Google.
[54:22] And you almost feel like there’s almost like an arts and crafts moment now we’re like in 1800 if you said I want something handmade that didn’t mean anything,
in 1900 if you say I want something handmade that that becomes a very meaningful statement you know I want to step out of mass production and I sometimes feel like there’s a lot of different strands in,
popular culture now that is sort of about stepping out of the fire hose he sort of what it serious as well isn’t it.
That is what Instagram is getting at there’s a lot of sort of ways that are trying to get you a way as not just a search box it’s something else.
[55:00] I remember the early days of etsy everyone thought they were crazy because the handmade category on eBay was like 20 million and they’re like can’t it’s not Venture back avoid the Tam isn’t big enough and now it’s like two billion dollars in GMB.
[55:12] Yeah well that’s like that guy who said that the time for Uber is taxi cabs like yeah I know.
[55:19] What do you think about scooters Tam is walking do you buy the you buy that argument.
[55:23] I don’t know um there’s.
[55:26] Are they a thing in London or is London.
[55:40] This is clearly a shift in electric changing what that can mean,
and changing the practicality of that and massively broadening that and there’s a shift instead of popular consensus around what road should look like which means that scooters and bikes can become much safer and much more practical.
How big is a scooter and a bike has some practicality in that like it’s you know you can fold it up so it doesn’t take the space that a bike the fall but whole bicycle does Maybe.
You know I mean it is a business how big a business is everybody on earth going to have one I don’t know you know I couldn’t have used one to commute 35 miles a day to Menlo Park from San Francisco,
um but I can certainly see that filling a segment.
In the same way that like it’s I don’t know maybe it’s like being in like 1975 on the same do you think hatchback small cars are going to work.
He wants his worlds for some people in some places.
[56:37] It’s never really fulfilling answer though yeah.
[56:40] Yeah it’s the answer is sort of yes maybe for some people it’s never going to be like binary.
[56:44] Depends exactly.
[56:47] Well this is I you know I studied history at University and I’m the master of my college Hugh trevor-roper of sort of famous for saying history teaches us nothing except that something will happen.
It’s always different.
hey I know we’re coming up on time maybe one one last question pivoting as far away from history as possible all this interesting Innovation is there anything in particular that you’re excited about for the future of Commerce like is there
is there one of these Trends or technologies that you’re more more bullish on than others.
[57:19] Um I think there’s like a hole
I hate this is such an overused term but it’s convenient there’s a sort of a Cambrian explosion in every kind of remote work every kind of video and collaboration and interaction we’re not in the same room and what do you do that it would be better than video.
And there was also a Cambrian explosion,
in every kind of sense of what would e-commerce be how would it work what does physical retail look like if it’s no longer the end point to a logistics chain so again a horrible word experiential huge amount of people thinking about retail is experience,
events is experience what does it mean if the alternative if it’s if it’s always easier to get it by Amazon or to buy online what we what is the reason you create to go to the store.
[58:07] If it’s easier to buy it on Amazon what’s the reason you create to put it on the website.
If people aren’t buying that online what would you put what would you change what online experience would you create to change that,
and I think the kind of the lockdown have been this sort of catalyst.
Of just we maybe just like the realization like everyone is online everyone will buy anything online there is no product that people will not buy online if you can’t come up with the right experience
and so we’ve got this sort of huge wave of innovation coming in the next year two years three years around working out what that means,
is this like all the things that come off to zoom which is a bit like all the stuff that happened with voice after Skype,
all the stuff that comes because out of that realization and it’s just going to be so many sort of interesting models in interesting ways of doing this.
[59:02] Yeah that is interesting it’s.
It’s going to be a fascinating area for all of us to live through that’s for sure I’m grateful we’re in a time of such such interesting and fascinating disruption,
Benedict that’s going to be a great place to leave it because it’s happen again we have used up a perfectly good hour of our listeners time,
as always if you have any questions or comments about the things we discussed on the show we’d love it if you’d leave us a comment on our Facebook page or hit us on our Twitter feed
and for sure if you enjoyed this show we sure would appreciate if you jump on the iTunes and give us that five star review.
[59:41] Benedict thanks for coming today if folks want to find you online you’re pretty much everywhere but what’s kind of the best Gateway that you folks.
[59:49] Well if you Google me my parents had good SEO so Benedict Evans will take you to my website which is Ben Evans been – evidence.com and there’s various sort of things you can do that.
[59:59] Yeah yeah yeah I share that with you Jason does.
[1:00:04] Yeah Scott Scott’s parents either had great SEO or were very bad spellers.
Yeah or perhaps perhaps both but I really enjoyed the chat thanks so much we’ll put a link to your bananas in the show notes and until next time happy commercing!